HARLAN & MCCANDLESS FEDERAL TRADE COMMISSION )(oll h 4 (Sonwll IGatu ^rljonl Bjtbrarij 7 isL-<)~~~ y- if 1 -^.^.k,/}— KF 1611.A C 4°H28 UnlVerSl ' yL,brary T n£KS&%S!!!i!!ton. Its nature Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019224330 THE FEDERAL TRADE COMMISSION ITS NATURE AND POWERS AN INTERPRETATION OF THE TRADE LAW AND RELATED STATUTES BT JOHN MAYNARD HARLAN AND LEWIS W. McCANDLESS of the Chicago Bab CHICAGO OALLAGHAN AND COMPANY 1916 $6*6 - Copyright, 1916 BY CALLAGHAN & COMPANY FOREWORD The following pages present an interpretation of the Trade Law, and related statutes, the meaning and opera- tion of which are somewhat vague and obscure in certain particulars, and have not yet been fully declared by the courts. If this interpretation shall assist the bar in reaching a conclusion as to what business conduct is prohibited by the statutes considered, and as to how those statutes should properly operate, we shall accom- plish all we hope. John Maynard Hablan. Lewis W. McCandless. Chicago, Illinois, February 1, 1916. CONTENTS [References are to pages.] ICHAPTER I. NATURE OF COMMISSION 1-8 Sec. 1. Organization of Commission 1 Sec. 2. Derivation of Commission 3 Sec. 3. Powers of Commission 4 Sec. 4. Regulative Power 4 Sec. 5. Advisory Power 6 Sec. 6. Investigative Power 7 Sec. 7. Commission an Administrative Body 7 CHAPTER II. REGULATIVE POWER 9-67 Sec. 8. Scope of Power 9 Sec. 9. Violations of the Clayton Law 11 Sec. 10. Price Discriminations and Exclusive Purchase and Sale Arrangements 12 Sec. 11. Intercorporate Shareholding 15 Sec. 12. Interlocking Directorates 17 (1) Banking corporations 18 (2) Non-banking corporations 19 Sec. 13. Clayton Law Creates Merely a New Remedy 20 Sec. 14. Violations of the Trade Law 23 Sec. 15. Injury to Public Essential to Violation of Trade Law 23 Sec. 16. Unfairness Essential to Violation of Trade Law... 29 Sec. 17. What Is "Unfair" 31 Sec. 18. Local Price Cutting , 35 Sec. 19. Payment of Rebates 36 Sec. 20. Bogus Independent Companies 36 Sec. 21. Espionage 37 Sec. 22. Fighting Brands 37 Sec. 23. Full Line Forcing 38 Sec. 24. Boycotts and Blacklists 39 Sec. 25. Definition Impossible 39 Sec. 26. Trade Law and Clayton Law Construed Together. . 41 Sec. 27. Trade Law Does Not Create a New Wrong 43 Sec. 28. Trade Law Creates Merely a New Remedy 46 Sec. 29. Proceedings by Commission 47 (1) Complaint and notice 47 (2) Service of complaint and notice 48 (3) Commission the complainant 49 (4) No compulsory process 49 (5) No default 50 (6) Report and order by Commission 50 CONTENTS [References are to pages.] (7) Enforcing and overthrowing Commission's orders 51 (8) Commission's control over its own orders. 53 (9) Court not bound absolutely by Commis- sion's record 53 (10) Jurisdiction of Court of Appeals exclu- sive 53 (11) Procedural rules 54 Sec. 30. Commission Not a Court.. 54 Sec. 31. Jurisdiction of Court of Appeals Original, Not Ap- pellate 58 Sec. 32. Court of Appeals Not to Proceed De Novo 60 Sec. 33. Conclusiveness of Commission's Findings -. 62 (1) Legal effect of facts for court 62 (2) Fair hearing essential 62 (3) Testimony essential 64 (4) What is "testimony" 65 (5) Jurisdictional facts 65 CHAPTER III. ADVISORY POWER 68-78 Sec. 34. Scope of Power 68 Sec. 35. Violations of Antitrust Laws 68 Sec. 36. Enforcement of Decrees 71 Sec. 37. Drafting Decrees 72 Sec. 38. Foreign Trade 75 See. 39. Additional Legislation 76 Sec. 40. Publicity 78 CHAPTER IV. INVESTIGATIVE POWER 79-98 Sec. 41. Scope of Power 79 Sec. 42. As Limited by Purpose of Grant 79 Sec. 43. As Limited by Method of Exercise 81 Sec. 44. Requiring Reports 82 Sec. 45. Examining and Copying Documents 85 Sec. 46. Examining Witnesses 88 Sec. 47. Obtaining Information from Other Departments.. 91 Sec. 48. Narrow Construction Possible 91 Sec. 49. Self Incrimination 92 Sec. 50. Immunity Clause 92 Sec. 51. Unreasonable Searches and Seizures 95 Sec. 52. Methods of Enforcing Power 95 Sec. 53. Criminal Proceedings 96 Sec. 54. Actions for Penalties 97 Sec. 55. Contempt Proceedings 97 Sec. 56. Mandamus 97 Sec. 57. Improper Disclosures 98 VI THE FEDERAL TRADE COMMISSION CHAPTER I. NATURE OF THE COMMISSION. § 1. Organization of Commission: The Federal Trade Commission 1 consists of five Commissioners, appointed by the President, by and with the advice and consent of the Senate. The first Commissioners 2 appointed are to continue in office for three, four, five, six, and seven years respectively, from and after the taking effect of the Trade Law on September 26, 1914, but their successors are to be appointed for terms of seven years, except that a person appointed to fill a va- cancy is to be appointed only for the unexpired term of the Commissioner whom he succeeds. The salary of a Commissioner is $10,000 a year. None of the Commis- sioners may engage in any other business, vocation, or employment, and not more than three of the Commission- iCreated by the Trade Law, en- Harris, Will H. Parry, who titled "An Act to create a Fed- are to serve, respectively, for eral Trade Commission, to define seven, six, five and four years its powers and duties, and for from September 26, 1914, and other purposes" (H. R. 15613; George Rublee (a recess ap- Pub. No. 203; 63d Congress) in pointee), who is to serve at all force September 26, 1914. Printed events during the pleasure of the in full in appendix. For organ- President, and until the end of ization of Commission, see Trade the session of the Senate next Law, Sees. 1-3. after March 6, 1915, and there- 2The first Commissioners ap- after, if confirmed, until Septem- pointed were Joseph E. Davies, ber 26, 1917. Edward N. Hurley, William J. §1.] THE FEDERAL TRADE COMMISSION. [Ch.I. ers may be members of the same political party. Any Commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office, and in case of a vacancy in the Commission, the remaining Commissioners may exercise all of the Commission's powers. 3 The principal office of the Commission is at Washington, D. C., 4 but it may meet and exercise all of its powers at any other place, and may, by one or more of its members, or by such examiners as it may desig- nate, prosecute any inquiiy necessary to its duties in any part of the United States. The Commission has a chairman chosen by it from its own membership, and a secretary appointed by it. 5 It has an official seal, of which courts are required to take judicial notice. It may employ and fix the compensation of such attorneys, special experts, examiners, clerks, and other employees as it may from time to time find neces- sary for the proper performance of its duties, and as may be appropriated for by Congress. Other depart- ments and bureaus of the government are required to detail to the Commission from time to time such of their officials and employees as the President may direct. Upon the organization of the Commission, and the elec- tion of its chairman, all the clerks, employees, records, papers, and property of the Bureau of Corporations were transferred to the Commission, and the Bureau of Cor- porations, and the offices of Commissioner and Deputy sThree Commissioners consti- As to sessions of the Commission, tute a quorum. See Rules of Prac- see Rules of Practice, No. I, in tice, No. I, in appendix. appendix. *A11 communications to the ^Commissioner Joseph E. Davies Commission shall be addressed to is Chairman. At the time of his Federal Trade Commission, Wash- appointment to the Trade Commis- ington, D. C, unless otherwise sion he was Commissioner of specifically directed. See Rules Corporations. See Sec. 2, infra. of Practice, No. XI, in appendix. Leonidas L. Bracken is Secretary. Ch. I.] NATURE OF THE COMMISSION. [§ 2. Commissioner of Corporations, automatically ceased to exist. §2. Derivation of Commission: The Trade Com- mission is an outgrowth of the office of Commissioner of Corporations abolished by the Trade Law, 6 and is plainly modeled upon the lines of the Interstate Com- merce Commission. The principal function 7 of the oL fice of Commissioner of Corporations, created in 1903, was to acquire, and to report to the President, inform- ation as to the organization, conduct and management of the business of corporations engaged in interstate commerce, to the end that the President might thereby be enabled to make recommendations to Congress for legislation regulating such commerce. It is one of the several functions of the Trade Commission to furnish information as a basis for the enactment of additional legislation regulating interstate and foreign commerce. 8 But the Trade Commission may report to Congress di- rectly, and is not under the domination of the President. The Commissioner of Corporations made his investiga- tions under the direction and control of a member of the cabinet, the Secretary of Commerce and Labor. The Trade Commission is more independent and may act upon its own initiative and at its own discretion to a large degree. 9 The office of Commissioner of Corpora- tions was a political office, and the incumbent changed with the administration. The Trade Commission is non- political and its membership will change infrequently. 10 The legislative purpose appears to have been that the Trade Commission should accumulate experience, form- eTrade Law, Sec. 3. sSecs. 5, (5), (6), and 38 and n U. S. Comp. Stat. (1913) Tit. 39, infra; Trade Law, Sec. 6, (f), 12A, Ch. O, Sec. 889, p. 357; W- United States v. Armour & Go. »Sec. 35, infra. (19061 142 Fed. 808. 819. "Sec. 1. sunra. § 3.] THE FEDERAL TRADE COMMISSION. [Ch. I. ulate precedents, maintain continuity and consistency of governmental policy towards business, and gradually bring about an evolutionary growth of regulation of in- dustrial corporations engaged in interstate commerce similar to that which has resulted in respect of carrying corporations from the creation of the Interstate Com- merce Commission. § 3. Powers of Commission: The general nature of the Trade Commission appears from the nature and scope of the powers which are conferred upon it by the Trade Law, and in part by the Clayton Law, 11 and are of course confined to the field of interstate and foreign commerce. 12 Its powers may be grouped as (1) regulative (2) advisory and (3) investigative. § 4. Regulative power: 13 The Commission has au- thority to institute and conduct against persons, 14 partnerships and corporations 15 engaged in interstate commerce, except banks and interstate common car- riers, a statutory proceeding 16 designed to lead to a decree by a competent court, (1) restraining the use of "unfair methods of competition in commerce" which are declared unlawful by the Trade Law, 17 and (2) pre- "The Clayton Law is entitled ton Law, in Sec. 1 thereof. The "An Act to supplement existing two definitions are different, laws against unlawful restraints isSee Chapter II, infra. and monopolies, and for other "For meaning of "persons", as purposes" (H. R. 15657; Pub. No. used in the Clayton Law, see Sec. 212; 63d Congress), in force Oc- 1 thereof. tober 15, 1914. Printed in full isFor meaning of "corpora- in appendix. For the provisions tion " as used in the Trade Law, of the Clayton Law which confer see Sec. 4 thereof, power upon the Trade Commis- isTrade Law, Sec. 5; Clayton sion, see Sees. 2, 3, 7, 8 and 11 Law, Sec. 11; Sees. 29 to 33, in- thereof. fra. ""Commerce", as used in the "As to what are "unfair meth- Trade Law, is defined in Sec. 4 ods of competition", see Sees. 14 thereof, and as' used in the Clay- to 27, infra. Ch. I.] natubb of the commission. [§4. venting violations of sections two, three, seven and eight of the Clayton Law. 18 Those sections of the Clayton .Law forbid (a) price discriminations between purchas- ers of commodities, where such discrimination may sub- stantially lessen competition or tend to create a monop- oly in any line of commerce; (b) exclusive purchase and sale arrangements, consisting of sales or leases of com- modities, or the fixing of prices of commodities, whether patented or unpatented, upon condition that the pur- chaser or lessee shall not use or deal in the goods of a competitor, where such transaction may substantially lessen competition or tend to create a monopoly in any line of commerce; (c) intercorporate shareholding, and holding companies, where one corporation's owning or voting shares of stock of another may substantially lessen competition between the corporations affected, or restrain commerce in any section or community, or tend to create a monopoly of any line of commerce; (d) any person, after October 15, 1916, to be a director, officer, or employee of more than one federal bank, if either of such banks has capital, surplus, and undivided profits of more than $5,000,000; (e) any private banker, or per- son who is a director of any state bank or trust com- pany having deposits, capital, surplus, and undivided profits of more than $5,000,000 to be a director of any federal bank, after October "15, 1916; (f) any federal bank, after October 15, 1916, in a city of more than 200,000 inhabitants, to have as a director, or other of- ficer or employee, any private banker, or any director, officer, or employee of any other bank located at the same place, with certain exceptions; and (g) any per- son, after October 15, 1916, to be at the same time a director in any two or more corporations, except banks i8gpe Sees. 9 to 12. infra. § 5.] THE FEDERAL TRADE COMMISSION. [Ch. I. and interstate common carriers by rail, or water, en- gaged in whole or in part in commerce, any one of which corporations has capital surplus and undivided profits of more than $1,000,000, if such two or more corpora- tions then are, or theretofore shall have been, competi- tors, so that the elimination of competition by agree- ment between them would violate any provision of any of the antitrust laws. 19 . § 5. Advisory power: 20 The Commission has au- thority (1) upon the direction of the President, or either House of Congress, to report the facts relating to the alleged violation of the antitrust laws by any cor- poration; (2) upon the request of the Attorney General, to make recommendations for the readjustment of the business of any corporation alleged to be violating the antitrust laws, in order that the corporation may there- after conduct its affairs in accordance with law; (3) to report to the Attorney General, upon his request or upon the Commission's own initiative, the manner in which a final decree entered against a defendant corporation in any suit brought by the United States under the antitrust laws has been, or is being, carried out; (4) upon the request of the court, to ascertain and report an appro- priate form of decree for complainant in any suit in equity brought by the Attorney General under the 'anti- trust laws; (5) to make reports to Congress, with such recommendations as the Commission may deem advis- able, in respect of foreign trade conditions which may affect the foreign trade of the United States; (6) to make annual and special reports to Congress, with rec- i9For meaning of "antitrust trust laws", see appendix. laws", see Sec. 1 of Clayton Law, 2°Trade Law, Sec. 6, (c), (d), and Sec. 4 of Trade Law; and, (e), (f), (h), Sec. 7. See Chapter for the provisions of the "anti- III, infra. CH. I.] NATURE OF THE COMMISSION. [§6. ommendations for additional legislation; and (7) to re- port to the public such information as the Commission may obtain and may deem it expedient in the public interest to publish, except trade secrets and names of customers, and to provide for the publication of its re- ports and decisions. § 6. Investigative power: 21 The Commission has au- thority (1) to prosecute any inquiry necessary to its duties in any part of the United States; (2) to con- tinue all investigations and proceedings pending in the Bureau of Corporations at the time when that Bu- reau automatically ceased to exist by the organization of the Trade Commission and the election of its chair- man; (3) to investigate the organization, business, con- duct, practice's, and management of any corporation en- gaged in commerce, except banks and common carriers, and the relation of such corporation to other corpora- tions and to individuals, associations, and partnerships ; (4) to conduct its investigations by (a) requiring reports from corporations, (b) examining and copying the docu- mentary evidence of corporations, (c) subpoenaing and examining witnesses and documents and (d) obtaining information from other departments and bureaus of the government; and (5) to enforce its investigative pow- er by requesting the proper governmental authorities to institute (a) criminal prosecutions, (b) actions for penalties, (c) contempt proceedings and (d) proceedings in mandamus, in case the exercise of its investigative power shall be obstructed or resisted. § 7. Commission an administrative body: The Com- mission thus appears, from the preceding sections, to be an administrative body, created in part to fur- aiTrade Law, Sees. 3, 6, 8, 9, 10. See Chapter IV, infra. §7.] THE FEDERAL TRADE COMMISSION. [Ch. I. nish information to the legislative and executive branches of the government in furtherance of the en- actment of new and the enforcement of existing laws, in part to inform and mould public opinion, in part to regulate trade, and in part to assist the courts. The Commission is not a court, and does not possess judicial power. 22 Its investigative power is perhaps the most formidable of any it possesses. Its regulative power is not great. The subjects intended principally to be affected by the Commission's powers would seem to be the antitrust laws, unfair competitive practices, and for- eign trade. While under its regulative authority the Commission may institute and conduct proceedings against natural persons, its powers in the main pertain to corporations and, with exceptions which will be noted, 23 cannot affect banks subject to the jurisdiction of the Federal Eeserve Board, or common carriers sub- ject to the jurisdiction of the Interstate Commerce Com- mission. 22Sec. 30, infra. "Sees. 11, 12, 35, 36, 45, infra. CHAPTER II. REGULATIVE POWER. § 8. Scope of power: The matters as to which the regulative power of the Commission may be exercised are discriminations in price between different pur- chasers of commodities, exclusive purchase and sale arrangements, intercorporate shareholding, and inter- locking directorates, declared unlawful by the Clayton Law, 24 and unfair methods of competition in commerce, declared unlawful by the Trade Law. 25 As to those matters, the Commission's authority is preve ntive only. It can only restrain, and cannot even restralh™^ectiveTy except in so far as its preventive orders may be sanc- tioned and enforced by the courts. 26 The Commission cannot punish violations of the law. It is without power to command affirmatively, or even to give protective per- mission for, the adoption of any course of conduct in interstate trade. The Trade Law is explicit that noth- ing therein contained shall be construed to prevent or interfere with the enforcement of the antitrust laws, or the acts to regulate commerce, 27 and that neither the restraining order of the Commission, nor the decree of a court in enforcement of such order, shall in any man- ner absolve or relieve any person or corporation from liability under the antitrust laws. 28 "Clayton Law, Sees. 2, 3, 7 and seSec. 29 (6), (7), infra. 8; Sec. 4 supra, Sees. 9 to 12, 27Trade Law, Sec. 11. in f ra - as-Trade Law, Sec. 5; Clayton =sTrade Law, Sec. 5; Sees. 14 Law Sec ^ to 27, infra. § 8.] THE FEDERAL TRADE COMMISSION. [Ch. II. The Commission may institute and conduct restrain- ing proceedings under its regulative power against natural persons as well as against all corporations en- gaged in interstate or foreign commerce, except banks subject to the authority of the Federal Eeserve Board and common carriers subject to the authority of the In- terstate Commerce Commission. Although the question is not by any means free from doubt, perhaps it might not have been an unconstitu- tional delegation of power for Congress, had it seen fit, to confer upon the Commission power authoritative- ly to inform a person engaged in interstate trade, in advance of action by such person, whether any given proposed course of conduct in interstate trade, if pur- sued, would so restrain trade by lessening competition, or so tend to create monopoly, or constitute such an un- fair method of competition, as to offend against the Trade Law, the Clayton Law, and the other antitrust laws. 29 And, since Congress failed to confer that power, it has been widely suggested 30 that, with the co-operation or acquiescence of the Attorney General, the Commis- sion can, and should, assume it, by permitting any pro- posed commercial plan to be submitted informally for consideration in advance of being acted upon by the proponent, and then expressing and publishing an extra- legal opinion as to whether or not such plan is repugnant to law. It is probably not to be anticipated that the Commis- sion will assume ungranted power in the manner sug- zvMutual Film Corp. v. Ohio ville Go-operative Creamery Co. v. Ind. Comm. (1915) 236 U. S. 230, Lemon (1908) 163 Fed. 145, 147- 245-246; Buttfield v. Stranahan 152. (1904) 192 U. S. 470, 496; Union 3°4 Federal Trade Rep. (Decern. Bridge Co. v. United States (1907) 1, 1915) 665, 667. 204 U. S. 364, 378-386; Coopers- 10 C'H. II. ] EEGULATIVE POWEE. [§9. gested, or otherwise. Interesting possibilities suggest themselves as to the consequences to the members of the Commission, under the Sherman Law and other stat- utes relating to conspiracies, 31 if the Commission should assume to give advance approval of any given proposed trade plan, and it should subsequently turn out, after the plan had been executed, or was in process of exe- cution, that the antitrust laws had been, or were being, violated thereby. And, of course, it is abundantly clear that no informal ruling by the Commission could pro- tect any person relying upon it, if a course of conduct in trade, approved in advance by the Commission, should subsequently be drawn into question before a court, and be deemed unlawful by the court. Even when an administrative officer possesses unquestionable au- thority to miake a ruling or regulation determinative of what specific act or acts, if performed, shall, or shall not, constitute a violation of a general rule or standard of conduct fixed by statute, the government is not es- topped to proceed against a violator of the statute by the circumstance that the act constituting the violation was within the terms of the administrative ruling, if the act was in truth repugnant to the statute. 32 § 9. Violations of the Clayton Law: As rules of conduct, sections two, three, seven and eight of the Clayton Law are indisputably vague. 83 The general nature of the acts, that is, price discriminations, ex- clusive purchase and sale arrangements, intercorporate shareholding, and interlocking directorates, which those sections of the Clayton Law denounce as unlawful, is 3iSee, for instance, 4 U. S. ^William J. Moxley v. Hertz Comp. Stat. (1913) Tit. 69A, Ch. (1911) 185 Fed. 757, 760. 4, Sec. 10201, p. 4694. »3See Sec. 4, supra; Sees. 10 to 12, infra. 11 §10.] THE FEDERAL TRADE COMMISSION. [Ch. II. clear enough. But the general declarations of what is unlawful are so hedged about with qualifications, pro- visos, and exceptions as to inject a large element of uncertainty into a determination of whether a given act or course of conduct, if pursued, will or will not con- stitute a violation of the Clayton Law and give occasion for the institution of preventive proceedings by the Commission. 34 § 10. Price discriminations, and exclusive purchase and sale arrangements: 35 Neither a discrimination in price between different purchasers of commodities, nor an exclusive purchase and sale arrangement, is unlawful under the Clayton Law, unless the "effect" thereof may be "to substantially lessen competition or tend to create a monopoly in any line of commerce." 36 In thus making the unlawfulness of a discrimination in price and of an exclusive purchase and sale arrangement depend upon whether its "effect" may be "to substantially lessen competition, or tend to create a monopoly", the Clayton "See note 37, infra. fies the lessening of competition 3=Clayton Law, Sees. 2 and 3. with restraint of trade" (our aowhile obviously, as was said italics). In Standard Oil Co. v. in United States v. Keystone United States (1911) 221 U. S. Watch Case Co. (1915) 218 Fed. 1, 57, 61, Mr. Chief Justice White 502, 507, "restraint of trade * * * said that "acts which it was con- is not always the same thing as sidered had a monopolistic ten- the mere restraint of competi- dency, especially those which were tion", nevertheless the words "to thought to unduly diminish com- substantially lessen competition", petition * * * came also in a as used in the Clayton Law, appear generic sense to be spoken of and to mean neither more nor less treated * * * as being in re- than substantially and unreason- straint of trade", and that "the ably to restrain trade. In Great acts which produce the same re- Atlantic cC Pacific Tea Co. v. suit as monopoly * * * all Cream of Wheat Co. (1915) 224 came to be spoken of as, and to Fed. 566, 574, Hough J., referring be indeed synonymous with, re- to the Clayton Law, said that sec- straint of trade" (our italics), tion two thereof "plainly identi- Cf., note 38, infra. 12 Ch.IL] REGULATIVE POWER. [§io. Law renders it exceedingly difficult for a person engaged in interstate commerce to tell in advance whether, if he shall discriminate in price between purchasers or make an exclusive purchase and sale arrangement he will thereby violate the law, because in the nature of things he cannot foresee very clearly what ultimate "effect" upon competition, trade, and monopoly his conduct may have. 37 s^Since the words "to substan- tially lessen competition" as used in the Clayton Law appear to mean, in effect, unduly to restrain trade (note 36 supra, note 38, infra), the "rule of reason" is of course as much a part of the Clayton Law as it is of the Sher- man Law. Standard Oil Co. v. United States (1911) 220 U. S. 1, 60. Cf., note 55, infra. And the essential uncertainty of the "rule of reason" cannot be gainsaid, especially when the standard of reason must be applied prophet- ically to determine in advance the lawfulness of the possible or prob- able effect of a given course of conduct, if such course of conduct shall be adopted. "But * * * where is a court to find the standard of reason? It seems to us that it must be found in the gradually accumulated results of general experience and ob- servation, in the gathered wis- dom of the community, for this is the product of a common and a prolonged effort by men who theorize and by practical men alike to deal as fairly, as justly, and as equitably as may be pos- sible with situations that are often obscure and complicated, and of high importance to large classes and to many individuals. Obviously a standard should have a true relation to the subject measured; and, since the inquiry here is whether in a given case trade is likely to be, or has actu- ally been, unduly restrained, rea- son can answer the question only by going to the facts of life and drawing upon the accumulated store of knowledge. * * * When should the standard of rea- sonableness be applied? Evi- dently this will depend on the time when the question is sub- mitted for decision. This time may either precede the proposed course of conduct, or it may fol- low the beginning of such a course so quickly that no body of experience, or no sufficient body, has yet come into existence. In that event the nature of things compels the court to enter the field of prophecy, or of probable anticipation. In such a situation, nothing else can be done. * * * In this world we must do our best with the means at our disposal. Even if prophets are always in danger of being discredited by the event, we are sometimes com- pelled to speculate about the fu- 13 §10.] THE FEDERAL TBADE COMMISSION. [Ch. II. As to price discriminations, further uncertainty as to what will constitute a violation of law arises out of the declaration in section two of the Clayton Law that ven- dors of goods in interstate commerce shall not be pre- vented from selecting their own customers 38 in bona fide transactions, and not in restraint of trade, and that a discrimination in price between different purchasers of commodities may be made with propriety if the discrim- ination (1) is on account of differences in the grade, ture; and our duty then is to check our speculations as much as possible by taking account of such probabilities as may arise from past experience and observation." McPherson J. in United States v. Keystone Watch Case Co. (1915) 218 Fed. 502, 516-517 (our italics). CI, also note 71, infra. ssin Great Atlantic & Pacific Tea Go. v. Cream of Wheat Co. (1915) 224 Fed. 566, 574, Hough J., referring to section two of the Clayton Law said: "But price discrimination is only forbidden when it 'substantially' lessens competition. Construing the whole section together, the last exception reads in effect that a 'vendor may select his own bona fide customers providing the effect of such selection is not to sub- stantially and unreasonably re- strain trade'" (court's italics). In the same case, on appeal (227 Fed. 46, 49), Lacombe, J., held that neither under the Sherman Law, nor the Clayton Law, had we "yet reached the stage where the - selection of a trader's cus- tomers is made for him by the government", the trader's business not constituting a monopoly or a 14 quasi-monopoly. Cf., also, note 36, supra. The extent of the right of a trader to select his own cus- tomers, in the sense of refusing to supply his goods to anybody ex- cept upon some restrictive condi- tion, as for instance that the purchaser should not sell the ar- ticle purchased for less than a fixed minimum price, and then enforcing that restrictive condi- tion, was a matter of uncertainty, especially as to patented articles, prior to the enactment of the Clayton Law. See Dr. Miles Medical Co* v. Park & Sons Co. (1911) 220 U. S. 373, and Bauer v. O'Donnell (1913) 229 U. S. 1, in both of which cases the court was of divided opinion; and Ford Motor Co. v. Union Motor Sales Co. (1914) 225 Fed. 373, and Amer- ican Graphaphone Co. v. Boston Store (1915.) 225 Fed. 785, which appear to be in conflict with each other. See also United States v. Motion Picture Patents Co. (1915) 225 Fed. 800, 805. It is not ap- parent that the Clayton Law has dissipated any of the uncertainty which, prior to its enactment, ex- isted in that regard. Ch. II. J REGULATIVE POWER. [§ H- quality, or quantity of the commodity sold, or (2) makes only due allowance for difference in the cost of selling or transportation, or (3) is made in good faith, in the same or different communities to meet competition. § 11. Intercorporate shareholding: Equal difficulty and uncertainty is involved in determining when inter- corporate shareholding, and the acquisition of stock by a holding company, will constitute a violation of the Clayton Law. The acquisition by one corporation engaged in com- merce of the stock of another, and the acquisition by a corporation not engaged in commerce of the stock of two or more corporations which are so engaged, are for- bidden by the Clayton Law 39 only if "the effect of such acquisition may be to substantially lessen competition" between the corporations engaged in commerce, or "to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce." If one corporation shall acquire shares of stock of an- other, it is manifestly impossible to foresee accurately what ultimately may be the "effect" thereof upon com- petition, restraint of commerce, and monopoly. 40 If, after the acquisition by one corporation of the stock of another, competition between the corporations shall be lessened to a degree, it must necessarily be exceedingly difficult, if not impossible, to establish with reasonable certainty either that the acquisition of the stock stands as a cause for the lessening of competition as an effect, or that competition has been so "substantially" lessened as to result in a violation of the Clayton Law. That, however, is not all. Not only is the rule against intercorporate stock-ownership vague in terms and diffi- cult of application, but in addition numerous exceptions s»Clayton Law, Sec. 7. *°See note 37, supra. 15 §11.] THE FEDEBAL TRADE COMMISSION. [Ch. II. are engrafted upon it. Subject to the proviso that noth- ing in section seven of the Clayton Law shall be con- strued to authorize or make lawful anything which, prior to the enactment of the Clayton Law was forbidden by the antitrust laws, the rule in said section seven against intercorporate shareholding does not apply at all (1) when one corporation purchases shares of the capital stock of another solely for investment, and does not vote or otherwise use the shares to bring about, or to attempt to bring about, a substantial lessening of competition; or (2) when a corporation causes the formation of sub- sidiary corporations for the purpose of actually carrying on their immediate lawful business, or the branches or extensions thereof, and owns and holds all or a part of the stock of such subsidiary corporations if the effect of forming the subsidiaries is not substantial- ly to lessen competition; or (3) when a common car- rier, subject to the laws regulating interstate commerce, constructs branches or short lines, as feeders to its main line, and acquires a part or all of the capital stock of such branch lines; or (4) when such common carrier acquires a part, or all, of the capital stock of a branch or short line' constructed by an independent company, if ^ there is no substantial competition between the com- pany which constructs or owns the branch line, and the common carrier which acquires the stock of the branch line; or (5) when such common carrier, for the purpose of extending its line, acquires the stock of another com- mon carrier, if there is no substantial competition be- tween the two carriers. Intercorporate shareholding by banks, banking asso- ciations, and trust companies, and by common carriers subject to the jurisdiction of the Interstate Commerce Commission, of course does not concern the Trade Com- 16 Ch. II.] REGULATIVE POWER. [§12. mission. 41 But corporations subsidiary to such common carriers might be engaged in interstate commerce within the purview of the Clayton Law, and at the same time might not be so engaged in interstate commerce as to be subject to the jurisdiction of the Interstate Commerce Commission under the laws regulating interstate com- merce. Such subsidiaries, and all other corporations subject to the jurisdiction of the Trade Commission, must necessarily find it hard to determine with reason- able certainty whether, if they shall participate in ar- rangements for intercorporate shareholding, or for the acquisition of stock by holding companies, their acts will involve them in difficulties with the Trade Commission as violating section seven of the Clayton Law, or will be held to fall within some -of the exceptions expressed in that section. §12. Interlocking directorates: The Clayton Law does not inhibit interlocking directorates until from and after October 15, 1916, 42 and the enforcement of the inhibition is entrusted to the Federal Eeserve Board, and the Interstate Commerce Commission, re- spectively, so far as banks and common carriers are concerned. 43 If an unlawful interlocking directorate "Clayton Law, Sec. 11. section. The Solicitor of the «That is, until two years after Treasury in an opinion dated No- the date of the approval of the vember 24, 1914, rendered for the Clayton Law. See Sec. 8 of said Federal Reserve Board, has, how- law. On the phraseology of said ever, held that the banks cov- Sec. 8, a question might be raised ered by the second paragraph as to whether the suspension for were as much within the two- two years of the inhibition against year suspension clause of said sec- interlocking directorates granted tion as were the banks covered by the first paragraph of said sec- by the first paragraph thereof, tion, is applicable in the case of «Clayton Law, Sec. 11. The federal banks in cities of more inhibition against interjocking di- than 200,000 inhabitants covered rectorates does not apply to "com- by the second paragraph of sei^ 1 mon capers subject to the act to 17 12.] THE FEDEEAL TEADE COMMISSION. [Ch. II. should be created by a bank, or by an interstate common carrier within the operation of the Clayton Law, the Trade Commission could not exert its regulative power upon the corporation. But it would seem that the Trade Commission might proceed against the individual di- rector, officer, or employee taking part in the violation of the law, if his participation in the management of the corporation constituted engaging in interstate commerce on his part. (1) Banking corporations. There is perhaps a less degree of uncertainty as to when the creation of an in- terlocking bank directorate will constitute a violation of the Clayton Law, than has been noted to exist in respect of price discriminations, exclusive purchase and sale ar- rangements, and intercorporate shareholding. So far as the eligibility of the director of one bank for lawful membership in the directorate of another, depends upon the aggregate amount of the deposits, capi- tal, surplus, and undivided profits of the banks, or either of them, section eight of the Clayton Law provides a reasonably certain rule for ascertaining such aggregate amount, by declaring that it shall be the average amount of deposits, capital, surplus, and undivided profits as shown in the official statements of such bank filed as provided by law during the fiscal year next preceding the date set for the annual election of directors. The exceptions to the statutory inhibition against in- terlocking bank directorates are fewer in number, and regulate commerce, approved Feb- panies, and the like, which have ruary fourth, eighteen hundred been made subject to the act to and eighty-seven". See Clayton regulate commerce by amend- Law, Sec. 8. That means, of ments thereof since 1887, are course, common carriers by rail within the rule of the Clayton or water. It would seem that Law against interlocking directo- other kinds of interstate carriers, rates, such as pipe lines, telegraph com- 18 C'H. II. J EEGULATIVE POWER. [§12. less elastic in character, than the exceptions to the rules declared by the Clayton Law against price discrimina- tions, exclusive purchase and sale arrangements, and intercorporate shareholding. The statutory rules of sec- tion eight of the Clayton Law prohibiting interlocking bank directorates are of universal and rigid application, except that (a) they do not apply to mutual savings banks not having a capital stock represented by shares ; (b) a director of a federal bank, in respect of which an interlocking directorate with another bank is other- wise forbidden, may be a director of not more than one other bank, federal or state, where the entire capital stock of one of the banks having a common director is owned by the stockholders of the other; and (c) a di- rector of "Class A" of a federal reserve bank may be an officer or director, or both, of one member bank. (2) Non-banking corporations. As to interlocking directorates in the case of such corporations other than banks as are within the operation of the Clayton Law, it is quite as difficult to tell what will constitute a vio- lation of section eight of the Clayton Law as in the case of price discriminations, exclusive purchase and sale arrangements, and intercorporate shareholding. So far as the inhibition against interlocking directorates in such non-banking corporations depends upon the aggregate amount of capital, surplus and undivided profits of the corporations, or either of them, the Clayton Law is defi- nite and certain. It declares that the eligibility of the director of one such corporation for membership in the directorate of the other shall be ascertained by taking the aggregate amount of the corporation's capital, sur- plus, and undivided profits, exclusive of dividends de- clared but not paid to stockholders, at the end of the corporation's fiscal year next preceding the election of directors. 