Standard Oil Co. was dissolved in accordance with this suggestion by simply dividing the stocks held by the holding company in its subsidiaries among the stockholders of the said holding company. As a comparatively few closely associated capitalists possessed a majority of the stock of the holding company they consequently became the controlling stockholders in each of the several separated companies. The general opinion is that this dissolution is effective neither in theory nor in fact. There is much ground for believing that it did not result in independent action or active competition between the various subsidiary companies. The public advantage of the dissolution has also been questioned, on the ground that prices were not immediately reduced, but on the contrary were increased. As such an advance in prices might occur under conditions of active competition, it would not be proper to assume this as proof of continued violation of the law without careful investigation. Moreover, there has been a marked decrease in prices since then, corresponding with decreases in the prices of crude oil. While the position of the independents has undoubtedly been improved, this is not satisfactory evidence of the effectiveness of the dissolution. That the dissolution of the Standard Oil Co. was not more satisfactory in form and results appears to be due, however, to the manner of its accomplishment rather than to any inherent difficulty in reestablishing competitive conditions among the component parts of the combination.

In the dissolution of the American Tobacco Co. the Supreme Court went further and ordered that the court below should hear the parties "for the purpose of ascertaining and determining upon some plan or method of dissolving the combination and of recreating, out of the elements now composing it, a new condition which shall be

general injunction. New Haven R. R. v. Interstate Commerce Commission, 200 U. S. 404. Besides it is said that the restraint imposed by section 6-even putting out of view the consideration just stated--was moreover calculated to do injury to the public and it may be in and of itself to produce the very restraint on the due course of trade which it was intended to prevent. We say this since it does not necessarily follow because an illegal restraint of trade or an attempt to monopolize or a monopolization resulted from the combination and the transfer of the stocks of the subsidiary corporations to the New Jersey corporation that a like restraint or attempt to monopolize or monopolization would necessarily arise from agreements between one or more of the subsidiary corporations after the transfer of the stock by the New Jersey corporation. For illustration, take the pipe lines. By the effect of the transfer of the stock the pipe lines would come under the control of various corporations instead of being subjected to a uniform control. If various corporations owning the lines determined in the public interests to so combine as to make a continuous line, such agreement or combination would not be repugnant to the act, and yet it might be restrained by the decree. As another example, take the Union Tank Line Company, one of the subsidiary corporations, the owner practically of all the tank cars in use by the combination. If no possibility existed of agreements for the distribution of these cars among the subsidiary corporations, the most serious detriment to the public interest might result. Conceding the merit, abstractly considered, of these contentions they are irrelevant. We so think, since we construe the sixth paragraph of the decree, not as depriving the stock holders or the corporations, after the dissolution of the combination, of the power to make normal and lawful contracts or agreements, but as restraining them from, by any device whatever, recreating directly or indirectly the illegal combination which the decree dissolved. In other words we construe the sixth paragraph of the decree, not as depriving the stockholders or corporations of the right to live under the law of the land, but as compelling obedience to that law. * * *" (Standard Oil Co. v. United States, 221 U. S., 80-81.)

honestly in harmony with and not repugnant to the law." The American Tobacco Co. submitted a plan of dissolution which in its main features was adopted by the court.

The plan as adopted provided, among other things, for (1) the abrogation of numerous restrictive covenants by which various tobacco companies had bound themselves not to engage in the tobacco business, (2) the disintegration of certain subsidiary combinations in particular branches of the business, namely, the tin foil, licorice, snuff, stogie, and cigar companies, (3) the distribution of the stocks of numerous subsidiary companies of the American Tobacco Co. among the shareholders of that company, and (4) the transfer of a part of the property and business of the American Tobacco Co. to two new companies to be organized, namely, Liggett & Myers Tobacco Co., and P. Lorillard Co., in such a manner that each of these three companies should have a large part of each branch of the tobacco business possessed by the American Tobacco Co., the stockholders of the American Tobacco Co. becoming, pro rata, stockholders in each of these three companies. In this manner out of the companies formerly combined there were released or constituted 14 different companies besides a number of other former subsidiary companies whose stocks were distributed as stated above.

