in restraint of interstate commerce against the will of the nation. Its effect was to make the Anti-Trust Act supreme as against the states throughout the country as a whole. And one of its first consequences was the re-opening of the anti-trust prosecution of the New Haven railway system in dissolution proceedings involving consolidations of one hundred and eighty-nine companies.

CHAPTER III

COMPETITION FAIR AND UNFAIR

WHAT the

HAT is there in the methods and practices

of the American trusts that from their very beginning has met with protest and demands for relief and remedy?

It is the resort to unfair methods of competition as a means of forcing combination among corporations to the extent of an actual or potential monopoly of more or less completeness.

The line of demarkation between the monopolizing trust and the law-respecting corporation lies in the kind of competitive treatment it gives in business relations with its rivals. The method of competition which causes trade and industry to revert to the status of rapine and robbery is outlawry practiced under the guise of corporate privilege. The competition which cooperates and conforms to both law and equity alike is the type destined to survive.

The modern doctrine of fair and unfair competition, as developed and applied in its larger scope in common law codes, in anti-trust court decisions, and in trade ethics, affords the via media between the competition which crucifies and that which is constructive. Both unfair competition and private monopoly are equally

immoral and anti-social. The former has no place in a healthy economic system, and the latter can not be tolerated except under public regulation. Unfair competition is foul play, and it can never serve either the ends of private prosperity nor those of the public weal. Much less ought a state, whose citizens have even an ordinary sense of honor, knowingly charter corporations to play unrestrained the rôle of economic highwaymen throughout sister commonwealths. The main problem of trust policy is, How can we prevent unfair methods and practices in competitive business? The answer is, By abolishing monopoly, or the hope of monopoly.

In applying the legal rule in equity to unfair competition a rule that is older than statute law itself a broad principle of business integrity and common justice has been developed, out of an earlier rule respecting the rights of trademarks, into a code of conduct as comprehensive as the relations of business. Commenting on this wider application of the law as a business principle, H. D. Nims, of the New York Bar, says:

"One reason for the growth of the law of unfair competition is probably to be found in the effects of the delay incident to suits at law for damages. Business lost and credit impaired by misrepresentation or threats made by malicious or unscrupulous competitors- such losses cannot be compensated for by damages received

at the end of a tedious suit at law, occupying perhaps two or three years. Any adequate remedy must stop the injurious acts instanter, and that can be afforded only by use of the writ of injunction.

"The law of unfair competition has developed in part also in response to a general feeling that the honest and fair-dealing merchant is entitled to the fruits of his skill and industry, and must be protected against loss caused by fraudulent and unfair methods used by business rivals. It is a recognition by the courts of the duty to be honest and fair in all relations of business life. This is one of the most healthful signs of the times. The gradual judicial development of this doctrine is an embodiment of the principles of sound common sense, business morality.”*

1. Unfair Corporate Competition

Inasmuch as unfair competition has been one of the main instruments by which combinations have achieved or exercised monopoly, it is highly important that this aspect of the trust movement be clearly appreciated. To begin with, it is not of the ordinary type of rivalry between individual buyers and sellers in the same market. Nor is it the competition of the copartnership, which dissolves with the death or retirement of a member. The unfair type of competition is

* The Law of Unfair Business Competition, H. D. Nims. Baker, Voorhis & Co., New York.

that of the compounded corporation wherein the individual disappears in the aggregate-an aggregate invested with a maximum of semipublic rights and divested of all but a minimum of personal responsibility. Such was the Northern Securities Company. Give to this corporate imperium in imperio the power over the sources of credit and capital; give it continuity of existence, unity of control from within, and free access to a home market of 75,000,000 to 100,000,000 consumers and investors, and we have the actual corporate unit in which lies the kernel of the trust problem in the United States.

This compound unit of competition has developed from the voluntary associations known as pools, based on the good faith of members, through the legal consolidation of several corporations, known as the trust proper, into the holding company. As state and nation outlawed pooling methods of controlling supply, prices, and rates, they took refuge in the trust scheme of combining corporate competitors. This scheme of compounding competitive capacity spread rapidly as its superior service in overcoming single corporations became known. At last the holding corporation came as the refinement of corporate compounding, destroying still more completely the competitive equilibrium which, both in law and economics, had, until the rise of the trust, always been regarded as an axiom of public policy.