Business Competition and

The Law

CHAPTER I

DANGERS OF AGGRESSIVE SALESMANSHIP

AN insignificant and unobtrusive little manufacturer began to market a specialty through the retail trade in a limited territory. He had a small plant where he put up the goods, and he acted largely as his own sales force, selling direct to the smaller stores. From each dealer he secured a straight contract binding the dealer, among other things, to resell the goods at a specified price.

By degrees a local demand for the specialty began to manifest itself, and one of the big stores made inquiry. The manufacturer produced his contract, which the store declined to sign. "No

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Business Competition

contract, no goods," said the manufacturer, whereupon the store filed a complaint in the office of the United States Attorney.

Let me emphasize the fact that, as regards the size of his business, this little fellow was utterly negligible. His annual gross business probably wouldn't have paid the cigar bill of any one of half a dozen concerns in the same field. To apply to him the epithets reserved for violators of the Federal anti-trust laws sounds like a huge joke. Yet the machinery designed for curbing predatory business, popularly known as "trust-busting," pulverized him quietly and expeditiously.

A month or two after his interview with the big-store buyer, the specialty man received a letter from the United States Attorney's office, the first paragraph of which was in effect a subpœna. He was practically directed to appear forthwith, and show cause why he should not be proceeded against as a conspirator in restraint of trade. He couldn't have been served with a more formidable document if he had been as big as the United States Steel Corporation.

His lawyer had a brief interview with the United States Attorney. The Government demanded the cancellation of those contracts; nothing else would

do; it wasn't a question of an equity suit for an injunction, but a Grand Jury proceeding under the criminal sections of the Sherman Act; the Government would summon every dealer who had signed the contract, as well as the big-store buyer who had been refused the goods; there would be no chance for the manufacturer to claim immunity if an indictment were found; no, it didn't make the slightest difference that this manufacturer happened to be small and insignificant.

The Grand Jury proceeding never took place. By advice of counsel, the manufacturer recalled his contracts, and several months later went into bankruptcy.

I have told the story of the specialty manufacturer at some length, because it illustrates very clearly a fact which must be understood at the outset; namely, that any concern which is doing business across a State line may at some time run foul of the anti-trust laws. No manufacturer or merchant can afford to be careless in his sales methods, or in his relations with customers or competitors, and assure himself that he will escape observation because he is inconspicuous. The duty of investigating alleged violations of one or another of the Federal anti-trust laws

now rests on both the Department of Justice and the Federal Trade Commission, and the latter body is even more accessible to complaints than the District Attorney's office. Most of the cases which have been threshed out in the courts have involved large concerns, but there have been hundreds of cases, like that of the little specialty man, which never reached the courts at all. Rather than go to all the expense of fighting a Government prosecution, many a concern has been obliged to change its selling methods in some particular to meet the demands of the Government. Probably few cases have resulted so disastrously as that cited above; but it is not an altogether pleasant experience to be reviewed by an agent of Uncle Sam with the shadow of the Grand Jury looming up behind him, and to be compelled to go to all the expense of a more or less complete reorganization. "Restraint of trade" is a pretty broad and comprehensive term, and it is a subject in which no business man can afford to plead lack of interest.

It is not my purpose to attack the law, nor to criticize the policy of the Government, nor to teach business men how to evade the law. My intention is simply to point out, from a considerable

study of the multitudinous court decisions in anti-trust cases, some of the acts which the Government regards as objectionable, and which are likely to be construed as evidence of an attempt to restrain trade. The vast majority of business men desire to obey the law, and are entitled to know the specific methods of getting business which are likely to be construed as a violation of the law. Business men, moreover, are entitled to know whether the competition to which they are being subjected by their rivals is legally justifiable.

IS THE GOVERNMENT "LETTING UP"?

One other point, before I go on to the discussion of conspiracy to restrain trade as interpreted by the courts. It has repeatedly been declared, since the recent decisions in the Cash Register, the Shoe Machinery, and the Steel Corporation cases, that the Government was "letting up" in its prosecutions of business concerns, that public opinion was running strongly against the vigorous enforcement of the Sherman and Clayton Acts, and that the courts were showing much greater leniency towards alleged offenders. After a careful study of the opinions rendered in these