nature, its extent, its effect, and in some instances, upon the intent of those who impose it. Any concerted action which coerces competitors and seriously hinders their competition is unreasonable. The courts are zealous in their determination to protect individual traders from coercion, or interference, by concerted acts of their competitors. Any voluntary concerted action, which directly lessens competition between the parties in price, terms, quality or service, in a substantial way, is unreasonable. By substantial is meant, not a theoretical, but a considerable or material lessening of competition. In other words, the trade restrained must have substance, its volume must be of sufficient importance that the restraint affects enough persons to make action by the government really in the public interest. This does not mean that its effect must be nationwide. A restraint localized in a single city can be unlawful if it affects a material volume of interstate traffic. The trivial and the incidental indirect restraints such, for example, as the regulating of business hours, which are often compelled by the necessities of efficient business operation, and do not harm the public, are not condemned. But any action which conflicts with the public interest by increasing prices, deteriorating quality, restricting terms or eliminating necessary service on any considerable volume of goods in interstate commerce violates the law. If the intention of the parties to substantially lessen competition is clearly shown, the intent creates a dangerous probability of the restraint being accomplished, which will warrant governmental action before the effect on competition is procured.

To avoid possible violation of the Clayton Act, a business man should not discriminate in price between the same class of customers on the same grade, quality, or quantity, of the commodity sold, except when necessary to meet the price of his competitors, nor should he enter into any understandings with customers, express or implied, that they will not use or deal in the goods of competitors. If he desires to risk a possible violation of the law by the use of such practices, he should remember that when the effect of their use creates a probability that they will substantially lessen competition or tend toward monopoly a violation occurs. The use of these practices in any way is therefore dangerous. A corporation should not purchase

stock in a competing concern engaged in interstate commerce, where the effect of such acquisition will probably lessen competition between them. Nor should person serve as a director for competing companies, one of which has a capital surplus and undivided profits aggregating more than $1,000,000 if they are so directly in competition with each other that an agreement between them to eliminate competition would amount to a violation of the Sherman Law.

Finally, it should also be borne in mind that competitive methods, which are fraudulent or deceptive, as well as methods which create a dangerous probability that competitors will be unduly hindered in the conduct of their business, or that a monopolistic control will be secured, are subject to certain condemnation by the Federal Trade Commission.

CHAPTER II

THE PURPOSE OF THE LAWS REGULATING

COMPETITION

THE laws regulating competition are of large social, economic and political significance. They are badly misunderstood by the average business man whose direct contact with them usually occurs when they directly restrict his liberty of trade. The far-reaching indirect benefits of the legislation is seldom, if ever, brought to his attention. While primarily enacted to protect the public, to the overwhelming majority of business men, these statutes afford the only protection against coercion, oppression and possibly even the destruction of their enterprises.

Protection of Efficient.-The thought behind the Anti-Trust Acts is that a status of free, fair competition must be preserved as the foundation of trade and commerce in order that the survival of men in business shall be determined by their efficiency rather than by artificial factors. This thought is expressed in the Corn Products case, cited supra, in the following language:

"The means forbidden have been evolved, often empirically, because of the slow recognition that they make for the disorganization of industry and of the depression of a competing producing capacity which, if left alone could compete upon even terms. While the statute under this theory relies upon competition as a proper stimulus to the maintenance of industrial advance and as the chief protection to the consumer, it takes a long view, not a short. It recognizes that with

1 United States vs Motion Picture Co. et al., 225 Fed. 800, 802 (1915); United States vs Corn Products Co., 234 Fed. 964, 1012, 1013, 1015 (1916); United States vs United Shoe Machinery Corp., 247 U. S. 32, 47, 53, 56 (1917); United States vs Reading Co. et al., 40 Sup. Ct. Rep. 425, 432; see also the able treatise by W. H. S. STEVENS on "Unfair Competition,"

p. 5.

the customer in the end must lie the decision between producers, and that those who fail to secure the market by the quality and cost of their service must pass out of the field but it does not identify permanent capacity with the inability to endure a transitory or local appeal to customers. Its presupposition is that there may well be competitors capable in the end of giving a service which will serve the public as well as their neighbors, who may yet succumb to concerted competition apparently more serviceable, but only because it is temporary, and is put forward with no purpose of universal application."