19 §13.] THE FEDERAL TRADE COMMISSION". [Ch. II. But the exception to the rule forbidding interlocking directorates as to corporations within the operation of the Clayton Law, other than banks, is- very indefinite and uncertain. Two such corporations, regardless of how great may be the amount of the capital, surplus and un- divided profits of either or both of them, may have in- terlocking directorates unless such corporations are, or previously shall have been, by virtue of their business and location of operation, competitors, so that the elimi- nation of competition by agreement between them would constitute a violation of any of the antitrust laws. This obviously makes the lawfulness of interlocking directo- rates created by two such corporations, depend finally upon an interpretation of the antitrust laws. If the two corporations, being otherwise within the terms of the Clayton Law, are competitors so that elimination of com- petition between them by agreement would violate any provision of the antitrust laws, they may not lawfully have interlocking directorates. Otherwise they may. It would be difficult to conceive a more uncertain and shift- ing standard of corporate conduct than this one, by which the question of what elimination of competition between two corporations by agreement would constitute a viola- tion of the antitrust laws, is made the test of the lawful- ness of an interlocking directorate between such corpo- rations. 44 § 13. Clayton Law creates merely a new remedy: It appears doubtful, to say the least, whether sections two, three, seven, eight, and eleven of the Clayton Law have materially changed the previously existing substantive law of interstate trade. It would seem that, prior to the enactment of the Clayton Law, the devices for restrain- ing trade and creating monopoly denounced by that stat- «Cf., note 37, supra. 20 Cm II.] KEGULATIVE POWEB. [§13. ute, might have been reached under the Sherman Law. 45 Thus the so-called "Gary Dinners" held to regulate prices in the iron and steel industry, appear to have represented a lesser degree of co-operation to eliminate competition in interstate trade than that which would result from such interlocking directorates as are for- bidden to commercial corporations by the Clayton Law. The "Gary Dinners" offended against the Sherman Law. 46 Again, exclusive purchase and sale arrange- ments such as are declared unlawful by section three of the Clayton Law, were prominent features in several cases wherein the government obtained decrees under the «The all-embracing scope of the Sherman Law has been empha- sized repeatedly. In United States v. Keystone Watch Case Co. (1915) 218 Fed. 502, 515-516, McPherson J., referring to the Sherman Law, said: ' "The act of 1890 is directed against restraint of interstate or foreign trade * * * Trade may be restrained * * * in many ways and by many devices, but these are all covered by the first and second sections of the act. In these sec- tions two classes of prohibited acts are described: (1) The concerted action of two or more persons, which may take the form of a contract, a combination in what- ever form, or a conspiracy; and (2) monopoly, or the attempt to monopolize, which may be the act of one person alone, or of more than one. These two classes are intended to be all-embracing, and thus jar in the history of the stat- ute no variety of device has es- caped their sweep" (our italics). In Standard Sanitary Mfg. Go. v. United States (1912) 226 U. S. 20, 49, Mr. Justice McKenna said that the "comprehensive and thorough character" of the Sherman Law, and "its sufficiency to prevent evasions of its policy, 'by resort to any disguise or subterfuge of form' or the escape of its provis- ions 'by any indirection'," had been demonstrated. In Standard. Oil Go. v. United States (1911) 221 U. S. 1, 62, Mr. Chief Justice White, referring to the Sherman Law, said that "the statute by the comprehensiveness of the enu- merations embodied in both the first and second sections makes it certain that its purpose was to prevent undue restraints of every kind or nature" (our italics). See also United States v. Ameri- can Tobacco Co. (1911) 221 U. S. 106, 178-181. Cf., note 93, infra. ^United States v. U. S. Steel Corporation (1915) 223 Fed. 55, 154-161, 173-178. 21 § 13. J THE FEDERAL TRADE COMMISSION. [Ch. II. Sherman Law. 47 So, also, as to intercorporate share- holding against which section seven of the Clayton Law is directed. 48 It may perhaps be that in so far as sec- tion three of the Clayton Law, in forbidding exclusive purchase and sale arrangements, thereby prohibits the selling or leasing of a patented article, as for , instance a machine, upon a restrictive condition binding the pur- chaser or lessee not to use in connection with such arti- cle any supplies obtained from a competitor, or from any source except the patentee, pre-existing law has to that extent been changed. That such is the case cannot, how- ever, be asserted very confidently, because the extent of the right of a patentee to make such so-called "tying" contracts was not very clearly or certainly defined before the Clayton Law was enacted, 49 and considering the limitations upon the prohibition of "tying" contracts, as found in the Clayton Law, 50 the right of a patentee to make such contracts is hardly, if at all, less vague and uncertain than it was before that statute was en- acted. Thus viewed, the principal effect upon pre-exist- ing law of sections two, three, seven, eight, and eleven of the Clayton Law appears to have been merely the "United States v. Great Lakes divided opinion; United States v. Towing Co. (1913) 208 Fed. 733, Winslow (1913) 227 U. S. 202, 204, 738-739, 743, 745; United States v. 205, 216-217; Elliott Machine Co. Keystone Watch Case Co. (1915) v. Center (1915) 227 Fed. 124; 218 Fed. 502, 511; United States United States v. United Shoe Ma- v. Motion Picture Patents Co. chinery Go. (1915) 227 Fed. 507, (1915) 225 Fed. 800, 809; United 510-511. States v. Eastman Kodak Co. sosecs. 4, 10, supra. As to the (1915) 226 Fed. 62, 73. retroactive operation of the pro- isunited States v. Union Pacific visions of the Clayton Law relat- R. R. Co. (1912) 226 U. S. 61, 86, ing to "tying contracts", see' El- 95-96; United States v. American u tt Machine Co. v. Center (1915) Tooacco Co. (1911) 221 U. S. 106, 227 Fed. 124; United States v. 143-148, 176. United Shoe Machinery Co. (1915) i»Hcnry v. Dick Co. (1912) 224 227 Fed. 507, 510-511. U. S. 1, in which the court was of 22 CH. II.] REGULATIVE POWER. [§14. creation of a new remedy, in the form of statutory pro- ceedings 51 by the Trade Commission, for wrongs against which, prior to the enactment of the Clayton Law and ever since the enactment of the Sherman Law, all the power of the government could be brought to bear. § 14. Violations of the Trade Law: The rule of conduct prescribed by the Trade Law is even more un- certain than the rules established by the Clayton Law in respect of price discriminations, exclusive purchase and sale arrangements, intercorporate shareholding, and interlocking directorates. The Trade Law declares merely that "unfair methods of competition in com- merce" are unlawful. 52 Unlike the Clayton Law, the Trade Law does not make explicit even the general na- ture of the acts and conduct which it denounces as un- lawful. It does not in any way define or describe what shall constitute "unfair methods of competition in com- merce," which it authorizes the Trade Commission, in the exercise of its regulative power, to prevent. What trade practices are inhibited by the Trade Law depends, therefore, upon what may be the sound interpretation of the statute. § 15. Injury to public essential to violation of Trade Law: There would seem to be adequate grounds to sup- port the conclusion that in declaring ' ' unfair methods of competition in commerce" to be unlawful, and authoriz- ing the Trade' Commission to institute proceedings to prevent such methods, Congress intended to denounce a public, as distinguished from a private, injury in re- spect of trade. Congress would hardly undertake, if indeed it has the power, to create and maintain at the cost of the public siCIayton Law, Sec. 11; and Sec. 62Trade Law, Sec. 5. 29, infra. 23 §15. J THE FEDERAL TRADE COMMISSION. [Ch. II. an administrative body to prevent, at public expense, any competitive trade practice essentially injurious merely to the individuals directly affected thereby. Moreover, by the terms of the Trade Law, the Trade Commission is required to institute proceedings to prevent the competi- tive methods generically denounced by the statute, only ' : if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public." The presence and force of that phrase in the Trade Law should not, it would seem, be overlooked. What is to the "interest of the public" in respect of preventing or encouraging any method of competition would seem quite clearly to be essentially a legislative question, and it is not open to doubt that the Constitu- tion forbids that the Trade Commission should be made a repository of legislative power. It therefore seems probable that in order to avoid a construction of the Trade Law which would make that statute of at least doubtful constitutionality, the courts will hold that, by authorizing the Trade Commission to exert its regula- tive power if it should appear to the Commission that the institution of proceedings by it looking to the pre- vention, by the decree of a competent court, of unfair methods of competition would be to the "interest of the public," Congress did not intend to delegate to the Com- mission the duty of determining the requirements of a sound public policy in respect of methods of competition, and did not intend to confer upon the Commission un- controlled power to suppress this, or encourage that, method of competition, according as the Commission, in the exercise of a wise discretion, might consider the one method of competition harmful, and the other beneficial, to the public. If that conclusion be sound, it would seem to follow therefrom that, when enacting the Trade Law, Congress must have entertained the view that there was 24 Ch. II.] REGULATIVE POWER. [§15. already in existence, in pre-existing law, some estab- lished rule or standard of what was to the "interest of the public" in respect of competition in trade, and must have intended to require that the Trade Commission should refer to, and be guided by, that rule or standard in discharging its administrative function of instituting proceedings designed to bring about action by competent courts to prevent unfair competitive practices. 53 When the pre-existing law is examined to ascertain what rule or standard Congress, by the use in the Trade Law of the phrase "interest of the public," intended to impose upon the Trade Commission for its guidance and control in determining when it should, and when it should not, institute proceedings with a view to having the courts enjoin any competitive method as unfair and so repugnant to the Trade Law, it appears that the only conduct in respect of competition in trade which our sys- tem of law has ever recognized as wrong and prejudicial to the "interest of the public," is such conduct as may result in undue and unreasonable restraint of trade and the creation or perpetuation of monopoly, which are or may be attended by the enhancement of prices, the de- struction of individual opportunity, initiative and inde- pendence, and other like injuries to the whole people. 54 ssThe Clayton Law does not con- eight of the Clayton Law. See tain any such provision in respect note 36, supra. of the "interest of the public" as **ln Nash v. United States is found in the Trade Law. Such (1913) 229 U. S. 373, 376, Mr. provision in the Clayton Law Justice Holmes, referring to the would be superfluous. Its place is Sherman Law, said "that only supplied by those terms of the such contracts and combinations Clayton Law which expressly are within the act as, by reason make a substantial lessening of of intent or the inherent nature competition, and a tendency to of the contemplated acts, preju- create monopoly essential to the dice the public interests by unduly unlawfulness of the acts inhibited restricting competition or unduly by sections two, three, seven, and obstructing the course of trade" §15.] THE FEDERAL TRADE COMMISSION. [Ch.II. It would therefore seem to follow that an indispensable attribute of any and every method of competition which lies within the inhibition of the Trade Law, must be a tendency, or a susceptibility of use, to restrain interstate or foreign trade unduly, or to create or perpetuate mo- nopoly. 55 (our italics). See also United States v. American Tobacco Co. (1911) 221 U. S. 106, 179. In United States v. International Harvester Co. (1914) 214 Fed. 987, 1005, Sanborn J., referring to the Sherman Law, said: "It is equally well established that the reason for the prohibition by the English rule of public policy and by the statute under consid- eration of unreasonable restraints of and attempts to monopolize trade was and is that, by unduly restricting competition, they are injurious to the public in that (1) they raise the prices to the con- sumers of the articles they affect, (2) limit their production, (3) deteriorate their quality, and (4) decrease the wages of the labor and the prices of the materials required to produce them. * * * Undue injury in the ways just stated to the public (that is to say, to the consumers and mak- ers of the articles produced or sold) is the basis and reason for the prohibition and the test of undue or unreasonable restraint or attempt to monopolize" (our italics)-. See also, Standard Oil Co. v. United States (1911) 221 U. S. 1, 52, 78; United States v. St. Louis Terminal (1912) 224 U. S. 383, 409. In applying the test of what the "public interest re- quires" as the measure of the re- lief which should be granted to the government in a suit under the Sherman Law, it was held in United States v. Keystone Watch Case Co. (1915) 218 Fed. 502, 519, that the "public interest" required only that the defendant should discontinue the policy of boycott, and the practice of seeking by mere notices to retailers, with whom it was not in any privity of relationship, to prevent the sale of its patented product for less than a certain minimum price. Otherwise stated, the only acts held injurious to the "public in- terest" were acts which tended di- rectly to restrain trade, perpet- uate monopoly, and enhance prices. ssThat conclusion, of course, makes the "rule of reason" a part of the Trade Law, just as it is a part of the Clayton Law, as was noted elsewhere. See note 37, supra. It also excludes from the cognizance of the Trade Commis- sion trade practices which, how- soever unfair, nevertheless result ordinarily in merely private wrongs, injurious only to the per- sons directly affected thereby, such for instance as trade libels, consisting of the disparagement of the goods of a rival, Everett Piano Co. v. Maus (1912) 200 Fed. 26 Ch.ILJ REGULATIVE POWER. [§15. That view assimilates the power of the Trade Com- mission in respect of regulating competition, to its other powers. The nature of the acts denounced by those por- tions of the Clayton Law which the Trade Commission is authorized to enforce, 56 and the nature of the subject- matter in respect of which the Commission's advisory and investigative powers are to be exercised, 57 show that the Commission was created to assist in combating the same evils of restraint of trade and monopolization against which the antitrust laws are directed. Nothing suggests that Congress intended that the Trade Com- mission should go outside that field of action in exercis- ing the regulative power conferred upon it by the Trade Law in respect of competition. 718, Victor Safe & Lock Co. v. Deright (1906) 147 Fed. 211, Non- pareil Cork Mfg. Co. v. Keasbey & Mattison Co. (1901) 108 Fed % 721, Gott v. Pulsifer (1877) 122 Mass. 235; "unfair competition", in the sense of imitating the name or lahel of a trade rival, or the trade dress of his goods, and thereby deceiving the public and palming off upon it one's own goods as and for the goods of an- other, which act obviously may, or may not, injure the public in a pecuniary sense, depending upon whether the goods so deceitfully palmed off upon the public are inferior or equal in quality to the goods of the trader whose name or label is imitated, McLean v. Fleming (1877) 96 U. S. 245, Goodyear Co. v. Goodyear Rubber Co. (1888) 128 U. S. 598; slander of title to a patent, Flint v. Hutchinson Smoke Burner Co. (1892) 110 Mo. 492, Cousins v. Merrill (1865) 16 U. C. C. P. 114; and sending out false notices that a rival's goods are made in in- fringement of a patent, and threatening in bad faith to sue the purchasers of such goods as infringers, Adriance Piatt & Go. v. National Harrow Co. (1903) 121 Fed. 827, Emack v. Kane, (1888) 34 Fed. 46. If, however, those practices, although usually and ordinarily private wrongs merely, should be adopted for the purpose of unduly restraining trade or ac- quiring a monopoly and should be found susceptible of effective use to accomplish that wrong to the public then it would seem that the Trade Commission might take cognizance of them under its power to prevent unfair methods of competition. ssSecs. 4, 9, 10, 11, 12, supra. "Sees. 5, 6, supra; Chapters III and IV, infra. § 15. J THE FEDERAL TRADE COMMISSION. [ClI. IT. Again, the fact that in order to prevent the methods of competition generically declared unlawful by the Trade Law, Congress has provided substantially the same statutory proceedings 58 as to enforce compliance with sections two, three, seven and eight of the Clayton Law, suggests that the competitive methods intended to be denounced by the Trade Law are acts of the same general nature, susceptible of being adequately prevented by the same proceedings, as the price discriminations, exclusive purchase and sale arrangements, intercorpo- rate shareholding, and interlocking directorates which are specifically described and declared unlawful in the Clayton Law. The indicia of unlawfulness common to all of the practices forbidden by sections two, three, seven and eight of the Clayton Law are tin: eliminating or substantial lessening of competition, the restraining of commerce, and the creating of monopoly. 59 The same indicia must, it would seem,, be indispensable to a com- petitive trade practice before it can be held to be within the purview of the Trade Law. That conclusion accords with the sense in which the words "unfair methods of competition" were used in the majority opinion of the United States Supreme Court in the Standard Oil Company Case. In that case, in outlining the contents of the govern- ment's bill of complaint, Mr. Chief Justice White, for the majority of the court, said that after charging that the Standard Oil Trust and the Standard Oil Company had monopolized and restrained interstate commerce in petroleum, "the bill at great length additionally set forth various means by which * * * the monopoly and re- straint complained of was continued." The averments of the bill as to the various means by which the monopoly and ssSec. 29, infra, oog ecs . 4, 9, 10, 11, 12, supra. 28 Ch. II.] REGULATIVE POWER. [§16. restraint, once established, had been continued could, the Chief Justice said, properly be grouped under the head, among others, of ' ' restraint and monopolization by * * * unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent" (our italics). 60 The phrase "unfair methods of competition" thus ap- pears to have been used by the Supreme Court as ge- nerically descriptive of various trade practices the effect of which had been to suppress competition, restrain trade unduly, and create or perpetuate monopoly. That use of the phrase in the Standard Oil Company Case was brought to the attention of the Senate while the Trade Law was being debated there. 61 It therefore seems rea- sonable to conclude that when Congress inserted the words "unfair methods of competition" in the Trade Law, the legislative intention was that those words should be understood and construed in the same sense as that in which the Supreme Court had used them. § 16. Unfairness essential to violation of Trade Law: It is not, however, to be concluded that the fact that the effect of a given trade practice may be to suppress com- petition, restrain trade unduly, and create or perpetuate monopoly is sufficient, in and of itself, to make such prac- tice unlawful within the purview of the Trade Law. To reach that conclusion would be to ignore the character of the practices mentioned illustratively in the Standard Oil Company Case es as "unfair methods of competition," and to fail to give due effect to the word "unfair" as ^Standard Oil Co. v. United (bound vol. pp. 12143, 12148). States (1911) 221 U. S. 1, 42-43. e^Sec. 15, supra. 6151 Cong. Rec. 13220, 13225 §16.] THE FEDERAL TRADE COMMISSION. [Ch. II. used in the Trade Law. Conceivably, an individual en- gaged in commerce might possess such superior fore- sight, business sagacity, and industrial efficiency, that by the use of only such competitive methods as everybody would concede to be in the highest degree ethical and proper, he would be able to overwhelm every rival in his field of commerce, and to establish a complete monopoly. The Trade Law is probably not to be understood as for- bidding that. 03 Before any given trade practice can be held to be within the operation of the Trade Law, and the regulative power of the Trade Commission, it is apparently essential not only that the effect of the prac- tice should be to suppress competition, restrain trade ea"I would not say that every person who strives to gain as much as he can of the commerce in a commodity is thereby at- tempting to monopolize that com- merce, within the meaning of the term as it is employed in legis- lative acts and understood in the courts. Magnitude of business does not, alone, constitute a mo- nopoly, nor effort at magnitude an attempt to monopolize." Hook J., in United States v. Standard Oil Co. (1909) 173 Fed. 177, 195. See also United States v. U. 8. Steel Corporation (1915) 223 Fed. 55, 96. "A monopolizing by effi- ciency in producing and market- ing a better and cheaper article than anyone else is not within it [i. e. the Sherman Law]. How- ever, possibly, efficiency is so abundant that in experience there never will be, as there never has been, such a monopolizing." Cochran J., in Patterson v. United States (1915) 222 Fed. 599, 619. "Congress certainly did not intend to condemn the proper exercise of business zeal and energy * * * As population has swelled, and as vast aggregations of men have multiplied their wants, the inevi- table trend of modern affairs has called for large business enter- prises, as well as for small; and we think it no more than reason- able to say that, when a large business has proved itself to be beneficial and not harmful to the community, it should not be con- demned merely because it is large." McPberson J., in United States v. Keystone Watch Case Co. (1915) 218 Fed. 502, 518. "There is no limit in this country to the extent to which a business may grow." Hazel J., in United States v. Eastman Kodak Co. (1915) 226 Fed. 62, 80. See also, Sheppard J., in United States v. American Naval Stores Co. (1909) 172 Fed. 455, 457-458, 459, quoted in note 93, infra. Cf., however, note 86, infra. 30 Ch. II. J REGULATIVE POWEE. [§17. unduly, and create monopoly, but also that the practice should be "unfair." § 17. What is "unfair": The word "unfair" is un- deniably indefinite in sense and meaning. What one per- son may consider "unfair" in competitive trade, another may perhaps regard as legitimate. Conceivably, mem- bers of a court may disagree as to whether or not, under the circumstances of a particular case, a given method of competition is "unfair", just as in one case they were unable to agree and adjudge whether or not certain regu- lations there involved constituted an "unreasonable" restraint of trade within the purview of the Sherman Law. 64 That, however, is of no consequence, so far as concerns the validity of the Trade Law. The Trade Law does not purport to denounce any competitive act as a crime. It does not provide for the imposition of a fine upon, or for the imprisonment of, any person guilty of practising ' ' unfair methods of competition. ' ' Whatsoever the peril, under the Sherman Law, 65 of practising "unfair methods of competition", a person resorting to such prac- tices incurs no other risk, under the Trade Law, than that the Trade Commission, by proceeding as pointed out in the statute, may obtain the order of a court requiring him to cease and desist from such practice. Vague as it is in making unfairness a standard of unlawfulness in re- spect of methods of competition in commerce, the Trade Law would nevertheless seem to be sufficiently definite to escape being declared void for uncertainty. 66 ^United States v. Periodical Corp. v. Ohio Indus'l Comm. (1915) Clearing House, an unreported 236 U. S. 230, 245-246, 247; Fox v. case, referred to in 216 Fed. 973. Washington (1915) 236 U. S. 273. esSecs. 27, 28, infra. Cf., International Harvester Co. v. eeNash v. United States (1913) Kentucky (1914) 234 U. S. 216, 229 U. S. 373, 376-378; Standard 221-224. See also, note 37, supra, Oil Co. v. United States (1911) and note 71, infra. 221 U. S. 1, 69-70; Mutual Film §17.] 'EDERAL TRADE COMMISSION. [Cll. II. So far as the practical administration of the Trade Law is concerned, the elasticity of meaning of the word "unfair", as applied to competitive practices, may result in some difficulty. But the Trade Commission and the courts must make shift to determine as best they may, from the circumstances of each case, whether the partic- ular competitive practice involved therein is "unfair" within the meaning of the Trade Law, just as other agencies of government have to determine other ques- tions for the solution of which there is no very certain standard to which reference may be made, as for in- stance the question of what constitutes an "unjust" dis- crimination, and what an "undue" preference, under the interstate commerce laws, 67 and what an "undue" and "unreasonable" restraint of trade under the Sherman Law. 08 The difficulty of determining what is "unfair," within the purview of the Trade Law, is hardly to be regarded as insuperable. Prior to the enactment of the Trade Law, the courts in discussing monopoly cases not in- volving any "unfair competition" in the accepted sense of palming off one man's goods as and for the goods of another, 00 had referred to the "business conduct" of a corporation "towards its competitors" as "honorable, clean and fair," and had used such expressions as "legit- imate competition" and "fair competition," and "un- fair competition. ' ' 70 If the courts knew then, as it must be assumed they did, what business conduct on the part G?4 U. S. Comp. Stat. (1913) 987, 1002; United States v. Stand- Tit. 56A, Ch. A, Sees. 8564, 8565, ard Oil Company (1909) 173 Fed. P- 3825. 177, 191, 197; Ware-Kramer To- o»See note 37, supra. baeco Co. v. American Tobacco Co. o»See note 55, supra. (1910) 180 Fed. 160, 165, 170; T>Vnited States v. International United States v. Patterson (1913) Harvester Co. (1914) 214 Fed. 205 Fed. 292, 297, 301. 32 Ch. II.] REGULATIVE POWER. [§ 17. of a corporation towards competitors was honorable, clean and fair, and what competition was legitimate, fair, and unfair, they can probably apply with reasonable satisfaction the word "unfair" as used in the Trade Law in forbidding "unfair methods of competition." 71 Likewise individuals engaged in commerce who really wish to obey the Trade Law's inhibition against "unfair methods of competition," will probably be able for the most part to keep on the side of safety. Within limits, the word "fair" has about the same meaning for one normal man as for another. Persons who may be in doubt as to whether or not any given competitive method held in contemplation is fair, may find a guide to proper action in considering the requirement of "common so- cial duty" which, although somewhat vague, has been recognized by the law as a criterion of correct conduct in analogous situations. 72 They may take account also of judicial dicta to the effect "that there is more of the Decalogue in the common law respecting the trading of merchants than is sometimes supposed," 73 and that "the ancient adage 'Live and let live' has its application to "In United States v. Keystone tifies, and, moreover, we may Watch Case Go. (1915) 218 Fed. safely deny that the words are 502, 518, in considering what was too vague for satisfactory use; for "unreasonable restraint of trade", it must be remembered that the and having in mind no doubt the common agreement of moral opin- Clayton Law and the Trade Law, ion in the community furnishes McPherson J., said: "On this an adequate guide to their practi- subject we are certainly able to cal meaning and their practical say some things with confidence. application. They are not likely Competitors must not be op- to be misapprehended or misap- pressed or coerced; fraudulent or plied" (our italics). Cf., note 37, unfair or oppressive rivalry must supra, and also cases cited in note not be pursued. And if these words 66, supra. are criticized as too general, we ™Nash v. United States (1913) may reply that such generality is 229 U. S. 373, 377. apparently unavoidable, as some ^United States v. Standard Oil recent legislation of Congress tes- Co. (1909) 173 Fed. 177, 196. 17.1 THE FEDERAL TEADE COMMISSION. [Ch. II. trade, and is a safe rule to go by," 74 and that "competi- tion for trade is likened to a race in which all may enter, but in which there must be no unfair jostling or hamper- ing of others. Each one is free to exert all his powers, and distance, if he can, all competitors and win all the prizes ; but he must run fairly and accord to others a like freedom." 75 They may see also what economists have regarded as unfairness in competitive practices. 76 And they may be guided by observing the nature of the practices of local price cutting, payment of rebates, oper- ation of bogus independent companies, and espionage T*United States v. Patterson (1912) 201 Fed. 697, 717. ^United States v. Motion Pic- ture Patents Co. (1915) 225 Fed. 800, 805. 76B. Dana Durand, in his lec- tures on "The Trust Problem", delivered at Harvard University in April, 1914, referred to "Price discriminations and other unfair methods of competition" (our italics). In addition to "price discriminations", he recognized as "unfair competitive methods" the obtaining of preferential rates from common carriers, and ex- clusive purchase and sale arrange- ments. 28 Quart. Journ. Econ. 391, 392-394. And William S. Stevens, writing on "Unfair Com- petition", in the Political Science Quarterly, in June and September, 1914, said: "Fair competition in an economic sense signifies a com- petition of economic or productive efficiency. On economic grounds an organization is entitled to re- main in business so long and only so long as its production and selling costs enable it to hold its own in a free and open market. * * * Unfortunately competi- tion is not always conducted under such conditions of equal opportunity in a free and open market. Productive and selling efficiency alone do not always per- mit an organization to survive, owing to the introduction of meth- ods and practices which destroy the freedom of the market, which hamper the productive or selling efficiency of other units and which prevent efficient potential competi- tors from becoming actual rivals. Such artificial restrictions are clearly unfair, since they hinder or prevent other organizations from competing to the extent which their productive and selling efficiency may warrant. If there be a sound basis for competition, it lies in the preservation of the economically efficient and the de- struction of the inefficient. It fol- lows that methods which destroy the efficient along with the ineffi- cient are economically unjusti- fiable and must be regarded as unfair. * * * In many cases 34 Ch.IL] REGULATIVE POWER. [§18. which were mentioned illustratively in the Standard Oil Company Case,' 11 as "unfair methods of competition." § 18. Local price cutting: The practice of local price cutting would seem to be substantially the same practice as the price discrimination between purchasers forbid- den by section two of the Clayton Law. The practice of local price cutting consists in a monopolistic concern's cutting its prices to a point below the cost of production in localities where there are competitors whom it may wish to destroy, and raising its prices in places where it has little or no competition to a point where the profits there gained will offset the losses due to price cutting in the competitive markets. After the price cutting has accomplished its purpose of driving competitors out of business, profitable prices are, of course, restored. 78 unfairness cannot be determined except with reference to the con- sequences of a given act. The definition of unfair competition, therefore, should be general in terms. Any act or method of com- petition which hampers, injures or destroys concerns which could compete on the basis of their pro- ductive and selling efficiency should be forbidden, as should also any method except productive and selling efficiency which pre- vents potential competition from becoming actual competition." 29 Polit. Sci. Quart. 282, 283, 490. Mr. Stevens reviewed eleven prac- tices in trade which he said were unfair from an economic stand- point as destroying competition by other means than superior pro- ducing and selling efficiency, viz: (1) Local price cutting. (2) Operation of bogus independent concerns. (3) Maintenance of "fighting ships" and . "fighting brands." (4) Lease, sale, pur- chase, or use of certain articles as a condition of the lease, sale, purchase or use of other required articles. (5) Exclusive sale and purchase arrangements. (6) He- bates and preferential contracts. (7) Acquisition of exclusive or dominant control of machinery or goods used . in the manufacturing process. (8) Manipulation. (9) Blacklists, boycotts, whitelists, etc. (10) Espionage and use of detect- ives. (11) Coercion, threats, and intimidation. 29 Polit. Sci. Quart. 284-306, 463-485. See Sees. 18 to 24, infra. "Sec. 15, supra. ^United States v. Great Lakes Towing Co. (1913) 208 Fed. 733, 738. §19.] THE FEDERAL TRADE COMMISSION. [Ch. II. § 19. Payment of rebates: The payment of rebates is ordinarily part of an exclusive purchase and sale ar- rangement. It is covered by the declaration in section three of the Clayton Law, that it shall be unlawful to allow a "rebate" ,on the price of goods sold on condition that the purchaser shall not use the goods of a competi- tor. Under the usual plan for payment of commercial rebates, a seller agrees that if a purchaser shall buy a given commodity exclusively from him during a certain period, he will set aside an amount equal to a given percentage of the price of all goods bought by the pur- chaser during such period, and will pay over such amount to the purchaser at the end of some subsequent period if, during such subsequent period also, the purchaser shall buy such commodity exclusively from the seller. 79 § 20. Bogus independent companies: The operation of a bogus independent company is a device whereby a concern having, or seeking, a monopoly in any line of commerce, establishes at a place where it has trouble- some competition, what ostensibly is another competitor, but in truth is merely a secret branch or agency of the parent monopolistic concern. 80 The bogus competitor, once established, proceeds to cut prices to a point below the cost of production, in a feigned trade war with its parent concern and all other rivals. If all goes well, the bogus competitor in time gets most of the business in the competitive market, and destroys independent dealers. That having been accomplished, the bogus independent company goes out of business, and leaves its creator a clear field freed from competition. iQWilder Mfg. Co. v. Corn Eastman Kodak Co. (191J) 226 Products Co. (1915) 236 U. S. Fed. 62, 73, 74. 165, 170; United States v. Great ^Virtue v. Creamery Package Lakes Towing Co. (1913) 208 Fed. Co. (1913) 227 U. S. 8, 26. 733, 738-739; United States v. 36 Ch. II.] EEGULATIVE POWER. [§21. § 21. Espionage: Espionage of the business of a com- petitor consists of obtaining information as to the busi- ness of a competitor in greater detail, and by other meth- ods, than is possible through ordinary business channels. The methods which have been used in the past embrace the use of spies and detectives, the bribing of the em- ployees of common carriers, and the like. Espionage has already been the subject of specific legislation by Con- gress, so far as the employees of common carriers are concerned. 81 Espionage is ordinarily used not as in it- self a means of suppressing competition, restraining trade, or acquiring monopoly, but in order to obtain in- formation as a basis to accomplish those ultimate ends by some other method, as for instance by local price cutting, or exclusive sale arrangements. 82 §22. Fighting brands: Another practice of the same general nature, and designed to accomplish the same end of destroying competition, is the use of so-called "fight- ing brands," "flying squadrons" and "fighting ships." 83 A ' ' fighting' brand " is a particular brand of a commodity made by a concern seeking a monopoly in its line of manufacture, for the purpose of being sold below the cost of production, solely to the customers of such con- cern's competitors. When by the marketing of a "fight- ing brand" at a price below the cost of production, all of the customers of the monopolistic concern's competitors have been won away, the manufacture and sale of the ' ' fighting brand ' ' is discontinued. The regular salesmen si4 U. S. Comp. Stat. (1913) American S. S. Line (1914) 216 Tit. 56A, Ch. A, Sec. 8583, (6), Fed. 971', 973; United States v. (7), p. 3855. Eastman Kodak Co. (1915) 226 ^United States v. Eastman Fed. 62, 73; decree in United Kodak Co. (1915) 226 Fed. 62, 78. States v. American Thread Co., 51 83 united States v. Hamburgh Cong. Rec. 12246-12248 (bound vol. pp. 11228-11230). § 23. J THE FEDERAL TRADE COMMISSION. [Ch. II. of the monopolistic concern rarely sell a "fighting brand." For them to do so would expose such con- cern's connection with the "fighting brand," and so tend to defeat the purpose of putting the "fighting brand" upon the market. A "fighting brand" is usually mar- keted by special salesmen, known as "flying squadrons," who do not, as their principal business, handle the brands commonly offered for sale by the monopolistic concern, or solicit orders from the trade generally, but confine their activities to marketing "fighting brands" and to soliciting patronage from the customers of the monop- olistic concern's competitors. So-called "fighting ships" are vessels employed by steamship combinations to pre- vent competitors from obtaining traffic. When a com- petitor of the combination seeks passengers or a cargo and announces a sailing date, the combination advertises a sailing for the same date and offers rates below the cost of transportation, with the result that the competi- tor cannot obtain any traffic. §23. Full line forcing: A variation of the "tying contract", is found in the practice of "full-line forcing," so called. That device is resorted to by a concern which manufactures a number of different articles all intended for use in a single industry, as for instance in agricul- ture, and desires to secure or perpetuate a monopoly in that line of trade. Some one of the articles made by the monopolistic concern may be very desirable, and may be exclusively controlled by patents or otherwise. The other articles may be not any more desirable, or even less desirable, than similar articles produced by inde- pendent manufacturers. "When the monopolistic concern forces dealers to carry a full line of all of its products, as a condition to supplying them with the controlled product, that constitutes what is called "full line forc- ing." The forcing of products upon dealers in this man- 38 Ch. II. ] EEGULATIVE POWER. [§24. ner, naturally drives from the market like products of independent manufacturers, and tends to create a monop- oly in the hands of the concern which does the forcing. 8381 § 24. Boycotts and blacklists: Boycotts and blacklists constitute another device of the same general nature for suppressing competition and restraining trade. They are frequently employed as auxiliary to exclusive sale and purchase arrangements, and agreements to maintain prices. When so employed, they are used to render it impossible for persons who once violate an exclusive sale and purchase arrangement, or a price-fixing agreement, subsequently to do business with the concern, or con- cerns, seeking to create or perpetuate a monopoly. Boy- cotts and blacklists have also been used as direct and primary restraints upon trade in certain lines of indus- try. 84 Thus an association of retailers may blacklist and refuse to do business with manufacturers or wholesalers who sell directly to consumers, and wholesalers may blacklist, and refuse the ordinary trade discounts to, re- tailers who buy directly from manufacturers. The ob- vious effect of such practices is of course to restrain trade and eliminate competition. § 25. Definition impossible: Other practices of the same nature as those above reviewed, might be in- stanced. 