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put out of business.1 Complaint was made that in several instances the International Harvester Co. concealed its control of formerly independent plants and held them out to the public as still independent for a year or two years after it had acquired them.2

The Government in a suit against the American Press Association, which furnished four-fifths of the plate matter used by newspapers in the United States, complained that—

It maintained for many years in different cities of the United States houses known under other names and understood by newspapers generally to be independent concerns. Its plan of operation was that if it did not desire to sell to a customer at a certain price, or if it lost a customer by reason of the prices it was charging, it would have one of these houses procure the business at such price as might be necessary to obtain it.3

A former Commissioner of Corporations complained that the American Tobacco Co. made frequent use of bogus independents for purposes of competition. One instance out of many reported is that of H. N. Martin & Co., of Louisville, Ky., two-thirds of whose capital stock was bought in 1903 by persons connected with the American Tobacco Co. The change of control was kept secret, and H. N. Martin & Co. was caused to cut its prices below cost, in an aggressive campaign against several independent plug-tobacco companies of the Middle West. By 1905 the Martin company was bankrupt; but the cost of the two-thirds interest to the American Tobacco Co. people was small in comparison with the damage they had done to others.* A former Commissioner of Corporations complained that the Standard Oil Co. sometimes used bogus independents to bid up the price of crude oil in order to kill off independent pipe lines.

The object obviously is to prevent clamor on the part of the producers throughout the entire field, who, if the Standard paid such premiums in its own name, might naturally demand the same prices for their product as were paid in the limited areas affected by the competition of rival lines."

Section 13. Exclusive-dealing requirements.

Powerful companies can often increase their power by discriminating against persons who buy from their competitors. The discrimination may take the form of higher prices, or the form of refusal to sell at all. Perhaps the best known case is that of the United Shoe Machinery Co., which leases certain of its machines, on the condition that the lessee forfeits his right to use them if he uses

1 Report of the Commissioner of Corporations on the Petroleum Industry, Pt. II, pp. 57, 58, 668.

Report of the Commissioner of Corporations on the International Harvester Co., pp. 296-299.

* United States v. Western Newspaper Union et al.; petition, quoted in Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on trust legislation, p. 1666.

Report of the Commissioner of Corporations on the Tobacco Industry, Pt. I, p. 110. Report of the Commissioner of Corporations on the Petroleum Industry, Pt. I, p. 26.

any similar machines made by others. This has for years been a matter of loud protest, both from the company's competitors and from shoe manufacturers.

A former Commissioner of Corporations complained that the American Tobacco Co. formerly gave a special discount of 6 per cent to certain jobbers on condition that they handle no cigarettes or tobacco but those of its manufacture.

This agreement was attacked in the courts of Massachusetts, and the American Tobacco Co. was compelled to give up this method of exclusive control of jobbing houses in New England territory.1

Complaint was also made to the Industrial Commission that the Continental Tobacco Co. refused altogether to sell to some jobbers because they sold goods of other manufacturers. When the tobacco combination was dissolved the independent tobacco manufacturers asked the court to place certain restraints on the corporations which succeeded to its business. Among them was the following:

From refusing to sell to any jobber any brand of snuff or cigarettes or smoking or chewing tobacco manufactured by it, which is indispensable in the particular market. It should also be restrained from giving any rebates, allowances, or other special inducements to those who use its goods exclusively or give preference to them over the goods of competitors."

The International Harvester Co. formerly used a commissionagency contract, by which dealers were required, under heavy penalties, to handle the company's harvesting machinery exclusively. A former Commissioner of Corporations said on this subject in 1913:

In 1905, however, at a time when antimonopoly proceedings against the company were threatened in several States, the exclusive clause was eliminated from the contract and has not been restored since. * * * Since the elimination of the exclusive clause from dealers' contracts other means have not infrequently been employed to secure the same end. In a considerable number of cases reported to the Bureau from different parts of the United States salesmen of the International Harvester Co. have endeavored to prevent the handling of goods made by competing manufacturers by threatening to discontinue the dealer's agency for the harvesting machines of the International Harvester Co. * In the sections of the United States visited by agents of the Bureau it was found that many dealers hesitate to take up the sale of independent makes of harvesting machines, fearing to lose the contract for some brand of the International Harvester Co.'s machines if they do so."

