VIII.

HOLDING COMPANIES.

Section 8 deals with what is commonly known as the "holding company," which is a common and favorite method of promoting monopoly. "Holding company" is a term, generally understood to mean a company that holds the stock of another company or companies, but as we understand the term a "holding company" is a company whose primary purpose is to hold stocks of other companies. It has usually issued its own shares in exchange for these stocks, and is a means of holding under one control the competing companies whose stocks it has thus acquired. As thus defined a "holding company" is an abomination and in our judgment is a mere incorporated form of the old-fashioned trust. Most of the corporations engaged in interstate commerce are organized under the laws of one or the other of the States. It is right that this should be so, and it is right that the various States, each of which has the right to exclude corporations of any other State from its borders, should exhibit comity to these other States, and that the Federal Government, which perhaps has the right to exclude corporations of any State from interstate commerce, should exhibit comity to all the States.

At common law a corporation had no right to own stock in another corporation, but from time to time the various States have, by special statutes, permitted it, until now certainly more than a majority of all the States permit corporate stockholding either generally or of certain kinds and under certain conditions. This legislation in its early operation may have served a useful, economic purpose. Trade and commerce could do as well without steam and electricity as without the idea of the commercial unit which is embodied in the word "corporation." Hence there are certain corporations which may properly be interested with individuals other than its own stockholders, but experience has taught us that the "holding company" as above described no longer serves any purpose that is helpful to either business or the community at large when it is operated purely as a "holding company." Section 8 is intended to eliminate this evil so far as it is possible to do so, making such exceptions from the law as seem to be wise, which exceptions have been found necessary by business experience and conditions, and the exceptions herein made are those which are not deemed monopolistic and do not tend to restrain trade.

IX.

INTERLOCKING DIRECTORATES.

Section 9 of the bill deals with the general subject of interlocking directorates. The President, in his message delivered before Congress on January 20, 1914, on the subject of trusts and monopolies, among other things, said:

We are all agreed that "private monopoly is indefensible and intolerable," and our program is founded upon that conviction. It will be a comprehensive but

not a radical or unacceptable program, and these are its items, the changes which opinion deliberately sanctions and for which business waits:

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 bodiesas in effect result in making those who borrow and those who lend practically one and the same, those who seli 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 organi zation 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.

In drafting the provisions of section 9 your committee has endeavored to carry out the recommendations of the President. In order that the corporations affected may have ample time in which to readjust their boards of directors in keeping with the requirements of this act, it is expressly provided that the provisions of this section shall not become effective until two years after the date of the approval of the act. This section is divided into three paragraphs, each of which relates to the particular class of corporations described, and the provisions of each paragraph are limited in their application to the corporations belonging to the class named herein.

The first paragraph deals with the eligibility of directors in interstate-railroad corporations, and provides that no person who is engaged as an individual or who is a member of a partnership or is a director or other officer of a corporation engaged in the business of producing or selling equipment, materials, or supplies, or in the construction or maintenance of railroads or other common carriers engaged in commerce, shall act as a director or other officer or employee of any other corporation or common carrier engaged in commerce to which he or such partnership or corporation sells or leases, directly or indirectly, equipment, material, or supplies, or for which he or such partnership or corporation, directly or indirectly, engages in the work of construction or maintenance. It is further provided in this paragraph that no person who is engaged as an individual or who is a member of a partnership, or is a director or other officer of a corporation which is engaged in the conduct of a bank or trust company, shall act as a director or other officer or employee of any common carrier for which he or such partnership, or bank, or trust company, acts, either separately or in connection with others, as agent for or underwriter of the sale or disposal by such common carrier of issues or parts of issues of its securities, or from which he or such partnership or bank or trust company purchases, either separately or in connection with others, issues or parts of issues of securities of such common carriers. The provisions of this paragraph prevent absolutely common directors or interlocking directors between corporations occupying relations to each other described therein, without any reference to the capital, surplus, and undivided profits of the corporations dealing with each other.

The second paragraph of the bill deals with the eligibility of directors, officers, and employees of banks, banking associations, and trust companies organized or operating under the laws of the United States, either of which has deposits, capital, surplus, or undivided profits aggregating more than $2,500,000, and provides that no private banker or person who is a director in any bank or trust company organized and operating under the laws of a State having such aggregate amount of deposits, capital, surplus, and undivided profits shall be eligible to be a director in any bank or banking association organized or operating under the laws of the United States. The purpose of this provision, which relates exclusively to banks and banking associations, is to prevent as far as possible control of great aggregations of money and capital through the medium of common directors between banks and banking associations, the object being to prevent the concentration of money or its distribution through a system of interlocking directorates. Your committee have not deemed it necessary or wise, therefore, to include within the provisions of this paragraph the smaller banks throughout the country, except where located in cities and towns of more than 100,000 inhabitants. There are three provisos relating to this paragraph. The first proviso excepts from its provisions mutual savings banks not having capital stock represented by shares. The second proviso permits a director, officer, or employee of a bank or banking association or trust company to be a director, officer, or or employee in another bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in the other. And the third proviso allows a director of class A of a Federal reserve bank, as defined in the Federal reserve act, to be a director or officer, or both a director and officer, in one member bank. This is permitted by the provisions of the Federal reserve act, and this proviso is inserted to avoid repealing that provision.

