Quinlan Mirror. (Quinlan, Okla.), Vol. 7, No. 44, Ed. 2 Thursday, January 13, 1910 Page: 3 of 4
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PRESIDENT SENDS
SPECIAL MESSAGE
Makes Recommendations
merce Law and the
as to Corn-
Trusts
WOULD CONSTITUTE A SPECIAL COURT
Judges to Have Power to Act in Certain Specified Cases
— Wisdom of Federal Incorporation of Indus-
trial Companies Suggested—Scope
of Present LawToo Wide
Washington, Jan. 7.—The following 1*
President Taft'a message to congress on
the subject of needed legislation re-
garding the interstate commerce law and
the control of the trusts;
To the Senate and House of Represent-
atives: I withheld from my annual mes-
sage a discussion of needed legislation
under the authority which congress lias
to regulate commerce between the states
and with foreign countries, and said that
I would bring this subject-matter to your
attention later In the session. According-
ly, I beg to submit to you certain recom-
mendations as to the amendments to the
Interstate commerce law and certain con-
siderations arising out of the operations
of the anti-trust law suggesting the wis-
dom of federal Incorporation of Inclug,
trial companies,
Interstate Commerce Law.
In the annual report of the Interstate
yommerce commission for the year 1908,
attention Is called to the fact that be-
tween July l, 1&08, and the close of that
year, 16 suits had been begun to set aside
orders of the commission (besides one
commenced before that date), and that
few orders of much consequence had
been permitted to go without protest;
that the questions presented by these va-
rious suits were fundamental, as the con-
stitutionality of the act Itself was in Is-
sue, and the right of congress to dele-
gale to any tribunal authority to estab-
lish an Interstate rate was denied; but
that perhaps the most serious practical
question raised concerned the extent of
the right of the courts to review the or-
ders of the commission; and It was point-
ed out that if the contention of the car-
riers in this latter respect alone were sus-
tained, but little progress had been
made In the Hepburn act toward the ef-
fective regulation of Interstate transpor-
tation charges. In 12 of the cases re-
ferred to, It was stated, preliminary In-
junctions were prayed for, being granted
In six and refused in six.
"It has from the first been well under-
stood." Bays the-commission, "that the
success of the present act as a regulat-
lng measure depended largely upon the
facility With which temporary Injunc-
tions could be obtained. If a railroad
company, by mere allegation In its bill
of < nmplaint, supported by exparte affi-
davits. can overturn the result of days
of patient investigation, no very satisfac-
tory result can be expected. The railroad
loses nothing by these proceedings since
If they fail. It can only be required to
establish the rate and to pay to shippers
the difference between the higher rate
collected and the rate which is finally
held to be reasonable. In point of fact
It usually profits, because it can seldom
be required to return more than a frac-
tion of the excess charges collected."
In Its report for the year 1903 the com-
mission shows that of the 17 cases re-
ferred to in its 1908 report, only one had
been decided in the supreme court of the
United States, although five other cases
had been argued, and submitted to that
tribunal In October. 1909.
Of course, every carrier affected by an
order of the commission has a constitu-
tional right to appeal to a federal court
to protect It from tho enforcement of an
order which It may show to ho prima-
facte confiscatory or unjustly discrimina-
tory in Its effect; and as this application
may be made to a court In any district of
the United States, not only does delay
resiflt in the enforcement of the order,
but great uncertainty Is caused by con-
trtirlely of decision.
The questions presented by these ap-
plications are too often technical in
their character and require a knowledge
of the business and the mastery of a
great volume of conflicting evidence
which Is tedious to examine and trou-
blesome to comprehend. It would not be
proper to attempt to deprive any cor-
poration of the right to the review by
a court of any order or decree which,-
If undisturbed, would rob It of a reason-
able return upon Its Investment or-wtiald
subject It to burdens which would un-
justly discriminate against it and In fa-
vor. of other carriers similarly situated.
What Is, however, of supreme impor-
tance Is that the decision of such ques-
tions Shall be as speedy as the nature of
the circumstances will admit, and that
a uniformity of decision be secured so
as to bring about an effective, system-
atic and scientific enforcement of the
commerce law, rather than conflicting de-
cisions and uncertainty of final result.
Recommends "Court of Commerce."
For this purpose I recommend the
establishment of a court of the United
States composed of five Judges desig-
nated for such purpose trom among the
circuit Judges of the United States, to
be known as the "United States court
of commerce," which court shall be
clothPd with exclusive original jurisdic-
tion over the following cl^sscs of cases:
U) All cases for the enforcement, oth-
erwise than by adjudication and collec-
tion. of a forfeiture or penalty, or by in-
action of criminal punishment, of any
, "order of the Interstate commerce com-
inisslen other than for the payment of
mohey.
