Section 22. Shutting off competitors' credit.

This may take many forms. Pressure may be exerted on banks and capitalists to refuse loans. A representative of a farmers' cooperative organization complained that a cooperative warehouse at Memphis, storing cotton and making advances on it, had been subjected to a financial boycott of this kind. An attempt may be made to throw a rival company into a receivership, or insinuations injurious to credit may be made. A mail-order lumber company complained that it had been attacked with such insinuations by the retail lumber dealers' associations."

Section 23. Shutting off materials, supplies, or machines from competitors.

The complaints under this head presuppose something in the nature of a monopoly; without this the alleged injury could not be inflicted. It may be a legal monopoly, as one based upon patents or on the ownership of practically the whole supply of a natural resource, or it may rest on a practical monopoly of an industry without such a definite legal guaranty. In the suit of the United States against the American Can Co., brought in 1913, it was made a ground of complaint that that company had acquired most of the valuable patents for can-making machinery in order "to prevent the remaining competing can manufacturers and persons who might wish to become competing can manufacturers from obtaining the necessary machinery." 3 7."3 The Government based its suit against the Aluminum Co. of America partly on the allegation that the company was endeavoring to obtain control of the bauxite properties of the United States (bauxite being the earth or ore from which aluminum is made) in order to prevent anyone but itself from producing the metal aluminum.

An example of monopoly without specific legal warrant is the control which the American Tobacco Co. obtained over the production of licorice, and the embarrassment into which it was thus enabled to bring independent manufacturers of tobacco to whom licorice was a necessary material. The Government made it one of its grounds of complaint against the American Tobacco Co. that a subsidiary, the MacAndrews & Forbes Co., "obtained a practical monopoly of domestic and foreign commerce in licorice root and its products, and all substantial competition has been destroyed. One former com

1 Control of Corporations, Persons, and Firms Engaged in Interstate Commerce: Report of the Committee on Interstate Commerce, United States Senate, 62d Cong., pursuant to S. Res. 98, p. 2341; statement of T. J. Brooks, representing the Farmers' Educational Cooperative Union, Atwood, Tenn.

Trust Legislation: Hearings before the Committee on the Judiciary, House of Repre senatives, 63d Cong., 2d sess., on Trust Legisltaion, p. 1770.

3 United States v. American Can Co. et al., original petition, filed Nov. 29, 1913, in the District Court of the United States, District of Maryland, p. 12.

petitor

remains, but he depends on the combination for

raw materials and exists by sufferance."

The method complained of in the last-named case was not complete denial of supplies to independent manufacturers, but exorbitant prices.2

Section 24. Acquiring stock in competing companies for purpose of reducing or destroying competition.

A large company sometimes obtains an interest in a competitor without obtaining control, and uses its interest to destroy or injure it. Persons interested in the United States Pipe Line Co., which had been formed by the independent refiners and crude-oil producers to transport both crude and refined oil, complained that the Standard Oil Co. obtained an interest in it with such ends in view.

The United States Pipe Line Co. excluded the Standard from its meetings on ground that the Standard acquired its stock to compass its destruction and to get information that would lead to the destruction of the independent movement." Section 25. Wrongful and malicious suits.

It is often not easy to determine how far suits are malicious and how far they are merely proper efforts to maintain supposed rights. There is in most cases, of course, ground of suit. Often it is an alleged infringement of patent. Among the "unfair means" by which the National Cash Register Co. was accused of restraining trade in the indictment brought against its officers in 1912 was this: That it brought suits against competitors and against purchasers of their machines, alleging infringement of patent rights, when it knew that no patents existed by which such suits could be sustained.4

Baseless and vexatious patent suits were one of the means which the Standard Oil Co. was accused of using to compass the destruction of the Buffalo Lubricating Oil Co.5

Section 26. Intimidation.

While threats are often a separate basis of complaint, they are in general only subsidiary to actual injuries. Threats are apt to be effective only as the power and the disposition to injure are actually manifested.

1 United States v. American Tobacco Co. and others; in the Supreme Court, October term, 1910; brief for the United States, p. 301.

2 Report of the Commissioner of Corporations on the Tobacco Industry, Pt. I, p. 24.

3 Industrial Commission, Preliminary Report on Trusts and Industrial Combinations (vol. 1 of the Commission's reports); testimony of Thomas W. Phillips, p. 590. United States v. Patterson and others (201 Fed., 703).

House Reports, 50th Cong., 1st sess., vol. 9, Report No. 3112, Standard Oil Trust hearIngs; pp. 432, 434.