85 But the illustrations given are sufficient to ssa-Vnited States v. United Shoe ssNash v. United States (1913) Machinery Co. (1915) 227 Fed. 229 U. S. 373, 375-376; Standard 507, 508-509. Sanitary Mfg. Go. v. United States ^Eastern States Lumber Assn. (1912) 226 U. S. 20; United States v. United States (1914) 234 II. S. v. American Tobacco Co. (1911) 600, 605-609; Straus v. Am. Pub- 221 U. S. 106, 181-182; Peoples Ushers' Assn. (1913) 231 U. S. Tobacco Co. v. American Tobacco 222, 235; Lawlor v. Loewe (1915) Co. (1909) 170 Fed. 396, 399-403; 235 U. S. 522; United States v. Ware-Kramer Tobacco Co. v. Am- Keystone Watch Case Co. (1915) erican Tobacco Co. (1910) 180 218 Fed. 502, 511, 512. Fed. 160, 166-168; United States §25.] THE FEDEBAL TEADE COMMISSION. [Ch. II. show the kind and nature of the trade practices which Congress appears to have intended to prohibit by declar- ing "unfair methods of competition in commerce" un- lawful. Since what is "unfair" in respect of competi- tive methods, as in respect of anything else, is a relative matter, depending upon the circumstances of each par- ticular case, 86 it is obviously impossible to work- out v. Patterson (1912) 201 Fed. 697, 701-704, s. c, (1913) 205 Fed. 292, 300; s. c. (1915) 222 Fed. 599; United States v. U. 8. Steel Cor- poration (1915) 223 Fed. 55, 61- 63; United States v. Great Lakes Towing Co. (1913) 208 Fed. 733, 744-745; decrees .in unreported cases involving the American Thread Co., the American Coal Products Co., and the General Electric Co., printed in 51 Cong. Rec. 12246-12248 (bound vol. p.p. 11228-11230). sgAs a circumstance bearing upon the question whether or not any given trade practice consti- tutes an unfair method of com- petition, the size of the business concern pursuing the practice may be not unimportant. "A merchant may without offense add one department to another as his business prospers, or his ambition expands; for the size and the varied character of his enter- prise do not in themselves violate the Anti-Trust Act. Size does not of itself restrain trade or injure the public; on the contrary, it may increase trade and may benefit the consumer; but, if the power given by the volume of a particu- lar business is improperly used to injure either a competitor or the public, or if such power evidently tends toward the injury of either, the mischief either done or threatened is condemned by the statute [i. e., the Sherman Law]. In this connection, it may be ob- served that, as power increases, the temptation to abuse it is likely also to increase, so that the acts of an influential factor in a particular trade may well be scru- tinized with more suspicion than the acts of a weak and inconspicu- ous contributor." McPherson J., in United States v. Keystone Watch Case Co. (1915) 218 Fed. 502, 510 (our italics). "Whether a particular act, contract or agree- ment was a reasonable and nor- mal method in furtherance of trade and commerce may, in doubtful cases, turn upon the in- tent to be inferred from the ex- tent of the control thereby secured over the commerce affected, as well as by the method which was used." Mr. Justice Lurton, in United States v. Reading Co. (1912) 226 U. S. 324, 370 (our italics). "Even competitive prac- tices, of a nature which as be- tween business rivals standing practically on even terms may Be normal and lawful, yet when em- ployed by a powerful monopolistic 40 Ch. II.] REGULATIVE POWER. [§26. anything in the nature of a definition of "unfair methods of competition," or to formulate a rule of thumb as to what may safely be done, or must certainly be avoided, under the Trade Law. About all that can be said would seem to be that no competitive practice can be an "un- fair method of competition" within the Trade Law, un- less the effect of the practice may be to eliminate or substantially to lessen competition, to restrain trade un- duly, or to create or perpetuate monopoly, and on the other hand, that any trade method potent to eliminate or substantially to lessen competition, to restrain trade unduly, or to create or perpetuate monopoly may be held an "unfair method of competition" within the Trade Law, if such potentiality of the method be due to any- thing else than the user's superior industrial efficiency exerted solely through commercial practices of general- ly conceded propriety. § 26. Trade Law and Clayton Law construed together: The construction hereinabove put upon the words "un- fair methods of competition" as used in the Trade Law, may perhaps be urged to be too broad. Four trade prac- tices were mentioned in the Standard Oil Company Case 87 as "unfair methods of competition." Only two of those four practices, namely local price cutting and payment of rebates, were selected by Congress for ex- press description and denunciation in the Clayton Law. 88 The Clayton Law was not approved, and did not go into combination with tha ability to should not be permitted to de- crush, and for the purpose of velop to such proportions as to crushing, a weak rival, may be- unreasonably engross a trade." come abnormal and unlawful." Hazel J., in United States v. East- Per curiam, in United States v. man Kodak Co. (1915) 226 Fed. Great Lakes Towing Co. (1913) 62, 77. Ci., note 63, supra. 208 Fed. 733, 744. "Generally 87Sec. IS, supra. speaking, I think that a business ssSecs. 4, 9, 10, 11, 12, supra. A1 § 26.J THE FEDERAL TRADE COMMISSION. [Ch. II. effect, until after the Trade Law. 89 From those circum- stances, it might perhaps be argued that the legislative intention was, in and by the Clayton Law, to define and limit the meaning of the phrase "unfair methods of com- petition" as used in the Trade Law, so as to exclude therefrom, and from the regulative power of the Trade Commission, any trade practices affecting competition except those particularly described and specifically de- clared unlawful by the Clayton Law. That such will be held to have been the legislative in- tention seems unlikely, however. If that narrow con- struction of the Trade Law and the Clayton Law should be adopted, the result of course would be to deprive the words "unfair methods of competition," as used in the Trade Law, of all effect. That result the courts will avoid, if reasonably possible. 00 The Trade Law and the Clayton Law are not inconsistent in any degree. The courts will so construe them as to give full force and effect to all of the provisions of each. 01 When the Trade Law was upon its passage in Con- gress, several amendments were offered with a view to denning more or less explicitly the words "unfair meth- ods of competition." But all such amendments were rejected. That circumstance indicates a legislative pur- pose, by the use of general language, not to limit the application of the regulative powers of the Trade Com- mission to specified acts, but rather to establish a gen- eral standard of conduct, and to leave it to the Trade Commission in the first instance, and to the courts finally, 8»See notes 1 and 11, supra. oiEx parte Crow Dog (1883) 109 wHeydenfeldt v. Daney Gold U. S. 556, 570; Chew Heong v. etc. Co. (1876) 93 U. S. 634, 640; United States (1884) 112 U. S. United States v. Ninety-nine Dia- 536, 549-550; United States v. monds (1905) 139 Fed. 961, 963- Langston (1S86) 118 U. S. 389, 904. 393, 394. .42 Ch. II.] REGULATIVE POWER. [§27. to apply that standard to the facts and circumstances of each particular case. Nothing inconsistent with that conclusion can be found in the fact that, in enacting the Clayton Law, Congress saw fit expressly to describe and denounce therein certain particular practices which, if not so specified, probably would have been held, under most circumstances, to be "unfair methods of competi- tion" within the Trade Law. That doubtless was a mere precautionary measure on the part of Congress to guard against the possibility that, under particular circum- stances, the competitive methods covered by the Clayton Law might be regarded by the Trade Commission, or the courts, as not so "unfair" as to fall within the opera- tion of the Trade Law. The plain intention of Congress was that the trade practices covered by the Clayton Law should be prevented at all events, and that all other trade practices, which the Trade Commission and the courts might find to be "unfair" in the sense indicated herein- above, 82 ' should also be prevented. That is the fair in- terpretation of the Trade Law and the Clayton Law, considered together, and the words "unfair methods of competition," as used in the Trade Law, cannot properly be taken as narrowed in meaning by the Clayton Law. § 27. Trade Law does not create a new wrong: Con- strued as it is hereinabove suggested they should be, the words "unfair methods of competition in commerce" as used in the Trade Law, include little if anything more than the words "attempt to monopolize" 93 as used in »2Secs. 15-25, supra. him..' " Morton J., in United ez"An attempt to monopolize States v. Whiting (1914) 212 Fed. means an attempt to get control 466, 478 (our italics). "To con- of the industry in which the de- stitute the offense of monopoliz- fendant is engaged 'by means ing or attempting to monopolize which prevent other men from under the act of Congress, it is engaging in fair competition with necessary to acquire, or attempt 43 27.] THE FEDEEAL TEADE COMMISSION. [Ch. II. section two of the Sherman Law. 94 That such is the correct construction of the phrase "unfair methods of competition," appears persuasively from the provision in the Trade Law that nothing in the said law contained shall be "construed to alter, modify, or repeal" 95 the antitrust laws, including of course the Sherman Law. The words "alter" and "modify" are comprehensive. They would seem to be adequate to cover any substantive change whatsoever. And since the Trade Law, so far as it prescribes any rule of conduct in commerce, and the to acquire, an exclusive right in such commerce by means ichich will prevent others from engag- ing therein. * * * Since the size of the business alone is not necessarily illegal, it is the crush- ing of competition, by means of force, threats, intimidation, fraud, or artful and deceitful means and practices, which violates the la,w. * * * The size of business, and the gaining of business popular- ity, fair dealing, sagacity, fore- sight, and honest business meth- ods, even if it should result in ac- quiring the business of competi- tors, would not make an illegal monopoly. It is the acquisition and use of unfair and illegal power in defeating competition which makes such illegal monop- oly." Sheppard J., in United States v. American Naval Stores Co. (1909) 172 Fed. 455, 457-458, 459, affirmed in 186 Fed. 489, and reversed, but on another point, in 229 U. S. 373 (our italics). "It matters not whether the combina- tion be 'in the form of a trust or otherwise', whether it be in the form of a trade association or a corporation, if it arbitrc uses its power to force weaker competitors out of business, or to coerce them into a sale to or union with the combination, it puts a restraint upon interstate commerce, and monopolizes or attempts to monopolize a part of that commerce, in a sense that violates the anti-trust act." Lan- ning J., in United States v. E. I. DuPont Be Nemours Co. (1911) 188 Fed. 127, 151, (our italics). "We next turn to ruinous trade wars against competitors which, as we have seen, was one of the features of attempted monopoly denounced by the Supreme Court." Buffington J., in United States v. U. S. Steel Corporation (1915) 223 Fed. 55, 77 (our italics). In Standard Oil Co. v. United States (1911) 221 U. S. 1, 61, Mr. Chief Justice White, referring to the second section of the Sherman Law, said: "Undoubtedly, the words 'to monopolize' and 'mo- nopolize' as used in the section reach every act bringing about the prohibited results" (our ital- ics). Cf., note 45, supra. o*See appendix. osTrade Law, Sec. 11. 44 Ch. II.] REGULATIVE POWER. [§27. Sherman Law, are cognate statutes dealing with the same general subject matter, the declaration by Congress that the Trade Law shall not be construed to "alter" or "modify" the antitrust laws, would seem to preclude the possibility of giving effect to the Trade Law as mate- rially adding to, or taking from, the substantive rules of competition in interstate and foreign commerce declared by the Sherman Law. If any competitive trade practice whatsoever can be an "unfair method of competition" under the Trade Law, and not at the same time an unlawful "attempt to monopolize" under the Sherman Law, that result must arise from the possibility that whereas a monopolistic intent is indispensable to an actionable "attempt to mo- nopolize," 96 it may not be essential to an "unfair method of competition." Such a possible distinction between an "attempt to monopolize" and an "unfair method of competition" would appear, however, to be rather a matter of terms than of substance. It is hardly likely that a competitive method possessing the characteris- tics necessary to make it "unfair" under the Trade Law, 97 could be practised inadvertently without appre- ciating its nature and intending its consequences. The word "method" imports system, repetition, and excludes the idea of casual, occasional, haphazard conduct. Cir- cumstances adequate to justify a ruling that any given competitive act was "unfair," and that it was so regu- larly or systematically performed as to constitute a "method" of competition, within the Trade Law, would no doubt suffice to raise the monopolistic intent essential to make the performance of such act an unlawful "at- tempt to monopolize" within the Sherman Law. MSwift & Go. v. United States "Sees. 15-25, supra. §28.] THE FEDERAL TBADE COMMISSION. [Ch. 11. § 28. Trade Law creates merely a new remedy: In this aspect, the provisions of the Trade Law empowering the Trade Commission to institute proceedings to pre- vent "unfair methods of competition in commerce," ap- pear merely to have created an additional remedy for a public wrong which, prior to the enactment of the Trade Law, had been denounced and made actionable. Under the Sherman Law, an "attempt to monopolize" was punishable by fine or imprisonment, and a person "injured in his business or property by such attempt could sue therefor and recover threefold damages, and costs including a reasonable attorney's fee. Also, under the Sherman Law, the government, through the Attorney General's department, could prevent and restrain an "at- tempt to monopolize" by a suit in equity. But, prior to the enactment of the Clayton Law, 98 nobody, other than the government, could obtain preventive relief against an "attempt to monopolize" merely as such." Now, under the Trade Law, .there is another govern- mental agency in addition to the Attorney General's de- partment, namely the Trade Commission, which by in- stituting the statutory proceedings 100 provided in the Trade Law to prevent "unfair methods of competi- tion", may in effect obtain in the right of the public pre- ventive relief against an "attempt to monopolize." The . probability would seem to be, however, that the Trade Law will be so construed as to prevent private suitors from seeking to enjoin "unfair methods of competition," as such. That construction of the Trade Law would seem to be required by the same reasoning which led to the ruling that, under the Sherman Law, only the Attor- ney General's department may maintain a suit in equity »»See Clayton Law, Sec. 16. ucts Co. (1915) 236 U. S. 165, 174- wWilder Mfg. Co. v. Corn Prod- 175. °Sec. 29, infra. loos CH. II.] REGULATIVE POWER. [§--'• to enjoin an "attempt to monopolize." In addition, it is to be observed that while, as noted, the Clayton Law provides expressly that private suitors may have in- junctive relief against threatened loss or damage by a violation of the antitrust laws, including sections two, three, seven and eight of the Clayton Law, 101 the enforce- ment of which is entrusted in part to the Trade Commis- sion, the Trade Law does not contain any similar pro- vision with reference to a violation of its inhibition against "unfair methods of competition." That omis- sion in the Trade Law is perhaps likely to be held signifi- cant in construing the Trade Law. It is not however of much practical importance whether a private suitor may or may not maintain a suit to enjoin "unfair meth- ods of competition" as such, if "unfair methods of com- petition" shall be held, as seems probable, not to in- clude any act which is not at the same time an ' ' attempt to monopolize" under the Sherman Law, 102 because if threatened with loss or damage as a result of an attempt to monopolize, section sixteen of the Clayton Law au- thorizes a private suitor to seek injunctive relief. But threatened loss or damage is essential to a private suit- or's obtaining injunctive relief under the Clayton Law. 103 § 29.' Proceedings by Commission: The Trade Law and the Clayton Law are substantially alike in their pro- visions 10 * authorizing the Trade Commission to insti- tute a proceeding to prevent "unfair methods of com- petition" under the Trade Law, 105 and violations of sec- tions two, three, seven and eight of the Clayton Law. 106 (1) Complaint and notice. The statutory proceeding is to be commenced by the Commission's issuing and ioiSecs. 4, 9, 10, 11, 12, supra. i°*See Trade Law, Sec. 5, Clay- io2Sec. 27, supra. ton Law, Sec. 11. io»Z7»io» Pacific R. Co. v. Frank, i°5Secs. 14-27, supra. flfllKI 9.9.R Fpri 90fi. 911. lOeSers 4 9 10 11 19 ««,„*■„ §29.] THE FEDERAL THADB COMMISSION. [Ch. II. serving upon the person, partnership, association or cor- poration to be proceeded against, a complaint stating the charges of the Commission against the accused, and containing a notice of a hearing of the charges before the Commission at a specified place, and at a specified time at least thirty 107 days after the service of the com- plaint. The complaint is not to issue in any event unless the Commission "shall have reason to believe" that a violation of law has occurred. 103 (2) Service of complaint and notice. The complaint and notice may be served by anyone duly authorized by the Commission, by delivering a copy thereof to the ac- cused, or by leaving a copy at, or mailing by registered mail a copy to, the principal office or place of business of the accused. If the accused be a partnership, service may be made upon any partner, and if a corporation, upon the president, secretary, or other executive officer or director. A verified return by the person serving the complaint setting forth the manner of service, or in case iorThe statutes require at least ferent footing by the fact that no thirty days notice. Trade Law, third person can invoke its regu- Sec. 5; Clayton Law, Sec. 11. The lative power as a matter of right, Commission, by rule, has provided but the Commission itself must for at least forty days notice. See be the actor in proceedings under Rules of Practice, No. II, in ap- its regulative power (Sec. 29, (3) Pendix. infra), and by the further fact i°8it would seem doubtful at that the Commission is not re- least whether the Trade Commis- quired to institute proceedings un- sion can be compelled by writ of til and unless it "shall have rea- mandamus to institute any pro- son to believe" that a violation ceeding. Mandamus will lie as of law has occurred. Decatur v. against the Interstate Commerce Paulding (1840) 39 U. S. (14 Pet.) Commission to compel it to exer- 497, 514-516. Any attempt to co- cise its regulative power. Int. erce action by the Trade Commis- Com. Com. v. Humboldt S. S. Co. sion could be defeated, it would (1912) 224 U. S. 474, 484. The seem, by the Commission's merely Trade Commission, however, saying that it did not have "rea- would seem to be put upon a dif- son to believe." CH. II.] REGULATIVE POWER. [§29. of service by mail the registry return receipt, shall be sufficent proof of the service of the complaint. 109 (3) Commission the complainant. There are not to be adversary parties litigant before the Commission, with the Commission sitting as an impartial arbiter to deter- mine their respective rights and obligations. The law does not contemplate that any person supposing himself to be aggrieved by another's practising "unfair methods of competition" or violating section two, three, seven or eight of the Clayton Law, shall file with the Commis- sion a complaint against such other person, and have his supposed grievance adjudged. 110 The Commission itself must be the complaining witness, in the first in- stance, in any proceeding before it. After the Commis- sion shall have instituted a proceeding it may, upon good cause shown, permit another party than the one first accused to intervene therein, and to appear in person or by counsel. 111 Such intervenor may, of course, align him- self against the person first accused, but even in such event, the proceedings before the Commission obviously cannot be regarded as a contest between private suitors. (4) No compulsory process. The Commission is not authorized to issue any attachment, warrant, or other compulsory process to require the appearance before it of any person against whom it issues a complaint/ The only thing in the nature of process which the Commis- sion may issue to secure the appearance before it of the accused, is the notice of the time and place of hear- ing upon the complaint. The accused may appear or i°»Cf., Rules of Practice, No. IV, respect of any violation of law in appendix. over which the Commission has noThe Commission has, by rule, jurisdiction. See Rules of Prac- authorized an application in writ- tice, No. II, in appendix, ing by any person to the Commis- mCf., Rules of Practice, No. V, sion for the institution of pro- in appendix, ceedings by the Commission in 49 29. J THE FEDERAL TRADE COMMISSION. [Ch. II. not, as lie shall see fit, but a failure to appear, if he should desire ever at any time to seek to make a defense, would be prejudicial. 112 If he shall appear at the hear- ing before the Commission, the statutes provide merely that "he may show cause why an order should not be entered by the Commission requiring" him to "cease and desist from the violation of law" charged against hkn in the complaint. 113 (5) No default. If the accused shall not appear, the Commission cannot, it would seem, enter his default and take the complaint against him as confessed, because the statutes clearly contemplate that, in every proceed- ing whatsoever before the Commission, whether the ac- cused shall appear or not, testimony shall be taken, reduced to writing, and preserved as well for the use of the accused, as for the use of the Commission, in pos- sible subsequent court proceedings. (6) Report and order by Commission. After a hear- ing upon any complaint shall have been had, the Com- mission, if of opinion that a violation of law has occurred as charged in the complaint, shall make a report in writ- ing in which it shall state its findings upon the facts, and shall then issue and cause to be served upon the accused an order requiring him to cease and desist from the vio- lation of law in question. The order of the Commission may be served in the same manner, above noted, as the complaint. The Commission may require the accused to cease and desist from violations of the Clayton Law n=Sec. 32, infra. will not be heard orally in argu- "3The rules of the Commission ment before the Commission, un- provide for the filing of an an- less the Commission shall so or- swer by the accused, within thirty der, but the accused may file a days after the service upon the brief with the Commission at the accused of the Commission's com- close of the testimony. See Rules plaint. See Rules of Practice, No. of Practice, No. X, in appendix. Ill, in appendix. The accused 50 OH. II.] REGULATIVE POWER.. [§29. "within the time fixed" by the order. There is no pro- vision in the Trade Law which expressly authorizes the Commission to fix the time within which the accused shall cease and desist from practising an "unfair method of competition." The only order which the Commis- sion may issue is one to "cease and desist." It cannot command affirmatively, or prescribe a rule of conduct for the accused in the future. 114 Its orders are not self- enforcing, and no penalty attaches for disobedience of its orders. 115 Neither the statutes, nor the Commission's rules of practice provide what shall become of a complaint if, after issuing it, the Commission shall de- cide not to prosecute it, or if after hearing the Com- mission shall be of opinion that no violation of law has occurred. Perhaps Congress intended that, in such con- tingencies, no order at all should be entered by the Com- mission, whether of dismissal of the complaint or other- wise, lest an order of dismissal, if entered, might be taken as permissive, or as a construction of the law by the Commission, and be distorted into a precedent. (7) Enforcing and overthrowing Commission's orders. If a person accused shall fail to obey the Com- mission's order to "cease and desist," the Commission by itself cannot overcome such contumacy. It has no power or process to enforce its own orders, and to ob- tain enforcement thereof must apply to the United States Circuit Court of Appeals either in the circuit wherein the i«See Sec. 8, supra, and com- \ i^Cf., 4 U. S. Comp. Stat, pare 4 U. S. Comp. Stat. (1913) 1(1913) Tit. 56A, Ch. A, Sec. 8584, Tit. 56A, Ch. A, Sec. 8583, (3), 1(6), (7), p. 3858, declaring it to (4), pp. 3852-3854, conferring up- on the Interstate Commerce Com- mission not only power to make orders to "cease and desist," but power to make various affirmative e the duty of common carriers to obey the orders of the Inter- state Commerce Commission made under its regulative power, and imposing a heavy penalty for dis- § 29.] THE FEDERAL TRADE COMMISSION. [Cl-I. II. violation of law against which the order is directed oc- curred, or in the circuit wherein the person against whom the order is issued resides or carries on business. With its application to the court, the Commission must file a certified transcript of the entire record of its proceed- ings, containing the complaint, all testimony taken, the report and findings of fact made by the Commission, and the order the enforcement of which is sought. The court is then required to notify the accused of the filing of the Commission's application for enforcement of its order and of the filing of the transcript, and thereupon the court shall have jurisdiction of the proceedings and of the question determined therein, and may proceed, up- on the transcript of the record of the proceedings before the Commission, to affirm, modify, or set aside the Com- mission's order. If any person against whom an order to cease and de- sist shall have been entered by the Commission, shall not wish merely to ignore the order, as safely he may, and to await application by the Commission to the court for the enforcement thereof, such person may file in the proper court of appeals a written petition praying that the order of the Commission be set aside. A copy of such petition shall forthwith be served upon the Com- mission, and thereupon the Commission shall certify and file in the court a complete transcript of the entire rec- ord of its proceedings. Thereafter the court may pro- ceed, upon the transcript of the record of the proceedings before the Commission, to affirm, modify, or set aside the Commission's order. No order of the Commission, or judgment or decree of the court of appeals enforcing the Commission's order, shall in any way relieve any person proceeded against by the Commission from liability or prosecution under the antitrust laws. 52 CH. II.] REGULATIVE POWER. [§ 29. (8) Commission's control over its own orders. Until a transcript of the record of a proceeding before the Commission shall have been filed in the proper court of appeals, the Commission may at any time, upon such notice to the accused and in such manner as the Commis- sion may deem proper, modify, or set aside, in whole or in part, the report and order involved in such proceed- ing. (9) Court not bound absolutely by Commission's rec- ord. The findings of the Commission as to the facts, if supported by testimony, are by the statutes made con- clusive upon the circuit court of appeals. 116 The court, after acquiring jurisdiction, may however order addi- tional evidence to be taken before the Commission, and adduced upon the hearing before the court, if either the Commission or the accused shall apply for leave there- for and shall show, to the satisfaction of the court, that such additional evidence is material and that there were reasonable grounds for failing to adduce the evidence before the Commission in the first instance. Such ad- ditional evidence may be taken upon such terms and conditions as to the court may seem proper. With the return to the court of such additional evidence, the Com- mission may make and file modified or new findings as to the facts, and its recommendations, if any, for the modi- fication or setting aside of its original order. Such new or modified findings by the Commission as to the facts, if supported by testimony, shall be conclusive upon the court. (10) Jurisdiction of court of appeals exclusive. Jurisdiction to enforce, set aside, or modify orders made by the Commission under its regulative power is vested neSee Sec. 33, infra. 53 § 30. J THE FEDERAL TRADE COMMISSION. [Ch. II. exclusively in the circuit court of appeals, 117 and pro- ceedings in that court to enforce, modify, or set aside the Commission's orders shall be given precedence over all other cases pending therein, and shall be in eveiy way expedited. The judgment and decree of the court of appeals affirming, modifying, or setting aside any order of the Commission, shall be final, subject only to review by the Supreme Court of the United States upon certio- rari. 118 (11) Procedural rules. Under the power conferred upon it to make rules and regulations, 110 the Commission has adopted certain rules of practice 120 which supplement in some degree the procedural provisions of the statutes. § 30. Commission not a court: The statutory proceed- ing just reviewed, leading to a decree by a court of ap- peals, is the only proceeding which the Trade Commis- sion is authorized to institute to prevent "unfair meth- ods of competition in commerce", or a violation of sec- tion two, three, seven or eight of the Clayton Law. And it seems entirely clear from the nature of the statutory proceeding that t he Comm ission, in thus discharging its regulative function, cannot_p_roperly be regarded as a ii'In view of the fact that the order of the Commission made in court of appeals is given, in ex- pursuance" of the Trade Law, is press terms, exclusive jurisdic- probably to be understood as ap- tion to enforce, set aside, or modi- plying only to orders made by the fy orders made by the Commis- Commission otherwise than in the sion in the exercise of its regula- course of the exercise of its regu- tive power (Trade Law, Sec. 5, lative power, that is, under its Clayton Law, Sec. 11), the pro- investigative power. Cf., Sec. 56, vision of the Trade Law (Sec. 9) infra. that district courts of the United "sThe Judicial Code, Sec. 240; States shall have jurisdiction to 1 U. S. Comp. Stat. (1913) Tit. issue "writs of mandamus com- 12C, Ch. 10, Sec. 1217, p. 511. manding any person or corpora- - n»Trade Law, Sec. 6 (g). tion to comply with * * * any I20 See appendix. 54 CH. II.] REGULATIVE POWER. [§30. c ourt, or as exercising any judicial power whatsoever w ithin the sense _a nd meaning of the Constitution. 1 21 The fact that the Commission cannot issue any coer- cive process to compel the appearance of the. accused, or to enforce obedience to its orders, and the further fact that in proceedings before the Commission there shall not be adversary parties litigant, but the Commission it- self shall be the actor in the first instance, completely differentiate the Commission from a court. The Commission is not in any aspect an impartial ad- judging body, as is a court. It is essentially an accusing body, so far as its regulative power is concerned. And it is fairly deducible from the provisions both of section five of the Trade Law and section eleven of the Clayton Law that Congress intended that the Commission, before instituting any proceeding, should investigate ex parte, and should measurably prejudge, the guilt of any sus- pect against whom the issuance of a complaint might be contemplated. That inference arises out of the fact that, by the terms of both statutes, the Trade Commission is not required to institute any proceeding unless it shall have "reason to believe" that a violation of law has oc- curred, and out of the further fact that both statutes evidently contemplate that such "reason to believe" shall be substantial, and not founded merely upon sus- picion or vague report. One consideration tending strongly to show the inten- tion of Congress that the Trade Commission, before in- stituting any proceeding, should -have a substantial "reason to believe", and not a mere suspicion, that a vi- olation of law had occurred, is found in the circumstance that, as noted in the preceding section, the Commission apparently cannot take a complaint as confessed, or otherwise make any enforceable order without testimony ^Gordon v. United States (1S64) 117 U. S. 697. 55 § 30.J THE FEDERAL TRADE COMMISSION. [Ch. II. to support it. Both section five of the Trade Law and section eleven of the Clayton Law are explicit in provid- ing for a "hearing" before the Commission, for the re- duction to writing and filing of the "testimony" adduced before the Commission, and for the inclusion of such "testimony" in the transcript of the record of the Com- mission's proceedings filed in a court of appeals. The findings of the Commission, so far as supported by "tes- timony" are declared by the statutes to be conclusive on the court but, except as so supported, inferentially they amount to nothing. The orders of the Commission are not self-enforcing, and a court could not enter a valid decree to enforce them without some testimony to sup- port the decree. Those considerations would seem to re- quire that unless the Commission shall wish to incur the risk of having a proceeding instituted by it made far- cical by the failure of the accused to appear, or having appeared to give evidence of his guilt, the Commission must be prepared in advance in every case to adduce tes- timony prima facie sufficient to sustain an order to cease and desist. To the acquisition by the Commission of the substan- tial "reason to believe" which Congress thus appears to have intended the Commission should possess before in- stituting proceedings, it is obviously essential that the Commission, acting ex parte before issuing any com- plaint, should first investigate and ascertain with at least a degree of certainty the facts bearing upon the supposed violation of law, and should reach a conclusion at least tentatively that those facts constitute an offense and es- tablish the guilt of the person to be accused. The conclusion forced by the considerations noted that the Commission is not in any sense a court, cannot be re- garded as weakened by the circumstance that the Com- mission is to conduct hearings, take testimony, make con- 56 Ch. II. J REGULATIVE POWER. [§ 3D. elusive findings from the evidence taken as to the ul- timate facts, and issue orders to cease and desist from "unfair methods of competition" and violations of sec- tions two, three, seven and eight of the Clayton Law. Those acts do not amount to the exercise of judicial pow- er, within the sense and meaning of the Constitution. The character of an inquiry by a governmental agency, as to whether it is executive, legislative, or judicial, is de- termined not by the conclusiveness, but by the nature, of the final act of the agency. 122 The final act of the Com- mission^in the exercise of ^its regul a tive power, is to"b e tTie issuance of an orde r to cease and desist, which, after all, ajnojinlgUfi-»atluii^but a mere executive admonition jor ^ reccmicafij^atiQm^t^notj^ jud^&gat. 123 It is not conclusive upon the courts, as are the Commission's find- " ings of facts, and cannot be enforced against the accused without the aid of the courts. The order of the Commis- sion to cease and desist, if supported by a transcript of the record of the proceedings before the Commission, may be made a basis of conclusive action by a United States Circuit Court of Appeals. Until and unless acted upon approvingly and given force by the judicial power acting through an established and regularly constituted court, the order of the Commission is nugatory. The accused may disregard it with impunity. The Commission after having issued a complaint, is to act somewhat like a mas- ter in chancery in conducting a hearing, taking testimony, reaching conclusions as to the facts and reporting its conclusions to the court. 124 What the Commission is to do, in the exercise of its regulative powers, is not to ex- iwLouis. & Nash. R. R. Co. v. S. 222, 226; Gordon v. United, Garrett (1913) 231 U. S. 298, 307, States (1864) 117 U. S. 697, 702. 308; Prentis v. Atlantic Coast ^^Oregon R. R. <£ N, Co. v. Fair- Line (1908) 211 U. S. 210, 227. child (1912) 224 U. S. 510, 527. 123/w re Sanborn (1893) 148 U. 57 § 31.] THE FEDERAL TRADE COMMISSION. [Ch. II. ercise judicial power, but merely to perform certain acts preliminary to judicial action. § 31. Jurisdiction of court of appeals original, not ap- pellate: Prior to the enactment of the Trade Law and the Clayton Law the jurisdiction of the United States cir- cuit courts of appeals was exclusively appellate. 125 Con- ceivably it might be argued that section five of the Trade Law and section eleven of the Clayton Law authorize an appeal from the Trade Commission to a court of appeals. And in support of that contention, it might be urged that those sections provide for the same procedure which is usually adopted to remove a cause from a trial court to a reviewing court, that is, for a filing of a transcript of the record of the proceedings before the Commission in a court of appeals, and provide also in terms that the court may "affirm, set aside or modify" the Commis- sion's orders upon the record. In view, however, of the considerations noted in the preceding section, the Commission must be taken to be merely an administrative body, without any power of a judicial nature. Under the separation of governmental powers provided for in the Constitution, a court, the re- pository of judicial power, cannot lawfully be called up- on to exercise executive or legislative power, whether by way of reviewing and enforcing the orders of an admin- istrative body or otherwise. 126 To construe the Trade Law and the Clayton Law as requiring a court of ap- peals to exercise an appellate jurisdiction, as a review- ing court, in respect of the orders enteredby the Com- mission as an administrative body would, therefore, be ^United States v. Mayer United States (1864) 117 U. S. (1914) 235 U. S. 55, 65. 697, 702, 703; In re Sanborn mHaylurn's Case (1792) 2 U. S. (1893) 148 U. S. 222; In re Pa- (2 Dall.) 408, 410-413; United cific Ry. Com. (1887) 32 Fed. 241, States v. Ferreira (1851) 54 U. S. 254-259. (13 How.) 40, 51-53; Gordon v. 58 Ch. II. ] REGULATIVE POWER. [§31. to raise doubtful constitutional questions as to those laws. And, so far as statutes may fairly be construed in such a way as to avoid doubtful constitutional questions, they should be so construed. 127 The 'sound construction of section five of the Trade Law and section eleven of the Clayton Law would seem to be that they confer an original jurisdiction upon courts of appeals in addition to the appellate jurisdiction pre- viously possessed. The proceedings authorized in the courts of appeals in respect of the Trade Commission's orders to "cease and desist" appear clearly to be a mere adaptation of the proceedings originally devised and au- thorized by Congress to enable the Interstate Commerce Commission to obtain the aid of federal trial courts to overcome by process for contempt of court any resist- ance to a lawful exercise of the Interstate Commerce Commission's investigative power. Such proceedings present a controversy for original judicial cognizance between the government, asserting a given right, and a citizen, denying that such right exists. 