There are

cluded among the corporations covered. various exceptions to these broad prohibitions, but the only one of importance relates to stockholdings heretofore acquired. In other words, the act applies only to future acquisitions of stock and does not undertake to undo things already accomplished. Of course there is a clause to the effect that the act shall not make lawful anything theretofore prohibited by the anti-trust laws; intercorporate stockholdings which were unlawful under the Sherman act may still be attacked.

This section seems to add nothing of real value to the Sherman act. Moreover, if strictly construed, it prohibits that which should not be prohibited. Under the Sherman law the courts have already held intercorporate stockholdings unlawful when they result in unreasonable restraint of trade or in a tendency toward monopoly. Several of the great trust cases decided by the Supreme Court have turned on this pointthe Standard Oil case, the Tobacco case, the Northern Securities case, the Union Pacific case and others. The new law, however, prohibits the acquisition of stocks not merely where competition in the trade that is in the business concerned as a whole — is restrained; but also where merely the competition between the particular corporations directly concerned is lessened. lessening of the competition between two corporations may increase the competition in the branch of industry or commerce in which they are engaged. One corporation may control, say, one-tenth of a given branch and another corporation one-twentieth. The acquisition of stock in one by the other may completely destroy competition between them, but may thereby render them more efficient in competing with other concerns. Doubtless the exercise of discretion by prosecuting authorities and courts will result in weakening the

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prohibitions of this section. In few cases perhaps will suits actually be brought and won by the government unless the public interest is threatened by the intercorporate stockholding. That, however, does not justify placing an economic and legal absurdity on the statute book. It is strange that Congress did not use, with respect to intercorporate stockholding, language similar to that used regarding interlocking directorates, which is far more closely guarded.

The administration anti-trust bill, as originally introduced in Congress, contained a provision with regard to interlocking directorates which, had it been enacted, would have been little less than disastrous. Virtually it prohibited the interlocking of directorates altogether, regardless of its effect. If two corporations, which together had only a small fraction of a given business, should have one common director, and if such corporations were natural competitors, the corporations would have been made subject to the penalties of the Sherman anti-trust law.

As it passed the House this absurd and drastic provision was toned down greatly, and in the Senate it was still farther shorn of claws by the omission of the penalty. In its final form the section (§ 8 of the antitrust act) applies only to large corporations and only in cases where the elimination of competition by agreement between them would be unlawful. No person, it declares, shall, after two years from the passage of the act, be a director in any two or more corporations, any one of which has capital, surplus and undivided profits aggregating more than one million dollars, if such corporations have been theretofore competitors "so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the anti-trust laws." Nothing is

said about community of officers or employees other than directors. Banks and common carriers are exempted from this general provision; but there are special provisions regarding banks.

If the fact that two or more corporations had common directors did actually result in restraint of competition

not merely between the corporations concerned but in the trade generally the courts could and probably would have held it unlawful under the Sherman act. In several decisions in which combinations based on intercorporate stock ownership have been dissolved, the courts have prohibited the segregated parts from having common officers or directors. The new act, however, goes farther and prohibits corporations from having the same directors even tho they do as a matter of fact actively compete, provided only that an agreement between the corporations to eliminate competition would be unlawful. In effect it makes the interlocking of directors in such case conclusive evidence of combination to restrain trade. Perhaps on the whole this is wise, for there is at least some tendency to eliminate competition where even a single individual is a director in two or more potentially competitive corporations.

The importance of this legislation, however, has been greatly exaggerated by its sponsors. The real evil is not community of directors but community of stock ownership. It will be easy enough for an individual or group who hold stock in several corporations to elect different men as directors who will act in harmony. The director is but the voice of those who elect him. Dummy directors are no new thing and they will doubtless be more numerous under this act than at present.

Apparently no one seriously proposed in Congress to restrict community of stock ownership by individuals. As I have pointed out elsewhere, the courts have

In this Journal, May, 1914, p. 406.

expressly tolerated community of interest in cases where it was almost self-evident that the result must be to prevent competition. They have seemed to consider it an inalienable right of the individual to hold what stocks he pleases. The "dissolution" of trusts by distributing the stocks of subsidiary companies pro rata among the stockholders of a controlling company is little more than a farce. The investigations of the Pujo committee emphasized the enormous extent and influence of community of stock interest as well as of interlocking directorates. But Congress seemed to be of the same mind as the courts with respect to the impossibility, or the unconstitutionality, of attempting to check the former. Some day our law makers will grow bolder; they will not permit any supposed right of private property to serve as a bulwark for monopoly.

The special provisions regarding interlocking directorates of banks, as passed by the House, were struck out by the Senate on the ground that the matter could best be provided for in connection with the banking laws. These provisions were, however, restored, with some modifications, by the conference committee and enacted into law. They prohibit interlocking of directors, officers or employees among large banks those having deposits, capital, surplus and undivided profits aggregating more than five million dollars wherever located. Moreover, subject to minor exceptions, no two banks, of whatever size, in a city of more than 200,000 inhabitants may have a common director, officer or employee. Naturally Congress has not undertaken to regulate private banks or those organized under state laws, but the act does apply to relations between a national bank on the one hand and a private or state bank on the other.

This provision as to banks is not qualified by any reference to the effect of the interlocking. It is not on its face directed against monopoly or restraint of competition among banks or in other business. The constitutionality of this provision cannot be questioned, since the national banks are creatures of the federal government. As to its justice and propriety there may be some doubt, and as to its effectiveness, for the reasons already mentioned above, still more doubt. The investigations of the Pujo committee have indeed made clear the immense power of concentrated banking interests. If that power can be weakened by this new legislation, most people will welcome it, even tho the law may incidentally prevent interlocking directorates among banks where no disadvantages would result therefrom.

It may be noted that there are no direct penalties for violation of the provisions as to intercorporate stockholding and interlocking directorates. The enforcement rests with the interstate trade commission by a procedure similar to that in the case of unfair competitive methods.

While, as already indicated, a good many teeth were drawn from the anti-trust bill during its progress through Congress, there remains one provision which distinctly increases the terrors of the law. Section 14

of the new act provides that whenever a corporation shall violate any of the penal provisions of any of the anti-trust laws, such violation shall be deemed to be also that of the individual directors, officers or agents who have authorized, ordered or done any of the acts constituting such violation. Upon conviction therefor any such director, officer or agent is subject to fine not exceeding $5000 or imprisonment not exceeding one year or both.