Acts Administered by Com Mission

2 F.T.C. 446 · Decided June 29, 1920

Citation: 2 F.T.C. 446
Decision: June 29, 1920 (recovered from the page header)
Case type: Unclassified
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Acts Administered by Com Mission, 2 F.T.C. 446 (1920). Consumer Law Library, https://consumerlawlibrary.org/decisions/v002-0059

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COMPLAINT IN THE MATTER OF THE ALLEGED VIOLATION OF

SECTION 5 OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26,

1014, AND OF TITE OBLIGED VIOLATION OF SECTIONS 2 AND 3 OF

AN ACT OF CONGRESS APPROVED OCTOBER 15, 1914,

Docket 24.—June 29, 1920, SYLLABUS, Where a corporation engaged fn the manufacture and sale of lubricating oils, greases, and compounds to railroad companies operating approximately 74 per cent of the entire railroad mileage of the United States, and possessing exact Information of the detailed cost to each of sald companies of the consumption of lubricants by locomotives, passenger cars, and freight curs per 1,000 miles run, Entered into contracts with different conipantes whieh provided—

(a) that said corporation should supply and the company purchase all needed lubricants at an Involee price to be uniform to all; but the total cost thus incurred to be subject to rebate or refund in the event that it should prove to exceed certain guaranteed unlit costs per thousand miles run by different classes of equipment, which costs were neither uniform as to all companies nor go fixed as to yield a unfform net price per gallon or per pound from each company; such rebates or refunds belng conditioned tn most of the contracts upon exclusive use of the corporation's lubricants: (>) that, In many cases, any saving upon any class or classes of equipment should) not be set off avainst the excess cost upon any other clars or classes, with an additional resulting advantage thereby fn such cases to the company; and (¢) that, in many contracta, should the cost at Invotce price fall below a point eralled the “mensure figure,” then the guaranteed cost should be further reduced upon a sliding sevle, usually one-half (he difference between 446 Comphiint. the actual cost and the measure figure, which bore a substantially different ratio to the guarantee figure in the case of different companies;

With the result that in many cases the total cost of lubricants to a company was much less than the invoice cost; that the net cost per gallon or per pound varied greatly with different companies; that in many causes the total actual cost was much less than the total uctual cost of many other companies consuming an equal or smaller quantity of the various kinds of lubricants per thousand miles run upon their several classes of equipment; and that in order to obtain any possible refunds the different companies uniformly purchased from said corporntion all the lubricants required by them: Held, (a) That the effect of such contracts and the practices thereunder was, and might be, to substantially lessen competition and tend to create a monopoly in the sale to railroad companies of lubricating oils, grenses, and compounds;

(b) that such discrimination in price between different railroad companies, under the circumstances, constituted a violation of section 2 of the act of October 15, 1914;

(ce) that such contracts und the gales made thereunder, and the methods and practices set forth constituted, under the circumstances, a violation of section 3 of the act of October 15, 1914: (@) that the use of such contracts and practices constituted, under the circumstances set forth, an unfair method of competition in violation of section 5 of the act of September 26, 1014,

COMPLAINT.

The Federal Trade Commission having reason to believe from a preliminary investigation made by it, that the Galena-Signal Oil Co., hereinafter referred to as the respondent, has been and is using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of the act of Congress approved September 26, 1914, entitled “An act to create a Federal Trade Commission, to define its powers and duties and for other purposes,” and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, on information and belief as follows:

Paragrapy 1. That the respondent, the Galena-Signal Oil Co,, is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania,

Complaint. 2¥.T.C. having its principal office and place of business in the city of Franklin, said State, and is now, and has for more than two years last past, engaged in the manufacture and sale in commerce among the various States and Territories of the United States and the District of Columbia, of lubricants consisting of oils, greases, and other ingredients used by railroads for lubricating rolling stock, and a cooling compound used by them for preventing or remedying hot boxes on said railroad rolling stock.

Par. 2. That the respondent, with the purpose, intent, and effect of stifling and suppressing competition and of building up and maintaining a monopoly in the manufacture and sale of lubricating oils and greases in interstate commerce, for many years last past has sold, and is now selling, lubricating oils and greases to railroad companies tmder a system or method of contracting, whereby it agrees to sell and deliver to the purchaser all of the lubricants, which such purchaser may require in the operation of its rolling stock, at certain fixed prices per gallon or per pound, guaranteeing to such purchaser that in the exclusive use of respondent's lubricants the average cost per thousand miles run for lubricating certain specified classes of its equipment shall not exceed fixed and definite amounts, and agreeing in the eveit that the cost of Jubricants used exceeds, at the contract or invoice price, such guaranteed cost, to refund or rebate the excess to the purchaser; that the respondent has for many years last past, and is now, paying or refunding such excess cost to its customers. The effect of this system of selling and the payment of rebates or refunds thereunder has been, and is, to prevent competitors of the respondent from selling lubricants to any railroad company which purchases to any extent from the respondent company, and thus to induce or procure the exclusive patronage of such companies. Under this system of selling, the respondent has also for many years last past, and does now, arbitrarily so adjust or fix the guarantees of cost of lubrication per thousand miles run, contained in its contracts with various railroads, as to require the respondent to pay to certain railroads varying refunds or rebates from the invoice prices paid by such roads, with 446 Complaint. the result that the respondent has discriminated, and does discriminate, in the net price per gallon or per pound charged various railroads purchasing lubricating oils and greases from it.

Il, The Federal Trade Commission, having reason to believe, from a preliminary investigation made by it, that the Galena Signal Oil Co., hereinafter referred to as respondent, has violated, and is violating, the provisions of section 2 and section 3 of the act of Congress approved October 15, 1914, entitled “ An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,” hereinafter referred to as the Clayton Act, issues this complaint, stating its charges in that respect, on information and belief, as follows:

Paracrary 1. That the respondent, the Galena Signal Oil Co., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania, having its principal office and place of business in the city of Franklin, said State, and is now, and has for more than two years last past, engaged in the manufacture and sale in commerce among the various States and Territories of the United States, and the District of Columbia, of lubricants consisting of oils, greases, and other ingredients used by railroads for lubricating rolling stock, and a cooling compound used by them for preventing or remedying hot boxes on said railroad rolling stock.

Par. 2. That the respondent for several years last past, in the course of interstate commerce, in violation of section 2 of the Clayton Act, has discriminated in price and is now discriminating in price between different purchasers of lubricant, which said Libricant is sold for use, consumption, or Tesale within the United States and the Territories thereof, and the District of Columbia, and that the effect of such discrimination may be and is to substantially lessen competition or tend to create a monopoly in the business of manufacturing and selling lubricants used by railroads in the Operation of their rolling stock.

180395 ° —20-——29

Findings.’ 2F.T.C.

Par. 8. That the respondent for several years last past in the course of interstate commerce, in violation of section 3 of the Clayton Act, has sold and made contracts for sale of large quantities of lubricants used by railroads in the operation of their rolling stock for use and consumption throughout the United States, the Territories thereof, and the District of Columbia, and has fixed and is now fixing the price charged therefor or discount from, or rebate upon such price on the condition, agreement, or understanding that the purchaser thereof shall not use the goods, wares, merchandise, supplies, or other commodities of a competitor or competitors of respondent, and that the effect of such sales and contracts of sale or such conditions and agreements or understandings may be and is to substantially lessen competition and to tend to create a monopoly.

REPORT, FINDINGS AS TO THE FACTS, AND

ORDER.

The Federal Trade Commission having issued and served its complaint herein, wherein it is alleged that it had reason to believe that the above-named respondent, Galena Signal Oil Co., has been and now is using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of an act of Congress approved September 26, 1934, entitled “An act to create a Federal Trade Commission, to define its powers and duties, and for other ptirposes,” and has been and is violating the provisions of sections 2 and 3 of an act of Congress approved October 15, 1914, entitled “ An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,” and that n proceeding by it in respect of such alleged violation of section 5 of the act of September 26, 1914, would be to the interest of the public, and fully stating its charges in that respect, and the respondent having entered its appearance by Frank L, Crawford, Esq., its attorney, and having duly filed its answer, admitting certain of the allegations of said complaint and denying certain others thereof, and containing certain allegations as affirmative defense, and the Commission having offered testimony m support of the charges on =—

GALENA SIGNAL OIL CO.

146 Findings, of said complaint, and the respondent having rested its case at the close of the Commission’s case, and counsel for both parties having waived the filing of briefs and hearing of argument, and the Commission having duly considered the record and being fully advised in the premises, now makes its report and findings as to the facts and conclusions:

FINDINGS AS TO THE FACTS.

Paracrarn 1. That the respondent, Galena Signal Oil Co.. is a corporation duly organized and existing under and by virtue of the laws of the State of Pennsylvania, pursuant to an agreement of consolidation and merger, made September 30, 1901, between the Galena Oil Co. and the Signal Oil Co., both corporations duly organized and existing under and by virtue of the laws of the State of Pennsylvania, whereby said respondent, the Galena Signal Oil Co. succeeded to the rights, privileges, and franchises of the Galena Oil Co, and the Signal Oil Co., subject to all of the restrictions, disabilities, and duties of each of the said corporations so consolidated. That the purposes for which the, Galena Oil Co. was organized and the character of the business it was empowered to do was manufacturing lubricating oils, and particularly the oil known as Galena oil, selling its own manufactured products, purchasing materials used in said manufacture, purchasing and owning the real estate and buildings necessary in said manttfacture and doing all things necessary to carry on said manufacture and to market the products; that the purposes for which the Signal Oi] Co. was organized and the powers which under its charter it was authorized to exercise and the business to transact was manufacturing valve and Signal oils, and particularly oils known as Perfection valve oils and Signal oils, selling its own manufactured products, purchasing materials used in said manufacture, purchasing and owning real estate and buildings necessary in said manufacture, and doing all things necessary to carry on said manufacture and to market the products.

Par. 2. That respondent since its organization has continued to carry on the business, among others, of manufacturing and selling to railroad companies certain lubricating oils,

Findings, 2F.T.C. greases, and compounds. That before and since the service of the complaint herein respondent was and has been selling its said lubricating oils, greases, and compounds to railroad companies owning and operating approximately 74 per cent of the entire railroad mileage of the United States. Pax. 3. That in the course of its said business of manufacturing and selling its said products, the respondent has purchased and transported its raw materials into and through various States of the United States, and has sold and shipped its refined and manufactured products into and through various States and Territories of the United States and the District of Columbia to various railroad companies having their respective offices and places of business, and their respective lines of railroads and receiving points for the said lubricating oils, greases and compounds in the various States and Territories of the United States and the District of Columbia.

Par. 4. That during the four years last past up to the commencement of this proceeding and prior thereto, respondent in the course of its said business has entered into certain contracts with various railroad companies to which respondent sells its said lubricating oils, greases, compounds, and Signal Oil in and by which said respondent has agreed to sell and deliver to said railroad companies respectively all of said lubricating oils, greases, compounds, and Signal oil which said railroad companies respectively may require for their use upon their respective locomotives, passenger ears, and freight cars in use upon their present mileage or any additional mileage, and said railroad companies have agreed to purchase all of the oils, greases, and lubricating compounds which they respectively may require for such purposes from respondent. That the said contracts have been and were made and entered into in most eases upon a standard printed form. That certain contracts with certain ‘ailroad companies have been entered into upon special forms which differed in certain particulars from said standard printed forms. That in and by each and all of said contracts entered into as aforesaid respondent has agreed to sell and deliver, and does agree to sell and deliver, to the said 446 Findings. railroad companies respectively its lubricating oils, greases, and compounds at the uniform equal invoice prices prevailing at the date of said contract in all cases and in each and all of said contracts it was and is provided that: The first party agrees that should a reduction be made to any other rallroud in the invoice prices named in Maid section 1 (excepting reductions due to decreases in freight rates) for the same oils or greases during the period covered by this contract, the second party hereto ig to receive the benefit of a Hke reduction for the remaining period of this contract. .

That respondent in each and all of the said contracts has agreed to guarantee and does agree to and does guarantee that the cost to the said railroad companies respectively for lubricating their respective locomotives, passenger cars, and freight cars per thousand miles run shall not exceed a certain specified amount for locomotives, a certain specified amount for passenger cars, and » certain specified amount for freight cars.

Par, 5. That it has been the practice of the respondent for many years to require, and it is expressly provided in most of the contracts entered into by the respondent with the railroad companies respectively that said railroad companies shall furnish to respondent monthly statements showing the actual amount of lubricating oils and greases and lubricating compounds consumed per thousand miles run on the locomotives, passenger cars, and freight cars of said respective railroad companies, with a detailed statement showing the invoice prices of the lubricants consumed by each class, the total number of miles run by each class of equipment, and the number of miles per pint; and the respondent has at all times during the four years last past and prior thereto had full and complete statements and statistics showing the actual cost of lubricating at invoice prices, the several classes of equipment of the railroad companies respectively and the actual amount of the different kinds of lubricating oils and greases and lubricating compounds consumed per thousand miles run by the various classes of equipment of said railroad companies respectively.

Par. 6. That the said guaranteed costs per thousand miles run for the different classes of equipments specified in the

Findings, : 2G. several contracts entered into by the respondent up to the commencement of this proceeding as aforesaid, were not and are not uniform in the case of all railroad companies, but the ratio between the said guaranteed costs per thousand miles run and the actual cost per thousand miles run at the uniform invoice price has varied and the said guaranteed costs per thousand miles run for the several ‘classes of equipment have not been fixed upon any basis or in any manner whereby the respondent would receive from all railroad companies a uniform net amount per gallon or per pound for the lubricants sold by it to said railroad companies respectively.

Par. 7. That in said contracts entered into as aforesaid by the respondent with said railroad companies respectively respondent has agreed and does agree to refund to the said railroad companies respectively the difference, if any, between the total cost at the uniform invoice prices of the lubrivants, oils, greases, and lubricating compounds required per thousand miles run for the several classes of equipment and the total guaranteed cost per thousand miles run. That under the said contracts the respondent has paid and given und does pay and give to various railroud companies the respective refunds aforesaid, whereby the cost to the railroad companies for lubricating their several classes of equipment per thousand miles run varies at different ratios to the cost at uniform invoice price of the several kinds of lubricating materials actually consumed per thousand miles run. Par, 8. That the quantity of lubricants per thousand miles run necessary for the different classes of equipment varies in the case of different railroad companies; but in many cases, under the contracts aforesaid, respondent has offered and given, and does offer and give, to railroad conipanies guaranteed costs per thousand miles run for the several classes of equipment, such that the total cost to the railroad company of lubricating the said equipment was and is much less than the cost at invoice prices of the lubricants so consumed, and such that in many cases the total actual cost of lubricating the said equipment was and is much less than the total actual cost in the case of many other railronds which consumed an 446 Findings. equal or a smaller quantity of the various kinds of lubricants per thousand miles run upon their several classes of equipment.

Par, 9. That during the four years last past up to the commencement of this proceeding, and prior thereto, respondent by the contracts aforesaid has agreed to offer and give, and has offered and given, to various railroad companies certain guaranteed costs per thousand miles run, as a result of which the net cost per gallon or per pound for the various kinds of lubricants furnished and delivered by said respondent has varied greatly in the case of the different railroad companies. Pan. 10. That the guaranteed cost in each service is computed by multiplying the number of miles run by the guaranty, and that the sum of the guaranteed costs for each class of equipment is the total guaranteed cost. That the total invoice cost is the amount paid by the railroad companies respectively, unless the total guaranteed costs is a smaller sum, in which case the latter is paid.

Par. 11. That in many cases, by the contracts aforesaid, respondent has offered and given, and does give to railroad companies an additional advantage in that the said respondent has agreed and does agree that in the event of any saying upon any class or classes of equipment, the same shall not be set off against the excess cost upon any other class or Classes, ench class being treated separately. Par, 12. That during the four years last past, up to the commencement of this proceeding, and prior thereto, the ratio between the invoice prices specified in the said several contracts and the total guaranteed costs actually paid by the several railroad companies has varied substantially.

Par. 18. That in most of the said contracts entered into by the respondent with said railroad companies respectively during the four years last past, up to the commencement of this proceeding, and prior thereto, it.is provided, among other things, that the said guaranteed costs per thousand miles run for the several classes of equipment aforesaid shall be allowed and given only in consideration of the exclusive use by said railroad companies respectively of the lubricants furnished by the respondent, for such purposes, That pur- Conclusion, 2Rr.NC. suant to said guarantee provisions, and in order to obtain any refunds provided for thereby, the railroad companies with which respondent has respectively entered into guaranty contracts have uniformly purchased from the respondent all lubricating oils and greases and lubricating compounds required for the lubrication of their respective several classes of rolling stock and have not purchased from any competitor of the respondent any of the lubricating oils and greases or lubricating compounds required for the lubrication of their said rolling stock.

Par. 14. That in many of the contracts entered into by the respondent with various railroad companies, it has been expressly provided that in case the actual cost at uniform invoice prices falls below a certain figure, termed the “ measure figure”—usually the previous actual cost at invoice prices—the guaranteed cost specified in said contracts should be further reduced upon a sliding scale, usually measured by one-half the difference between the measure figure and the actual cost. The ratio between the guaranty figure and the measure figure substantinlly varied in the ease of different railroad companies.

Par, 15. That many of the contracts, made and entered into by the respondent with various railroad companies, have been expressly limited in duration, but contain further provisions that they shall continue in force and effect unless terminated by either party upon different periods of notice. CONCLUSIONS, That by reason of the aforesaid contracts entered into up to the commencement of this proceeding, and the terms and conditions thereof, and by reason of the varying ratio between the said guaranteed costs and the said actual costs at uniform invoice prices, the net cost per gallon or per pound for the various kinds of lubricants furnished and delivered by said respondent has varied greatly in the case of different railroad companies, with the result that there has been discrimination in price between different purchasers of the commodities manufactured and sold by respondent in interstate commerce, 4486 Order, That the respondent has made contracts for the sale of and has sold under such contracts commodities manufactured by it and has fixed prices therefor, and discounts from and rebates upon such prices, on the conditions, agreements, or understanding that the purchasers thereof under such contracts should not use .or deal in the goods, wares, merchandise, or other commodities of a competitor or competitors of the respondent.

That the effect of such contracts for sale and the sales made thereunder, and the methods and practices hereinbefore set forth, is and may be to substantially lessen competition and tend to create a monopoly in the line of commerce in which the respondent is engaged. That such contracts for sale and the sales made thereunder and methods and practices hereinabove set forth, constitute a violation of section 2 of an act of Congress approved October 15, 1914, entitled, “An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes.”

That such contracts for sale and the sales made thereunder and methods and practices hereinabove set forth constitute a violation of section 3 of an act of Congress approved October 15, 191-4, entitled, “An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes.”

That the methods and practices of the respondent hereinabove set forth, constitute unfair competition within the Meaning of section 5 of an act of Congress approved September 26, 1914, entitled, “ An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes.”

ORDER TO CEASE AND DESIST, _ The Federal Trade Commission having issued and served its complaint herein wherein it is alleged, among other things, that it had reason to believe that the above-named respondent, Galenn Signal Oil Co. “ has been and is using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of an act of Congress approved Septem-

Order. 2F.T.C. ber 26, 1914, entitled ‘ An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,’ ” and “has violated and is violating the provisions of sections 2 and 3 of the act of Congress, approved October 15, 1914, entitled ‘ An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,’ ” and that a proceeding by it in respect of such alleged violation of section 5 of the act of September 26, 1914, would be to the interest of the public, and fully stating its charges in that respect, and the respondent having entered its appearance by Frank L. Crawford, Esq., its attorney, and having duly filed its answer, admitting certain of the allegations of said complaint and denying certain others thereof, and containing certain allegations as affirmative defense; and the Commission having offered testimony in support of the charges of suid complaint, and the respondent having rested its case at the close of the Commission’s case and counsel for both parties having waived the filing of briefs and hearings of argument, and the Commission having duly considered the record and being fully advised jn the premises, and having made and filed its report and findings as to the facts and conclusions, which report, findings, and conclusions are hereby referred to and made a part hereof: Now, therefore,

It is ordered, That respondent, Galena Signal Oil Co., shall forever cease and desist:

(1) From entering into or making any contract or contracts with any railroad company wherein or whereby such railroad company is permitted, allowed, or enabled to purchase from respondent the lubricating oils, greases, and compounds sold by respondent at prices lower than the prices offered and given by respondent to other railroad companies purchasing the same grade of products at the same period of time.

(2) From selling or offering to sell to any railroad company the lubricating oils, greases, and compounds sold by it at prices lower than those offered and given to other railroad companies purchasing the same grade of products at the same period of time, Order,

(3) T'rom making or entering into any contract or contracts with any railroad company wherein and whereby the said respondent agrees to or does guarantee to such railroad company that the cost of lubricating said company’s locomotives, passenger cars, and freight cars shall bear a smaller ratio to the actual cost at uniform invoice price than the ratio between the guaranteed cost and actual cost at invoice price, in the case of other ravroad companies purchasing the same grade of products from respondent.

(4) From directly or indirectly discriminating in price between different purchasers of the same grade of commodities sold by respondent, except that existing contracts. which are specifically shown in the schedule attached hereto shall not be affected by this paragraph or by paragraph 2 hereof until they expire or may be terminated by respondent, nor shall this paragraph nor paragraphs 1 or 2 be construed as prohibiting the use of a group of alternative plans for the purchase of commodities uniformly submitted to all prospective ctustomers and resulting in no unlawful dis riminations. (®) From making or entering into any contract or contracts with any railroad company wherein or whereby the said respondent agrees to or does guarantee to said railroad company, a maximum cost of lubrication per thousand miles run, or a maximum cost of lubrication based on any similar standard of measure, for Jecomotives, passenger cars, and freight cars, in consideration that the said railroad company shall purchase and use exclusively the lubricating products sold) by respondent.

(6) From making or entering into any contract or contracts with any railroad company wherein or whereby the respondent agrees to or does guarantee to said railroad company a specified cost of lubrication per thousand miles run, or a specified cost of lubrication based on any similar standard of measure. on the condition, agreement, or understanding that the said rail- Order. 2F.T.C., 446. road company shall not buy or use the goods, wares, merchandise, or other commodities of a competitor or competitors of the respondent.

(7) From continuing beyond the period at which any contracts may be terminated by respondent on notice, and from renewing or extending any such contracts wherein or whereby it is provided that the railroad companies severally making said contracts shall purchase -and use exclusively the lubricating oils, greases, and compounds sold by respondent.

CASES DISMISSED.

CASES IN WHICH ORDERS OF DISCONTINUANCE OR DISMISSAL HAVE BEEN ENTERED—Continued. | Dates of orders. | Docket Nos. | Respondents. | Commodities. | Charges. | Answer, stipulation, or trial. | Reasons for discontinuance or dismissal. | | Nov. 17 | 201 | Schwabacher Bros. & Co., Inc. | Coffee | Resale price maintenance | No answer filed, or hearing had | Charge not sustained. | | Nov. 17 | 202 | Seattle Grocery Co | do | do | do | Do. | | Nov. 17 | 203 | Washington Retail Grocers' & Merchants' Association. | do | do | do | Do. | | Nov. 17 | 204 | Commonwealth Color & Chemical Co. and Herbert L. Wittenbel. | Colors, chemicals, dye-stuffs, and similar products. | Bribery | Answer and trial | Do. | | Nov. 17 | 221 | Vapo-Cresolene Co | Proprietary medicine | Resale price maintenance | Answer | Do. | | Nov. 17 | 249 | The Corcoran Manufacturing Co. | Automobile radiators | Simulation of competitor's product, so as to deceive purchasers. | do | No reason assigned. | | Nov. 17 | 302 | North American Construction Co. | Lumber and building materials (cut and prepared for standardized houses). | False representations as to respondent's and its competitors' prices and products. | do | Dismissed without prejudice: respondent discontinued business. | | Nov. 19 | 84 | Cutler Mail Chute Co | Mail chutes and boxes | Selling below cost | Answer and trial | Practices of respondent shown by testimony not prohibited by Federal Trade Act. | | Nov. 24 | 130 | Gilbert & Barker Manufacturing Co. | Automatic measuring oil pumps, tanks, and other outfits, and patented devices for the storage, handling, and automatic measuring of oils, gasoline, and other volatile liquids. | Misrepresenting competitors' products and prices thereof; bringing about and attempting to bring about cancellation of orders for competitors' products; false representations by respondent's agents that they were also agents of competitors; price discrimination. | Answer | No reasons assigned. | | Nov. 24 | 136 | American Oil Tank & Pump Co. | do | Bringing about and attempting to bring about cancellation of orders for competitors' products. | do | New evidence. |

CASES DISMISSED.

CASES IN WHICH ORDERS OF DISCONTINUANCE OR DISMISSAL HAVE BEEN ENTERED—Continued. | Dates of orders. | Docket Nos. | Respondents. | Commodities. | Charges. | Answer, stipulation, or trial. | Reasons for discontinuance or dismissal. | | Mar. 25 | 125 | The Vaudeville Managers Protective Association, The National Vaudeville Artists, Inc., The United Booking Offices (The B. F. Keith Vaudeville Exchange), Vaudeville Collection Agency, E. F. Albee, Sam A. Scribner, Marcus Loew, Martin Beck, B. S. Moss, and Sime Silverman. | Vaudeville business | Making membership in National Vaudeville Artists condition precedent to employment; circumventing New York law limiting theatrical employment agencies to 5 per cent; requiring actors to advertise in publication owned by one of respondents; conspiring to make and publish black lists of actors not in good standing. | Answer and trial | Violation of Federal Trade Commission Act, or secs. 2, 3, 7, and 8 of Clayton Act do not appear. | | Apr. 7 | 265 | Butterick Co., Federal Publishing Co., Standard Fashion Co., Butterick Publishing Co., and New Idea Pattern Co. | Manufacture of paper dress patterns and publication of periodicals and catalogues describing garments made therefrom. | Resale price maintenance; exclusive and tying contracts. | ....do | Dismissed, on Commission's motion, without prejudice to right of Commission to issue another complaint with respect to same matter, directed to such respondents as Commission may elect. | | May 7 | 5 | The Shredded Wheat Co. | Shredded wheat biscuit | Exclusive contract with only concern making machinery capable of manufacturing respondent's product, to prevent said concern manufacturing for competitor; espionage upon business of competitor; misrepresenting quality of competitor's product; threatening customers of competitor; prosecution of vexatious suit with | ....do | No reasons assigned. |

1663 to 20 30 May 13 345 New England Bakery Co. Bread wide publicity; endeavoring to prevent competitor from securing advertising space. Answer Dismissed without prejudice; no reasons assigned. May 20 92 Standard Oil Co. of New York and Magnolia Petroleum Co. Petroleum products Acquisition of large amount of stock in competing corporation where the effect may be to substantially lessen competition or tend to create a monopoly. Answer and trial No reason assigned. May 20 546 National Wire Wheel Works, Inc. Wire wheels for automobiles. False representations as to possession of certain patents, whereas patents only applied for. Answer Advertisement published but once, and promptly discontinued upon notice. Public interest not sufficient to warrant order to cease and desist. May 25 166 Purity Preserving Co. and R. J. Megular Co. Tomato catsup Failure on part of one of respondents to fill contracts after sharp rise in price, and offer by second respondent, composed substantially of same officers, directors, and stockholders, of catsup made by first corporation's plant, and employees at market prices in competition with manufacturers in active competition with first corporation. ...do Dismissed without prejudice. June 3 330 Richardson Lubricating Co. Petroleum products Leasing devices used in connection with respondent's products at a nominal consideration, under circumstances tending to cause dealers to purchase respondent's products largely or exclusively. Answer and stipulation Practice abandoned.

CASES DISMISSED.

CASES IN WHICH ORDERS OF DISCONTINUANCE OR DISMISSAL HAVE BEEN ENTERED—Continued. | Dates of orders. | Docket Nos. | Respondents. | Commodities. | Charges. | Answer, stipulation, or trial. | Reasons for discontinuance or dismissal. | | June 8 | 31 | National Biscuit Co | Uneeda biscuits, and other bakery products. | System of cumulative rebates or discounts calculated to cause dealers to confine their purchases largely or exclusively to respondent's products; price discriminations; contracts for important advertising space or displays, reserving right to cancel at end any month if advertisement of products of competitors shown. | Answer and trial | Dismissed without prejudice to right of Commission to rule against cumulative discount principle in application to a different state of facts, it appearing that respondent continues its calculations to periods not exceeding one month, so that the tendency to create an exclusive dealing relationship and restrict competition is negligible. | | June 8 | 443 | David D. Levitt, doing business under the trade name and style of The Sport Shop. | Fishing tackle, guns, rifles, ammunition, camping and outing supplies, and similar products. | Simulation of firm name of competitor. | Answer and stipulation | No reasons assigned. | | June 14 | 514 | Albert H. Harman and Horace C. Klein, partners, styling themselves the Webb Publishing Co. | Agricultural journals | Price discriminations (for advertising space). | Answer | Dismissed without prejudice. Interstate commerce not involved. | | June 18 | 33 | American Radiator Co | Radiators | System of cumulative rebates or discounts calculated to cause dealers to confine their purchases largely or exclusively to respondent's products. | ...do | Charges not sustained. | Aprennrx T.

ACTS OF CONGRESS FROM WHICH THE COMMISSION

DERIVES ITS POWERS, WITH ANNOTATIONS.

FEDERAL TRADE COMMISSION ACT.

[Approved Sept. 26, 1914.] [Pustic—No. 203—63d Conaress. ]

[H. R. 15613.]

AN ACT To create a Federal Trade Commission, to define its powers and duties, and for other purposes,

Sec. 1. CREATION AND ESTABLISHMENT OF THE

COMMISSION, Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That a commission is hereby created and established, to be known as the Federal Trade Commission (hereinafter referred to as the commission), which shall be composed of five commissioners, who shall be appointed Rive commis ' by the President, by and with the advice and consent of pointed by Prest- ’ dent, by and with, the Senate. Not more than three of the commissioners etc. <Not more than three from Shall be members of the same political party. The first same political commissioners appointed shall continue in office for terms” of three, four, five, six, and seven years, respectively, from the date of the taking effect of this Act, the term of tee *The annotations are from decisions handed down before July 1, 1920, On petitions to review orders of the Commission, except in the Nulomoline, Basio Products, and Maynard Coal Co, cases, in which injunctions were Sought against the Commission, in the first to prevent the taking of certain testimony, and in the last two to prevent the requiring of certain Teporta, With respect to the petitions on decisions to review {t should be noted that in the case of Beech-Nut Packing Co. v. Federal Trade Commiesion, 204 Fed. S85, decided adversely to the Commisston, petition for certiorari was granted by the United States Supreme Court June 1, 1920. With respect to the Baste Products and Maynard Coal Co. cases, tn- Yolving the requiring of reports by the Commission under section 6, under the Circumstances there concerned, it should be noted with respect to the Weheral question involved, that after decision in the case last referred to

Sec. 1. CREATION AND ESTABLISHMENT OF THE

COMMISSION—Continued. each to be designated by the President, but their succeseae tm» seven sors 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 commissioner whom he ctonairman to be shall succeed. ‘The commission shall choose a chairman minsion. from its own membership. No commissioner shall engage Purauit other j siness. v. ] buamee’ otherin any other business, vocation, or employment. Any ited. , jaal ‘ ; . Te Removal by Commissioner may be removed by the President for in President, efficiency, neglect of duty, or malfeasance in office. A paitemreise Vacancy in the commission shall not impair the right of impair exercise or powers py ie, the remaining commissioners to exercise all the powers of sioners. the commission. , Sea’ odiially ~The commission shall have an official seal, which shall notice be judicially noticed.

See. 2. SALARIES. SECRETARY. OTHER EMPLOYEES.

EXPENSES OF THE COMMISSION. OFFICES.

aalay'g10.000, = SEC. 2. That exch commissioner shall receive a salary of $10,000 a year, payable in the same manner as the salaries of the judges of the courts of the United States. The Appointment of commission shall appoint a secretary, who shall receive secretary. Salery, $5,000. g salary of $5,000 a year, payable in like manner, and it (on motion for temporary injunction restraining the Commission from requiring reports under section 6), a temporary injunction restraining the Commission from requiring such reports was secured from the Supreme Court of the District of Columbia tn the ense of Claire Furnace Co. et al. v. Federal Trade Commisaion (June 19, 1920. No opinion); that such injunction also had the effect of staying certain mandamus proceedings against two of the petitioners In the Claire Furnace case, theretofore instituted by the Attorney General under section 9, at the request of the Commission, to compel the companies in the two cases to file reports previously demanded under section 6 (United Staier v. Bethichem Steel Co., petition filed June 4, 1920, Eastern District of Pennsylvania, and United States ¥. Republic Iron and Steel Oo., petition filed June 7, 1920, District of New Jerney); that the answer of the Commiaston in the Claire Furnace case prayed in the alternative form that (1) the bill be diemissed: that (2) the bill be dismissed as to the two petitioners above referred to (the defendants in the two mandamus proceedings); that

(8) the temporyry restraining order and preliminary injunction be modified so a8 to clearly exclude the prosecution of such mandamus proceedings by the Attorney General against the two defendants; and that at this writing (Sept. 20, 1920), neither the Maynard Coal case, Clairé Furnace case, nor mandamus proceedings have been heard. In this general connection (injunctions sought to restrain the Commission from proceeding under the act) reference should also be made to the case of T, C. Hurat & Son vy. Federal Trade Commiaaion (Sept. 20, 1920, 1D. c. for BK. D. of Va., before Judge Waddill, not yet reported), in whleh the Court suatalned the constitudonality of the act and refused the Injunction. In connection with the history in Congress of the Federal Trade Commission Act, see address of President Wilson delivered at a joint sesstoD on Jan. 20, 1914 (Congressional Record, vol. 51, pt. 3, pp. 1962-1964, shall have authority to employ and fix the compensation Other employees. Salaries of such attorneys, special experts, examiners, clerks, and xe! by Commis: 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 _ Except for sec. Tetary, commis- Toul. = seh 6 7} . sioners’ clerks, commissioner, the attor neys, and such special experts and &}9 seh pet tai examiners as the commission may from time to time find exverts and, ex. aminers as Comnecessary for the conduct of its work, all employees of the mission may find. a. necessary, all emcommission shall be a part of the classified civil Service, Plovers part | of 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 Ex2e0se* of commission alnecessary expenses for transportation incurred by the lowed and) paid on presentation commissioners or by their employees under their orders, of ims. ae 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 vouchers therefor approved by the commission. Until otherwise provided by law, the commission may Commission may rent suitable rent suitable offices for its use. offices, The Auditor for the State and Other Departments shal] , Auditing of ac receive and examine all accounts of expenditures of the commission.

