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"their officers and agents, cease and desist from requiring purchasers of cotton ties to also buy or agree to buy, a proportionate amount of American Manufacturing Company's bagging and further that the respondents cease and desist from refusing to sell cotton ties unless the purchasers buy or agree to buy from them corresponding amounts of American Manufacturing Company's bagging, or any amount of cotton bagging of any kind."

Upon respondents' petition the Circuit Court of Appeals, Second Circuit, annulled the commission's order. 258 Fed. 314, 169 C. C. A. 330. It said:

"We think there is no evidence to support any general practice of the respondents to refuse to sell ties unless the purchaser bought at the same time the necessary amount of the

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American Manufac*turing Company's bagging, and that the commission has no jurisdiction to determine the merits of specific individual grievances."

The challenged order is based solely upon the first count of the complaint which follows:

Charles O. Elmer.

cotton, and which jute bagging is manufactured by the American Manufacturing Company, of St. Louis, Missouri.

"Paragraph 2: That the respondents P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh are copartners doing business under the firm name and style of P. P. Williams & Co., having their principal office and place of business in the city of Vicksburg and state of Mississippi, and the said last-named respondents and the said respondent Charles O. Elmer, who is located and doing business at the city of New Orleans and state of Louisiana, are the selling and distributing agents of the said firm of Warren, Jones & Gratz, and sell and distribute the ties and bagging, manufactured as aforesaid, in interstate commerce, principally to jobbers and dealers, who resell the same to retailers, cotton ginners, and farmers.

"Paragraph 3: That with the purpose, intent, and effect of discouraging and stifling competition in interstate commerce in the sale of such bagging, all of the respondents do now refuse, and for more than a year last past have refused, to sell any of such ties unless the prospective purchaser thereof would also buy from them bagging to be used with the number of ties proposed to be bought; that is to say, for each six of such ties proposed to be bought from the respondents the prospective purchaser is required to buy six yards of such bagging."

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ticing "unfair methods of competition in commerce" within the fair intendment of those words. We go no further and confine this opinion to the point specified.

"Federal Trade Commission v. Anderson Gratz and Benjamin Gratz, Copartners Doing Business under the Firm Name and Style of Warren, Jones & Gratz, P. P. Williams, It is unnecessary now to discuss conflictW. H. Fitzhugh, and Alex. Fitzhugh, Copartners Doing Business under the Firming views concerning validity and meaning Name and Style of P. P. Williams & Co., and of the act creating the commission and effect of the evidence presented. The judgment "The Federal Trade Commission having rea- below must be affirmed, since, in our opinion, son to believe, from a preliminary investiga- the first count of the complaint is wholly intion made by it, that Anderson Gratz and Ben-sufficient to charge respondents with prac jamin Gratz, copartners doing business under the firm name and style of Warren, Jones & Gratz, P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh, copartners doing business under the firm name and style of P. P. Williams & Co., and Charles O. Elmer, all of whom are hereinafter referred to as respondents, have been and are using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of the act of Congress approved September 26, 1914, entitled 'An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,' and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, on information and belief, as follows:

When proceeding under section 5 it is essential, first, that, having reason to believe a person, partnership, or corporation has used an unfair method of competition in commerce, the commission shall conclude a proceeding "in respect thereof would be to the interest of the public"; next, that it formulate and serve a complaint stating the charges "in that respect," and give opportunity to the accused to show why an order should not issue directing him to "cease and desist from the violation of the law so charged in said complaint." If after a hear"Paragraph 1: That the respondents Ander-ing the commission shall deem "the method son Gratz and Benjamin Gratz are copartners doing business under the firm name and style of Warren, Jones & Gratz, having their princi

"I.

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pal office and place of business in the city of St. Louis and state of Missouri, and are engaged in the business of selling, in interstate commerce, either directly to the trade, or through the respondents hereinafter named, steel ties made and used for binding bales of cotton, and which steel ties are manufactured by the Carnegie Steel Company of Pittsburgh, Pennsylvania, and also selling, in the same manner, jute bagging, used to wrap bales of

of competition in question is prohibited by this act," it shall issue an order requiring the accused "to cease and desist from using such method of competition."

