Mr. MURDOCK. Except the public; they are all in, and the public is not a competitor of the United States Steel Co. Now, under existing law, under paragraph (e) in section 6—

The commission shall have power upon the application of the Attorney General to investigate and make recommendations 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.

Mr. YATES. What section is that?

Mr. MURDOCK. Paragraph (e) of section 6. In the early history of the commission, prior to my membership thereon, many of these associations of which I am speaking filed their minutes and proceedings with the commission and some wanted the commission to rule in advance on their acts as lawful or otherwise. The Federal Trade Commission refused to rule in advance, and I think very wisely. I do not think that the Congress of the United States intended to empower the commission with that much discretion. I am sure that as a citizen of the United States I do not want my Government to settle questions through rulings in advance; I believe controversial questions should be investigated and tried out. I would not care to submit my case or my brother citizen's case to group of goveinmental officials who could give final mandates without the right of review. But I think it would be very useful if Congress would empower the commission to look into these associations and combinations, inquire into them, into their practices, and if the commission believed, after full consideration and hearing, that an association was violating the antitrust acts, to issue an order against them to cease and desist, with an appeal both to the commission and to the party at interest to the circuit court of appeals.

Now that thought is embodied in an addition to section 6, which, Mr. Chairman, I desire to include in the hearings. Here is the proposed amendment:

Whenever from any investigation authorized to be conducted under this act the commission shall have reason to believe that any person, partnership, or corporation engaged in commerce has been or is in its organization, business, conduct, practices, or management violating the antitrust acts, or that the same. will substantially lessen competition or tend to create a monopoly, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect, and shall proceed in reference thereto in all respects as provided in section 5 of this act.

If upon the hearing the commission shall be of the opinion that the method of organization, business, conduct, practices, or management is prohibited by the antitrust acts, or that the same shall substantially lessen competition or tend to create a monopoly, it shall make a report in writing in which it shall state its findings as to the facts and shall issue its order to cease and desist, or to readjust its organization, business, conduct, practices, or management as ordered.

The commission or any party made a part to the proceeding provided by this section may apply to the proper circuit court of appeals of the United States under the same terms and under the same conditions as is now provided in section 5 of this act. The CHAIRMAN. Do you apply to the circuit court of appeals? Mr. MURDOCK. To the circuit court of appeals.

Mr. STEELE. An appeal lies to that court now.

Mr. MURDOCK. An appeal lies there now. Now, Mr. Chairman, service upon the Federal Trade Commission brings one governmental problem squarely before one. Men are no longer acting in trade individually as they did once. There is some form of combination in every line. It may be a combination in restraint of trade, in

violation of the Sherman Antitrust Act; it may be purely a voluntary association where the associated members do not fix a price; it may be a species of cooperation which is beneficial to society. But the twilight zones between those concerts of action which are harmless and those which are not call for vigilance. In my opinion it would be of real benefit to the community, to the Nation, if the people had some one constantly on guard over those stages that run from cooperation, from voluntary association to combination; a trade policeman standing on guard to say, "At this point you have gone too far."

Mr. STEELE. Bearing on this proposed amendment, Mr. Murdock, suppose the offender conformed to the judgment of the Federal Trade Commission, do you provide that there shall be any further immunity from prosecution, if he does comply with the judgment of the Federal Trade Commission?

Mr. MURDOCK. No, there is no such provision.

Mr. STEELE. Well, he might comply with your judgment, and still the Attorney General might proceed against him.

Mr. MURDOCK. That is true; and I should say, Mr. Steele, that if our judgment was so faulty as to permit him to break the law, he should be proceeded against by the Attorney General.

Mr. IGOE. It would hardly seem fair, though, if he is brought in for a hearing and you prescribe a practice for him, and he proceeds along that theory, for some other branch of the Government to haul him up and say, "While you have followed out the directions prescribed by the Federal Trade Commission, still you have violated the law."

Mr. MURDOCK. Well, I still believe, however, that there should be always on guard, above the Federal Trade Commission, the chief law officer of the Government as to infractions of the law.

Mr. STEELE. The Government would still have the right of appeal to the Circuit Court of Appeals?

Mr. MURDOCK. Always.

Mr. STEELE. Would not that be his remedy, then, if he thought the fellow was disobeying your judgment?

Mr. MURDOCK. Yes.

