petitor

* remains, but he depends on the combination for

raw materials and exists by sufferance." 1

The method complained of in the last-named case was not complete denial of supplies to independent manufacturers, but exorbitant prices.2

Section 24. Acquiring stock in competing companies for purpose of reducing or destroying competition.

A large company sometimes obtains an interest in a competitor without obtaining control, and uses its interest to destroy or injure it. Persons interested in the United States Pipe Line Co., which had been formed by the independent refiners and crude-oil producers to transport both crude and refined oil, complained that the Standard Oil Co. obtained an interest in it with such ends in view.

The United States Pipe Line Co. excluded the Standard from its meetings on ground that the Standard acquired its stock to compass its destruction and to get information that would lead to the destruction of the independent movement." Section 25. Wrongful and malicious suits.

It is often not easy to determine how far suits are malicious and how far they are merely proper efforts to maintain supposed rights. There is in most cases, of course, ground of suit. Often it is an alleged infringement of patent. Among the "unfair means" by which the National Cash Register Co. was accused of restraining trade in the indictment brought against its officers in 1912 was this: That it brought suits against competitors and against purchasers of their machines, alleging infringement of patent rights, when it knew that no patents existed by which such suits could be sustained.*

Baseless and vexatious patent suits were one of the means which the Standard Oil Co. was accused of using to compass the destruction of the Buffalo Lubricating Oil Co.5

Section 26. Intimidation.

While threats are often a separate basis of complaint, they are in general only subsidiary to actual injuries. Threats are apt to be effective only as the power and the disposition to injure are actually manifested.

1 United States v. American Tobacco Co. and others; in the Supreme Court, October term, 1910; brief for the United States, p. 301.

* Report of the Commissioner of Corporations on the Tobacco Industry, Pt. I, p. 24.

* Industrial Commission, Preliminary Report on Trusts and Industrial Combinations (vol. 1 of the Commission's reports); testimony of Thomas W. Phillips, p. 590.

4 United States v. l'atterson and others (201 Fed., 703).

House Reports, 50th Cong., 1st sess., vol. 9, Report No. 3112, Standard Oil Trust hearIngs; pp. 432, 434.

In United States v. Western Newspaper Union, American Press Association, et al., the petition accused the defendants of "numerous acts of unfair competition," which included "summoning competitors to conferences and openly telling them they could not continue in their competing business, but that they must either get out or sell out, and coupling such demands with threats of still fiercer unfair competition, including the installation of competitive plants in their territory, and a recitation of plants already bought out or put out, and of the cooperation between all the defendants in the campaign against them."1

Threats are often made to customers of competitors as well as to the competitors themselves. The petition just quoted furnishes an instance. It gives the following accusation against some of the defendants:

They have threatened papers located at points that can not support two small newspapers to start competing papers unless they patronized defendants.❜

Section 27. Fixing channels of trade.

Retailers feel themselves aggrieved if wholesalers sell to consumers, and often endeavor to stop it. In many towns, it is said, wholesale grocers understand that they will be boycotted if the retailers catch them selling to consumers. The retailers feel that they are only taking proper action to restrain competition which they regard as unfair. The associations of retail lumber dealers have been very active in enforcing the same view. "We do not consider it fair," said the secretary of the New Jersey Lumbermen's Protective Association, in a letter dated February 8, 1904, "for a man who is engaged in manufacturing or wholesaling lumber, competing with his own customers." The annual report of the board of directors of this association, submitted February 26, 1907, contained the following passage: "It is wrong in principle for the wholesaler or the manufacturer, as we have always contended, to become active competitors of their own customers, the retailers." Manufacturing consumers

of lumber who constantly buy in lots of a carload or more are usually able to buy from manufacturers and wholesalers without open objection from the retailers; but occasionally the retailers have been strong enough to shut out even very large consumers of this class. Against building contractors they have especially contended; even against contractors who have had lumber yards. In many cases the retailers' associations have been able to enforce upon wholesalers and manufacturers their contention that a man who makes a business of build

1 Quoted in Trust Legislation: Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on Trust Legislation; pp. 1664, 1665. -Ibid., p. 1665.

U. S. v. Eastern States Retail Lumber Dealers' Association et al., Record, Vol. IV, petitioner's exhibits, p. 293.

ing, even though he also makes a business of retailing lumber, is not a “regular” or "legitimate" retailer. For selling to such retailers many manufacturers and wholesalers have been boycotted.

