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important among the special privileges which breed trusts, but did not claim that the abolition of tariff duties would kill all or even most of them. "Tariff duties, such as this country levies [he argued] practically alienate us from the rest of the world, so far as concerns many industries, and make it easier for our producers in any one line to combine, formally or informally, and to put prices up to the import level of the dutypaid prices of foreign goods." *
Patents confer upon their owners an exclusive privilege. As such they have figured largely in the program of combinations. Under the anti-trust laws it became necessary to define to what extent a patent entitled its proprietor to restrictive control. In the Dick mimeograph case the Supreme Court took the view that the patentee might either suppress entirely his invention, or if he put it on the market he was within his rights in requiring users to purchase certain supplies (ink, etc.), as the condition of the right to use the invention at all. To use other supplies was adjudged to be an infringement. In that instance the patented article, the rotary mimeograph, was sold at cost and the profits made on the supplies sold with it.
Efforts to secure a monopoly by the combination of patents have been attempted in various instances, but not with much success. Where several manufacturers of harrows under United
*United States Industrial Commission, Vol. XIII, 553.
States patents agreed to organize, by assigning their patents to a corporation controlling seventy per cent of the total output of the United States, each subsidiary agreed to work under license and not to cut prices. In this case the combination was declared an unlawful restraint of trade. "Patents confer a monopoly [said the court in the National Harrow Case] as respects the property covered by them, but they confer no right upon the owners of several distinct patents to combine for the purpose of restraining competition and trade. Such ⚫ combinations are conspiracies against the public interests, and abuses of patent privileges." The same conclusion was reached in the bath-tub case, denying combinations the right to effect a monopoly under the cloak of a patent privilege. On this same principle the booksellers' association, which formed a combination and agreement to maintain the prices of copyrighted books at retail, was held to be unlawful. "No more than the patent statute was the copyright act intended to authorize agreements in unlawful restraint of trade and tending to monopoly."
In all of these cases the result of combination was to lessen competition and promote monopoly, by merging similar and rival industries. But in the combination of different industries, as seen in the new company formed by the three patent shoe machinery companies, the merging was not regarded as lessening competition or as
giving any more of a monopoly than resided in the patents of each company taken separately. "The combination," said Mr. Justice Holmes, "was simply an effort after greater efficiency."
4. Regulation of Public Utilities
Among the corporate problems of the day a more recent class to require attention is that of the public utilities. These include, besides interurban electric and hydro-electric plants, municipal companies organized for the purpose of rendering a public service and usually classed as municipal or franchise corporations. Formerly the functions of lighting, water supply, and the like were each performed in the local territory by one or more corporations enfranchised for the purpose. But it soon came to be seen that the public interest could not best be served by regarding this field as one suited for competition.
The inconvenience of rival corporations operating in the same streets, the waste of energies in pitting one corporation against another, the duplication of investment and the inevitable outcome of consolidation after a period of competitive waste and deficient service- these things led to the conclusion that regulated monopoly was better than unregulated competition. Hence, out of the competitive policy arose that of control and bargaining. First the municipal au
thorities acting for the state and then the state through public service commissions became the supervising power in determining, within constitutional and legal limits, the terms on which utilities should be operated under public franchise.
In an address delivered in 1914 Francis T. Homer said: "After years and years of experimenting with a view to having competitive service in the public utility field it has at last become universally recognized that a public utility is a natural monopoly, and that genuine competition between separate utility corporations furnishing a similar service is substantially impossible. Nay, it has been found that not only is it impossible, but by the very nature of the service rendered it is most undesirable. To illustrate that briefly—why have two gas plants with double the investment, each duplicating distribution pipe lines throughout a city furnishing gas, one to this consumer, one to that, when with a single plant and a single distribution system manufacturing costs would be less and interest charges on investment would be onehalf?"*
In certain services the tendency toward monopoly has gone still farther. Many municipalities sooner or later have come to take over the service of water supply. Two reasons are usually
*The Public, the Investor, and the Holding_Company, F. T. Homer. West Side Y. M. C. A., New York.
assigned for this: first, the simplicity of the service, involving much less technical talent and risk in administration than in the service of lighting and certainly less than in that of the street railway service. A second reason is that water relates so directly to the health of the community, and the cost of service is so negligible as compared with its importance that absolute control is desirable.
An idea of the growth of the service of furnishing light and power, largely in the public utility field, may be gathered from the fact that in 1877 the electrical industries of the country represented an investment of about $30,000,000, whereas the corresponding estimate in all the electrical fields at the end of 1913 was put conservatively at $20,000,000,000. In this particular utility, wherein electricity is the motive power, or medium of service, the considerations against public ownership are numerous. Both political and technical conditions veto the idea of the municipality preempting a service to itself in which the costs of development are so high. It is regarded as much better that pioneering profits should serve as a premium to induce private capital to enter this field of corporate monopoly under public supervision than that the state or city should impose upon its taxpayers the burden of providing and improving the facilities in a field which is still in a rapidly advancing state of progress.