PRESIDENT SENDS
SPECIAL MESSAGE
Makes Recommendations as to Com
merce Law and the Trusts
WOULD CONSTITUTE
Uudges to Have Power to Act in Certain Specified Cases
Wisdom of Federal Incorporation of Indus
trial Companies Suggested Scope
I of Present LawToo Wide
' Washington. Jan. 7.-The following Is
President Tart's massage 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 has
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 bog to submit to you certain recom
mendations as to the amendments to the
Interstate commerce law and certain con
siderations arising out of tlio operations
of the anti-trust law suggesting the wis
dom of federal Incorporation of Indus
trial companies.
Interstate Commerce Law.
In the annual report of the Interstate
commerce commission for the year 1908.
attention Is called to tho fact that be
tween July 1, 1908, and the close of that
year, 1$ suits had been begun to set aside
orders of the commission (besides one
commenced before that date), and that
few orders of much consequence hod
been permitted to go without protest;
that tho questions presented by these va
rious suits wero fundamental, as the con
stitutionality of tho act Itself was In Is
sue, and the right of congress to dele
gate 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 tho 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 tho 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," says the commission, "that tho
success ol the present act as a regulat- I
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 complaint, supported by oxparte am
davits, can overturn tho result of days
of patient Investigation, no very satisfac
tory result can bo oxpected. The railroad
loses nothing by these proceedings since
If they fall, It can only be required to
establish the rate and to pay to shippers
the difference, botween the higher rate
collected and the rate which la finally
held to be reasonable. In point of fact
It usually profits, because It can seldom
be required to return more than a frao
tlon of the excess charges collected."
In Its report for the year 1909 the com
mission shows that of tho 17 cases re-f
ferredl.to in Its 1908 report, only one had
been decided Iff the supreme court of tho
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 the enforcement of an
order which It may show to be prlma
facle confiscatory or unjustly discrimina
tory In Its effect; and as this application
may b made to a court In any district ef
the United States, not only does delay
result In the enforcement of the order,
but great uncertainty Is causod by con
trariety of decision.
Tho 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 examino and trou
blesome to comprehend. It would not be
proper to attempt to deprive any cor
poration of tho right to the review by
a court of any order or decree which,
if undisturbed, would rob It of a reason?
ablo return upon Its Investment or would
subject It to burdens whloh would un
justly discriminate against It and In fa
vor of other carrlorB similarly sltuatod.
What Is, however, of supremo Impor
tance Is that the .decision of such ques
tions shall bo as speedy as the nature of
the circumstances will admit, and that
a uniformity of decision be socured so'
as to bring about an effective, system
atic and sclentlflo enforcement of the
commerce law, rather than conflicting da-,
clslons 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 live Judges desig
nated for such purpose from among the
circuit judges of tho United States, to
be known as the "United States court
of commerce," which court shall be
clothed with exclusive original Jurisdic
tion over tho following classes of cases;
(1) All cases for the enforcement, oth
erwise than by adjudication and collec
tion, of a forfeiture or penalty, or by ln
diction of criminal punishment, of any
order of the Interstate commerce com
mission other than for the payment qf
money,
(2) AU cases brought to ehJoln, set
aside, annul or suspend any order or
lequtremont of the Interstate cqmmercs
commlsstqn,
(3) All such cases as under section S
of the act of February 19, 1901, known
as thp "KUtlna act," are authorized tq
be maintained In a circuit court qf tlo
Pnlted States,
(4) All suet) muridarnus prqceeedlnga
as under (he provisions qf section 20 or
ectlon 23 of tho Interstate commerce
law r.re authorized to bo maintained In a
circuit court of the United States.
Reasons precisely analogous to those
which Induced the congress to create the,
court of customs appeals by the provl
lions In (ho tariff act of August 5. 1909,
may be urged In support, of the creation
of the commerce cour(,
In order to provide a sufficient num
ber Of Judges to enable (bis court to be
constituted It will be necessary to au
thorize the appointment of flvo addi
tional circuit Judges, who, for the pur
poses of appointment, might be distrib
uted to those circuits where there Is at
the present time the largest volume of
business such as the second, third, fourth,
teventh and olehth circuits. The act
ihould smpqwer (he chief Justice at any
A SPECIAL COURT
time when thA business of the court of
commerce .does not require the services
of all the Judges to reassign tho Judges
designated to that court to the circuits
to which they respectively belong; and It
should also provide for payment to
such Judges while sitting by assignment
In the court 6f "commerce of such addi
tional amount as Is necessary to bring
their annuol compensation up to $10,090.
