Norwich Bulletin Newspaper, December 6, 1911, Page 9

WEDNESDAY, DECEMBER 6 PRESIDENT TAFT CHAMPIONS ANTI-TRUST LAW Declares in Message That Not Repeal or Amend- ment But Supplemental Legisiation is Needed Regards the Tobacco Trust Decision as an Effective One— | Federal Incorporation Recommended and a Federal Cor- | poration Commission Proposed—Government Adminis- trative Experts Needed to Aid Courts in Trust Dissolu- tion—The Test of Reasonableness—Force and Effective- ness of Statute a Matter of Growth. sentatives: This messagé is the first of several swvhich 1 shall send to congress during the interval between the opening of 4ts regular session and its adjourn- ment for the Christmas holidays. The smount of information to be commu- mnicated as’ to the operations of the government, the number of important subjects calling for comment by the executive and the transmission to con- gress of exhaustive reports of special <ommissions make it impossible to in- clude in one message of a reasonable dength a discussion of the topics that <ught to be brought to the attention of the npational legislature at its first regular session. Mo the Senate and Housre of Repre- | 1 | The Anti-trust Law—The Supreme Court Decisions. In May last the supreme court hand- «d down decisions in the suits in equi- ‘ty brought by the United States to en- in the further maintenance of the Standard Oil trust and of the Ameri- «can Tobacco trust and to secure their dissolution. The decisions are epoch | making and serve to advise the busi- ness world authoritatively of the | scope and operation of the anti-trust | act of 1800. The decisions do not de- | part in any substantial way from the wprevious decisiens of the court in con- struing and applying this important statute, but they clarify those deci- ®ions by further defining the already mdmitted exceptions to the literal con- wtruction 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. | fThese decisions suggest the need and rwisdom of additional or supplemental fegislation to make it easier for the ‘entire business community to square { twith the rule of action and legality ®hus finally established and to, pre- merve the benefit, freedom and spur of wreasonable competition without loss of wveal efficlency or progress. No Change In the Rule of Decision, Mereiy In Its Form of Expression. The statute in its firet section de- iclares to be illegal “every contract, | jcombination in the form of trust or jotherwise or conspiracy in restraint lof trade or commerce among the sev- eral states or with foreign nations” : and in the second declares gullty of a misdemeanor “every person who shall monopolize or attempt to monopolize ‘or combine or conspire with any other person to monopolize any part of the . trade or commerce of the several states % jor with foreign nations.” . In two early cases, where the statute : was invoked fo enjoin a transporta- tlon rate agreement between inter- state railroad compaaies, it was held - that it was no defense to show that . The agreement as to rates complained = of was reasonable at common law, he- ¢ <ause it was said that the statute was i . directed against all contracts and com- | binations in restraint of trade. whether reasonable at common law or not. It was plain from the record, however, that the contracts complained of in those cases would not have been deem- ‘ed reasonable at common law. In sub- ®equent cases the court said that the #tutute shouid be given = reasonable construction and refused to include ¥ within its inhibifion certain contrae- E._:nal restraints of irade which it de- F mominared as incidenta! or as indirect. § These cases of restrant of trade that fthe court excepted from the operation ¢ of the siatute were instances which e common law would have been call- i #d reasonable. - In the Standard Ofl Ea:ud tobaceo cases, therefore, the court merely adopted-the tests of the com- { mon law and in defiaing exceptions to £ the literal application of the statute i jonly substituted for the test of being {Inddfintal or indirect that of being ;'umble. and this without varying *dn the siightest tbe actual scope and wffect of the statute. In other words. ®ll the cases under the statute which jave now been decided would have heen decided the same way if the «ounrt had originally accepted in its wonstruction the rule at common law. It has been sald that the court by in- troducing into the construction of the atute common law distinctions bhas This is obviously un- By its judgment every contract wnd combination’ in - restraint of inter wtate trade made with the purpose or necessary “effect of controlling prices ¥ stifiing competition or of establish- ing in whele or in,part a monopoly of such trade is condemned by the stat- te. The