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The Commoner
VOL. 14, NO. 3
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Trust Legislation
Ily'CoiiKrossnmii Henry I). Clayton, Clwlriiiuii of lio Committee on tlio Judiciary
In vlow of tlio wldcfjproad Interest manifested
throughout tlio country In (ho general Hiibject
of trust legislation, and particularly In tlio ten
tative 1)U1h prepared by tlio subcommittee of the
committoo on tlio judiciary, composed of tlio
chairman of tlio full conimltteo and Representa
tlvefl Cai In and Floyd, on which public h ir
ingn aro being hold in connection with all other
bills rolatlng to trusts which havo been lnfo
ducod and referred to tho committee, it will
not bo doomed inappropriate to givo to tho public
a brief outlino of tho scopo and purposo of tho
proposod tentative bills.
In tho-first placo those proposed bills aro ten
tative, both mi to form and substance, but in
thoir preparation tho underlying purposo of the
subcoinmltteo was to formulato legislation tlr.it
would protoct tho public against well-known
practlcos and mothods of groat corporations
which tho subcommittee believes tend to rro
moto monopolies and aro, therefore, detrimental
to tho public interest. Tho president, in his
mossago to jcongross on trusts and monopolies,
dolivorod January 20, 1914, uses this language:
"Wo aro all agreed that 'prlvato monopoly Is
imlefotiBiblo and intolerable' and our program is
founded upon that conviction. It will bo a com
prehensive, but not a radical or unacceptable
program, and thoso aro its Items, tho changes
which opinion deliberately sanctions nnd for
which business waits:
"It waits with acquIoBcenco, in tho first place,'
for laws which will effoctually prohibit and pre
vent Buch intoiiockings of tho personnel of the
directorates of great corporations bunlu and
railroads, industrial, commercial, and public
Rorvico bodloB as in effect result in making
thoso who borrow and thoso who lend practically
ono and tho same, thoso who sell and thoso who
buy but tho samo porsons trading with ono an
othor under different names and in different
combinations, and thoso who affect to compote in
fact partner and masters of somo whole field of
business. Sulllciont timo should bo allowed, of
courso, in which to effeot thoso changes of or
ganization without inconvenience or confusion.''
Tho position of tho president. on the subject of
interlocking directorates is stated with such
odmirablo clearness, and tho abuses that have
grown up under that system aro so manifest to
every person who is reasonably informed on the
BUbject that wo feel that tho recommendations
of tho president for legislation on this subject
are fully justillod by tho sentiment of the entire
country. As illustrative of tho conditions in
businoss, described by tho president, in which
thoso who sell and thoso who buy aro but tho
samo persons trading with ono another, lot at
tention bo called to a transaction which was
brought out In tho investigation of another
matter by tho committoo on tho judiciary in a
previous congress, wherein it was disclosed that
a certain person who was a director in one coal
company mado an advantageous contract with
himself as a director of another coal company,
which contract was ratified by himself as a di
rector of a railroad company, of which one of
tho coal companies involved was a subsidiary
corporation. When asked by a member of the
committee whether he thought under the circum
stances there was any possible chance for him
to got tho worst of tho bargain so far as ho was
personally concerned, ho frankly admitted there
was not. TLis illustration and all similar trans
actions show conclusively the necessity for legis
lation on tho subject of interlocking directorates,
not only in the interest of the general public but
in tho interest of innocent stockholders in cor
porations, as well as in the interest of common
honesty.,
The purposo of tentative bill number three
now under consideration by the judiciary com
mittee, is to carry out tho recommendations of the
president in this regard and deals with directors
in three classes of corporations. As to whether
the hill is so worded as to meet tho requirements
in the particular cases to which it relates and to
roach tho evils intended to be reached is not
material, as tho bills are only tentative, and the
committee is open to receive from tho public and
from those particularly interested from the
standpoint of their own business tho fullest in
formation on the subject, in tho hopo that such
information will be beneficial to the committee
in tho perfection of the legislation, so as to meet
tho recommendations of tho administration and
tho general needs of tho country, and that, too,
without serious detriment or embarrassment to
any legitimate industry or enterprise.
Section 1 of the bill prevents any person who
is a director in an interstate railroad from being
a director in a' corporation which is engaged in
manufacturing or selling railroad cars or loco
motives or railroad rails or structural steel, or
in mining or selling coal, or in the conduct of a
bank or trust company. The contractual rela
tions between interstate railroad companies and
tho corporations specified are so common and
of such wide extent and ariety, and the dis
closures of abuses growing out of interlocking
directorates of other corporations with railroad
companies in the past have been so flagrant,
often involving millions of dollaTs to the stock
holders' of the corporation whose interests were
sacrificed, that it is deemed wise to prohibit
interlocking directorates altogether between
such affiliated corporations and the railroads.
It has been suggested in the hearings with
considerable force that corporations other than
thoso specified, and especially those furnishing
supplies to railroads, ought to be included. And
tho committe,e stands ready to make that or any
other modification, if on the final consideration
of tho matter, it is deemed necessary and in the
public intorest to do so.
Section 2 prohibits broadly interlocking di
rectorates between federal reserve banks, na
tional banks, banking associations, or other
banks and trust companies operating under fed
eral authority and also between federal banking
institutions and state banks or trust companies.
It has been urged before the committee that the
provision, as drafted, is too broad and sweeping
and that there ought to be some modificatipn of
it, so as to relieve the smaller banks, savings
banks and trust companies from its operation.
