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From this it may rightly be seen that the dominant form of unfair competition is to be found in the practices of the combination of two or more competing corporations. Paradoxical as this may seem, it is elemental that if two competing corporations combine, that very act puts every other single corporation in the same line of trade at a disadvantage, resulting in an inequality which is economically and legally unfair. It is unfair because the law which gave birth to the corporate unit contemplated competition by numerous independent units rather than competition by combination. It is unfair in economic principle and practice, because our whole theory of the competitive state rests on the assumption of something like equality of opportunity and responsibility among many different agencies making for material progress. For it is rivalry on something like equal terms that develops leadership, liberty, and economic power to best advantage among the many, and diffuses the largest measure of mastery among the mass of producers.
2. Coercion by the Corporate Crowd
Various kinds of force are recognized in law as coming under the category of unfairness in` trade methods. Among these are frauds, misrepresentation, and intimidation. "That is held fair," says Wyman, speaking of Types of Unfair Competition, "which the community re
gards as consistent with its safety; that is held unfair which the state considers dangerous to its peace." Causing another to break an existing contract, libelous statements to win away customers, violent and malicious acts to injure another's occupation; these are among the acts disallowed by law. "The idea in modern commerce is that to compete as one wills is not an absolute right in our law,' says the same authority just quoted. "On the contrary, competition is only a thing permitted by the state when its operation is for the best interest of established society, forbidden if it is carried on under circumstances prejudicial to the social order. It cannot be said that where one man has an absolute right to compete as he chooses, therefore ten men acting together have the same right to compete as they choose. By this theory, whenever the operation of a combination is proved to be detrimental to the best interests of society, its course will be held illegal."
If it be asked what distinguishing quality marks off fair from unfair competition in the methods and practices of trust policy, it is properly answered that it lies essentially in the economic pressure which combination tends to exercise against the simple corporation acting single-handed. It consists in the application of force which might not be feared if exercised, or even threatened, by a simple corporation against one of like kind; but which would become effec
tive if a dozen or more corporations acted as a unit against an individual company. When the combination comes to deal with the individual on a basis of force rather than of freedom, then economic liberty is eliminated and fair competition gives place to an unequal struggle between a united group and divided individuals. Unfair competition is therefore a manifestation of force by a crowd of competitors acting as a combination; and this very privilege of combination bespeaks submission or surrender on the part of the unmerged unit.
Nor is it always necessary that the economic pressure to be unfair in its effects should take the form of actually applied coercion. The Pittsburgh Glass Company's type of coercive brutality toward importers is possibly seldom resorted to for this purpose. The corporate crowd, or predatory trust, achieves its unfair purpose quite as certainly and with less hazard if the pressure be merely potential, not actual, and therefore not easily provable in court by any overt act. There is a coercion as inevitable as fate, but far too subtle in the policy of the marauding trust to leave any record of its prowlings. It may take the form of a passing suggestion, of a casual association, of a hint too vague ordinarily to deserve notice. But it is none the less the identical pressure which has driven hundreds of independent corporations into the coils of the combination.
It is this unfair struggle that imperils the fundamental status of free economic institutions. It is this very potentiality in combination, this very monopolizing capacity, which makes it unsafe for the state whose economic life is dependent on free institutions for the performance of its economic work, to tolerate for a moment the private combination which has power to paralyze whatever does not yield to its pretense to sovereignty.
3. Is Big Business Unfair?
The individual corhonorable than the Size in itself has
Respect for fair competitive conditions in business is not, however, a virtue that depends on the size of the concern. poration is no more or less combination in this respect. ordinarily no relation to the character of competitive conduct. Nevertheless, where there are fifty corporations doing the business of the country at a given time, they are all more or less on the alert as to each other's methods; and that in itself is a potent influence in setting limits to unfair trading. On the contrary,
where a single combination, as in the American Sugar Refining Company, had absorbed ninetyfive per cent of the sugar refining of the country, competitive restraints had been wholly broken down. Its dominance, amounting to monopoly, had become such as to leave the leviathan to be a law unto itself in the treatment of the pro
ducers of the other five per cent of the total supply to the consuming public.
The manifest object of unfair trading is to obtain control of producing and distributing the supply of a commodity. This misuse of the powers and privileges of the corporation has taken numerous forms of misdemeaning. One of the oldest, yet most unsound, of unfair business practices by big business is the exclusive contract. Under the trust régime this had had a wide vogue until it came to be recognized as a mistake, on general business principles. It lessened the zeal of the retailer in pushing the goods concerned, and it wounded his sense of freedom by coercing him into a distasteful contract. It caused him to lose customers who preferred other goods. It prejudiced the consumer against the goods which the manufacturers then attempted to force upon him. Consequently such far-seeing trusts as the American Tobacco Company abandoned the exclusive contract as economically bad business long before litigation to dissolve it had begun.
Where size counts most in competition among unequals is in the exhausting effect of underselling a few special brands which comprise the full line of the smaller rival's output, although only a small part of the trust's output. Trusts have been known to devise a special brand to sell under cost in a territory served by a successful small company which has only one brand to sell.