In Standard Oil Co. et al. v. Doyle, which was an action by the latter charging a conspiracy to drive him out of business, the proof tended to show that a representative of the defendant company offered one of the plaintiff's customers a rebate as an inducement to return certain oil purchased from the plaintiff and threatened to ruin him in case of a refusal, and that this customer subsequently sold out his business to the local oil inspector who became a competitor of the plaintiff and used wagons furnished by the Standard Oil Co. It further appeared that Doyle's drivers were obstructed, annoyed, and harassed, and that oil was sometimes offered to his customers without charge in order to prevent his drivers from making sales; that his oil was condemned by the oil inspector although it had been inspected and reported above test in another county; that the inspector subsequently notified Doyle's customers that his oil had been condemned and that they would be prosecuted if they bought or sold it; and that the deputy oil inspector, who was also deputy clerk, issued a summons against Doyle to show cause why he should not be punished for selling unsafe oils, but that after a trial the charge was dismissed. A judgment for the plaintiff was affirmed on appeal although it was urged by the defendants that the acts complained of were legitimate, for the purpose of building up the latter's business.1

In another case it appeared that upon the refusal of the Crystal Oil Co. to purchase supplies exclusively from the Standard Oil Co., the latter proceeded to equip itself with tank wagons and entered into active competition in the retail oil business. Its drivers were, among other things, instructed to do business ostensibly as independent dealers, and to "go after the Crystal Oil Company." Cards furnished by the latter to its customers to be displayed by them when oil was required, were in some cases carried away by the Standard's drivers and it appeared that special efforts were made to make sales wherever such cards were displayed, sometimes permitting the buyers to suppose that they were dealing with a Crystal agent. When the Crystal Oil Co. was finally driven out of business the Standard withdrew

1 Standard Oil Co. et al. . Doyle, 118 Ky., 662, 670, 681 (1904). Per Nunn, J.: "Undoubtedly one man may by fair methods compete with a rival until by sheer force of competition, by underselling or outbidding him, his own business is built up to the detriment and ruin of his rival. The damage in such case is in the eye of the law damnum absque injuria. But a different case is presented where one seeks not only to build up his own business at the expense of a rival's, but to impair, and if possible, destroy, that rival's business by the use of unlawful means by saying and doing that which he has no lawful right to say and do, in so far as it works loss and damage to his rival. If it be true, as the jury seems to have determined, that this conspiracy was formed, and in pursuance thereof the appellants fraudulently caused appellee's oils to be condemned, and willfully reported the oils to be below the legal test, when they knew or had reason to believe they were not below the test, and had appellee arrested upon the false charge of selling condemned oil, and obstructed, harassed, and annoyed appellee's drivers when delivering his oil, for the purpose of injuring and driving appellee out of the business of selling oils, we can not say that the verdict is excessive."

its wagons and drivers and gave its attention wholly to its wholesale business. Although the defendants contended that their conduct "did not transgress the bounds of legitimate competition," it was held that while they had the undoubted right to establish a competing business, they had no right, under the guise of competition, to inflict a malicious injury on the Crystal Co. or drive it out of business, intending to retire when their purpose had been effected.1

ENGLISH DECISIONS.

In Barley v. Walford a dealer in printed silk goods alleged that he had sent to the defendant a lot of handkerchiefs which he had printed with a certain pattern, and that he was about to fill other orders for handkerchiefs of the same design when the defendant, intending to defraud him and induce him to desist from printing the same, falsely represented that the pattern was copyrighted and that other parties intended to seek an injunction against him. The plaintiff further alleged that he was put to great expense in investigating the supposed claims of such other parties, that meanwhile he abstained from selling a large number of his handkerchiefs, while the defendant caused a large number of such handkerchiefs to be printed and sold them without competition. It was held by Lord Denman that a cause of action had been disclosed.2

