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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Dec. 8, 1911)
"!flW5wr?f'"i$wr " "& ,."!" . President Taft'sM :JT &- -, DECEMBER 8,. 19H- To thtf Senate and House of Representatives: This message is the first of several which" I shall send to congress during the interval be tween the opening of its regular session and Us adjournment for the Christmas holidays. The amount of information to be communicated as to the operations of the government, the number of important subjects calling for com ment by the executive, and the transmission to congress of exhaustive reports of special com missions, make it impossible to include in one message of a reasonable length a discussion of the topics that ought to be brought to the atten tion of the national legislature at its first regu lar session. The Anti-Trust Law The Supremo Court Decisions In May last the supreme court handed down decisions in the suits in equity brought by the United States to enjoin the further maintenance of the Standard Oil trust and of the American Tobacco trust, and to secure their dissolution. The decisions are epoch-making and serve to advise the business world authoritatively of the scope and operation of the anti-trust act of 1890. The decisions do not depart in any sub stantial way from the previous decisions of the court in construing and applying this important statute, but they clarify those decisions by further defining the already admitted excep tions to the literal construction of the act. By the decrees, they furnish a useful precedent as to the proper method of dealing with the capital and property of illegal trusts. TheBe decisions suggest, the need and wisdom of additional or supplemental legislation to make it easier for the entire business community to square with the rule of action and legality thus finally estab lished and to preserve the benefit, freedom, and spur of reasonable competition without loss of real efficiency or progress. No Change in the Rule of Decision Merely in Its Form of Expression The statute in Its first section declares to be Illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations," and in the second, declares guilty of a misdemeanor "every person who shall monopolize or attempt to monopolize or combine or conspire with any other person to monopolize any part of the trade or commerce of the several states or with foreign nations." In two early cases, where the statute was Invoked to enjoin a transportation rate agree ment between Interstate railroad companies, it was held that It was no defense to show that the agreement as to rates complained of was reasonable at common law, because it was said that the statute was directed against all con tracts and combinations in restraint of trade whether reasonable at common law or not. It was plain from the record, however, that the contracts, complained of in those cases would not have been deemed reasonable at common law. In subsequent cases the court said that the statute should be given a reasonable con struction and refused to include within its in hibition, certain contractual restraints of trade which it denominated as incidental or as in direct. These cases of restraint of trade that tha court excepted from the operation of the statute were instances which, at common law, wouhl have been called reasonable. In the Standard Oil and Tobacco cases, therefore, the court merely adopted the tests of the common law, and In. defining exceptions to the literal appli cation of the statute, only substituted for the test of being Incidental or Indirect, that of being reasonable, and this, without varying in the slightest the actual scope and effect of the statute. In other words, all the cases under the statute which .havfr now been decided would have been decided the same way if the court had originally accepted in Its construction the rule at common law. It has been said that the court, by introduc ing Into the- construction of the statute common-law distinctions, has emasculated It. This Is obviously untrue. By Its judgment every contract and combination in restraint of inter state trade made with the, purpose or necessary effect of controlling prices by stifling competi tion, or of establishing In whole or in part a monopoly of such trade, is condemned by the statute. The most extreme critics can not in stance a case that ought to be condemned under The Commoner. Message the statuto which Is not brought wilhin its terms as thus construed. The suggestion is also made that tho supremo court by its decision in the last two cases has committed to tho court the undefined and un limited discretion to determine whether a case of restraint of trade is within tho terms of the statuto. This Is wholly untrue. A reason able restraint of trade at common law Ib well understood and is clearly defined. It does not rest in tho discretion of the court. It must be limited to accomplish the purpose of a lawful main contract to which, in order that it shall be enforceable at all, it must be incidental. If it exceed the needs of that contract, it is void. Tho te3t of reasonableness was never applied by the court at common law to contracts or combinations or conspiracies in restraint of trade whose purpose was or whoso necessary effect would be to stifle competition, to control prices, or establish monopolies. The courts never assumed power to say that such contracts or cpmbinations or conspiracies might he lawful if the parties to them were only moderate in the use of tha. power thus secured and did not exact from the public toogreat and exorbitant prices. It Is true that many theorists, and others engaged m business violating the statuto, have hoped that some such lino could bo drawn by courts; but no court of authority has over attempted it. Certainly there is nothing in tho decisions of the latest two cases from which such a dangerous theory of judicial discretion in enforcing this statute can derive the slightest sanction. Force and Effectiveness of Statute a Matter of Growth We have been twenty-one years making this statute effective for the purposes for which it was enacted. The Knight case was discourag ing and seemed to remit to the states the whole available power to attack and suppress tho evils of the trusts. Slowly, however, tho error of that Judgment was corrected, and only in tho last three or four years has the heavy hand of the law laid upon the great illegal combina tions that have exercised such an absolute do minion over many of our Industries. Criminal prosecutions have been brought and a number are pending, but juries have felt averse to con victing for jail sentences, and