Fraud and misrepresentation,

Stock watering,

Artificial manipulation of prices to exploit and oppress the public. This purpose is especially noticeable in the first Act. In the second place, the laws also attempt to force competition by preventing holding companies and discouraging consolidations.

These two separate objects conflict with each other—one is feasible and the other is not. The first may best be secured by establishing some public authority which will watch over the general schedule of prices, as fixed by agreements; the conditions under which mergers and consolidations are formed, and permit those which are desirable and prevent or correct those which are harmful.

The second purpose is really a means of carrying out the first. It is thought if consolidations can be discouraged and stock-holding by other corporations prevented, that legal combines for the purpose of exploiting the public, fixing prices, and suppressing competition, will be rendered impossible. The strong objection to this second purpose is that it may be very good in one case and hurtful in another. If a consolidation is advantageous to the public, it should be made. If this consolidation can best be made by a holding company, that should be allowed, yet the law visits its penalty on both the good and the bad alike if they resort to the holding company form, or to any one of a number of other practical methods of consolidation. What is needed is not a general sweeping condemnation of all combines, as provided by these Acts, but rather a permissive authority, which will separate the good from the bad by administrative procedure after hearing evidence and making thorough investigations and thereupon decide what shall be permitted and what forbidden. The control of agreements in each State by a regulative public authority, is the practical way out of the difficulty, just as the National Government should control agreements in national commerce. A review of State experience in corporation control shows that the next steps should be (a) the establishment of some such permissive board or commission which would sanction or disapprove important corporate Acts of those companies which are not already under the control of the public service authorities or the banking and insurance commissioners,—that is, the ordinary manufacturing and commercial corporations; and (b) a relentless, insistent extension of the publicity principle. The first would prevent the grosser forms of extortion, business piracy and assassination, without in anyway preserving the inefficient or wasteful producers. The second would protect the investor on a side in which such protection is much needed, for outside of farming and real estate the funds of the community must be invested in corporation shares. It is no longer possible to tolerate concealment and irregularity in corporate affairs, under the pretext of encouraging freedom of enterprise; for with every new stage of growth in manufacturing and trading, the interdependence of all interests upon each other increases and becomes

more apparent, so that some State-assured minimum of safety from corporate dishonesty is as essential as a State protection against the other forms of burglary. In our regulations of business we have given too little attention to the small investor, the man or woman whose savings are often placed on the advice of some alluring advertisement or attractive circular which later turns out to be misleading. Or if the savings are well invested they may be "shaken down" in the ordinary processes of manipulation and reorganization. We may never hope to protect the fool from his folly nor the inveterate gambler from his vice, but we must offer some degree of safety to those who, having earned and saved, wish to take part in the general prosperity by placing their share in the general capital.

There is probably no stronger influence towards genuine conservatism in America to-day than the profitable and well-protected investment of small funds. It behooves the State in a special sense to care for the safe-guarding of these and to encourage their growth. The administrative obstacles to publicity are serious but not insurmountable; it is even now difficult and at times impossible for the State officials to secure proper, accurate statements on financial matters from the companies which are already subject to control, and it might be still more so from other corporations; there are also such differences between the rules of different Commonwealths and in their comparative efficiency that no general solution of the problem could be worked out by the States. If as seems probable it shall become clear that the States are unequal to the task, then the jurisdiction of the National Government might well be extended to obtain the desired result, by some such device as that suggested at the close of Chapter VIII.

REFERENCES

Annual Reports of State Banking and Insurance Commissioners.

W. Z. RIPLEY: Railroads: Rates and Regulation, 1912.

The American Year Book.

Annals American Academy, May, 1914, "State Regulation of Public Service Corporations."

E. R. JOHNSON AND G. G. HUEBNER: Railway Rates and Traffic; the Chapters on "Rate Regulation."

Annual Reports and Decisions, of the various State Public Service Commissions.

Commission Regulation, published by The Traffic Service Bureau, Market St., Chicago. This is a comprehensive and valuable analysis of commission laws, prepared for the National Civic Federation by Prof. John H. Gray and others. A model bill is published on the basis of this report, by the National Civic Federation, New York City.

R. H. WHITTEN: Valuation of Public Service Corporations.

Regulation of Municipal Utilities, published by D. Appleton & Company. BARNES AND MILNER: Selected Cases.

Combined State Public Utilities Commission Reports, published by the Public Utilities Corporation Reporter, Chicago: or Public Utilities, Annotated, published by the Lawyers Coöperative Association, Rochester, N. Y.

QUESTIONS

1. Why should a State government regulate business conditions? Explain the general lines along which regulation has run.

2.

3.

A manufacturing and trading company wishes to secure a charter of incorporation-explain the general procedure which it follows in most of the

States.

4. Can a corporation transact business not mentioned in its charter? Reasons.

5. Why do so many business concerns incorporate in Delaware and West Virginia?

6. May a State government cancel a charter which has been violated by a company? Does it?

7. Your company has a Delaware charter and wishes to open an office in Chicago-does its charter entitle it to do so without further formality? Reasons. 8. You are discussing the necessity of State regulation of banking, and insurance contrasted with State regulation of the farming business. What would be your view and why?

9. How are insurance companies inspected by the State?

10. Explain fully the defects of this system. Example.

II.

Why?