Only Second to Supreme Court.
The, regular sessions of such court
should be held at the capltol, but It
should be empowered to hold sessions In
different parts of tho United States If
found desirable; and Its orders and Judg
ments should be made final, subject only
to review by the supreme court of the
United States, with the provision that
tho operation of tho decree appealed
from shall not be stnyod unless tho su
preme court shall so order. The com
merce court should bo empowered In Its
discretion to restrain or suspend tho op
eration of an order of the Interstate com
merce commission under review pending
the final hearing and determination of
the proceeding, but 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 the 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 CO days, but
pending application to the court of Its
order or Injunction, tlion 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 the damage.
Under the existing law, the Interstate
commerce commission Itself Inltlatos and
defends litigation In the courts for the
enforceemnt, or in tho 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 the 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, be under the direct
control of the department of Justice; and
I therefore recommend that all proceed
ings affecting orders and decrees of tho
Interstate commerce commission bo
brought by or against tho United States
eo nomine, and be placed In charge of an
assistant attorney-general acting under
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 tho acts
of congress, and as recommended In this
communication, I see no reason why
agreemnts between carrlfers subject to
the act, specifying the classifications of
freight and the rates, faros and charges
for transportation of passengers and
freight which they may agree to estab
lish, should not be permitted, provided,
copies of such agreemnts 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 agreemnt to cancel It
as to all or any of tho agreed rates.
fares, charges, or classifications by 80
days' notice in writing to tno other par
ties and to the commission.
Under the existing law tho 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 Uy some Individual affected
thereby. I see no reason why the com
mission' should not be authorized to act
on Its own Initiative .as well as upon the
oo'mnlalnt of an Individual in Investigat
ing the fairness of any existing rate or
Dractlce: ana i recommenu tno amend
niont of the law to so provide; and also
that the commission null be fully em
powered, beyond any question, to pass
upon the classifications of commodities
for purpose or nxing rates, in like man
nr as It may now do with respect to tho
maximum rate applicable to any trans
portatlon.
Existing Law Powerless.
.Under the existing law the commission
may not investigate an Increase In rates
until after It shall become effective; and
although ono or more carriers may file
with tho commission a proposed Increaso
In rates or change In classifications, or
other .alteration of tho existing ratos or
classifications, to becomo effective at the
oxplratlon of 0 days from such jailng, no
proceeding can be takon to Investigate
tho reasonableness of such proposed
cnange until after It becomes operative.
On the other hand, If the commission
shall make an order finding that an ex
lstlng .rate Is excessive, and directing it
to bo reduced, tho carrier affected may
by proceedings in the courts, stay tho
operation oi sucn oruer or reduction ror
months, and oven years, It has, there
fore, been suggested that the commis
sion should be empowered whenever a
proposca increase in rates is nied, at
once tp enter upon, an Investigation of
tno reasonableness of tne increase, anq
to make an order postponing tho effec
tive date of such Increase until after
such. Investigation shall be completed. Tq
this much objection has tiecn mude on
the part of carriers. They contend that
this would bo In effect to take from the
owners of tho railroads the management
of their properties, and to clothe the In
terstate commerce commission with tid
original rate-maxing power a policy
which Was' much discussed at tho time
of. the passage of tho Hepburn act In
liro-o, and Which was then and has al
ways been distinctly rejected: and In re
ply to the suggestion that they nro able.
by resorting to the courts, to stay the
taking effect of the order of the commis
sion until Its reasonableness shall have
been investigatea oy tne courts, where
as, the people are deprived of aiiy such
remedy with respect to action by the
curriers, they point to the orovlsons of
the Interstate commerpe act providing for
restitution to the shippers by carriers, of
exccssiv? rates cnarceq in, cases where
tho order of the commission reducing
such rates' are affirmed. It may bo doubt
ed how effective this remedy really Is.
