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I. UNFAIR COMPETITIVE METHODS
Of the provisions relating to methods of competition there are three, - as to unfair methods in general, as to price discrimination, and as to restrictive sales and leases. The first named was not in either bill as it passed the House but was added by the Senate. Being comprehensive in character it would, if broadly interpreted, have rendered unnecessary the more specific provisions of the House bill regarding competitive methods and these were accordingly struck out by the Senate. In the conference committee of the two houses, however, they were restored, and they were finally adopted, tho with considerable amendment.
Section 5 of the trade-commission act provides simply “that unfair methods of competition in commerce are hereby declared unlawful.” This applies to individuals and firms as well as corporations. It adds no definitions or qualifications, leaving the determination of what constitutes unfair competition to the Trade Commission and the courts. In this respect the provision is similar to that of the interstate commerce act, which merely declares unreasonable railroad rates to be unlawful, leaving it to the Interstate Commerce Commission and the courts to determine what rates are unreasonable. In other words, Congress has established a standard and delegated to other agencies the sub-legislative power of applying or interpreting that standard.
There was much opposition to this general provision on the ground of its vagueness. It was stoutly maintained that no business man would know where he stood, what he could and what he could not do. The
reply to this was that the methods of unfair competition are so numerous, so varied and so constantly changing that they cannot all be specifically set forth by Congress, and that a law which attempted to do so would require constant amendment. To avoid the wellfounded objection that it would not do to punish a man for an offense indefinitely described, Congress wisely prescribed no penalties for initial violation of this section but provided a special and appropriate procedure for enforcement.
This procedure begins with action by the Federal Trade Commission, a body whose composition and other powers are more fully described later.
No court can take initial jurisdiction of an alleged offense against this section of the law; no prosecuting attorney bring an indictment. The commission is not even obliged to take action. The law declares that whenever the commission has reason to believe that any person or concern is using unfair methods of competition it shall proceed, “if it shall appear to the commission that a proceeding by it in respect thereof would be to the interest of the public.” The language just quoted was incorporated in the bill in the conference and was not in it as first passed by the Senate. While in a sense the clause materially weakens the law, there can be little doubt of its propriety, at least as a temporary device. . In its absence the commission would be obliged to take up every case of unfair competition, however unimportant and however little it actually tended to bring about monopoly. Instances of more or less unfair competition are simply innumerable in the business world, and it is vain for the government to attempt, under present conditions, to prevent them all. The commission
would find its hands full indeed if it had to take up every complaint brought before it. The interference with business which would result from a multitude of proceedings on the part of the commission would probably more than offset the good accomplished by the actual suppression of more important and serious abuses.
The commission having decided to take up a case of unfair competition must give a hearing, after which it may issue an order requiring the discontinuance of the unfair practice. This order, however, is not immediately enforceable. If the person or concern to whom it is directed fails to obey, the commission must apply to the circuit court of appeals for its enforcement. It will be recalled that a similar procedure formerly prevailed in case of the failure of a railroad to obey an order of the Interstate Commerce Commission, but by the amendment of 1906 a penalty was provided for failing to obey such an order and the railroad could escape the penalty only by taking the initiative in applying to the courts for relief. It is perhaps unfortunate that this amended procedure was not followed in the trade-commission act. The circuit court of appeals is given exclusive jurisdiction of cases relating to orders of the commission, thus avoiding the delay of appeals from lower courts.
The power of review given to the court with respect to orders of the Trade Commission is not without limits. The law provides that the findings of the commission as to the facts, if supported by testimony, shall be conclusive, tho the court, if it deems necessary, may order additional evidence to be taken before the commission. In other words, the court is supposed to
confine itself to questions of law. Doubtless, however, the courts will treat the question whether a particular practice in competition is unfair or otherwise as one of law rather than of fact, and a very wide field for judgemade legislation is thus opened.
No specific penalties appear in the trade-commission act for failure to obey an order of the court confirming an order of the commission with respect to unfair competition. However, the general provision contained in the anti-trust act as to penalties for contempt of court would apply. The maximum penalty for a . natural person is $1000 or six months' imprisonment.
In the anti-trust bill as it passed the House the practices of price discrimination and of restrictive sales and leases were made subject to penalties of fine and imprisonment. In the act as finally revised by the conference committee and passed these penalties were cut out, and the procedure for enforcing the prohibition of these practices was made similar to that for enforcing the general provision as to unfair methods of competition. There is this substantial difference, however, that in the anti-trust act the words “if it shall appear to the commission that a proceeding by it would be to the interest of the public ” do not appear.
This elimination of penalties and other similar changes made in the conference were vigorously attacked on the floor both of House and Senate. It was charged that the “ teeth " had been taken out of the bills. There is little reason to doubt, however, that even as to these more specifically defined practices it is much better, at least for the time being, that proceedings should begin only with the Trade Commission. Its expert investigation of the facts should be much more
satisfactory than could be expected in an ordinary criminal prosecution. Indeed, in all probability the law will be enforced more vigorously and effectively under this procedure than it could have been in any other way. It is a great mistake to suppose that the establishment of severe penalties for statute-made offenses, not recognized as offenses by the common practice of the business world, will forthwith assure their cessation.
This comprehensive provision regarding unfair competitive methods bids fair to inaugurate a marked improvement in business practices in the United States and to do much toward checking the growth of monopoly. In a certain sense the new provision adds little to the Sherman anti-trust act. It will be recalled that that act explicitly prohibits the monopolization of interstate or foreign trade or the attempt to monopolize it. Unfair competitive practices, if carried to such a degree as to justify their suppression by government, are in most cases, if not in all, attempts to monopolize. The most significant feature of the new legislation is the expert machinery for investigating the facts and for making at least the initial determination as to what constitutes an unfair practice injurious to the public interest.
As regards price discrimination, the anti-trust bill as it passed the House provided that any person who discriminated in price between different purchasers in the same or different sections “ with the purpose or intent thereby to destroy or wrongfully injure the business of a competitor” was subject to penalty. Rejected by the Senate, restored and amended in conference, the section ( 2 of the anti-trust act) omits the