sent off, to anticipate such orders, and supply the market before the goods on account of such orders" reached this country.59

9960

Custom house practices, as well as the ease of concealment, made it impossible to determine what proportion of imported goods were handled on foreign account. It was, in 1817, "supposed that more than one-half of the goods subject to ad valorem duties, . . imported into the United States" were "entered by ... the mere representatives of the owners of the goods.' In 1819 an estimate, based upon "a careful examination of the weekly abstracts of merchandise entered at the custom house in New York" was that three-fourths of the importations were on foreign account.1 The New York Mercantile Society in a petition to Congress in 1820 stated that the proportion ranged between two-thirds and three-fourths, and of dry goods from England, Scotland and Ireland four-fifths.62 In 1824 it was claimed it could be "substantiated by a reference to official papers, that about three-fourths of all British and French goods imported into New York" were on foreign account.63

COMMERCIAL EFFECTS OF THE AUCTIONS.

It has been shown above that the auction system tended to reduce the efficiency of the protective tariff; this fact gave auctions a political importance as well as economic and fiscal; the resulting legislative campaign against auctions is treated in later paragraphs. The auction system produced some important commercial effects. Auctions facilitated the introduction of new foreign and domestic products; goods were forced on the market by rank price-cutting and in time the prejudices that opposed their introduction and advancement were overcome; this was true both of foreign and domestic goods. The auctions were a solvent and revolutionary factor that broke down the too staid

Annals of Congress, 16th Congress, 2d session, 1653.

Niles, 27: 273. See similar and more detailed estimates in Niles, 27: 289 (1825), and Niles, 34: 106 (1828), and Bolles, I, 445 (1840), citing Ingersoll's Minority Report, April 4, 1844, No. 306, 28th Congress, Ist session.

Annals of Congress, 16th Congress, 2d session, 1531.

traditional methods of commerce and consumption; the changes in dress, for instance, were toward "cheap but showy fabric" and were noticed by contemporaries. The auctions served particularly the humbler domestic manufacturers with a means of reaching the market, and some who were too small to maintain a sales organization did all their selling through auctions.

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The strongest argument and apology for the auctioneers were that they tended to lower prices to the retailers and consumers through their economies in selling.7 Certainly the sale at auction of a lot of merchandise at a sacrifice tended to give a very public expression of the apparent values of that sort of merchandise and set a presumptive low value on all the existing stock, but such an assessment of value is a common objection to price-cutting in any sale however conducted. It was often alleged that auctioneers sold more goods daily than they advertised; that often the advertised lot was sold at a good price but other lots of the same goods were auctioned at successively lower prices; and that, this practice of the auctioneers being known, the price of the advertised lot was not bid up and there was therefore a general depression of prices.""

Undoubtedly there was much confusion as to values. Opponents of auctions claimed that the original diminution of prices to consumers soon ceased to exist and was compensated for by a reduction in quality.70 Others dwelt upon the fact that auctioneers provided much less service for their customers, as catering to individuality, delivery, better inspection, store open every day at all hours, book credit, etc.71

Other opponents denied outright that prices were any lower. It was argued that it was impossible that three-fourths of the imports into the United States could be sold for a series of years at a loss, and that since those sold at auction were subject to additional expense of about 5% above those sold at private sale, this added expense would be added to the cost of the

goods and be ultimately borne by the consumer.72 A most prominent auctioneer declared before an investigation committee of the New York Legislature in 1829 that goods sold higher at auction than at private sale.73 Auctions made it possible to test the market without real selling; the principal might instruct his agent to bid in the goods at a certain minimum price; to test the market the auctioneer would offer a small lot for trial and if these were sold above the limited price the sale would continue." The psychology of auction sales, with the excitement of a crowd of buyers bidding against each other, tends to raise prices.

The auction system affected the business of the importing merchants and the jobbers very materially. The passage of the auction law in New York in 1817, with its moderate duties on auction sales, gave New York City a comparative advantage over Boston and Philadelphia where "the free and absolute sale of goods at auction was not encouraged." East India goods which formerly all went to Boston were thereafter sent to New York. Of course, other factors were tending to give supremacy to New York, such as the establishment of the first regular packet line between New York and Liverpool in 1817 and the construction of the Erie Canal in 1825 and the natural advantages of New York.76

75

The interior merchants and retailers resorted increasingly to auction sales at New York"; they came from Ohio, Indiana, Tennessee, Missouri, and other states, and the compelling motive was said to be the cheaper prices78; the periodicity and dependability of the auction sales were a great convenience to the visiting

73

Niles, 35: 229; 34: 258; 27: 290.

