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ANNUAL REPORT
OF THE

FEDERAL

TRADE COMMISSION
FOR THE

FISCAL YEAR ENDED JUNE 30, 1916

WASHINGTON
GOVERNMENT PRINTING OFFICE
1916

FEDERAL TRADE COMMISSION
EDWARD N. HURLEY, Chairman.
WILLIAM J. HARRIS, Vice Chairman
JOSEPH E. DAVIES.
WILL H. PARRY.
LEONIDAS L. BRACKEN, Secretary.
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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.
WASHINGTON, D.C., November 15, 1916.
To the Senate and House of Representative:
The Federal Trade Commission, in compliance with statute, herewith submits to
Congress its annual report for the fiscal year ending June 30, 1916.
This report is the second annual report of the Commission, but the first to cover a
full year, the Commission having been originally organized on March 16, 1915.
THE COMMISSION.
According to its organic act, the Commission elects its own chairman. The
Commission has adopted the policy of annual rotation of the chairmanship, the order
or service in that capacity to be according to the seniority of appointment. This
arrangement went into operation on July 1, 1916, with the intention that subsequent
changes in the chairmanship should take place at the beginning of each fiscal year. The
vice chairmanship was regulated in like manner, the incumbent of this position
becoming chairman after serving one year.
Although occurring since the close of the fiscal year, it should be noted that the
office of one commissioner became vacant through the fact that the Senate did not
confirm the nomination of Hon. George Rublee. Mr. Rublee served on the
Commission, however, pending the Senate’s action from the original date of
organization until the expiration of his commission at the end of the last session of
Congress, and throughout the fiscal year covered by this report. We desire to express
our appreciation of the exceptionally valuable service which he rendered while a
member.
GENERAL ORGANIZATION OF THE STAFF.
The staff of the Commission is organized in three main departments, namely,
administrative, legal, and economic.
The administrative department is under the direction of the secretary, who is also
the formal channel of communication between the Commission and the other
departments. The assistant secretary, acting solicitor, and chief clerk are directly under
the secretary, as well as the chiefs of the docket, mails and files, supplies, and
stenographic divisions.
The Commission had an advisory counsel as the head of the legal department
during a part of the fiscal year, but this office is now vacant because the present
appropriation makes $5,000 the maximum
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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

salary payable to member of the staff. Subordinate legal officers were the chairman
of the law board of review, the board which considers and reports to the Commission
on all questions of law submitted to it, especially questions of law involving the quasi
judicial or administrative powers of the Commission; the chief examiner, who has
general supervision of the legal staff; and the assistant counsel.
The economic department during the fiscal year under consideration was placed
under the direction of a chief economist, subordinate to whom were the assistant chief
economist, and the chief of the division of corporation reports. It may be noted,
however, that since the close of the fiscal year the organization of this department has
been changed and that the economic work is now under the supervision of an advisory
economic board. The immediate conduct of the complicated and frequently changing
subjects of investigation within this department are entrusted to economists,
accountants, and other experts assigned thereto from time to time.
The functions of the Commission, especially those of a quasi judicial or
administrative character, involve the consideration of both legal and economic aspects
of trade problems, hence the staff of the Commission, also, is coordinated in its legal
and economic departments in order to secure effective cooperation. This is
accomplished through the joint board of review, which is composed of representatives
of both the legal and economic departments. The chairman of the law board of review
is also the chairman of the joint board of review.
LEGAL DEPARTMENT.
The organization of the legal department has already been described in general
terms. Its duties are, primarily, to assist the Commission in the enforcement of section
5 of the Trade Commission act, which prohibits unfair competition in interstate
commerce and also sections 2, 3, 7, and 8 of the Clayton Act , which prohibit, respectively, certain price discriminations, tying contracts, intercorporate stock holdings, and
interlocking directorates.
The Commission is also charged in the act creating it with certain duties respecting
the enforcement of the Sherman Antitrust Act, namely:
(1) At the request of the President of either House of Congress, to investigate and
report respecting alleged violations of the antitrust acts (sec. 6, par d.).
(2) At the request of the Attorney General, to make recommendations as to the
readjustment of the business of any corporation alleged to be violating the antitrust
acts, so that it may thereafter construct its business in harmony with the law (sec. 6,
par. e).
(3) At the request of courts, to recommend appropriate decrees in antitrust cases
(sec. 7).
(4) Upon its own initiative, to investigate the manner in which decrees in antitrust
cases are being carried out (sec. 6, par. c).
Again, even in connection with that portion of the Commission’s work which is
primarily economic or advisory in character, questions are constantly arising which
call for expert legal assistance, not only with regard to the extent of the Commission’s
powers and the proper method of their exercise, but also with regard to many other
matters.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

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Questions of law are passed on by the law board of review, which is composed of
three experienced lawyers. The reports of this board upon such questions are then
passed on by the counsel of the Commission before being finally submitted to the
Commission.
UNFAIR COMPETITION AND VIOLATIONS OF CLAYTON ACT.
Section 5 of the Federal Trade Commission act provides that whenever the
Commission shall have reason to believe that any person, partnership, or corporation
has been or is using any unfair method of competition in commerce, and if it shall
appear to the Commission that a proceeding by it in respect thereof would be to the
interest of the public, it shall issue and serve upon such person, partnership, or
corporation a complaint stating its charges in that respect, and containing a notice of
a hearing upon a day and at a place therein fixed at least 30 days after the service of
such complaint. The Clayton Act contains a like provision in reference to the
enforcement of the provisions of sections 2, 3, 7, and 8, except that it does not contain
the proviso, “if it shall appear to the Commission that a proceeding by it in respect
thereof would be to the interest of the public.” This provision was omitted from the
Clayton Act presumably because such violations would per se be of interest to the
public, as distinguished from an unfair method of competition, which might involve
only a private injury.
Applications for issuance of complaints.--The Commission has power, of its own
motion, to issue formal complaints charging violations of the Trade Commission act
or of the Clayton Act. Usually, however, the facts concerning such violations are
brought to its attention by persons who have suffered injury from the act complained
of. Any communication indicating such violations of the law is termed “an application
for the issuance of a complaint.”
Number of applications filed.--Since the Commission has been organized and up to
the end of the fiscal year there have been filed with it 246 separate applications for the
issuance of complaints. Some of these applications charged violations of more than
one provision of the law; 138 were applications for the issuance of complaints for
violations of Section 5 of the Trade Commission act; 78 were for violations of section
2 of the Clayton Act; 28 were for violations of section 3 of the Clayton Act; 4 were for
violations of section 7 of the Clayton Act; and l for violations of section 8 of the
Clayton Act. Of the total number, 107 applications have been disposed of and 139
were pending June 30, 1916.
Character of violations charged.--In the applications for issuance of complaints for
violations of section 5 of the Trade Commission act some of the unfair methods of
competition alleged are: Predatory price cutting, inducing breach of contract,
maintaining bogus independents, betrayal of trade secrets and confidential information,
bidding up the price of goods purchased, combinations and threats to cut off
competitor’s supplies, disparagement and confusion of goods, unfair manipulation of
guarantees against declines in price of goods sold, false and misleading advertising,
fighting ships and fighting brands, misbranding of goods, instituting boycotts and
threats to boycott, instituting vexatious actions and advertising such actions,

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

threats to institute such actions against competitors, influencing newspapers not to
accept advertising h of competitors, employing Systems of espionage, and enticing
away a competitor’s employees.
A considerable number of the complaints made to the Commission involved matters
which, by reason of their purely intrastate character or because the acts, though unfair
practices, where not competitive practices, did not come within the jurisdiction of the
Commission. Such cases were summarily disposed of--sometimes by published
conference rulings, where the matter was of sufficient general interest.
No attempt to define unfair competition.--The Commission has made no attempt to
define in general terms what methods of competition are “unfair” so that “a proceeding
by it in respect thereof would be to the interest of the public.” Unfair competition, like
“fraud,” “due care,” “unjust discrimination,” and many other familiar concepts in the
law, is incapable of exact definition, but its underlying principle is clear--a principle
sufficiently elastic to cover all future unconscionable competitive practices in
whatever form they may appear, provided they sufficiently affect the public interest.
Thus far the Conimission has been of the opinion that at least those cases in which the
method of competition restrains trade, substantially lessons competition, or tends to
create a monopoly are subject to a proceeding under section 5 of the Federal Trade
Commission act. The Commission has gone further than this, however, and in some
instances where these elements did not appear, as in certain cases of misbranding and
falsely advertising the character of goods where the public was particularly liable to
be misled, the Commission has taken jurisdiction. The question of public interest in
mere passing off of goods or imitation of trade names as yet has not been disposed of
by the Commission
“Trust Laws and Unfair Competition.”--In the study of umifair competition cases
the Commission has been greatly assisted by the report on “Trust Laws and Unfair
Competition,” made by Hon. Joseph E. Davies, as Commissioner of Corporations, on
March 15, 1915. This report attempts to set forth what practices have generally been
regarded as unfair methods of competition by business men, economic writers and
public men both in the United States and in foreign countries, amid also what practices
have been characterized as such by the Department of Justice or by the courts in the
administration of the antitrust laws. Furthermore, it sets forth various competitive
practices which both at common law and under the laws of foreign countries the courts
have termed unfair competition or which they have held could not be justified. On this
important question the Commission has endeavored to make use of every available
source of enlightenment.
Reason to believe.--In view of the fact that the Commission is authorized to issue
its complaint, not upon probable cause, but only upon grounds which give it “reason
to believe” that there has been a violation of the law, the Commission is required to
act, and has acted, with the utmost circumspection in the issuance of complaints and
the institution of proceedings. In all cases it makes a thorough preliminary
investigation of the matters charged in order that no formal proceeding may be
undertaken without an adequate foundation.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

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Some of the charges of violation of law brought to the attention of the Commission
have been found, upon investigation, to be groundless; in other cases, although the
practices were probably unfair, it did not appear to the Commission that it would be
to the interest of the public to interfere, because even if the charges were true they did
not appear to the Commission to injuriously affect the public interest. The
Commission has acted with the utmost hesitation and consideration in dismissing cases
on the ground of public interest. The applicant is requested to submit all the facts in
his possession bearing on the matter involved in his application for the issuance of a
complaint and to direct the Commission, so far as he is able, to evidence or sources of
evidence in reference thereto.
Preliminary investigation.--Each application as soon as it is received is assigned
by the secretary to the personal supervision of one of the commissioners, assignments
being made to each commissioner in rotation. After examination by the commissioner
to whom it is assigned, the application is turned over to the attorney specially assigned
to that commissioner for preliminary investigation.
No formal rule is laid down to regulate the manner in which such investigation shall
be conducted , but that method is pursued which seems best adapted to bring out all
the facts in the particular case under consideration, so that a clear understanding may
be had of the matters involved. The joint board of review advises with the special
attorney who has the case in charge and with the commissioner to whom it is assigned,
who directs the general character and scope of the preliminary investigation. The chief
examiner sees that the general instructions given by the joint board are properly carried
out, and passes upon the reports of those who make the field investigations. Many
complaints involve exceedingly complex business situations, which require the advice
and assistance not only of the legal staff but of the economists and expert accountants
as well. The questions at issue are fundamentally questions of practical business
affairs, and their consequences may be very far-reaching. For this reason it is the
Commission’s purpose to consider carefully in every case the economic or business
point of view. In this connection the attorneys, economists, examiners, and expert
accountants who had become expert in investigatory work under the Bureau of
Corporations, and who were taken over by the Commission, have been of great
assistance.
Names of parties complaining not disclosed.--The suppression of unfair methods
of competition and the prevention of the forbidden price discriminations, tying
contracts, intercorporate stock holdings, and interlocking directorates, being primarily
for the purpose of protecting the public interest in so far as proceedings before the
Commission are concerned, and not contests between individuals in relation to their
private rights, the person complaining of such unlawful acts is not a party to or in any
way connected with such proceedings except as he may be called upon to furnish
evidence. Moreover, in view of the fact that the Commission may institute a preceding
on its own motion without charges being made to it, or upon application of parties not
directly affected by the practices complained of, it is not the policy of the Commission
to disclose the

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

source of the information upon which it proceeds to make a preliminary
investigation.
Report of joint board of review.--When an investigation is completed the special
attorney in charge makes a report to the appropriate commissioner, and the entire
matter is then turned over to the joint board of review to be examined and considered.
The board makes a formal report to the commissioner having personal supervision over
the matter, stating concisely the facts developed from the investigation, together with
its opinion upon the questions of law and fact involved, and making one of the
following recommen-dations: (1) That a complaint be issued; (2) that the application
be dismissed because the charges have not been established; (3) that the acts charged
are not within the Commission’s jurisdiction or do not constitute a violation of any law
which the Commission is empowered to enforce; or (4), in cases of alleged unfair
methods of competition, that a proceeding would not be in the interest of the public.
The report of the Joint Board of Review is placed before the Commission by the
commissioner in charge, who makes a report either concurring in the recommendation
of tile board or, in the event of a disagreement, submitting separate recommendations.
Having before it the report of the Joint Board of Review and of the commissioner in
charge, the Commission acts, either by authorizing the issuance of a complaint or by
dismissing by resolution or ruling of the Commission.
Disposal of cases without formal proceedings.--Before the issuance of a formal
complaint the Commission notifies the party complained of that the charges have been
made, giving a statement thereof, and also information such party that it is not the
policy of the Commission to institute formal proceedings thereon without first making
a full investigation of the facts, stating to such party that it will have an opportunity
to be heard in reference thereto and to explain or deny the alleged violations of law.
This policy has been very successful not only in avoiding ill-founded prosecutions
but also because in a number of notable instances, although there appeared to be a
violation of law, still the party complained against agreed to cease and desist therefrom
and in such cases the Commission thus far has not instituted a proceeding, but has
dismissed the case by a conference ruling. This has not been adopted as a set policy
by the Commission, because it may be that cases will arise where the unfair practices
or the violations of the Clayton Act are so flagrant and the public injury so serious that
a proceeding should be instituted and a public hearing had and an order made
denouncing the practice and requiring its abandonment so that there may be a record
of the policy of the Commission in reference thereto, notwithstanding the fact that the
party complained against, before the institution of the proceeding, expressed a
willingness to desist.
Thus far where the parties complained of have ceased and desisted from the
violations charged, it has been considered that the public interests have been as well
subserved as they would have been if a formal proceeding were instituted and the
Commission and the respondent required to indulge in expensive and prolonged
litigation.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

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Instances of cases disposed of without proceedings.--As an indication of the
character of cases thus disposed of, the following instances are cited:
A manufacturer on the Pacific coast complained that a competitor whose factories
were located in the East was selling certain of its goods on the Pacific coast at a lower
price than it was selling the same goods in other parts of the country, the cost of
transportation being considered, and that this discrimination was made for the purpose
of and would, if continued, have the effect of injuring or destroying the business of the
applicant. Before the completion of the investigation the corporation complained of
notified the Com-mission that it had adopted a new price list for the Pacific coast, and
it appeared that while the investigation was in progress there was a substantial
reduction in railroad rates to the Pacific coast on shipments of the goods manufactured.
The new price list, together with the reduction of freight rates, brought the prices of
both competing concerns substantially to the same level. Moreover, the applicant for
the complaint advised the Commission that the grounds thereof had been removed.
Therefore, the discrimination complained of having been eliminated, the Commission
dismissed the proceedings.
In another case a manufacturer engaged in interstate commerce issued a publication
which, under the guise of trade news, gave misinformation of a character unfair and
detrimental to the applicant's business. Upon the institution of an investigation by the
Commission the alleged unfair method of competition was discontinued, and the party
complained of assured the Commission that its policy had changed with a change of
management and that no such practice would in the future be engaged in against any
competitor.
In another case a typewriter rebuilding company engaged in interstate commerce
circulated among dealers in various States a letter falsely stating that a competitor's
factory in the Middle West had been removed to the east and that for this reason many
of its customers in Central and Western States would make new arrangements for
rebuilding typewriters. The party complained of subsequently advised the Commission
that the statement when made was believed to be true. Upon the matter being inquired
into by the Commission the concern complained of sent a letter of retraction to all
dealers receiving the first communication, and assured the Commission of its readiness
to take any further action deemed necessary to correct the wrong which had been done.
In another case a manufacturer engaged in interstate commerce sent out a printed
circular containing a letter alleged to have been sent him by a dissatisfied customer of
a competitor, disparaging the quality of the competitor’s products. It was charged that
this letter was a bogus letter. As soon as the Commission began its investigation it
received assurance from the concern complained of that it had discontinued the
publication of the circular and that in the future it would not refer in its advertising
matter in any way to the product of its competitors.
Complaints issued.--At the end of the fiscal year the Commission had issued amid
served four complaints charging unfair methods of competition in interstate commerce
in violation of section 5 of the

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Federal Trade Commission act. Three of these complaints charged misbranding as to
the character of goods with the intent and purpose of confusing, deceiving, and
misleading the public, and to the injury of competitors who sell goods. The fourth
complaint charges the respondent with (a) attempting to hinder, delay, and embarrass
a competitor in equipping its plant and factory with suitable machinery; (b) espionage
to procure drawings of machinery; (c) bribing an employee of a railway company to
give information as to competitor's goods; (d) inducing the cancellation of sales and
withdrawal of patronage of customers of its competitors; (e) instituting an unjustifiable
and vexatious action against a competitor; (f) advertising such vexatious action; (g)
threats to institute actions against persons who dealt with the competitor; (h)
threatening to withdraw its advertising from newspapers that advertised the goods of
the competitor; (i) falsely advertising that it had exclusive right to manufacture and sell
its products; (j) endeavoring to induce other competitors to institute suit against the
new competitor; (k) endeavoring to embarrass, hinder, and delay its competitor in
procuring boxes in which to pack its products; (l) and generally endeavoring to prevent
and destroy competition.
The Commission has also issued a complaint charging a violation of section 3 of
the Clayton Act, forbidding “tying contracts,” where their effect may be to
substantially lessen competition or tend to create a monopoly in any line of commerce.
This case presents substantially the same state of facts and issues as were presented
in the case of Henry v. A. B. Dick Co. (224 U. S., 1).
At the end of the fiscal year all of these proceedings are at issue and the evidence
is being taken, or they are awaiting the joining of issue by respondents so that the
evidence may be taken.
Several other applications now under consideration by the Commission will in all
probability, so far as the Commission is now able to determine, result in the issuing
of complaints.
Form of complaint.--The formal portions of a complaint in a proceeding charging
unfair methods of competition are in substantially the following form :
UNITED STATES OF AMERICA
Before the Federal Trade Commission, ss:
At a regular session of the Federal Trade Commission, held at its office in the city of Washington, D. C.,
of
Present :
Joseph E. Davies,
Edward N. Hurley,
William J. Harris,
Will H. Parry,
George Rublee,

, 1916.