most extreme critics cannot netance s case that ought to be eon- demned under the statuie which is not brought within its terms as thus con- T rourt the undefined and unlimited dis- to determine whether a case ot mun of trade is within the terms must be incidental. If it exceed the neees of that contract it is void. The test 6f reasonableness was never applied by the court af comman law to contracts or combinations or con spiracies in restraint of t Durpose was or whose ne would be to stifle competit on, to con trol prices or establish monbpolies. The courts never assumed power to say that such centracts or combina- tions or conspiracies might be lawful mod- to them were only e of the power thus cured and did not exact from the pub- lic too great and exorbitant prices. It is true that many theorists and others engaged in business violating the stat- ute have hoped that some such line could be drawn by courts, but no court of authority has ever attempted it. Certainly there is nothing in the decl- sions of the latest two cases from which such.a dangerous theory of ju- dicial discretion in enforcing this stat- ute can derive the slightest sanction. if the parti erate in ihe u Force and Effectiveness of Statute a | Matter of Growth. We have been twenty-one years mak- ing this statute effective for the pur- with a capital of 51.800,000. and the eorporation of United Cigar Stores apital of $9.000.000. this arrangement each of the different kinds of business will be dis tributed between fwo or more compa- nies with a division of the promiment brands In the same tobacco products. as to make competition not omly possible. but necessary. Thue the smoking tobaceo business of the coun- try is divided so that the present in- dependent companies have 21.39 per cent. while the American Tobacco com- pany will ha .08 per cent, the Lig- gett & Meyers 20.05 per cent, the Loril- lard company 22.82 per cent and the Zieynolds company 2.66 per cent. The 86 | stock of the other thirteen companies, both preferred and common, has been cen from the defendant Amertcan hacco company and bas . been dis- ited among its stockholders. Al tri | covenants restricting competition have | been declareé¢ null and further per- poses for which it was enacted. The | Knight case was discouraging and seemed to remit to the states the whole available power to attack and suppress the evils of the trusts. Slowly, howev- | er, the error of that judgment was cor- | rected, and only in the last three ors four years.has the heavy hand of the law been laid upon the great illegal combinations that have exercised such an, absolute dominion over many of our industries. Criminal prosecutions have been brought, and a number are pend- ing, but juries have felt averse to con- ting for jail sentences and judges have been most reluctant to impose such sentences on men of respectable standing in soclety whose offense has been regarded as merely statutory. Still, as the offense becomes better un- formance of them has been enjoined. The preferred stock of the different companies has now been given voting power which was denied it under the old organization. The ratio of the pre- ferred stock to the commg@n was as 78 to 40. This constitutes a very decided change in the character of the owner- ship and control of each company. In the original sult there were twen- ty-nine defendants, who were charged with being the conspirators through whom the illegal combination acquired and exercised its unlawful dominion. TUnder the decree these defendants will hold amounts of stock in the various distributee companies ranging from 41 per cent as a maximum to 2815 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 in- dividual defendants are enjoined for three years from buying any stock ex- cept from each other, and the group is thus prevented from extending its con- trol during that period. All parties to the suit and the new companies who are made parties are enjoined perpet- ually from in any way effecting any combination between any of the com- | panies in violation of the statute by derstood and the committing of it par- takes more of studied and deliberate defiance of the law we can be confi- dent that juries will convict individu- | als and that jail sentences will be im- posed. The Remedy In Eqdity by Disselution. In the Standard Oil case the supreme and circuit courts found the combina- tion to be a monopoly of the iaterstate business of refining, transporting and | marketing petroleum and its product: effected and maintained through thir- ty-seven different corporations, the stock of which was held by a New Jer- sey company. It in effect commanded the dissolution of this combination, di- rected the transfer and pro rata distri- bution by the New Jersey