Hodges, Edward P.

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The Work of the Complaints Section of the Antitrust Division

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COMPLAINTS OF ANTITRUST LAW VIOLATIONSAND THEIR INVESTIGATIONI. THE WORK OF THE COMPLAINTS SECTIONOF THE ANTITRUST DIVISIONEDWARD P. HODGES*The objective of the Antitrust Division of the Department of Justice in theenforcement of the Sherman Act can be broadly stated in terms of the title of thatact: "An Act to protect trade and commerce against unlawful restraints and mo-nopolies." But in discharging this function, 'the Antitrust Division does not, indeedcannot, act as a policeman patrolling the highways and byways of interstate industryon the look-out for law breakers. Instead, it seeks to protect those who call upon itfor protection. It is the complaints which are received that give impetus and direc-tion to the activities of the Division. Accordingly, any comprehensive study of theenforcement of the Sherman*Act must include an examination of the source andvolume of the complaints received, the process of sifting the inconsequential fromthe important, the determination of the nature of the investigatory action to be takenand the problems which are encountered in investigation. This article will considerthe complaints which are received and the treatment initially accorded them. Thesubsequent steps in the process, whereby a complaint is converted into a proceedingunder the Sherman Act, will be dealt with in the two succeeding articles.It is the Complaints Section of the Antitrust Division to which complaints re-ceived are first routed. Prior to the autumn of 1938 no such section was in existence.The entire Division then comprised but sixty lawyers. With the decision to expandthe Division to many times its previous dimensions came an imperative need formore formal internal organization. The Complaints Section was created and anumber of attorneys assigned to the task of making the initial selection of thosesituations in which action could best be taken in the public interest. By devotingcareful consideration to this task and by disposing, through informal action, of com-plaints susceptible to such handling, it was anticipated-and experience has justifiedthe expectation-that the Section could reduce the proportion of field investigations*A.B., LL.B., x9g, University of South Carolina; LL.M., 1937, Georgetown University. Member ofthe South Carolina Bar. Special Assistant to the Attorney General, and Chief of the Complaints Section ofthe Antitrust Division, United States Department of Justice.COMPLAINTS OF VIOLATIONS AND THEIR INVESTIGATIONto complaints and thereby enable the resources of the Division available for investiga-tion to be directed to assignments which gave substantial promise of disclosingimportant violations of the Act.If the development of pending antitrust cases is traced, it will be found that eachoriginated in complaints to the Department. Ultimate consumers complain infre-quently because violations of the antitrust laws usually affect them only indirectly.Although large concerns complain when suffering at the hands of other powerfulinterests, a great majority of the complaints received come from small business menwho feel that they are the victims of illegal activities which will take from them theirinvestments and their business opportunities if they are not protected by the Govern-ment.At the outset it may prove interesting to review a few actual complaints so as tosee how an antitrust case starts. Not long ago four major typewriter companieswere indicted in the Southern District of New York. The Department did notselect these defendants after gazing into a crystal ball. Some time ago a certainprominent Washington lawyer was dissatisfied with the trade-in allowance offeredby the local representative of a major typewriter company. He tried three othercompanies only to be quoted identical prices for a new machine and to be offeredthe same allowance for his old typewriter. This man is known as a corporationlawyer and -is entirely sympathetic with big business. However, he became so thor-oughly irritated that he wrote to the Assistant Attorney General in charge of theAntitrust Division concerning his experience. Similar letters were received fromconsumers in all parts of the country. Dealers in second-hand machines also com-plained. Investigation of these complaints led to the indictment referred to.Recently a member of a leading New York law firm called on the AntitrustDivision. He stated that a company having a monopoly (which he termed "legal")in a certain field is seeking to expand it to embrace related commodities whichhis client produces. The expansion thus undertaken is resulting in heavy lossesto both companies. However, the complaining company, being the weaker, willsoon be forced out of business, and the company complained of will then recoupits losses and forge ahead to new profits unrestricted by competition. It is interestingto note this gentleman assumed that the aggressor company had a legal monopolyso far as its major activity was concerned. This view was no doubt based on theapparently cheerful acceptance of this monopolistic control by most of those con-cerned. However, the Department has received complaints as to the aggressor com-pany's actions from concerns over a thousand miles apart, setting forth charges whichthey are afraid to make openly because of fear of reprisals. A -preliminary investiga-tion has already been made of those charges. Information now in the Departmentfiles indicates that the present position of the so-called legal monopoly is being main-tained by very crude illegal activities. The current investigation will be broadenedto include this new complaint.The Department is investigating the complaint of a jobber that all suppliers of92 IAV AND CONTEMPORARY PROBLEMSa commodity vital to his business have refused to sell to him without cause or ex-planation. A few weeks ago this very active complainant suddenly ceased to co-operate with the Department, his frank explanation being that he was. now able toget the desired material. The companies involved have not changed their attitudedue to any pangs of conscience except in so far as such pangs may have been stimu-lated by the Department's investigation. This complainant does not realize that,if the investigation is dropped, the companies will immediately renew their earlierillegal activities, nor does he know that the companies against which he has com-plained have been charged with acquiring a number of competitors by deviousmeans-competitors who would have assured the continuance of the complainant'ssupplies had they been permitted to remain in business.I have discussed the foregoing complaints somewhat in detail because it is ofthe utmost importance to emphasize that the American public is the source of thecomplaints from which antitrust action arises, and that the Department in enforcingthe antitrust laws is merely seeking to protect its client, the public. That this clientis coming increasingly to call for this protection is shown by the table below whichnot only sets forth the number of complaints received, but also indicates the volumeof investigations and litigation during the past eight years.COMPLAINTS RECEIVED IN ANTITRUST DIVISION:Fiscal Years*1932 1933 1934 1935 r936 1937 1938 1939356 449 1,020 1,451 730 581 923 1,375INVESTIGATIONS OF COMPLAINTS BY FEDERAL BUREAU OF INVESTIGATION ORBY ANTITRUST DIvISIoN:Fiscal Years*1932 1933 1934 1935139 103 127 69ANTITRUST PROSECUTIONS AND INJUNCTION SUITS:Fiscal Years*1932 1933 1934 1935Pending ............... 19 I8 19 21Instituted .............. 3 7 II 10Terminated ............ 4 6 II 41936 1937 1938 x93967 90 59 901936 1937 1938 1939274Io2110328II732139"Ending June 30th.Some comment on these data is called for. It will be noted that the peak yearin volume of complaints was 1935 and that a high number was received the yearbefore. The explanation for these figures lies in the fact that they include com-plaints of violations of the NIRA and NRA codes. Over I,oo of the complaintsreceived in 1935 were from this source. The relatively high proportion of fieldinvestigations to complaints in the early years covered by the table reveals thattendency to resort at an early stage to field investigation which the sifting procedureof the Complaints Section is designed to correct. The expansion in the Division'sCoMPLAINrs oF VIoiTIoNs AND TIR INVESTIGATION 93personnel will not be reflected in the data as to proceedings instituted till the endof the current year.The number of complaints received increased almost 50 per cent in the pastyear over the year preceding, and the volume of complaints continues to grow.Complaints received from January I to November 30, 1939, inclusive, totalled 2751.Of these 1373 related to price increases following the outbreak of the present warin Europe.Whenever it is learned that a given industry is being investigated, the numberof complaints relating to that industry swings upwards sharply. The institutionof a suit has a like effect and, while different violations may not be revealed, leadsto valuable evidence are sometimes uncovered. Publicity of a general character con-cerning the work of the Division-an article in a magazine of national circulation,for example-will stimulate complaints from all quarters of the country and a greatvariety of industries. Important changes in policy by leaders in an industry arelikely to evoke complaints from smaller companies adversely affected.Many complainants submit their complaints in person, especially when importantmatters are concerned. Such procedure is most desirable because thus leads areobtained and the problems involved are explored which make for expeditious han-dling. However, the majority of complaints are received by mail. Every such com-plaint is given a prompt reply, unless as is sometimes the case, the writer has chosento remain anonymous. Complaints which are without merit or are clearly lackingthe necessary