Court Opinion

ID: 8830590
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:01:55.546958+00
Date Added: 2024-06-11T17:04:55.042934
License: Public Domain

DENISON, Circuit Judge
(dissenting in part). While I concur generally in the opinion of Judge DONAHUE as far as it goes, I see both the need and the occasion for a study of thé scope and extent of the Commission’s power along the line here involved, under section 5 of the act .(Comp. St. § 8836e).
In this matter, as in many others currently familiar, the Commission has adopted the theory that the “unfair methods of competition” denounced by section 5 include all false, not to say unethical, advertising and promotion of a particular article by which that fraction of the public desiring to purchase an article of that class may be, in a substantial way, misled. The vista of business censorship seen through such an opening is limitless. It extends to the advertising of fire sales *993when there has been no fire, and of cut price sales when there has been no cut, provided sales are to be made across a state line. Such suggestions are not fancifully extreme. In .the present case, thousands of pages of testimony have been taken, thousands of dollars of expense incurred, for the government and for the respondents, and the time and attention of the Commission and of the Circuit Court of Appeals consumed to the total extent of many days—all over questions of porcine genealogy and eugenics. In another recent case, before the Commission and another Circuit Court of Appeals, a similar amount of effort was expended concerning the truthfulness of advertising claims to merit in a medicinal condiment for live stock—the order to desist prohibiting, among other things the use of a fictitious testimonial. Guarantee Veterinary Co. v. Federal Trade Commission (C. C. A. 2) 285 Fed. 853. I do not believe that the Federal Trade Commission was created for any such purpose, or that the time and efforts of the federal courts should be devoted to such situations.
A study of the Congressional Record convinces me that the Federal Trade Commission Act (Comp. St. § 8836a et seq.) was wholly collateral to the Sherman and other anti-trust acts, and that the “unfair methods of competition,” intended to be reached by section 5, are only such methods as tend toward that monopoly or restraint of competition which the anti-trust acts prohibit. The act was the ultimate result of House Bill 15613, in the Second Session of the 63d Congress, introduced by Mr. Covington on April 13, 1914, and it was the often declared partial fulfillment of the general anti-trust program adopted by both parties in the previous political campaign, and specifically laid before Congress for its attention by the address of President Wilson on the subjects of trusts and monopolies, made January 20, 1914. Several other bills of more or less similar purport were introduced and referred, as this one was, to the committee on interstate and foreign commerce, or, as others were, to the judiciary committee. The committee reports and congressional debates, which from this beginning led up to the act as finally passed, cover nearly a thousand printed pages. They have all been read, with reasonably careful attention. Absolute inerrancy of review and inference cannot be claimed, but with reasonable certainty it may be said that the theory that the Commission was being endowed with powers and duties which went beyond the scope of the underlying purpose of the anti-trust acts .was never accepted by either house of Congress.
The chief controversy on the general subject was between those who wished to create a commission only for investigation and publicity and those who wished a commission “with teeth.” House Bill 16513, as introduced and as reported out by a majority of the committee, was of the former class. It contained provisions for reports by interstate corporations, for investigations, for publicity, and for aiding the courts when a dissolution was decreed under the anti-trust laws. It contained nothing resembling the present section 5. The majority report said that:
“The bill provides for an Interstate Trade Commission in accordance with the views of the President, expressed in his message to Congress in January last, on" the subject of trusts and monopolies.”
*994The Republican members of the committee (then in a minority) expressed their “general concurrence” in the majority report, pointing oüt that they regarded it as a fulfillment of the Republican party platform pledge. Mr. Rafferty presented a minority report, vigorously protesting against the lack of any sufficient power in the Commission to do anything effective in aid of anti-trust laws. It is made apparent in this minority report, as repeatedly in other places, that the bill was a companion to the one which, at the same session, became the Clayton Act (38 Stat. 730), and that, with one bill extending and defining anti-trust laws, and with another creating a suitable commission for their enforcement, the administration anti-trust program was fulfilled. In another minority report, Mr. R. B. Stevens also objected because sufficient powers were not given. His report refers to another .bill, introduced by him (IT. R. 15660), which was afterwards used in the Senate as the basis of the later formulated section 5, and the Stevens report thus gives the key to .the true definition of section 5 when it says:
“If we are to rely on the theory of competition to protect the public from large corporations, it is imperative that the government shall see to it that competition is on fair and. equal terms. The experience the government has had in the enforcement of the Sherman anti-trust law, interstate commerce law, and the pure food law, proves conclusively that this can be done successfully only through an administrative board having general power to prevent unfair competitive practices.”