(2) All cases brought to enjoin, set
aside, annul or suspend any order or
requirement of the Interstate commerce
* commission. . ;
(3) All such cases as under section I
of the act of February 19, 1903, known
as the "Elkins act,'' are authorized to
be maintained in a circuit court of the
. United States.
(4) All such mandamus proceedings
as under the provisions of section 20 or
section 23 of the interstate commerce
law are authorized to be maintained in a
circuit court of the United Slates.
Reasons precisely analogous to those
which Induced the congress to create the
court of customs appeals by the provi-
sions In the tariff act of August 5. 1909,
may be urged in support of the creation
of the commerce court.
In order to provide a sufficient num-
ber of Judges to enable this court to be
constituted It will be necessary to au-
thorize the appointment of five addi-
tional circuit judges, who, for the pur-
poses or appointment, might be distrib-
uted to these circuits where there Is at
the present time the largest volume of
business such as the second, third, fourth,
seventh and eighth circuits. The act
tbould empower the chief Justice at any
time when the business of the court of
commerce does not require the services
of all the Judges to reassign the Judges
designated to that court to the circuits
to which they respectively belong; and It
should alBo provide for payment to
such judges while sitting by assignment
in tho court of commerce of such addi-
tional amount as Is necessary to bring
their annuol compensation up to $10,000.
Only Second to Supreme Court.
The regular sessions of such court
should be held at the capitol, but it
should be empowered to hold sessions in
different parts of the United States If
found desirable; and Its orders and judg-
ments should be made final, subject only
to review by the supreme oourt of the
United State*, w|tt) the provision that
the operation of the decree appealed
from shall not be stay
the order of the commission reducing
•ucli rates are affirmed. It may be doubt-
ed how effective this remedy really Is.
Experlenc* has shown that many, per-
haps most shippers do not resort to pro-
ceedings to recover the excessive rates
which they may have been required to
pay, for the simple reason that they have
added the rates paid to the cost of the
goods, and thus enhanced the price there-
of to their customers, and that the public
has in cffect paid the bill. On the other
hand, the enormous volume of transpor-
tation charges, tho great number of sep-
arate tariffs filed annually with the In-
terstate commerce commission, amount-
ing to almost 200.000, and the impossibil-
ity of any commission supervising the
making of tariffs in advance of their be-
coming effective on every transportation
Ifne within the United States to the ex-
tent that would bo necessary If their ac-
tive concurrence were required In the ma-
king of avery tnrlff, has satisfied mo that
this power, If granted, should be con-
ferred In a very lindtcd and restricted
form.
Commission Should Probe Change.
I therefore recommend that the inter-
state commence commission be empow-
ered whenever any proposed increase of
rates is filed, at once, either on com-
plaint or of Its own motion, to enter
upon an investigation into the reasonable-
ness of such change, and that it be fur-
ther empowered. In Its discretion, to
postpone the effective date of such pro-
posed Increase for a period not exceed-
ing 60 days beyond the date when such
rate would take effect. If within this
time It shall determine that such In-
crease Is unreasonable. It may then, by
its order, either forbid the Increase at
all, or fix the maximum beyond which
It shall not he made. If, on the other
hand, at the explrntion of this time, the
commission shall not have completed its
investigation, then the rates shall take
effect precisely as it would under the ex-
isting law, nnd the commission may con-
tinue its investigation with such results
as might he realized under the law as It
now stands
The claim Is very earnestly advanced
by some large associations of shippers
that shippers of freight should bq em-
powered to direct the route over which
their shipments should pass to destina-
tion, and In this connecting jj been
urged that the prov-nm'tlon 15
of the Inter^tj-flcti w)l|0j1
empowers the commission, after
to cUablijjh
now
decree ttwyuaic-j , - .... ... , ,,,
(red ar.;s:; ht SU- hear.In? on complaint.
preme court shall so order. The com-
merce court should bo empowered In Its
discretion to restrain or suspend the op-
eration of an onjer o{ the Interstate com-
merce commission under review pending
the final hearing and determination of
the proceeding, hut no such restraining
order should be made except upon no-
tice and after hearing, unless In cases
where Irreparable damage would other-
wise ensue to tho petitioner. A Judge
of that court might be empowered to al-
low a stay of the commission's order for
a period of not more than 60 days, but
pending application to tho court of Its
order or Injunction, then only where his
order shall contain a specific finding
based upon evidence submitted to the
Judge making the order and Identified by
reference thereto that such Irreparable
damage would result to the petitioner,
specifying the nature of tho damage.
