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Show TAKES UP TO PROBLEM Only Matter Touched On In President's Message to Congress Additional Legislation to Strengthen Present Statutes Is Recommended Defends Standard Stand-ard Oil and Tobacco Decisions ed to accomplish the purpose and blase a clear path for honest merchants and business men to follow. It may be that such a plan will be evolved, but I submit sub-mit that the discussions which have been brought out in recent days by the fear of the continued execution of the antitrust anti-trust law have produced nothing but glittering glit-tering penerallties and have offered no line of distinction or rule of action as definite defi-nite and as clear as that which the Supreme Su-preme court itself lays down in enforcing the statute. Supplemental Legislation Needed Not Repeal or Amendment. I see no objection and indeed I can see decided advantages In the enactment of a law which shall describe and denounce methods of competition, which are unfair and are badges of the unlawful purpose denounced in the anti-trust law. The attempt at-tempt and purpose to suppress a competitor competi-tor by underselling him at a price so unprofitable un-profitable as to drive him out of business, or the making of exclusive contracts with customers under which they are required to give up association with other manufacturers, manu-facturers, and numerous kindred methods for stifling competition and effecting monopoly, mo-nopoly, should be described with sufficient accuracy in a criminal statute on the one hand to enable the government to shorten short-en its task by prosecuting single misdemeanors misde-meanors instead of an entire conspiracy, and, on the other hand, to serve the purpose pur-pose of pointing out more in detail to the businen community what must be avoided. Federal Incorporation Recommended. In a special message to congress on January 7, 1910, I ventured to point out the disturbance to business that would probably attend the dissolution of these offending trusts. I said: "But such an investigation and possible pos-sible prosecution of corporations whose prosperity or destruction affects the comfort not only of stockholders but of millions of wge earners, employes, and associated tradesmen must necessarily neces-sarily tend to disturb the confidence of the business community, to dry up the now flowing sources of capital from its places of hoarding, and produce a halt in our present prosperity that will cause suffering and strained circumstances circum-stances among the innocent many for the fault of the guilty few. The question ques-tion which I wish in this message tc bring clearly to the consideration and discussion of congress is whether, -in order to avoid such a possible business danger, something cannot be done by which these business combinations may be offered a means, without great financial finan-cial disturbance, of changing the character, char-acter, organization and extent of their business into one within the lines ol the law under federal control and supervision, su-pervision, securing compliance with the anti-trust statute. "Generally, in the industrial combinations combi-nations called 'Trusts,' the principal i business is the sale of goods in many states and in foreign markets; in other words, the interstate and foreign business busi-ness far exceeds the business done in any one state. This fact w-ill justify the federal government in granting a federal charter to such a combination to make and sell in interstate and foreign for-eign commerce the products of useful manufacture under such limitations aa will secure a compliance with the antitrust anti-trust law. It is possible so to frame a statute that while it offers protection protec-tion to a federal company against harmful, vexatious and unnecessnry invasion by the states, it shall subject it to reasonable taxation and control by the states with respect to its purely pure-ly local business. "Corporations organized under thl3 act should be prohibited from acquiring acquir-ing and holding stock in other corporations corpora-tions (except for special reasons, upon approval by the proper federal authority), author-ity), thus avoiding the creation under national auspices of the holding company com-pany with subordinate corporations in different states, which has been such an 1 effective agency in the creation of the great trusts and monooolies. "If the prohibition of the anti-trust act against combinations in restraint of trade is to be effectively enforced, i it is essential that the national govern- ! ment shall provide for tne creation of national corporations to carry on a legitimate business throughout the United States. The conflicting- laws of the different states of the Union with i respect to foreign corporations makes j it dicult. if not impossible, for one j corporation to comply with their requirements re-quirements so as to carry on business in a number of different states." Federal Corporation Commission Proposed. Pro-posed. I do not set forth in detail the terms and sections of a statute which might supply the constructive legislation permitting permit-ting and aiding the formation of combinations combina-tions of capital into federal corporations. They should be subject to rigid rules as to their organization an procedure, Including In-cluding effective publicity, and to the closest supervision as to the issue of stock and