void, has been stated by Chief Justice White in the opinion of the Supreme Court in the Standard Oil case:

In this country also the acts from which it was deemed there resulted a part if not all of the injurious consequences ascribed to monopoly, came to be referred to as a monopoly itself. In other words, here as had been the case in England, practical common sense caused attention to be concentrated not upon the theoretically correct name to be given to the condition or acts which gave rise to a harmful result, but to the result itself and to the remedying of the evils which it produced. The statement just made is illustrated by an early statute of the Province of Massachusetts, that is, chap. 31 of the laws of 1778-1779, by which monopoly and i restalling were expressly treated as one and the same thing.

It is also true that while the principles concerning contracts in restraint of trade, that is, voluntary restraint put by a person on his right to pursue his calling, hence only operating subjectively, came generally to be recognized in accordance with the English rule, it came moreover to pass that contracts or acts which it was considered had a monopolistic tendency, especially those which were thought to unduly diminish competition and hence to enhance prices-in other words, to monopolize came also in a generic sense to be spoken of and treated as they had been in England, as restricting the due course of trade, and therefore as being in restraint of trade. The dread of monopoly as an emanation of governmental power, while it passed at an early date out of mind in this country, as a result of the structure of our Government, did not serve to assuage the fear as to the evil consequences which might arise from the acts of individuals producing or tending to produce the consequences of monopoly. It resulted that treating such acts as we have said as amounting to monopoly, sometimes constitutional restrictions, again legislative enactments or judicial decisions, served to enforce and illustrate the purpose to prevent the occurrence of the evils recognized in the mother country as consequent upon monopoly, by providing against contracts or acts of individuals or combinations of individuals or corporations deemed to be conducive to such results. ***

It will be found that as modern conditions arose the trend of legislation and judicial decision came more and more to adapt the recognized restrictions to new manifestations of conduct or of dealing which it was thought justified the inference of intent to do the wrongs which it had been the purpose to prevent from the beginning.

Without going into detail and but very briefly surveying the whole field, it may be with accuracy said that the dread of enhancement of prices and of other wrongs which it was thought would flow from the undue limitation on competitive conditions caused by contracts or other acts of individuals or corporations, led, as a matter of public policy, to the prohibition or treating as illegal all contracts or acts which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing trade, but on the contrary were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy. It is equally true to say that the survey of the legislation in this country on this subject from the beginning will show, depending as it did upon the economic conceptions which obtained at the time when the legislation was adopted or judicial decision was rendered, that contracts or acts were at one time deemed to be of such a character as to justify the inference of wrongful intent which were at another period thought not to be of that character. But this again, as we have seen, simply followed the line of development of the law of England.

1 221 U. S., 56–59.

TRUSTS. The fact that agreements for fixing prices, or otherwise attempting to control the market, were generally held invalid at the common law was apparently the cause for the perversion of the legal "trust" to accomplish the same purpose.

The trust was an ancient device by which the legal ownership and management of property could be put in the hands of one person (trustee) while the beneficial interest remained in another person (cestui que trust). This device was largely employed for the benefit of minors cr for the management of property in which there were several beneficiaries, or a beneficiary with a limited interest.

The first application of this device for the purpose of forming a combination to control the market is attributed to the Standard Oil Co. Before 1879 this combination had been held together very largely by means of exchanging the stock of the Standard Oil Co. for the stock of other companies, such stock being held in the name of .some individual connected with the Standard and for the Standard's benefit.

