Unfair Methods of Competition and Their Prevention
| Date | 01 January 1916 |
| Author | W.H.S. Stevens |
| DOI | 10.1177/000271621606300103 |
| Published date | 01 January 1916 |
| Subject Matter | Articles |
37
UNFAIR
METHODS
OF
COMPETITION
AND
THEIR
PREVENTION
BY
W.
H.
S.
STEVENS,
Ph.D.,
Professor
of
Business
Organization
and
Management,
College
of
Commerce
and
Business
Administration,
The
Tulane
University
of
Louisiana.
Section
V
of
the
Federal
Trade
Commission
Act
reads
in
part
as
follows:
That
unfair
methods
of
competition
in
commerce
are
hereby
declared
un-
lawful.
The
Commission
is
hereby
empowered
and
directed
to
prevent
persons,
partnerships,
or
corporations,
except
banks,
and
common
carriers
subject
to
the
Acts
to
regulate
commerce,
from
using
unfair
methods
of
competition
in
com-
merce.
At
least
until
very
recently,
&dquo;unfair
competition&dquo;
has
meant,
&dquo;passing
off,
or
attempting
to
pass
off,
upon
the
public
the
goods
or
business
of
one
person
as
and
for
the
goods
or
business
of
an-
other.&dquo;1
In
other
words,
&dquo;unfair
competition&dquo;
has
hitherto
re-
ferred
with
but
few
exceptions2
to
the
marketing
of
goods
by
methods
involving
either
fraud
or
misrepresentation,
or
both.
Such
a
use
of
this
term
is
both
inaccurate
and
unsatisfactory.
Practices
of
this
character
would
undoubtedly
be
much
more
accurately
de-
nominated
if
termed &dquo;dishonest
competition.&dquo;
That
they
should
be
eliminated
from
business
certainly
cannot
be
questioned.
But
it
was
neither
to
facilitate
nor
to
effectuate
such
a
result
that
&dquo;unfair
competition&dquo;
was
prohibited
by
the
Trade
Commission
Act.
Rather
was
this
clause
intended
to
stamp
out
those
classes
of
acts
which,
for
want
of
a
better
term,
may
be
described
as
eco-
nomically
unfair.
These
methods3
are
not
always
easy
of
classification,
but
by
1
Cf.
38
Cyc.
756-759.
2
Specific
exceptions
to
this
rule
may
be
found
in
the
cases.
Some
of
the
later
legal
text
writers
also
consider unfair
competition
from
a
broader
standpoint.
For
example,
Nims
(Unfair
Business
Competition
)
devotes
a
chapter
to
a
dis-
cussion
of
interference
with
a
competitor’s
contracts.
3
Portions
of
this
article
appeared
in
the
Policital
Science
Quarterly
in
June
and
September,
1914.
Certain
other
portions
are
from
a
revised
and
enlarged
study
of
the
same
subject
as
yet
unpublished.
38
selecting
what
appear
to
be
their
most
fundamental
characteristics,
it
is
possible
to
distinguish
the
following
twelve
forms
of
&dquo;unfair
competition&dquo; :
I.
Local
price
cutting.
II.
Operation
of
bogus &dquo;independent&dquo;
concerns.
III.
Special
competitive
devices.
IV.
Conditional
requirements.
V.
Exclusive
sales
and
purchase
arrangements.
VI.
Rebates
and
preferential
arrangements.
VII.
Acquisition
of
exclusive
or
dominant
control
of
machinery
or
goods
used
in
the
manufacturing
process.
VIII.
Manipulation.
,
IX.
Black
lists,
boycotts,
white
lists,
etc.
X.
Espionage.
XI.
Coercion,
threats
and
intimidation,
etc.
XII.
Interference
with
contracts
and
business
of
competitors.
I.
Local
Price-cutting
Local
price-cutting
has
been
a
frequent
and
familiar
weapon
of
various
trusts.
As
here
used
the
term
means
that
an
organiza-
tion
cuts
the
prices
of
its
products
to
a
point
below
the
cost
of
production
in
one
or
more
of
the
localities
where
competition
exists.
The
loss
entailed
is
usually
recouped
by
the
profits
from
the
high
prices
charged
in
those
regions
where
competition
is
either
insignificant
or
non-existent.
This
method
has
been
em-
ployed
repeatedly
by
large
and
powerful
organizations.
The
ultimate
outcome
in
such
cases,
with
but
few
exceptions,
has
been
the
destruction
and
elimination
of
competition
in
those
regions
where-it
has
been
employed.
Probably
the
best
examples
of
the
operation
of
local
price-
cutting
are
to
be
found
in
the
histories
of
the
old
oil
and
powder
trusts.
In
the
case
of
the
former
organization,
the
prices
charged
in
various
localities
appear
to
have
been
definitely
governed
by
the
percentage
of
competition
to
be
met
in
each
section.
An
ex-
amination
of
the
tables
of
prices,
profits
and
percentages
of
com-
petition
presented
in
the
Brief
for
the
United
States
in
the
suit
against
the
Standard
Oil
Company
shows
that
the
prices
and
profits
on
oil
as
between
various
localities
were
roughly
high
or
low
according
as
the
percentages
of
competition
were
low
or
high.
On
October
15,
1904,
the
Standard
Oil
Company’s
profits
and
losses
on
white-
water
illuminating
oil
ranged
from
as
high
as
6.48
cents
per
gallon
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