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The Commoner
VOL; 14, NO. 10
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The Federal Trade Commission
By Joseph E. Davies, Commissioner of. Corporations
The first mouBuro in President Wilson's trust
program has been enacted into law. The fed
nral trade commission bill passed the senate on
the 8th day or September; passed the houso on
tho 10th day of September; and was immediate
ly .transmitted to tho president.
BRIEF ANALYSIS
' Tho following is a brief analysis or tho pro
visions of tho bill:
Organization: Tho commission is to bo com
posed of ilvo members, whoso terms of ofllco are
sovon years each, and not mora than throo of
whom are to bo members of tho same political
party; its employees in general are to bo under
tho civil service; tho bureau of corporations is
to' bo transferred to and merged in tho commis
uloii. Declarative Law: Unfair methods of competi
tion are doclarod to be unlawful. Power is given
to tho commission to order such practices stop
ped, whoro found, after all parties in interest
have boon duly heard. Tho orders of the com
mission are enforced through tho circuit court
of appeals. . A defendant may also file a petition
to havo an order sot aside, in tho circuit court
of appoals. Findings of fact by the commission
arq conclusive; the appellate court reviews only
questions of law. Tho judgment of the circuit
court of appeals is iinal, except that it is subject
to roviow by the supreme court upon certiorari.
Other Powers: The commission is also em
powed: (1) To investigate and procuro fucts upon
organization, business, conduct, practices, and
management of corporations in interstate com
merce, except banks and common carriers.
(2) To require reports, under oath or other
wise, from corporations or classes of corpora
tins proscribed by the commission as to facts of
organization, business, conduct, practices, man
agement, and relation to other corporations,
partnerships, or individuals.
((3J To investigate tho manner in which de
crees under tho Sherman law are carried out, and
to.malco report to tho attorney general.
(4) To Jnvostigato violations of tho anti
trust acts whenever dirocted to do so by tho pres
ident or either house of congress.
(5) To make recommendations upon the re
quest of tho attorney general for readjustment
o business of any corporation to comply with
tho anti-trust laws.
(6) To mako public such information obtain
ed by it hereunder as it may deem oxpodlent,
except trade secrets and names of customers.
(7) To investigate trade conditions in and
with foreign countries where associations, com
binations, practices of trades, or other conditions
may affect tho foreign trade of the United States,
and to report to congress thereon.
(8) To aid tho courts in the formulation of
decrees in trust cases whenever called in by tho
court.
(9) To require by subpoena tho attendanco
and testimony of witnesses and tho production of
documents, and to examine and copy any docu
mentary evidence of any corporation investi
gated. (10) Penalties of fine or imprisonment are
Imposed for failure or refusal to testify or to
answer, or for making any false statement or
false entry, or for mutilation or alteration of
documentary evidence. Penalty is also made in
the form of a forfeit of $100 for each day for
failure to file reports within the timo required
by the commission. Any employee or officer of
tho. commission who makes public any Informa
tion, unloss dirocted by the court, Is subject to
fine or imprisonment.
POWERS IMPOSED BY THE BILL: INTER
LOCKING STOCKHOLDINGS-AND
DIRECTORATES
Tho Clayton bill as now pending in congress pro
hibits interlocking stock ownership and direct
orates, the effect of which is to lessen competi
tion. Power to enter orders to enforce these
provisions within its jurisdiction is also con
ferred upon tho federal trade commission by tho
Clayton bill. At the date of writing tho final
form of the Clayton bill had not been agreed
upon; but tho powers as above outlined are sub
stantially assured.
COMMISSION OP STRONG POV$S.?
It is tq bo noted that tho bill provide for a
commission with strong powers. The court re-
viow provided for by the act is practically a "nar
row review"; the findings of tho commission as
to facta are in practical effect made conclusive.
The procedure is made simple, and is expedited
by direct appeal from the commission to the cir
cuit court of appeals. It is adapted to speedy
and expeditious determination of matters to tho
benefit and advantage of business.
FORECAST BY THE LATE JUSTICE HARLAN
As far back as 189 3, the late Justice Harlan,
in the caso of Interstate Commerce Commission
v. Brlmson, 154 U. S. 474, pointed out that:
"All must recognlzo the fact THAT THE FULL
INFORMATION NECESSARY as a basis of intel
ligent legislation by congress from time to lime
upon the subject of interstate commerce CAN
NOT BE OBTAINED, NOR CAN THE RULES
ESTABLISHED for tho regulation of such
commorco BE EFFICIENTLY ENFORCED,
otherwise than through the instrumentality of
an administrative body representing the whole
country, always watchful of the general inter
ests, and charged with tho duty not only of ob
taining tho required Information, but of compel
ling, by all lawful methods, obedience to such
rules." (Capitals ours.)
Thus did this great jurist foresee the neces
sity for an administrative body representing the
whole country, always watchful of the general
interest, and charged with the duty not only of
obtaining information as to the enforcement of
the law, but charged with" the duty of compel
ling, by all lawful methods, obedience to the
rules of law as to interstate commerce laid down
by congress.
The federal trade commission bill seems to
have been the fulfillment of- this need. ' It passed
tho house of representatives without a dissenting
voj;e, and it passed the senate with but five dis
senting votes.
FACTS AS TO CORPORATIONS
There were 305,330 corporations, the United ,
States in 1912, according to reports made "to the
commissioner of internal revenue. This number,
of course, includes corporations doing business
solely within a state (intrastate business), as
distinguished from those coming under the juris
diction of congress doing an interstate business!