Experience 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 slmplo 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 tho public
has In effect paid tho bill. On the other
ha'nd, the enormous volume of transpor
tation charges, the great number of sep
arate tariffs filed annually with the In
terstate commerce commission, amount
ing to almost 200,000, and tho Impossibil
ity of any commission supervising the
making of tariffs In advance of their be
coming effective on every transportation
lino within tho United States to. tho ex
tent that would be necessary It their ac
tlvo concurrence wero required In tho ma
king nf every tariff) has satisfied tno that
this power, It granted, should be con
ferred In u very limited and restricted
form.
Commission 8hould Probe Change.
I therefore recommend that the Inter
state commerce commission be empow
ered whenever nny proposed Increaso 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 bo fur
ther empowered, in its discretion, to
postpono the effective date of such pro
posed Increase for a period not exceed
ing w days beyond the date when such
rate would tako effect. If within this
time it shall determine that such In
creaso Is unreasonable. It may then, by
Its order, either forbid tho Increase at
all, or fix the maximum bevond which
it snau not be made. If, on tho other
hand, nt the oxntratlon of this time, the
commission shall not have completed Its
Investigation, then the rates shall take
orrcct precisely as It would under tho ex
isting law, and tho commission may con
tinue Its Investigation with such results
as might be realized under the law as It
nuw ninnus
Tho claim la verv narnrntlv nrfvanpiul
by some largo associations of shlnners
that shippers of freight should be em
powered to direct tho route over which
tneir shipments should pass to destina
tion, and In this connection It has ben
urged that tho nrovlslons of
oi tno interstnto commerce act. which
now empowers tho commission, after
ncaring on complaint, to establish
through routes and maximum Joint rates
to bo charged, etc., when no reasonable
or satisfactory through routo shall have
bocn already established, be amended so
as to empower the commission to take
sucn action, even when one exlstlni? ,.
sonnble and satisfactory route already
exists, It It bo possible, tn establish ad
ditional routes. This seems to me to
bo a rcasonabio 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, nnd
avoiding the common control of such
lines by any means whatever. Ono of
tho most potent means of exercls nsr such
control has been through the holding of
stock of one railroad company by an
other company1 owning a competing line.
This condition has grown up under ex
press leglslatlvo power conferred by the
laws of many states, and to attempt now
to suddenly reverse that policy so far
as It affects tho ownership of stocks here
tofore so acquired, would be to Inflict
grievous Injury, not only upon the cor
poratlons affected but upon large body
or me investment noiaing public.
Plan to End Rail Combine.
I, however, recommend that the law
shall be amended so as to provide that
from and after tho date of Its passage
no railroad company subject to tho Inter
state commorce net shall, directly or In
directly, acquire any Intor.ests of any
kind In capital stock or purchase or
leaso any railroad of any other corpora
tion which competed with It respecting
business to which tho Interstate com
merce act applies. But especially for
tho protection of tho minority stockhold
ers In securing to them the best market
for thcr stock, I recommend that such
prohibition bo coupled with a proviso
that It shall not operate to prevent any
corporation which, at tho dato of passage
of such act, shall own not less than one
half of tho entlro Issued nnd outstanding
capital stocK oi any otnor railroad com
cany, from acquiring ull or the remain
der of such stock; nor to prohibit any
raltroad company which ut tho dato of
the enactment of tho law Is operating a
railroad of any other corporation under
loaso, executed of a term not less than
25 years, from acquiring the reversionary
ownership of the domlBed railroad; but
that such provisions shall not operato to
authorlzo or validate tho acquisition,
throuah stock ownership or othorwlse.
of a competing line or Interest therein In
violation of tho anti-trust or any other
law.
Tho Republican platform of 1908 fur
ther declares In favor of such national
legislation and supervision as will pre
vent tho 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 tn
terstate commorce act shall hereafter for
any purpose connected with or relating
to any part of Its business governed by
said act, Issuo any capital stock without
previous or simultaneous payment to It
of not less than the par value of sucl
stock, or any bonds or other obligations
(except notes maturing not rnoro than
ono year from tho date of their Issue)
without the previous or simultaneous pay
ment to such corporation of not less than
tho par value of such bonds, or other ob
ligations, or, If Issued at loss than their
par value, then not without such pay
ment of tho rcasonabio market value of
such bonds or obligations as ascertained
by the Interstate commorce commls
slon; and that no property, service,
or other thing than money, shall be
taken In payment to such carrier cor
poration, of the par or othor required
price of such stock, bond or other obllga
tlon, except the fair valuo of such prop
erty, services or other thing ascertained
by tho commission; and that such net
shall also contain provisions to prevent
the abuso by the improvident or lmprop
er IsBue of notes maturing at a period
not exceeding 12 months from date, tn
such manner as to commit the commls
slon to the approval of a larger amount
of stook or bonds in order to retire such
notes than should legitimately have been
retired.