63a Cong., 2d seas.); report of Senator Summing from the Committee on Interstate Commerce on Control of Corporations, Persons, and Firms engaged {in Interstate Commerce (Feb. 26, 1913, 62d Cong., 3d sess,, Rept. No, 1826) 3 Hearings on Interstate Trade Commission before Committee on Interstate und Foreign Commerce of the House, Jan. 30 to Feb, 16, 1814, 63d Cong., 2d wegs. : Juterstate Trade, Hearings on Bills relating to Trust Legislation before Senate Committee on Interstate Commerce, 2 vola., 64d Cong., d sess.; report of Mr. Covington from the House Committee on Interstate and Foreign Commerce on Interstate Trade Commission (Apr. 14, 1914, 64a Cong., 2d sess., Rept. No. 543); also parts 2 and & of said report Presenting (he minority views respectively of Mesara. Stevens and Lafferty; report of Senator Newlands from the Committee on Interstate Commerce Cn Federal Trade Commission (June 18, 1014, 63d Coug., 2d sess, Rept. No, n97) and debates and speeches, among others, of Congresshen Covington for (references to Congressional Record, 63d Cong., 24 Beas, vol, 51), part 8, pp. 8840-8840; 9008; 14925-14983 (part 14); ickluson for, part 9, pp, 9189-9190; Mann against, part 15, pp. 14939- 14940; Morgan, part 9, 8854-8857, 2063-9064, 14941-14043 (pert 15); Sime for, 14940-14941; Stevens of N. H. for, 9068 (part 9); 14941 (part 15); Stevens of Minn. for, 8849-8853 (part 9); 14984-14939 (part 15); ana of Senators Borah against, 11186-11189 (part 11); 11282~ 41287, 11298-11302, 11600-11601 (part 12); Brandegee against, 12217- 12218, 12220-12222, 12261-12262, 12410-12411, 12792-12804 (part 13), 18108-13108, 13209-13801; Clapp against, 11872-11873 (part 12), 11061-18065 (part 18), 18148-12146, 18201-18802; Cummings for, 11102loge (part 11), 11876-11389, 11447-11158 (part 12), 11628-11539, 8~12875 (part 18), 12012-12924, 12987-12002, 13045-18052, 14708~

Sec. 3. BUREAU OF CORPORATIONS. OFFICE OF THE

COMMISSION. PROSECUTION OF INQUIRIES.

petitions ao. 5c. 3. That upon the organization of the commission sorbed by Com and election of its chairman, the Bureau of Corporations and the offices of Commissioner and Deputy Commissioner of Corporations shall cease to exist; and all pending investigations and proceedings of the Bureau of Corporations shall be continued by the commission. Clerks, em All clerks and employees of the said bureau shall be ployees, records, papers, provert¥ transferred to and become clerks and employees of the appropriations, transtered t 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 Commerce from the contingent appropriation for the Department 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 become funds und appropriations available to be expended by 14770 (part 18); Hollis for, 11177-11180 (part 11), 12141-12149 (part 12), 12161-12152; Kenyon for, 15155-13160 (part 18); Lewis for, 11302-11807 (part 11), 12924-12933 (part 13); Lippit against, 11111- 11112 (part 11), 18210-13219 (part 18); Newlands for, 9930 (part 10), 10376-10378 (part 11), 11081-1110t, 11106-11116, 11594-11507 (part 12); Pomerene for, 12870-12878 (part 13), 12993-12996, 18102-13103; Reed against, 11112-11116 (part 11), 11874-11876 (part 12), 12022- 12028, 12150-12161, 12539-12651 (part 13), 12933-12030, 13224-13234, 14787-14791 (part 15) > Robinson for, 11207 (part 11), 11228-19282; Saulsbury for, 11185, 11501-11594 (part 12); Shields against, 18050- 18061 (part 18), 18146-18148; Sutherland against, 11601-11604 (part 32), 12805--12817 (part 18), 12855-12862, 12980-12086, 18055..13056, 18109-18111; Thomas against, 11191-11185 (part 11), 11598-11600 (part 12), 12862-12869 (part 13), 12978-12980; Townsend against. 11870-11872 (part 12); and Walsh for, 18052-13054 (part 13). See also Letters from the Interstate Commerce Commisaton to the Chairman of the Committee on Interstate Commerce, submitting certaia Buggestiona to the Bill creating an Interstate Trade Commission, the first being a letter from Hon. C. A. Prouty dated Apr. 9, 1914 (printed for the use of the Committee on Interstate Commerce, 623d Cong., 2d sess.) + Letter from the Commisstoner of Corporations to the Chalrman of the Committee on Interstate Commerce, transmitting certain suggestion# relative to the Bill (H.R, 15813) to create a Federal Trade Commission, first letter dated July 8, 1914 (printed for the use of the Committee of Interstate Commerce, 63d Cong., 2d sega.); Brief by the Bureau of Cor porations, relative to Section 5 of the Bill (Hi. RB. 15812) to create & Federal Trade Commission, dated Aug. 20, 1914 (printed for the "sé ef the Committee on Interstate Commerce, 68d Cong., 2d geass.) 2 Relef DY George Rublee relative to the Court Review in the Bil CH. R. 15613) t@ create a Federal Trade Commtsston, dated Ang. 25, 1914 (printed for the use of the Committee on Interstate Commerce, 62d Cong., 2d sess.) > a @lasenting opinion of Justice Brandets in Federal Trade Commisaton V- Grats, 253 U. 8. 421, 420-442 (p. 564 at pp. 570-579 of this volume). the commission in the exercise of the powers, authority, and duties conferred on it by this Act. The principal office of the commission shall be in the, Prygipel office city of Washington, but it may meet and exercise all its>ut Commision powers at any other place. The commission may, by one “here or more of its members, or by such examiners as it may, Mey, prosecute designate, prosecute any inquiry necessary to its duties where dn “Gnited in any part of the United States.

Sec. 4. DEFINITIONS.

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 “Commerce.” 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- “Corporation.” corporated or unincorporated, which is organized to carry on business for profit and has shares of capital or capital stock, and any company or association, incorporated or unincorporated, without shares of capital or capital stock, except partnerships, which is organized to carry on busihess for its own profit or that of its members. “ Documentary evidence ” means all documents, papers. eridccamentary and correspondence in existence at and after the passage of this Act.

“Acts to regulate commerce” means the Act entitled tate ae to ree “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 hundred and ninety; -nlso the sections seventy-three to Seventy-seven, inclusive, of an Act entitled “An Act to reduce taxation, to provide revenue for the Government, and for other purposes.” approved August twenty- Seventh, eighteen hundred and ninety-four; and also the ct entitled “An Act to amend sectiong seventy-three and Seventy-six of the Act of August twenty-seventh, eighteen ta Dtttrust Sec. 4. DEFINITIONS—Continued. ' 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.

"See. 5. UNFAIR COMPETITION. COMPLAINTS, FIND-

INGS, AND ORDERS OF COMMISSION. APPEALS.

SERVICE.

Unfair methods Src. 5. That unfair methods of competition in comunlawful. merce are hereby declared unlawful. Commission to -. . . prevent. Banks The commission is hereby empowered and directed to ‘ire excepted, prevent persons, partners ups, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from using unfair methods of competition in commerce.

Commission to Whenever the commission shall have reason to believe isaue complaint h unfair? wpe ur shi. . = when umaygehat any such person, partnership, or corporation has to public inter 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 inon renpandent terest af the public, it shall issue and serve upon such perhearing. son, 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 perneeeeencens ag son, partnership, or corporation so complained of shall pear and how 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, oF corporation to cease and desist from the violation of the Intervention «law so charged in said complaint. Any person, partnergation and goed 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 prestimony to person. The testimony in any such proceeding shall be writing and filed. reduced to writing and filed in the office of the commission. If upon such hearing the commission shall be of. If method pro- the opinion that the method of competition in question 1s hibited, Comumission to mart prohibited by this Act, it shall make a report in writing stating findings, in which it shall state its findings as to the facts, and shall and to ivsue and serve order to igsue and cause to be served on such person, partnership, cease and desist on respondent. gr corporation an order requiring such person, partnership, or corporation to cease and desist from using such method of competition. Until a transcript of the record, Modifestion o in such hearing shall have been filed in a circuit court of {h¢, Commission 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, 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, partnership, or corporation fails or, Disobedience of. order. Applicaneglects to obey such order of the commission while the tien, to Cireult Court of Appeals Same is in effect, the commission may apply to the cir-by Commission. cuit court of appeals of the United States, within any circuit whére the method of competition in question was used or where such person, partnership, or corporation 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. Upon such filing of the appli-.46°'22,,.02 ‘ourt. Notice to cation and transcript the court shall cause notice thereof ee shi mnie, to be served upon such person, partnership, or corpora- Motifying, or set: tion and thereupon shall have jurisdiction of the proceed-™sion's order. ing 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. The findings of the commission as to the, Commtmion's ndings, Conclufacts, if supported by testimony, shall be conclusive. give Uf supported If either party shall apply to the court for leave to adduce ‘Introduction of additional evidence, and shall show to the satisfaction 420) tin ev dence, if reasonof the court that such additional evidence is material and failure to adduce that there were reasonable grounds for the failure to 7ettr: adduce such evidence in the proceeding before the commission, the court may order such additional evidence peasy, be, taken to be taken before the commission and to be adduced upon "on. a hearing in such manner and upon such terms and con- Mio sO teal Commission findings by reason of the additional evidence so taken of, “won there and it shall file such modified or new findings, which, if SUpported by testimony, shall be conclusive, and its recommendation, if any, for the modification or setting aside Of its original order, with the return of such additional,, dement and ®evidence, The judgement and decree of the court shall be decree subject to review upon cer. nal, except that the same shall be subject to review by {orat, but other.

Sec. 5. UNFAIR COMPETITION. COMPLAINTS, FIND-

INGS, AND ORDERS OF COMMISSION. APPEALS.

SERVICE—Continued. the Supreme Court upon certiorari as provided in section two hundred and forty of the Judicial Code. Petition by re’ = Any party required by such order of the commission to spondent to re 7 . : view order tocease and desist from using such method of competition cease and desist. may obtain a review of such order in said circuit court of appeals by filing in the court a written petition praying that the order of the commission be set aside. A copy on vores 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 Jurisdiction of the court shall have the same jurisdiction to affirm, set Court of Appeals same as on appli- , . . . . peri een ier to aside, or modify the order of the commission as in the case mission, and Com: of an application by the commission for the enforcement similarly conclu of its order, and the findings of the commission as to the facts, if supported by testimony, shall in like manner be conclusive.

Jurisdiction of 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. nr roceedinns te Such proceedings in the circuit court of appeals shall over other caset.he 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 _igbiity ander shall in any wise relieve or absolve any person, partneraffected. ship, or corporation from any liability under the antitrust acts. ; mn perrice of Com: Complaints, orders, and other processes of the commis: plaints, orders, sion under this section may be served by anyone duly esses, authorized by the commission, either (a) by delivering Personal; a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, se retary, or other executive officer or a director of the cor ote at bust poration to be served; or (b) by leaving a copy thereo ness; and at the principal office or place of business of such persoD: By registered partnership, or corporation; or (c) by registering a? mall mailing a copy thereof addressed to such person, part nership, or corporation at his or its principal office oF psrerited return place of business. The verified return by the person 50 ing, and returngerving said complaint, order, or other process settin# post-office receipt, . .

Proof of service. forth the manner of said service shall be proof of th? 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.

“UNFAIR METHODS OF COMPETITION.”

1. ‘‘The petitioner urges that. the declaration of section 5 must be held void for indefiniteness unless the words ‘unfair methods of competition’ be construed to embrace no more than acts which, on September 26, 1914, when Congress spoke, were identifiable as acts of unfair trade then condemned by the common law as expressed in prior cases. But the phrase is no More indefinite than ‘due process of law.’ * * * If the expression ‘unfair methods of competition’ is too uncertain for use, then under the same condemnation would fall the innumerable statutes which predicate rights and prohibitions upon ‘unsound mind,’ ‘undue influence,’ ‘unfaithfulness,’ ‘unfair use,’ ‘unfit for cultivation,’ ‘unreasonable rate,’ ‘unjust discrimination,’ and the like. This statute is remedial, and ordere to desist are civil; but even in criminal law convictions are upheld on statutory prohibitions of ‘rebates or concessions’ or of ‘schemes to defraud,’ without any Schedule of acts or specific definition of forbidden conduct, thus leaving the courts free to condemn new and ingenious ways that were unknown when the statutes were Snacted. Why? Because the general ideas of ‘dishonesty’ and fraud’ are ao well, widely, and Uniformly understood that the general term ‘rebates or concessions’ 8nd ‘schemes to defraud’ are sufficiently accurate measures of Conduct.” Baker, J., in Sears, Roebuck & Co. v. Federal Trade Commission, April 29, 1919, 258 Fed. 307, 310, 311. (See case in this vol., p. 536, at p. 541.) 2. "Tt seems to ua that unfair Methods of competition between individuals are not contemplated by the Act. Congress could not have intended to submit to the determination of the Commission such questions as whether a person, partnership, or corporation had treated or bribed the employees of a competitor for the purpose of inducing them to betray their employer. We think the unfair methods, though not restricted to such as violate the Antitrust Acta, must be at least such as are unfair to the public generally. It seems to us that section 5 is intended to provide a method of preventing practices unfair to the general public, and very particularly such as if not prevented will grow so large as to lessen competition and create monopolies in violation of the Antitrust Acts.

Such a preliminary inquiry and determination constitutes a most important supplement in carrying on the public policy which those acta are intended to vindicate.

8. ‘No authority is given to any individual to present his grievances and the commission is to interpose only in the interest of the public. * * * 4. ‘‘Counsel for the commiseion calls our attention to the opinion. of the Circuit Court of Appeals for the Seventh Circuit, not yet reported, Seara, Roebuck & (Co., petitioners, against Federal Trade Commission, respondent. The practice there prohibited as unfair was extensive advertising containing false and misleading statements calculated to deceive all purchasers and to discredit all competitors. It was clearly a9 method unfair to the public generally.’ Ward, J., in Federal Trade Commission vy. Gratz, May

ACTS ADMINISTERED BY COMMISSION.

ANNOTATIONS, Sec. 5—Continued.

“UNFAIR METHODS OF COMPETITION”—Con.

14, 1919, 258 Fed, 314, 316, 317.

(See case in this vol., p. 545, at pp. 548, 549, 5. ‘In my opinion, Congress had in mind, in this legislation, the prevention of acts which amount to unfair competition at their very inception. In this manner the anti-trust law was supplemented. To make successful either a criminal prosecution or other liability under the Clayton Act, it is necessary to find that a trust or monopoly is created which restrains trade. One act which may be an act of unfair competition may, of itself, restrain trade and may do damage to a complainant. The Federal Trade Commission Act was intended to reach such an unfair business method where the antitrust law could not do so. Of course, if all unfair acts were dealt with by the Federal Trade Commission, there would be no monopoly or trust created. It was intended by section 5 of the act to prevent practices or methods of businese unfair to the public which, if not prevented, would grow and create monopolies, and thus restrain trade and lessen competition.”” Manton, J., concurring in Beechnut Packing Co. v. Federal Trade Commission, . February 26, 1920, 264 Fed. 885, 890. (See case in this vol., p. 556, at p. 562.) 6. “The words ‘unfair method of competition’ are not defined by the statute and their exact meaning is in dispute. It is for the courts, not the commission, ultimately to determine as a matter of law what they include. They are clearly inapplicable to practices never heretofore regarded as opposed to good morals because characterized by deception, bad faith, fraud, or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly. The Act was certainly not intended to fetter free and fair competition as commonly understood and practiced by honorable opponents in trade.’’ McReynolds, J., in Federal Trade Commission v. Gratz, June 7, 1920, 253 U. S., 421, 427, 40 Sup. Ct.

572, 575. (See case in this vol., p. 564, at p. 569.) 7. “Instead of undertaking to define what practices should be deemed unfair, as had been done in earlier legislation, the Act left the determination to the commission. Experience with existing laws had taught that definition, being necessarily rigid, would prove embarrassing and, if rigorously applied, might involve great hardship. Methods of competition which would be unfair in one industry, under certain circumstances, might, when adopted in another industry, or even in the same industry under different circumstances, be entirely unobjectionable. Furthermore, an enumeration, however comprehensive, of existing methods of unfair competition must necessarily soon prove incomplete, as with new conditions constantly arising novel unfair methods would be devised and developed. * * * Recognizing that the question whether 4 method of competitive practice was unfair would ordinarily depend upon special facta, Congress imposed upon the commission the duty of finding the facts; and it declared that findings of fact 6° made (if duly supported by ev)” dence) were to be taken as final.

The question of whether the method of competition pursued could. on those facts, reasonably be held by the commission to constitute an unfair method of competition, being a question of law, was necessarily left open to review by the court.’’ Brandeis, J., dissenting in Federal Trade Commission v.

Gratz, June 7, 1920, 253 U. 8., 421, 436, 437, 40 Sup. Ct. 572, 578. (See cage in this vol., p. 564, at pp. 575, 576.) 8. “The reason assigned by the Circuit Court of Appeals for so holding [that the order of the commission must be set aside, because the commission was ‘without authority to determine the merits of Specific individual grievances’] was that the evidence failed to show that the practice complained of (although acted on in individual cases by respondents) had become their ‘general practice.’ But the power of the Federal Trade Commission to prohibit an unfair method of competition found to have been used is not limited to cases where the practice had become general. What section 5 declares unlawful is not unfair competition. That had been unlawful before. What that section made unlawful were ‘unfair meth- Oda of competition’; that is, the method or means by which an unfair end might be accomplished.

The commission was directed to act, if it had reason to believe that an ‘unfair method of competition in commerce has been, or 18 being used.’ The purpose of Congress was to prevent any unfair method which may have been used by any concern in competition from becoming its general Practice. It was only by stopping 18 use before it became a general ' Practice, that the apprehended ®flect of an unfair method in suppressing competition by destroying rivals could he averted.”

Brandeis, J., dissenting in Federal Commission v. Gratz, June 7, 1920, 253 U.S. 421, 441, 40 Sup.

Ct. 572, 579, (See case in this vol., P. 564, at pp. 578, 579.)

PRACTICES IN PARTICULAR CASES.—-REPRESEN-

TATIONS CALCULATED TO DECEIVE.

9. “In the second paragraph of the order petitioner is commanded to cease selling sugar below cost.

We find in the statute no intent on the part of Congress, even if it has the power, to restrain an owner of property from selling it at any price that is acceptable to him, or from giving it away. But manifestly in making such asale or gift the owner may put forward representations and commit acts which have a capacity or a tendency to injure or to discredit competitors and to deceive purchasers as to the real character of the transaction.

That paragraph should therefore be modified by adding to it ‘by means of or in connection with the Tepresentations prohibited in the first paragraph of this order, or similar representations’ ’’. Baker, J.. modifying as above, but otherwise altirming Commission’s order inl F. T. C. 163, Sears Roebuck & Co. v. Federal Trade Commission, April 29, 1919, 258 Fed. 307, 312, (See case in this val., p. 536, at p. 542.)

PRACTICES IN PARTICULAR CASES-—FULL

LINE FORCING.

10. “That the commission did not find sufficient proof to sustain the second count in the complaint, viz, that the method of the respondent found to be unfair violated section 3 of the Act of October 15, 1914, known as the Clayton Act, which makes unfair any condition, agreement, or understanding that may lessen competition or tend to create a monopoly shows that the method found to be unfair must have been unfair in certain individual transactions. And we discover no evidence to support the finding in paragraph 2, that the respondents ‘adopted and practiced the policy of refusing to sell steel ties to those merchants and dealers who wished to buy them

ACTS ADMINISTERED BY COM MISSION, ANNOTATIONS, Sec. 5—Continued.

PRACTICES IN PARTICULAR CASES—FULL LINE

FORCING—Continued. from them unless such merchants and dealers would also buy from them acorrespondingamountof jute bagging.’ It is the natural and prevailing custom in the trade to sell ties and bagging together, just aa one witness testified it is to sell cups and saucers together. Such evidence as there is of a refusal to sell is a refusal to sell at all to certain persons with whom the respondents had previous unsatisfactory relations and a refusal to sell ties without bagging at the opening of the market in 1916 and 1917 when there was fear that owing to scarcity of ties and the prospect of large crops, the marketing of the cotton crop might be endangered by speculators creating a corner in ties.’’ Ward, J., reversing Commission's order in LF. T.0.249. Federal Trade Commission v. Gratz, 258 Fed. 314, 317. (See case in this vol., p. 545, at pp. 548, 549.) 11. “The complaint contains no intimation that Warren, Jones & Gratz did not properly obtain their ties and bagging as merchanta usually do; the amount controlled by them is not stated, nor is it alleged that they held a monopoly of either ties or bagging or had ability, purpose, or intent to acquire one. So far as appears, acting independently, they undertook to eell their lawfully acquired property in the ordinary course, without deception, misrepresentation, or oppression, and at fair prices, to purchasers willing to take it upon terms openly announced.

12. “Nothing is alleged which would justify the conclusion that the public suffered injury or that competitors had reasonable ground for complaint. All question of monopoly or combination being eut of the way, a private merchant, acting with entire good faith, may properly refuse to sell except in conjunction, such closely associated articles as tics and bagging.

If real competition is to continue, the right of the individual to exercise reasonable discretion in respect of his own business methods must be preserved. United States v. Colgate, 250 U. S. 300;

United States v. A. Schrader’s Son, Ine. (Mar, 1, 1920), 252 U. S. 86.

13. “The first count of the complaint fails to show any unfair method of competition practiced by respondents and the order based thereon was improvident.”’ McReynolds, J., affirming decision of lower court, in Federal Trade Commission v. Gratz, June 7, 1920, 253 U. S., 421, 428, 40 Sup. Ct.

572,575. (See case in this vol., p. 564, at p. 570.) Brandeis, J. dissenting, at pp- 438-441. (See case in this vol., p. 564, at pp. 576-578.) 14. “It is obvious that the imposition of such a condition that the purchaser of ties must also purchase bagging] is not necessarily and universally an unfair method, but that it may be such under some circumstances is equally clear. Under the usual conditions of competitive trade the practice might be wholly unobjectionable. But the history of combinations has shown that what one may do with impunity may have intolerable resulta whet done by several in cooperation Similarly what approximately equal individual traders may 4° in honorable rivalry may result in grave injustice and public injury if done by a great corpor® tion in a particular field of business which it is able to dominate- In other words, a method of com petition fair among equals msy be very unfair if applied where there ig inequality of resources.

15. ‘The following facts found by the commission and which the Circuit Court of Appeals held were supported by sufficient evidence, show that the conditions in the cotton, tie and bagging trade were in 1918 such that the Federal Trade Commission could reasonably find that the tying clause here in question was an unfair method of competition.

* * * By virtue of their selling agency for the Carnegie Co., Warren, Jones & Gratz held a dominating and controlling position in the sale and distribution of cotton ties in the entire cottongrowing section of the country and thereby it was in a position to force would-be purchasers of ties to also buy from them bagging manufactured by the American Manufacturing Co. A great many Merchants, jobbers, and dealers in bagging and ties throughout the Cotton-growing States were many times unable to procure ties from 8ny other firm than Warren, Jones & Gratz. In many instances Warren, Jones & Gratz Tefuged to sell ties unlesa the purchaser would also buy from them & corresponding amount of bag- Bing, and such purchasers were oftentimes compelled to buy from them bagging manufactured by the American Manufacturing Co. in order to procure a sufficient ®upply of steel ties.

16. “These are conditions closely resembling those under which ‘full Line forcing,’ ‘exclusive dealing requirements,’ or ‘shutting off - Materials, supplies, or machines ™ competitors’'—well-known Methods of competition—have Sen held to be unfair when Practiced by concerns holding _ 8 Preponderant position in the @

PRACTICES IN PARTICULAR CASES—FREE

GOODS AS AN INDUCEMENT TO PURCHASE,

17. Commission’s order in Ward Boking Co. case, 1 F. T. C. 388, ; reversed in Ward Baking Co. v.' Federal Trade Commission, Febtuary 26, 1920, 264 Fed. 330, on ground that interstate commerce not involved. See digest of case, infra, pars. 25, 26. (See case at pp. 550-552 of this vol.)

PRACTICES IN PARTICULAR CASES—GRATUITIES

TO CUSTOMERS TO INDUCE PURCHASES.

18. Where the commission found that respondent had been ‘‘lavishly giving gratuitiés such as luncheons, cigars, meals, theater tickets, and entertainment to employees of customers as an inducement to influence their employers to purchase or to contract to purchase from the said respondent” its various products, without other consideration therefor, and held such methods of competition unfair and in violation of section 5, and the Court, examining the evidence to see whether the Commission's findings were supported by the testimony or not, found ‘that the officers of the company in the year 1918 did entertain at the company’s expense both customers and employees of customers; and that the salesmen down to May 1 were employed on a salary or on a salary and commission basis and were allowed to charge in their monthly accounts reasonable lump sums for entertainment. After May 1 they were on ® commission basis only, and any entertainment given by them was given at their own expense,” a charge in the complaint of giving valuable presents and sums of money having been abandoned by the Commission, held, in New Jersey Asbestos Co. v. Federal Trade Commission, February 6, 1920, 264 Fed. 509, reversing the orderof the Commiasion in 1 F.T.Q,

ACTS ADMINISTERED BY COM MISSION.

ANNOTATIONS, See. 5—Continued.

PRACTICES §N PARTICULAR CASES—GRATUITIES

TO CUSTOMERS TO INDUCE PURCHASES—Con.

472 on the basis of the decision of the lower court in the Gratz case (see pp. 545-549 of this vol.), that the matter was one not so affecting the public as to be within the jurisdiction of the Commission.

(See case at pp. 553-556 of this vol.)

PRACTICES IN PARTICULAR CASES—-RESALE

PRICE MAINTENANCE.

19. Where it appeared, among other things, that respondent adopted a resale price maintenance policy by advising those with whom it dealt, that it would not sell to any one failing to observe the resale prices suggested by it, or to any dealer in its chain of distribution selling to a distributor failing to observe suggested resale prices, but where it did not appear that there were any express contracts between the respondent and any of its distributors, held, in Beechnut Packing Co. v. Federal Trade Commission, Feb. 26, 1920, 264 Fed. 885 (pp.556-564 of this volume) reversing the Commission’s order in the Beechnut Packing Co. case, 1. F. T. C. 516, that the Commission’s conclusions that the methods of competition in the case in question were unfair, could not be sustained in the face of the decision in United States v. Colgate Co., 260 U. 8. 300.!

ADMINISTRATION.

20. ‘On the face of this statute the legislative intent is apparent. Commissioners are not required to aver and prove that any competitor has been damaged or that any purchaser has heen deceived.

The commissioners, representing the Government as parens patriae, are to exercise their common sense, as informed by their knowledge of the general idea of unfair trade at common law, and stop all those trade practices that have @ capacity or a tendency to injure competitors directly or through deception of purchasers, quite irrespective of whether the specific practices in question have yet been denounced in common-law cases. But the restraining order of the commissioners is merely provisional. The trader is entitled to his day in court, and then the same principles and tests that have been applied under the common law or under statutes of the kind hereinbefore recited, are expected by Congress to control.”

Baker, J., in Sears Roebuck & Co. v. Federal Trade Commission, April 29, 1919, 258 Fed. 307, 311. (See cage in this vol., p. 536, at p. 541.) 21.‘ * * * tho act undertook to preserve competition through supervisory action of the commission. The potency of accomplished facts had already beep demonstrated. The task of the commission was to protect competitive business from further itroads by monopoly. It was to be ever vigilant. If it discovered that any business concern had used any practice which would be likely to result in public injury because in its nature it would ten to aid or develop into a restraint of trade—the commission w® directed to intervene before aDY act should be done or conditio® arise violative of the anti-trust act And it should do this by filing ® complaint with a view to a thor ough investigation; and, if need be, the issue of an order. Itsactio® 1 But eee United States v. Schrader’s Son, Inc., Mar. 1, 1920, 252 U. & , distinguishing Colgate case from Dr, Miles’s Medical Co. case. FEDERAL TRADE ACT, was to be prophylactic. Its purpose in respect to restraint of trade was preventive of diseased conditions, not cure.” Brandeis, J., dissenting in Federal Trade Commission v. Gratz, June 7, 1920, 2538 U. S. 421, 435, 40 Sup. Ct.

572, 577 (see case in this vol., p. 564, at p. 574).

CONSTITUTIONALITY.

22. ‘But such a construction of section 5 fone not construing the words ‘unfair methods of com petition” to embrace no more than acts which, on September 26, 1914, when Congress spoke, were identifiable as acts of unfair trade then condemned by the common law as expressed in prior cases] according to petitioner’s urge, brings about an unconstitutional delegation of legislative and judicial power to the commission. Grants of similar authority to administrative officers and bodies have not been found repugnant to the Constitution. [Citing cases.] 23. ‘With the increasing complexity of human activities many situations arise where governmental control can be secured only by the ‘board’ or ‘commission’ form of legislation. In such instances Congress declares the public policy, fixes the general principles that are to control, and charges the administrative body With the duty of ascertaining within particular fields from time to time the facts which bring into play the principles established by Congress. Though the action of the commission in finding the facts and declaring them to be specific offenses of the character embraced Within the general definition by Congress may be deemed to be quasi legislative, it is only so in the sense that it converts the actual legislation from a static into & dynamic condition. But the converter ia not the electricity.

And though the action of the commission in ordering desistance may be counted quasi judicial on account of its form, with respect to power it is not judicial, because a judicial determination is only that which is embodied in a judgment or decree of a court and enforceable by execution or other writ of the court.” Baker, J., in Sears Roebuck & Co. v. Federal Trade Commission, April 26, 1919, 258 Fed. 307, 811. (See case in this vol., p. 536, at p. 542.).

“TO THE INTEREST OF THE PUBLIC”— ISSUANCE

OF ORDERS AFTER PRACTICE ABANDONED.

24. ‘Petitioner insists that the injunctional order was improvidently issued because, before the complaint was filed and the hearing had, petitioner had discontinued the methods in question and, as stated in its answer, had no intention of resuming them. For example, no sugar offers of the character assailed were made after August, 1917. But respondent was required to find from all the evidence before it what was the real nature of petitioner’s attitude. It was permissible for respondent to take judicial notice of the Government’s war-time control of sugar sales and consumption. It was also proper to note that petitioner was contending (and still contends) that the Act is void for indefiniteness, that the Act is unconstitutional, and that the Act, even if valid, under any proper construction, has not been infringed by petitioner’s practices, * * * no assurance is in sight that petitioner, if it could shake respondent’s hand from its shoulder, would not continue its former course.” Baker, J., in Sears Roe buck & Co. v. Federal Trade Com mission, 258 Fed. 307-310. (See case in this vol., p. 636, at p. 540.)

ACTS ADMINISTERED BY COMMISS'ON, ANNOTATIONS, See. 5—Continued.

INTERSTATE COMMERCE!

25. Where “it appeared from the testimony that the respondent transported the bread in question in its own wagons from Fall River, Mass., to Tiverton and Stone Bridge, R. I., their wagona calling at the retail stores in those places and their drivers then and there selling the respondent’s bread to such storekeepers as wanted to buy, and then and there delivering additional bread gratis to the purchasers,” held, on basis of decision in Wogner v. City of Covington, December 8, 1919, 251 U. S.

95, that interstate commerce was not involved, and that the Commission therefore had no jurisdiction to hold unfair the giving of bread gratis under the circumstances concerned. Ward Baking Co. v. Federal Trade Commission, February 26, 1920, 264 Fed. 330 (See case at pp. 550-552 of this vol.), reversing Commission’s order inl F. T. C. 388.

The Court stated at page 331 (p. 551 of this vol.):

26. “Doubtless bread sold in Massachusetts to be delivered to the purchaser in Rhode Island would be interstate commerce, but thatis not thiscase. Moreover, the commission is not finding the act of transportation from Massachusetts to Rhode Island unfair, but the method of local sales made in Rhode Island. If the respondent had its own stores in Rhode Island and carried to them from Massachusetts bread to be there sold, this method of selling could not be considered interstate commerce.”’

PLEADING.

27. “If, when liberally construed, the complaint is plainly insufficient to show unfair competition within the proper meaning of these words, there is no foundation for an order to desist —the thing which may be prohibited is the method of competition specified in the complaint.

Such an order should follow the complaint; otherwise itisimprovident and, when challenged, will be annulled by the court.”

28. ‘The complaint contains no intimation that Warren, Jones & Gratz did not properly obtain their ties and bagging as merchants usually do; the amount controlled by them is not stated; nor is it alleged that they held a monopoly of either ties or bagging or had ability, purpose, or intent to acquire one. . So far as appears, acting independently, they undertook to sell their lawfully acquired property in the ordinary course, without deception, misrepresentation, or oppression, and at fair prices, to purchasers willing to take it upon terms openly announced.

29. “ Nothing is alleged which would justify the conclusion that the public suffered injury or that competitors had reasonable ground forcomplaint. * * * 80. “The first count of the complaint fails to show any unfair method of competition practiced by respondentaand the order based thereon was improvident.” Mc- Reynolds, J., in Federal Trade Come mission v. Gratz, June 7, 1920, 253 U. 8. 421, 427-429, 40 Sup. Ct.

