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If this limitation is incorporated in the agreement, the authorities seem to be rather uniform in holding that neither trustees nor certificate holders can be held

into an agreement with another, he binds himself personally unless by the terms of the contract the parties agree that the fund alone is to be looked to for liability. Bradner, Smith & Co. v. Williams, 178 Ill. | liable in such agreements provided, of 420, 53 S. E. 358.

This principle of the law is found imbedded in the rule of liability binding executors, administrators, guardians and trustees personally on their contracts and absolving beneficiaries because the latter have no active participation in the management or control of the trust.

The measure of legal responsibility offered in the doctrine of respondeat superior has been uniformly disregarded as not furnishing a satisfactory solution of the intricate problems created by voluntary trusts known as "Trading Trusts." Logically the principle of immunity to beneficiaries would seem on principle to exclude trusts of voluntary creation where the members themselves define the trust, select their trustees and fix not only their own rights and liabilities, but also the rights and liabilities of the trustees and third parties.

Whatever may be said on this score the law is thoroughly well settled that the legal relationship created by the typical declaration of trust is that of trustee and cestui que trust, and the many perplexing problems that have arisen have been solved by looking to that relationship in the first instance. Hence it follows that the nonliability of the shareholders and the personal liability of the trustee arise as necessary corollaries.

The problem of the declarer of this kind of a trust is to preserve the immunity of the shareholder on the one hand and ward off the personal liability of the trustees on the other, and this is sought to be ac complished by depriving the certificate holder of active participation in the control of the trust and by keeping constantly in view in the making of all agreements by the trustees that the trust property alone is bound, and all liability is limited to the extent of trust funds and trust property.

course, that notice of the limitation is brought home to parties dealing with the trustee.

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In the case hereinbefore quoted, the non-liability of both certificate holder and trustee is placed upon the ground of actual knowledge of exemption from liability provided for in the trust instrument both as to trustee and certificate holder. other cases the solution has not been so simple. In George v. Hall (Texas Civil Appeals, May 7, 1924), 262 S. W. 174, the facts were that A accepted as security for a note certificates of shares in a business trust, exempt ng members of the company who alone could be trustees, from personal liability for its debts and stating that persons acquiring shares, as security for debt. or otherwise, accept terms of the declaration. It was held that parol testimony that A was told during negotiations that trustees executing the note were not personally liable and would not indorse it personally was held admissible as not varying the terms of the written instrument (the note) and to show that A was looking to the company for the debt. In Hardee v. Adams Oil Association (Texas Civil Appeal), 254 S. W. 602, the court say:

"There can be no reason for denying the shareholders' exemption from personal liability to one who has agreed in entering into a contract with the association nor to hold the shareholders liable thereon, and to look only to the funds and property of the association as security for the performance of the contract. The agree

ment to exempt the shareholders from personal liability is binding as between themselves, and when one becomes a shareholder in an organization of this kind he is charged with knowledge of the stipulations and agreements contained in the declaration of trust which creates the association, defines its powers and the relation of the

shareholders to the association and to each other, and is bound by such declaration and agreement."

From these and other cases it may be deduced as settled law that notice that one is trustee, and not agent, is sufficient protection aganst individual liability on the part of the certificate holders, if knowledge of the articles of association are brought home to the parties dealing with the trustee, and they provide exemption from personal liability. Indeed many cases hold that notice that that one is a trustee is of itself sufficient to relieve the certificate holder from personal liability.

THE FEDERAL TRADE COMMISSION By Edgar Watkins

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Sociology and economies are placed by Mr. Justice Holmes alongside of history as necessary tools "if one is to practice law in a large way." The Federal Trade Commission relies on history, is influenced by sociological concepts and is gradually announcing economic theories which will have an influence on the development of the science or a science of economics.

As business economics is so largely regulated by statutes, the lawyer who hopes to be of service to business must give thought to these statutes and to their application by administrative tribunals. The Federal Trade Commission, with powers largely negative, is nevertheless by the process of elimination fixing affirmative rules for the direction of business policies. A long continuation of prohibitions will raise the presumption that rulings not objected to are lawful.2

History Federal Trade Commission Act.-Statesmen, lawyers and business men prior to 1914 became convinced that the anti-trust laws were of little or no value and that such laws constituted a handicap to business. This conviction caused a general demand for the adoption of statutes

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which would lessen the handicaps of the anti-trust laws without destroying their usefulness. In discussing this question in a message to the Congress in January. 1914, President Wilson said:

"And the business men of the country desire something more than that the menace of legal process in these matters be made explicit and intelligible. They desire the advice, the definite guidance and information which can be supplied by an administrative body, an interstate trade commission.

