Railway Co., and that other business might as well be the construction and management of other railroads as the planting of vines, or the raising of fruit, in which some of these directors and officers and employees have been in fact engaged. And they are entitled to the same protection and exemption from inquisitorial investigation into such business as any other citizen engaged in like business.

But the commission claims that, inasmuch as the plaintiff is a corporation, it has the authority claimed under the visitorial power of Congress. That the power sought is visitorial in its nature is clear, for in order to give the information and make the reports required, it will be necessary (that it is, so appears from the affidavits on file) for the plaintiff to keep records and books in addition to those now kept by it and by other corporations engaged in a like business, at a considerable expense, and to make monthly reports based on calculations made from such records. This is not the simple obligation of a witness under a subpoena duces tecum, to answer questions and to produce books and records for inspection, but in addition to keep records and make calculations and reports. Such a burden can not be imposed upon an ordinary witness. (Northern Pacific Railway Co. v. Keyes, 91 Fed. Rep. 47; 4 Wigmore, sec. 2203, p. 2989.)

The commission contends that the order served upon the plaintiff does not undertake to prescribe methods of bookkeeping, nor to keep additional records, but under the allegations of the bill and the affidavits filed I am of the opinion that this contention can not be sustained. The plaintiff can not comply with the order of the commission without changing its methods of bookkeeping. That the act undertakes to vest such powers (certainly as to matters connected with interstate commerce) in the commission is clear from section 10 of the act, which provides penalties for any person who shall willfully "neglect or fail to make or cause to be made, any false entry in any account, records, or memorandum kept by any corporation subject to this act, or who shall willfully neglect or fail to make full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the business of such corporation." These powers could only be justified under visitorial power.

It has been held that Congress has such visitorial power over corporations engaged in interstate commerce in Wilson v. U. S. (221 U. S. 361), and in Ellis v. Interstate Commerce Commission (237 U. S. 434), but in these cases the power was limited to that portion of the business which was under the control of the Federal Government. No such power would seem to exist, however, as to other matters, and the two cases referred to were cases in which subpoena duces tecum had been issued, requiring the production of a corporation's books in the one case before a grand jury investigating charges of fraudulent use of the mail and in the other before the Interstate Commerce Commission. And in the latter case the court, through Mr. Justice Holmes, on page 444 (237 U. S.), said:

If the price paid to the Armour Car Lines was made as a cover for a rebate to Armour & Co., or if better cars were given to Armour & Co. than to others, or if, in short, the act was violated, the railroads are responsible on proof of the fact. But the only relation that is subject to the commission is that between the railroads and the shippers. It does not matter to the responsibility of the roads whether they own or simply control the facilities, or whether

they pay a greater or less price to their lessor. It was argued that the commission might look into the profits and losses of the Armour Car Lines (one of the matters inquired about) in order to avoid fixing allowances to it at a confiscatory rate. But the commission fixes nothing as to the Armour Car Lines except under section 15 in the event of which we shall speak.

The appellant's refusal to answer the series of questions put was not based upon any objection to giving much of the information sought, but on the ground that the counsel who put them avowed that they were the beginning of an attempt to go into the whole business of the Armour Car Lines-a fishing expedition into the affairs of a stranger for the chance that something discreditable might turn up. This was beyond the powers of the commission. (In re Pacific Railway Commission, 32 Fed. Rep., 241; Interstate Commerce Commission v. Brinson, 154 U. S. 447, 478, 479; Harriman v. Interstate Commerce Commission, 211 U. S. 407.) The Armour Car Lines not being subject to regulation by the commission its position was simply that of a witness interested in but a stranger to the inquiry, and the commission could not enlarge its powers by making the company a party to the proceedings and serving it with notice. Therefore the matter to be considered here, subject to the qualifications that we are about to state, is how far an ordinary witness could be required to answer the questions that are before the court.

In the case of a corporation doing a wholly intrastate business, could it be said that Congress had any visitorial power under the commerce clause of the Constitution of the United States? Clearly it has not. The fact that it happens to be the same corporation in this instance which mines and ships the coal does not give Congress any greater power to regulate production and the intrastate commerce of such corporation. The visitorial power of Congress is limited to that part of the business over which it has control, and which under the Constitution it has the power to regulate.

In Hammer v. Dagenhart (247 U. S. 251), it is said (p. 260): While the power to regulate commerce among the several States is in the same grant and in the same terms with the power over foreign commerce, yet there is a difference with respect to the extent of that power growing out of the difference in the relation of the United States to the two kinds of commerce, and the difference in the right of the citizen of the United States and the foreigner to engage therein. As to foreign commerce, the United States possesses and exercises all the attributes of sovereignty. As to interstate commerce, it exercises only that portion of sovereignty delegated to it.

