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and March, 1912. June, September, and December, 1912, 2 per cent. each and since March, 1913, 5 per cent. quarterly. Extra dividends on common stock: 1905, 10 per cent.; 1906, 12 per cent.; 1907, 15 per cent.; 1908, 22 per cent.; 1909, 25 per cent.; 1910, 30 per cent.; March and June, 1911, 7 per cent. each.

In May, 1911, the American Tobacco combination was declared unlawful by the Supreme Court. The case was remanded to the Circuit Court to work out a plan for dissolution which was put into effect from December, 1911.

Under this dissolution plan the manufacturing business of the combination was divided substantially as follows: The American Snuff Company was separated from the control of the combination and its business was divided into three parts, one remaining with the American Snuff Company, the other two parts being transferred to two new companies organized for this purpose, the Weyman-Bouton Co. and the George W. Helme Co. The R. J. Reynolds Tobacco Company, chiefly a manufacturer of plug tobacco, was reestablished as an independent company. Most of the remaining business of the combination relating to tobacco manufacture in the United States was divided among three large companies, the American Tobacco Company and two new corporations, the P. Lorillard Co. and the Liggett and Myers Tobacco Company. The business in tobacco and related products controlled, before the dissolution, by the American Tobacco Company is now separated into fourteen separate and independent companies, no one of them having any control over or interest in any other.

The ownership of the stock of the new companies was placed in the hands of the owners of the combination stock but preferred stock was given voting rights. This reduced the voting power of the twenty-nine chief stockholders from about 56 per cent. in the combination to about 35 per cent. in

the new companies, on the average, when the dissolution went into effect.

The leading propositions of the summary of results given by the Commissioner of Corporations report in 1915, as to Prices, Costs, and Profits in the Tobacco Industry, are so significant a statement of the policy and power of the tobacco combination before its dissolution, of the effects of the dissolution upon the business of the companies into which the combination was divided, and upon the business of other tobacco firms, that its inclusion here is justified. Lack of space forbids the inclusion of illustrations and tables, but the reader interested in the present status of trusts in the United States, the effects of the dissolution policy of the courts, the price and cost of production effects of combination is referred to this third volume of the Report of Commissioner of Corporations in the Tobacco Industry. Following are the thirty-nine summarizing propositions* of this, one of the most enlightening documents in recent trust literature:

"(1) That the Combination from 1902 to 1910 had a monopolistic position in each of the chief branches of the tobacco business, except in cigars, the minimum proportion of the annual output in the several branches ranging from two-thirds to more than five-sixths of the total output of the country, while in cigars the maximum proportion in any year was only one-sixth of the total.

"(2) That for the Combination high rates of profit have followed monopolistic control, the greater the degree of control the greater the rate.

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(3) That for most types of manufactured tobacco the Combination's rates of profit were ordinarily more than double those of its competitors, though for a few types it had no advantage.

*Report of the Commissioner of Corporations on the Tobacco Industry, Part III (1915) pp. 2-29, passim.

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“(4) That selling costs were materially reduced as the volume of the Combination's business increased.

"(5) That generally there were material decreases in advertising expenditures of the Combination after a controlling proportion of the total production had been secured.

"(6) That there was a large advance in the cost of leaf tobacco for the Combination from 1901 to 1910.

"(7) That during 1901 and 1902 the internal-revenue tax was reduced 6 cents per pound on manufactured tobacco, 42 cents per thousand on cigarettes, and 46 cents per thousand on little cigars, but the Combination made practically no change in the prices to the jobber, while the prices to the consumer also remained unchanged, so that the Combination profited by substantially the whole extent of the tax reduction, though it was presumably intended for the benefit of the

consumer.

"(8) That in 1910 when the internal-revenue tax on manufactured tobacco was increased from six cents to eight cents per pound, on cigarettes from $1.08 to $1.25 per thousand, and on little cigars from $0.54 to $0.75 per thousand, the prices of certain products of the Combination were increased as much as the tax both to the jobber and the consumer, so that the burden was shifted to the consumer while for other products the prices to jobbers and consumers were not increased, so that the burden rested on the Combination.

"(9) That there were practically no changes in prices to the consumer for the Combination's principal brands of manufactured tobacco, cigarettes, and little cigars from 1901 to July, 1910.

"(10) That, while there were practically no changes in prices to the consumer from 1901 to July, 1910, for the Combination's principal brands, there were substantial increases in prices to jobbers, thus reducing the margins between these prices.

"(11) That the most profitable years of the Combination's existence were from 1903 to 1908-the period of low tax, moderate leaf costs, decreased advertising expenditures, and highly monopolistic control.

"(12) That the Combination for various types of classes of tobacco products developed one or two predominating brands, a policy which tended to promote concentration and economy in manufacture and afforded a greater protection against competition than a multiplicity of brands, but which, at the time of dissolution, presented difficulties in dividing the business.

"(13) That the several successor companies established in accordance with the plan of dissolution were much larger producers of tobacco products than any of the other companies.

"(14) That a comparison of the successor companies' combined proportion of the total output of the country in the various branches of the tobacco business in 1913 with those of the Combination in 1910 shows that the combined proportion of the successor companies was less in smoking and in fine cut; more in cigarettes and in snuff, and about the same in plug and little cigars.

"(15) That in most branches there was a more equal distribution of business among the successor companies in 1912 and 1913 than there was directly after the dissolution.

"(16) That, although there were no important changes in prices, the results for certain branches, particularly smoking and cigarettes, tend to show competition for business in 1912 and 1913 and an effort on the part of the several successor companies to fill in gaps in types of their business in which they were weak, though for certain other branches, particularly snuff, such competition had not been apparent.

"(17) That in the snuff branch each of the three successor companies has practically a monopoly in its respective type and to a large extent a distinct sales territory; that the branch

is characterized by unusually high profits and small advertising and selling costs.

"(18) That the cost of leaf tobacco used by the successor companies in 1912 and 1913 in the plug, fine-cut, and cigarette branches was less, while in the smoking, snuff, and littlecigar branches it was more, than the cost of that used by the Combination in 1900 and 1910.

"(19) That the factory costs, other than leaf, of the successor companies in 1912 and 1913 and of the Combination in 1909 and 1910 were not materially different.

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“(20) That almost invariably marked increases or decreases in the volume of particular brands decidedly reduced or increased, respectively, factory costs other than leaf.

"(21) That increases in selling cost after the dissolution were general, resulting from the duplication of selling organization and increased overhead expense, due to the division of the business.

"(22) That there was a marked increase in the advertising expenditure of the successor companies as compared with that of the Combination.

"(23) That the aggregate amount of profit of the successor companies in 1913 was slightly less than that of the Combination in 1910 in spite of a larger volume of sales.

"(24) That the ratios of profit to net receipts less tax for the successor companies in 1913 were, in general, comparatively low in those branches or types in which competition for business was most pronounced, e. g., plug-cut smoking and domestic and blended cigarettes, and very high in those in which competition was slight, e. g., snuff.

"(25) That on the book value of the total investment, the earnings of the successor companies averaged 12.1 per cent. in 1912 and 11.3 per cent. in 1913, while the profit accruing to the holders of the common stock in respect to their interest was at a much higher rate.

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