the federal courts jurisdiction in cases involving the assertion of that public policy? But it needs amendment in the ways which have. been indicated.

219. Provisions of the Clayton Act

The Clayton act provides:

A. That it shall be unlawful for any person engaged in commerce to make discriminations in prices between different purchasers of commodities sold for use, consumption, or resale, where the effect of the discrimination may be substantially to lessen competition or tend to the creation of a monopoly.

B. That it shall be unlawful for any person engaged in commerce to lease, sell, or contract for the sale of goods, patented or unpatented, or to fix a price charged therefor, or discount, or rebate, upon such price, conditioned upon the lessee or purchaser thereof, not using or dealing in goods, of competitors of the lessor or seller, where the effect may be substantially to lessen competition, or tend to create a monopoly.

C. That no corporation shall acquire the whole or any part of the stock or other share capital of another corporation, or two or more corporations, where the effect may be substantially to lessen competition, to restrain commerce, or to tend to create a monopoly. D. From and after two years from the date of the approval of the act:

I. No person shall be a director or other officer or employee of more than one bank organized under the laws of the United States if any one of them is above a certain size; and no private banker or person who is director in any bank or trust company organized under the laws of any state, and above a certain size, shall be eligible as a director of any bank or banking association incorporated or operating under the laws of the United States.

2. No bank organized or operating under the laws of the United States in any city, incorporated town, or village, of more than 200,000 inhabitants, shall have as director or officer or employee any private banker or any director or any other officer or employee of any other bank located in the same place.

3. No person shall be a director at the same time in any two or more corporations (other than banks and common carriers) engaged in interstate commerce, any one of which has capital, surplus, and

Only a few of the provisions of the law are given, and these, because of their great length, are presented in summary form. The adaptation is that of W. H. S. Stevens, in "The Clayton Act," in the American Economic Review, V, 40-41. Copyright (1915).

undivided profits aggregating more than $1,000,000, if such corporations have been competitors so that the elimination of competition between them will constitute a violation of any of the provisions of the anti-trust laws.

220. The Trade Commission and Clayton Acts31

BY W. H. S. STEVENS

Two acts have recently been passed making important changes in the federal law as it applies to trusts and combinations. These measures are generally known as the Trade Commission Act and the Clayton Act.35 With reference to this legislation the following conclusions may be drawn:

1. The Trade Commission is a body with wide powers of investigation and limited administrative authority.

2. Several of its investigatory powers have to a noticeable degree been previously exercised by the Bureau of Corporations or the Department of Justice. But the investigatory authority of the commission is considerably greater than that possessed in the past by both of these other agencies.

3. The commission is given powers of making recommendations to the Attorney-General for the readjustment of the business of corporations violating the anti-trust acts and also of ascertaining and reporting appropriate decrees in equity suits brought by or under the Attorney-General. But the exercise of these functions depends in the first place upon the application of the Attorney-General and in the second case upon the reference of the suit by the courts to the commission.

4. The Trade Commission act gave the commission a most important administrative authority in providing that the body should prevent unfair methods of competition. The Clayton measure further extended this authority in giving it jurisdiction to enforce the prohibitions against holding companies and interlocking directorates. It also gave it jurisdiction to prevent price discriminations and exclusive and tieing agreements.

5. The enforcement of the principal prohibitions of the Clayton act and of the unfair competition section of the Trade Commission act is entrusted to the commission by the following method of procedure. The commission conducts a hearing and makes an order against a practice, a review of which may be had by the party 34 Adapted from "The Clayton Act," in the American Economic Review, V, 51-54. Copyright (1915).

The former measure became a law when the President attached his signature to it September 26, 1914, and the latter on October 16, 1914.

against whom it is made in the Circuit Court of Appeals. If the order is not obeyed the commission applies to the same court for enforcement, and the jurisdiction of the court in both cases is exclusive and final.

6. A concurrent justification has been vested in the district. courts to enforce the prohibitions against price discriminations, exclusive and tieing agreements, holding corporations, and interlocking directorates. Thus it is to be noted that there are two courts of appeal: the Circuit Court of Appeals when the Trade Commission makes orders against these practices, the Supreme Court when the district court enjoins them.

7. The new laws rely primarily upon contempt proceedings and the penalties therefor in enforcing their prohibitions.

8. The elimination of the criminal penalties from several sections of the Clayton act and the lack of any such provisions as punishment for unfair methods of competition clearly point to civil rather than criminal procedure as the remedy to be invoked in cases of violation of the principal prohibitions of the new legislation. This, coupled with the fact that the new laws provide for a Trade Commission with jurisdiction over the important prohibitions, points to a policy of administrative regulation of the trusts.

