effect of harassing it with unreasonable demands or inquiries;

(7) From circulating reports injurious to the business of the other;

(8) From persuading customers of competitors to violate contracts made with them by undertaking to indemnify them against loss and damage by reason of so doing.*

A long step forward was made to relieve business of predatory practices by the creation of the Federal Trade Commission (1914). The feature of this act was its declaration, "that unfair methods of competition in commerce are hereby declared unlawful," (Sec. 5). The Commission is empowered and directed to prevent persons, partnerships, or corporations, except banks and common carriers subject to the act to regulate commerce, from using unfair methods of competition in interstate and foreign com

merce.

Two unfair advantages helped to put the Standard Oil Company in a position to eliminate competitors. First, it enjoyed exclusive rebates, drawbacks, and discriminating railway rates. These not only gave it control of markets against its rivals, but early in the history of the industry of producing, refining and marketing oil it equipped the company with a surplus of working and investment capital, which it was not slow to use as a war chest to drive its

* Report of the Attorney General, 1912, p. 13.

rivals out of the market. Such a resource enabled it indefinitely to undersell its less favorably situated competitors.

Secondly, its ownership of pipe lines which it refused to put at the service of rivals as common carriers, enabled the Standard to strengthen and perpetuate its monopoly. In the report of the Interstate Commerce Commission, in the Pipe Lines Cases, that tribunal declared that "more than anything else, the pipe line has contributed to the monopoly of the Standard Oil Company, and the supremacy of that company must continue until its rivals enjoy the same facilities of transportation by this means." And the contention of the Government in the "Pipe Lines. Cases," before the Supreme Court, finally compelling the pipe lines companies to serve as common carriers, was absolutely within the facts when it asserted that "the shipment of oil except by pipe line is a practical impossibility. No other means of transportation can possibly compete with it. Without a pipe line the oil produced is, as it were, shut out by an impassable barrier." Under the California law, requiring pipe lines to serve as common carriers on heavy penalty for failure, the Standard lines preferred to pay what was meant as a confiscatory tax of fifty cents a barrel, rather than yield the advantage of exclusive control of its lines of transportation obtained under the right of eminent domain.

CHAPTER IV

REGULATION AND MONOPOLY

WE have seen that neither predatory com

petition nor monopoly for private profit can hope in the long run to survive in the field of corporate enterprise. Yet large-scale production has come to be welcomed under the corporate form in trade and industry in all leading countries of the globe. And monopolies rightly regulated serve certain public uses acceptably. Out of an era of wasteful competition we have come into one of restrictive combinations. We are entering upon a third stage of business, a re-division of the domain of corporate service. On the one hand competition tends to become the ruling principle within legal limits in corporations operating for private profit. On the other, monopoly under public regulation becomes the dominant policy in public service activities.

1. Regulation of Competition

Do these two fields require different policies? Louis D. Brandeis is credited with the formula that the only sound policy in relation to trusts is the regulation of competition rather than the regulation of monopoly. But this is too narrow a view of trust policy taken in its larger

aspects. It suffices to express the right aim as it applies to corporations organized for private profit. But it does not cover that large class of cases included in the quasi-public corporations known as franchise trusts. The fact is that the treatment of monopoly and competition as operative policies in business has long since ceased to call for a simple or a single solution.

In the field of private profit the industrial and commercial corporation affords a large number of instances of combinations still exercising some degree of monopoly control over natural resources, methods of distribution, or the fixing of prices. The main reason for the more offensive kind of monopoly, however, is not to be found in the destructive competition which in the past has had no limitation set to it short of the survival of the strongest. Destructive competition is a tendency which, unregulated by public control, corrects itself in its own costly way. When private control of policies and prices becomes institutionalized the corporation may become one of the principal instruments of monopoly. "The corporation will be a danger to industrial and financial freedom," declares Robert R. Reed, of New York, in his argument for restricting the state charters of interstate companies, "so long as single or secret interests can control nominally competing concerns. The essential reform is to destroy the power of control of competing companies." From this viewpoint it is clear that be

fore fair competition can prevail it will be necessary to take from corporate charters that which keeps the corporations themselves from functioning as competitive units. There is no way of making corporations compete on fair and equal terms except by de-monopolizing them as legalized institutions.

This policy insists that, as the basis for industrial and commercial liberty, the conditions of fair competition must be re-established in all corporations which lie outside of the domain of public utility. There must be no legalized monopoly without public regulation. Private monopoly-monopoly for private profit as the essential and preeminent aim-is repugnant to the public sense of right, because it gives to individuals acting in their private capacity a privileged opportunity apart from government to exploit the community. Wherever by combination or other means private corporations succeed in securing a position for themselves which amounts virtually to a privilege of this type, there the status of the private combination becomes intolerable because it has usurped a power which the state should grant only to corporations consecrated to the public service.

2. The Law and Limits of Monopoly

Competition and monopoly stand as opposites in economic terminology. They represent mutually exclusive practices and principles. They