Concerning the desirability of leaving unimpaired the right to contract, the Supreme Court of the United States said, in the Standard Oil case, “Although the statute (the Sherman Act), by the comprehensiveness of the enumerations embodied in both the first and second sections, makes it certain that its purpose was to prevent undue restraints of every kind or nature, nevertheless, by the omission of any direct prohibition against monopoly in the concrete, it indicates a consciousness that the freedom of the individual right to contract, when not unduly or improperly exercised, was the most efficient means for the prevention of monopoly. * In other words, that freedom to contract was the

essence of freedom from undue restraint in the right to contract."

Summary

As the committee indicated at the beginning of its report, as well as under its separate recommendations, it believes that any attempt at prohibition of unfair practices in competitive businesses through detailed definition will be harmful. A different method for dealing with questions of competition has been proposed and incorporated in a bill introduced in Congress (H. R. 15660, Mr. Stevens). Under the terms of this bill all unfair and oppressive competition is declared illegal and upon complaint the proposed interstate trade commission is given authority to decide if a practice in the circumstances shown is in fact unfair and oppressive. If the commission determines there is unfairness and oppression it will issue its order that the practice be stopped.

Under all the circumstances, the interstate trade commission, if it is created by Congress, might very properly be directed to inquire into matters of unfair competition and report to Congress its conclusions.

ENFORCEMENT OF EXISTING LAW

Among the proposals which will be considered by Congress there is one provision which has for its purpose increased facility for individuals to enforce their rights under existing law. Some aspects of such a proposal always raise questions which belong peculiarly to lawyers, but so far as questions of policy are involved the committee expresses an opinion.

IV

Government Decrees in Private Suits

In the address of January 20 the President said:

"There is another matter in which imperative considerations of justice and fair play suggest thoughtful remedial action. Not only do many of the combinations effected or sought to be effected in the industrial world work an injustice upon the public in general; they also directly and seriously injure the individuals who are put out of business in one unfair way or another by the many dislodging and exterminating forces of combination. I hope that we shall agree in giving private individuals who claim to have been injured by these processes the right to found their suits for redress upon the facts and judgments proved and entered in suits by the Government where the Government has upon its own initiative sued the combinations complained of and won its suit, and that the statute of limitations shall be suffered to run against such litigants only from the date of the conclusion of the Government's action. It is not fair that the private litigant should be obliged to set up and establish again the facts which the Government has

Freedom of contract

Stevens bill

President's statement

7

proved. He can not afford, he has not the power, to make use of such processes of inquiry as the Government has command of. Thus shall individual justice be done while the processes of business are rectified and squared with the general conscience."

According to the House bill, a final decree in an equity suit brought by the United States under the antitrust laws would, as to the same facts and the same questions of law subsequently at issue in a private suit for three-fold damages, be conclusive evidence both in favor of and against the defendants.

The Senate bill contains no provision bearing directly upon this point, but both bills contain an identical paragraph which during the pendency of an equity proceeding brought by the United States would suspend the statute of limitations as to each private right of action arising under the antitrust laws and based in whole or in part upon any matter involved in the equity proceeding.

THE COMMITTEE RECOMMENDS THAT THE FINAL DECREE IN AN EQUITY SUIT BROUGHT BY THE GOVERNMENT WHICH ESTABLISHES THE EXISTENCE OR THE NONEXISTENCE OF A RESTRAINT OF TRADE OR OF A MONOPOLY SHOULD BE CONCLUSIVE EVIDENCE AS TO THE SAME GENERAL FACT IN PRIVATE ACTIONS BROUGHT AGAINST THE SAME DEFENDANTS UNDER THE ANTITRUST LAWS.

The purpose of this proposal is to increase the efficiency of the means for enforcing the antitrust laws. This purpose will be equitably attained by the committee's recommendation; for on the one hand the decree in an equity proceeding brought by the Government will be conclusive subsequently in actions brought by private persons only concerning the general and essential question whether or not there has been a restraint of trade or a monopoly, and on the other hand the decree will not be conclusive upon specific acts occurring between defendants and individual members of the public. In other words, the decree in a suit by the Government would determine for all civil suits the question whether or not there had been in a given situation a restraint of trade or a monopoly, which is the only question in which the public as a whole is interested, but it would not establish the identity of persons who may have been injured by the restraint of trade, the amount of the damages to which they were entitled, or other questions to which direct public interest does not attach and which would not be issues in proceedings initiated by the Attorney General in the general public interest. If decrees in Government suits were to be conclusive as to specific facts, every Government suit would necessarily become an inquisition of such dimensions that final decision would be postponed until the questions involved had ceased to have practical importance.

Perhaps the greatest proportionate amount of space in the House and the Senate bills is devoted to provisions which seek to regulate corporations in their business relations and their business practices. These provisions the committee has considered under separate heads.

Interlocking of Directors

Referring to business opinion, the President said in his address of January 20, "It waits with acquiescence, in the first place, for laws which will effectually prohibit and prevent such interlockings of the personnel of the directorates of great corporations-banks and railroads, industrial, commercial and public service bodies-as in effect result in making those who bor

row and those who lend practically one and the same, those who sell and those who buy but the same persons trading with one another under different names and in different combinations, and those who affect to compete in fact partners and masters of some whole field of business. Sufficient time should be allowed, of course, in which to effect these changes of organization without inconvenience or confusion.

"Such a prohibition will work much more than a mere negative good by correcting the serious evils which have arisen because, for example, the men who have been the directing spirits of the great investment banks have usurped the place which belongs to independent industrial management working in its own behoof. It will bring new men, new energies, a new spirit of initiative, new blood, into the management of our great business enterprises. It will open the field of industrial development and origination to scores of men who have been obliged to serve when their abilities entitled them to direct. It will immensely hearten the young men coming on and will greatly enrich the business activities of the whole country."

Subsequently in the same address the President said:

"Enterprises, in these modern days of great individual fortunes, are oftentimes interlocked, not by being under control of the same directors, but by the fact that the greater part of their corporate stock is owned by a single person or group of persons who are in some way intimately related in interest. We are agreed, I take it, that holding companies should be prohibited, but what of the controlling private ownership of individuals or actually cooperative groups of individuals? Shall the private owners of capital stock be suffered to be themselves in effect holding companies? We do not wish, I suppose, to forbid the purchase of stocks by any person who pleases to buy them in such quantities as he can afford, or in any way arbitrarily to limit the sale of stocks to bona fide purchasers. Shall we require the owners of stock, when their voting power in several companies which ought to be independent of one another would constitute actual control, to make election in which of them they will exercise their right to vote? This question I venture for your consideration."

In treating the question of interlocking of directors the House and Senate bills contain important differences which are pointed out below. The two bills are alike, however, in mentioning three classes of corporations,-ordinary business corporations, railroad corporations, and banks.

Interlocking of Directors-Business Corporations

The Senate bill makes it unlawful for a corporation to engage in commerce which Congress can regulate if among its officers or directors there is any person who is an officer or director in a competitive corporation, unless within one year the proposed interstate trade commission upon application and after public hearings at which the petitioner, the Attorney General, and any persons who are engaged in competitive business may be heard, has certified that the community of officers or directors does not substantially impair competitive conditions. To exclude from commerce a corporation with directors or officers of the sort prohibited the Attorney General could institute proceedings in equity, and the offending individuals would be subject to fine and imprisonment.

The House bill contains an outright prohibition without means of approval for a particular case, but this prohibition is effective only (1) if one of the corporations in question has capital, surplus, and undivided profits aggregating more

Interlocking of stock ownership

House and Senate bills

Senate bill

See page 26

House bill