machines every year since it was formed. It has made workable over 100 different new machines, some of which perform operations formerly performed by hand and all of which are far better than those formerly in use. Taken in connection with reduction in royalties, shoe manufacturers by their use effect a saving of nearly 9 cents in the cost of making a pair of Goodyear welt shoes, or nearly double the royalty now paid. A greater number of practical patents in shoe machinery have been made effective in the past 12 years than in any other period of equal length since shoe-making began." 1

That the technical progress of the industry has been promoted by the United Company is denied by prominent shoe manufacturers. A group of them instrumental in organizing the Shoe Manufacturers' Alliance made the following statement: "At present [1912] practically all of the essential machinery used in bottoming shoes in this country is owned by a single corporation, which is dominated practically by one man. This is a condition permitting the exercise of complete and arbitrary control of our businesses. It is contrary to the very spirit of liberty, and as such humiliating to us as shoe manufacturers. It also necessarily tends to retard and to restrict improvements in shoe machinery. "That it does so restrict development will be clear to those who compare the progress of shoe machinery during the last 12 years with the advances made from year to year prior to that date. Shoe manufacturing in America is to-day efficient, and much of that efficiency is due to the extraordinary advances in shoe machinery made prior to the organization of the Shoe Machinery Trust. Nearly every one of the 30 years prior to 1900 witnessed some marked advance in shoe machinery. That was a period of open competition in the production of shoe machinery. Those who controlled the successful inventions reaped rich rewards. The activities of inventors and mechanics were stimulated, and the results were revolutionary in character. Wages increased, but the unit labor cost of producing shoes was being continually and substantially lowered.

"Since 1900 the development in essential shoe machinery has Roe, Journal of Political Economy, 22, p. 55.

not been marked by any important invention materially reducing the cost or improving the quality of work. Such new inventions as have been made are confined to details of minor consequence as compared with the advances made prior to the formation of the Shoe Machinery Trust. This check upon the development of essential shoe machinery is believed to be a necessary result of the formation of the combination. It has removed the stimulus of competition." 1

Mr. Charles H. Jones testified that it was the belief of men in the shoe business and in the shoe machinery business that the inventors of the United Company were allowed to work only along very narrow lines, and that they were not encouraged to develop original ideas. In fact, so he said, "it is directly against the interests of this company, in its machinery investments, to find revolutionary machines. They have got 90,000 machines, they claim, in the factories of the United States. These machines are producing them an enormous revenue. What possible inducement would it be for them to throw out one, two, or three of those machines and put in something very much better? They could not get any more royalty. They would have a very large machinery cost, but there would be no additional return." 3

That the United Shoe Machinery Company possessed no monopoly of inventive genius is proven by the Plant episode. Mr. Thomas G. Plant, a shoe manufacturer at Roxbury, Massachusetts, succeeded in inventing a set of bottoming machinery which, to say the least, had great experimental promise. The business of the shoe machinery trust, protected 'as it was by patents, bade fair to be interfered with, when the whole outfit, including Mr. Plant's shoe factory, was purchased (1910) by the United Shoe Machinery Company for $6,000,000.5

1 Report of the Senate Committee on Control of Corporations, pp. 2266– 2267.

2 Ibid., p. 2264.

3 Ibid., p. 2117.

4 This episode is described in Brief for the United States (no. 207), pp. 105

133.

5

$3,000,000 in cash and the balance in stock of the United Company having a par value of $1,500,000, but a market value of $3,000,000. 247 U. S. 49.

We will let Mr. Brandeis (now Justice of the Supreme Court) tell the story:

"He [Mr. Plant] was a very successful shoe manufacturer—a remarkably successful man. His concern was earning five or six hundred thousand dollars a year. His business had been built up through his own efforts and with his brother's aid. With a few about him he displayed admirable business ability, governing a business extending throughout the country. He undertook a task which was large, namely, of creating a competing shoemachinery system, and it involved the expenditure of several million dollars-between three and four million dollars. Now, with Mr. Plant's shoe business and with these machines which he had developed into a successful system-declared by some of the best manufacturers of the country to be superior to the United's he was in a position where he was entitled practically to any reasonable credit he might ask. The amount that he required to carry him along was about $2,000,000. He had property that was worth four or five million dollars. His shoe business was one of the leading shoe businesses in the country, and yet after he had completed his machinery system; after he had demonstrated the success of it and gotten the certificate of approval from some of the best manufacturers of the country, east and west, his credit was cut off absolutely. Men who were disposed to give credit after a few days withdrew."

