Problems in American Democracy Part 48

333. The Clayton Act of 1914.--The Clayton Act forbids "unjustifiable discriminations in the prices charged to different persons," and also prohibits the lease or sale of goods made with the understanding that the lessee or purchaser shall not patronize competing concerns. The Act specifies a number of other practices which const.i.tute unreasonable restraints of trade. Somewhat complicated limitations are imposed upon interlocking directorates, by which is meant the practice of individuals being on the board of directors of different corporations. [FOOTNOTE: The danger of the interlocking directorate, of course, is that individuals who are directors in two or more corporations may attempt to suppress compet.i.tion between those corporations. This may lead to monopoly.] The Act likewise forbids the acquisition by one corporation of stock in another corporation when the effect may be "to substantially lessen compet.i.tion" between such corporations, or "to tend to create a monopoly."

334. THE FEDERAL TRADE COMMISSION ACT OF 1914.--The second of the two Acts of 1914 created a Federal Trade Commission of five members, appointed by the President. The Commission has the power to require annual or special reports from interstate corporations in such form and relating to such matters as it may prescribe. At the request of the Attorney General, the Commission must investigate and report upon any corporation alleged to be violating the anti-trust laws. The most important power of the Commission is undoubtedly that of issuing orders restraining the use of "unfair methods of compet.i.tion in commerce." This clause aims at prevention rather than at punishment, and if its power is wisely used it will check monopoly in the early stages. Most authorities claim that in this regard the work of the Commission has already proved definitely helpful.

335. THE OUTLOOK.--Since 1911, and especially since the pa.s.sage of the two Acts of 1914, the trust situation has materially improved. The vague and wholly inadequate powers of the old Sherman Act have been clarified and supplemented by the more specific provisions of the Clayton and Federal Trade Commission Acts. Fairly adequate machinery for the investigation and prosecution of trusts is now provided. The present laws cover not only combinations making use of the old trust device, but also combinations employing other methods of exercising monopoly control. The Federal Trade Commission Act provides for publicity, so that public opinion may have a chance to enforce the principle of fair play and open compet.i.tion in business. The trust problem in the United States is not yet solved, but the careful control which we are now exercising over this type of organization justifies the belief that the trust evil will become less important as time goes on.

336. THE TRUST PROBLEM OF THE FUTURE. In connection with the matter of making anti-trust legislation more effective, a new and pressing problem is arising. This has to do with the necessity of distinguishing, first, between the legitimate and the illegitimate practices of trusts [Footnote: Large-scale combination or management allows important economies to be practiced. Plant can be used more advantageously, supervision is less costly, supplies can be purchased in large quant.i.ties and hence more cheaply, etc. The securing of these economies const.i.tutes a legitimate feature of large-scale combination or management.]; and second, between combinations which are monopolistic and combinations in which there is no element of monopoly.

We are coming to realize a fact which in Europe has long been a matter of common knowledge, namely, that trusts are never wholly and unqualifiedly bad. The law should not aim to destroy trusts, but rather should attempt so to regulate their activities that their economical features will be preserved while their harmful practices will be suppressed. Laws should also recognize the fact that many large-scale combinations have in them no element of monopoly, and that such combinations should be exempted from anti-trust prosecution. In drawing up anti-trust legislation, prohibitions and restrictions should be as concise and as definite as possible, both in order to facilitate the execution of the law, and in order to prevent hardships being worked upon combinations which have consistently observed the rules of fair play in compet.i.tive business.

QUESTIONS ON THE TEXT

1. Why is public interest in business necessary?

2. What is the nature of public interest in business?

3. What is the nature of monopoly?

4. What are the two types of monopoly? Give an example of each.

5. Describe the origin of the trust.

6. Explain clearly the meaning of the word "trust" as it is now used.

7. During what period of our history was trust development greatest?

8. In what sense have trusts abused their power?

9. What was the purpose of the Sherman act of 1890?

10. How did the act work out in practice?

11. What important development is a.s.sociated with the period 1911-1914?

12. What are the main provisions of the Clayton act?

13. What is the purpose of the Federal Trade Commission act?

14. Outline the problem of the future with respect to trusts.

REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter xxvii.

Or all of the following:

2. Durand, _The Trust Problem_, chapter i.

3. Ely, _Outlines of Economics_, chapter xiii.

4. Fetter, _Modern Economic Problems_, chapter xxviii.

5. Seager, _Principles of Economics_, chapter xxv.

QUESTIONS ON THE REQUIRED READINGS

1. What are the four methods by which industrial combinations have taken place? (Fetter, pages 433-434.)

2. What are the three types of trusts? (Durand, page 9.)

3. What is a pool? (Durand, page 9.)

4. Name some of the important trusts which were formed between 1890 and 1899. (Fetter, pages 435-436.)

5. Name some of the most successful trusts. (Seager, page 456.)

6. What is the relation of trust development to the tariff? (Seager, pages 464-465.)

7. What is the evil of over-capitalization? (Seager, pages 465-466; Ely, pages 221-223.)

8. What are the chief advantages claimed for the trust? (Ely, pages 228-230; Durand, page 28.)

9. What are some of the devices used in "unfair compet.i.tion"? (Ely, pages 239-240.)

10. What are the three ways of dealing with the trust evil? (Durand, pages l0-11.)

11. How has the trust evil been handled in other countries? (Ely, pages 245-246.)

12. What can be said as to the ultimate solution of the trust problem?

(Durand, page 30.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. The chartering of corporations in your state

2. History of anti-trust legislation in your state.

3. Outline the present laws of your state relative to monopolistic combinations.

4. Trust development in your state, or in your section of the country.

II