[1, 2] If, when liberally construed, the complaint is plainly insufficient to show unfair competition within the proper meaning of these words there is no foundation for an order to desist-the thing which may be prohibited is the method of competition specified in the complaint. Such an order should follow the complaint; otherwise it is improvi

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(40 Sup.Ct.)

dent and, when challenged, will be annulled | show any unfair method of competition pracby the court. ticed by respondents and the order oased thereon was improvident.

[3, 4] The words "unfair method of competition" are not defined by the statute and their exact meaning is in dispute. It is for the courts, not the commission, ultimately to determine as matter of law what they include. They are clearly inapplicable 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 compe

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The judgment of the court below is
Affirmed.

Mr. Justice PITNEY concurs in the result.

Mr. Justice BRANDEIS dissenting, with whom Mr. Justice CLARKE concurs.

First. The court disposes of the case on a question of pleading. This, under the circumstances, is contrary to established practice. The circumstances are these:

this suit. It is the pleading by which was

The pleading held defective is not one in

raised in this suit in the court below. It was not made here by counsel. The objection is taken now for the first time and by

the court.

tition or create monopoly. The act was *certainly not intended to fetter free and fair competition as commonly understood and originated the proceeding before the Federal practiced by honorable opponents in trade. [5] Count 1 alleges, in effect: That War- Trade Commission, an administrative triburen, Jones & Gratz are engaged in selling, nal, whose order this suit was brought to set either directly to the trade or through their aside. No suggestion was made in the procorrespondents, cotton ties produced by the ceeding before the commission that the comCarnegie Steel Company and also jute bag-plaint was defective. No such objection was ging manufactured by the American Manufacturing Company. That P. P. Williams & Co., of Vicksburg, and C. O. Elmer, of New Orleans, are the selling and distributing This suit, begun in the Circuit Court of Apagents of Warren, Jones & Gratz, and as such sell and distribute their ties and bag-peals for the Second Circuit, was brought to ging to jobbers and dealers, who resell them set aside an order of the Federal Trade Comto retailers, ginners, and farmers. That with mission. Before the latter the matter inthe purpose and effect of discouraging and volved was thoroughly tried on the merits. Thirstifling competition in the sale of such bag- There was a complaint and answers. ty-five witnesses were examined and crossging all the respondents for more than a year have refused to sell any of such ties examined. A report of proposed findings as unless the purchaser would buy from them a to facts was submitted by the examiner and corresponding amount of bagging-six yards exceptions were filed thereto. Then, the case with as many ties. was heard before the commission, which made a finding of facts, stated its conclusions as to the law, and ultimately issued the order in question. The proceedings occupied

The complaint contains no intimation that Warren, Jones & Gratz did not properly obtain their ties and bagging as merchants usually do; the amount controlled by them is not stated; nor is it alleged that they held a monopoly of either ties or bagging or had ability, purpose or intent to acquire one. So far as appears, acting independently, they undertook to sell their lawfully acquired property in the ordinary course, without deception, misrepresentation, or oppression, and at fair prices, to purchasers willing to take it upon terms openly announced.

[6] Nothing is alleged which would justify the conclusion that the public suffered injury or that competitors had reasonable ground for complaint. All question 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 ties and bagging. If real competition is to continue, the right of the individual to

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more than 16 months. The report of them fills 400 pages of the printed record. In my opinion it is our duty to determine whether cient in law to support the order, and also, the facts found by the commission are suffiif it is questioned, whether the evidence was sufficient to support the findings of fact.

