senting dollars as their par value, should not be issued, but that a plan first reported by a committee of the New York State Bar Association and later adopted as a permissive, though not a compulsory plan of stock issue in New York, should be followed. This, it was thought, would afford a remedy for all these evils. The plan is as follows:

"To permit the formation of a distinct class of business stock corporations, whose capital stock may be issued as representing proportional parts of the whole capital without any nominal or money value.

"The effect of such amendment would be to provide for the measurement of the interest or shares of the members of such a corporation by a statement of proportion, as in case of the part owners of a ship, and not by an arbitrary assignment of money value, which is delusive in the case of every corporation whose capital stock has a market value either more or less than its nominal par value.

"Such an amendment, though somewhat radical, is not altogether novel. It embodies a principle adopted in corporation laws in Germany.

"It would relieve any possibility of injury to the public from misleading representations as to the money value of corporate stock, and would also relieve from embarrassment conscientious corporate officers often compelled to deal with legal fiction as to which they have no personal knowledge, as though it were a reality within their own observation.”*

The suggestion is valuable and would apparently

*Proceedings of New York State Bar Association, January, 1892, p. 148. New York Laws of 1912, chap. 351, Stock Corporation Law, sec. 13.

prove effective; but there is no general interest in a change, and it is probably, for the present at least, not practicable for use on an extended scale.

The effect of over-capitalization upon prices will be discussed briefly in a later chapter.

CHAPTER VIII

METHODS OF ORGANIZATION AND MANAGEMENT

B

EFORE the compact combinations of the pres

ent day were known, various forms of specific agreements among independent corporations and individual competitors were common, such agreements often being called pools, even when the earnings of the different companies were not put into one common stock from which profits were to be distributed.*

For some years before the organization of the Whiskey Trust, competition had been very fierce among the different distillers, and agreements were usually made from year to year which fixed the amount that each distiller should produce during the year. At other times, under agreement, an assessment was levied which each distiller should pay upon each bushel of corn mashed. From the fund thus raised some distillers were paid to export goods at a loss, and thus, by relieving the home market of its surplus, make sufficient

*In a pool properly so called all the companies put their net earnings, or any other special funds agreed upon, which are then expended for some common purpose or distributed according to some special rule. In use the word was greatly extended in meaning. As in the case cited below, each distiller paid into a common fund a certain amount per bushel of corn mashed. From this fund then were refunded to the exporters the losses made by them when their goods were sold abroad at a loss in order to enable the others to maintain prices in the home market. This was really a pool. But the same word was used to characterize a mere agreement to restrict the output, or one to sell at a common price agreed upon, or one to divide the territory among different sellers, the latter forms of agreement not being pools at all in the proper use of the word, but merely agreements for what was supposed to be the common good.

provision for selling the remainder of the domestic production at a remunerative price. These so-called pools were not stable. Ordinarily, within a year, some one of the parties to the agreement would be discovered distilling more than his proportion of the normal output, or selling at a price below that agreed upon, and the result would be a break in the pool.

Agreements for fixing the price of the product or for dividing territory were perhaps most common. A noteworthy case is that of the Addyston Pipe Company,* in which the different parties agreed not to enter into competition with one another. The contract was to be carried out in the following way: a committee consisting of a representative from each corporation entering into the agreement set the price for each job of work, and the corporation that offered to the combination the largest bonus for the job, secured it, the others putting in higher bids to make an apparent competition. After payment of expenses the bonus was then divided among the remaining corporations. It will be seen that, although in this agreement there was no uniform fixing of price or of profits, competition was done away with, and the agreement may fairly be considered as one tending to create a monopoly, or, at any rate, to bring about all the evil effects of a monopoly and to oppress the consumers.

An agreement of a quite different nature was formed some years ago among coal dealers in one of our cities. A committee of several of the leading dealers determine the price at which coal shall be sold by all wholesalers

*United States v. Addyston Pipe and Steel Co., et al. 78 Fed. 712, 85 Fed. 271; 175 U. S. 211.

and retailers. They also keep a supervision of the trade, seeing that full weight is given, that the quality of coal is exactly as represented, and that the consumers are protected against dishonest dealers as well as the dealers against excessive competition. If any dealer cuts the price to any of his consumers, he is heavily fined by the central committee. If he refuses to pay the fine, an agreement with the mines stops his securing a sufficient supply of coal to meet the needs of his customers. The initial cause of this agreement was said to be excessive competition. Some of the dealers, finding the prices so low that they could not make a profit, came to the conclusion that some others must be giving light weight. An investigation and a reweighing of several loads proved this. The combination was then formed, which may be said to exist primarily to protect the dealers and incidentally the consumers against this unfair kind of competition, which resulted to the detriment of both. Prices are fixed at a rate which is said to give only moderate profits to retailers and wholesalers, and fair prices to the consumers; while the consumers, as has been said, are secure against light-weight loads and poor quality of coal. It should be noted that those who fix the "fair" prices are interested parties; but experience may have shown them what is really wise and fair for all. All those dealers who are willing to conduct their business fairly and honorably at the rates fixed are allowed to make a reasonable profit. An experience of several years seems to justify this regulative combination which, through arrangements with mines, also has been able to do effective work.