which are for the mutual advantage of all the parties engaging in it, it is believed that a strong Federal enactment against the practice, striking at each person participating, both givers and recipients, coupled perhaps with immunity to the first informant, may aid greatly in stamping out the vicious practice.

For the reasons stated, and others, the need for action by Congress seems apparent. It seems also that Congress has sufficient power to strike at the entire practice, inasmuch as Congress has power not only to prohibit such transactions in interstate commerce, but, under the Minnesota rate and Shreveport cases, has power to remove any obstruction which may prevent or hamper shipments in interstate commerce. To illustrate: If a company doing business solely within one State resorts through its agents to this vicious method of competition, it will surely hamper, if not make it impossible, for a manufacturer of another State seeking to compete honestly to make any sales in such State except by resorting to like vicious and unfair practices. Congress undoubtedly has the power to remove such obstruction from the path of the interstate competitors.

It is useless to discuss the origin of the practice. It is sufficient to know that it exists generally and appears to be spreading. The mere suggestion shows that it must engulf even those honestly inclined if they desire to maintain their commercial life in any industry where such practices prevail. It should be also noted that the practice appears to have been most general on the part of concerns in introducing the goods and wares of German firms. Among such concerns and their salesmen the evidence is that the practice is recognized as a legitimate method of competition.

The Commission therefore respectfully recommends that Congress consider the enactment in the public interest, as an aid to the preservation of fair and free competition, of a sufficient law striking at the unjustifiable and vicious practices of commercial liberty; and that such a law be so comprehensive as to strike at each person participating in any such transactions.

PROCEDURE OF THE COMMISSION.

Section 5 of the Federal Trade Commission act lays down a single principle of law. It is, "Unfair methods of competition in commerce are hereby declared unlawful." The rest of the Commission's organic act is procedural, being simply a clear method of procedure laid down by the Congress.

In administering this law, the Federal Trade Commission follows scrupulously a procedure carefully laid down by the Congress. When anyone believes that unfair practices are being used to his injury, and he addresses the Federal Trade Commission with a brief statement of the facts as he understands them, the Commission makes a preliminary investigation and if, in the end, it has reason to believe that it is to the interest of the public that the matter be formally inquired into, then it issues its complaint in writing, directed to the concern against whom the citation has been made. This issuance of the complaint is no judgment of condemnation but a resolution for an orderly trial of the matter.

The party cited is then given 40 days in which to prepare his reply in writing and thereafter a full hearing is had, the respondent being present in person or by attorney with every opportunity to crossexamine witnesses and examine documentary evidence.

After that there is placed at his disposal all the processes of the Commission so that he may produce his own witnesses and compel the production of books and papers or any other documentary evidence which he may wish to employ in his defense. In the end the Commission may find either that the acts complained of have not been committed, or, if committed, may not properly be said to be unfair. In which case the whole matter is dismissed.

If, however, it is found that the things complained of have actually been done, and that they are contrary to the public interest, the Commission's order to cease and desist from the practice complained of is issued. But thereafter the respondent may, if he believes that the decision is unfair to him, appeal to the circuit court of appeals of the United States and thence to the Supreme Court of the United States; so that every possible safeguard of law is thrown about the proceedings.

Experience has shown that about two out of three of the complaints which are brought to the Commission's attention are not such as to warrant any formal proceedings and those matters are dismissed without annoyance to the respondent, without publicity, and without public knowledge.

Since its organization, March 16, 1915, the Commission has received and filed 1,990 applications for the issuance of formal complaints. Of these, 992 were dismissed after examination as being without merit or without the jurisdiction of the Commission, 537 are in the process of examination, and the remaining 461 applications have resulted in the issuance of 611 formal complaints. That 461 applications resulted in the issuance of a greater number of formal complaints is due to the fact that many applicants name several parties in single application who could not properly be joined in formal actions.

Of the 611 formal complaints 303 were issued and 172 disposed of prior to the beginning of the present fiscal year. During the present fiscal year 308 were issued and 155 disposed of, leaving a total of 284 undisposed of formal complaints on June 30, 1920.

Complaints, findings, and orders, constituting the decisions of the Commission in the cases disposed of, are published in two volumes entitled "Decisions of the Federal Trade Commission" and may be had by purchase from the Superintendent of Documents, Government Printing Office, Washington, D. C.

METHODS OF COMPETITION CONDEMNED.

Among the methods of competition thus far condemned by the Commission may be mentioned the following:

Misbranding of fabrics and other commodities respecting the materials or ingredients of which they are composed, their quality, origin, or source.

Adulteration of commodities, misrepresenting them as pure or selling them under such names and circumstances that the purchaser would be misled into believing them to be pure.

Bribery of buyers or other employees of customers and prospective customers to secure new customers or induce continuation of patronage.

The payment of bonuses by manufacturers to salesmen of jobbers and retailers to procure their special services in selling their goods; and making unduly large contributions of money to associations of customers.

Procuring the business or trade secrets of competitors by espionage, by bribing their employees, or by similar means.

Procuring breach of competitors' contracts for the sale of products by misrepresentation or by other means.