Such act should also provide for the
approval by the interstate commerce com
mission ot tne amount or stock ana bond;
to bo Issued by any railroad company
subject to this act upon any reorganlza
tlon, pursuant to Judicial sale or other
legal proceedings, In order tq prevent the
Issue ot stocks and bonds to an amount
In excess of the fair value of the prop
erty which Is the subject of such roor
ganlzatlou.
Hy my direction the attorney general
has drafted a bill ta carry out these
recommendations, which will be fur
nlshed upop request to the appropriate
commutes whenever It may be desired
ANTI-TRUST LAW AND
FEDERAI, INCORPORATIONS
Government Control of Big Industrial
Corporations Favored Asserts
8cope of Present Law ll
Too Wide,
There has been a marked tondency In
business In this country ror 40 years last
past toward combinations of capital and
yiuiu in manufacture, sale ana trans
portatlon. The faovlng causes havo, besrii
several: irst, it nas renaerea possioie
great economy; second, by a union ot
former competitors It has reduced the
probability of excessive competition; and,
third, If the combination has been ex
tensive enough, and 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- tho combination has been to put
the capital and plants of various Individ
uals, firms, or corporations engaged in
the same business under the control ot
trustees.
The Increase In the capital of a busi
ness for the purpose ot reducing the
cost ot production and effecting economy
In tho management has become as essen
tial In modern progress as the change
from the hand tool to tho machine.
When, therefore, we come to construe
the object ot congress in adopting tho
so-called "Sherman Anti-Trust Act" In
1890, whereby In the first section every
contract, combination In tho form of a
trust or otherwise, -or conspiracy in re
straint of Interstate or foreign trado or
commerce, Is condemned as unlawful and
made subject to Indictment and restraint
by Injunction; and whereby In the sec
ond section evory monopoly or attempt
to monopolize, ana every combination or
conspiracy with other persons to monopo
lize any part ot interstate traue or com
merce, Is denounced as Illegal and mndo
subject to similar punishment or re
straint, wo must Infer that the evil aimed
nt wan not the mere bigness of tho en
terprise, but it was tno aggregation ot
capital and plants with tho express or
Implied Intent to restrain Interstate or
foreign commerce, or to monopolize It In
whole or In ptfrt.
Trust Not Necessarily Bad.
MnnoDolv destroys competition entire
ly and tho restraint of the full and frco
operation ot competition has a tendency
to restrain commerce and trade. A com
Kinntlon of persons, formerly engaged In
trado as partnerships or corpoiatlons or
otherwise of course eliminates tno com
petition that existed between them; but
the inciucntai cuuum ui nun Luijiuiiiion
i. tint to be regarded as necessarily n
direct restraint of trade, unless of such
n all-embracing cnaructer mat the In
tentlon' and effect to restrain trade are
nnnnrent from the circumstances or are
expressly declared to bo tho object ot
the combination. A mere Incidental re
straint of trado and competition Is not
within the inhibition or tne act, but It
i. witnrn the combination or consnlracv
or contract Is Inevitably and directly a
substantial constraint ot competition, nnd
so a restraint of traae, tuat tne statute
Is violated.
Tho second condition of the act Is sun
plement of the first, A direct restraint
of trade sueh as Is condomncd In the
first section, It successful and used to
suoorcss competition, Is one of the com
monost methods of securing a trade
monopoly, condemned In the second
section.
It Is possible for the owners of a busi
ness ot manufacturing and selling usoful
articles of merchandise so to conduct
their business as not to violate the In
hibitions of the anti-trust law and yet
to secure to themselves the benefit of the
economies ot management and of produc
tion due to tho concentration under one
control of large capital and many plants.