128 A proceeding in a court of appeals under the Trade Law and the Clayton Law will be in effect an original proceeding between the government, represented by the Trade Commission, as plaintiff, and a citizen accused of an unlawful industrial practice, as defendant. The gov- ernment will assert a right to have the citizen proceeded against compelled by the court to cease and desist from a given trade practice as constituting either an "unfair method of competition" or a violation of section two, three, seven or eight of the Clayton Law. The citizen will deny that the government has any such right in re- spect of the practice which may be in controversy. The wFoxv. Washington (1915) 236 (1894) 154 U. S. 447, 477, s. c. U. S. 273, 277. 155 U. S. 3. i28jji(. Com. Com. v. Brimson 59 § 32.] THE FEDERAL TRADE COMMISSION. [ Ch. II. court will determine the issue thus raised by reference to the laws of the United States and the ultimate facts which may be presented in the particular case, and in determining the issue will exercise a jurisdiction strict- ly original, and not in any sense appellate. That view finds additional support in the provisions of section five of the Trade Law and section eleven of the Clayton Law which authorize a court of appeals, un- der the circumstances specified in those sections, to cause the Commission to take and return for the consideration of the court, evidence and findings in addition to those contained in the transcript of the record of the original proceedings before the Commission as first filed in the court. That circumstance, that the record as originally made up by the Commission and first filed in court, may subsequently be supplemented or modified by the intro- duction therein of new matter, would seem to exclude a conclusion that a court of appeals, in dealing with an or- der of the Commission to cease and desist, is to act strict- ly as a court of review and nothing else, confined to and bound by the record made before the Commission in the first instance. § 32. Court of appeals not to proceed de novo: From the fact that the jurisdiction of a United States Circuit Court of Appeals in respect of an order of the Trade Commission to cease and desist, is original and not appel- late, it does not follow however that, when called upon to determine whether or not an order by the Commission shall be enforced, the court is to proceed and determine de novo, without regard to the proceedings before the Commission, whether or not a violation of law has oc- curred. The intention of Congress appears to have been that in any proceeding instituted by the Commission, all the facts of the case shall be disclosed before the Commis- 60 Ch. II.] REGULATIVE POWER. [§32. sion and not withheld until the proceeding reaches a court. 129 That is clear from the fact that Congress has provided, both in section five of the Trade Law and in section eleven of the Clayton Law, that the "findings of the Commission* as to the facts, if supported by testi- mony, shall be conclusive" upon the courts, and has re- stricted the right of a person accused to bring before a court defensive facts in addition to those introduced at the hearing before the Commission. Neither the Com- mission nor the accused may introduce new evidence be- fore the court, in addition to that adduced before the Commission, unless it can be shown "to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the Commission." And even when such additional evidence may be obtained at all, it must be taken before the Com- mission, and the Commission may, if it shall see fit, make findings as to the ultimate facts shown by such evidence, which findings also, so far as supported by testimony, shall be conclusive upon the courts. The circumstance that the accused must present his whole case to the Commission, and the further circum- stance that the Commission's findings as to the facts, if supported by testimony, are conclusive upon the courts, necessarily operate to limit to a degree the power which the courts otherwise might possess to deal with the ques- tion of the propriety of any order by the Commission as wholly res Integra in any given case. There is not how- ever, it would seem, anything in the Constitution to in- validate the requirement that the accused shall in gen- i2»Ci». N. O. & Tex. Pac. Ry. v. 238-239; M. K. & T. R. Co. v. Int. Int. Com. Com. (1896) 162 U. S. Com. Com. (1908) 164 Fed. 645, 184, 196; Tex. & Pac. Ry. v. Int. 649. Com. Com. (1896) 162 U. S. 197, 61 § 33.J THE FEDERAL TRADE COMMISSION. [Ch. II. eral, with the exception above noted, present at the hear- ing before the Commission all the defensive facts of which he ever expects to have any benefit. 130 And prob- ably it was also competent for Congress, so far as the Constitution is concerned, to provide that the findings of the Commission upon the facts, if supported by tes- timony, shall be conclusive upon the courts in proceed- ings tp enforce, or to vacate, the Commission's orders to cease and desist. 131 § 33. Conclusiveness of Commission's findings: The provisions of section five of the Trade Law and section eleven of the Clayton Law that the Commission's find- ings as to the facts shall be conclusive, are not to be un- derstood as requiring the United States Circuit Court of Appeals, blindly and without question, to give effect to the Commission's orders at all events, or even to accept the Commission's findings upon the facts as unqualifiedly binding. (1) Legal effect of facts for court. The legal effect of the Commission's findings of fact in any given case, and their sufficiency howsoever favorably viewed to con- stitute a violation of law and support the Commission's order to cease and desist, must, it would seem, always be a question for the courts. 132 (2) Fair hearing essential. The findings of the Com- isoorefiron R. R. cG N. Co. v. Fair- Co. v. Kemp (1881) 104 U. S. 636, child (1912) 224 U. S. 510, 527; 640; Lewis v. Frick (1914) 233 Bet. & Mackinac Ry. v. Mich. R. U. S. 291, 300; United States v. R. Comm. (1914) 235 V. S. 402. Williams (1912) 200 Fed. 538, ^United States v. Ju Toy 539. (1905) 198 U. S. 253, 262-263; Mint. Com. Com. v. Louis. & United States v. Louis. &-Nash. R. Nash. R. R. (1913) 227 U. S. 88, R. (1914) .235 U. S. 314, 320-321; 92; School of Magnetic Healing v'. Miller v. Mayor of New York McAnnulty (1902) 187 U. S. 94, (1883) 109 U. S. 385, 393-394; 108-110; Great Northern Ry. v. Johnson v. Towsley (1871) 80 U. Minnesota (1915) 238 U. S. 340, S. (13 Wall.) 72, 83-84; Smelting 345. 62 Ch. II. ] REGULATIVE POWER. [§33. mission will not be given effect if it shall appear that the accused was denied a hearing, or that the hearing granted was inadequate, or manifestly unfair. And a fair hearing would seem at the least to require that the accused be informed of the facts charged against him and be given an opportunity to deny those facts and thereby to raise a definite issue to which the hearing may be confined ; that he be apprised of the evidence submit- ted, or to be considered, against him, and be permitted to cross-examine witnesses and inspect documents ; that he be given full opportunity to secure and present evidence in explanation or rebuttal of what may be urged against him, and that he be afforded the benefit of compulsory process, if necessary, to obtain his evidence ; that he be permitted to be heard in argument to controvert the charge against him ; and that what may be offered by the accused in his behalf be not merely listened to, but weighed and given due effect. 133 Neither section five of the Trade Law nor section elev- en of the Clayton Law provides in detail the manner in which hearings upon complaints issued by the Commis- sion shall be conducted. Both sections do, however, pro- vide that if the accused shall appear before the Commis- sion, he shall have the right to "show cause why an or- der" to cease and desist should not be entered against him. If that provision should be given effect by the Com- mission as making its complaint in effect prima facie evi- dence of guilt and putting the burden upon the accused to establish his innocence, if at all, without first hearing the evidence against him, it might be open to doubt whether the requirements of a fair hearing would be met. But that probably is not reasonably to be anticipated. i33jnf. com. Com. v. Louis. & Fairchild (1912) 224 U. S. 510, Nash. R. R. (1913) 227 U. S. 88, 524-525; hpuis. d Nash. R. R. Co. 91-93; Oregon R. R. d N. Co. v. v. Finn (1915) 235 U. S. 601, 608. 63 §33.] THE FEDERAL TRADE COMMISSION. [Ch. II. (3) Testimony essential. Even after the accused shall have had a fair hearing before the Commission, the Commission's findings as to the facts are not so con- clusive upon the courts that the courts cannot go behind them or examine at all into the testimony adduced before the Commission. Both section five of the Trade Law and section eleven of the Clayton Law are explicit that the Commission's findings as to the facts are conclu- sive -in any case only ' ' if supported by testimony ' '. Both sections require that all "testimony" in any proceeding before the Commission, "shall be reduced to writing and filed in the office of the Commission", and that the tran- script of the record of any proceeding before the Com- mission filed in a court of appeals shall contain, among other things, "all the testimony taken". Both laws au- thorize a court of appeals "to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the Commission". Those provisions obviously contemplate that the Com- mission shall not in any case make any finding based up- on its general information, or upon knowledge acquired by it in the regular discharge of its duties, or upon any- thing other than testimony actually taken and preserved in the particular proceeding in which the finding is made. 134 Those provisions also plainly authorize a. court in every case to consider and decide whether or not there is any "testimony" at all in the transcript of the record of the Commission's proceedings to support the Com- mission's findings as to the facts. Probably a mere scintilla of proof will be held not enough, and a court will examine the testimony sufficiently to determine whether istint. Com. Com. v. Louis. & Nash. R. R. (1914) 235 U. S. 314, Nash. R. R. (1913) 227 U. S. 88, 321; Whitfield v. Hanges (1915) 93; United States v. Louis. & 222 Fed. 745, 753-755. 64 Ch. II.] REGULATIVE POWER. [§33. there was substantial evidence to support the Commis- sion's finding. 135 (4) What is "testimony"? The obligation which the Trade Law and the Clayton Law manifestly impose up- on the courts to determine whether or not the findings of the Commission are "supported by testimony", neces- sarily imposes upon the courts the duty to decide as to what constitutes "testimony" in the sense in which that word is used in those statutes. Conceivably, it may be held that nothing is "testimony" in that sense, except what would be admissible in evidence under the strict rules of the common law. But that seems unlikely. 136 The Commission must, however, it would seem, observe in its proceedings the essential rules of evidence, which are of such character that their non-observance might prejudice the accused in making his defense or asserting his rights. 137 In so far as a court may be authorized to inquire and decide whether or not in any given case the Trade Commission has given due regard to the essential rules of evidence, to that extent the power of the court to go behind the findings of the Commission and to de- termine for itself the probative force of the testimony adduced before the Commission, will of course be in- creased. (5) Jurisdictional facts. As to jurisdictional facts, upon the existence of which the power of the Commission • issint. Com. Com. v. Union Pa- upon another point, (1915) 239 cific R. B. (1912) 222 U. S. 541, TJ. S. 3; Choy Gum v. Backus 547-548. (1915) 223 Fed. 487, 492-493; Ex iss/rat Com. Com. v. Baird parte Chin Loy You (1915) 223 (1904) 194 U. S. 25, 44; Tang Fed. 833, 835. Tun v. Edsell (1912) 223 XJ. S. wlnt. Com. Com. v. Louis. & 673, 677; Low Wah Suey v. Nash. R. R. (1913) 227 U. S. 88, Backus (1912) 225 U. S. 460, 471; 93; Ex parte Chin Loy You (1915) United States v. Uhl (1914) 215 223 Fed. 833, 839; Cf., Sec. 46, Fed. 573, 574, 576, reversed but infra. 65 § 33. J THE FEDERAL TRADE COMMISSION. [Ch. II. to enter any order at all in any given case may depend, the provisions of the Trade Law and the Clayton Law making the findings of the Commission conclusive, are likely to be held to be altogether without application. The question of the power of the Commission to exercise a regulative authority at all in any given case, is essen- tially a judicial question which the Constitution forbids should be withdrawn from the courts. 138 If the testi- mony bearing upon a jurisdictional fact shall be nicely balanced in any given case, a court will doubtless attach great weight to the Commission's finding as to that fact. 139 But it would seem that, whenever a finding of a jurisdictional fact is involved, a court may, if it shall see fit, consider not merely whether the Commission had substantial evidence to support such finding, but also the weight of the whole evidence, and may disregard the Commission's finding if regarded as against the weight of the evidence. Thus, if the construction which hereinabove 140 has been placed upon the words "unfair methods of competition in commerce" as used in the Trade Law be correct, a finding by the Trade Commission that the effect of a given competitive practice is to suppress competition, unduly restrain trade, or create monopoly, will be a find- ing as to a jurisdictional fact, which will not be conclu- sive upon the courts. On the other hand, a finding by the Commission that the competitive practice in question is "unfair", if supported by testimony and made after a fair hearing, will probably be accepted by the court as binding upon it. 141 Likewise, if called upon to enforce an order of the Trade Commission requiring an accused iss/ni. Com. Com. v. 1. 0. R. R. "oSecs. 14 to 27, supra. (1910) 215 U. S. 452, 470. i«Cf., United States v. Louis. iss/nt. Com. Com. v. Nor. Pac. <£ Nash. R. R. (1914) 235 U. S. By. Co. (1910) 216 U. S. 538, 544. 314, 320-321. 66 Ch. II.] REGULATIVE POWER. [§33. person to cease and desist from a violation of section two, three, seven or eight of the Clayton Law, 142 a court will probably regard the finding of the Commission that the effect of the particular act in question may be to eliminate or substantially to lessen, competition, to re- strain trade, or to create monopoly, as a finding of a jurisdictional fact, in respect of which the court will con- sider itself at liberty to examine, and to reach its own conclusions upon, the testimony adduced before the Com- mission. As to any other facts, the courts will probably take the Commission's findings, if supported by testi- mony, as conclusive. i«Secs. 4, 9, 10, 11, 12, supra. 67 CHAPTER III. ADVISORY POWER. § 34. Scope of power: In the exercise of its advisory power 113 the Trade Commission may make reports (1) to the President, to either House of Congress, or to the Attorney General, as to alleged violations of the anti- trust laws ; (2) to the Attorney General as to the manner in which decrees, entered at the suit of the United States to restrain violations of the antitrust laws, are being carried out; (3) to the courts as to appropriate decrees for complainant in suits by the United States under the antitrust laws ; (4) to Congress as to trade conditions in and with foreign countries where associations, combina- tions, or practices of manufacturers, merchants, or traders, or other conditions may affect the foreign trade of the United States; and (5) to Congress as to addi- tional legislation. The Commission may also (6) report to the public at any time any information it may obtain, and may deem it expedient in the public interest to pub- lish, except information as to trade secrets and the names of customers of persons or corporatons acquired by it in the discharge of its duties. §35. Violations of antitrust laws: The Commission, upon the direction of the President or either House of Congress, is to report the facts relating to any alleged violation of the antitrust laws by any corporation. 144 Upon the application of the Attorney General, the Com- mission is to make recommendations for the readjust- i"Trade Law, See. 6, (c), (d), pra. (e), (f), (h), Sec. 7; Sec. 5, su- i«Trade Law, Sec. 6, (d). 68 Ch. III.] ADVISOEY POWEE. [§35. ment of the business of any corporation alleged to be violating the antitrust laws in order that the corporation may thereafter conduct its affairs in accordance with law. 145 While the Trade Law does not so declare explicitly, it is probably to be understood that the reports and recom- mendations thus provided for are to be made to the re- spective officers or bodies requesting them, that is to the President or either House of Congress in the one case, and to the Attorney General in the other. There is nothing in the Trade Law which suggests that Congress intended that, upon the application of the Attorney Gen- eral, the Commission should make recommendations di- rectly to the corporations involved as to how they might readjust the conduct of their business so as to make it conform with the antitrust laws. The reasonable suppo- sition is that Congress intended that the Attorney Gen- eral, and not the Commission, should be spokesman for the government in recommending readjustments to cor- porations accused of violating the antitrust laws. Con- sidering the relative powers of the Attorney General and the Commission respectively, in respect of securing enforcement of the law, it is probable that recommenda- tions voiced by the former will receive considerably more attention than those coming from the Commission. Moreover, an Attorney General can assure a corpora- tion adopting recommendations offered, a degree of im- munity from subsequent prosecution at least during that Attorney General's term of office. The Commission can- not furnish such assurance in any degree. It cannot de- clare authoritatively in advance whether any given line of conduct, if pursued by a corporation or anybody else, will be prosecuted or not. The advisory power of the Commission in respect of "sTrade Law, Sec. 6, (e). 69 § 35.] THE FEDERAL TEADE COMMISSION. [Ch. III. violations of the antitrust laws, relates exclusively to the conduct of corporations. It cannot affect natural persons. But that power does extend in terms to making reports and recommendations as to an alleged violation of the antitrust laws by "any corporation" 146 whatsoev- er, and therefore includes a bank or an interstate com- mon carrier which, as well as any other corporation, might be a party to a combination or conspiracy in re- straint of trade, or other violation of the antitrust laws. The Trade Law, in one of its provisions, 147 distin- guishes in terms between action by the Commission "up- on its own initiative" and action "upon the applica- tion" of another governmental agency. In view of that circumstance, the terms of the grant of power to the Com- mission to make reports and recommendations in re- spect of alleged violations of the antitrust laws, are per- haps significant. By the terms of the Trade Law, the Commission is to make reports as to alleged violations of the antitrust laws "upon the direction" 148 of the Pres- ident or either House of Congress, and recommendations so that the business of a corporation may be readjusted to conform with the antitrust laws "upon the applica- tion',' 140 of the Attorney General. It may be held that a grant in such terms implies a condition that the power shall not be exercised at all, unless in the one case the President or either House of Congress shall first direct, or in the other the Attorney General shall first apply for, the exercise thereof. That construction of the Trade Law would, of course, deny to the Commission any lawful initiative in setting about the preparation of any report, or the making of any recommendation, in connection with alleged viola- tions of the antitrust laws, and deprive the Commission n«Trade Law, Sec. 6, (d), (e). "sTrade Law, Sec. 6, (d). «7Trade Law, Sec. 6, (c). "BTrade Law, Sec. 6, (e). 70 Ch. III.] ADVISORY POWER. [§36. of all protection of the statute as to any report or recom- mendation it might make without previous request there- for from the proper officer or hody. Congress may have intended to accomplish just that. The same considera- tions which led Congress generally to exclude banks and interstate common carriers from the operation of the powers of the Commission, may have contributed to in- duce Congress to withhold discretion and initiative from the Commission in this particular instance when the exercise of its powers might touch such corporations. And so far as concerns the making of recommendations to enable a corporation to readjust its business so as to conform with the antitrust laws, a ruling that the Com- mission has any discretionary authority or power of in- itiative in connection with that matter would obviously create a possibility, if not a risk, of a conflict between the Attorney General and the Commission. Congress prob- ably did not intend that. § 36. Enforcement of decrees: In conferring power upon the Commission to make reports and recommenda- tions to the Attorney General in respect of the manner in which decrees obtained by the government restraining corporations from violating the antitrust laws are being carried out, 150 the legislative purpose appears to have been twofold. The Trade Law makes it the imperative duty of the Commisson to investigate and make such report and rec- ommendation, upon the request of the Attorney General. One purpose of Congress appears, therefore, to have been that the Commission should, upon request of the Attorney General, assist him in ascertaining whether decrees enjoining violations of the antitrust laws are be- ing complied with by corporations, and in securing their enforcement. But Congress appears to have intended iisoTrade Law, Sec. 6, (c). 71 § 37.] THE FEDERAL TEADE COMMISSION. [Ch. III. also, that if the Attorney General should be lax about se- curing compliance with any such decree, the Commission should correct that, not by interfering with the conduct of the Attorney General's office in seeking by direct ac- tion to obtain the enforcement of the decree, but by bring- ing the laxness of the Attorney General to public notice, and thereby affording the public an opportunity, if it should so desire, to apply in due course a political rem- edy. The intention of Congress thus to vest in the Com- mission an indirect coercive power over the Attorney General, appears from the fact that the Commission is expressly given not only power of initiative to make re- ports and recommendations to the Attorney General, in connection with the enforcement of decrees entered at the suit of the government to restrain violations of the antitrust laws, but also full discretionary power to make such reports and recommendations public. The power of the Commission thus to make reports and recommendations does not extend to decrees against natural persons, but does extend in terms to a de- cree against "any defendant corporation". 151 That, of course, includes decrees against banks and interstate common carriers, as well as other corporations. The ob- vious difference in position between a bank or interstate common carrier against which a decree enjoining a vi- olation of the antitrust laws has been entered, and a like corporation merely alleged to have been guilty of such violation, would seem to be sufficient to explain why Con- gress granted the Commission initiative and discretion in exercising its advisory power as to the one, and denied it, as was noted in the preceding section, as to the other. § 37. Drafting decrees: 152 By the terms of the Trade Law, the "form" of a decree for complainant is the mat- ter in respect of which the Commission, as a master in isiTrade Law, Sec. 6, (c). isaTrade Law, Sec. 7. 72 Ch. III.] ADVISORY POWER. [§37. chancery, is to report to the court in suits in equity brought by the government under the antitrust laws. The "form" of decree in such suit, as in every other suit in equity in a federal court, is, however, prescribed by the equity rules. 153 The Trade Law is therefore probably to be understood as authorizing the Commission to report to the court what substantial terms and provisions would be appropriate in such decree. The Commission is not authorized to act upon its own initiative in reporting a decree to the court. The court must first refer the suit to the Commission for that pur- pose, and the law does not authorize a reference until af- ter all testimony shall have been concluded, and the court shall have formed an opinion that the government is en- titled to a decree. The Commission, in ascertaining what would be an appropriate decree in any suit which may be referred to it, shall proceed upon such notice to the parties to the suit, and under such rules of procedure, as the court may prescribe. The provision for notice doubtless implies that the parties shall be granted a hearing before the Commission as to what decree the Commission should recommend to the court. It is not, however, to be under- stood that such hearing may be for the purpose of en- abling the Commission to determine for whom, whether complainant or defendant, a decree should be rendered, or that the parties may offer additional evidence before the Commission at such hearing. That possibility is probably excluded by the "due process" clause of the Fifth Amendment, the Commission not being a court, 154 and it is clearly excluded by the fact that, by the terms Of the Trade Law, a reference of any suit to the Commis- sion is not authorized until after the testimony there- issEquity Rules of 1912, No. 71; i54Sec. 30, supra. 226 U. S. 669-670. 73 § 37.] THE FEDERAL TRADE COMMISSION. [Ch. III. in shall have been closed, and the court shall have con- cluded, upon that testimony, that the complainant is en- titled to relief. What the Trade Law obviously contem- plates is that, at the hearing before the Commission, the parties shall be heard in argument, upon the testimony taken prior to the reference, as to what, in view of such testimony, would be an appropriate decree for complain- ant. After the Commission shall have reported to the court such decree for complainant as the Commission may consider would be appropriate, the parties may file excep- tions to the Commission's report, and such proceedings may thereafter be had with reference thereto as with reference to the report of a master in chancery in any other suit in equity. 156 The court is not, however, bound to accept the report of the Commission in whole or in part. The court may reject the Commission's report al- together; and enter such decree as in the judgment of the court may be appropriate. The framing of a proper decree to dissolve a combina- tion or consolidation effected in violation of the antitrust laws is a laborious matter of exceeding complexity and difficulty. 156 The decrees entered in the Standard Oil Company Case 15 " 1 and in the American Tobacco Company Case, 158 respectively, have been criticized as not effectu- al to accomplish the purposes for which they were en- tered. 159 In making it one of the duties of the Commis- sion to act in an advisory capacity to the courts in fram- ing decrees for the complainant in suits by the govern- ment under the antitrust laws, the legislative purpose lo^Bquity Rules of 1912, No. 66 ; izsUnited States v. American To- 226 V. S. 668. oacco Co. (1911) 221 U. S. 106. ^United States v. American To- "Sf/51 Cong. Rec. 9750 (bound vol. Tmcco Co. (1911) 191 Fed. 371. p. 8976); E. Dana Durand, in ^Standard Oil Co. v. United ''The Trust Problem," 28 Quart. States (1911) 221 U. S. 1. Journ. Econ., 406-408. 74 CH. III.] ADVISORY POWER. [§38. appears to have been in part to lighten the labors of the courts, and in part to give the courts the benefit of the higher learning in economics, and superior wisdom in business affairs, which Congress appears to have expect- ed that the members of the Commission either would pos- sess when appointed, or would gradually acquire by ex- perience in the course of the discharge of their official duties. 160 § 38. Foreign trade: In granting authority to the Commission to make reports and recommendations for legislation in respect of trade conditions in and with for- eign countries where combinations or practices of manu- facturers or traders, or other conditions, may affect the foreign trade of the United States, 161 Congress appears to have had in view the possible desirability of amending the antitrust laws so as clearly to exempt combinations of exporters of goods from the United States from the operation thereof. As was pointed out during the debates in Congress 162 upon the Trade Law, "cartels" or combinations of manu- facturers and traders are expressly sanctioned by some foreign governments, and tolerated by others. That en- ables foreign competitors of United States producers and foreign purchasers of exports from the United States, to eliminate competition among themselves and act unitedly, and thereby seriously to affect, if not ab- 16051 Cong. Rec. 12129 (bound framing decrees in favor of the vol. p. 11083), 12455 (bound vol. government in cases arising un- p. H236). The District Court for der the antitrust laws. United the Western District of New York States v. Eastman Kodak Co. (Hazel J.) and the District Court (1915) 226 Fed. 62, 80-81; United for the Eastern District of Penn- States v. Reading Co. (1915) 226 sylvania (Buffington, Hunt and Fed. 229, 285. McPherson, JJ.) have declined the isiTrade Law, Sec. 6, (h). request of the government that 16251 Cong. Rec. 9987 (bound the Trade Commission be per- vol. p. 8851), 12129-12130 (bound mitted to assist those courts in vol. pp. 11083-11084). 75 §39.] THE FEDERAL TEADE COMMISSION. [Ch. III. solutely to control, the foreign markets and foreign prices for American products. There has been a differ- ence of opinion among Attorneys General as to whether or not the inhibition of the Sherman Law against con- tracts, combinations, and conspiracies in restraint of interstate and foreign trade and commerce, forbids ex- porters of commodities from the United States to com- bine and eliminate competition among themselves in or- der successfully to cope with the combination of foreign- ers. 163 That uncertainty has led American producers either to be reluctant to enter into foreign trade at all, or having entered to act independently as competitors, bidding against each other and cutting their prices in or- der to dispose of their products abroad. That has op- erated, as of course, much to the advantage of the for- eigners. Those conditions, in foreign trade Congress appears to have intended the Trade Commission should investi- gate fully and report upon, with recommendations for appropriate legislation to meet whatsoever evils may be found to exist. § 39. Additional legislation: The grant of authority to the Commission to make annual and special reports to Congress with recommendations for "additional leg- islation", 164 is probably to be understood as meaning ad- ditional legislation touching the same matters as those affected by the Trade Law and the antitrust laws. Those matters are, of course, most comprehensive. They would seem to include all activities in interstate and for- eign commerce, except perhaps such activities of banks 16351 Cong. Ree. 12129-12130 izing or restricting foreign trade, (bound vol. pp. 11083-11084). United States v. U. S. Steel Corpo- Semble, the Sherman Law does ration (1915) 223 Fed. 55, 97-114. forbid combinations of exporters is-iTrade Law, Sec. 6, (f). which have the effect of monopol- 76 Oh. III.] ADVISORY POWER. [§ 39. and interstate common carriers as lie clearly outside the field of the antitrust laws. To illustrate, under its advisory power in respect of additional legislation, the Commission may perhaps be expected to recommend from time to time that certain unfair competitive trade practices, in addition to those now covered by the Clayton Law, be specifically de- scribed and forbidden by statute. Also, the Commission may perhaps make recommendations as to the much dis- cussed advisability of Congress enacting a general in- corporation law and requiring all corporations en- gaged in interstate or foreign commerce to operate under a federal charter. 165 Again, there are numer- ous classes of persons desirous of being exempted from the operation of the inhibition found in the anti- trust laws against combinations and conspiracies in re- straint of trade. Labor unions and agricultural organ- izations have gained such exemption.' 166 Like exemption has been urged upon Congress as necessary for organ- izations of retailers, to enable them to maintain them- selves in competition with chain stores and department stores; for specialty producing manufacturers, to en- able them to make exclusive trade agreements so that consumers of their products in all sections of the country may be assured of equal treatment; for users of water- power, to enable them to induce capitalists to make the investment necessary to the development and utilization of the waterpower of the country; and for producers of coal and lumber, to enable them to avoid competition, op- erate economically, and conserve the forests and coal de- posits yet remaining. 167 The Commission may perhaps be expected to make recommendations to Congress as to 16551 Cong. Rec. 9988 (bound vol. "751 Cong. Rec. 9987 (bound p. 8851). vol. pp. 8850-8851). issClayton Law, Sec. 6. 77 §40.] THE FEDERAL TEADE COMMISSION". [Ch. III. whether or not those classes of persons, and others, should be granted the exemptions which they seek, and generally to study, and to report to Congress npon, the relative efficiency and desirability of big business and little business, of co-operation, combination, and competi- tion, and other economic questions of like character. 168 § 40. Publicity: In providing that the Commission might publish its reports and decisions, and might report to the public from time to time such information ob- tained by it as it might deem expedient in the public in- terest, except trade secrets and the names of customers as to which it might obtain information in the discharge of its duties, 169 Congress appears to have proceeded upon the view that the establishment of a governmental agency for publicity is an efficient method to check the growth of monopoly. 170 «85i Cong. Rec. 9989 (bound i"51 Cong. Rec. 9608 (bound vol. p. 8852). vol. p. 8843). i«»Trade Law, Sec. 6, (f). 78 CHAPTER IV. INVESTIGATIVE POWER. §41. Scope of power: The investigative power of the Trade Commission is comprehensive. 171 It is not, however, without limitations. Its exercise is limited to the ends for which it was granted. 172 Also, the Trade Law provides several different methods whereby the Commission may investigate, and the persons whom the Commission's investigative power may affect, and the matters which it may touch, vary somewhat, depending upon the method of the exercise of the power. 173 The power is further limited in its exercise by the inhibition of the Fourth Amendment against unreasonable searches and seizures, and by the provision of the Fifth Amend- ment that no person may be compelled to incriminate himself, or be deprived of liberty or property without due process of law. 174 § 42. As limited by purpose of grant: The Trade Commission's investigative power cannot reasonably be regarded as other than merely complementary of its other powers. There is nothing in the Trade Law to indicate that Congress intended that the Commission should make investigation an end in and of itself, or that it should investigate at all except in furtherance of the legitimate exercise of its regulative and advisory pow- ers. Regulative and advisory powers 175 were conferred "iTrade Law, Sees. 3, 6, 8 to i^Secs. 48 to 51, infra. 10; Sec. 6, supra; Sec. 48, infra. i"Secs. 4 and 5, and Chapter i'2Sec. 42, infra. II, and Chapter III, supra. i73Secs. 43 to 47, infra. 79 § 42. J THE FEDERAL TRADE COMMISSION. [Ch. IV. upon the Commission to the end, (1) that the Commis- sion itself might institute and conduct the statutory pro- ceeding prescribed in the Trade Law and in the Clayton Law to prevent "unfair methods of competition in com- merce," and violations of sections two, three, seven and eight of the Clayton Law; (2) that the Commission might furnish information to the President and to the Attorney General bearing upon alleged violations of the antitrust laws and upon the enforcement of decrees re- straining violations of those laws, for the purpose ap- parently of enabling the President and Attorney Gen- eral, respectively, the better to exact obedience to those laws on the part of corporations, and perhaps of supply- ing the President a basis for recommendations by him to Congress for additional legislation; (3) that the Com- mission might furnish information to Congress to enable it to enact remedial legislation in respect of foreign trade and the matters affected by the antitrust laws and the Trade Law; and (4) that the Commission might furnish to the public such information, except as to trade secrets and names of customers, as it might acquire in the dis- charge of its duties and might deem it expedient in the public interest to publish. The authority granted to the Commission to furnish information to the public does not, however, empower the Commission even by implication to obtain informa- tion as to any particular matter. The Commission is merely to give to the public so much as the Commission may see fit of such information as it may obtain relating to matters as to which, apart from its authority to report to the public, it is authorized to acquire information. The three primary ends, first above stated, of the grant of reg- ulative and advisory powers to the Commission, are there- fore to be taken as marking the limits within which the Commission must exercise its investigative power. Every 80 Ch. IV.] INVESTIGATIVE POWER. [§43. exercise by the Commission of its investigative power, in order to be lawful, must be confined to developing facts the ascertainment of which will tend to assist the Com- mission in accomplishing one or more of the three pri- mary ends for which it received regulative and advisory powers. It will always be open to any person called upon by the Commission to furnish information to refuse it, if he can show that the information sought does not relate to the particular matter under investigation, or to any matter which the Commission is entitled under the Trade Law or Clayton Law to investigate. 176 Even with that limitation, however, the investigative power of the Commission is probably to be regarded as quite compre- hensive, 177 particularly since apparently it is not essen- tial that the information which the Commission may seek, in any given instance should, in every particular, bear directly and immediately upon the advisory or regu- lative end for which it may be sought, but it is enough that the bearing of such information upon such end should be appreciable although remote. 178 § 43. As limited by method of exercise: In addition to the general limitation upon the Commission's investi- gative power noted in the preceding section, the power appears to be subject to certain special limitations de- pending upon the method by which it may be sought to be exercised. The Trade Law provides four methods whereby the Commission may exercise its investigative power. 179 Those methods -are (1) by requiring a report !from any corporation, except a bank or an interstate common carrier; (2) by examining and copying any nslnt. Com. Com. v. Brimson Transit Co. (1912) 224 U. S. 194, . (1894) 154 U. S. 447, 479, s. c. 215. 155 U. S. 3. "oTrade Law, Sees. 6 (b), 8, "7See, however, Sec. 48, infra. 