The Causes and Consequences of Webb-Pomerene Associations: A Reappraisal

• Author: James D. Whitney
• Published date: 01 June 1993
• Date: 01 June 1993
• DOI: http://doi.org/10.1177/0003603X9303800207
• Subject Matter: Article

The Antitrust Bulletin/Summer 1993

The causes and consequences

of

Webb-Pomerene Associations:

areappraisal

BY JAMES D. WHITNEY·

I.

Introduction

395

The 1918 Export Trade Act, more commonly known as the Webb-

Pomerene Act, permits firms in any commodity-producing indus-

try to form

. . . an association entered into for the sole purpose of engaging in

export trade,

...

provided such association

...

does not

...

do any

act which artificially or intentionally enhances or depresses prices

within the United States of commodities of the class exported by such

association, or which substantially lessens competition within the

United States or otherwise restrains trade therein.'

• Associate Professor, Occidental College.

AUfHOR'S

NOTE:

I wish to thank Leonard Weiss and my colleagues at

Occidental College for their comments on earlier drafts

of

this article,

Carl Hevener

of

the Federal Trade Commission for his assistance in

accessing information on Webb-Pomerene Associations, and Stephen

Gambee for his research assistance.

!See

UNITED

STATES

FEDERAL

TRADE

CoMMISSION,

WEBB-POMERENE

AsSOCIATIONS:

A

50-YEAR

REVIEW

73-75 (1967) [hereinafter A

50-YEAR

REVIEW].

II) 1993by FederalLelal Publicatiolll,Inc.

396 : The antitrust bulletin

Initially, a Webb-Pomerene Association (WPA) had to serve as a

foreign selling agent for its members in order to qualify for an

exemption from domestic antitrust laws. But in 1924 the Federal

Trade Commission responded to various questions raised by

domestic silver producers by issuing the "Silver Letter" which

broadened the exemption to include any association that simply

"engage]s] in allotting export orders among its members and in

fixing prices at which the individual members shall sell in export

trade.

"2

Thus, early on it became appropriate to interpret the

Webb-Pomerene Act as a vehicle for establishing United States

export cartels.

The Export Trading Company Act of 1982 brought the course

of U.S. export cooperation to a crossroads. The Act provides U.S.

producers with a more attractive option for cooperating on export

sales.. WPA registrations have continued since, but Export Trading

Companies (ETCs) are certain to eclipse WPAs and may eventu-

ally extinguish them outright. However, given a slow start for

ETCs and skimpy early returns on their effects, WPAs serve as the

best available signpost for what we can anticipate from ETCs in

the future. This article reexamines the lessons to be learned from

WPAs.

Larson, and Amacher, Sweeney and Tollison have conducted

statistical analyses

of

WPAs, with mixed results.! Larson investi-

gated the causes

of

WPA activity, and Amacher, Sweeney and Tol-

lison examined the consequences. For a sample

of

47 WPAs,

Larson classified six WPAs as active and found WPA activity to

have a significant positive association with industry concentration

and product homogeneity. This result parallels case study evi-

dence that suggests that, for a handful of WPAs, basic export car-

tel theory and practice have in fact coincided. In contrast, the

2

For

the text of the Silver Letter, see A

50-YEAR

REVIEW,

supra

note 1, at 102-106.

3See Larson, An Economic Analysis

of

the Webb-Pomerene Act, 13

J.

LAw

&Ecox, 461 (1970); and Amacher, Sweeney &Tollison, A Note

on the Webb-Pomerene Law and Webb-Cartels, 23

ANn'I'RuST

BULL.

371

(1978).