1938: Federal Trade Commission

The Federal Trade Commission, a quasi-judicial body, was established to deal with unfair methods of competition and monopolistic practices, and to make investigations into the organization, business and practices of industrial and trading corporations.

The Wheeler-Lea Act of 1938 amended the Federal Trade Commission Act in various particulars, but most notably in extending its jurisdiction to cover not merely 'unfair methods of competition,' but also 'unfair or deceptive acts or practices' in interstate commerce. This means that the consumer may be protected independently of the protection afforded to the honest business competitor.

Furthermore, the amended act specifically forbids the dissemination of any false advertisement in the mails, with respect to food, drugs, devices (as defined) or cosmetics, or by any means likely to induce the purchase thereof in interstate commerce, and it gives to the Commission, where the public interest so requires, the authority to sue for a temporary injunction.

From Jan. 1 to Dec. 31, 1938, the Commission initiated 394 quasi-judicial proceedings; issued 231 orders to cease and desist from specified unlawful practices; dismissed 11 cases, and definitively closed 18 cases.

Of the Commission's decisions adjudicated by the United States Circuit Courts of Appeals during this period, nine have been affirmed and one reversed. The only decision of the Supreme Court affecting a decision of the Commission, was in a case which the lower court had declared moot, but which the Supreme Court remanded for a decision on its merits.

Under Section 13 (a) of the Commission's organic act, as amended in 1938, a preliminary injunction was obtained through a United States District Court (pending a proceeding by the Commission and the adjudication thereof) against a drug company from advertising a certain weight-reducing drug, alleged to be injurious to health through impairment of eyesight.

The report on the inquiry into the Agricultural Implement and Machinery Industry, made in response to a resolution of Congress, was submitted in June 1938, and printed. Among the principal findings of the Commission were (1) the marked concentration of the industry wherein the International Harvester Company occupied a dominating position, (2) 'follow the leader' pricing policies, the International being generally the leader, (3) 'full-line forcing,' that is, the practice of insisting that dealers handling generally the machines of a large 'full-line' company must not sell competing machines of any other company.

Pursuant to a resolution of Congress, the Commission began, in April 1938, an inquiry into the methods of distribution and sale of motor vehicles. This was well advanced at the end of the year.

During the summer of 1938, a beginning was made by the Commission (as a member of the Temporary National Economic Committee) in the study of various economic problems, particularly those relating to competition and monopoly.