Under the existing law, the interstate
commerce commission itself initiates and
defends litigation In tho courts for the
enforceemnt, or in the defense of Its or-
ders and decrees, and for this purpose It
employs attorneys, who, while subject to
the control of the attorney general, act
upon the Initiative and under the Instruc-
tions of the commission. This blending
of administrative, legislative and Judi-
cial functions tends, In my opinion, to
impair the efficiency of tho commission
by clothing it with partisan characteris-
tics and robbing it of the impartial Judi-
cial attitude it should occupy In pass-
ing upon questions submitted to It. In
my opinion. all litigation affecting the
government should he under the direct
control of the department of Justice; and
I therefore recommend that all proceed-
ings affecting orders and decrees of the
Interstate commerce commission be
brought by or against the United States
eo nomine, and be placed In charge of an
assistant attorney-general acting undor
the direction of the attorney general.
Would Permit Agreements.
In view of the complete control over
rate-making, and other practices of In-
terstate carriers established by the acts
of congress, and as recommended In this
communication, I see no reason why
ngreemnts between carriers subject to
the act, specifying the classifications of
freight and the rates, fares and charges
for transportation of passengers and
freight which they may agree to estab-
lish, should ncft be permitte.d, provided,
copies of such agrcemnls be promptly
filed with the commission, but subject to
all the provisions of the Interstate com-
merce act, and subject to the right of
any parties to such agreomnt to cancel It
as to all or any of the agreed rates,
fares, charges, or classifications by 30
days' notice In writing to the other par-
ties and to the commission.
Under the existing law the commis-
sion can only act with respect to an al-
leged excessive rate or unduly discrimin-
atory practice by a carrier on a com-
plaint made by some individual affected
thereby. I see no reason why the com-
mission should not be authorized to act
6n Its own initiative as well as upon the
complaint of an individual In Investigat-
ing the fairness of any existing rate or
practice; and I recommend the amend-
ment of the law to 80 provide; and also
that tho commission shall be fully em-
powered, beyond any question, to pass
upon the classifications of commodities
for purpose of fixing rates, In like man-
ner as It may now do with respect to the
maximum rate uppllcable to any trans-
portation.
Existing Law Powerless.
Under the existing law the commission
may not investigate an Increase In rates
until after it shall become effective; and
although, one or more carriers may file
with the commission a proposed increase
In rates or change in classifications, or
other alteration of the existing rates or
-classifications, to become effective at the
expiration of 30 days from such filing, no
proceeding can be taken to Investigate
the reasonableness of such proposed
change until after It becomes operative.
On the other hand, If the commission
shall make an order finding that an ex-
isting rate Is excessive, and directing it
to be reduced, the carrier affected may
by proceedings In the courts, stay the
operation of such order of reduction for
months, and even years. It has, there-
fore, been suggested that the commis-
sion should be empowered whenever a
proposed increase in rates Is filed, at
once to enter upon an investigation of
the reasonableness of the increase, and
to make an order postponing the effec-
tive date of such Increase until after
such Investigation shall be completed. To
this much objection hag been made on
the part of carriers. They contend that
this would be In effect to take from the
owners of the railroads the management
of their properties and to clothe the In-
terstate commerce commission with the
original rate-making power—a policy
which was much discussed at the time
of the passage of the Hepburn act In
1905-6, and which was then and has al-
ways been distinctly rejected; and in re-
ply to the suggestion that they are able,
by resorting to the courts, to stay the
taking effect of the order of the commis-
sion until Its reasonableness shall have
been investigated by the courts, where-
as, the people are deprived of any such
remedy with respect to action by the
carriers, they point to the provlsons of
the interstate commerce act providing for
restitution to the shippers by carriers, of
excessive rates charged , in cases where
throii routes and maximum joint rates
to lie charged, etc., when no reasonable
or satisfactory through route shall have
been already established, be amended so
as to empower the commission to take
such action, even when one existing rea-
sonable nnd satisfactory route nlready
exists, if It be possible, to establish ad-
ditional routes. Tills seems to me to
be a reasonable proposition.
The Republican platform of 1908 de-
clared In favor of amending the Inter-
state commerce law, but so as always to
maintain the principle of competition be-
tween naturally competing lines, and
avoiding the common control of such
lines by any means whatever. One of
the most potent means of exercising such
control has been through the holding of
stock of one railroad company by an-
other company owning a competing line.
This condition has grown up under ex-
press legislative power conferred by the
laws of many states, and to attempt now
to suddenly reverse that policy so far
as It affects the ownership of stocks here-
tofore so acquired, would be to Inflict
grievous Injury, not only upon the cor-
porations affected but upon a large body
of the Investment holding public.