572, 574, 575. (See case in this vol., p. 564, at pp. 569, 570.)

INTERLOCUORY ORDER NOT REVIEWABLE.

31. In complaint No. 20, Federal Trude Commission v. The Nulomoline Co.? (see 1 F. T. C. 400), the ! Ou interstate commerce, see also post, pars. 33-44 (pp. 484-486), and annotations to Clayton Act, pars. 32-85 (p. 600). +A more complete report of this case will appear in the next volume of the Commission's decisions.

FEDERAL TRADE ACT.

United States Circuit Court of Appeals of the Second Circuit, sitting in New York City, refused on August 16, 1918, to interfere with the Commission in the taking of testimony.

32. The respondent contended taking to pass upon the validity of a patent which under the law the Commission had no right to do.

The Court, however, decided the order of the Commission requiring the taking of testimony was interlocutory and for this reason refused to interfere. that the Commission was under-

Sec. 6. FURTHER POWERS.

Sec, 6. That the commission shall also have power—

(a) To gather and compile information concerning, ,.Te father and and to investigate from time to time the organization, tion, and to in business, conduct, practices, and management of any cor-reference to or- ’ ganization, busiporation engaged in commerce, excepting banks and com setione, eee mon carriers subject to the Act to regulate commerce, and banks and comits relation to other corporations and to individuals, associations, and partnerships.

(b) To require, by general or special orders, corpora- 3) "S™e,2" tions engaged in commerce, excepting banks, and COM erin econ mon carriers subject to the Act to regulate commerce, or avis and _comany 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 special, reports or answers in writing to specific questions, furnishing to the commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. Such re- , Such reports to be under oath, or say ’ ‘ “wi other wise, and Ports and answers shall be made under oath, or otherwise, otherwise, and Sea} IDeOPT ~ ; reasonable period as the commission may prescribe, and shall be filed with reasonable period the commission within such reasonable period as the com-may prescribe. Mission may prescribe, unless additional time be granted in any case by the commission.

(c) Whenever a final decree has been entered against, 7 investigate, er on own any defendant corporation in any suit brought by the initiative oF ap: 5; e ‘ 7 1 i torney General, United States to prevent and restrain any violation of the tote, General, antitrust Acts, to make investigation, upon its own initia-final, decree | entive, of the manner in which the decree has been or is trust acts. being carried out, and upon the application of the Attorney General it shall be its duty to make such investiga- , tion. It shall transmit to the Attorney General a report qruainge arm *embodying its findings and recommendations as a result Attorme. Gee of any such investigation, and the report shall be made eral, Public in the discretion of the commission. Sec. 6. FURTHER POWERS—Continued.

To investigate, on direction President or either House, alleged violations of antitrust acts.

(d) Upon the direction of the President or either House of Congress to investigate and report the facts relating to any alleged violations of the antitrust Acts by any corporation. To investigate and make recommendations, on application of Attorney General, for readjustment of business of alleged violator of antitrust acts.

(e) Upon the application of the Attorney General to investigate and make recommendations for the readjustment 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. To make public, as it deems expedient, portions of information obtained.

(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 expedient in the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations 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 information and use. To make reports to Congress, together with recommendations for new legislation. To provide for the publication of its reports and decisions. To classify corporations, and make rules and regulations incidental to administration of Act.

(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. To investigate foreign trade conditions involving foreign trade of United States, reporting to Congress with recommendations deemed advisable.

(h) To investigate, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or 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. "MANUFACTURE" OR "PRODUCTION" DISTINGUISHED FROM "COMMERCE"—AS AFFECTING RIGHT TO INVESTIGATE CONCERN UNDER CLAUSE A.¹

33. Where it appeared that the Commission, at the request of the Navy Department, undertook to make an investigation to ascertain costs of production of a patented product, in the manufacture of which certain secret processes were also involved; that the purpose of said investigation was to furnish the Navy Department with information to enable it to come to a conclusion as to the price it should pay for said product; that no complaint of unfair competition had been made against the manufacturer concerned; that no such element, furthermore, was in any way involved in the case and that nowhere had it been made to appear that the defendant was "engaged in interstate commerce in any other way than any other corporation or any citizen may be so engaged, by making one or more shipments of manufactured goods from one State into another." ¹ On interstate commerce, see also ante, pars. 25, 26 (p. 482) and annotations to Clayton Act, pars. 32-35 (p. 500).

FEDERAL TRADE ACT.

Held in United States v. Basic Producta Co., Sept. 9, 1919, 260 Fed. 472; that such investigation, under the circumstances involved, was beyond the powers of the Commission.

The court stated, inter alia 34. “* * * investigation under subdivision (a), section 6, is limited to corporations engaged in interstate commerce. The deiendant is engaged in manufacture.

35. ‘‘A comprehensive consideration of the lack of constitutiona) authority over industry is found in the language of Mr. Justice Lamar, whp delivered the opinion of the court in Kidd v. Pearson, 128 U. S. 1, 20, 21, 9 Sup. Ct. 6, 10 (32 L. Ed, $46), as follows: oo 36. “No distinction is more Popular to the common mind or more clearly expressed in economic or political literature than that between manufacture and Commerce. Manufacture is a transformation—the fashioning of Taw materials into a change of form for use. The functions of Commerce are different. The buying and selling and the transportation incidental thereto constitute commerce; and the regulation of commerce in the constitutional *@nee embraces the regulation at et of such transportation.

* If it be held that the term includes the regulation of all Such manufactures as are intended to be the subject of commercial transactions in the future, it is imposnible to deny that it vould alao include all productive Ndustries that contemplate the same thing. The result would be that Congress would be invested. to the exclusion of the States, with the power to regulate, not only manufactures, but also agriculture, horticulture, stock raising, domestic fisheries, mining—in short, every branch of human industry. For is there one of them that does not contemplate, more or less clearly, an interstate or foreign market * * *,’”

“MANUFACTURE” OR “PRODUCTION” AS DIS-

TINGUISHED FROM “COMMERCE”—-AS AFFECT”

ING RIGHT TO DEMAND REPORTS UNDER

CLAUSE B.

37. ‘‘ The plaintiff is a corporation engaged in the mining, production, and sale of bituminous coal. It owns and operates mines in Kentucky and Ohio. Practically all of the coal mined in Kentucky and about one-half of the coal mined in Ohio is shipped to points without. those States, and the remainder of that mined in Ohio to points in that State. On January 31, 1920, the defendant commission served upon a large number of coal-mining corporations, including the plaintiff, an order requiring them to report ‘monthly costs of production and other data, as set out in specification accompanying the order,’ * * * No question of unfair competition was involved, but defendant ‘‘ agserta that such information is sought for a lawful purpose within the scope of the powers conferred upon the defendant by section 6 of the said commission act.’’ Held, that under the circumstances the commission had no right to demand such a reort. Maynard Coal Co. v. Federal Trade Commission,? April 19, come” case came up on a4 petition for a writ of mandamus against the company filed by the Attorney General at the request of the Commission. ‘Urrer to the answer of defendant way overruled and the petition refused.

Federal p 4G Tn connection with this case see third paragraph of footnote to rade Commission Act on pp. 467, 468. wi Tanting temporary Injunction against the Commission. In connection Act on pp. 467, 468, this cage see third paragraph of footnote tu Federal Trade Commission ACTS ADMINISTERED BY COM MISSION, ANNOTATIONS, Sec. 6—Continued.

+ “MANUFACTURE” OR “PRODUCTION” AS DIS-

TINGUISHED FROM “COMMERCE"—AS AFFECT

ING RIGHT TO DEMAND REPORTS UNDER

CLAUSE B—Continued.

1920, Supreme Court of the District of Columbia.

The court stated inter alia:

38. ** * * the commission in its answer ‘denies that the plaintiff has the right to segregate its business and to say that part of its business is interstate and part is intrastate, but in order to ascertain if defendant is engaged in commerce the courts will look to the entire business transactions of the plaintiff, and if any part of its business is intrastate and a part interstate and the whole business is conducted under one organization as is set forth and admitted in the plaintiff’s bill, then the defendant insists that the plaintiff, considering its business as a whole (is engaged in) interstate commerce and the defendant has the right to ask the information sought.’ 89. ‘‘And the information sought in this case is such as would apply as well to a corporation whose business was wholly intrastate as to the plaintiff. The defendant unquestionably is demanding information as to intrastate commerce and as to coal production, and frankly asserts the right to do so.

40. ‘‘That there is a radical distinction between production and commerce is clear. [Also quoting that part of Kidd v. Pearson, 128 U. 8. 1, 20, quoted in United States v. Basic Producta Co., supra 41. ‘In the case of a corporation doing a wholly intrastate business could it be said that Congress had any visitorial powor under the commerce clause of the Constitution of the United States? Clearly it has not. The fact that it happens to be the same corporation in this instance which mines and ships the coal does not give Congress any greater powers to regulate production to the intrastate commerce of such corporation. The visitorial power of Congress is limited to that part of the business over which it has control, and which under the Constitution it has the power to regulate.”’ 42. ‘The power claimed by the commission is vast and unprecedented. The mere fact that a corporation engaged in mining ships a portion of its product to other States does not subject its business of production or its intrastate commerce to the powers of Congress * * *,”

43. ‘‘The corporations referred to in the act are, by its terms, limited to those engaged in ‘commerce’ as defined in the act, and all the powers vested in the commission should be, and it seems may be, construed with this limitation, But the commission has | undertaken to construe the act otherwise, and to take steps under its construction of the act to require information and reports not relating to interstate commerce, but relating chiefly or wholly to production, and under its order the information which it has the power to demand can not be separated from that over which it has nocontrol * * *, 44, “It follows, therefore, that the commission can not compel the making of the reports which it has demanded of the plaintiff.”

Sec. 7. SUITS IN EQUITY UNDER ANTITRUST ACTS.

COMMISSION AS MASTER IN CHANCERY.

Sec. 7. That in any suit in equity brought by or under Court may rethe direction of the Attorney General as provided in the fer suit to Comantitrust Acts, the court may, upon the conclusion of the mission. testimony therein, if it shall be then of opinion that the complainant is entitled to relief, refer said suit to the To ascertain commission, as a master in chancery, to ascertain and and report an apreport an appropriate form of decree therein. The com-propriate form of decree. mission shall proceed upon such notice to the parties and Commission to under such rules of procedure as the court may prescribe, proceed on noand upon the coming in of such report such exceptions tice to parties and as prescribed by court. Excepmay be filed and such proceedings had in relation thereto tions. Proceedas upon the report of a master in other equity causes, but ings as in other equity causes. the court may adopt or reject such report, in whole or in Court may part, and enter such decree as the nature of the case may adopt or reject report in whole or in part. in its judgment require.

THAT IN ANY SUIT . . . THE COURT MAY,

. . . REFER SAID SUIT TO THE COMMIS-

SION AS A MASTER IN CHANCERY," ETC.

45. Above possibility called to such course not considered necesthe attention of the court, but sary under the circumstances of the case in United States v. Eastman Kodak Co., Aug. 24, 1915, 226 Fed. 62, 81.

Sec. 8. COOPERATION OF OTHER DEPARTMENTS AND

BUREAUS.

Sec. 8. That the several departments and bureaus of To furnish, the Government when directed by the President shall fur-when directed by President, recnish the commission, upon its request, all records, papers, ords, papers, and information, and and information in their possession relating to any corpo- to detail officials and employees. ration 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. EVIDENCE. WITNESSES. TESTIMONY. MAN-

DAMUS TO ENFORCE OBEDIENCE TO ACT.

Sec. 9. That for the purposes of this Act the commis- Commission to sion, or its duly authorized agent or agents, shall at all have access to documentary evireasonable times have access to, for the purpose of ex- dence and right to copy same. amination, and the right to copy any documentary evidence of any corporation being investigated or proceeded against; and the commission shall have power to require May require atby subpœna the attendance and testimony of witnesses and tendance of witthe production of all such documentary evidence relating nesses and proto any matter under investigation. Any member of the duction of evidence.

Sec. 9. EVIDENCE. WITNESSES TESTIMONY. MAN-

DAMUS TO ENFORCE OBEDIENCE TO ACT—Continued. oethe cama, commission may sign subpcenas, and members and extions, examina-aminers of the commission may administer oaths and aftion of witnesses.

Reception of evi firmations, examine witnesses, and receive evidence. Witnesses and Such attendance of witnesses, and the production of i b ye. fequired from Such documentary evidence, may be required from any any Pata. place in the United States, at any designated place of Disobedience hearing. And in case of disobedience to a subprena the to a_ subpena. oo. . . .

Commission inay commission may invoke the aid of any-court of the United invoke aid of any | . a. .

United States States in requiring the attendance and testimony of witcourt. . .

nesses and the production of documentary evidence. In case of con. Any of the district courts of the United States within tumacy or dis C2, ; . . : ; ope nai once ao the jurisdiction of which such inquiry is carried on may, trict court inin case of contumacy or refusal to obey a subpmwena issued jurisdiction involved may order to any corporation or other person, issue an order requiring such corporation or other person to appear before the commission, or to produce documentary evidence if so Disobedience ordered, or to give evidence touching the matter in questhereafter pun- . . jshable as con-tion; and any failure to obey such order of the court may ‘emp: be punished by such court as a contempt thereof. pilandamustom Upon the application of the Attorney General of the lication of; ~ oe + application United States, at the request of the commission, the dis to enforce com trict courts of the United States shall have jurisdiction pliance with Act. : . : 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. Commission 1S] ] may mutt depo, he commission may order testimony to be taken by sitions at any deposition in any proceeding or investigation pending under this Act at any stage of such proceeding or investi- © May be taken vation. Such depositions may be taken before any person before person. ao; designated by designated by the commission and having power to ad- Commiesion. we.

Testimony to Minister oaths. Such testimony shall be reduced to writbe reduced to ing by the person taking the deposition, or under his direction, and shall then be subscribed by the deponent. reappearance, Any person may be compelled to appear and depose and productionot evi to produce documentary evidence in the same manner as dence may be compelled as in witnesses may be compelled to appear and testify and proceeding before. 2S Commission. — produce documentary evidence before the commission as hereinbefore provided. sane nem fem Witnesses summoned before the commission shall be Oecd “State paid the same fees and mileage that are paid witnesses in courts. the courts of the United States, and witnesses whose depositions 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- , Znct!minating ing or from producing documentary evidence before the dence ne excuse commission or in obedience to the subpcena of the com-testify or promission on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him may tend to criminate him or subject him to a penalty or forfeiture. But no natural person shall be prose- ,2ut, attra! cuted or subjected to any penalty or forfeiture for or on >é,prosecrted account of any transaction, matter, or thing concerning ™**ers involved. which he may testify, or produce evidence, documentary or otherwise, before the commission in obedience to a subpuma issued by it: Provided, That no natural person so coesaTy testifying shall be exempt from prosecution and punishment for perjury committed in so testifying. Sec. 10. PENALTIES.

Failure to tesfy or to pro- Sec. 10. That any person who shall neglect or refuse to 4; attend and testify, or to answer any lawful inquiry, or to Se", {yenee, produce documentary evidence, if in his power to do so, prance, fublect in obedience to the subpena or lawful requirement of the ™™e" oF both. 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, F*!se entries, statements, or. statements, or made, any false entry or statement of fact in any report tampering with required to be made under this Act, or who shall will- or other documentary evidence, fully make, or cause to be made, any false entry in any ° willful failure to make entries, account, record, or memorandum kept by any corpora-ete» or tion subject to this Act, or who shall willfully neglect or fail to make, or to cause to be made, full, true, and cor- Tect entries in such accounts, records, or memoranda of all facts and transactions appertaining to the business of such corporation, or who shall willfully remove out of the jurisdiction of the United States, or willfully mutilate, alter, or by any other means falsify any documentary evidence of such corporation, or who shall willfully, Will refueat refuse to submit to the commission or to any of its au- mentary evidence thorized agents, for the purpose of inspection and taking, copies, any documentary evidence of such corporation in his Possession or within his control, shall be deemed Sec. 10. PENALTIES—Continued. guilty of an offense against the United States, and shall ject ene 0; be subject, upon conviction in any court of the United imprisonment or 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. paativn fo ‘fle Lf any corporation required by this Act to file-any anrequired report. nual or special report shall fail so to do within the time fixed by the commission for filing thé same, and such failure shall continue for thirty days after notice of such each day cow default, the corporation shall forfeit to the United States tinued taliure the sum of $100 for each and every day of the continuance of such failure, which forfeiture shall be payable into the Treasury of the United States, and shall be recivil cuit in dis. coverable in a civil suit in the name of the United States trict where corporation hasbrought in the district where the corporation has its Miss tusivess.”” principal office or in any district in which it shall do Various district business. It shall be the duty of the various district attorneys to. . prosecute for re- attorneys, under the direction of the Attorney General covery, . ~ of the United States, to prosecute for the recovery of forfeitures. The costs and expenses of such prosecution shall be paid out of the appropriation for the expenses of the courts of the United States.

Unauthorized Any officer or employee of the commission who shall divulgence of inoration cam. Make public any information obtained by the commission mission pune without its authority, unless directed by a court, shall be imprisonment oF deemed guilty of a misdemeanor, and, upon conviction 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. ANTITRUST ACTS AND ACT TO REGULATE

COMMERCE.

aXet affected by = Sec, 11. Nothing contained in this Act shall be construed to prevent or interfere with the enforcement of the provisions of the antitrust Acts or the Acts to regulate 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 of parts thereof.

Approved, September 26, 1914,

THE CLAYTON ACT!

(Approved October 15, 1914.) [Puntic—No, 212—63p Conaress.]

{H. R. 15657.)

AN ACT To supplement existing laws against unlawful restraints and monopolies, and for other purposes.

Sec. 1. DEFINITIONS.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That “antitrust laws,” as used herein, includes “Antitrust the Act entitled “An Act to protect trade and commerce against unlawful restraints and monopolies,” approved July second, eighteen hundred and ninety?; sections seventy-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 1 Annotations cover cases through 265 Fed. 464 (part 2, Advance Sheets, issued as of Aug. 26, 1920), and 40 Sup. Ct. Reporter, which disposes of all cases decided at the October term, 1919 (last decisions handed down on June 7, 1920). In the case of sections other than secs. 1, 2, 3, 7, 8 (sections administered by the Commission In go far as applicable, See first paragraph of sec. 11 on p. 518), and 11, annotation hag been Mmited to a Hat of the decisions for the reason that some of such sections do not involve the Commission at all, and the rest do so only more or less remotely.

It should also be noted in connection with this law that the so-called Shipping Board Act (Sec. 15, C. 451, 64th Cong., Ist sess.) provides that “every agreement, modification, or cancellation lawful under this section shall be excepted from the provisions of the act approved July 2, 1890, entitled ‘An act to protect trade and commerce against unlawful restraints and monopolies, and amendments and acty supplementary thereto * © #."

‘The Sherman Act (26 Stat. 209), which, as a matter of convenience, {se printed herewith. While the Act Itself has not been amended, appropriations for the fiscal yeara ending June 30, 1920 and 1921 (Sundry Civil Appropriation Act, July 19, 1919, ch. 24, par. 1, 41 Stat., and Sundry Civil Appropriation Act, June 5, 1920, ch. —, par. 1, 41 Stat., respectively) were made contingent upon no part of the moneys being— “Spent in the prosecution of any organization or individual for entering into any combination or agreemnent having in view the increasing of wages, Shortening of hours or bettering the conditions of labor, or for any act done in furtherance thereof, not in itself unlawful: Provided further, That ho part of this appropriation shall be expended for the prosecution of Producerg of farm products and associations of farmers who cooperate €nd organize in an effort to and for the purpose to obtain and maintain 8 fair and reasonable price for their products.” The act, omitting the usual formal Be it enacted,’ ete., follows:

CONTRACTS, COMBINATIONS, ETC,, IN RESTRAINT OF TRADE ILLEGAL.

Section 1, Every contract, combination in the form of trust or other. Wise, 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 combina- “ Commerce.”

ACTS ADMINISTERED BY COMMISSION.

Sec. 1. DEFINITIONS—Continued.

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 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 commerce 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 Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States: Provided, That tion or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shatl be punished by fine not exceeding five thousand do'lars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

PERSON MONOPOLIZING TRADE GUILTY OF MISDEMEANOR—PENALTY, Sac. 2. Every person who shall monopolize, or attempt 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 foreign 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 punisliments, in the discretion of the court.

COMBINATIONS IN TERRITORIES OR DISTRICT OF COLUMBIA ILLEGQAL—PHNALTY.

Suc. 3. Every contract, combination in form of trust or otherwise, or ~ conspiracy, in restraint of trade or commerce tn any Territory of the Untted States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any auch Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any State or States or foreign nations, is hereby declared tilt-gal. 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, shal) be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, ip the discretion of the court.

ENFORCEMENT.

Sec. 4. The several circuit 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 otherwise prohibited. When the parties complained of shall have been duly notified of such nothing in this Act contained shall apply to the Philippine Islands.

The word “person” or “persons” wherever used in song sreon OF per this Act shall be deemed to include corporations 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.

“COMMERCE.” mission Act, pars. 25, 26 (p. 482), On interstate commerce, see an- | 33-44 (pp. 484-486), and annotanotations to Federal Trade Com- | tions to this act, pars. 32-35(p.500).

Sec. 2. PRICE DISCRIMINATION.

: . Unlawful whe Src. 2. That it shall be unlawful for any person en- Unlawful where: : . 1 substantiall gaged in commerce, in the course of such commerce, either fpbetantially i indi j imi ] i tion or tend t directly or indirectly to discriminate in price between tent a ‘menor different purchasers of commodities, which commodities yare sold for use, consumption, or resale within the United States or any Territory thereof or the District of Colum-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,

ADDITIONAL PARTIBS.

Suc. 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 subpenas to that end may be served 4m any district by the marshal thereof.

FORFEITURE OF lROPERTY.

Suc. 6. Any property owned under any contract. or by any combination, Or pursuant to any conspiracy (and being 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 forfeited to the United States, and may be seized and condemned by lke proceedings as those provided by law for the forfeiture, seizure, and condemnation of Property imported into the United States contrary to Jaw.

SUITS——RECOVERY.

Suc. 7. 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 unlawful 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 controversy, and shall recover threefold the damages by him sustained, and the costs of suit, including & reasonable attorney's fee.

“ PRBRSON” OR “ PERSONS ” DEFINED.

Suc. 8. That the word “person,” or “persons,” wherever used in this Act shall be deemed to include corporations and associations existing under oY authorized by the Jaws of either the United States, the laws of any of Territories, the laws of any State, or the laws of any foreign country. Sec. 2. PRICE DISCRIMINATION—Continued. bia or any insular possession or other place under the jurisdiction of the United States, where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of comfeat permissible merce: Provided, That nothing herein contained shall cont or twee quality, or quantity of the commodity sold, or that makes tion, and only due allowance for difference in the cost of selling or transportation, or discrimination in price in the same or different communities made in good faith to meet competition: 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- Vendor may select own customers if not in restraint of trade. straint of trade.

LEASES.

1, “In the opinion of the court, section 2 of the act is limited to sales and not leases, and therefore does not apply to any of the acts prohibited by section 3."’ United States v. United Shoe Machinery Co., March 31, 1920, 264 Fed. 138, 165.

REFUSAL TO SELL ON ACCOUNT OF FAILORE TO

MAINTAIN SUGGESTED RESALE PRICES.

See also post, par. 77.

39. Held, that a provision by which a trading stamp concern required its so-called ‘subscribers,’ who obtain under contract the right to give out these coupons (exchangeable for various premiums) by paying a consideration therefor and by agreeing to distribute the stamps only to customers does not violate the section in question. “This statute forbids the converse of the acts complained of in the present action, and we have nothing to do with what might happen if the Green Trading Stamp people were seeke ing to forbid the use by ita subscribers of any other kind of trading stamps. This might or might not be a restriction upon competition or tend to effect a monopoly.” Sperry & Huichinson Co. v. Fenster, Jan. 16, 1915, 219 Fed. 7565, 756.

40. Where the bill stated, among other things, that nearly all the shoes made in the United States are machine made; that defendants make and control 98 per cent of the shoe machinery in the United States; that defendanta have business relations with nearly

ACTS ADMINISTERED BY COMMISSION, ANNOTATIONS, Sec. 3—Continued.

TYING OR EXCLUSIVE CONTRACTS OR LEASES—

IN PARTICULAR CASES—Continued. all shoe manufacturers in the United States: that ‘some of the machines made by the defendants are designated by them as ‘ principal,’ while others are designated ‘auxiliary’; that ‘““The ‘principal’ machines can not be operated profitably without the use of some, if not all of the ‘auxiliary’ machines, and the latter are of no practical value, except as they are used in connection with the ‘principal’ machines”; that the terms under which defendants lease their machinery include the following, to wit; that the lessee

(1) Shall not use the machine in the manufacture or preparation of footwear which has not had certain essential operations performed upon it by other machines leased from the lessor;

(2) Shall use the leased machine to its fullest capacity;

“(3) Shall use exclusively the leased machine for the class of work for which it is designed;

“(4) Shall obtain from the lessor exclusively, at such price as it may establish, ali duplicate parts and mechanisms needed in operating the leased machines, and all supplies in connection with them;

“(5) ‘Shall use patented insoles made on defendant's machinery only in connection with certain footwear manufactured by machinery leased from the lessor;

(6) Shall lease from the lessor any additional machinery which he may need for work in the same department as that of the machine leased;

““(7) Shall permit the lessor to deterinine whether the lessee has in his factory more machinery adapted for doing the same work than he needs, and, if so, to remove such machines as, in the opinion of the lessor, are unnecessary;

(8) Shall, at the election of the lessor, suffer a termination of all leases which he may have and the removal of all machines leased by him from the defendants, in the event of the violation of any term of any one of the leases.”

Hfeld, that reating the ‘act of Congress and the cases complained of together, there can be but one conclusion, and that is that all of the clauses (with the possible exception of No. 2) complained of in the bill are clearly violative of the plain words of the statute.

41. “If the court were in doubt as to the meaning of the act and of the intention of Congress in enacting it, that doubt will be readily removed by reading and considering the proceedings in both houses of Congress touching the purpose of the law.’”’ Dyer, J., granting preliminary injunction, United States v. United Shoe Machinery Co. Nov. 9, 1915, 227 Fed.

507, 508, 509.

42. Where a corporation enjoying a dominating position in the manufacture and sale or lease of shoe machines, through ownership of patents, and through contracts made by it with its lessees, leased ita machinery with tying clauses providing among other things that by using no machines other than those of defendants, the lessee should be relieved of certain royalties otherwise exacted: that “if the lessees use the defendants’ lasting machinery for shoes welted on machines made by other manufacturers, or fail to use exclusively defendants’ machines for lasting shoes, or fail to purchase from the defendants exclusively all duplicate parts, extras, and devices © every kind, needed or used in oP” erating, repairing, or renewing thé lasting machinery, or fail te us exclusively the auxiliary machin ery of the lessor in the manufacture or preparation of insoles licensed under letters patent No.

849,-245, or fail to buy any additional machines needed in their shoe factory, which can be leased from the lessor,’ that all the leases could be canceled and the lessees be deprived of the use of them, and be compelled to pay certain royalties, which otherwise they would not have to pay. Held, that such leases constituted a violation of section 3.

The court stated:

43. ‘Can it be doubted that these provisions are not only within the spirit but the letter of the statute? What is the natural, direct, and necessary effect of these conditions? There can be but one answer to this: To compel the lessees to use defendants’ machinery and material, regardless of whether the terms granted by the defendants are as favorable as can be obtained from other manufacturers of some of the machines, or dealers in some of the materials.

44. ‘In addition, it is charged that by reason of these leases there is no market for anyone inclined to manufacture these or some of these machines, and therefore all are deterred from engaging in their manufacture, as, there being no market for them, financial failure ia bound to result from the attempt. Such a condition of affairs clearly tends to substantially lessen competition, and Create, in favor of the defendants, & monopoly in that line of commerce.”’ Trieber, J., overruling motion to dismiss in United States

Vv. United Shoe Machinery Co., June 6, 1916, 234 Fed. 127, 148, 149, 45. “On this record we are constrained to find that this restriction may substantially lessen

CLAYTON ACT.

competition and may tend to create a monopoly. It already appears that, out of some 52,000 pattern agencies in this country, the plaintiff or a holding company controlling it and two other pattern companies control approximately two-fifths. The restriction of each merchant to one pattern manufacturer must in hundreds, perhaps in thousands, of small communities, amount to giving such single pattern manufacturer a monopoly of the business insuchcommunity. * * * 46. ‘We must consider this restriction in the light of the facts peculiar to the business to which the restraint is applied, to the conditions already achieved under such restraint, as well as the nature of the restraint and its effect, actual or probable. Viewing it thus, in the light of the surrounding circumstances, we are constrained to agree with the District Court that the negative covenant in this contract may lessen competition, or may tend to create a monopoly, or both, and is therefore obnoxious to the Clayton Act [citing Chicago Board of Trade v. United States, 246 U. 8.

231, 238).”” Anderson, Circuit Judge, in Standard Fashion Co. v.

Magrane Houston Co., June 28, 1919, 259 Fed. 793, 798.

47. ‘To predict the consequences of the defendant's agreement not to sell or permit to be sold on its premises, during the term of the contract, any other make of patterns, it is necessary to consider the pecularities of the particular business to which the contract relates * * *,.”

48. ‘“‘In the present case there is no evidence that any competitor of the plaintiff had ever been excluded from competition in the city of Boston or elsewhere because of inability to procure cus-

ACTS ADMINISTERED BY COMMISSION.

ANNOTATIONS, See. 3—Continued.

TYING OR EXCLUSIVE CONTRACTS OR LEASES—

IN PARTICULAR CASES—Continued. tomers or a store in which he might market his goods * * *.”

‘“* * * in the present case there is evidence that the largest competitor of the plaintiff is rapidly extending its business by affirmative contracts without restricted conditions, and has a much more dominant position in the field than the present plaintiff. T can see no ground in the record for apprehension that anybody is likely to acquire a monopoly in the dress pattern business, in which, as the evidence shows, competition is very active.

49. ‘“‘I am unable to agree that this bill should be dismisred because the contract in question is unlawful under the Clayton Act * * *2 Brown, District Judge, concurring in denying relief sought, but dissenting as to reasona in above case. (Pp. 800, 801, 803.)

50. Held, that provisionsin leases made by a manufacturer of shoe machinery to the effect (1) that the lessee should use the leased machinery to its full capacity; (2) that the lessee should purchase all repair parts or mechanisms from tho lessor at the lessor’s regular prices; (3) that the leases should continue for 17 years unless sooner terminated by the lessor; do not, under the circumstances involved, violate any provisions of the section in question.

51. That provisions in said leases to the effect that the lessee must purchase all supplies used by it in connection with said leased machinery, exclusively from the lessor at prices established by the lessor; that the lessee must not use said leased machinery in connection with those of the lessor’s competitors, or on shoes or other footwear manufactured in part on competitors’ machines; violate the provisions of the section in question, notwithstanding the fact that the lessees have the choice of unrestricted leases, it appearing that the consideration for said unrestricted leases was prohibitive, notwithstanding the fact that leases executed since the enactment of the Clayton Act do not contain the objectionable clauses, it appearing that said leases are only ‘‘temporary leases,” with the right reserved to the lessor to substitute or add different terms, the intention appearing to avoid the prohibitions of the section in question pending the litigation affecting the legality of the leases containing the objectionable clauses, and notwithstanding the fact that the right to declare a lease forfeited for a breach of any of the clauses involved had not up to that time been exercised.

52. That provisions to the effect that the lessor might terminate the lease for breach of any condition contained therein does not violate the section in question in so far as lawful conditions are involved, and that the provisionsasto royalty. are not objectionable except that which allows a discount or rebate on condition of the lessees not using competitors’ machines. United States v. United Shoe Machinery Co., Mar. 81, 1920, 264 Fed. 138, 165-169.

“WHERE THE EFFECT OF SUCH LEASE, SALE, OF

CONTRACT FOR SALE, OR SUCH CONDITION, |

SUBSTANTIALLY LESSEN COMPETITION OR

TEND TO CREATE A MONOPOLY IN ANY LINE

OF COMMERCE.”

53. “I am satisfied with the reasoning of Judge Trieber [ United States v. United Shoe Machinery Co., 234 Fed, 127, 150] that Congress, with the full knowledge of the construction whichhad heen placed upon the Sherman Act by the Supreme Court, did not intend that the same construction should be placed upon the specific terms of the Clayton Act; for it chose to define the lessening of competition which it declared to be unlawful, and to do this used the word ‘substantially’ to make it apparent that a real, as opposed to an imaginary or fanciful lessening of competition, was intended.

54. “Doubtless a substantial lessening of competition would amount to an unreasonable restraint of trade; but I do not think it is the duty of the Court to find this before it can pronounce a contract unfair, the effect of which it has found may be to ‘substantially lessen competition.’” The reports of the committees of both Houses of Congress, as well as the legislative history of the bill, show the intent of Congress to protect the public from practices which it believed to be inimical to the Public good by preventing these Practices from being put in operation.

55. “I think, therefore, it is the duty of the Court to determine whether or not the contract has Provided means for a real or substantial lessening of competition, irrespective of what use has been oris being made of these meana.

56. “By the use of the word ‘may’ the intent is manifest to deal With the potential evil which a contract may contain, and to make the attempt to substantially lessen competition unlawiully.” Johnson, Circuit Judge, in Standard Fashion Co, v. Magrane Houston Co., Mar.