The third paragraph of section 9 deals with the eligibility of directors in industrial corporations engaged in commerce, and provides that no person at the same time shall be a director in any two or more corporations, either of which has capital, surplus, and undivided profits aggregating more than $1,000,000, other than common carriers which are subject to the act to regulate commerce, if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competitors, so that an elimination of competition by agreement between them would constitute a violation of any of the provisions of the antitrust laws. In this, as in the preceding paragraph relating to banks, it was not deemed necessary or advisable that interlocking directorates should be prohibited between the smaller industrial corporations. The importance of the legislation embodied in section 9 of this bill can not be overestimated. The concentration of wealth, money, and property in the United States under the control and in the hands of a few individuals or great corporations has grown to such an enormous extent that unless checked it will ultimately threaten the perpetuity of our institutions. The idea that there are only a few men in any of our great corporations and industries who are capable of handling the affairs of the same is contrary to the spirit of our institutions. From an economic point of view, it is not possible that one individual, however capable, acting as a director in fifty corporations, can render as effi

cient and valuable service in directing the affairs of the several corporations under his control as can fifty capable men acting as single directors and devoting their entire time to directing the affairs of one of such corporations. The truth is that the only real service the same director in a great number of corporations renders is in maintaining uniform policies throughout the entire system for which he acts, which usually results to the advantage of the greater corporations and to the disadvantage of the smaller corporations which he dominates by reason of his prestige as a director and to the detriment of the public generally.

As the President has well said in his message, the adoption of the provisions of this section will bring new men, new energies, new spirit of initiative, and new blood into the management of our 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.

X.

VENUE.

Section 10 relates to procedure and provides that any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant but also in any district wherein it may be found. Under the law as it now exists, a suit against a corporation must be brought in the district whereof it is an inhabitant.

XI.

SUBPOENAS RUN INTO OTHER DISTRICTS.

Section 11 provides that in any suit, action, or proceeding brought by or on behalf of the United States, subpoenas for witnesses who are required to attend a court of the United States in any judicial district in any case, civil or criminal, arising under the antitrust laws, may run into any other district. Under the existing law, subpoenas for witnesses in such suits may run only in the district in which they are issued.

XII.

PERSONAL GUILT.

Section 12 is the personal guilt provision of the bill. It provides that whenever a corporation shall be guilty of a violation of any of the provisions of the antitrust laws the offense shall be deemed to be also that of the individual officers or agents of such corporation, and upon the conviction of the corporation, any director, officer, or agent who shall have authorized, ordered, or done any of such prohibited acts shall be deemed guilty of a misdemeanor and upon conviction therefor shall be punished as prescribed in the section.

XIII.

SAME AS SECTION 4 OF SHERMAN ACT.

Section 13 is a reenactment of section 4 of the act of July 2, 1890, so as to enable the United States to proceed against corporations for the violation of any of the provisions of this act as it is now authorized by law to proceed against corporations for violations of the Sherman Act.

XIV.

INJUNCTIVE RELIEF AUTHORIZED.

Section 14 authorizes a person, firm, or corporation or association to sue for and have injunctive relief against threatened loss or damage by a violation of the antitrust laws, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity under the rules governing such proceedings. Under section 7 of the act of July 2, 1890, a person injured in his business and property by corporations or combinations acting in violation of the Sherman antitrust law, may recover loss and damage for such wrongful act. There is, however, no provision in the existing law anthorizing a person, firm, corporation, or association to enjoin threatened loss or damage to his business or property by the commission of such unlawful acts, and the purpose of this section is to remedy such defect in the law. This provision is in keeping with the recommendation made by the President in his message to Congress on the subject of trusts and monopolies.

INJUNCTIONS AND CONTEMPTS.

The remaining sections of the bill, 15 to 23, inclusive, are substantially the same as the provisions of the two separate bills (H. R. 23635 and H. R. 22591, 62d Cong.), known as the Clayton injunction and contempt bills, which were considered and passed by the House of Representatives at the last Congress, but failed of passage in the Senate. They deal entirely with questions of Federal procedure relating to injunctions and contempts committed without the presence of the court. The reports upon these bills made to the House in the last Congress are comprehensive and explain in detail their purpose, and for convenience are adopted as a part of this report. They follow in order: