we are to have confidence in the good faith of the Commission in determining when the public interest is concerned, it had been better never to have established such a body. It is particularly important, however, that the Commission act in good faith, since the initiative in preventing unfair competition under this act can be taken only by it; the Department of Justice can not institute a suit to restrain unfair methods of competition; nor can the Court entertain such a suit.

An important change was also made in conference in the nature of the court review of the Commission's orders. The Senate bill had provided that the Commission might bring a suit for the enforcement of its orders in the district court of the appropriate district (the party against whom the order had been given might do the same). In order to avoid the delay of the lower courts, it was provided in conference that the circuit court of appeals should have initial jurisdiction of cases relating to the orders of the Commission, and that the circuit court should expedite the cases in every way possible. The controversy in the Senate between the advocates of a "broad review" of the Commission's orders and a "narrow review" resulted in a victory for the former. The advocates of a "broad review" contended that the Trade Commission Act would be unconstitutional unless it provided for a broad review of the Commission's orders by the courts. A narrow review of the orders of the Interstate Commerce Commission had been held to be constitutional, it was true; but this commission exercised legislative power-the power to prescribe the rates to be charged in the future-and the courts can not interfere with constitutional exercise of legislative power. But the Federal Trade Commission was to have no legislative power; it was to have no power to prescribe fair methods of competition. It was to possess merely the judicial power to order the discontinuance of an unfair method of competition; and under the Constitution the power to act finally in a judicial capacity can be exercised only by a court. The conclusion of the Commission as to the facts was conclusive, but its decision that the facts found constituted a violation of the law had in the nature of the case to be reviewed by the court. Not until the

order of the Commission was sustained did any penalties lie, and even if the Commission was sustained, there were no penalties unless the order of the court was disobeyed. In that event the penalty would be imposed for contempt of court.

The "unfair competition" provisions of the Trade Commission Act should prove very important. The study of individual trusts made earlier in this book has made it clear that unfair competitive methods have proved a powerful weapon in the hands of the trusts to destroy competing enterprises and to discourage potential competitors. In so far as the trusts maintain their position by the use of such tactics, the determined exercise by the Commission of its powers in this respect will go far toward "solving" the trust problem. But while this was probably the purpose of the law, its incidental effects should prove much greater. The law is not limited in its application to trusts or combinations; it applies to all corporations subject to the jurisdiction of the Commission. And perhaps as important, there is legislative approval of the view that ethical principles can be applied to business relationships, that "shrewd" tricks are not to be justified on the ground that "business is business." The commercial world by the acceptance of these principles would make an important stride toward raising the plane of business competition, and toward a marked reduction in the "ruinous" character of competition.

Miscellaneous Provisions

Certain miscellaneous provisions may be noted. It is provided that the Commission or its agents shall at all reasonable times have access to the documentary evidence of any corporation being investigated or proceeded against, with the right to copy such documentary evidence.2 The penalty for refusal on the

1 For a copy of the decisions of the Commission dealing with unfair methods of competition, see Federal Trade Commission Decisions, vol. I (covering the period from March 16, 1915, to June 30, 1919). For an enumeration of the methods condemned by the Commission, see Annual Report of the Federal Trade Commission, 1920, p. 56.