Mr. IGOE. If the Federal Trade Commission, under the act, states that something is an unfair practice, then they have reached that stage where some one is eliminated from competition, and the only thing left is to prosecute the one who is eliminating his competitor. Mr. MURDOCK. That is true, of course, to a limited extent, but that does not reach the voluntary association.

Mr. STEELE. Suppose you do reach them, and you pass judgment, that judgment ought to be worth something to the respondent, if he conforms to it?

Mr. MURDOCK. I should say it would be helpful to him.

Mr. STEELE. And if he does conform to it, it seems to me he ought to be exempt from any further prosecution, and the Attorney General ought to have the right of appeal, if he thinks the public ought to be entitled to any further protection.

Mr. IGOE. That is where you specify the practice or procedure which he must follow.

Mr. STEELE. Bearing on your statement that you made a while that you had on your docket now something like 1,400 cases

ago

Mr. MURDOCK. That is the total number of applications filed since the beginning of the commission.

Mr. YATES. Applications for complaints?

Mr. MURDOCK. Applications for complaint, not complaints.

Mr. STEELE. During the five years of the existence of the Federal Trade Commission it has passed, no doubt, a very large number of

cases.

Mr. MURDOCK. About 350 actual complaints have been issued. Mr. COLVER. That is not going to make a truthful record. You have dismissed a great many, too.

Mr. MURDOCK. I am speaking about their being about 1,400 applications for complaints docketed. There have been about 350 complaints issued, and a great many applications dismissed.

Mr. STEELE. I was just about to follow that up. That was only preliminary, Mr. Murdock. I was just about to follow that up by a question. I wanted to see whether or not, in general, the rulings of the Federal Trade Commission were followed, or what proportion of those cases were appealed to the Circuit Court of Appeals.

Mr. MURDOCK. About 5. As a matter of fact, Mr. Steele, the cases that come to us are so thoroughly gone into, and I think, upon the whole, the judgement is so fair, that the respondent does not appeal. I do not know whether the committee is aware of it or not, but Sears, Roebuck & Co. took the initial appeal from the commission's order. Mr. STEELE. Is not the general disposition to accept the judgment of the commission as to what is fair or unfair?

Mr. MURDOCK. That is perfectly true. Sears, Roebuck & Co. of Chicago was complained against to the commission because they advertised in one of their catalogues that by reason of their large quantity purchases of sugar they were enabled to sell sugar cheaper than competitors. Well, of course, sugar buyers enjoy no advantage in quantity purchases. Everybody is supposed to buy sugar at the same price. We issued a complaint against Sears, Roebuck & Co., and they appealed against our order to cease and desist, and the court of Appeals upheld our contention. Very generally respondents against whom an order issues take the order by consent, because when the commission develops an unfair method of competition, in the majority of cases it is manifest to the offender himself that his practice was unfair.

Mr. IGOE. I take it that in the sponge case you spoke of that the trade wanted protection against themselves.

Mr. MURDOCK. Certainly. That very frequently happens. While I was in Congress I tried my best to get some sort of remedial law on misbranding textiles. I did not get very far. I got to the stage of introducing the bill and talking about it, with a hearing or two. Soon after I came on the commission a dealer in rope wrote in to the commission and said they were selling rope all over the United States called hardware manila, and it had no manila in it. That was an unfair proposition to the man who was selling manila rope. It so appeared to me. We went into the rope proposition. We found that many, but not all rope-makers by any means, were selling hardware manila. Hardware manila was sisal. It is not manila and has not the resisting qualities of manila, particularly as against salt water.

The CHAIRMAN. It has not the tensile strength either?

Mr. MURDOCK. No; it has not the same tensile strength. I talked to almost all the members of the trade. Most of them said, "Well,

137692-19 -2

we are glad this thing is to be stopped." I said, "Why did you ever get into it?" Some of them said, "Well, one or two fellows started it on a dare, and when they srarted it we had to go in to meet it, but it is not truthful; there is no manila in that rope; it is sisal." When we decided to clear up this practice, two manufacturers or rope said to me that it would cripple them to stop that practice, and I asked why. They said: "Because there is a price fluctuation in the content of rope, when one material will be up the other will be down, and we so manipulate the content that we can make money. If you put a brand on that rope, make mandatory a brand on that rope, you are going to deprive us of that leeway and cripple us."