Second. If the sufficiency of the complaint is held to be open for consideration here, we should, in my opinion, hold it to be sufficient. The complaint was filed under section 5 of the Federal Trade Commission Act which declares unlawful "unfair methods of compe tition in commerce," empowers the commis

sion to prevent their use, and directs it to issue and serve "a complaint stating its charges in that respect" whenever it has reason to believe that a concern “has been or is using" such methods. The function of the complaint is solely to advise the respondexercise reasonable discretion *in respect of ent of the charges made so that he may have his own business methods must be preserved. | due notice and full opportunity for a hearing United States v. Colgate, 250 U. S. 300, 39 Sup. Ct. 465, 63 L. Ed. 992; United States v. A. Schrader's Son, Inc. (March 1, 1920), 252 U. S. 85, 40 Sup. Ct. 251, 64 L. Ed. 471. The first count of the complaint fails to

thereon. It does not purport to set out the elements of a crime like an indictment or information, nor the elements of a cause of action like a declaration at law or a bill in equity. All that is requisite in a complaint

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*In considering whether the complaint is sufficient, it is necessary to bear in mind the nature of the proceeding under review. The proceeding is not punitive. The complaint is not made with a view to subjecting the respondents to any form of punishment. It is not remedial. The complaint is not filed with a view to affording compensation for any injury alleged to have resulted from the matter charged, nor with a view to protecting individuals from any such injury in the future. The proceeding is strictly a pre

before the commission is that there be a plain statement of the thing claimed to be wrong so that the respondent may be put upon his defence. The practice of the Federal Trade Commission in this respect, as in many others, is modeled on that which has been pursued by the Interstate Commerce Commission for a generation and has been sanctioned by this as well as the lower federal courts. United States Leather Co. v. Southern Ry. Co., 21 Interst. Com. Com'n R. 323, 324; Clinton Sugar Refining Co. v. C. & N. W. Ry. Co., 28 Interst. Com. Com'n R. 364, 367; Stuarts Draft Milling Co. v. South-ventive measure taken in the interest of the ern Ry. Co., 31 Interst. Com. Com'n R. 623, 624; New York Central, etc., R. R. Co. v. Interstate Commerce Commission (C. C.) 168 Fed. 131, 138, 139; Dickerson v. Louisville & Nashville R. R. Co. (C. C.) 187 Fed. 874, 878; Texas & Pacific Ry. v. Interstate Com-mative and advisory. The commission can

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merce Commission, 162 *U. S. 197, 215, 16 Sup. Ct. 666, 40 L. Ed. 940; Cincinnati, Hamilton & Dayton Ry. Co. v. Interstate Commerce Commission, 206 U. S. 142, 149, 27 Sup. Ct. 648, 51 L. Ed. 995.

The complaint here under consideration stated clearly that an unfair method of competition had been used by respondents, and specified what it was, namely, refusing to sell cotton ties unless the customer would purchase with each six ties also six yards of bagging. The complaint did not set out the circumstances which rendered this tying of bagging to ties an unfair practice. But this was not necessary. The complaint was similar in form to those filed with the Interstate Commerce Commission on complaints to enforce the prohibition of "unjust and unreasonable charges" or of "undue or unreasonable preference or advantage” which the act to regulate commerce imposes (Comp. St. § 8565). It is unnecessary to set forth why the rate specified was unjust or why the preference specified is undue or unreasonable, because these are matters not of law but of fact to be established by the evidence. Pennsylvania Co. v. United States, 236 U. S. 351, 361, 35 Sup. Ct. 370, 59 L. Ed. 616. So far as appears neither this nor any other court has ever held that an order entered by the Interstate Commerce Commission may be set aside as void, because the complaint by which the proceeding was initiated, failed to set forth the reasons why the rate or the practice complained of was unjust or unreasonable; and I cannot see why a different rule should be applied to orders of the Federal Trade Commission issued under section 5.1

See Report Senate Committee on Interstate Commerce, June 13, 1914, Sixty-Third Congress, Second Session, No. 597, p. 13: : "It is believed that the term 'unfair competition' has a legal significance which can be enforced by the commission and the courts, and that it is no more difficult to determine what is unfair competition than it is to determine what is a reasonable rate or what is an unjust discrimination. The committee was of the opin

general public. And what it is brought to prevent is not the commission of acts of unfair competition, but the pursuit of unfair methods. Furthermore, the order is not selfexecutory. Standing alone it is only infornot enforce it. If not acquiesced in by the respondents, the commission may apply to the Circuit Court of Appeals to enforce it. But the commission need not take such action, and it did not do so in respect to the order here in question. Respondents may, if they see fit, become the actors and ask to have the order set aside. That is what was done in the case at bar.