9, 1918, 254 Fed. 493, 499. (District Court.) 57. “The mere fact that Congress *nacted the Clayton Act after Rumerous courts had held similar

CLAYTON ACT.

or analogous restrictions [i. 6., agreements on the part of the covenantee not to dealin productsother than those of the seller during the term of the contract] not obnoxious to the Sherman Act, July 2, 1890, C. 647, 26 Stat. 209 (Comp. St. pars. 8820-8823, 8827-8830), or invalid at common law, or under State antitrust statutes, justifies the inference that the Legislature intended in the line of actual experience to’change the law. [Citing numerous cases. ] 58. “There is no answer to the suggestion of Judge Trieber in U.S.v. United Shoe Machinery Co, (D. C.), 234 Fed. 127, 150, that the presumption is, not that Congress intended that the construction of the Sherman Act should control, buton the contrary that it should not control.” And again quoting from Judge Trieber: ‘Evidently Congress was not satisfied to only prohibit actual lessening of competition or monopolizing, but to make it unlawful for any person to do these acts, which may put it in his power to do so.’ 59. ‘‘The very title of this act is significant—‘An act to supplement existing laws against unlawful restraint and monopolies, and for other purposes.’’? Standard Fashion Co. v. Magrane Houston Co., June 28, 1919, 259 Fed. 793, 795, 796.

60. ‘‘In order to condemn the negative covenant it is not necessary that the Court should find that it will lessen competition or will tend to create & monopoly; it is enough to find that it may lessen competition or may tend to create & Monopoly.”

61. ‘‘On this record we are constrained to find ths: this restriction may substantially lessen competition and may tend to createa monopoly. It already ap- ACTS ADMINISTERED BY COMMISSION, ANNOTATIONS, Sec. 3—-Continued.

“WHERE THE EFFECT OF SUCH LEASE, SALE, OR

CONTRACT FOR SALE, OR SUCH CONDITION.

AGREEMENT, OR UNDERSTANDING MAY BE TO

SUBSTANTIALLY LESSEN COMPETITION OR

TEND TO CREATE A MONOPOLY IN ANY LINE

OF COMMERCE”—Continued. pears that, out of some 52,000 pattern agencies in this country, the plaintiff or a holding company controlling it and two other pattern companies control approximately two-fifths. The restriction of each merchant to one pattern manufacturer must in hundreds, perhaps in thousands of small communities amount to giving such single pattern manufacturer a monopoly of the business in such community. * * *.” Anderson, Circuit Judge in Standard Fashion Co. v. Magrane Houston Co., June 28, 1919, 259 Fed. 793, 798. ‘ Brown, District Judge, concurring in denying relief asked, but not in holding the contract involved unlawful under the Clayton Act.

62. ‘‘Full weight must. be given to the final clause of section 3 of the Clayton Act [quoting above clause, namely, ‘‘Where the effect of auch lease,”’ etc.]. - 63. ‘‘In determining the effect we must consider the thing upon which the effect is to be produced. This clause seems to require that the interpretation and application of section 3, of the Clayton Act should be according to the principles stated in the opinion of Mr.

Justice Brandeis in Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 Sup. Ct. 242, 244 (62 L. Ed. 683).

64. ‘‘‘But the legality of an agreement or regulation can not be determined by so simple a text, as whether it restrains competition. Every agreement concerning trade, every regulation of trade, restraina. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates, and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition. To determine that question the Court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint, and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, and all relevant facts.

This is not because a good intention will serve an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the Court to interpret facts and to predict consequences.’ ’”

65. ‘‘In applying the statute it must be judicially determined what the effect may be. This judgment must be more than a mere feeling of ‘possibility’ arising in ignorance of facts which, if known, would destroy that feeling.

Tt must he based on knowledge and upon a reasonable belief that, in view of existing facts, there is a ‘dangerous probability’ ’’ (pps.

799, 800, 801). .

66. ‘‘There is nothin, .n me Sherman Act, or any other act of Congress, making the acts enumerated in section 3 of the Clayton Act unlawful, ‘where the effect’ of them ‘may be to substantially lessen competition or tend to create a monopoly in any line of commerce.’ Section 1 of the Sherman Act (Comp. St. sec. 8820) makes unlawful ‘contract * * * in restraint of trade or commerce,’ and as construed by the Supreme Court in the above cited cases, they mean ‘contracts which unduly restrain trade and commerce.’ This language differs materially from the language used in section 3 of the Clayton Act. That contracts or leases may substantially lessen competition was not sufficient to make them unlawful under the Sherman Act, if not unduly or oppressively enforced as was held in clauses hereinbefore cited.”

67. ‘The Clayton Act as the court construes it, is intended as _ & preventive act, to arrest the creation of trusts etc., in their incipiency and before consummation 68. ‘‘It is therefore unnecessary to determine whether the defendants, by the tying clauses and the discounts and rebates, have succeeded in unduly monopolizing or attempted to monopolize unduly, any part of the trade or commerce among the several States, or to unduly restrain competition in that part of commerce. The question to be decided is: Do the clauses complained of, or any of them, put it in their power, or have the effect, or tend, if enforced, as the defendants would have the right to do, if they are not unfair under the Clayton Act—and that is their intention [contention?j|—‘to substantially lessen competition’ or ‘establish & monopoly in trade’? 69. ‘In the opinion of the court there can be no doubt that the enforcement of some of the provisions hereinafter mentioned will have that effect. Ifshoe manufacturers are not permitted to use machines Manufactured by competitors without being penalized, such Prohibition tends to lessen competition, and eventually will result in giving the defendants a Monopoly in that part of trade or

CLAYTON ACT, commerce. Who will invest the millions necessary to establish such manufacturing plants, and the evidence convinces that it would require these large sums to establish them, when the product can not be sold, or at best can find buta very limited market? * * *”’ United States v. United Shoe Machinery Co., Mar. 31, 1920, 264 Fed. 188, 161-163.

WHETHER LIMITED BY SECTION 2.

70. ‘In the opinion of the Court section 2 of the Act is limited to sales and not leases, and therefore does not apply to any of the acts prohibited by section 3.’ United States v. United Shoe Machinery Co., Mar. 31, 1920, 264 Fed. 138, 165,

WHETHER RETROACTIVE.

71. ‘Counsel for defendant earnestly insists that, even if Congress so intended, the statute can not be construed to apply to preexisting contracts and to prohibit their performance and enforcement, without violating fundamental and constitutional rights. The statute does not in terms except from ita operation any agreements or contracts, past, present, or future, and, in the absence of such exceptions, it is to be presumed that Congress intended to prohibit, not only the making of future contracts, but also any further performance of past contracts of the kind specified.

[Continuing contracts of lease.]’’ Elliott Machine Co. v. Center, Feb. 20, 1915, 227 Fed. 124, 126; United States v. United Shoe Machinery Co., Nov. 9, 1915, 227 Fed. 507, 510.

72. “Section 3 of the Clayton Act does not declare ‘any contracts and leases [prohibited by that section] to be void,’ but that ‘it shall be unlawful for any person,’ etc., ‘to make such contracta,’ etc. Ordinarily the word M&y sve in any United States district court, and recover threefold damages, including cost of suit.

ACTS ADMINISTERED BY COMMISSION, ANNOTATIONS, See. 3—Continued.

WHETHER RETROACTIVE—Continued.

‘shall’ indicates that the act is to be prospective, and not. retrospec- 73. ‘If there is room for doubt as to the intention of Congress, it is removed by reference to the proceedings in Congress when the bill was pending in the Senate e eo) 74, “The conclusion of the Court is that the act should not be given a retroactive construction declaring these clauses, made beforeits enactment, void.” United States v. United Shoe Machinery Co., Mar. 31, 1920, 264 Fed. 188, 171, 174, 175.

WORDS AND PHRASES —“UNDERSTANDING.”

75. ‘The word ‘understanding,’ as defined by lexicographers, includes mental discernment, comprehension, clear knowledge 76. “Counsel contend that ‘understanding’ is equivalent to ‘agreement,’ except that it imputes that it is oral. The Court can not adopt this definition. In its opinion it means something more. It means an implied agreement, resulting from the expressed terms of the agreement, whether written or oral, or where the law from certain acts of the parties implies an agreement to do a certain act * * ¥*.’ United States v.

United Shoe Machinery Co., June 6, 1916, 234 Fed. 127, 148.

IN GENERAL.

77. Provisions of this section held to strengthen conclusion that owner of a patent moving-picture projecting machine, enjoying a monopoly in the sale of motionpicture projecting machinery, by reason of such patent, can not sell the same with the condition attached that only a certain kind of films, not a part of the machine and not patented, shall be used in connection therewith, Motion Picture Patents Co. v. Universal Film Mfg. Co., 1916, Circuit Court of Appeals, 235 Fed. 398.

Affirmed (1917) in 243 U. 8. 502, 517.

Sec. 4. VIOLATION OF ANTITRUST LAWS—DAMAGES

TO PERSON INJURED.

Sro, 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 defendant 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, including a reasonable attorney’s fee,

DECISIONS.

Frey € Son, Inc. v. Cudahy Packing Co., Dec, 9, 1915, 228 Fed. 209, American Sea Green Slate Co. v. O'Halloran, Dee. 14, 1915, Fed. 77, 79. - Dowd v. United Mine Workers of America, Circuit Court of Appeals, July 21, 1916, 235 Fed. 1, 4, 6. Venner vy. Pennaylvania Steel Co., April 18, 1918, 250 Fed. 292. Sec. 5. PROCEEDINGS BY OR IN BEHALF OF UNITED STATES UNDER ANTITRUST LAWS. FINAL JUDGMENTS OR DECREES THEREIN AS EVIDENCE IN PRIVATE LITIGATION. INSTITUTION THEREOF AS SUSPENDING STATUTE OF LIMITATIONS. SEC. 5. That a final judgment or decree hereafter ren- Prima facie evidered in any criminal prosecution or in any suit or pro-dence against ceeding in equity brought by or on behalf of the United same defendant States under the antitrust laws to the effect that a dein private litigafendant has violated said laws shall be prima facie evi-tion. dence against such defendant in any suit or proceeding brought by any other party against such defendant under 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 judgconsent judgments or decrees entered before any testi-ments or decrees mony has been taken: Provided further, This section shall excepted. not apply to consent judgments or decrees rendered 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 Running of prosecution is instituted by the United States to prevent, statute of limitarestrain or punish violations of any of the antitrust laws, tions with rethe running of the statute of limitations in respect of spect to private each and every private right of action arising under said rights suspended laws and based in whole or in part on any matter com-pending proceedplained of in said suit or proceeding shall be suspended ing by the United during the pendency thereof. States under antitrust laws.

DECISIONS.

Buckeye Powder Co. v. Du Pont Powder Co., Dec. 9, 1918, 248 U. S., 55, 68, affirming Buckeye Powder Co. v. E. I. Du Pont de Nemours Powder Co., July 2, 1915, 223 Fed. 881, 884.

Sec. 6. LABOR OF HUMAN BEINGS NOT A COM-

MODITY OR ARTICLE OF COMMERCE.

SEC. 6. That the labor of a human being is not a com- Labor, agriculmodity or article of commerce. Nothing contained in the tural, or hortiantitrust laws shall be construed to forbid the existence cultural organizaand operation of labor, agricultural, or horticultural or- tions and their ganizations, instituted for the purposes of mutual help, members, organand not having capital stock or conducted for profit, or ized for mutual to forbid or restrain individual members of such organi-help and without capital stock, not affected by antitrust laws with respect to their legitimate objects.

See. 6. LABOR OF HUMAN BEINGS NOT A COM-

MODITY OR ARTICLE OF COMMERCE—Continued. 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.

DECTSIONS, United States v. King, Apri] 25, 1916, 250 Ped. 908, 909, 910. Dowd vy. United Mine Workers of America, Circuit Court of Appeals, July 21, 1916, 235 Fed. 1, 5. Stephens v. Ohio State Telephone Co., February 14, 1917, 240 Fed. 759, 777.

Duplex Printing Press Co. vy. Deering, April 23, 1917, 247 Fed. 192, 195.

Paine Lumber Co. v. Neal, June 11, 1917, 244 U. S. 459, 483, 487. Duplex Printing Press Co. v. Deering, May 25, 1918, Circuit Court of Appeals, 252 Fed. 722, 743, 747. Montgomery v. Pacific Electric Railway Co., Muy 26, 1919, Circuit Court of Appeals, 258 Fed. 382, 389. Dail Overland Co. v. Willys Qverland, December 27, 1919, 263 Fed. 171, 185, 186.

See. 7. ACQUISITION BY CORPORATION OF STOCK

OR OTHER SHARE CAPITAL OF OTHER CORPORATION

OR CORPORATIONS.

Of other corpo. §= Src, 7, That no corporation engaged in commerce shall tation. Prohibit- 5 pit, ae rn 0 peo ane acquire, directly or indirectly, the whole or any part of stantially lessen the stock or other share capital of another corporation encompetition, restrain commerce, raged also in commerce, where the effect of such acquisi- _ a monopoly. tion may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce. other’ amen No corporation shall acquire, directly or indirectly, the tone, | Pron’ whole or any part of the stock or other share capital of may itty ieentWO OF more corporations engaged in commerce where competition, ve the effect of such acquisition, or the use of such stock by or tera ye the voting or granting of proxies or otherwise, may be to substantially lessen competition between such corporations, 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 monopoly of any line of commerce, This section shall not apply to corporations purchasing, Purchase solely such stock solely for investment and not using the same exerted. by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying, Formation of bsidiary corpo- , Wn} 1, } sc rations for imon of their immediate lawful business, or the natural and "tions | for im. legitimate branches or extensions thereof, or from own-tent MP ex ing and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen competition. Nor shall anything herein contained be construed to Common car. riers excepted prohibit any common carrier subject to the laws to regu- with reference to =" branch or tap late commerce from aiding in the construction of lines | awhere no branches or short lines so located as to become feeders to petition the main line of the company so aiding in such construction or from acquiring or owning all or any part of the stock of such branch lines, nor to prevent any such common 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 competition between the company owning the branch line so constructed and the company owning the main line acquiring the property or an interest therein, nor to prevent 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 extending 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, Existing rights or impair any right heretofore legally acquired: Pro- {u!ly, scauired vided, That nothing in this section shall be held or construed to authorize or make lawful anything heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided. ACQUISITION OF STOCK, ETC. IN interstate commerce as independ- PARTICULAR CASES. ent wholesale fresh fish dealers on 78. “The evidence discloses | the Fish Pier, and the assets and that the Boston Fish Pier Co. in | business of Ernest F. Rich, doing 1916, acquired the stock of 25 of | business under the name of A. F. the corporations doing business in | Rich & Co., and the partnerships ACTS ADMINISTERED BY COMMISSION, ANNOTATIONS, See. 7—Continued.

ACQUISITION OF STOCK, ETC., IN PARTICULAR

CASES—-Continued. of Lombard & Curtis and Fulham & Herbert, the three latter concerns being wholesale fresh fish dealers engaged in interstate trade on the pier, and that it thereafter conducted the businesses of these dealers, and all competition between them ceased. We think the acquisition of these corpora tions was plainly in violation of the Clayton Act, and that their combination in the Boston Tish Pier Co. must be dissolved.

79. ‘We also are of the opinion that the acquisition by the Bay State Fishing Co. of the stock in the 8 corporations in its combination is likewise in violation of the Clayton Act. The fact that 5 out of 8 of the corporations whose stock was taken over by the Bay State Fishing Co. were organized under the laws of Maine, to whom the Massachusetts corporations bearing the same names conveyed their businesses and assets, does not make the situation different than it would have been, and no less a violation of the Clayton Act, had it taken over the stock of the Massachusetts corporations directly. ‘The respective Maine and Massachusetts corporations were in substance the same, and the effect of the formation of the Maine corporations, and the taking over of their stock was to defeat competition between all of the subsidiary corporations. The combination of these corporations with the Bay State Fishing Co. was therefore a violation of the Clayton Act and must be dissolved.” United States v. New England Fish Frehange, July 11, 1919, 258 Fed. 732, 746.

80. ‘“‘Nor does the ownership by the plaintiff of a majority of the defendant company’s stock substantially or otherwise lessen competition between them (if they can at all be said to compete), or restrain commerce, or create a monopoly in any line thereof. As heretofore stated the Tool Company is in effect, if not in fact, a subsidiary company, engaged largely, if not wholly, in performing contracts sublet to it by the plaintiff. The case is not within the provisions of section 7 of the Clayton Act. * * *,." Niles- Bement-Pond Co. v. Iron Moulders’ Union, Oct. 9, 1917, 246 Fred. 861, 863, 864. (Reversed on ground of jurisdiction in 258 I’ed. 408. Reversal affirmed on same ground by Supreme Court in opinion handed down Nov, 8, 1920.)

81. Section referred to but not passed on in Venner v. Pennsylvania Steel Co., Circuit Court of Appeals, June 30, 1916, 233 Fed. 407, involving proposed acquisition of assets of one corporation by another corporation, alleged to violate the act; (supplementary bill) Apr. 18, 1918, 250 Fed, 292.

WHETHER RETROACTIVE.

82. Section assumed not intended to be. Hyams v. Calumet & Hecla Mining Co., Jan. 6, 1915, Circuit Court of Appeals, 221 Fed, 529, 537.

CLAYTON ACT, §13

Sec. 8. DIRECTORS, OFFICERS, OR EMPLOYEES OF

BANKS, BANKING ASSOCIATIONS, OR TRUST COM-

PANIES OPERATING UNDER LAWS OF UNITED STATES

AND DIRECTORS OF OTHER CORPORATIONS.

Src. 8. That from and after two years from the date of the approval of this Act no person shall at the same Not to serve ore than one time be a director or other officer or employee of more bank, banking as. sociation, or trust than one bank, banking association or trust company, company if deposite, capital, organized or operating under the laws of the United surplus, and un divided profits States, either of which has deposits, capital, surplus, and se kao gaa Ove 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,How slisibitity rmined. employee under the foregoing provisions shall be determined by the average amount of deposits, capital, surplus, and undivided profits as shown in the official statements of such bank, banking association, or trust company filed as provided by law during the fiscal year next preceding the date set for the annual election of directors, and when a director, officer, or employee has been elected or selected in accordance with the provisions of 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, organ- Not to serve: . . more than one I zed or operating under the laws of the United States, bank, banking as. . . . . sociation, or trust In any city or incorporated town or village of more than company located. ‘ ’ n city or incortwo hundred thousand inhabitants, as shown by the last porated town or. . . village of more preceding decennial census of the United States, shall than 200,000 in- . . habitants, have as a director or other officer or employee any private 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 Savings banks. . . without capita Shall apply to mutual savings banks not having a capital (share) stock ex. ry | cepted, stock represented by shares: Provided further, That a director or other officer or employee of such bank, banking Where entire. . . “ gtoc Qo one Association, or trust company may be a director or other bank, etc., owned ’ y stockholders officer or employee of not more than one other bank or vi other, also ex: . . cepted. trust company organized under the laws of the United 186895 ° —20-——33 Sec. 8. DIRECTORS, OFFICERS, OR EMPLOYEES OF BANKS, BANKING ASSOCIATIONS, OR TRUST COMPANIES OPERATING UNDER LAWS OF UNITED STATES AND DIRECTORS OF OTHER CORPORATIONS—Contd. States or any State where the entire capital stock of one is owned by stockholders in the other: And provided further, That nothing contained in this section shall forbid a director of class A of a Federal reserve bank, as defined in the Federal Reserve Act from being an officer or director or both an officer and director in one member bank: And provided further, That nothing in this Act shall prohibit any private banker or any officer, director, or employee of any member bank or class A director of a Federal reserve bank, who shall first procure the consent of the Federal Reserve Board, which board is hereby authorized, at its discretion, to grant, withhold, or revoke such consent, from being an officer, director, or employee of not more than two other banks, banking associations, or trust companies, whether organized under the laws of the United States or any State, if such other bank, banking association, or trust company is not in substantial competition with such banker or member bank. Class A director of Federal reserve bank excepted. Private banker or officer, etc., of member bank, or Class A director may serve, with consent of Federal Reserve Board, not more than two other banks, etc., where no substantial competition. The consent of the Federal Reserve Board may be procured before the person applying therefor has been elected as a class A director of a Federal reserve bank or as a director of any member bank.¹ Comment may be secured before applicant elected director. 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 aggregating more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associations, trust companies and common carriers subject to the Act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws. The eligibility of a director under the foregoing provision shall be determined by the aggregate amount of the capital, surplus, and undivided profits, Not to serve two or more presently or previously competing corporations if capital, surplus, and undivided profits aggregate more than $1,000,000, and elimination of competition by agreement would violate antitrust laws. How eligibility determined.

¹ The part of the section immediately preceding beginning with, "And provided further, That nothing in this Act" to this point. amendments made by act May 5, 1916, C. 120, and act May 26, 1920, C. 206.

CLAYTON ACT.

exclusive of dividends declared but not paid to stockholders, at the end of the fiscal year of said corporation next preceding the election of directors, and when a director has been elected in accordance 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 Eligibility at me of election or selection not changed for one 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 provisions 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.

INTERLOCKING DIRECTORATES—ABSENCE OF

COMPETITIVE FEATURES.

83. “Furthermore, it is to be observed that the Delaware Co.’s holdings are not in naturally competing companies. The companies named in the present record are widely separated and Operate in distinct municipalities, and the gas plant here in question is the only one in the city of Holland, and is entirely within the State of Michigan. The case, therefore, does not fall within any principal opposed to the suppression of competition, as, for instance, the underlying principal of the Northern Securities case, Sec.

193 U. 8. 197, 24 Supreme Court 436, 48 L. Ed. 679, nor within any statutory inhibition against interlocking directorates similar to that of the Clayton Act (Act Oct. 15, 1914, C. 323, 38 Stat. L.

732, sec. 8 [Comp. Stat. Sec.

8835H]) * * *,.” City of Holland v. Holland City Gas Co., Circuit Court of Appeals, Feb. 18, 1919, 257 Fed. 679, 685.

IN GENERAL.

84. Provisions of section disregarded as not then operative.

Hyams v, Calumet & Hecla Mining Co., Circuit Court of Appeals, Jan. 6, 1915, 221 Fed. 529, 537.

9. WILLFUL MISAPPLICATION, EMBEZZLE-

MENT, ETC., OF MONEYS, FUNDS, ETC., OF COMMON

CARRIER A FELONY.

Src. 9. Every president, director, officer or manager of any firm, association or corporation engaged in commerce as a common carrier, who embezzles, steals, abstracts or willfully misapplies, or willfully permits to be misapplied, any of the moneys, funds, credits, securities, property or assets of such firm, association or corporation, arising or accruing from, or used in, such commerce, in Sec. 9. WILLFUL MISAPPLICATION, EMBEZZLEMENT,

ETC., OF MONEYS, FUNDS, ETC., OF COMMON CARRIER

A FELON Y—Continued. 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 Penalty, line, fined not less than $500 or confined in the penitentiary or imprisonment, ok both. not less than one year nor more than ten years, or both, in the discretion of the court.

May prosecute i 1 istri in May, prosecute. Prosecutions hereunder may be in the district court of of United States i Ste istric i P ¢ pf United states the United States for the district wherein the offense may piense commit have been committed.

Jurisdiction of hat nothing in this section shall be held to take away State gous ctor impair the jurisdiction of the courts of the several oro secution States under the laws thereof; and a judgment of convichereunder. “tion 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. LIMITATIONS UPON DEALINGS AND CON-

TRACTS OF COMMON CARRIERS, Sec. 10. That after two years from the approval of this copings ins Act no common carrier engaged in commerce shall have cqntracts for ose any dealings in securities, supplies or other articles of eine tote commerce, or shall make or have any contracts for conpian $50,000 a struction or maintenance of any kind, to the amount of n case director» more than $50,000, in the aggregate, in any one year, with ete., of common carrier, also 4 another corporation, firm, partnership or association ether party sticr When the said common carrier shall have upon its board interest therein. f directors or aS its president, manager or as its purchasing or selling officer, or agent in the particular 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 corporation, firm, partnership or association, unless and except such purchases shall be made from, or such dealings shall be with, the Bidding to be bidder whose bid is the most favorable to such common der repuatan carrier, to be ascertained by competitive bidding under terstate Com regulations to be prescribed by rule or otherwise by the tion, and to show Interstate Commerce Commission. No bid shall be re dresses of bidder, ceived unless the name and address of the bidder or the officers, eto. l names and addresses of the officers, directors and genera managers thereof, if the bidder be a corporation, or of the members, if it be a partnership or firm, be given with the bid.

Any person who shall, directly or indirectly, do or at- Fenalty, fe tempt to do anything to prevent anyone from bidding or tempting to, preshall do any act to prevent free and fair competition fpmpetition in among the bidders or those desiring to bid shall be punished as prescribed in this section in the case of an officer or director.

Every such common carrier having any such transac- Carrier to re port transactions tions or making any such purchases shall within thirty hereunder to, Indays after making the same file with the Interstate Commerce ‘Gominis merce Commission a full and detailed statement of the transaction showing the manner of the competitive bidding, 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 whenever the said commission shall, after investigation or commission to. . t violations, hearing, have reason to believe that the law has been ana its own tind violated in and about the said purchases or transactions fer." it shall transmit all papers and documents and its own views or findings regarding the transaction to the Attorney General.

If any common carrier shall violate this section it shal] ,, Misdemeanor for director, etc., eed) se. , 1 to knowing! be fined not exceeding $25,000; and every such director, ,* tor direct, agent, manager or officer thereof who shall have know-aid, ete., dp vic. ingly voted for or directed the act constituting such violator. tion or who shall have aided or abetted in such violation Shall be deemed guilty of a misdemeanor and shall be Penal fined not exceeding $5,000, or confined in jail not exceeding one year, or both, in the discretion of the court. The effective date on and after which the provisions of,,Pfective date Section 10 of the Act entitled “An Act to supplement } 19% existing laws against unlawful restraints and monopolies, and for other purposes,” approved October fifteenth, nineteen hundred and fourteen, shall become and be effective is hereby deferred and extended to January first, Nineteen hundred and nineteen: Provided, That said sec- 224,12, tion shall become effective on January eighth, nineteen Pig piguningd hundred and eighteen, as to any corporations hereafter organized.' ee ‘4 Above paragraph resolution Jan, 12, 1918. c. 8, 40 Stat. 431,

Sec. 11. JURISDICTION TO ENFORCE COMPLIANCE.

COMPLAINTS, FINDINGS, AND ORDERS. APPEALS.

SERVICE.

renpeialy ape SEC. 11. That authority to enforce compliance with plicable vested sections two, three, seven and eight of this Act by the perin Interstate Com- Sons Tespectively subject thereto is hereby vested: in the TH sion; ™* Interstate Commerce Commission where applicable to ye tdera! Reserve common carriers, in the Federal Reserve Board where applicable to banks, banking associations and trust com- Federal Trade panies, and in the Federal Trade Commission where applicable to all other character of commerce, to be exercised ag follows:

» commissionsce ~=© Whenever the commission or board vested with juriscomplaint if > diction thereof shall have reason to believe that any lieves secs. 2, 3, 7, or 8 violated person is violating or has violated any of the provisions with notice of of sections two, three, seven and eight of this Act, it shall hearing on apondent or de issue and serve upon such person 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 person so haeanondent gp complained of shall have the right to appear at the place pear and “HW 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 violation of the law mb het vention so charged in said complaint. Any person may make apted for good plication, and upon good cause shown may be allowed cane by the commission or board, to intervene and appear in teat nner, be Said proceeding by counsel or in person. The testimony filed in any such proceeding shall be reduced to writing and filed in the office of the commission or board. If upon In case of vio such hearing the commission or board, as the case may be, lation commission or beard to shall be of the opinion that any of the provisions of said make written report stating. {ne sections have been or are being violated, it shall make a wue and serve oF report in writing in which it shall state its findings as to der to cease and desist on respond the facts, and shall issue and cause to be served én 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 manner and within the time fixed by said Commission or order. Until a transcript of the record in such hearing board may modty or set aside shall have been filed in a circuit court of appeals of the transcript of rec- 1 . save. transcript of rec: United States, as hereinafter provided, the commission ca Ut of AP or board may at any time, upon such notice and in such manner ag it 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 In case of disthe commission or board while the same is in effect, the obedience of its commission or board may apply to the circuit court of order, commisappeals of the United States, within any circuit where sion or board the violation complained of was or is being committed or may apply to Cirwhere such person resides or carries on business, for the cuit Court of Apenforcement of its order, and shall certify and file with peals for enforceits application a transcript of the entire record in the ment of its order, proceeding, including all the testimony taken and the and file tranreport and order of the commission or board. Upon such script of record. filing of the application and transcript the court shall Court to cause cause notice thereof to be served upon such person and notice thereof to thereupon shall have jurisdiction of the proceeding and be served on reof the question determined therein, and shall have power spondent and to to make and enter upon the pleadings, testimony, and have power to proceedings set forth in such transcript a decree affirm-enter decree afing, modifying, or setting aside the order of the commis-firming, modifysion or board. The findings of the commission or board ing, or setting as to the facts, if supported by testimony, shall be con-aside order of clusive. If either party shall apply to the court for leave commission or to adduce additional evidence, and shall show to the sat-board. isfaction of the court that such additional evidence is Findings of material and that there were reasonable grounds for the commission or failure to adduce such evidence in the proceeding before board conclusive the commission or board, the court may order such addi- if supported by tional evidence to be taken before the commission or testimony. board and to be adduced upon the hearing in such manner Introduction of and upon such terms and conditions as to the court may additional eviseem proper. The commission or board may modify its dence may be findings as to the facts, or make new findings, by reason permitted on apof the additional evidence so taken, and it shall file such plication, and modified or new findings, which, if supported by testi-showing of reamony, shall be conclusive, and its recommendation, if sonable ground any, for the modification or setting aside of its original for failure to adorder, with the return of such additional evidence. The duce theretofore. judgment and decree of the court shall be final, except Commission or that the same shall be subject to review by the Supreme board may make Court upon certiorari as provided in section two hundred new or modified and forty of the Judicial Code. findings by rea- Any party required by such order of the commission or son thereof. board to cease and desist from a violation charged may Judgment and obtain a review of such order in said circuit court of ap- decree subject to review upon certiorari, but otherwise final.

Petition by respondent to review order to cease and desist. qr ho [ome

ACTS ADMINISTERED BY COMMISSION.

Sec. 11. JURISDICTION TO ENFORCE COMPLIANCE.

COMPLAINTS, FINDINGS, AND ORDERS. APPEALS.

SERVICE—Continued. peals by filing in the court a written petition praying that the order of the commission or board be set aside. A To be served on copy of such petition shall be forthwith served upon the commission or onboard which commission or board, and thereupon the commission or ereupon to file. . . transcript of ree-hoard forthwith shall certify and file in the court a ord in the court. . . . transcript of the record as hereinbefore provided. Upon. Jurisdiction of the filing of the transcript the court shall have the same Court of Appeals, - qe 2 . . sanie a on appli: jurisdiction to affirm, set aside, or modify the order of the cation by com ... mission or board commission or board as in the case of an application by and commission's or board's find. the commission or board for the enforcement of its order, ngs #iintarly conclusive, and the findings of the commission or board as to the facts, if supported by testimony, shall in like manner be conclusive.

Jurisdiction of The jurisdiction of the circuit court of appeals of the Court of Appeals exclusive. United States to enforce, set aside, or modify orders of the commission or board shall be exclusive. Proceedings to ‘Such proceedings in the circuit court of appeals shall have precedence over other cases be given precedence over other cases pending therein, and dited. shall be in every way expedited. No order of the comadi iability un. mission or board or the judgment of the court to enforce wt ultected. the same shall in any wise relieve or absolve any person from any liability under the antitrust Acts. mittvice of com Complaints, orders, and other processes of the commis- Peete. orders, SION OF board under this section may be served by anyand ‘other proc one duly authorized by the commission or board, either Personal; (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 place at tase OF & director of the corporation to be served; or (b) by news; OF leaving a copy thereof at the principal office or place of my rewistered business of such person; or (c) by registering and mailing a copy thereof addressed to such person at his prinof ceneuserving, Cipal office or place of business. The verified return by and return post- the person so serving said complaint, order, or other proof of service. 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. PLACE OF PROCEEDINGS UNDER ANTITRUST

LAWS. SERVICE OF PROCESS.

SEC. 12. That any suit, action, or proceeding under the Proceeding may antitrust laws against a corporation may be brought be instituted or not only in the judicial district whereof it is an inhabit-process served in district of which ant, but also in any district wherein it may be found or corporation an inhabitant or transacts business; and all process in such cases may be wherever it may be found. served in the district of which it is an inhabitant, or wherever it may be found.

DECISIONS.

Frey & Son, Inc., v. Cudahy Packing Co., Dec. 9. 1915, 228 Fed. 209.

Thorburn v. Gates, July 17, 1915, 225 Fed. 613, 615. Frey & Son, Inc., v. Cudahy Packing Co., Apr. 27, 1916, 232 Fed. 640.

Southern Photo Material Co. v. Eastman Kodak Co., July 20, 1916, 234 Fed. 955-957.

Venner v. Pennsylvania Steel Co., Apr. 18, 1918, 250 Fed. 292, 297.

Wainwright v. Pennsylvania R. Co., Oct. 22 1918, 253 Fed. 459, 463.

Sec. 13. SUBPŒNAS FOR WITNESSES IN PROCEEDINGS

BY OR ON BEHALF OF THE UNITED STATES UNDER

ANTITRUST LAWS.

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 May run into other district: Provided, That in civil cases no writ of any district, but permission of subpœna shall issue for witnesses living out of the dis-trial court necessary in civil cases trict in which the court is held at a greater distance than if witness lives one hundred miles from the place of holding the same out of district and more than without the permission of the trial court being first had 100 miles distant. upon proper application and cause shown.

Sec. 14. VIOLATION BY CORPORATION OF PENAL

PROVISIONS OF ANTITRUST LAWS.

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 di- Deemed also rectors, officers, or agents of such corporation who shall that of individual directors, offihave authorized, ordered, or done any of the acts consti-cers, etc. Sec. 14. VIOLATION BY CORPORATION OF PENAL PROVISIONS OF ANTITRUST LAWS—Continued. tuting in whole or in part such violation, and such violation shall be deemed a misdemeanor, and upon conviction 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. A misdemeanor.

