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A brief summary of the leading anti-trust provisions of the Federal Trade Commission Act follows:
THE FEDERAL TRADE COMMISSION ACT* By Act of Congress approved September 26, 1914, a non-partisan Federal commission was created, which is directed to "prevent persons, partnerships, or corporations, excepting banks and common carriers subject to the acts to regulate commerce, from using unfair methods of competition in commerce.” To carry out the provisions of the act, the Federal Trade Commission, composed of five members appointed by the President, is empowered to conduct hearings in any city of the United States. If unfair methods are shown, the Commission shall direct the offenders to desist therefrom, and may apply to the U. S. Circuit Court of Appeals for the enforcement of its orders. The Commission is also empowered to enforce compliance with certain sections of the Clayton Act; to conduct investigations into business practices and management; to investigate the enforcement of decrees under the Sherman Act; and to investigate and report to Congress on foreign trade combinations. Maximum penalties of imprisonment for six months, a fine of $1,000 or both, are provided for refusal to testify before the Commission, falsification of evidence, and failure to submit required reports.
The Federal Trade Commission, as established by this act of September, 1914, has not only the functions of investigation and publicity exercised from 1903 to 1914 by the Bureau of Corporations, but it has additional functions of investigation, publicity, and recom*See Appendix F-9. Act of September 26, 1914.
mendation, and further, it has powers of a quasijudicial character. Among the new powers of investigation, publicity, and recommendation are notable: Authority to require corporations to make annual or special reports in such form as the Commission may prescribe; general power to investigate corporations; authority, under direction of the President or of either House of Congress to investigate and report concerning any alleged violations of the anti-trust acts by any corporation; authority to investigate trade conditions in other countries with reference to combinations or other conditions affecting foreign trade of the United States; authority to make recommendations to the attorney-general for readjustment of any corporation found to be violating the anti-trust acts; authority to investigate the manner in which any court decrees, restraining corporations from violating the anti-trust laws, are being carried out; and authority to make public such portions of the information obtained in its investigations as it shall deem expedient, except trade secrets and names of customers.
The quasi-judicial functions of the Commission may be thus summarized: It has authority to enforce the provisions of the Federal Trade Commission Act relative to unfair competition, and the provisions of the Clayton Act, notably those relative to price discrimination, tying contracts, holding companies, and interlocking directorates, as to all corporations which come under its jurisdiction.
There has thus been created and broadly empowered a Federal administrative agent to deal with great industrial corporations which do business beyond the borders of a single state. Such an agent is indispensable if the difficult trust problem of the United States is to be solved scientifically. Men of vision, such men as Justice Harlan, began to point out the need for such an administrative body as soon as the Sherman Law began to be applied. The Bureau of Corporations was a forerunner, which demonstrated the high value of official expert determination of the facts about Trusts. The Federal Trade Commission is the fully developed, fact-finding, and administrative body, all too slowly evolved through the urgent necessities of the situation.
The Federal Trade Commission was organized in accord with the law on March 16, 1915. While it has been conducting an elaborate study of the entire petroleum industry and has, incidental to this study, made investigation of the gasolene situation to aid the Department of Justice in dealing with numerous complaints of discrimination, its activities during its first two years emphasize its powers of service to industry rather than its trust-detecting and trust-smashing powers. Absorbing the Bureau of Corporations, it fell heir to an investigation of the fertilizer industry already under way. This report was completed and printed August 16, 1916. The friendly attitude is indicated in the record that the Commission had held conferences with various fertilizer companies as a result of which these companies have voluntarily agreed to abandon their prevalent custom of operating many controlled companies as apparent independents. The friendly attitude appears, too, in the published suggestions of the Commission to retail merchants and to manufacturers, relative to accounting systems suitable for adoption by such merchants and manufacturers. The Commission has found that unreliable knowledge of costs of production and of distribution cause a great deal of unfair competition. Instead of applying immediately pounds of investigation to the end of punishing, the Commission has chosen to issue ounces of prevention in the form of these helpful simple manuals which may induce merchants and manufacturers to give the subject of accurate costs the attention it deserves and, learning their true costs, to lessen predatory pricecutting responsible for so heavy a death rate in business enterprises.
The Commission is extending especial assistance toward the permanent expansion of American foreign trade. Its report of June 30, 1916, on trade and tariffs in six South American countries, is probably but an indication of large service it may render to American importers and exporters. The report aims not only to show the obstacles to be encountered in the trade conditions and in the customs laws and practices of Latin America, but also to indicate both to business men and to the governments of North and South America how these obstacles may be overcome.
The two-volume “Report on Coöperation in American Export Trade,” published at the close of 1916, is a detailed investigation of the “competitive conditions affecting Americans in international trade." The Commission reaches a convincing conclusion in this report that legislation should be enacted permitting the formation of combinations to carry on foreign trade.
The summary of the Commission recommendations in this report gives high official sanction for abandoning the hard-and-fast anti-combination attitude of American Federal legislation for the past quarter century: “By its investigation the Commission has established the fact that doubt as to the application of the anti-trust laws to export trade generally prevents concerted action by American business men in export trade, even among producers of non-competing goods. In view of this fact and of the conviction that coöperation should be encouraged in export trade among competitors as well as non-competitors, the Commission respectfully recommends the enactment of declaratory and permissive legislation to remove this doubt. This recommendation is made subject to the condition that the legislation shall be carefully safeguarded and shall make absolutely clear that the combinations for export business are subject to all the rigors of the Sherman Law if they are used to restrain trade in the United States.”
“The commission does not believe that Congress intended by the anti-trust laws to prevent Americans from coöperating in export trade for the purpose of competing effectively with foreigners, where such cooperation does not restrain trade within the United States and where no attempt is made to hinder American competitors from securing their due share of the trade. It is not reasonable to suppose that Congress meant to obstruct the development of foreign commerce by forbidding the use in export trade of methods of organization which do not operate to the prejudice of the American public, are lawful in the countries where the trade is to be carried on, and are necessary if Americans are to meet competitors there on more nearly equal terms."