Illiil UNIVERSITY OF CALIFORNIA. SAN DIEGO ill! ii inn m in in ii T in || iimi • 3 1822 02199 5295 The New COMPETITIO Arthur Jerome Eddy ■■■ II ffiRtiRIflbtfiUBXtt*, SAN D'EGO 3 1822 02199 5295 lilt Social Sciences & Humanities Library University of California, San Diego Please Note: This item is subject to recall. Date Due U.CS.D. FEB 1 1 1997 NTERL I BRARY LOAN tjysi MAR 1 3 1997 CLEARED lJ CI 39 (2J95) uncr> THE NEW COMPETITION 'Competition Is War, and ' War Is HelV " THE NEW COMPETITION AN EXAMINATION OF THE CONDITIONS UNDERLYING THE RADICAL CHANGE THAT IS TAKING PLACE IN THE COMMERCIAL AND INDUSTRIAL WORLD— THE CHANGE FROM A COMPETITIVE TO A COOPERATIVE BASIS BY ARTHUR JEROME EDDY AUTHOR OF "THE LAW OF COMBINATIONS," ETC. FOURTH EDITION COMPLETELY REVISED WITH FULL TEXTS OF CLAYTON AND FEDERAL TRADE COMMISSION LAWS, AND COMMENTS THEREON FIFTH EDITION CHICAGO A. C. McCLURG & CO. 1916 COPYRIGHT. 1912. BY D. APPLETON AND COMPANY COPYRIGHT, 1913-1915. BY A. C. McCLURG & CO. Printed in the United States of America 0. V. Sail Printing (Cninpunii (Shiraoo TO STEPHEN S. GREGORY, ESQ., This book is inscribed as a slight recognition of his unselfish devotion to political and economic ideals, some of which may find inadequate expres- sion herein, and as a memento of many years of personal and professional friendship. The Author FOREWORD This book deals, first of all, with what is now going on — with Facts; secondly, with the Principles underlying ac- tual conditions ; thirdly, with Tendencies so far as they can be inferred from close and impartial consideration of facts and principles. No attempt is made to fit facts to a preconceived theory, or stretch any stubbornly held theory to cover unrelated facts. Such notions as the writer holds have been slowly developed during years of intimate contact with many forms of cooperation, and the best evidence to himself that he has been open-minded in his observations is that nearly all his early ideas regarding competition and cooperation have been forced to yield to the pressure of realities. The reader will also be interested to know that many of the suggestions — even to the most radical — have been tested in practice. In so far as the book has any merit whatsoever it is of as much value to the laborer as to the employer, to the country mechanic and merchant as to the large corporation and trust. Certain chapters — "The New Competition," "The Open- Price Association," "Brutal Competition," and "The Trust Problem, Segregation vs. Disintegration" — appeared in condensed form in The World's Work. FOREWORD TO FOURTH REVISED EDITION The friendly reception accorded this book has been far beyond the expectations of publisher and writer. Better still has been the practical and successful appli- cation of some of its suggestions by keen and progressive FOREWORD business men, who advocate in print and in public ad- dresses the adoption of the open price policy. The passing of the Clayton and Trade Commission Laws marks a radical step toward finer and fairer com- petitive methods ; hence the inclusion of those laws in this revised edition. Chicago, June, 1915. CONTENTS CHAPTER I. The Old Order Changeth II. What Is Competition ? . . . III. Competition Is War, and "War Is Hell" IV. Growth of Cooperation .... V. Brutal Competition .... VI. True vs. False Competition . VII. The Old Competition VIII. The New Competition .... IX. The Open-price Policy .... X. Open-price Association .... XI. Harmony XII. Relations with Customers . XIII. Relations with Sellers .... XIV. Relations with the Public . XV. Vanishing Industries .... XVI. What Is a Fair Price? .... XVII. The Trust Problem — Segregation vs integration XVIII. The Labor Problem — Integration vs. Aggrega tion XIX. Class Legislation and Discrimination XX. Constructive Legislation Appendix I. Conditions in Canada Appendix II. Conditions in England Appendix III. Conditions in Germany Appendix IV. Clayton Law .... Appendix V. Federal Trade Commission Law Index Dis- PAGB I 12 19 38 59 85 97 105 115 123 157 190 203 225 232 243 271 293 3i9 347 359 363 368 378 397 409 THE NEW COMPETITION CHAPTER I THE OLD ORDER CHANGETH "Competition is the life of trade." "Competition is the death of trade." One proposition is as true as the other according to the point of view of him who utters it. To the man who has downed his competitor competi- tion is the life of trade; to the competitor who is downed competition is death. Again, to the purchaser who buys bargains from mer- chants who in their jealous rivalry sell below cost, competi- tion is the life of trade ; to the merchants, one or more of whom must go to the wall, competition is fatal. To the public who buy for cost or less than cost when rivalry is fierce, competition may seem a good thing, but when the rivalry results in disaster, and later prices go up to a point sufficient to make good the losses of the survivors, with a profit added, competition is wasteful and costly. Nothing is more certain than that the community, the country as a whole, bears all the cost and all the losses of wasteful competition; whether it reaps the profits is another question. I 2 THE NEW COMPETITION The profits may be spent elsewhere, the losses — the waste of time, of energy, of money, in unsuccessful efforts to get trade, to establish a business, to build up an industry — cannot be shifted, they lodge at home, are borne in the long run by the entire community, and covered in the long run in the prices of products. So that to the community competition, so far from being the life of trade, may be the reverse. II Competition, blind, vicious, unreasoning, may stimulate trade to abnormal activity, but such a condition is no more sound, healthy "life" than is the abnormal activity of the man who has taken a little too much alcohol — one stimulant is like another, exhausting in the end. Competition is a fetish that men ignorantly worship, but the cult has had its day, the sanctity of the god is be- ing assailed, the people are waking up and asking: "What is this competition and why should it be hedged about and preserved?" The country merchant asks himself: "Why is it a good thing for me to undersell the man across the way and try to drive him out of business? Why is it a good thing for him to undersell me and try to drive me out of business?" If either succeeds, will not a stranger take the loser's place ? The country mechanic asks himself: "Why should I work for less than others in the foolish effort to starve them out of the village ? Why should they try to take the bread from my mouth by working for less than I must have to support my family? What gain is there in that sort of competition?" The labor union says to its members : "You shall not THE OLD ORDER CHANGETH 3 compete one against another by offering to work for lower wages or longer hours, that sort of competition is dead." The tendency with the unions is to go a step further and say : "You shall not even compete in the amount of work you do per day, but each man shall do so much and no more." A crude solution of a pressing problem ; a very curt answer to the proposition, "Competition is the life of trade." Ill The Socialist would eliminate competition altogether, a cardinal principle of his philosophy being that it is not only wasteful but inherently wrong, and the Socialist must be reckoned with. He is abroad in the land, he is making himself felt at the polls, he is winning and holding offices, he is causing the leaders of the older parties no little anxiety. Why? Because the people are becoming So- cialists? Not at all. Socialism as Socialism probably has little if any greater appeal to-day than it had a generation ago. It will always have its ardent followers, but in its more logical form it is too abstract a theory to be understood and attract generally. Its practical suggestions are absorbed by older political organizations, with the result that the Socialist party is ever a band of enthusiasts "crying loudly in the wilderness." The strength of Socialism at the moment lies in the fact that some of its demands coincide with the tendencies of the hour. Say, if you please, the world has caught up with Socialism in certain directions, and propositions that seemed revolutionary twenty-five years ago — yes, ten years ago — are now debated as reasonable, are even turned into laws. More or less unconsciously the labor movement has 4 THE NEW COMPETITION traveled converging lines with Socialism. Each repudiates the other, yet both have much in common, and of late the sympathetic ties are being recognized. Without quite knowing it they are in complete accord on the fundamental proposition that competition, as hereto- fore understood and practiced, is an evil to be suppressed. What partially blinds Labor Unionism to the viciousness of competition is the so-called "conflict between Capital and Labor." This supposed conflict leads labor to encourage "cut-throat" competition where capital and profits are concerned, while decrying it where labor and wages are involved — an illogical position. Some Socialists in their hatred of capitalism uphold laws — such as the anti-trust laws — that are supposed to promote competition, quite overlooking the obvious truth that such legislation is contrary to all the tenets of Social- ism, being the over-ripe fruit of individualism. In the main the more philosophical Socialist writers look upon the "trust" as the final stage of "Capitalism," the fore- runner of the Socialistic community. For our present purpose it is sufficient to point out that two very large factors in modern Society are opposed in theory and practice to competition as commonly under- stood. Unionism will have none of it in the world of labor. Socialism would have none of it in the world at all. When to the opposition of these two factors is added the opposition of Capitalists, Society would seem to be pretty nearly a unit to the effect that competition is not the good thing it is said to be. IV In Europe as well as America there is a ferment of new ideas, of protest, of doubt, of discontent regarding THE OLD ORDER CHANGETH 5 this matter of competition. The old ideas do not seem so sound, they do not ring so true as they once did; they do not fit present conditions, there is something wrong. As a matter of fact, they never were true, they never were more than superficially sound. f Competition was the life of trade only when trade was piratic, merciless. Competition, good, old-fashioned "cut- (' throat" competition, belongs to trade's buccaneering days when every industry flew the black flag and the appearance of a competitor meant war to the knife. Conditions have changed, men no longer look upon one another as industrial and commercial brigands. We are far from an era of universal good feeling, of mutual con- fidence, of generous and hearty cooperation, but the world is working that way. Steam and electricity have brought countries, cities, in- dividuals, so close together the old feeling of bitter an- tagonism is softened. The real competitor of the country merchant is not the fellow on the opposite corner, but the mail-order store a thousand miles away. The real com- petitor of the mine-worker in Pennsylvania is not the man in the next shaft, but the immigrant boarding the steamer at Naples. The only competition the laborer in California fears is from the Orient. Within a hundred years the world has narrowed to a very small area. Distance has been well-nigh annihilated; men, once far apart and strangers, are now near neighbors ; in close contact they speak to one another with ease. The competition of isolation is no longer possible, it never was profitable, it has become disastrous; yet a very respectable section of the body politic — louder than all, the politicians — cry out for it ; they would stem the tide of progress and restore the obsolete. It is all futile. The old competition is passing beyond recall. The new is coming, coming as surely as the con- 6 THE NEW COMPETITION quest of the air is coming, coming as surely as other and greater inventions and discoveries are coming to weld men closer together. All the King's horses and all the King's men cannot put competition back again. It is fallen, cracked, and forever spilled. In a recent case in the Supreme Court of the United States a Justice, distinguished for his philosophical insight and literary expression, said : "I think that we greatly exaggerate the value and im- portance to the public of competition in the production or distribution of an article, as fixing a fair price. What really fixes that is the competition of conflicting desires. We, none of us, can have as much as we want of all the things that we want. Therefore, we have to choose. As soon as the price of something that we want goes above the point at which we are willing to give up other things to have that, we cease to buy it and buy something else. Of course, I am speaking of things that we can get along without." * Other courts have said: "Excessive competition may sometimes result in actuai injury to the public, and competitive contracts, to avert per- sonal ruin, may be perfectly reasonable. It is only when such contracts are publicly oppressive that they become un- reasonable and are condemned as against public policy." 