For a number of years after the Sherman Act was passed, actions under the law by the Attorney General of the United States were few; but in recent years, and especially in the past decade, numerous actions have been brought to dissolve combinations and to prevent cooperation. Perhaps the most famous cases which have been decided affirmatively were those of Northern Securities Co., the Standard Oil Co., and the American Tobacco Co. Two great cases which are still pending are the United States Steel Corporation and the International Harvester Co.

Prosecution under the Sherman law rests with the Attorney General. It is natural that action should have been brought by him in those instances in which offenders were most conspicuous and most unpopular. Altogether some hundreds of actions have been brought, and a number of the offenders have been found guilty and their organizations have been compelled to dissolve.

In some of the States, also, actions have been brought for the dissolution of combinations and contracts in restraint of trade.

COOPERATION TO CONTROL THE MARKET.

Notwithstanding the national law, which has been on the statute books for 27 years, and notwithstanding the State statutes, many of which have been on the statute books for 20 years or more, cooperation exists throughout the United States for every important standard article. This is true from the country crossroads to the great metropolis. At the country crossroads the two or three grocers charge the same prices for sugar or flour. In almost every city there are daily or weekly agreements by the dealers in regard to prices to be charged for standard articles that day or that week. For many articles, boards of trade gauge the market and fix the prices. In the great city there may be scores of dealers in anthracite; in the little town, two. In each case the price will be the same from each dealer in a given community. Precisely the same thing is true for ice, the antithesis of anthracite; and so on for every standard article.

DESTRUCTION OF COMMODITIES TO HOLD UP PRICES.

The cooperation and control of the market to keep up prices has in many cases even gone so far as to lead to the destruction of perishable goods. There is scarcely an important city of the country in which at some season of the year perishable vegetables, such as melons, squash, lettuce, beets, cabbage, etc., have not been allowed to go into the dump rather than to the market and thus lower prices. Prices have also been held up by keeping out of the market a vast quantity of the product for the time being. This is illustrated by

the coffee of Brazil. Often the sale of a less quantity of a commodity at a high price gives a larger total than the sale of a larger quantity at a lower price. This principle is well illustrated by the potato crop of 1916. The crop was short not only in the two chief producing States, Wisconsin and Maine, but generally. The smaller production realized a larger amount to many farmers for their half crop than for the full crop the previous year.

COOPERATION GENERAL.

It therefore may be said without fear of contradiction, that in the matter of prices there is cooperation between concerns of the same class for every standard article for all or a large part of the United States. This is inevitable under modern conditions, because it is so much more profitable to cooperate than it is to compete. Rapid transportation gives a steady flow of goods to any community. Telephone communication is instantaneous. The same class of dealers will all have standard articles, for which they will charge like prices. These statements, made many times in public addresses throughout the United States, have never been challenged.

The arrangements for cooperation are not written out in documents and signed, as formerly was the situation; but they are no less effective in their binding force, and instead of being sporadic, as was early the situation, they are almost universal.

FURTHER LEGISLATION TO CONTROL THE TRUSTS.

Because of the general dissatisfaction throughout the country with the existing situation, Congress in 1914 passed the law creating the Federal Trade Commission and a supplementary antitrust act known as the Clayton Act.

Before 1914, there existed the Bureau of Corporations, with authority to investigate into the practices of the various corporations and report to the Attorney General violations of the antitrust law. These powers went over to the Federal Trade Commission. Also, unfair methods of competition in commerce were declared to be unlawful, and the Federal Trade Commission was empowered to prevent the use of such unfair methods. The Clayton antitrust law also introduced a new principle in regulation, that practices and combination were prohibited which resulted in substantial lessening of competition.

It thus appears that antecedent to the war, while there was an abundance of natural resources and while there was an abundance of commodities for all, there was deep-seated dissatisfaction with prices, and the first steps had been made to regulate industry through the antitrust laws and through the Federal Trade Commission.

INADEQUACY OF THE ANTITRUST LEGISLATION.

By one group of people, including a number of political economists, it was held that, while the Federal Trade Commission had been beneficial in preventing unfair practices and by its watchfulness had made conspicuous violations of the antitrust law less common, the legislation of Congress did not afford a permanent solution to the problem of control of prices and quality.

They held that it has been proved that the laws of supply and demand and competition can not be depended upon adequately to control prices. They cited as evidence of this position the universal cooperation in the control of the market for all standard articles throughout the country. This group of men said, that since the law of supply and demand had wholly failed to introduce real competition, the same principle should be applied to standard articles that has been so successfully applied to the public utilities.'

Before there was regulation of the railroads the owners regarded their business as private and resented any interference on the part of the public. Under these circumstances there were alternating high and low prices. One day there would be cut-throat competition, during which both passenger and freight service would be performed at much below cost, and then the companies would get together again and fix such prices as the market would bear. Indeed, the fundamental principle as regards freight and passenger rates was to exact what the market would bear. In many cases the prices fixed were so high as not to comply with the law of maximum return which would have been given by lower rates because of the larger quantity which would have been handled. In addition to excess charges the uncertainty and variability of rates was seriously detrimental to business because the charges could not be forecast. Finally there were extensive uses of unfair practices, such as discrimination in rates between shippers and in various other ways. The indefensible methods included rebates and even drawbacks.

