XXI

THE DISSOLUTION OF THE TRUSTS

JUDGMENT day for the trusts has arrived. Some of them, we hope, are good, and some of them are evil. The federal courts are now, and will be for a long time, occupied in separating the sheep from the goats. The Supreme Court, in the Oil and Tobacco cases, has set up a standard by which to decide which of these great companies is lawful, and which must be dissolved.

The opinion of the court is clear that any corporation engaged in interstate commerce (which includes all the trusts), and which has been formed not "with the legitimate purpose of reasonably forwarding personal interest and developing trade, but on the contrary were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public, and to limit the right of individuals, thus restraining the free flow of commerce, and tending to bring about the evils such as enhancement of prices which were con

sidered to be against public policy," is unlawful under the Sherman Act.

The court says, in effect, that any large company or collection of companies, formed with the purpose of limiting competition, that is advancing or keeping up prices, or which, after its promotion, uses its power to limit competition, so that prices can be advanced, is an unlawful organization and must be dissolved. In the light of these decisions the legal position of the large companies formed in the last twenty years, to put together sometimes thirty smaller concerns which had been competing with one another, is very doubtful. Most people who own securities of any kind have the preferred or common stocks of these industrials. There are large companies, all organized on the model of the Standard Oil Company, whose stock prices appear in the daily New York quotations. If the movement against the trusts continues, all these hundreds of thousands of stock-holders-the Steel Trust alone has over 100,000-must adjust themselves to new conditions. Until this adjustment is made, or so long as the fear of it is present, what we call prosperity will not return.

How will this adjustment be made? How can

the trusts be dissolved, in such a manner as the court says, "to protect, not to destroy, rights of property?" A word about the organization of the trusts. Here are five corporations, A, B, C, D, and E, making shoes, or steel, or pumps, or harvesting machinery. These companies are competitors; they are constantly fighting one another-raiding one another's customers; cutting prices, secretly and sometimes openly; making agreements, gentlemen's agreements, and then breaking them; stealing or corrupting one another's employees; biting and clawing each other in the bear-pit of competition; behaving like mediæval captains of brigands instead of modern captains of industry. The men who control these companies decide to combine and so stop the waste of competition.

Suppose, for the sake of simplicity, the stock of each of these five companies is $2,000,000, each share having a face value of $100. A New Jersey corporation is organized, which issues $20,000,000 of stock-$10,000,000 preferred and $10,000,000 common. The preferred stock is entitled to receive $700,000, seven per cent., before anything is paid on the common. The consolidation is now formed by the exchange of one share of pre

ferred stock and one share of common stock of the New Jersey corporation for each of the 100,000 shares of the five companies. The New Jersey company-let us call it the Amalgamated Company-now owns $10,000,000 of the five companies and their former stock-holders own $10,000,000 of the preferred and common stocks, $2.00 for $1.00 of the stock of the five companies-an operation familiar to most people as stock watering.

Immediately price-cutting, misrepresentation, slander, back-biting, everything that goes under the name of cut-throat competition, is at an end between them. The Amalgamated Company is the sole owner of all five, electing directors, choosing officers, establishing prices, driving these five tamed animals to one vehicle and in one set of harness. Every feature of the business policy is now reduced to rule and order. The territory over which, as competitors, all were accustomed to raid and foray, is divided among them. One of the five plants may be out of date, badly located. Its business is divided among the other four. The general administration is centred in New York; financing, buying, advertising supervision, all are managed from a central office. In place of war, concord, peace, and harmony succeed within the

circle of these former rivals. The new company may not advance prices, but it gets from the customer those prices which it publishes; every one pays the same prices. There are no rebates, no special discounts, no allowances.

This, in brief, is the change which was accomplished by the organization of the trusts. There is a darker side to the picture. Stories and sworn statements of the wrongful and oppressive use of the great power of these great corporations are numerous. Business, however, is not conducted to the strains of soft melody. At best, some of its practices are not pretty. Probably the two culprits did no more, nor as much, against the moral law, when their enormous size is considered, than the average grocer or milkman. In passing, it may be observed that in the grocery trade, to quote but one instance, there are three prices for the same coffee done up in different packages.

The Supreme Court did not, however, heed these charges. It passed them over. To arrive at the conclusion that the Standard Oil and the American Tobacco Companies should be dissolved, it was not necessary to inquire whether these companies were benevolent despotisms. That they were, or aimed to be, supreme in their