2 "While, without doubt, contracts which have a direct tendency to prevent a healthy competition are detrimental to the public, and consequently against public policy, it is equally free from doubt that when such contracts prevent an unhealthy competition and yet furnish the public with adequate facilities at fixed and reasonable rates, they are 1 Dissenting opinion of Justice Holmes, in Dr. Miles Medical Cc vs. Park & Sons Co., 220 U. S. p. 373. 2 People vs. North River Sugar Refining Company, 54 Hun. 354, and N. Y. S. 406. THE OLD ORDER CHANGETH 7 beneficial and in accord with sound principles of public policy. For the lessons of experience, as well as the deduc- tion of reason, amply demonstrate the public interest is not subserved by competition which reduces the rate of trans- portation below the standard of fair compensation." * "I think it would be unsafe to adopt as a rule of law every maxim which is current in the counting room. It was said some three hundred years ago that trade and traffic were the life of every commonwealth, especially of an island. 2 If it be true also that competition is the life of trade, it may follow such premises that he who relaxes competition commits an act injurious to trade; and not only so, but he commits an overt act of treason against the commonwealth. But I apprehend that it is not true that competition is the life of trade. On the contrary, that maxim is the least reliable of the host that may be picked up in every market place. It is, in fact, a shib- boleth of mere gambling speculation, and is hardly en- titled to take rank as an axiom in the jurisprudence of this country. I believe universal observation will attest that for the last quarter of a century competition in trade has caused more individual distress, if not more public injury, than the want of competition. Indeed, by reducing prices be- low or raising them above values (as the nature of the trade prompted), competition has done more to monopolize trade, or to secure exclusive advantages in it, than has been done by contract." 3 It is interesting to find such expressions regarding com- petition from the mouths of judges called upon to decide actual cases involving competition. Theirs is no academic theory evolved in the seclusion of the closet, but con- clusions reached in the adjustment of controversies be- tween man and man. There are plenty of courts that have held otherwise, that have talked about competition in the old way, that 1 M. & L. R. R. Co. vs. Concord R. R. Co., 66 N. H. ioo. 1 City of London's Case, 8 Co. 125. 'Kellogg vs. Larkin (1851, 3 Pinney Wis.) 123, 56 Am. Dec. 178-181. 8 THE NEW COMPETITION have, in short, treated it as a fetish, instead of critically examining its claims to immunity. VI The world is filled with men who repeat, parrot-like, what others have said; that is the easy, the natural, the safe thing to do. It may be just as well that the over- whelming majority of men do this, for stability depends upon tradition, but progress follows in the footsteps of him who challenges, who utters the insistent "Why?" who accepts nothing on hearsay, but goes straight to the root of things and finds out for himself. It is the business of the office-seeker and holder to curry favor — that is, he thinks it is, and it is this convic- tion that governs his tongue. He speaks the things he thinks the people wish to hear. He does not know they would like to hear the new thing and the true thing. He does not realize that while he is repeating what he has heard and what he has read, reiterating the worn-out phrases, there may be those in his audience who are think- ing about coming things, who are eagerly listening for just one word that will throw some light on the problems of the day, and they are the only ones worth talking to. Of what use is it to talk to the laborer or the small merchant about the glorious benefits of the old competi- tion when they know it is the old competition that is stifling them, when the laborer knows that his Union has absolutely suppressed competition in his particular trade, when the merchant knows that if the competition to which he is being subjected at the moment continues six months, he will be bankrupt ? The man who hires labor or buys goods may applaud the familiar utterance, but even he has his competition in THE OLD ORDER CHANGETH 9 what he has to sell, and while he would like to destroy the labor union and prevent the merchant from cooperating with other merchants, he, himself, has his own interests he would like to protect by some form of combination with his competitors. While these words are being written the Governors of a number of Southern States are conspiring together to devise a scheme whereby their cotton-growers will get better prices for their cotton, whereby competition will be checked, production controlled, and, in the end, the mills be made to pay more for raw material. A laudable enter- prise surely — from the point of view of the grower — but how about the consumer, and how about the law, and how about the speeches of those very Governors in support of those laws which say competition must flourish unfettered ? Congressmen and Senators from the cotton-growing States are especially eloquent in this behalf, the Sherman law has no more fiery and uncompromising defenders — when Northern trusts are involved. VII Efforts to suppress competition in products of the soil are not confined to the Southern States. In the North high political officials have lent the sanction of their presence and approval to movements to control prices of farm products. In fact, so far as the politician is concerned, he sees no evil in the union of laborers, cotton-growers, to- bacco-growers and farmers — i. e., voters — to absolutely fix prices ; they may combine, strike, boycott, pool, store, de- stroy, do anything they please, but let the capitalist, the employer, the manufacturer, do a tithe of these things and there is trouble. To the politician the combination of labor can do no io THE NEW COMPETITION wrong, the combination of capitalists can do no right. Only the judge who is called upon to administer the law to all men alike sees no distinction, and, following the letter of the law, impartially condemns combinations of both, thereby proving the futility of the law, for if there is any- thing certain it is that combinations of labor are with us to stay in one form or another, and it is no whit less certain that combinations of employers are here to stay, and it is for society to make the best use of both. VIII Times are changing and, with the times, business meth- ods. Secrecy is yielding to publicity, men are coming out into the open and dealing more fairly with one another. As an inevitable result competition is undergoing a change, the old is giving way to a new, true competition is taking the place of the false. The country feels that things are happening, but they are happening so fast it does not quite comprehend. The people do not understand the new competition that is slowly but surely taking the place of the old, courts do not under- stand it, legislatures do not understand it, therefore they oppose it and vainly try to preserve the old and vicious order of things — try to make men fight when they no longer wish to fight, to make them destroy one another industrially and commercially when they are striving to establish industrial and commercial peace. The old cry, "Competition is the life of trade," is yield- ing to the new cry, "Cooperation is trade." The old cry is the echo of primitive and barbaric conditions ; it never did mean competition on terms of fairness and equality, it meant the relentless suppression of the weak, the merciless THE OLD ORDER CHANGETH n triumph of the strong, it meant methods so questionable they are now condemned as criminal. The old, with its unfair advantages, its secret prices and rebates, its conspiracies to ruin competitors, help favored parties, localities, towns, at the expense of others, is passing; the new is taking its place, is winning its way in spite of ignorant clamor, regardless of legislative enact- ments, in the face of hampering decisions; it is winning its way because, fundamentally, it is right — it is progress. CHAPTER II WHAT IS COMPETITION? What is competition? The man in the street laughs at the question: "Why, everybody knows what competition is." "Well, what is it?" "It is the effort of the other fellow to get my job," the laborer cries. "It is the effort of the other man to get my customers," the merchant and manufacturer respond. "It is the fierce struggle for life and means, the elimina- tion of the weak, the survival of the strong," the biologist says, and dismisses the subject. Is it so? Then competition is not worth preserving; it is a bio- logical rather than an economic, a natural rather than a hu- man condition; it is part of the philosophy of evolution rather than a matter of ethics; it is on a level with those relentless forces with which men are striving; like the familiar doctrine of the "survival of the fittest" it is more than non-human it is inhuman. II Granted that the universe is an evolution, that man is an evolution, that society is an evolution — that all are products 12 WHAT IS COMPETITION? 13 of that one fundamental law, the survival of the fittest, which is neither more nor less than competition in its fierc- est form — what then? Do we pass laws to foster this competition, to make it more certain that the weak disappear and the strong sur- vive? Do we bend all our efforts to that end? No, only in the breeding of plants and animals do we try to aid the law of natural selection, and even with animals we are tender toward the sick and old — toward those nature is trying to eliminate. We even pass laws to protect them and organize societies to help them. When it comes to human beings only savages permit the law of the survival of the fittest to work unchecked; they expose infants, abandon the sick, kill the aged — they are evolutionists without human compunctions, they are biologists without hearts. Civilized man, in his struggle for existence, forgets that law which the evolutionist says is the foundation of progress. Were it not for a few savage examples to the contrary we might say he fights it instinctively. But fight it he does with laws, with customs, with moral sanctions, with social conventions, with individual standards of right and wrong, with praise for those who sacrifice their lives for others, with words of scorn for the selfish and cowardly — in short, with almost every legal, so- cial, and moral force do men fight for the preservation of the sick, the weak, the helpless, the very beings the cold doctrine of evolution says should be eliminated. Of the struggles for existence in the animal world Huxley said, "The creatures are fairly well treated and set to fight; whereby the strongest, the swiftest, the cun- ningest, live to fight another day." Of the struggle in the human world he says in a later lecture, "Social progress means a checking of the cosmic forces at every step, and the substitution of another, which 14 THE NEW COMPETITION may be the ethical process ; the end of which is not the sur- vival of those who may happen to be the fittest, in respect to the whole of the conditions which exist — but of those who are ethically the best." And the proof of the ethically best, of the purest and loftiest souls, lies in the care taken of, and the sacrifices made for, the weak, the idiotic, the insane, the criminal — if you please. In the language of another, "If it be true that reason must direct the course of human evolution, and if it be also true that selection of the fittest is the only method available for that purpose, then, if we are to have any race improve- ment at all, the dreadful law of the destruction of the weak and helpless must, with Spartan firmness, be carried out voluntarily and deliberately. Against such a course all that is best in us revolts." Ill In his social relations man has made vast strides in ad- vance of the bald biological proposition, progress is a sur- vival of the fittest. In his commercial and industrial relations he is in that savage condition wherein the "destruction of the weak and helpless" is carried out, not only "voluntarily and deliber- ately" and "with Spartan firmness," but with precisely the satisfaction a Roman audience watched one gladiator slay another, or a wild beast devour a Christian. A distinguished professor says: "The big company has a right to beat the little one in an honest race for cheap- ness in making and selling goods; but it has no right to foul its competitor and disable it by an underhand blow." l That is the theory of the thorough-going evolutionist — > 1 Prof. John B. Clark, "The Control of Trusts," p. 15. WHAT IS COMPETITION? 