Penalty, fine or imprisonment, or both. Sec. 15. JURISDICTION OF UNITED STATES DISTRICT COURTS TO PREVENT AND RESTRAIN VIOLATIONS OF THIS ACT. 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 otherwise 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 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. Whenever it shall appear to the court before which any such proceeding 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 subpœnas to that end may be served in any district by the marshal thereof. District attorneys, under direction of Attorney General, to institute proceedings. Proceedings may be by way of petition setting forth the case, etc. After due notice, court to proceed to hearing and determination as soon as may be. Pending petition instituting proceeding Court may make temporary restraining order or prohibition. Court may summon other parties.

DECISIONS.

Wainwright v. Pennsylvania R. Co., Oct. 22, 1918, 253 Fed. 459, 463. Sec. 16. INJUNCTIVE RELIEF AGAINST THREATENED LOSS BY VIOLATION OF ANTITRUST LAWS. Sec. 16. That any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a Open to any person, firm, etc., on same conditions and principles as other injunctive relief by courts of equity against violation of the antitrust laws, including sections two, threatened conthree, seven and eight of this Act, when and under the duct that will same conditions and principles as injunctive relief cause loss or against threatened conduct that will cause loss or damage damage. is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond Temporary inagainst damages for an injunction improvidently granted junction may isand a showing that the danger of irreparable loss or sue upon proper damage is immediate, a preliminary injunction may is- bond and showsue: Provided, That nothing herein contained shall be ing. construed to entitle any person, firm, corporation, or But United association, except the United States, to bring suit in States alone may equity for injunctive relief against any common carrier sue for injuncsubject to the provisions of the Act to regulate commerce, tive relief against common approved February fourth, eighteen hundred and eighty-carrier subject to seven, in respect of any matter subject to the regulation, Act to Regulate supervision, or other jurisdiction of the Interstate Com- Commerce. merce Commission.

DECISIONS.

Union Pacific Railway Co. v. Frank, Circuit Court of Appeals, July 9, 1915, 226 Fed. 906, 911.

Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., July 20, 1915, 224 Fed. 566, 571.

Flirtman v. Welsbach Co., Jan. 24, 1916, 240 U. S. 27, 29. Paine Lumber Co. v. Neal, June 11, 1917, 244 U. S. 459, 471, 480. Venner v. Pennsylvania Steel Co., Apr. 18, 1918, 250 Fed. 292. Duplex Printing Press Co. v. Deering, Circuit Court of Appeals, May 25, 1918, 252 Fed. 722, 748.

Sec. 17. PRELIMINARY INJUNCTIONS. TEMPORARY

RESTRAINING ORDERS.

Sec. 17. That no preliminary injunction shall be issued No preliminary without notice to the opposite party. injunction without notice.

No temporary restraining order shall be granted with- No temporary out notice to the opposite party unless it shall clearly restraining order appear from specific facts shown by affidavit or by the in absence of a verified bill that immediate and irreparable injury, loss, showing of imor damage will result to the applicant before notice can mediate and irbe served and a hearing had thereon. Every such tem-reparable injury or loss. porary restraining order shall be indorsed with the date Temporary reand hour of issuance, shall be forthwith filed in the straining order, clerk's office and entered of record, shall define the into show date and jury and state why it is irreparable and why the order hour of issue, dewas granted without notice, and shall by its terms expire fine injury, etc.

Sec. 17. PRELIMINARY INJUNCTIONS. TEMPORARY

RESTRAINING ORDERS—-Continued. 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 entered It without no of record, In case a temporary restraining order shall tice, issuance preliminary in,be granted without notice in the contingency specified, junction Lo Uisposed car the matter of the issuance of a preliminary injunction moment. 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 application for a preliminary injunction, and if he does not do so the court shall dissolve the temporary restraining order. Upon Opposite party two days’ notice to the party obtaining such temporary may move disso lution or modi-restraining order the opposite party may appear and days’ notices = move the dissolution or modification of the order, and in that event the court or judge shall proceed to hear and determine the motion as expeditiously as the ends of justice may require. ane, 268,08 Je: Section two hundred and sixty-three of an Act entitled pealed. “An Act to codify, revise, and amend the laws relating to the judiciary,” approved March third, nineteen hundred and eleven, is hereby repealed. wees? et Nothing in this section contained shall be deemed to alter, repeal, or amend section two hundred and sixtysix of an Act entitled “An Act to codify, revise, and amend the laws relating to the judiciary,” approved March third, nineteen hundred and eleven, DECISIONS, Supreme Council of Royal Arcanum v. Hobart, Circuit Court of Appeals, June 15, 1917, 244 Ped. 885, 390. Mississippi Valley Trust Co. v. Raiheray Steel Co., Cireuit Court of Appeals, Apr. 19, 1919, 258 Fed. 346, 349. Dail Overland Co. vy. Willys Overland, Dee. 27, 1919, 268 Fed. 171, 188.

Sec. 18. NO RESTRAINING ORDER OR INTERLOCUTORY

ORDER OF INJUNCTION WITHOUT GIVING SECURITY.

yercent at pro; = Suc. 18. That, except as otherwise provided in section of this act. 16 of this Act, no restraining order or interlocutory order 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 suffered by any party who may be found to have been wrongfully enjoined or restrained thereby.

' DECISIONS.

Western Union Tel, Co. v. United States € M. T. Co.. Circult Court. of Appeals, May 16, 1915. 221 Fed. 545, 555. Swift v. Black Panther Oil € Gas Co., Circuit Court of Appeals, May 30, 1917, 244 Fed. 20, 29, 80.

See. 19. ORDERS OF INJUNCTION OR RESTRAINING

ORDERS—REQUIREMENTS.

Sec. 19. That every order of injunction or restraining order shall set forth the reasons for the issuance of the Must set forth “oO . . reasons, be spesame, shall be specific in terms, and shall describe in rea-cific, “and desonable detail, and not by reference to the bill of com-tecirained plaint or other document, the act or acts sought to be restrained, and shall be binding only upon the parties to. Binding only. . on parties to the suit, their officers, agents, servants, employees, and aut net offiattorneys, or those in active concert or participating with them, and who shall, by personal service or otherwise, have received actual notice of the same.

DECISIONS.

Lion Tractor Co. v. Bull Tractor Co., Circuit Court of Appeals, Feb, 12, 1916, 281 Fed. 156, 162.

Davis v. Hayden, Nov. 9, 1916, 238 Fed. 784. Stephens y. Ohio State Telephone Co., Feb. 14, 1917, 240 Fed. 759, 765, 776.

Sec. 20. RESTRAINING ORDERS OR INJUNCTIONS BE-

TWEEN AN EMPLOYER AND EMPLOYEES, EMPLOY-

ERS AND EMPLOYEES, ETC., INVOLVING OR GROWING

OUT OF TERMS OR CONDITIONS OF EMPLOYMENT.

Src. 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 employment, unless necessary to prevent irreparable injury to Not to sue unless necessary Property, or to a property right, of the party making the jo prevent irrer-

Sec. 20. RESTRAINING ORDERS OR INJJUNCTIONS BE-

TWEEN AN EMPLOYER AND EMPLOYEES, EMPLOY-

ERS AND EMPLOYEES, ETC., INVOLVING OR GROWING

OUT OF TERMS OR CONDITIONS OF EMPLOYMENT—

Continued. application, for which injury there is no adequate remedy Threatenedat Jaw, and such property or property right must be sroperty or property nate rt described with particularity in the application, which particularity. must be in writing and sworn to by the applicant or by his agent or attorney. ; ann °t, ta prohibit And no such restraining order or injunction shall propersons trom ter hibit any person or persons, whether singly or in concert, lation of employ. from terminating any relation of employment, or from mending others ceasing to perform any work or labor, or from recommeans so to do,mending, advising, or persuading others by peaceful “te means so to do; or from attending at any place where any such person or persons may lawfully be, for the purpose of peacefully obtaining or communicating information, 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 recommending, advising, or persuading others by peaceful and lawful means so to do; or from paying or giving to, or 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 disinhi pgeemen pute by any party thereto; nor shall any of the acts t to be con- ; 1 1 o } c not to be om specified in this paragraph be considered or held to be of any law of the yj } : 1 (1 ed Staten violations of any law of the United States.

DECISIONS.

Alaska 8S. 8. Co. v. International Longshoremen’s Asan., Sept. 5, 1916, 236 Fed. 964, 970-972.

Stephens v. Ohio State Telephone Co., Web. 14, 1917, 240 Fed. 759, 765, 769, 778.

Duplex Printing Co. v. Deering, Apr. 28, 1917, 247 Fed. 192, 195. Paine Lumber Co. v. Neal, June 11, 1917, 244 U. S. 459, 484, 485. Puget Sound Traction, Light € Power Co., v. Whitley, July 25, 1917, 243 Fed. 945-952.

Kroger Grocery & Baking Co. v. Retail Clerks’ I. P. Assn., Mar. 22, 1918, 250 Fed. 890, 892, 893.

Duplex Printing Press Co. v. Deering, Circuit Court of Appeals, May 25, 1018, 252 Fred. 722, 744, 747, 748. United States v. Norris, Dec. 16, 1918, 255 Fed. 423, 424, Montgomery vy. Pacific Electric Raiheay Co, May 26, 1919, Clreutt Court of Appeals, 258 Fed. 382, 390. Dail Overland Co. v. Willys Overland Co., Dec. 27, 1919, 263 Fed. 171, 185, 186, 187.

Vonnigut Alachinery Co. v. Toledo Machine & Tool Co., Feb. 7, 1920, 263 Fed. 192, 197, 200-202.

Kinloch Telephone Co. v. Local Union No. 2, May 6, 1920, 265 Fed, 812, 815-320.

Sec. 21. DISOBEDIENCE OF ANY LAWFUL WRIT,

PROCESS, ETC., OF ANY UNITED STATES DISTRICT

COURT, OR ANY DISTRICT OF COLUMBIA COURT.

Sxc, 21. That any person who shall willfully disobey any lawful writ, process, order, rule, decree, or command of any district court of the United Sates 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 done also criminal ofact or thing so done by him be of such character as to con-fense under Jaws ” of United States stitute also a criminal offense under any statute of the or or State in which commit- United States, or under the laws of any State in which ted, person to be the act was committed, shall be proceeded against for his hereinafter provided, Said contempt as hereinafter provided.

DECISIONS.

Couta v. United States, Circuit Court of Appeals, March 4, 1918, 249 Fed. 595, 97.

Swepston v. United States, Cireuit Court of Appeals, May 7, 1918, 251 Fed. 205, 210.

Sec, 22. RULE TO SHOW CAUSE OR ARREST. TRIAL,

PENALTIES.

Sxc. 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 18 reasonable ground to believe that any person has been fuilty of such contempt, the court or judge thereof, or court or judge any judge therein sitting, may issue a rule requiring the issue Tule to show cause why Said person so charged to show cause upon a day certain Peron, charged Why he should not be punished therefor, which rule, to- punished. Sether with a copy of the affidavit or information, shall € Served upon the person charged, with sufficient promptness to enable him to prepare for and make return to the order at the time fixed therein. If upon or by such re-

Sec. 22. RULE TO SHOW CAUSE OR ARREST. TRIAL.

PENALTIES—Continued.

Trial if alleged contempt not sufficiently purged by return. turn, in the judgment of the court, the alleged contempt be not sufficiently purged, a trial shall be directed at a time and place fixed by the court: Provided, however, Failure of natural person to make return. Attachment against person.

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 If body corporate, attachment for sequestration of its property. corporate, an attachment for the sequestration of its property may be issued upon like refusal or failure to answer.

Trial may be by court or, upon demand of accused, by jury.

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 sufficient number 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 Trial to conform to practice in criminal cases prosecuted by indictment or upon information. misdemeanor; and such trial shall conform, as near as may be, to the practice in criminal cases prosecuted by indictment or upon information.

Penalty, fine or imprisonment, or both.

If the accused be found guilty, judgment shall be entered accordingly, prescribing the punishment, either by fine or imprisonment, or both, in the discretion of the court.

Fine paid to United States or complainant or other party injured. If accused natural person, fine to United States not to exceed $1,000.

Such fine shall be paid to the United States or to the complainant or other party injured by the act constituting 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 imprisonment exceed the term of six months: Provided, That in Court or judge may dispense with rule and issue attachment for arrest. any case the court or a judge thereof may, for good cause shown, by affidavit or proof taken in open 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 i 7 £ Accused to be which event such person, when arrested, shall be brought, Accused fo, be ] ] judge promptly before such court or a judge thereof without unnecessary 4 ce Promptly delay and shall be admitted to bail in a reasonable penalty alle roceeee for his appearance to answer to the charge or for trial for me as if rule the contempt; and thereafter the proceedings shall be the Same as provided herein in case the rule had issued in the first instance.

DECISIONS, In re Heyman, Mar. 22, 1915, 225 Fed. 1000, 1003. Stephens v. Ohio State Telephone, Feb. 14, 1917, 240 Fed. 759, 764, .

Couts vy. United States, Circuit Court of Appeals, Mar. 4, 1918, 249 Fed. 595-7.

Swepston v. United States, Circult Court of Appeals, May 7, 1918, 251 Fed. 205, 210.

Toledo Newspaper Co, v. United Statics, June 10, 1918, 247 U. S.; 402, 423.

Toshet v. West Kentucky Coal Co., Circuit Court of Appeals, June 14, 1918, 252 Fed. 44, 45,

Sec. 23. EVIDENCE. APPEALS.

Src. 23. That the evidence taken upon the trial of any, Pvidence | may be preserved by Persons so accused may be preserved by bill of exceptions, bill of excepand any judgment of conviction may be reviewed upon “Tudgment re Writ of error in all respects as now provided by law in Wid cotP criminal cases, and may be affirmed, reversed, or modified 48 justice may require. Upon the granting of such writ Grenti ng of of error, execution of judgment shall be stayed, and the cution, and accused, if thereby sentenced to imprisonment, shall be, ,*crpred to be ‘admitted to bail in such reasonable sum as may be required 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.

DECISIONS, Coute vy. United Stutes, Circuit Court of Appeals, Mar. 4, 1918, 249 Ved. 595-7.

Swepston v. United States, Circuit Court of Appeals, May 7%, 1918, 251 Fed. 205, 210.

Poledo Newspaper Co. v. United States, June 10, 1918, 247 U. S. 402, 403.

Sec. 24. CASES OF CONTEMPT NOT SPECIFICALLY

EMBRACED IN SEC. 21 NOT AFFECTED.

Sec. 24. That nothing herein contained shall be con- Committed instrued to relate to contempts committed in the presence or near presence. . of court, or =o f the court, or so near thereto as to obstruct the adminis- In disobedience ¢ py 7-3 eee, : . Tig of any leew eration of justice, nor to con tempts committed in dis writ or process obedience of any lawful writ, process, order, rule, decree, in suit or action by or in behalf; ] 1 1 . by or in behalfor command entered in any suit or action brought or prosecuted in the name of, or on behalf of, the United And other ses States, but the same, and all other cases of contempt not not in sec. 21 Punished insnecifically embraced within section twenty-one of this conformity with prevailing usages Act, may be punished in conformity to the usages at law at law and in ’ equity. and in equity now prevailing.

Sec. 25. PROCEEDINGS FOR CONTEMPT. LIMITATIONS.

Sec. 25. That no proceeding for contempt shall be in- Mast be inst: stituted against any person unless begun within one year year. from the date of the act complained of; nor shall any crivinal prosecu. SUCH proceeding be a bar to any criminal prosecution for Hon. the same act or acts; but nothing herein contained shall covlinae net at Uffect any proceedings in contempt pending at the time fected. of the passage of this Act. Sec. 26. INVALIDITY OF ANY CLAUSEH, SENTENCE,

ETC., NOT TO IMPAIR REMAINDER OF ACT. :

Sxc. 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 pnut f@ be con thereof, but shall be confined in its operation to the clause, eee ia vic di sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered.

Approved, October 15, 1914.

IN GENERAL.

RESALE PRICE MAINTENANCE.? Sales Co., August 1, 1917, Cireuit _ See also ante, par. 2. Court of Appeals, 244 Fed. 156,

85. Nothing found in either the | 160. Clayton or Federal Trade Commission Acta validates price re- See also ante, par. 2. strictions by a vendor on resale of | 86. ‘** * *. Numerous indiproperty sold absolutely by him. | viduals and corporations have Ford Motor Co. v. Union Motor | been enjoined from restraining the 18ee also in thla genera) connection cases, among others, of Straus ¥- Viotor Talking Muchine Oo., Apr. 9, 1917, 243 U. 8. 490, and #oston Storé vy. American Graphuphone Co., Mar. 4, 1918, 246 U. 8. 8,

RIGHT TO REFUSE TO SELL

CLAYTON ACT.

trade of other people, no matter how flourishing the offenders’ trade might be, nor how greatly the general volume of trade had increased during the period of restraint. But never before has it been urged that, if J. 8. mado enough of anything to supply both Doe and Roe, and sold it all to Doe, refusing even to bargain with Roe, for any reason or no reason, such conduct gave Roe a cause of action. If Congress has sought to give him one, the gift is invalid, because the statute takes from one person for the private use of another the first person’s private property.’’ Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., July 20, 1915, 224 Fed. 566, 574.

87. ‘Before the Sherman Act it was the law that a dealer might reject the offer of a proposing buyer, for any reason that appeared to him; it might be because he did not like the other’s business methods, or because he had some personal difference with him, political, racial, or social. That was purely hia own affair, with which nobody else had any concern.

Neither the Sherman Act, nor any decision of the Supreme Court construing the same, nor the Clayton Act, has changed the law in this particular. We have not yet reached the stage where the selection of a trader’s customers is made for him by the Government.”

Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., November 10, 1915, Circuit Court of Appeals, 227 Fed. 46, 49, affirming decision in 224 Fed. 566;

88. “It seems unnecessary to dwell upon the obvious difference between the situation presented when a manufacturer merely indicates his wishes concerning prices and declines further dealings with all who fail to observe them, and one where he enters into agreementa—whether express or implied from a course of dealing or other circumstances—with all customers throughout the different States which undertake to bind them to observe fixed resale prices, In the first, the manufacturer but — exercises his independent discretion concerning his customers and there is no contract or combination which imposes any limitation on the purchaser. In the second the parties are combined through agreements designed to take away dealers’ control of their own affairs and thereby destroy competition and restrain the free and natural flow of trade amongst the States.” United States v. Schrader's Son, Inc., March 1, 1920, 252 U.S. 85, 99, reaffirming decision in Dr. Miles Merical Co. v.

Park & Son’s Co., 220 U.S. 373, distinguishing the same from United States v. Coigate & Co., 250 U. S. 300, and reversing 264 Fed. 175.

WHAT NECESSARY TO STATE CAUSE OF

ACTION.

89. ‘It will be noticed that in this Act [the Clayton Act] there is nothing said of combinations or conspiracies, nor that the parties complained of are monopolizing or attempting to monopolize any part of the commerce among the several States, as was required in the Sherman Act. * * * Evidently Congress was not satisfied to only prohibit actual lessening of competition, or monopolizing, but to make it unlawful for any person to do those acts, which may put it in his power to do so.

90. ‘‘For these reasons, in the opinion of the Court, all that is necessary to state a cause of action under the Clayton Act is to charge that the defendants committed the acta prohibited by the statute and that they tend to substantially lessen competition or create a

ACTS ADMINISTERED BY COM MISSION, ANNOTATIONS, IN GENERAL —Continued,

WHAT NECESSARY TO STATE CAUSE OF

ACTION—Continued. monopoly ininterstate commerce.”

United States v. United Shoe Machinery Co., June 6, 1916, 234 Fed. 127, 150.

IN GENERAL,

91. Judgments of Federal courts in determining questions under Act, independent of decisions of State courts. Skaggs e al. v.

Kansas City Terminal Ry. Co. ei al., May 12, 1916, 233 Fed. 827.

92. No change has heen wrought in the law of conspiracy as applicable to the case in question.

Lamar v. United States, Circuit Court of Appeals, June 4, 1919, 260 Fed. 561, 563.

Act cited. United States v. Rintelen et al., June 29, 1916, 233 Fed. 793, 799.

Section referred to in passing.

United States v. Colyate & Co., Oct. 29, 1918, 253 Fed. 522, 525.

WEBB ACT:

Approved April 10, 1918.] [Punric—No, 126—65rH Coneress.]

[F. R. 2816.)

AN ACT To promote export trade, and for other purposes, Sec. 1. DEFINITIONS. ;

Be it enacted by the Senate and House of Representatives of the United States of America in Congress as- “Export trade.” sembled, That the words “ export trade” wherever used in this Act mean solely trade or commerce in goods, wares, or merchandise exported, or in the course of being exported from the United States or any Territory thereof to any foreign nation; but the words “ export trade ” shall not be deemed to include the production, manufacture, or selling for consumption or for resale, within the United States or any Territory thereof, of such goods, wares, or merchandise, or any act in the course of such production, manufacture, or selling for consumption or for resale. That the words “trade within the United States” wherever used in this Act mean trade or commerce among the several States 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 or Territories and any State or States or the District of Columbia, or between the District of Columbia and any State or States.

“Trade within the United States.”

1 Annotations cover cases through 26% Fed. 464 (Part 2, Advance Sheets, fasued as of Aug. 26, 1920), and 40 Sup. Ct. Reporter, which disposes of all cases decided at the October term, 1919 (last decisions handed down on June 7, 1820).

That the word “Association” wherever used in this “Association.” Act means any corporation or combination, by contract or otherwise, of two or more persons, partnerships, or corporations.

“TRADE WITHIN THE UNITED STATES.” 33-44 (pp. 484-486), and annota- On interstate commerce, see an- tions to Clayton Act, pars. 32-35 notations to Federal Trade Com- (p. 500). mission Act, pars. 25, 26 (p. 482),

Sec. 2. ASSOCIATION FOR OR AGREEMENT OR ACT

MADE OR DONE IN COURSE OF EXPORT TRADE—

STATUS UNDER SHERMAN ANTITRUST LAW.

Sec. 2. That nothing contained in the Act entitled “An Association not Act to protect trade and commerce against unlawful re- illegal if organstrains and monopolies,” approved July second, eighteen ized for and enhundred and ninety, shall be construed as declaring to be gaged in export illegal an association entered into for the sole purpose of trade solely. engaging in export trade and actually engaged solely in such export trade, or an agreement made or act done in Nor agreement the course of export trade by such association, provided nor act, if not such association, agreement, or act is not in restraint of in restraint of trade within the United States, and is not in restraint of trade within the the export trade of any domestic competitor of such as- United States, or sociation: And provided further, That such association of the export does not, either in the United States or elsewhere, enter trade of any dointo any agreement, understanding, or conspiracy, or do mestic competiany act which artificially or intentionally enhances or de- tor, and presses prices within the United States of commodities If such associaof the class exported by such association, or which sub-tion does not stantially lessens competition within the United States artificially or inor otherwise restrains trade therein. tentionally enhance or depress prices of, or substantially lessen competition, or restrain trade in commodities of class exported.

Sec. 3. ACQUISITION BY EXPORT TRADE CORPORA-

TION OF STOCK OR CAPITAL OF OTHER CORPORA-

TION.

Sec. 3. That nothing contained in section seven of the Act entitled “An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,” approved October fifteenth, nineteen hundred and fourteen, shall be construed to forbid the acquisition or ownership by any corporation of the whole or any Lawful under part of the stock or other capital of any corporation Clayton Act unorganized solely for the purpose of engaging in export less effect may be trade, and actually engaged solely in such export trade, to restrain trade unless the effect of such acquisition or ownership may be or substantially to restrain trade or substantially lessen competition lessen competiwithin the United States. tion within United States.

See. 4. FEDERAL TRADE COMMISSION ACT EX-

TENDED TO EXPORT TRADE COMPETITORS.

Sec. 4. That the prohibition against “unfair methods of competition ” and the remedies provided for enforcing said prohibition contained in the Act entitled “An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,” approved September twenty-sixth, nineteen hundred and fourteen, shall be construed as extending to unfair methods of competition used in export trade against competitors engaged in ex- Even thou ‘h. . . acts involved port trade, even though the acts constituting such unfair done without t. Mp sn ae gs vitorial jurisdic. Methods are done without the territorial jurisdiction of tion of United the United States.

Sec. 5. OBLIGATIONS OF EXPORT TRADE ASSOCI-

ATIONS UNDER THIS ACT. PENALTIES FOR FAILURE

TO COMPLY. DUTIES AND POWERS OF COMMISSION.

Export trade Suo. 6. That every association now engaged solely in associations or corporativy te export trade, within sixty days after the passage of this with Pederal a. with Pederal Act, and every assoc iation entered into hereafter which on showing lo- i ithi i wion showing To engages solely in export trade, within thirty days after names, and ad: its creation, shall file with the Federal Trade Commisdreszes of offi. cers, ete, andsion a verified written statement setting forth the locaaleo articles of incorporation | oF tion of its offices or places of business and the names and ciation, ete. nddlresses of all its officers and of all its stockholders or members, and if a corporation, a copy of its certificate or articles of incorporation and by-laws, and if unincorporated, a copy of its articles or contract of association, and on the first day of January of each year thereafter it shall make a like statement of the location of its offices or places of business and the names and addresses of all its officers and of all its stockholders or members and of all amendments to and changes in its articles or certificate of incorporation or in its articles or To furnish also contract of association. It shall also furnish to the cominformation to organization, mission such information as the commission may require buainesa, etc, as to its organization, business, conduct, practices, management, and relation to other associations, corporations, partnerships, and individuals. Any association which Penalties, of cates, {Mt shall fail so to do shall not have the benefit of the prorece. Zand Band Visions of section two and section three of this Act, and it shall also forfeit to the United States the sum of $100 for each and every day of the continuance of such failure, which forfeiture shall be payable into the Treasury of the United Stutes, and shall be recoverable in ‘a civil suit in the name of the United States brought in the district where the association has its principal office, or in any district in which it shall do business. It shall be the, District ator. neys to prosecute 1 } Tot. for recovery of duty of the various district attorneys, under the direction forfeiture. of the Attorney General of the United States, to prosecute for the recovery of the forfeiture. The costs and expenses of such prosecution shall be paid out of the appropriation for the expenses of the courts of the United States.

Whenever the Federal Trade Commission shall have federal trade Commission to reason to believe that an association or any agreement investigate reoe 1 oe. trai f, made or act done by such association is in restraint of aritciar ournde: trade within the United States or in restraint of the ex-fontions! em port trade of any domestic competitor of such association, Pro? of Piet or that an association either in the United States or else- Sry Sa where has entered into any agreement, understanding, or “#4 conspiracy, or done any act which artificially or intentionally enhances or depresses prices within the United States of commodities of the class exported by such association, or which substantially lessens competition within the United States or otherwise restrains trade therein, it shall summon such association, its officers, and agents to appear before it, and thereafter conduct an investigation into the alleged violations of law. Upon investigation, may recom if it shall conclude that the law has been violated, it may trent 4 readjust, make to such association recommendations for the read-°"“™ justment of its business, in order that it may thereafter maintain its organization and management and conduct its business in accordance with law. If such association, To refer findings and recomfails to comply with the recommendations of the Federal mendations to torney General Trade Commission, said commission shall refer its find- if snot a tion ings and recommendations to the Attorney General of the with | recommend. United States for such action thereon as he may deem” proper.

For the purpose of enforcing these provisions the Fed- Commission given same poweral Trade Commission shall have all the powers, so far ers as under Fed. eral Trade Comas applicable, given it in “An Act to create a Federal mission Act ao Trade Commission, to define its powers and duties, and ble ” for other purposes.”

Approved, April 10, 1918.

IN GENERAL |

Act referred to in opinion in, to dissolve United Statea Steel United States v. United Stutes Steel | Corporation as involved in an incorporation, March 1, 1920, 251 | consistency in the decree proposed U.S. 417, 453, 64 1., Ed. 222, 229, 40 | by the Governme t in sid suit. Sup. Ct. 298, 300, in deciding suit Avprnpix IT.

DECISIONS ON PETITIONS TO REVIEW THE

ORDERS OF THE COMMISSION.

SEARS, ROEBUCK & CO. v. FEDERAL TRADE

* COMMISSION.2

(Cireutt Court of Appeals, Seventh Circuit. April 29, 1919. No. 2659.)

1. TrapE-Marks AND TRaDE NameEs, Key No. 803, New, Vol. 84; Key No. Series—Unraigz Competition. A finding by the Federal Trade Commission that a mail-order house doing an Interstate business was guilty of unfair compe tition in selling sugars, teas, and coffees under representation’ that it had obtained special price concessions because of the magnitude of its purchases, and that it purchased selected brands from abroad, held warranted. 2, Trapke-Margks AND TRADE NAMES, Key No. 804, New, Vol. 84: Key No. Series—Procyrpines Berore FEvERAL TRADE COoM-

MISSION—INJUNCTIONAL ORDER.

An injunctional order issued by the Federal Trade Commissio® restraining a mail-order house doing an interstate business from certain unfair practices in connection with the sale of sugar and other staple commodities held not to have been improevldently issued because the mail-order house had discontinued such methods, where it was contending that act September 26, 1914, #5 (Comp. St. § 883G6e), creating the Federal Trade Commission, was unconstitutional, or, if valid, had not been infringed, and the Government’s control of sugar sales and consumption pad temporarily put an end to the objectionable practices in any event.

8, Hvinencn, Key No. 23 (1)—Jupicrat Norice—Governatent CON-

TROL o¥ TRADE.

On petition to have an injunctional order issued by the Federal Trade Commission vacated on the ground that the unfal? practices of petitioner which related to sales of sugar, etc. ha ——— 1 Reviewing order of Commission in federal Trade Commission had Sears, Roebuck & Co., 1 F. T. C. 163, ceased, the court will take judicial notice of the Government's control of the sale and consumption of sugar during the war, which temporarily at Jeust put an end to the objectionable practice.

4, TRADE-MARKS AND TRADE-NamrS, Key No. 804. New, Vol. 8A, Key No. Series—Unralk CoMPETITION—-FEDERAL TRADE CoM-

MISSION. :

Act September 26, 1914, § 5 (Comp. St. § 8836e), giving the Federal Trade Commission authority over unfair methods of competition and declaring the sume unlawful, is not void for indetiniteness because the words “unfair methods of cumpetition’ were not defined, the trader being entitled to his day in court, where common-law principles would control.

5. ConstiruTIONAL Law, Key No. 62, 80(2)—UNLawruL Detxaa-

TION OF LEGISLATIVE AND JUDICIAL POWER.

Act September 26, 1914, § 5 (Comp. St. § &8&36e), giving the Federal Trade Comission power to stop unfair methods of competition in commerce and declaring the same unlawful, is not an unlawful delegation of legislative and judicial power, Congress having by the act declared the publie policy applicable to the situation.

6, TRADE-MARKS AND TRADE-Namers, Key No. 803, New, Vol. 8A, Key No. Series—Powerxrs oF Frperat TRapk CoMMIsstuN— UnrFair COMPETITION.

The Federal Trade Commission, under its authority to stop unfair methods of competition, can not prevent a trader from selling a staple article as sugar below cost, although it may prevent such sales accompanied by representations which would injure other traders.

(The syllabus is taken from 258 Fed. Rep. 307.) Alschuler, circuit judge, dissenting in part. Original petition to review order of Federal Trade Commission.

Original petition by Sears, Roebuck & Co. against the Federal Trade Commission, to review an order command- ‘ing petitioner to desist from certain unfair methods of competition in commerce. Commission directed to modify its orders, and petition in other respects denied. Sidney Adler, of Chicago, Ill., for petitioner. John Walsh, of Chicago, IIl., for respondent. Before Baker and Alschuler, circuit judges, and Carpenter, district judge.

Baker, circuit judge, delivered the opinion of the court: This is an original petition to review an order entered by the respondent, the Federal Trade Commission, against the petitioner, Sears, Roebuck & Co., a corporation, commanding the petitioner to desist from certain unfair methods of competition in commerce. Respondent’s order was based on its complaint, filed on February 26, 1918, on the petitioner’s answer, and on a written stipulation of facts. Procedure before the Commission and also before this court on review is prescribed in section 5 of the act to create a Federal Trade Commission, approved on September 26, 1914. Respondent’s authority over the subject matter of its order is derived from the following provision in the same section: “ Unfair methods of competition in commerce are hereby declared unlawful.” Section 4 is a dictionary of terms used in the act. “Commerce ” means interstate or foreign commerce; but the general term, “unfair methods of competition,” is nowhere defined specifically, nor is there a schedule of methods that shall be deemed unfair. Tn its complaint respondent averred that petitioner is engaged in interstate and foreign commerce, conducting 2 “ mail-order” business; that petitioner for more than two years last past has practiced unfair methods of competition in commerce by false and misleading advertisements and acts, designed to injure and discredit its competitors und to deceive the general public, in the following ways: 1, By advertising that petitioner, because of large purchases of sugar and quick disposal of stock, is able to sell sugar at a price lower than others offering sugar for sale;

2. By advertising that petitioner is selling its sugar at a price much lower than that of its competitors and thereby imputing to its competitors the purpose of charging more than a fair price for their sugar;

3. By selling certain of its merchandise at less than cost on the condition that the customer simultaneously purchase other merchandise at prices which give petitioner a profit on the transaction, without letting the customer know the facts;

4, By advertising that the quality of merchandise sold by its competitors 1s inferior to that of similar merchandise sold by petitioner, and that petitioner buys certain of its merchandise in markets not accessible to its competitors and is therefore able to give better advantages in quality and price than those offered by its competitors. Petitioner extensively circulated the following advertisements, among others:

We can afford to give this guarantee of a “less than wholesale price” because we are among the largest distributors of sugaty wholesule or retail, in the world. We sel! every year thirty-five million pounds of sugar. And, buying in such vast quantities, and buying directly from the refiners, we naturally get our sugar for Jess money thun other dealers, For instance, every grocer carries granulated sugar in stock, but does he tell you which kind?) There are two kinds—granulated cane sugar and granulated beet sugar--and they look exactly alike. Some people prefer the one and some the other. But beet sugar usually costs less (han cane sugar, so if you are getting beet sugat you should pay tess for it. Do you know which kind you are getting and which you are paying for?