It is only over interstate commerce that congress
has jurisdiction.
Of this total, only about 8,700 have a capital
ization of $1,000,000 or over.
It should be noted that in this 8,700 are in
cluded many corporations that are doing an in
trastate business, and therefore are not included
within tho jurisdiction of the federal trade com
mission; and Included therein also are a large
number of railroads and banking corporations,
which are under the. jurisdiction of the federal
reserve board and the interstate commerce com
mission. TABLE OF CORPORATIONS AND CAPITAL
Total number of corporations, 1912, 305,336
mimuer navmg less than
$1,000,000 capital . .
Number having capital
of $1,000,000 and less
than $2,000,000
Number having capital
of $2,000,000 and less
than $3,000,000
Number having capital
of $3,000,000 and less
than $4,000,000
Number havmg capital
of $4,000,000 and less
than $5,000,000 ... I
Number having capital
of $5,000,000 and less
than $10,000,000 ... SGI
Number having capital
of $10,000,000 and
lesn than $50,000,000 G52
Number having capital
of $50,000,000 and
less than $100,000,000 G2
Number having capital
of $100,000,000 or
over, 35
Total having capital of
$5,000,000 or over..;
29G,G70
4,688,.
t;399 '
; G77.r
2 as
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1,610
305,330
T
Derived from publications of the commission
er of internal revenue, treasury department.
Of the total number of corporations, only 1,000
have a capitalization of $5,000,000 or over. Hero
again this number includes corporations en
gaged in intrastate commerce, banks and. rail
10 Jid1
"' JURISDICTION OF COMMISSION ', "
Orders on Unfair Competition: Probably tho
most significant, and certainly tho function most
discussed by congress is tho power of tho com
mission to enter orders on unfair competition.
Apart from control of transportation)! natural
resources, it is generally recognized tha the
most powerful factors in tho building up of mon
opoly are unfair trade practices. In practically
all of the government trust suits the pleadings
UYQ full of declarations of unfajr methods of com
petition, by which the monopoly had grown up.
Some of these practices are as follows:
. Bogus independents, Used to drivo out and de
stroy competition.
"Fighting ships and fighting brands," used to
kill tho market of a competitor: '
Espionage and bribery.
Refusal to sell to dealers unless lhoy,act as
exclusive agents, to deprive competitors of mar
kets and to destroy tliem.
Refusal to sell article unless dealer or pur
chaser agrees to buy certain other articles tied
up in the contract of sale, for the purpose of de
stroying competition.
Cutting the price of an article locally, to drive
out competition, and raising tho price elsewhere
to recoup tho loss.
All these and many others appear in the plead
ings and decrees in the trust cases brought by
the government. They aro generally alleged as
a part of the conspiracy or as tending to show
a monopoly or an attempt to monopolize. Where
they have been brought together, showing a con
spiracy in restraint of trade or showing a mon
opoly or an attempt to monopolize, they have
been condemned by the courts. There was con
siderable doubt, however, as to whether the law
has been sufficient to reach any one of these
practices by itself.. The commission is given
power to stop them IN ISOLATED INSTANCES,
wherever they may appear, upon due hearing
had, and to stop them before the restraint of
trade has actually .been accomplished or before
tho monopoly has actually been achieved. By
prohibiting these practices in their inception, it
is maintained that the seeds of monopoly are
destroyed. There is promise, therefore, that by
its rulings on unfair competition there will grad
ually be built up a body of administrative law
for the definite guidance of business in this field
that is declared by many to be uncharted. The
object and design of the legislation is to destroy
monopoly and to provide for competition upon a
sane and just basis. It contains possibilities of
great promise ,for real constructive aid to the
business world. It affords relief to the moderate-sized
businesses of the country, those which
have not attained monopolistic size, and which
are seeking and must have protection from mon
opoly and its weapons of unfair competition.
SEEDS OF MONOPOLY DESTROYED
According to the latest returns available, there
o??ll I'6,00 corporations out of a total of
JUo.ddb that had a capitalization of $5,000,000
or over, as shown in the preceding table. This
is but one-half of one per cent of the corpora
tions of the country. The great body of corpora
tions, practically 303,000, are of a smaller cap
italization than $5,000,000. There are 296,000
corporations that have a capitalization of under
a million. Practically all of these relatively
smaller units are subjected to the possibility of
practices of unfair competition employed by
their monopolistic rivals. It is to the great ad
antago of this 95 per cent of the corporations
ot the country, and to the great preponderance
Si bu?mes men of the nation, that unfair
piactices, the favorite weapon of these big units,
may be stopped before monopoly has been cre-
?,,!f ian?i as hBComQ susceptible of proof in a
suit by the government under the Sherman law.
INFORMATION, PUBLICITY AN AID TO
. , BUSINESS
.""swntive law may prohibit tho interlock
lh?!!;i i?resJ8' either through stockholding or
n?JS? i dlrfctorates, or restraints of trade and
n P,-yi buL up to tllIs tim there has been
m, i! miniBJraJive agency of government direct
um ri? ilivi? .attfentioa to the procuring of
Si, nlbliGlty ls In itself a event corrective
SS?S V Vlm, ,?ommssion is charged with the
hpJp mn?fbta,l?n?1 th0 facts wIth reference to
buR1Lmattr3 in,the lnterest of the public and
mSrSSKn P!,,oyisIon is mae in tho law for the
and the ?lke secrets, lists of customers,
Benefit and advantage to business and to busi-
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