Court Opinion

ID: 9418433
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:25:18.268592+00
Date Added: 2024-06-11T17:22:02.929300
License: Public Domain

Mr. Justice Brandeis
dissenting, with whom Mr. Justice Clarke concurs.
First. The court disposes of the case on a question of pleading. This, under the circumstances, is contrary to established practice. The circumstances are these:
The pleading held defective is not one in this suit. It is the pleading by which was originated the proceeding before the Federal Trade Commission, an administrative tribunal, whose order this suit was brought to set aside. No suggestion was made in the proceeding before the Commission that the complaint was defective. No such obj ection was raised in this suit in the court below. It was not made here by counsel. The objection is taken now for the first time and by the court.
This suit, begun in the Circuit Court of Appeals for the Second Circuit, was brought to set aside an order of the Federal Trade Commission. Before the latter the matter involved was thoroughly tried on the merits. There was a complaint and answers. Thirty-five witnesses were examined and cross-examined. A report of proposed findings as to facts was- submitted by the Examiner and-exceptions were filed thereto. Then, the case was heard before the Commission, which made a finding of facts, stated its conclusions as to the law, and ultimately issued the order in question. The proceedings occupied more *430than sixteen months. The report of them fills four hundred pages of the printed record. In my opinion it is our duty to determine whether the facts found by the Commission are sufficient in law to support the order; and, also, if it is questioned, whether the evidence was sufficient to support the findings of fact.
Second. If the sufficiency of the complaint is held to be open for consideration here, we should, in my opinion, hold it to be sufficient. . The complaint was filed under § 5 of the Federal Trade Commission Act which declares unlawful “unfair methods of competition in commerce empowers the Commission to prevent their use; and directs it to issue and serve “a complaint stating its charges in that respect” whenever it has reason to believe that a concern “has been or is using” such methods. The function of the complaint is solely to advise the respondent of the charges made so that he may have due notice and full opportunity for a hearing thereon. It does not purport to set out the elements of a crime like an indictment or information, nor the elements of a-cause of action like a declaration at law or a bill in equity. All that is requisite in a complaint before the Commission is that, there be a plain statement of the thing claimed to be wrong so that the respondent may be put upon his defence. The practice of the Federal Trade Commission in this respect, as in many others, is modelled on that which has been pursued by the Interstate Commerce Commission for a generation and has been sanctioned by this as well as the lower federal courts. United States Leather Co. v. Southern Ry. Co., 21 I. C. C. 323, 324; Clinton Sugar Refining Co. v. C. & N. W, Ry. Co., 28 I. C. C. 364, 367; Stuarts Draft Milling Co. v. Southern Ry. Co., 31 I. C. C. 623, 624; New York Central, etc., R. R. Co. v. Interstate Commerce Commission, 168 Fed. Rep. 131, 138-439; Dickerson v. Louisville & Nashville R. R. Co., 187 Fed. Rep. 874, 878; Texas & Pacific Ry. Co. v. Interstate Commerce Commission, 162 *431U. S. 197, 215; Cincinnati, Hamilton & Dayton Ry. Co. v. Interstate Commerce Commission, 206 U. S. 142, 149.
The complaint here under consideration stated clearly that an unfair method of competition had been used by respondents, and specified what it was, namely, refusing to sell cotton ties unless the customer would purchase with each six ties also six yards of bagging. The complaint did not set out the circumstances which rendered this tying of bagging to ties an unfair practice. But this was not necessary. The complaint was similar in form to those filed with the Interstate Commerce Commission on complaints to enforce the prohibition of “unjust and unreasonable charges” or of “undue or unreasonable preference or advantage” which the Act to Regulate Commerce imposes. It is unnecessary to set forth why the rate specified was unjust or why the preference specified is undue or unreasonable, because these aie matters not of law but of fact to be established by the evidence. Pennsylvania Company v. United States, 236 U. S. 351,361. So far as appears neither this nor any other court has ever held that an order entered by the Interstate Commerce Commission may be set aside as void, because the complaint by which the proceeding was initiated, failed to set forth the reasons why the rate or the practice complained of was unjust or unreasonable; and I cannot see why a different. rule should be applied to orders of the Federal Trade Commission issued under § 5.1
