THE FEDERAL TRADE

COMMISSION

CHAPTER I.

NATURE OF THE COMMISSION.

§ 1. Organization of Commission: The Federal Trade Commission1 consists of five Commissioners, appointed by the President, by and with the advice. and consent of the Senate. The first Commissioners2 appointed are to continue in office for three, four, five, six, and seven years respectively, from and after the taking effect of the Trade Law on September 26, 1914, but their successors are to be appointed for terms of seven years, except that a person appointed to fill a vacancy is to be appointed only for the unexpired term of the Commissioner whom he succeeds. The salary of a Commissioner is $10,000 a year. None of the Commissioners may engage in any other business, vocation, or employment, and not more than three of the Commission

1Created by the Trade Law, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes" (H. R. 15613; Pub. No. 203; 63d Congress) in force September 26, 1914. Printed in full in appendix. For organization of Commission, see Trade Law, Secs. 1-3.

2The first Commissioners appointed were Joseph E. Davies, Edward N. Hurley, William J.

Harris, Will H. Parry, who are to serve, respectively, for seven, six, five and four years from September 26, 1914, and George Rublee (a recess appointee), who is to serve at all events during the pleasure of the President, and until the end of the session of the Senate next after March 6, 1915, and thereafter, if confirmed, until September 26, 1917.

ers may be members of the same political party. Any Commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office, and in case of a vacancy in the Commission, the remaining Commissioners may exercise all of the Commission's powers. The principal office of the Commission is at Washington, D. C., but it may meet and exercise all of its powers at any other place, and may, by one or more of its members, or by such examiners as it may designate, prosecute any inquiry necessary to its duties in any part of the United States.

The Commission has a chairman chosen by it from its own membership, and a secretary appointed by it. It has an official seal, of which courts are required to take judicial notice. It may employ and fix the compensation of such attorneys, special experts, examiners, clerks, and other employees as it may from time to time find necessary for the proper performance of its duties, and as may be appropriated for by Congress. Other departments and bureaus of the government are required to detail to the Commission from time to time such of their officials and employees as the President may direct. Upon the organization of the Commission, and the election of its chairman, all the clerks, employees, records, papers, and property of the Bureau of Corporations were transferred to the Commission, and the Bureau of Corporations, and the offices of Commissioner and Deputy

3Three Commissioners constitute a quorum. See Rules of Practice, No. I, in appendix.

4 All communications to the Commission shall be addressed to Federal Trade Commission, Washington, D. C., unless otherwise specifically directed. See Rules of Practice, No. XI, in appendix.

As to sessions of the Commission, see Rules of Practice, No. I, in appendix.

5Commissioner Joseph E. Davies is Chairman. At the time of his appointment to the Trade Commission he was Commissioner of Corporations. See Sec. 2, infra. Leonidas L. Bracken is Secretary.

Commissioner of Corporations, automatically ceased to

exist.

§ 2. Derivation of Commission: The Trade Commission is an outgrowth of the office of Commissioner of Corporations abolished by the Trade Law, and is plainly modeled upon the lines of the Interstate Commerce Commission. The principal function of the of fice of Commissioner of Corporations, created in 1903, was to acquire, and to report to the President, information as to the organization, conduct and management of the business of corporations engaged in interstate commerce, to the end that the President might thereby be enabled to make recommendations to Congress for legislation regulating such commerce. It is one of the several functions of the Trade Commission to furnish information as a basis for the enactment of additional legislation regulating interstate and foreign commerce.8 But the Trade Commission may report to Congress directly, and is not under the domination of the President. The Commissioner of Corporations made his investigations under the direction and control of a member of the cabinet, the Secretary of Commerce and Labor. The Trade Commission is more independent and may act upon its own initiative and at its own discretion to a large degree. The office of Commissioner of Corporations was a political office, and the incumbent changed with the administration. The Trade Commission is nonpolitical and its membership will change infrequently.10 The legislative purpose appears to have been that the Trade Commission should accumulate experience, form

Trade Law, Sec. 3.

71 U. S. Comp. Stat. (1913) Tit. 12A, Ch. C, Sec. 889, p. 357; United States v. Armour & Co. (1906) 142 Fed. 808, 819.

8Secs. 5, (5), (6), and 38 and 39, infra; Trade Law, Sec. 6, (f), (h).

Sec. 35, infra. 10 Sec. 1, supra.

ulate precedents, maintain continuity and consistency of governmental policy towards business, and gradually bring about an evolutionary growth of regulation of industrial corporations engaged in interstate commerce similar to that which has resulted in respect of carrying corporations from the creation of the Interstate Commerce Commission.

Powers of Commission:

11

§ 3. The general nature of the Trade Commission appears from the nature and scope of the powers which are conferred upon it by the Trade Law, and in part by the Clayton Law,11 and are of course confined to the field of interstate and foreign commerce.12 Its powers may be grouped as (1) regulative (2) advisory and (3) investigative.

§ 4. Regulative power:13 The Commission has authority to institute and conduct against persons,14 partnerships and corporations 15 engaged in interstate commerce, except banks and interstate common carriers, a statutory proceeding16 designed to lead to a decree by a competent court, (1) restraining the use of "unfair methods of competition in commerce" which are declared unlawful by the Trade Law,17 and (2) pre

11The Clayton Law is entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes" (H. R. 15657; Pub. No. 212; 63d Congress), in force October 15, 1914. Printed in full in appendix. For the provisions of the Clayton Law which confer power upon the Trade Commission, see Secs. 2, 3, 7, 8 and 11 thereof.

12"Commerce", as used in the Trade Law, is defined in Sec. 4 thereof, and as used in the Clay

ton Law, in Sec. 1 thereof. The two definitions are different.

13 See Chapter II, infra.

14 For meaning of "persons", as used in the Clayton Law, see Sec. 1 thereof.

15 For meaning of "corporation" as used in the Trade Law, see Sec. 4 thereof.

16 Trade Law, Sec. 5; Clayton Law, Sec. 11; Secs. 29 to 33, infra.

17 As to what are "unfair methods of competition", see Secs. 14 to 27, infra.

venting violations of sections two, three, seven and eight of the Clayton Law.18 Those sections of the Clayton Law forbid (a) price discriminations between purchasers of commodities, where such discrimination may substantially lessen competition or tend to create a monopoly in any line of commerce; (b) exclusive purchase and sale arrangements, consisting of sales or leases of commodities, or the fixing of prices of commodities, whether patented or unpatented, upon condition that the purchaser or lessee shall not use or deal in the goods of a competitor, where such transaction may substantially lessen competition or tend to create a monopoly in any line of commerce; (c) intercorporate shareholding, and holding companies, where one corporation's owning or voting shares of stock of another may substantially lessen competition between the corporations affected, or restrain commerce in any section or community, or tend to create a monopoly of any line of commerce; (d) any person, after October 15, 1916, to be a director, officer, or employee of more than one federal bank, if either of such banks has capital, surplus, and undivided profits of more than $5,000,000; (e) any private banker, or person who is a director of any state bank or trust company having, deposits, capital, surplus, and undivided profits of more than $5,000,000 to be a director of any federal bank, after October 15, 1916; (f) any federal bank, after October 15, 1916, in a city of more than 200,000 inhabitants, to have as a director, or other officer or employee, any private banker, or any director, officer, or employee of any other bank located at the same place, with certain exceptions; and (g) any person, after October 15, 1916, to be at the same time a director in any two or more corporations, except banks 18 See Secs. 9 to 12, infra.