It they use no other Inducement than
the constant low price of their product
and Its good (quality to attract custom,
and their business Is a profitable one,
they vlolato no law. It their actual
competitors are stnajl tn comparison with
the' total capital Invested, tho prospect
of new Investments of capital by others
In such a profitable business Is sufficient
ly near and potential to restrain them In
the prices at which they sell their prod
uct. Rut If they attempt by a use ot their
preponderating capital, and by a Bale of
their goods temporarily at unduly low
prices, to drive out ot business their
competitors, or If they attempt, by ex
clusive contracts with their patrons and
threats of non-draling, excopt upon such
contracts or by other methods of a aim
liar character, to uso the largeness of
their resources and the extent of their
output compared with tho total output
as a means of compelling custom nnd
frightening off competition, then thoy
disclose a purpose to restrain trado and
to establish a monopoly, nnd vlolato the
act.
Law to Suppress Abuses.
The object of tho anti-trust law was
to suppress tho abuses of business of tho
kind described. It was not to lntorfcro
with a great vslumo of capital which,
concentrated under one organization, re
duced the cost of production and made
Its profit thereby, and took no advantago
of Its slue, by methods akin to duress, to
stine competition with It.
I wish to make this distinction as em
phatlu as possible, because I conceive
that nothing could happen more destruc
tive to the prosperity of this country than
tne loss or mat great economy In produc
tlon which has been and will be effect
ed tn 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 tho enlarge
ment of plant ceases; and where this
happens and combination continues be
yond this point, the vory 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 do
sire to unite by purchase, combination
or otherwise, all the plants In the coun
try engaged in tne manufacture or n par
tlcular line ot goods, The Idea was rife
that thereby a monopoly could be ef
fected and a control or 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 uf tho
business after the aggregation was com
plete. There were enough, however, of
such successful combinations ta nrouso
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 tho
prices qf all manufactured products.
Refers to Sugar Trust Case.
The antitrust statute was punsod In
1890. and prosecutions were soon negun
under It. In tho case of the United States
vs. Knight, known us the "sugar trust
case," because of the narrow scopo of
tho pleadings, tin combination sought to
be enjoined was held not' to be Included,
within the prohibition of the act, because
the averments did not go byond the
mere acquisition of manufacturing plant
for the refining of suiar, and did not in
elude that of a dlrt and Intended re
stralnt upon trade and commerce In the
sale and delivery of sugar across stats
boundaries and n foreign trado. The
result ot the sugar trust case was not
happy, In that it gave other companies
and combinations seexing a similar inetli
od of making profit by establishing In
absolute control and monopoly In a par
ticular line of manufacture, a sense of
immunity, against prosecuaiqns jn the
federal Jurisdiction, and where" that
Jurisdiction Is" barred- In respect to a
business which is necessarily cotnmensur
ato with tho boundaries of tho country,
no state prosecution Is able to supply the
needed machinery for adequate restraint
or punishment,
The supreme court In several ot Its
decisions, has declined to rend Into the
stntuto the word "unreasonable" before
'restraint ot trade," on tho ground that
tho statute applies to all restraints and
does not Intend to leave the court tho
discretion to determine what Is a reason
able restraint ot trado. Tho expression
'restraint of trado" comes from the com
mon law, and at common law there were
certnln covenants incidental to tho car
rying out of a main or principal con
tract which were said to be covenants In
partial restraint ot trade, and were held
to bo enurclble because "reasonably"
adapted to tho performance ot the main
or principal contract, and under the
general contract, and under the general
languago used by tho supreme court In
several cases. It would seem that even
such Incidental covenants In restraint
of Interstate trade wero within the In
hibition of tho statute and must bo con
demned.
In order to avoid such a result, J have
thought and said that It might bj well
to amend the statute so as to cxcludo
such covenants from Its condemnation. A
Clone examination ot the later decisions
ot tho court, however, shows quite clear
ly In canes presenting the exact ques
tion, that such Incidental restraints ot
trade aro held not to be within the law
nnd nro excluded by the general state
ment that, to bo within tho statute, tho
effect upon the trado of tho restraint
must bo direct nnd not merely Inciden
tal or Indirect. Tho necessity, therefore,
for an amendment oi tho stntuto so as
to excludo theso Incidental and bono-
tidal covenants In restraint of trndo held
In common law to be reasonable, dors not
exist.