15 the "big fellow" has the right to survive because he has the brute force, the "little fellow" must and should go to the wall in order that the "fittest" may live and the com- mercial race be improved ! Strange how these crude propositions drawn from nat- ural development persist in the field of economics long after they have disappeared from the field of ethics. In all social, mental, moral progress, in their daily lives, men give the lie to the proposition that the strong have the right to elbow the weak to one side ; on the contrary, it is recognized that the most precious privilege of the strong is the succoring of the weak — that is life at its best. If such is the law of man's social, intellectual, and moral development, why should not the same high obligations ob- tain in his commercial and industrial development ? That is a question every writer, every speaker on the subject should ask himself, and remain silent until the answer comes, for at heart it is not a question of making money but of making men. It is a question every legislator should be able to answer before he frames new laws to encourage the old, the nat- ural, the brutal competition. Why pass laws to help one man to get the work, the customer, the livelihood, the very bread of another? Why copy nature in her most drastic mood? IV Nature is merciless, she knows no pity. "Survival of the fittest" is her goal. The way is strewn with corpses of the weak, with the debris of the rejected. Nature has no use for the lame, the halt, and the blind ; her prizes are to the strong, and to only those of the strong who have no heart, who unfeelingly trample on the necks of others. The 16 THE NEW COMPETITION slightest hesitation is fatal ; the man who lags behind to lend a helping hand never catches up; the man who lifts the weak, carries the old, sits by the side of the sick, is a fool. Nature's competition is a battle in which no quarter is given. Why should man compete so blindly, so mercilessly? Why should we seek to make it a law of the industrial world that only the young, the strong, the vigorous shall find employment? Why should it be a law of the commercial world that only the big, the rich, the powerful shall survive? Because that is the natural order of things it does not follow it should be the human. The human law should be not the survival of the strong, but the survival of all, of the best there is in all, and, oftentimes, there is more of good, more of real value to humanity in the weak than in the strong. The decrepit body may be of little use to nature, but to mankind it may possess a priceless content, and even though the aged are a burden from a material point of view, they are needed to develop those qualities of sym- pathy and unselfishness, of devotion, and love that lift men toward the angels. No, competition — true competition — is not the mere striving of two men to get the same job, the same customer, the same material advantage — it must be something finer and better than that. V Toward contests for industrial success the attitude of the American public is that of the eager spectator at a prize fight — the fiercer, the bloodier the contest the better; the slightest sign of relaxation on the part of either con- testant, the slightest sign of a disposition to quit is greeted WHAT IS COMPETITION? 17 with howls of derision, the fight must go to the limit, there must be no let-up before the final blow, and the greater the punishment received by both the more successful the event — from a sporting point of view. With just that indifference to the fate of the individual does the public watch two merchants or manufacturers struggle for supremacy. Everybody knows the contest can- not last long, that one or the other, perhaps both men, will go into bankruptcy to the detriment of creditors, employees, families. Everybody knows that when one is disposed of somebody — and that "somebody" is the public — must pay the cost of the wasteful rivalry, that, in the long run, no good can result from men trying to ruin each other by sell- ing goods below cost, yet if the two try to get together to put an end to the disastrous competition they are liable to prose- cution as criminals. If they organize a company to own and operate both their stores or factories the combination is a monopoly, or in restraint of trade, and a violation of law. The public, like the spectator at the prize fight, howls in anger at the slightest sign of cessation of hostilities before a "knock-out." That sort of competition is not worth while. It is not worth fostering and preserving. It savors of the dark ages of progress, of those primitive and savage conditions when the weak were abandoned, the old were killed. It is a curi- ous persistence of a natural, a biological law in the indus- trial world long after man in his social and moral relations has advanced to higher and finer ideals. Morality has made progress in every department of hu- man thought save that of economics. Ethical standards have been set up in every branch of human activity save that of making money. 1 8 THE NEW COMPETITION VI Of all the rivalries in which man engages brute competi- tion in the production and distribution of wealth is the most contemptible, since it is the most sordid, a mere money-making proposition, unrelieved by a single higher consideration. This is not the fault of competition — of rivalry as such — but of our industrial economy. There is nothing in- herently wrong in rivalry in the large sense of the term; on the contrary, it is a most powerful incentive toward per- fection, ethical, aesthetic, and material ; it is the most power- ful incentive toward cooperation, which is the foundation of progress. Rivalry — competition in its broadest significance — is the earnest, intelligent, friendly striving of man with man to attain results beneficial to both; it is neither relentless nor indifferent; it is neither vicious nor vindictive, it is not in- considerate, nor is it wholly selfish; it is not mechanical, but human, and should be, therefore, sympathetic. CHAPTER III COMPETITION IS WAR, AND "WAR IS HELL" Academic definitions do not help much toward ascertain- ing what competition really is. One says it is the "aspiration of two or more persons to the same office, dignity, or other advantage," which is about as illuminating as to say it is a — word. A little more specifically it is said to be, "the rivalry which exists between manufacturers, merchants, etc., whether concerning the quality of their products, their mer- chandise, etc., or concerning prices, with a view to sharing the profits of the same branch of commerce, industry, etc." x 1 A writer in the last edition of the Encyclopedia Britannica says: "Competition, in the sense in which the word is still used in many economic works, is merely a special case of the struggle for survival, and, from its limitation, does not go far toward explaining the actual working of modern institutions. To buy in the cheapest market and sell in the dearest; to secure cheapness by lowering the expenses of production ; to adopt the less expensive rather than the more expensive method of obtaining a given result — these and other maxims are as old as human society. Competition, in the Darwinian sense, is charac- teristic, not only of modern industrial states, but of all living organ- isms ; in the narrower sense of the 'higgling of the market,' as found on the Stock Exchange, in the markets of old towns, in medieval fairs and Oriental bazaars. In modern countries it takes myriads of forms, from the sweating of parasitic trades to the organization of scientific research. Economic motives, again, are as varied as the forms of competition and their development is coeval with that of human society. "They have to be interpreted in every age in relation to the state of society, the other notions or ideals with which they are associated, the kind of action they inspire and the means through which they operate. Apparently the same economic notions have led in the same age and 19 20 THE NEW COMPETITION A better definition is that it is "The effort of different individuals engaged in the same line of activity each to benefit himself, generally at the other's expense, by render- ing increased service to outside parties." x A German writer separates the struggle for existence into two divisions, (a) struggles for domination, and (b) struggles for annihilation. "The struggle between buyer and seller in a bargain is of the former sort; each tries to make the other serve him as fully as possible, but does not desire his annihilation. The struggle between different buy- ers, or between different sellers, - is of the latter class ; each is desiring to get rid of the other so far as he can. Competi- tion, then, is the legalised form of the struggle for annihila- tion in modern life. . . . Legalized because of its tendency to benefit an indefinite number of third parties, and thus become a means of collective economy of force and of general benefit to society." 2 II Why is it so difficult to define competition? Why are the definitions suggested so vague in terms they include al- most every motive that controls human effort ? in the same nation to monopoly and individual enterprise, protection and free trade, law and anarchy. In our own time they have inspired both the formation of trade combinations and attempts to break them up, hostility to all forms of state interference, and a belief in collec- tivism." 1 "Dictionary of Philosophy and Psychology," edited by James Mark Baldwin, Ph.D. The definition and article are by President A. T. Hadley, of Yale, who goes on to say : "Important as the term 'com- petition' is, there have been few attempts to define it." It is not taken up in Malthus' "Definitions." Mill lays down important propositions about its action, but seems to assume the fundamental meaning of the term as self-evident. Walker defines it by antithesis, as opposed to combination, custom, statement. Marshall says : "The strict meaning of competition seems to be the racing of one person against another with special reference to the bidding for the sale or purchase of any- thing." 