The power to impose such restrictions depends on control of some article which is necessary to the buyer or which it is at least advantageous to him to have. Often the power depends on a legal monop

1 Report of the Commissioner of Corporations on the Tobacco Industry, Pt. I. p. 311.

* Report of the Industrial Commission, Vol. XIII (1901), pp. 306, 334.

* Control of Corporations, Persons, and Firms Engaged in Interstate Commerce: Report of the Committee on Interstate Commerce, United States Senate, 62d Cong., Pursuant to 8. Res. 98, with Hearings, Digest, and Index, p. 1222.

Report of the Commissioner of Corporations on the International Harvester Co., pp. 304, 305.

oly, such as a patent or a trade-mark. But in other cases the arises from monopolistic control of an industry.

power

Said an independent tobacco manufacturer a few years ago, speaking of the supposed absorption by the tobacco combination of 80 per cent of the tobacco trade of New England:

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That 80 per cent was made by four or five different factories controlling about 20 brands. No one of these factories could say, 'If you do not handle our brands to the exclusion of all other brands in competition, you shall not have our brands at a price that you can make a profit on." But now one company, owning the 20 brands, all popular and well established, have that power.1 When the power exists, fear may produce a similar effect without any definite requirement. Says a manufacturer of motor cars:

Let me now ask you to put yourself in the place of the independent manufacturer who has to purchase his raw material in a market, the control of which is dominated by an enormous overpowering factor in the lines of material he requires. He feels he has to buy his supplies from this trust; he has to pay the price asked. * He is afraid to buy of an independent small producer, even at possibly an equal or better figure, because he will surely have to come back some busy year and deal with the trust, when he fears he might find himself not in the preferred list of the trust's patrons.'

* *

When the Eastman Kodak Co. formed its subsidiary, the General Aristo Co., to combine its own photographic-paper business with that of most of the other principal manufacturers, contracts were alleged to have been obtained with the European manufacturers of raw paper, binding them to sell to no one in America but the General Aristo Co. Independent manufacturers of sensitized paper said that paper for sensitizing was made only in Europe, and they complained that their business had been greatly interfered with by these contracts.3

Section 14. Full-line forcing.

This consists in a requirement that specified goods be handled on pain of refusal to furnish certain other goods or to give certain discounts or other favorable terms. It is often called full-line forcing, because a manufacturer of a particular brand of goods which is specially desired may insist that all his other goods, for which there is no special preference, shall be taken in lieu of those of rival. makers as a condition of obtaining supplies of specially desired goods, thus attempting to force the dealer to handle the "full line" of the manufacturer. Thus, a former Commissioner of Corporations complained that salesmen of the International Harvester Co. used to

1 Reports of the Industrial Commission, Vol. XIII, p. 339.

2 Control of Corporations, Persons, and Firms Engaged in Interstate Commerce: Report of the Committee on Interstate Commerce, United States Senate, 62d Cong., Pursuant to S. Res. 98, with Hearings, Digest, and Index, p. 1296.

* Reports of the Industrial Commission, Vol. XIII, pp. liii, liv, 173–185, 191.

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require dealers to order the so-called "new lines" (i. e., tillage implements, wagons, manure spreaders, etc.) as a condition of retaining the agency of some brand of the company's harvesting machines.1

Full-line forcing is closely analogous to the requirement of exclusive dealing. The latter forbids buying from competitors; the former requires that goods which might otherwise be bought from competitors be bought from the company which enforces the demand.

The exclusive-dealing requirement may cover only a single article and have no reference to any other, but the essence of the full-line forcing method is the tying of two or more articles together. This method is available, therefore, only to a seller who can, by control of a product necessary or desirable to dealers in a certain line, induce them to buy from him either products of which he has not exclusive control or products which they may not care to buy at all.