THE CONTROL OF THE PUBLIC UTILITIES.

It is not the purpose here to narrate the long contest and slow progress in securing control of the public utilities through the inter state and State commissions. To settle firmly the principle of con trol of the public utilities through the commerce commissions required some 25 years of severe and frequently bitter contest.

The principle of control of public utilities through commissions is now recognized as wise, both by the public and the owners of the public utilities; neither would go back to the chaotic condition under which the railroads were operated in accordance with the laws of supply and demand and competition.

1 See Concentration and Control, by Charles R. Van Hise. The Macmillan Co., 1912 and 1914.

It is now settled that, so far as the public utilities are concerned, rates must be fair, that they must be stable, and that there must be reasonable service. Changes in the rates either up or down must have the approval of the appropriate commission. While the commission itself does not directly fix freight rates, a proposed increase in the rates must be approved by the appropriate commission as necessary under the circumstances to give a fair return. Also, if it is proposed that the rates be reduced, the approval of the commission is likewise necessary. This provision has been found to be very important, for not infrequently by small utilities companies, rates have been placed so low as not to provide for depreciation, and bankruptcy was certain in the future.

The public may be injured just as much by allowing a public utility to depreciate in its efficiency as it is by too high a rate. The utilities statutes contradict the theory that the laws of supply and demand and competition are adequate to control rates, although this may not have been recognized by the legislatures making the laws.

THE PURE-FOOD LAWS.

During the past decade the public has generally recognized the complete failure of the laws of supply and demand and competition to produce quality for foods, drinks, and drugs. During the first decade of this century the pure-food and drug laws were passed by Congress for interstate commerce and by nearly every State of the Union, the majority of the States acting between 1903 and 1910, and the United States in 1906. Not only were these laws passed, but an agency was created, both for the United States and in each of the States, whose duty it was to see that the laws were complied with. Scarcely a decade after the passage of these laws it seems to us most extraordinary that we should ever have been willing to be deceived by false brands, to use adulterated medicines, and to eat poor and frequently harmful food bearing the name of wholesome products. It now seems amazing to us that the meat packers opposed most bitterly the public inspection of meats. Before that time diseased, unsanitary, and poisonous meats had been sold in large quantities.

COMMON FEATURE OF UTILITIES AND PURE-FOOD LAWS.

The essential common feature of both the public-utilities and the pure-food laws is that an agency is created which may be called a commission, or one of several other names whose duty it is to give its entire time to the protection of the public upon its own initiative. The agency in a given case may be a single man or several men.

Before the public-utilities and pure-food laws were passed a wronged individual had redress in the courts; but in most cases the

loss of the individual was small, and only in exceptional cases was this redress a practicable one.

The revolutionary feature of control through administrative agencies is that the individual is protected through the continuous activity of public officials, one of the primary duties of whom is to see that the laws are obeyed.

DESIRABLE TO EXTEND THE PRINCIPLE OF REGULATION.

The great gains resulting from the public-utilities and pure-food laws led a group of men to propose that the same principles be applied to all standard commodities. They took the position that the production, distribution, and sale of necessary standard articles are vested with a public interest just as are public utilities. They held that there is no essential difference between the United States Steel Corporation and the Pennsylvania and New York Central Railroads, except that the operation of the one has been declared to be vested with a public interest and the others have not been so declared. Can anyone doubt, when a single great corporation owns substantially half of the vast iron-ore deposits of the country and a large proportion of the coking coals necessary to produce iron products, and manufactures half of the iron and steel of the United States, that the operation of such corporation is not vested with a public interest?

It took the building of the world to produce the deposits of iron ore and the coal beds. They can not increase. They are natural resources, limited in quantity, available to mankind.

Can anyone seriously hold that the manner of their exploitation and the prices that shall be charged for them in the raw state and in manufactured form are not matters of public interest?

THE FEDERAL TRADE COMMISSION.

Believing these principles, it was proposed long in advance of the creation of the Federal Trade Commission that there be created Federal and State commissions that should have substantially the same powers for the standard products that have the public utilities commissions in regard to utilities. It was held that for a standard article, such as steel rails, sugar, flour, or meat, it is just as advantageous to have the price fair, reasonable, and stable as it is for the public utilities; and it was held that these advantages could only be secured, when cooperation to control the market everywhere exists throughout the United States, by regulation through administrative agencies.1

1 For a fuller development of the argument for governmental regulation for standard articles see Concentration and Control, A Solution of the Trust Problem in the United States, by Charles R. Van Hise (first edition, 1912; revised 1914. Macmillan).

12088-17-3