In another case where it appeared that a dealer in order to attract trade advertised a piano of a certain make and class at a reduced price, and continued the publication of such advertisements after the piano had been sold, it was held by the court of appeal that the piano manufacturer was not entitled to an injunction. In explanation of his conduct the defendant stated that for a time he was prepared to take orders for the plaintiff's pianos since he knew several dealers who would supply him, and further, that it was difficult, or at all events caused additional expense, to alter the advertisement. Although the court disapproved of the defendant's conduct and expressed the opinion that the advertisement was not such as ought to have been published and that great negligence had been shown with respect to its withdrawal, it denied the injunction, being of opinion that as a general rule any person, acting honestly, may sell or offer for sale at any price whatsoever goods of which he is not the owner but which he expects or hopes to acquire, and further, that although the advertisements amounted to a representation that the defendant had in his possession a piano of the description advertised,

1 Dunshee v. Standard Oil Co. et al., 152 Iowa, 618 (1911). And see Dunshee v. Standard Oil Co. et al., 165 Iowa, 625 (1914). Cf. Boggs v. Duncan-Schell Furniture Co. et al., p. 456.

29 A. & E., 197 (Q. B., 1846).

such misrepresentation was not the cause of damage to the plaintiff and consequently gave no right of action.1

In a recent Scottish case it appeared that a body of harbor trustees, incorporated by an act of Parliament, were vested with authority to operate ferries within certain limits and had power in the event of a deficiency in ferry revenues to increase the rates payable by shipowners using the harbor. On several occasions when the steamers were not required for ferry traffic they were hired out by the trustees for excursions beyond the ferry limits. A firm of shipowners, part of whose business consisted in hiring out excursion steamers, brought an action to restrain the trustees from so using their steamers, claiming, among other things, that the rates charged were altogether inadequate and such as no private shipowner could compete with, that the excursions would result in a loss to the trustees, and that such acts were ultra vires and interfered with their business. It was held that the acts complained of were ultra vires, and as it appeared that the complainants had by statute an interest in the trust fund, contributed as harbor ratepayers, and had certain statutory rights with respect to the management and control of the undertaking as electors and possible trustees, it was further held that they were entitled to bring the action.2

In another case, where a stockholder of a railway sought to enjoin the company from running excursion boats to a certain place on the ground that this was beyond the powers of the corporation, and it appeared that the plaintiff was a large stockholder in a steam packet company which was prejudiced by the acts complained of and, further, that the packet company directed the suit and indemnified the plaintiff against costs, the lord chancellor treated the suit as an imposition on the court and dismissed it accordingly.3

1 Ajello v. Worsley, L. R. (1898), 1 Ch., 274. Cf. Passaic Print Works v. Ely & Walker Dry Goods Co. et al., p. 456; Rex v. Jakeman, 24 Cox's C. C., 153 (1914) and Winchester Repeating Arms Co. v. Butler Bros., 128 Fed., 976 (D. C., 1904).

2 D. & J. Nicol v. Trustees of the Harbour of Dundee, 1914, Session Cases, 374, affirmed, L. R. (1915), A. C., 550, 559, 561, Viscount Haldane, L. C.: "I do not think that the respondents could have made their claim successfully on the mere foundation of injury to their interests as rival traders. It appears to me that their real case is that they are beneficially and individually interested in the administration of property and the execution of powers to be carried out in strict accordance with the terms and limits prescribed by the Act of Parliament under which the incorporated trustees derive their capacity and the respondents their beneficial rights." Lord Dunedin: "In the phraseology of Scottish law, when a complainer can only say that he is a rival trader and nothing more, he qualifies an interest but not a title." Cf. Stockport District Waterworks Co. v. Mayor, etc., of Manchester et al., 9 Jurist (N. S.), 266 (1863); Pudsey Coal Gas Co. v. Corporation of Bradford, L. R. (1873), 15 Eq., 167; and Railroad Co. v. Ellerman, 105 U. S., 166 (1881).

* Forrest v. The Manchester, Sheffield and Lincolnshire Ry. Co., 4 De Gex, F. & J., 126 (1861).

CHAPTER VIII.

FEDERAL STATUTES RESPECTING UNFAIR METHODS OF COMPETITION.