On April 8, 1879, a trust agreement was made among all the stockholders of the Standard Oil Co. of Chio whereby the stocks of 30 separate companies named in the agreement were turned over to three trustees to hold temporarily for the benefit of said stockholders. This trust agreement was succeeded by a more elaborate one dated January 2, 1882. This named nine trustees for specified terms, and also provided the means of electing their successors. To these trustees were confided the ownership and management of all the property of the various individuals who as stockholders or partners were associated together in the Standard Oil combination. In respect to some companies, only a part of the stock was owned by such persons. It was provided that the trustees should issue "Standard Oil trust certificates" of a par value of $100 each, such certificates to be issued to each person joining in the agreement in proportion to the value of the interest which he conveyed to the trust. Such certificates were to represent the beneficial interests of the parties to the trust agreement. The distribution of dividends was to be made at the discretion of the trustees to the holders of the trust certificates. It was provided that the trust might continue during the lives of the survivors and survivor of the trustees named in the agreement and for 21 years thereafter, but that it could be terminated under certain conditions at an earlier date, but not before a period of 10 years.

The Standard Oil Trust was organized substantially like the holding company of later date, which is discussed below. It was imitated by several other great monopolistic combinations, namely, the Whiskey Trust, the Cotton Seed Cil Trust, and the Sugar Trust. The procuring of a monopoly by a "trust" agreement was held by the courts to be contrary to law and against public policy.

The first great trust case was decided in 1890 in People v. North River Sugar Refining Co.' The North River Sugar Refining Co. was a corporation of the State of New York which had been absorbed by the Sugar Refineries Co., or Sugar Trust, in 1887. About 23 sugar-refining companies were combined in this trust, which thus obtained about 90 per cent of the total production of refined sugar in the United States. The capital stock of the North River Sugar Refining Co. was put in the hands of the board of trustees and the former shareholders received in return the shares of the trust. These trustees chose and controlled the officers of the North River Sugar Refining Co., and for a time they shut down the plant. A suit was instituted by writ of quo warranto to forfeit the charter of the North River Sugar Refining Co. in 1888. The court of appeals held that the defendant had violated and abused its franchises by entering into the combination under the trust deed. (See p. 62.)

The Standard Oil Trust was declared illegal in 1892 as a consequence of similar proceedings begun in Ohio about 1890. This combination was held ultra vires, contrary to public policy, and void. (State v. Standard Oil Co.). (See p. 62.)

These decisions made it clear that the trust device for combining competitors to control the market was unlawful.

HOLDING COMPANIES.-The holding company was next tried as a means of obtaining monopolistic control. It is important, therefore, to consider briefly certain features of State corporation laws prior to the Sherman Act.

At the beginning of the nineteenth century there were only a few corporations, mostly in Massachusetts. Such corporations were all organized under special grant of the legislature. The first State to have anything approaching a general incorporation act was New York; a general law for organizing manufacturing corporations was enacted in 1811 which limited the capital stock to $100,000. After that, general incorporation laws were gradually adopted in other States, but States having such laws were in the minority at the middle of the nineteenth century.

Except in a few States, the common law was interpreted in the sense that no corporation could hold the stocks of another corporation, and some States forbade such holdings by statute. (See p. 58.)

For a long time also corporations were not generally authorized to consolidate. In New York, for example, the consolidation of manufacturing corporations was first permitted in 1867, and was confined to those engaged in the same branch of industry. This privilege was extended in 1892.

Regarding the legal possibility of forming corporate consolidations by means of a holding company, Judge Edward B. Whitney, formerly

1121 N. Y., 582. Compare Brown v. Pacific Mail S. 8. Co., 5 Blatch., 525 (1867), and Hafer t. Railway Co. et al., 14 Cin. Wkly. Law Bull., 68 (1885).

$49 Ohio St., 137.

an Assistant Attorney General of the United States, made the following statement:

In New York, for instance, the first act enabling one industrial to purchase and hold stock of another was passed in 1853, permitting a manufacturing company to purchase mining stock in certain cases. The principle was extended, but in a very restricted form, in 1866 and 1876. It did not become general, or permit the buying stock of a competitor, for sixteen years later still. In New Jersey the movement began in a very small way in 1883. The present statutes, which permit any company to purchase stock of a rival for control, are more recent even than the Sherman Antitrust Law. They were in all probability adopted, although the legislatures did not know it, for the very purpose of circumventing that law. They date in New York from 1892. In New Jersey their development was from 1888 to 1893. Before that the holding corporation, now so familiar, was a rarity.