Commissioners.

FEDERAL TRADE COMMISSION
v.
__________
Respondents

complaint in the matter of the alleged
violation of section 5 of the act of Congress ,
approved September 26, 1914.

The Federal Trade Commission, having reason to believe that __________ _________, hereinafter
referred to as respondent, has been and is using unfair methods of competition in interstate

commerce in violation of the provisions of section 5

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

11

of the act of Congress approved September 26, 1914, entitled “An act to create a Federal Trade
Commission, to define its powers and duties, and for other purpose,” and it appearing that a proceeding
by it in respect thereof would he to the interest of the public, issues this complaint, stating its charges as
follows :
(Here follow the specific allegations of unfair competition.)
THEREFORE, NOTICE IS HEREBY GIVEN YOU, the said respondent, that the charges of this
complaint will be heard by the Federal Trade Commission at its office in the Commerce Building in the
city of Washington, D. C., on the ___ day of 1916, at 10.30 o’clock in the forenoon of said day, or as soon
thereafter as the same may be reached, at which time and place you shall have the right to appear amid
show cause why an order should not be entered by the Federal Trade Commission requiring you to cease
and desist from the violation of law charged in this complaint.
And you will further take notice that within thirty (30) days after service of this complaint you are
required to file with the Commission aim answer in conformity with Rule III of time rules of practice
before the Commission.
In witness whereof the Federal Trade Commission has caused this complaint to be issued, signed by
its secretary, and its official seal to be affixed hereto at the city of Washington, D. C., this
day
of
, A. D. 1916.
By the Commission.
[SEAL]
LEONIDAS L. BRACKEN, Secretary

Answer by respondent.--The formal complaint, in accordance with the
Commission’s rules of practice, notifies the respondent that within 30 days he is
required to file with the Commission an answer to the charges against him, which
answer must specifically admit or deny or explain each of the facts alleged in the
complaint, or disclaim knowledge regarding them.
Hearing upon complaint issued.--While the notice to be served with a complaint
is framed, as required by the statute, in the form of a rule to appear and show cause
why an order should not be issued by the Commission requiring the respondent to
cease and desist from the violations of law charged, nevertheless the Commission has
assumed that the burden is upon it to prove the allegations of the complaint, and that
the respondent should be permitted to hear its evidence and to cross-examine its
witnesses and then to prove every available defense set up in the answer.
The taking of the testimony in proceedings begins immediately after the joining of
issue before a commissioner or an examiner of the Commission, at such times and
places as are convenient. The offering of the evidence in substantiation of the charges
of the complaint and the examination of witnesses is conducted by counsel for the
Commission, and the respondent may appear in person or be represented by counsel.
While it is the purpose of the Commission to confine the evidence within the scope
of the inquiry, nevertheless the technical rules of evidence are liberally considered and
judicial rules of pleading and procedure are not strictly adhered to. The main desire
is to get mill the facts pertinent in as direct a manner as possible in order to make a just
amid fair and speedy disposition of the matter. It is believed that generally the final
disposition of a case before the Commission can be reached under this method of
procedure more expeditiously than it is ordinally reached in a suit in equity in the
courts.
Attitude of Commissioners toward proceedings.--In view of the fact that the
Commission issues its own complaint and is thereafter

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

required to pass on the evidence in the proceeding and to make findings therein, the
commissioners have endeavored with scrupulous circumspection to allow the conduct
of the proceedings, and the presentation of the evidence, to be controlled as much as
possible by the attorneys and examiners to whom the case has been assigned, in order
that no Commissioner may be finally committed on questions involved until all the
evidence has been presented.
VIOLATIONS OF SHERMAN ACT.
Commission directed to report form of decree in Corn Products case.--The duties
of the Commission with respect to the enforcement of the Sherman Act have already
been described. In the opinion rendered by the Hon. Learned Hand, judge of the
District Court of the United States for the Southern District of New York, delivered
June 24 1916, in the case of United States v. Corn Products Refining Co., which is a
suit in equity brought by the Attorney General as provided in the antitrust acts, the
court found the defendant, the Corn Products Refining Co., an unlawful combination
in violation of the Sherman Antitrust Act and referred the suit to the Federal Trade
Commission, as a master in chancery, to ascertain and report an appropriate form of
decree. This was done by the court under the authority of section 7 of the Trade
Commission act. At the end of the fiscal year the proceedings in the suit had not yet
been certified to the Commission.
Commission directed to investigate Standard Oil companies.--By resolution of
September 28, 1914 (Senate resolution No. 457, Sixty-third Congress, second session)
, the Commission was directed by the Senate to investigate the relations now existing
among the companies into which the Standard Oil Co. was dissolved by the decree of
the Supreme Court; the business practices of these companies toward other producers,
transporters, and refiners of oil; the efforts of these companies, if any, to control the
price of crude oil and its refined products, and the result of such efforts; and the
earnings, dividends, and capital of the Standard and other companies in the oil
industry.
Relations with Department of Justice.--The most cordial relations have existed and
are maintained between time Commission and the Department of Justice. Each refers
to the other complaints primarily within the other's jurisdiction. Complaints involving
solely restraints of trade in violation of the Sherman Antitrust Act which have been
made to the Commission, or which develop into such cases upon investigation, are
referred by the Commission to the Department of Justice; and complaints made to the
Department of Justice, or facts developed there which involve primarily unfair
methods of competition in commerce have been referred by that department to the
Commission. In some instances these cases were referred to the Commission after an
extensive investigation and marshaling of the facts had been made by the Bureau of
Investigation of that department.
Trade Commission act and Clayton Act cases--Conference rulings.--Following the
practice of the Interstate Commerce Commission, the Commission has interpreted,
upon request, the laws which

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

13

it is empowered to enforce. Its responses to requests for advice upon matters of law
have been made in a formal way only by means of conference rulings. Copies of all the
conference rulings made during the fiscal year upon advice requests and upon the
dismissal of cases are hereto appended. (See Exhibit 4.) It has not been considered
advisable or to the public interest to use, in conference rulings the names of the parties
involved, either in advice requests or in cases that have been dismissed because the
parties have desisted from the unlawful practices charged, or in cases dismissed for
want of jurisdiction or because the acts charged were not unlawful. Copies of the
Commission’s rulings have been in great demand from industrial concerns throughout
the country.
Anticipating the taking effect on October 1, 1916, of the provisions of the Clayton
Act (section 8) forbidding certain interlocking directorates, many requests have come
to the Commission for advice as to the application of those provisions to specific cases
and for the general interpretation or construction of those provisions.
So also the Commission has been asked for advice in reference to, or its approval
of, proposed acquisitions of stock in competing corporations in so far as such
acquisitions might violate section 7 of the Clayton Act. The Commission has refrained
from giving such advice where it would be necessary to pass upon questions of fact
(which could not be determined ex parte) as to whether the contemplated acquisition
would substantially lessen competition, restrain trade, or tend to create a monopoly.
The Commission contemplates issuing in the near future, however, a series of
general rulings in reference to the construction and interpretation of sections 7 and 8
for the use of the public generally and to be submitted to applicants for advice
whenever the rulings may cover the state of facts described. The Commission has
observed a general commendable endeavor on the part of industrial corporations to
comply with these provisions.
Attitude of business toward the Commission.--The Commission has received many
communications from business men commending the purposes of the Trade
Commission act, and particularly the provisions condemning unfair methods of
competition. From this correspondence and from other information coming to it in the
course of its duties the Commission is convinced that the law has drawn the attention
of business men throughout the country to the creation and observance of proper
standards of commercial morality.
In the enforcement of the law the Commission seeks to understand and make
allowance for the difficulty of the problem, to see both sides of every case, to protect
men in the furtherance of legitimate self-interest by all reasonable and normal
methods, and at the same time to keep the channels of competition free and open to all,
so that a man with small capital may engage in business in competition with powerful
rivals, assured that he may operate his business free from harassment and intimidation
and be given a fair opportunity to work oust his business problems with such industry,
efficiency, and intelligence as he may possess. To this end, the Commission seeks and
has received the hearty cooperation of business men throughout the country.

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

ECONOMIC DEPARTMENT
All of the matters which the commission is empowered by the Trade Commission
act to investigate or determine involve questions of fact and require work which is
partly, and often wholly, of an economic character, namely:
(1) To investigate the organization, business conduct, etc., of corporation. (Sec.6,
par. a)
(2) To require annual and special reports from corporations. (Sec. 6, par. b.)
(3) To investigate and make recommendations concerning the observance of decrees
in antitrust cases. (Sec. 6, par. c.)
(4) To investigate alleged violations of antitrust laws. (Sec. 6, par. d.)
(5) To recommend adjustments of corporations alleged to be violating antitrust acts.
(Sec. 6, par. e.)
(6) To investigate trade conditions in and with foreign countries,
particularly with respect to combinations. (Sec. 6, par. h.)
(7) To recommend appropriate form of decree in antitrust cases. (Sec. 7.)
(8) To determine and prevent unfair methods of competition. (Sec. 5.)
The same is true of those provisions of the Clayton Act the enforcement of which
is intrusted to the Commission. These provisions relate to-(9) Price discriminations. (Sec. 2.)
(10) Tying contracts. (Sec. 3.)
(11) Intercorporate stockholding. (Sec. 7.)
(12) Interlocking directorates. (Sec. S.)
Broadly speaking, the economic work under these powers may be grouped as
follows:
(l) Compilation of information of a general character through corporation reports.
(2) Specific investigations of particular corporations, industries, or business
problems, including those relating to the enforcement of the antitrust laws.
(3) Investigation of cases arising under the quasi-judicial, or administrate powers
of the Commission under section 5 of the Trade Commission act, and sections 2, 3, 7,
and 8 of the Clayton Act. .
For convenience and brevity these three groups may be denoted as, (l) corporation
reports; (2) specific investigations; and (3) unfair competition.
CORPORATION REPORTS.
The power of the Commission to gather information concerning corporations
generally is very broad, and the organic act of the Commission contemplates that it
may classify corporations and require both annual and special reports from them.
Provisions is also made for the publication of reports, with proper safeguards
respecting trade secrets. The particular provisions conferring these powers are found
in section 6, paragraphs (a), (b), (f), and (g) of the Trade Commission act.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

15

The legislative history of the Federal Trade Commission and the debates in
Congress thereon show it was contemplated that the Commission might use these
powers in an extensive ways to secure information of interest to the public and of
value to the corporations which made reports. These broad powers were also necessary
for the effective execution of the various other duties imposed upon the Commission.
In some quarters the opinion was expressed, nevertheless, that such broad powers
would be burdensome to business corporations and if required would involve great
expense both to them and to the Government. The Commission has never
contemplated using these grants of power in any burdensome way, and, in fact, even
such use of it as would be highly beneficial to business was rendered impossible by
the very limited appropriation made for the Commission.
The Commission found, in fact, that while most business men were eager to
cooperate with the Commission along constructive lines, much educational work
would be required before any extensive plan could be put into operation.
As a fundamental basis for any successful development of such useful information
as might be derived from corporation reports it was found that it would be necessary
to bring about an improvement in the methods of accounting used by business
corporations, particularly with respect to accurate and uniform methods of cost
accounting. Only in this way would the Commission be able to secure comparable data
in the reports from corporations authorized by law. The first step of the Commission,
therefore was to inaugurate an educational movement for better accounting methods.
As a general indication of its plans in this direction a brief circular was issued by
the Commission and widely distributed entitled “Helpful Activities to Strengthen
American Business,” which received a very favorable reception from the business
world.
Uniform accounting--The Commission’s investigations showed that a large
percentage of the merchants and manufacturers of the country, particularly the smaller
ones, had very inadequate knowledge either of their costs of production or of their
selling expenses. Many of them kept their books in such a way that they were unable
to supply the Commission with even the simplest facts concerning their business. Even
some of the most important concerns in the country manufacturing or selling several
different classes of goods could not tell the amount of the sales of each class they
handle, and those who knew the costs of, or the amount of profit on each were
comparatively few.
Proper development of cost-accounting methods is essential to the obtaining of
corporation reports which will be of any real value, while the urgent need for better
bookkeeping and cost-accounting practice is recognized by all business men. Statistics
based on estimates are apt to be misleading and therefore dangerous, yet with the
methods in use in so many industries it the present time either this must be done or else
an appreciable percentage of the reports from corporations must be left out of the
computation.
Proper accounting even for the smaller manufacturer is of vital importance. It is
necessary for his success that he know on what

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

particular article he is making a fair profit and on what he is making only a narrow
margin of profit or losing money.
It is the desire of the Federal Trade Commission to help cure these conditions and
bring about a more healthy state of affairs, and it hopes to accomplish this by
reviewing systems of cost accounting submitted to it and by making suggestions
looking to their improvement.
The Commission, while believing in and recommending uniform methods of
accounting, has consistently pointed out that a uniform method of cost accounting does
not mean uniform costs, and it does not approve any system which attempts to
standardize costs by adopting arbitrary charges. It has pointed out that uniform costs
can not show true results of an enterprise and also tend to inefficiency. It has
furthermore emphasized the necessity of a merchant or manufacturer being in a
position to make a true statement of his financial condition to his banker when seeking
credit, thereby enabling the banker to put more faith in the statements submitted to
him, and to grant the full amount of credit to which the borrower is entitled.
Two experienced accountants and a small staff were engaged during the fiscal year
on this work.
The American Association of Public Accountants has appointed an advisory
committee, consisting of seven accountants of national reputation who have aided the
Commission with their advice in improving accounting methods.
There were prepared during the fiscal year two publications, one entitled
“Fundamentals of a Cost System for Manufacturers” and the other “A System of
Accounts for Retail Merchants,” which were not received from the printing office until
after the close of the fiscal year. These pamphlets have been widely distributed with
a view to educating the manufacturers and merchants in proper accounting methods.
Subsequent events have proved that the Commission did not overestimate the need for
these pamphlets, as they have been literally overwhelmed with requests for them.
During the brief period that this uniform accounting work has been in operation
much has been accomplished, and the business men of the country have shown
appreciation of the services rendered. Owing to the limited funds available for this
work it was impossible to make it as extensive as desired.
Reports by industries.--As already pointed out, the development of a system of
corporation reports which will be of value to both business men and to the public
depends principally on the application of correct methods of and on the completeness
of the books kept. While the Commission, under its organic act, might prescribe forms
of reports which would necessitate complete and uniform methods of accounting and
require corporations to make returns in the manner so prescribed, yet it would be
obviously impracticable and extremely disadvantageous to attempt to carry out any
plan of that character in a comprehensive way at the present time.
The value and the necessity of such work should he made clear, not merely in
general, but also with respect to the particular indus-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

17

tries and the classes of business concerns affected before any steps are taken. In this
matter the business world should be consulted at every important stage of the work,
and it is highly desirable that the work undertaken should have its hearty cooperation.
While the Commission believes that great advantages to the public generally, to the
Government, and to the industries directly involved will eventually be obtained by
comprehensive statistics of current operations regarding commercial and financial
conditions, whether considered by industries by other methods of grouping (without
showing the results of individual concerns), nevertheless, any steps toward this goal
should be taken gradually and only after careful consideration.
The Commission wished at the very beginning to emphasize especially the
advantages which would accrue to the business world by a better knowledge of
industrial conditions and business results, and, in general, these can best be shown by
the statistics of particular industries.
Furthermore, it wished to demonstrate and to bring to the attention of business men
certain facts regarding the inadequate methods of accounting which so largely prevail
at the present time and which are to a considerable degree responsible for the
unsatisfactory conditions in many branches of trade. These unsatisfactory methods of
accounting apply particularly to the failure of many business concerns to correctly
determine their costs and profits, with the result that the former appear lower and the
latter higher than is really the fact. Among the most common reasons for such
inaccurate determinations of costs and profits is the failure to make adequate
depreciation charges.
The Commission was especially encouraged to make a prompt beginning in this
direction by the many requests it received from business men for information
concerning the industries in which they were themselves engaged.
With these purposes in view the Commission decided to send a brief schedule of
questions to manufacturing and mercantile corporations covering only certain
fundamental data for which the books of every corporation should furnish an answer.
The total number of schedules sent out was 289 460 which were sent to three
classes of corporations as follows: (1) Manufacturing and mining, 115,939 (2)
mercantile, 74,512; (3) miscellaneous, 99,009.
Though the request for this information was put on a voluntary basis, nevertheless
the Commission in a large number of instances sent out “follow-up” letters to secure
more complete returns. Up to the end of the fiscal year 1916, 70,796 replies were
received in response to the first request, and 16,283 replies in response to the second,
making a total of 87,079. A considerable proportion of the replies, however, showed
the concerns addressed to be inactive or out of business.
In order to make the results as useful as possible the Commission classified the
returns received according to industries, and in thus work it was greatly assisted by the
secretaries of various trade associations.