SEARS, ROERUCK & CO. V. FEDERAL TRADE COMMISSION, Our teas have a pronounced, yet delicate, tea flavor with an appealing fragrance, because we spare neither time nor expense to get the very best the greatest tea gardens of the world can produce, First, because of the difficulty of getting In this country the exact character and flavor of certain teas, we do our own importing and critically test every tea. Our representative goes to the various tea-growing countries and makes the selection in person. Then, the greatest care is taken to get only first-erop pickings from upland soil.

Also, by buying direct from the tea gardens, while the crops are being harvested, we are able to have them always perfectly fresh. It would be natural for you to conclude that all this care in buying and selecting would nuke our teas very high in price, but in reality, our prices are unusually low for such high quality. Here is a reason: By buying direct from the tea gardens we cut out the middleman’s profit.

Over land and sea, from the greatest coffee regions in the world we bring you the choicest of the crop, and make it possible for you to have that fresh, savory, and fragrantly tempting cup of coffee for your breakfast. You see, we buy direct from the best plantutions in the world. We get the pick of the crop—upland coffees from rich, healthy soil and growers of unquestioned experience and skill. We buy enormous quantities and pay cash, thus making it possible to offer our customers the very best coffees at very low prices.

Petitioner’s sales of sugar during the second half of 1915 amounted to $780,000 on which it lost $196,000, Petitioner used sugar as a “leader” (“ You save 2 to 4 cents on every pound ”), offering a limited amount at the losing price in connection with a required purchase of other commodities at prices high enough to afford petitioner a satisfactory profit on the transaction as a whole, without letting the customer know that the sugar was being sold on any other basis than that of the other commodities. Petitioner obtained its sugar in the open market from refiners and wholesalers. Competitors got their sugar from the same sources, of the same quahty, and at the same price. Sugar is a staple in the market. Price concessions upon large purchases are unobtainable. From the facts respecting petitioner’s methods of advertising and buying and selling sugar respondent found, and properly so, in our judgment, that petitioner intentionally injured and discredited its competitors by falsely leading the public to believe that the competitors were unfair dealers in sugar and the other commodities which petitioner was offering in connection with sugar. Petitioner purchased 75 per cent of its teas from wholesalers and importers in the United States. The remainder it purchased through its representative Peterson in Japan; but there was no proof that Peterson made or was qualified to make “selections in person” or “ firstcrop pickings from upland soil.” All of petitioner’s | coffees were purchased from wholesalers and importers in the United States. Respondent found that petitioner’s advertisements of teas and coffees were false andy designed to deceive the public and injure competitors, 540.

DECISIONS ON PETITIONS TO REVIEW.

By the order, issued on June 24, 1918, petitioner was commanded to desist from—

(1) Circulating, throughout the States and Territories of the United States and the District of Columbia, catalogues containing advertisements offering for sale sugar, wherein it is falsely represented to its customers or prospective customers of said defendant or to customers of competitors, or to the public generally or leads them to believe, that because of large purchasing power and quick-moving stock, defendant is able to sell sugar at a price lower than its competitors;

(2) Selling, or offering to sell, sugar below cost through catalogues circulated throughout the States and Territories of the United States and the District of Columbia among its customers, prospective customers, and customers of its competitors;

(3) Circulating throughout the various States and Territories of the United States and the District of Columbia, among customers, prospective customers, and customers of its competitors, catalogues containing advertisements representing that defendant's competitors do not deal justly, fairly, and honestly with their customers;

(4) Circulating throughout the various States and Territories of the United States and the District of Columbia, among customers, prospective customers, or customers of its competitors, catalogues containing advertisements offering for sale its teas, in which said advertisements it falsely stated that the defendant sends a special representative to Japan, who personally goes into the tea gardens of said country and personally supervises the picking of such teas;

(5) Circulating through the various States and Territories of the United States and the District of Columbia, among customers, prospective customers, or customers of its competitors, catalogues containing advertisements offering for sale its coffees, in which it falsely stated that the defendant purchases all of its coffees direct from the best plantations in the world.

I. Petitioner insists that the injunctional order was improvidently issued because, before the complaint was filed and the hearing had, petitioner had discontinued the methods in question and, as stated in its answer, had no intention of resuming them. For example, no sugar offers of the character assailed were made after August, 1917. But respondent was required to find, from all the evidence before it, what was the real nature of petitioner's attitude. It was permissible for respondent to take judicial notice of the Government's wartime control of sugar sales and consumption. It was also proper to note that petitioner was contending (and still contends) that the act is void for indefiniteness, that the act is unconstitutional, and that the act, even if valid, under any proper construction has not been infringed by petitioner's practices. In Goshen Mfg. Co. v. Myers Mfg. Co. (242 U. S., 202), which was a suit for infringement of a patent, the defendant company averred and introduced evidence to prove that six months before the bill was filed and with notice to complainant it had sold its factory, wound up its business, and had no intention of resuming. But throughout the intervening period and also in the answer to the bill the defendant company was attacking the validity of the patent and the right of the complainant to compel desistance., - This. conduct .was. held to be such. a continuing menace as to justify the Ipaintenance of the bil. So here, 1 no. assurance is-in sight, that petitioner, if it could shake: respondent’ Ss. hand fiom its. shoulder, would not continue its foriner’ course. *.. II: Petitioner, urges that, the declaration of’ section. 5 must be: held void for indefiniteness, unless the words “unfair methods of competition 7, ? be ‘construed. ‘to embrace’ no more than. acts which on September. 26, 1914,, when Congress spoke, . were identifiable a as, jicts of unfair trade, . then condémned | by, the, common, law. as expressed i in prior cases,’ Brit) the, phrase, is no: more, ‘indefinite than “due. process of ‘law.” “The. general, idea, of, that “phrase as it | appears in constitutions and statutes i 1S quite ‘well: known; -but' we have’ never encountered what. purported. to:bé an all-embracing schédule or found a. Specific definition that. would bar the. continuing, “processes, rot judicial inclusion | and exclusion” based. upon, accumulating 2experience. If the, expression;° ‘unfair -tethods: ‘of: competition,” is too unitertain for. use, “then; under. ‘the, ,same condemnation, would, fall’ the innumerable, s statutes, which prec ‘icate,, rights and, pr ‘ohibitions upon.., “ungound mind, 1 “ Linde, inflience,” ‘+ unfaith fuliness,” “unfair, wage, a unfit. f or. cultivation,” “uriréasonabley, “rate,” - Wh just, ‘discrimina-_ | 6 tion 7. ‘and, ihe ike. Statute 1s donee ail outer Pe Cy ara the; Vii are, Joavily) “put, evens in crm J law convictions, to désist cessions? schemes, to; idefratid,’ eithout any seb ule: ora Or: - Specific. definition,’ ‘Of forbidden: <conduct,,. thus ° ile: wing the. ‘courts, free, to, ‘condemn, ‘new, “and. i in-": ety ee c enacted.” Wit! ‘Because’ the: general: j ideas of, dishon-. . . esty ” and “ ‘fraud » are. ‘SO. “well, aviclely,, and, unifor. my,” . uniderstodd” ‘thatthe general,’ ‘term Rs hat. rm. “rebates. OF,cOnces; sions’ ” mand” “ sclidines'to leet auc” re'su ficiently accirate a measures) Mot Conde. Patt Eh ae "

On: “the "face, of, this dtabute vhs “ewidlative. “inteiit, ig ‘ap- We "LOS V3 cee parent. * The Commissioners are’ Not Tequired to, ayerand prove that, any, competitor, has. been damaged. or ‘that any purchaser’ has been deceived, | rhe’ 20m signers, “repre:,, seriting the’ Government, as parens hat rab, are, to. exer cise, ii their common SENSE, | 8 informed by. their’ knowledge, ‘of, al the generil idea ‘oft unt fat Ir, “‘trade’a at common; law, and ‘StOP s3 all those" ‘trade, practicés ‘that have. ¢ a “Gapacity. OF a. tend;. ency ‘to’ injure, competitors: directly or through, ‘deception i" of Purchasers, quite’ irrespective, of | ‘whether the, Specific, Gy. pra actices in question have, yet een, denounced i in,common: 4 law casés. But thie’ restraining order of the. Commission-.’ ers ‘is merely, provisional, . The’. trader: 3 entitled, to, his, cay. in court, ‘and there, ‘ths me pring ples and. tests that’ = have -been’ ‘applied’ under’ the,commion. Jaw or, under’, istat-,/ utes of‘ the’ kitids"hereinbeforé ‘récited are expected, bY. “0

DECISIONS ON PETITIONS TO REVIEW.

Congress to control. This prima facie reading of legislative intent is confirmed by reference to committee reports and debates in Congress, wherein is disclosed a refusal to limit the Commission and the courts to a prescribed list of specific acts (Cong. Rec., 63d Cong., 2d sess., pp. 13, 18, 533, 12246). And this interpretation is not affected by the subsequent adoption of the Clayton Act, October 15, 1914 condemning certain specific acts. TU. But such a construction of section 5, according to petitioner’s urge, brings about an unconstitutional delegation of legislative and judicial power to the Commission. Grants of similar authority to administrative officers and bodies have not been found repugnant to the Constitution. Buttfield v. Stranahan, 192 U. S. 470; Union Bridge Co. v. United States, 204 U. S. 365; Penn. Rd. Co. v. International Coal Co., 230 U. S. 184; National Pole Co. v, Chicago & N. W. Ry. Co., 211 Fed. 65. With the increasing complexity of human activities many situations arise where governmental control can be secured only by the “board” or “commission” form of legislation. In such instances Congress declares the public policy, fixes the general principles that are to control, and charges an administrative body with the duty of ascertaining within particular fields from time to time the facts which bring into play the principles established by Congress. Though the action of the Commission in finding the facts and declaring them to be specific offenses of the character embraced within the general definition by Congress may be deemed to be quasi legislative, it is so only in the sense that it converts the actual legislation from a static into a dynamic condition. But the | converter is not the electricity. And though the action of the Commission in ordering desistance may be counted quasi judicial on account of its form, with respect to power it is not judicial, because a judicial determination is only that which is embodied in a judgment or decree of a court and enforceable by execution or other writ of the court. .

}V. In the second paragraph of the order petitioner 18 commanded to cease selling sugar below cost. We find 1n the statute no intent on the part of Congress, even if it has the power, to restrain an owner of property from selling it at any price that is acceptable to him or from giving it away. But manifestly in making such a sale or gift the owner may put forward representations aD commit acts which have a capacity or a tendency to injure or to discredit competitors and to deceive purchasers as to the real character of the transaction. That paragraph should therefore be modified by adding to it “ bY means of or in connection with the representations pT0hibited in the first paragraph of this order, or similar representation,”

SEARS, ROEBUCK «& CO..V. FEDERAL TRADE COMMISSION, Sufficient appears in this record and in the presentation of the case to warrant us in expressing the belief that petitioner’s business standards were at least as high as those generally prevailing in the commercial world at the time in question, and that the action of the Commission is to be taken rather as a general illustration of the better methods required for the future than a specific selection of petitioner for reproof on account of its conduct in the past.

Respondent is directed to modify its order as above stated; and in other respects the petition is Denied.

By ArscHuter, Circuit Judge.

In my judgment the order of the Commission should be further modified by striking out the third paragraph, which relates to alleged representation that petitioner’s competitors do not deal fairly and honestly with their customers. In so far as the sugar, coffee, and tea advertisements ascribe petitioner’s asserted lower prices and superior qualities to quantity purchases and special facilities and advantages for inspection, selection, and purchasing, they would tend to negative any imputation upon competitors of unfair dealing with their patrons. IT believe the charge of imputing to competitors unfair dealing with their patrons rests wholly on petitioner’s socalled “Caveat emptor” advertisement in its catalogue of March and April, 1916, wherein the public is cautioned in regard to white sugar, stating that some is cane and some beet sugar, alike in appearance, but. the former usually higher in price; that petitioner plainly designates which of the two it offers, and the query is suggested, where else are goods so plainly described, and whether the customer gets elsewhere what he thinks he is buying. Tt seems to me that this does not amount to more than a statement or boast that petitioner, without being asked, describes the white sugars it proposes to sell, and the intimation is carried that competitors do not volunteer such description, but it is not suggested that they actually misrepresent the truth.

The facts before the Commission appear by stipulation, and those concerning this advertisement, aside from the advertisement itself, are as follows: When Mr. A. M. Daly, the attorney in charge of the investigation in these proceedings was in Chicago, in March, 1916, he submitted to Mr. A. V. H. Mory, chief chemist of Sears, Roebuck & Go., and Mr. Joseph Scott, manager of the grocery department, a copy of the advertisement entitled ‘ Caveat emptor ” hereinbefore mentioned, and hereto attached, and requested them to state their views as to this particular advertisement and what it meant. They stated that this advertisement was for the purpose of calling attention to the distinction between beet sugar and cane sugar and laying stress upon the point of the facilities that Sears, Roebuck & Co. have for marking everything plainly so that the customer would know better from description the exact nature of what he was buying. After this explanation Mr. Daly went to his hotel. In a short time Mr. Mory called on him there and stated in substance that he had submitted the above-mentioned advertisement to Mr. A. Hl. Loeb, the vice president of Sears, Roebuck & Co., and that Mr, Loch sald that this course of advertising was unfair and unjust and declared that it must be discontinued, and further that it was against the policy of the house to send out such advertisements. Thereupon, on March 28, 1916, Mr. A. V. H. Mory, chief chemist, wrote to the Commission - in part as follows: “The young man who wrote this was in to-day, and IT pointed out to him wherein he had made a mistake and acted against house policy, He promised to use the soft pedal on all references to the dealer in the future. He tells me that this is an angle that had not occurred to him. He had not thought of the write-up in the Hght of a criticism of the dealer, se intent was he in pointing ou¢ that with our system of marking everything plainly and our facilities for knowing what we are selling. the customer would know better from our description the exact nature of what he was buying, in the case of those things difficult to judge, than if he hud them placed before him, which of course is true.”

But, assuming, as did petitioner’s vice president, that this advertisement does carry the imputation that competitors deal unfairly with their customers, under the circumstances indicated by the quotation ought this advertisement to be the basis of a finding and order? The publication was in the catalogue for March and April, 1916. The complaint was filed nearly two years afterwards. The act authorizes the Commission to proceed when it shall have reason to believe that unfair methods of competition are or have been used, “and if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public.” In a monitory proceeding such as this seems to be, it could hardly be said that it would be “of interest to the public” to predicate action on a transgression for which due amends had long before been made, without remotest cause to believe there would be a repetition. To revive a stale advertisement of this nature which the advertiser immediately after the publication distinctly disavowed as having been unintentionally and inadvertently unfair to competitors, and ordered discontinued, without directly or indirectly repeating or renewing it for so long an interval, far from = subserving the public interest, might, in my judgment, have the contrary tendency of raising an imputation of oppressive or at least uncalledfor action, in predicating any proceeding or order on this advertisement.

‘Nor ain I impressed with the authoritative relevancy here of decisions respecting injunctions. In a proceeding such as this, neither remedial nor punitive decisions of courts respecting injunctional relief in equity are not more analogous than are common-law decisions defining unfair trade practices, arising out of controversies between individuals, as fixing thereby the limitation of the Commission’s authority or scope.

The suggested modification would necessitate corresponding modification of the Commission’s findings of facts, eliminating paragraphs numbered 4 and 5 thereof.

Paragraphs 2, 6, and 7 (as well as pars. 4 and 5) of the findings state the circulation of the several advertisements to have been in each case for “ more than two years last past,” indicating thereby the two years next before the date of the findings, which is June 24, 1918. This is in contravention of the stipulated fact that none of the advertisements were more recent than August, 1917— some of them even antedating the passage, September 26, 1914, of the Trade Commission act itself. These findings should, in my judgment, be modified to comply with the stipulated fact.

FEDERAL TRADE COMMISSION v. GRATZ

ET AL.

(Circuit Court of Appeals, Second Circuit. May 14,1919. No. 286.) TRADE-MARKS AND TrapE-NamMes, Key No. 804 New, Vol. 8A, Key No. Series—Unrarr ComMPETITION—POWERS OF FEDERAL TRADE

CoM MISSION. :

Act September 26, 1914, § 5 (Comp. St. § 88386e), giving the Federal Trade Commission power to investigate unfair methods of competition, does not contemplate the prohibition of unfair methods of competition between individuals, there being no authority given to individuals to present grievances, hence where defendants, who engaged in selling ties and bagging for cotton bales, refused to sell to persons with whom they had had previous unsatisfactory relations, and refused to sell ties without bagging when there was fear that, owing to the scarcity of ties and the prospect of large crops, the marketing of the cotton crop might be endangered by creating corners in ties, the Commission is not authorized to make any order compelling such sales. The unfair methods contemplated by the act are such as affect the public generally.

(The syllabus is taken from 258 Fed. Rep. 314.) 1 Reviewing order of Commiasion in Federal! Trade Commiasion v. Grats et al., 1 F. T. C. 249. See same case in Supreme Court, 253 U. S. 421 and infra, at pp. 564-579.

186395 °—20——-35

DECISIONS ON PETITIONS TO REVIEW.

Petition to revise order of the Federal Trade Commission.

Petition of Warren, Jones & Gratz, by Anderson Gratz, for an order for the review of the findings and order of the Federal Trade Commission, and for an order setting the same aside, in a proceeding against Anderson Gratz and Benjamin Gratz, copartners doing business under the firm name and style of Warren, Jones & Gratz, and others. Order reversed.

T. F. Magner, of Brooklyn, N. Y., for petitioner. John Walsh, of Washington, D. C., for respondent. Before Ward, Hough, and Manton, circuit judges. Warp, Circuit Judge:

This is a petition of Anderson Gratz, a member of the firm of Warren, Jones & Gratz, under section 5 of the act of September 26, 1914, 38 Stat. L. 730, creating the Federal Trade Commission, to review the following order of the Commission:

Therefore, it is ordered, that the respondents, Anderson Gratz and Benjamin Gratz, copartners, doing business under the firm name and style of Warren, Jones & Gratz; P. P. Willams, W. H. Fitzhugh, and Alexander Fitzhugh, copurtners, doing business under the firm name and style of P. P. Willinms & Co., and C, O. Elmer, their officers and agents, cease and desist from requiring purchasers of cotton ties to also buy or agree to buy a proportionate amount of ..merican Manufacturing Co.’s bagging: and further that the respondents cease and desist from refusing to sell cotton ties unless the purchasers buy or agree to buy from them corresponding amounts of Americun Manufacturing Co.’s bagging, or any amount of cotton bagging of any kind. By the Commission: .

(BEAL, ] L. L. Bracken, Secretary.

If Anderson Gratz has not sufficient standing to file this petition, counsel for the Commission has very fairly waived the objection and invited the court to dispose of the questions raised.

The first count of the complaint served on the respondents, which is the only one involved, is as follows:

PARAGRAPH 1. That the respondents, Anderson Gratz and Benjamin Gratz, are copartners, doing business under the firm name and style of Warren, Jones & Gratz, having their principal office and place of business In the city of St. Louis, and State of Missourt, and are engaged in the business of selling, in interstate commerce, either directly to the trade, or through the respondents hereinafter named, steel ties made and used for binding bales of cotton, and which steel ties are manufactured by the Carnegle Steel Co., of Pittsburgh, Pa., and also selling, in the snime manner, jute bagging, used to wrap bales of cotton, and which jute bagging is manufactured by the American Manufacturing Co., of St. Louiss Mo.

Par, 2. That the respondents, P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh, are copartners, doing business under the firm name and style of P. P. Williams & Co., having their principal office and place of business in the city of Vicksburg, and State of Mississippl, and the said last-named respondents and the said respondent Charles O. Elmer, who !s located and doing business at the city of New Orleans, and State of Louisiana, are the selling and distributing agents of the said firm of Warren, Jones & Gratz, and sell and distribute the ties and bagging, manufactured as aforesaid, in interstate commerce, principally to jobbers and dealers, who resell the same to retailers, cotton ginners, and farmers.

Par. 3. That with the purpose, intent, and effect of discouraging and stifling competition in interstate commerce in the sale of such bagging, all of the respondents do now refuse, and for more than a year last past have refused, to sell any of such ties unless the prospective purchaser thereof would also buy from them bagging to be used with the number of ties proposed to be bought; that is to say, for each six of such ties proposed to be bought from the respondents the prospective purchaser is required to buy six yards of such bagging.

The respondents filed an answer admitting the facts stated in paragraphs 1 and 2, but denying the Facts stated and the conclusion therefrom contained in paragraph 3, They appeared and offered testimony before the Commission.

The Commission’s material findings of fact and its conclusions of law are as follows:

Par. 2, That within three years last past respondents, Anderson Gratz and Benjamin Gratz, copartners, doing business under the firm name and style of Warren, Jones & Gratz; P. P. Wiliams, W. 4H. Fitzhugh, and Alexander Fitzhugh, copartners, doing business under the firm name and style of P. P. Williams & Co., and C. O. Elmer, adopted and practiced the policy of refusing to sell steel ties to those merchants and dealers who wished to buy them from them unless such merchants and denlers would also buy from them a corresponding amount of jute bagging. * * *

Par. 4, * * * The dominating and controlling position occupied by said respondents in the sale and distribution of ties made it possible for them to force would-be purchasers of ties to also buy from them bagging manufactured by the American Manufacturing Co., and In many ins I ances, Raid respondents refused to sell ties unless the purchuser would also buy from them a corresponding almount of bagging and such purchasers were oftentimes compelled to buy bagging manufactured by the American Manufacturing Co., from said respondents, in order to procure a sufficient supply of steel ties used for the purpose aforesaid.

CONCLUSIONS OF LAW.

That the methods of competition set forth In the foregoing findings us to the facts, in paragraphs 1, 2, 3, and 4, and each and: all of them are, under the circumstances therein set forth, unfair methods of competition in interstate commerce, against other manufacturers, dealers, and distributors of jute bagging, and against other dealers and distributors in the material known as sugarbag cloth, and against manufacturers, dealers, and distributors of the bagging known as rewoven bagging and second-hand bagging, in violation of the provisions of section 5 of an act of Congress, Approved September 26, 1914, entitled “An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,” and that there is not sufficient proof submitted In the hearings to sustain the paragraph in the complaint charging a violution of section 3 of an act of Congress known as the Clnyton Act. (Act Oct, 15, 1914, C, 823, 38 Stat. 731 [Comp, St. 18835 c].) DECISIONS ON PETITIONS TO REVIEW, By agreement between the parties the Commission filed a transcript of the entire record in the proceeding before it. This court is given power by the act to affirm, modify, or set aside such an order, the Commission’s findings of fact to be conclusive if supported by testimony. There is testimony to support the findings of fact and therefore the question before us is whether they do support the Commission’s conclusion of law that the method of competition forbidden is unfair within the meaning of section 5 of the act of September 26, 1914. It seems to us that unfair methods of competition between individuals are not contemplated by the act. Congress could not have intended to submit to the determination of the Commission such questions as whether a person, partnership, or corporation had treated or bribed the employees of a competitor for the purpose of inducing them to betray their employer. We think the unfair methods, though not restricted to such as violate the antitrust acts, must be at least such as are unfair to the public generally. It seems to us that section 5 is intended to provide a method of preventing practices unfair to the general public and very particularly such as if not prevented will grow so large as to lessen competition and create monopolies in violation of the antitrust acts. Such a preliminary inquiry and determination constitutes a most important supplement in carrying out the public policy which those acts are intended to vindicate. This view is confirmed by the language of the section:

Whenever the Commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition in commerce, and {f it shall appear to the Commission that a proceeding by it In respect thereof would be to the Interest of the public, if 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 tixed at least thirty days after the service of said complaint, No authority is given to any individual to present his grievances, and the Commission is to interpose only in the interest of the public.

That the Commission did not find sufficient proof to sustain the second count in the complaint, viz. that the method of the respondents found to be unfair violated section 3 of the act of October 15, 1914, known as the Clayton Act, which makes unlawful any condition, agreement, or understanding that may lessen competition or tend to create a monopoly, shows that the method found to be unfair must have been unfair in certain individual transactions, And we discover no evidence to support the finding in paragraph 2 that the respondents “ adopted and practiced the policy of refusing to sell steel ties to those merchants and dealers who wished to buy them from them unless such merchants and dealers would also buy from them a corresponding amount of jute bagging.” It is the natural and prevailing custom in the trade to sell ties and bagging together, just as one witness testified it is to sell cups and saucers together. Such evidence as there is of a refusal to sell is a refusal to sell at all to certain persons with whom the respondents had previous unsatisfactory relations and a refusal to sell ties without bagging at the opening of the market in 1916 and 1917, when there was fear that, owing to scarcity of ties and the prospect of large crops, the marketing of the cotton crop might be endangered by speculators creating a corner in ties. The evidence is that with these exceptions the respondents sold ties without any restrictions to all who wanted to buy, and indeed made extraordinary efforts to induce the manufacturers of ties to increase their output so that all legitimate dealers and all cotton raisers should get enough ties and bagging at reasonable rates to market their cotton. It is only these exceptional and individual cases, which established no general practice affecting the public that can sustain the findings in paragraph 4.

Counsel for the Commission calls our attention to the opinion of the Circuit Court of Appeals for the Seventh Circuit, Sears, Roebuck & Co., Petitioners, v. Federal Trade Commission, Respondent, 258 Fed. Rep. 807. The practice there prohibited as unfair was extensive advertising containing false and misleading statements calculated to deceive all purchasers and to discredit all competitors. It was clearly a method unfair to the public generally.

As we think there is no evidence to support any general practice of the respondents to refuse to sell ties unless the purchaser bought at the same time the necessary amount of the American Manufacturing Co.’s bagging, and that the Commission has no jurisdiction to determine the merits of specific individual grievances, the order is reversed, DECISIONS ON PETITIONS TO REVIEW,

WARD BAKING CO. vy, FEDERAL TRADE COM-

MISSION,*

(Circuit Court of Appeals, Second Circuit. February 26, 1920.) No. 90.

Commerce. Key No. 40—(1) Sates sy AGENTS FROM Wacons Sent Across State Line Nor Inrersrate

CoMMERCE.

Where a baking company sends its wagons across a state line in charge of its drivers, who call on retail dealers and then and there sell and deliver bread to them, the sales do not constitute interstate commerce, subject to regulation by the Federal Trade Commission.

(The syllabus is taken from 264 Fed. Rep. 330.) Petition to Review Order of Federal Trade Commission. - Proceeding before the Federal Trade Commission against the Ward Baking Co. On petition to review an order of the Federal Trade Commission. Order reversed. Eugene H. Hickok, for petitioner.

Edward L. Smith (Claude R. Porter and W. T. Rob-erts, both of Washington, D. C., of counsel) for respondent.

Before Ward, Rogers, and Manton, circuit judges. Wann, Circuit Judge:

November 26, 1917, the Federa] Trade Commission filed a complaint under section 5 of the act of September 26, 1914, entitled “An act to create a Federal Trade Commission, to define its powers and duties and for other purposes,” against the Ward Baking Co. on the ground that the company had at periods of several consecutive days in the year 1917 given gratis to each purchaser of its bread in certain places a quantity of bread equal to the amount of the purchase with the intent of suppressing competition in the manufacture and sale of bread in interstate commerce and that a proceeding by the Commission in respect thereof would be to the interest of the public.

The company filed an answer, denying this charge, appeared and offered testimony at the hearing. The Com- 1Reviewing order of Commission in Federal Trade Commission v, Ward Baking Co., 1 F. T. C. 888.

WARD BAKING CO. V. FEDERAL TRADE COMMISSION.

mission made a report and findings of which the material finding for the purposes of this opinion is: ParagkaPlt THREE. That respondent during the said month of May, in the year 1917, for a period of about four weeks, in the cities of New Bedford and Fall River, in the State of Massachusetts, and other towns and cities in said State, and also tn the towns of North Tiverton and Stone Bridge, in the State of Rhode Island, did give to all who purchased bread from ft an amount of bread equal to the amount so purchased with the intent and purpose of suppressing and stifling competition in the sale of bread In the towns and cities named in the State of Massachusetts and the State of Rhode Island, and that all the bread so sold and given away in the State of Rhode Island, during said period when sold free bread campaign was being so conducted, was manufactured at the city of Cambridge, in the State of Massachusetts, and shipped by the said respondent from the city of Cambridge to the city of Fall River, both in the State of Massachusetts, and from said city of Fall River was distributed by wagons, trucks, and other conveyances across the State line and into the State of Rhode Island, in the vicinity of North Tiverton and Stone Bridge, and there given away to purchasers of bread from said respondent in the manner and form aforesaid, and that said bread so given away and distributed in the State of Rhode Island was transported and sold in interstate commerce across the state line dividing the State of Massachusetts and the State of Rhode Island, for the purpose nnd with the effect of stifling and suppressing competition in interstate commerce as aforesaid. This method of competition the Commission held to be unfair. September 2, 1919, the Commission entered an amended order requiring respondent to desist from the practice:

Now, therefore, it {s ordered that the respondent, Ward Baking Company, its officers, directors, agents, servants, nnd employees, cease and desist from directly or indirectly initiating or carrying on, in the course of interstate commerce, any so-called free-bread campaign, or any practice of supplying bread free of cost to retail deulers In quantities equal to those purchased from respondent by such dealers, or in any other quantities, where such practice is calculated to or does stifle or suppress competition in the manufacture and sales of bread. :

It appeared from the testimony that the respondent transported the bread in question in its own wagons from Fall River, Mass., to Tiverton and Stone Bridge, R. L.; their wagons calling at the retail stores in those places and their drivers then and there selling the respondent’s bread to such storekeepers as wanted to buy, and then and there delivering additional bread gratis to the purchaser.

Doubtless bread sold in Massachusetts to be delivered to the purchasgr in Rhode Island would be interstate commerce, but that is not this case. Moreover, the Commission is not finding the act of transportation from Massachusetts tu Rhode Island unfair, but the method of local sales made in Rhode Island. Jf the respondent had its own stores in Rhode Island, and carried to them from Massachusetts bread to be there sold, this method of selling could not be considered interstate commerce, DECISIONS ON PETITIONS TO REVIEW, The question arose in respect of the right of the city of Covington, a municipality of Kentucky, to impose @ license tax upon the business of an Ohio corporation making sales in exactly this way in Kentucky. The Supreme Court held that such sales were subject to the tax, and not invalid as a regulation of interstate commerce. Wagner v. The City of Covington, 251 U. S. 93 (Dec. 8, 1919). Mr. Justice Pitney said at pp. 99 and 1038: Plaintiffs were and are manufacturers of such drinks, having their factory and bottling works In the City of Cincinnati, in the State of Ohio, on the opposite side of the Ohio River from Covington, They have carried on and do carry on the business of selling in Covington soft drinks, the product of their manufacture, in the following manner: They have a list of retail dealers In Covington to whom they have been and are in the habit of making sales. Two or three times a week a wagon or other vehicle owned by plaintiffs is loaded at the factory in Cincinnati and sent across the river to Covington, and calls upon the retail dealers mentioned, many of whom have been for years on plaintiff’s list and have purchased their goods under a general understanding that plaintiffs’ vehicle would call occasionally and furnish them with such soft drinks as they might need or desire to purchase from plaintiff. When a customer's place of business is reached by the vehicle the driver goes into the storeroom and either asks or looks to see what amount of drinks 1s needed or wanted. He then goes out to the vehicle and brings from it the necessary quantity, which he carries into the store and delivers to the customer. Upon his trips to Covington he always carries sufficient drinks to meet the probable demands of the customers, based on past experience; but, with the exception of occasional small amounts carried for delivery in response to particular orders previously received at plaintiffs’ place of business in Cincinnati, all sales in Covington are made from the vehicle by the driver in the manner mentioned. * * * Of course the transportation of plaintiffs’ goods across the state line is of itself interstate commerce; but it is not this that is taxed by the city of Covington, nor is such commerce a part of the business that is taxed, or anything more than a preparation for it. So far as the itinerant vending is concerned the goods might just as well have been manufactured within the State of Kentucky; to the extent that plaintiffs dispose of their goods in that kind of sales, they make them the subject of local commerce; and, this being so they can elutin no immunity from local regulations, whether the goods remain in original packages or not.

As interstate commerce is not involved, the order is reversed, NEW JERSEY ASBESTOS CO, V, FEDERAL TRADE COMMISSION,

NEW JERSEY ASBESTOS CO. v. FEDERAL

TRADE COMMISSION:

(Cireuit Court of Appeals, Second Circuit. February 26, 1920.) No. 91.

1. Evipencre Krey No, 21.—Jupictat Notice TAKEN oF BUSINESS Practice tro ENTERTAIN CUSTOMERS AND ‘THEIR EMPLOYEES. The court takes judicial notice that the practice of entertaining customers and employees of customers by furnishing them liquor, cigars, meals, theater tickets, ete., found by the Federal Trade Commission to be unfair, has been an incident of business from time immemorial, especially as expenditures for such purposes are recognized as a proper deduction by the income tax regulations.

2. Master AND SERVANT Key No. 30 (4)—Girrs to EMPLOYEE TO Inpucre ConTRACT 18 FRAUD, JUSTIFYING DISCHARGE. The payment of money or the giving of valuable presents to an employee to induce him to influence his employer to make a contract of purchase Is a fraud, justifying the employee's discharge within his contract term of service.

3. TRapE-MARKS AND TRADE Names Key No. 804 New, Vor. 8A Kry-No. SeneS--FEpERAL TRADE COMMISSION WITHOUT Jurispiction TO REGULATE ENTERTAINMENT OF CUSTOMER'S

EMPLOYEES.

The practice of a company engaged in Interstate commerce In entertaining employees of Its customers with liquor, cigars, meals, theater tickets, etc., is not a matter so uffecting the public as to be within the jurisdiction of the Federal Trade Commission.

(The syllabus is taken from 264 Fed. 509.) Petition to Review Order of Federal Trade Commission.

Petition by the New Jersey Asbestos Company for review of an order of the Federal Trade Commission, Order reversed.