company of the &tock held by it in the thirty-seven | corporations to and among its stock- holders, and the corporations and indi- vidual defendants were enjoined from conspiring or combining to restore such monopoly. and all agreements be- tween the subsidiary corporations tend- ing to produce or bring about further violations of the act were enjoined. In the tobacco case the court found that the individual defendants, twen- ty-nine in number, had been engaged in a successful effort to acquire com- plete dominion over the manufacture, sale and distribution of tobacce in this couniry, and abroad and that this had been dome by combinations made with a purpose and effect to stifie competi- tion, control prices and establish a monopoly, not only in the manufacture of tobacco, but also of tin foll and lic- orice used in its manufacture and of its products of cigars, cigarettes and snuffs. The tobacco suit presented a far more complicated and difficult case than tbhe Standard Oil suit for a decree which would effectuate the will of the court and end the violation of the stat- ute. There was here no single hold- ing company, Standard Oil trust. The main company was the American Tebacro company, a manufacturing, selling and holding company, The plan adopted to de- stroy the combination and restore com- petition involved the redivision of the capital and plants of the whole trust between some of the companies con- stituting the trust and new companies organized for the purposes of the de- cree and made parties to it and num- bering, new and old, fourteen. Situation After Readjustment. The American Tebacco company (old), readjusted capital $92,000,000; the Liggett & Meyers Tobacco company (new), capital $87,000,000; the P, Loril- lard (new), capital $47,000, 000, endithe R. J, Reynolds.Tobacco, company (old). capital $7,525,000, are as in the case of the | way of resumption of the old trust. Each of the fourteen companies 18 en- joined from acquiring stock in any of the others. All these companies are enjoined from having common direc- tors or officers, or common buying or | selling agents, or common offices, or lending money to each other. Size of New Companiss. Objection was made by certain in- dependent tobacco companies that this | settlement was unjust because it left companies with very large eapital in active business and that the settle- ment that would be effective to put all on an equality would be a division of the capital and plant of the trust into small fractfons in amount more near- ly equal to that of each of the inde- pendent companies. This contention 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 busi- ness enterprises in which such a com- bination can secure reduced cost of production, sale and distribution. It is directed against such an aggrega- tion of capital only when its purpose is that of stifiing competition, enhanc- ing or controlling prices and estabiish- ing a monopoly. If we shall have by the decree defeated these purposes | and restored competition between the large units Into which the capital and plant have been divided we Shall have accomplished the useful purpose of the statute. Confiscation Not the Purpose of the Statute. It is not the purpose of the statute o confiscate the property and capital of the offending trusts. Methods of punishment by fine.or imprisohment | of the individual offenders, by fine of the corporation or by forfeiture of its goods in transportation ‘are provided, but-the proceeding in equity is a spe- cific remedy to stop the operation of the trust by finjunetion and prevent the futare use of the plant and capital in vielation of the statute. Effectiveness of Decree. I venture to say that not in the his- tory of American law has a decree more effective for such a purpose been entered by a court than that against the tobacco trust. As Circuit Judge Noyes sald In his judgment approving the decree: “The extent to which it has been necessary to tear apart:this:.combina- tion and force it into new forms with the attendant burdens ought to demon- strate that the federal anti-trust statute is a drastic statute which-accomplishes effective results, which-so long as it stands on the statute books must be obeyed and which; cannet be disobay- ed w!thoue!mh“hmw- ‘altles. And, onifhe’other hgnd, the succesaful - reconstruction: of this or- ganization should teach that the effect of enforcing this statute is not:to de- stroy, but to reconstruct;.not te de- melish, but:to:: mh*how with the which: haw ; Beclared “shafl L extat i people of the ] tion or combination: they have differ- ent managers. directors, purchasing and sales agents. If all or many of the numerous stockholders, reaching into the thousands, attempt to secure concerted acticn 