of course, is directed at combinations or conspiracies designed to eliminate or restrict competition, whereas the FTC Act, in section 5, was designed to permit the Commission to build up "a body of precedent in the matter of business practices;" i. e., a code of ethics to be observed in "methods," "manners," or "systems" of competing. (See S. Rept. No. 597, 63d Cong.)

The respondents in the Cement case were charged with conspiring, and were found by the Trade Commission to have conspired, to fix prices by means of a basing-point system. As has been seen, price-fixing agreements or conspiracies have always been a per se violation of the Sherman Act. Yet the Commission charged, and proved to its own satisfaction, that a combination to remove competition was an unfair method of competing.

Senator Cummins also stated:

"I think that it [the FTC] should be free to prosecute an investigation whenever it believes that it would serve the public welfare to do so, and if in the course of the investigation a violation of the antitrust law * * * is developed, I think it ought to report the result of its investigation to the Attorney General, whose duty it is to prosecute offenders. * * *" (p. 11, 532).

Chairman Newlands said that, while he, individually, favored placing administration of the Sherman Act "in a commission such as this, we faced the fact then that we could not give this Commission jurisdiction and control over the administration of the antitrust law, but we could make it efficient in aid of the Court and the Attorney General" (p. 12, 623).

Section 6 of the FTC Act was thus designed to make the Commission "efficient in the aid of the Court and the Attorney General."

Copious additional material in the legislative history of the Trade Commission Act shows that Congress did not intend to vest the Commission with jurisdiction over restraints of competition, but intended to confine its prosecuting and deciding functions to "unethical" or "unfair" methods of active competition between sellers. However, the foregoing must suffice to support a view that the Trade Commission does not possess statutory jurisdiction over conspiracies in restraint of trade, and that its present jurisdiction over Sherman Act cases has come about through administrative usurpation of power acquiesced in by the courts because of a presumed administrative "expertness."

Despite the legislative history to the contrary, however, there can be no doubt that, at least until Congress declares otherwise, the Commission in effect now has concurrent jurisdiction with district courts over alleged conspiracies in restraint of trade (FTC v. Cement Institute, supra).

This leads to anomalous situations. One group of defendants, charged with conspiracy in restraint of trade, may be compelled to try their case before an administrative employee, under the Trade Commission's lax rules of evidence, and with a right to only perfunctory court review. On the other hand, another group, charged with the same practices, may defend the charge in a district court, under established rules of evidence, with a direct appeal to the Supreme Court. Depending upon the prosecutor, one group may be subjected to civil, criminal, and treble damage liabilities, while the other is confronted with a cease and desist order. Moreover, any group of alleged conspirators may be prosecuted by both the Trade Commission and the Department of Justice at the same time and for the identical practices.

"Implied conspiracy" doctrine.-Judicial acquiescence in Trade Commission usurpation of jurisdiction over alleged conspiracies raises a major problem with respect to its methods of proving such allegations.

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Mr. Justice Jackson, in Krulewitch v. Ü. S., decided March 28, 1949, has described the modern crime of conspiracy as so 'vague that it almost defies definition," and that it "sounds undertones of treachery, secret plotting and violence on a scale that menaces social stability and the security of the state itself." It would seem fundamental, therefore, that when a businessman is accused of conspiracy he should be entitled to all the procedural safeguards and presumptions of innocence embodied in the letter and spirit of our Federal Constitution. Nevertheless, Justice Jackson referred to the recent tendency on the part of the Supreme Court to "expand" the offense of conspiracy and "to facilitate its proof," even in criminal cases. Because of this tendency, he also recognized that there "are procedural advantages" to the prosecutor in using "a scattergun to bring down the defendant."

But the Trade Commission is not bound even by the "extremely low" standards of proof referred to by Justice Jackson. It can, therefore, prove conspiracy on the basis of something short of the "low" standards applied in criminal prosecu

tions. Thus the Commission, again quoting Justice Jackson, is able to prove conspiracy "by evidence that is admissible only upon assumption that conspiracy existed." This the Commission does by introducing evidence designed to show a "conscious parallelism of action" in a particular industry, and concluding therefrom that an "implied conspiracy" exists.

It is elementary that agreement, combination, or conspiracy may be proved by circumstantial as well as by direct evidence (Eastern States Retail Lumber Dealers Ass'n v. U. S. (1914), 234 U. S. 600). Throughout its history the Trade Commission has been permitted to rely upon inference in alleged conspiracy cases (FTC v. Pacific States Paper Trade Ass'n (1927), 273 U. S. 52). It also seems clear that direct proof of agreement among competitors to adopt, use, or alter a delivered pricing method will support a cease-and-desist order issued by the Commission. (See e. g., FTC v. Cement Institute, supra and Triangle Conduit & Cable Co. v. FTC, 168 F. 2d 175, aff'd 336 U. S. 956 (1949).)