.This bill, substantially as reported,,, passed the House, went to the Senate,'and was referred, to the interstate commerce committee. If reported out a substitute which made a number of changes, not now important, as to the examining, publicity, and dissolution aiding features, but added section 5 in its present form, except for certain changes to be later noted.1 In its report (page 11090, vol. 51, Cong.. Rec,) the committee discussed the general purposes of the bill, as a collateral anti-trust act. In explaining section 5 the report says:
“The committee was of the opinion that it would be better to put in a general prohibition 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.”
The debates in the Senate cover 400 pages of the record (scattered from page 10376 to page 13319, parts 12 and 13, vol. 51, Cong. Rec.), and are devoted largely to the meaning of “unfair competition.” The opposition to this section was mainly upon two grounds: First, That “unfair competition” was of such vague and indefinite meaning that giving a commission povfrer to prohibit would be a delegation of legislative. power; second, that the phrase, by long judicial construction, meant, and meant only, “palming off” the goods of one as those of another,’ and on that subject no additional law was needed. The advocates of the section generally insisted that “unfair competition” was those practices which tended to destroy competition, and so tended *995to monopoly, and that the general character of these practices had been so well defined by the Supreme and other courts in the anti-trust cases that the phrase was no longer unduly vague. What Senator (formerly Circuit Judge) Colt believed was the dominant thought, he formulated, when stating the'different views that might finally be taken, as follows (page 13154):
“Fourth. A court may take the view * * * that it' was plainly the intention of Congress to use these words in the broad sense of comprising the various steps which lead up to monopoly, and hence that ‘unfair competition,’ within the meaning of the law, signifies the various things which have been forbidden by the courts in decrees entered under the anti-trust laws, and all transactions of a similar nature. That such was the intention of Congress, a court may say, clearly appears from the arguments in the Senate. And in support of this construction it may be further urged that Congress was engaged in a general scheme of legislation supplementary to the Sherman law, and hence that it intended that these words should cover ali those transactions which any person may employ in a scheme or plan to establish a monopoly in violation of law.”
It is not easy to say just how far quotations from the debates themselves are admissible as evidence of intent. Senator Newlands was the chairman of the committee, Senator Cummins a leading member, and they and most of the advocates of the bill spoke in explanation of the committee report. The line between this and mere debate is not easy to draw. In reporting the substitute, containing this section 5, Senator Newlands said (page 10376):
“The need has long been felt for an administrative board which should act in these matters in aid of the Sherman anti-trust law.”
Senator Cummins said (page 11103):
“The unfair competition sought to be reached by the’section [5] is that violence of competition, conducted through unfair practices and methods, which will ultimately result in the extinction of the competition and the establishment of monopoly. * * * ”
At page 11105:
“We are here endeavoring to sustain competition; * * * it is the only justification for the establishment of a trade commission. * * * We have chosen to report a rule for the trade commission in the language which has been suggested, viz. ‘unfair competition.’ It is that competition which is resorted to for the purpose of destroying competition, of eliminating a competitor, and of introducing monopoly. That is the ‘unfair competition’ which this bill endeavors to prevent.”
Seemingly authoritative statements of the same kind were too numerous for inclusion here. Some of them are collected in the margin.2 The contentions that the phrase had any other meaning came *996from those who opposed the section, because they thought the phrase covered nothing but “palming off,”, or because they thought it covered everything. Nothing is found from its supporters indicating the possibility of any definition broader than Senator Cummins’, except occasional broad language followed by some narrowing specification.3 There'was universal agreement, frequently expressed, that the bill was not intended to reach private controversies between rival traders.