In some of the opinions ot the federal
circuit Judges, thcro hove been intima
tions, having tho effect, ir sound, to
wenkon tho force or the statuto by In
cluding within It absurdly unimportant
combinations and arrangements, nnd sug
gesting, thercrore, tno wisuom or chang
ing Its language by limiting Its nnoll-
cation to serious combinations with In
tent to restrain competition or control
prices. A rending of tho opinions ot the
supreme court, however, makes the
change unnecessary, for they exclude
from the operation of tho act contracts
affecting Interstnto trndo In but u small
and Incidental way. and apply tho stat
Uto only to tho real evil alined nt by
congress.
The statute has been on the statute
book now for two decades, and tho su
premo court In moro than a dozen opin
ions has construed It In appllaatlon to
various phases ot buttings combinations
and In roferenco to various subject mnt-
tor. It has applied It to the union un
dor ono 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 tho country. Including a dozen states,
and to many other combinations affect
ing Interstate trade. Tho value or a
statute which Is rendered moro nnd moro
certnln In Its meaning by a series of do
clslons ot tho supreme court furnishes n
strong reason for leaving tne act as
It Is, tn accomplish Its usoful purpose,
oven though If It woro being nowry en
acted, useful suggestions as to change of
phrase might bo made.
For Qovernment Control.
Many people conducting great busi
nesses have cherished a nope una a ue
lief that In somo way or other a Una
may be drawn botween "good trusts" and
"bad trusts," and thnt It Is posslblo by
amendment to tho anti-trust law to make
a distinction under which good comulnn
tlona may bo pertained to organize, sup
press competition, control prices, and do
It all legally If only thoy do not abuso
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 mothods by
tho U36 ot Illegal rebates ana plain cheat
lng, nnd by vurlous acts utterly vlolatlvo
of business honesty or morality, and urge
the establishment of some legal line ot
separation by which "criminal trusts'
of this kind can bo punished, and they,
on thu other hand, bo permitted tinder
tho law to carry on their business. Now,
the, public, and especially the business
public, ought .to rid thomselves of the
Idea that such a distinction Is practlc
able ot can be Introduced Into tho stat
Utf.
Certainly under tho present anti-trust
law no such distinction exists. It has
bf.cn proposed, howevor, that the word
"reasonablo" should bo mado a part ot
tho statute, and then It should be loft to
the court to- say what Is a roasonabto
restraint of trade, what Is a reasonablo
suppression or competition, what Is a rca
sonublo monopoly, I venturo to think that
this Is to put Into the hands or tho
court a power Impossible to exercise on
any consistent principle which will In
sure tho uniformity ot decision essential
to Just Judgment. It Is to thrust upon
the courts a burden that thoy havo no
precedents to enublo them to carry, nnd
to glvo them a power approaching
arbitration, tho abuso or which might
Involve our whole Judicial system In dls
aster.
An Aid to Business Virtue.
In considering violations nt the antl
trust lnw wo ought, or course, not to
forgot thnt that law makes unlawful
methods ot carrying on business which
beforo Its passage were regarded as ovl
dence ot business sagacity and success,
and that they were denounced In this act
not because ot tholr Intrinsic Immoral
Ity, but because or tho dangerous ro
suits toward which they temlod, tho con
centrntlon of Industrial power In tho
hands of the few, leading to opprvs
slon and Injustice. In dealing, tliercforo
with many of the men who havo used
the mothods condemned by the statute
for tho purpose of maintaining a profit
able business, wn may well tucllltate a
change by thxm In the method or doing
business, and ennblo them to bring It
back into tho zone or lawrulnoss, with
out losing to the country tho economy
or management by which, In our domestic
trade the cost or production has been
materially lessened, nnd In competition
with rorelgn manufacturers our foielgn
trado lias been greatly Increased.
Through all our consideration of this
grave question, however, we miiBt Insist
that the suppression of competition, tho
controlling or prices, nnd the monopoly
or attempt to monopolize In Interstate
rommerca nnd business are not only un
lawful, but contrary to the public good,
nnd thnt they must be restrained and
punished until ended.