The proceeding is thus a novelty. It is a new device in administrative machinery, introduced by Congress in the year 1914, in the hope thereby of remedying conditions in business which a great majority of the American people regarded as menancing the general welfare, and which for more than a generation they had vainly attempted to remedy by the ordinary processes of law. It was be lieved that widespread and growing concentration in industry and commerce restrained trade, and that monopolies were acquiring increasing control of business. Legislation de signed to arrest the movement and to secure disintegration of existing combinations had been enacted by some of the states as early as 1889. In 1890 Congress passed the Sherman Law (Comp. St. §§ 8820-8823, 8827-8830). It was followed by much legislation in the states2 and many official investigations. Between 1906 and 1913 reports were made by the Federal Bureau of Corporations of its investigations into the petroleum industry, the tobacco industry, the steel industry, and the farm implement industry. A special committee of Congress investigated the affairs of the United States Steel Corporation. And in 1911 this court rendered its decision in Standard

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ion that it would be better to put in a general provision 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."

2 See Laws on Trusts and Monopolies, Compiled under direction of the Clerk of the House Committee on the Judiciary, Sixty-Third Congress, by Nathan B. Williams, Revised January 10, 1914; also Trust Laws and Unfair Competition (Federal) Bureau of Corporations, March 15, 1915.

(40 Sup.Ct.)

Oil Co. v. United States, 221 U. S. 1, 31 Sup. (and that it might prove possible thereby to Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, preserve the competitive system. It was a Ann. Cas. 1912D, 734, and in American Tobac- new experiment on old lines; and the maco Co. v. United States, 221 U. S. 106, 31 chinery employed was substantially similar: Sup. Ct. 632, 55 L. Ed. 663. The conviction In undertaking to regulate competition became general in America, that the legisla- through the Trade Commission, Congress (betion of the past had been largely ineffective. sides resorting to administrative as distinThere was general agreement that further leg-guished from judicial machinery) departed islation was desirable. But there was a clear in two important respects from the methods division of opinion as to what its character and measures theretofore applied in dealing should be. Many believed that concentration with trusts and restraints of trade: (called by its opponents monopoly) was inevitable and desirable; and these desired that concentration should be recognized by law and be regulated. Others believed that concentration was a source of evil; that existing combinations could be disintegrated, if only the judicial machinery were perfected; and that further concentration could be averted by providing additional remedies, and particularly through regulating competition. The latter view prevailed in the Sixty-Third

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The

(1) Instead of attempting to inflict punishment for having done prohibited acts, instead of enjoining the *continuance of prohibited combinations and compelling disintegration of those formed in violation of law, the act undertook to preserve competition through supervisory action of the commission. potency of accomplished facts had already been demonstrated. The task of the commission was to protect competitive business from further inroads by monopoly. It was to be Congress. *The Clayton Act (Act Oct. 15, ever vigilant. If it discovered that any busi1914, c. 323, 38 Stat. 730) was framed largely ness concern had used any practice which with a view to making more effective the would be likely to result in public injury— remedies given by the Sherman law. The because in its nature it would tend to aid Federal Trade Commission Act (Act Sept. 26, or develop into a restraint of trade-the 1914, c. 311, 38 Stat. 717) created an admin-commission was directed to intervene, before istrative tribunal, largely with a view to reg- any act should be done or condition arise ulating competition.