True, it is not without importance that amendments were proposed, and defeated, expressly defining “unfair competition” along the lines of Senator Cummins’ explanations (pages 13303-13314, 13325-13335). The record indicates no objection to the declared purpose of those proposing these aniendments, but rather that their defeat was due to suspicion of amendments from “the enemies of the hill,” fear that the restrictive definitions were imperfect, and knowledge that the bill would go to conference, where amendments could be made.
So it passed the Senate with section 5 prohibiting “unfair competition,” and containing no express limitation to cases of public interest. The House refused to concur, and conference managers were appointed by both houses. The conferees reported a substitute bill, which (as to the matters now here involved) was like that passed by the Senate, except that section 5 was, amended by changing “unfair competition” to “unfair methods cf competition” in the prohibitory clause, and that there was inserted the clause found in the final act and reading, “and if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public.”
The Senate conference managers reported the changes made. There was little debate or comment. No reference is found to any supposed change -in the prohibitions of section 5. The conference bill was *997passed. The House conference managers made a report, explaining section 5, which had been added. The report said (page 14924):
“Section 5 declares unfair methods of competition to be unlawful, and empowers the Commission to order a discontinuance of such methods. It is now generally recognized that the only effective means of establishing and maintaining monopolies * * * is the use of unfair competition. The most certain way to stop monopoly at the threshold is ttf stop unfair competition.”
Mr. Covington, one of the House conference managers, and chairman of the subcommittee in charge of the bill, while explaining section 5, said (page 14927):
This section “ * * * embraced within its broad and elastic scope all the specific practices against which there had been prohibitions in the Clayton bill. * * * The most certain way to stop monopoly at the threshold is to prevent unfair competition. This can be best accomplished through the action of an administrative body of practical men. * * * ”
And (on page 14929):
. “We are seeking here, not to enter into any unknown or speculative realm of the law, but to deal, as we ought to deal, with those practices of unfair trade in their incipient stages which, if left untrammeled and uncontrolled, become the acts which constitute, in their culmination, restraint of trade and monopoly.”
As to the inserted “public interest” clause, he said (page 14930):
“This prevents the Commission from becoming a clearing house to settle the everyday quarrels of competitors, free from detriment to the public, which should be adjusted through the ordinary processes of the courts.”
Mr. Stevens, also a manager and of the committee, said (page 14934):
“It [the bill] does not [do away with the Sherman law]. It is a method of enforcing it and making it more effective, and preventing its misuse.”
On page 19436 he said:
“* * * With this jurisdictional qualification' carefully stated in the bill, that the Commission has no authority to act unless the methods of unfair competition shall injuriously affect the public interest. That must be the basis of its action and jurisdiction. In that way the Commission will be freed from private quarrels and controversies.”
The two amendments made in conference can be traced back in the record and measurably interpreted by it. In meeting the objection that “unfair competition” would mean “palming off,” and nothing else, Senator Hollis, of, the committee, said (page 12145):
“If * * * the words ‘unfair competition’ have a peculiar and limited meaning, applicable only to the substitution of one man’s goods for another’s, * * * it is very easy to separate the two words, ‘unfair’ and ‘competition,’ so that they will not become mixed with [that] particular sort of methods. * * It would be very easy to make the operation of this act certain by specifying that * * * unfair methods of competition * * * are prohibited. Therefore * * * I suggest—and I hope the chairman of the committee will consider the suggestion and agree to it—that the words ‘unfair’ and ‘competition’ be separated by some word that will not do them any harm, such as ‘oppressive,’ or ‘methods of,’ so that there will not be the particular label that has been attached in many cases. * * *' ”
Apparently the conferees adopted this suggestion.
*998Commenting on and repeating the frequent assertion that the law was not intended for those acts of competition, unjustifiable as between traders, for which existing laws gave remedy, Senator Cummins, in the course of the main discussion, said (page 13151):
“The unfair competition with which the public is concerned is unfair competition which is inconsistent with or repugnant to the continuance of competition as a force in the business life of the country.”