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

As the work was not completed during the fiscal year, the Commission at this time
desires merely to describe the general plan and the great possibilities it presents for
useful service to the public generally to the Government, and to the business men
immediately concerned.
SPECIFIC INVESTIGATIONS.
The term “specific investigations,” as already stated, is used to denote the
investigations of particular corporations, industries, or business problems, including
those relating to the enforcement of the antitrust laws. These investigations are
generally similar to those formerly undertaken by the Bureau of Corporations, which
was merged in the Federal Trade Commission on its organization. In fact, some of the
investigations now being conducted by the Federal Trade Commission were initiated
by the Bureau of Corporations
The specific investigations upon which important work was done during the fiscal
year under consideration were as follows :
(l) Cooperation in American export trade.
(2) Trade and tariffs in South America.
(3) Pipe-line transportation of petroleum.
(4) Fertilizer industry.
(5) Gasoline prices.
(6) Beet-sugar industry.
(7) Lumber industry.
(9) Trade associations.
(10) Mexican sisal hemp.
The pipe-line and gasoline investigations were parts of a general investigation of the
petroleum industry which was directed by several resolutions of the Senate.
Preliminary work on certain new investigations was also begun near the end of the
fiscal year, namely :
(11) Anthracite coal industry.
(12) Bituminous coal industry.
(13) News-print paper industry.
Of these investigations, which are described in more detail below, the first three and
the tenth, namely, (l) Cooperation in American export trade, (2) trade and tariffs in
South America, (3) pipe-line transportation of petroleum, and (10) Mexican sisal
hemp, were completed (luring the fiscal year under consideration; and the three others,
fertilizer industry, gasoline prices, and beet-sugar industry, were nearly complete. Two
others, namely, resale-price maintenance and trade associations, were suspended on
account of pressure of other work. The limited appropriations for the staff and
quarters of the Commission have made it impossible to carry out and complete all
investigations simultaneously and have tended to delay the work on those which were
completed or continued.
Since the close of the fiscal year under consideration a Senate resolution was passed
calling for another investigation of the paper industry (Senate resolution No. 269,
Sixty-fourth Congress, first session) , the one previously ordered having been confined
to the news-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

19

print paper, while an investigation of the bituminous coal industry tentatively begun
by the Commission during the fiscal year was since then specifically ordered to be
conducted by resolution of the House (House resolution No. 352, Sixty-fourth
Congress, first session). Precedence is naturally given to those investigations which
are directed by Congress or imposed upon the Commission by its organic act.
Cooperation in American export trade.--During the year the Commission concluded
its investigation of cooperation in American export trade. This investigation was
undertaken pursuant to the authority given in section 6, paragraph (h), of the act
creating the Commission. The investigation was started in the closing weeks of the
preceding fiscal year.
The plan of this investigation included public hearings and professional men,
research in published material, questionnaires sent out to business and professional
men, special reports from the United States consuls and commercial attaches, and
investigations both in the United States and abroad by representatives of the
Commission. The investigation was conducted according to this plan, and public
hearings were held by the Commission in New York, Boston, Chicago, Detroit,
Cincinnati, Indianapolis, St. Paul, Spokane, Seattle, Takoma, Portland, San Francisco,
Los Angeles, San Diego, and other cities. At these hearings the Commission obtained
much first-hand information from business men who were personally acquainted with
the conditions of international trade and the export trade of the United States.
Following the public hearings questionnaires were sent out to several thousand
corporations, firms, associations, and individuals throughout the United States who
were understood to have any interest in the question of cooperation in American
Export trade or any information bearing on international competitive conditions. In
sending out these questionnaires the Commission endeavored to get information and
opinions in a comprehensive manner from export commission merchants,
manufactures, export agents, importers, domestic merchants, publicists, economics,
bankers, engineers, contractors, and manufacturers in every important industry in the
country. It desired to get the facts from as many different points of view as possible
on all sides of the question from every section of the country. The replies to these
questionnaires furnished the Commission with extensive data, opinion, and suggestion
on the subject of the inquiry. These replies were supplemented by field investigations
on the part of representatives of the Commission in the United States. In this way the
accuracy of many statements was verified and additional pertinent facts and supporting
data were obtained.
The Commission desired to make use of all the information available in published
sources, and for this purpose had all such material systematically examined. This
necessitated research in more important trade journals and commercial and financial
publications not only in the United States and Canada, but of Great Britain, Australia,
New Zealand, South Africa, India, China, Japan, South America, France, Belgium,
Germany, Italy, and Austria-Hungary. Moreover, the official reports and
parliamentary papers of those

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

countries, so far as available, together with bulletins and reports of their trade
associations, monographs and reports of students and economic investigators, as well
as other material, were examined. In this way also a great deal of valuable information
was obtained.
Through the cooperation of the Secretary of State and the Secretary of Commerce
arrangements were made whereby special reports were to be made to the Commission
by American consuls and commercial attache's abroad. Owing to the disturbed
condition resulting from the war these reports contained much information which it
would have been impossible for the Commission to have obtained through its own
agents or in any other way. They constitute an especially valuable contribution to the
information collected.
In order to obtain certain facts first hand in respect to conditions in South America
the Commission sent one of its expert investigators there, and the activities of various
European combinations in South American markets were studied. In addition,
valuable information was obtained as to the opportunities for cooperative effort by
organizations of Americans to develop trade in South America.
A summary of the Commission’s findings and recommendations was sent to
Congress on May 10, 1916. The complete report was not published until after the end
of the year. This report is in two volumes, the first containing the Commission’s
discussion of the facts presented regarding competitive conditions in international
trade and setting forth its recommendations in detail; the second volume, of about 600
pages, consists of exhibits. Exhibit l gives the special reports of United States consuls;
Exhibit 2 consists of excerpts from the statements made at the public hearings held by
the Commission; Exhibit 3 gives the forms of the questionnaires used by the Commission in the investigation; Exhibit 4 gives a large number of typical replies to the
different inquiries in the questionnaires; Exhibit 5 consists of examples of price and
export agreements of different foreign combinations; and Exhibit 6 contains
miscellaneous data concerning foreign corporations and combinations.
On the whole, the report is the most comprehensive presentation of facts relating to
the question of combination and cooperation as it affects international trade that is
anywhere available.
The Commission concluded as the result of this investigation that cooperation in
American export trade would be of great advantage to this country, but that business
men generally were deterred from engaging in cooperative organizations for that
purpose on account of the fear that they might violate the antitrust laws. The
recommendations of the Commission on this matter are discussed below.
Trade and tariffs in South America.--At the direction of the President, the
Commission undertook an investigation of trade and tariffs in South America. This
work was begun in December, 1915. The investigation was conducted under the
provisions of section 6 paragraph (h) of the Trade Commission act. The information
was desired by the Secretary of the Treasury, chairman of the American branch of the
International High Commission, for use in the deliberations of the full Commission,
which met at Buenos Aires in April, 1916. This high commission was appointed as
an outcome of the First Pan American Financial Conference, which met at Washington
on May 24-29, 1915.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

21

The representatives of the Federal Trade Commission studied the subjects
discussed in its report in Brazil, Uruguay, Argentina, Chile, Bolivia, and Peru, and the
report of the Commission was placed in the hands of the Secretary of the Treasury
before the American branch of the Intenational High Commission departed for Buenos
Aires in March, 1916.
The report was also submitted to Congress and published on June 30, 1916.
In the preparation of this report the Federal Trade Commission also sought to make
it of general utility to American business men engaged in or contemplating trade with
South American countries.
The tariff characteristics of each country are discussed in the report. The
administrative requirements respecting ships’ manifests, bills of lading, and consular
invoices are described, as well as customhouse procedure and the functions of customs
brokers in the different countries visited. The important regulations relating to fines
and seizures, protests and appeals, and samples of commercial travelers are either cited
or discussed in condensed form. Peculiarities of tariff classifications and rules
governing them and dutiable returns are given whenever of special importance.
Methods of valuation for customs purposes are described, and specific examples of
their results given when they were available. Smuggling and irregularities are
discussed in a broad way, and the competitive effects of the sales of abandoned or
unclaimed goods at less than their value plus duties and other charges.
A number of typical shipments of different American goods were selected as
examples, and a full illustration of the exact customs duties, other fiscal charges, and
important expenses incurred upon their importation in each country, are shown in
explicit detail in the report for each of the six countries, after verification of these
items at the principal customhouses of the counties visited. The relation of these
duties and charges to the invoiced value is shown in each instance.
The principal industries of these countries are described, and statistical information
as to their importance submitted with the report.
The Commission s investigation established the prevalence of a decided protectivetariff tendency in some of the South American countries, and brought out this fact
prominently for the information of American exporters for the first time in an
American Government report. The erroneous impression had been created in this
country that all the Latin American tariffs are devised purely for revenue, and it was
considered important to point out that at least certain American goods must compete
with native manufactures and products in Latin America under protective-tariff
provisions.
In its recommendation to Congress the Federal Trade Commission endeavored to
point out what American producing and financial interests can do to extend trade with
South America. Concrete illustrations of the customs treatment of American goods in
the countries covered by the report contrasted with our own favorable customs
treatment of South American products were laid before Congress, and our policy
respecting these products compared with that of the leading European countries. For
the further information of Con-

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

gress a number of the outstanding features of South American tariffs and customs
systems which most tend to restrict freer commercial intercourse with our South
American neighbors were pointed out. In connection with these facts it was shown
how the Governments of those countries could contribute effectively toward improving
commercial relations with the United States by modifying unworkable or burdensome
tariff provisions and customs regulations.
Pipe-line transportation of petroleum.--An investigation of the important features
of the production, transportation, refining, and distribution of petroleum and its
products was begun in 1913 by the Bureau of Corporations in response to a Senate
resolution (Senate resolution No. 109, passed June 18, 1913). This resolution directed
a thorough investigation into the price of oil in Oklahoma transported by interstate
pipe lines, and a comparison of such prices with the general market level in the United
States, quality and transportation considered. In order to answer this resolution
completely a thorough study into the several different branches of the petroleum
industry, including the pipe lines, was necessary.
Another Senate resolution was passed September 28, 1911 (Senate resolution No.
457), which, in contemplation of the organization of the Federal Trade Commission,
directed the Commission to investigate certain features of the petroleum industry. This
resolution further extended the scope of the inquiry already in progress.
On February 28, 1915, the Commission issued its report on Pipe Line Transportation
of Petroleum. This is the first of a series of reports to be issued in answer to Senate
resolutions 109 and 457, mentioned above. The subject of pipe-line transportation is
one of the most important in the industry. The economic value of the information
which had been collected, and the need for immediate use of some of it in dealing with
present-day conditions, made it advisable to issue this report before the final
completion of the investigation in order to make the information immediately available
in a convenient and authoritative form.
The report covers the interstate pipe-line transportation of oil produced in the MidContinent field, and that produced in the Gulf Coast field, and transported by the chief
pipe lines in that field. The Mid-Continent field is the chief source of crude oil for all
refineries located between the Rocky Mountains and the Mississippi River, and one
of the most important sources of crude oil for all the refineries east of that river.
The report deals primarily with the financial and operating accounts of the pipe
lines. It outlines the general situation in regard to the sources of crude oil, describes
the construction and operation of pipe lines, and gives detailed analyses of the
operating costs, receipts, tariff rates, and investment of the five principal interstate
pipe-line systems which transport oil from the Mid-Continent and Gulf fields.
The principal conclusions of the Commission were as follows :
The cost of pipe-line construction is so great that small concerns can not build lines
from the Mid Continent field to the large consuming and distributing markets.
There is generally a large difference between the cost of pipe-line transporation and
pipe-line tariff rates, while the independent shipper can not, practically speaking, use
railroads instead, because their

ANNUAL REPORT OF THE FEDERAL TRADE COMMSSION

23

rates are still higher. Lower pipe-line rates and also smaller minimum shipments are
necessary in many cases, therefore, to enable small concerns to compete with large
refineries affiliated with pipe-line companies.
Reasonable and equitable conditions of shipment by pipe line would tend to a
greater equality in the prices of Mid-Continent and Appalachian crude oil and in the
prices of refined products in different markets.
Fertilizer industry.--An investigation into the prices of certain fertilizing materials
was begun by the Bureau of Corporations in accordance with a resolution of the
Senate, but the completion of the investigation devolved upon the Commission. The
work was finished and the report on this subject prepared during the fiscal year 1916,
but its issue was delayed in order to give certain fertilizer manufacturing companies
an opportunity to consider what they should do with regard to matters which were the
subject of criticism by the Commission.
The ability of the Federal Trade Commission to bring about improved business
methods in an industry through the cooperation of those in it was demonstrated in this
conference with the fertilizer manufacturers. As a result of its investigation of this
industry, the Commission found that several of the larger companies were operating
subsidiary concerns ostensibly as competitors. This practice had certain advantages
to the controlling companies, the most important of which was that it enabled them to
get more dealers in a locality, and thereby to increase their sales and distribute their
credit risks. But the practice also involved features which the Commission felt were
not fair to competitors nor to the public. Following the plan of informal conference
rather than formal procedure, which has proven so successful in numerous complaints
that have been dealt with, the Commission referred the matter to one of its members,
who held informal conferences with various fertilizer manufacturers, at which the
whole matter was considered with the greatest frankness The fertilizer manufacturers
explained the business reasons back of the practice and admitted that it was
responsible, in part at least, for some of the unsatisfactory conditions existing in the
industry. They all voluntarily agreed, however, that they would identify their
subsidiary and affiliated companies by using suitable expressions on their letterheads,
advertising matter, contracts, and bags, so that hereafter the identity of such concerns
will be evident to all who have dealings with them.
The consensus of opinion of those engaged in the fertilizer industry is that while
this identification of controlled companies may work some temporary inconvenience
to those making this change, in the long run it will be beneficial to the business. The
fictitious nature of some of the competition previously existing will be eliminated.
Hereafter competition will be directed more to the manufacture and sale of goods of
superior quality, for it will no longer be possible to sell dissatisfied customers the same
goods under different names. Some of the subsidiaries and affiliated companies will
be given up, because with their identity disclosed it will not be found profitable to
continue their operation. In a number of cases the interest of the large corporations in
the local concerns will be disposed of, so that they will again become bona fide
independents.

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

The independent manufacturers of fertilizers feel especially gratified that the
Commission has brought about these changes in the industry, and the large
manufacturers who have made them voluntarily at the suggestion of the Commission
appreciate the value of its efforts in the matter.
Gasoline prices.--During the fiscal year 1916, while the general petroleum
investigation was in progress, an extraordinarily rapid advance occurred in the price
of gasoline, and many complaints were made to the Commission concerning
discriminations in the price of gasoline in different localities. As this advance in
gasoline prices was a matter of wide public concern, the Commission determined to
postpone certain other phases of the investigation of the petroleum industry in order
to study the situation.
A rapid but comprehensive investigation was made of the gasoline situation in order
to determine the causes of the rapid advance in prices and to ascertain whether it was
due to normal market conditions or to artificial conditions. A preliminary report,
giving some of the basic statistical facts was submitted to Congress on April 10, 1916.
After the investigation was nearly completed the Commission, in June of the fiscal
year, had public hearings at which testimony was taken from parties connected with
or interested in this question. The final report on this subject, however, was not completed nor issued during the fiscal year.
Beet-sugar industry.--An investigation has been initiated in the sugar industry by the
Bureau of Corporations, at the direction of the Secretary of Commerce. It was not
completed, however, when the Commission was organized. While the work was
finished during the fiscal year 1916 , the pressure of other work made it impossible for
the Commission to give it final consideration.
Lumber industry.--An investigation of the lumber industry was initiated a number
of years ago by the Bureau of Corporations, in accordance with a resolution of the
Senate, and though it issued several reports on this subject, some of the work remained
uncompleted at the time of the organization of the Commission. Since then certain new
problems have developed in the lumber industry, and the Commission has been
engaged in the investigation of these matters in cooperation with the Forest Service,
of the Department of Agriculture, and with the Bureau of Foreign and Domestic
Commerce, of the Department of Commerce. These problems relate to the fundamental
conditions of timber ownership, the manufacture of lumber, and the methods of
distributing lumber products.
Numerous conferences and hearings were had with other Government agencies and
also with representatives of the lumber industry, and a definite plan of investigation
was determined upon and the work commenced during the fiscal year 1916.
Resale price maintenance.--The investigation of resale price maintenance, as a broad
question of trade policy from an economic standpoint was initiated by the Bureau of
Corporations, but its progress was interrupted by various circumstances. While some
further investigation and study of this question was made by the Commission during
the fiscal year 1916, the pressure of other work and the inadequate appropriations and
small staff of the Commission rendered it impossible to make much progress
thereunder.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

25

Trade associations.-- One of the most important questions of trade policy at the
present time relates to the practice of trade associations. Their activities are of a
varied character, and many of them are of great benefit not only to the branch of trade
concerned therein, but also to the public. Nevertheless, their activities have sometimes
involved them in practices which have been condemned by the courts as violations of
the antitrust laws. The practices of trade associations have important relations also to
the problem of unfair competition. For these reasons a study of their methods is of
great importance to this Commission and requires a comprehensive investigation.
The Commission collected a large amount of general information on this subject
during the fiscal year 1916, but no thorough investigation was attempted.
Mexican sisal hemp.--In Acetin, Mexico, a commission (Comision Reguladora del
Mercado de Henequen) was organized under authority of law in Mexico to purchase
sisal hemp from the producers and sell it for export trade in such a manner as to
control prices. This commission established connections with certain financial
interests in the United States and practically controlled the importation and price of
sisal in this country. During the fiscal year difficulties arose in obtaining this
commodity, and a marked advance in the price occurred. A Senate committee made
an investigation of the situation and of this sisal combination, in the course of which
the Comision Reguladora, in order to meet in part the requirements of American
manufacturers, offered to sell a certain quantity at definite prices if the Senate
committee would indicate the quota which the various manufacturers were fairly
entitled to receive.
The determination of this question was referred by the Senate committee to this
Commission, and report was made by the Commission, indicating what would be a fair
allotment of this commodity to American manufacturers under the conditions laid
down by the Comision Reguladora.
Anthracite coal industry.--According to a Senate resolution (Senate resolution
No.217, Sixty-fourth Congress, first session) passed just before the close of the fiscal
year the Commission was directed to make an investigation of the anthracite coal
industry with reference to the recent increase of prices and especially the relation of
the price increase to the increase of labor cost.
The Commission was not able immediately to organize the investigation directed
by this resolution, because the entire available force of the Commission was engaged
on other work. It regards the investigation of the anthracite situation, however, as very
important and believes that a thorough and impartial study of the reasonableness of the
price of anthracite coal will be of great public interest and value at thus time.
Bituminous coal industry.--As early as March, 1915, the attention of the
Commission was called to conditions existing in the bituminous coal industry in
Indiana and Illinois, through requests made by coal operators with respect to existing
conditions and various plans of cooperation which they desired to undertake to remedy
a situation which was claimed to the injuries not only to the bituminous coal
producers, both operators and miners, but also to the consumers and the general public.

26

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

A preliminary investigation made at that time indicated that the conditions
complained of might also exist in other sections of the country, and that it would be
necessary to consider the bituminous coal industry as a whole before the questions
submitted by the operators in Illinois and Indiana could receive an adequate answer.
Hearings, in May and June, 1915, were held in Chicago, and in June in Pittsburgh,
at which many of the coal operators were present. Many of the difficulties of the
situation were discussed. Subsequent to the end of the fiscal year, similar hearings
were held at Charleston, W.Va., Kansas City, Mo., and Denver.
On August 18, after the close of the fiscal year 1916, a resolution was passed by
the House (House resolution No.352, Sixty-fourth Congress, first session) which
directed the Commission to make inquiry into the conditions in the production and
distribution of bituminous coal, and to report the facts to Congress with
recommendations.
"News-print paper industry.--In consequence of a marked advance in the prices of
news-print paper during the fiscal year 1916 a Senate resolution (Senate resolution
No.177, Sixty-fourth Congress, first session) passed just before the close of the year,
directed the Commission to make an investigation of the situation.
The work was only begun during the fiscal year under consideration, but it was
expedited in order that a report might be submitted to the Senate on this subject shortly
after it convenes in December.
UNFAIR COMPETITION.

