CHAPTER III.

FEDERAL TRADE COMMISSION'S FUNCTIONS:

1. As a Board of Inquiry.

2. As a Judicial Body.

General Comment.-The main functions of the Federal Trade Commission are fundamentally distinct. In the one instance it sits as a Board of Inquiry, institutes and prosecutes investigations, compiles data and reports, either at its own instance or at the request of Congress or the President. In the other capacity, it hears testimony and issues orders granting relief, which orders are reviewable and may be enforced by the Federal Courts.

The combination of powers so dissimilar, and each so far-reaching, creates a department which is unique in Federal legislation. The originality of the Congressional conception of what this body should be indicates that the abuses thereby sought to be curbed or destroyed were such as usual remedies failed to overcome. That this is so, the history of Anti-trust legislation and of the resultant litigation would seem to show. Rules were adopted which the trusts often ignored and found means to circumvent through technical points of law. This condition, as appears in Chap. VIII, Sherman Anti-trust Law, pp. 70-95, at length became intolerable. The small manufacturer or merchant existed only by sufferance, and the business world was strewn with the wreckage of battles in which the resources and acumen of the trusts destroyed the independent competitor with monotonous regularity. To end this superiority of combined wealth, and to restore the equilibrium of competition operating in accordance with law, Congress enacted various restrictive laws ending with the Federal Trade Commission Act and the Clayton Law, which are in effect a code of business ethics, fortified with provisions for carrying those rules into effect. Furthermore, since the full-grown trust has displayed a rampant energy and pugnacity which statute-laws seemed helpless to meet and overcome, Congress has sought to pursue a preventive course by prohibiting "unfair methods of competition in commerce" with the intention of guarding legitimate business against piratical and unfair methods of illegitimate combinations and powerful unprincipled competitors fraudulent

practices generally, and thereby to preserve so far as possible equal opportunity and a fair chance for all.

This explanation is necessary before entering upon a description of the functions of the Commission itself. The functions must be viewed in connection with the situation they were intended to meet; otherwise the machinery created for that purpose cannot be appreciated or understood. If the purpose of these statutes is kept clearly in mind, numerous difficulties or uncertainties will disappear and the task of understanding their provisions will be greatly diminished.

1. THE COMMISSION'S FUNCTIONS AS A BOARD OF INQUIRY.

Inquisitorial Powers Enumerated.-By Section 6 of the Federal Trade Commission Act general power is vested in that Board to gather, compile and distribute information. With this object in view the Commission is given power in eight particulars,probably confined, however, to matters connected with enforcing the Anti-trust laws:

(a) To inquire into the organization, business, conduct, practice and management of any corporation engaged in commerce excepting banks and common carriers and the relation of such corporation to other corporations and to individuals, associations and partnerships.

(b) To require annual or special reports, covering the lines of inquiry named in the paragraph (a).

(c) Upon its own initiative or upon the request of AttorneyGeneral, it shall be privileged to inquire into and report upon the effectiveness of any final decree in any suit brought by the United States to prevent and restrain any violation of the Anti-trust acts.

(d) Upon the direction of the President or either House of Congress to investigate and report the facts relating to any alleged violations of the Anti-trust acts by any corporation.

(e) Upon the application of the Attorney-General, and with the obvious and laudable purpose of preventing litigation, the Commission is authorized to investigate and make recommendations for the readjustment of the business of any corporation alleged to be violating the Anti-trust laws.

(f) In the interest of the public the board is authorized and empowered in its discretion to publish the records of its investiga

tions, not including trade secrets and names of customers, and to publish its decisions; also to make annual and special reports to Congress, with recommendations for additional legislation.

(g) From time to time, to classify corporations and make rules and regulations for the purpose of carrying on the provisions of the act. Much discussion took place in the Congressional committees concerning the futility of compelling reports unless the Commission had previously fixed a standard of computation, so that the information thus collected and filed would be in a form convenient for reference, and by comparison of the reports definite results could be secured. The right to classify and to make suitable rules, etc., should obviate that difficulty. Doubtless, among the approximately 300,000 corporations amenable to the Federal Trade Commission, a large percentage will not afford anything of interest to the Commission, and will be excused altogether from the burden of making reports. Special reports can be demanded whenever occasion requires.

(h) Investigations are authorized into matter connected with the foreign trade of the United States and the Commission is empowered to report to Congress thereon, with recommendations. Hearings have been held at commercial centres, looking to such a report at the ensuing session of Congress.