Plan to End Rail Combine.
I, however, recommend that the law
shall be amended so as to provide that
from and after the date of its passage
no railroad company subject to the Inter-
state commerce act shall, directly or In-
directly, acquire any interests of any
kind in .capital stock or purchase or
lease any railroad of any other corpora-
tion which competes with it respecting
business to which the Interstate com-
merce act applies. But especially for
the protection of the minority stockhold-
ers in securing to them the best market
for ther stock, I recommend that such
prohibition be coupled with a proviso
that it shall not operate to prevent any
corporation which, at the date of passage
of such act, shall own not less than one-
half of the entire issued and outstanding
capital stock of any other railroad com-
pany, from acquiring all or the remain-
der of such stock; nor to prohibit any
railroad company which at the date of
the enactment of thu law Is operating a
railroad of any other corporation under
lease, executed of a term not less than
25 years, from acquiring the reversionary
ownership of the demised railroad; but
that such provisions shall not operate to
authorize or validate the acquisition,
through stock ownership or otherwise,
of a competing line or interest therein in
violation of the anti-trust or any other
law.
The Republican platform of IPOS fur-
ther declares in favor of such national
legislation and supervision as will pre-
vent the future over-issue of stocks and
bonds by Interstate carriers, and in order
to carry out its provisions I recommend
the enactment of a law providing that
no railroad corporation subject to the in-
terstate commerce act shall hereafter for
any purpose connected with or relating
to any part of Its business governed by
said act, Issue any capital. stock without
previous or simultaneous payment to it
or not less than the par value of such
stock, or any bonds or other obligations
(except notes maturing not more than
one year from the date of their Issue),
without the previous or simultaneous pay-
ment to such corporation of not less than
the par value of such bonds, or other ob-
ligations, or, If issued at less than their
par value, then not without such pay-
ment of the reasonable market value of
such bonds or obligations as ascertained
by the Interstate commerce commis-
sion; and that no property, service,
or other thing than money, shall be
taken in payment to such carrier cor-
poration, of the par or other required
price of such stock, bond or other obliga-
tion, except the fair value of such prop-
erty, services or other thing ascertained
by the commission; and that such act
shall also contain provisions to prevent
the abuse by the improvident or improp-
er issue of notes maturing at a period
not exceeding 12 months from date, in
such manner as to commit the commis-
sion to the approval of a larger amount
of stock or bonds in order to retire such
notes than should legitimately have been
retired.
Such act should also provide for the
approval by tho interstate commerce com-
mission of the amount of Block and bonds
to be Issued by any railroad company
subject to this act upon any reorganiza-
tion, pursuant to judicial sale or other
legal proceedings, In order to prevent the
Issue of stocks and bonds to an amount
In excess of the fair .value of the prop-
erty which is the subject of such reor-
ganization.
By my direction the attorney general
has drafted a bill to carry out these
recommendations, which will he fur
nished upon request to the appropriati
committee whenever It may be dc-slred.
portatlon. The moving causes have been
several. First, It has rendered possible
great economy: second, by a union of
former competitors It has reduced the
probability of excessive competition; and.
third, If the combination has been ex-
tensive enough, nnd certain methods In
the treatment of competitors and cus-
tomers have been adopted, the combiners
have secured a monopoly and complete
control of prices or rates.
A combination successful In achieving
complete control over a particular line of
manufacture has frequently been called
a "trust." I presume that the derivation
of the word Is to be explained by the fact
that a usual method of carrying out the
plan of the combination has been to put
thi> capital and plants of various Individ-
uals, firms, or corporations engaged In
the same business under the control of
trustees.
The Increase In the capital of a busi-
ness for the purpose of reducing the
cost of production nnd effecting economy
In the management has become as essen-
tial in modern progress as tho change
from the hand tool to the machine.
When, therefore, we come to construe
the object of congress In adopting tho
so-called "Sherman Anti-Trust Act" In
1S90. whereby in tho first section every
contract, combination In tho form of a
trust or otherwise, or conspiracy In re-
straint of Interstate or foreign trade or
commerce, Is condemned as unlawful and
made subject to Indictment and restraint
by Injunction; and whereby In the sec-
ond section every monopoly or attempt
to monopolise, and every combination or
conspiracy with other persons to monopo-
lize any part of Interstate trade or com-
merce, Is denounced as Illegal and made
subject to similar punishment o
straint, we inuBt Infer that the evil aimed
at was not tho mere bigness of the en-
terprise, but It was the aggregation of
capital and plants with the express or
Implied intent to restrain Interstate or
foreign commerce, or to monopolize It In
whole or In part.