*432In considering whether the complaint is sufficient, it is necessary to bear in mind the nature of the proceeding under review. The proceeding is not. punitive. The complaint is not made with a view to subjecting the respondents to any form of punishment. It is not remedial. The complaint is not filed with a view to affording compensation, for any injury alleged to have resulted from the matter charged, nor with a view to protecting individuals from any such injury in the future. The proceeding is strictly a preventive measure taken in the interest of the general public'. And what it is brought to prevent is.not the commission of acts of unfair competition, but the pursuit of unfair methods. Furthermore, the order is not self-executory. Standing alone it is only informative and advisory. The Commission cannot enforce it. If not acquiesced in by the respondents the Commission may apply to the Circuit Court of Appeals to enforce it. But the Commission need.not take such action; and it did not do so in respect to the order here in question. Respondents may, if they see fit, become the actors and ask to have the order set aside. That is what was done in the case at bar.
The proceéding is thus a novelty. It is a new device in administrative machinery, introduced by Congress in the year 1914, in the hope thereby of remedying conditions in business which a great majority of the American people regarded as menacing the general welfare, and which for more than a generation they had vainly attempted to remedy by the ordinary processes of law. It was believed that widespread and growing concentration in industry and commerce restrained trade and that monopolies were acquiring increasing control of business. Legislation designed to arrest the movement and to secure disintegration of existing combinations had been enacted by some of the States as early as 1889. In 1890 Congress passed the Sherman Law. It was followed by. much *433legislation in the States1 and many .official investigations. Between 1906 and 1913 reports were made by the Federal Bureau of Corporations of its investigations into the petroleum industry, the tobacco industry, the steel industry and the farm implement industry. A special committee of Congress investigated the affairs of the .United States Steel Corporation. And in 1911 this court rendered its decision in Standard Oil Co. v. United States, 221 U. S. 1, and in United States v. American Tobacco Co., 221-U. S. 106. The conviction became general in America, that the legislation of the past had been largely ineffective. There was general agreement that further legislation was desirable. But' there was a clear división of opinion as to .what its character should be. Many believed that concentration (called by its opponents monopoly) was inevitable and desirable; and these desired, that concentration should be recognized by law and be regulated. Others believed that concentration was a source of evil; that existing combinations could be disintegrated, if only the judicial machinery were perfected; and that further concentration could be averted by providing additional remedies, and particularly through regulating competition. The latter view prevailed in the Sixty-third Congress.2 *434The Clayton Act (October 15, 1914, c. 323, 38 Stat. 730) was framed largely with a view to making more effective the remedies given by the Sherman Law. The Federal Trade- Commission Act (September 26, 1914, c. 311, 38 Stat. 717) created an administrative tribunal, largely with a view to regulating competition.
Many of the duties imposed upon the Trade Commission had been theretofore performed by the Bureau of Corporations. That which was in essence new legislation was the power conferred by § 5. The belief was widespread that the great trusts had acquired their power, in the main, through destroying or overreaching their weaker rivals by resort to unfair practices.1 As Standard Oil rebates led to the creation of the Interstate Commerce Commission,2 other unfair methods of competition, which the investigations of the trusts had laid bare, led to the creation of the F'ederal Trade Commission. It was hoped that as the former had substantially eliminated rebates — the latter might put an end to all other unfair trade practices;— and that it might prove possible thereby to preserve the competitive system. It was a new éxperiment on old lines; and the machinery employed was substantially, similar.
In undertaking to regulate competition through the Trade Commission Congress (besides resorting to administrative as distinguished from judicial machinery) departed in two important, respects from the methods and measures theretofore applied in dealing with trusts and restraints of trade:
(1) Instead of attempting to inflict punishment for •having done prohibited acts, instead of enjoining the-*435continuance of prohibited combinations .and compelling disintegration of those formed in violation of law, the act undertook to preserve competition through supervisory action of the Commission. The potency of accomplished facts had already been demonstrated. The task of the Commission was to protect competitive business from further inroads by monopoly. It was to be ever vigilant. If it discovered that any business concern had used any practice which would be likely to result in public injury — because in its nature it would tend to aid or develop into a restraint of trade — -the Commission was directed to intervene, before any act should be done or condition arise violative of the Anti-Trust Act. And it should do. this by filing a complaint with a view to-a thorough investigation; and, if need be, the issue of an order. Its action was to be prophylactic. Its purpose in respect to restraints of trade was prevention of diseased business conditions, not cure. 1
