XIX

AMENDMENT OF THE SHERMAN ACT, 19141

After years of public agitation the Anti-Trust Law of 1890 was at last supple mented by two statutes enacted in 1914 after seven months of debate, in fulfillment of the campaign pledges of the Democratic party, and even more particularly, of President Wilson. This legislation was initiated by a Presidential Message on January 20, 1914, accompanying five proposed bills, fashioned upon the lines of the "Seven Sisters" laws in New Jersey. These five measures finally simmered down to the two, known respectively as the Trade Commission Law and the Clayton Anti-Trust Act.

The first four sections of the Trade Commission Law require little explanation. They merely prescribe the form of the commission, its manner of succession to the Bureau of Corporations, and similar routine details. Outwardly the administrative body created closely resembled the Interstate Commerce Commission. It is in the 5th section [together with section II of the Clayton Act] that the real innovation in the whole scheme of trust regulation resides. The gist of the entire matter lies here. For while, as will soon appear, the Clayton Act prohibited certain specific unfair practices, such as price discrimination and exclusive tying contracts, section 5 of the Trade Commission Law, in terms as sweeping as those of the Interstate Commerce Act in condemning all unreasonable railroad rates, declares "unfair methods of competition in commerce unlawful." This is the section which transforms the Trade Commission from a merely investigatory body like its predecessor the Bureau of Corporations, into an administrative agency clothed with extended and, as I believe, necessary, police power. This authority it may exercise in the public interest generally, for the good of all rather than to satisfy the claims of an aggrieved plaintiff, whenever it has reason to believe that any unfair method of competition is being employed. In other words, it is intended to promote the standardization of business practice upon a higher and always a decent plane.

As for the machinery for enforcement, as well as the penalties, the details are set forth in sections 5 and 6, — as well as in the Clayton Act, soon to be

1 Consult American Economic Review, Vol. IV, 1915, pp. 839–855, and Vol. V, 1915, pp.38-54; Quarterly Journal of Economics, Vol. XXIX, 1914, pp. 72-97; Journal of Political Economy, Vol. XXIII, 1915, pp. 201-220, 305–326, and 417-436.

described. New powers to initiate investigation; to prescribe forms of accounting, such as shall, for instance, be really illuminating as to the relative costs of production under various forms of industrial organization; to classify such reports, according to the needs in each case; and to coöperate with the Department of Justice in detecting and punishing offenders; all of these powers and functions make the Trade Commission law an experiment of the first importance in the exercise of state authority for the promotion of upright, straightforward and sportsmanlike competition-a competition which shall stifle neither opportunity nor efficiency. To seek this end by means of the administrative arm of the government acting in a quasi-judicial capacity, rather than, as under the Sherman Act, by the agency of the courts alone, is quite in consonance with the tendency of the times. The evident aim is to secure a speedier, more direct, and essentially economic, rather than technically legal, determination of vexatious matters of business. Stevens foremost among authorities on the subject - does not overstate the case in the conclusion that the Trade Commission Act is "an important step. . . toward the ultimate solution of the trust problem." Given a fair field and no secret or discriminatory favors, and competition may well be relied upon to maintain or even to reestablish itself in the face of impersonal and so often unwieldy monopoly. But the success of this plan, it should be added, depends more directly upon the tact and ability of the members of the commission than upon many verbal details of the law itself. Pettifogging membership may easily wreck the experiment; a broad statesmanlike personnel may lead it on to success. ED.

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 by the President, by and with the advice and consent of the Senate. Not more than three of the commissioners shall be members of the same political party. The first commissioners appointed shall continue in office for terms of three, four, five, six, and seven years, respectively, from the date of the taking effect of this Act, the term of each to be designated by the President, but their successors shall be appointed for terms of seven years, except that any person chosen to fill a vacancy shall be appointed only for the unex

1 American Economic Review, Vol. IV, 1915, p. 854.

pired term of the commissioner whom he shall succeed. The commission shall choose a chairman from its own membership. No commissioner shall engage in any other business, vocation, or employment. Any commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office. A vacancy in the commission shall not impair the right of the remaining commissioners to exercise all the powers of the commission.

The commission shall have an official seal, which shall be judicially noticed.

SEC. 2. That each 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 commission shall appoint a secretary, who shall receive a salary of $5000 a year, payable in like manner, and it shall have authority to employ and fix the compensation of such attorneys, special experts, examiners, clerks, and other employees as it may from time to time find necessary for the proper performance of its duties and as may be from time to time appropriated for by Congress.

With the exception of the secretary, a clerk to each commissioner, the attorneys, and such special experts and examiners as the commission may from time to time find necessary for the conduct of its work, all employees of the commission shall be a part of classified civil service, and shall enter the service under such rules and regulations as may be prescribed by the commission and by the Civil Service Commission.

All of the expenses of the commission, including all necessary expenses for transportation incurred by the commissioners or by their employees under their orders, in making any investigation, or upon official business in any other places than in the city of Washington, shall be allowed and paid on the presentation of itemized vouchers therefor approved by the commission.

Until otherwise provided by law, the commission may rent suitable offices for its use.

The Auditor for the State and Other Departments shall receive and examine all accounts of expenditures of the com. mission.

SEC. 3. That upon the organization of the commission and election of its chairman, the Bureau of Corporations and the offices of Commissioner and Deputy Commissioner of Corporations shall cease to exist; and all pending investigations and proceedings of the Bureau of Corporations shall be continued by the commission.

All clerks and employees of the said bureau shall be transferred to and become clerks and employees of the commission at their present grades and salaries. All records, papers, and property of the said bureau shall become records, papers, and property of the commission, and all unexpended funds and appropriations for the use and maintenance of the said bureau, including any allotment already made to it by the Secretary of 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 and appropriations available to be expended by 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 city of Washington, but it may meet and exercise all its powers at any other place. The commission, may, by one or more of its members, or by such examiners, as it may designate, prosecute any inquiry necessary to its duties in any part of the United States. SEC. 4. That the words defined in this section shall have the following meaning when found in this Act, to wit:

"Commerce" means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation.

"Corporation" means any company or association incorporated 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 business for its own profit or that of its members.

"Documentary evidence" means all documents, papers, and correspondence in existence at and after the passage of this Act. "Acts to regulate commerce" means the act entitled "An Act to regulate commerce," approved February fourteenth, eighteen hundred and eighty-seven, and all acts amendatory thereof and supplementary thereto.

"Anti-trust acts" means the Act entitled "An Act to protect trade and commerce against unlawful restraints and monopolies," approved July second, eighteen hundred and ninety; also 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 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.

SEC. 5. That unfair methods of competition in commerce are hereby declared unlawful.

The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from using unfair methods of competition in commerce.

Whenever the commission shall have reason to believe that any such person, partnership, or corporation has 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 and serve upon such person, partnership, or corporation a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The 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