2 Article above referred to. COMPETITION IS WAR 21 The trouble is we attribute too much to competition; it is either feared as an evil or worshipped as a fetish, it is held accountable for nearly everything that happens, not only in the industrial and commercial world, but in the de- velopment of society, of even life itself; it is a biological, a sociological, a philosophical, an economic, a political term, used indiscriminately in a thousand connections, meaning one thing here, another, and fundamentally different thing, there. In short, competition is on a level and practically syn- onymous with terms such as "struggle," "contest," "ri- valry," hence its broadest definition can be no more specific than their definitions. Everybody knows what a competition is, but no one can say off-hand what competition is; everybody knows what a struggle is, but few could give a definition of the term so comprehensive as to include every conceivable struggle. That is the trouble with defining competition generally. It must be considered, not necessarily defined, in connection with each particular rivalry. In its elements competition is : 1. The effort, 2. To secure, 3. An advantage over others. But the same is true of "contest" and "rivalry." Yet everybody knows, or has the feeling, that competition has a meaning of its own, especially when used in connection with trade and commerce, and so it has, but it is a meaning that cannot be defined because it is not so much a term of specific significance as it is the appropriation by long usage of a particular word to a particular connection. "Contest is the life of trade," or "Rivalry is the life of trade" would answer just as well and mean as much. Biology has appropriated the word "struggle" — "strug- 22 THE NEW COMPETITION gle for existence" — "competition" for existence would have answered just as well. The biologist may lay great stress upon the struggle for existence as a biological fact, he may even go so far as tq elevate the fact to the dignity of a condition of progress, but he does not set up his "struggle" as a fetish to be pro- tected by law, to be preserved and encouraged at all hazards, as political and economic writers insist their competition shall be fostered. The humane philosopher accepts the "struggle for ex- istence," but he accepts it reluctantly and regretfully; he seeks ways to modify it, he gladly looks to human sym- pathies and human cooperation to alleviate, if not com- pletely nullify, the harsh law. In sharp contrast, the old-school economist — followed by legislatures and courts — magnifies his competition to the proportions of a god, a god like unto those savage idols that demand the blood of human sacrifices, of women and little children. Ill The cry that competition must be preserved, must not be curtailed, must not be suppressed, is a senseless cry; in and of itself it has no more meaning than a cry that "strug- gle must be preserved," "rivalry must not be suppressed." Some competitions, like some struggles, should be rigidly suppressed by law, others by custom, others by voluntary cooperation. Per contra, there are many forms of com- petition that are so beneficial they should be neither sup- pressed nor curtailed. It all depends upon the particular competition, the par- ticular form of rivalry. If the average man were asked the following questions COMPETITION IS WAR 23 he would probably make the following replies — each con- taining a broad qualification : "Do you believe in fighting?" "Why no — but there are times " "Do you believe in contests?" "It all depends upon what they are." "Do you believe in rivalry?" "Of course, when it is " "Do you believe in competition?" "Generally speaking, yes, but, hold on, what sort of competition do you mean?" The man who says he believes in competition ninety- nine times out of a hundred has in mind the rivalry of those who are trying to sell him goods — he thinks that is a good thing. The man who says he does not believe in competition has quite another so~t of competition in mind and ninety-nine times out of a hundred it is his own rivalry with others in the same business to sell goods — he would very much like to modify or suppress that competition. One does not have to go far afield for illustrations of the results of competition in the world of labor, trade, and industry to prove that, so far from being a good thing — much less a sacred thing — it is as disastrous to the material advancement of the community as war, and disastrous in very much the same manner — in appalling waste of time, effort, money, and life, for competition is war, and "war is hell," as General Sherman said. The thoroughgoing evolutionist, the hero-worshipper, the believer in the superman, will argue that war has made man what he is and reason to the conclusion that humanity must be left free to "fight it out." To that argument and that conclusion there is no ade- quate answer, since no man can say what the world would be to-day if there had been no wars, no struggles, no fierce 24 THE NEW COMPETITION competitions resulting in the elimination of the weak; but one thing is certain, that, while there are and will be for generations — possibly forever — wars and struggles, and fierce competitions in which no mercy is shown, the intel- ligence and better impulses of mankind are opposed; the peoples of the earth may fight, but they do not believe in fighting. IV The foundation of society is not competition, but co- operation. The family is a cooperative unit. Cain and Abel com- peted over their offerings and their rivalry resulted in mur- der. To-day the hand of brother is raised against brother as the result of fierce struggles for wages, place, position, power — the slugger and the dynamiter are Cain's succes- sors. The tribe, the village, the state, the nation, are all stages of cooperation, and the perfection of each depends upon the effectiveness of the cooperation. Not until the thirteen colonies were willing to sink, in a large measure, their jealousies and cooperate was it pos- sible to form this Republic, and the very term "United" States signifies the cooperative basis of our national ex- istence. The competition between the North and South cul- minated in attempted secession — an assertion of individual- ism — and a war that cost the lives of nearly a million men to reestablish federal cooperation on a lasting basis. Without cooperation progress, life itself, is impossible. It is a law of brute nature that animals cooperate for a time to feed and protect their young. Only in the very lowest forms of life is this cooperation lacking; the higher the form the greater the cooperation necessary if the species is COMPETITION IS WAR 25 to be preserved. In the case of man the cooperation of parents is supplemented by that of the tribe, the community, the state, and, in the better days to come, the woefully im- perfect present cooperation of the state will develop into an intelligent and far-seeing interest compared with which that of the parent to-day is ignorant and inefficient. In the world of trade and industry success is the result of cooperation. Division of labor is cooperation. The vital condition that each man may devote himself to the pursuit for which he is best fitted depends upon coopera- tion. Cooperation is interdependence, a sacrifice, and, at the same time, a gain of independence. The farmer depends upon the manufacturer for his goods, the manufacturer upon the farmer for his food, but this very dependence leads to larger individual independ- ence, to broader opportunities for individual development. If each man were obliged to produce all he needs the world would be in a condition lower than that of the lowest known savages, for with even them there is some division of labor, some cooperation. The history of every people of every nation has been the history of the rise and fall of cooperation. The history of every industry has been a story of the rise and fall of cooperation. Every partnership, every association, every corporation, every trust is cooperation — for what? To produce results, to get larger returns for time and money spent. Whether this form or that form of cooperation is right or wrong is not here under discussion ; only the effect of co- operation as distinguished from competition. The terms as heretofore used are diametrically opposed. It is the purpose of this book to show wherein the New Competition is a highly developed form of cooperation, but the New Competition has little in common with the old. 26 THE NEW COMPETITION So far from promoting progress, competition stays and hinders; it generates the bitterness, the jealousy, the dis- trust that disintegrate families, partnerships, classes, states, and nations. Competition is progress only in the sense that the war of the Rebellion was progress, in that it resulted in a stronger cooperative commonwealth; a result that intelligent men should have achieved by peaceful means. Rightfully viewed, there is not a single good result ac- complished by man in politics or economics commonly at- tributed to wars, struggles, competitions, that should not be attained by intelligent and far-sighted cooperation. That it should be argued that the lives of a million men, the tears of more than a million widows and chil- dren were necessary to more firmly cement together the states of this union is a lamentable confession of human in- competency. The argument that it is necessary for countless numbers of men, women, and children to freeze, starve, suffer an- nually in order that competitive conditions in the labor and industrial world may be maintained and society profit by their misery, is again a lamentable confession of human in- competency. The proposition that thousands of merchants and man- ufacturers, of builders and contractors must be encouraged to ruin each other in order that the community may get goods at less than cost is another lamentable confession of human incompetency. The blind worship of competition is the root of all these errors. COMPETITION IS WAR 27 The benefits of competition have been classed as fol- lows ! : 1. "As the regulator of prices, this is the one on which the greatest stress has been laid in the past." 2. "As a stimulus to productive efficiency and espe- cially to the introduction of new methods." 3. "As a means of educating the community in rational egoism, teaching its members that they must seek their industrial success, not in giving as little as possible to those with whom they deal, but as much as possible." As a matter of fact, competition leads to precisely con- trary results, and the fiercer the competition the more disastrous the outcome. 1. Cooperation, whether voluntary or involuntary — compelled by law — is the only regulator of prices. Com- petition, free and unfettered, is absolutely destructive to all stability of prices. Before the Interstate Commerce Law, regulating- railway rates, competition reigned and rates varied arbitrarily from day to day, from person to person, from place to place, with countless rebates and secret fa- vors; to a certain extent the railroads, from time to time, cooperated to control conditions by pools and associations, but not until the Government stepped in and called a halt to vicious competition were rates regulated in any permanent manner. The proposition is too simple to call for demonstration since every man knows that it is the appearance of a com- petitor that causes prices and wages to drop, and every 1 By President Hadley, in the article referred to. 28 THE NEW COMPETITION labor-unionist, and every small manufacturer know that where cooperation is effective wages and prices are more constant. The very theory of our anti-trust laws is that they sup- press cooperation, and, by encouraging competition, pro- mote the widest possible fluctuations in prices — for the sup- posed benefit of the consumer who is — the law forgets — first of all a producer. 2. This error is more firmly grounded. If competi- tion is a disintegrating and wasteful force then it cannot possibly be "a stimulus to productive efficiency," and it is not. Its effect is altogether disheartening and discouraging. It may seemingly result in introduction of new methods and new inventions, but progress in these directions is due to broader influences. The great inventions of the world were not due to com- petitive conditions — competition had no more influence on Watts than on Newton. Bell's interest in the telephone was primarily scientific. Few inventions have been so perfect at the outset that competitors could at once make use of them. On the contrary, it has usually required long co- operation of labor and capital, in the face of jeering op- position, to bring an invention to practical perfection. It is true artificial monopolies resting upon grants from the crown or state have been notoriously indifferent to ad- vancement, but not so with monopolies resting upon the ability of men to hold trade; they are as quick to develop improved methods as if they had many competitors. The Standard Oil Company was charged with having been for a generation or more a monopoly, yet no one would claim its methods were not up to date — the actual complaint is that its methods were a little too advanced to admit of competition. As a producer and distributor of oil that com- pany has led the world. The United States Steel Corporation is charged with COMPETITION IS WAR 29 being a monopoly, 1 and beyond the reach of competition, yet no independent steel man would assert for a moment that the Corporation is indifferent to new methods and processes — in the scientific application of recent discoveries it is a pioneer, its experiments are being watched with interest. It takes capital, strength, courage to try new inventions, new methods, and competition exhausts a man's capital and saps his courage. While the old competition accomplishes none of the good results attributed to it, the cooperation at the basis of the new does. 3. Competition does not educate the community in "rational egoism," but, on the contrary, develops an irra- tional and belligerent individualism — ending in artificial combinations and consolidations. It does not teach that the basis of industrial success is the giving as much as possible, but, on the contrary, the fundamental proposition of competition is to give as little and get as much as possible. Competition is the most pow- erful incentive to selfishness known to man — it is selfish- ness. "Rational egoism," altruism, unselfishness, generosity, have their foundation in cooperation. Cooperation is essentially constructive; competition de- structive. , Even war is a conflict between forces, the strength of each of which depends upon the degree of cooperation — of unity — attained, and it is easily discernible from the most casual survey of history that whatever of good comes out of war depends upon the extent to which the successful side is more closely knit together by the force of the con- flict. 