In the cases last cited, an attempt was made by the Commission's attorneys to introduce evidence of conspiracy, i. e., evidence beyond the mere common use of the same pricing method, with common knowledge of such use, and uniformity of prices. Such evidence as was introduced gave rise to specific findings of conspiracy, beyond mere "conscious parallelism of action," and the courts accepted them as supported by substantial evidence. Thus, in no case thus far decided, have the Commission and the courts gone so far as to say that mere uniformity of action (pricing or otherwise), standing alone, constituted, a conspiracy and thus a violation of the Trade Commission Act. The courts have, however, gone quite far in indicating they would (presumably on the basis of "expertness") uphold the Commission when and if a case charging a conspiracy on the basis of mere uniformity is presented. For example, in Allied Paper Mills v. FTC ((1948), 168 F. 2d 600), the Court stated in part:

"Moreover, a uniform participation by competitors in a particular system of doing business, where each is aware of the others' acts and where the effect is to restrain commerce, is sufficient to establish an unlawful conspiracy." (See also the rigid steel conduit case, supra.)

In view of this and similar language in other court opinions it would be but a short step for the Commission to attack mere uniformity of conduct under its doctrine of "implied conspiracy." Moreover, unless checked by the Congress, it would seem that this step will soon be taken. This is indicated in the following rationale of its proceeding in the Rigid Steel Conduit case on the theory that uniformity of action, with knowledge, violated the Trade Commission Act. It stated, in a Notice to the Staff Re Commission Policy Toward Geographic Pricing Practices, October 12, 1948, page 3:

"In the Rigid Steel Conduit case, the Commission found, and the circuit court agreed, that adherence to an industry-wide basing point formula, with the knowledge that other concerns are adhering to it also, constitutes in itself a violation of the Federal Trade Commission Act by the individual adhering companies when price competition is thereby eliminated. It would have been possible to describe this state of facts as a price conspiracy on the principle that, when a number of enterprises follow a parallel course of action in the knowledge and contemplation of the fact that all are acting alike, they have, in effect, formed an agreement. Instead of phrasing its charge in this way, the Commission chose to rely on the obvious fact that the economic effect of identical prices achieved through conscious parallel action is the same as that of similar prices achieved through overt collusion, and, for this reason, the Commission treated the conscious parallelism of action as violation of the Federal Trade Commission Act. Should the Supreme Court sustain the Commission's view, the effect will be to simplify proof in basing point cases, but to expose to proceedings under the Federal Trade Commission Act only courses of action which might be regarded as collusive or destructive of price competition."

The Supreme Court, without opinion and in a 4-to-4 split, did "sustain the Commission's view" that "conscious parallelism of action" violated the Federal Trade Commission Act. There can be little doubt, therefore, that the Commission will construe the Rigid Steel Conduit decision as authority for proceeding against a mere uniformity, or a common course of action, as constituting an "implied conspiracy." Yet how a businessman can compete without some awareness of what his competitors are doing and without meeting competitors' prices are matters that apparently do not concern the staff and members of the Federal Trade Commission.

Based on the foregoing discussion we feel that three amendments to the Federal Trade Commission Act should be seriously considered by this committee.

First. Because of the radical extension and application of the "expertness" doctrine, we suggest that the definition of what constitutes "unfair methods of competition" be made once more the responsibility of the Federal judiciary.

Second. We suggest legislation which would make clear that the phrase "unfair methods of competition" refers only to individual, not concerted, practices which may give unfair competitive advantage to the person or firm engaging therein. We further suggest that such an amendment also require the Trade Commission to report to the Attorney General any violations of the Sherman Act it may discover in the course of its investigations.

Third. Because of the rapid development of the "implied conspiracy" doctrine, we suggest as an alternative to our first two suggested amendments, that the Commission be required to follow the rules of evidence prevailing in Federal courts. Moreover, we recommend that it be made clear that mere membership in a trade association should not, in and of itself, be held or construed to be, or evidence of, an illegal combination or conspiracy in restraint of trade. This latter suggestion would merely extend to members of business groups the same protection which is afforded labor organizations under section 6 of the Clayton Act.

Hon. EMANUEL Celler,

INTERSTATE COMMERCE COMMISSION,
Washington, October 6, 1949.

Chairman, Committee on the Judiciary,

House of Representatives, Washington, D. C.

MY DEAR CHAIRMAN Celler: This has reference to your letter of September 16, 1949, addressed to Chairman Mahaffie and referred by him to me and acknowledged September 19, in which you requested a report from this Commission by October 15 on the administration of the Reed-Bulwinkle law.

The Commission has received up to this time a total of 13 applications from railroads, motor carriers, and water carriers under the new law seeking the relief therein authorized. Opportunity has been extended all interested parties to enter objections or other representations in respect to these applications. The Department of Justice has, so far, entered protest against each one of the first 12 applications.

The first application to come on for hearing was the Western Traffic Association agreement designated as section 5a application No. 2. The parties were fully heard, briefs were filed, and the cause was orally argued before the Commission. The Commission reached its decision October 3 and announced it October 4.

There are attached hereto a list of the applications which have been filed with the Commission and a copy of the Commission's report and order in the decision on the first application, which sets forth fully and completely its interpretation of the law.

