this sort. In 1911 a decision of the Supreme Court condemned a merger of competing corporations which was monopolistic in effect, and since then combinations of this form and character have been seldom attempted.

SCOPE OF THE SHERMAN LAW.

The judicial interpretation of the Sherman Antitrust Law, especially in more recent decisions, indicates (1) that it is adapted to prevent all kinds of contracts or combinations which directly or hurtfully restrain trade or commerce subject to Federal control, or monopolize or attempt to monopolize it, although the means of restraint employed are so various and changing that it would be difficult to define all of them specifically by statute; (2) that the present judicial interpretation of interstate commerce is such as to leave practically no twilight zone which can not be reached either by Federal or State law; (3) that combinations of persons in whatever walks of life in so far as they are engaged in such commerce are within the scope of its provisions, and in particular that combinations of manufacturers engaged in such commerce are comprehended by the law notwithstanding that an early decision of the Supreme Court gave rise to some doubts as to the extent to which manufacturing combinations were contrary to the law.

Although the Sherman Antitrust Law, therefore, is comprehensive in its scope, it is not so clearly established that the judicial decisions afford a basis for determining with exactness the lawfulness or unlawfulness, when taken severally, of many particular devices that have been used collectively to control the market. Almost every decision has been based on a complex set of facts and the use of a number of different devices to restrain trade.

RECENT FEDERAL ANTITRUST LEGISLATION.

The Clayton Act of October 15, 1914, was designed in part to establish more definitely the unlawfulness of some of these devices to lessen competition, especially with respect to (1) price discrimination, (2) exclusive contracts, (3) the holding by one corporation of stock in another corporation, and (4) the employment by different corporations of common directors. This act also modifies in some particulars the provisions of the antitrust acts, especially with regard to labor and agricultural organizations, and changes in certain respects the methods of procedure and the remedies in the enforcement of the antitrust laws. The provisions of this law, however, have not yet been judicially interpreted and are merely set forth in this report together with those of earlier antitrust laws.

STATE ANTITRUST LAWS.

Almost all the 48 States of the Union have passed laws against trusts and combinations; the comparative study of these laws which is made in this report affords a useful basis for determining the most effective system of State legislation. In certain directions the States, prior to the enactment of the Federal Trade Commission Act. and the Clayton Act, had gone further than Congress in forbidding specific forms of unfair competition. The broad field of corporation law is one in which the Federal Government has not attempted any general legislation, and the report refers to this subject only incidentally in respect to State legislation. Undoubtedly extensive reforms in State corporation laws are desirable not only to make them more effective in preventing abuses, but also to make them as nearly uniform as possible for the general convenience of the business world.

TRUST LAWS IN FOREIGN COUNTRIES.

In foreign countries the greatest diversity exists with respect to trust legislation. England has no prohibitory legislation, and in the interpretation of the common law the courts appear to favor freedom of contract more than freedom of industry. In the great English colonies, however, where conditions are most nearly like those in the United States, monopolistic combinations are generally forbidden. The laws of Germany allow a freedom of contract even wider than those of England, and generally uphold combinations or cartels even when they are practically monopolistic in character, while in France such combinations are prohibited in so far as they tend to disturb the natural course of prices as determined by free competition. In Austria such combinations are invalid but not prohibited by the criminal law. A similar diversity of law is found in other European countries.

One of the most remarkable features in the policy of certain foreign countries is the enactment of laws which restrict competition in certain industries or even make obligatory the combination of competitors, as, for example, in the potash industry in Germany, the sulphur industry in Italy, and the petroleum industry in Roumania.

FEDERAL TRADE COMMISSION AND UNFAIR COMPETITION.

The act approved September 26, 1914, establishing a Federal Trade Commission gives extensive administrative powers to the commission with respect to corporation activities and the enforcement of the antitrust laws, and also gives it the quasi judicial function of determining questions of unfair methods of competition. The powers of this commission are extended under the Clayton Act to determine questions concerning certain devices to lessen competition,

referred to above, which are unlawful under the said act, in so far as these devices are used by corporations under its jurisdiction.

MEANING OF UNFAIR METHODS OF COMPETITION.

This report shows what practices have generally been regarded as unfair methods of competition by business men, economic writers, and public men in the United States, and also what practices have been characterized as such by the Department of Justice or by the courts in the administration of the antitrust laws. Furthermore, it shows various competitive practices which at common law the courts have termed unfair competition or which they have held could not be justified. These decisions give a much wider scope to the term than has been generally recognized. In presenting this information, however, it is not intended, in this report, to limit or define the term "unfair methods of competition.

UNFAIR COMPETITION IN FOREIGN COUNTRIES.

A broad survey is also made of legislation on the subject of unfair competition in the chief European countries, with some illustrations of the applications of these laws in the jurisprudence of the respective countries. In some countries reliance is chiefly placed on general provisions of the civil codes, while other countries have elaborate special laws prohibiting particular practices. The present tendency is to combine both of these systems. In most foreign countries the basic idea of unfair competition is an act which unjustly injures a competitor, and comparatively little consideration is given to the question of the effects on the general public.

