immediately after its passage, the results during the first decade of its existence were, on the whole, unsatisfactory. Various factors are alleged to have contributed to this result. Among these are the following: The serious business depression existing from 1893 to 1896; the alleged lack of sympathy on the part of some Attorneys General with the purposes of the law; the decision in the Knight case (referred to below); and perhaps to some extent the lack of adequate appropriations for the prosecution of such suits. Several criminal cases were brought at the very beginning, and some failed, it is alleged, on account of faulty indictments. One, at least, of the Attorneys General was apparently very much opposed to the enforcement of the law, and several of them showed but slight activity in initiating suits against offenders. This attitude was taken in spite of the existence and contemporary organization of notorious combinations.

In the following sections a few of the leading judicial decisions will be briefly noted, and their apparent effect upon the economic development suggested.

KNIGHT CASE (1895). The effectiveness of the act received a severe blow from the decision in the Knight case,' which was a proceeding in equity against the American Sugar Refining Co. (Sugar Trust), and the first case under this law to be decided by the United States Supreme Court. The court made a distinction between "manufacture" and "commerce," and held that the evidence proved merely a combination of sugar manufacturers, and this did not constitute a violation of the law, inasmuch as "manufacture" was not "commerce" and the law was directed against combinations in interstate or foreign commerce. It has frequently been claimed that this decision was generally understood to mean that the Antitrust Act did not apply to combinations or consolidations of manufacturing establishments.

The decision has also been much criticized, but it is said that the pleadings of the Government were bad, did not specify a combination engaged in interstate commerce, and that the record of the case did not prove that fact. At any rate, the failure of this case against one of the most notorious combinations of the day threw grave doubt on the effectiveness of the law, and tended to discourage efforts to enforce it. At the same time it gave encouragement to further combinations of the same character.

TRANS-MISSOURI FREIGHT ASSOCIATION CASE (1897). This case was a proceeding in equity against a combination of railroads formed. for the purpose of maintaining rates alleged by defendants to be just and reasonable. The Supreme Court held that the combination was unlawful, and that it was immaterial whether the rate agreement in question was reasonable or not.

This decision was understood by many to mean that the reasonableness of an agreement would not be considered, if it in any way restricted competition; that is, that even contracts which only incidentally affected competition, or were only "in partial restraint of trade" (and therefore valid under the common law interpretation of "restraint of trade"), were contrary to the Antitrust Act. The effect of this decision was obviously to discourage efforts at combination by such methods.

ADDYSTON PIPE & STEEL Co. CASE (1899).-In this case, which was a proceeding in equity, a combination of pipe manufacturers established for the purpose of dividing the markets and enhancing the prices of cast-iron pipe was declared by the Supreme Court to be contrary to the law. This case, like the railroad case just considered, tended strongly to discourage combinations in the form of a pool.

Section 7. Economic and political results.

RAPID GROWTH OF TRUSTS (1898-1901).—The last two decisions referred to, wherein pools were declared unlawful and the question of the reasonableness of the terms of the agreement were held to be immaterial, apparently greatly discouraged efforts to form combinations by means of pools, while the failure in the Knight case to condemn a consolidation of manufacturing companies tended to encourage the formation of large consolidations of industrial enterprises.

At any rate, there developed between 1898 and 1901 an extraordinary number of large consolidations, and this period is often referred to as that of the "consolidation craze." Among the great consolidations formed during this period may be mentioned the following:

All the foregoing concerns were apparently combinations of competing enterprises which embraced a considerable part of the total industry of the United States in their respective branches of business. All of these combinations were apparently formed either by combining control of competing concerns through the agency of a holding company, or by the merging of the plants and business of the concerns combined under the direct control of one company.

INDUSTRIAL COMMISSION (1898-1902).-This extraordinary era of consolidation attracted much public attention. A commission, known as the Industrial Commission, was created by Congress in 1898 to investigate various industrial questions, but particularly the growth of large corporations and trusts. Although the commission was assisted by some expert economists, who helped to make the examination of witnesses more effective than it would otherwise have been, the method of conducting the examination prevented the commission from obtaining the best results. Especially there was a lack of sufficient supporting documentary evidence in statements of account, in statistics of prices, and of production, etc., which would have enabled the commission to weigh accurately the testimony given. While the Industrial Commission, therefore, failed to ascertain many important facts regarding these great combinations, nevertheless it served to awaken popular attention to their great size and power and to some of their excesses, especially in relation to stock watering, promotion profits, and unfair competition. The report of the commission recommended as the chief measure of reform greater publicity regarding the operations of corporations and particularly the establishment of some organ of publicity in the Federal Government.