1 As a matter of fact, the two companies referred to were "monopo- lies" only in the sense that they dominated their respective industries; aside from patent, natural, and public-service monopolies few real monopolies exist in this country. 3 o THE NEW COMPETITION All there is of good in competition is its tendency to re- sult in closer cooperation, greater harmony, closer and finer relations between the, for a time, conflicting units. Disintegration leads to integration — if not the world would have been doomed long ago. Integration attains a certain degree of perfection and again disintegrates, but each ebb and flow must mark a new high level in human achievement, else there is no real progress. VI A right understanding of what competition is in the world of trade and industry is so important that we will give a few instances, each of which is typical of a large class. In the labor world a small town is dependent upon a large factory, it has grown up with the factory, it is pros- perous because the industry is prosperous. One of two things happens : ( i ) The owners of the factory see an opportunity to increase profits by bringing in cheaper labor ; or (2) the men employed ask for better wages and the owners meet the demand by threatening to employ or actu- ally employing cheaper labor from other places. The foregoing is a bald outline of a situation that often prevails where there is a controversy between employers and employees regarding wages and terms of employment. The strength of the employer lies in the struggle — the com- petition — of men for employment; the weakness of the em- ployees who have grown up with the factory, who own their homes, lies in this competitive condition which imperils not only their places but their savings. • COMPETITION IS WAR 31 VII Formerly mines, factories — employers generally — could import labor from abroad; competition was world-wide. The law now forbids that sort of competition. Many state laws go farther and, by ingeniously devised restric- tions, seek to make it difficult for employers to bring in "strike breakers" — i. e., competing labor — and, if brought in, make it difficult to adequately protect the new comers. So much for "competition" in the labor world ; it is not looked upon as the good thing it is supposed to be, and labor unions are doing all they can to absolutely control it; their methods may be crude and brutal, but they are strug- gling with a crude and brutal competitive condition. Near one of the principal hotels in New York there was for years a small and well-managed drug store. In a quiet way it did a very good business. One day two stores next to it were rented and in a few weeks merged into a glass and marble "palace" that sold drugs at "cut rates" and nearly everything else that would attract custom. The em- ployees of the small store were all men except the cashier; the employees of the large are mostly boys and girls. The inevitable result was the disappearance of the small, it closed up; the large is simply one of a "chain" of "cut' rate" drug stores operated by one large company; against such competition the individual owner, or even the owner of two or three stores has no chance; the appearance of the big company in a block is a signal for the small to disappear. This is competition ; there is no question about that. It is a very modern sort of competition. It is typical of the department store, the mail-order house, the company with branches here, there, and everywhere — it is the last word in "cut rate" — "cut throat" competition. 32 THE NEW COMPETITION The bloodless economist will say, "Let them alone, it is evolution, the fittest will survive." But that is just the question, will the fittest survive? The strongest may, but fittest! That is another question. If survival means the displacement of men by women and girls, and the disintegration of the family into compet- ing units, if it means a cheapening of quality all around, above all a cheapening of the atmosphere, if it means loss of personal interest and personal touch, then it may not be the fittest for the betterment of either those directly inter- ested or of the community as a whole. VIII Some years ago there was an old and long established company in England the products of which were standard the world over. A powerful American company wished to buy the Eng- lish company and control the business in Great Britain. The English company had no desire to sell and refused all offers. The American company, to force a sale, established a factory in England, flooded the country with an inferior and cheaper product, demoralizing the trade. In the end the English company was forced to sell. That was good old-fashioned competition. The prac- tice is common; it is common in the small town where the large dealer cuts prices to force a small to either sell out or get out. It is done in the world of "big business" when the large corporation deliberately invades the territory of the small and, by selling below cost, compels the latter to dis- pose of its business. In fact, it is part of the every-day tactics of the old competition. "And why not?" some one cynically asks. "Doesn't the COMPETITION IS WAR 33 public reap the benefit in the way of low prices while the war is on?" "Yes, but " What is the use of arguing with a man who thinks that competition of that character is beneficial ? IX Then there is the disreputable competition of those who sell out and immediately go into business again in opposi- tion to purchasers who buy in good faith. The law permits the purchaser to take a limited contract restraining the seller from immediately competing, but, aside from such contracts, and often in evasion of them, men who sell their establishments with good-will take the money they receive and open up in the same town, the same block, to get the very trade they sold. This is dishonorable but — competition, and the com- munity is supposed to benefit economically from a condi- tion that is morally bad — does it ? X The great mass of mankind are both sellers and buyers. As sellers they would stifle competition; as buyers they would foster it. Unhappily, they actually try to do both. The farmer demands freedom to organize his cooperative societies, but, in the same breath, demands laws to prevent other classes doing the same thing. The laborer insists upon his right to organize unions and dictate wages, and, in the same breath, calls for the enforcement of the law against the organization of em- ployers. 34 THE NEW COMPETITION The dealer and manufacturer is caught between the up- per and nether millstones — he is obliged to pay prices fixed by farmers' organizations and wages fixed by labor unions, but cannot — under the laws of most of the states — organize with others for his own benefit. This is a condition so manifestly unfair and illogical it cannot exist for long, and while it does exist it engenders mischief and class hatred. The problem presented is by no means peculiar to this country, for the nations of Europe are struggling with it, but the condition is more acute here because we have forty- eight states and a federal government passing laws on the subject, and for nearly a generation passing laws — "anti- trust laws" — drawn in most drastic terms to suppress co- operation and promote competition. XI The Sherman Act was passed 1890. Since its enactment many suits have been begun to dis- solve "trusts" — combinations of dealers and manufacturers. Not a single suit has been begun to dissolve any one of the large combinations of labor or of farmers, though the existence of such combinations arbitrarily controlling inter-state commerce is a matter of common knowledge. 1 What is the net result of the enforcement of that law? A few "trusts" and a number of lesser combinations have dissolved, but where one has been suppressed five hundred have taken its place. No such era of combination and cooperative organization has ever been known in the history of the world as the period of twenty-odd years since the passage of the Sherman act. This movement has not been organized in "defiance" of iSee Chapter XIX. COMPETITION IS WAR 35 the law, but in response to irresistible forces — the same forces that brought the partnership, the corporation, the la- bor union, into existence; the forces that compel men to work together in harmony to accomplish the things mod- ern society demands of them. Just as the stage-coach, owned and driven by one man, has given way to the railroad, owned and operated by a. hundred thousand men, so the individual laborer, farmer, merchant, small manufacturer, merges his identity in that of his union, his cooperative society, his large corporation, his "trust," to secure larger results, to do things on a larger scale, a scale commensurate with the marvelous develop- ment of the world of to-day. XII The country has reached the parting of the ways. It must make its choice, and make it intelligently — either the competitive or the cooperative basis. If the competitive, then no class should be permitted to organize a cooperative movement to get more for what it has to sell; if the co- operative basis, then no class should be prevented from or- ganizing — either one policy or the other, the two cannot exist together. The man who argues for competition must be consist- ent; he must argue against farmers' cooperative societies and labor unions just as vehemently as he argues against combinations of dealers and manufacturers. XIII We are in course of making this choice ; Congress is de- bating constructive legislation to supplement or take the 36 THE NEW COMPETITION place of the Sherman law, which is purely destructive in its intent. But, judging from the debates in Congress and its com- mittees, this new legislation is not being considered in the spirit it should be. Many of the bills offered are directed against cooperation. There is still a belated cry for a more drastic "anti-trust" remedy, for a law that will purge the country of all combinations — all combinations except combinations of farmers and combinations of labor — no statesman proposes to frame a law that will interfere with them. But while many of our law-makers refuse to see condi- tions as they are, that is by no means true of all, and cer- tain it is that as time goes by the conviction gains ground in Washington that the country is passing slowly but surely from the old competitive basis to the cooperative, and what is needed are not futile laws directed against cooperation, but more legislation in aid of the new spirit that is abroad in the land, legislation that will help men to come together and work together, securing for the public the maximum of good from cooperation, and, at the same time, protecting the people and all classes from abuse of power by combina- tions. Many additional illustrations of unfair, oppressive, and disastrous competition are given in the following chapters, but no reader need go beyond his own experience and obser- vation for facts. The farmer knows that competition means lower prices for his produce, and so all over this country farmers are or- ganizing cooperative societies, 1 to enable them to sell what 1 In addition to the many farmers' cooperative associations enume- rated in Chapter XIX, the following just at hand is in point: "Ken- tucky farmers are preparing to organize a farmers' union covering the entire state, and to establish a central store in every county seat. To date this union has been organized in only a few counties. Wherever the cooperated stores have been established they have given satis- faction. COMPETITION IS WAR 37 they have to sell for more money, to get larger and surer returns. The laborer knows that competition means lower wages, therefore he joins a union to suppress competition and ad- vance