"The opinion of the country would immediately approve of such a commission. It would not wish to see it empowered to make terms with monopoly or in any sort to assume control of business, as if the Government made itself responsible. It demands such a commission only as an indispensable instrument of information and publicity, as a clearing house for the facts by which both the public and the managers of great business undertakings should be guided, and as an instrumentality for doing justice to business where the processes of the courts or the natural forces of correction outside the courts are inadequate to adjust the remedy to the wrong in a way that will meet all equities and circumstances of the case."

The recommendations of President Wilson were not followed and the statute finally passed does not eliminate the difficulties and uncertainties of business, although, as stated above, in the course of years there may be some definiteness resulting from the continued pronouncements of the Federal Trade Commission.

Summary of Act.-The Federal Trade Commission Act was approved September 26, 1914, and, aside from its administrative provisions and definitions, the statutory changes made thereby are few.3 Section 5 provides "that unfair methods of competition in commerce are hereby declared unlawful." The same section gives the Commission the power to issue orders for the purpose of preventing unfair methods of (3) Watkins Shippers & Carriers, 3rd Ed., Vol. 2, p. 1400 seq.

competition in commerce, and for that purpose the Commission may file, hear and determine complaints if it shall appear to the Commission that a proceeding by it in respect thereof would be "to the interest of the public." All the Commission can do is to issue an order to cease and desist, in effect an injunction, which order if law ful may be enforced in the courts and the respondent in the order may obtain a review thereof in the proper circuit court of appeals. Section 6 gives the Commission power to compile information, to require certain reports, to publish information, to classify corporations, to investigate trade conditions, and gives it certain duties in connection with anti-trust laws. These

are:

"Whenever a final decree has been entered against any defendant corporation in any suit brought by the United States to prevent and restrain any violation of the Anti-Trust Acts, to make investigations, upon its own initiative, of the manner in which the decree has been or is being carried out, and upon the application of the Attorney-General it shall be its duty to make such investigation, to investigate and report the facts relating to any alleged violations of the Anti-Trust Acts by any corporation, ⚫ to investigate and make recommendations for the readjustment of the business of any corporation alleged to be violating the Anti-Trust Acts in order that the corporation may thereafter maintain its organization, management, and conduct of business in accordance with law."

By Section 7, in an Anti-Trust suit brought by the Attorney-General, courts may refer said suit to the Commission, as a master in chancery, to ascertain and report an appropriate form of decree therein. Certain sections of the Clayton Act hereinafter discussed are enforced by the Commission. It will be seen from the above that except as to its duties as a fact finding commission, its duties as to investigations and in acting as a master in chancery in anti-trust suits the Federal Trade

Commission's power is comprehended in its right to prevent unfair methods of competition.

Two Classes of Unfair Methods.-Unfair methods of competition, while not susceptible of accurate definition are, as stated by the Supreme Court, limited to the practices heretofore regarded as deceptive, fraudulent, oppressive, or characterized by bad faith. The phrase may be broadly classified as including two distinct characters of acts: One, those which are fraudulent; two, those which tend unduly to hinder competition or to create monopoly. Typical of the first are:

Inducing breach of competitor's contracts, enticing employees from the service. of competitors, betrayal of trade secrets, betrayal of confidential information, defamation of competitors, disparagement of competitor's goods, misrepresentation, testimonials, bribery of employees, competfalse or misleading advertising, misuse of ing with purchaser after the sale of business and good will, passing off the goods of one manufacturer or dealer as those of another, this last including simulation of trade marks.

As to this category there is little possibility of disagreement. However, when the second category is involved there is wide divergence among different economists. What constitutes dangerous or undue hindrance of competition is not easily defined or delimited. Opinions of economists vary greatly.

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Fraudulent Methods.-I shall give typical cases decided by the Commission which subsequently reached the courts. ments by a seller of goods for entertainment of employees of his customers and prospective customers having been held by the Commission to be an unfair practice as constituting a fraud on the purchaser, the United States Circuit Court for the Second

Circuit reversed the Commission, stating that the facts presented a matter between individuals and not one "so affecting the Federal Trade Commission v. Gratz, 253 U. S. 421, 427, 64 L. Ed. 993, 40 Sup. Ct. 572.