9; Sees. 44 to 47, infra, mint. Com. Com. v. Goodrich 81 § 44.] THE FEDEKAL TBADE COMMISSION. [Ch. IV. documentary evidence of any corporation being investi- gated or proceeded against; (3) by requiring by sub- poena the attendance and testimony of witnesses, and the production of any documentary evidence relating to any matter under investigation, and by taking deposi- tions in any proceeding or investigation; and (4) by obtaining information from other departments of the government. The employment of one of the four in- vestigative methods thus provided does not necessarily exclude the use of any of the others in the same investi- gation. Circumstances may exist whereunder all four methods may be used together. But the matters in re- spect of which the Commission may inquire, and the sources from which it may obtain information, are dif- ferent in some particulars under each of the different investigative methods. § 44. Requiring reports: 180 The general grant of in- vestigative power in the Trade Law 181 starts with an enumeration of certain particular matters in respect of which the Commission is expressly authorized to investi- gate all corporations, except banks and interstate com- mon carriers, which, for the most part, are not subject to the jurisdiction of the Commission. That enumera- tion might perhaps be construed as depriving the Com- mission of power to investigate any corporation as to any matter not specially enumerated, and hence as a general limitation upon the Commission's investigative power. As against that view, however, it is to be observed that the Trade Law apparently contemplates that all corporations, including even banks and interstate com- lsoct Trade Law, Sec. 6, and 4 Commission to require interstate U. S. Comp. Stat. (1913) Tit. 56A, common carriers to make reports Ch. A, Sec. 8592, p. 3872, author- to it. izing the Interstate Commerce isiTrade Law, Sec. 6 (a) 82 OH. IV.] INVESTIGATIVE POWER. [§44. mon carriers, 182 shall be subject to investigation by the Commission in some manner in respect of certain par- ticular matters, as, for instance, alleged violations of the antitrust laws, which are, not mentioned in express terms in the specific enumeration of matters for investi- gation contained in the clause of general grant of in- vestigative power. Further, in the same connection, it is to be noted that the same subjects for investigation which are enumerated in the clause of general grant of investigative power, are also enumerated in that clause of the Trade Law 183 which authorizes the Commission to require the filing of reports by corporations, and that banks and interstate common carriers are excepted in the clause conferring authority upon the Commission to require corporations to file reports as well as in the clause of general grant of investigative power to the Commission. Those circumstances suggest that whatso- ever implied limitation upon the Commission's investi- gative power may properly be deduced from the enu- meration, in the general grant of investigative power, of certain special subjects for investigation, should per- haps be confined to investigations conducted by the Com- mission's requiring corporations, other than banks and interstate common carriers, to file reports with it. In this view, every exercise of investigative power by the Commission's compelling a corporation subject to the requirement to file a report, must be restricted not. only to obtaining facts bearing upon a matter lying with- in the Commission's advisory or regulative powers, 184 but in addition must be confined to inquiries as to the corporation's "organization, business, conduct, practices, and management," and "its relation" to other corpo- is?Secs. 35 and 36, supra. is*Sec. 42, supra. isaTrade Law, Sec. 6, (b). 83 § 44.] THE FEDERAL TEADE COMMISSION. [Ch. IV. rations, and to individuals, associations, and partner- ships, those being the subjects for investigation specially enumerated in the clauses of the Trade Law under con- sideration. 185 The power of the Commission to investigate by requir- ing the filing of reports, is limited further in that the terms of the Trade Law do not purport to make that method of investigation applicable to natural persons, any more than to banks or interstate common carriers. The Commission is given wide discretion in respect of reports. 186 Thus the Commission may from time to time classify such corporations as are bound to render re- ports, and may require any class, or any one of any class, of such corporations to report, without making a like requirement of others. It may require annual re- ports, or special reports, or both. It may require reports either by general orders, or by special orders. It may determine what questions shall be propounded to the corporations,^ what shall be the form of the reports, whether the reports shall be under oath or otherwise, when the reports shall be filed, and generally may make rules and regulations for the purpose of carrying out the provisions of the Trade Law relating to the filing of reports. It is perhaps not unlikely that this grant of discretion- ary authority to the Commission may be attacked as a delegation of legislative power repugnant to the Con- stitution. But the line which separates exactly the ex- ercise of legislative and administrative power is not easy to define, 187 and the success of such attacks, if made, would appear doubtful, to say the least. 188 i85Trade Law, Sec. 6, (a), (b). Indus'l Gomm. (1915) 236 U. S. isoTrade Law, Sec. 6, (b), (g). 230, 245. w Mutual Film Corp. v. Ohio wButtfleld v. Stranahan (1904) 84 CH. IV.] INVESTIGATIVE POWER. [§45. § 45. Examining and copying documents: 189 The Commission's power to investigate by means of exam- ining and copying documents is limited, by the terms of the Trade Law, to "any documentary evidence of any corporation being investigated or proceeded against." 100 The phrase "documentary evidence" may perhaps be narrowly construed so as to exclude, for instance, the corporate records of a corporation. 191 And, in order to be subject to being examined and copied, the documen- tary evidence must, it would seem, bear upon some mat- ter in respect of which the Commission is charged with a regulative or advisory function. 192 Examining and copying documents, as a method of investigation, is restricted to the documentary evidence of corporations. The Trade Law does not purport to extend that method of investigation to the papers of natural persons. And it is only when a corporation is "being investigated or proceeded against," that its docu- mentary evidence may be examined and copied by the Commission. The Trade Law, however, authorizes the examination of the documents of "any corporation," if the corporation is "being investigated or proceeded against." That would seem to include banks and inter- state common carriers, as well as other corporations. It would seem that the Commission, acting upon its 192 U. S. 470, 496; St. L. I. M. carriers. & S. B. B. v. Taylor (1908) 210 moThe phrase "documentary U. S. 281, 287; United States v. evidence" as used in the Trade Grimaud (1911) 220 U. S. 506, Law "means all documents, pap- 516. ers, and correspondence in exist- isoCf. Trade Law, Sec. 9, and ence at and after the passage" of 4 U. S. Comp. Stat. (1913) Tit. the Trade Law on September 26, 56A, Ch. A, Sec. 8592, (5), p. 1914. Trade Law, Sec. 4. 3873, and Sec. 8591, (8), p. 3869, ^United States v. Louis. & giving the Interstate Commerce Nash. B. R. (1915) 236 V. S. 318, Commission access to the accounts 334. and records of interstate common 102 Sec. 42, supra. 85 § 45.] THE FEDERAL, TEADE COMMISSION. [Ch. IV. own initiative, possesses at least very wide, and probably practically unlimited, discretionary power to place any corporation, except a bank or an interstate common car- rier, in the position of "being investigated or proceeded against, ' ' and thereby to create such a situation as would authorize examining and copying the corporation's docu- mentary evidence bearing upon the matter involved in the investigation or proceeding. That can be accom- plished as to any corporation, except a bank or an inter- state common carrier, by the Commission's instituting a proceeding against the corporation under the Commis- sion's regulative power to prevent unfair methods of competition in commerce and violations of sections two, three, seven and eight of the Clayton Law. The only possible limitations upon the Commission's discretionary power in that regard would seem to be that, before instituting the proceeding under either the Trade Law or the Clayton Law, the Commission shall have ' ' reason to believe ' ' that there has been a violation of law on the part of the corporation to be proceeded against, and that in addition, before instituting a pro- ceeding under the Trade Law, it "shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public." 193 For a corporation being proceeded against to seek to invoke the aid of a court to prevent the Commission's examining and copying documentary evidence, on the ground that the Commission had omitted, before insti- tuting the proceeding, to acquire "reason to believe" that a violation of law had occurred, and to reach a con- clusion that the "interest of the public" required the institution of the proceeding, would in effect draw the good faith of the Commission into question. Whether a i»3Trade Law, Sec. 5, Clayton Law, Sec. 11. 86 Ch. IV.] INVESTIGATIVE POWER. [§45. court would entertain such a question at all is, to say the least, open to serious doubt. But, if a court would hear the question at all, the difficulty of the corporation's proving affirmatively that the Commission had acted in bad faith in instituting the proceeding would, in the na- ture of things, be practically insuperable. As to banks and interstate common carriers, however, the situation would seem to be otherwise. The regula- tive power of the Commission does not extend to author- izing the institution of any proceeding against a bank or interstate common carrier. And while banks and interstate common carriers may be put in the position of "being investigated" by the Commission, the initia- tive in accomplishing that result apparently does not, with one exception, lie with the Commission. 194 That ex- ception, when a bank or an interstate common carrier may be subjected to "being investigated" by the Com- mission upon the Commission's own independent initia- tive, is when a final decree has been entered against such corporation at the suit of the government to prevent and restrain any violation of the antitrust laws. In such case the Commission may proceed upon its own initiative, and upon the application of the Attorney General is bound to proceed, to make investigation of the manner in which such decree has been, or is being, carried out. A bank or interstate common carrier involved in such investigation would seem to be in the position of ' ' being investigated," in such sense as to subject its documen- tary evidence to being examined and copied by the Com- mission. Under the only other circumstances which may subject a bank or an interstate common carrier to ' ' being inves- tigated" by the Commission, the Commission cannot act upon its own initiative ,in instituting the investigation. i»*Secs. 35, 36, supra. 87 §46.] THE FEDERAL TEADE COMMISSION. [Ch. IV. Those circumstances are (1) when a bank or an inter- state common carrier is alleged to be violating the anti- trust laws, and the President, or either House of Con- gress, directs the Commission to investigate and report the facts with reference to such alleged violation; and (2) when such corporation is alleged to be violating the anti- trust laws, and the Attorney General applies to the Com- mission to investigate and make recommendations for the readjustment of the business of such corporation to conform with the antitrust laws. Under those circum- stances, the initiative in putting a bank or interstate common carrier in the position of "being investigated" by the Commission, would seem to be lodged in the one case in the President or either House of Congress, and in the other in the Attorney General, the Commission apparently being, as noted elsewhere, 195 without power to investigate, report or make recommendations in con- nection with mere alleged violations of the antitrust laws by any corporation, except as and when first specially requested so to do by the governmental authorities named in the Trade Law. § 46. Examining witnesses: 196 In addition to the gen- eral limitation that the evidence sought must have a bear- ing upon some matter lying within the scope of the Com- mission's advisory or regulative powers, 197 the principal special limitation upon the Commission's exercising its investigative power by examining witnesses, taking dep- ositions, and requiring the production of documentary evidence by subpoena, would seem to be that there must first be a "matter under investigation" or a "proceed- ing or investigation pending" before the Commission losSec. 35, supra. 3844, giving the Interstate Com- loocf. Trade Law, Sec. 9, and merce Commission power to exam- 4 U. S. Comp. Stat. (1913) Tit. ine witnesses. 56A, Ch. A, Sec. 8576, pp. 3842- lO'Sec. 42, supra. 88 Ch. IV.] INVESTIGATIVE POWER. [§46. under the Trade Law, in respect of which testimony may be taken. 198 . A state of affairs presenting a "matter under investigation" or a "proceeding or investigation pending," can of course be created by the Commission of its own motion at any time as to any matter within the regulative or advisory powers of the Commission, under the Trade Law, except alleged violations of the antitrust laws by corporations, in respect of which the power to initiate investigations to be conducted by the Commission is vested, as noted elsewhere, 199 in the Presi- dent, or in either House of Congress, or in the Attorney General. When exercising its investigative power by subpoenaing and examining witnesses and documentary evidence, the Commission may, of course, subject natural persons as well as corporations to the investigative proc- ess. To the efficient use of a subpcena to obtain documents, a degree of foreknowledge as to the identity, nature and contents of the documents, and as to who has the custody of them, is essential. 200 For that reason, the obtaining of documentary evidence by subpcena must be regarded as a relatively restricted method of obtaining informa- tion, as compared with examining and copying the docu- mentary evidence of a corporation under the investiga- tive method considered in the preceding section. While, as noted elsewhere, 201 in conducting proceed- ings under its regulative power to prevent unfair meth- ods of competition in commerce and violations of the Clayton Law, the Commission must regard the essential rules of evidence the non-observance of which might mTrade Law, See. 9. v. Machinery Co. (1904) 128 Fed. is>»Sec. 35, supra. 753, 761-762. Cf. Rules of Practice, zooMurray v. Louisiana (1896) No. VII, in appendix. 163 U. S. 101, 107; Hale v. Henkel aoiSec. 33 (4) supra. (1906) 201 U. S. 48, 77; Dancel 89 § 46.] THE FEDERAL TRADE COMMISSION. [Oh. IV. prejudice the rights of the person or corporation being proceeded against, the Commission apparently possesses greater freedom of action when investigating in further- ance of the exercise of its advisory power to obtain in- formation to enable it to make reports and recommenda- tions for the enlightenment of the legislative or executive branches of the government in connection with enacting new, or enforcing existing legislation. 202 Any member of the Trade Commission may sign sub- poenas, and the subpoenas may require the attendance of witnesses, and the production of documentary evi- dence, from any place in the United States at any desig- nated place of hearing. 203 Any Commissioner, and any of the Commission's examiners, may administer oaths and affirmations, examine witnesses, and receive evi- dence. The Commission may order testimony taken by deposition 204 in any proceeding or investigation pend- ing before it, before any person who may have power to administer oaths and may be designated by the Com- mission. A deposition shall be reduced to writing by, or under the direction of, the person before whom the testimony is taken, and shall be subscribed by the depo- nent. Any person may be compelled to testify, and pro- duce documentary evidence by deposition, in the same manner as witnesses may be compelled to appear in per- son, testify, and produce documentary evidence before the Commission. Witnesses summoned before the Com- mission are to receive the same fees and mileage as are paid to witnesses in the federal courts. Witnesses 202jjnited States v. Armour & shall permit their testimony to be Co. (1906) 142 Fed. 808, 826. taken by deposition. See Rules 203See Rules of Practice, No. of Practice, No. VII, in appendix. VII, in appendix. As to the manner of taking and re- 2o*Witnesses are to be examined turning depositions, see Rules of orally, unless for "good and ex- Practice, No. VIII, in appendix, ceptional cause" the Commission 90 Ch. IV.] INVESTIGATIVE POWER. [§47. whose depositions are taken, and the persons before whom the depositions are taken, are to receive the same fees respectively as are paid for like services in the federal courts. § 47. Obtaining information from other departments: The power of the Commission to exact records, papers, and information from other departments and bureaus of the government, is limited by the provision that the President must first direct such other bureau or depart- ment to comply with the Commission's request for in- formation, and that the only records, papers and infor- mation which the Commission is authorized to request are those relating to corporations subject to the pro- visions of the Trade Law. 205 § 48. Narrow construction possible: Having regard for the Constitution, it is at least open to doubt whether the investigative power of the Commission can be given operation and effect, especially as to natural persons, to the full limits to which the Trade Law in terms appar- ently purports to extend that power. Whether Congress itself has unlimited power to in- vestigate the private affairs of natural persons for the purpose of acquiring information to assist it in enact- ing additional legislation, and whether Congress can delegate such power, if it possesses it at all, to an ad- ministrative body, are constitutional questions which the Supreme Court of the United States has recognized as of grave difficulty, but has expressly left open. 206 The same doubt would seem to exist as to the power of Con- gress or of the President, or both together, to require, or to authorize an administrative body to require, nat- 205Trade Law, Sec. 8. Cf., 4 to Interstate Commerce Commis- U. S. Comp. Stat. (1913) Tit. 56A, sion. Ch. A, Sec. 8602, p. 3888, relating 2 °sHarriman v. Int. Com. Com. (1908) 211 U. S. 407, 417-418. 91 § 49. J THE FEDERAL TEADE COMMISSION. [Ch. IV. ural persons to disclose their private affairs for the pur- pose of enabling a discovery as to whether the antitrust laws have been violated, or of facilitating the enforce- ment of such laws. Notwithstanding the broad investigative power which the Trade Law purports to confer upon the Trade Com- mission, it may perhaps be held that the only matters in respect of which the Trade Commission can compel natural persons to furnish evidence relating to their private affairs, are such matters as may be made the sub- ject of a complaint, and an investigation in form judicial, before the Commission, 207 that is, violations of the inhi- bition of the Trade Law against unfair methods of com- petition in commerce, and violations of sections two, three, seven and eight of the Clayton Law. § 49. Self-incrimination: Even as to matters with reference to which the Commission may lawfully require natural persons to disclose their private affairs in any degree, the investigative power of the Commission is further limited by the protection against self-incrimina- tion guaranteed to natural persons by the Fifth Amend- ment. That protection does not extend to corpora- tions, 208 nor does it extend to natural persons in respect of the documentary evidence of corporations, but only as to the natural person's own private papers. 209 §50. Immunity clause: With a view doubtless to disentitling a natural person to refuse to furnish infor- mation to the Commission on the ground that such in- formation might incriminate him, Congress inserted in wHarriman v. Int. Com. Com. ^Wilson v. United States (1908) 211 U. S. 407, 419-420, 421; (1911) 221 U. S. 361, 379-386; United States v. Skinner (1914) Dreier v. United States (1911) 221 218 Fed. 870, 872. U. S. 394, 399-400; Wheeler v. 208flaZe v. Henkel (1906) 201 United States (1913) 226 U. S. U. S. 43, 74-75. 478, 488-490. 92 Ch. IV.] INVESTIGATIVE POWER. [§50. the Trade Law a clause which declares that no person shall he excused from testifying or producing evidence before the Commission, or in obedience to the subpoena of the Commission, on the ground that such evidence may tend to incriminate him, but that no natural person shall be prosecuted or subjected to any penalty or for- feiture for or on account of any transaction, matter or thing concerning which he may testify, or produce evi- dence, documentary or otherwise, before the Commission in obedience to a subpoena issued by it. 210 A natural person, within the operation of an immunity clause enacted by Congress, may be compelled to furnish evidence notwithstanding the tendency thereof may be to incriminate him, if the protection against prosecution afforded by the immunity clause is as broad as that contained in the Fifth Amendment. 211 But otherwise not. 212 An immunity clause may, it seems, operate to protect a witness from prosecution in respect of docu- mentary evidence of a corporation which he may pro- duce, as well as in respect of his own private papers, 213 although, as noted, 214 the protection against self-incrim- ination guaranteed by the Fifth Amendment does not extend to the production by a natural person of a cor- poration's documentary evidence. Whether because of a desire to prevent persons from acquiring immunity from prosecution by obtruding tes- timony upon the Commission, or to safeguard the Com- mission against conferring immunity inadvertently, or sioTrade Law, Sec. 9. Cf., 4 ^nBrown v. Walker (1896) 161 U. S. Comp. Stat. (1913) Tit. 56A, U. S. 591. Ch. A, Sees. 8577, 8578, pp. 3846, mCounselman v. Hitchcock 3847, relating to the immunity of (1892) 142 U. S. 547. a witness from prosecution in con- zizHale v. Henkel (1906) 201 nection with matters testified to U. S. 43, 73. before the Interstate Commerce 2"Sec. 49, supra. Commission. 93 § 50.] THE FEDERAL TEADE COMMISSION. [Ch. IV. for some other reason, Congress so drafted the immu- nity clause in the Trade Law as apparently to make the issuance and service of a subpoena a prerequisite of pro- tection from prosecution as to any matter concerning which a witness may furnish evidence to the Commission. In thus making a subpoena essential to protection, and also perhaps in other particulars, the immunity clause of the Trade Law differs from some other statutory provisions of like nature which have been held to afford protection from prosecution as broad as that guaranteed by the Fifth Amendment. 215 In addition to refusing to furnish self -incriminating evidence unless and until he shall have been first duly served with a proper subpoena, prudence plainly requires that before answering any self-incriminating interrogatory which may be pro- pounded to him, or producing any self-incriminating documentary evidence, before the Commission, a natural person, wishing to avail himself of the protection of the immunity clause in the Trade Law, should also take other precautions. Before furnishing any self-incriminating evidence, the witness should make certain that such evi- dence is within the scope of the subpoena served upon him, and that it relates to a matter concerning whicE the Commission has clear power to compel the giving of testimony and the production of documents. And in estimating the coercive authority of the Commision in respect of obtaining evidence, the witness should take the narrow view of the Commission's investigative power suggested in a preceding section. 216 Also, before furnish- zisUnited States v. Armour & nity clauses in the federal stat- Co. (1906) 142 Fed. 808, 819, 822- utes, including those in respect of 825. Cf., however, 4 U. S. Comp. -which it was held in Armour & Stat. (1913) Tit. 56A, Ch. A, Sec. Company's case that a subpoena 8580, pp. 3848-3849, which seems was not necessary to protection, to make a subpoena essential to 2i6Sec. 48, supra. protection under all of the immu- 94 Ch. IV.] . INVESTIGATIVE POWER. [§51. ing any self-incriminating evidence, even if such evi- dence be clearly within the scope of the subpoena and the coercive authority of the Commission, the witness should expressly claim his constitutional right to be silent and not incriminate himself, and should not give self-incriminating evidence until after his constitutional privilege of silence shall have been denied him. He should not trust to the immunity clause of the Trade Law to operate automatically, in the absence of an ex- press claim of his constitutional privilege against self- incrimination, to protect him against subsequent prose- cution based on the self-incriminating evidence given by him. 217 § 51. Unreasonable searches and seizures: Although corporations are not within the protection of the Fifth Amendment, the investigative power of the Commission as to corporations is perhaps limited to a degree by the prohibition in the Fourth Amendment against unreason- able searches and seizures. The restraint of the Fourth Amendment upon the Commission's subpoenaing, or ex- amining and copying, the documentary evidence of a corporation, cannot however be regarded as very nar- row. 218 § 52. Methods of enforcing power: The Trade Law provides four methods whereby the Trade Commis- sion's investigative power may be enforced, should the exercise thereof be sought to be obstructed or resisted. They are substantially the same as the methods whereby the Interstate Commerce Commission may secure the enforcement of its investigative power. They are (1) ununited States v. Skinner States (1911) 221 U. S. 361, 382- (1914) 218 Fed. 870. 384; Int. Com. Com. v. Goodrich zwHale v. Henkel (1906) 201 Transit Co. (1912) 224 U. S. 194, U. S. 43, 76-83; Wilson v. United 215. 95 § 53.] THE FEDERAL TRADE COMMISSION. [Ch. IV criminal proceedings (2) actions for penalties (3) con- tempt proceedings and (4) mandamus. § 53. Criminal proceedings: Certain acts in obstruc- tion or resistance of the Trade Commission's investiga- tive power, if done with the necessary intent, are de- clared by the Trade Law to be offenses against the United States. 219 Those acts are (1) willfully neglecting or refusing to attend and testify, or to answer any law- ful inquiry, or to produce documentary evidence in obedience to the subpoena or lawful requirement of the Commission; (2) making, or causing to be made, any false entry or statement of fact in any report required to be made under the Trade Law; (3) making any false entry in any account, record or memorandum kept by any corporation subject to the Trade Law; (4) neglect- ing or failing to make, or to cause to be made, full, true and correct entries in accounts, records or memoranda kept by any corporation subject to the Trade Law, of all facts and transactions appertaining to the business of such corporation; (5) removing out of the jurisdiction of the United States, or mutilating, altering, or by other means falsifying any documentary evidence of any corporation subject to the Trade Law; (6) refusing to submit to the Commission, or any of its authorized agents, for the purpose of inspection and taking copies, any documentary evidence of any corporation subject to the Trade Law, if such evidence is within the possession or control of the person refusing. A person convicted of any of those acts in a federal court of competent jurisdiction, may be fined not less than $1,000 nor more than $5,000, or imprisoned, or both. The maximum imprisonment possible is one year for 2i»Trade Law, Sec. 10. Cf. 4 U. relating to Interstate Commerce S. Comp. Stat. (1913) Tit. 56A, Commission. Ch. A, Sec. 8592, (7) p. 3874, 96 Ch. IV.] INVESTIGATIVE POWER. [§54. refusing to appear and testify or to produce documen- tary evidence in obedience to the subpcena of the Com- mission, and three years for each of the other offenses. § 54. Actions for penalties: 220 If a corporation shall fail to file any annual or special report within the time fixed therefor by the Commission, and such failure shall continue for thirty days after notice of such default, the corporation shall forfeit to the United States the sum of $100 for each and every day of the continuance of such failure. The forfeiture may be recovered in a civil suit in the name of the United States brought by the district attorney in the district court of the United States in the district where the corporation has its principal office, or in any district in which it does business. The for- feiture, when recovered, is to be paid into the Treasury of the United States. §55. Contempt proceedings: 221 In case of diso- bedience of a subpoena issued by the Commission, the Commission may invoke the aid of the district court of the United States in the district where the inquiry by the Commission is being conducted. The court may or- der the corporation or person guilty of such disobedience to appear before the Commission, or to produce docu- mentary evidence, or to give testimony, and may punish any failure to comply with such order as a contempt of court. 222 §56. Mandamus: 223 The Commission may request 22°Trade Law, Sec. 10. Cf. 4 zm-nt. Com. Com. v. Brimson U. S. Comp. Stat. (1913) Tit. 56A, (1894) 154 U. S. 447 s. c. 155 U. Ch. A, Sec. 8592, (2), p. 3873, re- S. 3. lating to Interstate Commerce 223Trade Law, Sec. 9. Cf. 4 U. Commission. S. Comp. Stat. (1913) Tit. 56A, 22iTrade Law, Sec. 9. Cf. 4 U. S. Ch. A, Sec. 8592, (9), p. 3875, re- Comp. Stat. (1913) Tit. 56A, Ch. lating to Interstate Commerce A, Sec. 8576, p. 3834, relating to Commission. Interstate Commerce Commission. 97 § 57.] THE FEDERAL TRADE COMMISSION. [Ch. IV. the Attorney General to apply for, and upon such appli- cation the district courts of the United States may issue, writs of mandamus commanding any person to comply with the provisions of the Trade Law or any order of the Commission made in pursuance thereof. The terms of the Trade Law relating to writs of man- damus are broad enough, considered in isolation, to au- thorize the issuance of such writs by district courts to compel obedience to orders to cease and desist made by the Commission under its regulative power. But the provision of the Trade Law 224 which confers exclusive jurisdiction upon the courts of appeals of the United States to enforce, set aside, or modify the Commis- sion's orders to cease and desist, would seem to preclude the possibility of obtaining enforcement of such orders by writs of mandamus issued by the district courts. It seems likely, therefore, that the use of writs of man- damus will be confined to obtaining enforcement of the Commission's investigative power. And a writ probably will be denied when the information sought by the Com- mission consists of confidential communications, such as letters between attorney and client, and perhaps in other instances. 225 § 57. Improper disclosures: If any Commissioner, or any employee of the Commission, shall, without the au- thority of the Commission, make public any informa- tion obtained by the Commission, unless directed so to do by a court, he shall be guilty of a misdemeanor, and may be punished by a fine of not more than $5,000, or by imprisonment not exceeding one year, or by both fine and imprisonment in the discretion of the court. 226 saiTrade Law, Sec. 5. Cf. note 22eTrade Law, Sec. 10. Cf. 4 117, supra. U. S. Comp. Stat. (1913) Tit. 56A, ^United States v. Louis. & Ch. A, Sec. 8592, (8), p. 3874, re- Nash. R. R. (1914) 212 Fed. 486, lating to Interstate Commerce 493-495, aff'd (1915) 236 U. S. 318. Commission. 98 APPENDIX. Pages. Trade Law 101-114 Antitrust Laws 115-142 Clayton Law 115-136 Sherman Law 137-139 Wilson Law 140-142 Enles of Practice before Federal Trade Com- mission 143-149 TRADE LAW.* Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress as- sembled, That a commission is hereby created and estab- lished, to be known as the Federal Trade Commission (hereinafter referred to as the commission), which shall be composed of five commissioners, who shall be appoint- ed by the President, by and with the advice and consent of the Senate. Not more than three of the commissioners shall be members of the same political party. The first commissioners appointed shall continue in office for terms of three, fonr, five, six, and seven years, respect- ively, from the date of the taking effect of this Act, the term of each to be designated by the President, but their successors shall be appointed for terms of seven years, except that any person chosen to^ fill a vacancy shall be appointed only for the unexpired term of the commis- sioner whom he shall succeed. The commission shall choose a chairman from its own membership. No com- missioner shall engage in any other business, vocation, or employment. Any commissioner may be removed by the President for inefficiency, neglect of duty, or malfea- sance in office. A vacancy in the commission shall not im- pair the right of the remaining commissioners to exer- cise all the powers of the commission. The commission shall have an official seal, which shall be judicially noticed. "Entitled "An Act To create a Approved September 26, 1914. Federal Trade Commission, to de- Supp. U. S. Comp. Stat. (1913) fine its powers and duties, and Tit. 56CC; Sees. 8836a-8836k; 38 for other purposes." (Public No. U. S. Stat, at L., Ch/ 311, p. 717. 203; 63d Congress; H. R. 15613). 101 THE FEDERAL TRADE COMMISSION. Sec. 2. That each, commissioner shall receive a salary of $10,000 a year, payable in the same manner as the sal- aries of the judges of the courts of the United States. The commission shall appoint a secretary, who shall re- ceive a salary of $5,000 a year, payable in like manner, and it shall have authority to employ and fix the compen- sation of such attorneys, special experts, examiners, clerks, and other employees as it may from time to time find necessary for the proper performance of its duties and as may be from time to time appropriated for by Congress. With the exception of the secretary, a clerk to each commissioner, the attorneys, and such special experts and examiners as the commission may from time to time find necessary for the conduct of its work, all employees of the commission shall be a part of the classified civil service, and shall enter the service under such rules and regulations as may be prescribed by the commission and by the Civil Service Commission. All of the expenses of the commission, including all nec- essary expenses for transportation incurred by the com- missioners or by their employees under their orders, in making any investigation, or upon official business in any other places than in the city of "Washington, shall be allowed and paid on the presentation of itemized vouch- ers therefor approved by the commission. Until otherwise provided by law, the commission may rent suitable offices for its use. The Auditor for the State and Other Departments shall receive and examine all accounts of expenditures of the commission. Sec. 3. That upon the organization of the commission and election of its chairman, the Bureau of Corporations and the offices of Commissioner and Deputy Commission- er of Corporations shall cease to exist; and all pending 102 TEADB LAW. investigations and proceedings of the Bureau of Cor- porations shall be continued by the commission. All clerks and employees of the said bureau shall be transferred to and become clerks and employees of the commission at their present grades and salaries. All records, papers, and property of the said bureau shall become records, papers, and property of the commission, and all unexpended funds and appropriations for the use and maintenance of the said bureau, including any allotment already made to it by the Secretary of Com- merce from the contingent appropriation for the Depart- ment of Commerce for the fiscal year nineteen hundred and fifteen, or from the departmental printing fund for the fiscal year nineteen hundred and fifteen, shall be- come funds and appropriations available to be expend- ed by the commission in the exercise of the powers, au- thority, and duties conferred on it by this Act. The principal office of the commission shall be in the city of Washington, but it may meet and exercise all its powers at any other place. The commission may, by one or more of its members, or by such examiners as it may designate, prosecute any inquiry necessary to its duties in any part of the United States. Sec. 4. That the words defined in this section shall have the following meaning when found in this Act, to- wit: "Commerce" means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation. "Corporation" means any company or association in- corporated or unincorporated, which is organized to car- 103 THE FEDERAL TRADE COMMISSION. ry on business for profit and has shares of capital or cap- ital stock, and any company or association, incorporated or unincorporated, without shares of capital or capital stock, except partnerships, which is organized to carry on business for its own profit or that of its members. "Documentary evidence" means all documents, pa- pers, and correspondence in existence at and after the passage of this Act. "Acts to regulate commerce" means the Act entitled "An Act to regulate commerce," approved February fourteenth, eighteen hundred and eighty-seven, and all Acts amendatory thereof and supplementary thereto. "Antitrust acts" means the Act entitled "An Act to protect trade and commerce against unlawful restraints and monopolies," approved July second, eighteen hun- dred and ninety; also the sections seventy-three to sev- enty-seven, inclusive, of an Act entitled "An Act to re- duce taxation, to provide revenue for the Government, and for other purposes," approved August twenty-sev- enth, eighteen hundred and ninety-four; and also the Act entitled "An Act to amend sections seventy-three and seventy-six of the Act of August twenty-seventh, eighteen hundred and ninety-four, entitled 'An Act to re- duce taxation, to provide revenue for the Government, and for other purposes,' " approved February twelfth, nineteen hundred and thirteen. Sec. 5. That unfair methods of competition in com- merce are hereby declared unlawful. The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regu- late commerce, from using unfair methods of competition in commerce. Whenever the commission shall have reason to believe that any such person, partnership, or corporation has 104 TBADE LAW. been or is using any unfair method of competition in commerce, and if it shall appear to the commission that a proceeding by it in respect thereof would be to the in- terest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The per- son, partnership, or corporation so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission requiring such person, partnership, or corporation to cease and desist from the violation of the law so charged in said complaint. Any person, partner- ship, or corporation may make application, and upon good cause shown may be allowed by the commission, to intervene and appear in said proceeding by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in the office of the com- mission. If upon such hearing the commission shall be of the opinion that the method of competition in question is prohibited by this Act, it shall make a report in writ- ing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person, part- nership, or corporation an order requiring such person, partnership, or corporation to cease and desist from us- ing such method of competition. Until a transcript of the record in such hearing shall have been filed in a cir- cuit court of appeals of the United States, as hereinafter provided, the commission may at any time, upon such notice and in such manner as it shall deem proper, mod- ify or set aside, in whole or in part, any report or any or- der made or issued by it under this section. If such person, partnership, or corporation fails or neglects to obey such order of the commission while the 105 THE FEDERAL TRADE COMMISSION. same is in effect, the commission may apply to the circuit court of appeals of the United States, within any circuit where the method of competition in question was used or where such person, partnership, or corporation re- sides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, includ- ing all the testimony taken and the report and order of the commission. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person, partnership, or corporation and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree af- firming, modifying, or setting aside the order of the com- mission. The findings of the commission as to the facts, if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce addi- tional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the commission, the court may order such additional evidence to be taken before the commission and to be adduced upon the hear- ing in such manner and upon such terms and conditions as to the court may seem proper. The commission may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if support- ed by testimony, shall be conclusive, and its recommenda- tion, if any, for the modification or setting aside of its original order, with the return of such additional evi- dence. The judgment and decree of the court shall be final, except that the same shall be subject to review by 106 TRADE LAW. the Supreme Court upon certiorari as provided in section two hundred and forty of the Judicial Code. Any party required by such order of the commission to cease and desist from using such method of competi- tion may obtain a review of such order in said circuit court of appeals by filing in the court a written peti- tion praying that the order of the commission be set aside. A copy of such petition shall be forthwith served upon the commission, and thereupon the commission forthwith shall certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court shall have the same jurisdic- tion to affirm, set aside, or modify the order of the com- mission as in the case of an application by the commis- sion for the enforcement of its order, and the findings of the commission as to the facts, if supported by testi- mony, shall in like manner be conclusive. The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify orders of the commission shall be exclusive. Such proceedings in the circuit court of appeals shall be given precedence over other cases pending therein, and shall be in every way expedited. No order of the commission or judgment of the court to enforce the same shall in any wise relieve or absolve any person, partner- ship, or corporation from any liability under the anti- trust acts. Complaints, orders, and other processes of the com- mission under this section may be served by anyone duly authorized by the commission, either (a) by deliver- ing a copy thereof to the person to be served, or to a mem- ber of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served ; or (b) by leaving a copy thereof at the principal office or place of business of such person, 107 THE FEDERAL TRADE COMMISSION. partnership, or corporation; or (c) by registering and mailing a copy thereof addressed to such person, part- nership, or corporation at his or its principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said com- plaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. Sec. 6. That the commission shall also have power — (a) To gather and compile information concerning, and to investigate from time to time the organization, busi- ness, conduct, practices, and management of any corpora- tion engaged in commerce, excepting banks and common carriers subject to the Act to regulate commerce, and its relation to other corporations and to individuals, asso- ciations, and partnerships. (b) To require, by general or special orders, corpora- tions engaged in commerce, excepting banks, and com- mon carriers subject to the Act to regulate commerce, or any class of them, or any of them, respectively, to file with the commission in such form as the commission may prescribe annual or special, or both annual and spe- cial, reports or answers in writing to specific questions, furnishing to the commission such information as it may require as to the organization, business, conduct, prac- tices, management, and relation to other corporations, partnerships, and individuals of the respective corpora- tions filing such reports or answers in writing. Such re- ports and answers shall be made under oath, or other- wise, as the commission may prescribe, and shall be filed with the commission within such reasonable period as the commission may prescribe, unless additional time be granted in any case by the commission. (c) Whenever a final decree has been entered against 108 TRADE LAW. any defendant corporation in any suit brought by the United States to prevent and restrain any violation of the antitrust Acts, to make investigation, upon its own initiative, of the manner in which the decree has been or is being carried out, and upon the application of the At- torney General it shall be its duty to make such investi- gation. It shall transmit to the Attorney General a re- port embodying its findings and recommendations as a result of any such investigation, and the report shall be made public in the discretion of the commission. (d) Upon the direction of the President or either House of Congress to investigate and report the facts re- lating to any alleged violations of the antitrust Acts by any corporation. (e) Upon the application of the Attorney General to in- vestigate and make recommendations for the readjust- ment of the business of any corporation alleged to be violating the antitrust Acts in order that the corporation may thereafter maintain its organization, management, and conduct of business in accordance with law. (f ) To make public from time to time such portions of the information obtained by it hereunder, except trade secrets and names of customers, as it shall deem expedi- ent in the public interest ; and to make annual and special reports to the Congress and to submit therewith recom- mendations for additional legislation ; and to provide for the publication of its reports and decisions in such form and manner as may be best adapted for public informa- tion and use. (g) From time to time to classify corporations and to make rules and regulations for the purpose of carrying out the provisions of this Act. (h) To investigate, from time to time, trade conditions in and with foreign countries where associations, com- binations, or practices of manufacturers, merchants, or 109 THE FEDERAL TRADE COMMISSION. traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable. Sec. 7. That in any suit in equity brought by or under the direction of the Attorney General as provided in the antitrust Acts, the court may, upon the conclusion of the testimony therein, if it shall be then of opinion that the complainant is entitled to relief, refer said suit to the commission, as a master in chancery, to ascertain and re- port an appropriate form of decree therein. The com- mission shall proceed upon such notice to the parties and under such rules of procedure as the court may prescribe, and upon the coming in of such report such exceptions may be filed and such proceedings had in relation there- to as upon the report of a master in other equity causes, but the court may adopt or reject such report, in whole or in part, and enter such decree as the nature of the case may in its judgment require. Sec. 8. That the several departments and bureaus of the Government when directed by the President shall furnish the commission, upon its request, all records, papers, and information in their possession relating to any corporation subject to any of the provisions of this Act, and shall detail from time to time such officials and employees to the commission as he may direct. Sec. 9 That for the purposes of this Act the commis- sion, or its duly authorized agent or agents, shall at all reasonable times have access to, for the purpose of ex- amination, and the right to copy any documentary evi- dence of any corporation being investigated or proceeded against ; and the commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence re- lating to any matter under investigation. Any member of the commission may sign subpoenas, and members and 110 TKADli LAW. examiners of the commission may administer oaths and affirmations, examine witnesses, and receive evidence. Such attendance of witnesses, and the production of such documentary evidence, may be required from any place in the United States, at any designated place of hearing. And in case of disobedience to a subpoena the commission may invoke the aid of any court of th& United States in requiring the attendance and testimony of witnesses and the production of documentary evi- dence. Any of the district courts of the United States within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any corporation or other person, issue an order requir- ing such corporation or other person to appear before the "commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof. Upon the application of the Attorney General of the United States, at the request of the commission, the dis- trict courts of the United States shall have jurisdiction to issue, writs of mandamus commanding any person or corporation to comply with the provisions of this Act or any order of the commission made in pursuance thereof. The commission may .order testimony to be taken by deposition in any proceeding or investigation pending under this Act at any stage of such proceeding or investi- gation. Such depositions may be taken before any per- son designated by the commission and having power to administer oaths. Such testimony shall be reduced to writing by the person taking the deposition, or under his direction, and shall then be subscribed by the deponent. Any person may be compelled to appear and depose and to produce documentary evidence in -the same manner as 111 THE FEDERAL TRADE COMMISSION". witnesses may be compelled to appear and testify and produce documentary evidence before the commission as hereinbefore provided. Witnesses summoned before the commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States, and witnesses whose dep- ositions are taken and the persons taking the same shall severally be entitled to the same fees as are paid for like services in the courts of the United States. No person shall be excused from attending and testify- ing or from producing documentary evidence before the commission or in obedience to the subpoena of the com- mission on the ground or for the reason that the testi- mony or evidence, documentary or otherwise, required of him may tend to criminate him or subject him to a penal- ty or forfeiture. But no natural person shall be prose- cuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he may testify, or produce evidence, documentary or otherwise, before the commission in obedience to a subpoena issued by it: Provided, That no natural per- son so testifying shall be exempt from prosecution and punishment for perjury committed in so testifying. Sec. 10. That any person who shall neglect or refuse to attend and testify, or to answer any lawful inquiry, or to produce documentary evidence, if in his power to do so, in obedience to the subpoena or lawful requirement of the commission, shall be guilty of an offense and upon conviction thereof by a court of competent jurisdiction shall be punished by a fine of not less than $1,000 nor more than $5,000, or by imprisonment for not more than one year, or by both such fine and imprisonment. Any person who shall willfully make, or cause to be made, any false entry or statement of fact in any report required to be made under this Act, or who shall willfully 112 TRADE LAW. make, or cause to be made, any false entry in any account, record, or memorandum kept by any corporation subject to this Act, or who shall willfully neglect or fail to make, or to cause to be made, full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the business of such corpor- ation, or who shall willfully remove out of the jurisdic- tion of the United States, or willfully mutilate, alter, or by any other means falsify any documentary evidence of such corporation, or who shall willfully refuse to submit to the commission or to any of its authorized agents, for the purpose of inspection and taking copies, any docu- mentary evidence of such corporation in his possession or within his control, shall be deemed guilty of an offense against the United States, and shall be subject, upon con- viction in any court of the United States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000, or to imprisonment for a term of not more than three years, or to both such fine and imprisonment. If any corporation required by this Act to file any an- nual or special report shall fail so to do within the time fixed by the commission for filing the same, and such fail- ure shall continue for thirty days after notice of such de- fault, the corporation shall forfeit to the United States the sum of $100 for each and every day of the continu- ance of such failure, which forfeiture shall be payable into the .Treasury of the United States, and shall be re- coverable in a civil suit in the name of the United States brought in the district where the corporation has its prin- cipal office or in any district in which it shall do business. It shall be the duty of the various district attorneys, un- der the direction of the Attorney General of the United States, to prosecute for the recovery of forfeitures. The costs and expenses of such prosecution shall be paid out 113 THE FEDERAL TRADE COMMISSION. of the appropriation for the expenses of the courts of the United States. Any officer or employee of the commission who shall make public any information obtained by the commis- sion without its authority, unless directed by a court, shall be deemed guilty of a misdemeanor, and, upon con- viction thereof, shall be punished by a fine not exceeding $5,000, or by imprisonment not exceeding one year, or by fine and imprisonment, in the discretion of the court. Sec. 11. Nothing contained in this Act shall be con- strued to prevent or interfere with the enforcement of the provisions of the antitrust Acts or the Acts to regu- late commerce, nor shall anything contained in the Act be construed to alter", modify, or repeal the said antitrust Acts or the Acts to regulate commerce or any part or parts thereof. 114 CLAYTON LAW. a Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress as- sembled, That "antitrust laws," as used herein, includes the Act entitled "An Act to protect trade and commerce against unlawful restraints and monopolies," approved July second, eighteen hundred and ninety; sections sev- enty-three to seventy-seven, inclusive, of an Act entitled "An Act to reduce taxation, to provide revenue for the Government, and for other purposes," of August twenty- seventh, eighteen hundred and ninety-four; an Act en- titled "An Act to amend sections seventy-three and seventy-six of the Act of August twenty-seventh, eight- een hundred and ninety-four, entitled 'An Act to reduce taxation, to provide revenue for the Government, and for other purposes,' " approved February twelfth, nineteen hundred and thirteen; and also this Act. ""Commerce," as used herein, means trade or com- merce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State, Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Colum- bia or any foreign nation, or within the District of Co- lumbia or any Territory or any insular possession or "Entitled "An Act To supple- Approved October 15, 1914. Supp. ment existing laws against unlaw- U. S. Comp. Stat. (1913) Tit. 56C, ful restraints and monopolies, and Sees. 8835a-8835o; 38 U. S. Stat, for other purposes." (Public No. at L., Ch. 323, p. 730. 212; 63d Congress; H. R. 15657). 115 THE FEDERAL TRADE COMMISSION". other place under the jurisdiction of the United States : Provided, That nothing in this Act contained shall apply to the Philippine Islands. The word "person" or "persons" wherever used in this Act shall he deemed to include corporations and as- sociations existing under or authorized by the laws of either the United States, the laws of any of the Terri- tories, the laws of any State, or the laws of any foreign country. Sec. 2. That it shall he unlawful for any person engag- ed in commerce, in the course of such commerce, either di- rectly or indirectly to discriminate in price between differ- ent purchasers of commodities, which commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdic- tion of the United States, where the effect of such dis- crimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce": Provided, That nothing herein contained shall prevent discrimination in price between purchasers of commodi- ties on account of differences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for difference in the cost of selling or trans- portation, or discrimination in price in the same or dif- ferent communities made in good faith to meet com- petition: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in re- straint of trade. Sec. 3. That it shall be unlawful for any person en- gaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies or other commodities, 116 CLAYTON LAW. whether patented or unpatented, for use, consumption or resale within the United States or any Territory thereof or the District of Columbia or any insular pos- session or other place under the jurisdiction of the United States, or fix a price charged therefor, or dis- count from, or rebate upon, such price, on the condition, agreement or understanding that the lessee or purchaser thereof shall not -use or deal in the goods, wares, mer- chandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement or understanding may be to sub- stantially lessen competition or tend to create a monop- oly in any line of commerce. Sec. 4. That any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor' in any district court of the United States in the district in which the defend- ant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, in- cluding a reasonable attorney's fee. Sec. 5. That a final judgment or decree hereafter ren- dered in any criminal prosecution or in any suit or pro- ceeding in equity brought by or on behalf of the United States under the antitrust laws to the effect that a de- fendant has violated said laws shall be prima facie evi- dence against such defendant in any suit or proceeding brought by any other party against such defendant un- der said laws as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto: Provided, This section shall not apply to consent judgments or decrees entered before any tes- timony has been taken : Provided further, This section shall not apply to consent judgments or decrees rendered 117 THE FEDERAL TBADE COMMISSION. in criminal proceedings or suits in equity, now pending, in which the taking of testimony has been commenced but has not been concluded, provided such judgments or decrees are rendered before any further testimony is taken. Whenever any suit or proceeding in equity or criminal prosecution is instituted by the United States to prevent, restrain or punish violations of any of the antitrust laws, the running of the statute of limitations in respect of each and every private right of action arising under said laws and based in whole or in part on any matter complained of in said suit or proceeding shall be sus- pended during the pendency thereof. Sec. 6. That the labor of a human being is not a com- modity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural or- ganizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organi- zations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. Sec. 7. That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another cor- poration engaged also in commerce, where the effect of such acquisition may be to substantially lessen competi- tion between the corporation whose stock is so acquired and the corporation making the acquisition, or to re- strain such commerce in any section or community, or tend to create a monopoly of any line of commerce. No corporation shall acquire, directly or indirectly, 118 CLAYTON LAW. the whole or any part of the stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition between such cor- porations, or any of them, whose stock or other share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monoply of any line of commerce. This section shall not apply to corporations purchas- ing such stock solely for investment and not using the same by voting or otherwise to bring about, or in at- tempting to bring about, the substantial lessening of competition. Nor shall anything contained in this sec- tion prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen compe- tition. Nor shall anything herein contained be construed to prohibit any common carrier subject to the laws to regu- late commerce from aiding in the construction of branches or short lines so located as to become feeders to the main line of the company so aiding in such construc- tion or from acquiring or owning all or any part of the stock of such branch lines, nor to prevent any such com- mon carrier from acquiring and owning all or any part of the stock of a branch or short line constructed by an independent company where there is no substantial com- petition between the company owning the branch line so constructed and the company owning the main line ac- quiring the property or an interest therein, nor to pre- 119 THE FEDERAL TEADE COMMISSION. vent such common carrier from extending any of its lines through the medium of the acquisition of stock or otherwise of any other such common carrier where there is no substantial competition between the company ex- tending its lines and the company whose stock, property, or an interest therein is so acquired. Nothing contained in this section shall be held to affect or impair any right heretofore legally acquired: Provided, That nothing in this section shall be held or construed to authorize or make lawful anything hereto- fore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided. Sec. 8. That from and after two years from the date of the approval of this Act no person shall at the same time be a director or other officer or employee of more than one bank, banking association or trust company, organized or operating under the laws of the United States, either of which has deposits, capital, surplus, and undivided profits aggregating more than $5,000,000 ; and no private banker or person who is a director in any bank or trust company, organized and operating under the laws of a State, having deposits, capital, surplus, and undivided profits aggregating more than $5,000,000, shall be eligible to be a director in any bank or banking association organized or operating under the laws of the United States. The eligibility of a director, officer, or employee under the foregoing provisions shall be deter- mined by the average amount of deposits, capital, sur- plus, and undivided profits as shown in the official state- ments of such bank, banking association, or trust com- pany filed as provided by law during the fiscal year next preceding the date set for the annual election of direc- tors, and when a director, officer, or employee has been elected or selected in accordance with the provisions of 120 CLAYTON LAW. this Act it shall be lawful for him to continue as such for one year thereafter under said election or employment. No bank, banking association or trust company, or- ganized or operating under the laws of the United States, in any city or incorporated town or village of more than two hundred thousand inhabitants, as shown by the last preceding decennial census of the United States, shall have as a director or other officer or employee any pri- vate banker or any director or other officer or employee of any other bank, banking association or trust company located in the same place: Provided, That nothing in this section shall apply to mutual savings banks not hav- ing a capital stock represented by shares: Provided further, That a director or other officer or employee of such bank, banking association, or trust company may be a director or other officer or employee of not more than one other bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in the other : And provided farther, That nothing contained in this section shall forbid a director of class A of a Federal reserve bank, as defined in the Federal Eeserve Act from being an officer or director or both an officer and director in one member bank. That from and after two years from the date of the approval of this Act no person at the same time shall be a director in any two or more corporations, any one of which has capital, surplus, and undivided profits ag- gregating more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associa- tions, trust companies and common carriers subject to the Act to regulate commerce, approved February fourth, eighteen hundred and eigbty-seven, if such corporations are or shall have been theretofore, by virtue of their business and location of- operation, competitors, so that 121 THE FEDERAL TRADE COMMISSION". the elimination of competition by agreement between them would constitute a violation of any of the provis- ions of any of the antitrust laws. The eligibility of a director under the foregoing provision shall be deter- mined by the aggregate amount of the capital, surplus, and undivided profits, exclusive of dividends declared but not paid to stockholders, at the end of the fiscal year of said corporation next preceding the election of di- rectors, and when a director has been elected in accord- ance with the provisions of this Act it shall be lawful for him to continue as such for one year thereafter. When any person elected or chosen as a director or officer or selected as an employee of any bank or other corporation subject to the provisions of this Act is eligi- ble at the time of his election or selection to act for such bank or other corporation in such capacity his eligibility to act in such capacity shall not be affected and he shall not become or be deemed amenable to any of the pro- visions hereof by reason of any change in the affairs of such bank or other corporation from whatsoever cause, whether specifically excepted by any of the provisions hereof or not, until the expiration of one year from the date of his election or employment. Sec. 9. Every president, director, officer or manager of any firm, association or corporation engaged in com- merce as a common carrier, who embezzles, steals, ab- stracts or willfully misapplies, or willfully permits to be misapplied, any of the moneys, funds, credits, securities, property or assets of such firm, association or corpora- tion, arising or accruing from, or used in, such commerce, in whole or in part, or willfully or knowingly converts the same to his own use or to the use of another, shall be deemed guilty of a felony and upon conviction shall be fined not less than $500 or confined in the penitentiary 122 CLAYTOK LAW. not less than one year nor more than ten years, or both, in the discretion of the court. Prosecutions hereunder may be in the district court of the United States for the district wherein the offense may have been committed. That nothing in this section shall be held to take away or impair the jurisdiction of the courts of the several States under the laws thereof; and a judgment of con- viction or acquittal on the merits under the laws of any State shall be a bar to any prosecution hereunder for the same act or acts. Sec. 10. That after two years from the approval of this Act no common carrier engaged in commerce shall have any dealings in securities, supplies or other articles of commerce, or shall make or have any contracts for con- struction or maintenance of any kind, to the amount of more than $50,000, in the aggregate, in any one year, with another corporation, firm, partnership or associa- tion when the said common carrier shall have upon its board of directors or as its president, manager or as its purchasing or selling officer, or agent in the particu- lar transaction, any person who is at the same time a director, manager, or purchasing or selling officer of, or who has any substantial interest in, such other corpora- tion, firm, partnership or association, unless and except such purchases shall be made from, or such dealings shall be with, the bidder whose bid is the most favorable to such common carrier, to be ascertained by competitive bidding under regulations to be prescribed by rule or otherwise by the Interstate Commerce Commission. No bid shall be received unless the name and address of the bidder or the names and addresses of the officers, direc- tors and general managers thereof, if the bidder be a corporation, or of the members, if it be a partnership or firm, be given with the bid. 123 THE FEDERAL TBADE COMMISSION. Any person who shall, directly or indirectly, do or at- tempt to do anything to prevent anyone from bidding or shall do any act to prevent free and fair competition among the bidders or those desiring to bid shall be pun- ished as prescribed in this section in the case of an officer or director. Every such common carrier having any such transac- tions or making any such purchases shall within thirty days after making the same file with the Interstate Com- merce Commission a full and detailed statement of the transaction showing the manner of the competitive bid- ding, who were the bidders, and the names and addresses of the directors and officers of the corporations and the members of the firm or partnership bidding; and when- ever the said commission shall, after investigation or hearing, have reason to believe that the law has been violated in and about the said purchases or transactions it shall transmit all papers and documents and its own views or findings regarding the transaction to the At- torney General. If any common carrier shall violate this section it shall be fined not exceeding $25,000; and every such di- rector, agent, manager or officer thereof who shall have knowingly voted for or directed the act constituting such violation or who shall have aided or abetted in such vio- lation shall be deemed guilty of a misdemeanor and shall be fined not exceeding $5,000, or confined in jail not exceeding one year, or both, in the discretion of the court. Sec. 11. That authority to enforce compliance with sections two, three, seven and eight of this Act by the persons respectively subject thereto is hereby vested: in the Interstate Commerce Commission where applicable to common carriers, in the Federal Eeserve Board where applicable to banks, banking associations and trust com- panies, and in the Federal Trade Commission where ap- 124 CLayToN LAW. plicable to all other character of commerce, to be exer- cised as follows : Whenever the commission or board vested with juris- diction thereof shall have reason to believe that any per- son is violating or has violated any of the provisions of sections two, three, seven and eight of this Act, it shall issue and serve upon such person a complaint stat- ing its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The person so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission or board requiring such person to cease and desist from the vio- lation of the law so charged in said complaint. Any person may make application, and upon good cause shown may be allowed by the commission or board, to intervene and appear in said proceeding by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in the office of the com- mission or board. If upon such hearing the commission or board, as the case may be, shall be of the opinion that any of the provisions of said sections have been or are being violated, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person an order requiring such person to cease and desist from such violations, and divest itself of the stock held or rid itself of the directors chosen contrary to the provisions of sections seven and eight of this Act, if any there be, in the man- ner and within the time fixed by said order. Until a transcript of the record in such hearing shall have been filed in a circuit court of appeals of the United States, as hereinafter provided, the commission or board may at any time, upon such notice and in such manner as it 125 THE FEDERAL TRADE COMMISSION". shall deem proper, modify or set aside, in whole or in part, any report or any order made or issued by it under this section. If such person fails or neglects to obey such order of the commission or board while the same is in effect, the commission or board may apply to the circuit court of appeals of the United States, within any circuit where the violation complained of was or is being committed or where such person resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the commission or board. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the commission or board. The findings of the commission or board as to the facts, if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evi- dence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the commission or board, the court may order such additional evidence to be taken before the commis- sion or board and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The commission or board may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported 126 CLAYTOK LAW. by testimony, shall be conclusive, and its recommenda- tion, if any, for the modification or setting aside of its original order, with the return of such additional evi- dence. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided in sec- tion two hundred and forty of the Judicial Code. Any party required by such order of the commission or board to cease and desist from a violation charged may obtain a review of such order in said circuit court of ap- peals by filing in the court a written petition praying that the order of the commission or board be set aside. A copy of such petition shall be forthwith served upon the commission or board, and thereupon the commis- sion or board forthwith shall ceitify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court shall have the same jurisdiction to affirm, set aside, or modify the order of the commission or board as in the case of an applica- tion by the commission or board for the enforcement of its order, and the findings of the commission or board as to the facts, if supported by testimony, shall in like manner be conclusive. The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify orders of the commission or board shall be exclusive. Such proceedings in the circuit court of appeals shall be given precedence over the other cases pending therein, and shall be in every way expedited. No order of the commission or board or the judgment of the. court to enforce the same shall in any wise relieve or absolve any person from any liability under the antitrust Acts. Complaints, orders, and other processes of the com- mission or board under this section may be served by anyone duly authorized by the commission or board, 127 THE FEDERAL TRADE COMMISSION. either (a) by delivering a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served; or (b) by leaving a copy thereof at the principal office or place of business of such person; or (c) by registering and mailing a copy thereof addressed to such person at his principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. Sec. 12. That any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabi- tant, but also in any district wherein it may be found or transacts business ; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found. Sec. 13.- That in any suit, action, or proceeding brought by or on behalf of the United States subpoenas for witnesses who are required to attend a court of the United States in any judicial district in any case, civil or criminal, arising under the antitrust laws may run into any other district : Provided, That in civil cases no writ of subpoena shall issue for witnesses living out of the district in which the court is held at a greater distance than one hundred miles from the place of holding the same without the permission of the trial court being first had upon proper application and cause shown. Sec. 14. That whenever a corporation shall violate any of the penal provisions of the antitrust laws, such violation shall be deemed to be also that of the individual 128 CLAYTON LAW. directors, officers, or agents of such corporation who shall have authorized, ordered, or done any of the acts constituting in whole or in part such violation, and such violation shall be deemed a misdemeanor, and upon con- viction therefor of any such director, officer, or agent he shall be punished by a fine of not exceeding $5,000 or by imprisonment for not exceeding one year, or by both, in the discretion of the court. Sec. 15. That the several district courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this Act, and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or other- wise prohibited. "When the parties complained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hearing and determi- nation of the case ; and pending such petition, and before final decree, the court may at any time make such tem- porary restraining order or prohibition as shall be deemed just in the premises. Whenever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other par- ties should be brought before the court, the court may cause them to be summoned whether they reside in the district in which the court is held or not, and subpoenas to that end may be served in any district by the marshal thereof. Sec. 16. That any person, firm, corporation, or asso- ciation shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdic- tion over the parties, against threatened loss or damage 129 THE FEDERAL TRADE COMMISSION. by a violation of the antitrust laws, including sections two, three, seven and eight of this Act, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or dam- age is granted by courts of equity, under the rules gov- erning such proceedings, and upon the execution of proper bond against damages for an injunction improvi- dently granted and a showing that the danger of irrep- arable loss or damage is immediate, a preliminary in- junction may issue : Provided, That nothing herein con- tained shall be construed to entitle any person, firm, corporation, or association, except the United States, to bring suit in equity for injunctive relief against any com- mon carrier subject to the provisions of the Act to regu- late commerce, approved February fourth, eighteen hun- dred and eighty-seven, in respect of any matter subject to the regulation, supervision, or other jurisdiction of the Interstate Commerce Commission. Sec. 17. That no preliminary injunction shall be issued without notice to the opposite party. No temporary restraining order shall be granted with- out notice to the opposite party unless it shall clearly ap- pear from specific facts shown by affidavit or by the veri- fied bill that immediate and irreparable injury, loss, or damage will result to the applicant before notice can be served and a hearing had thereon. Every such temporary restraining order shall be indorsed with the date and hour of issuance, shall be forthwith filed in the clerk's office and entered of record, shall define the injury and state why it is irreparable and why the order was granted without notice, and shall by its terms expire within such time after entry, not to exceed ten days, as the court or judge may fix, unless within the time so fixed the order is extended for a like period for good cause shown, and the reasons for such extension shall be ' 130 CLAYTON LAW. entered of record. In case a temporary restraining or- der shall be granted without notice in the contingency specified, the matter of the issuance of a preliminary in- junction shall be set down for a hearing at the earliest possible time and shall take precedence of all matters except older matters of the same character; and when the same comes up for hearing the party obtaining the temporary restraining order shall proceed with the ap- plication for a preliminary injunction, and if he does not do so the court shall dissolve the temporary restraining order. Upon two days' notice to the party obtaining such temporary restraining order the opposite party may appear and move the dissolution or modification of the order, and in that event the court or judge shall pro- ceed to hear and determine the motion as expeditiously as the ends of justice may require. Section two hundred and sixty-three of an Act entitled "An Act to codify, revise, and amend the laws relating to the judiciary," approved March third, nineteen hun- dred and eleven, is hereby repealed. Nothing in this section contained shall be deemed to alter, repeal, or amend section two hundred and sixty-six of an Act entitled "An Act to codify, revise and amend the laws relating to the judiciary," approved March third, nineteen hundred and eleven. Sec. 18. That, except as otherwise provided in section 16 of this Act, no restraining order or interlocutory or- der of injunction shall issue, except upon the giving of security by the applicant in such sum as the court or judge may deem proper, conditioned upon the payment of such costs and damages as may be incurred or suf- fered by any party who may be found to have been wrongfully enjoined or restrained thereby. Sec. 1 9. That every order of injunction or restraining order shall set forth the reasons for the issuance of the 131 THE FK.ntiRAL TRADE COMMISSION. same, shall be specific in terms, and shall describe in rea sonable detail, and not by reference to the bill of com- plaint or other document, the act or acts sought to be restrained, and shall bo binding only upon the parties to the suit, their officers, agents, servants, employees, and attorneys, or those in active concert or participating with them, and who shall, by personal service or other- wise, have received actual notice of the same. Sec. 20. That no restraining order or injunction shall be granted by any court of the United States, or a judge or the judges