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Many of the duties imposed upon the Trade Commission had been theretofore performed by the Bureau of Corporations. That which was in essence new legislation was the power conferred by section 5. The belief was widespread that the great trusts had acquired their power, in the main, through destroying or overreaching their weaker rivals by resort to unfair practices. As Standard Oil rebates led to the creation of the Interstate Commerce Commission, other unfair methods of competition, which the investigations of the trusts had laid bare, led to the creation of the Federal Trade Commission. It was hoped that, as the former had substantially eliminated rebates, the latter might put an end to all other unfair trade practices,

3 See Report of Senate Committee on Interstate Commerce, June 13, 1914, Sixty-Third Congress, Second Session, No. 597, p. 10, reporting the bill: "Some would found such a commission upon the theory that monopolistic industry is the ultimate result of economic evolution and that it should be

so recognized and declared to be vested with a public interest and as such regulated by a commission. This contemplates even the regulation of prices.

Others hold that private monopoly is intolerable, unscientific, and abnormal, but recognize that a commission is a necessary adjunct to the preservation of competition and to the practical enforcement of

the law.

"The commission which is proposed by your committee in the bill submitted is founded upon the latter purpose and idea.

"Unfair Competition," by William S. Stevens, Political Science Quarterly (1914) p. 283; "The Morals of Monopoly and Competition" (1916) by H. B. Reed.

violative of the Anti-Trust Act. And it should
do this by filing a complaint with a view to
a thorough investigation; and, if need be, the
issue of an order. Its action was to be pro-
phylactic. Its purpose in respect to restraints
of trade was prevention of diseased business
conditions, not cure.

Senator Cummins, chairman of the committee
which reported the bill, said (Cong. Rec. vol. 51, p.
11455):

"Unfair competition must usually proceed to great lengths and be destructive of competition before it can be seized and denounced by the anti-trust law. In other cases it must be associated with, coupled with, other vicious and unlawful practices in order to bring the person or the corporation guilty of the practice within the scope of the anti-trust law. The purpose of this bill in this section and in other sections which I hope will be added to it, is to seize the offender before his ravages have gone to the length necessary in order to bring him within the law that we already have.

"We knew little of these things in 1890. The commerce of the United States has largely developed in the last 25 years. The modern methods of carrying on business have been discovered and put into oper-ation in the last quarter of a century; and as we have gone on under the anti-trust law under the decisions of the court in their effort to enforce that law, we have observed certain forms of industrial activity which ought to be prohibited whether in and of themselves they restrain trade or commerce or not. We have discovered that their tendency is evil; we have discovered that the end which is inevitably reached through these methods is an end which is destructive of fair commerce between the states. It is these considerations which, in my judgment, have made it wise, if not necessary to supplement the anti-trust law by additional legislation, not in antagonism to the anti-trust law, but in harmony with the anti-trust law, to more effectively put into the industrial life to America the principle of the anti-trust law, which is fair, reason

5 See Railway Problems by William Z. Ripley (1907) able competition, independence to the individual,

p. x.

40 SUP.CT.-37

and disassociation among the corporations.

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taken as final.

and it declared that findings of fact so made *(2) Instead of undertaking to define what (if duly supported by evidence) were to be practices should be deemed unfair, as had been done in earlier legislation, the act left the de- method of competition pursued could, on The question whether the termination to the commission. Experience those facts, reasonably be held by the comwith existing laws had taught that definition, being necessarily rigid, would prove embarrassing and, if rigorously applied, might involve great hardship. Methods of competition which would be unfair in one industry,

under certain circumstances, might, when adopted in another industry, or even in the same industry under different circumstances, *437

be entirely unobjectionable.8 Furthermore, an enumeration, however comprehensive, of existing methods of unfair competition must necessarily soon prove incomplete, as with new conditions constantly arising novel unfair methods would be devised and developed. In leaving to the commission the determination of the question whether the method of competition pursued in a particular case was unfair, Congress followed the precedent which it had set a quarter of century earlier, when by the act to regulate commerce it conferred

upon the Interstate Commerce Commission power to determine whether a preference or advantage given to a shipper or locality fell within the prohibition of an undue or unreasonable preference or advantage. See Pennsylvania Co. v. United States, supra, 236 U. S. 361, 35 Sup. Ct. 370, 59 L. Ed. 616; Texas & Pacific Railway v. Interstate Commerce Commission, 162 U. S. 197, 219, 220, 16 Sup. Ct. 666, 40 L. Ed. 940. Recognizing that the question whether a method of competitive practice was unfair would ordinarily depend upon special facts, Congress imposed upon the commission the duty of finding the facts,