Thus all the trusts are in part a product of artificial conditions produced by human legislation, while some of the most dangerous, or at least the most unpopular, among them are a product of legislation obtained by their own lawyers and legislative agents, put quietly through under the cover of the antitrust agitation, while the public, led by the newspapers, were looking somewhere else.1

It is noteworthy, though perhaps merely a coincidence, that the New Jersey laws permitting such holding companies were passed between 1888 and 1893, while the legal proceedings against the trust form of combination were first begun in New York in 1888.

There seems to be but little doubt that those interested in forming large corporate combinations hoped to obtain a secure legal basis in the holding company, as the pool and trust had both been declared invalid (though not criminal) at the common law.

Section 4. Legislation against combinations prior to the Sherman Antitrust Act.

STATE ANTITRUST LAWS.-The development of great monopolistic combinations attracted much public attention during the eighties, and especially the formation of trusts, such as the Standard Oil Trust and the Sugar Refineries Co.

The fact that these existed in spite of their supposed illegality at the common law made it seem desirable to those who opposed such monopolistic combinations to prohibit them under the criminal law.

Consequently, several States during the later eighties passed so-called antitrust statutes prohibiting trusts and other combinations in restraint of trade or tending to monopoly. Among the States which passed such laws prior to the Sherman Antitrust Act were the following: Maine, 1889; Michigan, 1889; Tennessee, 1889; Texas, 1889; Iowa, May 6, 1890; Kentucky, May 20, 1890.

In this connection it may be noted that several States prior to 1890 had constitutional provisions declaring monopolies or combinations in restraint of trade unlawful. Among them may be noted Arkansas, Georgia, Kentucky, Tennessee, and Texas.

1 American Economic Association. Papers and Proceedings of the Seventeenth Annual Meeting (Chicago, 1904), Part II, pp. 3 4.

INTERSTATE COMMERCE ACT OF 1887.-The way for a Federal law against trusts was paved by the Interstate Commerce Act of 1887, which, among other things, provided that rates in interstate commerce should be reasonable and prohibited discrimination and railway pooling in interstate commerce. This law also established a commission

to supervise the enforcement of the law and to decide complaints regarding rates and discriminations.

This Federal railway law was itself preceded by laws of a similar character, in several of the States, relating to intrastate commerce. Section 5. Sherman Antitrust Act of 1890.

Just as several of the States had found it expedient to pass criminal laws against trusts, so the Federal Government was impelled to legislate in a like manner. This seemed especially desirable for the reason that these combinations were generally of such magnitude that their commerce was largely of an interstate character and affected the country as a whole. Moreover, the Federal Government was regarded as more able to successfully combat them, more likely to do so, and by enforcing a general rule more apt to operate with equality than could be expected from the local application of diverse laws in the several States. Another reason for such Federal legislation was the fact that the common law did not apply in the Federal jurisdiction except in certain cases where the Federal courts applied the laws of the States in which the question arose, and without express legislation there was nothing to prevent the formation of such combinations nor any means of enforcing the law by penalties.

Consequently, in 1890 a bill to prohibit such combinations was introduced in Congress by Senator Sherman, and after earnest debate and careful revision the so-called Sherman Antitrust Act was passed on July 2, 1890. The provisions of this law and some of the judicial decisions thereunder are described in detail in Chapter III. Broadly stated, this law prohibited, under severe penalties, every contract or combination in restraint of interstate or foreign commerce, and every monopolization or attempt to monopolize the same, and provided additional remedies, including suit in equity by the Federal Government, to restrain such combinations, and action at law for triple damages by private parties injured thereby. By this law, therefore, acts which at common law were invalid, were made criminal offenses so far as they related to commerce among the States and with foreign nations, while special remedies were established both at law and in equity.

Section 6. Early judicial interpretation (1890-1901).

INEFFECTIVE ENFORCEMENT OF THE LAW.-While both criminal and civil suits to enforce the Antitrust Act were brought almost