*436(2) Instead of undertaking to define what practices should be deemed unfair,, as had been doné in earlier legislation, the act left the determination to the Commission.1 Experience with existing laws had taught that definition, being necessarily rigid, would prove embarrassing and, if rigorously applied, might involve great hardship, Methods of competition which would be unfair in one industry, under certain circumstances, might, when adopted in another industry, or even in the' same -industry under different circumstances, be entirely unobjectionable.2 *437Furthermore, an enumeration, however comprehensive, of existing methods of unfair competition must necessarily soon prove incomplete, as with new conditions constantly arising novel unfair methods would be devised and developed. In leaving to the Commission thé determination of the question whether the method of competition pursued'in a particular case was unfair, Congress followed the precedent which it had set a quarter of a century 'earlier, when by the Act to Regulate Commerce it conferred upon the Interstate Commerce Commission power to determine whether a preference or advantage given to a shipper or locality fell within the prohibition of an undue or unreasonable preference or advantage.1 See Pennsylvania Co. v. United States, supra, p. 361; Texas & Pacific Ry. Co. v. Interstate Commerce Commission, 162 U. S. 197, 219, 220. Recognizing that the question whether a method of competitive practice was unfair would ordinarily depend upon special facts, Congress imposed upon the Commission the duty of finding the facts; .and it declared that findings of fact so made (if duly, supported by evidence) were to be taken as final. The question whether the method of - competition pursued could, on those facts, reasonably be held by the Commission to constitute an unfair method of competition, being a question of law, was necessarily left open to jreview by the court. Compare Interstate Commerce Commission v. Diffenbaugh, 222 U. S. .42; Interstate Commerce Commission v. Baltimore & Ohio R. R. Co., 145 U. S. 263.
Third. Such a question of law is presented to us for decision; and it is this: Can the refusal by a manufacturer to sell his product to a jobber or retailer except upon condition that the purchaser will buy from him also his *438trade requirements in another article or articles, reasonably be found by the Commission to be an unfair method of competition under the circumstances set forth in the findings of fact? If we were called upon to consider the sufficiency of the complaint, and that merely, the question for our decision would be, whether the particular practice could, under ahy circumstances, reasonably be deemed an unfair method of competition. But as this suit to set aside the order of the Commission brings before us its findings of fact, we must determine whether these are sufficient to support their conclusion of law that the practice constituted “under the circumstances therein set forth, unfair methods of competition in interstate commerce, against other manufacturers, dealers and distributors . ’ . . in the material known as sugar bag cloth, and against manufacturers, dealers and distributors of the bagging known as rewoven bagging and second hand bagging, in violation of” the statute.
It is obvious that the imposition of such a condition is not necessarily and universally an unfair method; but that it may be such under some circumstances seems equally clear. Under the usual conditions of competitive trade the practice might be wholly unobjectionable. But the history of combinations has shown that what one may do with impunity, may have intolerable results when done by several in cooperation; Similarly, what approximately equal individual traders may do in honorable rivalry, may result in grave injustice and public injury, if done by a great corporation in a particular field of business' which it is able to dominate. In other words, a method of competition fair among equals may be very unfair if applied where there is inequality of resources.1 Without providing for those cases where tL > method of competition here involved would be unobjectionable, *439Massachusetts legislated against the practice, as early as 1901, by a statute (c. 478) of general application. Its highest court, in applying the law which it held to be constitutional, described the prohibited method as “unfair competition.” Commonwealth v. Strauss, 188 Massachusetts, 229; 191 Massachusetts, 545. Compare People v. Duke, 44 . N. Y. S. 336. The (Federal) Bureau of Corporations held the practice, which it described as “full-line forcing”, to be highly reprehensible.1 Congress, by § 3 of the Clayton Act, specifically prohibited the practice in a limited field under certain circumstances. An injunction against the practice has been included in several decrees in favor of the Government entered in cases under the Sherman Law.2 In the decree by which the American Tobacco Company was disintegrated pursuant to the mandate of this court, each of the fourteen companies was enjoined from “refusing to sell to any jobber any brand of any tobacco-product manufactured by it, except upon condition that such jobber shall purchase from' the vendor some other brand or product.also manufactured and sold by it. . . . ” United States v. American Tobacco Co., 191 Fed. Rep. 371, 429. The practice herein question is merely one form of the so-called “tying clauses” or “conditional requirements” which have been declared in a discerning study of the whole subject to be “perhaps the most interesting of any of the methods of unfair competition.” 3
