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banks respectively. Common carriers and banks do not ordinarily deal in commodities which “are sold for use, consumption or resale," and seem plainly not intended to be regulated by this section. This same Congress has created an elaborate machinery to regulate the dealings of banks in exchange, which is an additional reason why this section seems not to apply to banks or banking. Probably only ordinary commercial operations are intended to be covered by section 2. Where a bank or common carrier engages in merchandising either directly or indirectly the Interstate Commerce Commission or the Reserve Board would have jurisdiction to enforce this section. But in practical application this section will seldom if ever be invoked against banks or common carriers.

The language used shows that business is not intended to be unduly restricted. Differences in price are permitted because of differences in grade, quality, or quantity of the commodity sold, or differences in the cost of selling, or the cost of transportation. And finally aside from all these exceptions discrimination in price is permitted without any of the foregoing causes, if made in good faith to meet competition. And merchants are permitted if acting in good faith to choose their own customers.

The section applies only to price discrimination which substantially lessens competition or tends to create a monopoly.

2. Tying or Conditional Contracts.

It is probable that section 3 was passed as a result of the agitation against the practice of certain large concerns, by which in contracts of sale or lease of patented appliances they customarily inserted conditions tying up their customers so that they would be unable to purchase from competitors. Hence it is usually referred to as the "tying clause” section. It makes unlawful the insertion of a condition in a contract of sale or lease of goods, wares or merchandise, patented or unpatented, in interstate commerce, which condition binds the lessee or purchaser not to use the goods of a competitor of the lessor or seller. But such contracts are made unlawful only where the effect thereof is substantially to lessen competition or to tend to create a monopoly. The question to be determined is largely one of fact.

The Interstate Commerce Commission and the Federal Reserve Board are specifically given the power by section 11 of the Clayton law to enforce this section as to common carriers and banks respectively. But the section applies only to merchandising, to "the sale or lease of goods, wares, and merchandise for use, resale or consumption.” And plainly in the normal course of their operations carriers and banks do not perform acts to which this section could apply.

3. Stock Ownership by One Corporation in Another.

The inhibitions against stock ownership apply to corporations only.

The first paragraph of section 7 provides that no “corporation engaged in commerce” shall acquire directly or indirectly the whole or any part of the stock of another corporation engaged also in commerce, where the effect thereof would be substantially to lessen competition between the corporation owning the stock and the corporation whose stock is so acquired, or to restrain commerce or tend to create a monopoly.

The second paragraph of the section is directed against so-called "holding corporations” whether engaged in commerce or not. It provides that "no corporation” shall acquire capital stock of two or more corporations engaged in commerce where the effect of such acquisition or the use of the stock by voting of proxies or otherwise may be substantially to lessen competition between such corporations or any of them whose stock is so acquired, or to restrain commerce, or tend to create a monopoly. This applies to banks, common carriers and all other corporations.

The section is not applicable to the purchase of stock by a corporation for investment only, where there is no bringing about or attempting to bring about a substantial lessening of competition.

The section states that its provisions are not intended to prevent a corporation from forming subsidiary corporations for the actual carrying on of its immediate lawful business or the natural and legitimate branches or extensions thereof, or from owning or holding all or part of the stock of such subsidiary corporations when the effect thereof is not substantially to lessen competition.

The application of the stock ownership provisions to common carriers is discussed under the heading “Common Carriers.'

The provisions of the section are not to be held to affect or impair any existing lawful stock ownership of one corporation in another, nor shall they authorize or make lawful anything made illegal by the Anti-trust laws, nor exempt any person from the penal provisions thereof or the civil remedies therein provided.

Broad as are the prohibitions of section 7 against stock ownership by corporations, ownership by one or more persons of any part or all of the capital stock of competing corporations is not therein condemned.

4. Interlocking Directors.

Section 8 condemns interlocking of officers, directors or employees of banks, common carriers and other corporations subject to certain limitations which differ in their application to the different kinds of corporations affected thereby.

a) As To BANKS.

Interlocking provisions extend to officers, directors or employees thereof and not to directors only as in the case of corporations other than banks and common carriers.

The provisions of the first and second paragraph of section 8 are ambiguous and when read in connection with the fourth paragraph of the section are still more difficult of interpretation. The evident purpose of Congress was to prevent interlocking in institutions of large resources. In order certainly to accomplish the desired result Congress applied its regulations from two points of view. In the first place it forbade after two years from the date of the approval of the act interlocking between national banks wherever located if one of them has deposits, capital, surplus and undivided profits aggregating more than $5,000,000, and also forbade interlocking between any private banker or state bank having deposits, capital, surplus and undivided profits aggregating more than $5,000,000 and any national bank of whatever size wherever located. Secondly, apparently more as a matter of precaution than necessity, Congress provided that there shall be no interlocking

whatever in a city of more than 200,000 inhabitants between any national bank of whatever size and any other national bank or state bank or private banker located in the same place. The two provisions referred to appear in the same section, though in separate paragraphs, and the second paragraph contains two provisos—the first to the effect that the section shall not apply to mutual savings bank not having shares of capital stock, and the second to the effect that interlocking is permitted as between not more than two banks of the kinds described where the entire capital stock of one is owned by the stockholders in the other. The second paragraph basing interlocking provisions on population does not in terms permit the interlocking for two years after the approval of the law as does the first paragraph. But we believe, reading the law as a whole, that the second paragraph is in substance a portion of the first paragraph and should be construed as a part thereof, and therefore its provisions likewise do not become effective for two years.

The provisions of the fourth paragraph of the section are to the effect that when any person elected as a director or officer, or selected as an employee of any bank or corporation is eligible to the position at the time of his election or employment, his eligibility shall not be affected by reason of any change in the affairs of such bank or other corporation until the expiration of one year from the date of his election or employment."

5.–Opinion construing the two year provisions of the section:

Department of Justice,
Office of the Solicitor of the Treasury,

Washington, D. C., November 24, 1914. The Federal Reserve Board,

Gentlemen: Referring to the so-called “Clayton Law" approved October 15, 1914,

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