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CONDITIONS LEADING UP TO THE ENACTMENT OF THE FEDERAL TRADE COMMISSION
LAW AND THE CLAYTON LAW.
Notwithstanding the comprehensive character of the Sherman Anti-trust law and indeed because of its general terms there has been continual agitation for additional legislation with two main considerations in view: first, that the interpretation of the Sherman law should be made fairly certain and that business men should be afforded means of knowing with reasonable certainty in advance whether or not the law applied to a given state of facts; second, that the law should be made to deal more effectively with monopoly in its incipiency, or in other words with practices tending to create monopoly. Objection was also made that with regard to certain methods or practices the Sherman law was not sufficiently specific, and finally that court decrees when entered were not always effective in securing the relief that was sought. It may be assumed that it was the concurrence of Congress in these conclusions as to the operation of the Sherman law which lead to the passage of the Federal Trade Commission and Clayton laws.
Even in its most recent decisions 1 the Supreme Court has announced no definite standard from which
1.-In Standard Oil Co. vs. United States, 221 U. S. 1, the Supreme Court says (p. 63): "The merely generic enumeration which the statute makes of the acts to which it refers and the absence of any definition of restraint of trade as used in the statute leaves room for but one
the legality or illegality of any particular action can be determined. That this doubt is well founded is shown by the reasoning of two trial Courts in recent cases, both of which had before them for interpreta
tion the rule laid down by the Supreme Court in the V Standard Oil and Tobacco cases. In United States
v. Hamburg-American Steamship Company, 216 Fed. 971, and in United States v. International Harvester Company, 214 Fed. 987, each trial Court interprets these decisions to mean that only such restraints of trade as are unreasonable are forbidden by the Sherman law. But the two Courts diverge widely in applying the rule. In the Harvester case a majority of the Court says (p. 993):
"While the evidence shows some instances of attempted oppression of the American trade by the International and the America Companies, such cases are sporadic, and in general their treatment of their smaller competitors has been fair and just, and if the International and America Companies were not in themselves unlawful there is nothing in the history of the expanding of the lines of manufacture, so as to make an all the year round business, that could be condemned.
“The real question is whether the combination of the companies was illegal in the beginning, or became so with the addition subsequently made.”
conclusion, which is, that it was expressly designed not to unduly limit the application of the act by precise definition, but while clearly fixing a standard, that is, by defining the ulterior boundaries which could not be transgressed with impunity, to leave it to be determined by the light of reason, guided by the principles of law and the duty to apply and enforce the public policy embodied in the statute, in every given case whether any particular act or contract was within the contemplation of the statute.”
And in the case of the United States vs. American Tobacco Co., 221 U. S. 106, the Supreme Court says (p. 180): “Coming then, to apply to the case before us the act as interpreted in the Standard Oil and previous cases, all the difficulties suggested by the mere form in which the assailed transactions are clothed become of no moment. This follows because, although it was held in the Standard Oil case that, giving to
And the Court decided that the combination was illegal in the beginning.
In the Shipping Trust case the Court says that the main subject matter of the controversy is the controlling of transportation so as to allot proportionate shares of it to the different defendants who are in the combination. Then the Court concludes (p. 974):
“There is nothing to add to the elaborate presentation of all sides of the controversy, * * * and we find it most persuasive to the conclusion that in view of the peculiarities of ocean transportation, the method adopted by the defendants if purged of its obnoxious feature, the 'fighting' ship—is a reasonable one, which, so far from restraining trade, really fosters and protects it, by giving it a stability which insures more satisfactory public service for all concerned.”
In the Harvester case the Court practically eliminated from consideration the results which flowed from the combination, whether good or evil (and the Court in fact found the results not to be evil), and based its decision upon its finding that the combination of the companies was illegal in the beginning.
Quite to the contrary of what the Court did in the Harvester case, the Court in the Shipping Trust case ignored any consideration of the question as to
the statute a reasonable construction, the words ‘restraint of trade' did not embrace all those normal and usual contracts essential to individual freedom, and the right to make which was necessary in order that the course of trade might be free, yet, as a result of the reasonable construction which was affixed to the statute, it was pointed out that the generic designation of the 1st and 2d sections of the law, when taken together, embraced every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed. That is to say, it was held that, in view of the general language of the statute and the public policy which it manifested, there was no possibility of frustrating that policy by resorting to any disguise or subterfuge of form, since resort to reason rendered it impossible to escape by any indirection the prohibition of the statute."
whether the combination at its inception was legal or illegal, but considered only the results of the combination.
Both the Harvester and the Shipping Trust cases will be passed upon later by the Supreme Court when some of the existing conflict of ideas as to the meaning of the Sherman law will no doubt be removed.
PURPOSE OF THE TWO NEW LAWS.2
It is the apparent purpose of the new laws to establish guides for business, to afford relief from the condition of uncertainty that has existed, to restrain the development of trusts in their inception, and to assist the Courts in effecting dissolution of any such corporations or associations found to exist in violation of the law.
The Federal Trade Commission law provided for the establishment of governmental machinery for the interpretation and enforcement of its own provisions, of the Sherman law and of any other laws affecting the regulation of business. In addition to creating this machinery, the control of which was vested in the Federal Trade Commission, this law established a new legislative standard in declaring that “unfair methods of competition in commerce are hereby declared unlawful.” The Sherman law was aimed only at contracts, combinations and conspiracies in restraint of trade, and monopolies and attempts to monopolize, but did not specifically condemn unfair methods of competition. The phrase "unfair methods of competition” is new in the law. Unfair competi
2.-Two laws were passed. The Federal Trade Commission law received the approval of the President on September 26, 1914, and the Clayton law on October 15, 1914.