2 Section nine.

part of a corporation is fine or imprisonment, or both. The Commission is given power to require by subpoena the attendance and testimony of witnesses, and the production of all documentary evidence relating to the matter under investigation.2 In case of disobedience to its subpoena the Commission may invoke the aid of any court of the United States. Failure to obey the order of the court may be punished by the court as a contempt thereof. In another section it is provided that any person who neglects or refuses to attend and testify, or to answer any lawful inquiry, or to produce documentary evidence in obedience to the subpoena or lawful requirement of the Commission, shall be guilty of an offense, and upon conviction thereof by a court shall be subject to a fine of $1,000 to $5,000, or imprisonment for not more than one year, or to both fine and imprisonment. No person may be excused from testifying or from producing documentary evidence on the ground that the testimony or evidence may tend to criminate him, but no natural person shall be prosecuted on account of any matter concerning which he may testify or produce evidence before the Commission in obedience to its subpoena. To prevent any misuse by the employees of the Commission of the information obtained by them in the exercise of their duties and powers, it is provided that any officer or employee of the Commission who shall without authority make public any information obtained by the Commission, unless directed by a court, shall be deemed guilty of a misdemeanor, and be subject to fine or imprisonment, or both.5 In section eight it is provided that the several departments and bureaus of the government shall, when directed by the President, furnish the Commission, upon its request, all records, papers, and information in their possession relating to any corporation subject to the provisions of the act, and shall detail from time to time such officials and employees as the President may direct; and in the last section (section 11) it is stated that nothing contained in this act shall be construed to interfere with the enforcement of the provisions of the anti-trust acts or the

1 Section ten.

2 Section nine.

3 Section ten.

4 Section nine.

5 Section ten.

acts to regulate commerce, nor construed to alter, modify, or repeal these acts or any part thereof.

measure.

THE CLAYTON ACT

The Trade Commission Act is a unified measure; it creates a trade commission, and outlines its powers and duties. The Clayton Act, on the other hand, deals with a wide range of matters, a number of which hardly belong in an anti-trust Its leading provisions may be summarized under three headings: first, a set of positive prohibitions dealing with local price discrimination, tying contracts, holding companies, and interlocking directorates; second, remedies; and third, labor provisions. Sections nine and ten, dealing with misconduct on the part of common carriers, it is not proposed to discuss.

3

Positive Prohibitions

After defining in section one the terms anti-trust laws,1 commerce, and persons, the act proceeds in sections two, three, seven, and eight, respectively, to prohibit, with certain qualifications, (1) local price discrimination, (2) tying contracts, (3) holding companies, and (4) interlocking directorates. The purpose of these sections, according to the Senate Committee on the Judiciary, was to "make unlawful certain trade practices which, as a rule, singly and in themselves, are not covered by the act of July 2, 1890, or other existing antitrust acts, and thus, by making these practices illegal, to arrest the creation of trusts, conspiracies, and monopolies in their incipiency and before consummation."

"4

1 Anti-trust laws include, as in the Trade Commission Act, the Sherman Act, sections 73-77 of the Wilson Tariff Act of 1894, and an Act of February 12, 1913, amending sections 73-77 of the Wilson Act; but in addition it includes the Clayton Act itself.

2 Commerce is defined more broadly than in the Trade Commission Act. It includes insular possessions or other places under the jurisdiction of the United States. The Philippine Islands, however, are excluded. The reasons for the exclusion of the Islands are given in Senate Report no. 698, 63rd Cong., 2nd Sess.

3 The word persons includes corporations and associations.

* Senate Report no. 698, 63rd Cong., 2nd Sess.

(1) Local price discrimination. The detailed study of trusts made in the earlier part of this book has shown the pressing need for federal legislation dealing with local price discrimination. At the time of the passage of this clause at least nineteen separate states had laws prohibiting this form of discrimination.1 But state legislation is not effective for this purpose, since it does not prevent a trust, doing a nation-wide business, from making its prices uniformly low in a given state in order to eliminate competition in that state, meanwhile recouping itself for the loss thus sustained by charging high prices in the other states. Section two of the act declares "that it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly to discriminate in price between different purchasers of commodities, which commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the 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 commerce: Provided, That nothing herein contained shall prevent discrimination in price between purchasers of commodities on account of differences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for difference in the cost of selling or 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 restraint of trade.”

The House bill had declared that any person engaged in commerce who discriminated in price between different purchasers, "with the purpose or intent thereby to destroy or wrongfully injure the business of a competitor," should be deemed guilty of a misdemeanor and subject to penalty, either fine or imprisonment, or both. The Senate Committee on the Judiciary was of House Report no. 627, 63rd Cong., 2nd Sess.