And again, page 261:

However much the Knight case (156 U. S. 1), may be weakened by later decisions, its distinction between production and commerce is still effective to prevent direct congressional regulation of production as distinguished from sale and transportaton.

The power claimed by the commission is vast and unprecedented. The mere fact that a corporation engaged in mining ships a portion of its product to other States does not subject its business of production or its intrastate commerce to the powers of Congress. Doubtless the business of every coal-mining corporation, whether engaged in interstate business or not, to some extent affects interstate prices and commerce, but, as stated in U. S. v. Knight (156 U. S. 1 (above) ), The power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but this is a secondary and not the primary sense." No sound reason is given why there is any difference in the business of coal mining of a corporation which ships its coal to another State and that of a corporation which does not. Interstate commerce is not affected any more in the one case than in the other.

In the case of United States v. Basic Products Co. (260 Fed. Rep. 472), in which it was urged that section 6 of this act was unconstitutional, not only in so far as it authorized investigation and compulsory disclosure of matters which are beyond the commercial powers of Congress, but also in so far as it attempted to authorize a search or seizure by an administrative agency of the Government without charge or suspicion, Justice Orr of the District Court of the Western District, Pennsylvania, said:

While the contention of counsel is probably sound, this court does not deem it necessary to go further than to hold that the commission has not the power to carry on investigation which it has assumed in the present case.

In the same decision he also said:

Imagination, if not experience, can suggest that persons, partnerships, and corporations may be engaged in interstate commerce by the transportation of merchandise solely by water; that their activities may give them their income from lighterage; or they may be engaged in the sole business of forwarding goods, with no interest in the vessels or wagons on which they are transported. The foregoing are merely the illustrations of activities which may perhaps be within the scope of the powers granted to the Commission by the act as found in the fifth section thereof.

Imagination, however, can not suggest such an extension of constitutional limitation as may justify the investigation undertaken by the commission in this case. Indeed, so far as it has been brought to the attention of the court, no such assertion of power has ever been made to the courts. Investigation under subdivision (a), section 6, is limited to corporations engaged in interstate commerce. The defendant is engaged in manufacture.

I am of the opinion, therefore, that no such visitorial power as that claimed by the commission in the instant case has been vested in Congress by the Constitution, nor could Congress delegate such power to the commission.

But did Congress undertake to vest such power in the commission? It is the duty of the courts, if possible, to give the statute a construction which would not conflict with the Constitution. (Knight Templar Co. v. Jarmon, 187 U. S. 197, 205.)

The corporations referred to in the act are, by its terms, limited to those engaged in "commerce as defined in the act, and all the powers vested in the commission should be, and it seems may be, construed with this limitation. But the commission has undertaken to construe the act otherwise, and to take steps under its construction of the act to require information and reports not relating to interstate commerce, but relating chiefly or wholly to production, and under its orders the information which it has the power to demand can not be separated from that over which it has no control. While as to other matters, as statetd in In re Pacific Railway Commission, supra, Congress may authorize the commission to obtain information upon any subject which, in its judgment, it may be important for it to possess, it may not compel the production of such information in respect to matters over which the Federal Government has no control.

It follows, therefore, that the commission can not compel the making of the reports which it has demanded of the plaintiff.

The plaintiff further contends that this power of the commission has been taken away by presidential order. Much proof in the form of affidavits has been introduced by the defendant to show contemporaneous constructions of this order, and that the power claimed by the commission in this case was not taken from it. The order is

ambiguous, but in view of my opinion as to the power of the commission, it is not necessary to decide this question in passing upon the application for a preliminary injunction.

Section 10 of the act provides that

if any corporation required by this act to file any annual or special report shall fail to do so within the time fixed by the commission for filing the same, and such failure 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.

The plaintiff has failed to file the report demanded and the commission has notified it that steps will be taken to recover the penalty prescribed above. The jurisdiction of a court of equity is not questioned by the defendants, and as I am of the opinion that the commission has not the power to exact the reports and information sought, the injunction prayed for will issue upon plaintiff executing bond with surety to be approved by the court in the penalty of $5,000.

FEDERAL TRADE COMMISSION v. GRATZ ET AL."

(U. S. Supreme Court. Argued April 20 and 21, 1920. Decided June 7, 1920.)

No. 492.