The following facts found by the Commission, and which the Circuit Court of Appeals held were supported by sufficient evidence, show that the conditions in the *440cotton tie and bagging trade were in 1918 such that , the Federal Trade Commission could reasonably find that the tying cláuse here in, question, was an unfair method of competition: Cotton, Anierica’s.chief staple, is marketedm bales. To bale cotton steel ties and jute bagging are essential. The Carnegie Steel Company, a subsidiary of the United States Steel Corporation, manufactures so large a proportion of all such steel ties that it dominates the cotton tie situation in the United States and is able to fix and control the price of such ties throughout the country. The American Manufacturing Company manufactures about 45 per cent, of all bagging used for cotton baling; one other company about 20 per cent.; and the remaining 35 per cent. is. made up of second-hand bagging and a material called sugar-bag cloth.,- Warren, Jones & Gratz, of St. Louis, are the Carnegie Company’s solé, agents for selling and distributing steel ties. They are also the American Manufacturing Company’s sole agents for selling and distributing jute bagging in the cotton-growing section west of the ■ Mississippi;' ' By virtue. of their selling agency for the Carnegie Company, Warren, Jones & Gratz held a dominating and controlling position in the sale and, distribution of cotton , ties in the entire cotton-growing séction of the country, and thereby were in a position to force would-be purchasers of ties to also buy from thert. bagging manufactured by the American Manufacturing .Company. A great many merchants, jobbers and dealers in bagging and ties throughout the cotton-growing States were many times unable to procure ties from any other firm than Warren, Jones & Gratz. In many instances Warren, Jones & Gratz refused to sell ties unless the purchaser would also buy from them a corresponding amount of bagging, and such purchasers were oftentimes compelled to buy from them bagging manufactured by the. American Manufacturing Company in order to procure a sufficient supply of steel ties.
*441These are conditions closely resembling those under which “full-line forcing,” “exclusive-dealing requirements” or “shutting off materials, supplies or machines from competitors ” — well known methods of competition,, have been heid to be unfair, when practiced by concerns holding a preponderant position in the trade.1 .
Fourth. The Circuit Court of Appeals.set aside the order of the Commission solely on the ground that it was without authority to determine the merits of specific individual grievances, and that the evidence did' not support its finding that Warren, Jones & Gratz had “adopted and practiced the policy of refusing to sell steel ties to those merchants and dealers who wished to buy them from them unless such merchants and dealers would also buy from them a corresponding amount of jute bagging.” ■,
' The reason assigned by the Circuit Court of Appeals for so holding was that the evidence failed to show that the practice complained of (although acted on in individual cases by respondents) had become their “general practice.” But the power of the Trade Commission to prohibit an unfair method of competition found to have been used is not limited to cases where the practice had become general. What § 5 declares unlawful is not unfair competition. That had been unlawful before. What that section made unlawful were “unfair methods of competition ” ; that is, the method or means by which an unfair end might be accomplished. The Commission was directed to act, if it had reason to believe that an “unfair-method of competition in commerce ” has been or is being used. The purpose of Congress was to prevent any unfair method which may have been used by any concern in competition from becoming its general practice. It was only by stopping its use before it became a general prac*442tice, that the apprehended effect of an unfair method in suppressing competition by destroying rivals could be averted. As the Circuit Court of Appeals found that the evidence was sufficient to support the facts set forth above, ' and since on those facts the Commission could reasonably hold thát the method of competition in question was unfair under the circumstances, it had power under the act to issue the order complained of.
In my opinion the judgment of the Circuit Court of Appeals should be reversed.