I trust this is a sufficient response to your inquiry, but if any additional information is desired we shall be glad to respond upon request.

Cordially yours,

J. HADEN ALLDREDGE, Commissioner.

INTERSTATE COMMERCE COMMISSION

SECTION 5A. APPLICATIONS

(Reed-Bulwinkle law)

NUMBER AND TITLE

1. Kane Transfer Co., et al, agreement relating to Household goods carriers' Bureau.

2. Western Traffic Association agreement.

3. Eastern railroads agreement.

4. Independent Movers' and Warehousemen's Association, Inc., agreement. 5. American Trucking Associations, Inc. (national motor freight classification), agreement.

6. Southern Freight Association et al agreements.

7. Association of American Railroads-per diem, mileage, demurrage and storage agreement.

8. Inland Water Carriers' Freight Association agreements.

9. National Bus Traffic Association (rate and tariff procedure) agreement.

10. Waterways Freight Bureau agreement.

11. General Tariff Bureau, Inc., new furniture agreement.

12. Interstate Freight Carriers' Conference, Inc., agreement.

13. North Atlantic Port Railroads, tidewater coal demurrage, agreement.

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INTERSTATE COMMERCE COMMISSION

Section 5a. Application No. 2

WESTERN TRAFFIC ASSOCIATION-AGREEMENT

Submitted June 20, 1949. Decided October 3, 1949

Found that approval of agreement establishing the Western Traffic Association, and organizations associated therewith, providing procedures for the joint consideration, initiation, or establishment of rates, fares, etc., applicable to transportation in interstate or foreign commerce by railroad between, to, and from points in the Western district is not prohibited by paragraph (4), (5), or (6) of section 5a of the Interstate Commerce Act, and that by reason of furtherance of the national transportation policy declared in the act, the relief provided in paragraph (9) of section 5a should apply with respect to the making and carrying out of such agreement. Agreement approved subject to terms and conditions, and appropriate order entered.

Douglas F. Smith, Joseph H. Hays, Amos M. Mathews, Robert Thompson, C. S. Edmonds, and Martin Lucente for applicants.

James E. Kilday, Edward Dumbauld, David Hume, Samuel Karp, and Joseph E. McDowell for Department of Justice.

Henry A. Cockrum for the Secretary of Agriculture.

John S. Burchmore, C. A. Miller, A. H. Schwietert, L. James Harmanson, Ed. P. Byars, T. C. Taylor, E. B. Wilson, F. G. Robinson, Louis A. Schwartz, W. R. Scott, H. B. Cummins, C. B. Bee, Frank A. Leffingwell, Douglas Orme, Leland D. Smith, and J. W. Holloway for interveners.

BY THE COMMISSION:

REPORT OF THE COMMISSION

By application filed November 15, 1948, as amended, under the provisions of section 5a of the Interstate Commerce Act, some 112 common carriers by railroad and The Pullman Company, comprising the Western Traffic Association, seek approval of an agreement between and among themselves, relating to procedures for the joint consideration, initiation, or establishment of rates, fares, classifications, divisions, allowances, charges, rules, regulations and practices, applicable to the transportation of property and passengers in interstate or foreign commerce, from, to, and between points in an area hereinafter referred to as the Western district. The Secretary of Agriculture intervened, but took no position for or against the agreement. The American Short Line Railroad Association, Railway Labor Executives' Association, and the Brotherhood of Locomotive Engineers intervened in support of the application. Numerous shipping interests, hereinafter specifically identified, intervened generally in support of the application, although some objected to approval of portions of the agreement. The Department of Justice opposes the application. Hearings have been held and the issues were orally argued.

The Western Traffic Association, to which the agreement relates, with headquarters at Chicago, Ill., is an unincorporated organization which functions through an executive committee, hereinafter called the association executive committee, and various associated rate bureaus, committees, subcommittees, and passenger associations. The agreement continues in form and substance the organizations and procedures as they presently exist in this area.

Section 5a of the act, enacted June 17, 1948, as Public Law 662, 62 Stat. 472, 49 U. S. C. 5b, authorizes common carriers and freight forwarders subject to the act to apply to us for approval of any agreement between or among two or more such carriers relative to rates, fares, classifications, and certain other matters or procedures for the joint consideration, initiation, or establishment thereof. The parties to any agreement approved by us are relieved from the operation of the antitrust laws with respect to the making and carrying out of such agreement in conformity with its provisions and such terms and conditions as may be prescribed by us. We are directed to appprove such agreement (unless it falls within certain prohibitions) if we find that by reason of furtherance of the national transportation policy such relief should apply. We are directed not to approve any 1 The area of the United States on and west of a line starting at Sault Ste. Marie, Mich., thence along the international boundary and the southern boundary of the northern peninsula of Michigan to Manistique, Mich., thence along the western bank of Lake Michigan to Chicago, Ill. (including points in the Chicago switching district and Gary, Ind.), thence along the Illinois-Indiana State line to the Ohio River, thence along the Ohio River to Cairo, Ill., thence along the Mississippi River to the Gulf of Mexico.