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THE TRUST LEGISLATION OF 1914
Introduction. Attitude of the parties in Congress; general character of the legislation, 72. — I. Unfair competitive methods, 74. — General declaration of illegality, 74. - Method of enforcement; discretion of trade commission, 75. — Price discrimination, 77.—Sales and leases conditioned on exclusive patronage, 80. — II. New provisions as to combinations in restraint of trade, 81. Adequacy of the Sherman act without amendment, 82.- Intercorporate stockholdings, 82.Interlocking directorates, 84. — Inadequacy of prohibition when community of stock interest is permitted, 85. Provisions as to banks, 86.- Personal liability to penalties under anti-trust laws, 87.— Private suits, 88. — III. Mismanagement of railroads. Relations to banking, supply and construction companies. Misappropriation of funds, 89. IV. The interstate trade commission, 90.- Powers of investigation; reports from corporations, 91.- Powers in enforcement and interpretation of law, 94. — Assistance of the commission to attorney general and courts; recommendations for future legislation, 95.- Beneficial results to be anticipated, 97.
Two important acts relating to trusts and corporations have just been adopted by Congress. They represent the fruition of the policy laid down in the last national platform of the Democratic party. They are "administration measures. In fact, it is doubtful whether without the persistent and forceful leadership of President Wilson the conflicting views in Congress could have been harmonized and the legislation passed in addition to the other important and long-debated measures which have occupied the attention of that body.
The "administration" bills regarding trusts and corporations were introduced into Congress at the very
beginning of 1914. They were under almost continuous consideration by the two houses and their committees for nine months before enactment. Many of the crudities of the original bills have been eliminated and in general the provisions as adopted are workable and understandable. In fact, if the destruction of trusts and the maintenance of competition be accepted as the proper policy, these acts must be approved for the most part as a valuable aid in carrying out that policy. The present writer has already expressed his opinion that this policy is on the whole the best for the American people.
As might be expected, there were efforts in Congress, particularly on the part of the Progressive party, to turn the trust legislation in the direction of regulation rather than prohibition. The Democrats, however, stood with practically united front for the policy of suppressing combinations and many Republicans joined with them.
The two acts are entitled respectively: "An Act to supplement existing laws against unlawful restraints and monopolies and for other purposes," and "An Act to create a federal trade commission, to define its powers and duties and for other purposes." We shall call them briefly the anti-trust act and the trade-commission act. The trade-commission bill, as it passed the House, was substantially confined to procedure, to machinery and methods for enforcing the laws. The Senate, however, inserted in this bill provisions with respect to unfair competitive methods, and these stand in the act as finally adopted, altho they more logically belong in the other act, which is chiefly concerned with prohibitions of unlawful practices.
It is perhaps needless to call attention to the fact that both these acts are, of necessity, limited to fields over
which the federal government has jurisdiction. Except certain provisions on national banks, they deal exclusively with interstate and foreign commerce.
The new prohibitions and definitions of unlawful practices in the two acts fall under three main heads: (1) those relating to competitive methods; (2) those relating to methods and forms of combination in restraint of trade; and (3) those relating to mismanagement of railroads.
I. UNFAIR COMPETITIVE METHODS
Of the provisions relating to methods of competition there are three as to unfair methods in general, as to price discrimination, and as to restrictive sales and leases. The first named was not in either bill as it passed the House but was added by the Senate. Being comprehensive in character it would, if broadly interpreted, have rendered unnecessary the more specific provisions of the House bill regarding competitive methods and these were accordingly struck out by the Senate. In the conference committee of the two houses, however, they were restored, and they were finally adopted, tho with considerable amendment.
Section 5 of the trade-commission act provides simply "that unfair methods of competition in commerce are hereby declared unlawful." This applies to individuals and firms as well as corporations. It adds no definitions or qualifications, leaving the determination of what constitutes unfair competition to the trade commission and the courts. In this respect the provision is similar to that of the interstate commerce act, which merely declares unreasonable railroad rates to be unlawful, leaving it to the interstate commerce commission and the courts to determine what rates are unreasonable.
In other words, Congress has established a standard and delegated to other agencies the sub-legislative power of applying or interpreting that standard.
There was much opposition to this general provision on the ground of its vagueness. It was stoutly maintained that no business man would know where he stood, what he could and what he could not do. reply to this was that the methods of unfair competition are so numerous, so varied and so constantly changing that they cannot all be specifically set forth by Congress, and that a law which attempted to do so would require constant amendment. To avoid the wellfounded objection that it would not do to punish a man for an offense indefinitely described, Congress wisely prescribed no penalties for initial violation of this section but provided a special and appropriate procedure for enforcement.
This procedure begins with action by the federal trade commission, a body whose composition and other powers are more fully described later. No court can take initial jurisdiction of an alleged offense against this section of the law; no prosecuting attorney bring an indictment. The commission is not even obliged to take action. The law declares that whenever the commission has reason to believe that any person or concern is using unfair methods of competition it shall proceed, "if it shall appear to the commission that a proceeding by it in respect thereof would be to the interest of the public." The language just quoted was incorporated in the bill in the conference and was not in it as first passed by the Senate. While in a sense the clause materially weakens the law, there can be little doubt of its propriety, at least as a temporary device. In its absence the commission would be obliged to take up every case of unfair competition, however unimpor
tant and however little it actually tended to bring about monopoly. Instances of more or less unfair competition are simply innumerable in the business world, and it is vain for the government to attempt, under present conditions, to prevent them all. The trade commission would find its hands full indeed if it had to take up every complaint brought before it. The interference with business which would result from a multitude of proceedings on the part of the commission would probably more than offset the good accomplished by the actual suppression of more important and serious abuses.
The commission having decided to take up a case of unfair competition must give a hearing, after which it may issue an order requiring the discontinuance of the unfair practice. This order, however, is not immediately enforceable. If the person or concern to whom it is directed fails to obey, the commission must apply to the circuit court of appeals for its enforcement. It will be recalled that a similar procedure formerly prevailed in case of the failure of a railroad to obey an order of the interstate commerce commission, but by the amendment of 1906 a penalty was provided for failing to obey such an order and the railroad could escape the penalty only by taking the initiative in applying to the courts for relief. It is perhaps unfortunate that this amended procedure was not followed in the trade-commission act. The circuit court of appeals is given exclusive jurisdiction of cases relating to orders of the commission, thus avoiding the delay of appeals from lower courts.
The power of review given to the court with respect to orders of the trade commission is not without limits. The law provides that the findings of the commission as to the facts, if supported by testimony, shall be