wages. The merchant and manufacturer know that competition means "cut-throat" prices for what they have to sell, hence they, too, try to form cooperative organizations to lessen competition ; but the law is not so indulgent to them, it tries to prevent their doing what farmers and laborers do. The only class in the community that profits from unre- stricted competition is the class that has nothing to sell, people who live on fixed incomes; their interest is in low prices. If they can buy what they want below cost they are happy, even though their advantage means ruination to the farmer, the laborer, the dealer, the manufacturer. But this class is small in numbers and importance as compared with the rest of the community, and not a few would have diffi- culty in justifying their right to be non-producers in any fair theory of social organization. "Solicitors for members are constantly at work, and by the time the tobacco, wheat, and corn crops are ready for harvest, many more counties, it is expected, will take up the plan. "A meeting held in Lexington was attended by leading farmers of different parts of the state. Many of these were members of the old American Society of Equity, established several years ago to force higher prices for tobacco and other farm products from trusts, which then controlled these products. "From the agitation started by the American Society of Equity came the Burley Tobacco Society, which now controls the production of more than 200,000,000 pounds of tobacco annually in Kentucky, Ohio, Indiana, and West Virginia." Another instance from Illinois : "Farmers of Cumberland and Cole counties signed an agreement to-day pledging themselves not to raise broom-corn for five years unless the dealers will guarantee them a price to exceed $120 a ton in advance of planting. For twenty years the two counties have been the broom- corn center of the country." President Taft recently advised consumers to form cooperative societies, after the English type, to eliminate the profits of exchange by buying direct from producers. And Colonel Roosevelt, speaking to Minnesota farmers, has advised them to form cooperative societies to eliminate the intermediate dealers and sell direct to the consumers. CHAPTER IV GROWTH OF COOPERATION Every railroad, every telegraph, every telephone, means cooperation, and cooperation means combination in one form or another. Before the railroad merchants in towns fifty miles apart did not compete with one another; each could charge prac- tically what he pleased; prices could vary fifty or a hun- dred per cent, without affecting trade appreciably. A low man might draw trade from territory within, say, twenty or even fifteen miles of the other town, depending upon condition of the roads, season of the year, etc., but the high man in the second town wduld have customers the other could not reach, customers who could not afford to go the extra distance to make the saving in price. A railroad between the towns changes their economic re- lations; now a very slight difference in prices draws trade one way or the other. Theoretically, and, in large measure, practically, the measure of the opportunity of the merchant in one town to charge more than a merchant in another for like goods, is measured by the fare to and fro between the towns, plus the element of loss of time. When an electric line is built, running cars every half hour and carrying passengers at nominal rates, the two 38 GROWTH OF COOPERATION 39 towns, so far as prices and competition are concerned, vir- tually coalesce. As a matter of fact, smaller towns within twenty-five or fifty miles of large cities are placed in positions of great disadvantage by the rapid spread of electric car lines; they are made suburbs, and trade is seriously affected. Cities attract trade with a force far beyond the eco- nomic advantages offered. Men and, especially, women like to do their shopping in the larger places, even though they lose car fare and time by doing so, and pay as much as their local merchants ask for the same goods. 1 Railroads were slow in building compared with the phenomenally rapid spread of electric lines incident to the development of the trolley. The latter are so easily and in- expensively constructed they have spread everywhere within a few years; they and the telephone, with rural postal de- livery, have brought the farmer into the city, until it is now as easy for the farmer's wife to do her shopping and marketing as it was for the townsman's wife a generation ago. The parcel post will still further annihilate distance; it will place the department store and the big mail order house five hundred or a thousand miles away on a footing of equality with both the country and the city merchant; it will intensify competition by bringing in new and powerful factors. The country merchant sees this, he reads the handwrit- ing on the wall, and he joins hands with the express com- panies in opposing the parcel post. He is willing it should be tried on rural deliveries because that means he will be able to get his parcels delivered to his customers at a nominal cost while the city house will be excluded. 1 "Not long ago the merchants of a Wisconsin city made vigorous protests against the low passenger charges to Chicago, in order to keep the people in the city from going to Chicago to purchase supplies." — Prof. R. T. Ely, "Evolution of Industrial Society," pp. 249-250. 4 o THE NEW COMPETITION But the parcel post is at hand and it will affect local trade very much as the railroads affected it years ago, very much as the trolleys have affected it in times more recent — in short, precisely as every cheapening of transportation is bound to affect trade, by widening the competitive area. II There are two ways in which the competition of a given dealer or manufacturer may be increased: (a) By the establishment of a rival in the locality — the intensive way: (b) by the widening of the area of com- petition by improvement in facilities for communication and transportation — the extensive way. So far as the local merchant is concerned one may be as disastrous as the other, since both mean division of trade. So far as the community is concerned the effects are different. In the first case a new shop is added to the sum total of all in existence (unless it has been moved from some other place) ; in the second case no new capital is invested or labor employed, save as some additional may be required by the larger establishments to take care of the trade ab- sorbed from the smaller. In times past it was competition of the intensive sort that men feared and resented. The local carpenter, brick- layer, blacksmith, miller, merchant, fought the newcomer as an intruder. The medieval guilds were organized in large part to protect localities against intensive competition — competition within the gates. The modern labor union, with its re- strictions regarding apprentices, its opposition to immigra- tion, and its arbitrary requirement that unionists from other places must take out local cards — if they can — fights inten- sive competition, the intrusion of the stranger. Formerly extensive competition — the competition of dis- tant localities — was a negligible quantity, made so by dif- GROWTH OF COOPERATION 41 Acuities in communication and transportation, by tariffs, taxes, brigandage, etc., etc. Nowadays it is the extensive competition, the competition of city with city, state with state, country with country, that is affecting prices and wages. And it is this competition that must be dealt with in a big way and a broad way. It cannot be suppressed, it cannot be checked, unless mankind wishes to suppress steam, gasoline, and electricity — but it may be controlled and transformed. Ill The history of nations shows how the pendulum of progress swings to and fro from perfection in little things to perfection in big things. At the same period one nation may be doing things intensively, while another is doing things in a spirit of extension; one may be living a life of extraordinary fullness within its gates, another may find satisfaction only in conquering the earth. Again at different periods the ambitions of mankind are widely different. For a time the nations are content within their borders, are absorbed in building their cities, their cathedrals, their monuments — in artistic and intellec- tual pursuits ; the conflicts are few and personal or local in character; there is an astonishing development of every trade, every craft. Suddenly there comes a change, due, perhaps, to some great invention or discovery, or, perhaps, to the restless personality of some mighty leader who re- flects the spirit of his times. The period of intense develop- ment is at an end; as if moved by one impulse the nations embark on a period of conquest, of discovery, of coloniza- tion ; a period wherein local barriers are annihilated and countries come together in one grand clash, one supreme struggle either on the field of battle or in the more bloodless but none the less fierce rivalry for commercial and indus- trial victories. 4 2 THE NEW COMPETITION We are in the midst of one of those great movements, one of those world-wide conflicts. It is so fierce that again and again are nations on the verge of declaring war for no reason whatsoever except trade jealousy. Projects of ter- ritorial expansion are justified by commercial reasons. Controversies concerning this country or that, over China, Persia, Turkey, are in substance, if not in form, trade con- troversies. The world has gone mad over trade and the problems of trade. Financiers and diplomats exhaust their energies trying to devise new schemes, new treaties, new tariffs whereby one nation can sell the world more than it buys, whereby the "balance of trade" can be turned hither and thither at the will of man — this is the era of "dollar diplo- macy." The conquests of Alexander, of Caesar, of Napoleon, were as nothing compared with the struggle that is now on for trade supremacy — a struggle that is made fiercer from year to year by marvelous inventions and developments in means of communication and transportation. Peoples, heretofore safe in their isolation, are swept into the mael- strom — the globe is a sizzling unit. 1 IV Intense competition makes for quality, extense for quan- tity. At this moment the cry is not "how good," but "how much." In the mad race for wealth, for gross production, the beautiful is lost sight of, there is no love or longing for 1 This forecast was written early in 1912 when the world seem- ingly was at peace. The prediction has been quickly realized. The bitterest — and true — cause of the present war is the rivalry of Ger- many and Great Britain for trade supremacy. This country has caught the virulent fever and is ambitious to reach out for the markets of the globe. We, too, seek war, for war will surely follow. Foreign trade is the most dangerous will-o'-the-wisp a nation can pursue; it is the great economic illusion. GROWTH OF COOPERATION 43 perfection — it is "More, more, more — Oh God, give us more!" With an indifference to the morrow that is criminal the earth is mined and denuded; future generations are being robbed of their patrimony; minerals, coal, iron, wood, are being rapidly exhausted. It is true human ingenuity has met every emergency in the past and will probably suffice in the future; new forces, new resources will be discovered, but the surest relief from the present wasteful extensive competition which demands quantity is the return to intense competition which is con- tent with far less but demands greater perfection. Again, extense competition .means combination on a large scale ; intense is the opportunity of the individual. The effort to produce quantity leads inevitably to the organization of industry, to the factory system, the large corporation, the trust — a break-neck pace in which to halt is to fall. The effort to produce quality means a reversal of these steps, the disintegration of the factors of wholesale and indiscriminate production until the individual is permitted to emerge and impress his personality upon his work. The change is bound to come, and signs are not wanting that this country is getting tired of the mere production of wealth in gross. It is demanding better things. It is de- manding more sightly things in even the most matter-of- fact industries and enterprises. Take railroading, for in- stance ; the depots and bridges that satisfied everyone a gen- eration ago would not be tolerated in a country town to- day. There is an immense amount of thought and labor given to the