1

The court ordered that the defendants should be enjoined from carrying out the combination or any combination of a like character to that adjudged illegal, especially by any of the following acts: (a) With respect to the 14 companies mentioned above and without limitation of time (1) by conveying the property or business of any one of them to any other, (2) by placing the stocks of two or more of them in a voting trust, (3) by making any agreement for common management, or with regard to the price of tobacco or tobacco products or with regard to apportioning the trade therein, or for the employment of common clerical staff or offices, (4) by doing business secretly under any other name, (5) by refusing to sell goods desired by jobbers in certain cases; (b) for a period of five years the same 14 companies were enjoined (1) from having common officers, directors, or agents for the purchase or sale of goods, (2) from acquiring the stocks or property of any of the said companies, or (3) from extending financial aid to them; (c) for a period of three years the 29 individual defendants (the chief stockholders of the combination) were enjoined from increasing their stock holdings in any of these 14 companies, except one foreign concern. Most of the injunctions applied to the 14 companies, but those against agreements affecting prices and apportionment of business apparently extended to all parties to the combination with respect to any of its elements.

1 The 14 companies were: The American Tobacco Co., Liggett & Myers Tobacco Co., P. Lorillard Co., American Snuff Co., George W. Helme Co., Weyman-Bruton Co., R. J. Reynolds Tobacco Co., BritishAmerican Tobacco Co. (Ltd.), Porto Rican-American Tobacco Co., MacAndrews & Forbes Co., J. S. Young Co., The Conley Foil Co., The Johnston Tin Foil & Metal Co., and United Cigar Stores Co.

The Government requested the court to incorporate numerous other restrictive provisions in the decree for the purpose of procuring a more effective dissolution and of insuring that competitive conditions would be reestablished. Some of these were adopted by the court, but many of them were denied.1

In particular, the court denied the request of the Government that the manner and form of the dissolution might be tested by practice, and if not satisfactory that the Government should be allowed to apply for further relief (within a period of five years) to procure a satisfactory arrangement. The court also denied the request of the representatives of the independents that "common stock holding" (i. e., the holding of the stocks of all the companies by the same group of stockholders) should be prohibited."

The tobacco company dissolution has been criticized in the same way as the oil company dissolution, but probably with less force.2

It has generally been observed that both in framing the plans for the dissolution of trusts and in the supervision of the execution of these plans it would be highly desirable to have some administrative

1 Among the restrictions which the Government urged should be incorporated in the decree which were not adopted by the court were the following: (1) That no company established under the decree should have more than 40 per cent of the output of any particular kind of tobacco product. The court denied this, saying that the instances in which the proposed allotments of business exceeded 40 per cent were few and the excess over 40 per cent negligible. (2) That giving rebates or other special inducements to purchasers should be prohibited. The court denied this on the ground that all other companies were free to employ such means under the law. (3) That espionage on the business of a competitor, bribery of employees of such competitor, or obtaining information from United States revenue officials, should be prohibited. The court denied this, saying that when illegitimate methods were proved they could be dealt with. (4) That every independent or other person interested should have the right to apply to the court for protection if the injunction were violated. The court denied this, on the ground that the court would be overwhelmed with applications, mainly frivolous, and said that such complaints should be made to the Attorney General. (5) That the stock of the United Cigar Stores Co. should be sold and distributed to other persons than the 29 individual defendants. The court declared that it had not the power to penalize parties to the suit except in the manner provided in the law, and denied this request. (6) Finally, it may be noted that the Attorney General requested that the Government should have the right to reopen the case at any time within five years, with a view to obtaining further relief in case the plan of dissolution adopted did not prove satisfactory. The court held that it had not the power to establish such a modus vivendi and that even its power to make the form of dissolution adopted would have been questionable if not expressly authorized by the Supreme Court.

2 Besides the modifications to the plan recommended by the Attorney General, numerous other changes, many of which were of a much more extensive character, were proposed by the representatives of other interests. The most important of these was that common holding of stock in the various new companies by the stockholders of the American Tobacco Co. should be prohibited, on the ground that no real competition between the new companies could exist unless such prohibition were made. With regard to this request the court said in part:

"With this argument or the reply to it, it seems to me this court is not concerned. In two recent cases (the Northern Securities and the Standard Oil) the Supreme Court found a combination of corporations to have offended against the Anti-Trust Act. As a result of such finding there was a disintegration of the combination. In each case the disintegration left the stock of the separate entities into which the group was split in the hands of the same body of individual stockholders. Since there was no disapproval of this method of disintegration indicated in either opinion, it would seem that the question whether or not common stockholding is 'repugnant to the law,' that is, repugnant to the Anti-Trust Act, has been settled for this court by controlling authority.

"It is true that the Supreme Court did not enter into a discussion of this question of 'common ownership,' but its existence in both cases was so plainly manifest that it is difficult to understand how the court could have approved of the new arrangement unless it was satisfied that such arrangement did not contain the same vice as the old one which they held must be terminated.”