The quasi judicial or administrative powers of the Commission to prevent unfair
methods of competition and to enforce certain sections of the Clayton Act, referred to
above in connection with the work of the economic department, have been described
in detail in connection with the work of the legal department and require no detailed
discussion here.
As already noted, in connection with the organization of the Commission, the
economic department is represented on the joint board of review which makes final
recommendations to the Commission concerning cases arising under this provision of
the law. The staff of the economic department is engaged in the investigation and
study of these cases from the point of view of the facts, and economic aspects of such
practices as come before the Commission for consideration.
While the legal aspects of these matters are of fundamental importance, particularly
in the accurate determination of jurisdiction and the development of a body of rules
consistent and in harmony with the general principles of law, the Commission regards
the social and economic aspects of which rules and their practical business
consequences as a matter of prime importance. For this reason they require very careful
consideration of these questions from the economic or business point of view. The
Commission aims, in making its rulings and orders to promote business efficiency and,
within the limits of practicability, to cooperate with the business world in developing
the best standards of commercial ethics. This attitude has received the general
approbation of the business public and has greatly facilitated the settlement of such
matters without friction or expensive litigation.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

27

Much of the detailed work in determining facts in a given case requires careful
economic study and often involves the examination of the books of account of the
parties interested or affected. This work is the special field of the economists and
accountants. Some of the economic problems involve very large questions of business
organization and methods of distribution or sale, as, for example, questions of price
cutting, maintenance of resale prices, and practices affecting the channels of
distribution. Such questions really demand specific investigation of conditions in the
country as a whole, so that the work of the economic department with respect to
specific investigations has important relations to the solution of particular cases regarding the trade practices which come before the Commission under its quasi judicial
or administrative powers.
ADMINISTRATIVE DEPARTMENT.

The principal administrative divisions under the immediate direction of the
secretary of the Commission included during the fiscal year the chief clerk’s office and
the docket, mail and files, stenographic, and library divisions.
Chief clerk.--The chief clerk and the clerical force under his immediate
supervision have charge of the disbursements, appointments, printing, supplies, and
the usual office records concerning the personnel of the staff. During the fiscal year
under consideration the disbursing clerk of the Department of Commerce also acted
as special disbursing officer of the Commission (without compensation).
Docket division.--The docket division keeps the applications made for the issuance
of complaints under section 5 of the Trade Commission act and under sections 2, 3,
7 , and 8 of the Clayton Act, together with the fines connected with each case and the
results of the Commission’s action, whether for dismissal, complaint, order to cease
and desist, etc.
Mail and file division.--The mail and files division has charge of the mail matter
received and copies of the mail matter sent out by the Commission, except such part
is kept in the docket division. It also keeps in its files all original documentary material
otherwise collected or acquired by the Commission through its field investigations,
hearings, etc., together with memoranda, office reports, completed statistical and
accounting computations, and tabulations and publications issued by the Commission.
Stenographic division.--The stenographic work of the Commission fluctuates
markedly between deferent departments, and in order to promote the greatest
efficiency most of the stenographic force is consolidated into a single division and
placed under the administrative department.
About the beginning of the fiscal year it became apparent that the stenographic
division, both in personnel and equipment, was wholly inadequate to meet the
demands of the work, and a number of temporary appointments were made. During the
year all but two of these men were replaced by permanent appointees, it having
become evident that there would be a continuous need for their services. The total
number of employees in the division, however, was not increased after the first month
of the fiscal year.

28

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

During the greater part of the year the work of the division was considerably in
arrears, due to a great increase in the volume of work. Owing to lack of space, it was
not practicable to employ additional men to take care of this work, and it was
necessary to draft clerks from other divisions to assist in typewriting. At the close of
the year the current work was being kept approximately up to date, although there was
much other work of not so pressing a nature which was necessarily delayed through
lack of the force to handle it.
Due to lack of funds, it was impossible to provide adequately for depreciation in
typewriter equipment. Many machines are now in use which need thorough
overhauling, and others which are so old that overhauling would not be economical.
They are kept only in such state of repair as will enable them to be used on rough work
for office use.
Library division.--The library of the Commission during the fiscal year under
consideration was entirely inadequate on account of the lack of specific authority in
the appropriation for the purchase of books, etc. The requirements of the Commission
in this respect are of a highly specialized character, and the libraries of other departments of the Government do not afford adequate facilities. Efficiency, moreover,
demands that the library material most constantly in use should be immediately at
hand.
The services of an experienced librarian were secured to organize a library for the
Bureau of Corporations, which would serve as a foundation for the new Commission
when created.
The library now contains 2,100 catalogued volumes, exclusive of the law
collection, which consists of 1,300 volumes. In addition to law books, the library has
collections on economics, corporation finance, industries, foreign trade , scientific
management, transportation, accounting, etc. Special attention has been given to
collecting trade directories, city directories, and corporation and security manuals. The
collection of documents in antitrust cases numbers 1,152. Owing to the fact that no
money was available for the purchase of books for the Commission during the fiscal
year 1916, it was possible to secure only such volumes for the library as could be
procured without cost.
The material in the library is catalogued in detail, as it is necessary to produce at
a moment's notice all information on hand concerning a certain subject or corporation.
In addition to the above-mentioned material the library maintains a corporation
and trade-association file. The corporation file consists of reports and other
information arranged alphabetically by corporations. The association file consists of
constitutions and bylaws, proceedings, lists of members and other information
arranged alphabetically by associations under an industrial classification.
The law library at present consists of approximately 1,300 volumes. Many of
these are State session laws which should be replaced by recently compiled codes, and
some other volumes are useless for the present purposes of the Commission. Even the
useful books in its possession are insufficient in number; namely, one set of United
States Supreme Court Reports; one incomplete set of Federal Court Reports; one
incomplete set Lawyer’s Annotated Reports; one incomplete set of State codes; one
set American and English Encyclopedia, second edition; American and English
Corporation

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSiON.

29

Cases (old series); Rose’s Notes; Rose’s Digest; Federal Statutes, Annotated; United
States Statutes at Large; Opinions of Attorneys General; and a very limited number of
suitable textbooks. With such a meager equipment it is not difficult to see that much
time must needs be wasted and much delay and inconvenience caused to the
Commission by having at times many members of its legal staff working in the
thoroughly equipped libraries of other departments.
In order that the legal work of the Commission may be expeditiously and
economically performed under efficient administrative methods, it is necessary to
equip its library with at least four sets of the United States Supreme Court Reports and
Digests, two sets of Federal Reporter and Digests, two sets of Shepard’s Citations, the
last 90 volumes of Federal Reporter, Encyclopedia of United States Supreme Court
Reports, Federal Cases, Citer Digest, Federal Statutes Annotated (Supplement),
Century, Decennial, and Key Number Series Digests, “Cyc” and Corpus Juris,
National Reporter System, Lawyers’ Reports, Compiled Statutes of the United States,
News Digest, and a sufficient supply of textbooks and other books of reference relating
to the business of the Commission, including subscriptions to a few of the more
important periodicals, etc. The cost of such an equipment would approximate $8,000.
PUBLICATIONS OF THE COMMISSION.

The publications issued by the Commission during the fiscal year ending June 30,
1916, were as follows:
Pipe Line Transportation, of Petroleum, February 28, 1916, pp. XXV, 464.
Investigation of the Price of Gasoline, Preliminary Report. April 10, 1916, pp.15.
Cooperation in American Export Trade, May 2, 1916, 2 voIs., pp. XVI, 387, XXIII, 597.
Trade and Tariffs in South America, June 30, 1916, pp. 246.
Conference Rulings, Bulletin No.1, January 31, 1916, pp.13.
Helpful Activities to Strengthen American Business, January 16, 1916, pp.4.
Annual Report of the Federal Trade Commission for the fiscal year ended June 30, 1915,
pp.14.

The report of the Commission on Mexican sisal hemp was not printed by the
Commission but by the Senate, as Document No.440, Sixty-fourth Congress, first
session (8 pages) .
PERSONNEL.

The personnel of the members of the Commission did not change during the fiscal
year under consideration. The great increase in the work of the Commission
necessitated large additions to the staff. In accordance with its organic act, the staff
of the Bureau of Corporations became the staff of the Commission on its organization,
and only a few additional appointments were made in the few intervening weeks prior
to the fiscal year 1916. The total staff at the beginning of the fiscal year was 138 and
at the close 219. During the last part of the fiscal year the temporary employment of
a considerable number of special agents, etc., made the maximum number of staff
employees somewhat greater than at the chose of the fiscal year 1916.

30

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

The following statement gives an analysis of the personnel of the Commission and its staff at the
close of June 30, 1916.
77 statutory employees
147 lump-sum roll employees
224 Total

$132, 420
263, 770
396,190

Classified as follows :
5 commissioners, at
$10,000
1 secretary at
5,000
5 clerks to commissioners at 1 1,800
1 chief clerk at 1
2,500
4 clerks of class 4, at
1,800
3 clerks at class 3, at
1,600
6 clerks at class 2, at
1,400
11 clerks at class 1, at
1,200
12 clerks, at
1,000
49 clerks, at 2
900
1 meesenger, at
840
2 assisstant messengers at
720
8 messanger boys, at
480
-------$162,320
3 special attorneys, at
5,000
2 special attorneys, at
3,000
1 special attorney, at
2,640
2 special attorneys, at
2,460
2 special attorneys, at
2,400
1 special attorney, at
2,340
1 special attorney, at
2,000
1 special attorney, at
1,980
2 special attorneys, at
1,800
1 special attorney, at
1,440
------ 44,720
1 attorney and examiner, at 4,750
1 special agent, at
4,000
3 special agents, at
3,000
1 special agent, at
2,700
1 special agent, at
2,520
2 special agents, at
2,460
1 special agents, at
2,400
1 special agent, at
2 special agents, at
4 special agents, at
3 special agents, at
3 special agents, at
1 special agent, at
4 special agents, at
4 special agents, at
3 special agents, at
1 special agent, at
1 special expert, at
1 special expert, at
1 special expert, at
1 special expert, at
1 special examiner, at
2 special examiners, at
1 special examiner, at
1 special examiner, at
2 special examiner, at
1 special examiner, at
1 special examiner, at
1 examiner, at
1 examiner, at
1 examiner, at
1 examiner, at
1 examiner, at

1,740
1,680
1,620
1,500
1,440
1,400
1,380
1,320
1,260
1,200
------- $96,780
3,000
2,700
1,800
1,200
-------- 8,700
5,000
4,200
3,500
2,640
2,520
2,400
2,220
------ 28,800
5,000
2,700
2,400
2,000
1,920

5 examiners, at
2 examiners, at
21 examiners, at
1 examiner, at

1,800
1,500
1,200
900

1 At the close of June 30, 1916, the salaries of the clerks to commissioners were $1,800 each, the new rate of $1,500 becoming
effective on July l. 1916; in the case of the chief clerk the salary was $2,500 on June 30, 1916, becoming $2,000 on July l. 1916.
2 Of these 49 clerks at $900 each, 31 were carrled on the lump-sum roll.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

31

At the close of June 30, 1916, the services of the following terminated :
12 examiners ( temporary )
5, at $1,800
2, at $1,500
total salaries______________________________ $18,000
5, at $1 ,200
1 special expert_____________________________________________ 2,000
1 special attorney___________________________________________ 14,400
------34,400
The total personnel of the Commission and its staff at the end of the fiscal year
1916 was 224, as compared with 143 at the end of the fiscal year 1915, showing a
increase of 81.
QUARTERS OF THE COMMISSION.

The quarters occupied by the Commission during the fiscal year were those
allowed by the Secretary of Commerce, in the Commerce Building, and were, with
comparatively slight additions of space, the same as those occupied by the Bureau of
Corporations. As already shown, the Bureau of Corporations had a much smaller staff
than the Federal Trade Commission and needed less room for the superior officers and
for the accommodation of hearings, etc. The provision of law regarding the quarters
of the Federal Trade Commission for the fiscal year under consideration, found in the
sundry civil appropriation act approved March 3, 1915, reads as follows :
The space now occupied by the Bureau of Corporations in the building rented for the use
of the Department of Commerce is transferred to and for the accommodation of the Federal
Trade Commission, and the Secretary of Commerce is directed to transfer to said Commission
any additional rooms or space in said building that may be required for its use.

The inadequate quarters which the Commission obtained under this provision of
law was a serious physical impediment to the proper performance of its duties and
undoubtedly diminished the efficiency of the staff in consequence of crowded rooms
and insufficient air and light. As there was no other room available, hearings were held
in the office of the chairman. A slight measure of relief was afforded for a part of the
time by the courtesy of the Treasury Department, which furnished space for those
members of the staff who were working on its records.
While an appropriation was made for rent for the current fiscal year, the amount
was much below that estimated as necessary. The Commission has been unable to find
satisfactory accommodations lip to the present time within its appropriation and has,
therefore, been obliged to remain in its old quarters.
APPROPRIATIONS AND EXPENDITURES.

The appropriations of the Commission for the fiscal year ended June 30, 1916,
under the study civil appropriations act approved March 3, 1915, were $355,000.
Besides this amount the Commission had the slim of $75,964.08 allowed by the ruling
of the Comptroller of the Treasury, under the second paragraph of section 3 of the act
creating the Commission. Thus fund consisted of the unexpended

32

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

balance of the appropriation for the Bureau of Corporations for the fiscal years ended
June 30, 1913, and 1914, and was made available until expended.
The expenditures of the Commission for the fiscal year ended June 30, 1916, were
$379,927.41. These appropriations and expenditures are tabulated below,

Salaries, commissioners and secretary
Salaries, per diem in lieu of subsistence, contingent and miscellaneous
expense
Federal Trade Commission (without year)
Total

Appropriated.
Expended.
-----------------------------$55,000.00
$52,00.00
300,000.00
299,999.73
75,964.08
---------------430,964.08

27,927.68
-------------379,927.41

In this connection it may be noted that the appropriations made for the Federal
Trade Commission, apart from the amount provided for the commissioners and
secretary, was only about $50,000 greater than for the Bureau of Corporations.
Furthermore, it should be noted that the Bureau of Corporations received in addition
for the fiscal year 1915 an allotment from the appropriation for contingent expenses
of the Department of Commerce to cover expenses for furniture, equipment, stationery,
and other necessary miscellaneous expenses. For this purpose the Commission
expended during the fiscal year ended June 30, 1916, $10,843.93.
Considering the much more comprehensive and varied functions and duties of the
Federal Trade Commission, compared with those of the Bureau of Corporations, it is
evident that the Commission was seriously handicapped in the performance of its
duties by the inadequacy of tile appropriation.
COOPERATION WITH OTHER DEPARTMENTS AND GOVERNMENT ESTABLISHMENTS.

Efficient conduct of public business requires not only an extensive division of
labor, but also intelligent cooperation between the various Government organizations
intrusted therewith. The Federal Trade Commission has been animated by the desire
to make such cooperation as effective as possible and has had frequent occasion to
give it practical application. In this matter it has found that other departments and
Government establishments are inspired by the same motives, and it has greatly
profited by their cooperation and has striven to be of all possible service to them.
While such cooperation is a matter of almost daily occurrence in minor matters,
which do not call for specific mention here, the Federal Trade Commission regards it
as desirable to point out a few of the more conspicuous instances and to acknowledge
its indebtedness to other departments of the Government in particular cases.
The Department of State, in the investigation of the subject of cooperation in
American export trade, which has been described above, was of very great assistance.
The valuable information in the possession of the consular officers was made
available to the Commission through a schedule of ques-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

33

tions prepared by the Commission and transmitted by the Department of State to
American consuls in all parts of the world. Likewise, in the investigation of trade and
tariffs in South America the diplomatic and consular officials of the State Department
rendered valuable aid to the representatives of the Commission in their work in the
countries visited.
The Treasury Department, through the appraiser’s office in New York, furnished
very important information regarding combinations and trade conditions in foreign
countries, in connection with the investigation of cooperation in American export
trade. Furthermore, it placed its valuable lists of business corporations and certain
other important data at the disposal of the Commission for use in the preparation of its
schedules for corporation reports, and in that connection furnished quarters for the
accommodation of a part of the force of the Commission which was engaged on this
subject. On the other hand, the report of the Commission on trade and tariffs in South
America, which was undertaken at the suggestion of the Secretary of the Treasury and
by the direction of the President gave to the former, as member of the Joint High
Commission, at the Pan American Conference, in Buenos Aires, in April, 1916, useful
data for the purpose of that conference, for which very cordial acknowledgments were
received.
Between the Department of Justice and the Commission cooperation is
contemplated by the very terms of the organic act of the Commission with respect to
certain matters which relate to the enforcement of the antitrust acts. This desirable
arrangement has been carried out in a spirit intended to give the fullest effect to
ameliorative methods of procedure and in the proper manner to meet the general desire
of business men to conform to the laws of the land.
In several directions opportunities for cooperation with the Department of
Agriculture have occurred which have been availed of, it is believed, to mutual
advantage. This is especially the case in regard to the Forest Service, in connection
with the reports on different phases of the lumber industry, which are in the course of
preparation both by that bureau and by the Commission. Various hearings have been
held by the Commission with respect to the lumber industry at which representatives
of the Forest Service have been present. Special mention should also be made of
various conferences between the Office of Markets and Rural Organization and the
Commission concerning agricultural associations, trade practices, and various other
conditions which were of common interest.
With the Department of Commerce conferences were held regarding suitable
measures to prevent dumping of foreign products in American markets, and with
regard to the lumber industry. The Bureau of Standards made various expert tests of
materials and commodities for the benefit of the Commission. The Secretary of
Commerce also rendered valuable assistance to the Commission in its investigation of
cooperation in American export trade.
The Commission worked under a cooperative arrangement also with the Interstate
Commerce Commission in the preparation of its Report on Pipe-Line Transportation
of Petroleum. Various resolu-

34 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.
tions of the Senate had directed the work to be done both by this Commission and by
the Interstate Commerce Commission, which would necessarily have resulted in a
duplication of a part of the work. By this cooperative arrangement such duplication
was avoided. The methods of work adopted and the results arrived at by the
Commission were promptly communicated to the Interstate Commerce Commission,
in order that it might have the benefit thereof in pursuing that part of the work which
it was planning to do.
The Commission has cooperated to advantage with other departments,
departmental bureaus, and Government establishments besides those specifically
mentioned above, but enough has been indicated to illustrate the extent to which this
has been done and the advantages resulting therefrom.
RECOMMENDATIONS.

The work of the Federal Trade Commission during the fiscal year 1916, which has
been outlined above, is capable of great expansion in the future. This is especially true
if it is developed on broad constructive lines of public service, which has hitherto been
the constant aim of the plans of the Commission. These plans are in accordance with
the extensive powers conferred upon it and are designed to utilize the great
opportunities presented to serve the business world and the general public.
COOPERATION IN EXPORT TRADE.