judges have been most reluctant to impose such sentences on men of respectable standing in society whose offense has been regarded as merely statutory. Still, as the off ease becomes better understood and the committing of it partakes more of studied and deliberate defiance of the law, we can be cosfident that juries will convict individuals and that jail sentences will be imposed. Tho Remedy in Equity by Dissolution In the Standard Oil case the supreme court and circuit courts found the combination to be a monopoly of the interstate business of refin ing, transporting, and marketing petroleum and its products, effected and maintained through thirty-seven different corporations, the stock of which was held by a New Jersoy company. It in effect commanded the dissolution of this combination, directed the transfer and pro rata distribution by the New Jersey company of tho stock held by It in thirty-seven corporations to and among its stockholders; and the corpora tions and individual, defendants were enjoined from conspiring or combining to restore such monopoly; and all agreements between the sub sidiary corporations tending to produce or bring about further violations of tho act wero enjoined. In the Tobacco case, the court found that the Individual defendants, twenty-nine in number, had been engaged In a successful effort to acquire complete dominion over the manufac ture, sale, and distribution of tobacco in this country and abroad, and that this had been done by combinations made with a purpose and effect to stifle competition, control prices, and establish a monopoly, not only in the manufacture- of tobacco, but also of tin-foil and licorice used in. its manufacture and of its products of cigars, cigarettes and snuffs. The tobacco suit presented a far more complicated and difficult case than the Standard Oil suit for a decree which would effectuate the will of tha court and end the violation of the statute. There was here no single holding company as in the case of the Standard Oil trust. The main company was the- American Tobacco company, a manu facturing, selling, and holding company.. The plan adopted -to destroy tho combination and rostore competition involvod tho redlvlsion of tho capital and plants of tho whole trust be tween some of tho companies constituting tho trust and now companies organized for tho pur poses of tho docreo and made parties to it, and numbering, now nnd old, fourteen. Situation After Readjustment Tho American Tobacco company (old), re adjusted capital, $92,000,000; tho Liggett & Meyers Tobacco company (now), capital, $G7, 000,000; the Lorillard company (now), capital, $17,000,000; and tho R. J, Reynolds Tobacco company (old), capital, $7,525,000, are chiefly engaged In the manufacture and salo of chew ing and smoking tobacco and clgarB. Tho former one tin-foil company in divided into two, one of $825,000 capital and tho other ot $100,000. Tho one snuff company Is divided into threo companies, ono with a capital of $15,000,000, another with a capital of $8,000, 000, and a third with a capital of $8,000,000. Tho licorice companies are two, ono with a capital of $5,758,300 and another with a capi tal of $2,000,000. There Is, also, tho British American Tobacco company, a British corpora tion, doing business abroad with a capital of $26,000,000, the Porto Rlcan Tobacco company, with a capital of $1,800,000, and tho corpora tion of United Cigar Stores, with a capital of $9,000,000. Under this arrangement, each of tho different kinds of business will bo distributed botwecn two or more companies with a division of the prominent brands in tho same tobacco products, so as to make competition not only posslblo but necessary. Thus the smoking-tobacco business of tho country in divided so that tho present independent companies have 21.39 por cent, whilo the American Tobacco company will have 33.08 per cent, the Liggett & Meyers 20.05 per cent, the Lorillard company 22.82 per cent, and tho Reynolds company 2.CG per cont. Tho stock of tho other thirteen companies, both preferred and common, has been takon from tho defen dant American Tobacco company and has beon distributed among Its stockholders. All cove nants restricting competition have been declared null and further performance of them has beon enjoined. The preferred stock of tho different companies has now been given voting power which was denied it under tho old organization. Tho ratio of the preferred stock to the common was 78 to 40. This constitutes a very decided change in the character of tho ownership and control of each company. In the original suit there wero twenty-nine defendants who wero charged with being the conspirators through whom tho Illegal combi nation acquired and exercised its unlawful do minion. Under the decree theso defendants will hold amounts of stock in the various distributee companies ranging from 41 por cont as a maxi mum to 28 por cent as a minimum, except in tho case of ono small company, tho Porto Rlcan Tobacco company, In which they will hold 45 per cent. Tho twenty-nine individual defendants are enjoined for threo years from buying any stock excopt from each other, and the group is thus prevented from extending Its control during that period. All parties to the suit, and the new companies who are made parties, are enjoined perpetually from in any way effecting any combination between any of the companies in violation of the statute by way of resumption of the old trust. Each of the fourteen companies is enjoined from acquiring stock in any of tho others. All these companies are enjoined from having common directors or officers, or common buying or selling agents, or common offices, or lending money to each other. Size of New Companies Objection was made by certain independent tobacco companies that this settlement was un just because it left companies with very large capital in active business, and that the settle ment that would be effective to put all on am equality would be a division of the capital ant plant of the trust into small fractions in amount more nearly equal to that of each of the Inde pendent companies. This contention results from a misunderstanding of the anti-trust law and its purpose. It is not Intended thereby to prevent the accumulation of large capital in business enterprises in which such a combina tion can secure rednced cost of production, sale and distribution. It is directed against suck an aggregation of capital only when its purpose is that of stifling competition, enhancing or controlling prices, and establishing a monoply. If we shall have by the decree defeated these (Continued on Pago 10.) 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