Asks National Corporation Law.
I therefore recommend the enactment
hy congress or a general law providing
ror tne rormauon or corporations to on
gage In trado nnd commerce among tho
states ana with foreign nations, protect
lng them from undue Interference by
the states nnd regulating their nctlvltlos
sp as to prevent the recurrence, under
natianui auspices, at tnoso anuses which
have arisen under state control. Such
a law should provide ror the Issue or
stock of suoh corporations to an amount
eaual only to tne casn paid In on th
stock; and If the stock be Issuod ror
properly, then ot a rair valuation ascer
talncd under approval ana supervision o
rederal authority after a full and com
plcto disclosure or an tne racts pertain
ing to tho yalue of such property and tho
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 ot such
corporations to. the same taxation us Im
posed .by the states within whloh It may
be situated upon other similar property
located therein, und It should require
such corporations to file full nnd com
plete reports of their operations with the
department of commerce nnd labor at
regular Intervals, Corporations organized
under this net should bo prohibited from
acquiring and holding stock In other cor
porations (oxcept for special reasons Upon
approval by tho proper rodcrnl author
ity), thus avoiding tho creation, under
national auspices, or tho holding oom
pnny with subordinate corporations In
dlfferont states which has been sucK an
effective agency In tho creation . ot tno
great trusts and monopolies.' '
If the nrnhlliltlnn nf tho anti-trust act
against .combinations In , restraint of
trndo Is to.be effectively onforcod. It Is
essential thnt the national government,
shall provide for the creation ot national
corporations to carry on a lotltlmato
business throughout tho United Btates.
Tho conflicting laws olf tho different
states of tho union with respect to tor
elgn corporations make It difficult. It npt
Impossible tor ono corporation to comply
with their rcnulrnments so as to . carry
on business tn ft number of different
states.
To the sueirestlort that this proposal Of
foderat Incorporation for Industrial com
binations Is Intended to furnish them a,
rofugo In which to continue Industrial
business under federal protection. It
should bo said that the moasuro contem
plated docs not repoal tho Sherman anti
trust law nnd Is not to bo trameu so
In nnr-mlt tlm ilnlilCF nf tlln WrongS WhlCll
It Is tho purposo of that law to prevent, '
but only to fostor n continuance and ad
vance of tho highest muusinai biuuisuv
without permitting Industrial abuses.
Sure to Meet Opposition.
0..-1. - .. I 1 lnnn.nnrnllim 11W Will
be opposed, first, by those who bellevo
that trusts should bo completely broken
up nnd their property uestroyou. i
bo opposed, second, by those who doubt
tho constitutionality of such fedoral In
corporation and even If It Is valid, object
to it as too great leucrai crntru.
It will bo opposed, third, by those who
...in t t ,t. n n vtri vninntnrv lncor
poratlon llko this will not attract to Its
nsslstanco tno worst oi mu u.v"v..
against tho anti-trust stntuto and who
will thorctore propose Instead of It ft. sys
tem of compulsory Ijconses for all fed
eral corporations engaged In Interstate
business.
t ... Mi.no nhtnntlons In their
order. Tho government Is now trying to
dissolve somo oi tueso cuinuiuunui.a .
It Is not tho Intention of tho government
to desist In tho leaBt degrco In its effort
to end theso combinations which oro to
day monopolizing tho commerce ot this
country: that whero It appears that the
acquisition nnd concentration ot property
go to tho extent ot creating a monopoly
or substantially ana uiroctiy restraium
Interstate commcrco, It Is not tho Inton-
Inn nt tt trnvmment to Dermlt this
monopoly to oxlst under federal Incor
poration or to transrer to tno proiccuua
iUn Ailnrril frnvftrnmcnt Of B
state corporation now violating the Sher
man act. Hut It Is not, and should not
be, tho policy ot tno government to pre
vent reasonable concentration of capital
iu nnncKfinrv tn tlm cconomlo devel
opment of manufacture, trndo and com
merce. This country nas snown powai
of oconomlo productldn that has nston-
lt.n.t ,riM mwl linn Annhlnd UR tO
IBIICU WU . ' I . .
competo with foreign manufacturers in
many markets. It snouia oo tno care oi
the government to permit sucn concen
t..nnn n, nnnltnl tvViMa ItonnlnfT nnnn the
lluiiw.i u . v. n J w .,... r
avenues of Individual enterprise, and the
opportunity for a man or corporation
Willi reasonable capiuu 10 ciikubu hi
Tf iua ttnulf1 mnltitnln nut
present business supremacy, wo should
glvo to tmiusirini concerns an oppor
tunity to organize or to concentrate, thelt
legltlmato capital in a federal corpora
tion, und to carry on their largo huslnesi
within tno lines oi tno law.