thereof, in any case between an employer and employees, or between employers and employees, or between employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concerning terms or conditions of employ- ment, unless necessary to prevent irreparable injury to property, or to a property right, of the party making the application, for which injury there is no adequate remedy at law, and such property or property right must be described with particularity in the application, which must be in writing and sworn to by the applicant or by his agent or attorney. And no such restraining order or injunction shall pro- hibit any person or persons, whether singly or in concert, from terminating any relation of employment, or from ceasing to perform any work or labor, or from recom- mending, advising, or persuading others by peaceful means so to do; or from attending at any place where any such person or persons may lawfully he, for the pur- pose of peacefully obtaining or communicating informa- tion, or from peacefully persuading any person to work or to abstain from working; or from ceasing to patronize or to employ any party to such dispute, or from recom- mending, advising, or persuading others by peaceful and lawful means so to do; or from paying or giving to, or 132 CLAYTON LAW. withholding from, any person engaged in such dispute, any strike benefits or other moneys or things of value; or from peaceably assembling in a lawful manner, and for lawful purposes; or from doing any act or thing which might lawfully be done in the absence of such dis- pute by any party thereto ; nor shall any of the acts spe- cified in this paragraph be considered or held to be vio- lations of any law of the United States. Sec. 21. That any person who shall willfully disobey any lawful writ, process, order, rule, decree, or command of any district court of the United States or any court of the District of Columbia by doing any act or thing therein, or thereby forbidden to be done by him, if the act or thing so done by him be of such character as to constitute also a criminal offense under any statute of the United States, or under the laws of any State in which the act was committed, shall be proceeded against for his said contempt as hereinafter provided. Sec. 22. That whenever it shall be made to appear to any district court or judge thereof, or to any judge therein sitting, by the return of a proper officer on lawful process, or upon the affidavit of some credible person, or by information filed by any district attorney, that there is reasonable ground to believe that any person has been guilty of such contempt, the court or judge thereof, or any judge therein sitting, may issue a rule requiring the said person so charged to show cause upon a day cer- tain why he, should not be punished therefor, which rule, together with a copy of the affidavit or information, shall be served upon the person charged, with sufficient promptness to enable him to prepare for and make re- turn to the order at the time fixed "therein. If upon or by such return, in the judgment of the court, the alleged contempt be not sufficiently purged, a trial shall be di- rected at a time and place fixed by the court : Provided, 133 THE FEDERAL TRADE COMMISSION. however, That if the accused, being a natural person, fail or refuse to make return to the rule to show cause, an attachment may issue against his person to compel an answer, and in case of his continued failure or refusal, or if for any reason it be impracticable to dispose of the matter on the return day, he may be required to give reasonable bail for his attendance at the trial and his submission to the final judgment of the court. Where the accused is a body corporate, an attachment for the sequestration of its property may be issued upon like refusal or failure to answer. In all cases within the purview of this Act such trial may be by the court, or, upon demand of the accused, by a jury; in which latter event the court may impanel a jury from the jurors then in attendance, or the court or the judge thereof in chambers may cause a sufficent num- ber of jurors to be selected and summoned, as provided by law, to attend at the time and place of trial, at which time a jury shall be selected and impaneled as upon a trial for misdemeanor; and such trial shall conform, as near as may be, to the practice in criminal cases prose- cuted by indictment or upon information. If the accused be found guilty, judgment shall be en- tered accordingly, prescribing the punishment, either by fine or imprisonment, or both, in the discretion of the court. Such fine shall be paid to the United States or to the complainant or other party injured by the act con- stituting the contempt, or may, where more than one is so damaged, be divided or apportioned among them as the court may direct, but in no case shall the fine to be paid to the United States exceed, in case the accused is a natural person, the sum of $1,000, nor shall such im- prisonment exceed the term of six months: Provided That in any case the court or a judge thereof may, for good cause shown, by affidavit or proof taken in open 134 CLAYTON LAW. court or before such judge and filed with the papers in the case, dispense with the rule to show cause, and may issue an attachment for the arrest of the person charged with contempt; in which event such person, when ar- rested, shall be brought before such court or a judge thereof without unnecessary delay and shall be admitted to bail in a reasonable penalty for his appearance to an- swer to the charge or for trial for the contempt; and thereafter the proceedings shall be the same as provided herein in case the rule had issued in the first instance. Sec. 23. That the evidence taken upon the trial of any persons so accused may be preserved by bill of excep- tions, and any judgment of conviction may be reviewed upon writ of error in all respects as now provided by law in criminal cases, and may be affirmed, reversed, or modi- fied as justice may require. Upon the granting of such writ of error, execution of judgment shall be stayed, and the accused, if thereby sentenced to imprisonment, shall be admitted to bail in such reasonable sum as may be re- quired by the court, or by any justice, or any judge of any district court of the United States or any court of the District of Columbia. Sec. 24. That nothing herein contained shall be con- strued to relate to contempts committed in the presence of the court, or so near thereto as to obstruct the ad- ministration of justice, nor to contempts committed in disobedience of any lawful writ, process, order, rule, de- cree, or command entered in any suit or action brought or prosecuted in the name of, or on behalf of, the United States, but the same, and all other cases of contempt not specifically embraced within section twenty-one of this Act, may be punished in conformity to the usages at law and in equity now prevailing. Sec. 25. That no proceeding for contempt shall be in- stituted against any person unless begun within one year 135 THE FEDERAL TRADE COMMISSION. from the date of the act complained of; nor shall any such proceeding be a bar to any criminal prosecution for the same act or acts; but nothing herein contained shall affect any proceedings in contempt pending at the time of the passage of this Act. ,Sec. 26. If any clause, sentence, paragraph, or part of this Act shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered. 136 SHERMAN LAW. a Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress as- sembled, Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be pun- ished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 2. Every person who shall monopolize, or at- tempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with for- eign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 3. Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or com- merce in any Territory of the United States or of the District of Columbia, or in restraint of trade or com- "Entitled "An Act To protect- Comp. Stat. (1913) Tit. 56 C, Sees, trade and commerce against un- 8820-8823, 8827-8830, pp. 4010-4012, lawful restraints and monopolies." 4014-4015; 26 U. S. Stat, at L., Ch. Approved July 2, 1890. 4 U. S. 647, p. 209. 137 THE FEDERAL TEADE COMMISSION. merce between any such Territory and another, or be- tween any such Territory or Territories and any State or States or the District of Columbia, or with foreign na- tions, or between the District of Columbia and any State or States or foreign nations, is hereby declared illegal. Every person who shall make any such contract or en- gage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 4. The several circuit courts of the United States are hereby invested with jurisdiction to prevent and re- strain violations of this act, and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney- G-eneral, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly no- tified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case ; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises. Sec. 5. Whenever it shall appear to the court before which any proceeding under section four of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not; and subpoenas to that end may be served in any district by the marshal thereof. 138 SHERMAN LAW. Sec. 6. Any property owned under any contract or by any combination, or pursuant to any conspiracy (and be- ing the subject thereof) mentioned in section one of this act, and being in the course of transportation from one State to another, or to a foreign country, shall be for- feited to the United States, and may be seized and con- demned by like proceedings as those provided by law for the forfeiture, seizure and condemnation of property im- ported into the United States contrary to law. Sec. 7. Any person who shall be injured in his busi- ness or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any circuit court of the United States, in the district in which the defendant re- sides or is found, without respect to the amount in con- troversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reason- able attorney's fee. Sec. 8. That the word "person," or "persons," wher- ever used in this act shall be deemed to include corpora- tions and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country. 139 WILSON LAW." (as amended) Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress as- sembled, That * * * . Sec. 73. That every combination, conspiracy, trust, agreement, or contract is hereby declared to be contrary to public policy, illegal, and void when the same is made by or between two or more persons or corporations either of whom, as agent or principal, is engaged in importing any article from any foreign country into the United States, and when such combination, conspiracy, trust, agreement, or contract is intended to operate in restraint of lawful trade, or free competition in lawful trade or commerce, or to increase the market price in any part of the United States of any article or articles imported or intended to be imported into the United States, or of any manufacture into which such imported article enters or is intended to enter. Every person who is or shall here- after be engaged in the importation of goods or any com- *Entitled "An Act To reduce tax- section seventy-six of the Act of ation, to provide revenue for the August twenty-seventh, eighteen Government, and for other pur- hundred and ninety-four, entitled poses." Received by the President 'An Act to reduce taxation, to August 15, 1894, and became a provide revenue for the Govern- law without the President's ap- ment, and for other purposes'." proval, pursuant to Art. I, Sec. 7 (Public No. 370; 62d Congress; of the Constitution, on August H. R. 25002). Approved Febru- 27, 1894. 28 U. S. Stat, at L., ary 12, 1913. 37 U. S. Stat, at Ch. 349, pp. 509, 570. Amended L„ Ch. 40, p. 667. See 4 U. S. by an act entitled "An Act to Comp. Stat. (1913) Tit. 56 C, Sees, amend section seventy-three and 8831-8835, pp. 4015-4017. 140 WILSON LAW. modity from any foreign country in violation of this sec- tion of this Act, or who shall combine or conspire with an- other to violate the same, is guilty of a misdemeanor, and on conviction thereof in any court of the United States such person shall be fined in a sum not less than one hun- dred dollars and not exceeding five thousand dollars, and shall be further punished by imprisonment, in the discre- tion of the court, for a term not less than three months nor exceeding twelve months. Sec. 74. That the several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of section seventy-three of this Act; and it shall be the duty of the several district at- torneys of the United States, in their respective districts, under the direction of the Attorney-General, to institute proceedings in equity to prevent and restrain such viola- tions. Such proceedings may be by way of petitions set- ting forth the case and praying that such violations shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such peti- tion the court shall proceed, as soon as may be, to the hearing and determination of the case ; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibi- tion as shall be deemed just in the premises. Sec. 75. That whenever it shall appear to the court before which any proceeding under the seventy-fourth section of this Act may be pending, that the ends of jus- tice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not ; and subpoenas to that end may be served in any district by the marshal thereof. Sec. 76. That any property owned under any contract or by any combination, or pursuant to any conspiracy, 141 THE FEDEBAL TKADE COMMISSION. and being the subject thereof, mentioned in section sev- enty-three of this Act, imported into and being within the United States or being in the course of transportation from one State to another, or to or from a Territory or the District of Columbia, shall be forfeited to the United States, and may be seized and condemned by like pro- ceedings as those provided by law for the forfeiture, sei- zure, and condemnation of property imported into the United States contrary to law. Sec. 77. That any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlaw- ful by this Act may sue therefor in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in con- troversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reason- able attorney's fee. 142 RULES OF PRACTICE BEFORE THE FEDERAL TRADE COMMISSION. 4 I. SESSIONS. The principal office of the Commission at Washington, D. C, is open each business day from 9 a. m. to 4.30 p. m. The Commission may- meet and exercise all its pow- ers at any other place, and may, by one or more of its members, or by such examiners as it may designate, prosecute any inquiry necessary to its duties in any part of the United States. Sessions of the Commission for hearing contested pro- ceedings will be held as ordered by the Commission. Sessions of the Commission for the purpose of making orders and for the transaction of other business, unless otherwise ordered, will be held at the office of the Com- mission at Washington, D. C, on each business day at 10.30 a. m. Three members of the Commission shall con- stitute a quorum for the transaction of business. All orders of the Commission shall be signed by the Secretary. II. COMPLAINTS. Any person, partnership, corporation, or association may apply to the Commission to institute a proceeding in respect to any violation of law over which the Commis- sion has jurisdiction. Such application shall be in writing, signed by or in behalf of the applicant, and shall contain a short and ^Adopted June 17, 1915. Amend- infra. ed October 29, 1915; see note "b" 143 THE FEDEEAL TRADE COMMISSION. simple statement of the facts constituting the alleged vi- olation of law and the name and address of the applicant and of the party complained of. The Commission shall investigate the matters com- plained of in such application, and if upon investiga- tion the Commission shall have reason to believe 6 that there is a violation of law over which the Commission has jurisdiction, the Commission shall issue and serve upon the party complained of a complaint stating its charges and containing a notice of a hearing upon a day and at a place therein fixed, at least 40 days after the service of said complaint. III. ANSWERS. Within 30 days from the service of the complaint, un- less such time be extended by order of the Commission, the defendant shall file with the Commission an answer to the complaint. Such answer shall contain a short and simple statement of the facts which constitute the ground of defense. It shall specifically admit or deny or explain each of the facts alleged in the complaint, unless the de- fendant is without knowledge, in which case he shall so state, such statement operating as a denial. Answers in typewriting must be on one side of the paper only, on paper not more than 8y 2 inches wide and not more than 11 inches long, and weighing not less than 16 pounds to bThe third paragraph of Rule believe" now appear. In substi- No. II, as originally adopted, was tuting the words "the Commission amended October 29, 1915. As shall have reason to believe" for originally adopted the third para- the words originally used, the graph of Rule No. II had the Commission adopted language words "it shall appear to the Com- found both in section five of the mission," following the word "in- Trade Law and section eleven of vestigation," where the words "the the Clayton Law. Commission shall have reason to 144 RULES OF PEACTICE. the ream, folio base, 17 by 22 inches, with left-hand mar- gin not less than IV2 inches wide, or they may be printed in 10 or 12 point type on good unglazed paper 8 inches wide by 10^ inches long, with inside margins not less than 1 inch wide. IV. SERVICE. Complaints, orders, and other processes of the Com- mission may be served by anyone duly authorized by the Commission, either (a) by delivering a copy thereof to the person to be served, or to a member of the partner- ship to be served, or to the president, secretary, or other executive officer, or a director, of the corporation or as- sociation to be served; or (b) by leaving a copy thereof at the principal office or place of business of such person, partnership, corporation, or association; or (c) by regis- tering and mailing a copy thereof addressed to such per- son, partnership, corporation, or association at his or its principal office or place of business. The verified return by the person so serving said complaint, order, or other process, setting forth the manner of said service, shall be proof of the same, and the return post-office receipt for said complaint, order, or other process, registered and mailed as aforesaid, shall be proof of the service of the same. V. INTERVENTION. Any person, partnership, corporation, or association desiring to intervene in a contested proceeding shall make application in writing, setting out the grounds on which he or it claims to be interested. The Commission may, by order, permit intervention by counsel or in per- son to such extent and upon such terms as it shall deem just. 145 THE FEDERAL TEADE COMMISSION. Applications to intervene must be on one side of the paper only, on paper not more than 8% inches wide and not more than 11 inches long, and weighing not less than 16 pounds to the ream, folio base, 17 by 22 inches, with left-hand margin not less than IV2 inches wide, or they may be printed in 10 or 12 point type on good unglazed paper 8 inches wide by lO 1 /^ inches long, with inside mar- gins not less than 1 inch wide. VI. CONTINUANCES AND EXTENSIONS OF TIME. Continuances and extensions of time will be granted at the discretion of the Commission. VII. WITNESSES AND SUBPOENAS. Witnesses shall be examined orally, except that for good and exceptional cause for departing from the gen- eral rule the Commission may permit their testimony to be taken by deposition. Subpoenas requiring the attendance of witnesses from any place in the United States at any designated place of hearing may be issued by any member of the Com- mission. Subpoenas for the production of documentary evidence (unless directed to issue by a Commissioner upon his own motion) will issue only upon application in writing, which must be verified and must specify, as near as may be, the documents desired and the facts to be proved by them. Witnesses summoned before the Commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States, and witnesses whose depositions are taken, and the persons taking the same, 146 EULBS OF PRACTICE. shall severally be entitled to the same fees as are paid for like services in the courts of the United States. VIII. DEPOSITIONS IN CONTESTED PROCEED- INGS. The Commission may order testimony to be taken by deposition in a contested proceeding. Depositions may be taken before any person designated by the Commission and having power to administer oaths. Any party desiring to take the deposition of a witness shall make application in writing, setting ont the reasons why such deposition should be taken, and stating the time when, the place where, and the name and post-office address of the person before whom it is desired the depo- sition be taken, the name and post-office address of the witness, and the subject matter or matters concerning which the witness is expected to testify. If good cause be shown, the Commission will make and serve upon the parties, or their attorneys, an order wherein the Commis- sion shall name the witness whose deposition is to be taken and specify the time when, the place where, and the person before whom the witness is to testify, but such time and place, and the person before wbom the deposi- tion is to be taken, so specified in the Commission's order, may or may not be the same as those named in said ap- plication to the Commission. The testimony of the witness shall be reduced to writ- ing by the officer before whom the deposition is taken, or under his direction, after which the deposition shall be subscribed by the witness and certified in usual form by the officer. After the deposition has been so certified it shall, together with a copy thereof made by such of- ficer or under his direction, be forwarded by such officer 147 THE FEDERAL TEADE COMMISSION. under seal in an envelope addressed to the Commission at its office in "Washington, D. C. Upon receipt of the deposition and copy the Commission shall file in the rec- ord in said proceeding such deposition and forward the copy to the defendant or the defendant's attorney. Such depositions shall be typewritten on one side only of the paper, which shall be not more than 8% inches wide and not more than 11 inches long and weighing not less than 16 pounds to the ream, folio base, 17 by 22 inches, with left-hand margin not less than 1% inches wide. No deposition shall be taken except after at least 6 days' notice to the parties, and where the deposition is taken in a foreign country such notice shall be at least 15 days. No deposition shall be taken either before the proceed- ing is at issue, or, unless under special circumstances and for good cause shown, within 10 days prior to the date of the hearing thereof assigned by the Commission, and where the deposition is taken in a foreign country it shall not be taken after 30 days prior to such date of hearing. IX. DOCUMENTARY EVIDENCE. Where relevant and material matter offered in evidence is embraced in a document containing other matter not material or relevant and not intended to be put in evi- dence, such document will not be filed, but a copy only of such relevant and material matter shall be filed. X. BRIEFS. Unless otherwise ordered, briefs may be filed at the close of the testimony in each contested proceeding. The presiding Commissioner or examiner shall fix the time 148 RULES OF PRACTICE. within which briefs shall be filed and service thereof shall be made upon the adverse parties. All briefs must be filed with the Secretary and be ac- companied by proof of service upon the adverse parties. Fifteen copies of each brief shall be furnished for the use of the Commission, unless otherwise ordered. Application for extension of time in which to file any brief shall be by petition in writing, stating the facts upon which the application rests, which must be filed with the Commission at least 5 days before the time for filing the brief. Every brief shall contain, in the order here stated — (1) A concise abstract, or statement of the case. (2) A brief of the argument, exhibiting a clear state- ment of the points of fact or law to be discussed, with the reference to the pages of the record and the authori- ties relied upon in support of each point. Every brief of more than 10 pages shall contain on its top fly leaves a subject index with page references, the subject index to be supplemented by a list of all cases referred to, alphabetically arranged, together with refer- ences to pages where the cases are crEed. Briefs must be printed in 10 or 12 point type on good unglazed paper 8 inches by 10% inches, with inside mar- gins not less than 1 inch wide, and with double-leaded text and single-leaded citations. Oral arguments will be had only as ordered by the Commission. XI. ADDRESS OF THE COMMISSION. All communications to the Commission must be ad- dressed to Federal Trade Commission, Washington, D. C, unless otherwise specifically directed. 149 TABLE OF CASES [References are to sections.] Adriance Piatt Co. v. National Harrow Co 15 American Graphophone Co. v. Boston Store 10 Bauer v. O'Donnell 10 Brown v. Walker 50 Buttfield v. Stranahan 8, 44 Chew Heong v. United States 26 Choy Gum v. Backus 33 Cin. N. O. & Tex. Pac. Ry. v. Int. Com. Com 32 Coopersville Co-operative Creamery Co. v. Lemon 8 Counselman v. Hitchcock 50 Cousins v. Merrill 15 Dancel v. Machinery Co 46 Decatur v. Paulding 29 Det. & Mackinac Ry. v. Mich. R. R. Comm 32 Dr. Miles Medical Co. v. Park & Sons Co 10 Dreier v. United States 49 Eastern States Lumber Ass'n. v. United States 24 Elliott Machine Co. v. Center 13 Emack v. Kane 15 Everett Piano Co. v. Maus.. 15 Ex parte Chin Loy You 33 Ex parte Crow Dog 26 Flint v. Hutchinson Smoke Burner Co 15 Ford Motor Co. v. Union Mo- tor Sales Co 10 Fox v. "Washington 17, 31 Goodyear Co. v. Goodyear Rubber Co 15 Gordon v. United States.. 30, 31 Gott v. Pulsifer 15 Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. 10 Great Northern Ry. v. Minne- sota 33 Hale v. Henkel 46, 49, 50, 51 Harriman v. Int. Com. Com. . . 48 Hayburn's Case 31 Henry v. Dick Co 13 Heydenfeldt v. Daney Gold etc. Co 26 In re Pacific Ry. Com 31 In re Sanbora 30, 31 International Harvester Co. v. Kentucky 17 Int. Com. Com. v. Baird 33 Int. Com. Com. v. Brimson . . 31, 42, 55 Int. Com. Com. v. Goodrich Transit Co 42, 51 Int. Com. Com. v. Humboldt S. S. Co 29 Int. Com. Com. v. I. C. R. R. 33 Int. Com. Com. v. Louis. & Nash. R. R 33 Int. Com. Com. v. Nor. Pac. Ry. Co 33 Int. Com. Com. v. Union Pa- cific R. R 33 Johnson v. Towsley 32 Lawlor v. Loewe 24 Lewis v. Frick 32 Louis. & Nash. R. R. v. Finn 33 Louis. & Nash. R. R. v. Gar- rett 30 Low Wah Suey v. Backus 33 McLean v. Fleming 15 Miller v. Mayor of New York 32 M. K. & T. R. Co. v. Int. Com. Com 32 Murray v. Louisiana 46 Mutual Film Corp. v. Ohio Ind. Com 8, 17, 44 Nash v. United States. .15, 17, 25 Nonpariel Cork Mfg. Co. v. Keasbey & Mattison 15 151 TABLE OF CASES. [References are to sections.] Oregon R. R. & N. Co. v. Fairchild 32, 33 Patterson v. United States ... . 16 Peoples Tobacco Co. v. Ameri- can Tobacco Co 25 Prentis v. Atlantic Coast Line 30 St. L. I. M. & S. R. R. v. Tay- lor 44 School of Magnetic Healing v. McAnnulty 33 Smelting Co. v. Kemp 32 Standard Oil Co. v. United States 10, 13, 15, 17, 27, 37 Standard Sanitary Mfg. Co. v. United States 13, 25 Straus v. Am. Publishers Ass'n 24 Swift & Co. v. United States 27 Tang Tun v. Edsell 33 Tex. Pac. Ry. v. Int. Com. Com 32 Union Bridge Co. v. United States 8 Union Pacific R. R. Co. v. Frank 28 United States v. American Naval Stores Co 27 United States v. American To- bacco Co 13, 15, 25, 37 United States v. Armour & Co. 2, 46, 50 United States v. Eastman Ko- dak Co. 13, 16, 19, 21, 22, 25, 37 United States v. E. I. DuPont De Nemours Co 27 United States v. Ferreira 31 United States v. Great Lakes Towing Co 13, 18, 19, 25 United States v. Grimaud .... 44 United States v. Hamburgh . American S. S. Line 22 United States v. International Harvester Co 15, 17 United States v. Ju Toy 32 United States v. Keystone "Watch Case Co. 10, 13, 15, 16, 17, 24, 25 United States v. Langston 26 United States v. Louis. & Nash. R. R 32, 33, 45, 56 United States v. Mayer 31 United States v. Motion Pic- ture Patents Co 10, 13, 17 United States v. Ninety-nine Diamonds 26 United States v. Patterson. 17, 25 United States v. Periodical Clearing House 17 United States v. Reading Co. 25, 37 United States v. St. Louis Ter- minal 15 United States v. Skinner.. 48, 50 United States v. Standard Oil Co 16, 17 United States v. Uhl 33 United States v. Union Pacific R. R. Co 13 United States v. United Shoe Machinery Co 13, 23 United States v. U. S. Steel Corporation ..13, 16, 25, 27, 38 United States v. Whiting 27 United States v. Williams... 32 United States v. Winslow 13 Victor Safe & Lock Co. v. Deright 15 Virtue v. Creamery Package Co 20 Ware-Kramer Tobacco Co. v. American Tobacco Co. ..17, 25 Wheeler v. United States 49 Whitfield v. Hanges 33 Wilder Mfg. Co. v. Corn Prod- ucts Co 19, 28 William J. Moxley v. Hertz. . 8 Wilson v. United States.. 49, 51 152 INDEX [References are to sections.] ACTS TO REGULATE COMMERCE: carriers subject to Act of February 4, 1887, not within inhi- bition of Clayton Law against interlocking directorates (note 43) 12 Trade Law not to prevent or interfere with enforcement of . . 8 ADDITIONAL LEGISLATION: Trade Commission to make recommendations to Congress as to 39 ADDRESS OP TRADE COMMISSION: fixed by rules of practice (note 4) 1 ADMINISTRATIVE RULINGS: (see "Powers or Trade Commis- sion, Regulative Power.") ADVISORY POWER: of Trade Commission (see "Powers of Trade Commission"). 5, 34-40 AGRICULTURAL ORGANIZATIONS: exempted from inhibition of antitrust laws against combina- tions in restraint of trade 39 AMENDMENT: of antitrust laws, desired by various interests 39 ANSWER: (see "Proceedings by Trade Commission.") ANTITRUST LAWS: remedies under 28 term as used in Clayton Law and Trade Law, defined (note 19) 4 Trade Law not to be construed to alter, modify or repeal .... 27 Trade Law not to prevent or interfere with enforcement of. . 8 APPEALS: (see "Proceedings by Trade Commission.") APPEARANCE BEFORE TRADE COMMISSION: (see "Proceed- ings by Trade Commission.") APPLICATION: (see "Proceedings by Trade Commission.") ATTEMPT TO MONOPOLIZE: (see "Unfair Methods of Com- petition.") ATTORNEY GENERAL: and not Trade Commission, to be spokesman for government. 35 control of, over Trade Commission 35, 36 153 INDEX [References are to sections.] ATTORNEY GENERAL.— Continued. difference of opinion among attorneys general as to applica- bility of Sherman Law to export trade 38 exclusively empowered to seek injunctive relief under Sher- ' man Law 28 how Trade Commission may affect indirectly 36 to apply for writs of mandamus, on request of Trade Com- mission 56 BANKS AND INTERSTATE COMMON CARRIERS: not subject to the jurisdiction of the Trade Commission, for the most part 7, 8, 11, 12, 44 exceptions (see "Powers of Teade Commission.") as to alleged violations of antitrust laws by any cor- poration and making recommendations for readjustment of the business of any corporation 35 as to examining and copying documents of banks and com- mon carriers being investigated 45 as to individual directors, officers, and employees of banks and common carriers whose participation in the manage- ment of such corporations constitutes engaging in in- terstate commerce on their part 12 as to subsidiaries of interstate common carriers engaged in interstate commerce but not within the jurisdiction of the Interstate Commerce Commission 11 as to Trade Commission's reporting upon the manner in which decrees, entered in favor of the government against corporations in suits under the antitrust laws, are being carried out 36 violations of Clayton Law by banks, within jurisdiction of Federal Reserve Board 7, 11, 12 by interstate common carriers, within jurisdiction of In- terstate Commerce Commission 7, 11, 12 BIG BUSINESS: (see "Unfair Methods of Competition.") BOGUS INDEPENDENT COMPANIES: an unfair method of competition 15, (note 76) 17,20 BOOKS OP CORPORATIONS: (see "Powers of Trade Commis- sion, Investigative Power.") BOYCOTTS AND BLACKLISTS: an unfair method of competition (note 76) 17, 24 154 INDEX [References are to sections.] BRIEFS: (see "Proceedings by Trade Commission.") BURDEN OF PROOF: (see "Proceedings by Trade Commission.") BUREAU OF CORPORATIONS: (see "Commissioner of Corpora- tions.") abolished : 1 all employees, records, and property of, transferred to Trade Commission 1 investigations and proceedings pending before, to be contin- ued by Trade Commission 6 CERTIORARI: (see "Proceedings by Trade Commission.") CHAIRMAN OF TRADE COMMISSION: bow chosen 1 who is (note 5) 1 CIRCUIT COURT OF APPEALS: (see "Proceedings by Trade Commission.") CLAYTON LAW: V and Trade Law construed together 15, 26 approved and in force when (note 11) 3 merely creates a new remedy 13 operation of, as to interlocking directorates, suspended 12 provisions of, which concern Trade Commission, summarized. 4 retroactive operation of, as to "tying contracts". ... (note 50) 13 "rule of reason" a part of (note 37) 10 title of (note 11) 3 uncertainty of inhibitions of 9-12 COMMERCE: term as used in Clayton Law and Trade Law, defined (note 12) 3 COMMISSIONERS, FEDERAL TRADE (see "Federal Trade Com- mission.") appointed how 1 disability of, to have any other business avocation or em- ployment 1 disclosures by improper, except when 57 of trade secrets and names of customers, forbidden. . . .5, 34, 40 number and names of (note 2) 1 qualifications of, for office 1 removal of 1 salary of 1 term of office of 1 155 INDEX. [References are to sections.] COMMISSIONER OF CORPORATIONS: (see "Bureau of Cor- porations.") chairman of Trade Commission formerly was (note 5.) 1 function of office of 2 office of, abolished 1 Trade Commission, an outgrowth of office of 2 COMMON CARRIERS: (see "Banks and Interstate Common Carriers.") subject to act to regulate commerce approved February 4, 1887, not within inhibition of Clayton Law against interlocking directorates (note 43) 12 COMPETITION: (see "Unfair Methods of Competition.") lessening of, identified by Clayton Law with restraint of trade (notes 36, 38) 10 "unfair competition,' - in sense of palming off one manufac- turer's goods as and for goods of another, not within oper- ation of Trade Law, unless effect is to restrain trade un- duly (note 55) 15 COMPLAINT: (see "Proceedings by Trade Commission.") CONGRESS: control of, over Trade Commission 1, 35 CONSPIRACY: whether members of Trade Commission might become liable for, if they should assume and exercise affirmative regula- tive power 8 CONSTITUTIONAL QUESTIONS: as to authority to execute its own orders being an indispens- able attribute of a, court (note 121) 30 as to character of inquiry by governmental agency, whether judicial or not 30 as to conclusiveness of findings by an administrative body upon jurisdictional facts 33 (5) as to granting authority to Trade Commission to give advance approval of proposed course of conduct in trade. ., 8 as to how far guarantee against unreasonable searches and seizures protects documentary evidence of corporations. . . 51 as to imposing upon courts duty of reviewing orders of an administrative body 31 as to limiting the Trade Commission's investigative power, in respect of natural persons, to matters which are the sub- ject of a complaint and an investigation in form judicial. . 48 156 INDEX. [References are to sections.] CONSTITUTIONAL QUESTIONS.— Continued. as to making Trade Commission's findings upon facts conclu- sive upon the courts 32 as to natural person's privilege in respect of producing docu- ments of a corporation which incriminate such natural per- son 49 as to necessity of expressly claiming privilege against self- incrimination, in order to obtain benefit of immunity clause 50 as to privilege against self-incrimination, and whether it ex- tends to a corporation 49 as to requirement of a fair hearing in proceedings by an ad- ministrative body 33 (2) as to requiring circuit courts of appeals to adjudge contro- versies arising out of Trade Commission's administrative orders (note 128) 31 as to requiring person proceeded against by Trade Commis- sion to disclose before the Commission all the defensive evi- dence of which he desires ever at any time to have the benefit 32 as to Trade Commission's hearing evidence in connection with drafting decrees for courts 37 as to validity of a legislative grant of immunity to a witness 50 as to validity of grant to Trade Commission of discretion- ary power to classify, and require reports from, corpora- tions 44 as to whether Trade Law, in making fairness a standard of lawfulness, is void for uncertainty 17 as to withdrawing from courts power to determine legal effect of facts found by an administrative body 33 (1) CONSTRUCTION OF STATUTES: to avoid doubtful constitutional questions 15, 31 to make related statutes stand together and give full effect to all the provisions of each (note 91) 26 to permit all parts of statute to stand and give effect to all its words '. (note 90) 26 when a statute creates a new right and declares the remedy, the statutory remedy is exclusive (note 99) 28 .CONTEMPT: proceedings for, to enforce submission to Trade Commission's investigative power 55 CORPORATIONS: (see "Banks and Interstate Common Car- eiers," and "Powers of Trade Commission.") classifying (see "Powers of Trade Commission, Investigative Power") . . .' 44 157 INDEX. [References are to sections.] CORPORATIONS.— Continued. common directors, when unlawful to have (see "Interlocking Directorates") 4, 12 defined, in Trade Law (note 15) 4 documentary evidence of, examining and copying (see "Powers of Trade Commission, Investigative Power").... 45 included under "persons," in Clayton Law (note 14) 4 investigation of affairs of by Commissioner of Corporations 2 by Trade Commission (see "Powers of Trade Commission, Investigative Power") 6 offenses by 53,54 requiring reports from (see "Powers of Trade Commission, Investigative Power") 44, 54 self-incrimination, no privilege against 49 service of Trade Commission's process and orders upon.... 29 (2) shares of stock, when unlawful for one corporation to own shares of another (see "Intercorporate Shareholding") . .4, 11 unreasonable searches and seizures, how far protected against 51 COURTS: (see "Proceedings by Trade Commission.") aid of, essential to enforcement of Trade Commission's orders 29 (7) cannot be required to review proceedings and orders of ad- ministrative bodies 31 have declined aid of Trade Commission in drafting decrees in antitrust suits (note 160) 37 judicial power cannot be withdrawn from 33 (5) Trade Commission authorized to aid courts in drafting de- crees 37 Trade Commission is not a court 30 CRIME: to obstruct exercise of Trade Commission's investigative power 53 Trade Law does not denounce any competitive conduct as . . . 17 CUSTOMERS: names of, not to be disclosed by Trade Commission 5,34,40 trader's right to select, under Clayton Law (note 38) 10 vendor's power to select, by restricting vendee's right of re- sale (note 38) 10 DECREES: courts have declined assistance of Trade Commission in draft- ing (note 160) 37 158 INDEX. [References are to sections.] DEGREES.— Continued. drafting of satisfactory, in antitrust suits, difficult and labori- ous 37 for government, in antitrust suits, have been criticized as in- effectual 37 Trade Commission authorized to assist courts in drafting, in antitrust suits 37 Trade Commission authorized to investigate and publish how decrees for government in antitrust suits have been, or are being, carried out 36 DEFAULT: complaint by Trade Commission not to be taken as confessed, upon default of appearance by accused 29(5) of corporation to file report with Trade Commission, penalized 54 DEFINITION: of "antitrust laws" in Trade Law and Clayton Law, respect- ively (note 19) 4 of "attempt to monopolize," under Sherman Law. . . . (note 93) 27 of "commerce" in Trade Law and Clayton Law, respectively (note 12) 3 of "corporation," in Trade Law (note 15) 4 of "documentary evidence," in Trade Law (note 190) 45 of "method" 27 of "persons," in Clayton Law (note 14) 4 of "unfair methods of competition," concise definition impossi- ble 25 DEPARTMENTS: other, of government, to furnish to Trade Commission employees 1 information 47 DEPOSITIONS: (see "Evidence" and "Witnesses.") DEPUTY COMMISSIONER OF CORPORATIONS: office of, abolished (see "Bureau or Corporations" and "Com- missioner of Corporations") 1 DIRECTORS: (see "Interlocking Directorates.") DISCLOSURES OF INFORMATION: as to trade secrets and names of customers, not to be made by Trade Commission 5, 34, 40 by members and employees of Trade Commission unlawful except when 57 punishment for unlawful 57 159 INDEX. [References are to sections.] DISCRETIONARY AUTHORITY: (see "Powers of Trade Com- mission.") DOCUMENTARY EVIDENCE: contempt proceedings in aid of obtaining 55 defined '. (note 190) ' 45 mandamus in aid of obtaining 56 natural person cannot refuse to produce documents of corpora- tion on ground that they tend to incriminate him ' 49 obtaining by subpoena 46 refusal to produce, punishable as a crime 53 Trade Commission's right to examine and copy documents of corporations 45 ECONOMISTS: regard what, as unfair methods of competition (note 76) 17 ESPIONAGE: an unfair method of competition 15, (note 76) 17, 21 EVIDENCE: (see "Immunity," "Proceedings by Teade Commis- sion," and "Witnesses.") accused to disclose all of his evidence before Commission.... 