I said that I did not believe that a square proposition in branding would cripple anybody. The rest of the trade were all strongly in favor of this change, several never having followed the practice, so we provided that where the maker used the brand "manila" on the burlap which covers the coil of rope, and there was only a percentage of manila in that rope, he should not use the word "manila" unless he showed the percentage of manila. One month after that unfair method was corrected I talked to the two men who were afraid it was goint to hurt them and they said it did not hurt them, that it was a good thing. It frequently happens that men are afraid to disturb any very old business practice, but if you use good, common, ordinary horse sense in making a ruling apply to a trade, you will find everybody is content and glad it is done.

The CHAIRMAN. I just wanted to make another suggestion. I notice that in some foreign countries they provide that a person selling shall not discriminate as between persons that want to purchase, practically putting them in the same position as common carriers. A common carrier can not discriminate, but must take and carry anybody's goods without reference to who he may be. Now, why should not these large concerns be compelled to sell to anybody, if they are a combination of practically the whole industry, why should we not adopt the practice that I understand prevails in some countries of compelling anybody to sell, provided he is offered the money for his goods?

Mr. MURDOCK. Mr. Chairman, the courts say that a man has the right to chose his own customer.

The CHAIRMAN. Yes. We said so in the Clayton Act. We no doubt can say that any of these very large concerns shall not be permitted to choose his own customer, provided he is offered the same price.

Mr. MURDOCK. This question of discrimination is perpetually before the commission; that is very pertinent.

The CHAIRMAN. We have this situation, for instance, in the coal and lumber trade. No man can start, for instance, in a small town to run a coal or lumber business without the consent of the wholesale industry, because he can not buy the goods. Now, I have no doubt that is true in a good many other lines. I want you to think that over, and see what your suggestion is.

Mr. MURDOCK. That will come into the discussion later very fully. Mr Colver and Mr. Thompson will both handle that proposition, and I think Mr. Porter.

The CHAIRMAN. The policy I suggest is in force in some countries, it is the same as the one we enforce against common carriers, and it

is a question whether these large concerns should not be compelled to sell indiscriminately to anybody that asked for their goods and offered to pay the price.

Mr. MURDOCK. I am glad you brought that up, because we are up against that problem in the Federal Trade Commission daily, and that brings us properly in order to section 2 of the Clayton act.

Mr. WHALEY. I understand that there are certain manufacturers of soap who sell to the retail trade with the understanding that the retail trade can not sell except for a certain price. Have you got jurisdiction over that?

Mr. MURDOCK. We have tried to have jurisdiction over that. We have taken jurisdiction on the civil side of it.

Mr. WHALEY. I understand that is universally the rule in Washington.

Mr. STEELE. Was not that declared illegal under the Miles case in New York?

Mr. MURDOCK. Yes, but under the Colgate case there is a ruling of the Supreme Court that a man has the right to choose his own

customer.

Mr. STEELE. He has the right to choose his own customer, but he can not impose upon him that he shall sell for a certain price.

Mr. MURDOCK. I think that is in the bosom of the court.

Mr. STEELE. Well, it is only an impression I had from that line of

cases.

Mr. MURDOCK. I would like to go ahead with section 2 of the Clayton act and clear up my matters, so that Mr. Colver can come on in the morning. Section 2 is the antidiscriminatory section of the Clayton Act. It is strong in the first prohibition, and then it is weakened perceptibly and materially in the subsequent provisos, Also we have found in our activity under section 2 that there is discrimination in buying as well as in selling, and that the discrimination in buying, Mr. Chairman, is usually more frequent than discrimination in selling. What Congress had in mind was that a manufacturer or dealer should not sell to one man for less than to another man, quality, grade, and quantity of goods considered. So, we write that prohibition in our law. But we find another thing going on in the community much more often than we do discriminating in selling, and that is discrimination in buying. A big manufacturer will move into a community to buy his raw material, and will run the price up on his competitors in that community, cripple them, sometimes run them out of business, absorb them, and then drop the price back to normal or below normal again. That is discrimination in buying, and I am suggesting an amendment to the committee, and I am going to read it to get it into the hearings. I propose that section 2 of the Clayton Act be amended so that the amended section will read as follows:

That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers or sellers, where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce, or where such discrimination constitutes an unfair method of competition or an unfair act in

commerce.

Section 3 of the Clayton Act is one in regard to rebates, and to my mind it is an excellent section. It comes into use frequently, and I think always helpfully, and I do not propose that it be changed much.