Inducing employees of competitors to violate their contracts or enticing away employees of competitors in such numbers or under such circumstances as to hamper or embarrass them in business.

Making false or disparaging statements respecting competitors' products, their business, financial credit, etc.

The use of false or misleading advertisements.

Making vague and indefinite threats of patent infringement suits against the trade generally, the threats being couched in such general language as not to convey a clear idea of the rights alleged to be infringed, but nevertheless causing uneasiness and fear in the trade.

Widespread threats to the trade of suits for patent infringement arising from the sale of alleged infringing products of competitors, such threats not being made in good faith but for the purpose of intimidating the trade.

False claims to patents or misrepresenting the scope of patents. Intimidation for the purpose of accomplishing enforced dealing by falsly charging disloyalty to the Government.

Tampering with and misadjusting the machines sold by competitors for the purpose of discrediting them with purchaser.

Trade boycotts or combinations of traders to prevent certain wholesale or retail dealers or certain classes of such dealers from procuring goods.

Passing off of products or business of one manufacturer for those of another by imitation of product, dress of goods, or by simulation of advertising or of corporate or trade names.

Unauthorized appropriation of the results of a competitor's ingenuity, labor and expense, thereby avoiding costs otherwise necessarily involved in production.

Preventing competitors from procuring advertising space in newspapers or periodicals by misrepresenting their standing or other misrepresentation calculated to prejudice advertising mediums against them.

Misrepresentation in the sale of stock of corporations.

Selling rebuilt machines of various descriptions, rebuilt automobile tires, and old motion-picture films slightly changed and renamed as and for new products.

Harassing competitors by fake requests for estimates on bills of goods, for catalogues, etc.

Giving away of goods in large quantities to hamper and embarrass small competitors; and selling goods at cost to accomplish the same purpose.

Sales of goods at cost, coupled with statements misleading the public into the belief that they are sold at a profit.

Bidding up the prices of raw materials to a point where the business is unprofitable for the purpose of driving out financially weaker competitors.

Loaning, selling at cost, or leasing for a nominal consideration pump and tank outfits to dealers on condition that they be used only for the distribution of the product of the particular manufacturer. Loans or leases of other equipment under similar conditions.

The use by monopolistic concerns of concealed subsidiaries for carrying on their business, such concerns being held out as not connected with the controlling company.

Intentional appropriation or converting to one's own use of raw materials of competitors by diverting shipments.

Giving and offering to give premiums of unequal value, the particular premiums received to be determined by lot or chance, thus in effect setting up a lottery.

Any and all schemes for compelling wholesalers and retailers to maintain resale prices on products fixed by the manufacturer.

Combinations of competitors to enhance prices, maintain prices, bring about subsantial uniformity in prices, or to divide territory or business.

PROCEEDING UNDER SUBSECTION (E), SECTION 6, OF THE FEDERAL TRADE COMMISSION ACT.

The first proceeding conducted by the Commission pursuant to subdivision (e), section 6, of the Federal Trade Commission act, arose on application of the Attorney General, dated September 30, 1919. This application requested the Commission to make an investigation

of the California Associated Raisin Co., alleged to be violating the antitrust acts, and to make recommendations for the readjustment of its business in order that the corporation might thereafter maintain its organization and management and conduct its business in accordance with law. Hearings had on November 20, 22, 24, 25, 26, 28, 29, December 1 and 2, were concluded on December 3, 1919. The essential facts thereby disclosed and the conclusions and recommendations of the Federal Trade Commission thereon will be found in Appendix 8.

PROCEEDINGS UNDER SECTION 5 OF THE COMMISSION ACT.

The first formal complaint was issued by the Commission February 18, 1916. It charged the use of an unfair method of competition within the meaning of section 5 of the Federal Trade Commission act. Since that date violations of this section have been charged in 572 formal complaints. Of these, 255 have resulted in the issuance of orders to cease and desist from the use of various methods of competition found by the Commission to violate the act.

PROCEEDINGS UNDER THE CLAYTON ACT.

Thirty-three complaints issued by the Commission have charged violations of section 2 of the Clayton Act, and in four of these cases final orders to cease and desist have been issued. Seventy-nine complaints have charged violations of section 3 of the act, and in 29 of these cases final orders to cease and desist have been issued. In only one case under section 3 has appeal to the court been taken from the Commission's order. Twenty-one complaints have charged violations of section 7 of the Clayton Act, and two complaints have charged violations of section 8. No final orders to cease and desist have thus far been made under either of the last two mentioned sections.

PROCEEDINGS PENDING AND DISPOSED OF.

Proceedings pending and disposed of during the fiscal year 1920 will be found in Exhibit 8.

CHIEF EXAMINER.

The duty of the second branch of the Legal Division-that is, the staff under the chief examiner is to do all investigating work in connection with applications for the issuance of complaints and the gathering of evidence in preparation of formal cases for trial. It also furnishes the examiners who sit at the trial of formal cases. The staff includes one assistant chief examiner, three attorneys and examiners in charge of branch offices, and a small force of investi