*

In United States v. Western Newspaper Union, American Press Association, et al., the petition accused the defendants of "numerous acts of unfair competition," which included "summoning competitors to conferences and openly telling them they could not continue in their competing business, but that they must either get out or sell out, and coupling such demands with threats of still fiercer unfair competition, including the installation of competitive plants in their territory, and a recitation of plants already bought out or put out, and of the cooperation between all the defendants in the campaign against them."1

Threats are often made to customers of competitors as well as to the competitors themselves. The petition just quoted furnishes an instance. It gives the following accusation against some of the defendants:

They have threatened papers located at points that can not support two small newspapers to start competing papers unless they patronized defendants.

Section 27. Fixing channels of trade.

Retailers feel themselves aggrieved if wholesalers sell to consumers, and often endeavor to stop it. In many towns, it is said, wholesale grocers understand that they will be boycotted if the retailers catch them selling to consumers. The retailers feel that they are only taking proper action to restrain competition which they regard as unfair. The associations of retail lumber dealers have been very active in enforcing the same view. "We do not consider it fair," said the secretary of the New Jersey Lumbermen's Protective Association, in a letter dated February 8, 1904, "for a man who is engaged in manufacturing or wholesaling lumber, competing with his own customers." The annual report of the board of directors of this association, submitted February 26, 1907, contained the following passage: "It is wrong in principle for the wholesaler or the manufacturer, as we have always contended, to become active competitors of their own customers, the retailers." Manufacturing consumers of lumber who constantly buy in lots of a carload or more are usually able to buy from manufacturers and wholesalers without open objection from the retailers; but occasionally the retailers have been strong enough to shut out even very large consumers of this class. Against building contractors they have especially contended; even against contractors who have had lumber yards. In many cases the retailers' associations have been able to enforce upon wholesalers and manufacturers their contention that a man who makes a business of build

1 Quoted in Trust Legislation: Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on Trust Legislation; pp. 1664, 1665. 2.Ibid., p. 1665.

3 U. S. v. Eastern States Retail Lumber Dealers' Association et al., Record, Vol. IV, petitioner's exhibits, p. 293.

ing, even though he also makes a business of retailing lumber, is not a "regular" or "legitimate" retailer. For selling to such retailers many manufacturers and wholesalers have been boycotted.

On the other hand, a great body of opinion holds that all such discriminations are unfair and should be prohibited. Says Samuel Untermeyer:

*

I think that, broadly speaking, a man who is in interstate commerce ought to be obliged to sell to anybody who is responsible. A man should not arbitrarily refuse, without cause, to sell a given customer. * * * You need never extend credit to a man, but the man who comes with the money should be allowed to purchase.1

The same idea is implied in the proposition that goods should be sold at a fixed and published price, uniform to all comers.2

1 Trust Legislation: Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on Trust Legislation, p. 849.

2 P. 316, above.

CHAPTER VII.

UNFAIR COMPETITION AT THE COMMON LAW.

Section 1. Introductory.

The purpose of this chapter is to present certain phases of the common law relating particularly to the right of persons engaged in business to be protected from unfair or oppressive methods of competition, without assuming to determine whether or not such methods are unfair within the meaning of section 5 of the Federal Trade Commission act.

Every person has a right to engage in business and to strive by all lawful means to advance his own interests, and if, as the result of a mere exercise of this right, others conducting similar enterprises lose custom, they have no cause of action for such injury. The right to lawfully compete in business affords a justification and negatives any claim that the injury was inflicted wantonly or without cause. The right to compete is not absolute, however, but is qualified by the existence of a similar right in others.

Generally speaking, persons engaged in business occupy much the same relation to each other as other members of society. Business rivalry ordinarily confers no privilege to commit acts or to engage in practices which would be unlawful if indulged in by persons in other walks of life. The fact, for instance, that two men are business competitors will not justify one in making libelous statements concerning the other, in physically obstructing the passage of his agents along the public highways, or in bribing them to act contrary to his interests. Whether or not the object of such an attack is a competitor, conduct of this character is equally unlawful. But acts which would ordinarily not result in actual damage may sometimes seriously injure a business rival. To illustrate, a false statement that a farmer uses a low-grade fertilizer could not conceivably cause him injury, whereas a similar statement made by one engaged in the manufacture of fertilizer respecting the product of a competing manufacturer, if generally believed, would probably result in a loss of sales by the competitor and consequent financial injury for which damages could be recovered.

On the other hand, the fact that the parties are competitors has been held, in some cases, to constitute a justification for acts which have resulted in damage, although, under other circumstances, they