MERCANTILE AGENCY, a business enterprise, usually an incorporated company, which agrees to furnish subscribers who pay a yearly fee, with information as to the business responsibility, financial standing and credit rat ing of business houses, whether conducted by private individuals, firms or corporations. They also sometimes have a department for the col lection of debts, and sometimes they sell two or three different services, at different prices. The business originated in the United States in 1837, following a financial panic, it being recognized that it was necessary for business houses to obtain better information in the giving of credits. Lewis Tappan was the founder of the first mercantile agency in New York City. The most conspicuous concerns now in the business are R G. Dun and Com pany and the Bradstreet Company of New York; a good rating by either is highly prized by merchants. They issue large books, usually once a year, and loan them to subscribers for their own use; in these books appear lists of addresses and the kind of business, followed by letters or signs indicating their financial responsibility, their promptness in paying bills, etc. Subscribers are also entitled to send in for special reports, giving more detailed or later information. The agencies obtain their information— (1) direct from the parties in question, sending a representative to interview them, and asking for a statement, but in no case indicating who wants to know their stand ing; (2) by inquiry of the concerns from whom the party buys goods; (3) by exchange of in formation between other agencies or people likely to know their reputation. Concerns that are noted in the agency books as prompt pay, or as being worth $5,000 or more, are usually spoken of as g rated') houses. The highest rat ing is usually worth $1,000,000 or more, and prompt pay.
In addition to agencies doing a general confidential reporting business on all classes of business houses all over the country, there are others that confine themselves to a particular in dustry, as Typo, which reports on the houses engaged in printing, publishing and allied in dustries. The laws recognize that such ex
change of information is legitimate, and es sential to the conduct of business on a credit basis, and an action for libel in sending out a bad report will not hold against an agency that conducts its business in a fair manner. How ever, the reports have to be made confidential; if promiscuously circulated, they might become libelous. For it unquestionably happens thht at times the agencies report concerns as hav ing less money and less standing than they are entitled to, and they can make mistakes. But as long as they try to be fair, and send out their reports under the seal of confidence, the law protects them. Abuse of the system, to revenge, spite or for blackmail, is practically unknown. The agencies are more apt to err in the matter of continuing to rate concerns too high when their financial standing is impaired. When large concerns have failed it has fre quently happened that the mercantile agencies had continued to report them in good standing up to the last. Therefore the credit men of the large houses do not pin their faith entirely to commercial ratings, but use other means where with to know the truth. In the very large cities there are credit men's associations, where the confer as to ways and means of keeping credit safe. While there is opportunity for bear and more accurate reporting. as to credits, it is true that the mercantile agencies of America handle their business extremely well, and con stitute one of the most important links in the artificial chain between the industries of the nation. Consult Errant, The Law Relating Mercantile Agencies) (1889); Reinhard, 'A Treatise on the Law of Agency> (1902).