« ForrigeFortsett »
Big corporations have other resources than the exclusive contract or the refusal to sell to some and not to others, in dealing with small rivals.
"Sometimes they make many kinds of goods, while a rival makes only a few. If, then, a trust cuts prices on a few varieties which its rival makes, but charges a large profit on the other kinds, it can make money itself while it is exterminating its opponent. The small producer must meet the cut in prices on all the goods he sells, and that will soon make an end of him. When cut-throat competition takes the shape of putting prices very low on one or two things, which are all a small manufacturer makes, it is not necessary to resort to the factor's agreement at all." *
4. Legal Limits of Fair Competition
From the legal standpoint there is much debatable ground as to what is allowable and what is not in trust policies. But the so-called "twilight zone" has faded out rapidly during the past few years. Prof. Bruce Wyman sum
marizes the results as follows: "Policies which have been used in the past to get control of the market, the illegality of which is beyond argument, include (1) rebates from the railroads, to which many a trust owes its dominance; (2) the abuse of the patent laws by getting out lists of patents as the basis for lawsuits against com*The Problem of Monopoly, pp. 35-36.
petitors; (3) establishment of a bogus competing concern; (4) bribery of employes, to get at trade secrets." * To these should be added another: (5) selling to a subsidiary distributor at less than to other jobbers, as in case of the American Tobacco Company to the Manhattan Tobacco Company. No trade ethics can justify such policies. There are others rather more debatable, by which many trusts have gained their dominating position, the illegality of which, as Wyman points out (Annals, etc., July, 1912), has not been so clear. They include (1) refusal to sell to retailers who persist in buying anything of a rival manufacturer; (2) making a lower price in certain localities, where incipient competition has appeared; (3) imposing terms in leases that the lessee shall not buy anything of the same sort; and (4) fixing prices at which the product may be re-sold. The combinations which are keeping their position by these policies have no economic justification; and for them there can be no defense.
It is evident, from what has thus far been said, that neither in trade circles nor in business ethics is there entire clearness as to what practices are regarded as against sound commercial and industrial policy. In the zeal for profits standards of trade demeanor have not been de
*Control of the Market: A Trust Problem, Bruce Wyman. New York.
Legal Solution of the
fined nor developed as they should have been by the cooperation of the ones directly interested. Trades having failed to develop their cooperative capacities, the burden of demarking the limits of fair competition has fallen to the equity procedure of our courts. Scattered through these records of twenty-four years may be found the essentials of a substantial code of fair competitive practice.
It is surprising to note how insignificant has been the actual contribution to positive criteria of trade conduct by the trusts during the thirty years of their existence. Yet they have afforded the occasion for the courts to re-define and assert anew the essentials of fairness in common law and in current morals. By this means, mainly through the use of the injunction, there has been elaborated a series of forbidden practices in specific cases. In this way the higher courts have come to enumerate the more important of unfair conditions of competition. As lower courts came to apply the same prohibitions the limits of fair trading became more clearly re-established.
5. Court Control of Unfair Competition In the use of the injunction to eliminate unfair and restore fair rivalry two steps have generally been necessary. Agreements found to be in restraint of free and open competition have been cancelled, and specific orders issued against enumerated practices and relations. The Alumi
num Company of America, for instance, was ordered to refrain from any contract by which control of necessary materials for manufacturing aluminum could prevent the purchasing of such materials" of good quality in the open market in free and fair and open competition." The Pacific Coast Plumbing Supply Association of twenty-four corporations and sixty individuals, wherein the court found the trade bound hand and foot by forbidden restrictions, was another flagrant instance. So arbitrary had this small junta of tradesmen become that the court found it necessary to forbid its members "from communicating with a manufacturer or dealer to induce him not to sell to persons not members of the association or not conforming to the definition of a jobber given in the blue book." Still more recently in the Yellow Pine Lumber Manufacturers' Association the list of prohibitions included one even against holding membership in the organization. These restrictions may seem to cut very close to the quick of the fundamental right of communication and of the freedom of association. Yet they illustrate the length to which legal authorities go in the attempt to reconstruct competitive conditions on a fair and just basis to all within the trade.
Probably as definite and comprehensive a statement of what competitive lawlessness does is to be found in the injunction of the Supreme Court against practices of the Central West Publishing
Company and the Western Newspaper Union. These two concerns practically controlled the supply of ready-print matter and stereotype plates. As defendants they were enjoined against combining with each other and thus suppressing all existing competition in the business. They were further enjoined:
(1) From underselling any competing service with the intent or purpose of injuring or destroying a competitor;
(2) From sending out traveling men for the purpose or with instructions to influence the customers of the competitors, or either of them, so as to secure the trade of the customers, without regard to the price;
(3) From selling their goods at less than a fair and reasonable price with the purpose or intent of injuring or destroying the business of a competitor;
(4) From threatening any customer of a competitor with starting a competing plant unless he patronized the defendant;
(5) From threatening the competitors of either one that they must either cease competing with the defendants or sell out to one of the defendants, under threat that unless they did so their business would be destroyed by the establishment of near-by plants to compete with them;
(6) From in any manner, directly or indirectly, causing any person to purchase stock or become interested in the other for the purpose or