2 See Report of the Commissioner of Corporations on the Tobacco Industry, Part III.

organ of the Government which could advise the court in the first instance and act for it subsequently.1

PROSECUTION OF THE STEEL CORPORATION, ETC.-The victory of the Government against the oil and tobacco trusts was followed by similar results in a number of other cases, and the prosecution of the trusts was actively continued. Having succeeded against the oil trust, which was generally regarded as the archetype of trusts and the worst offender, the Government then turned its attention to certain other combinations claimed by some to be "good" trusts (on the assumed ground that they did not try to exact unduly high prices or to destroy their competitors), notably the United States Steel Corporation and the International Harvester Co.

The Government's position was that not only was the Steel Corporation itself a combination contrary to the Antitrust Act, but also that it had combined with the chief independent producers to artificially control prices under the so-called "cooperative" system.

Section 10. The Federal Trade Commission and supplementary antitrust legislation, 1914.

PUBLIC AGITATION TO MODIFY THE SHERMAN LAW.-The Standard Oil and Tobacco decisions made it plain that the great trusts were unlawful and that they could be dissolved. Following these decisions the whole question of Government policy regarding the regulation of combinations and monopoly became a matter of public discussion.

Concurrent with this development, a number of investigations were conducted by congressional committees into certain monopolized industries, namely, steel and sugar, and also into the so-called "money trust."

STATE REFORM OF CORPORATION LAW. That defective State laws are partly responsible for the growth of monopolistic organizations is generally recognized, and has led to some reforms in State legislation. The most comprehensive effort in reforming State legislation. with this purpose in view is found in the "Seven Sisters" laws of New Jersey, which were passed in 1913. They are found in chapters 13 to 19, inclusive, of the laws of the New Jersey Legislature for 1913. These laws, as well as other State antitrust laws, are described in Chapter IV.

FEDERAL TRADE COMMISSION.-The President, in an address before a joint session of Congress on January 20, 1914, recommended the establishment of a Federal trade commission, and said, in part:

The opinion of the country would instantly approve of such a commission. It would not wish to see it empowered to make terms with monopoly or in any sort to assume

1 See Federal Trade Commission act, pp. 22, 129.

control of business, as if the Government made itself responsible. It demands such a commission only as an indispensable instrument of information and publicity, as a clearing house for the facts by which both the public mind and the managers of great business undertakings should be guided, and as an instrumentality for doing justice to business where the processes of the courts or the natural forces of correction outside the courts are inadequate to adjust the remedy to the wrong in a way that will meet all the equities and circumstances of the case.

As the first result of the movement for additional Federal legislation, Congress passed a law establishing a Federal Trade Commission, which was approved on September 26, 1914. The provisions of this law are set forth in more detail in Chapter III. (See p. 128.) It is sufficient to note here that this act provides for a commission which shall absorb the Bureau of Corporations and which is intrusted with broad powers of investigation and of recommendation with respect to the enforcement of the antitrust acts and the right to require annual and special reports from corporations subject to its jurisdiction. In particular it may be noted that the commission is empowered to act as a master in chancery in the preparation of decrees made in the execution of the antitrust acts in such cases as may be referred to it by the courts. Further, the Federal Trade Commission is clothed with important quasi judicial powers in the interpretation of a provision of declaratory law embodied in this act, namely, "That unfair methods of competition in commerce are hereby declared unlawful." The Federal Trade Commission is empowered to prevent persons, corporations, etc., from using such unfair methods of competition in interstate and foreign commerce. It was stated by the committees of Congress which had jurisdiction of the Federal Trade Commission bill that this provision regarding unfair methods of competition was incorporated on the theory that the prevention of such unfair competition was one of the most important means of preventing the development of monopolies.

This act also expressly provides that the antitrust acts are in no way modified by anything contained in it.

CLAYTON ANTITRUST ACT.-A second result of the agitation for additional Federal trust legislation was the enactment of the Clayton Antitrust Act of October 15, 1914, which, according to its title, was intended to supplement the existing antitrust acts. A more detailed description of this act is given in Chapter III. (See p. 132.)

It is sufficient to note here merely the chief features and purposes of this law from the point of view of the development of trust legislation, which are as follows: (1) Certain practices in so far as they tend substantially to lessen competition, etc., are prohibited in certain cases, namely, (a) price discrimination, (b) tying contracts, (c) the holding by one company of the stock of another company, and () common directors or officers in different companies. With respect to these questions, quasi judicial powers are given to the