Section three amends section seven of the Clayton Act by providing that any corporation may acquire all or part of the stock or other capital of any company organized in accordance with the terms of the Webb Act, "unless the effect of such acquisition or ownership may be to restrain trade or substantially lessen competition within the United States."

Section four declares that the provisions of the Trade Commission Act with regard to unfair methods of competition "shall be construed as extending to unfair methods of competition used in export trade against competitors engaged in export trade, even though the acts constituting such unfair methods are done without the territorial jurisdiction of the United States." This section extends the jurisdiction of the Federal Trade Commission over unfair competition to foreign trade as well as to domestic; and is in line with a recommendation of that body in its report on Cooperation in American Export Trade.1 The prohibition of unfair competition, it should be observed, relates only to methods used against American competitors engaged in export trade. The section says, to be sure, competitors engaged in export trade, without qualification, yet since export trade is defined as trade in goods exported from the United States, it is clear that it applies only to American competitors. The provisions of section four are applicable not only to associations, but also to corporations and individual exporters.

Section five provides that every association organized under the act shall file with the Federal Trade Commission a statement' giving certain information, including the location of its offices, the names and addresses of all of its officers, stockholders, or members, and a copy of its articles of incorporation or association; and that on January first of each year a similar statement, noting changes, if any, shall be made. Every association "shall also furnish to the commission such information as the commission may require as to its organization, business, conduct, practices, management, and relation to other associations, corporations, partnerships, and individuals." Any association failing to comply with these requirements is to be denied the benefits 1 I, p. 380.

of sections two and three of the act, and to be subject to a fine of $100 per day to be recovered by the Attorney General.

The foregoing provisions are substantially as in the original House bill, except for the clause, inserted in the Senate, permitting the Commission to inquire into the organization, business, etc., of export associations. But because of its amendments to section two, dealing with the effect of export associations on prices or competition in the United States, the Senate deemed it advisable to add another paragraph to section five, establishing administrative machinery for the enforcement of the restrictions imposed in section two. It accordingly provided that whenever the Federal Trade Commission had reason to believe that the provisos of section two had been violated, it should conduct an investigation; and if upon investigation it concluded that the law had been violated "it may make to such association recommendations for the readjustment of its business, in order that it may thereafter maintain its organization and management and conduct its business in accordance with law." If the association fails to comply with the recommendations of the Federal Trade Commission, the latter is to refer its findings and recommendations to the Attorney General for such action as he may deem proper. This paragraph was accepted by the House.

In the House an attempt had been made to require associations desiring to benefit by this act to secure a permit from the Federal Trade Commission; and to authorize the Commission to refuse such permits, and once having issued them to cancel them for cause after a hearing. The author of this amendment took the position that, if permits were required, and were held subject to good behavior, administrative supervision would be effective, as it would not be if offenders had to be haled into court. The objection was made that this would vest a dangerous power in the Commission, and the proposition was rejected by a vote of 131-11.1

A third and final paragraph gave the Commission in the enforcement of these provisions all the powers, where applicable, 1 Cong. Record, June 13, 1917, pp. 3578, 3580, 3584.

given it in the Trade Commission Act of September 26,

1914.

The advantages of export associations have been stated. We may now consider some of the possible disadvantages.

The chief objection to the export associations authorized by the Webb Act is that they may be used as a means of restricting competition in the domestic market. The Federal Trade Commission recognized this danger, but expressed the opinion that it would be possible through administrative supervision to prevent these organizations from being employed in this fashion. Others, however, doubt whether this is possible. If all the concerns in a given industry are associated in a common enterprise, they will tend to draw together and to pursue a harmonious policy with regard to domestic business. The Gary dinners in the steel trade were a remarkably effective device in maintaining a policy of coöperation that was equivalent to the fixing of prices. These dinners were illegal, and they were discontinued. However, meetings of these same groups through the medium of an export association are not illegal; and it will be exceedingly difficult, if not impossible, to prevent some understanding being arrived at with regard to domestic prices and output. This is the more true, since the export associations will naturally fix export prices, and an agreement as to the relationship between export and domestic prices can readily be effected. Whether or not it be true, as alleged by the minority of the House Committee on the Judiciary, that the Webb legislation was sought "not so much for its value in the foreign trade as for the effect it would have on the domestic trade," it is hardly to be doubted that a restraint of domestic trade will be the practical result in some, if not numerous, instances.

A second possibility is that the Webb Act will promote international combination. Even prior to the enactment of this measure there had been international combinations in steel rails, gunpowder, tobacco, thread, and other products, the underlying purpose of these combinations being the maintenance of an undisputed position in the domestic market. So far as the 1 House Report no. 50, 65th Cong., 1st sess.

United States is concerned these arrangements will now be legal, since such restrictions as the Sherman Act imposed on restraints of foreign trade are now removed, providing the restraint of the export trade does not restrain trade within the United States, and does not restrain the export trade of a domestic competitor of the export association. It is also to be anticipated, the provisos in section two to the contrary notwithstanding, that the effect of an extension of international combination will be to reduce the effectiveness of foreign competition in this country, that is, where the absence of a protective tariff has permitted such competition to exist.

Another result of the organization of export combinations in the United States may be a further extension of foreign combinations, in order that foreign buyers may be in a position to bargain effectively with American export sales agencies. The ultimate consequences of pitting a single American seller against a single foreign buyer in each country, if it should come to that, are not easy to foresee, yet it is clear that there exists the possibility of prolonged negotiations during the pendency of which the export trade will greatly suffer.

Finally, there is danger lest the pursuit of trade by large groups will tend to upset once more the peace of the world. The House Committee on the Judiciary, in advocating the passage of the Webb bill, declared that export trade, by virtue of the methods adopted by other leading countries, had become "largely a matter of competition between nations." If the Government of the United States is to become a party to this international rivalry for trade, it must be in a position to support its foreign trade agencies by force of arms, if necessary, with consequences that may easily be foreseen by any one who has learned the lessons of the recent war. It may be, however, that it is not necessary for us to run these risks, particularly in view of the insistent demand abroad for American products, and in view of the immense proportions of our domestic trade.

CHAPTER XVII

JUDICIAL INTERPRETATION OF THE

SHERMAN ACT

We come now to the interpretation of the Sherman Antitrust Act by the courts. No attempt is here made to consider all the cases involving the Sherman Act that have arisen in the courts; only the leading cases that are significant for the purposes of this book are treated. Generally speaking, reference is made only to the decisions of the Supreme Court, though in two instances the harvester and the glucose cases-the decisions of the lower courts are briefly outlined.

The first case to come before the Supreme Court was United States v. E. C. Knight Company. In 1892 the American Sugar Refining Company, producing about 65 per cent of all the sugar refined in the United States, had purchased control of E. C. Knight Company and three other independent sugar refining companies, producing among them some 33 per cent of the country's output of refined sugar.3 The government charged that the contracts under which these purchases had been made constituted combinations in restraint of trade; and it brought suit to compel their cancellation. Both the Circuit Court and the Circuit Court of Appeals ordered the suit dismissed. Thereupon an appeal was taken to the Supreme Court.

The Supreme Court in its decision rendered on January 21, 1895, sustained the lower courts. "The fundamental question,"

1 For a topical analysis of the leading cases that have arisen under the Sherman Act, see the report of the Commissioner of Corporations on Trust Laws and Unfair Competition, pp. 70-123.

2

156 U. S. 1-46 (January 21, 1895).

3 See p. 93.

60 Fed. Rep. 306.

5 Ibid., 934.