Robert W. Crawford, of New York City, for petitioner, Edward L. Smith, of Washington, D. C. (Claude R. Porter and Charles S. Moore, both of Washington, D. C., of counsel), for respondent.

Before Ward, Rogers, and Manton, circuit judges. 1 Reviewing order of Commission in ¥ ‘ederal Trade Commission v, The New Jersey Asbestos Co., 1 F. T. C, 472. DECISIONS ON PETITIONS TO REVIEW, Warp, Circuit Judge:

January 6, 1919, the Federal Trade Commission issued a complaint against the New Jersey Asbestos Company, under Section 5 of the Act of September 26, 1914 (Comp. St. J 8836e), entitled “An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,” alleging that the company had during the year 1918 been giving to employees of its customers and prospective customers liquors, cigars, meals, theater tickets, valuable presents, and sums of money and entertainments to induce them to influence their employers to purchase the company’s products and that a proveeding y the Commission in respect thereof would be to the interest of the public.

The company filed an answer, admitting that it is engaged in interstate as well as intrastate business and that it had paid reasonable amounts in furnishing entertainment to employees of customers and as incidental to such entertainment had supplied liquors, cigars, meals, and theater tickets, but denying that this was done for the purpose of inducing them to influence their employers to buy its goods, and especially denying that it ever gave them valuable presents or sums of money. The charge of giving valuable presents and sums of money has been abandoned by the Commission. May 27, 1919, the Commission filed its report. and two findings of fact, and its conclusion of Jaw as follows: First. That the respondent, the New Jersey Asbestos Co., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New Jersey, having its principal office and place of business at the city of New York, in the State of New York, and is now, and for more than one year last past has been, enguged in manufacturing and selling engine packings composed of asbestos, metal and asbestos, flax, wood fiber and kindred products throughout the States and Territories of the United States, and that at all times hereinafter mentioned, the respondent has carried on and conducted such business in direct competition with other persons, firms, copartnerships, and corporations manufacturing and selling like products. Second. That said respondent, the New Jersey Asbestos Co., in the course of its business of manufacturing and selling engine packings composed of asbestos, metal and xasbestos, flax, wood fiber and kindred products throughout the States and Territories of the United States, for more than one yeur last past has been lavishly giving gratuities, such as liquor, cigars, meals, theater tickets, and entertainment to employees of customers as an inducement to influence their employers to purchase or to contract to purchase from the said respondent, the New Jersey Asbestos Co., engine packings composed of asbestos, metal and asbestos, flax, wood fiber and kindred products without other consideration therefor.

CONCLUSION.

That the methods set forth in the foregoing findings of fact, under all the circumstances therein set forth, are unfair methods of competition in violation of the provisions of section 5 of the act of Congress, approved September 26, 1914, entitled “An act to create a Federal Trade Commission, to define its powers and duties, und for other purposes.”

The findings of fact being mere conclusions, it is necessary to examine the evidence to see whether they are supported by any testimony or not. It shows that the officers of the company in the year 1918 did entertain at the company’s expense both customers and employees of customers, and that the salesmen down to May 1 were employed on a salary or on a salary and commission basis, and were allowed to charge in their monthly accounts reasonable lump sums for entertainment. After May 1 they were on a commission basis only, and any entertainment given by them was given at their own expense.

We have held in Federal Trade Commission v. Gratz, 258 Fed. Rep. 314, that only unfair practices which affect the public as distinguished from individuals, are within the jurisdiction of the Commission. We take judicial notice of the fact that the method of entertainment found to be unfair has been an incident of business from time immemorial. It is recognized by article 133 of the regulations covering the assessment of income tax promulgated January 2, 1918, as follows:

Spending money. So-called spending or treating money, if actually advanced by corporations to their traveling salesmen to be used by them as a part of the expenses incident to selling the product of such corporations, is an allowable deduction in a return of income by such corporations. The deduction of such expenditures is conditioned upon a satisfactory showing that all the allowance claimed as a deduction was actually expended for and was an ordinary and usual expense incurred in selling the product or merchandise of the corporation. The payment of money or the giving of valuable presents to an employee to induce him to influence his employer to make a contract of purchase is a fraud justifying the discharge of the employee within his contract term of service, and perhaps the recovery by the purchaser of the amount or value of such inducement from the seller, upon the theory that it must have been included in the price. But even in such a case we think it would be a matter between individuals, and not one so affecting the public as to be within the jurisdiction of the Commission, under our decision in the Gratz case. However, it stretches theory to the breaking point to suppose that the entertainment expenses found unfair in this case constitute fraud practiced by the respondent and by the employees on the purchasers of the respondent’s goods. It is difficult to conceive that the purchaser would have a right to recover the amount of such entertainment as a part of the price paid for the goods bought, or that he would have a right to discharge the employee within the term of his service on this ground. So broad a construction of the statute would bring within the disposition of the Commission a vast number of subjects and controversies which in their nature belong to the legislative and judicial departments of the Government. For instance, advertising is a method of selling goods which, without increasing their merits, increases their cost; and so ‘does securing servants of competitors by paying them higher wages, though we suppose no one would say the act gives the Commission a right to regulate these matters. The order is reversed.

BEECH-NUT PACKING CO. v. FEDERAL TRADE

COMMISSION.)

(Circuit Court of Appeals, Second Circuit. February 26, 1920.) No. 92.

TRADE-MARKS AND TRADE-NAMES Kry 804, New, Vor. 8A Key-No. SERIKS—MANUFACTURER HeLD Nor SunJect TO ORDER OF Feperar TRADE COMMISSION; “ UN¥FarR METHOD OF COMPE-

TITION.”

That a manufacturer of products sold in interstate commerce to jobbers and wholesale dealers, who in turn sell to other jobbers and wholesale and retail dealers, issues circulars to its trade suggesting prices for resale, both at wholesale and retail, and refuses to continue to sell to any dealer who fails to maintain such prices, or who sells to another dealer failing to maintain them, in the absence of contracts requiring adherence to such prices, Held not to constitute an “unfair method of competition,” in violation of Federal Trade Commission Act Sept. 26, 1914 (Comp. St. Par. 8836e).

(The syllabus is taken from 264 Fed. 885.) Petition to Review Order of Federal Trade Commission.

Petition by the Beech-Nut Packing Co. to review an order of the Federal Trade Commission. Order reversed. Charles Wesley Dunn, of New York City (Charles E. Hughes, of New York City, of counsel), for petitioner. Edward L. Smith, of Washington, D. C. (Claude R. Porter and Marshal B. Clarke, both of Washington, 1 Reviewing order of Commission in Federal Trade Commission v. Beechnut Packing Co., 1 5. T. C. 616. Petition for certiorari filed by the Commission in the United States Supreme Court May 10, 1920, and granted June 1, 1920, BEECH-NUT PACKING CO. V. FEDERAL TRADE COMMISSION, D. C., and Joseph A. Burdeau, of New York City, of counsel), for respondent.

Before Ward, Hough, and Manton, circuit judges. Warn, Circuit Judge:

April 15, 1918, the Federal Trade Commission issued a complaint against the Beech-Nut Packing Co. under section 5 ‘of the act of Congress of September 26, 1914 (Comp. St. § 8836e), entitled “An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,” charging the company with using an unfair method of competition in interstate commerce, viz. in selling its products to such purchasers, principally wholesalers and jobbers, as do not resell at a price lower than that fixed by the company and in refusing to sell to such as do, with the purpose of eliminating competition in the sale of the company’s products and that a proceeding by the Commission in respect to this method would be to the interest of the public. The company appeared and answered, admitting these facts, but denying that it had entered into any agreement with purchasers requiring them to maintain its prices, or in any way qualifying their title to the articles purchased, or restricting their freedom to sell to anyone and charge any price they chose.

An agreed statement of facts was filed. June 30, 1919, the Commission filed its report and findings. The respondent is engaged in interstate commerce in selling divers food products, such as sliced bacon, sliced beef, peanut butter, candies, chewing gum, etc., under the trade name “ Beech-Nut Brand.” The Commission’s findings of fact are very long, and it will be sufficient for. the purposes of our decision to state the following: ParaoraPH Four. That respondent customarily markets its ‘ products principally through jobbers and wholesalers In the grocery, drug, candy, and tobacco lines, who In turn resell to retailers in these lines, all of which wholesale and retail dealers are selected as desirable customers for the reason that they are known or believed to be (@) of good credit standing; (0) willing to resell at the resale prices suggested by respondent and who do resell at such prices, as hereinafter set forth; (ec) willing to refuse to sell and who do refuse to sell to jobbers, wholesalers and retailers who do not resell at the resale prices suggested by respondent, and who do not sell to such jobbers, wholesalers ani retailers as also hereinafter set forth; (d@) good and satisfactory merchandisers in other respects. Such jobbers, wholesalers, and retailers are designated by the respondent as “selected ” or “ desirable” dealers. Respondent also sells “direct” in a few instances to certain large retailera who are selected on the same basis as the aforesaid jobbers, wholesalers, and retailers. The total number of such dealers handling the products of respondent includes the greater proportion of the jobbers, wholesalers, and retailers, respectively, in the grocery trades, and a large proportion of the jobbers, wholesalers, and retailers in the drug, gindy, and tobacco trades, respectively, throughout the United States.

DECISIONS ON PETITIONS TO REVIEW.

ParaGRaPH Five, That respondent, in the sale and distribution of its products has adopted and maintained, and still maintains, policy known as the ‘‘ Beech-Nut Policy,” and requests the cooperation therein of all dealers selling the products manufactured by it, dealing with each customer separately. ParacrapH SEVEN. In order to carry out said Beech-Nut policy and to secure such cooperation, respondent

(a) Issues circulars, price lists and letters to the trade generally showing suggested uniform resale prices, both wholesale and retail, to be charged for Beech-Nut products.

(b) Requests and insists that the aforesaid selected jobbers, wholesalers, and retailers resell only at the suggested resale prices.

(c) Requests and insists that the aforesaid selected jobbers, wholesalers, and retailers sell only to such other jobbers, wholesalers, and retailers as have been and are willing to resell and do resell at the prices so suggested by the respondent; and requests and insists that such jobbers, wholesalers, and retailers discontinue selling to other jobbers, wholesalers, and retailers who fail to resell at the prices so suggested by respondent.

(d) Makes it known broadcast to such selected jobbers, wholesalers and retailers, whether sold “direct” or not, that if they, or any of them, fail to sell at the resale prices suggested by the respondent as aforesaid, respondent will absolutely refuse to sell further supplies of its products to them, or any of them, and will also absolutely refuse to sell any jobbers, wholesalers, and retailers whatsoever who sell to other jobbers, wholesalers, or retailers falling to resell at the prices suggested by respondent. Paracraryu Eiaut. That respondent, in the carrying out of said policy (@) Has within the time aforementioned refused and does refuse to sell its products to practically all such jobbers, wholesalers, and retailers as do not resell at the prices so suggested by the respondent.

(6) Has within the time aforementioned refused and does refuse to sell to practically all such jobbers, wholesalers and retailers reselling to other jobbers, wholesalers, and retailers who have failed to resell at the prices so suggested by the respondent.

(c) Has within the time aforementioned refused and does refuse to sell to practically all so-called mall-order houses engaged in juterstute commerce, on the ground that such mail-order houses frequently sell at cut prices, and has within the time aforementioned refused and does refuse to sell to practically all jobbers, wholesalers, and retailers who sell its products to such mail-order houses. :

(d) Has within the time aforementioned refused and does refuse to sell to practically all so-called price-cutters.

(e) Has maintained within the time aforementioned and does maintain a large force of so-called specialty salesmen or representatives who call upon the retail trade and solicit orders therefrom to be filled through jobbers and wholesalers, which orders are commonly known in the trade as “turnover orders"; that respondent’s salesmen, under its instructions, have within the time aforementioned refused and do refuse to accept any such turnover orders to be filled through jobbers and wholesalers who themselves sel] or have sold at less than the suggested resale prices or sell or have sold to jobbers, wholesalers, and retailers who sell or have sold at less than such suggested resale prices; and in such cases have requested such retailers to name other jobbers,

(f) Has within the time aforementioned reinstated and does reinstate as distributors of its products, jobbers, wholesalers, and retailers previously cut off or withdrawn from the list of selected jobbers, wholesalers, and retailers for failure to resell at the prices suggested by the respondent and/or for selling to distributors who do not maintain such suggested resale prices, upon the basis of declarations, assurances, statements, promises, and similar ex- Juessluus, us Lue case Way de, by said distributors, respectively, which satisfy the respondent that such distributors will thereafter resell at the prices suggested by the respondent and/or will refuse to sell to distributors who do not maintain such suggested resale prices.

(g) Has within the time aforementioned added and does add to its list of new distributors, concerns reported by its representatives as declaring that they intend to and will resell at the prices suggested by the respondent, and/or will refuse to sell to distributors who do not muintain such suggested resale prices.

(h) Has within the time aforementioned utilized a system of key numbers or symbols stamped or marked upon the cases containing “ Beech-Nut Brand” products, thus enabling the respondent, for any purpose whatsoever, to ascertain the identity of the distributors from whom such products were purchased; and that repeatedly, within the time aforementioned, when instances of price cutting have been reported to respondent by the selected wholesalers and retailers, or ascertained in other ways, its salesmen and representatives have been instructed by respondent to investigate, and that in pursuance of these instructions salesmen and representatives of respondent have by means of these key numbers or symbols traced the price cutters from whom the goods have been obtained and have thus ascertained the identity of such price cutters, and have also thus traced and ascertained the identity of distributors from whom price cutters have purchased “ Beech-Nut Brand” products; and have thereafter refused to supply all such dealers with its products, whether such dealers were themselves cutting the suggested resale prices or were selling to dealers cutting the suggested resale prices.

(i) Has within the time aforementioned maintained and does maintain card records containing the names of thousands of jobbing, wholesale, and retail distributors, Including the aforesaid selected distributors, and in furtherance of its refusals to sell goods either to distributors selling at less than the suggested resale price, or to distributors selling to other distributors selling at less than the suggested resale prices, has listed upon those cards bearing the names of such distributors the words “ Undesirable— Price cutters,” “ Do not sell,” or “D. N. S.,” the abbreviation for “Do not sell” or expressions of a like character, to indicate that the particular distributor was not, in the future, to be supplied with respondent’s goods on account of failure to maintain the aforesaid suggested resale prices or on account of failure to discontinue selling to dealers failing to maintain such suggested resale prices. When respondent has received declarations, assurances, statements, promises, and similar expressions, as the case may be, by said distributors, respectively, which satisfy the respondent that such distributors will resell at the prices suggested by the respondent, and/or discontinue selling to distributors failing to maintain the resale prices suggested by respondent, said respondent has issued instructions to “ Clear the record,” or directions of similar Import, notation of which Is made on the cards, and has thereafter permitted shipments of {ts products to be made to such distributors; and such distributors to whom shipments are thus allowed to go forward constitute the respondent's list of so-called “selected” jobbers, wholesalers, and retailers, and no distributor is thus Hsted on such card records as one to whom goods are allowed to go forward who fails to maintain the resale prices suggested by respondent or sells to distributors failing to resell at such suggested prices; and when a jobber, wholesaler, or retailer 1s reported as failing to maintain the suggested resale prices, and/or ns selling to distributors who fall to maintain such suggested resale prices, and has been entered in the card records as one to whom shipments should not go forward, respondent notifies those jobbers, wholesalers, and retailers who supply said distributor of this fact, and also notifies its specialty Salegmen, and gives similar notices to said jobbers, wholesalers, and retailers and to its specialty salesmen when reinstatements are made in its said list of “selected” jobbers, wholesalers, and retailers, The Commission’s conclusion of law is: That the methods of competition set forth in the foregoing findings are, under the circumstances therein set forth, unfair methods of competition in interstate commerce in violation of the provisions of an act of Congress approved September 26, 1914, entitled “An act to create n Federal Trade Commission, to define its powers and duties, and for other purposes.”

June 30, 1919, the order under review issued as follows: Now, therefore, it is ordered that respondent, Beech-Nut Packing Co., its officers, directors, agents, servants, and employees cense and desist from, directly or indirectly, recommending, requiring, or by any means bringing about the resale of Beech-Nut products by distributors, whether at wholesale or retail, according to any system of prices fixed or established by respondent, and more particularly by any or all of the following means:

1. Refusing to sell to any such distributors because of their failure to adhere to any such system of resule prices,

2. Refusing to sell to any such distributors because of their having resold respondent’s sald products to other distributors who have failed to adhere to any such system of resale prices.

3. Securing or seeking to secure the cooperation of its distributors in maintaining or enforcing any such system of resale rices, P 4. Carrying out or causing others to carry out a resale price maintenance policy by any other means, The subject is one affecting the public generally and plainly within the jurisdiction of the Commission. The ground upon which the conclusion of law rests is that the method is unfair, because its stifles competition and so restrains trade. The obvious purpose of the respondent is to prevent any competition as to the resale price between purchasers of its products. Such a method Fonte upon an agreement between a manufacturer and purchasers severally, was held to be a violation of the Sherman Act (Comp Sts. §s 8820-8823, 8827-8830) in Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 370. It is difficult to say why a different conclusion should be reached, if the same result is attnined by acquiescence and cooperation without express agreement between the manufacturer and his purchusers severally. Eastern States Retail Lumber Association v. United States, 234 U.S. 600. But we understand the Supreme Court to hold in United States v. Colgate & Co., 250 U.S. 300, that a similar but less drastic method of sale constitutes merely the exercise of a man’s right to do what he will with his own and is not obnoxious to the Sherman Act.

The facts as found by the Commission, being supported by testimony, are conclusive; but the effect of them is a question of aw, to be expressed i in a conclusion of law, and e Commission so describes it. We do not see how this conclusion can be sustained in face of the decision in the Colgate case. he order is reversed, Manton, Circuit Judge (concurring) ! I concur in the result here announced and will state my reasons:

In considering the cases which arise under the jurisdiction of the Federal Trade Commission, the distinction between the Sherman Act (July 2, 1890, chap. 647, 26 Stat. 209) and the act which creates and defines the jurisdiction and duties of the Federal Trade Commission (Act of Congress, Sept. 26, 1914, chap. 315, sec. 5, 38 Stat. 719) must be kept in mind. The purposes of the Sherman Act and of the Federal Trade Commission act are different. The Sherman Act is intended for the prohibition of contracts and combinations in restraint of trade which are of sufficient force of oppression or coercion as amount to a monopoly or trust. In order for the Government to succeed in an equity or criminal action, or for a private litigant to succeed, where he seeks damages as a result of such alleged trust or combination, each must successfully bear the burden of establishing a combination which restrains trade. No such obligation is imposed upon the Federal Trade Commission before its order may issue requiring an individual, partnership, or corporation engaged in commerce, to desist from a practice which might lead eventually to an unlawful trust or combination which would be in restraint of trade. Section 5 of the Federal Trade act prohibits unfair methods of competition in commerce, declaring them unlawful. This act forbids all unfair methods of competition. It does not define what is unfair competition, but leaves that to the Commission for determination. Section 5 provides that the Commission is empowered and directed to prevent persons, partnerships, or corporations, except banks and common carriers subject to the acts to regulate commerce, by [from?] using methods of unfair competition in commerce. It will thus be observed that there is no restriction or qualification to the powers thus conferred, but the method of commerce must be unfair. ' This legislation appears to be analogous to that provided for in the creation of the Interstate Commerce Commission. The Interstate Commerce Act conferred _ the powers upon the commission to enforce any order or orders provided in the act that it might issue, and it gives to the Interstate Commerce Commission the power to issue an order to cease and desist a violation. B. & O. R. Co. v. Pitcairn Coal Co., 215 U. S. 481. The Interstate Commerce Commission was created for the purpose of receiving and correcting any abuse or injustice perpetrated 186395 °-—20-——86 upon shippers by railroads or injustice to the railroads. What were reasonable rates was to be determined by the commission. It was held by the Supreme Court, with respect to enjoining or setting aside the orders of the commission by the Federal courts, that authority of the courts, in reviewing their determination, was confined to whether there had been violations of the Constitution or of the power conferred by statute or any exercise of power so arbitrary as to virtually transcend the authority conferred. Kansas City Ry. Co. v. United States, 231 U. S. 423; Interstate Commerce Commission v. L. & N. Ry. Co., 227 U. S. 88. The Federal Trade Commission | Act provides that when an order is made and it is based upon a finding of unfair competition supported by evidence, it is conclusive upon the courts, and this court so held in Federal Trade Commission v. Gratz, 258 Fed. Rep. 314. n my opinion, Congress had in mind in this legislation the prevention of acts which amount to unfair competition at their very inception. In this manner, the antitrust law was supplemented. To make successful either a criminal prosecution or other liability under the Sherman Act, it is necessary to find that a trust or monopoly is created which restrains trade. One act which may be an act of unfair competition may, of itself, restrain trade and may do damage toa complainant. The Federal Trade Commission Act was intended to reach such an unfair business method where the antitrust law could not do so. Of course, if all unfair acts were dealt with by the Federal Trade Commission, there would be no monopoly or trust created. It was intended by section 5 of the act to prevent practices or methods of business unfair to the public which, if not prevented, would grow and create monopolies, and thus restrain trade and lessen competition. In the case of Dr. Miles Medical Co. v. Park & Son, 220 U. S. 378, the Supreme Court held that where the defendant successfully prevented competition by fixing resale prices between purchasers of the products of the defendant, this amounted to a restraint of trade, and was a violation of the Sherman Anti-trust Act of July 2, 1890. The only difference between the price fixing of the Dr. Miles case and the price fixing in the “ Beech-Nut merchandizing policy,” which the Federal Trade Commission in the case at bar has found offensive as an unfair method of competition, is that in the former case there was an agreement in writing provided for, while in the latter the success or failure of the plan depended upon a tacit understanding with the purchasers and prospective purchasers. It is difficult to see any difference between a written agreement and a tacit understanding. In each case, if the agreement, written or unwritten, is not lived up to, it means that the prospective purchaser could not buy or obtain the goods he wished. This may of itself create a restraint of trade. In the case of Boston Store v, American Graphophone Co., 246 U. S. 8, speaking of the Dr. Miles case, the court said:

It was decided that under the general law the owner of movables (in that ease, proprietary medicines compounded by a secret formula) could not sell the movables and lawfully, by contract. fix a price at which the product should afterwards be sold, because to do so would be at one and the same time to sell and retain, to part with and yet to hold, to project the will of the seller, so as to cause it to control the movable parted with when it was not subject to his will, because owned by another, and thus to make the will of the seller unwarrantedly take the place of the law of the land as to such movables. It was decided that the power to make the limitation as to price for the future could net he exerted consistently with the prohibitions against restraint of trade and monopoly contained in the antitrust law. In the plan of the petitioner herein called a “suggestion,” which in truth 1s a tacit understanding, to do precisely what was done in the Dr. Miles case, disobedience of the “suggestion” would result in a failure to be able to buy further from the petitioner. It has been held that the trader or manufacturer who carries on an entirely private business may sell to whom he pleases. U.S. v. Trans-Missouri Freight Assn., 166 U.S. 290. And this case was approved in United States v. Colgate, 250 U. S. 300. However, in the Colgate case the court dealt solely with the purpose of the antitrust act in its prohibition of monopolies, contracts, and combinations which interfere with the free exercise of the rights of a merchant to engage in trade and commerce. The court said that in the absence of any purpose to create or maintain a monopoly, the act does not restrict the right of a trader or manufacturer, engaged in an entirely private business. freely to exercise his own independent discretion as to the parties with whom he will deal. Tt distinguishes the Dr. Miles ease for the reason that it was found in this case there existed an unlawful combination which was effected through contracts which undertook to prevent dealers from freely exercising the right to sell. Referring to the facts in the Colgate case, the court said: Considering all said in the opinion’? (notwithstanding some serious doubts), we are unable to accept the construction placed upon It by the Government. We can not, e. £., wholly disregard the statement that “ The retailer, after buying, could, if he chose, give away his purchase or sell it at-any price he saw fit, or not sell it at all; his course in these respects being affected only by the fact that he might by his action incur the displeasure of the manufacturer who could refuse to make further sales to him, as he had the undoubted right to do.’ And we must conclude that, as interpreted below, the indictment does not charge Colgate & Co. with selling its products to deulers under agreements which obligated the latter not to resell except at prices fixed by the company. 1In the court below.

\ In view of this recent pronouncement in the Colgate case and even accepting the finding of facts of the Commission, I think we are forced to the conclusion that the acts found and charged in the method of doing business under the “Beech-Nut merchandising policy” are not unfair methods of competition and that therefore this court must hold, as a matter of law, that the Commission exceeded its power in making the order appealed from.

FEDERAL TRADE COMMISSION v. GRATZ

ET AL.¹

(Argued April 20 and 21, 1920. Decided June 7, 1920.) No. 492.

1. TRADE-MARKS AND TRADE-NAMES, KEY No. 804, NEW, VOL. 8A, KEY-NO. SERIES—FEDERAL TRADE COMMISSION’S ORDER TO DESIST FROM UNFAIR COMPETITION MUST BE BASED ON SUFFICIENT COMPLAINT. Under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), providing that, when the Federal Trade Commission has reason to believe that a person, etc., has used an unfair method of competition, it shall formulate and serve a complaint, stating the charges, and after a hearing, if it deems the method of competition in question prohibited thereby, shall issue an order requiring the accused to cease and desist from using such method, if the complaint is plainly insufficient to show unfair competition, there is no foundation for an order to desist.

2. TRADE-MARKS AND TRADE-NAMES, KEY No. 804, NEW, VOL. 8A, KEY-NO. SERIES—FEDERAL TRADE COMMISSION’S ORDER MUST FOLLOW COMPLAINT. An order of the Federal Trade Commission to cease and desist from using a specified method of competition, under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), should follow the complaint; otherwise it is improvident, and, when challenged, will be annulled by the court.

3. TRADE-MARKS AND TRADE-NAMES, KEY No. 804, NEW, VOL. 8A, KEY-NO. SERIES—WHAT CONSTITUTES UNFAIR METHODS OF COMPETITION A QUESTION FOR THE COURT. Under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), declaring unfair methods of competition in commerce unlawful, it is for the courts, and not for the Federal Trade Commission, ultimately to determine as matter of law what constitutes unfair methods of competition.

4. TRADE-MARKS AND TRADE-NAMES, KEY No. 68—“UNFAIR METHODS OF COMPETITION” DO NOT INCLUDE PRACTICES NOT HERETOFORE CONDEMNED. Act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), declaring “unfair methods of competition” unlawful, does not ¹ 253 U. S. 421. See case in court below, at pp. 545-549 (this volume).

FEDERAL TRADE COMMISSION V. GRATZ.

apply to practices never heretofore regarded as opposed to good morals, because characterized by deception, bad faith, fraud, or oppression, or as against public policy, because of their dangerous tendency unduly to hinder competition or create monopoly.

[Ep. Norr.—For other definitions, see Words and Phrases, First and Second Series, Unfair Competition.]

5. TrapE-MArks anp TravE-NAMES, Key No. 804, New, Vor. 8A, Kry-No. Series——Compiain? Finep py FPreperat Trape Com-

MISSION INSUFFICIENT TO SHow UNFAIR METHODS OF CoMPE-

TITION.

A complaint filed by the Federal Trade Commission under act September 26, 1914, paragraph 5 (Comp. St., par. 8836e), charging that sellers of cotton ties and bagging and their selling and distributing agents, with the purpose and effect of discouraging and stifling competition in the sale of such bagging, had refused to sell ties, unless the purchaser would buy from them a corresponding amount of bagging, was insufficient to support an order to desist from such practice, where It did not Intimate that they did not properly obtain their ties and bugging, or state the amount controlled by them, or allege that they held a monopoly of either ties or bagging, or had ability, purpose, or intent to acquire one, or allege anything justifying the conclusion that the public suffered injury, or that competitors had reasonable ground for complaint.

6. TrapbE-Marks AND TRADE-Namrs, Key No. 68.—Mrrcuant May REFUSE To SELL Corton Tres and Baaarneg, Excepr In Con- JUNCTION, All questions of monopoly or combination being out of the way, a private merchant, acting with entire good faith, may properly refuse to sell, except in conjunction, such closely associated articles as steel ties used for binding bales of cotton and jute bagging used to wrap such bales. (The syllabus is taken from 40 Sup. Ct. 572.)

Mr. Justice Brandeis and Mr. Justice Clarke dissenting. On Writ of Certiorari to the United States Circuit Court of Appeals for the Second Circuit. Proceeding by Anderson Gratz and another, doing business as Warren, Jones & Gratz, and others, against the Federal Trade Commission, to set aside an order of the Commission. The order was annulled by the Circuit Court of Appeals for the Second Circuit (258 Fed, 314, 169 C, C. A. 330), and the Commission brings certiorari, Affirmed.

(See also 250 U. S. 657, 40 Sup. Ct. 18, 64 L. Ed. 51.) Messrs Huston Thompson, of Washington, D. C., Alexunder C. King, of Atlanta, Ga., and Claude R. Porter, of Washington, D. C., for petitioner.

DECISIONS ON PETITIONS TO REVIEW.

Mr. Thomas F. Wagner, of Brooklyn, N. Y., for respondents.

Mr. Justice McReynowbs delivered the opinion of the court, By an act approved September 26, 1914 (c. 311, 38 Stat. 717 [Comp. St. §s- 8836a-8836k]), Congress made provision for the Federal Trade Commission and declared its powers.

Section 4 defines commerce as: “ 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.”

Section 6. That unfair methods of competition {n commerce are hereby declared unlawful. The commission is hereby empowered and directed to prevent persons, partnerships, or corporutions, except banks, and common carriers subject to the acts to regulate commerce, from using unfair methods of competition fn commerce. Whenever the commission shall have reason to believe thut any such person, partnership, or corporation, hus 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 interest of the public, it shall. issue und serve upon such person, partnership, or corporation a complaint stating ita churges in that respect, and containing & notice of a hearing upon a day and at a place therein fixed at least 30 days after the service of said complaint. The person, 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 Jaw so charged in said complaint * * * If upon such hearing the comnission shall be of the opinion that the method of competition in question is prohibited by this act, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue und cause to be served on such person, partnership, or corporation an order requiring such person, partnership, or corporation to cense and desist from using such method of competition.

Section 5 further provides that the Commission may apply to the designated Circuit Court of Appeals to enforce an 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. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person, partnership, oF corporation and thereupon shall have jurisdiction of the proceeding and the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript & decree affirming, modifying, or setting aside the order of the Commission. The findings of the Commission as to the facts, if supported by testimony, shall be conclusive.

FEDERAL TRADE COMMISSION V, GRATZ.

* * * 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 by section 240 of the Judicial Code. Any party required by such order of the Commission to cease and desist from using such method of competition may obtain a review of such order in said Circuit Court of Appeals by filing in the court a written petition 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 jurisdiction to affirm, set aside, or modify the order of the Commission as in the case of an application by the Commission for an enforcement of its order, and the findings of the Commission as to the facts, if supported by testimony, shall in like manner be conclusive.”

Sections 6 and 7 empower the Commission to require reports and compile information concerning corporations; to inquire concerning execution of decrees restraining violations of the antitrust acts; to investigate alleged violations of such acts; to recommend readjustments of corporate business; to publish information and make reports to Congress; to classify corporations and make rules and regulations; to investigate trade conditions; to act, under orders of the court, as a master in chancery in certain designated circumstances, etc. Undertaking to proceed under section 5, June 4, 1917, the Commission issued a complaint containing two counts against respondents. The first related to unfair methods of competition, and the second charged violation of section 3 of the Clayton Act, approved October 15, 1914 (ce. 823, 88 Stat. 730, Comp. St. § 8835c). Respondents denied both charges. After taking much testimony the Commission held there was no evidence to support the second count; but it ruled that respondents had practiced unfair competition and ordered that they—* their officers and agents, cease and desist from requiring purchasers of cotton ties to also buy or agree to buy, a proportionate amount of American Manufacturing Co.’s bagging, and further that the respondents cease and desist from refus- | ing to sell cotton ties unless the purchasers buy or agree to buy from them corresponding amounts of American Manufacturing Co.’s bagging, or any amount of cotton ba ging of any kind.” Upon respondents’ petition the Circuit Court of Appeals, Second Circuit, annulled the Commission’s order, 258 Fed. 814. It said, “ We think there is no evidence to support any general practice of the respondents to refuse to sell ties unless the purchaser bought at the same time the necessary amount of the American Manufacturing Uo.’s bagging, and that the Commission has no jurisdiction to determine the merits of specific individual grievances.”

The challenged order is based solely upon the first count of the complaint, which follows: Federal Trade Commission v. Anderson Gratz and Benjamin Gratz, copartners, doing business unler the firm name and style of Warren, ones & Gratz; P. P. Williams, W. H. Fitghugh and Alex. Fitzhugh, copartners, doing business under the firm name and style of P. P. Williams & Co., and Charles 0, Elmer. The Federal Trade Commission having reason to believe, from a preliminary investigation made by it that Anderson Gratz and Benjamin Gratz, copartners, doing business under the firm name and style of Warren, Jones & Gratz; P. P, Williams, W. H. Fitzhugh, and Alex. Iitzhugh, copartners, doing business under the tirmry name and style of P. P. Willlums & Co., and Charles O. Ehner, all of whom are hereinafter referred to as respondents, have been, and are, using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of the act of Congress approved September 26, 1914, entitled “An act to create a Federal Trade Conunission, to define its powers and duties, and for other purposes,” and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, on information and belief, as follows:

L ParaGRAPH ONnE.—That the respondents, Anderson Gratz and Benjamin Gratz, are copartners, doing business under the firm hame and style of Warren, Jones & Gratz, having their principal. office and place of business in the city of St. Louls and State of Missouri, and are engaged in the business of selling in interstate commerce, either directly to the trade or through the respondents hereinafter named, steel ties made and used for binding bales of cotton, and which steel ties are manufactured by the Carnegie Steel Co., of Pittsburgh, Pa., and also selling, In the same manner, jute bagging, used to wrap bales of cotton, and which Jute bugging {s manufactured by the American Manufacturing Co., of St. Louis, Mo, ParackaPH Two.—That the respondents, P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh, are copartners, doing business under the firm nrme and style of P. P. Willams & Co., having their principal office and place of business in the city of Vicksburg and State of Mississippi, and the said last-named respondents and the sald respondent Charles O, Elmer, who is located and doing business at the city of New Orleans and State of Louisiana, are the selling and distributing agents of the said tirm 6f Warren, Jones & Gratz, and sell and distribute the ties and bagging, manufactured as aforesnid, in interstate commerce, principally to jobbers and dealers, who resell the same to retailers, cotton ginners, and farmers, PARAGRAPH THREE.—That with the purpose, intent, and effect of discouraging and stifling competition in interstate commerce in the sale of such bagging, all of the respondents do now refuse, and for more than a year last past have refused, to sell any of such ties unless the prospective purchaser thereof would also buy from them bagging to be used with the number of ties proposed to be bought; that is to say, for each six of such ties proposed to be bought from the respondents the prospective purchaser is required to buy six yards of such bagging.