Public Hearings Optional with Commission.-No specific provision of the Federal Trade Commission law requires it to hold public hearings or to make public its proceedings or the resultant information, except at its own volition. The Interstate Commerce Commission holds public sessions in some though not all of its investigations; the Bureau of Corporations has conducted all its hearings in private and it seems entirely optional with the Federal Trade Commission to adopt either course, as it deems fit. Probably those investigations it holds under its strictly inquisitorial powers will not be conducted publicly, and only the results will be published in annual or special reports. Where corporations neglect to file required reports, or fail to impart information duly called for, penalties are imposed by this act.

2. THE FEDERAL TRADE COMMISSION AS A JUDICIAL BODY.

Complaints Filed only When Violations Shown.-In the exercise of this function, the Commission is empowered to hold hearings as to particular acts and to enter orders in accord

ance with the facts disclosed (Federal Trade Commission Act, Section 5).

Complaints may be filed only by the Commission itself when it has reason to believe the law has been violated. This statutory interdiction against natural persons or corporations instituting proceedings, in effect simplifies the practice. When a complaint appears to the Commission to be without merit, filing thereof can be refused. Probably, in the event of a mistake, mandatory proceedings would lie in the United States District Court to compel acceptance of such a complaint.1

The absence of any absolute right by a party to file a complaint applies to both the Federal Trade Commission Act and to the Clayton Law (compare Clayton Law, Section 11). It is hardly conceivable that such omission should be without some definite purpose or plan. Probably refusal to file a complaint will amount in Commission practice to the dismissal of a pleading in ordinary courts of law or equity.

Complaints under Section 5 of the Trade Commission Act have an element which distinguishes them from complaints under Sections 2, 3, 7 and 8 of the Clayton Law. In the former proceedings, the element of "public interest" must be present, whereas under the Clayton Law the disputes of private individuals are the matters required to be adjudicated. This important and farreaching distinction gives to proceedings under Section 5 of the Commission Act something of the nature and scope of state-instituted prosecutions under the provisions of Section 4 of the Sherman Law.

The whole purport and scope of the Federal Trade Commission Act lends itself readily to such an interpretation of the language of the statute. It is fitting and natural that the law which provides the means of making effective the Anti-trust laws in so far as they effect general business concerns, should in the same statute designate a class of acts and type of behavior that the Commission can take cognizance of only when the public interests are concerned. This rule in practice will emphasize such complaints, for the interest of the public therein will constitute them state trials in numerous instances; and the Attorney-General

1 To this effect, see Interstate Commerce Commission v. Humboldt Steamship Co., 224 U. S. 484.

may no doubt intervene to protect the rights of the community at large.

Provisions Analyzed and Compared.-The authorizing words of the statutes conferring power upon this Commission to hold hearings under the Federal Trade Commission Act, Section 5, and the Clayton Law, Section 11, are generally the same, except that the Commission under the former law is empowered to proceed only when "it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public." This grant of power is in substance similar to that which the original Act to Regulate Commerce (Sections 12, 13) confers upon the Interstate Commerce Commission in respect to its rights to hold hearings and enter orders. While we find in the Act to Regulate Commerce, Section 13, a provision that "no complaint shall at any time be dismissed because of the absence of direct damage to the complainant," and while there is no positive direction to that effect in either of the statutes regulating the power and procedure of the Federal Trade Commission, it is probable that the legal result is the same."

Under the last-named statutes it becomes the duty of the Federal Trade Commission to issue a restraining order if it shall be the opinion of the Commission that the prohibitions contained in those laws "have been or are being violated." No mention is made or anywhere suggested that proof of "direct damage to the complainant" is made the test of ability to successfully carry the proceeding to conclusion. It appears to be assumed that while such an element might be pertinent to the case, it is not an essential feature in the proceeding.

The legal questions presented by the grant of power to hold hearings and enter orders persuant to the provisions of the Federal Trade Commission Act and the Clayton Law will in due course be definitely set at rest by judicial construction.

From the wording of both these laws it seems very plain that Congress neither attempted nor intended to institute a new branch of the legislative department of government; rather, the purport and natural inference and construction is that the Commission has been given power to act as a judicial body. In furtherance and

2 For purposes of comparison of powers, see Statute-Interstate Commerce Act (Act to Regulate Commerce, approved February 4, 1887), contained in Appendix O, pages 345, 361.