'See Report Senate Committee on Interstate Commerce, June 13, 1914, Sixty-Third Congress, Second Session, No. 597, p. 13: "The committee gave careful consideration to the question as to whether it would attempt to define the many and variable unfair practices which prevail in commerce and to forbid their continuance or whether it would, by a general declaration condemning unfair practices, leave it to the commission to determine what prac

tices were unfair. It concluded that the latter course

would be the better.

Competition," by W. H. S. Stevens (University of
Chicago Press, 1916) pp. 1, 2. For laws prohibiting

specific acts of unfair competition, see "Trust Laws
and Unfair Competition" (Federal) Bureau of Cor-
porations (March 15, 1915) pp. 184, 199.

30:

mission to constitute an unfair method of competition, being a question of law, was Compare Interstate Commerce Commission v. necessarily left open to review by the court. Diffenbaugh, 222 U. S. 42, 32 Sup. Ct. 22, 56 L. Ed. 83; Interstate Commerce Commission v. Baltimore & Ohio R. R., 145 U. S. 263, 12 Sup. Ct. 844, 36 L. Ed. 699.

Third. Such a question of law is presented to us for decision, and it is this: Can the refusal by a manufacturer to sell his product to a jobber or retailer, except upon condition that the purchaser will buy from him also

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his trade requirements in another article or
sion to be an unfair method of competition
articles, reasonably be found by the commis-
under the circumstances set forth in the find-
ings of fact? If we were called upon to con-
sider the sufficiency of the complaint, and
that merely, the question for our decision
would be, whether the particular practice
could, under any circumstances, reasonably
be deemed an unfair method of competition.
But as this suit to set aside the order of the
commission brings before us its findings of
fact, we must determine whethere these are
sufficient to support their conclusion of law
that the practice constituted—
"under the circumstances therein set forth, un-
fair methods of competition in interstate com-
distributors in the material known as sugar-bag
merce against other manufacturers, dealers and
cloth, and against manufacurers, dealers and
distributors of the bagging known as rewoven
bagging and second-hand bagging in violation
of" the statute.

It is obvious that the imposition of such a
condition is not necessarily and universally
an unfair method; but that it may be such
under some circumstances seems equally
clear. Under the usual conditions of compet-
itive trade the practice might be wholly unob-
See also "Unfair jectionable. But the history of combinations
has shown that what one may do with im-
punity, may have intolerable results when
done by several in co-operation. Similarly
what approximately equal individual traders
may do in honorable rivalry may result in
grave injustice and public injury, if done by a
great corporation in a particular field of
business which it is able to dominate. In
other words, a method of competition fair —
among equals may be very unfair if applied
where there is inequality of resources.10
Without providing for those cases where the
method of competition here involved would

Report of (Federal) Bureau of Corporations on the International Harvester Co., March 3, 1913, P. "In discussing the competitive methods of the company it should be recognized that some practices which might be regarded with indifference if there were a number of competitors of substantially equal size and power may become objectionable when one competitor far outranks not only its nearest rival, but practically all rivals combined, as is true of the International Harvester Company, so far as several of its most important lines are concerned."

The Australian Industries Preservation Act, 19081910, expressly declares that "unfair competition

means competition which is unfair in the circumstances." "Trust Laws and Unfair Competition" (Federal) Bureau of Corporations (March 15, 1915) pp. 552, 747.

See note 1, supra.

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be unobjectionable, *Massachusetts legislated against the practice, as early as 1901, by a

10 See "The Morals of Monopoly and Competition," by H. B. Reed (1916) pp. 120-122.

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