Federal Trade Commission Act (1914)

To enforce the Sherman Antitrust Act (1890), Congress passed the Federal Trade Commission (FTC) Act in 1914. This legislation, 15 U.S.C §§ 41–58, created the agency charged with ensuring competition within nontransportation industries. Transportation would be under the purview of the Interstate Commerce Commission. The FTC was administered by five commissioners, appointed by the president. Antitrust legislation had begun with the Sherman Antitrust Act of 1890, a somewhat reactive law, in that it was invoked by the government only after a monopoly or unfair trade practice existed.

As a companion to the FTC Act, Congress also passed the Clayton Antitrust Act of 1914 (Pub.L. 63-212, 38 Stat. 730, enacted October 14, 1914). It addressed certain activities that encouraged monopoly or thwarted competition. Authored by Alabama Democrat Henry De Lamar Clayton (1857–1929), the Clayton bill sought to impose strict limitations on several business operations, criminalizing specific violations: exclusive dealing arrangements, tie-in contracts, price discrimination, and certain types of stockholding. The bill also simplified claims procedures for those damaged by violations of the Sherman Act.

Two Supreme Court cases, Standard Oil Co. v. United States (1911), and United States v. American Tobacco Company (1911), served as precursors to the FTC due to the “rule of reason.” The Court ruled that the Sherman Act covered only those trade restraints that were unreasonable. The issue elevated antitrust questions during the 1914 midterm election. Some believed that FTC should be modeled after the Interstate Commerce Commission.

The FTC Act was passed “with the intention of correcting the deficiencies of the Sherman Antitrust Act” (Harris 142 ). Initially, President Woodrow Wilson did not support an administrative FTC. In January 1914, he proposed an agency to advise industry and be a source of information. His administration then supported a bill proposed by Maryland Representative James H. Covington that created the FTC as an information agency without enforcement powers. Covington's bill supplemented Clayton's by creating the Interstate Trade Commission, which could publicize unfair practices. This agency became the Federal Trade Commission. Representative Raymond Stevens of New Hampshire later presented a bill creating an agency that consisted of experts with the ability to create policies governing unfair competition. George Rublee, a former progressive, persuaded Wilson and his economic advisor, Louis Brandeis, to support the strong administrative model for a trade commission. Theodore Roosevelt had expressed the same during the 1912 presidential campaign and again during the 1914 midterm elections. Although reluctant, Wilson, under pressure from progressives, particularly Roosevelt, transferred three sections of Stevens's bill to the FTC Act, sections that empowered the agency administratively. When Congress finished, the FTC Act was much stronger.

In The Promise of American Life Herbert Croly, a political philosopher, editor, and intellectual leader of the progressive movement, favored the model of a strong Hamiltonian central government to the Jeffersonian republic. He supported Theodore Roosevelt in his 1912 presidential campaign. Croly later founded the influential periodical The New Republic. He supported five aspects of the FTC Act. These were (1) strange wording that allowed the FTC to make decisions based on the public interest, (2) cease and desist orders for extant monopolies, (3) consent decree power as related to the cease and desist orders to simultaneously encourage experimentation and compliance, (4) punishment for distribution of misinformation, and (5) allowing the FTC to act as a governing institution. Although the FTC acted as an administrative agency, its power of consumer protection increased with the Wheeler-Lea Act (1938) (Jaenicke).

Ralph M. Hartsock

See also: Clayton Antitrust Act (1914) ; Interstate Commerce Act (ICA) (1887) ; Progressivism ; Roosevelt, Theodore (1858–1919)

References

Cornell University Law School. United States Code, Title 15, Chapter 2, Subchapter 1. Federal Trade Commission. http://www.law.cornell.edu/uscode/15/usc_sup_01_15_10_2_20_I.html . Accessed January 3, 2013.

Croly, Herbert. The Promise of American Life. New York: Macmillan, 1909.

Federal Trade Commission, 90th Anniversary Symposium, September 22–23, 2004. http://www.ftc.gov/ftc/history/docs/90thAnniv_Program.pdf . Accessed January 3, 2013.

Harris, Richard A., and Sidney M. Milkis. “The Federal Trade Commission, Consumer Protection, and Regulatory Change.” In The Politics of Regulatory Change (pp. 140–224). New York: Oxford University Press, 1996.

Jaenicke, Douglas Walter. “Herbert Croly, Progressive Ideology, and the FTC Act.” Political Science Quarterly 93 (3): 471–493.

James, Scott C. Presidents, Parties, and the State: A Party System Perspective on Democratic Regulatory Choice, 1884–1936. New York: Cambridge University Press, 2000.

Levy, David W. Herbert Croly of the New Republic. Princeton, NJ: Princeton University Press, 1985.