Now, with reference to section 13, which provides:

That any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of this act 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, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue.

They already have, by specific provision, an action for damages under the Sherman Act. But let me draw your attention to the fact that if any person in trade is injured by any unfair dealing of a corporation which threatens him with irrevocable loss, against which he has no adequate remedy at law, he already, under the general rules of equity, has a right to enjoin and restrain any act of this character, no matter whether it is threatened by a person, firm, corporation, or association. That is a principle so familiar that it is not worth while to enlarge upon it. Unless this section was intended to give a private individual some power to sue for injunctive relief which at present rests only in the Government, it had no effect whatsoever beyond the remedies which are already available to the litigant; consequently there is no reason for it. It introduces the question as to whether something more is not meant, but if something more is meant, it would be wholly improper.

Senator ROBINSON. Do you think that the same right to injunctive relief should be granted individuals as is now given the Government under the Sherman Act?

Mr. MATHEWSON. Absolutely not.

Senator ROBINSON. Why?

Mr. MATHEWSON. I think that would be a very, very serious situation.

Senator ROBINSON. Of course, we all understand, I presume, that injunctive relief can only be granted under the Sherman Act to the Government, in suits by the Government; that an individual can not avail himself of.

Mr. MATHEWSON. Injunctive relief to dissolve a corporation or declare it a monopoly in restraint of trade may be obtained only by the Government, but any private individual may bring an action toenjoin the corporation from doing any act which under the Federal rules of equity would result in irreparable loss or damage to him, quite regardless of whether it is monopoly or not; he can do that under the established rules of equity.

Senator ROBINSON. Oh, yes.

Mr. MATHEWSON. I am totally opposed to giving an individual any right to employ the form of procedure, or seek for the sort of decree, which heretofore has only been possible for the Government; that is, a decree enjoining it as a monopoly or as in restraint of trade under the Sherman Act. If you threw that open to private suits, there is not a corporation of any magnitude in this country that would not be simply pestered with such suits, because there are a great many lawyers who will take up such suits, both because they are unscrupulous and because they have not the knowledge of the law which advises them that they should not be maintained, perhaps. I would not state any names, but the names of many men occur to me who almost make it a business to bring suits of an annoying character

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against corporations, hoping to be bought off, and the prevalence of this practice would not only be a perpetual nuisance to the corporation and a crying injustice, but it would quite likely affect their credit with people, who do not understand the situation, and result in the hampering of trade and commerce beyond almost any other one thing that you could imagine.

I should think of all of these bills that have been presented the two sections which are most subject to criticism would be sections 12 and 13 of this bill, assuming that section 13 is to allow an individual to act, as you might say, as the arm of the Government.

I will simply say, in reference to bill No. 2, which is an endeavor to define various things which shall be construed as a violation of the Sherman Act, that if it have any effect whatever to vary the construction of the act as now established by the Supreme Court, it would restrict any contract of cooperative effort which might now be entered into. That can be the only object. The Supreme Court has already said virtually that any contract in restraint even of competition, which is inimical to the public welfare, is restrained by the act. If you pass an act here now which attempts to say that all combinations and contracts between individuals which have the effect to restrain competition shall be invalid, although they do not injuriously affect the public welfare, then, as I said yesterday, you have simply written an act which is unconstitutional on its face, because you have no right nor power to restrain the liberty of contract of an individual except under the police power, and the police power, as you know, is devoted to measures injuriously affecting the public health, morals, or welfare, and I again express my view of yesterday that the Supreme Court saved the Sherman Act from being unconstitutional by placing upon it the construction which they did in reference to agreements which do not interfere with the public welfare.

Dr. Van Hise suggests that there would be no objection to this act if there were inserted after the word "agreement," on page 2, line 1, the top of the page, the words "detrimental to the public welfare." I shall leave him to express himself on that subject. I quite agree with him that the words "detrimental to the public welfare" should be inserted.