jurisdictional element of interstate commerce are ended at this point.If a complaint seems to be meritorious, every effort is made to develop all availablefacts by correspondence so as to save time and money if a field investigation isundertaken. Further correspondence may develop that the complaint is withoutmerit.Great care is taken not to treat a complaint as a mere isolated instance; it maybe the symptom of a more widespread condition. In this connection it may beobserved that the closed files of the Department are just as accessible as the openfiles. Accordingly, many times complaints which do not seem on their face to bemeritorious take on new significance in the light of material in the Department'sfiles.Frequently isolated situations which will not justify the expense of an investiga-tion are adequately taken care of by correspondence. For instance, a salesman ofa certain machine used by nearly every city in the United States complained tothe Department that he had lost a sale in a certain city only because his competitorhad violated the Robinson-Patman Act. The letter seemed to justify his position.The Department requested the company complained against to furnish it with astatement concerning the sale in question. In reply the company contended thatit had never violated the law. The Department thereupon wrote a more pointedletter to the company in question, vhich then investigated the matter and wrotethe Department that its salesman without its authority had given a secret rebateLAW AND CONTEMPORARY PROBLEMSof $500 out of his commission. The company promised that it would see to it thatits salesmen were more careful in the future. The Department's reply let this com-pany know that it did not like what had happened and indicated that, althoughnothing futher was contemplated at the time, no promises were made.Situations which involve prdbable violations of the law but are lacking in sub-stantial public interest have been disposed of satisfactorily after conference withattorneys for the companies involved. Where a situation does not justify the expenseof investigation, much can be done by merely letting the companies involved knowthat they are under surveillance.Preliminary investigation of meritorious complaints which involve substantialpublic interest are made through the Federal Bureau of Investigation. After theBureau has completed its investigation at times the Department does not press thematter further because facts tending to make a case have not been developed. Some-times, when the public interest will permit, informal disposition of a case is possible.For instance, the owner of a patented process was seeking to obtain a monopolyfor his process by a very wide form of license agreement. The matter was endedwhen he changed his form of license agreement. The Department will observe theactual working of this concern under the new licensing agreement and, if it provessatisfactory, nothing further will be done. Another illustration is the case of a tradeassociation which during NRA days had adopted restrictive rules for its memberswith respect to bidding on certain types of contracts. After the NIRA had beendeclared unconstitutional, these rules were continued because they provided a veryconvenient, way' tb keep prices up. Conferences by members of the Division staffwith bfficials of the association led to the adoption of a resolution by the association'sboard of directors abandoning the objectionable rules. Notice of this action wasforwarded to all members of the association. The Department thereupon informedthe association that no further action was contemplated. Disposal in this mannerwould not have been possible had the public interest been substantial in either ofthe two cases described.From the data presented earlier in this article, it is obvious that a large propor-tion of the complaints are disposed of by means other than the institution of legalprodeedings. 1 Where, however, the preliminary investigation indicates that courtaction will probably be taken, representatives of the Department go into the fieldto develop more important aspects of the case. If the type of case will permit, con-ferences are held with the companies complained against. Of course, there are manycomplaints in which to approach the defendants would be merely to give them anopportunity to destroy documentary evidence before a grand jury could be called.Whenever grand jury action, or the filing of a complaint is deemed necessary, a mem-orandum setting forth the facts and recommendation is directed to the AttorneyGeneral for the signature of the Assistant Attorney General in charge of the Antitrust'The mnimber of complaints so disposed of is not the difference between the total of complaints andthe total of proceedings instituted. A large number of complaints may have preceded a single proceeding.

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The Work of the Complaints Section of the Antitrust Division

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