Section 15. Inducing breach of contract.

One of the bills for amendment of the Sherman law, submitted in 1914 to the Senate Committee on Interstate Commerce, proposed to forbid "unfair competition" and to define it to include, among other things, the following:

Causing or attempting to cause any purchaser of the goods of any competitor to break any contract for purchase of such goods.'

Complaints have been made by manufacturers of harvesting machinery, both against the salesmen of the International Harvester Co. in its earlier years and against those of various companies before that company was formed, that they made a practice of following up their competitors and inducing farmers to back out of orders they had given.3

The Eastman Kodak Co., or its subsidiary, the General Aristo Co., is accused of attacking a competing manufacturer of photographic paper in such a way that the competitor's customers even shipped back goods they had received, with the result that he was bankrupted. The alleged method was a sudden refusal to sell, not merely to any dealer who bought the competitor's goods but even to any dealer who sold what he had on hand. William B. Dailey, another independent manufacturer of photographic paper, in presenting his complaint against the Eastman Kodak Co. to the Industrial Commission, related the case as follows:

They were doing quite a large business, and the trust offered to buy them out, which offer they refused, not thinking it large enough. They had a very nice

1 Report of the Commissioner of Corporations on the International Harvester Co., p. 306, et seq.

* Interstate Trade: Hearings before the Committee on Interstate Commerce, United States Senate, 63d Cong., 2d sess., on Bills Relating to Trust Legislation, p. 1169.

3 Report of the Commissioner of Corporations on the International Harvester Co, p. 324.

plant in Newark and were doing a good business and making a good deal of money. They did not sell out, so the trust boycotted their goods. The trust did not boycott their goods as quickly as ours. They commenced on ours the 1st of January, 1899, and they did not throw this paper out until about the 1st of September, 1899; but, on the other hand, when they did throw them out they prohibited the dealers from selling their goods when the dealers had a considerable stock on hand. The trust did not buy that paper out, and the dealers could not sell it, and did not know what to do with it. Consequently those dealers who had not paid the bills shipped it back to the American Self-Toning Co. The goods were perishable, and great quantities came back on the company's hands, and they lost a great deal of money. The accounts being small, if they had undertaken to sue all, they would have had a couple of thousands of suits on hand, and it looked as if it would not pay them. They were losing all their business, and it was not very many months until they were in a receiver's hands.1

Section 16. Enticement of competitors' employees.

Accusations are not infrequently made of attempts to entice away important employees for the purpose of embarrassing a competitor's business. In the celebrated case of People v. Everest, a prosecution of certain persons alleged to have acted in the interests of the Standard Oil Co., it was one of the grounds of complaint that they had conspired to entice certain skilled employees from the Buffalo Lubricating Oil Co., particularly Albert A. Miller, superintendent of the construction of its work, and the only man in the company able to superintend the manufacture of oil.2

Section 17. Espionage by corruption and bribery.

A part of the "restraint upon unfair competition" which the independent tobacco manufacturers asked the court to impose on the new corporations into which the tobacco combination was dissolved was that:

*

Each corporation which is to carry forward any part of the manufacturing business of the trust should be restrained * * from espionage on the business of any competitor, either through bribery of any agent or employee of such competitor or obtaining information from any United States revenue official.'

Many have proposed specific legislative action to the same effect. Thus Senator La Follette's bill for amending the Sherman Act proposed to declare every restraint of trade, under circumstances described, unreasonable and in violation of the act as to any party who

As the vendor, lessor, licensor, or bailor of any article spies upon the business of any competitor or secures information concerning his business, either through

1 Reports of the Industrial Commission, Vol. XIII, p. 187.

* Standard Oil Trust Hearings, 50th Cong., 1st sess., House Report 3112, pp. 815, 816, 945, 946.

Control of Corporations, Persons, and Firms Engaged in Interstate Commerce: Report of the Committee on Interstate Commerce, United States Senate, 62d Cong., Pursuant to S. Res. 98, with Hearings, Digest, and Index, p. 1221.

Ibid., p. 1779.

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