Let the suggest another change in section 4, if this bill is to be considered. After the word "corporation," in line 10, I would insert the word "knowingly," so as to make it read "such corporation knowingly authorizing, ordering, or doing." Of course agents of corporations act through others.

I now pass on to bill No. 3, leaving bill No. 2 to be further consid ered by Dr. Van Hise, and I suggest this language at the end of section 1, at the top of page 2, referring to interlocking directorates as between coal companies and mining companies and banks and railroads or public-service companies. After the words "or other publicservice corporation which conducts an interstate business" I would add "and with which such individual, partnership, or business corporation has any business relations whatsoever."

Senator ROBINSON. Where is that?

Mr. MATHEWSON. At the end of paragraph 1, section 1. I have made these particular entries in my copy of this bill as it stood yesterday, and I will be very glad to leave it with the chairman and the members of the committee.

The CHAIRMAN. Have you any other amendments to offer? Mr. MATHEWSON. Just those that I have suggested. As to the last amendment, I will say that if there are no business relations between a steel company and a railroad upon which a man may also be a director, there seems to be no reason why he should not act on both.

Senator LIPPITT. Could any case arise in which the possibility of business relation of some nature could not exist even if they did not actually exist? Are not the ramifications of such corporations so far-reaching and so large that when you say business relations, "any business relation whatsoever," that even if they did not actually exist they might potentially exist?

Mr. MATHEWSON. It is possible that there might be cases of that kind where the ramifications would be such that it would be difficult to determine, generally speaking, whether business relations as one would naturally construe that expression existed. If, for instance, a director of a steel corporation was also a director of a railway which was purchasing its rails, the business relations would pretty clearly exist there, and I am impressed with the suggestion of those who say that the buyers and sellers should not act through the same agent.

The CHAIRMAN. But in that very case the railroad company might not be a purchaser of the steel company.

Mr. MATHEWSON. It might not be.

The CHAIRMAN. At the time this individual became a director
Mr. MATHEWSON. Surely.

The CHAIRMAN. And yet within three months it might become a purchaser.

Mr. MATHEWSON. Then the situation would arise which would require

The CHAIRMAN. The withdrawal of the director?

Mr. MATHEWSON. The withdrawal of the interlocking director, yes; from one or the other. In other words, a man can not act on both sides of a proposition.

Mr. VAN HISE. The act says, "shall act."

Mr. MATHEWSON. So it covers the present and the future. This is a bill that I have not considered very largely.

The CHAIRMAN. What do these words mean, "shall act as a director"? Do they mean he shall withdraw from the corporation as a director or that he shall not act in that individual transaction as director?

Mr. MATHEWSON. Well, I should suppose it would mean to fill the office of a director-not in connection with that transaction, but should not be a director. He should not merely remain out of the room or fail to vote on any proposition coming up between that corporation and some other-I had supposed the intent of this bill to be much broader than that, and I treated the bill as I understood it to be meant.

Now, with regard to section 4 of that same bill, I find something that is not advisable. If two or more corporations have an interlocking director, there seems to be no particular objection to saying that may be prima facie evidence that no competition exists, assuming that you pass your general act in relation to interlocking direc

torates. We would suggest in that event that in place of the word "conclusive," in line 5 of the last bill, there be inserted the words "prima facie," and that the section stop at the word "corporations" in the next line, so as to make it read "shall be prima facie evidence that there exists no real competition between such corporations. In other words, if you provide that there shall not be interlocking directorates of competing companies, then it is fair to presume, of course, that if they be common directors they are not competitors. The last part of that section reads:

And if such corporations shall have been theretofore, or are, or shall have been, by by virtue of their business and location of operation, natural competitors

Whatever that may mean

such elimination of competition thus conclusively presumed shall constitute a combination between the said corporations in restraint of interstate or foreign commerce under the provisions of and subject to all the remedies and penalties provided in an act approved July second, eighteen hundred and ninety, entitled "An act to protect trade and commerce against unlawful restraints and monopolies.'