"That was not accident. It was not the result of internal deliberation upon the question. It was undoubtedly the result of that influence exercised directly and indirectly by the powerful organization to which he was opposed. As a matter of fact this shoe machinery corporation is a financial power as much as it is an industrial power. The managers of the shoe machinery corporation are practically the controlling influence in the First National Bank of Boston. They are a very large influence in our leading trust company, and have important influence in the Hanover National Bank and other banks of New York. It has been the steady policy of the United Shoe Machinery Corporation to keep at all times a huge cash balance which was deposited in those various banks, evidently not so much for current use in the

business as for the financial control which they exercised through being large depositors in important banks. . . . I have very good evidence-absolutely reliable in my judgment-that one of the men who refused Mr. Plant credit, thought that his credit was perfectly good and was willing to give him the credit, but was not willing to oppose the important financial interests that intimated to him that they did not want him to have credit. You know how he happened to sell out his business to the Shoe Machinery Trust. Mr. Plant was driven to the position where the next day he had to meet perhaps half a million dollars of obligations and he simply could not get any money. He had been driven to the last ditch. He had been trying to raise some money through an arrangement with western manufacturers. They were in Boston for that purpose. They were not quite ready to agree to advance the large sum of money needed. It was necessary to have about a million dollars to meet the situation. He left these western manufacturers at about 8 o'clock. Failure to meet his obligations stared Mr. Plant in the face. He then went to the office of the counsel of the Shoe Machinery Trust to see the members of that corporation, and between 8 that evening and 5 o'clock the next morning the transaction was completed by which this wonderful competitive machinery system was turned over to the shoe machinery corporation. The officers and counsel were in conference all night to complete the transaction which involved something like $5,000,000, enough to enable Mr. Plant to pay his debts and to remain a rich man.'

" 1

Thus, said Mr. Brandeis, even in the ably managed United Shoe Machinery Company the inefficiency which is bred of monopoly manifested itself.2

The charge of banking pressure has been denied by representatives of the company. The president in a letter to the Senate Committee before which Mr. Brandeis told his story wrote that "the United Shoe Machinery Co., or anyone connected with it, never did anything to injure Mr. Plant's credit at the bank or to in any way affect banks in regard to Mr. Plant." 3 Representa1 Report of the Senate Committee on Control of Corporations, pp. 11882 Ibid., p. 1161. 3 Ibid., p. 1960.

1190.

tives of the company further charged that Mr. Plant's inventions in their then existing form could not have been utilized to the best advantage by the trade, but combined with the inventions owned by the United Company and incorporated in its machines they would advance the art of shoe-making materially. In fact-so they charged-Mr. Plant had no desire to supply the shoe manufacturers with machines; he had built up his line of machines to sell to the United Company.2 Whatever may be the merits of this controversy, it is admitted by counsel for the company that the improvements made by Mr. Plant were worth every cent that they cost the company; 3 and it would appear to be proven, therefore, that the United Company, with all its corps of inventors, did not entirely take the place of independent endeavor in promoting the technical progress of the industry.

3

The profits of the United Shoe Machinery Company come largely, of course, from the royalties on the use of the leased machines. The number of machines on lease in the United States on March 1, 1911, was 90,276.4 According to the president of the company, the amounts paid per pair of shoes for the use of all the principal royalty machines furnished by the company for the manufacture of the different classes of shoes, when accounts were paid within thirty days, were substantially as follows: 5

1 Report of the Senate Committee on Control of Corporations, p. 1959. See on this point 247 U. S 50-51, 87-89.

* Report of the Senate Committee on Control of Corporations, p. 2162. Judge Dodge of the Circuit Court declared this charge to be true. 222 Fed. Rep. 376.

3 Report of the Senate Committee on Control of Corporations,

p. 2162.

* Annual Report of the United Shoe Machinery Company, 1911,

P. 5.

5 Ibid., p. 7.