On the other hand, a great body of opinion holds that all such discriminations are unfair and should be prohibited. Says Samuel Untermeyer:

*

*

You need

I think that, broadly speaking, a man who is in interstate commerce ought to be obliged to sell to anybody who is responsible. * A man should not arbitrarily refuse, without cause, to sell a given customer. never extend credit to a man, but the man who comes with the money should be allowed to purchase.1

The same idea is implied in the proposition that goods should be sold at a fixed and published price, uniform to all comers.2

1 Trust Legislation: Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on Trust Legislation, p. 849.

2 P. 316, above.

CHAPTER VII.

UNFAIR COMPETITION AT THE COMMON LAW.

Section 1. Introductory.

The purpose of this chapter is to present certain phases of the common law relating particularly to the right of persons engaged in business to be protected from unfair or oppressive methods of competition, without assuming to determine whether or not such methods are unfair within the meaning of section 5 of the Federal Trade Commission act.

Every person has a right to engage in business and to strive by all lawful means to advance his own interests, and if, as the result of a mere exercise of this right, others conducting similar enterprises lose custom, they have no cause of action for such injury. The right to lawfully compete in business affords a justification and negatives any claim that the injury was inflicted wantonly or without cause. The right to compete is not absolute, however, but is qualified by the existence of a similar right in others.

Generally speaking, persons engaged in business occupy much the same relation to each other as other members of society. Business rivalry ordinarily confers no privilege to commit acts or to engage in practices which would be unlawful if indulged in by persons in other walks of life. The fact, for instance, that two men are business competitors will not justify one in making libelous statements concerning the other, in physically obstructing the passage of his agents along the public highways, or in bribing them to act contrary to his interests. Whether or not the object of such an attack is a competitor, conduct of this character is equally unlawful. But acts which would ordinarily not result in actual damage may sometimes seriously injure a business rival. To illustrate, a false statement that a farmer uses a low-grade fertilizer could not conceivably cause him injury, whereas a similar statement made by one engaged in the manufacture of fertilizer respecting the product of a competing manufacturer, if generally believed, would probably result in a loss of sales by the competitor and consequent financial injury for which damages could be recovered.

On the other hand, the fact that the parties are competitors has been held, in some cases, to constitute a justification for acts which have resulted in damage, although, under other circumstances, they

might possibly have been considered actionable as a wanton and malicious interference with another's business. Thus, though the decisions are not in accord, it has been held that a business man knowing that a competitor has a contract to sell goods to another may procure the latter to violate the contract and purchase his goods instead and that such conduct should be permitted in the interest of free competition, although in the absence of competition it might be actionable. This chapter has, therefore, been largely confined to a consideration of cases arising between business rivals; in other words, to cases in which the justification of competition might have been considered by the courts. Only where there was not a sufficient number of decisions of this description to show the true state of the law has resort been had to cases in which the element of competition was not present.

There are also certain forms of property, such as secret formulas, lists of customers, and other trade secrets, as well as the good will of a business, or the property in particular brands or trade names, which are peculiarly the product of business activity. Attempts by competitors to discover such secrets by the corruption of employees or by other methods, or unfairly to appropriate the benefits resulting from the established reputation of a rival's products by palming off, as his goods, articles manufactured by others, have given rise to many legal controversies. The decisions in these cases constitute a distinct body of the law, dealing wholly with trade competition.

While the primary question to be determined in the cases presented here is the legality of the acts or conduct complained of, there is involved in many cases an element of unfairness, of breach of trust, of willful misrepresentation, of flagrant dishonesty, or of coercion or oppression. This fact appears to have led the courts to characterize certain acts as unfair competition. The use of marks or wrappings to deceive purchasers and pass off one man's goods as those of another has for years in this country been termed unfair competition. Other practices, such as procuring the breach of a competitor's contracts, betraying, or inducing others to betray, a competitor's trade secrets, or intimidating a competitor's customers by threats of infringement suits, have also been characterized by the courts as unfair competition. These and many other acts or practices have been frequently described or alluded to by the courts in other terms of much the same significance, such as "inequitable competition," "unfair conduct," "unfair dealing," "unfair means," "unfair business methods," "unfair advantage," "unfair mode of trading," or as "unfair and unjust practices and methods." Such expressions also as not "fair competition," not "proper competition," not "honest competition," not "legitimate