Competition, Cartels and Their Regulation

RICHARD H. HOLTON

University of California, Berkeley, California, U.S.A.

The distributive sector of an economy is subject to two quite different definitions. The more common of these we will call the functional definition, the other the industrial view. According to the functional view, distribution includes all those activities generally referred to as "marketing": buying and selling and all the activities auxiliary to buying and selling, namely such functions as transportation, storage, financing of goods as they move from producer to ultimate user, and so forth. For example, when Stewart and Dewhurst in 1939 discussed the magnitude of distribution costs in the United States they included the distribution costs incurred by manufacturers and primary producers as well as those represented by wholesaling and retailing activities.² And when one hears complaints of the high cost of distribution, the costs referred to nearly always include not only retailing and wholesaling margins but the expense of maintaining manufacturers' sales forces and promotion programs as well. The U.S. Department of Agriculture, responding to the farmer's perennial complaint about the difference between the amount the consumer pays for food and the amount the farmer receives for that food, in its studies refers to this difference as the "marketing margin" even though the difference includes sizable processing costs in many instances.³ Not only retailing and wholesaling margins but also the marketing costs incurred by others in the channel are thus included as part of the cost of distribution. The multitude of textbooks in the field of marketing also employ the functional approach. They are invariably concerned not only with retailing and wholesaling but also with the distribution policies of manufacturers and of primary producers as well.⁴

-263-