such United States registration would shortly become a valuable business and financial privilege for any large corporation. The standing of the company with that public opinion that underlies legislative action and the financial status of its securities with the investing public would be affected in a very practical way by the possession or cancellation of such registry. The approval now granted to corporate transactions through existing State public-service commissions has already a very definite market effect on the price of securities and on the attitude of public opinion.

(5) "The preciseness with which the grounds for denial or cancellation should be stated in the law, and whether the commission shall have the power to make regulations, lack of compliance with which will result either in a denial or cancellation?"

The grounds of cancellation should be broadly stated, leaving the commission to apply in specific cases the general rules prescribed by Congress. If power of making regulations be conferred on the commission, it should be simply for such regulations as will carry out the terms of the act and make effective the rules laid down therein.

(6) "As the power to regulate interstate commerce is a legislative power, it has been held that the law turning over the administration of such power to a commission or board shall prescribe the rules or standards under which the power is to be exercised. Would this apply to a mere registration in which no substantial property right is involved?"

The question of whether the delegation of a power is constitutional depends wholly on the nature of the power. Legislative power, strictly speaking, cannot be delegated, but executive power can, of course, be conferred by legislation, and there can also be given quite broad power of executive administration in ascertaining facts and applying to them the rule established by legislation. It seems probable that the powers granted in this bill come under the latter head and are constitutional.

An excellent case on the subject is Union Bridge Co. vs. United States (204 U.S. 364), where the earlier cases are reviewed in detail. The case itself involved the question of whether an act of Congress granting to the Secretary of War power to order the removal of the bridge over a navigable stream "whenever the Secretary of War shall have reason to believe that any . . . bridge . . . over any of the navigable waters. . . is an unreasonable obstruction to the free navigation of such waters on account of insufficient height, width of span, or otherwise," was a delegation of legislative power.

The court held that this was not an objectionable delegation of power, and quoted, with approval from Lock's appeal (72 Pa. St. 291), as follows:

"The legislature cannot delegate its power to make a law, but it

can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend.

See also other cases cited in this decision.

An excellent legislative precedent is in the steamboat-inspection law, where, by section 4405, Revised Statutes, a board is given power to "establish all necessary regulations required to carry out in the most effective manner the provisions of this title." These regulations now cover over 100 pages.

In the same law, also, the inspectors are given broad power over the licenses of steamboat officers, as follows: "But such license shall be suspended or revoked upon satisfactory proof of bad conduct

a power obviously closely analogous to the power of cancellation provided in your bill.

It should be noted also that the only power delegated is the mere revocation of registration. Registration is not a property right. It is simply a privilege granted through the commission and revocable by it.

Thus, as stated in paragraph 5 above, rules of action and grounds for cancellation of registration should be set forth in the bill itself, with sufficient definition to make clear the intention of Congress as to the class of acts to be covered thereby. For example, the word "overcapitalization" is perhaps sufficiently definite in itself, while "unfair or oppressive methods of competition" would perhaps be too indefinite. (7) "In case the power to fix prices should be included," etc.

I would prefer not to discuss the form of such power, as I personally believe it unwise to confer any such power on the commission, and do not consider myself competent to treat the subject properly.

In considering any such treatment of our commercial problem as is attempted in this bill, it seems to me, at least, that the Government should not, at present, commit itself, by way of general policy, either to the theory of "unlimited competition" or of "unlimited combination." We are not, I feel, sufficiently advanced to justify us in taking a definite position in favor of either one of these opposing ideas. Any system we adopt now should be so framed as to be alike available for either development. To give the power to fix prices would tend to commit us to a policy of industrial combination.

(8) "Shall the provision regarding registration be simply p.rsuasive or compulsory; and if compulsory as to the large corporations, shall permissive registration be granted to the smaller corporations?"

I believe that the system would be entirely workable, if the publicity, etc., were simply permissive, and that some complications would thus be avoided. But a compulsory system for large corporations should also bring much the same results, especially if coupled with permissive

registration for smaller concerns. The permissive feature for smaller companies seems decidedly desirable.

(9) "Shall the commission, in case of revocation of registration, have power to order that the offending corporation shall not engage in interstate commerce?"

This power is a peculiarly drastic one, and would require rather elaborate machinery for its enforcement. I doubt both the wisdom and the necessity here.

I take the liberty of adding some general considerations, which may be relevant to the discussion of such a system as is proposed by your bill. These views are based on an experience of eight years in the Bureau of Corporations.

(10) The one imperative change now required in our policy toward the "corporate problem," is a change from our present system of treating that problem through occasional prosecution, to a system which will treat it with continuous administrative action. We should advance from a negative policy to a positive constructive policy; from mere occasional prohibition to permanent regulation and pre

vention.