Senator McCumher said (page 13304):
“There are many practices which might be unfair as between competitors, the result of which is beneficial to the public [as, by forcing lower prices to meet it], and it only ceases to be beneficial to the public when the effect of the competition is such that it destroys one of the competitors.”
It was apparently to meet this view that the conference committee made its second amendment, requiring an initial finding of public interest.
This review leads me to the conclusion with which this discussion opened, viz. that the jurisdiction of the Commission is limited to those situations indicating at least substantial tendency to restraint of 'trade or monopoly. There is, however, another, or second, view not without support in the record. It is that the jurisdiction extends also to cases of “palming off,” if the sufficient “public interest” exists. Against this view it is to be noted that such result was foreign to the general purpose of the act, was not called for in addition to existing remedies, and was not urged in reports or debates, as well as that the words “methods of” were inserted for the seeming purpose of avoiding this meaning. For this view it is to be said that Congress chose a phrase, “unfair methods of competition,” that was so analogous to the phrase, “unfair competition,” which had been judicially defined as “palming off,” that the courts must accept this fixed meaning as indi-, eating one at least of the results accomplished by the law.4 I come to> this again, after considering the course of the judicial decisions.
The act passed in 1914. No case seems to have reached the courts until 1919, when, at about the same time, the Sears-Roebuck Case was decided by the Seventh C. C. A. (258 Fed. 307, 169 C. C. A. 323, 6 A. L. R. 358), and the Gratz Case by the Second C. C. A. (258 Fed. 314, 169 C. C. A. 330, 11 A. L. R. 793). The Sears-Roebuck Case was typical of the class which, in my judgment, was not intended to be brought within the act. Competitors complained that the Sears-Roebuck Company promoted the sale of its goods by advertising certain nonexistent merits;- there is no suggestion, in the opinion, that the practice tended toward monopoly or restraint of competition; the court evidently assumed, perhaps for lack of any challenge, that “unfair competition” in this act would have the broadest natural meaning as in private controversies between traders—an inference in express conflict with the repeatedly declared purposes of House and Senate. The case was not reviewed by the Supreme Court.
*999In the Gratz Case it appeared that the unfair methods complained of did have to do with a restriction thought to be undue restraint of trade, tending to monopoly. When the case reached the Supreme Court (253 U. S. 421, 40 Sup. Ct. 572, 64 L. Ed. 993) the majority thought that the practices in question did not unlawfully restrain competition, and hence that the act was not violated. Justice Brandéis, dissenting, thought that the methods used were undue restraint, and he reviewed the origin and purposes of the Trade Commission. He makes it clear that the whole purpose of the act creating the Commission was to aid the anti-trust acts. In 1920, in the Asbestos Case (Second C. C. A.) 264 Fed. 509, 18 A. L. R. 546, it was held that for one competitor to bribe the employees of another was not an unfair method of competition, within section 5, because such practices were not a matter of public interest. Both this decision and the previous one in the Gratz Case are based upon the provision of section 5 that public interest must b,e involved before the Commission proceeds. The court found that there was no public interest of any kind, and so had no occasion to consider the limiting definitions repeatedly made in the House and Senate.
At about the same time the same court considered the Beechnut Case, 264 Fed. 885. This again involved a supposed restriction of competition, tending to monopoly. The court thought the facts did not make the restraint unlawful. The whole question considered was whether the methods employed would violate the Anti-Trust Act, or, as stated by the court (page 889), “is that the method is unfair, because it stifles competition and so restrains trade.” Judge Mantón said (page 890) that “it was intended by section 5 * * * to prevent practices or methods * * * unfair to the public which, if not prevented, would grow and create monopolies, and thus restrain trade and lessen competition.” This case was reviewed by tire Supreme Court and reversed. 257 U. S. 441, 42 Sup. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882. The majority of the court thought that the Beechnut methods of price restriction were within the forbidden unlawful restraint of trade, and the reversal was for this reason. Justice Day said (257 U. S. p. 453, 42 Sup. Ct. 154, 66 L. Ed. 307, 19 A. L. R. 882) that the Trade Commission Act “was intended to supplement previous anti-trust legislation.” The dissent is only as to the unduly restraining character of the Beechnut methods.