FEDERAL TRADE COMMISSION V. GRATZ.

It is unnecessary now to discuss conflicting views concerning validity and meaning of the act creating the Commission and effect of the evidence presented. The judgment below must be affirmed, since, in our opinion, the first count of the complaint is wholly insufficient to charge respondents with practicing “unfair methods of competition in commerce” within the fair intendment of those words. We go no further and confine this opinion to the point specified.

When proceeding under section 5, it is essential, first, that, having reason to believe a person, partnership, or corporation has used an unfair method of competition in commerce, the Commission shall conclude a proceeding “in respect thereof would be to the interest of the public”; next, that it formulate and serve a complaint stating the charges “in that respect” and give opportunity to the accused to show why an order should not issue directing him to “cease and desist from the violation of the law so charged in said complaint.” If after a hearing the Commission shall deem “‘the method of competition in question is prohibited by this act,” it shall issue an order requiring the accused “to cease and desist from using such method of competition.”

If, when liberally construed, the complaint is plainly insufficient to show unfair competition within the proper meaning of these words there is no foundation for an order to desist; the thing which may be prohibited is the method of competition specified in the complaint. Such an order should follow the complaint; otherwise it is improvident and, when challenged, will be annulled by the court.

The words “unfair method of competition” are not defined by the statute, and their exact meaning is in dispute. It is for the courts, not the Commission, ultimately to determine as matter of law what they include. They are clearly inapplicable to practices never heretofore regarded as opposed to good morals because characterized by deception, bad faith, fraud, or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly. The act was certainly not intended to fetter free and fair competition as commonly understood and practiced by honorable opponents in trade. Count one alleges, in effect: that Warren, Jones & Gratz are engaged in selling, either directly to the trade or through their corespondents, cotton ties produced by the Carnegie Steel Co., and also jute bagging manufactured by the American Manufacturing Co. That P. P. Williams & Co., of Vicksburg, and C. O. Elmer, of New Orleans, are the selling and distributing agents of Warren, Jones & Gratz, and as such sell and distribute their ties and bagging to jobbers and dealers, who resell them to retailers, ginners, and farmers. That with the purpose and effect of discouraging and stifling competition in the sale of such bagging all the respondents for more than a year have refused to sell any of such ties unless the purchaser would buy from them a corresponding amount of bagging—6 yards with as many ties.

The complaint contains no intimation that Warren, Jones & Gratz did not properly obtain their ties and bagging as merchants usually do; the amount controlled by them is not stated; nor is it alleged that they held a monopoly of either ties or bagging or had ability, purpose, or intent to acquire one. So far as appears, acting independently, they undertook to sell their lawfully acquired property in the ordinary course, without deception, misrepresentation, or oppression, and at fair prices, to purchasers willing to take it upon terms openly announced.

Nothing is alleged which would justify the conclusion that the public suffered injury or that competitors had reasonable ground for complaint. All question of monopoly or combination being out of the way, a private merchant, acting with entire good faith, may properly refuse to sell, except in conjunction, such closely associated articles as ties and bagging. If real competition is to continue, the right of the individual to exercise reasonable discretion in respect of his own business methods must be preserved. United States v. Colgate, 250 U. S. 300; United States v. A. Schrader’s Son, Inc. (Mar. 1, 1920), The first count of the complaint fails to show any unfair method of competition practiced by respondents and the order based thereon was improvident. The judgment of the court below is A firmed.

Mr. Justice Prrnrey concurs in the result.

Mr. Justice Branpris dissenting, with whom Mr. Justice CLarke concurs.

First. The court disposes of the case on a question of pleading. This, under the circumstances, is contrary to established practice. The circumstances are these: The pleading held defective is not one in this suit. It is the pleading by which was originated the proceeding before the Federal Trade Commission, an administrative tribunal, whose order this suit was brought to set aside. No suggestion was made in the proceeding before the Commission that the complaint was defective. No such objection was raised in this suit in the court below. It -was not made here by counsel. The objection is taken now for the first time and by the court. This suit, begun in the Circuit Court of Appeals for the Second Circuit, was brought to set aside an order of the Federal Trade Commission. Before the latter the matter involved was thoroughly tried on the merits. There was a complaint and answers. Thirty-five witnesses were examined and cross-examined. A report of proposed findings as to facts was submitted by the examiner and exceptions were filed thereto. Then, the case was heard before the Conimission, which made a finding of facts, stated its conclusions as to the law, and ultimately issued the order in question. The proceedings occupied more than 16 months. The report of them fills 400 pages of the printed record. In my opinion, it is our duty to determine whether the facts found by the Commission are sufficient in law to support the order; and also, if it is questioned, whether the evidence was sufficient to support the findings of fact. Second. If the sufficiency of the complaint is held to be open for consideration here, we should, in my opinion, hold it to be sufficient. The complaint was filed under section 5 of the Federal Trade Commission Act, which declares unlawful “unfair methods of competition in commerce”; empowers the Commission to prevent their use; and directs it to issue and serve “a complaint stating its charges in that respect” whenever it has reason to believe that a concern “has been or is using” such methods. The function of the complaint is solely to advise the respondent of the charges made so that he may have due notice and full opportunity for a hearing thereon. It does not purport to set out the elements of a crime like an indictment or information, nor the elements of a cause of action like a declaration at law or a bill in equity. All that is requisite in a complaint before the Commission is that there be a plpin statement of the thing claimed to be wrong so that the respondent may be put upon his defense. The practice of the Federal Trade Commission in this respect, as in many others, is modeled on that which has been pursued by the Interstate Commerce Commission for a generation and has been sanctioned by this as well as the lower Federal courts. United States Leather Co. v. Southern Ry. Co., 21 I. C. C. 328, 884; Clinton Sugar Refining Co. ». C. & N. W. Ry. Co., 28 I. C. C. 364, 367; Stuarts Draft Milling Co. 2. Southern Ry. Co., 31 I. C. C. 623, 624; New York Central, etc., R. R. Co. v. Interstate Commerce Commission, 168 Fed. 181, 188-189; Dickerson v. Louisville & Nashville R. R. Co., 187 Fed. 874, 878; Texas & Pacific Ry. v, Interstate Commerce Commission, 162 U. 8. 197, 215; Cincinnati, Hamilton & Dayton Ry. Co. v. Interstate Commerce Commission, 206 U. S. 142, 149. The complaint here under consideration stated clearly that an unfair method of competition had been used by respondents, and specified what it was, namely, refusing to sell cotton ties unless the customer would purchase with each six ties also six yards of bagging. The complaint did not set out the circumstances which rendered this tying of bagging to ties an unfair practice. But this was not necessary. The complaint was similar in form to those filed with the Interstate Commerce Commission on complaints to enforce the prohibition of “unjust and unreasonable charges” or of “undue or unreasonable preference or advantage ” which the act to regulate commerce imposes. It is unnecessary to set forth why the rate specified was unjust or why the preference specified is undue or unreasonable, because these are matters not of law but of fact to be established by the evidence. Pennsylvania Co. v. United States, 236 U. 8S. 351, 361. So far as appears neither this nor any other court has ever held that an order entered by the Interstate Commerce Commission may be set aside as void, because the complaint by which the proceeding was initiated, failed to set forth the reasons why the rate or the practice complained of was unjust or unreasonable; and I can not see why a different rule should be applied to orders of the Federal Trade Commission issued under section 5.3 In considering whether the complaint is sufficient, it is necessary to bear in mind the nature of the proceeding under review. The proceeding is not punitive. The complaint is not made with a view to subjecting the respondents to any form of punishment. It is not remedial. The complaint is not filed with a view to affording compensation for any injury alleged to have resulted from the matter charged, nor with a view to protecting individuals from any such injury in the future. The proceeding is strictly a preventive measure taken in the interest of the general public. And what it is brought to prevent is not the commission of acts of unfair competition, but the pursuit of unfair methods. Furthermore, the order is not self-executory. Standing alone it is only informative and advisory. The Commission can not enforce it. If not acquiesced in by the respondents, the Commission may apply to the Circuit Court of Appeals to enforce it. But the Commission need not take such action; and it did not do so in respect to the order here in question. Respondents may, if they see fit, become the actors and ask to have the order set aside. That is what was done in the case at bar.

The proceeding is thus a novelty. It is a new device in administrative machinery, introduced by Congress in the year 1914, in the hope thereby of remedying condi- 1See Report Senate Committee on Interstate Commerce, June 18, 1914, 63d Cong., 2d seas., No. 507, p. 13: “It is believed that the term ‘unfair competition’ hag a legal significance which can be enforced by the Commission and the courts, and that it fa no more difficult to determine what {g unfair competition than it ia to determine what is a reasonable rate or what is an unjust discrimination. The committee was of the opinion that it would be better to put in a general provision condemning unfair competition than to attempt to define the numerous unfair practices, auch as local price cutting, interlocking directorates, and holding companies jatended to restrain substantial competition,”

FEDERAL TRADE COMMISSION V. GRATZ.

tions in business which a great majority of the American people regarded as menacing the general welfare, and which for more than a generation they had vainly attempted to remedy by the ordinary processes of law. It was believed that widespread and growing concentration in industry and commerce restrained trade, and that monopolies were acquiring increasing control of business. Legislation designed to arrest the movement and to secure disintegration of existing combinations had been enacted by some of the States as early as 1889. In 1890 Congress passed the Sherman law. It was followed by much legislation in the States! and many official investigations. Between 1906 and 1913 reports were made by the Federal Bureau of Corporations of its investigations into the petroleum industry, the tobacco industry, the steel industry, and the farm implement industry. A special committee of Congress investigated the affairs of the United States Steel Corporation. And in 1911 this court rendered its decision in Standard Oil Co. v. United States, 221 U.S. 1, and in American Tobacco Co. ». United States, 221 U. S. 106. The conviction became general in America, that the legislation of the past had been largely ineffective. There was general agreement that further legislation was desirable. But there was a clear division of opinion as to what its character should be. Many believed that concentration (called by its opponents monopoly) was inevitable and desirable; and these desired that. concentration should be recognized by law and be regulated. Others believed that concentration was a source of evil; that existing combinations could be disintegrated, if only the judicial machinery were perfected; and that further concentration could be averted by providing additional remedies, and particularly through regulating competition. The latter view prevailed in the Sixty-third Congress.² The Clayton Act (Act Oct. 15, 1914, c. 323, 38 Stat. 7830) was framed largely with a view to making more effective the remedies given by the Sherman law. The Federal Trade Commission Act (Act Sept. 26, 1914, ¢. 311, 38 Stat. 717) created an administrative tribunal, largely with a view to regulating competition.

1S8ee Laws on Trusts and Monopolies, compiled under direction of the Clerk of the House Committee on the Judiciary, 68d Cong., by Nathan B. Wiliams, revised Jan, 10, 1914; also Trust Laws and Unfair Competition (Federal) Bureau of Corporations. Mar, 15, 1015. 2Sec Report of Senate Committee on Interstate Commerce, June 13, 1914, 62d Cong., 2d sess., No. 597, p. 10, reporting the bill: “Some would found such a commission upon the theory that_monopolistic industry is the ultimate result of economic evolution and that ft should be so recognized and declared to be vested with a public interest and as such regulated by a commission, This contemplates even tho regulation of prices. Others hold that private monopoly ig intolerable, unscientific, and abnormal, but recognize that a commission is & necessary adjunct to the preservation of competition and to the practical enforce ment of the law. * * “The commission which Is proposed by your committee in the BU submitted ts founded upon the latter purpose and idea."

DECISIONS ON PETITIONS TO REVIEW.

Many of the duties imposed upon the Trade Commission had been theretofore performed by the Bureau of Corporations. That which was in essence new legislation was the power conferred by section 5. The belief was widespread that the great trusts had acquired their power, in the main, through destroying or overreaching their weaker rivals by resort to unfair practices As Standard Oil rebates led to the creation of the Interstate Commerce Commission? other unfair methods of competition, which the investigations of the trusts had laid bare, led to the creation of the Federal Trade Commission. It was hoped that, as the former had substantially eliminated rebates, the latter might put an end to all other unfair trade practices, and that it might prove possible thereby to preserve the competitive system. It was a new experiment on old lines, and the machinery employed was substantially similar. n undertaking to regulate competition through the Trade Commission, Congress (besides resorting to administrative as distinguished from judicial machinery) departed in two important respects from the methods and measures theretofore applied in dealing with trusts and restraints of trade:

(1) Instead of attempting to inflict punishment for having done prohibited acts, instead of enjoining the continuance of prohibited combinations and compelling disintegration of those formed in violation of law, the act undertook to preserve competition through supervisory action of the Commission. The potency of accomplished facts had already been demonstrated. The task of the Commission was to protect competitive business from urther invords by monopoly. It was to be ever vigilant. f it discovered that any business concern had used any practice which would be likely to result in public injury— because in its nature it would tend to aid or develop into a restraint of trade—the Commission was directed to intervene, before any act. should be done or condition arise violative of the antitrust act. And it should do this by filing a complaint with a view to a thorough investigation; and, if need be, the issue of an order. Its action was to be prophylactic. Its purpose in respect to restraints of trade was prevention of diseased business conditions, not cure.® 1Sec “ Unfair Competition,” by William &, Stevens, Political Sefence Quarterly (1914), p. 283; “The Morals of Monopoly and Competition” (1916), by H. B. Reed, * See Railway Problems, by William Z. Tipicy (1807), p. X. 3Senator Cummins, chatrman of the cammittce which reported the bill, gatd (Cong. Rec., vol. 51, p. 11465): “Unfair competition must usually proceed to great lengths and be destructive of competition before it can be seized and denounced by the antitrust law. In other cases it must be associated with, coupled with, other vicious and unlawful practices in order to bring the person or the corporation guilty of the practice within the scope of the antitrust law. The purpose of this bill in this section and in other sections which I hope will added to it, is to seine the offender before his ravages have gone

FEDERAL TRADE COMMISSION V. GRATZ.

(2) Instead of undertaking to define what practices should be deemed unfair, as had been done in earlier legislation, the act left the determination to the Commission. Experience with existing laws had taught that definition, being necessarily rigid, would prove embarrassing and, if rigorously applied, might involve great hardship. Methods of competition which would be unfair in one industry, under certain circumstances, might, when adopted in another industry, or even in the same industry under different circumstances, be entirely unobjectionable. Furthermore, an enumeration, however comprehensive, of existing methods of unfair competition must necessarily soon prove incomplete, as with new conditions constantly arising novel unfair methods would be devised and developed. In leaving to the Commission the determination of the question whether the method of competition pursued in a particular case was unfair, Congress followed the precedent which it had set a quarter of century earlier, when by the act to regulate commerce it conferred upon the Interstate Commerce Commission power to determine whether a preference or advantage given to a shipper or locality fell within the prohibition of an undue or unreasonable preference or advantage.* See Pennsylvania Co. v. United States, supra, 236 U. S. 361; Texas & Pacific Railway v. Interstate Commerce to the length necessary in order to bring him within the law that we already have.

“ We knew little of these things in 1890, The commerce of the United States has largely developed in the last 25 years. The modern methods .of carrying on business have been discovered and put into operation in the last quarter of a century; and as we have gone on under the antitrust law and under the decisions of the court In their effort to enforce that law, we have observed certain forma of Industrial activity which ought to be prohibited whether in and of themselves they restrain trade or commerce or not. We have discovered that their tendency {is evil; we have discovered that the end which {is inevitably reached through these methods is an end which is destructive of fair commerce between the States. It ia these considerations which, in my judgment, bave made it wise if not necessary to supplement the antitrust law by additional legislation, not In antagonism to the antitrust law, but in harmony with the antitrust law, to more effectively put into the industrial life of America the principle of the antitrust law, which 1s fair, reasonable competition, independence to the individual, and disassociation among the corporations. ”

1 See Report Senate Committee on Interstate Commerce, June 13, 1914, 63d Cong., 2d sese., No. 597, p. 13: “Phe comnilitee gave careful consideration to the question as to whether it would attempt to define the many and variable unfair practices which prevail {n commerce and to forbid their continuance or whether it would, by a general declaration condemning unfair practices, leave it to the commixsion to determine what raetices were unfair, It concluded that the latter course would be the etter, * * *" See also “ Unfair Competition,” by W. H. S. Stevens (University of Chicago Press, 1916), pp. 1, 2. For laws prohibiting specific acts of unfair competition, see “ Trust Laws and Unfair Competition,” (Federal) Bureau of Corporations (Mar. 15, 1915), bP, 184, 199. 2 Report of (Federal) Bureau of Corporations on the International Harvester Co., Mar. 3, 1913, p. 30: “In discussing the competitive methods of the company it should be recognized that some practices which might be regarded with indifference if there were a number of competitors of substantinily equal size and power may become objectionable when one competitor far outranks not only its nearest rival, but practically all rivals combined, as is true of the International Harvester Co., so far as several of its most important lines are concerned.” The Austratian Industries Preservation Act, 1908-1910, expressly de- Clarea that “unfair competition means competition which is unfair In the Circumstances." “Trust Laws and Unfair Competition” (Federal) Bureau of Corporations (Mar. 165, 1915) pp. 652, 747, ‘See note 1, supra footnote on p. 57 }. DECISIONS ON PETITIONS TO REVIEW, Commission, 162 U.S. 197, 219,220. Recognizing that the question whether a method of competitive practice was unfair would ordinarily depend upon special facts, Congress imposed upon the Commission the duty of finding the facts; and it declared that findings of fact so made (i duly supported by evidence) were to be taken as final. The question whether the method of competition pursued could, on those facts, reasonably be held by the Commission to constitute an unfair method of competition, being a question of law, was necessarily left open to review by the court. Compare Interstate Commerce Commission v. Diffenbaugh, 222 U. 8. 42; Interstate Commerce Commission v, Baltimore & Ohio R. R., 145 U. 5. 263.

Third. Such a question of law is presented to us for decision; and it is this: Can the refusal by a manufacturer to sell his product to a jobber or retailer, except upon condition that the purchaser will buy from him also his trade requirements in another article or articles, reasonably be found by the Commission to be an unfair method of competition under the circumstances set forth in the findings of fact? If we were called upon to consider the sufficiency of the complaint, and that merely, the question for our decision would be, whether the particular practice could, under any circumstances, reasonably be deemed an unfair method of competition. But as this suit to set aside the order of the Commission brings before us its findings of fact, we must determine whether these are sufficient to support their conclusion. of law that. the practice constituted— “Under the circumstances therein set forth, unfair methods of competition in interstate commerce against other manufacturers, dealers, and distributors in the material known as sugar-bag cloth, and against manufacturers, dealers, and distributors of the bagging known as rewoven bagging and second-hand bagging in violation of ” the statute.

It is obvious that the imposition of such a condition is not necessarily and universally an unfair method; but that it may be such under some circumstances seems equally clear. Under the usual conditions of competitive trade the practice might be wholly unobjectionable. But the history of combinations has shown that what one may do with impunity, may have intolerable results when done by several in cooperation. Similarly what approximately equal individual traders may do in honorable rivalry may result in grave injustice and public injury, if done by a great corporation in a particular field of business which it is able to dominate. In other words, a method of competition fair among equals may be very unfair if applied where this is inequality of resources.!. Without See “The Morals of Conopoly and Competition " by H. B. Reed (1016), pp. 120-122.

FEDERAL TRADE COMMISSION V, GRATZ.

providing for those cases where the method of competition here involved would be unobjectionable, Massachusetts legislated against tho practice, as early as 1901, by a statute (ec. 478) of general application. Its highest court, in applying the law which it held to be constitutional, described the prohibited method as “unfair competition.” Commonwealth v. Strauss, 188 Mass. 229; 191 Mass. 545. Compare People ». Duke, 44 N. Y. Suppl. 336. The (Federal) Bureau of Corporations held the practice, which it described as “full-line forcing,” to be highly reprehensible. Congress, by section 3 of the Clayton Act, specifically prohibited the practice in a limited field under certain circumstances. An injunction against the practice has been included in several decrees in favor of the Government entered in cases under the Sherman law.? In the decree by which the American Tobacco Co. was disintegrated pursuant to the mandate of this court, each of the 14 companies was enjoined from “refusing to sell to any jobber any brand of any tobacco product manufactured by it, except upon condition that such jobber shall purchase from the vendor some other brand or product also manufactured and sold by it. * * *” United States 7 American Tobacco Co., 191 Fed. 371, 429. The practice here in question is merely one form of the so-called “tying clauses” or “conditional requirements” which have been declared in a discerning study of the whole subject to be “ perhaps the most interesting of any of the methods of unfair competition.” ® The following facts found by the Commission, and which the Circuit Court of Appeals held were supported by sufficient evidence, show that the conditions in the cotton-tie and bagging trade were in 1918 such that the Federal Trade Commission could reasonably find that the tying clause here in question was an unfair method of competition: Cotton, America’s chief staple, is marketed in bales. To bale cotton, steel ties and jute bagging are essential. The Carnegie Steel Co., a subsidiary f the United ‘States Steel Corporation, manufactures so large a proportion of all such steel ties that it dominates the cotton-tie situation in the United States and is able to fix and control the price of such ties throughout the country. The American Manufacturing Co. manufactures about 45 per cent of all bagging used for cotton baling; one other company about 20 per cent; and the remaining 35 per cent is made up of second-hand bagging and a material called sugar-bag cloth. Warren, Jones & Gratz, of St. Louis, are the Carnegie Co.’s sole agents 2 Report of the (Federal) Bureau of Corporations on the International ster Co. (Mar. 3, 1913), p. 308.

Ae Fone Methods of Competition and Their Prevention" by W. H. &. Stevens, Annals, American Academy of Volitical and Social Science 1916), p od? 48. “ Trust Laws sud Untajr Competition,” (Federal) Bureau of Corporations ar, + DP. ~486, 493. a Unfair eet a by W. H. 8. Rie eae (1916), p. 54, 186395 °—-20-—-37 Vv DECISIONS ON PETITIONS TO REVIEW, for selling and distributing steel ties. They are also the American Manufacturing Co.’s sole agents for selling and distributing jute bagging in the cotton-growing section west of the Mississippi. By virtue of their selling agency for the Carnegie Co., Warren, Jones & Gratz held a dominating and controlling position in the sale and distribution of cotton ties in the entire cotton-growing section of the country, and thereby it was in a position to force would-be purchasers of ties to also buy from them bagging manufactured by the American Manufacturing Co. A great many merchants, jobbers, and dealers in bagging and ties throughout the cotton-growing States were many times unable to procure ties from any other firm than Warren, Jones & Gratz. In many instances Warren, Jones & Gratz refused to sell ties unless the purchaser would also buy from them a corresponding amount of bagging, and such purchasers were oftentimes compelled to buy from them ageing manufactured by the American Manufacturing Co. in order to procure a sufficient supply of steel ties. These are conditions closely resembling those under which “full-line forcing,” “exclusive-dealing requirements,” or “shutting off materials, supplies, or machines from competitors,’—well-known methods of competition, have been held to be unfair, when practiced by concerns holding a preponderant position in the trade. * Fourth. The Circuit Gourt of Appeals set aside the order of the Commission solely on the ground that it was without authority to determine the merits of specific individual grievances, and that the evidence did not support its finding that Warren, Jones & Gratz had— “adopted and practiced the policy of refusing to sell steel ties to those merchants and dealers who wished to buy from them unless such merchants and dealers would also buy from them a corresponding amount of jute, bagging.”

‘he reason assigned by the Circuit Court of Appeals for so holding was that the evidence failed to show that the practice complained of (although acted on in individual cases by respondents) had become their “ general practice.” But the power of the Trade Commission to prohibit an unfair method of competition found to have been used is not limited to cases where the practice had become general. What section 5 declares unlawful is not unfair competition. That had been unlawful before. What that section made unlawful were “unfair methods of competition ”; that is, the method or means by which an unfair end might be accomplished. The Commission was directed to act, if it had reason to believe that an “unfair method of competition in commerce has been 18ee “Trust Laws and Unfair Competition” (Federal) Bureau of Corporations (Mar, 16, 1915), pp. 310-328, 328.

FEDERAL TRADE COMMISSION V. GRATZ.

or is being used.” The purpose of Congress was to prevent any unfair method which may have been used by any concern in competition from becoming its general practice. It was only by stopping its use before it became a general practice, that the apprehended effect of an unfair method in suppressing competition by destroying rivals could be averted. As the Circuit Court of Appeals found that the evidence was sufficient to support the facts set forth above, and since on those facts the Commission could reasonably hold that the method of competition in question was unfair under the circumstances, it had power under the act to issue the order complained of. In my opinion the judgment of the circuit court of appeals should be reversed.

Aprennix IIT,

RULES OF PRACTICE BEFORE THE COMMISSION.

Adopted June 27, 1915. Amended as shown by footnotes.]

I. SESSIONS.

Principalofice. The principal office of the Commission at Washington, D. C., is open each business day from 9 a. m. to 4.80 p. m. commission ission'The Commission may meet and exercise all its powers at power elsewhere. 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. qeicarings a9 or Sessions of the Commission for hearing contested proceedings will be held as ordered by the Commission. qcemions for or- Sessions of the Commission for the purpose of making business, orders and for the transaction of other business, unless otherwise ordered, will be held at the office of the Commission at Washington, D. C., on each business day at Quorum, 10.30 a. m. Three members of the Commission shall constitute a quorum for the transaction of business. o Oudere, tiene All orders of the Commission shall be signed by the Secretary.

II. COMPLAINTS.

Who may ak Any person, partnership, corporation, or association complaint. sos. . . may apply to the Commission to institute a proceeding in respect to any violation of law over which the Commission has jurisdiction.

Form of appt Such application shall be in writing, signed by or in “ behalf of the applicant, and shall contain a short and simple statement of the facts constituting the alleged violation of law and the name and address of the applicant and of the party complained of. Commission The Commission shall investigate the matters comto investigate ... : . . plained of in such application, and if upon investigation the Commission shall have reason to believe that there is a violation of law over which the Commission has veetsuance and jurisdiction, the Commission shall issue and serve upon plaint. 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 NM said complaint."

I. ANSWERS.

Within 30 days from the service of the complaint, un- Time slowed 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 Form of ansimple 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 defendant 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 8} inches wide and not more than 11 niarain, of | Paper. inches long, and weighing not Jess than 16 pounds to the ream, folio base, 17 by % . inches, with left-hand margin not less than 13 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. Three copies of such answer must be filed?

IV. SERVICE.

Complaints, orders, and other processes of the Commission may be served by anyone duly authorized by the Commission, either (a) by delivering a copy thereof to Personal, or 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 or as-, sociation to be served; or (d) by leaving a copy thereof By leaving at the principal office or place of business of such person, partnership, corporation, or association; or (¢c) by regis- | By registered tering and mailing a copy thereof addressed to such person, partnership, corporation, or association at his or its principal office or place of business. The verified return Return. by the person so serving said complaint, order, or other 17he third paragraph of Rule II originally read as follows: “The Commission shall investigate the matters complained of in such application, and if upon investigation 1t shall appear to the Commission that there 1s 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." It was amended to Its present form on Oct. 29, 1015. 4 Resolution passed by the Commission Oct. 19, 1920, calls for the dling of three copies of the answer, 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, caform of appli: Any person, partnership, corporation, or association desiring to intervene in a contested proceeding shall make application in writing, setting out the grounds on which one r mitted by he or it claims to be interested. The Commission may, by order, permit intervention by counsel or in person to such extent and upon such terms as it shall deem just. moze, of, papers Applications to intervene must be on one side of the on application. paper only, on paper not more than 84 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 14 inches wide, or they may be printed in 10 or 12 point type on good unglazed paper 8 inches wide by 104 inches long, with inside margins not less than 1 inch wide.

VI. CONTINUANCES AND EXTENSIONS OF TIME.

In discretion of Continuances and extensions of time will be granted Commission. . . y oo at the discretion of the Commission.

VII. WITNESSES AND SUBP(ENAS.

Examination Witnesses shall be examined orally, except that for ordinarily oral. . : good and exceptional cause for departing from the general rule the Commission may permit their testimony to be taken by deposition.

Subdpenas for Subpoenas requiring the attendance of witnesses from witnesses, . . ‘ . any place in the United States at any designated place of hearing may be issued by any member of the Commission.

Subpenss for Subpoenas for the production of documentary evidence production of. : 1 os. documentary evi- (unless directed to issue by a Commissioner upon his own dence. 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.

Witness feos Witnesses summoned before the Commission shall be “eee 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, shall severally be entitled to the same fees as are paid for like services in the courts of the United States. Witness fees shall be paid by the party at whose instance the witnesses appeuar.?

VUE. TIME FOR TAKING TESTIMONY, eos es. ' - Exmination of Upon the joining of issue in a proceeding by the Com- , Exminatto pre mission the examination of witnesses therein shall proceed te, fast as ceed with all reasonable diligence and with the least, practicable delay. Not less than five nor more than ten, Notice to coundays’ notice shall be given by the Commission to counsel or parties of the time and place of examination of witnesses before the Commission, a Commissioner, or an Examiner.

IX. OBJECTIONS TO EVIDENCE.

Objections to the evidence before the Commission, a Tostategrounds of objection, ete.

Commissioner or an Examiner shall, in any proceeding, be in short form, stating the grounds of objections relied upon, and no transcript filed shall include argument or debate.

X. MOTIONS.

A motion in a proceeding by the Commission shal] _To briefly state briefly state the nature of the order applied for, and all upplied io ee affidavits, records, and other papers upon which the same is founded, except such as have been previously filed or served in the same proceeding, shall be filed with such motion and plainly referred to therein.

XI. HEARINGS ON INVESTIGATIONS.

When a matter for investigation is referred to a single By single com. missioner.

Commissioner for examination or report, such Cominissioner may conduct or hold conferences or hearings thereon, either alone or with other Commissioners who _ may sit with him, and reasonable notice of the time and place of such hearings shall be given to parties in interest and posted.

The General Counsel or one of his assistants, or such | _feneral | coun. other attorney as shall be designated by the Commission, yin conduct hearshall attend and conduct such hearings, and such hearings " may, in the discretion of the Commissioner holding same, be public.

This sentence added pursuant to resolution passed by the Commission Noy. 19, 1920.

1 Rules VIII, IX, X, and XI were not a part of the original rules. They were adopted on Apr. 25, 1917. The rules now numbered XII, XAT, XIV, and XV were originally numbered VIII, LX, X, and XL,

XII. DEPOSITIONS IN CONTESTED PROCEEDINGS.

may amen esion The Commission may order testimony to be taken by deposition in a contested proceeding. persone at Depositions may be taken before any person designated noted. by the Commission and having power to administer oaths. tor Bopcciting* Any party desiring to take the deposition of a witness shall make application in writing, setting out 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 deposition 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 Commission 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 whom the deposition is to be taken, so specified in the Commission’s order, may or may not be the same as those named in said application to the Commission. ents timony of The testimony of the witness shall be reduced to writing 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 Deposition toby the officer. After the deposition has been so certified be forwarded: . it shall, together with a copy thereof made by such officer or under his direction, be forwarded by such officer under seal in an envelope addressed to the Commission at its office in Washington, D. C. Upon receipt of the deposi- And filed. Copytion and copy the Commission shall file in the record in to defendant or. . oye his attorney. said proceeding such deposition and forward the copy to the defendant or the defendant’s attorney. Sixe of paper, Such depositions shall be typewritten on one side only “tee 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.

Notice. No deposition shall be taken except after at least six 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- , imitations as 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.

XIII. DOCUMENTARY EVIDENCE.

Where relevant and material matter offered in evidence Relevant and is embraced in a document containing other matter not only to be fied. material or relevant and not intended to be put in evidence, such document will not be filed, but a copy only of such relevant and material matter shall be filed.

XIV. BRIEFS.

Unless otherwise ordered, briefs may be filed at the ™™¢°t Mire: close of the testimony in each contested proceeding. The presiding Commissioner or Examiner shall fix the time 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- renee ith sec companied by proof of service upon the adverse parties, of service. Twenty? 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,,,.A2 Ri ication: brief shall be by petition in writing, stating the facts “™upon which the application rests, which must be filed with the Commission at least five 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 statement of the points of fact or law to be discussed, with the reference to the pages of the record and the authorities relied upon in support of each point. Every brief of more than 10 pages shall contain on its |, Beauirements top fly leaves a subject index with page references, the pases subject index to be supplemented by a list of all cases referred to, alphabetically arranged, together with references to pages where the cases are cited. Briefs must be printed in 10 or 12 point type on good pete of type, unglazed paper 8 inches by 103 inches, with inside mar- Form of brief.

\Fifteen copies originally called for. Amended to its present form July 29, 1920. gins not less than 1 inch wide, and with double-leaded text and single-leaded citations.

Oral arguments. Oral arguments will be had only as ordered by the Commission.

XV. ADDRESS OF THE COMMISSION.

Federal Trade Commission, Washington, All communications to the Commission must be addressed to Federal Trade Commission, Washington, D. C., unless otherwise specifically directed.

← 2 F.T.C. 442