9. The powers given to the Trade Commission of classifying corporations and prescribing the form of reports are pregnant with possibilities. Through these powers it would appear possible for the Trade Commission to determine with some correctness the relative economic efficiency of competition on the one hand and combination and monopoly on the other. Even if no such broad determination can be arrived at for industry in general, it ought at least to be able to learn in what types and kinds of business the one or the other principle is the more efficient.

10. There are provisions in the new legislation in the direction of enabling individuals to protect themselves against loss or damage by reason of violations or threatened violations of the anti-trust acts. This embraces among other things a re-enactment, now applied to violations of any of the anti-trust acts, of the threefold damage clause of the Sherman act.

221. Ultimate Results of Regulating Combinations36

BY E. DANA DURAND

Few of those who have advocated the policy of permitting combinations to exist subject to regulation seem to have given thought

"Adapted from The Trust Problem, 46-59. Copyright by Harvard University (1914).

to the magnitude of the task, its difficulties, or its ultimate outcome. They have had in mind the comparatively few closely knit trusts of the present time; the so-called "good trusts" with their alleged superior efficiency and their more or less reasonable policy toward the public.

In the first place it would be difficult to limit the number of trusts under such a policy. It is, of course, conceivable that the government should undertake to suppress combinations in general while permitting a few trusts to exist. A limited number might be tolerated because of the special economic characteristics of the industries concerned which tended to make combination particularly economical. If, however, the people once concede the right of a monopolistic combination to exist, independently of extraordinary conditions, a sense of justice should apparently compel them to permit combinations ad libitum. Under no theory of justice could all the trusts heretofore organized be permitted to continue without granting permission to organize trusts in every other field.

In the second place, it would seem that if combinations having power to restrain trade are to be permitted at all, they must be permitted to become as comprehensive as they desire. Why should a combination not be allowed to take over 100 per cent of the business in its field quite as readily as 80 or 70 per cent? Few desire to prohibit combinations controlling only a small proportion of a given industry; but if we permit that limit to be overstepped at all, there is no limit. One can only speculate upon how numerous and how comprehensive the trusts and pools would become if the policy were adopted of permitting them freely but subjecting them to regulation. In all probability the number would become very great. Beyond question every combination, unless prevented by the government, would take in just as large a proportion of the trade as could be persuaded to enter it. In many cases this would mean the entire trade.

If corporations were freely permitted and no limit placed upon their magnitude, neither actual nor potential competition would be an adequate check upon prices and charges for service. Government regulation would unquestionably be necessary.

Some have suggested that regulation would be comparatively simple. Only bad trusts would be interfered with, and the fear of government intervention would make most of the trusts good. The government, some seem to think, could let the trust go its own way until it was proved to have become extortionate or to have used unfair methods, and could then step in and punish its officers, or sus

pend its right to do business. But how is the trust manager to know in advance what prices and what practices will be adjudged so unreasonable as to call for criminal prosecution? What advantage would there be in breaking up a trust, if another trust could be formed in its place the next day? It would be intolerable to the users of its products and services to stop its business even temporarily. A good trust may become a bad trust overnight. Shall it be a lawful organization today and an outlawed wreck tomorrow? Regulation implies continuity of the combinations. Even if the government adopted the policy of punishing trust managers as a penalty for extortionate prices and unfair practices, this would require as thorough an investigation and as difficult a judgment as to determine the proper prices and practices for the future.

In its very essence, however, regulation implies, not punishment of past action, but prescription of future action. This means that the government, if it undertakes regulation of trusts, will ultimately have to fix their prices or limit their profits, or both. There is not way to insure reasonable prices under monopoly control, but to restrict them. If the government enters upon this policy ought it not to go a step further and guarantee to the combination a permanent monopoly, protecting them against competition? The public is coming to accept the view that justice to investors in public service industries demands protection against competition. If the investor in trust securities has had his profits held down by government regulation, it is hardly fair to permit those profits to be still further lowered, perhaps wholly destroyed, by the advent of a competitor.

Whatever might be the outcome of government regulation, there can be no doubt of the immense difficulty of just and efficient regulation of the prices or the profits of industrial combinations. The federal government and the states would have to maintain elaborate. and powerful machinery to control the combinations. Consider the nature of the task which would confront an administrative body. In the first place, it would have to possess at all times detailed information regarding all the concerns under its jurisdiction. The prices of many commodities are necessarily variable. The cost of material may change greatly and rapidly. The conditions of demand are changeable. Grave injury might be done to the public during the time required for securing information on which to base action if such information were not already in the possession of the regulating authority.

In the second place, the amount of detail involved would be enormous. A proper fixing of prices would require complete