CHAPTER VII.

COMMON CARRIERS: REGULATIONS CONTAINED

IN:

1. Federal Trade Commission Act.

2. Clayton Law.

1. PROVISIONS OF THE FEDERAL TRADE COMMISSION ACT.

Banks and Common Carriers Generally Excepted from Jurisdiction. As in the case of banks, ordinary transactions pertaining to the business and management of common carriers are expressly taken out of the jurisdiction of the Federal Trade Commission, as conferred by Section 5 of said law; and they are also excepted from the requirements as to inspection and annual or special reports, contained in Section 6. These exceptions are due to no favoritism or undue advantage accorded to financial institutions, or common carriers; such omission is merely an acknowledgment of the minute inspection and detailed reports required of these two branches of business by other departments, boards or commissions. In brief, it may have been thought that if such exactions were duplicated, no time would be left to run trains or to make bank-loans. To that extent, the statute is merciful to the classes of corporations concerned.

Such Exemptions Strictly Construed.-It should be repeated, however, here as elsewhere, that where curative statutes are enacted to reach and obliterate a long-standing abuse, the excepting clauses will without doubt be strictly and even narrowly construed by the Commission and by, in a less degree, the courts. This principle of the applications of such specific legislation is due to human nature rather than to any recognized rule of statutory construction. Every newly created member of the governmental body is bound to justify its right to exist; and the most obvious means at command is for it to assume jurisdiction in doubtful or border-line cases. Thus Congress has often found in experience that it has builded wider if not better than it knew. The early decisions of Chief Justice Marshall are replete with holdings that widened the scope of the powers of the Supreme Court; and while it was no doubt to the advantage of the country

at large that there should be no twilight-zone or no-man's land in that sphere of government, still the fact remains that the history of that court illustrates the human tendency of institutions to retain or enlarge their rights and influence, when their own voice is potent in the demarcation of their powers. Edmund Burke said: "The speculative line of demarcation, where obedience ought to end and resistance must begin, is faint, obscure and not easily definable," and the practical line in legal construction is often as thin and hazy. This being so, the omission of excepting clauses will without question be construed to leave the business concerned within the statute, under the broad definitions of corporations, etc., therein contained. Thus where a bank or common carrier goes out of its ordinary and special field and enters upon any enterprise that involves general merchandising, it will as a matter of course become amenable to every requirement of the Federal Trade Commission Act, and of the Clayton Law as well.

Right to Inquire and Recommend, in Certain Instances.— But while by express exception, Section 6 of the first-named law exempts common carriers from inspection and the burden of making reports to that body, there are certain requirements that apply to common carriers, since they are directed to "any defendant corporation," or "any corporation." These requirements are contained in subdivision (c) authorizing the Commission to investigate the manner in which any decree is being carried out, in any suit brought by the United States to prevent and restrain any violation of the Anti-trust acts; subdivision (d) upon the direction of the President or either House of Congress empowering the Commission to investigate and report the facts relating to any alleged violations of the Anti-trust acts by any corporation; subdivision (e) upon the application of the Attorney-General like power is conferred to investigate and make recommendations for the readjustment of the business of any corporation alleged to be violating the Anti-trust acts, in order that the corporation may thereafter maintain its organization, management and conduct of business in accordance with law; subdivision (f) whereby the Commission is likewise empowered to make public information thereby secured, in its discretion, except trade secrets and names of customers; 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 de

cisions; subdivision (g) containing the important power from time to time to classify corporations and make rules and regulations for the purpose of carrying out the provisions of the Federal Trade Commission Act; subdivision (h) establishing a new field of endeavor, by conferring authority to investigate from time to time, trade conditions in and with foreign countries where associations, conditions 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.

The above provisions have been inserted at length and practically in the words of the statute, because it will appear upon a general view thereof that there are conditions, including the entrance upon matters of merchandising where the regulations of the Federal Trade Commission Act would apply. The right to investigate alleged infractions of the Anti-trust laws and to enquire into the effectiveness of decrees entered in actions by the government to enforce the provisions thereof, and to make recommendations as to the readjustment of the corporate affairs of a company charged with such violations—are all phases of the statute that do affect common carriers along with other incorporated concerns. Whether the right to classify corporations under subdivision (g) relates to common carriers, or not, certainly they must, so far as concerned, conform to the rules and regulations which the Federal Trade Commission thereby is empowered to make; and it may be that steamship trusts and special rates, singly or combined, upon foreign railroads and steamship lines, or in conjunction with traffic corporations in the United States, would make the terms of subdivision (h) very important in its regulating effect upon common carriers, and make its influence felt abroad as well as within the limits of the United States and its dependencies.