Trust Not Necessarily Bad.
Monopoly destroys competition entlre-
!•> and the restraint of tho full and free
operation of competition has a tendency
to restrain commerce and trade. A com-
bination of persons, formerly engaged In
trade as partnerships or corporations or
Otherwise 0f rour e eliminates the m;
peliiioli that existed between them; out
the incidental ending of that competition
Is not to be regarded as necessarily a
direct restraint of trade, unless of such
an oll-epibraclng character that the in-
tention and effect *0 restrain trade are
apparent from the circumstances or are
expressly declared lo be the object of
the combination. A mere Incidental re-
straint of trade and competition is not
within the inhibition of the act, but it
is wlure the combination or conspiracy
or contract is Inevitably and directly a
substantial constraint of competition, and
so a restraint of trade, that the statute
is violated.
The Becond condition of the act Is sup-
plement of the first. A direct restraint
of trade such as Is condemned in the
first section. If successful and used lo
suppress competition. Is one of the com-
monest methods of securing a trade
monopoly, condemned in the second
section.
ate with the boundaries of the country,
no state prosecution Is able to supply the
needed machinery for adequate restraint
or punishment.
The supreme court in several of Its
decisions, has declined to rend Into tho
statute the word "unreasonable" before
"restrnlnt of trade," on the ground that
the statute applies to all restraints and
docs not Intend to leave the court the
discretion to determine what is a reason-
able restraint of trade. The expression
restraint of trade" comes from the com-
mon law, and at common law there were
crtaln covenants Incidental to the cur-
rying out of a main or principal con-
tract which were said to be covenants In
partial restraint of trade, and were held
to be enfonible because "reasonably"
adapted to the performance of the main
or principal contract, and under the
general contract, and under the general
language used by the supreme court In
several cases, It would seem that even
such Inch ital covenants In restraint
of Intersta.c trade were within tho In-
hibition of the statute and must be con
demned.
It is possible for the owners of a busi-
ness of manufacturing and selling useful
articles of merchandise so to conduct
their business as not to violate the tn-
hfbltlons of the anti-trust law and yet
to secure to themselves the benefit of the
economies of management and of produc-
tion due to the concentration under one
control of largo capital and many plants.
If they use no other Inducement than
the constant low price of their product
and Its good quality to attract custom,
and their business la a profitable one.
they violate no law. If their actual
competitors are small In comparison with
the total capital Invested, the prospect
of new Investments of capital by others
In suchf profitable business Is sufficient-
ly near and potential to restrain them In
the prices at which they sell their prod-
uct. But If they attempt by a use of their
preponderating capita), and by a.sale of
their goods temporarily at undnly low
prices, to drive out of business their
competitors, or If they attempt, by ex-
clusive contracts with their patrons and
threats of non-dealing, except upon such
contracts or by other methods of a sim-
ilar character, to use the largeness of
their resources and the extent of their
output compared with the total output
as a means of compelling custom and
frightening off competition, then they
disclose a purpose to restrain trade anil
to establish a monopoly, and violate the
act.
Law to Suppress Abuses.
ANTI-TRUST LAW AND
FEDERAL INCORPORATIONS
Government Control of Big Industrial
Corporations Favored—Asserts
Scope of Present Law Is
Too Wide.
There has been a marked tendency In
business In this country for 40 years last
past toward combinations of capital and
plant In manufacture, sale and trans-
The object of the anti-trust law was
to suppress the abuses of business of the
kind described. It was not to Interfere
With a great volume of capital which,
concentrated under one organization, re-
duced tho cost of production and made
its profit thereby, and took no advantage
of Its size, by methods akin to duress, to
stifle competition with It.
I wish to make'this distinction as em-
phatic as possible; because I conceive
that nothing could happen more destruc-
tive to the prosperity of tills country than
the loss of that great economy In produc-
tion which has been nnd will be effect-
ed In all manufacturing lines by the em-
ployment of large capital under one man-
agement. I do not mean to say that
there Is not a limit beyond which the
economy of management by the enlarge-
ment of plant ceases: and where this
happens and combination continues be-
yond this point, the very fact shows in-
tent to monopolize and not to economize.
The original purpose of many combina-
tions of capital In this country was not
confined to the legitimate and proper ob-
ject of reducing the cost of production.