 See Report Senate Committee on Interstate Commerce, June 13, 1914, 63d Cong., 2d sess., No. 597, p. 13: “It is believed-that the term ‘unfair competition’ has a legal significance which can be enforced by the commission and the courts, and that it is no more difficult to determine what is unfair competition than it is to determine what is a-reasonable rate or what is an unjust discrimination. The committee was of the opinion that it would be better to put in a general provision condemning unfair competition than to attempt to define the numerous unfair practices, such as local price' cutting, interlocking directorates, and holding companies intended to restrain substantial competition.”

 See Laws on Trusts and Monopolies. Compiled under direction of'the Clerk of the House Committee on the Judiciary, 63d Cong., by Nathan B. Williams. Revised January 10,1914; also Trust Laws and Unfair Competition (Federal) Bureau of Corporations, March 15,1915.

 See Report of Senate Committee on Interstate Commerce, June 13, 1914, 63d Cong., 2d sess., No. 597, p. 10, reporting the bill:
“Some would - found such" a Commission upon the theory that monopolistic industry is the ultimate result of economic evolution and that it should be so recognized and declared to be vested with a public interest and as such regulated by a commission. This contemplates even the regulation of prices. .Others hold that private monopoly is intolerable, unscientific, and abnormal, but recognize that a commission is a necessary adjunct to the preservation of competition and to . the practical enforcement of the law. ...
*434“The commission which is proposed by your committee in the bill submitted is founded upon the latter purpose and idea.”

 See “Unfair Competition,” by William S. Stevens, Political Science Quarterly (1914), p. 283; “The Morals of Monopoly and Competition” (1916), by H. B. Reed.

 See Railway Problems, by William Z. Ripley (1907), p. X.

 Senator Cummins, chairman of the committee which reported the bill, said (Cong. Rec., vol. 51, p: 11455):
“Unfair competition must usually proceed to great lengths and be destructive of competition before it can be seized and denounced by the anti-trust law. In other cases it must be associated with, coupled with, other vicious and unlawful practices in order to bring the person or the corporation guilty of the practice within the scope of the anti-trust law. The purpose of this bill in this section and in other sections which I hope will be added to it, is to seize the offender before his ravages have gone to the length necessary in order to bring him within the law that we already have.
“We knew little of -these things in 1890. The commerce of the United States has largely developed in the last twenty-five years. The modem methods of carrying on business have been discovered and put into operation in the last quarter of a century; and as we have gone on under the anti-trust law and under the decisions of the court in their effort to enforce that law, we have observed certain forms of industrial activity which ought to be prohibited whether in and of themselves they restrain trade or commerce or not. We have discovered that their tendency is evil; we have discovered that the end ■vyhich is inevitably *436reached through these methods is an end which is destructive of fair commerce between the states. It is these considerations which, in my judgment, have made it wise, if not necessary to supplement the antitrust law by additional legislation, not" in antagonism' to the antitrust law, but in harmony with the anti-trust law, to more effectively put into the industrial life of America the principle of-the anti-trust law, which is fair, reasonable competition, independence to the individual, and disassociation among the corporations. ...”

 See Report Senate Committee on Interstate Commerce, June 13, 1914, 63d Cong., 2d sess., No. 597* p. 13: “The committee gave careful-consideration to the question as to whether it would attempt to define the many and variable unfair practices which prevail in commerce-and to forbid their continuance or whether it would, by a general declaration condemning unfair practices, leave it to the commission to determine what practices were unfair. It concluded that the latter course would be the better. . . .”■ See algo “Unfair Competition,” by W. H. S. Stevens (University of Chicago Press, 1916), pp. 1, 2. For laws prohibiting specific acts of unfair competition, see “Trust Laws and Unfair Competition,” (Federal) Bureau of Corporations (March 15, 1915), pp. 184,_199.

 Report of (Federal) Bureau of Corporations1 on the International Harvester Co., March 3,1913, p. 30: “In discussing the competitive methods of the company it should be recognized that some practices which might be regarded with indifference if there were a number of competitors of substantially equal size and power may become objectionable when one competitor far outranks not only its nearest rival, but practically all rivals combined, as is true of the International Harvester Co., so far as several of its most important lines are concerned.”
.The Australian Industries Preservation Act, 1908-1910, expressly *437declares that “unfair competition means competition which is unfair in the circumstances.” “Trust Laws and Unfair Competition,” (Federal) Bureau of Corporations (March 15, 1915), pp. 552, 747.

 See note 1, ante, 431.

 See “The Morals of Monopoly and Competition,'’ by H. B. Reed (1916), pp. 120-122.

 Report of the (Federal) Bureau of Corporations on the International Harvester Company (March 3, 1913), p. 308.

 See “Unfair Methods of Competition and their Prevention,” by W. H. S. Stevens, Annals, American-'Academy of Political and Social Science (1916), pp. 42, 43. “Trust Laws and Unfair Competition” (Federal) Bureau of Corporations (March 15,1915), pp. 484-486, 493.

 “Unfair Competition,” by W. H. S. Stevens (1916), p. 54.

 See “Trust Laws and Unfair Competition,” (Federal) Bureau of. Corporations (March 15,1915), pp. 319^323, 328. -