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conclusive, tho the court, if it deems necessary, may order additional evidence to be taken before the commission. In other words, the court is supposed to confine itself to questions of law. Doubtless, however, the courts will treat the question whether a particular practice in competition is unfair or otherwise as one of law rather than of fact, and a very wide field for judgemade legislation is thus opened.
No specific penalties appear in the trade-commission act for failure to obey an order of the court confirming an order of the commission with respect to unfair competition. However, the general provision contained in the anti-trust act as to penalties for contempt of court would apply. The maximum penalty for a natural person is $1000 or six months' imprisonment.
In the anti-trust bill as it passed the House the practices of price discrimination and of restrictive sales and leases were made subject to penalties of fine and imprisonment. In the act as finally revised by the conference committee and passed these penalties were cut out, and the procedure for enforcing the prohibition of these practices was made similar to that for enforcing the general provision as to unfair methods of competition. There is this substantial difference, however, that in the anti-trust act the words "if it shall appear to the commission that a proceeding by it would be to the interest of the public " do not appear.
This elimination of penalties and other similar changes made in the conference were vigorously attacked on the floor both of House and Senate. It was charged that the "teeth" had been taken out of the bills. There is little reason to doubt, however, that even as to these more specifically defined practices it is much better, at least for the time being, that proceedings should begin only with the trade commission.
Its expert investigation of the facts should be much more satisfactory than could be expected in an ordinary criminal prosecution. Indeed, in all probability the law will be enforced more vigorously and effectively under this procedure than it could have been in any other way. It is a great mistake to suppose that the establishment of severe penalties for statute-made offenses, not recognized as offenses by the common practice of the business world, will forthwith assure their cessation.
This comprehensive provision regarding unfair competitive methods bids fair to inaugurate a marked improvement in business practices in the United States and to do much toward checking the growth of monopoly. In a certain sense the new provision adds little to the Sherman anti-trust act. It will be recalled that that act explicitly prohibits the monopolization of interstate or foreign trade or the attempt to monopolize it. Unfair competitive practices, if carried to such a degree as to justify their suppression by government, are in most cases, if not in all, attempts to monopolize. The most significant feature of the new legislation is the expert machinery for investigating the facts and for making at least the initial determination as to what constitutes an unfair practice injurious to the public interest.
As regards price discrimination, the anti-trust bill as it passed the House provided that any person who discriminated in price between different purchasers in the same or different sections "with the purpose or intent thereby to destroy or wrongfully injure the business of a competitor" was subject to penalty. Rejected by the Senate, restored and amended in conference, the section (§ 2 of the anti-trust act) omits the words just quoted and declares such discrimination
unlawful only where the effect " may be to substantially lessen competition or tend to create a monopoly." Moreover, to the unimportant and proper exceptions contained in the House bill is added the exception of discrimination "made in good faith to meet competition."
The wisdom of the first of these two changes can scarcely be doubted. The purpose of all competition, at least in a sense, is to destroy the business of competitors. Price discrimination is an all but universal practice and is not necessarily injurious or calculated to bring about a monopoly. The House bill if broadly interpreted would virtually have prohibited price discrimination altogether; it went too far. On the other hand, to permit price discrimination when made to" meet competition " may largely defeat the effectiveness of this section. The great corporation or combination that seeks to drive out a small competitor by price discrimination usually maintains that all it does is in good faith to meet competition. The Standard Oil Company, for example, may have the entire oil trade of a given town. It may be charging excesssive prices there. A competitor seeking to gain a foothold enters the town and offers oil at a somewhat lower price, but still a fair price. The Standard meets this price, perhaps goes below it. The merchants being accustomed to deal with the Standard give little patronage to the competitor, who must cut again, and so the process goes on till prices are below cost. Meantime the Standard recoups itself for reduced prices in the town in question by advancing them elsewhere; the less fortunate competitor is driven out of business. It is doubtful
whether under the phraseology of the new statute such tactics could be held unlawful, altho they certainly would tend to create monopoly.
It would appear, therefore, that the section with regard to price discrimination, so far from adding to the effectiveness of the general provision as to unfair competitive methods, may actually weaken it.
The Senate, as already indicated, struck out the provision of the House bill prohibiting in general terms the practice of restrictive sales and leases. It substituted, however, a somewhat similar provision relating only to patented articles. The Senate evidently feared lest the holder of a patent might claim by reason of the patent the right to do that which if done by others would be held unfair competition. The courts had already upheld restrictive sales and leases of patented articles. In conference, however, this section of the bill was again made general in application, explicit reference being made to both patented and unpatented articles. Section 3 of the anti-trust act declares it unlawful for any person to lease or sell goods or fix a price therefor on the condition or understanding that the lessee or purchaser shall not use or deal in the goods of a competitor. In conference was added the qualification 'where the effect . . . may be to substantially lessen competition or tend to create a monopoly."
Again there can be no doubt of the wisdom of this qualifying clause. It is common in many branches of business to make sales or leases subject to the condition of exclusive patronage. The practice is by no means necessarily objectionable. It is substantially akin to the practice of establishing agencies which handle goods on commission or on a salary basis, and which are not allowed to handle similar goods of other sellers. One seller has one dealer to handle his goods exclusively, another competing seller another dealer and so on. Competition instead of being restrained may be made the more effective thereby. Often this may be the only
effective way of securing the distribution of the goods in a given locality. An unqualified prohibition of tying contracts" would have been unfortunate. On the other hand, such contracts have been in some cases an important means of creating or protecting monopoly, and where that is the case they should be prohibited as the law now prohibits them.
It may be noted that there was a provision in the bill as it passed the House making it unlawful for mine operators and certain other concerns to refuse to sell their products to any responsible person. This was struck out by the Senate as of doubtful constitutionality and has not been restored.
II. NEW PROVISIONS ON COMBINATIONS IN
We come now to consider those provisions of the new legislation which seek to clarify and extend the definitions of forbidden contracts and combinations in restraint of trade. These provisions, which are confined to the anti-trust act, relate chiefly to intercorporate stockholdings and to interlocking directorates.
If broadly interpreted, the Sherman anti-trust act without amendment could be made to reach every harmful, or potentially harmful, combination in restraint of interstate trade, however indirect its form. That act declares "every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade" to be unlawful. The language is comprehensive in the extreme. To be sure, the Supreme Court has declared that the Sherman act must be interpreted in the "light of reason;" that there may be certain contracts or combinations which restrain trade in only a reasonable manner and which Congress did not intend