Among the first questions to which the Commission directed its attention was one
which it was specifically authorized to investigate under its organic act (sec. 6, par. h)
, namely, “trade conditions in and with foreign countries where associations,
combinations, or practices of manufacturers, merchants, or traders, or other conditions,
may affect the foreign trade of the United States.” The Commission was directed,
moreover, “to report to Congress thereon with such recommendations as it deems
advisable.”
The scope and character of this investigation has been described above. The
Commission, as a result of its investigation, found that, while there were various
conditions which affected the successful development of export trade, there was one
factor which was peculiarly within its jurisdiction, namely, cooperative organization
of American exporters for the purpose of efficiently conducting their trade in foreign
markets. The Commission found that American exporters were at a disadvantage
compared with their rivals in the chief foreign exporting countries, where
combinations for the export trade are effectively developed.
Furthermore, it was found that doubt and fear as to legal restrictions prevented
American can exporters from developing equally effective organizations for overseas
business and that the foreign trade of our manufacturers and producers, particularly the
smaller concerns, suffered in consequence. The Commission recommended, therefore,
that declaratory and permissive legislation be enacted by Congress to make it clear that
such organizations are lawful. The chief conclu-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

35

sions of the Commission, as stated in the summary of this report, were as follows:
PREVENT DANGER OF MISUSE OF COOPERATIVE EXPORT ORGANIZATIONS.
Two chief dangers from cooperative export organizations of American manufacturers and producers
are apparent. They may be used to exploit the home market and they may be used unfairly against
individual American exporters in foreign trade. The dangers in cooperative action must be faced frankly
and provided against fully.
The Commission is confident that this can be done without sacrificing the essential advantages of
joint action and without altering the policy of the anti-trust laws or interfering with their enforcement.
Thus specific extension of the law prohibiting unfair methods of competition to export trade and requirement of full reports to the Federal Trade Commission from cooperative export Organizations will protect
the individual exporter, while the enforcement of the antitrust laws will prevent the use of such
organizations to effect restraint of trade or monopoly in the domestic market.
The Commission does not believe that Congress intended by the antitrust laws to prevent Americans
from cooperating 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 our foreign commerce by forbidding the use, in export
trade, of methods of organization which did 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 equal terms.
DECLARATORY LEGISLATION RECOMMENDED.
By this investigation the Commission, however, has established the fact that doubt as to the application
of the antitrust laws to export trade now prevents concerted action by American business men in export
trade, even among producers of noncompeting goods. In view of this fact and of the conviction that
cooperation should be encouraged in export trade among competitors as well as noncompetitors, the
Commission respectfully recommends the enactment of declaratory and permissive legislation to remove
this doubt.
The Commission feels that it would fail of its duty if it did not urge the pressing need of such action
immediately. If American business men are to make the most of the great opportunities now before them,
are to build securely in foreign trade, and are to avoid disaster in the shock of the stern and determined
competition that will doubtless follow the war, they must at once perfect the organization demanded by
tile conditions of international trade.

This recommendation of the Commission was given consideration by the
Committee on the Judiciary of the House of Representatives, which reported a bill (II.
R 17350), commonly known as the Webb bill (see Exhibit 5), embodying the
principles recommended by the Commission. This bill was passed by the House near
the close of the present session, but there was not sufficient time left for its consideration by the Senate.
Particular attention, however, is called to the fact that though the bill as originally
reported to the House appears, in the opinion of the Commission, to effectively meet
the purpose for which it was drafted, yet, on the other hand, two amendments were
made to the bill during the debate which seem to give a basis for legal construction
which might entirely nullify this purpose.
The first amendment referred to was made in the first section of the bill. In order
to permit cooperation only with respect to export trade, the term “export trade” was
originally carefully defined to exclude the production or manufacture of goods within
the United States, but the

36 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.
amendment made it also exclude “trading in or marketing” such goods within the
United States. (See Exhibit 5.) Obviously a successful cooperative export organization
would, in most cases, be obliged to purchase goods in the United States and therefore
to trade in them.
The second amendment referred to is found in the second section. This originally
granted the right of cooperative association for export trade, provided such association
did not involve “restraint of trade within the United States.” But the amendment added
a further proviso, namely, “and does not restrain the export trade of the United States.”
(See Exhibit 5.) The Commission is of the opinion that these provisions of the bill
would not change the present law. But the very purpose of the bill was to clarify the
law, while this amendment presents the same question of construction as the existing
law. The law, therefore, would be neither changed nor clarified if the bill were enacted
in the form in which it was passed by the House. Therefore the business man who is
deterred from engaging in cooperative action in export trade by fear or doubt
concerning antitrust laws would be left in exactly the same position as before.
APPROPRIATIONS.
The Commission in performing the varied duties intrusted to it under its organic
act has been seriously limited by the comparatively small appropriation made by
Congress. This appropriation, as elsewhere shown, was not much greater than that
received by the Bureau of Corporations, although the duties of the latter were much
less extensive and less difficult. It might be contended with some force, indeed, that
at the beginning it was better to develop the new lines of work gradually and hence
that a large appropriation would not be imperatively required. Nevertheless, even from
the start, the Commission was very much hampered in conducting the work (which
included a large amount of work of the Bureau of Corporations) by its comparatively
small appropriations. Now that the work has been well organized, it would appear that
no reasonable argument can be advanced for not making an appropriation adequate to
the extensive and constantly increasing volume of work imposed on the Commission.
Many investigations are necessarily delayed by the lack of a sufficient staff and by the
inadequate appropriations for other items of expenditure. The Commission in its
annual estimate for the appropriations for the fiscal year 1917, has asked for a comparatively moderate increase, but it wishes to emphasize in this connection the urgent
importance of making a sufficient provision for its work.
QUARTERS.
The inadequate quarters of the Commission is also a serious handicap to its present
work. As has been shown above, adequate quarters are necessary not merely on
grounds of efficiency, but also as a matter of decent regard for its employees. The
estimate of the amount required for rental of quarters for the last fiscal year was placed
at $20,000, but it was reduced to $15,000 in the appropriation act. The Commission
has vainly searched for suitable accommo-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

37

dations that were within the appropriation made. In the opinion of the Commission the
most desirable method of providing for the quarters of the Commission is to allow it
to make a contract of lease or a series of years with an adequate rental appropriation
in order that it may make arrangements for the erection of a suitable building. The
building should be erected on a site sufficiently large so that subsequent additions
might be made thereto as needed, thus enabling the staff to be always housed under
one roof in the interest of economy and efficiency.
SALARY LIMITATION.
Finally attention is respectfully called to a salary limitation imposed by the last
appropriation act for the Commission whereby the maximum salary payable to any
employee of the Commission was fixed at $5,000. The Commission regards this
limitation as seriously and unnecessarily impairing the efficient operation of the
Commission. The Commission should be in a position to employ the best experts
available in the various branches of its work. Other similar commissions in the
Federal service are not restricted in this way. A practical instance of the injurious
effect of such limitation is found in the fact that the services of the distinguished
lawyer who acted in the capacity of advisory counsel for the Commission during a part
of the fiscal year 1916 could not have been obtained, nor even reasonably asked for,
under the limitations imposed by the current appropriation act.
All of which is respectfully submitted.
EDWARD N. HURLEY, Chairman.
WILLIAM J. HARRIS, Vice-Chairman.
JOSEPH E. DAVIES.
WILL H. PARRY.

EXHIBIT l.
FEDERAL TRADE COMMISSION ACT.
AN ACT To create a Federal Trade Commission, to define its powers and duties, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress
assembled, That a commission is hereby created and established, to be known as the Federal Trade
Commission (hereinafter referred to as the commission), which shall be composed of five commissioners,
who shall be appointed by the President, by and with the advice and consent of the Senate. Not more than
three of the commissioners shall be members of the same political party. The first commissioners
appointed shall continue in office for terms of three, four, five, six, and seven years, respectively, from the
late of the taking effect of this act, the term of each to be designated by the President, but their successors
shall be appointed for terms of seven years, except that any person chosen to fill a vacancy shall be
appointed only for the unexpired term of the commissioner whom he shall succeed. The commission shall
choose a chairman from its own membership. No commissioner shall engage In any other business,
vocation, or employment. Any commissioner may be removed by the President for inefficiency, neglect
of duty, or malfeasance in office. A vacancy in the commission shall not impair the right of the remaining
commissioners to exercise all the powers of the commission.
The commission shall have an official seal, which shall be judicially noticed.
SEC. 2. That each commissioner shall receive a salary of $10,000 a year, payable in the same manner
as the salaries of the judges of the courts of the United States. The commission shall appoint a secretary,
who shall receive a salary of $5,000 a year, payable in like manner, and it shall have authority to employ
and fix the compensation of such attorneys, special experts, examiners, clerks, and other employees as it
may from time to time find necessary for the proper performance of its duties and as may be from time to
time appropriated for by Congress.
With the exception of the secretary, a clerk to each commissioner, the attorneys, and such special
experts and examiners as the commission may from time to time find necessary for the conduct of its work,
all employees of the commission shall be a part of the classified civil service, and shall enter the service
under such rules and regulations as may be prescribed by the commission and by the Civil Service
Commission.
All of the expenses of the commission, including, all necessary expenses for transportation incurred by
the commissioners or by their employees under their orders, in making any investigation, or upon official
business in any other places than in the city of Washington, shall be allowed and paid on the presentation
of itemized vouchers therefor approved by the commission.
Until otherwise provided by law, the commission may rent suitable offices for its use.
The Auditor for the State and Other Departments shall receive and examine all accounts of expenditures
of the commission.
SEC. 3. That upon the organization of the commission and election of its chairman, the Bureau of
Corporations and the offices of Commissioner and Deputy Commissioner of Corporations shall cease to
exist; and all pending investigations and proceedings of the Bureau of Corporations shall be continued
by the commission.
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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

All clerks and employees of the said bureau shall be transferred to and become clerks and employees
of the commission at their present grades and salaries. All records, papers, and property of the said bureau
shall become records, papers, and property of the commission, and all unexpended funds and
appropriations for the use and maintenance of the said bureau, including any allotment already made to
it by the Secretary of Commerce from the contingent appropriation for the Department of Commerce for
the fiscal year nineteen hundred and fifteen, or from the departmental printing fund for the fiscal year
nineteen hundred and fifteen, shall become funds and appropriations available to be expended by the
commission in the exercise of the powers, authority, and duties conferred on it by this act.
The principal office of the commission shall be in the city of Washington, but it may meet and exercise
all its powers at any other place. The commission may, by one or more of its members, or by such
examiners as it may designate, prosecute any inquiry necessary to its duties in any part of the United
States.
SEC. 4. That the words defined in this section shall have the following meaning when found in this act,
to wit:
“Commerce” means commerce among the several States or with foreign nations, or in any Territory of
the United States or in the District of Columbia, or between any such Territory and another, or between
any such Territories and any State or foreign nation, or between the District of Columbia and any State
or Territory or foreign nation.
“Corporation” means any company or association incorporated or unincorporated, which is organized
to carry on business for profit and has shares of capital or capital stock, and any company or association,
incorporated or unincorporated, without shares of capital or capital stock, except partnerships, which is
organized to carry on business for its own profit or that of its members.
“Documentary evidence” means all documents, papers, and correspondence in existence at and after
the passage of this act.
“Acts to regulate commerce” means the act entitled “An act to regulate commerce,” approved February
fourteenth, eighteen hundred and eighty-seven, and all acts amendatory thereof and supplementary thereto.
“Antitrust acts” means the act entitled “An act to protect trade and commerce against unlawful restraints
and monopolies,” approved July second, eighteen hundred and ninety; also the sections seventy-three to
seventy-seven, inclusive, of an act entitled “An act to reduce taxation, to provide revenue for the
Government, and for other purposes,” approved August twenty-seventh, eighteen hundred and ninety-four;
and also the act entitled “An act to amend sections seventy-three and seventy-six of the act of August
twenty-seventh, eighteen hundred and ninety-four, entitled ‘An act to reduce taxation, to provide revenue
for the Government, and for other purposes,’” approved February twelfth, nineteen hundred and thirteen.
SEC. 5. That unfair methods of competition in commerce are hereby declared unlawful.
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 commerce.
Whenever the commission shall have reason to believe that any such person, partnership, or corporation
has been or is using any unfair method of competition in commerce, and if it shall appear to the
commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue
and serve upon such person, partnerships or corporation a complaint starting its charges in their respect,
and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the
service of said complaint. The person, partnership, or corporation so complained of shall have the right
to appear at the place and time so fixed and show cause why an order should not be entered by the
commission requiring such person, partnership, or corporation to cease and desist from the violation of
the law so charged in said complaint. Any person, partnership, or corporation may make application, and
upon good cause shown may be allowed by the commission, to intervene and appear in said proceeding
by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in
the office of the commission. If upon such hearing the commission shall be of the opinion that the method
of competition in question is prohibited by this act, it shall make a report in writing in which it shall state
its findings as to the facts, and shall issue and cause to be served on such person, partnership, or
corporation an order requiring such person, partnership, or corporation to cease and desist from using such
method

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41

of competition. Until a transcript of the record in such hearing shall have been filed in a circuit court of
appears of the United States, as hereinafter provided, the commission may at any time, upon such notice
and in such manner as it shall deem proper, modify or set aside, in whole or in part, any report or any order
made or issued by it under this section.
If such person, partnership, or corporation fails or neglects to obey such order of the commission while
this same is in effect, the commission may apply to the circuit court of appeals of the United States, within
any circuit where the method of competition in question was used or where such person, partnership, or
corporation resides or carries on business, for the enforcement of its order, and shall certify and file
application transcript of the entire record in the proceeding, including all testimony taken and the report
and order of the commission. Upon such filing of the application and transcript the court shall cause
notice thereof to be served upon such person, partnership, or corporation and thereupon shall have
jurisdiction of the proceeding and of the question determined therein, and shall have power to make and
enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming,
modifying, or setting aside the order of the commission. The findings of the commission as to the facts,
if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce
additional evidence, and shall show to the satisfaction of the court that such additional evidence is
material, and that there were reasonable grounds for the failure to adduce such evidence in the proceeding
before the commission, the court may order such additional evidence to be taken before the commission
and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court
may seem proper. The commission may modify its findings as to the fact, or make new findings, by reason
of the additional evidence so threat, and it shall file such modified or new findings, which, if supported
by testimony, shall be conclusive, and its recommendation, If any, for the modification or setting aside
of its original order, with the return of such additional evidence. The judgment and decree of the court
shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as
provided in section two hundred and forty of the Judicial Code.
Any party required by such order of the commission to cease and desist from using such method of
competition may obtain a review of such order in said circuit court of appeals by filing in the court a
written petition praying that the order of the commission be set beside. A copy of such petition Shall be
forthwith served upon the commission, and thereupon the commission forthwith shall certify and file in
the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court
shut have the same jurisdiction to affirm, set aside, or modify the order of the commission as in the case
of an application by the commission for the enforcement of its order, and the findings of the commission
as to the facts, if supported by testimony, shall in like manner be conclusive.
The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify
orders of the commission Shall be exclusive.
Such proceedings in the circuit court of appeals Shall be given precedence over other cases pending
therein, and shall be in every way expedited. No order of the commission or judgment of the court to
enforce the same shall In any wise relieve or absolve any person, partnership, or corporation from any
liability under the antitrust acts.
Complaints, orders, and other processes of the commission under this section may be served by anyone
duly authorized by the commission, either (a) by delivering a copy thereof to the person to be served, or
to a member of the partnership to be served, or to the president, secretary, or other executive officer or a
director of the corporation to he Served ; or (b) by leaving a copy thereof at the principal office or place
of business of such person, partnerships or corporation; or (c) by registering and mailing a copy thereof
addressed to such person, partnership, or corporation at his or its principal office or place of business. The
verified return by the person so serving said complaint, order, or other process setting forth the manner
of said service shelf be proof of the same, and the return post-office receipt for said complaint, order, or
other process registered and mailed as aforesaid ,hall be proof of the service of the same.
SEC. 6. That the commission shall also have power-(a) To gather and compile information concerning, and to investigate from time to time the organization,
business, conduct, practices, and management of

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

any corporation engaged in commerce, excepting, banks and common carriers and it subject to the act to
regulate commerce, relation to other corporations and to Individuals, associations, and in partnerships.
(b) To require, by general or Special orders, corporations engaged in commerce, excepting, banks, and
common carriers subject to the act to regulate commerce, or any class of them, or any of them,
respectively, to file with the commission in such form as the commission may prescribe annual or special,
or both annual and special, reports or answers in writing to specific questions, furnishing to the
commission such information as it may require as to the organization, business, conduct, practices,
management, and relation to other corporations, partnerships, and individuals of the respective
corporations filing such reports or answers in writing. Such reports and answers shall be made under oath,
or otherwise, as the commission may prescribe, and shall be filed with the commission within such
reasonable period as the commission may prescribe, unless additional time be granted in any case by tile
commission.
(c) Whenever a final decree has been entered against any defendant corporation in any suit brought
by the United States to prevent and restrain any violation of the antitrust acts, to make investigation, upon
its own initiative, of the manner in which the decree has been or is being carried out, and upon the
application of the Attorney General it shall be its duty to make such investigation. It shall transmit to the
Attorney General a report embodying its findings and recommendations as a result of any such
investigation, and the report shall be made public in the discretion of the commission.
(d) Upon the direction of the President or either House of Congress to investigate and report the facts
relating to any alleged violations of the antitrust acts by any corporation.
(e) Upon the application of the Attorney General to investigate and make recommendation for the
readjustment of the business of any corporation alleged to be violating the antitrust acts in order that the
corporation may thereafter maintain its Organization, management, and conduct of business in accordance
with law.
(f) To make public from time to time such portions of the information obtained by it hereunder, except
trade secrets and names of customers, as it shall deem expedient in the public interest; and to make annual
and special reports to the Congress and to submit therewith recommendations for additional legislation;
and to provide for the publication of its reports and decisions in such form and manner as may be best
adapted for public information and use.
(g) From time to time to classify corporations and to make, rules and regulations for the purpose of
carrying out the provisions of this act.
(h) To investigate, from time to time, trade conditions in and with foreign countries where associations,
combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the
foreign trade of the United States, mid to report to Congress thereon, with such recommendations as it
deems advisable.
SEC. 7. That in any suit in equity brought by or under the direction of the Attorney General as provided
in the antitrust acts, the court may, upon the conclusion of the testimony therein, if it shall be then of
opinion that the complainant is entitled to relief, refer said suit to the commission, as a master in chancery,
to ascertain and report an appropriate form of decree therein. The commission shall proceed upon such
notice to the parties and under such rules of procedure as tile court may prescribe, and upon the coming
in of such report such exceptions may be filed and such proceedings had in relation thereto as upon the
report of a master in other equity causes, but the court may adopt or reject such report, in whole or in part,
and enter such decree as the nature of the case may in its judgment require.
SEC. 8. That the several departments and bureaus of the Government when directed by the President
shall furnish the commission, upon its request, all records, papers, and information in their possession
relating to any corporation subject to any of the provisions of this act, and shall detail from time to time
such officials and employees to the commission as he may direct.
SEC. 9. That for the purposes of this act tile commission, or its duly authorized agent or agents, shall
at all reasonable times have access to, for the purpose of examination, and the right to copy any
documentary evidence of any corporation being investigated or proceeded against; and the commission
shall have power to require by subpoena the attendance and testimony of witnesses and the production of
all such documentary evidence relating to any matter under investigation. Any member of the commission
may sign subpoenas, and