It appears to be the view of the courts that monopolies cannot be acquired and maintained by superior efficiency alone because capacity and ability is so generally distributed among mankind that its monopolization is a practical impossibility. A similar position is taken by some of the leading economists of this country, who maintain that no one concern can monopolize efficiency and that it is primarily the use of unfair methods and undue restraints which create and perpetuate monopoly. The law has no concern for the inefficient producer who is unable to meet the fair competition of his more efficient competitors; but it holds the public is entitled to the free play of industrial power and competitive efficiency which traders are able to develop, and improper restraints imposed on competitors are viewed as a social evil. Magnitude alone acquired through efficient fair methods is not condemned. Large scale production or the integration of non-competitive units is not objectionable for there is no purpose expressed in the Sherman Law to reduce manufacture to isolated units of the lowest degree. The law intends that the honest efficient business man shall be

2 United States vs U. S. Steel Corp., 223 Fed. 51, 163; Patterson vs United States, 222 Fed. 599, 619 (1915); Standard Oil Co. vs United States, 221 U. S. 1, 55 (1911).

8 See W. H. S. STEVENS, "Unfair Competition," Chap. 13: University of Chicago Press.

4 United States vs Corn Products Co., 234 Fed. 964, 1012, 1013, 1015 (1916).

5 United States vs U. S. Steel Corp., 40 Supreme Court Reporter, 293, 298; United States vs United Shoe Machinery Corp., 247 U. S. 32, 56 (1917).

6 United States vs United Shoe Machinery Corp., 247 U. S. 32, 45 (1917); United States vs Winslow, 227 U. S. 202, 217.

protected from unfair and dishonest methods of competition or from combined action to restrain his trade. It intends too that the public shall have the benefit of the competition of all competitors who are efficient enough to survive, unrestrained by any conspiracy, combination or agreement. The legal application of the competitive theory is not the laissez faire economic theory of a merciless and wholly uncontrolled competition but rather that of a regulated competition preserving and protecting the efficient and guaranteeing to the public the benefits of competition between them. It abhors monopoly and is designed to preserve the spirit of democracy in industry by requiring that the good of the majority shall control.

Preservation of Individual Opportunity. These laws are designed to preserve individual initiative and opportunity. To quote the language of a Federal Court, they are based upon the inherent "right of every individual to choose his own calling in life and to follow the trade of his choice unhampered by any undue and any unfair interference from others." The whole policy of the law is opposed to combined actions that "repress individual enterprise." Perhaps in no other country is there such an opportunity to win business success and rise to the foremost ranks of society. Men with vision but limited capital are constantly achieving amazing success in industry. It would be an irretrievable loss to society were monopoly to become the rule in industry making every man a hired man.10 In the Trans-Missouri Freight Association case, cited above, the Supreme Court of the United States long ago in discussing the economic changes forced by combinations in restraint of trade, emphasized this phase of the Anti-Trust Acts in the following language:

"It is not for the real prosperity that such changes should occur which result in transferring an independent business man, the head of

7 United States vs International Harvester Co., 214 Fed. 987, 1001 (1914); United States vs Trans-Missouri Freight Assn., 166 U. S. 290, 323. 8 United States vs Motion Picture Co., 225 Fed. 800, 802 (1915). 9 Motion Picture Co. vs United States, 193 U. S. 197, 341 (1902). 10 See United States vs Trans-Missouri Freight Assn., 166 U. S. 290, 323, 324; State vs Standard Oil Co., 48 Ohio State 37.