(11) One of the primary objects of the commission is the providing of proper publicity. This should not be combined with the administration of the Sherman law. It is probably true that efficient publicity is inconsistent with prosecution, at least as administered by the same office. The Bureau of Corporations, the present agent of corporate publicity, secures now at least nine-tenths of its information by voluntary cooperation. The interstate trade commission would continue this work, but should the function of prosecution under the Sherman law be combined with publicity, it is obvious that the present voluntary coöperation of corporations, the main source of information, will very largely be destroyed.

There are of course exceptions to this general principle. At times it would be necessary for the information obtained by the commission and indicating a clear and flagrant violation of law to be turned over to the Department of Justice. The Bureau of Corporations has in this manner given much assistance to the Department of Justice. The numerous prosecutions of the Standard Oil Co. since 1906 for railway rate discriminations were all based on the report of that bureau, and the agents of the bureau furnished much of the evidence and assisted largely in the preparation of the cases.

Similarly, in the recent prosecution of that company under the Sherman law, the case was instituted as a result of the investigations of the bureau, was largely prepared by its agents, and, I venture to say, would not have been successfully presented without their aid. Some of the ablest men in the bureau gave over a year of their time to this case.

But in general such connection with prosecution should be wholly incidental and secondary, and the publicity work of the commission should be directed primarily at furnishing reliable economic and financial information for the general public and not at securing evidence for prosecution.

(12) One of the most important features of such an administrative system of corporate regulation is its provision, as above referred to, for broad corporate publicity. The effects of such publicity have been well shown by the past work of the Bureau of Corporations, as set forth in the annual report of the Commissioner of Corporations for 1910.

The report of the bureau on the transportation of petroleum, published in May, 1906, effected a sweeping decrease in the granting of railway rebates throughout the country. Practically every railroad involved in the railway discriminations described in this report canceled the objectionable rates within six months after the issuance of the report.

The report of the bureau on cotton exchanges resulted within a few months in a marked improvement in the regulations of the New Orleans Cotton Exchange, and while the New York Cotton Exchange has not yet made any changes in its system, that exchange, on March 23, 1911, voted "that it is the sense of this meeting that since . . . the Department of Commerce and Labor has made an exhaustive investigation of the business methods of the cotton exchanges and has criticised the methods and by-laws of the New York Cotton Exchange

it will be good judgment on the part of this exchange to, . . . SO far as possible, adopt the suggestions made by the Government."

In the tobacco industry the independent manufacturers have in many instances stated that the work of the bureau has caused the cessation of various objectionable methods of competition.

In the problem of waterways, the reports of the bureau, three in number, have very widely influenced public opinion by showing the real questions to be solved and the real advantages to be attained in waterway transportation.

A Federal administrative system of publicity and registration should develop both strength and elasticity. The administration of such a system should result in a definite and broadening policy, based on exact information, establishing definite standards of business action, of public economics, and of Government regulation, in themselves highly effective, and valuable also as the raw material for further statutory enactment.

We may fairly hope to get from it a gradual rise in the standard of business conduct, closer relationship between large business and public authorities, marked improvement in corporate accounting and in the standing of our industrial securities, and the elimination of unfair

practice and business privilege. All of this without any disturbance of properly conducted business.

The time seems ripe for such action. It has been obvious since the Supreme Court decisions on the Standard Oil and Tobacco Co. cases that the public is ready and anxious for an advance to some such administrative system of regulation by the Federal Government. It seems to be true that corporate managers concede more and more the necessity for such regulation and publicity, recognizing both its public necessity and its advantage to fair business.

Very sincerely, yours,

HERBERT KNOX SMITH, Commissioner.

FROM THE TESTIMONY OF TAYLOR VINSON, ATTORNEY AT LAW, AND ALSO ENGAGED IN THE COAL BUSINESS, HUNTINGTON, W. VA.1

The trouble with the business man to-day is that he doesn't know, and his lawyers cannot tell him, whether he is violating the law or whether he doing a legitimate and sane thing.

Now, that is the difficulty with the business man. A man does not know how to do it. They do not want to violate the law, and they will not if they can help it, but there is the condition. Now, I know it is claimed that the atmosphere has been cleared very largely by the recent decisions of the Supreme Court in the oil and the tobacco cases. The construction that the court put upon that statute by putting the word "reasonable" in there, it seems to me, was the only construction that the court could have given it, because we cannot assume that this Congress would propose a law that would require men to do an insane thing or do an unreasonable thing, and to keep from being destroyed, or rather the business being put into bankruptcy, it would be the sane thing or the reasonable thing for any business man to go to his neighbor and say, "I cannot live, this business is ruining me, and I want you to take it over at a fair price," and the law would say this whether you are a trust and using oppressive powers or not.

In my judgment the court is wholly inadequate to do those things. They cannot administer economic laws. Their laws are constitutional laws, and laws, of course, that are passed by Congress. Take, for instance, those two cases which the court has just decided. If we look at the result in those cases we see the complication that must necessarily arise in any and every case that the court passes upon.

1 Pp. 34-35.