bonds by an executive bureau or commission in the department of commerce and labor, to which in times of doubt theyt might well submit their proposed pro-posed plans for future business. It must be distinctly understood that incorporation incorpora-tion under a federal law could not exempt ex-empt the company thus formed and its incorporators and managers from prosecution prose-cution under the anti-trust law for subsequent sub-sequent Ilegal conduct, but the publicity of its procedure and the opportunity for frequent consultation as to the legitimate purpose of its transactions would offer it as great security against successful prosecutions for violations of the law as would be practical or wise. Such a bureau or commission might well be invested also with the duty already al-ready referred to, of aiding the courts in the dissolution and recreation of trusts within the law. It should be an executive execu-tive tribunal of the dignity and power of the comptroller of the currency or the interstate commerce commission, which now exercise supervisory power over important im-portant classes of corporations under federal fed-eral regulation. The drafting of such a federal incorporation incorpor-ation law would offer ample opportunity to prevent many manifest evils in corporate corpor-ate management today, including irresponsibility irre-sponsibility of control in the hands of the few. who are not the real owners. Incorporation Voluntary. I recommend that the federal charters thus to be granted shall be voluntary, at least until experience justifies mandatory provisions. The benefit to be derived from the operation of great businesses under the protection of such a charter would attract all who are anxious to keep within the lines of the law. Other large combinations that fall to take advantage of the federal Incorporation will not have . a rlcht to complain if their failure is ascribed to unwillingness to submit their transactions to the careful scrutiny, competent supervision and publicity attendant at-tendant upon the enjoyment of such a charter. Supplemental Legislation Needed. The opportunity thus suggested for federal fed-eral incorporation, it seems to me, is suitable suit-able constructive legislation needed to facilitate fa-cilitate the squaring of great in dust rial enterprises to the rule of action laid down by the anti-trust law. This statu! as construed by the Supreme court must continue to be the line of distinction for legitimate business. It must be enforced, unless we are to banish individualism from ail business and reduce it to one common system of regulation or control of prices like that which now prevails with re.?pect to public utilities, and which when applied ap-plied to all business would b. long step toward state socialism. WM. H. TAFT, 4 Washington. President Taft's annual mesage, which was read in both houses of congTess Tuesday, deals exclusively with the anti-trust statute. The message in part is as follows: To the Senate and House of Representatives: Represent-atives: This mesage is the first of several sev-eral which I shall send to congress during the interval between the opening of its regular session and its adjournment for the Christmas holidays. The amount of Information to be communicated as to the operations of the government, the number of important subjects calling for comment by the executive, and the transmission trans-mission to congress of exhaustive reports re-ports by special commissions, make it impossible im-possible to Include in one message of a reasonable length a discussion of the topics top-ics that ought to be brought to the at-r at-r tention of the national legislature at its first regular session. The Anti-Trust Law The Supreme Court Decisions. In May last the Supreme court handed down decisions in the suits in equity brought by the United States to enjoin the further maintenance of the Standard Oil trust and of the American Tobacco trust, and to secure their dissolution. The decisions are epoch-making and serve to advise the business world authoritatively of the scope and operation of the antitrust anti-trust law of 1S90. The decisions do not depart in any substantial way from the previous decisions of the court in construing constru-ing and applying this' important statute, but they clarify those important decisions by further defining the already admitted exceptions to the literal construction of the act. By the decrees, they furnish a useful precedent as to the proper method of dealing with the capital and property of illegal trusts. These decisions suggest sug-gest the need and wisdom of additional or supplemental legislation to make it easier for the entire business community to square with the rule of action and legality thus finally established and to preserve the benefit, freedom and spur of reasonable competition without loss of I real efficiency or progress. No Change in the Rule of Decision Merely in Form of Expression. The statute in its first section declares to be illegal "every contract, combination In the form of trust or otherwise, or conspiracy, con-spiracy, in restraint of trade or commerce com-merce among the several states or with foreign nations," and In the second, declares de-clares guilty of a misdemeanor every person per-son who shall monopolize or attempt to monopolize or combine or conspire with .ny other person to monopolize any part of the trade or commerce of the several