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 partic- ipants would be at once subject to con- tempt proceedings and imprisonment of a summary character. The immedi- ate result of the present situation will aecessarily be activity by all the com- panies under different managers, 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 op- rtunity for continued co-operation must disappear. Those critics who speak of this disintegration in the trust as a mere change of garments have not given consideration to the inevitabie working of the decree and understand | little the personal danger of attempt- ing to evade or set at naught the sol- emn injunétion of a court whose®object is made plain by the decree and whose inhibitions are set forth with a detail and comprebensiveness unexampled in the history of equity jurisprudence. Voluntary Reorganizations of Other | Trusts at Hand. The effect of these two decisions has of manufacturers of electric a southern wholesale grocers’ tion lamps, association, against the powder trust, with direc- tions by the circuit court compeliling dissolution, and other combinations of a similar history are now negotlating with the department of justice looking to a disintegration by decree and re- organization Iin accordance with. law. It seems possible to bring about these reorganizations without general busi- ness disturbance. Movement For Repeal of the Anti- trust Law. But now that the anti-trust act js seen to be effective for the accomplish- ment of the purpose of its enactment ‘we are met by a cry from many differ- ent quarters for its repeal. It is said to be obstructive of business progress, to be an attempt to restore old fash- foned methods of destructive competi- impossible those useful combinations tinued prosperity and normal growth. court makes clear that there is noth- ing in the statute which condemns ness of plant organized to seture econ- omy in production and a reduction of its cost. It is only when the purpose and maintenance of the combination or the aggregation of immense size are the stifling of competition, actual and potential, and the enhancing of prices statute is violated. Mere size is no sin _against the law. The merging of two or more business plants necessari- 1y eliminates competition between the units thus combined, but this elimina- tion is in contravention of the statute only when the combination is made for purpose ¢f ending this particular com- petition in order to secure control of and enhance prices.and create a mo- mnopoly. Lack of.Definitonu: In the Statute. The complaint is made of the stat- ute that it is not sufficiently definite in its description of that which is for- is that of two on for the at- its violation. The suggestion we may have a combination corporations which may run vears and that subsequently torney general may conclude The answer to this hypothetical case is that when men attempt to amass such stupendous capital as will enable them to suppress competition, control prices and establish a monopoly they do not do such a thing witheut having it clearly in mind. If what they do is merely for the purpose of reducing the bigness of the plant they are creating, then they cannot be convicted at the time the union is made, nor can they be convicted later unless it happen that later on they conclude to sup- methods for doing so and thus estab- lish for themselves a monopoly. They can in such a case hardly compiain If closed is attributed by the court to the original combination! New Remedies Suggested. Much is sald of the repeal of this statute and of constructive legisiation intended to accomplish the purpose and blaze a clear path for honest mer- chants and business men to follow. It may be that such a plan will be evolved, but I submit that the discus- stons whichjhave bpen led to decrees dissolving the combina- | an interlocutory decree | tion between small units and to make | combinations of capital or mere big-| and establishing a monopoly that the | that it | ‘was a violation of the statute and that | ‘which was supposed by the combiners | to be innocent then turns out to be a ‘ combination in violation of the statute. | know the purpose of their acts. Men | cost of production, without the thought | | of suppressing competition by use of the | | l} | | t of capital and the reduction of the cost | of production that are essential to con- | In the recent decisions the supreme | or necessary effect of the organization | bidden to enable business men to avoid | f | enable the government to shorten its task by prosecuting single misdemean- ors instead of am entire conspiracy and on the other hand to serve_the purpose of pointing out more in demil to the business community what must be avoided. Federal Incorporation Recommended. In a special message to c¢ongress on Jan. 7. 