1 TRADE-MARKS AND TRADE NAMES, KEY No. 802, NEW, VOLUME 8A, KEY-NO. SERIES-FEDERAL TRADE COMMISSION'S ORDER TO DESIST FROM UNFAIR COMPETITION MUST BE BASED ON SUFFICIENT COMPLAINT.

Under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), providing that, when the Federal Trade Commission has reason to believe that a person, etc., has used an unfair method of competition, it shall formulate and serve a complaint, stating the charges, and after a hearing, if it deems the method of competition in question prohibited thereby, shall issue an order requiring the accused to cease and desist from using such method, if the complaint is plainly insufficient to show unfair competition there is no foundation for an order to desist.

2. TRADE-MARKS AND TRADE NAMES, KEY NO. 802, NEW, VOLUME SA, KEY-NO SERIES—FEDERAL TRADE COMMISSION'S ORDER MUST FOLLOW COMPLAINT.

An order of the Federal Trade Commission to cease and desist from using a specified method of competition, under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), should follow the complaint; otherwise it is improvident and, when challenged, will be annulled by the court.

3 TRADE-MARKS AND TRADE NAMES, KEY No. 802, NEW, VOLUME 8A, KEY-NO. SERIES WHAT CONSTITUTES UNFAIR METHODS OF COMPETITION A QUESTION FOR THE COURT.

Under act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), declaring unfair methods of competition in commerce unlawful, it is for the courts, and not for the Federal Trade Commission, ultimately to determine as matter of law what constitutes unfair methods of competition.

#253 U. S. 421. See case in court below, at p. 43, this volume.

4. TRADE-MARKS AND TRADE NAMES, KEY No. 68-"UNFAIR METHODS OF COMPETITION" DO NOT INCLUDE PRACTICES NOT HERETOFORE CONDEMNED.

Act September 26, 1914, paragraph 5 (Comp. St. par. 8836e), declaring "unfair methods of competition" unlawful, does not apply to practices never heretofore regarded as opposed to good morals, because characterized by deception, bad faith, fraud, or oppression, or as against public policy, because of their dangerous tendency unduly to hinder competition or create monopoly. 5. TRADE-MARKS AND TRADE NAMES, KEY No. 802, NEW, VOLUME 8A, KEY-NO. SERIES-COMPLAINT FILED BY FEDERAL TRADE COMMISSION INSUFFICIENT TO SHOW UNFAIR METHODS OF COMPETITION.

A complaint filed by the Federal Trade Commission under act September 26, 1914, paragraph 5 (Comp. St., par. 8836e), charging that sellers of cotton ties and bagging and their selling and distributing agents, with the purpose and effect of discouraging and stifling competition in the sale of such bagging, had refused to sell ties, unless the purchaser would buy from them a corresponding amount of bagging, was insufficient to support an order to desist from such practice, where it did not intimate that they did not properly obtain their ties and bagging, or state the amount controlled by them, or allege that they held a monopoly of either ties or bagging, or had ability, purpose, or intent to acquire one, or allege anything justifying the conclusion that the public suffered injury, or that competitors had reasonable ground for complaint.

6. TRADE-MARKS AND TRADE NAMES, KEY No. 68.-MERCHANT MAY REFUSE TO SELL COTTON TIES AND BAGGING, EXCEPT IN CONJUNCTION.

All questions of monopoly or combination being out of the way, a private merchant, acting with entire good faith, may properly refuse to sell, except in conjunction, such closely associated articles as steel ties used for binding bales of cotton and jute bagging used to wrap such bales.

(The syllabus is taken from 40 Sup. Ct. 572.)

Mr. Justice Brandeis and Mr. Justice Clarke dissenting. On writ of certiorari to the United States Circuit Court of Appeals for the Second Circuit.

Proceeding by Anderson Gratz and another, doing business as Warren, Jones & Gratz, and others, against the Federal Trade Commission, to set aside an order of the commission. The order was annulled by the Circuit Court of Appeals for the Second Circuit (258 Fed. 314, 169 C. C. A. 330), and the commission brings certiorari. Affirmed.

(See also 250 U. S. 657, 40 Sup. Ct. 13, 64 L. Ed. 51.)

Messrs. Huston Thompson, of Washington, D. C., Alexander C. King, of Atlanta, Ga., and Claude R. Porter, of Washington, D. C., for petitioner.

Mr. Thomas F. Magner, of Brooklyn, N. Y., for respondents.

Mr. Justice McREYNOLDS delivered the opinion of the court:

By an act approved September 26, 1914 (ch. 311, 38 Stat. 717, Comp. St., pars. 8836a-8836k), Congress made provision for the Federal Trade Commission and declared its powers.