On the contrary, the history of most
trades will show at times a feverish de-
sire to unite by purchase, combination,
or otherwise, all the plants In tho coun-
try engaged in the manufacture of a par-
ticular line of goods. The Idea was rife
that thereby a monopoly could be ef-
fected and a control of prices brought
about which would Inure to the profit of
those engaged In the combination. The
path of commerce Is strewn with failures
of such combinations. Their projectors
found that the union of all plants did not
prevent competition, especially where
proper economy had not been pursued in
the purchase and in the conduct of the
business after the aggregation was com-
plete. There were enough, however, of
such auccessful combinations to arouse
the fears of good, patriotic men as to the
result of a continuance of this movement
toward the concentration In the hands of
a few of the absolute control of the
prices of all manufactured producta.
Refers to Sugar Trust Case.
The anti-trust statute was passed in
1S90. and prosecutions were soon begun
'under it. In the case of the United States
vs. Knight, known as the "sugar trust
case,", because of the narrow scope of
the pleadings, tho combination sought to
be enjuinud was heid not to be Included
within the prohibition of the act. because
the averments did not go beyond the
mere acquisition of manufacturing plants
for the refining of sugar, and did not in
elude that of a direct and Intended re-
straint upon trade and commerce 111 the
sale an! delivery of sugar across state
boundaries and In foreign trade. The
result of the sugar trust case was not
happy, in that It gave other companies
and combinations seeking a similar meth-
od of making profit by establishing In
absolute control and monopoly In a par-
ticular line of manufacture, a sense of
Immunity against prosecutions in the
federal Jurisdiction, and where that
jurisdiction is barred In respect to a
business which Is necessarily commensur-
In order to avoid such a result, I have
thought and suld that It might bo well
to nmend the statute so as to exclude
such covenants from Its condemnation. A
lose examination of the later decisions
of the court, however, shows quite clear
ly In cases presenting the exact ques
tlon, that such Incidental restraints of
trade are held not to be within the law
and are excluded by the general state-
ment that, to be within the stutute, the
effect upon tho trude of the restrulnt
must be direct andr not merely Inddcn
tal or Indirect. The necessity, therefore
for an amendment of the statute so as
to exclude these Incidental and bene
tidal covenants In restraint of trude held
In common luw to be reasonable, does not
exist.
In some of tho opinions of the federal
circuit Judges, there have been Intlina
Hons, having the effect, If sound, to
weaken the force of the statute by In
eluding within It absurdly unimportant
combinations and arrangements, and sug
gesting, therefore, the wisdom of chang
Ing Its language by limiting Its appll
cation to serious combinations with In
tent to restrain competition or control
prices. A readlna oj '.he oplniojjs of yje
Churl, however, makes the
change unnecessary, for they exclude
from the operation of the act contracts
uffoctlng Interstate trade In but a small
and Incidental way. and apply the stat-
ute only to the real evil aimed at by
congress.
The statute has been on the statute
book now for two decades, and the su-
preme court In more than a dozen opin-
ions has construed it in application to
various phases of business combinations
and In reference to various subject mat-
ter. It has applied It to the union un-
der one control of two competing Inter-
state railroads, to prlvato manufacturers
engaged in a plain attempt to control
prices and suppress competition In a part
of the country. Including a dozen states,
and to many other combinations affect-
ing Interstate trade. The value of a
statute which Is rendered more and more
certain in its meaning by a series of de-
cisions of tho supreme court furnishes a
strong reason for leaving tho act as
it is, to accomplish Its useful purpose,
even though If It were being newly en-
noted, useful suggestions as to change of
phrase might be made.
For Government Control.
Many people conducting great busi-
nesses have cherished a hope and a be-
lief that In some way or other a line
may be drawn between "good trusts" and
"bad trusts," and that It Is possible by
amendment to tho anti-trust law to make
a distinction under which good combina-
tions may be permitted to organize, sup-
press competition, control prices, and do
it all legally If only they do not abuse
the power by taking too great profit out
of the business. They point with force to
certain notorious trusts as having grown
into power through criminal methods by
the use of Illegal rebates and plain cheat-
ing. and by various acts utterly violative
of business honesty or morality, and urge
the establishment of some legal lino of
separation by which "criminal trusts"
of this kind enn be punished, and they,
on the other hand, be permitted under
the law to carry on their business. Now,
the public, and especially the business
public, ought to rid themselves of the
Idea that such a distinction Is practic-
able or can be Introduced Into the stat-
ute.