1910, I ventnred to point out the disturbance to business that would probably attend the dissolution of these offending trusts. I said: “But such an investigation and pos- sible prosecution of corporations whose prosperity or destruction affects the comfort not only of stockholders, but | of millions of wage earners. empioyees and assoeiated tradesmen, must neces- | sarlly tend to disturb the confidence | of the business community, to dry up | the now flowing sources of capital from its places of hoarding and pro-| duce a halt in our present prosperity that will cause sufi g and strained circumstances among the innocent many for the faults of the guilty few. The question which 1 wish in this message to bring clearly to the con- | sideration and discussion of congress is whether, in order to avoid such = possible business danger, something cannot be done by which these busi-| ness combinations may be offered means, without great financial dis turbance, of changing the character, [ organization and extent of their busi- ness into one within the lines of the well MINCEMEAT “LIKE MOTHER USED TO MAKE™ the goeod, old-fashioned dessert—just the same as twenty years ago and at the same old price—two- pie package, 10 cents, MERRELL-SOULE CO, SYRACUSE, NEW YORK urity a#gainst successrui prosecutions r violations of the law as would be ractical or wise. Such a burean or commission might be sted with the duty in also law under federal control and super ready referred to of aiding courts vision. securing complinnce with the | in the rii\mhumu 1wl recreation of anti-trust statute. trusts within the v. It should be an “Generally in the industrial combina- ©¥ecutive ll‘mmul of the dignity and tions called ‘trusts’ the principal busi- | POWer of the comptroller of the cur- ness is.the sale of goods in many states | Fency or the Interstate commerce com- and in foreign markets—in other wor mission, which naw exercises supervis- the interstate and foreign business fai | OFY power over important clusses of exceeds the business dome in any one| ¢Orporations under federal regulation. state. This fact will justify the fed The drafting of such a federal in- eral government in granting a federal | corporation law would offer ample op- charter to such a combination to make | POTtunity to prevent wany manifest and sell in interstate and for merce the products of useful manufac ture under such lmitations as will se- cure a compliance with the anti-trust law. It is possible so to frame a stat- ute that, while it offers protection to a federal company against harmful, vex atious and unnecessary invasion hv the states, it shall subject it to reasona 2 com- | evils in e | including irresponsibility of control in > management today, the hands of the few who are nut the real owners Incorporation Voluntary. I recommend that the federal char- ters thus to be granted shall be volun- tary, at least until experience justifies mandatory provisions. The benefit to ble taxation and control by the s derived from the operation of great with respect to its purely local busi | puginesses nnder the protection of such . a charter would attract all who are “Corporations organized under this anxious to keep within the lines of the act should be prohibited from acquir | juw. Other large combinations that ing and holding stock in other corpo- | faj to take advantage of the federal rations (except for special reasons, jpcorporation will not have a right to upon approval by the proper federal (omplain if their failure is ascribed to authority), thus avoiding the creation | ynwiiinerace to submit their transace under national auspices of the holding ' tjong o the carefnl official scrutiny, company with subordinate corporations supervision and publicity which has been in the crea: and monopo in different states, such an effective agency tion of the great trusts les. “If the prohibition of the anti-trust act against combinations in restraint of trade is to be effectively enforced it is essential that the national ment shall provide for the cre: national corporations to carry on a le- gitimate business throughout the Unit- ed States. The conflictiug laws of tl different states of the Urioa with r spect to foreign corporations make it difficult, if not impossible, for one cor- poration to comply with their requir ments so as to carry on business in a number of different states. I renew the recommends enactment of a general law for the voluntary formation of « porations to engage in trade and com- merce among the states and with for eign nations. Every argument which was then advanced for such a law and every explanation which was at that time offered to possible objections has been confirmed by our