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

43

members and examiners of the commission may administer oaths and affirmations, examine witnesses, and
receive evidence.
Such attendance of witnesses, and the production of such documentary evidence, may be required from
any place in the United States, at any designated place of hearing. And in case of disobedience to a
subpoena the commission may invoke the aid of any court of the United States in requiring the attendance
and testimony of witnesses and the protection of documentary evidence.
Any of the district courts of the United States within the jurisdiction of which such inquiry is carried
on may, in case of contumacy or refusal to obey a subpoena issued to any corporation or other person,
issue an order requiring such corporation or other person to appear before the commission, or to produce
documentary evidence if so ordered, or to give evidence touching the matter in question; and any failure
to obey such order of the court may be punished by such court is a contempt thereof.
Upon the application of the Attorney General of the United States, at the request of the commission,
the district courts of the United States shall have jurisdiction to issue writs of mandamus commanding any
person or corporation to comply with the provisions of this act or any order of the commission made in
pursuance thereof.
The commission may order testimony to be taken by deposition in any proceeding or investigation
pending under this act at any stage of such proceeding or investigation. Such depositions may be taken
before any person designated by the commission and having power to administer oaths. Such testimony
shall be reduced to writing by the person taking the deposition, or under his direction, and shall then be
subscribed by the deponent. Any person may be compelled to appear and depose and to produce
documentary evidence In the same manner as witnesses may be compelled to appear and testify and
produce documentary evidence before the commission as hereinbefore provided.
Witnesses summoned before the commission shall be paid the same fees and mileage that are paid
witnesses in the courts of the United States, and witnesses whose depositions are taken and the persons
taking the same shall severally be entitled to the same fees as are paid for like services in the courts of the
United States.
No person shall be excused from attending and testifying or from producing documentary evidence
before the commission or in obedience to the subpoena. of the commission on the ground or for the reason
that the testimony or evidence, documentary or otherwise, required of him may tend to criminate him or
subject him to a penalty or forfeiture. But no natural person shall be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he may testify,
or produce evidence, documentary or otherwise, before the commission in obedience to a subpoena issued
by it: Provided, That no natural person so testifying shall be exempt from prosecution and punishment for
perjury committed in so testifying
SEC. 10. That any person who shall neglect or refuse to attend and testify, or to answer any lawful
inquiry, or to produce documentary evidence, if in his power to do so, in obedience to the subpoena or
lawful requirement of the commission, shall be guilty of an offense and upon conviction thereof by a court
of competent jurisdiction shall be punished by a fine of not less than $1,000 nor more than $5,000, or by
imprisonment for not more than one year, or by both such fine and imprisonment.
Any person who shall willfully make, or cause to be made, any false entry or statement of fact in any
report required to be made under this act, or who shall willfully make, or cause to be made, any false entry
in any account, record, or memorandum kept by any corporation subject to this act, or who shall willfully
neglect or fail to make, or to cause to be made, full, true, and correct entries In such accounts, records, or
memoranda of all facts and transactions appertaining to the business of such corporation, or who shall
willfully remove out of the jurisdiction of the United States, or willfully mutilate, alter, or by ally other
means falsify any documentary evidence of such corporation, or who, shall willfully refuse to submit to
the commission or to any of its authorized agents, for the purpose of inspection and taking copies, any
documentary evidence of such corporation in his possession or within his control, shall be deemed guilty
of an offense against the United States, and shall be subject, upon conviction in any court of the United
States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000, or to
imprisonment for a term of not more than three years, or to both such fine and imprisonment.

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

If any corporation required by this act to file any annual or special report shall fail so to do within the
time fixed by the commission for filing the same, and such future shall continue for thirty days after notice
of such default, the corporation shall forfeit to the United States the sum of $100 for each and every day
of the continuance of such failure, which forfeiture shall be payable into the Treasury of the United States
and shall be recoverable in a civil suit in the name of the United States brought in the district where the
corporation has its principal office or in any district in which it shall do business. It shall be the duty of
the various district attorneys, under the direction of the Attorney General of the United States, to prosecute
for the recovery of forfeitures. The costs and expenses of such prosecution shall be paid out of the
appropriation for the expenses of the courts of the United States.
Any officer or employee of the commission who shall make public any information obtained by the
commission, without its authority, unless directed by a court, shall be deemed guilty of a misdemeanor,
and, upon conviction thereof, shall be punished by a fine not exceeding $5,000, or by imprisonment not
exceeding one year, or by fine and imprisonment, in the discretion of the court.
SEC. 11. Nothing contained in this act shall be construed to prevent or interfere with the enforcement
of the provisions of the antitrust acts or the acts to regulate commerce, nor shall anything contained In the
act be construed to, alter, modify, or repeal the said antitrust acts or the acts to regulate commerce or any
part or parts thereof.
Approved, September 26, 1914.

EXHIBIT 2.
PROVISIONS OF THE CLAYTON ACT WHICH CONCERN THE FEDERAL TRADE COMMISSION.
“Commerce,” as used herein, means trade or commerce among the Several States and with foreign
nations, or between the District of Columbia or any Territory of the United States and any State, Territory,
or foreign nation, or between any insular possessions or other places under the jurisdiction of the United
States, or between any such possession or place and any State or Territory of the United States or the
District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any
insular possession or other place under the jurisdiction of the United States: Provided, That nothing in this
act contained shall apply to the Philippine Islands.
The word “person” or “persons” wherever used in this act shall be deemed to include corporations and
associations existing under or authorized by the laws of either the United States, the laws of any of the
Territories, the laws of any State, or the laws of any foreign country.
SEC. 2. That it shall he unlawful for any person engaged in commerce, in the course of such commerce,
either directly or indirectly to discriminate in price between different purchasers of commodities, which
commodities are sold for use, consumption, or resale within the United States or any Territory thereof or
the District of Columbia or any insular possession or other place under the jurisdiction of the United
States, where the effect of such discrimination may be to substantially lessen competition or tend to create
a monopoly in any line of commerce: Provided, That nothing herein contained shall prevent discrimination
in price between purchasers, of commodities, on account of differences in the grade, quality, or quantity
of the commodity sold, or that makes only due allowance for difference in the cost of selling or
transportation, or discrimination in price in the same or different communities made in good faith to meet
competition: And provided further, That nothing herein contained shall prevent persons engaged in selling
goods, wares, or merchandise in commerce from .selecting their own customers in bona fide transactions
and not in restraint of trade.
SEC. 3. That it shall be unlawful for any person engaged in commerce, in the course of such commerce,
to lease or make a sale. or contract for sale of goods, wares, merchandise, machinery, supplies or other
commodities, whether patented or unpatented, for use, consumption, or resale within the United States or
any Territory thereof or the District of Columbia or any insular possession or other place under the
jurisdiction of the United States, or fix a price charged therefore or discount front, or rebate upon, such
price, on the condition, agreement or understanding that the lessee or purchaser thereof shall not use or
deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or
competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such
condition, agreement or understanding may be to substantially lesson competition or tend to, create a
monopoly in any line of commerce.
SEC. 7. That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any
part of the stock or other share capital of another corporation engaged also in commerce, where the effect
of such acquisition maybe to substantially lessen competition between the corporation whose stock is so
acquired and the corporation making the acquisition, or to restrain such commerce in any section or
community, or tend to create a monopoly of any line of commerce.
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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

No corporation shall acquire, directly or indirectly the whole or any part of the stock or other share
capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use
of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition
between such corporations, or any of them, whose stock or other share capital is so acquired, or to restrain
such commerce in any section or community, or tend to create a monopoly of any line of commerce.
This section shall not apply to corporations purchasing such stock solely for Investment and not using
the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening
of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce
from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful
business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or
a part of tile stock of such subsidiary corporations, when the effect of such formation is not to substantially
lessen competition.
Nor shall anything herein contained be construed to prohibit any common carrier subject to the laws
to regulate commerce from aiding in the construction of branches or short lines so located as to become
feeders to the main line of the company so aiding in such construction or from acquiring or owning all
or any part of the stock of such branch lines, nor to prevent any such common carrier from acquiring and
owning all or any part of the stock of a branch or short line constructed by an independent company where
there is no substantial competition between the company owning the branch line so constructed land the
company owning the main line acquiring the property or an interest therein, nor to prevent such common
carrier from extending any of its lines through the medium of the acquisition of stock or otherwise of any
other such common carrier where there is no substantial competition between the company extending its
lines and tile company whose stock, property, or an interest therein is so acquired.
Nothing contained. in this section shall be held to affect or impair any right heretofore legally acquired:
Provided, That nothing in this section shall be held or construed to authorize or make lawful anything
heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided.
SEC. 8. That from and after two years from the date of the approval of this act no person at the same
time shall be a director in any two or more corporations, any one of which has capital, surplus, and
undivided profits aggregating more than $1,000,000, engaged in whole or in part in commerce, other than
banks, banking associations, trust companies and common carriers subject to the act to regulate commerce,
approved February fourth, eighteen hundred and eighty-seven, if such corporations are or shall have been
theretofore, by virtue of their business and location of operation, competitors, so that the elimination of
competition by agreement between them would constitute a violation of any of the provisions of any of
the antitrust laws. The eligibility of a director under the foregoing provision shall be determined by the
aggregate amount of the capital, surplus, and undivided profits, exclusive of dividends declared but not
paid to stockholders, at the end of the fiscal year of said corporation next preceding the election of
directors, and when a director has been elected in accordance with the provisions of this act it shall be
lawful for him to continue as such for one year thereafter.
When any person elected or chosen as a director or officer or selected as an employee of any bank or
other corporation subject to the provisions of this act is eligible at the time of his election or selection to
act for such bank or other corporation in such capacity his eligibility to act in such capacity shall not be
affected and lie shall not become or be deemed amenable to ally of the provisions hereof by reason of any
crime in the affairs of such bank or other corporation from whatsoever cause, whether specifically
excepted by any of the provisions hereof or not, until the expiration of one year from the date of his
election or employment.
SEC. 11. That authority to enforce compliance with sections two, three, seven and eight of this act by
the persons respectively subject thereto is hereby vested in the Interstate Commerce Commission where
applicable to common carriers, in the Federal Reserve Board where applicable to banks, banking
associates and trust companies, and in the Federal trade Commission where applicable to all other
character of commerce, to be exercised as follows:
Whenever the commission or board vested with jurisdiction thereof shall have reason to believe that
any person is violating or has violated any of the

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

47

provisions of sections two, three, seven and eight of this act, it shall issue and serve upon such person a
complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place
therein fixed at least thirty days after the service of said complaint. The person so complained of shall
have the right to appear at the place and time so fixed and show cause why an order should not be entered
by the commission or board requiring such person to cease and desist from the violation of the law so
charged in said complaint. Any person may make application, and upon good cause spoken may be
allowed by the commission or board, to intervene and appear in said proceeding by counsel or in person.
The testimony in any such proceeding shall be reduced to writing and filed in the office of the commission
or board. If upon such hearing the commission or board, as the case may be, shall be of the option that
any of the provisions of said sections have been or ire being violated, it shall make a report in writing in
which it shall state its findings as to the facts, and shall issue and cause to be served on such person an
order requiring such person to cease and desist from such violations, and divest itself of the stock held or
rid itself of the directors chosen contrary to the provisions of sections seven and eight of this act, if any
there be, in the manner and within the time fixed by said order. Until a transcript of the record in such
notice shall have been filed in a circuit court of appeals of the United States, as hereinafter provided, the
commission or board may at any time, upon such notice and in such manner as it shall deem proper,
modify or set aside, in whole or in part, any report or any order made or issued by it under this section.
If such person fails or neglects to obey such order of the commission or board while the same is in
effect, the commission or board may apply to the circuit Court of appeals of the United States, within any
circuit where the violation complained or was or is being committed or where such person resides or
carries on business, for the enforcement of its order, and shall certify and file with its application a
transcript of the entire record in the proceeding including all the testimony taken and the report and order
of the commission or board. Upon such filling of the application and transcript the court shall cause
notice thereof to be served upon such person and thereupon shall have jurisdiction of the proceeding and
of the question determined therein, and shall have power to make and enter upon the pleadings, testimony,
and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the
commission or board. The findings of the commission or board as to the facts, if supported by testimony,
shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and
shall show to the satisfaction of the court that such additional evidence is material and thwart there were
reasonable grounds for the failure to adduce such evidence In the proceeding before the commission or
board, the court may order such additional evidence. to be taken before the commission or board and to
be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem
proper. The commission or board may modify its findings as to the facts, or make new findings, by reason
of the additional evidence so taken, and it shall file such modified or new findings, which, if supported
by testimony, shall be conclusive, and its recommendation, if any, for the modification or setting aside of
its original order, with the return of such additional evidence. The judgment and decree of the court shall
be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided
in section two hundred laid forty of the Judicial Code.
Any party required by such order of the commission or board to cease and desist from a violation
charged may obtain a review of such order in said circuit court of appears by finite in the court a written
petition praying that the order of the commission or board be set aside. A copy of such petition shall be
forthwith served upon the commission or board, and thereupon the commission or board forthwith shall
certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the
transcript the court shall have the same jurisdiction to affirm, set aside, or modify the order of the
commission or board as in the case of an application by the commission or board for the enforcement of
its order, and the finding of the commission or board as to the facts, if supported by testimony, shall in
like manner be conclusive.
The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify
orders of the commission or board shall be exclusive.
Such proceedings in the circuit court of appeals shall be given precedence. over other cases pending
therein, and shall be in every way expedited. No order of the commission or board or the judgment of the
court to enforce the same shall

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

in any wise relieve or absolve any person from any liability under the antitrust acts.
Complaints, orders, and other processes of tile commission or board under this section may be served
by anyone duly authorized by the commission or board, either (a) by delivering a copy thereof to the
person to be served. or to a member of the partnership to be served, or to the president, secretary, or other
executive officer or a director of the corporation to be served; or (b) by leaving a copy thereof at the
principal office or place of business of such person; or (c) by registering and mailing a copy thereof
addressed to such person at his principal office or place of business. The verified return by tile person so
serving said complaint, order, or other process setting forth the manner of said service shall be proof of
the same, and the return post-office receipt for said complaint, order, or other process registered and
mailed as aforesaid shall be proof of tile service of the same.
Approved, October 15, 1914.

EXHIBIT 3.

RULES OF PRACTICE BEFORE THE FEDERAL TRADE COMMISSION.
I. SESSIONS.
The principal office of the commission at Washington, D. C., is open each business day from 9 a.m. to
4.30 p.m. The commission may meet and exercise all its powers at any other place, and may, by one or
more of its members, or by such examiners as it may designate, prosecute any inquiry necessary to its
duties in any part of the United States.
Sessions of the commission for hearing contested proceedings will be held as ordered by the
commission.
Sessions of the commission for the purpose of making orders and for the transaction of other business,
unless otherwise ordered, will be held at the office of the commission at Washington, D. C., on each
business day at 10.30 a.m. Three members of the commission shall constitute a quorum for the transaction
of business.
All orders of the commission shall be signed by the Secretary.
II. COMPLAINTS.
Any person partnership, corporation, or association may apply to the commission to institute a
proceeding in respect to any violation of law over which the commission has jurisdiction.
Such application shall be in Writing, signed by or in behalf of the applicant, and shall contain a short
and simple statement of the facts constituting the alleged violation of law and the name and address of the
applicant and of the party complained of.
The commission shall investigate the matters complained of in such application, and if upon
investigation the commission shall have reason to believe that there is a violation of law over which the
commission has jurisdiction, tile commission shall issue and serve upon the party complained of a
complaint, stating its charges and containing a notice of a hearing upon a day and at a place therein fixed
at least 40 days after the service of said complaint.
III. ANSWERS.
Within 30 days from the service of the complaint, unless such time be extended by order of the
commission, the defendant shall file with the commission an answer to the complaint. Such answer shall
contain a short and simple statement of the facts Which constitute the ground of defense. It shall
specifically admit or deny or explain each of the facts alleged in the complaint, unless the defendant is
without knowledge, in which case lie shall so state, such statement operating as a denial. Answers in
typewriting must be on one side of the paper only, on paper not more then 8 ½ inches wide and not more
than 11 inches long, and weighing not less then 16 pounds to the ream, folio base, 17 by 22 inches, with
left-hand margins not less than 1 ½ inches wide, or they may be printed in 10 or 12 point type on good
unglazed paper 8 inches wide by 10 ½ inches long, with inside margins not less than 1 inch wide.
IV. SERVICE.
Complaints, orders, and other processes of the commission may be served by anyone duly authorized
by the commission, either (a) by delivering a copy
49

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

thereof to the person to be served, or to a member of the partnership to be served, or to the president,
secretary, or other executive officer, or a director, of the corporation or association to be served; or (b) by
leaving a copy thereof at the principal office or place of business of such person, partnership, corporation,
or association; or (c) by registering and mailing a copy thereof addressed to such person, partnership,
corporation, or association at his or its principal office or place of business. The verified return by the
person so serving said complaint, order, or other process, setting forth the manner of said service, shall
be proof of the same, and the return post-office receipt for said complaint, order, or other process,
registered and mailed as aforesaid, shall be proof of the service of the same.
V. INTERVENTION.
Any person, partnership, corporation, or association desiring to intervene in a contested proceeding
shall make application in writing, setting out the grounds on which lie or it claims to be interested. The
commission may, by order, permit intervention by counsel or in person to such extent and upon such terms
as it shall deem just.
Applications to intervene must be on one side of the paper only, on paper not more than 8 ½ inches
wide and not more than 11 inches long, and weighing not less than 16 pounds to the ream, folio base, 17
by 22 inches, with left-hand margin not less than 1 ½ inches wide, or they may be printed in 10 or 12 point
type on good unglazed paper 8 inches wide by 10 ½ inches long, with inside margins not less than 1 inch
wide.
VI. CONTINUANCES AND EXTENSIONS OF TIME.
Continuances and extensions of time will be granted at the discretion of the Commission.
VII. WITNESSES AND SUBPOENAS:
Witnesses shall be examined orally, except that for good and exceptional cause for departing from the
general rule the commission may permit their testimony to be taken by deposition.
Subpoenas requiring the attendance of witnesses from any place in the United States at any designated
place of hearing may be issued by any member of the Commission.
Subpoenas for the production of documentary evidence (unless directed to issue by a commissioner
upon his own motion) will issue only upon application in writing, which must be verified and must
specify, as near as may be, the documents desired and the facts to be proved by them.
Witnesses summoned before the commission shall be paid the same fees and mileage that are paid
witnesses in the courts of the United States, and witnesses whose depositions are taken, and the persons
taking the same, shall severally be entitled to the same fees as are paid for like services in the courts of the
United States.
VIII. DEPOSITIONS IN CONTESTED PROCEEDINGS.
The commission may order testimony to be taken by deposition in a contested proceeding.
Depositions may be taken before any person designated by the Commission and having power to
administer oaths.
Any party desiring to take the deposition of a witness shall make application in writing, setting out the
reasons why such deposition should be taken, and stating the time when, the place where, and the name
and post-office address of the person before whom it is desired the deposition be taken, the name and postoffice address of the witness, and the subject matter or matters concerning which the witness is expected
to testify. If good cause be shown, the commission will make and serve upon the parties of their attorneys
an order wherein the commission shall name the witness whose deposition is to be taken, and specify the
time when, the place where, and the person before whom the witness is to testify, but such time and place,
and the person before whom the deposition is to be taken, so specified in the commission's order, may or
may not be the same as those named in said application to the Commission.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