May Doubt Constitutionality.
Second Thoro nro those who doubt th
constitutionality of such federal Incorpor
ation. Tho regulation of Interstate nnd
foreign commerce Is certainly conferred
In tho fullest moasuro upon congress, and
If for tho purposo ot securing In the most
thorough manner that kind of regulation,
congrcsR shall Insist that It may provide
and authorlzo agencies to carry on thai
commerce, It would seem to bo within Its
power, this has been distinctly affirmed
with respect to railroad companies doing
an Interstnto business nnd Interstate
bridges. Tho powar of Incorporation has
been exercised by congress und upheld
by tho supremo court In this regard.
Why, then, with respect to any other
form of Intcratato commerce, like the sals
of goods acrosH stato boundaries and Into
foreign countries, may tho same power
not be nssertodT Indeed, it Is the very
fact that thoy carry on Interstate) com
merce that makes theso groat Industrial
concorns subject to federal prosecution
and control. How far as Incidental to
tho carrying on ot thnt commerce It may
bo within the power or tho rederal gov
ernment to authorlzo the manufacturer ot
goods, Is perhaps moro open to discus
sion, though a recent decision or tho su
preme court would seem to nnswer that
question In tho nfilrmntlve.
Evon thoso who nro willing to concede
that tho supremo court may sustain such
rederal Incorporation nro Inclined to op
pose It on tho ground or Its tendency to
tho enlargement ot tho federal power nt
tho expense or tho power or the state.
It Is a sufficient answer to this argument
to sny that no othor method can be sug
gested which offers rodern! protection on
tho one hand and close federal supervi
sion on tho othor or theso great organi
zations that aro In fact federal because
thoy aro as wide ns tho country nnd are
entlroly unlimited In their business by
stato lines. Nor Is the centralization ot
fedoral power under this act likely to b
excessive. Only tho largest corporations
would avail thomselves of such a law, be
cause tho burden of completo federal su
pervision and control that must certainly
bo Imposed to accomplish tho purposo ot
tho Incorporation would not be accepted
by an ordlnnry business concern. The
third objection, thnt tho worxt offonders
will not accept federal Incorporation, Is
eiiBlly nnowored. The decrees or Injunc
tion recently ndoptcd In prosecutions un.
dor the anti-trust law aro so thorough
and sweeping that tho corporations af
fected iiy them havo but thrR courses
beforo them:
First, they must rcsolvo themselves
Into tholr component pnrts In the differ
ent states, with n consequent loss to
themselves or capital and effective organ
ization and to the country of concen
trated energy and enterprise; or soaontf.
In dellanco of tho law and under som
socrot trust they must attempt to con
tinue their hUBlnoss In violation of tho
federal statute, and thus Incur the pen
alties of contempt and bring on an In
evitable criminal prosecution of the Indi
viduals named In tho decree and their;
nsuoclatos; or
Third, thoy must reorganize nnd nccept
In good faith the federal charter I sug
gest a federal compulsory license law,
urged ns a substitute for n federal Incor
poration law. Is unnecessary oxcept to.
reach thnt kind of corporation which, by
virtue ot tho considerations already ad
vanced, wilt tako advantago voluntarily
or an Incorporation law, whllo tho other
stato corporations doing an Interstato
business da not need the supervision or
the regulation of federal llconso nnd
would only be unnecessarily burdened
thereby.
Tho uttorney general, at my suggestion,
has drafted a federal Incorporation law.
embodying tho vlows I have attempted
to set forth und It will bo ut tho disposi
tion ot tho approprlato committees of
congress.
WIMiIAM H. TAFT.
The White Il'iuse. Jan. T. 1910,
59
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isttaUc.