Thereby you virtually condemn them on the mere circumstance that they are to have a single common director. We think that is far too extreme. It is not anything that naturally follows at all. The penalty is much greater than the crime, if I may so put it, and we think that should be a fact which the court would have the right to determine.

That is all I care to say; and I thank you, gentlemen, for your attention.

Senator LIPPITT. As to that question of interlocking directors, in your opinion, are there or are there not many cases in which there would be advantages in having directors who were engaged in potentially competitive business-having common directors in corporations that were engaged in potentially competitive operations; that is, where the competition is very remote but where the industries are the same, might there not be great benefits to the efficiency of the management of the corporations in having common directors?

Mr. MATHEWSON. I think so. I feel very strongly so. My knowledge and experience in that line teaches me that it would be unwise to provide against interlocking directorates except in cases where direct business relations exist. The experience of men in other lines. of business is very valuable in that line of business if they are men of competency, wherever their advice is presented, and I think it would be a great mistake to prohibit generally interlocking directorates. I think that the prohibition should be limited to cases where there is actual business relation so that it would be improper for them to act on both sides. In other words, buyer and seller at the same time, such as a bank loaning money to a railroad and the railroad borrowing the money; a concern which is financing the corporation and sitting at the same time on the board of the corporation voting the terms on which it shall be financed, whether his interest be a million or a million and a half dollars in the transaction. Those things, I am free to say, I think have been magnificd. I believe there has been a great deal of smoke for the size of the fire, but it does give potential power to do wrong. A man must be, and always is, prejudiced in favor of his own interests and in the interest of public case, and I should think in the interest of the men themselves

they had better not be on both sides of the transaction. I say that, although I have a great many acquaintances who are.

Senator LIPPITT. Take the case of the railroad. Do you or do you not think that the board of directors of a railroad company would be weakened if they did not have among their membership som body who was familiar with banking operations and actively engaged in them so that he was in touch with the present situation. of banking operations? Do you think that a board of directors. would be a better or worse board, as regards the efficiency of management of that railroad, by having such persons on the board?

Mr. MATHEWSON. If you take a banker-as, of course, you do assume of ability and standing, and understanding financial conditions, it would be of very great advantage to have such a man on the board of directors of a railway corporation. It would depend somewhat upon what railway corporation and the condition of the times. It is perfectly true that in our period of reorganization of railroad corporations from 1893 to 1900 so many of them went into the hands of receivers it would have been almost impossible to float the securities of some of the reorganizations if it had not been that the bankers who put out the securities and recommended them to their clients on this side of the water and the other inserted in their proposition as a vital point that the banking concern itself, or its appointees, would sit on the board of directors to see that the money was properly applied and that the railroads did not get into trouble again. That was the assurance upon which such financing was made possible.

The same condition does not exist to-day to the same extent, and consequently that consideration does not impress one as of the same importance as it did then, but if the same situation again occurred the same treatment would again be necessary.

Senator LIPPITT. Is it not true that some of the most important questions that a board of directors of a railroad corporation has to deal with are questions of its financing?

Mr. MATHEWSON. Unquestionably.

Senator LIPPITT. You might also say they were the most important questions that they had to deal with.

Mr. MATHEWSON. At times that is undoubtedly true.

Senator LIPPITT. And looking at it from that point of consideration, would it not seem that it was almost necessary to have on the board of directors proper consultation-men skilled in finance and banking operations?

Mr. MATHEWSON. It would be very desirable in many cases, and there may be cases in which it is almost necessary.

Senator LIPPITT. This paragraph has to deal particularly with commercial operations and not public-welfare corporations. Take two companies engaged in making steel. They may be making entirely different articles or productions of steel, although the material they use is the common one of iron and steel. A large proportion of the questions which come before such a board of directors would be the question of the efficient management of the steel production. Would not added efficiency be given to both boards if they had in one or two instances a common directorship that would be bringing in, for the information of those boards, the methods of organization, of manage