more artistic designing of all kinds of machin- ery. There is a growing appreciation of the efforts made by owners of factories to cultivate their grounds and build their buildings so they will please rather than offend the eye. 44 THE NEW COMPETITION The value of structures well built and perfectly kept, as an advertisement, is being recognized. Compare the fronts and interior arrangements of the shops of to-day with those of a few years ago, the ef- fort to make them look better is obvious even if the ef- fect is often blatant. There is a growing effort to make our cities and towns and all they contain more beautiful. This effort is crystal- lizing in the appointments of commissions, the organiza- tions of societies and public bodies; it finds expression in laws and appropriations; it may make many attempts that are failures; it may produce ugly where beautiful effects were intended ; but the point is, the cry for quality is mak- ing itself heard above the din of the demand for quantity. Beauty is not a wholesale proposition; it dislikes the partnership; it avoids the corporation; it flees the trust. It is essentially personal. When America really demands beauty, demands it as loudly and insistently as it now de- mands wealth, many of the problems of to-day will find so- lution in the changed conditions, but, for the present, we have competition in the most extensive form the world has ever known, and the problems presented by that competi- tion must be dealt with; we cannot wait the slow chang- ing of ideals, the evils of the hour must be corrected; all that is false, vicious, unfair, must be eliminated. The race for wealth, for quantity, must be made a fair race in which all will have as nearly equal opportunities as human in- genuity can provide. As already stated, this inevitable tendency of competition in the production of quantity is combination of forces, of strength, of capital and labor, in large units to secure greater results per dollar invested and per man employed. GROWTH OF COOPERATION 45 This cooperation takes the following familiar forms : 1. Partnerships — association of individuals, the sim- plest and most primitive form of cooperation. 2. Corporations — in reality only a legal form of a large partnership, the chief advantage of which is the limit- ing of the personal liability of the partners — i. e., the stock- holders. 3. "Trusts" — as they are popularly called; they are simply partnerships of partnerships or corporations ; con- solidations in one form or another of a number of existing companies. The three forms are so many steps in the evolution of organized industry, and organized industry is absolutely es- sential if the maximum of quantity is to be produced at a minimum cost. Inherently there is no objection, economic, moral, or legal, to any one of the three forms. A partnership of companies — the trust — is as logical and legitimate a development of corporate organization as is the corporation from partnerships of individuals. The trusts do not originate anything in novel and op- pressive competitive methods; they are rather backward and clumsy — literally elephantine — in their attempts to do what individuals do. They suffer from a multitude of counselors, and those in control, however unscrupulous, lack the decision, the alertness of the equally unscrupulous individual in devising ways to promote his own busi- ness. No unfair, oppressive, or illegal practice has been charged against a corporation or a partnership that did not have its origin and practical demonstration in the methods of the individual. This is no plea for either the trust or the corporation; it is simply a suggestion that, before we charge upon legal entities of our own creation vices that are the common prac- 46 THE NEW COMPETITION tices of individuals, we take an inventory of and frankly acknowledge our own shortcomings. For instance, when the employees of the American Sugar Refining Company were found guilty of smuggling large quantities of sugar by tampering with the scales a great cry went up against the "trust," and, by induction, so to speak, against all trusts, as if cheating the government by smuggling was a new offense devised and practiced only by them. The records of the custom house show that smuggling is the pet failing of American citizens who cross the borders. From time immemorial people have felt at liberty to "beat the customs" if they could. All the sugar smuggled by the trust in a year probably does not equal in value articles smuggled into New York every six months by our "best people," by families, by children, by rich and poor, by high officials. The practice is notorious. In the year ending June 30, 191 1, the United States District Attorney in the City of New York instituted seventy-four prosecutions and collected over two millions of dollars in fines and duties on smuggled goods. Not a day passes that the customs officials do not discover goods people "failed to declare," and collect the duties without prosecution; yet, with all their vigilance, probably nine travelers out of ten get by with dutiable goods that escape observation. It would be easy to take up every specific charge made against a trust or large corporation and trace its origin to practices of individuals and small firms, practices that, in the case of individuals, are often looked upon by the trade as "shrewd" or "sharp," and, on the whole, rather cred- itable. Many a laudatory funeral sermon is preached over an unconscionable rascal. 1 x In this connection Herbert Spencer's essay on "The Morals of Trade," though written half a century ago, is timely reading. GROWTH OF COOPERATION 47 The writer holds no brief in defense of either the trusts or the practices referred to — as subsequent chapters will disclose — but the hypocrisy of those who assail large cor- porations, while at the same time asserting or assuming on the part of individuals virtues they do not possess, is so distasteful that the temptation to expose it cannot be re- sisted. The demagogue who makes the welkin ring with de- nunciations of the trusts is silent regarding the short weights and measures, the adulterated goods, the poisoned milk used and sold by men in his audience. He never says to them, "The heads of trusts may cheat and defraud, but they only do on a large scale what you do on a small ; they cheat the public, you cheat the women and babies in your neighborhood — people who know you and trust you. You buy goods of the trust and, in the main, you get the quality you order and you get full weight and measure. You dole out these same goods by short weight and measure, as of- ficial records show." The man who should say such true things might im- peril his reputation as a "trust baiter," but he might also gain votes and high office in the end, for the people like the truth even when it cuts. The large corporation, the "trust" — call it what you will — is here to stay so long as competition, national and in- ternational, is to produce quantity. It is here to stay be- cause it is an economic evolution. When quantity is the object men will cooperate together up to the point where cooperation ceases to produce the maximum of results by the expenditure of a minimum of effort — that is a self-evi- dent proposition. Any law that tries to check cooperative growth is a law against maximum efficiency and, therefore, contrary to the spirit of the age which demands, above all things, quantity, which demands labor- and capital-saving devices in all in- 48 THE NEW COMPETITION dustries, and, in the last analysis, the trust is a labor- and capital-saving device. VI In so far as the "trust" is a monopoly, that introduces another and artificial condition, which must be dealt with by itself. 1 But a monopoly is a monopoly whether possessed by a "trust," a partnership, or an individual, and, of all forms of monopoly, that of the large corporation is probably the most vulnerable, the least stable. Missouri has a law limiting the size of corporations permitted to do business in the state to a capitalization of ten millions. The amount may have seemed abundantly large to the legislature that passed the act, but the law is as absurd as it is futile, except for mischief. A distinguished political leader proposes to arbitrarily limit any one corporation's control of an industry to 50 per cent.; if it controls 51 per cent, it is a bad trust — a proposition without a shadow of reason. Aside from its fundamental unsoundness it has its ridiculous aspects. The corporation that is anxiously trying to keep within its 50 per cent, might find itself in the clutches of the law by the unexpected retirement of a distant competitor, or a number "'We must sharply distinguish between large scale production and monopolistic production. This is something that the author has been iterating and reiterating for the past fifteen years or more. Many others have also been saying the same thing, and it seems now to be generally understood. It is indeed strange that it should ever have been difficult to understand the difference between vast production and monopolistic production. One of our great retail stores, like Marshall Field's or Mandel Brothers', in Chicago, or Wanamaker's, in Philadel- phia or New York City, represents very large scale production, but along with the large scale production there is the sharpest kind of competition." — Prof. R. T. Ely, "Evolution of Industrial Society," pp. 96-97. GROWTH OF COOPERATION 49 of competitors in dull times might close down for the pur- pose of leaving the "trust" in control of more than 50 per cent, of the trade; their plea would be they were forced to shut down by the larger competitor — a sympathetic prose- cuting officer would quickly institute proceedings. A great majority of the states have so-called "anti-trust laws," which, while aimed at trusts and large combinations, hit practically all combinations, including partnerships and labor unions. More of these laws in detail farther on. Here it is suf- ficient to say that, in so far as they attempt to check co- operation, they have proven disastrous rather than bene- ficial. Combinations of forces to accomplish the things men wish to accomplish will continue to be made so long as such combinations are essential to the economic and speedy achievement of those objects. When men cease to desire the things that large co- operative forces can produce most economically, then, and not till then, will such large organizations disappear. VII There are two distinct cooperative forces at work in every country. A. Cooperation to increase production and lower prices. B. Cooperation to control production and increase prices. The two may, and frequently do, but need not neces- sarily, come in conflict. 5 o THE NEW COMPETITION VIII Cooperative associations, such as partnerships, corpora- tions, trusts, are ordinarily formed to increase production, to get larger results for the same outlay in time and money. They are the logical, the inevitable outcome of old com- petitive conditions. When two men who are competitors see they can do better, make more money, by working together, they form a partnership. When more men see they can do better by joining forces they form a corporation; when a number of competing corporations see they can do better by consolidat- ing they form a large corporation, a trust — all so many steps toward securing larger results at lower costs. 