itates or with foreign nations." In two early cases, where the statute was invoked to enjoin a transportation igreement between interstate raflroad companies, it was held that It was no de-Tense de-Tense to show that the agreement as to rates complained of was reasonal at common com-mon law, because it was said that the statute was directed against all contracts con-tracts and combinations in restraint of trade whether reasoqal at common law or not. It was plain from the record, however, that the contracts complained Df in those cases would not have been fleemed reasonable at common law. It has been said that the court, by Introducing In-troducing Into the construction of the statute common law distinctions, has emasculated it. This is obviously untrue. By. its judgment every contract and combination com-bination in restraint of interstate trade made with the purpose, or necessary effect ef-fect of controlling prices by Stirling competition, com-petition, or of establishing in whole or in part a monopoly of such trade, is condemned con-demned by the statute. The most extreme ex-treme crltiics cannot instance a case that ought to be condemned under the statute which is not brought within its terms as thus construed. The sugestion is also made that the Supreme Su-preme court by its decisions In the last two cases has committed to the court the undefined and unlimited discretion to determine de-termine whether a case of restraint of trade is within the terms of the statute. This is wholly untrue. A reasonable re-ctraint re-ctraint of, trade at common law is well understood and Is clearly defined. It does not rest In the discretion of the court. It must be limited to acomplish the purpose of a lawful 'mnln contract to which, in order that It shall be enforceable at all. It must be Incidental. If It exceeds the needs of that contract it Is void. The Remedy In Equity by Dissolution. In the Standard OH case the Supreme and circuit courts found the combination to be a monopoly of the interstate business busi-ness of refining, transporting, and marketing mar-keting petroleum and Its products, effected effect-ed and maintained through thirty-seven different corporations, the stock of which . was held by a New Jersey company. It In effect commanded the dissolution of this combination, directed the transfer and pro-rata distribution by the New Jersey Jer-sey company of the stock held by it in the thirty-seven corporations to and among its stockholders, and the corporations corpora-tions and individual defendants were- en-Joined en-Joined from conspiring or combining to restore such monopoly ; and all agreements agree-ments bctwen the subsidiary corporations tending to produce or bring about further violations of the act were enjoined. In the Tobacco case, the court found that the Individual defendants, twenty- , nine in number, had been engaged in a successful effort to acquire complete dominion do-minion over the manufacture, sale, and , distribution of tobacco in this country nd abroad, and that this had been done by combinations made with a purpose and effect to stifle competition, control i prices, and establish a monopoly, not only in the manufacture of tobacco, but also of tin-foil and licorice, used In its manufacture and of its prod icts of cigars, ci-gars, cigarettes and snuffs. The tobacco suit presentend a far more complicated and difficult ense than the Standard Oil suit for a decree which would effectuate the will of the court Rnd end the violation viola-tion of the statute. There was here no Blngle. holding company as In the case of the Standard Oil trust. The main company com-pany was the American Tobacco company, com-pany, a manufacturing, selling and holding hold-ing company. The plan adtpted to de-utroy de-utroy the combination and restore competition compe-tition Involved the redivision of the capital capi-tal and plants of the whole trust between lome of the companies constituting the trust and new companies organized for the purposes of the decree and made parties par-ties to it, and numbering, new and old, fourteen. In the- original suit there were twenty-nine twenty-nine defendants who were charged with being the conspirators through whom the Illegal' combination acquired and exercised its unlawful dominion. Under the decree de-cree these defendants will hold amounts of stock in the various distributee companies com-panies ranging from 41 per cent, as a maximum to 2&y3 per cent, as a minimum, except in the case of one small company, the Porto Rican Tobacco company, in which they will hold 45 per cent. The twenty-nine Individual defendants are enjoined en-joined for three years from buying any Stock except from each other, and the group is thus prevented from extending its control during that period. All parties to the suit, and the new companies who are made parties, are enjoined perpetually perpetual-ly from in any way effecting any combination com-bination between any of the companies in violation of the statute by way of resumption of the old trust. Each of the fourteen companies is enjoined from acquiring stock In any of the others. All these companies are enjoined from having common directors or officers, or common buying or selling agents, or common com-mon offices, or lending money to each other. Size of New Companies. Objection was made by certain independent inde-pendent tobacco companies that this settlement set-tlement was unjust because