CHAPTER XIII. Sections II-III of the Webb-Pomerene Law. Price-Fixing. Is price-fixing alone sufficient to qualify under the WebbPomerene Act, or is actual exporting required of an association? Whether or not an export association, whose functions consist principally, if not exclusively, in fixing or regulating export prices for its members, would qualify under the Webb-Pomerene Act, depends upon a number of considerations. It can readily be conceived that many manufacturers who desire to carry on their export trade individually through their own established channels instead of selling jointly with others, would nevertheless be willing to enter into an agreement with their competitors regarding export prices, if it could be done lawfully under the Act. Many European trade associations confine their activities simply to the fixing of prices, mainly for the home market. They are known variously as price cartels, price combines, etc. The question immediately arises, whether an association, which engages primarily in fixing export prices, complies with the specific provisions of Sections 2 and 5 of the Act which require that the association per se shall (a) "be entered into for the sole purpose of engaging in," and (b) "be actually engaged solely in export trade." Language of Statute Grammatically Construed. The most natural grammatical construction of these two quoted clauses seems to be to consider the word "actually" as modifying the verb "engaged." The meaning thus conveyed in Section 2 would be to the effect that associations must not only be entered into, but must actually be engaged in "export trade,” as that term is defined in Section 1. That is, export associations must actually be engaged in trade or commerce of goods, wares or merchandise exported from the United States to a foreign nation. The current meaning of "trade" (see Webster's New International Dictionary, 1912) is "to be engaged in the exchange, purchase or sale of goods, etc." Availing ourselves of this definition, we have the functions of export associations formulated as follows, viz., they shall be actually engaged solely in the exchange, purchase or sale of goods shipped from the United States to a foreign nation. Obviously this interpretation would preclude an association merely passive or dormant in its functions. Moreover, an association functioning primarily as a price-fixing agency could hardly be considered as being actually engaged in selling goods to foreign nations. Furthermore, the quantity of goods actually sold by the export association, it would seem, should represent a fair proportion of the total quantity of export goods of the participating members of such association. It would appear to be a mere "camouflage” to sell a few articles jointly through the association, while each individual member is exporting independently of the association, co-operating with his fellow members only in respect of prices. Other Reasons Adverse to Price-Fixing. Added strength is given to the foregoing view by the fact that when the Federal Trade Commission recommended to Congress the enactment of legislation permitting export trade associations, it advised "that they be limited to the activities of selling goods, as distinguished from their production or manufacture." Moreover, during the debates in Congress on the Webb bill it was repeatedly stated by Representative Webb and 1U. S. Federal Trade Commission. Report on Co-operation in American Export Trade, op. cit., Pt. I, p. 380. 2Congressional Record, June 13, 1916, p. 3851; Sept. 2, 1916, p. 15983; Dec. 11, 1917, p. 166. others that the associations which were contemplated under the terms of the bill were to engage in selling. Finally, an examination of the mass of discussions, hearings, etc., on that bill, in and out of Congress, shows that the generally prevailing opinion was to the effect that associations, when functioning under its provisions, should operate as bona fide exporters of American goods. Arguments Which Price-Fixing Interests Advance. Over against the foregoing view it has been contended that export associations concerned with fixing export prices but strictly selling nothing in export trade would still be engaged solely in trade or commerce within the meaning of the Webb-Pomerene Act, if the term "commerce" be taken in a broader sense than the term "trade." It is argued that each of the distinct operations involved in selling or "trade" constitutes "commerce" within the legal meaning of that term. It is further claimed "that persons engaged in only a single type of these operations, and having nothing to do with the other operations which go to make up selling or 'trade,' are nevertheless engaged in 'commerce' just as truly as those who perform the entire series of operations that constitute selling or 'trade.'" In furtherance of this view it is argued that the word "actually" in Section 2 modifies the word "solely," and that no distinction is there made between "entered into" and "engaged in" export trade, the wording of the Act merely emphasizing the fact that an association must engage solely in export trade. The points discussed in the foregoing lead us to the further question of what would constitute the minimum functions required of an export association under the Webb-Pomerene Act. However, in the absence of a special ruling on the whole subject by the Federal Trade Commission or a court, a discussion of assumed facts would be of academic value only and without practical importance, although we may properly register our opinion that price-fixing is not tantamount to engaging in traffic; and that such acts, standing alone, will not justify an association when claiming to be "actually engaged solely in export trade." RESTRAINT OF TRADE. Effect of Export Combinations Upon Domestic Trade. Among the objections urged most strongly against export trade combinations, when the Webb-Pomerene bill was under consideration, prior to its passage by Congress, were those voicing the fear that, if legalized, such combinations might be used as a blind to cover attempts to restrain trade at home. This danger was clearly recognized, and the present wording of the Act represents careful efforts to guard effectually against possible attempts to oppress trade within the United States. It was the avowed intent of those who framed the legislation and of Congress not to repeal or render nugatory the provisions of the Sherman Law covering restraint of trade within the United States, while at the same time legalizing the operation of associations engaged solely in export trade. Safeguards against restraint of trade are contained in Section 2 of the Act, viz., "provided such association, agreement or act is not in restraint of trade within the United States, and is not in restraint of the export trade of any domestic competitor of such association" * * "or otherwise restrains trade therein" (viz., in the United States). Again, in Section 3 the acquisition or ownership by a corporation of stock or capital of any corporation engaged solely in export trade is legalized "unless the effect of such acquisition or ownership may be to restrain trade or substantially lessen competition within the United States." Finally, in Section 5 of the Act the Federal Trade Commission is given certain investigatory powers, whenever it "shall have reason to believe that an association or any agreement made or act done by such association is in restraint of trade within the 1See U. S. Federal Trade Commission. Report on Co-operation in American Export Trade, op. cit., Pt. I, p. 376 fol. Hearings before the U. S. Senate Committee on Interstate Commerce, op. cit. United States or in restraint of the export trade of any domestic competitor of such association, or that an association * otherwise restrains trade therein" (viz., the United States). Two Resultant Problems. The question arises what constitutes (1) restraint of trade within the United States by an export association or an agreement made or act done by it, and (2) restraint of the export trade of any domestic competitor of an export association. The restraint of trade prohibited by the Sherman Law is of two kinds, viz., first, voluntary restraint, i. e., suppression of competition by voluntary agreement or combination among competitors, and, second, involuntary restraint, i. e., elimination of an outsider by means of such a voluntary combination. In the latter case the contracting parties direct restriction against a competitor. As both forms of restraint are prejudicial to the public interest, the Sherman Law prohibits them.1 Competition in Export Trade Eliminated Between Members. The Webb-Pomerene Law, however, legalizes the first kind of restraint mentioned above, i. e., voluntary restriction of competition among co-operating members of an association engaged solely in export trade. It legalizes this, but it penalizes the other kind, the restraint of competition directed against a competitor, who is outside of the combination. "By authorizing combinations *** otherwise prohibited by the Sherman Law, for the purposes of export trade, Congress has declared that the protective policy embodied in the Sherman Law shall no longer obtain for the public of foreign nations. *** Competition which affects only the foreign public may, therefore, be suppressed without liability under the Sherman Law. It quite consists with this policy, however, that competition between the combining exporters in the markets of the United States shall not be suppressed." Within the United States a normal com 1 See г. 41 |