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the status of large industrial companies in the United States, presumably for many years to come. This case and that of the International Harvester Company seem to contain the necessary elements for settling definitely the position of the United States Supreme Court regarding the great corporations. When that issue is settled, the law will be known. If the Supreme Court sustains this decision of the lower court, business men may follow their consciences and fear no ill if they do not harm the community, competitors, dealers, or the public; and not only the courts, but public opinion will approve.
INTERNATIONAL HARVESTER COMPANY*
A PETITION was filed, April 30, 1912, in the District Court of Minnesota, against the International Harvester Company, alleging that it had acquired and maintained a monopoly, contrary to the Sherman Act, in harvesting and agricultural machinery and implements and twine. August 15, 1914, the court sustained the contentions of the government and decreed the dissolution of the combination. The case was appealed to the Supreme Court, where it has been argued and reargued and decision is now awaited.
This case is of particular interest because in the course of this trial as well as through the report of the Bureau of Corporations on the International Harvester Company, this combination is shown to be a "good" trust. The facts indicate that it is not over-capitalized, does not use clearly predatory methods of competition, does not sell abroad more cheaply than at home, is not in monopolistic control of basic patents, does not make exorbitant profits and does not charge excessive prices. Yet the District Court decreed its
*This story of the International Harvester Company has been compiled from the government and the Company briefs in hearings before the U. S. Supreme Court in October, 1914, from the U. S. Bureau of Corporations Report on The International Harvester Co. (1913) and from Moody's and Poor's Manuals of Industrials.
dissolution. Mere extent of control in an industry, if, in the court's judgment, it approximates monopoly, seems to insure dissolution decree under the Federal Anti-Trust Acts. If the Harvester combination be dissolved by the decree of the Supreme Court it will be clear, that as the law will then stand interpreted, approach toward monopoly will not be permitted in industry of the United States, regardless of the fair methods by which the monopoly may be approached and regardless of any advantages, such as cost-cheapening or bettered development of foreign trade, that may flow from the more centralized control. At least the central issue of the anti-trust fight in the United States will then be made clear.
A brief outline statement of the history of the Harvester combination is given by the United States Commissioner of Corporations, Luther Conant, Jr., in transmitting to the Secretary of the Department of Labor his report on "The International Harvester Co." That statement, which summarized the findings of this detailed 250-page report, is here given in full:*
"The International Harvester Company was organized in 1902 as a consolidation of the five principal manufacturers of harvesting machines in the United States, namely, the McCormick Harvesting Machine Co., Deering Harvester Co., Plano Manufacturing Co., the Warder, Bushnell & Glessner Co., and the Milwaukee Harvester Co. The companies thus consolidated had in 1902 about 90 per cent. of the total production of grain binders in the United States, and about 80 per cent. of the total production of mowers, the two chief kinds of harvesting machines. The principal outside makers of harvesting machines were located in New
*U. S. Bureau of Corporations Report on The International Harvester Co., (March 3, 1913) pp. XVII to XXIII inclusive.
York State, and their market was chiefly confined to the North Atlantic States and to the export trade.
"The interests included in the combination had previously been in keen competition. An attempt made in 1890 to establish a general consolidation of makers of harvesting machines was a failure, and from that time until the merger, competition was severe. In fact, it has been asserted that the combination was virtually forced by such competition. However, the two most important concerns, namely, the McCormick and Deering companies, were making large profits just prior to the merger, and two of the other companies merged were making at least fair profits. Obviously, therefore, it cannot be contended that this competition was destructive.
"It has been represented in formal testimony by officers of the company and its financial promoter, G. W. Perkins, then of the firm of J. P. Morgan & Co., that its organization was not the result of concerted action by the former competing owners, but merely of the purchase of their properties by new and outside interests. Documentary evidence gathered by the Bureau completely disposes of this contention and shows that the principal competing interests considered and discussed among themselves the formation of this combination and were active in bringing it about.
"The chief features of the International Harvester Co.'s operations are the substantial maintenance of its monopolistic position in the harvesting-machine business, originally acquired through combination, and its extensions on a large scale into new lines of the farm-machinery industry. The company has been able to do this in part through the acquisition of some of its chief rivals in the harvesting-machine business; in part by using its monopolistic advantage in these harvesting-machine lines to force the sale of its new lines; in part by certain objectionable competitive methods; and
especially through its exceptional command of capital, itself the result of combination.
Acquisitions of Competing Concerns
"Almost immediately after its organization the International Harvester Co. commenced the acquisition of competing makers of harvesting machines. In January, 1903, it secretly acquired control of D. M. Osborne & Co., of Auburn, N. Y., its chief competitor. This secret control was maintained for nearly two years, during which the Osborne Company was operated and advertised as an independent concern. Two of the chief stockholders of the Osborne company agreed to refrain from engaging independently in the same lines of business for a period of ten years. Again, the combination, between 1903 and 1904, acquired and secretly operated several other competing harvesting-machine concerns, namely, the Minnie Harvester Co., the AultmanMiller Co., and the Keystone Co. In some cases it was contended that the concealment of ownership was employed to facilitate liquidation of certain accounts of the purchased
"Negotiations for the acquisition of several other harvesting-machine concerns were not consummated; in some cases the initiative came from the competitors.
Extensions into New Lines
"The company's acquisition of competitors in harvesting machines was followed by extension of its manufacture into numerous new lines, partly by the purchase of established concerns. Among the most important of such lines were tillage implements, manure spreaders, farm wagons, gasoline engines, tractors, and cream separators. The extension of the company into these lines was directly furthered by its substantially monopolistic control of the harvesting-machine
business. It is obvious that the possession of a monopolistic position in that important branch of the business afforded a powerful lever for forcing the sale of its new lines.
"The competitive methods employed by the company have been the subject of much complaint. Some of these complaints relate to practices which, like the use of the exclusive clause in agency contracts and the operation of purchased companies as independent, were at one time extensively practised, but which have since been abandoned. As above noted, some of these acquired concerns were openly advertised as independent.
"Among the most important complaints charged against the company in recent years is an effort to secure an undue proportion of local dealers in farm machinery by allotting, as a rule, only a single brand to any one dealer in the same place, thus tending to restrict the outlet for competitors' goods. The company's own records show that this was one purpose at least in making this distribution of its brands, and it appears to have had some practical effect in handicapping competition.
"Compulsion of dealers to take the company's 'new' lines by reason of its monopolistic control of harvesting machines ('full-line forcing') has been attempted with more or less success by the company's representatives. Attempts to secure the exclusive handling of certain lines of the company by similar methods were also reported to the Bureau.
"Special discriminatory prices and terms have been reported in a number of instances, but the general policy of the company is to maintain high prices in the monopolized lines; in the principal new lines, however, where considerable competition is encountered, unusually low prices and long terms have been generally employed.