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form of trust or otherwise, or conspiracy in restraint of trade" to be unlawful. The language is comprehensive in the extreme. To be sure, the Supreme Court has declared that the Sherman act must be interpreted in the "light of reason"; that there may be certain contracts or combinations which restrain trade in only a reasonable manner and which Congress did not intend to make unlawful. President Taft and others have made it clear, however, that the Court did not in this statement refer to any contract or combination that would in any way injure the people, nor did it contemplate substituting its own judgment for that of Congress. Those restraints of trade which in the light of reason might be held lawful are only of a very limited class, such as were lawful at common law, and such as practically every one recognizes to be perfectly legitimate. There were members of Congress who proposed so to amend the Sherman act as to leave no discretion whatever to the courts. Practically, tho they would not have stated it in so many words, they would have had the law declare any restraint of trade, whether reasonable or unreasonable, to be unlawful. Better counsels prevailed, however, and no such provision appears in the new legislation.

The Sherman law being thus broad and comprehensive, the lawyer and the economist alike look with critical eye upon any attempt to add to its definitions. Has the new legislation strengthened our ability to prevent combinations in restraint of trade? Has it forbidden anything which ought not to be forbidden ? Has it gone far enough, or gone too far?

Section 7 of the anti-trust act contains the provisions on intercorporate stockholdings. It declares,

first, that no corporation shall acquire directly or indirectly any part of the stock of another corporation, where the effect "may be to substantially lessen competition " between the two corporations, 66 or to restrain such commerce ... or to tend to create a monopoly." A similar provision is made with regard to holding companies; no corporation may acquire stocks in two or more corporations under the conditions above set forth. Common carriers are included among the corporations covered. There are various exceptions to these broad prohibitions, but the only one of importance relates to stockholdings heretofore acquired. In other words, the act applies only to future acquisitions of stock and does not undertake to undo things already accomplished. Of course there is a clause to the effect that the act shall not make lawful anything theretofore prohibited by the anti-trust laws; intercorporate stockholdings which were unlawful under the Sherman act may still be attacked.

This section seems to add nothing of real value to the Sherman act. Moreover, if strictly construed, it prohibits that which should not be prohibited. Under the Sherman law the courts have already held intercorporate stockholdings unlawful when they result in unreasonable restraint of trade or in a tendency toward monopoly. Several of the great trust cases decided by the Supreme Court have turned on this point, the Standard Oil case, the Tobacco case, the Northern Securities case, the Union Pacific case and others. The new law, however, prohibits the acquisition of stocks not merely where competition in the trade, that is in the business concerned as a whole, is restrained; but also where merely the competition between the partic

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ular corporations directly concerned is lessened. lessening of the competition between two corporations may increase the competition in the branch of industry or commerce in which they are engaged. One corporation may control, say, one-tenth of a given branch and another corporation one-twentieth. The acquisition of stock in one by the other may completely destroy competition between them, but may thereby render them more efficient in competing with other concerns.

Doubtless the exercise of discretion by prosecuting authorities and courts will result in weakening the prohibitions of this section. In few cases perhaps will suits actually be brought and won by the government unless the public interest is threatened by the intercorporate stockholding. That, however, does not justify placing an economic and legal absurdity on the statute book. It is strange that Congress did not use, with respect to intercorporate stockholding, language similar to that used regarding interlocking directorates, which is far more closely guarded.

The administration anti-trust bill, as originally introduced in Congress, contained a provision with regard to interlocking directorates which, had it been enacted, would have been little less than disastrous. Virtually it prohibited the interlocking of directorates altogether, regardless of its effect. If two corporations, which together had only a small fraction of a given business, should have one common director, and if such corporations were natural competitors, the corporations would have been made subject to the penalties of the Sherman anti-trust law.

As it passed the House this absurd and drastic provision was toned down greatly, and in the Senate it was

still farther shorn of claws by the omission of the penalty. In its final form the section (§ 8 of the antitrust act) applies only to large corporations and only in cases where the elimination of competition by agreement between them would be unlawful. No person, it declares, shall, after two years from the passage of the act, be a director in any two or more corporations, any one of which has capital, surplus and undivided profits aggregating more than one million dollars, if such corporations have been theretofore competitors "so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the anti-trust laws.” Nothing is said about community of officers or employees other than directors. Banks and common carriers are exempted from this general provision; but there are special provisions regarding banks.

If the fact that two or more corporations had common directors did actually result in restraint of competition, - not merely between the corporations concerned but in the trade generally, -the courts could and probably would have held it unlawful under the Sherman act. In several decisions in which combinations based on intercorporate stock ownership have been dissolved, the courts have prohibited the segregated parts from having common officers or directors. The new act, however, goes farther and prohibits corporations from having the same directors even tho they do as a matter of fact actively compete, provided only that an agreement between the corporations to eliminate competition would be unlawful. In effect it makes the interlocking of directors in such case conclusive evidence of combination to restrain trade. Perhaps on the whole this

is wise, for there is at least some tendency to eliminate competition where even a single individual is a director in two or more potentially competitive corporations.

The importance of this legislation, however, has been greatly exaggerated by its sponsors. The real evil is not community of directors but community of stock ownership. It will be easy enough for an individual or group who hold stock in several corporations to elect different men as directors who will act in harmony. The director is but the voice of those who elect him. Dummy directors are no new thing and they will doubtless be more numerous under this act than at present.

Apparently no one seriously proposed in Congress to restrict community of stock ownership by individuals. As I have pointed out elsewhere, the courts have expressly tolerated community of interest in cases where it was almost self-evident that the result must be to prevent competition. They have seemed to consider it an inalienable right of the individual to hold what stocks he pleases. The "dissolution" of trusts by distributing the stocks of subsidiary companies pro rata among the stockholders of a controlling company is an economic absurdity. The investigations of the Pujo committee emphasized the enormous extent and influence of community of stock interest as well as of interlocking directorates. But Congress seemed to be of the same mind as the courts with respect to the impossibility, or the unconstitutionality, of attempting to check the former. Some day our law makers will grow bolder; they will not permit any supposed right of private property to serve as a bulwark for monopoly.

1 Pages 35 ff.

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