51

The testimony of the witness shall be reduced to writing by the officer before whom the deposition is
taken, or under his direction, after which the deposition shall be subscribed by the witness and certified
in usual form by the officer. After the deposition has been so certified it shall, together with a copy thereof
made by such officer or under his direction, be forwarded by such officer under seal in an envelope
addressed to the commission at its office in Washington, D. C. Upon receipt of the deposition and copy
the commission shall file in the record in said proceeding such deposition and forward the copy to the
defendant or the defendant's attorney.
Such depositions shall be typewritten on one side only of the paper, which shall be not more than 8 ½
inches wide and not more than 11 inches long and weighing not less than 16 pounds to the ream, folio
base, 17 by 22 inches, with left-hand margin not less than 1 ½ inches wide.
No deposition shall be taken except after at least 6 days’ notice to the parties, and where the deposition
is taken in a foreign country such notice shall be at least 15 days.
No deposition shall be taken either before the proceeding is at issue, or, unless under special
circumstances and for good cause shown, within 10 days prior to the date of the hearing thereof assigned
by the commission, and where the deposition is taken in a foreign country it shall not be taken after 30
days prior to such date of hearing.
IX. DOCUMENTARY EVIDENCE.
Where relevant and material matter offered in evidence is embraced in a document containing other
matter not material or relevant and not. intended to be put in evidence, such document will not be filed,
but a copy only of such relevant and material matter shall be filed.
X. BRIEFS.
Unless otherwise ordered, briefs may be filed at the close of the testimony in each contested proceeding.
The presiding commissioner or examiner shall fix the time within which briefs shall be filed and service
thereof shall be made upon the adverse parties.
All briefs must be filed with tile secretary and be accompanied by proof of service upon the adverse
parties. Fifteen copies of each brief shall be furnished for the use of the commission, unless otherwise
ordered.
Application for extension of time in which to file any brief shall be by petition in writing, Stating the
facts upon which tile application rests, which must be filed with the commission at least 5 days before the
time for filing the brief.
Every brief shall contain, in the order here stated-(1) A concise abstract, or statement of the case.
(2) A brief of the argument, exhibiting, a clear statement of the points of fact or law to be discussed,
with the reference to the pages of the record and the authorities relied upon in support of each point.
Every brief of more than 10 pages shall contain on its top fly leaves a subject index with page
references, the subject index to be supplemented by a list of all cases referred to, alphabetically arranged,
together with references to pages where the cases are cited.
Briefs must be printed in 10 or 12 point type on good unglazed paper 8 inches by 101 inches, with
inside margins not less than 1 inch wide, and with double leaded text and single-leaded citations.
Oral arguments will be had only as ordered by the Commission.
XI. ADDRESS OF THE COMMISSION.
All communications to the commission must be addressed to Federal Trade Commission, Washington,
D. C., unless otherwise specifically directed.

EXHIBIT 4.

CONFERENCE RULINGS OF THE FEDERAL TRADE COMMISSION.
EXPLANATORY NOTE.
The following are rulings of the Commission in conference which are published as being of public
interest. Future rulings will be announced from time to time through the public press and subsequently
compiled and Issued by the Commission in successive bulletins. The rulings are published for the
information of business men engaged in interstate commerce and others interested in the work of the
Commission. They are not decisions in formal proceedings, but merely expressions of the opinion of the
Commission on applications for the issuance of complaints and informal inquiries with regard to particular
facts which involve the interpretation and construction of the Federal Trade Commission Act and of those
sections of the Clayton Act with the enforcement of which the Commission is charged.
While these rulings may be regarded as precedents in so far as they are applicable in proceedings before
the Commission, a more extensive presentation of facts in later cases may result in their modification, and
they should not, therefore, be regarded as conclusive in the determination by the Commission of any future
action.
Copies may he obtained by those interested on application to the Secretary of the Commission.
l. Public interest--Competitive method discontinued --On application for the issuance of a complaint,
it appeared that a corporation engaged in the refining and sale of cane sugar, whose principal market is
in the State in which its refinery is located, alleged that a larger corporation, having refineries located in
other States and disposing of its product in interstate commerce in many states, refined and sold
exclusively in the State of the applicant and in competition with it sacked sugar which is branded “pure
cane fine granulated sugar.” The applicant alleged that this sugar is not a standard fine granulated sugar
is the branding leads consumers as well as many in true trade to believe, but what is known as “off” sugar
in the manufacture of which an expensive part of the refining process which is necessary to extract the
final residue of from 2 to 3 per cent of molasses is omitted; flint this “off” sugar is sold to jobbers at about
10 cents per hundred pounds less than the market price for standard granulated sugar; and that by reason
of the alleged false brand or label on the sacks retailers and consumers are deceived into the belief that
they are buying granulated sugar equal to standard. As a result, the applicant stated, it was compelled to
meet the competition of this “off” sugar in the sale of Its standard fine granulated sugar, in the manufacture
of which it uses the complete refining process, a part of which its competitor omits in manufacturing the
“off” sugar.
Upon consideration of the above allegations, the Commission, having instituted an investigation, and
shortly thereafter the corporation complained of having issued a notice to the trade announcing that it had
discontinued the sale of the “off” brand of sugar, and the applicant requesting to be permitted to withdraw
its application, and the corporation complained of assuring the Commission that it had discontinued the
sale of sugar branded in the manner complained of and had no intention of resuming the sale of this
package: Held, That the method of competition complained of having been permanently discontinued, it
does not appear to the Commission that a proceeding by it in respect thereof would be to the interest of
the public.
2. Public interest--Competitive method discontinued.--On application for the issuance of a
complaint, it appeared that a manufacturer engaged in inter-

52

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

53

state commerce issued a publication in which, under the guise of trade news, misinformation of a character
unfair and detrimental to the applicant’s business was circulated. Upon investigation by the Commission
the applicant advised that the use of the alleged unfair method had been discontinued and the party
complained of assured the Commission that its policy had changed with a change of management and no
such practice would in the future be engaged in either against the applicant or any other competitor. Held,
That the method of competition complained of having been permanently discontinued, it does not appear
to the Commission that a proceeding by it in respect thereof would be to the interest of the public.
3. Public interest--Competitive method discontinued.--On application for the issuance of a
complaint, it appeared that a typewriter rebuilding company engaged in interstate commerce had circulated
among dealers in various States a letter falsely stating that a competitor’s factory in the Middle West had
been removed to the East, and that for this reason many of its customers in Central and Western States
would make new arrangements for obtaining typewriters. The party complained of subsequently advised
the Commission that the statement when made was believed to be true. It also sent a letter of retraction
to all dealers receiving the first communication, and assured the Commission of its readiness to take any
further action deemed necessary. The applicant, being advised of these facts, suggested that no further
action be taken. Held, That the method of competition complained of having been permanently discontinued, it does not appear to the Commission that a proceeding by it in respect thereof would be to the
interest of file public.
4. Public interest--Competitive method discontinued.--On application for the issuance of a
complaint, it appeared that a manufacturer engaged in interstate commerce sent out a printed circular
containing an alleged letter to it by a dissatisfied customer of tile applicant, disparaging tile quality of
applicant’s product, which letter the applicant charged was fictitious. Upon investigation, the Commission
received assurances from the concern complained of that it had discontinued the publication of the circular
in question, and that in future it would not in its advertising matter refer in any way to the products of its
competitors. Held, That the method of competition complained of having been permanently discontinued,
it does not appear to the Commission that a proceeding by it in respect thereof would be to the Interest
of the public.
5. Public interest-Competitive method discontinued.--On application for flue issuance of a
complaint, it appeared that an association of wagon peddlers, competing with a jobber, had, by threats of
boycott, prevailed on a manufacturing engaged in interstate commerce to refuse to sell to such jobber.
Shortly after an investigation was started the commission was advised by the jobber flint the manufacturer
had resumed selling to it. Assurances were also given the Commission by the manufacturer that the jobber
would not in future be denied the privilege of buying from it by reason of the threatened boycott. Held,
That the matter having been satisfactorily adjusted as between the parties, it does not appear to the
Commission that a proceeding by it in respect thereof would be to the interest of the public.
6. Exclusive territory--Refusal to sell.--On application for the issuance of a complaint, it appeared
that a manufacturer engaged in interstate commerce having designated an exclusive dealer in a certain
local territory, refused to sell to another dealer within this territory. It further appeared that such exclusive
dealer was under no obligation to refrain from dealing in the products of other manufacturers of the same
commodity. Held, That neither the Federal Trade Commission Act nor the Clayton Act prohibits
manufacturers selling their product exclusively through one dealer in a given territory. A refusal to sell
others in such territory, under such circumstances, is not unlawful.
7. Manufacturers engaged in interstate commerce, irrespective of the size of their business, and
all wholesalers so engaged, subject to Clayton Act.--On inquiry: Held, That all manufacturers engaged
in interstate commerce, irrespective of the size of their business, and all jobbers or wholesalers thus
engaged, are subject to the provision’s of the Clayton Act.
8. The right of one manufacturer engaged in interstate commerce to buy out a competitor, and
jurisdiction of the commission in such matters.--On inquiry as to the right of one manufacturer to buy
out a competitor in the same line of business: Held, That the only jurisdiction of the Commission in
respect of such transactions is to enforce the provisions of section 7 of the Clayton Act prohibiting the
acquisition by any corporation engaged in interstate commerce of

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

where the tendency of such acquisition may be to substantially lessen competition between such two
corporations, or to restrain interstate commerce, or to create a monopoly; and also possibly to enforce
section 5 of the Federal Trade Commission Act, if such purchase either of property or of capital stock in
connection with other circumstances might constitute an unfair method of com petition. Held, also, That
the mere purchase of the property of such competitor other than capital stock is not prohibited by the
Clayton Act or the Federal Trade Commission Act.
As to the validity of such purchase of property or capital stock under the Sherman Act, the Commission
expresses no opinion.
9. Exclusive agency.--On Inquiry by a piano manufacturer whether the following clause in a
“consignment agreement” is in contravention of the Clayton Act, to wit:
Item 3. The factor shall offer, sell, or lease the pianos consigned to him by the consignor only
to persons residing in the counties of_____ in the State of______, and shall not sell nor lease,
during the life of this contract, any other pianos than those consigned by the said (piano
manufacturer) .
Held, It appearing that the “consignment agreement” does not provide for a sale or lease of the goods
of the principal to the person designated as “factor,” but only for the establishment of an agency for the
sale of the goods of the principal, therefore the use of such clause does not appear to be in violation of section 3 of the Clayton Act.
10. Direct selling.--On application for the issuance of a complaint, it was alleged that certain mining
operators were selling their product direct to consumers at wholesale prices, and coercing retail dealers
into handling their product, either by threats to sell or by temporary arrangements for selling their product
direct to consumers. Upon investigation by the Commission, it appeared that the operators were in fact
selling their product direct to consumers, but that this method of competition was not used for purposes
of coercion but was necessary in order to keep their product on the market. Held, That the sale by a mining
operator of his product direct to the consumer is not of itself an unfair method of competition.
11. Practice-Information respecting alleged violation of law submitted by parties not directly
interested.--On inquiry : Held, That the fact that a party complaining to the Commission has no direct
interest and acts without specific authority from the parties alleged to be injured will not prevent the
Commission from taking action if the matter presented is one properly within its jurisdiction. It is the
evident purpose of the law that action by the Commission should be taken regardless of the source of its
information when it is as reason to believe that there is a violation of a law which it is empowered to
enforce and that a proceeding by it in respect thereof would he to the interest of the public.
12. Public interest--Violation of State statutes.--On application for the issuance of a complaint it
appeared that the commissioners of a certain county had appointed an employee of a bridge company to
the position of county civil engineer, and that this situation made it possible for the company to secure information respecting the letting of bridge work which was not available to competing companies. It
appears that the State law prohibits such engineer from being interested, directly or indirectly, in any
contract for the construction of bridges under his supervision. Held, That as the condition complained of
may he corrected by resort to a State statute a proceeding will not be instituted in the absence of important
considerations of public interest.
13. Exclusive territory.--On inquiry by a manufacturer whether section 3 of the Clayton Act is
violated by a contract containing the following clause:
In consideration of exclusive sale of your goods in_____ from date of this contract to March 1,
191__,________ agree to neither sell your goods outside of the territory heretofore reserved to,
directly or indirectly, under penalty of paying all damages resulting from a violation of this clause
and cancellation of this contract at the option of the manufacturer; nor to countermand this order
except on payment to_________ Manufacturing Co., as liquidated damages, 20 per cent of the net
amount of goods hereby purchased.
Held, That section 3 of the Clayton Act does not prohibit manufacturers selling their product
exclusively through one dealer in a given territory and requiring the dealer not to sell their product outside
of the territory assigned.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

55

14. Refusal to sell.--On application for the issuance of a complaint, it appeared that certain
manufacturers, pursuant to their established sales policy of selling only to local retail dealers, refused to
sell to the applicant, a retail dealer doing business principally by mail, a certain commodity for shipment
direct from the mills to consumers in a state where the applicant maintained no place of business. On
investigation by the Commission it appeared that there was no agreement or understanding among the
manufacturers complained of to prevent the applicant or others doing a similar business, by refusal to sell
or otherwise, from securing this commodity, nor did it appear that such manufacturers had been coerced
or intimidated by retailers affected by the competition of the applicant. Held, That, under the
circumstances, a refusal of a manufacturer to sell to the applicant for direct shipment from the mill to
territory covered by local dealers is not a violation of any law which the commission is authorized to
enforce. Whether a refusal to sell under other circumstances is contrary to the provisions of the Clayton
Act or the Federal Trade Commission Act the Commission does not now decide.
15. Exclusive agency--Exclusive territory--Refusal to sell.--On application for the issuance of a
complaint, it appeared that several manufacturers, having appointed exclusive agents or distributors in a
given place, refused to sell to another dealer at the same point. Held, That neither the Clayton Act not the
Federal Trade Commission Act prohibits manufacturers establishing exclusive agencies or assigning
exclusive territory to dealers. Under such circumstances a refusal to sell to others than such agents or
distributors is not unlawful under these acts.
16. Practice-Charges not sustained on investigation.--On application for the issuance of a complaint,
it was charged by a packer of canned clams that a competitor, in order to drive the applicant out of
business, bid up the price of fresh clams to such an extent as to make the business unprofitable. The
applicant, when requested, failed to submit further information, and an investigation by the Commission
did not substantiate the charges made. Held, That the Commission, having no reason to believe that the
party complained of has been or is using the alleged unfair method of competition, will not proceed
further.
17. Corporate name--Private rights--Public interest.--On application by a corporation for the
issuance of a complaint, it was alleged that one of its stockholders, whose name had been adopted by the
applicant as part of its corporate name, had formerly been a stockholder in a competing corporation and
had then permitted the latter to use his name as part of its corporate name, but that after the withdrawal
of said stockholder from the competing corporation it had, in violation of an alleged agreement between
one of its officers and said stockholder, retained his name in its corporate name, to the injury of the
applicant. Held, That as the application presents questions concerning purely private rights, in which the
interest of the public is quite remote and indirect, it does not appear to the Commission that a proceeding
in respect thereof would be to the interest of the public.
18. Refusal to sell-Exclusive agency.--On inquiry: Held, That the Clayton Act does not prohibit
manufacturers establishing exclusive sales agencies in c~tam territory and selling their product in such
territory only through such agencies. A refusal to sell to others in such territory, where such agency has
been established, is therefore not unlawful. Whether a mere refusal to sell under any circumstances is
contrary to the provisions of the Clayton Act; or the Federal Trade Commission Act the Commission does
not now decide.
19. Pipe lines jurisdiction.--On application for the issuance of a complaint as to methods of a pipe line
for the transportation of oil between the States : Held, That the Commission has no jurisdiction in the
premises, and that the matter should be referred to the Interstate Commerce Commission.
20. Exclusive territory--Refusal to sell.--On application for the issuance of a complaint, it appeared
that a manufacturer engaged in Interstate commerce assigned exclusive territory to jobbers of his product
in various States and refused to sell to the applicant, a competing jobber. Held, That the Federal Trade
Commission Act and the Clayton Act do not prohibit manufacturers selling their product exclusively
through the dealer in a given territory. A refusal to sell to others in such territory under such
circumstances Is therefore not unlawful. Whether a mere refusal to sell under any circumstances or for
any reasons is contrary to the provisions of the Clayton Act or the Federal Trade Commission Act the
Commission does not now decide.