Next in order came the National Harness Association Case, before this court. 268 Fed. 705. We sustained the Commission’s order, but the whole complaint was that the methods attacked were part of a plan to suppress competition throughout the trade. Nothing else was involved or considered. The same situation existed in the Gasoline Pump Cases, in the Second, Sixth, and Seventh Circuits (273 Fed. 478, 17 A. L. R. 389; 274 Fed. 571; 276 Fed. 686), where the practices involved were thought hot unduly restrictive, and the Commission’s order was vacated. When the Supreme Court came to consider and affirm these cases, April 9, 1923 (43 Sup. Ct. 450, 67 L. Ed. -), its whole discussion is consistent with, and indeed indicates, the idea that the unfair competition contemplated by section 5, is that which unduly restricts competition.
*1000In Kinney-Rome Co. v. Federal Trade Commission (C. C. A. 7) 275 Fed. 665, 18 A. L. R. 542, it was held that giving a commission to the salesmen of jobbers was not unfair competition. The court, inferentially, made the same assumption as in the Sears-Roebuck Case. Other cases, not necessary to cite, have involved merchants’ associations’ and jobbers’ practices—plainly undue restraint of trade, if unfair at all.
With an exception yet to be noted, this recital covers all the judicial decisions under this act which are found up to date. Save for the Sears-Roebuck and Guaranty Veterinary Co. Cases, they are all at least consistent with the conclusion that there is no unfair competition under section 5 unless there is a tendency to monopoly. The exception, not yet noticed, is the Winstead Hosiery Case. When this was before the Second C. C. A. (272 Fed. 957), there was no occasion to consider whether the statute went beyond undue restriction of competition, since the court concluded that the defendant’s acts were not unfair. It was without doubt' assumed by the court that the statute did have a broader scope, else the court never would have reached the question which it considered and decided. So far as the report indicates, the contention that section 5 reached only such unfair competition as tended to monopoly was in no way brought* to the attention of the court.5 The same thing is true as to .the treatment of the' case in the’ opinion of the Supreme Court (258 U. S. 483, 489, 42 Sup. Ct. 384, 66 L. Ed. 729), though attention was drawn’ in the argument to the fact that “the purpose behind the act was the regulation of competition,” and reference was made to Senate Report 597. The court found that public deception was caused by the labels and—'
“the facts show that it is to the interest of the public that a proceeding to stop the practice be brought; and they show also that the practice constitutes an unfair method of competition as against manufacturers of all wool knit underwear and as against those manufacturers of mixed wool and cotton underwear who brand their product truthfully.”
The opinion concludes:
“As a substantial part of the public was still misled by the use of the labels which the Winstead Company employed, the public had an interest in stopping the practice as wrongful; and since the business of its trade rivals who marked their goods truthfully was necessarily affected by that practice, the Commission was justified in its conclusion that the practice constituted, an unfair method of competition.”
Here was a typical case of “palming off” of his goods by one dealer, not as those of another individual, but as those of another class. The case must be taken as approving, though sub silentio, what I have called the second view of the phrase “unfair methods of competition,” making it include the fixed .judicial definition of “unfair competition,” even when there is no tendency to monopoly or undue restriction, except that remote tendency which always exists in every such case, and provided the public interest arises. If upon full consideration, that court should decide to adopt a more restricted definition, it will not be embarrassed by any contrary, unspoken, but necessary, inference *1001from the Winstead Case, but all other courts are bound by those inferences.