experience since the enforcement of the anti-trust stat- ute has resulted in the actual dissolu- tion of active commercial organiza- tions. It 18 even more manifest now than it was then that the denunciation of conspiracies in restraint of trade should not and does not mean the de- nial of organizations large enough to be intrusted with our interstate and foreign trade. It has been made more clear now than it was then that a purely npegative statute like the antl- trust law may well be supplemented by specific provisions for the bullding up and regulation of legitimate na- tional and foreign commerce. tion of the providing r- Government Administrative Experts Needed to Aid Courts In Trust Dissolutions. The drafting of the decrees In the | dissolution of the present trusts, with press competition and take the usual | the motive which subsequently is dis- | a view to their reorganization into le- gitimate corporatioms, has made it es- pecially apparent that the courts are not provided with the administraiive machinery to make the necessary in- quiries preparatory to reorganization or to pursue such inquiries, and they should be empowered to invoke the aid of the bureau of corporations in determining the suitable reorganiza- ' tion of the disintegrated parts. The circuit court and the attormey;general | were greatly aided:in framing-the de- | cree in the tobaceo-trust dissolution by | | an expert from the bureau of corpora- | ,,m,.fum-. competent ! the enjoyment of such Only Supplemental Legislation Needed. The opportunity thus suggested for 1 incorporation, it seems to me, ible constructive legislation «1 to facilitate the sguaring of industrial enterprises to the rule action laid down by the anti-trust law. This statute as construed by the supreme court must continue to be the line of distinction for legitimate busi- It must be enforced unless we banish individualism from all and reduce it 1o ope common of regulation or control of which now prevails to public utilities and applied to all business long step toward state so- ness are business system prices with which to like Importance of the Anti-trust Act. The i-trust act is the expression of the effort of a freedom loving peo- ple to pre: e eqlity of opportunity. It is the ult of the confident deter- mination of such a people to maintain thelr future growth by preserving un- countrolled and unrestricted the enter- prise of the Individual, his industry, ce and his his ingepuity, bis intellige: independent courage. For twenty ye or more this stats ute has been upon the statute book. All knew its general purpose and ap- proved. Many of its violators were cynlcal over its assumed impotence, Tt seemed impossible of enforcement, Slowly the mills of the courts ground, and only gradually did the majesty of the law assert itself. Many of its statesmen-authors died before it be- came a living force, and they and.oth- ers saw the evil grow which they had hoped to destroy. Now its efficaecy Is seen; now its power is heavy; mow its object is near achievement. Now we hear the eall for #ts repeai-on the plea that it interferes with business.pros- perity, and we are advised in"most general terms how, by some other#tat- pte and In some.other’ way, theievil we are just stamping out'can be cured if we only abandon this work-of twen- ty' years and try another experiment for another term- of years, It 1s said that the act has not'done good. Cmn this be said in.theface.of the effect of the NortherniSecurities decree? That decree was In ‘no ‘way £0 drastic or inhibitive in;detnfl.as.ei- ther the Standard« Ofl 'Geereeior)the tobacco decree. for all time the.then powerful move- ment toward the conmtrol ofjall”the rallroads ot the . country; in’ & single Such & .one man pow ‘eould But did it notéestop . Federal Corperation Commission Pre- possd. 1 4o not set:forth-in detail the terms |‘and seotions of; a-statnte wiich might 'W the constrnctive legistation: per. tting. and- aifling »the ‘formation of mwa caphall into federal hould be subjecs bm ‘their rorganization and procedure,’ inclufing: effective pub- 1 mee no objection, and“Indeed I ean | Ncity, and todie closest supervision as in the enact. | to the isane of stoek and bonds by an ufi‘h“‘*mi ‘whieh 4n In- of doubdt they mtgh: E ‘well " submit their propased pians for recent deys by the.fear of con- tinmed’ execution of the anth-trust’law | bave produced nothing but glittering generalities anéd have offered no line bhand? duetion for' the Dbenefit By = ways and means, ‘making perma- nent'in a’ few mcmmu con- trol of the conditions and pre- vatling in-the whole fleld;of industry, then individual mm effort will be paralyzed and the spirit. of commercial freedom will be dead. The White Flouse, Dec. 5, 1911, x “What I8, &x