32 additional, after Commission's record closed, may be taken when 29 (9), 31 common law rules of, how far binding upon Trade Commission in proceedings under regulative power of Commission .. 33 (4) in investigations under investigative power of Commission 46 constitutional privileges, in respect of furnishing 48,49,51 criminal to refuse to give or produce 53 "documentary" defined (note 190) 45 immunity from prosecution, for natural person furnishing. . 50 obtained how examining and copying documentary evidence of corpora- tions 45 getting information from other departments of government 47 requiring reports from corporations 44 subpoenaing and examining witnesses 46 production of, coerced by contempt proceedings 55 by mandamus 56 punishment for obstructing obtaining of 53, 54 relevancy of, rule as to, in investigations by Trade Commis- sion under its investigative power 42 EXCLUSIVE PURCHASE AND SALE ARRANGEMENTS r forbidden by Clayton Law 4 160 INDEX. [References are to sections.] EXCLUSIVE PURCHASE AND SALE ARRANGEMENTS.— Continued. inhibition against, identifies lessening of competition with re- straint of trade (note 36) 10 "rule of reason" a part of inhibition against exclusive purchase and sale arrangements (notes 36, 37) 10 essential uncertainty of (note 37) 10 "tying contracts," one form of 13 "full line forcing" a phase of 23 retroactive operation of inhibition against (note 50) 13 uncertainty of pre-existing, law as to 13 uncertainty of pre-existing law as to, not cured by Clay- ton Law 10,13 uncertainty of inhibition against exclusive purchase and sale arrangements 10 unlawful only when the effect thereof may be substantially to lessen competition and restrain trade i 10 wrong, and redressable, under the Sherman Law 13 EXPORT TRADE: whether combinations in respect of unlawful (note 163) 38 FEDERAL RESERVE BOARD: jurisdiction of, over violations of Clayton Law by banks ... 7, 11, 12 FEDERAL TRADE COMMISSION: (see "Interstate Commerce Commission," "Powers of Trade Commission," "Proceedings by Trade Commission.") address of (note 4) 1 an administrative body 7 authority of exclusive, to obtain preventive relief against "un- fair methods of competition" as such 28 Bureau of Corporations, merged into 1,6 chairman of, who is, and how chosen (note 5) 1 classification, and summarization, of powers of 3-6 derivation of 2 employees, other governmental departments to detail to ... . 1 employment by, of attorneys, experts, examiners, clerks and other employees, authorized 1 functions' of, in general 7 independence of 1, 35, 36 Interstate Commerce Commission, taken as model for. .. .2, 31, 52 investigations by (see "Powers of Trade Commission.") jurisdiction of, territorial 1 legislative purpose in creating 2 master in chancery, Trade Commission to act as 30,37 161 INDEX. [References are to sections.] FEDERAL TRADE COMMISSION— Continued. may meet where 1 members of (note 2) 1 nonpartisan, and nonpolitical 1 not a court 7, 30 office of 1 organization of 1 outgrowth of office of Commissioner of Corporations. 2 powers of (see "Powers or Trade Commission.") proceedings by (see "Proceedings by Trade Commission.") quorum of (note 3) 1 seal of, to be judicially noticed 1 secretary of, who is, and how chosen (note 5) 1 vacancies in, effect of, and how filled 1 FIGHTING BRANDS: an unfair method of competition (note 76) 17, 22 FIGHTING SHIPS: an unfair method of competition (note 76) 17, 22 FINDINGS OF FACTS: (see "Proceedings by Trade Commis- sion.") FINES: for obstructing investigative power of Trade Commission .... 53 for improper disclosure of information by members or em- ployees of Trade Commission 57 FLYING SQUADRONS: an unfair method of competition 22 FOREIGN TRADE: Trade Commission to investigate, and to make reports and recommendations to Congress, in respect of 38 FULL LINE FORCING: a variation of a "tying contract" 23 an unfair method of competition 23 "GARY DINNERS": offended against Sherman Law 13 HEARING: accused to be heard how in argument, in proceedings by Trade Commission (note 113) 29 fair, essential to validity of proceedings by Trade Commis- sion 33 (2) 162 INDEX. [References are to sections.] HEARING.— Continued. of parties provided for, in connection with Trade Commission's aiding courts in drafting decrees in antitrust suits 37 IMMUNITY: conditions of immunity constitutional privilege against self-incrimination must be expressly claimed by witness, and denied him 50 evidence sought must be within scope of subpoena served on witness, and relate to a subject in respect of which the Commission has clear authority to compel the giving of testimony or the production of documents 50 valid subpoena must have been served on witness 50 none, from liability or prosecution under antitrust laws, be- cause of any order to cease and desist made by Commission in exercise of its regulative power, or because of any de- cree of any court enforcing such order (see "Proceedings by Trade Commission") . . *. 8, 29 (7) of witnesses, provided for 50 test of constitutionality of statutory provision' for immunity of witnesses 5C whether an immunity clause extends to protect witness against production of only his own private papers, or also papers belonging to a corporation which tend to incriminate him. . 50 INFRINGEMENT OF PATENT: false notices of, and threats in bad faith to sue for, not within operation of Trade Law, unless effect is to restrain trade unduly (note 55) 15 INITIATIVE: (see "Powers of Trade Commission.") of Trade Commission, limitations upon . ..,. 35, 45 INJUNCTION: (see "Preventive Relief.") who may obtain, to prevent violations of antitrust laws 28 INTERCORPORATE SHAREHOLDING: as between a common carrier and its subsidiary not subject to the acts to regulate commerce, might perhaps be within jurisdiction of the Trade Commission so far as subsidiary is concerned 11 by banks and common carriers, does not concern the Trade Commission 11 forbidden by Clayton Law 4 if resorted to under such circumstances as to violate the Sher- man Law, not authorized by Clayton Law 11 163 INDEX. [References are to sections.] INTERCORPORATE SHAREHOLDING— Continued. "rule of reason" a part of the inhibition against lessening competition by intercorporate shareholding (note 37) 10 essential uncertainty of (note 37) 10 subject to requirement that intercorporate shareholding shall not be practised in violation of the Sherman Law, or in such manner as to effect a substantial lessening of competition, the Clayton Law does not forbid intercorporate shareholding by a common carrier, as to the stock of its branch lines, and extensions 11 by any corporation, if for investment purposes solely 11 by a parent corporation, as to the stock of its subsidiaries 11 substantial lessening of competition by essential to unlawfulness of 11 lessening of competition is identified by the Clayton Law, with restraint of trade (notes 36, 38) 10 uncertainty of inhibition against intercorporate shareholding 11 wrong, and redressable, under the Sherman Law 13 INTEREST OF THE PUBLIC: (see "Powers of Trade Com- mission" and "Unfair Methods of Competition.") import of phrase "interest of the public" as used in the Trade Law 15 phrase unnecessary, and not found, in Clayton Law.. (note 53) 15 INTERLOCKING DIRECTORATES : as between banks, when unlawful 4, 12 as between non-banking corporations, other than interstate carriers by rail or water, unlawful only if any of the corporations has capital, surplus and un- divided profits of more than $1,000,000 4, 12 if the corporations having interlocking directorates are, or shall have been competitors, so that the elimination of competition by agreement between them would violate the antitrust laws 4, 12 by banks and common carriers, does not concern Trade Com- mission 12 forbidden by Clayton Law 4 inhibition against does not apply to interstate carriers by rail or wa- ter (note 43) 12 not effective until October 15, 1916 4,12 natural persons, participating in unlawful interlocking di- rectorates even in the case of banks or of such common 164 INDEX. [References are to sections.] INTERLOCKING DIRECTORATES— Continued. carriers ns are forbidden to have interlocking directorates, might perhaps be subject to jurisdiction of Trade Com- nii&bion ■ 12 uncertainty of inhibition against, in case of non-banking cor- porations 12 whether a wrong, and redressable, under Sherman Law 13 INTERSTATE COMMERCE COMMISSION: comparisons suggested between Interstate Commerce Commis- sion and Federal Trade Commission, as to character of orders, whether self -enforcing or not (note 115) 29 compelling exercise of regulative power of respective Commissions by mandamus (note 108) 29 conferring immunity on witnesses (notes 210, 215) 50 disclosures of information by the members and employee's of the respective Commissions (note 226) 57 enforcing investigative powers of the respective Commis- sions 52 by contempt proceedings (note 221) 55 by mandamus (note 223) 56 power of the Commissions respectively to examine the documents and records of corporations subject to their respective jurisdictions. . (note 189) 45 to make affirmative orders (note 114) 29 to obtain information from other governmental de- partments (note 205) 47 to require reports from corporations subject to their respective jurisdictions (note 180) 44 to subpoena and examine witnesses (note 196) 46 proceedings by the Commissions respectively 31 punishment for obstructing exercise of powers of the respective Commissions (note 219) 53, (note 220) 54 jurisdiction of Interstate Commerce Commission over viola- tions of Clayton Law by interstate common carriers. .. .7, 11, 12 mandamus will lie to compel exercise of regulative power of Interstate Commerce Commission (note 108) 29 Trade Commission modeled upon Interstate Commerce Com- mission 2, 31, 52 INTERVENTION: (see "Proceedings by Teade Commission.") INVESTIGATIVE POWER: of Trade Commission (see "Powers of Trade Commission") 6, 41-57 165 INDEX. [References are to sections.] JUDICIAL. POWER: (see "Constitutional Questions.") cannot be withdrawn from courts 33 (5) Trade Commission does not possess 30 JURISDICTION: of Circuit Court of Appeals exclusive, and original not appellate, in respect of orders of Trade Commission 29 (10), 31 what particular court of appeals has jurisdiction in respect of an order of the Trade Commission in any given case 29 (7) of Trade Commission as to subject-matter (see "Powers or Teade Commission") 7 territorial 1 LEGISLATION: Trade Commission to make recommendations to Congress in respect of additional legislation 39 legislation concerning foreign trade 38 LEGISLATIVE POWER (see "Constitutional Questions.") cannot be conferred upon Trade Commission 15 court cannot be required to exercise 31 line between legislative and administrative power, not sharply denned 44 LOCAL PRICE CUTTING: an unfair method of competition 15, (note 76) 17, 18 MANDAMUS: does not lie to compel exercise of Trade Commission's reg- ulative power (note 108) 29 does not lie to compel obedience to orders made by Trade Com- mission in exercise of its regulative power. ... (note 117) 29,56 exercise of regulative power of Interstate Commerce Com- mission may be compelled by (note 108) 29 lies in aid of Trade Commission's investigative power 56 MASTER IN CHANCERY: Trade Commission to act as 30, 37 MISDEMEANOR: for members or employees of Trade Commission to make im- proper disclosures of information 57 NATURAL PERSONS: how far subject to Trade Commission's investigative power documents of, not to be examined or copied 45 166 INDEX. [References are to sections.] NATURAL PERSONS— Continued. how far subject to Trade Commission's investigative "power may be subpoenaed and examined as witnesses, subject to restrictions 46, 48-51 not required to make reports 44 subject to Trade Commission's regulative power 8 NOTICE: (see "Proceedings by Trade Commission.") to accused, of filing in a circuit court of appeals of transcript of proceedings before Trade Commission 29 (7) to accused, of hearing before Trade Commission period of (note 107) 29 (1) served how , 29 (2) to corporation of its failure to file a report within time fixed by Trade Commission '. 54 to parties, of hearing before Trade Commission in connection with drafting a decree in favor of the government in an antitrust suit 37 ORDERS OF TRADE COMMISSION: (see "Proceedings by Trade Commission.") PARTIES BEFORE TRADE COMMISSION: (see "Proceedings by Trade Commission.") PATENTS: (enforceability of restrictive conditions accompanying sale of patented articles (note 38) 10 "full-line forcing" in connection with patented articles, an unfair method of competition 23 lawfulness of "tying contracts" in respect of patented articles 13 sending out false notices of infringement of patent, and threatening in bad faith to sue for infringement, an unfair method of competition when (note 55) 15 slander of title to a patent, an unfair method of competition when (note 55) 15 PAYMENT OF REBATES: an unfair method of competition 15, (note 76) 17, 19 inhibited by Clayton Law 19 PENALTY: for failure by corporation to file report with Trade Com- mission 54 PERSONS: (see "Natural Persons.") term, as used in Clayton Law, defined (note 14) 4 POLITICAL ECONOMY: what are unfair methods of competition from viewpoint of (note 76) 17 167 INDEX. [References are to sections.] POWERS OF TRADE COMMISSION: I. Regulative Powee (see "Proceedings bt Trade Commission.") administrative only 7, 30 administrative ruling under affirmative by Trade Commission not author- ized 8, 29 (6), 35 by Trade Commission is not a judgment, but a mere admonition 30 "cease and desist," only ruling Trade Commission is authorized to make 29(6) courts cannot be required to review ." 31 government not estopped by erroneous ruling by ad- ministrative body 8 affirmative protective authority under assumption of by Commission, widely suggested 8 Commission has none 8,29 (6), 35 constitutionality of grant of, if made 8 whether Commissioners liable for conspiracy if affirm- ative authority assumed and exercised 8 banks and common carriers, how far subject to (see "Banks and Interstate Common Carriers") 4, 8, 11, 12 defective, except as aided by courts 29 (7), 30 exercise pt applied for by person aggrieved, how (note 110) 29 arbitrary, forbidden by Constitution 33(2) conditions precedent to under Trade Law, "interest of the public" must require exercise , 15, 45 under both Trade Law and Clayton Law, Com- mission must have "reason to believe" that violation of law, within its jurisdiction, has occurred 29 (1),30, 45 discretionary, except as noted above under "conditions precedent to" (note 108) 29, 45 investigation, by Commission, to precede 30 mandamus will not lie to compel (note 108) 29 manner of exercise (see "Proceedings by Trade Com- mission" ) 29 not to confer upon person or corporation against whom exercised, immunity from liability or prose- cution under antitrust laws 8, 29 (7) master in chancery, Commission to act as 30 negative and preventive merely 8, 29 (6) not judicial 30 punishment, Commission cannot inflict under 8 168 INDEX. [References are to sections.] POWERS OF TRADE COMMISSION— Continued. I. Regulative Power — (Continued) subjects of all corporations, except banks and common carriers (see "Banks and Interstate Common Carriers"). 4,8 natural persons 4, 8 subject-matter of exclusive ' purchase and sale arrangements ("tying contracts") 4, 8, 10, 13, 29 intercorporate shareholding 4, 8, 11, 29 interlocking directorates 4, 8, 12, 29 price discriminations 4, 8, 10, 29 unfair methods of competition 4,8,15-26,29 II. Advisory Power banks and common carriers, how far subject to (see "Banks and Interstate Common Carriers") 35,36 decrees Commission at court's request to report appropriate form of, in favor of government, in suits under anti- trust laws 5, 37 courts have declined aid of Commission in drafting (note 160) 37 hearings before Commission in connection with draft- ing 37 master in chancery, Commission to act as, in drafting 37 exercise of controlled by Attorney General provisionally, as to reports by the Commission as to the manner in which decrees are carried out 36 unreservedly, as to recommendations by the Com- mission for the readjustment of the business of any corporation in conformity with the anti- trust laws 35 controlled by. courts as to the Commission's reporting forms of de- crees 37 controlled by President or either House of Congress as to reports by the Commission relating to al- leged violations of the antitrust laws by any corporation 35 discretionary as to making annual reports to Congress 39 as to publishing the Commission's reports and decisions 40 169 INDEX. [References are to sections.] POWERS OF TRADE COMMISSION.— Continued. II. Advisory Power discretionary — ( Continued ) as to recommendations by the Commission for additional legislation 39 as to reports and recommendations by the Com- mission to Congress in respect of foreign trade conditions 38 as to reports by the Commission as to the manner in which decrees are carried out 36 as to reports to the public of information ac- quired by the Commission, except trade secrets and names of customers 40 as to special reports by the Commission to Con- gress 39 master in chancery, Commission to act as 37 reports, to whom made 5, 35 subject-matter of enforcement of decrees for government in suits under antitrust laws 5, 36 forms of decrees in suits under antitrust laws 5,37 general information for the public 5, 40 recommendations for additional legislation 5, 39 trade conditions in foreign countries 5, 38 violations of antitrust laws by corporations 5, 35 III. Investigative Power abuse of, punishable 57 banks and common carriers, how far subject to (see "Banks and Interstate Common Carriers") 35, 36, 45 Bureau of Corporations abolished 1 investigations, begun by, to be continued by Trade Com- mission 6 classifying corporations under Commission's authority 44 constitutionality of grant of authority 44 complementary only, of other powers 42 crime to obstruct 53 documentary evidence denned ■ (note 190) 45 examining and copying documentary evidence of corpora- tions under investigative power 45 obstacles to obtaining by subpoena duces tecum 46 of banks and common carriers, when may be examined and copied (see "Banks and Interstate Common Car- riers" ) 45 170 INDEX. [References are to sections.] POWERS OF TRADE COMMISSION— Continued. III. Investigative Powee documentary evidence — (Continued) of natural persons, not to be examined or copied 45 enforced how actions for penalties 6, 54 contempt proceedings 6, 55 criminal prosecutions 6, 53 mandamus 6, 56 evidence relevancy, rule of, in exercise of investigative power.... 42 rules of, how far applicable to investigations under 46 exercisable, anywhere in United States 1, 46 exercise of (see "Advisoby Power, exercise of," above) conditions precedent to, dependent upon subject-matter of investigation application by Attorney General in connection with Commission's making recommendations for readjust- ment of business of corporations 35,45 request by President or either House of Congress in connection with Commission's investigating alleged violations of the antitrust laws 35, 45 conditions precedent to, dependent upon method of in- vestigation none, when investigative power is exercised by re- quiring reports from corporations 44 President's intervention essential to enable Commis- sion to require other governmental departments to furnish it information 47 there must be investigation or proceeding pending before Commission before investigative power may properly be exercised by examining and copying the documentary evidence of any corporation 45 examining witnesses 46 discretionary, except as noted above under "conditions pre- cedent to" 44, 45, 46 methods of exercise examining and copying documentary evidence of cor- porations 45 obtaining information from other departments of government 47 requiring reports from corporations 44 subpoenaing and examining witnesses and documents (see "Witnesses") 46 immunity from prosecution of persons furnishing information 171 INDEX. [References are to sections.] POWERS OF TRADE COMMISSION.— Continued. III. Investigative Powee — {Continued) under (see "Immunity") 50 limitations upon investigative power confined to inquiries respecting subject-matter within scope of Commission's regulative and advisory powers (see above, under "Regulative Power", and "Advisory Power" ) 42 documents of corporations only, to be examined and copied 45 natural person bound to furnish information relating to his private affairs only as to a matter which is the sub- ject of a complaint, and an investigation in form judi- cial, before the Commission 48 only certain specified matters in respect of which corpora- tions may be required to make reports 44 only corporations, excluding banks and common carriers, required to make reports 44 self-incrimination 49 unreasonable searches and seizures 51 reports by corporations under banks and common carriers not required to make reports 44 discretionary authority of Commission as to 44 1 matters as to which corporations may be required to re- port 44 witnesses, examining under (see "Witnesses") 46 PRESIDENT: control of, over Trade Commission 1, 35, 47 PREVENTIVE RELIEF: (see "Injunction.") Attorney General exclusively empowered to obtain, under Sher- man Law 28 private suitor, if threatened with loss or damage but not otherwise, may obtain under Clayton Law 28 Trade Commission exclusively empowered to obtain against "unfair methods of competition" as such 28 PRICE: right of vendor of an article to fix a resale price. . . . (note 38) 10 PRICE DISCRIMINATIONS: an unfair method of competition 15, (note 76)17,18 forbidden by Clayton Law 4 inhibition against, identifies lessening of competition with re- straint of trade (notes 36, 38) 10 172 ISTDEX. [References are to sections.] PRICE DISCRIMINATION— Continued. inhibition against, not to prevent vendors from selecting their customers in bona fide transactions not unreasonably in re- straint of trade (note 38) 10 in how far can a vendor enfprce a resale price-restriction (note 38) 10 not unlawful when based on differences in the grade, quality, or quantity of a commodity sold to different purchasers 10 based on difference in cost of selling or transportation, as between different purchasers 10 made in good faith, in order to meet competition 10 "rule of reason" a part of the inhibition against price discriminations (notes 36, 37) 10 essential uncertainty of (note 37) 10 uncertainty of inhibition against price discriminations 10 unlawful only when the effect thereof may be substantially to lessen competition and restrain trade (note 36) 10 PRIVILEGES: of witnesses 48-51 PROCEEDINGS BY TRADE COMMISSION: (see "Powers of Tbade Commission, Regulative Powee.") an adaptation of proceedings originally devised to enable the Interstate Commerce Commission to obtain information.. 31 answer by accused in, when due (note 113) 29 (4) appearance in advisable for accused to appear 29 (4), 32 Commission cannot coerce appearance by accused 29 (4) appellate jurisdiction in not competent for Congress to confer any upon a court in respect of Trade Commission 31 of Supreme Court to review decrees of courts of appeals affecting Commission's orders 29 (10) application for institution of proceedings, by person suffering griev- ance, how made (note 110) 29 for leave to intervene in proceedings 29 (3) to court by accused to set aside Commission's orders, how made 29 (7) to court by Commission for enforcement of its orders, how made 29 (7) arbitrary power in conducting, not possessed by Commission 33 (2) 173 INDEX. [References are to sections.] PROCEEDINGS BY TRADE COMMISSION.— Continued. argument, oral, not permitted in, unless the Commission shall so order (note 113) 29 banks, how far subject to (See "Banks and Interstate Com- mon Careieks") 4, 8, 12 briefs, accused may file in (note 113) 29 burden of proof in 30, 33 (2) certiorari in 29 (10) circuit court of appeals (see "Courts.") aid of, indispensable to enforcement of orders of Trade Commission 29 (7) bound, how far, by Trade Commission's findings upon the facts 33 decisions of, in respect of orders of Trade Commission, final, subject only to review by Supreme Court on cer- tiorari 29 (10) jurisdiction of, in respect of orders of Trade Commission exclusive 29 (10) original, not appellate 31 not to proceed de novo 32 proceedings in, to enforce orders of Trade Commission an adaptation of contempt proceedings devised to enable In- terstate Commerce Commission to obtain aid of courts to enforce its investigative power 31 what particular court of appeals has jurisdiction in re- spect of an order of the Trade Commission in any given case 29 (7) commenced how by Commission's serving complaint and notice on ac- cused 29 (1) mandamus will not lie to compel institution of. . (note 108) 29 common carriers, how far subject to (see "Banks and Inter- state Common Carriers") 4, 8, 11 complaint of Commission in, how served 29 (2) conditions precedent to under Trade Law, "interest of the public" must require institution of proceedings 15,45 under both Trade Law and Clayton Law, Commission must have "reason to believe" that violation of law, within its jurisdiction, has occurred 29 (1), 30, *5 contumacy of accused in, Commission cannot overcome without the aid of the courts 29 (4), (7), 30 default of accused in, effect of 29 (5) depositions in (see "Witnesses") (note 204) 46 174 INDEX. [References are to sections.] PROCEEDINGS BY TRADE COMMISSION— Continued. dismissal of complaint in, whether Commission can enter or- der of ; 29(6) enforcement of Commission's orders in 29 (7) evidence in (see "Evidence.") additional evidence taken by order of court, after tran- script of record of Commission's proceedings filed in a court of appeals 29 (9), 31 balanced, Commission's findings to have great weight even as to jurisdictional facts 33 (5) competent for Congress to require accused to disclose to Commission all evidence of which he desires ever to have any benefit 32 obtained how (see "Powers of Teade Commission, Investi- gative Powee") 6, 44-47 rules of, what binding upon Commission 33 (4) scintilla of, not enough 33 (3) unsafe to withhold evidence from Commission, with view to subsequently introducing it before court 29 (4), 32 . findings of facts in by Commission, how far conclusive upon the courts as to jurisdictional facts, Commission's findings can- not, under the Constitution, be conclusive 33 (5) courts not concluded, by Commission's findings, as to legal effect of the facts 33 (1) fair hearing before Commission essential, under the Constitution, to conclusiveness of Commission's find- ings 33 (2) some substantial testimony to support findings es- sential to conclusiveness 33 (3) competency, in general, of Congress to make Commission's findings conclusive upon the courts 32 new findings by Commission, or modification of original findings, after additional evidence taken, authorized 29 (9), 31 not to be based upon Commission's general information, but only upon testimony adduced in the particular pro- ceeding in which the findings are made 33 (3) pro confesso,- upon default of accused, not permissible 29 (5), 30, 33 (3) grievance, person suffering, to invoke action by Commission how (note 110) 29 immunity resulting from for persons furnishing information in obedience to sub- poena of Commission (see "Immunity") 50 175 INDEX. [References are to sections.] PROCEEDINGS BY TRADE COMMISSION.— Continued. immunity resulting from — (Continued) none, from liability or prosecution under the antitrust laws as result of Commission's orders, or decrees of courts enforcing such orders 8, 29 (7) intervention of parties in, provided for 29 (3) investigation, to precede institution of proceedings 30 judicial power cannot he withdrawn from the courts 33 (5) proceedings by Commission merely preliminary to exercise of by the courts 30 jurisdictional facts in not competent for Congress to make Commission's findings as to, conclusive upon the courts 33 (5) what are 33 (5) mandamus, not available in to compel institution of proceedings (note 108) 29 to enforce obedience to Commission's orders. . (note 117) 29, 56 master in chancery, Commission to act somewhat as 30 notice to accused in by Commission , 29 (1) by courts of appeals 29 (7) period of notice, by Commission (note 107) 29 served how, by Commission 29 (2) orders, by Commission in admonitory only 30 affirmance, modification, or setting aside of, by courts of appeals 29 (7), 31 affirmative, not permissible 8, 29 (6) "cease and desist", only authorized order 29 (6) certiorari, to obtain review by Supreme Court of decrees of courts of appeals affecting 29 (10) control over, by Commission, until transcript of record of Commission's proceedings filed in a court of appeals. 29 (8) court proceedings in respect of, to be expedited 29 (10) dismissal of complaint, whether Commission empowered to order, or not : 29 (6) enforceable only by courts of appeals 29 (10), 56 judicial judgments, orders of Commission are not 30 mandamus will not lie to enforce (note 117) 29, 56 modification of original order, after additional evidence taken, may be recommended by Commission to court. .29 (9) not self-enforcing, but must be aided by courts.... 29 (7), 30 penalty for disobeying order of Commission, none 29 (6) petition by accused to a court of appeals to set aside order of Commission, provided for 29 (7) 176 INDEX. [References are to sections.] PROCEEDINGS BY TRADE COMMISSION.— Continued. orders, by Commission in — (Continued) testimony essential to support 29 (5), 30, 33, (3) time for compliance by accused with Commission's order to "cease and desist" not" fixed by statutes 29 (6) parties to, who may be as accuser nobody except Commission, unless by intervention after complaint filed by Commission 29 (3) as accused banks and common carriers, when may be affected (see "Banks and Interstate Common Carriers") 11, 12 corporations, other than banks and common carriers 4, 8 natural persons 4, 8 intervening parties 29 (3) petition, to enforce and to set aside order of Commission .. 29 (7) pleadings answer of accused (note 113) 29 complaint of Commission 29 ( 1 ) intervening petitions - 29 (3) prima fade case, Commission must be prepared to make 30 procedure in, rules of made by Commission 29 (11) process of Commission in compulsory, none 29 (4) notice of hearing 29 (1), (2), (4) order to "cease and desist" 29 (6) penalty for disobeying, none ' 29 (6) return upon, what sufficient 29 (2) served how 29 (2) subpoena (see "Witnesses" ) 46 record of Commission in accused may cause filing of in a court of appeals, how. .29 (7) binding upon court, how far '. 29 (9), 31, 32, 33 court may permit record, as originally filed to be supple- mented by new matter 29 ( 9 ) , 31 duty of Commission to file in a court of appeals 29 (7) must contain what 29 (7), S3 (3) notice by court to accused of filing of 29 (7) report by Commission required in, to sustain order to cease and desist 29 (6) subject-matter of exclusive purchase -and sale arrangements 4, 8, 10 intercorporate shareholding 4, 8, 11 interlocking directorates 4, 8, 12 price discriminations 4, 8, 10 177 INDEX. [References are to sections.] PROCEEDINGS BY TRADE COMMISSION.— Continued. subject matter of — (Continued) unfair methods of competition 4, 8, 15-26 testimony in 29 (5), 33 (3), (4) venue of proceedings under, anywhere in United States 1 witnesses in (see "Witnesses") 46 PROCESS OF TRADE COMMISSION: (see "Pboceedings by Tbade COMMISSION.") PUBLICITY: as an agency to check monopoly 40 Trade Commission to provide 36, 40 PUNISHMENT: (see "Immunity.") for improper disclosures by members, or employees, of Trade Commission 57 for obstructing Trade Commission's investigative power. .. .53, 54 Trade Commission cannot inflict any 8, 17, 30 QUORUM: three members of Trade Commission constitute a (note 3) 1 REASON, RULE OF: a part of Clayton Law (note 37) 10 a part of Trade Law (note 55) 15 uncertainty of (note 37) 10 REASON TO BELIEVE: effect of requirement that Trade Commission, before instituting proceedings, must have "reason to believe" that a violation of law has occurred , (note 108) 29, 30 whether courts would inquire into sufficiency of Commission's reason to believe 45 RECORDS OF CORPORATIONS: (see "Powers of Trade Commis- sion, Investigative Power.") RECORD OF TRADE COMMISSION: (see "Proceedings by Trade , Commission.") REGULATIVE POWER: of Trade Commission (see "Powers of Trade Commission") 4, 8-33 REMEDY: certiorari, to obtain review by Supreme Court of decision by a circuit court of appeals in respect of an order of the Trade Commission 29 (10) 178 INDEX. [References are to sections.] REMEDY.— Continued. Clayton Law merely creates a new 13 for obstruction of Trade Commission's investigative power. . contempt proceedings 55 mandamus 56 for unfair methods of competition and violations of the Clayton Law 29 mandamus, not available as, to compel exercise by Trade Com- mission of its regulative power (note 108) 29 Trade Law merely creates a new 28 what available, for violations of antitrust laws 28 REPORTS BY CORPORATIONS: (see "Powers of Trade Commis- sion, Investigative Power.") RESALE: power of vendor of commodity to restrict vendee's right of resale (note 38) 10 RESTRAINT OF TRADE: comprehensiveness of meaning of "restraint of trade" (note 36) 10 RETROACTIVE: Clayton Law is, as to "tying contracts" (note 50) 13 SEARCHES AND SEIZURES: privilege against unreasonable 51 SECRETARY OP TRADE COMMISSION: how chosen 1 who is (note 5) 1 SELF-INCRIMINATION: (see "Immunity.") privilege against 49 SHERMAN LAW: comprehensiveness of scope of (note 45) 13 practices denounced by Clayton Law preventable under 13 proceedings by Trade Commission not to confer immunity from liability or prosecution under 8, 29 (7) remedies under 28 "unfair methods of competition," as inhibited by Trade Law, an offense against 27, 28 SLANDER OF TITLE: to a patent, not within operation of Trade Law, unless effect of is to restrain trade unduly (note 55) 15 179 INDEX. [References are to sections.] STOCK OF CORPORATIONS: (see "Inteecokpobate Shareholding.") SUBPCENA: (see "Immunity," and "Witnesses.") TESTIMONY: (see "Pboceedings by Trade Commission.") r TRADE LAW: and Clayton Law construed together 15,26 approved and in force when (note 1) 1 does not denounce any competitive conduct as a crime 17 merely creates a new remedy , . . 28 not to be construed to alter, modify, or repeal the antitrust laws 27 not to prevent, or interfere with, enforcement of antitrust laws or acts to regulate commerce 8 not void for uncertainty 17 "rule of reason" a part of (note 55) 15 title of (note 1) 1 uncertainty of inhibitions of 14 TRADE LIBELS: not within operation of Trade Law, unless effect is to re- strain trade unduly (note 55) 15 TRADE SECRETS: Trade Commission not to disclose 5,34,40 TRADE UNIONS: exempted from inhibition of antitrust laws against combina- tions in restraint of trade 39 TYING CONTRACTS: (see "Exclusive Purchase and Sale Arrangements.") forbidden by Clayton Law 13 "full-line forcing" a phase of 23 retroactive operation of inhibition of Clayton Law against ■ (note 50) 13 uncertainty of inhibition of Clayton Law as to 10, 13 uncertainty of law as to, before enactment of Clayton Law. . 13 UNCERTAINTY: of Clayton Law 9-12 of "rule of reason" (note 37) 10 of Trade Law 14 Trade Law not void because of 17 180 i INDEX. [References are to sections.] UNFAIR COMPETITION: in sense of palming off one manufacturer's goods as and for goods of another, not within operation of Trade Law, unless effect is to restrain trade unduly (note 55) 15 UNFAIR METHODS OF COMPETITION: "attempt to monopolize," as forbidden by Sherman Law description of (note 93) 27 monopolistic intent essential to 27 substantially synonymous with "unfair methods of com- petition" 27 big business and competitive conduct of big business to be scrutinized with more suspicion than competitive conduct of a weak and inconspicuous business (note 86) 25 inhibition against "unfair methods of competition" not directed against big business, if magnitude of business due solely to industrial efficiency. (note 63)16,17 concise definition of, impossible (note 71) 17, 25 determination of what shall be regarded as, a legislative func- tion 15 discretionary authority of Trade Commission to determine what shall be regarded as, none 15 economists regard what industrial conduct as (note 76) 17 essentials of injury to the public as a whole, through monopolization and undue restraint of trade 15 unfairness 16 forbidden by Trade Law 4, 8, 14 general language in describing, in Trade Law legislative purpose in using 26 use of unavoidable (note 71) 17 use of does not render Trade Law void for vagueness and uncertainty 17 illustrations of bogus independent companies 15, (note 76) 17, 20 'boycotts and blacklists (note 76) 17, 24 espionage 15, (note 76) 17, 21 "fighting brands," "fighting ships," and "flying squadrons" (note 76) 17, 22 "full line forcing" (note 76) 17, 23 local price cutting 15, (note 76) 17, 18 other practices which tend to monopolization and undue restraint of trade (note 76) 17, (note 85) 25 payment of rebates 15, (note 76)17,19 181 INDEX. [References are to sections.] UNFAIR METHODS OF COMPETITION.— Continued,. "interest of the public" import of phrase, as used by Congress in authorizing Trade Commission to prevent "unfair methods of com- petition" 15 provision as to unnecessary, and not found, in Clayton Law (note 53) 15 what industrial practices alone, the law recognizes as prejudicial to the (note 54) 15 "method," imports what 27 phrase "unfair methods of competition" as used by Supreme Court 15 not too vague for satisfactory use in defining a rule of conduct (note 71) 17 scope of, as used in Trade Law, not restricted by Clay- ton Law 26 use of, by Supreme Court brought to attention of Congress during debates on Trade Law 15 used by economists prior to passage of Trade Law (note 76) 17 uncertainty and vagueness of inhibition against 14 Trade Law not void because of 17 unavoidable (note 71) 17 "unfair" acquiring monopoly solely through industrial efficiency is not 16 guides to determining what competitive methods are, within purview of Trade Law 17 what competitive methods are, from viewpoint of political economy (note 76) 17 what is, depends upon circumstances of each particular case 25 wrongs purely private in respect of business, howsoever un- fair, nevertheless are not "unfair methods of competition" within purview of the Trade Law, unless they tend to create monopoly or to restrain trade unduly (note 55) 15 WITNESSES: (see "Evidence," and "Immunity.") attendance of from what distance required 46 secured by subpoena ' 46 constitutional privileges of natural person not compelled to furnish evidence relating to his private affairs except as to matters that are made the subject of a complaint, and an investigation in form judicial before the Commission 48 182 INDEX. [References are to sections.] WITNESSES.— Continued,. constitutional privileges of — {Continued) against self-incrimination, in case of natural person, un- less granted full immunity from prosecution 49 against unreasonable searches and seizures 51 crime to disobey subpoena 53 depositions of by whom may be taken 46 fees for taking 46 how taken and returned 46 not to be taken, unless by special permission of Commis- sion (note 204) 46 examination of conditions precedent to 46 to be oral, unless for exceptional cause, Commission shall permit testimony to be taken by deposition. . (note 204) 46 who may examine 46 fees and mileage of 46 immunity of (see "Immunity") 50 oaths and affirmations, who may administer 46 subpoena crime to disobey 53 duces tecum, obstacles to use of 46 obedience to, coerced by contempt proceedings 55 by mandamus 56 who may sign 46 183 -fc-