Certainly under the present anti-trust
law no such distinction exists. It has
been proposed, however, that tha word
"reasonable" should be made a part of
the statute, and then It should be left to
the court to say what Is a reasonable
restraint of trade, what is a reasonable
suppression of competition, what is a rea-
sonable monopoly. I venture to think that
tills Is to put Into tho hands of the
court a power Impossible to exercise on
any consistent principle which will In-
sure the uniformity of decision essential
to just Judgment. It Is to thrust upon
the courts a burden that they have no
precedents to enable them to carry, nnd
to give them a power approaching
arbitration, the abuse of which might
Involve our whole Judicial system In dls
aster.
such corporations to file full and com-
plete reports of their operations with the
department of commerce and labor at
regular Intervals. Corporations organized
undor this act should be prohibited from
acquiring and holding stock In other cor-
porations (except for special reasons upon
approval by the proper federal author-
ity), thus avoiding the creation, under
national auspices, of the holding com-
pany with subordinate corporations In
different states which has been such an
effective agency In the creation of the
great trusts and monopolies.
If the prohibition of the anti-trust aot
ngalnst combinations In restraint of
trade Is to be effectively enforced. It 1
essential that the national government
shall provide for the creation of national
corporations to carry on a legitimate
business throughout the United States.
The conflicting laws of the olfferent
states of the union with respect to for-
eign corporations make It difficult, if not
Impossible, for ono corporation to comply
with their requirements so as to carry
on business In a number of different
states.
To the suggestion that this proposal of
federal Incorporation for Industrial com-
binations Is Intended to furnish them a
refuge In which to continue Industrial
business under federal protection. It
should be sold that tho measure contem-
plated docs not ropeal tho Sherman anti-
trust law and Is not to be framed so as
to permit the doing of the wrongs which
It is the purpose of that law to prevent,
but only to foster a continuance and ad-
vance of the highest Industrial efficiency
without permitting Industrial abuses.
Sure to Meet Opposition.
Such a national Incorporation law will
be opposed, first, by those who believe
that trusts should be completely broken
up and their property destroyed. It will
ho opposed, second, by those who doubt
the constitutionality of such federal In-
corporation and even If It Is valid, ob ect
to It as too great federal centralization.
It will be opposed, third, by those who
will Insist that a mere voluntary Incor-
poration like this will not attract to Ite
assistance the worst of the ofren^"*
against tho anti-trust statute and who
will thoref<ire broposg lftSlead Of 11 £
tom of wniplory ««« f°r J*,
eral corporations engaged In n
business. •
I,et us consider these objections In their
order. The government Is now trying to
dissolve some of these combinations and
la not the intectlnu of the government
to desist In t1Te least dcgies In Its effort
end these combinations which are to-
day monopolizing the commerce
An Aid to Business Virtue.
In considering violations of the anti-
trust law we ought, of course, not to
forget that that law makes unlawful,
methods of carrying on business which
before Its passage were regarded as evi-
dence of business sagacity and success
and that they were denounced In this act
not because of their Intrinsic immoral
ity, but because of the dangerous re
suits toward which they tended, the con
centratlon of Industrial power In the
hands of the few, leading to oppres-
sion and Injustice. In dealing, therefore
with many of the men who have used
the methods condemned by the statute
for the purpose of maintaining a profit
able business, we may well facilitate I
change by them In the method of doing
business, and enable them to bring It
back into the zone of lawfulness, with
out losing to the. country the economy
of mnnngement by which, in our domestic
trade the cost of production has been
materially lessened, and In competition
with foreign manufacturers our foreign
trade has been greatly Increased.
Through all our consideration of this
grave question, however, we must Insist
that the suppression of competition, the
controlling of prices, and the monopoly
or attempt to monopolise in Interstate
commerce and business are not only un-
lawful, but contrary to the public good
and that they must be restrained and
punished until ended.
Asks National Corporation Law.
I therefore recommend the enactment
by congress of a general law providing
for the formation of corporations to en
^aee In trade and commerce among the
states and with foreign nations, protect
ing them from undue interference by
the stales and regulating their activities
bo as to prevent the recurrence, under
national auspices, of those abuses which
have arisen under state control. Such
a law should provido for the Issue of
stock of such corporations to an amount
equal only to the cash paid In on the
stock; and If the stock be Issued for
property, then at a fair valuation ascer-
tained under approval and supervision of
federal authority after u full and com-
plete disclosure of all the facts pertain-
ing to the value of Buch property and the
Interest therein of the persons to whom
it is proposed to Issue stock in payment
of such property. It should subject the
real and personal property only of such
corporations to the same taxation as Im-
posed by the states within which It may
be situated upon other similar property
located therein and It should require
of thf«
countrv; that where It appeurs that the
acquisition and concentration of property
Ko to the extent of creating a monopoly
of substantially and directly restraining
Interstate commerce, it is not tho Inten-
tion of the government to permit tbli
monopoly to exist under federal Incor-
poration or to transfer to tho protecting
wing of the federal government of a
state corporation now violating the Sher-
man act. But It Is not, and should not
e, the policy of the government to pr*>
,e'nt reasonable concentration of capital •
which Is necessary to the economic devel-
opment of manufacture, trade and com-
merce. This country has shown power
of economic production that has aston-
ished the world, and has enabled us to
ompcto with foreign manufacturers In
many markets. It should be the care of
the government to permit such concen-
ration of capital while keeping open the
avenues of Individual enterprise, and the
opportunity for a man or corporation
vvitn reasonable capital to engage In
business. If we would maintain out
present business supremacy, we should
give to industrial concerns an oppor-
tunity to organize or to concentrate their
legitimate capital in a federal corpora-
tion, and to carry on their Urge business
within tho lines of the law.
