are engrafted upon it. Subject to the proviso that nothing in section seven of the Clayton Law shall be construed to authorize or make lawful anything which, prior to the enactment of the Clayton Law was forbidden by the antitrust laws, the rule in said section seven against intercorporate shareholding does not apply at all (1) when one corporation purchases shares of the capital stock of another solely for investment, and does not vote or otherwise use the shares to bring about, or to attempt to bring about, a substantial lessening of competition; or (2) when a corporation causes the formation of subsidiary corporations for the purpose of actually carrying on their immediate lawful business, or the branches or extensions thereof, and owns and holds all or a part of the stock of such subsidiary corporations if the effect of forming the subsidiaries is not substantially to lessen competition; or (3) when a common carrier, subject to the laws regulating interstate commerce, constructs branches or short lines, as feeders to its main line, and acquires a part or all of the capital stock of such branch lines; or (4) when such common carrier acquires a part, or all, of the capital stock of a branch or short line constructed by an independent company, if there is no substantial competition between the company which constructs or owns the branch line, and the common carrier which acquires the stock of the branch line; or (5) when such common carrier, for the purpose of extending its line, acquires the stock of another common carrier, if there is no substantial competition between the two carriers.

Intercorporate shareholding by banks, banking associations, and trust companies, and by common carriers subject to the jurisdiction of the Interstate Commerce Commission, of course does not concern the Trade Com

mission.41 But corporations subsidiary to such common carriers might be engaged in interstate commerce within the purview of the Clayton Law, and at the same time might not be so engaged in interstate commerce as to be subject to the jurisdiction of the Interstate Commerce Commission under the laws regulating interstate commerce. Such subsidiaries, and all other corporations subject to the jurisdiction of the Trade Commission, must necessarily find it hard to determine with reasonable certainty whether, if they shall participate in arrangements for intercorporate shareholding, or for the acquisition of stock by holding companies, their acts will involve them in difficulties with the Trade Commission as violating section seven of the Clayton Law, or will be held to fall within some of the exceptions expressed in that section.

§ 12. Interlocking directorates: The Clayton Law does not inhibit interlocking directorates until from and after October 15, 1916,42 and the enforcement of the inhibition is entrusted to the Federal Reserve Board, and the Interstate Commerce Commission, respectively, so far as banks and common carriers are concerned.43 If an unlawful interlocking directorate

41 Clayton Law, Sec. 11.

42That is, until two years after the date of the approval of the Clayton Law. See Sec. 8 of said law. On the phraseology of said Sec. 8, a question might be raised as to whether the suspension for two years of the inhibition against interlocking directorates granted by the first paragraph of said section, is applicable in the case of federal banks in cities of more than 200,000 inhabitants covered by the second paragraph of seid

section.

The Solicitor of the Treasury in an opinion dated November 24, 1914, rendered for the Federal Reserve Board, has, however, held that the banks cov ered by the second paragraph were as much within the twoyear suspension clause of said section as were the banks covered by the first paragraph thereof.

43 Clayton Law, Sec. 11. The inhibition against interlocking directorates does not apply to "com. mon carriers subject to the act to

should be created by a bank, or by an interstate common carrier within the operation of the Clayton Law, the Trade Commission could not exert its regulative power upon the corporation. But it would seem that the Trade Commission might proceed against the individual director, officer, or employee taking part in the violation of the law, if his participation in the management of the corporation constituted engaging in interstate commerce on his part.

(1) Banking corporations. There is perhaps a less degree of uncertainty as to when the creation of an interlocking bank directorate will constitute a violation of the Clayton Law, than has been noted to exist in respect of price discriminations, exclusive purchase and sale arrangements, and intercorporate shareholding.

So far as the eligibility of the director of one bank for lawful membership in the directorate of another, depends upon the aggregate amount of the deposits, capital, surplus, and undivided profits of the banks, or either of them, section eight of the Clayton Law provides a reasonably certain rule for ascertaining such aggregate amount, by declaring that it shall be the average amount of deposits, capital, surplus, and undivided profits as shown in the official statements of such bank filed as provided by law during the fiscal year next preceding the date set for the annual election of directors.

The exceptions to the statutory inhibition against interlocking bank directorates are fewer in number, and

regulate commerce, approved February fourth, eighteen hundred and eighty-seven". See Clayton Law, Sec. 8. That means, of course, common carriers by rail or water. It would seem that other kinds of interstate carriers, such as pipe lines, telegraph com

panies, and the like, which have been made subject to the act to regulate commerce by amendments thereof since 1887, are within the rule of the Clayton Law against interlocking directorates.

less elastic in character, than the exceptions to the rules declared by the Clayton Law against price discriminations, exclusive purchase and sale arrangements, and intercorporate shareholding. The statutory rules of section eight of the Clayton Law prohibiting interlocking bank directorates are of universal and rigid application, except that (a) they do not apply to mutual savings banks not having a capital stock represented by shares; (b) a director of a federal bank, in respect of which an interlocking directorate with another bank is otherwise forbidden, may be a director of not more than one other bank, federal or state, where the entire capital stock of one of the banks having a common director is owned by the stockholders of the other; and (c) a director of "Class A" of a federal reserve bank may be an officer or director, or both, of one member bank.

(2) Non-banking corporations. As to interlocking directorates in the case of such corporations other than banks as are within the operation of the Clayton Law, it is quite as difficult to tell what will constitute a violation of section eight of the Clayton Law as in the case of price discriminations, exclusive purchase and sale arrangements, and intercorporate shareholding. So far as the inhibition against interlocking directorates in such non-banking corporations depends upon the aggregate amount of capital, surplus and undivided profits of the corporations, or either of them, the Clayton Law is definite and certain. It declares that the eligibility of the director of one such corporation for membership in the directorate of the other shall be ascertained by taking the aggregate amount of the corporation's capital, surplus, and undivided profits, exclusive of dividends declared but not paid to stockholders, at the end of the corporation's fiscal year next preceding the election of directors.

V

But the exception to the rule forbidding interlocking directorates as to corporations within the operation of the Clayton Law, other than banks, is very indefinite and uncertain. Two such corporations, regardless of how great may be the amount of the capital, surplus and undivided profits of either or both of them, may have interlocking directorates unless such corporations are, or previously shall have been, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws. This obviously makes the lawfulness of interlocking directorates created by two such corporations, depend finally upon an interpretation of the antitrust laws. If the two corporations, being otherwise within the terms of the Clayton Law, are competitors so that elimination of competition between them by agreement would violate any provision of the antitrust laws, they may not lawfully have interlocking directorates. Otherwise they may. It would be difficult to conceive a more uncertain and shifting standard of corporate conduct than this one, by which the question of what elimination of competition between two corporations by agreement would constitute a violation of the antitrust laws, is made the test of the lawfulness of an interlocking directorate between such corporations.44

§ 13. Clayton Law creates merely a new remedy: It appears doubtful, to say the least, whether sections two, three, seven, eight, and eleven of the Clayton Law have materially changed the previously existing substantive law of interstate trade. It would seem that, prior to the enactment of the Clayton Law, the devices for restraining trade and creating monopoly denounced by that stat

44Cf., note 37, supra.