Debates in Congress have developed a disposition to regard the Commission, acting under subdivision (h), as constituting a convenient and permanent substitute for a Tariff Revisional Commission. What effect this aspect of its powers will produce cannot be estimated in advance; but this proposal indicates the unusual nature and far-reaching extent of the jurisdiction these statutes confer.

The right to compel access to books and papers is conferred by Section 9, together with the usual power to subpoena wit

nesses; and by Section 10 failure to attend and testify, or to produce documentary evidence is made a criminal offense; also, the mutilation of or making false entries in corporate papers and records, is likewise prohibited under penalty of fine and imprisonment. To secure privacy, acts of employees resulting in unauthorized publicity are penalized, and the fine of $5,000 or imprisonment for not exceeding one year, or in the discretion of the court, the imposition of both said imprisonment and fine, indicate the intent of the statute makers that Section 10 should prevent unauthorized disclosures during the progress of investigations of this nature.

Reverting to subdivision (e) which confers the power to make recommendations to the Attorney-General, this feature seems to supply the ounce of prevention that will in practice obviate pounds of cure, when the corporation concerned is ready to shape its course to the law's requirements without recourse to long and expensive litigation to determine the legal status of its acts. In effect, this provision may do much to occupy the place of the power to commend which was advocated by persons experienced in corporate management, as appears in the reports of the Congressional committees and the discussions connected with the enactment of the Trade Commission Act and the Clayton Law. The right to "investigate and make recommendations" might almost be said to imply the power to "make commendations."

Power to Investigate Foreign Trade Conditions.—Another point should not be passed by without some further consideration, Under subdivision (h) of Section 6 the right to investigate foreign conditions is made a feature of the Federal Trade Commission's powers. Such investigation might likely enough disclose combinations by state-owned railroads and steamship lines operating under governmental control, wherein and whereby shipping of goods is permitted at such nominal traffic rates as to seriously handicap our public service corporations of similar kinds in maintaining competition upon anything resembling a fair basis of transportation cost. In that event, it would appear equitable and right to mitigate or temporarily remove altogether the restrictions of the Anti-trust statutes so far as they affect the articles of trade concerned by those practices, in foreign commerce. These are considerations which will arise from time to time, when the condition of our foreign trade is productive of situations such

as are referred to above. As we have seen, the requirements of Section 5, regulating “unfair methods of competition in commerce" do not apply to common carriers, since they are specifically excepted therefrom. Likewise they are not liable to be investigated and common carriers are not compelled to file reports under the general provisions of Section 6. This exemption however, would not extend to matters of business outside of the right to conduct railroads, pipe lines, telephone, or telegraph systems, and similar auxiliary enterprises. Upon the whole, the provisions of the Federal Trade Commission Act cannot be said to be burdensome to common carriers. When construed in a spirit of friendly consideration, as we have every reason to believe is and will be the constant attitude of the Commission,-the law will prove a shield to protect common carriers from needless interference and litigation; in brief, it guarantees them "equality under the law."

2. PROVISIONS OF THE CLAYTON LAW.

Certain Common Carrier Provisions Apparently Unrelated. -Although certain of the provisions affecting common carriers appear quite unrelated in the two statutes, it seems proper and necessary to collate and discuss them in one chapter, where the points of similarity and divergence can best be noted and compared as they occur in the text of the several statutes.

Extent to which Law Applies. It is possible that Section 2, relating to price discrimination, and Section 3, prohibiting "tying" agreements, do not relate to common carriers in so far as those corporations confine their transactions to normal operations within the scope of their business; indeed, such outside lines of business are pro tanto forbidden by the Act to Regulate Commerce, as amended, Section 1,1 which prohibits any common carrier from transporting any article or commodity manufactured, mined or produced by it or under its authority, or in which it may have any interest, except those intended for its use in its transportation business, and further excepting timber and products manufactured therefrom. Doubtless the number and extent of the land grants bestowed upon railroads to encourage construction made it unjust to interfere with their ability to cut and market lumber derived from their own domains.

There are, moreover, types of common carriers that are not

I See Appendix O, pages 345-361, for original Act, with amendatory laws cited.