Niles, 36: 186; 34: 258. See Niles, 34: 298, and "Remarks upon the Auction System," 48-52, for instances where auction prices exceeded retailers' prices.

74 Niles, 34: 259.

Hunt's, 10: 167.

"For a contemporary expert estimate of the relative merchandising advantages of New York, Boston and Philadelphia, see Girard, Merchants' Sketch Book, 1, 6: "In New York alone is located a class of foreign agents, whose whole business is to vend, through auctioneers and commission houses, the immense surplus production of their manufacturing districts."

77 Niles, 21: 103.

"An Examination of the 'Remarks on Auctions,'" 4, 9.

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buyers; and they found the jobbers became more accommodating in the face of the competing auctions. The overstocking of the seaports tended to force the goods into the interior "generally on extended credits"s"; in the mercantile world the East tended to become creditor to the West. It was complained at the time that the New York auction tax had the effect of making the consumers of taxed goods in all states subject to New York tax laws. The American manufacturers did not object so much to wholesale sales of foreign goods provided they were made through the regular jobber channels, but sales at auction obstructed their distributing system by eliminating the jobber.82

81

83

Besides the country merchants, the small city retailers were advantaged by auction sales. They were able to procure their supplies without the necessity of paying the intermediate jobbers' profits, which were commonly estimated at 15 or 20%. A contemporary estimated that in New York City in 1831 there were about 7,000 persons engaged in the retail dry goods business most of whom made their purchases at auction piece sales. The retailer with small capital, either on his sole account or jointly with others of his class, was able to buy direct and free himself from jobber monopoly.85 A common complaint, however, of the retailer was that he had to spend so much time in auction rooms.86

The two middlemen who were hurt most were the importing merchants and the jobbers. A majority of the American drygoods importing merchants, formerly the most numerous and important of the mercantile class, gave place to, or became themselves, agents of British manufacturing houses. If an American merchant sent an order with description or samples the British manufacturer frequently sent by the same ship a large

87

79 Annals of Congress, 16th Congress, 2d session, p. 1530. So Annals of Congress, 16th Congress, 1st session, p. 2302. 81 Niles, 34: 259.

82 Annals of Congress, 16th Congress, 1st session, p. 2198. Annals of Congress, 16th Congress, 2d session, p. 1531. "An Examination of 'Remarks on Auctions,'

4.

85 Ibid., 6; Annals of Congress, 16th Congress, 2d session, p. 1531.

Se Niles, 34: 350.

87 "Observations on the Report of the Committee of Ways and Means,” 1828, p. 23; Niles, 34: 218; 35: 241; 23: 130.

quantity of the same goods to be sold at auction by his agent, thus defeating the merchants' market.88 On account of this and other devices, the old importing houses faileds and new houses were restrained from beginning.90 The general decline of the American merchant marine after 1815 was a leading factor in this tendency to mortality of mercantile houses.

The jobbers, as distinguished from retailers on the one hand. and importing merchants on the other, were opposed to seeing their old customers go to auctions and were loud in their condemnation of the auction system.91 The auctioneers, replying to the jobbers' demand for legislation prohibiting auctions, urged the danger of class legislation,92 that other classes of tradesmen might be abolished or regulated when once such legislation had been initiated. Their efforts to abolish their new competitor having failed, there arose an "intermediate grade of merchants" who purchased largely at auctions, at the package sales, from wholesale importers, and in such other ways as they could obtain merchandise on reasonable terms, and who sold to local and country retailers.93 One of these New York houses, Reuben Vose, shoe and hat store, was the first to introduce the one-price plan, which has come to characterize American business; he published a catalogue describing some hundred different articles with all prices marked against them; he gained and kept the ascendency over all other New York jobbers in sales to western and southern merchants; his business was conducted on a strictly cash basis and he won from the credit houses their cash business." There arose at this time in New York a company of young men, called "Prime Ministers," who were the junior

94

58 "Remarks on Present System of Auctions," 12; Bolles, I, 389-90. Read the lamentation of a Philadelphian in 1823, Niles, 23: 130. Of the 37 names, all merchants of high standing, appearing on an insurance policy in 1799, 27 had become bankrupt by 1823; of 54 persons or houses having merchant flags in the Baltimore observatory as engaged as ship owners in foreign trade and importers, 24 became bankrupts in the four years ending 1823.

Niles, 35: 241.

91 Niles, 20: 66.

* "An Examination of 'Remarks on the Present System of Auctions,'" 8. New York Assembly Journal, 1829, p. 393. A common form of such transaction is detailed in Niles, 34: 298.