ESTABLISHMENT OF BUREAU OF CORPORATIONS (1903).—In consequence partly of the recommendations of the Industrial Commission, partly of certain recommendations made by Attorney General Knox, and in response to a general demand for a more effective oversight of corporations, the Bureau of Corporations was organized in 1903 under the Department of Commerce and Labor. The duties of the Commissioner of Corporations were described substantially as follows: To investigate the organization and conduct of corporations and combinations, etc., engaged in interstate commerce (except common carriers) in order to give information to the President and to

enable him to make recommendations to Congress. The powers conferred on the Commissioner for such investigations were extensive and included the power to issue subpoenas to compel the attendance of witnesses and the production of books and papers. The reports of the Bureau were to be made to the President, and published according to his directions.

The method of work contemplated in the formation of the Bureau of Corporations was scientific economic research, and the taking of testimony as ordinarily practiced by commissions was, conseqently, of secondary importance.

The primary objects of the Bureau of Corporations, therefore, were first, information for the Government for purposes of legislation, and second, the remedial effects of publicity through the publication of the reports of its investigations.

STATE ANTITRUST LEGISLATION.-It should be noted that State antitrust legislation, which antedated Federal legislation on this subject, continued throughout the period thus far considered and also since that time. The majority of the States established antitrust laws, some of which were more stringent than the Federal law. An important feature of the legislation in several States was the prohibition of certain kinds of "unfair competition," particularly local price discrimination. (See Chap. IV.)

Section 8. Northern Securities case (1901-1904) and its political and economic effects.

NORTHERN SECURITIES CASE (1904). The Northern Securities Co. was a holding company formed in 1901 by dominant stockholders in the Northern Pacific and Great Northern Railways for the purpose of putting in the hands of a single company the voting power of the dominant stockholders in the said railroads. The Government sought to procure a dissolution of the Northern Securities Co. by proceedings in equity as a combination in restraint of interstate commerce. While in the final opinion of the Supreme Court, rendered in 1904, several important legal questions were settled, the chief significance of the decision in relation to economic development was that the device of a holding company to procure a combination of competing interests in restraint of trade was unlawful. The holding company was enjoined from voting the stock held by it, and the railroad companies were enjoined from paying any dividends to the holding company on such stock, etc.

This decision, which condemned the device of the holding company for the purpose of procuring a common control of competing interests, was of capital importance in the interpretation of the Sherman Antitrust Act, and of great significance with respect to subsequent economic development.

DECLINE OF CONSOLIDATIONS AND DEVELOPMENT OF (6 'GENTLEMEN'S AGREEMENTS" AND "COOPERATION."-Prior to the decision in the Northern Securities case, the tendency seems to have been toward the formation of consolidations either by merger or through the device of the holding company. Subsequent to that decision, in so far as monopolistic combinations of competing interests were made, they did not often take the form of the holding company. It may be noted that the American Tobacco Co., which prior to 1904 was largely a holding company, was reorganized about seven months after the decision in the Northern Securities case in the form of a merger with respect to the properties of the principal concerns combined, which appears to have been prompted in part by the decision in that case.1 It may be noted also that the International Harvester Co., which was formed subsequent to the initiation of the Government suit against the Northern Securities Co. but before the final decision, was a merger of the manufacturing properties of competing interests. The decision in the Northern Securities case, as well as the increased activity of the Government in the investigation and prosecution of suits against consolidations, was apparently of great influence in preventing further efforts to restrict competition by such means. It was not until several years later, however, that the Supreme Court expressly declared that a merger for such purposes was illegal.

Legal difficulties had at an earlier date, as noted above, discouraged the use of written price and pooling agreements as a means of combination, and tended to promote combination through consolidation, but the decision in the Northern Securities case, as just stated, tended to discourage efforts at combination in this form also. Thereafter, apparently, the device most available for evading the Antitrust Law was the looser and unwritten form of agreement generally described as a "gentlemen's agreement." This device became known somewhat later as the system of "cooperation," which is particularly well illustrated in certain combinations at one time practiced by steel manufacturers. The fundamental idea of such cooperation was to procure substantial harmony in policy among competitors regarding volume of output and prices, without specific written or oral agreements, but rather by tacit understandings and the communication of information regarding the production and prices of the various cooperating interests in order to insure good faith in the performance of the tacit understandings. A particular variation of this policy was the apparent tacit understanding to follow the price quotations of the "leading interest," as, for example, the American Tin Plate Co., for tin plate, and the Reading Coal & Iron Co., for anthracite coal. INCREASE OF ACTIVITY IN THE PROSECUTION OF TRUSTS.-The Northern Securities decision, by declaring the holding-company

1 Report of the Commissioner of Corporations on the Tobacco Industry, Part I, p. 11.