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public interest as to be within the jurisdiction of the Federal Trade Commission.''5 Fraudulent advertising has been discussed by the Commission and the courts and typical of these decisions are cases: where cut prices were advertised and the general advertising policy of the respondent held unfair, the Commission's order being modified and as modified sustained; where the Commission found that false and misleading statements concerning a particular stock food and a misuse of a trade mark were unfair, and the court sustained the order of the Commission;7 and where the Commission found that false statements as to the pedigree of hogs constituted an unfair method of competition, which finding was affirmed in part by the court. Denison, Circuit Judge, dissenting, facetiously described the case as one involving porcine genealogy.8

There have been several cases of mis

branding and its kindred fraud of simulating a competitor's trade mark. A leading

case involved both the claim of fraud and a misuse of a trade mark. The Federal Trade Commission had issued an order to cease and desist from using as labels or brands on underwear or other knit goods not composed wholly of wool, the words "Merino," "Wool" or "Worsted." The Circuit Court of Appeals for the Second Circuit reversed the order of the Commission. The Supreme Court reversed the Circuit Court of Appeals, using this expressive sentence:10

"A method inherently unfair does not cease to be so because those competed against have become aware of the wrongful practice. Nor does it cease to be unfair because the falsity of the manufacturer's representation has become so well known

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New Jersey Asbestos Co. v. Fed. Trade Com., 264 Fed. 509; Kinney-Rome Co. V. Fed. Trade Com. (7th Cir.), 275 Fed. 665.

(6) Sears, Roebuck & Co. v. Fed. Trade Com. (7th Cir.), 258 Fed. 307.

(7) Guarantee Veterinary Co. v. Fed. Trade Com. (2nd Cir.), 285 Fed. 853.

(8) The L. B. Silver Co. v. Fed. Trade Com. (6th Cir.). 289 Fed. 985; Motion for rehearing denied, 292 Fed. 752.

(9) Winsted Hosiery Co. v. Fed. Trade Com., 272 Fed. 957.

(10) Fed. Trade Com. v. Winsted Hosiery Co., 258 U. S. 843, 494, 66 L. Ed. 729, 734.

to the trade that dealers, as distinguished from consumers, are no longer deceived."

In the Baking Powder case the Circuit Court of Appeals for the Second Circuit sustained an order of the Commission which found as a fact that an inferior product was so advertised and labeled as to create the impression that the advertised product was the same as an old and superior product.11

The simulation of a name and trade mark having been condemned by the Federal Trade Commission, its order was affirmed by the Circuit Court of Appeals for the Ninth Circuit.12

In the Film case the Commission had condemned the offering of a re-issue of photoplays without disclosing that it was a re-issue rather than a new picture and its order was affirmed by the Circuit Court of Appeals for the Second Circuit.13

In a case where the Commission had issued a cease and desist order against the publication of disparaging statements as to a competitor's product, the Circuit Court of Appeals for the Second Circuit reversed the Commission because the public had no interest in the protection of the article there used by the respondent.14

Commission's Powers of Investigation.— The Commission's power of investigation has been considered by the courts, the leading cases being the tobacco companies cases. The Circuit Court of Appeals there held that it was not the intention of the statute to grant to the Commission an unlimited right of examination and inspection and that such right must be based upon facts tending to establish a charge of wrongdoing.15 The cases were affirmed by the Supreme Court,16 the grounds of affirmance being sufficiently indicated by the following quotation:

(11) Royal Baking Powder Co. v. Fed. Trade Com. (2nd Cir.), 281 Fed. 744.

(12) Juvenile Shoe Co., Inc., v. Fed. Trade Com. (9th Cir.), 289 Fed. 57.

(13) Fox Film Corp. v. Fed. Trade Com. (2nd Cir.), 296 Fed. 353.

(14) John Bene & Sons. Inc., v. Fed. Trade Com. (2nd Cir.), 299 Fed. 468.

(15) Fed. Trade Com. v. Lorillard Company. and same v. American Tobacco Company, 283 Fed. 999 (Dist. Court).

