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itself often one of the strongest of deterrents. Thus any member of the association may withdraw when it suits his interest to do so, a result that minimizes the harm that such a combination may effect. For experience shows that the result is that competition goes on surreptitiously, despite the agreement, since every active member is strengthening his position in preparation for an ultimate withdrawal. And at the psychological moment some member, who has accumulated a large stock while production has been curtailed, will sell out at near to the top price and break the market, thus causing his associates irreparable losses.

Such was the state of the law when the trust agreement was discovered by a startled community. The features of this scheme are well known. All the shares of the capital stock of all the confederating corporations are transferred to a board of trustees. These issue trust certificates in lieu of these shares, thus reserving the voting rights in all the corporations. As a cover for the scheme all of the corporations remain in existence; and in form each conducts its own business without any cross agreements among themselves.

From the point of view of those who had on foot a scheme to monopolize, this trust device was excellent. It was centralized in its control and secret in its doings. It left the power of control with the inner circle, while enabling them to market as many securities. as they pleased. But adverse court decisions robbed the agreement of its effectiveness.26 It was held against the law governing corporations in that it was beyond its powers for a company thus to surrender its independence. It was also a void arrangement by the law against combinations in restraint of trade. The courts looked through the outer forms into the inner facts. This was fortunate for from the point of view of the state the scheme was almost beyond control as its accounts could be juggled and responsibility for wrongdoing could not be fixed.

A transition period of a few years followed upon the dissolution of the trusts. The original owners still had the properties; and the common danger held them together, temporarily at least. Meanwhile the lawyers were casting about for some new scheme for combining interests that would have legal sanction. The first schemes were rather obvious attempts to make use of some established arrangement as a cover for combination. Rather absurd these were, doomed to early exposure from the outset. What could not be done directly could not be brought about by indirection. The imperative need was a device that would stand the test of legality. It is true that without legal sanction much may be done under a gentleman's

"People v. North River Sugar Refining Company, 121 N. Y. 582; State v. Standard Oil Company, 49 Ohio St. 137.

agreement; but without legality in organization there is no security. Nor can there be any permanence unless the arrangement is perpetual. And, further, without security and permanence, there can be no issue of securities or market for them.

Eventually there was evolved the idea of a holding corporation, a new central body which should acquire a majority of the stocks of the constituent companies. The holding company possessed possibilities of manipulation pleasant to contemplate; the marketable issues could be doubled by making the stock of the holding corporation twice that of the constituent companies; and since the operation of the business could be concealed between the accounts of the holding company and the constituent companies, there would be nothing to fear from the publication of formal statements.

There were obviously legal difficulties. In most states by the common law it was beyond the powers of one corporation to hold the stock of another for the purpose of operation. In some states, however, statute law or special charter permitted corporations to be organized to hold the stocks of other corporations. But this was at best a solution of only one of the difficulties; another remained. Granted that the corporation was enabled to act without violation of the corporation law, there was the anti-trust law still to reckon with.

So it came to be recognized that there was a safer way, if one chose to take it. The approved form among lawyers during the last few years for making a consolidation of interests is by the formation of a single gigantic corporation intended to take over by purchase all the different concerns that are to be brought together. It has been ruled that "corporations are empowered to purchase, hold, and use property appropriate to their business. Under such powers it is obvious that a corporation may purchase the plant and business of competing individuals and concerns." But this is not unquestioned law by any means. A court of equal authority has said, "There is no magic in a corporate organization which can purge the trust scheme of its illegality, and it remains as essentially opposed to the principles of sound public policy as when the trust was in existence. It was illegal before and is illegal still, and for the same reasons."

From step to step in this succession there is a movement toward integration. Now that the end of economic evolution has been reached in a single corporation, the law against combinations in restraint of trade may perhaps cease to operate. Now the state may impose such special regulation upon these industrial concerns as the situation requires. The problem is therefore much simplified since the time of the trusts. It has been reduced to its lowest terms by Trenton Potteries Company v. Oliphant, 58 N. J. Eq. 507.

the activity of the law in insisting that all combinations of every stripe should be destroyed. The question then emerges, Shall these great corporations be destroyed or shall they be regulated? That, it is submitted, is the trust problem in its latest phase.

214.-The Sherman Anti-Trust Act28

Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment. not exceeding one year, or by both said punishments, in the discretion of the court.

Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

Section 3. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any territory of the United States or in the District of Columbia, or in restraint of trade or commerce between any such territory and another, or between any such territory or territories and any state or states or the District of Columbia, or with foreign nations, or between the District of Columbia and any state or states or foreign nations, is hereby declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments. in the discretion of the court.

Section 7. Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any circuit court of the United States in the district in which the 28 From 26 U. S. Statutes 209 (1900). There are eight sections. The five sections given here form the essential part.

defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the costs of the suit, including a reasonable attorney's fee.

Section 8. That the word "person" or "persons," wherever used in this act, shall be deemed to include corporations and associations existing under or authorized by the laws of the United States, the laws of any of the territories, the laws of any state, or the laws of any foreign country.

215. The Meaning of Restraint of Trade29

In substance, the propositions urged by the Government are reducible to this: That the language of the statute embraces every contract, combination, etc., in restraint of trade, and hence its text leaves no room for the exercise of judgment, but simply imposes the plain duty of applying its prohibitions to every case within its literal language. The error involved lies in assuming the matter to be decided. This is true because, as the acts which may come under the classes stated in the first section and the restraint of trade to which that section applies are not specifically enumerated or defined, it is obvious that judgment must in every case be called into play in order to determine whether a particular act is embraced within the statutory classes and whether, if the act is within such classes, its nature or effect causes it to be a restraint of trade within the intendment of the act. To hold to the contrary would require the conclusion either that every contract, act, or combination of any kind or nature, whether it operated a restraint on trade or not, was within the statute, and thus the statute would be destructive of all right to contract or agree or combine in any respect whatever as to subjects embraced in interstate trade or commerce, or if this conclusion were not reached, then the contention would require it to be held that as the statute did not define the things to which it related and excluded resort to the only means to which the acts to which it relates could be ascertained-the light of reason-the enforcement of the statute was impossible because of its uncertainty. The merely generic enumeration which the statute makes of the acts to which it refers and the absence of any definition of restraint

29 Adapted from the opinion of the court in the case of The Standard Oil Company of New Jersey v. United States, 221 U. S. 1 (1911). By this decision the Standard Oil Company of New Jersey was ordered "dissolved." The significance of the decision lies in the distinction made by the court between "reasonable" and "unreasonable" restraint of trade, and the insistence that the Sherman act was meant to apply to the latter exclusively. This is the subject of discussion in the selection given here. The Standard, of course, was found guilty of "unreasonable" restraint of trade.

of trade as used in the statute leaves room for but one conclusion, which is that it was expressly designed not to unduly limit the application of the act by precise definition, but while clearly fixing a standard-that is, by defining the ulterior boundaries which could not be transgressed with impunity-to leave it to be determined by the light of reason, guided by the principles of law and the duty to apply and enforce the public policy embodied in the statute in every given case, whether any particular act or contract was within the contemplation of the statute.

216. Dissolution of the Standard Oil Company

Standard Oil Company (of New Jersey)
26 Broadway,

To the Stockholders of the

New York, July 28, 1911.

Standard Oil Company (of New Jersey):

Obedience to the final Decree in the case of the United States against the Standard Oil Company (of New Jersey), and others, requires this Company, to distribute, or cause to be distributed, ratably, to its stockholders the shares of stock of the following corporations, which it owns directly or through its ownership of stock of the National Transit Company, to wit: Anglo-American Oil Company, Limited; The Atlantic Refining Company; Borne-Scrymser Company; The Buckeye Pipe Line Company; Chesebrough Manufacturing Company, Consolidated; Colonial Oil Company; Continental Oil Company; The Crescent Pipe Line Company; Cumberland Pipe Line Company, Incorporated; The Eureka Pipe Line Company; Galena-Signal Oil Company; Indiana Pipe Line Company; National Transit Company; New York Transit Company; Northern Pipe Line Company; The Ohio Oil Company; The Prairie Oil and Gas Company; The Solar Refining Company; Southern Pipe Line Company; South Penn Oil Company; South West Pennsylvania Pipe Lines; Standard Oil Company (California); Standard Oil Company (Indiana); The Standard Oil Company (Kansas); Standard Oil Company (Kentucky); Standard Oil Company (Nebraska); Standard Oil Company of New York; The Standard Oil Company (Ohio); Swan & Finch Company; Union Tank Line Company; Vacuum Oil Company; Washington Oil Company; Waters-Pierce Oil Company.

Such distribution will be made to the stockholders of the Standard Oil Company (of New Jersey) of record on the 1st day of

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