RELATION OF UNFAIR COMPETITION TO MONOPOLISTIC PRACTICES.

In the United States, on the other hand, the application of the term "unfair competition" in legal decisions and in legislation indicates that the effects on the general public are considered. In certain classes of cases, when determining whether a method of competition is unfair or not, the question whether it tends to lessen competition or to bring about a monopoly appears to be of primary importance. It appears that Congress was conscious of this identity between unfair methods of competition and certain practices to lessen competition, and therefore provided that the quasi judicial functions of the Federal Trade Commission concerning unfair methods of competition should apply to those devices to lessen competition which are prohibited under the Clayton Act.

Very respectfully,

The PRESIDENT.

JOSEPH E. Davies, Commissioner of Corporations.

TRUST LAWS AND UNFAIR COMPETITION.

CHAPTER I.

BRIEF HISTORICAL VIEW OF ANTITRUST LEGISLATION.

Section 1. Introductory.

Efforts to obtain monopolistic control of the market have existed to a greater or less extent in almost all periods of civilization. The general existence of legislation against such efforts is itself evidence. of this fact. The degree to which monopolistic conditions have arisen from time to time has depended on a great variety of complex economic conditions and also on the general character of the laws regulating property and business. The opposing tendencies of competition and of monopoly, however, have almost always been present. The recent development of large combinations and monopolies in the United States, as well as in various foreign countries, has been especially striking, because it followed an era in which competition. had been strongly developed. This pronounced competitive era was apparently the result of several historical circumstances, among which may be mentioned the development of the factory system of production, the improvement of means of transportation and communication, the development of more liberal laws of commercial intercourse between nations, and the influence of the economic doctrine of free trade and free industry.

In the United States in the early part of the nineteenth century, competition was more limited locally than to-day, and in particular places was apparently often modified to a considerable extent by local understandings among competitors as well as by the natural limitation of competition through the protection afforded by costs of transportation, difficulty of communication, etc. With the improvement in means of transportation and communication, and the development of nation-wide and world-wide competition, the protection afforded to particular concerns by local position or local understandings disappeared to a large extent and gave rise to efforts at combination and control of the market on a larger scale.

The problem of monopoly in the present day, therefore, is not a new one, although the material interests involved in a particular

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case may be of much greater magnitude. Legislation for the purpose of destroying monopoly to-day, as in former historical periods, is only one of the factors to be relied on, because as long as the fundamental laws of property and of trade contemplate and favor a system of individual activity and free contract the power of competition will assert itself to a wide extent, even though monopolistic agreements are not prohibited. Furthermore, if the law, while allowing free contract in general, prohibits such kinds of contracts and associations as have the express purpose or tendency to create in a monopolistic control of the market, competition will be stimulated and monopoly generally prevented.

Section 2. English law regarding monopolies and restraint of trade. MONOPOLIES BY CROWN PATENT.-Under the Tudors the Crown developed the practice of granting patents of monopoly for the general trade of the country for the enrichment of courtiers and capitalists. These grants became particularly numerous and obnoxious in the time of Elizabeth, and in 1601, after Parliamentary protest, many of them were abolished. In 1602 was decided the so-called Case of Monopolies (Darcy v. Allen, 11 Coke, 84). The court declared illegal a Crown patent of monopoly for making playing cards as contrary to the common law and to divers acts of Parliament (e. g., 9 Edward III, cap. 1, 2; 25 Edward III, cap. 2). It enumerated the evils of monopoly as tending (1) to increase prices, (2) to deteriorate the quality of commodities, and (3) to reduce artificers to idleness and beggary. Nevertheless, the grants of monopolies by Crown patent continued on an even larger scale in the reign of James I, and this led to the passage of the Antimonopoly Act of 1624 (21 James I, cap. 3). This act abolished many monopolies, but specially sanctioned some of them. Moreover, this law was frequently disregarded thereafter. The Long Parliament in 1640 declared most of the monopolies void, but some continued in existence and others were created during the period of the Restoration. Monopoly by patent of the Crown was finally abolished in 1689. Monopoly by act of Parliament remained lawful, but this power has not been exercised with respect to trade in Great Britain.

ENGROSSING, REGRATING, FORESTALLING, PRICE AGREEMENTS, ETC.There were various ancient criminal statutes against engrossing, regrating, and forestalling, as for example, 5 and 6 Edward VI, cap. 14 (1552). These laws were repealed by 12 George III, cap. 71 (1772). Briefly, the elements of these offenses at the common law, as defined by Coke and Hawkins, were as follows: Engrossing consisted in the buying up of large quantities of an article for the purpose of selling it at an unreasonable price; regrating included every practice or device by act, conspiracy, or spreading reports for the purpose of enhancing the prices of victuals; forestalling consisted in