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ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

21. Exclusive agency--Exclusive territory--Refusal to sell.--On application for the issuance of a
complaint, it appeared that a manufacturer, engaged in interstate commerce, having selected an exclusive
agent or distributing dealer in certain territory, refused to sell to another dealer within this territory. Held,
That neither the Federal Trade Commission Act nor the Clayton Act prohibits manufacturers establishing
exclusive agencies or assigning exclusive territory to dealers. Under these circumstances a refusal to sell
to others than such agents or distributors is therefore not unlawful under these acts.
22. Railroads--Jurisdiction.--On application for the issuance of a complaint as to abandonment by
an interstate railway company of part of a branch line and its purpose to abandon more of it: Held, That
the Commission has no jurisdiction of the subject matter of this complaint.
23. Interstate commerce--Jurisdiction.--On inquiry whether a local merchant in offering an
automobile free to the customer drawing a specified number is practicing an unfair method of competition:
Held, That, as interstate commerce is not involved, the Commission has jurisdiction to determine whether
or not the act complained of is unlawful.
24. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, a retail dealer
alleged that a competitor, engaged in business in the same city, sold goods below the price at which the
applicant could purchase them. Held, That, as interstate commerce is not involved, the Commission has
no jurisdiction to determine whether or not the practice complained of is unlawful.
25. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, it appeared
that a retail dealer was selling a well-known make of underwear much below the customary price, to the
injury of a jobber in the same city who sold these goods to the local retail trade. Held, That, as interstate
commerce is not involved, the Commission has no jurisdiction to determine whether or not the practice
complained of is unlawful.
26. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, it appeared
that two competitors of the applicant, located in the same city, sold lumber below cost. The sales of all
parties at interest were confined wholly within one State. Held, That, as interstate commerce is not
involved, the Commission has no jurisdiction to determine whether or not the practice complained of is
unlawful.
27. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, it was alleged
by a retail dealer that other dealers in the community were using unfair methods in competition with him.
Held, That, as interstate commerce is not involved, the Commission has no jurisdiction to determine
whether or not the methods complained of are unlawful.
28. Bank--Jurisdiction.--On inquiry respecting the refusal of banks to lend money on a particular kind
of collateral: Held, That the facts do not present a case within the jurisdiction of the Commission, banks
being expressly excepted from the provisions of section 5 of the Federal Trade Commission Act.
29. Practice where suggestion of violation of decree of Federal court is made.--On application for
the issuance of a complaint, it appeared that the practice complained of might be in violation of a decree
against the party charged with these practices, which decree was entered in a Federal court. Held, That the
matter should be, in this instance, referred by the Commission to the Department of Justice. Each matter
of this kind will be disposed of upon its own facts.
30. Jurisdiction--Deprivation of rights by municipal ordinance.--On inquiry: Held, That the
Commission has no jurisdiction to pass upon the claim of an electrical engineer that, by town ordinance,
his right there to carry on his work is unduly abridged.
31. Interstate Commerce--Jurisdiction--Refusal to sell.--On inquiry: Held, That where a jobber or
manufacturer refuses to sell to retailer in the same State, and no interference with interstate commerce
appears to be involved, the Commission has no jurisdiction to act in the premises.
32. Interstate commerce--Labor unions--Jurisdiction.--On application for the issuance of a
complaint respecting tire enforcement of certain local labor-union rules: Held, That as the labor union is
not engaged in commerce, the Commission has no jurisdiction to determine whether or not the practice
complained of is unlawful.
33. Refusal to manufacture and sell--Competition--Jurisdiction.--On application for the issuance
of a complaint, it appeared that a company engaged in the manufactured of bottle crowns refused to make
certain crowns for the appli-

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

57

cant, assigning as the reason that the crowns ordered would constitute an infringement of the trade-mark
of another customer, a competitor of the applicant. It did not appear that the refusal complained of was
induced by the competitor. Held, That, as the facts do not disclose a method of competition, the
Commission is without jurisdiction to act in the premises.
34. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, it appeared
that the proprietors of certain small coal mines refused to sell to a retail dealer in the immediate vicinity
except through a competing dealer and, through the purchase of other near-by mines, cut off his supply
of coal. Held, That, as interstate commerce is not involved, the Commission has no jurisdiction to
determine whether or not the practice complained of is unlawful.
35. Interstate commerce--Jurisdiction.--On application for the issuance of a complaint, it appeared
that a retail dealer competing with the applicant, both doing business only within the State, discriminated
in price between different localities in the sale of a commodity. Held, That, as interstate commerce is not
involved, the Commission has no jurisdiction to determine whether or not the practice complained of is
unlawful.
36. Procedure--Combinations in restraint of trade.--On application for the issuance of a complaint,
suggesting unlawful combinations by companies engaged in interstate commerce in restraint of such
commerce, no unfair method of competition being alleged: Held, That the matter thus involved should be
referred to the Department of Justice.
37. Clayton Act-Section 3-Pending litigation.--On application for the issuance of a complaint,
alleging a violation of section 3 of the Clayton Act, where it appeared that the party complained of is the
defendant in a suit brought by the Department of Justice, involving the same questions of law and fact:
Held, That a proceeding by the Commission at this time would not be to the interest of the public.
38. Interstate commerce--Jurisdiction--Competition.--On application for the issuance of a complaint,
it appeared that a retail dealer, doing business wholly within one State, advertised the product of the
applicant, a manufacturer engaged in interstate commerce, at less than the price at which the latter sold
it at wholesale. Held, That, as in this instance, the method of competition complained of is used by a
concern engaged solely in intrastate commerce, and only against local competitors not engaged in
interstate commerce, the Commission has no jurisdiction.
39. Manufacture and sale of repair parts--Unpatented articles.--On application for the issuance of
a complaint, it appeared that certain foundrymen made and sold repair parts for stoves manufactured by
the applicant. It was not claimed that the stoves were patented or that the foundrymen led the public to
believe that the parts were made by the applicant. Held, That under such circumstances the making and
selling of repair parts for unpatented articles, by others than the original manufacturer, is not a violation
of section 5 of the Federal Trade Commission Act.
40. Interstate commerce--Local boycott--Jurisdiction.--On application for the issuance of a
complaint, it appeared that certain advertisers in a local newspaper, and some of its subscribers, all
apparently residing in the community where it was published, combined together and threatened to
withdraw their patronage unless the management of the paper changed its policy. Held, That the facts
alleged do not disclose the violation of any law which the Commission has jurisdiction to enforce.
41. Price discrimination by absorption of freight charges--Alleged discrimination discontinued-Clayton Act.--Upon application by a corporation engaged in the manufacture on the Pacific coast of
sanitary enameled iron ware, for the issuance of a complaint for violation of section 2 of the Clayton Act,
it was alleged by the applicant that a competition whose factories were located in the East, was selling
certain of its goods on the Pacific coast at a lower price than it was selling the same goods in other parts
of the country, cost of transportation being considered, and that this discrimination in price was made for
the purpose of, and would, if continued, have the effect of injuring or destroying the business of the
applicant. Upon investigation by the Commission it appeared that, previous to the time the applicant
entered into active competition with , the corporation complained of sold its products in Pacific coast
territory at its eastern prices, and absorbed a portion of the freight charges, the balance of the freight
charges being paid by the purchaser. After the applicant had established its business and entered into
active competition

58

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

with it the corporation complained of adopted the policy of selling certain staple articles, in which there
was competition from the applicant, at a delivered price, absorbing all freight charges. The effect of such
freight absorption by the corporation complained of was to make the price charged by it for those staple
articles, in the territory where the applicant competed with it, substantially lower than the prices charged
by it for the same articles in territories where the applicant did not compete with it. Before the completion
of the investigation the corporation complained of notified the Commission that it had adopted a new price
list for the Pacific coast. It further appeared that, after the application was made to the Commission and
while the investigation was in progress, there had been a substantial reduction in railroad rates on
shipments of enameled iron ware to the Pacific coast. The new price list, considered together with this
reduction in freight rates, brought the Pacific coast prices of the corporation complained of substantially
to the level of the prices charged by it for the same articles ill territory where the applicant did not compete
with it, and, according to a statement filed with the Commission by the applicant, thereby removed its
cause of complaint. Held, That while the Commission is authorized to issue a complaint where it shall
have reason to believe that any person is violating or has violated any of the provisions of section 2 of the
Clayton Act, it does not consider it necessary or advisable In the present case to issue such complaint,
since the discrimination complained of has been discontinued.
42. Refusal to sell--Adjustment between parties--Pendency of suit by Government.--On application
for the issuance of a complaint, it appeared that a corporation engaged in interstate commerce in the
manufacture and sale of sirups refused to sell its products to a wholesale grocer in another State because
this grocer advertised and sold these products at prices lower tuna those made by other jobbers, which
conduct was unsatisfactory to the manufacturing company. After the Commission had instituted an
investigation, but before its completion, the complaining party notified the Commission that the matter
had been amicably adjusted to its entire satisfaction, and that it desired that the application should be
dismissed. It also appeared that there is pending a suit filed by the Government against the manufacturing
corporation, brought under the Sherman Antitrust Act. Held, That under all the circumstances, the matter
having been thus satisfactorily adjusted as between the parties and the Government having brought suit
under the Sherman Act, it does not appear to the Commission that a complaint should be issued.
43. Price discrimination--Agency.--On application of a jobber of iron pipe for the issuance of a
complaint for violation of section 2 of the Clayton Act, it was alleged that a manufacturer of such pipe
discriminates in prices of such product in favor of a certain large jobber. Upon investigation of such
charges it appears that such jobber sells the product of the manufacturer at prices fixed by the
manufacturer under a contract of agency on a commission basis. Held, That as the contract is not one of
sale, but of agency, it does not come within the provisions of section 2 of the Clayton Act.
44. Discrimination--Charges not sustained on investigation.--On application for the issuance of a
complaint, it was charged that a company engaged in the manufacture and sale in interstate commerce of
paving brick discriminated in price between purchasers indifferent cities and between different purchasers
in the same city. Upon investigation, the concern complained of denied the practices charged and the
Commission was unable to obtain any evidence sustaining the charges. Held, That the Commission, having
no reason to believe that the party complained of has been or is practicing the alleged discrimination, will
not proceed further, and the application is therefore denied.
45. Refusal to supply films to more than one exhibitor in same city.--On application for the issuance
of a complaint, it was alleged that a motion-picture distributing company refused to supply the applicant
with films on the ground that another exhibitor in the same city has been given the exclusive right to
exhibit the films of the distributing company. Held, That under ordinary circumstances, and in the absence
of intent thus to accomplish an unlawful purpose, neither the Federal Trade Commission Act nor the
Clayton Act prohibits a corporation dealing exclusively with one firm in a given territory. Upon the facts
presented a refusal to supply others in such territory is therefore not unlawful.
46. Infringement of registered trade-mark--Public Interest.--On application for the issuance of a
complaint it was alleged that certain registered trade-marks of the applicant were being infringed. It
appears that Congress has

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

59

provided a special Federal remedy for the redress of alleged infringements of registered trade-marks (sec.
17, Trade-Mark Act, 33 U. S. Stats. at Large, 775; and par. 7, sec. 24, Judiciary Act, 36 U. S. Stats. at
Large, 1092) , whereby unusual advantages are given a complainant by being permitted to bring suit in
a Federal court irrespective of citizenship of parties or of amount of damages sought. Held, That where
the conditions complained of involve nothing more than a question of infringing registered trade-marks,
a proceeding will not be instituted in the absence of important considerations of public interest.
47. Misbranding--Competitive method discontinued.--On application for the issuance of a
complaint, it appeared that the applicant was engaged in manufacturing an article in which deer hair is
used, and selling the same in interstate commerce, and that a competitor manufactured and sold similar
articles marked “100% Deer Hair,” whereas in fact they contained approximately 50 per cent goat hair
which was worth considerably less than deer hair. After an investigation by the Commission the company
complained of discontinued the practice and assured the Commission that it would not be resumed. In
view of the fact that the practice complained of has been permanently discontinued, it is Held, That further
action by the Commission would not be to the interest of the public.
48. Unfair competition--Refusal to sell.--On application for the issuance of a complaint, it was alleged
that a corporation engaged In the manufacture and sale of goods in interstate commerce refused to sell to
the applicant certain commodities manufactured by it. It was further alleged that this refusal to sell was
made at the direction of an officer of the corporation complained of, who was also the president of another
corporation competing with the applicant. On investigation it appeared that the refusal to sell was made
on personal grounds and was not made for the purpose, and did not have the effect, of restraining interstate
commerce. Held, That a refusal to sell, made solely for personal reasons, without the purpose or effect of
restraining interstate commerce, is not a violation of any law which the Commission is authorized to
enforce.

EXHIBIT 5.
AN ACT TO PROMOTE EXPORT TRADE, AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress
assembled, That the words “export trade” wherever used in this Act mean solely trade or commerce in
goods, wares, or merchandise exported, or in the course of being exported from the United States or any
Territory thereof to any foreign nation; but the words “export trade” shall hot be deemed to include the
production, manufacture trading in, or marketing within the United States or any Territory thereof of such
goods, wares, or merchandise, or any act in the course of such production or manufacture.
That the words “trade within the United States” wherever used in this Act mean trade or commerce
among the several States or in any Territory of the United States, or of the District of Columbia, or
between any such Territory and another, or between any such Territory or Territories and any State or
States or the District of Columbia, or between the District of Columbia and any State or States.
That the word “association” wherever used in this Act means any corporation or combination, by
contract or otherwise, of two or more persons, partnerships, or corporations.
SEC. 2. That nothing contained in the Act entitled “An Act to protect trade and Commerce against
unlawful restraints and monopolies,” approved July second, eighteen hundred and ninety, shall be
construed as declaring to be illegal an association entered into for the sole purpose of engaging in export
trade and actually engaged solely in such export trade, or an agreement made or act alone in the course
of export trade by such association, provided such association, agreement, or act is not in restraint of trade
within the United States, and does not restrain the export trade of the United States.
SEC. 3. That nothing contained in section seven of the Act entitled “An Act to supplement existing laws
against unlawful restraints and monopolies, and for other purposes,” approved October fifteenth, nineteen
hundred and fourteen, shall be construed to forbid the acquisition or ownership by any Corporation of the
whole or any part of the stock or other capital of any Corporation organized solely for flue purpose of
engaging In export trade, and actually engaged solely in such export trade, unless the effect of such
acquisition or ownership may be to restrain trade or substantially lessen competition within the United
States.
SEC. 4. That the prohibition against “unfair methods of competition” and the remedies provided for
enforcing said prohibition contained in the Act entitled “An Act to Create a Federal Trade Commission,
to define its powers and duties, and for other purposes,” approved September twenty-sixth, nineteen
hundred and fourteen, shall be Construed as extending to unfair methods of Competition used In export
trade against Competitors engaged In export trade, even though the acts constituting such unfair methods
are done without the territorial jurisdiction of the United States.
SEC. 5. That every association now engaged solely in export trade, within sixty days after the passage
of this Act, and every association entered into hereafter which engages solely in export trade, within thirty
days after its creation, shall file with the Federal Trade Commission a verified written statement setting
forth the location of its offices or places of business and the names and addresses of all its officers and of
all its stockholders or members and if a Corporation, a copy of its certificate or articles of incorporation
and by-laws, and if unincorporated, a copy of its articles or contract of association, and on the first day
of January of each year thereafter it shall make a like statement
60

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION.

61

of the location of its offices or places of business and the names and addresses of all its officers and of all
its stockholders or members and of all amendments to and changes in its articles or certificates of
incorporation or in its articles or contracts of association and of all contracts, agreements, and
understandings had with any foreign or domestic association in regard to the conduct of or practices in
foreign trade. Any association which shall fail to do so shall not have the benefit of the provisions of
section two and section three of this Act, and It shall also forfeit to the United States the sum of $100 for
each and every day of the continuance of such failure, which forfeiture shall be payable into the Treasury
of the United States, and shall be recoverable in a civil suit in the name of the United States brought in
the district where the association has its principal office, or in any district in which it shall do business.
It shall be the duty of the various district attorneys, under the direction of the Attorney General of the
United States, to prosecute for the recovery of the forfeiture. The costs and expenses of such prosecution
shall be paid out of the appropriation for the expenses of the courts of the United States.
Passed the House of Representatives September 2, 1916.

EXHIBIT 6.
APPROPRIATIONS FOR FEDERAL TRADE COMMISSION, FISCAL
YEAR ENDED JUNE 30, 1916.
Federal Trade Commission, 1916:
For five commissioners, at $10,000 each; secretary, $5,000; in all, $55,000.
To continue all of such services and employments provided for the Bureau of
Corporations during the fiscal year nineteen hundred and fifteen, except the offices
of commissioner and deputy commissioner, as in the discretion of the Federal Trade
Commission may be required for its purposes and at the rates of compensation
specified or authorized therefor, and for such additional clerks and others as are
authorized in and at the rates of compensation fixed by section one hundred and sixtyseven of the Revised Statutes of the United States; for necessary contingent and
miscellaneous expenses, including per diem in lieu of subsistence when allowed
pursuant to section thirteen of the sundry civil appropriation act approved August
first, nineteen hundred and fourteen, $300,000.
The space now occupied by the Bureau of Corporations in the building rented for
use of the Department of Commerce is transferred to and for the accommodation of
the Federal Trade Commission, and the Secretary of Commerce is directed to transfer
to said commission any additional rooms or space in said building that may be
required for its use.
Estimates in detail for all expenditures under tile Federal Trade Commission for the fiscal
year nineteen hundred and seventeen, and annually thereafter, shall be submitted to Congress
in the annual Book of Estimates. - - Sundry civil act
March 3, 1915 _______________________________________________$355, 000.00
Printing and binding____________________________________________$15, 000.00
62

EXHIBIT 7.
EXPENDITURES OF FEDERAL TRADE COMMISSION, FISCAL YEAR
ENDED JUNE 30, 1916.
Annual leave------------------- $18,860.23
Sick leave---------------------4,197.67
Administrative:
General----------office-62,659.60
Do-----------field-18,828.67
Miscellaneous--office-74.66
Purchase and supplies------4,900.41
Mail and files----------------8,239.69
Labor (messenger service)-5,040.68
Docket------------------------2,932.14
Contingent expenses--------10,843.93
Corporation reports--office22,765.99
Do-----------------field-443.02
Library-----------------office5,850.16
Trade association--------do-3,659.71
Uniform accounting-----do-4,982.75
Do------------------field1,071.34
Advice requests:
Economic--------office-227.89
Do-------------field-138.54
Legal-------------office-2,647.75
Do-------------field-127.02
Beet Sugar-------------office818.24
Conflict of foreign corporation
laws----------------------455.00
Corporate taxation------do--583.57
Efficiency of trusts-----do--308.21
Foreign trades-----------do--44,481.36
Do-----------------field-5,625.66
Foreign trusts---------field--30.53
Fertilizer-----------------do--4,987.11
Do----------------field--264.25
Interlocking directorates--office733.41

Informal complaints:
Economics----------office-- $2,375.45
Do-------------field--- 1,618.21
Legal-----------------office-- 32,782.57
Do-------------field--- 7,058.64
Lumber--------------------office-462.73
Miscellaneous:
Economic-------------do----199.70
Legal-------------------do---- 17,307.11
Oklahoma oil---------------do---- 38,906.80
Do---------------------field--- 11,619.44
Resale prices---------------office- 3,170.41
Do---------------------field--430.87
Trust legislation-----------office- 13,686.60
Details-----------------------do---128.76
Disbursements and
accounts--------------office-541.61
Publications---------------do-----460.93
Latin American tariffs---do------ 2,174.00
Do---------------------field--- 5,125.73
Sisal------------------------office-26.81
Formal complaints,
legal------------------office-- 1,354.99
Do------------------field--- 1,316.91
Print paper----------------office-550.43
Do--------------------field--315.90
Coal------------------------office-807.60
Do---------------------field--656.85
Formal complaints,
economic------------office-19.17
-----------Total------------------------ 379,927.41

63