The Federal Trade Commission Law

• Author: Nathan B. Williams
• Published date: 01 January 1916
• Date: 01 January 1916
• DOI: http://doi.org/10.1177/000271621606300101
• publishedBy: Sage Publications, Inc.

THE FEDERAL TRADE COMMISSION LAW
BY NATHAN B. WILLIAMS,
Of the Washington, D. C., Bar.
The political and economic considerations which confronted the
sixty-third Congress were most unusual. Their counterpart had
not occurred within a generation. The extraordinary effect of
these conditions was probably only equaled by the dynamic nature
of the questions which are pressing to the front in the Congress just
assembling as these lines appear.
The sixty-third Congress made a legislative attempt to overtake
the advances which public opinion, wise or otherwise, had made in
economic thought in the past twenty-five years. Twenty-four
years’ experience with varying desultory and active efforts to
enforce the provisions of the Sherman Anti-trust Law, our marvel-
ous corporate development, and our fatuous belief in the curative
efficacy of legislation, coupled with our experience and what was
believed to be the judgment of the country, suggested that certain
practices which had developed scandal in some corporate manage-
ments be made unlawful. It was believed that the responsibility
of the guilty individual should be made a little more certain.
There was a well founded feeling that the trust laws should be
liberalized to the extent that an individual or corporation injured
from what either believed to be an unlawful combination to restrain
or monopolize interstate trade or commerce need not wait upon
the processes of the Department of Justice, but that independent
action in the courts should lie at any time. It was also felt that
the right of action for damages to the individual should be permitted
to await without limitation the determination of a government suit
against an unlawful combination. Further, a liberalization of
process seemed wise in order that service might be had wherever the
business was being carried on.
Objects or Ends of the Trade Commission Law
Beyond the subjects previously mentioned, certain other sub-
stantive matters which were believed to tend to the development of
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monopoly were made unlawful by the provisions of the Clayton
Act. These are sections two, three, seven and eight of the Clayton
law and relate, respectively, to certain forms of discrimination in
price, so-called tying contracts, certain forms of intercorporate
stockholding, and common or interlocking directors in certain cor-
porations. These will be again referred to.
The Clayton law is a part of the anti-trust laws of the country.
The Federal Trade Commission law is not an anti-trust act. The
Trade Commission law marks probably the high tide of govern-
mental attempts at legislative regulation of business conduct in in-
terstate commerce. As the act passed the House, it carefully omit-
ted many provisions which have been since heralded as the great
constructive enactments of the law. On the final vote in the Senate
the law passed by a bare quorum. The act was almost completely
rewritten in conference between the two Houses of Congress. If
ever a conference committee took liberties with pending legislation,
it was done in making the final draft of this law.
The President in his address to Congress after referring to
the uncertain meaning of the anti-trust laws had said:
The opinion of the country would instantly approve of such a commission
(Interstate Trade Commission). It would not wish to see it empowered to make
terms with monopoly or in any sort to assume control of business, as if the govern-
ment made itself responsible. It demands such a commission only as an indis-
pensable instrument of information and publicity, as a clearing ’house for the
facts by which both the public mind and the managers of great business under-
takings should be guided, and as an instrumentality for doing justice to business
where the processes of the courts or the natural forces of correction outside the
courts are inadequate to adjust the remedy to the wrong in a way that will meet
all the equities and circumstances of the case.
It is apparent to students of present-day economics that a very
real conflict is on in this country between two alliteratively desig-
nated economic theories-competition-cooperation. The results
of this contest no man can foresee. A corporation, sometimes de-
fined as &dquo;a body without decay, a mind without decline,&dquo; is but the
physical expression of a more or less comprehensive development of
cooperative capital and business ability. While I believe that this
country is committed to the principle of competition, it is daily
becoming more evident that this principle must be understood with
certain limitations. Unrestrained and unregulated competition
logically leads to monopoly. The adage that &dquo;Competition is the

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life of trade&dquo; is faulty for the lack of a qualifying adjective. &dquo;Hon-
est competition is the life of trade.&dquo;
As it appears to me, one of the designs of the Trade Commis-
sion law is to modify the centrifugal force of individualism while at
the same time holding a check upon the centripetal tendency of
cooperation ; holding these forces in balance, as it were, much like
their counterparts are held in the physical world; to make them
both serve the common good.
Unfair Methods of Competition
The limitations of this paper will not permit an extended
discussion of all of the phases of this law. One of its most important
provisions is that relating to what is described as &dquo;unfair methods
of competition.&dquo; Manifestly, &dquo;unfair competition&dquo; is the sub-
stantive thing itself while &dquo;methods&dquo; are the means used to accom-
plish the unfair end.
&dquo;Unfair competition&dquo; has long been a familiar term in the law,
while &dquo;unfair methods of competition&dquo; are yet to be catalogued
and described. The legal problems relating to unfair methods of
competition are measurably new in the law. They are intricate and
complex. Whether or not a code of business ethics will develop
from the working out of section five of this law remains for the
future.
All lawyers know that what is described in the law as the Law
Merchant is merely the codification into written statutes of the
laws or rules of merchants in the great marts of trade which in their
dealings one with another had come to be their expression of fair
dealing; in other words, the rules of the game. After these rules
had been developed and had come to meet practical agreement
among upright and scrupulous merchants they were written into
the laws of the land and have come down to us with infrequent and
moderate changes as the Law Merchant. These laws were the
development of centuries.
No unfair or dishonest practice will long survive the condemna-
tion of the men engaged in that trade. The men engaged in business
make the rules of the game, legislatures and courts to the contrary
notwithstanding. The most that legislative bodies do or can do is
to write into statute law more or less imperfectly what the great
body of business men regard as the approved rules of practice

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among intelligent and high-minded business men. Legislative
bodies rarely initiate laws.
This feature of the law was the subject of most exhaustive
debate in the Senate of the United States. Whether from this or
from some other reason it was most left in doubt. As it was not
in the House bill, the subject had scant consideration there. Nu-
merous attempts to secure a definition of unfair competition were
made and one attempt failed by only two votes. The objections to
attempting such definitions were, in short, that the ingenuity of the
American business man, advised by some portion of the American
bar, would be equal to inventing methods almost or quite as fast
as they could be defined.
In this day of trans-oceanic telephone talks we cannot wait
with patience the corrective processes of business as applied to
itself. This legislation gives over to the Federal Trade Commission
the task of developing this code of higher business ethics and, by
its orders and proceedings to enforce them, it is proposed to develop
this supplementary code to the Law Merchant.
Fair competition, in the more popular sense in which it is
doubtless intended in this legislation, is that which obtains in the
daily endeavor of the business man to succeed by the peaceful and
honest use of his skill and industry to the development of his busi-
ness without taking or endeavoring to take any undue or secret
advantage over either competitors or the public. And the same
rule which applies to the individual business man is equally appli-
cable to industry in corporate form.
Unfair competition as instanced and condemned by proceedings
in equity is unlawful regardless of the method used. The restriction
in the law to &dquo;unfair methods&dquo; may seriously handicap the activ-
ities of the commission, adversely or advantageously, depending
upon the point of view.
Methods which in themselves it would be
disastrous to condemn may in some instances be used to accomplish
the result aimed to be prevented.
Then again, a method of competition which might be unfair
in one industry or trade might very properly be without any basis
of criticism when used in a different industry or line of commerce.
Bricks are not apples and there are many differences in the customs
of trade in cotton goods as distinguished from the trade in coal. The
methods of distribution and sale, the public demand, customs and

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characteristics of the industry, its proximity to market, the rela-
tion of the product to human needs and many other considerations
would all have to be taken into...