May Doubt Constitutionality.
Socond—There are those who doubt the
constitutionality of such federal Incorpor-
ation. The regulation of Interstate and
foreign commerce Is certainly conferred
In the fullest measure upon congress, and
If for the purpose of securing In the most
thorough manner that kind of regulation,
congress shall Insist that It may provide
and authorize agencies to carry on that
commerce, It would seem to be within Its
power, this has beon distinctly affirmed
with respect to railroad companies doing
Interstate business and Interstate
bridges. The power of Incorporation has
been exercised by congress and upheld
by tho supreme court In this regard.
Why, then, with respect to any other
form of Interstate commerce like the sale
of goods across state boundaries and Into
foreign countries, may the same power
not be asserted? Indeed, It is the very
fact that they carry on Interstate com-
merce that makes these Rreat Industrial
concerns subject to federal prosecution
and control. How far as Incidental ta
the carrying on of that eommorce It map
be within the power of the federal gov-
ernment to authorize the manufacturer of
goods, is perhaps more open to discus-
sion, thougli a recent decision of the su-
preme court would seem to answer that
question In the affirmative.
Even those who nre willing to concede
that the supreme court may sustain such
federal Incorporation are Inclined to op-
pose It on the ground of its tendency to
the enlargement of the federal power at
the expense of the power of the state.
It Is a sufficient answer to tills argument
to say that no other method can be sug-
gested which offers federal protection on
the one hand and close federal supervi-
sion oil the other of these great organi-
zations that are In fact federal because
they nre as wide as the country and are
entirely unlimited In their business by
state lines. Nor Is the centralization of
federal power under this act likely to ha
excessive. Only the largest corporations
would avail themselves of such a law, be-
cause the burden of complete federal su-
pervision and control that must certainly
he imposed to accomplish the purpose of
the incorporation would not be accepted
by an ordinary business concern. The
third objection, that the worst offenders
will not accept federal Incorporation, Is
easily answered. The decrees of Injunc-
tion recently adopted In prosecutions un-
der the anti-trust law are so thorough
and sweeping that the corporations af-
fected i.y them ht "e but throe courses
before them:
First, they must resolve themselvei
into their component parts In the differ-
ent states, with a consequent loss to
themselves of capital and effective organ-
ization and to tho country of concen-
trated energy and enterprise; or second.
In defiance of the law and under some
Becret trust they must attempt to con-
tinue their business in violation of the
federal statute, and thus incur the pen-
alties of contempt and bring on an In-
evitable criminal prosecution erf the indi-
viduals named in the. decree nnd their
associates; or
Third, they must reorganize and accept
in good faith the federal charter I sug-
gest a federal compulsory license law,
urccil as a substitute for a federal Incor-
poration law. Is unnecessary except to
reach that kind of corporation which, by
virtue of the considerations already ad-
vanced, will take advantage voluntarily
of nn incorporation law, while the other
state corporations doing an interstate
business do not need tho supervision or
the regulation of federal license ami
would only be unnecessarily burdened
thereby.
The attorney general, at my suggestion.
haB drafted a federal Incorporation law,
embodying the views I have attempted
to set forth and it will be at the disposi-
tion of the appropriate committees of
congress.
WILLIAM II. TAFT.
The White House. Jan. 7, 1910.
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Tipton, W. B. Quinlan Mirror. (Quinlan, Okla.), Vol. 7, No. 44, Ed. 2 Thursday, January 13, 1910, newspaper, January 13, 1910; Quinlan, Oklahoma. (https://gateway.okhistory.org/ark:/67531/metadc174445/m1/3/?q=%22Business%2C+Economics+and+Finance+-+Communications+-+Newspapers%22&rotate=270: accessed June 21, 2024), The Gateway to Oklahoma History, https://gateway.okhistory.org; crediting Oklahoma Historical Society.