CORNERS.-Forbidden. So in the case of a corner in bread stuffs denounced by special edict from the Throne; and the Governor-General of the province wherein the case arose was directed to enquire into these practices and punish the offenders ******.

Section 32. International law.

No treaties have been noted which affect directly the lawfulness of combination agreements.

The nearest approach to such international regulation, apparently, was the Brussels treaty of March 5, 1902, regarding sugar legislation, which has been referred to above. (See pp. 268,290.) This treaty was signed by Germany, Austria-Hungary, Belgium, Spain, France, Great Britain, Italy, The Netherlands, and Sweden. The following provisions are specially noteworthy. Article 1 of this treaty provided that the signatories should suppress direct or indirect bounties which would benefit the production or exportation of sugar and should not establish such bounties during the term of the treaty. Article 3 provided that the import duties on imported sugar should not exceed the internal taxes on sugar of domestic production by more than 6 francs per 100 kilograms for refined sugar or 5.50 francs for other kinds of sugar. Article 4 provided that the signatories should levy a special import tax on the imports of sugar from countries which allowed bounties on the production or exportation of sugar, the amount of the tax to be equal to the value of the bounty. Article 7 provided for the creation of a commission to decide certain questions, to collect information, and to supervise the execution of the treaty. This treaty was made for a term of five years, commencing September 1, 1903, with provisions for its continuance from year to year, for the admission of other States and for the withdrawal of signatory States on prescribed notice. Russia became a member in 1907 under special conditions (see p. 290), and there were other changes with respect to the States adhering to the treaty. On March 17, 1912, the treaty was prolonged for five years, the following States being signatories: Germany, Austria-Hungary, Belgium, France, Luxemburg, The Netherlands, Peru, Russia, Sweden, and Switzerland. Rules were established for withdrawal, and special provisions were again made regarding Russia. Great Britain was not a party to this agreement.

The relation of this treaty to the international regulation of cartels is found in the fact that certain governments had established export bounties on sugar, and that in some cases the apportionment of these bounties among producers was affected by the existence of cartels. which regulated production and exportation and which depended largely on the existence of such bounties to maintain their organization. As already pointed out (see p. 268), Austria-Hungary passed a law in January, 1903, which fixed the quotas of production of sugar manufacturers; but this was held by the commission which was estab

lished under this treaty to be repugnant to the provision forbidding the granting of indirect bounties, and so this law was repealed in July, 1903. On the other hand, when Russia became a signatory to the treaty it was under the special condition of preserving its customs and excise system with respect to sugar which would apparently have been inconsistent with the general provisions of the treaty.

The Russian Government, which did not take part in the original establishment of the treaty in 1902, held that its system of regulating the sugar industry was not equivalent to a grant of bounty, and the Minister of Finance in Russia at that time, Mr. de Witte, through the Russian Ministry of Foreign Affairs, intimated to the representatives of the signatory powers that the Russian Government was willing to negotiate concerning a treaty which should look to the prevention of conditions which tend to the elevation of domestic prices and the depression of prices in international trade with respect to all important commodities, whether on account of bounties, industrial combinations, or otherwise.1

1 Raffalovich, Trusts, Cartels & Syndicats. Paris, 1903, pp. 196–198.

CHAPTER VI.

UNFAIR METHODS OF COMPETITION FROM THE BUSINESS AND ECONOMIC VIEWPOINT.

Section 1. Introductory.

About the subject of unfair competition centered a large share of the debate on trust legislation during the third session of the Sixtythird Congress (1914). It was discussed in connection with the act creating the Federal Trade Commission as well as the Clayton Antitrust Act. In the former "unfair methods of competition in commerce" are declared unlawful, and the Federal Trade Commission is directed "to prevent persons, partnerships, or corporations, except banks and common carriers subject to the acts to regulate commerce, from using unfair methods of competition in commerce." This general prohibition of unfair competition is supplemented in the Clayton Antitrust Act by prohibition of certain specific practices, including price discrimination and exclusive-dealing requirements. It is the purpose of this chapter to indicate how the term "unfair competition" and other similar terms have been applied by economic writers and by business men, and to describe some of the competitive acts which have been complained of as unfair.