(16) American Tobacco Co. v. Fed. Trade Com, 264 U. S. 298, 68 L. Ed. -.

"Anyone who respects the spirit as well der Section 7 of the Clayton Act18 by the

as the letter of the Fourth Amendment would be loath to believe that Congress intended to authorize one of its subordinate agencies to sweep all our traditions into the fire (Interstate Commerce Commission v. Brimson, 154 U. S. 447, 479), and to direct fishing expeditions into private papers on the possibility that they may disclose evidence of crime.

"The right of access given by the statute is to documentary evidence not to all documents, but to such documents as are evidence. The analogies of the law do not allow the party wanting evidence to call for all documents in order to see if they do not contain it.

* * In other words, there must appear to be some reasonable cause for a search such as a definite complaint charging a specific wrong and thus presenting an inquiry which would have reasonable and readily ascertainable limits."

Restraint of Trade.-The Federal Trade Commission does not enforce the anti-trust acts except in so far as it has certain functions similar to a master in chancery and

Circuit Court of Appeals for the Third Circuit.19 However such a purchase at sheriff's sale for the purpose of collecting a bona fide debt is lawful.20 A similar holding to that in the first hearing in the Aluminum case was made by the Circuit Court of Appeals for the Ninth Circuit.21

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Resale Price Fixing and Selection of Customer. The Supreme Court has distinctly held that when a vendor sells goods he has no right to require the vendee to resell such goods at a price fixed by the seller-resale price-fixing contracts being generally declared to be void. The question of refusals by dealers to trade with those purchasers who did not maintain prices has been presented to the Federal Trade Commission and it has usually held it to be an unfair method of competition for a manufacturer to sell his goods to a wholesaler or dealer with a suggested resale price and, thereafter, if the suggested price is not observed, refuse to make sales to the offending dealer. This involves the right of a dealer to select the persons with whom he deals and that such right exists.

as to certain parts of the Clayton Act and there can be no no doubt. The Supreme

except in so far as those acts offer evidence of a public policy which is to be considered in determining what is unfair. In discussing the powers of the Federal Trade Commission the Supreme Court said:17

"The Sherman Act is not involved here except in so far as it shows a declaration of public policy to be considered in determining what are unfair methods of competition, which the Federal Trade Commission is empowered to condemn and suppress."

I shall discuss representative cases where the Commission has held that particular acts were unfair methods of competition because of their tendency unduly to restrain commerce.

The order of the Commission preventing acquisition of stock by one corporation in a competing corporation was sustained un(17) Fed. Trade Com. V. Beech-Nut Packing Co., 257 U. S. 441, 66 L. Ed. 307.

Court said:23

(18) Sec. 501.

Watkins Shippers & Carriers, 3rd Ed.,

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Fed. Trade Com. v. Raymond BrothersClark Co., 250 Fed. 529, 263 U. S. 565. In support of this statement the court said: "United States v. Colgate & Co.. 250 U. S. 300, 307. See also United States v. Freight Ass'n, 166 U. S. 290, 320; Dueber Watch Case Co. v. Howard Watch Co. (C. C. A.), 66 Fed. 637, 645; Great Atlantic Tea Company v. Cream of Wheat Co. (C. C. A.), 227 Trade Fed. 46, 48; Wholesale Grocers' Ass'n v. Comm. (C. C. A.), 277 Fed. 657, 664; Mennen Co. v. Fed. Trade Comm. (C. C. A.), 288 Fed. 774, 780; Both v. Burgess, 72 N. J. Eq. 181, 190; and Cooley on Torts (3d ed.), 587. Thus a retail dealer has the unquestioned right to stop dealing with a wholesaler for reasons satisfactory to himself.' Eastern States Lumber Co. v. United States, 234 U. S. 600, 614; United States v. Colgate & Co., supra, p. 307. He may lawfully make a fixed rule of conduct not to buy from a producer or manu. facturer who sells to consumers in competition with himself. Granada Lumber Co. v. Mississippi, 217 U. S. 433, 440. Or he may stop dealing with a wholesaler who he thinks is acting unfairly in trying to undermine his trade. Eastern States Lumber Co. v. United States, supra, p. 614; United States v. Colgate & Co., supra, p. 307. Likewise a wholesale dealer has the right to stop dealing with a manufacturer 'for reasons sufficient to himself.' And he may do so because he thinks such

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