Section 1. Introductory.

This chapter deals with certain Federal statutes which specifically prohibit certain methods of competition or which, under the construction given them by the courts, may be invoked to prevent the use of such methods. These statutes are the Sherman Antitrust Act, the Federal Trade Commission Act, the Clayton Act, and the Act to Regulate Commerce. While the Federal Trade Commission Act is undoubtedly the most comprehensive in this respect, it has not yet been applied. On the other hand, the Sherman Act has been interpreted by the courts with respect to various methods of competition, either through judicial decisions or decrees. The opinions and decrees under the Sherman Act are set forth without attempting to determine how far such practices are unfair methods of competition within the meaning of the Federal Trade Commission Act. Such statutes as the Pure Food and Drugs Act, which appear to have been enacted primarily to protect the consumer from fraud and imposition, but which incidentally protect the honest dealer from the fraudulent competition of unscrupluous rivals, are not included in this chapter, nor are the statutes and decisions relating to trademarks, these latter being fully treated in comprehensive textbooks and reference works.

DECISIONS UNDER THE SHERMAN LAW WITH RESPECT TO METHODS OF COMPETITION.

Section 2. General statement.

Although the Sherman Antitrust Act does not in terms condemn unfair competition, certain classes of contracts or specific competitive practices have been complained of in proceedings arising under the act as tending to establish a restraint of trade or an attempt to monopolize. In some instances the courts have passed upon the legality of those practices in their decisions; in others they have been prohibited in the decrees, but without any comment by the courts upon the legality of the particular devices or practices.

The following competitive methods have been passed on in the reported decisions: Price cutting, the use of "fighting ships," "bogus independents," exclusive and "tying" contracts, inducing breach of

contract, enticing employees from the service of competitors, bribery and espionage, and the boycott by trade associations, accompanied by the black list.

Section 3. Price cutting.

In United States v. Great Lakes Towing Co. et al.,' the court referred to the combination represented by the towing company as "a monopoly created by abnormal and unfair means," specifying as one of these,"unfair rate wars," and stated that "stringent provisions against unfair rate cutting" were contained in the decree.2

In reviewing the evidence of a conspiracy admitted by the trial court in a criminal prosecution of the president and certain officers and agents of the National Cash Register Co., the circuit court of appeals took occasion to comment adversely upon two methods practiced by the defendants in competition with the American Cash Register Co. These methods were (1) cutting prices on machines made by the American Company and secured by the National in the course of business, and (2) cutting prices on their own machines. The court said:

The method of attack was to prevent him [an employee of the American Co.] from making sales of American machines and to displace such as he made. The way in which the former was attempted was by offering Hallwoods [the name of the American Co.'s machine], owned by the National Co. at low prices—i. e., 30 cents on the dollar, in competition. The way in which the displacements were brought about was by offering the regular National machines on unusual terms. Both methods were unfair.3

*

After the judgment of the Supreme Court in United States v. American Tobacco Co. et al., the Circuit Court for the Southern District of New York considered a request that the defendant companies be enjoined " from giving away or selling at or below the cost of manufacture and distribution any of its products, from giving rebates, allowances, or other special inducements to purchasers or users, and from refusing to sell to any jobber any special brand he may require." This request, however, was denied by Lacombe, J., who said:

The record in this case shows that these are the common methods of the tobacco business, practiced by all alike. It is only by giving away samples, or by offering on favorable terms, irrespective of cost, that new brands of tobacco products can be introduced or old brands extended into new territory. All other companies are free to employ these methods, which are obnoxious to no statute, and there is no reason why the fourteen companies should be forbidden to do so.

1217 Fed., 656, 659–661 (D. C. 1914). This case is now pending in the U. S. Supreme Court.

2 See decree, pp. 479, 481, 484.

Patterson et al. v. United States, 222 Fed., 599, 636 (C. C. A., 1915).

4221 U. S.. 106 (1911).

U. S. v. American Tobacco Co. et al., 191 Fed., 371, 381 (1911).