Would you favor or oppose national regulation of insurance companies?

12. Explain fully, with constitutional reasons, why the National Government does not regulate insurance, and cite authorities on this point.

13. How can the States lessen the cost of life insurance in private companies?

14. Resolved that the State should not sell life insurance. Defend either side. 15. Is it advisable for the State to attempt to protect the investor from fraud? Reasons.

16. Explain fully the causes of the passage of the Kansas Blue Sky law. 17. Outline the Act.

18. What have been its practical results?

19. Prepare a brief essay on the advantages and disadvantages of a Blue Sky law in your State.

20.

Give briefly the origin of the State prohibition of restraints on trade. How has the legal principle of free competition been used to destroy competition?

21. Explain the connection between this change and the South Dakota law of 1907, forbidding improper competition. Outline the Act.

22. The Doe Manufacturing Company sells its product in Trenton and Camden, New Jersey. The legislature forbids companies selling in more than one place within the State to lower prices in one place with the intention of destroying competition there. The Doe Company claims that the law deprives it of the equal protection of the law and is discriminatory, applying only to companies selling in more than one place, and thereby violates the 14th Amendment. What would the court decide and why? Cite an authority.

23. Explain the general purposes of the Seven Sister laws in New Jersey, giving the chief reasons for their passage.

24. Outline the Acts briefly.

25. Resolved that the Seven Sister Acts are partly correct and partly incorrect in principle. Defend either side.

26. Why have corporations received special attention from the regulating power of the State and why are they of special importance to the small investor? 27. Give your impressions of the value of a State trade commission. 28. Explain what authority the States have over interstate railways. 29. Give some examples of laws passed for this purpose.

30. What is the disadvantage of regulation by State legislatures in this field? 31. Explain some of the more important causes of popular hostility to the railway companies.

32. How does this affect a solution of the regulative question to-day?

33. Why was the railway commission plan adopted and what is the difference between it and legislative regulation?

34. What are the powers of the railway commissions?

35. What practical benefits have they secured for the public?

36. Where have they failed and why?

37. A State lowers the local freight rates on shipments within its borders. The railways protest claiming that this affects freight rates on shipments passing through from other States in national trade, and that the change can therefore only be made by the interstate commerce commission or by Congress. If it proves true that national freight rates are affected, is the State act illegal? Reasons. Cite an authority.

38. If in such a case as the above, the national commission attempts to change interstate rates in such a way as to affect rates within the State, is its action legal? Reasons. Cite an authority.

39. It is claimed that the National Government should control all local freight rates which directly or indirectly affect interstate trade. What is your impression of this claim?

40. It is argued against this claim that the commission is already overburdened. Explain and discuss any practical proposal for relief.

41. What is a public service commission and why is it so called? What is the difference between a public service and a railway commission?

42. What are its advantages over legislative regulations?

43. How would you show that the commission plan met present needs? 44. Outline the organization of the Maryland commission?

45. Explain the powers of the commission and give some examples showing the nature of its work and decisions.

46. Explain the chief features of the Wisconsin commission and its powers. 47. Outline the distinctive features of the Pennsylvania law.

48. Explain how appeals from the decisions of a commission are usually regulated by the State laws.

49. How is excessive delay in appeals avoided?

50. Summarize the principal methods of regulating security issues with the advantages of each.

51. An electric light company has been established in a small city. There are occasional complaints as to rates and service. Some of the citizens talk of the need of competition. What would be your attitude and why?

52. Taking advantage of some discontent with the existing company a new company is formed and secures the consent of the State authorities to erect poles and wires and offer light at a lower charge, but the law requires the approval of the State public service commission before the new company can operate. What would the commission probably decide and why? Cite a precedent.

53. Do the commissions as a rule favor reduction of charges or improved service and why?

54. John Doe owns some stock in a water supply company. It is proposed to establish a State public utilities commission. Would Doe's financial interest be helped or injured by the establishment of such a body? Reasons.

55. Why do the State commissions appraise or value the property of public service companies?

56. Cite the clauses in the State and National Constitutions which affect this problem.

57. In valuing a plant will a public service commission include the cost of incorporating the company? Why?

58. What is meant by going concern value? Is it included?

59. A company has a monopoly of the slaughtering business in a small city, it has paid nothing for this right or franchise which, nevertheless, is highly valuable. Must the value be included, in appraising the total value of the company's property? Reasons. Cite a precedent.

60. Explain your impressions of the most successful aspects of commission regulation.

61. Of the unsatisfactory sides of commission work.

62. What are the causes of delay in carrying out the rulings of the commissions?

63. How do the commissions' powers affect the purchase by cities of their local public service plants?

64. How do the commissions generally affect the rights of the cities to settle their own public utility problems as they please?

65. The State commission allows the gas company in Bytown Center to furnish gas to large consumers at 70c, to small consumers at 85c. At the end of a year it lowers the small consumer's rate to 8oc. There is a gathering storm of public indignation and demands that the small consumer be given the 70c rate. Explain the arguments on both sides and give your views as to the correct course to pursue, with reasons.

66. Have you a public service commission in your State? If so, what are its powers?

67. Prepare an essay on the advantages and disadvantages of public service regulation by commissions.

68. Write up a summary history of any complaint made to the public service commission in your State and of the action taken upon it.