2

NO DEFINITION OF UNFAIR METHODS OF COMPETITION ATTEMPTED IN THIS CHAPTER.—It is not intended in this chapter to define the meaning of "unfair methods of competition," nor is the term capable, probably, of exact definition in brief terms. Indeed, the unfairness may often depend as much on the circumstances as on the method itself. The purpose here is merely to indicate methods of competition which some persons have viewed as unfair without attempting to pass upon their fairness or unfairness. Citation here does not indicate, therefore, any conclusion that the action or practice cited should or should not be considered unfair, still less that it is among the "unfair methods of competition" which Congress has prohibited. Some of the methods included in this chapter might perhaps be regarded by Congress and by a majority of people as legitimate and proper. Nevertheless, the presentation of various and sometimes conflicting views may throw some light on the question of the unfairness of particular practices when they come up for actual decision.

This chapter, dealing with business and economic rather than legal opinions, excludes the decisions of courts on the legality of certain methods of competition-a subject treated in the following chapters of this report. However, complaints in antitrust suits are occasionally cited here on the same basis as other complaints, namely, to show that some persons have regarded the methods complained of as unfair.

The enumeration of devices here given is not exhaustive. Neither are the several designations of the kinds of unfair competition always mutually exclusive. They are intended to follow in general the views that have been expressed and the complaints that have been made, and this inevitably results in some crossing of classification.

KINDS OF COMPETITION.-The natural rivalry between one manufacturer and another, between one dealer and another, each striving for business and profits, constitutes the competition which has been called "the life of trade."

This competition may be classified according to the class of traders engaged in it, the point at which competition occurs, the size and circumstances of competitors, and the fairness or unfairness of the competitive methods.

COMPETITION BY CLASSES OF TRADERS.-Competition, as the term is here used, may be subdivided by classes of traders as follows:

1. Between producers of raw materials.

2. Between manufacturers.

3. Between dealers, wholesale or retail.

4. Between concerns combining several stages in the process of production and distribution.

There is, however, competition between competitors one or both of whom are engaged in more than one stage in the process of production and distribution. If a single concern combines the functions of raw-material producer, manufacturer of primary products, manufacturer of secondary products, wholesale distributor, and possibly also retail distributor, thus putting the product into the hands of the final consumer, its competition with a concern engaged only in manufacturing, or a concern engaged only in mining, is relatively much more limited in points of contact than that between two like concerns.

POINT AT WHICH COMPETITION OCCURS.-The point in the process of production and distribution at which competition occurs is different in different cases; it may take place at almost any stage of the process. There is a kind of competition in each concern's development of its own internal productive efficiency. Competition is most obvious, however, at the points where the competing units come into contact with outsiders, and it is conspicuous in proportion as this

contact takes the form of a struggle for something of which each competitor must have less as the others have more. The points of contact with outsiders are chiefly connected with the hiring of labor, the purchase of raw material or goods, and the sale of the product or commodity. Usually the competitor appears to be not so keenly aware that his supply of raw material or goods and of labor is limited by the purchases or the hirings of others. At the selling end, however, the demand almost always appears limited, and each competitor feels sharply that his sales will tend to be less as his neighbor's are greater. At this point, therefore, competition is usually most conspicuous. At any one of these stages the methods of competition may be fair or unfair.

INEQUALITIES IN SIZE AND OTHER CIRCUMSTANCES OF COMPETITORS.— Mere differences in size may also make competition one sided, even where no competitor works in more than a single stage of the process of production and distribution. A company of ample capital, large plants, extensive credit, experimental departments, and an elaborate selling organization may be able, in some cases, to buy more cheaply its raw materials, to manufacture its products more economically, and to undersell its competitors. Mere size, however, does not necessarily create serious inequality of competitive conditions. Some of the larger "trusts" are notoriously inefficient, and their independent competitors do a large and increasing business.

The possession of unusually good supplies of raw materials, the location of plants close to raw materials, or to markets, often give special advantages to some competitors. Unusually capable workmen or particularly able management, newer or better machinery, the ownership or control of patents or special processes, are also factors which may give a concern special advantages.

Such special advantages in competition have usually been regarded as fair, except perhaps where monopolization exists with respect to natural resources, or where advantage has been taken of large capital resources to extend credits abnormally.

Section 2. Fair and unfair methods of competition.

Some methods of competition are universally recognized as proper and legitimate, such as supplying goods of better quality for the same price or goods of the same quality at a lower price, and more prompt or more satisfactory service. Dishonest methods are condemned by most persons not immediately profiting by their employment, such as false weights and measures or passing off one commodity for another. There is a great intermediate field of practices which lie, in varying degrees, under the shadow of general disapproval, and the shadow is slowly shifting. For instance, in the early days of railroads it may have generally seemed right that the shipper of 10 carloads