it left companies com-panies with very large capital in active business, and that the settlement that would be effective to put all on an equality equal-ity would be a division of the capital and plant of the trust into small fractions in amount more nearly equal to that of each of the independent companies. This contention con-tention results from a misunderstanding of the anti-trust law and its purpose. It is not intended thereby to prevent the accumulation of large capital in business enterprises In which such a combination can secure reduced cost of production, sale and distribution. It is directly against such an aggregation of capital only when its purpose is that of stifling competition, enhancing or controlling prices and establishing a monopoly. If we shall have by the decree defeated these purposes and restored competition between be-tween the large units into which the capital cap-ital and plant have been divided, we shall have accomplished the useful purpose pur-pose of the statute. Confiscation Not the Purpose of the Statute. It Is not the purpose of the statute to confiscate the property and capital of the offending trusts. Methods of punishment by fine or Imprisonment of the individual offenders, by fine of the corporation, or by forfeiture of its goods in transportation, transporta-tion, are provided, but the proceeding in equity Is a specific remedy to stop the operation of the trust by Injunction and prevent the future use of the plant and capital in violation of the statute. I venture to say that not in the history of American law has a decree more effective ef-fective for such a purpose been entered by a court than that against the Tobacco trust. Common-Stock Ownership. It has. been assumed that the present pro-rata and common ownership in all these companies by former stockholders of the trust would insure a continuance , of the same old single control of all the companies into which the trust has by decree been disintegrated. This is erroneous er-roneous and is based upon the assumed In-efflcacy In-efflcacy and innocuousness of judicial injunctions. in-junctions. The companies are enjoined from co-operation or combination; they have different managers, directors, purchasing pur-chasing and sales agents. If all or any of the numerous stockholders, reaching into the thousands, attempt to secure concerted action of the companies with a view to the control of the market, their number is so large that such an attempt could not well be concealed and its prime movers and all its participants would be at once subject to contempt proceedings and imprisonment of a summary character. charac-ter. The immediate result of the present situation will necessarily be activity by all the companies under different managers man-agers and then competition must follow, or there will be activity by one company and stagnation by another. --Only a short time will inevitably lead to a change in ownership of the stock, as all opportunity oppor-tunity for continued co-operation must disappear. Movement for Repeal of the Anti-Trust Law. But now that the anti-trust act Is seen to be effective for the accomplishment of the purpose of its enactment, we are met by a cry from many different quarters for its repeal. It Is said to be obstructive of business progress, to be an attempt to restore old-fashioned methods of destructive de-structive competition between small units, and to make impossible those useful combinations com-binations of capital and the reduction of the cost of production that are essential to continued prosperity and normal growth. In the recent decisions the Supreme court makes clear that there is nothing In the statute which condemns combinations combina-tions of capital or mere bigness of plant organized to secure economy, in production produc-tion and a reduction of its cost. It is only when the purpose or necessary effect of the organization and maintenance of the combination or the aggregation of immense im-mense size are the stifling of competition, actual and potential, and the enhancing of prices and establishing a monopoly, that the statute is violated. Mere size is no sin against the law. The merging of two or more busines plants necessarily eliminates competition between the units thus combined, but this elimination is In contravention of the statute only when the combination is made for purpose of ending this particular competition in order or-der to secure control of, and enhance, prices and create a monopoly. Lack of Definiteness In the Statute. The complaint Is made of the statute that it Is not sufficiently definite in Its description of that which Is forbidden, to enable business men to avoid Its violation. viola-tion. The suggestion Is. that we may have a combination of two corporations, which may run on for ye-rs. and that subsequently the attorney general may conclude that it was a violation of the statute, and that which was supposed by the combiners to be inocent then turns out to be a combination in violation of the statute. The answer to tls hypothetical hypo-thetical case is that when men attempt to amass stupendous capital as will enable them to suppress competition, control prices and establish a monopoly they know the purpose of their acts. Men do not do such a thing without having It clearly in mind. New Remedies Suggested. Much is said of the repeal of this statute stat-ute and of constructive legislation Intend- |