It is also thereby decided that the public interest does exist under circumstances substantially like those there involved; but it goes no further. It cannot, as I think, intend to hold that the public interest may be found merely because a fraction of the public may be misled as to the origin or identity of merchandise advertised for sale. That kind of public interest inheres in every ordinary injunction suit for unfair competition brought by one trader against another, and the public interest clause was inserted expressly to limit the scope of the act and to exclude that kind of controversy. The Winstead Case discloses a public interest of that very unusual kind and degree which alone, as I think, can justify a proceeding by the Commission where it is not striking at incipient monopoly. The purchasing public liable to be misled comprised the whole people, and the controversy was about an article of universal use. If a mere “palming off” case, not involving a tendency to crush competition, can ever indicate a public interest sufficient to give the Commission jurisdiction, the Winstead Case does.
Not so with the present case. It interests, not the whole public, but only those on farms; not all farmers, but only those who are stock raisers; not all stock raisers, but only swine breeders; and not all swine breeders, but only those with predilections for the Chester type. I cannot believe there is any statutory public interest in establishing that the “Mammoth” hog of early Pennsylvania lived only in fable, and is mythological, not historical. Nor is there any “palming off.” Defendant advertises, “My goods are better than plaintiff’s, because they are different.” Plaintiff says, “They are not better; they are the same thing.” Complaint to a court by such a plaintiff of such competition is, I think, without precedent. Further, as the opinion of Judge DONAHUE points out, there is no restraint of competition; quite the contrary.
While I concur in that opinion, both as to reasoning and result, I would go further, and vacate entirely the first paragraph of the order to desist.

 In the debates it is stated (e. g., page 11538) that this section 5 was brought to the committee by Mr. Stevens, as founded on his H. R. 15660, and as said to have been urged by Mr. Brandéis and to have been approved by the President.

 Senator ‘ Newlands (page 11108) enumerates at length “the practices which are generally considered unfair.” They all have to do with fraud or force used to destroy a competitor. He also said (page 11235): “The provision with reference to unfair competition is intended to disarm monopoly. It is monopoly, or the corporation possessing monopolistic tendencies, that engages in unfair competition, and unfair competition is a means of creating monopoly!’ He further stated (page 12030) the purpose of section 5 to be to “afford protection to numerous pigmies in business, that are being injured and destroyed by giant competitors, whose practices, while leading up to monopoly, do not as yet have the character of monopoly.”
When Senator Williams (page 12210) said, “What is really meant in the *996bill, wlien it says ‘unfair competition,’ is the unfair stifling of competition,’ Senator Newlands replied (page 12211): “I want to do the same thing. * * * to prevent the stifling of competition by unfair means. * * Those who support the bill have presented authorities *" * * showing that the words ‘unfair competition’ have the very meaning of stifling competition by unfair means.”
Senator Cummins said (page 11381): “The bill is in harmony with the purposes of the anti-trust statute. It has no other office, except to render the principle of that statute more effective than it now is.” He supposed (page 11105) it would. not apply to the case of one railroad misrepresenting the facilities of another, and so diverting custom. His further explanations (page 11455) quoted at length in 253 U. S. 435, 40 Sup. Ct. 572, 64 L. Ed. 993, q. v., are informing.
Senator Kenyon said (page 13156): “The difference between this act and the Sherman Act, * * * this can take hold of matters that are not in themselves sufficient to amount to a monopoly or to amount to a, restraint of trade.”
Senator Hollis said (page 12146): “If the proposed trade commission has its attention called to some unfair method of competition, it can immediately investigate, and if it decides that it is unfair competition, and may lead to monopoly or restraint of trade, it can prohibit it.”

 For examples, see Senator Newlands’ rather inclusive words (page 11112), and his interpretating enumeration (page. 11113), and Senator Robinson’s corresponding expressions (pages 1122S, 11230). but then naming “nearly all the methods of unfair competition now in use.”

 Particularly some of tbe discussions in tbe House, after tbe section 5 was reported by tbe managers, lend support to the theory that the “palming off” subject was thought to be within the power granted, when upheld by the necessary public interest.

 The Royal Baking Powder Case (C. C. A. 2) 281 Red. 744, is essentially like the Winstead Case.