All that need be said at this time as to that
criticism is that this provision is tentative, and
it is the purpose of the committee to make any
modification thereof which,-on final considera
tion may be deemed necessary in the public in
terest. But it is confidently asserted that the
object sought to be accomplished by this pro
vision is fundamentally sound.
Section 3 prohibits interlocking directorates
botween competing industrial corporations en
gaged in interstate business. The necessity for
such inhibition in the law is supported on the
same ground and is justified by the same reason
ing which calls for a prohibition of interlocking
directorates in railroad and banking corpora
tions. The purpose of tentative bill number one is
to prevent certain discriminations in trade which
have often tended to monopoly and injured the
competitors of those concerns which resorted to
such discriminations and unfair practices And
in addition thereto to afford to injured persons
further and more effective remedies than exist
under the Sherman act. This bill proposes to
leave intact and unaffected by any of its pro
visions the full text of the Sherman law, but to
supplement the same by adding thereto these ad
ditional sections to be designated as sections
nine, ten, eleven, twelve and thirteen.
Section 9 prohibits discriminations in price
between different purchasers of commodities in
the same or different sections or communities
with tho purpose or intent thereby to injure or
destroy a competitor, either of the purchaser
or ot the seller, with a proviso which clearly de
fines certain exceptions. This is not a new
legislative proposition, for a great number of
the states have passed statutes prohibiting with
in their borders differences in price for such
wrongful purpose. While these states statutes
differ in phraseology, the general purpose in!
tended to be accomplished by each is the same
This section, as drafted, follows generally the"
Phraseology of the New Jersey statute dealing
with the trust question passed during the Tad
min istratioii of Governor Woodrow Wilson, and
is the first of a series of statutes fatni i-iriv
designated in New Jersey a "The Seven ffis"
all relating to the trust question. It may not bo
inappropriate to say, in this connection, that the
promulgation of and securing the passage of
this trust legislation by Governor WUson bad
much to do with popularizing his candidacy for
the presidency and in the end resulted in his
nomination and election as president.
Section 10 is intended to prohibit a very com
mon evil, prohibiting any person in interstate or
foreign commerce from making a sale of goods,
wares, or merchandise or fixing a price charged
therefor or discounting from or rebating upon
such price on the condition or understanding
that the purchaser thereof shall not deal in tho
goods, wares, or merchandise of a competitor or
competitors of the seller, and accomplishes its
purpose by simply declaring That such trans
action shall be deemed an attempt to monop
olize within the meaning of the Sherman act and
shall be punished accordingly.
The president, in his message to congress al
ready referred to, recommended additional legis
lation to aid those who had been injured in their
business or property by the operations of un
lawful combinations acting in violation of the
Sherman law. On that subject he had this
to say:
" "There is another matter in which impera
tive considerations of justice and fair play sug
gest thoughtful remedial action. Not only do
many of the combinations effected or sought to
be effected in the industrial world work an in
justice upon the public in general; they also di
rectly and seriously injure the individuals who
are put out of business in one unfair way or an
other by the many dislodging and exterminating
forces of combination. I hope that we shall
agree in giving private individuals who claim
to have been injured by these processes the right
to found their suits for redress upon the facts
and judgments proved and entered in suits by
the government where the government has upon
its own initiative sued the combinations com
plained of and won its suit, and that the statute
of limitations shall be suffered to run against
such litigants only from the date of the con
clusion of the government's action. It is not
fair that the private litigant should be obliged
to set up and establish again the facts which
the government has proved. He cannot afford,
he has not the power to make use of such pro
cesses of inquiry as the government has com
mand of. Thus shall individual justice be done
while the processes of busin ss are rectified a-d
squared with the general conscience." ' '
Section 12 of the bill provides1 that a final
judgment or decree obtained by the government
for the dissolution of any unlawful combination
or corporation shall constitute as against the
defendant conclusive evidence of the same facts
and bo conlusive as to the same issues of law in
favor of any other party in any other proceeding
brought under or involving any of the provisions
of the Sherman act, to the full extent to which
such judgment or decree would constitute in any
other proceeding an estoppel between the gov
ernment and such defendant in the original suit.
This we think is in strict keeping with the rec
ommendation of the president and we believe
that the section is so drafted as to accomplish
the purpose desired.
Section 13 provides that any person, firm,
corporation, or association, threatened or injured
in his business by the unlawful acts of any cor
poration or combination may have injunctive
nlf!iHany C0Ur 0f the United stas having
jurisdiction over the parties against threatened
loss or damage by reason of a violation of any
of the provisions of the Sherman act. This adds
an. additional remedy for persons injured in
their bus iness or threatened with injury to their
SfSSt8 by unlawful combinations and is also in
above fet out1 Pent's recommendation
nJL sra:myl to state that very little adverse
bofnvi8 ? Lh?n ,Ve,en ma(le in the ublic hearings
before the judiciary committee of the provisions
incorporated in sections 12 and 13 of the pro
posed Din,
mihSfl?1!1 numbw two prepared by the
subcommittee is commonly referred tn na th
MT "!" u 1,aB islS
nfaSv ?hr 1S' an? ,is tlle least understood
of any o the proposed bills. The purpose of It
IS'Vtti? t0 na,rrow thTdXtll'e
ground of the Sherman aw as to criminal
S?;,"11 t0 make scific and clear St eeS
tain well-known practices which tend to monop-
ShS? f?tefed Int between two or more dis
tinct individuals, persons, corporations or firms
KonoJ6"11 aw- These we set out
m tlio following paragraphs:
in 'trade'orM Si 0r carry out restrictions
in trade or to acquire a monopoly in anv inter
state trade, business or commerce
Second. To limit or reduce the production
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