1 1 "Competition between rival producers and distributors — plain, old- fashioned competition — tends to build up larger and larger enterprises, and ultimately to leave only one, or at most, a few great producers in the field. There are, indeed, exceptions to this rule — counter tendencies ■ — but the proposition in the main is correct, and will rarely, if ever, be questioned. * * * It is the rule rather than the exception that trusts produce more cheaply than the individual producers whom they displace, and therefore they can make the cost to the consumer less than the individual competitors can. The cost of an article to the consumer — its ordinary retail selling price — depends not only upon the expense of making, but of marketing it. The great individual combi- nations cheapen their product, not only by lessening the cost of making, but infinitely more by saving expenses in marketing. * * * In the struggle of competition it is always the weakest that is trodden under foot, and it is generally the smallest that is the weakest. The process is continuous and cumulative. The little goes down before the large, and the large runs above and upon the little. This is not the result of trusts. It is the result of competition. It is not the result of trusts, but the cause of trusts. The underlying cause is the irresistible force that has never yet ceased and probably never will — the demand for cheap production. * * * Competition — the old-fashioned competition that weeds out the weak and inefficient — gives battle, then, first to the partnership, afterward the corporation, and in our day the gigantic cor- poration. The story of economic progress, from the dawn of industry 1 to Switchmen : Switchmen : Switchmen : Switchmen ■Si 1 H Trainmen : Trainmen : Trainmen : Trainmen It I .23 ftZ Firemen : Firemen : Firemen : Firemen I "3 Engineers : Engineers : Engineers : Engineers V a ■ Conductors 1 : Conductors : Conductors : Conductors V t> and so on through all Union along horizontal lines = classes of employees. Aggregation. It is plain at a glance that two fundamentally different modes of combination are possible : Combination in the vertical line — integration. Combination in the horizontal line — aggregation. The lines of cleavage depend upon the lines of organ- ization. All labor unions are organized along horizontal lines, each is an aggregate of individuals who follow the same occupation, and their power depends upon numbers — the underlying theory is combative, not cooperative. The lines of cleavage are horizontal, destructive to cooperation and harmony within the industry. 1 Compare this with scheme of industrial cooperation on page 264. 298 THE NEW COMPETITION The firemen of all the railroads in the country are banded together, and the engineers of all the roads are in a brotherhood, but the fireman and the engineer who ride in the same cab are not united ; in fact, their unions are neces- sarily more or less antagonistic ; one may support the other in a demand for higher wages and a threat to strike, but only as a matter of policy. Ask a brakeman or a switchman what he thinks of the demand of the engineers for increased pay, 1 and he will give you his opinion in language hardly fit for publication, but his union will keep silent, because it expects to put in its own demand later on, when, in turn, the engineers will be expected to lend their support. It is needless to say a fireman on a road in California has nothing in common with a fireman on a road in Maine ; the work is not the same, the fuel is not the same, the cost of living is not the same, yet the two are linked together each as against not only the company that employs him, but against the engineer and conductor who run the train on which he fires. His wages and conditions of employ- ment are fixed by men he never sees, who live in States thousands of miles from where he lives; he works when they tell him to, strikes when they tell him to, and accord- ingly as he is told he will or will not take his engineer's place if the latter strikes for better wages. The condition is fundamentally unsound, and the stronger the unions become the more clearly do they dem- onstrate the weakness of the theory of combination by ag- gregation. Just as was found in discussing industrial combina- 1 Formulated, April, 1912. THE LABOR PROBLEM 299 tions, 1 it is integration in the vertical line that is normal and powerful to the extent of even being a menace to non- integrated units. To-day labor unions spread over the country like so many thin strata of slate, the larger they are the greater the danger of breakage; the lines of cleav- age are so well marked that many "shrewd" employers have little trouble in exciting dissensions that split for a time the superimposed layers, and array union against union. Integration is granite in texture; it is the fusing of each industrial and commercial unit into one homogeneous whole. Integration starts normally from within; aggregation starts usually from without. The outsider, the profes- sional agitator, has no interest in integrating a plant or a factory, in welding all its employees, from day laborer to owner, together in one harmonious body — that sort of a union makes no place for him. The outsider finds his opportunity and profitable em- ployment in associations along horizontal lines, in huge ag- gregates, each with its corps of officials. Per contra, the insider, the man who has something at stake in the success of a given plant, has no interest in uniting with workmen employed in a competing plant ; that is folly. As things now are, with labor organized in large ag- gregates on horizontal lines, a union of plumbers, steam- fitters, plasterers, carpenters, engineers — of any given trade — formulates its demands for increased wages; these de- mands have no relation whatever to the special work or the needs of the employees of a particular contractor or com- pany, nor do they take into consideration the ability of a particular employer to meet the demands. If the demands are not complied with, strikes are called, 1 See page 263. 300 THE NEW COMPETITION not so much for the purpose of coercing employers directly, as for the purpose of so inconveniencing the entire com- munity that the public will compel employers to yield, or arbitrate, which up to the present time has been but an- other manner of yielding. These methods are crude and primitive, and will surely give place to ways that are rational and scientific. The strike has no place in a civilized community, neither has the lockout — they are the weapons of brute man. But so long as labor organizes in aggregates the chief strength of which is brute force, the strike and the lock- out will be with us, and in more and more violent forms, with the inevitable result that employers and employees will get farther and farther apart, feeling between the two will become more and more bitter; even now the friendli- ness, the cordiality that should exist are gone, and gone long ago. The employee acknowledges no loyalty except to his union; the employer acknowledges no interest in his work- men other than that of a purchaser of labor at fixed rates, and no obligation to them other than the law imposes. While integration of labor is the natural development of .organization, and aggregation the artificial, conditions have been such that employees have been compelled to or- ganize along the arbitrary and artificial. Employers have so stubbornly refused to admit their workmen to any voice, much less interest, in the business, that they could not organize within; employers have been so short-sighted they have systematically discouraged that sort of organization. Hence the opportunity of the out- sider, the professional agitator. But employers are becoming a little wiser, and the men are beginning to see that those employed in one factory in one State have no very vital interest in striking to support the demands of men employed in a competing factory in an THE LABOR PROBLEM 301 adjoining State ; they are beginning to see that the real interest of each body is in making their own factory so prosperous it can afford to pay more to all connected with it. VI Under existing conditions all negotiations are conducted between employers on one side and employees on the other in a spirit of sharp antagonism. Every controversy over wages is preceded by preposterous claims and state- ments, and by charges and counter-charges of the bitterest nature. Nothing is left undone and unsaid to inflame both sides. Every spring the situation becomes very acute in the building trades in large cities, in coal-mining districts, and between railroads and their employees. The public that bears the cost tamely submits to the following programme : Demands by employees. Refusals by employers. Strikes with violence. Arbitration and adjustment. Advance in wages. Advance in prices far more than sufficient to cover the higher wages. Peace for a few months. Repeat. For weeks and months the papers are filled with ac- counts of rioting, slugging, and shooting, entire communi- ties are terrorized, men, women, and children are wounded and killed. Meetings are held at which agitators and anar- chists breathe hatred and defiance toward capitalists, toward the government, toward society itself. 3 02 THE NEW COMPETITION Is it conceivable that after such experiences the men, no matter if all their demands are conceded, can return to work with the loyal devotion they should have to the industry and property in which they are far more inter- ested than distant stockholders and upon which they de- pend for a livelihood? Every observer knows that only the most intelligent are able to overcome the feeling of hatred so systematically engendered, many of the more ignorant actually take de- light in injuring and destroying tools and property in a spirit of "getting even" for real or fancied wrongs. VII At this moment the country is trembling on the brink of a great railroad strike. On April 22 the following letter was sent the chief of the Brotherhood of Locomotive Engineers, which has a membership of over 70,000. "Dear Sir : We understand that negotiations between the Brotherhood of Locomotive Engineers and the man- agers' committee of the eastern railroads have been defi- nitely broken off, and that the engineers are likely to with- draw forthwith from the service. "If this is unfortunately the fact it is evident that a grave situation has arisen which threatens most serious consequences to the public. In this emergency we are im- pelled by the sense of duty to tender our friendly offices to the contending parties, in the hope that some means may be found to adjust the matters in dispute without the ca- lamity of a general strike. "We are sending an identical letter to Mr. J. C. Stuart, chairman of the committee of railroad managers." MARTIN A. KNAPP, Presiding Judge, U. S. Commerce Court. CHARLES P. NEILL, U. S. Commissioner of Labor. THE LABOR PROBLEM 303 VIII "The mediation of federal officials came immediately after the refusal of the managers of fifty railroads con- cerned to concede the engineers' demands for an 18 per cent, increase in wages, when Chief Warren S. Stone, of the Brotherhood of Locomotive Engineers, had announced that in view of this refusal a strike of engineers would go into effect within thirty-six hours." "Although Chief Stone had a few minutes before de- clared that his fifty associates on the engineers' committee would proceed to-night to their headquarters to prepare for a strike within thirty-six hours, he was impressed with the letter to the extent that he amended the order, declar- ing the committee would remain intact here to-night to consider the situation. "He said : 'No organization is so strong it can fail to hearken to an appeal from representatives of the federal government,' and declared he would place the proposition before the engineers' committee with the recommendation that it be accepted." "Officials of the local Chicago division of the Brother- hood of Locomotive Engineers last night said all traffic, including passenger, freight, and yard, within the strike zone, would be stopped simultaneously. " The men are "sore" because of the inequality of wages,' he said. 'Some of the lines in the east run side by side for miles. The engineers of one line will be receiv- ing 4 cents a mile and those of the other line 4^ cents a mile.' " 1 In threatening to "tie up" 52 per cent, of the railway traffic of the country unless their demands are complied with, the union of engineers is acting in open defiance of the Sherman law. Imagine what would occur if railroad companies com- bined and threatened to stop all traffic unless wages were reduced or freight rates advanced — the rage of the pub- 1 From the daily press. 30 4 THE NEW COMPETITION lie, the super-rage of the press — it is all quite unthinkable. Why should the public submit without protest to the threat of the engineers to stop every train in the country unless their wages are advanced? The public has only an indirect and a comparatively small interest in the increase of wages demanded, even if it should lead to a slight increase in rates. But the public has a direct and very great interest in the threat to stop traffic for any cause, and // social progress is not a sham and a delusion, the time will come speedily when the representatives of the public will not beg as a favor that traffic be not stopped, but will command sharply and peremptorily that traffic go on without interruption, and that controversies between individuals and classes of individuals be adjusted without inconvenience to the public at large. That several thousand men in combination should threaten to stop the commerce of ninety millions and have the power, to do so, is a proposition so grotesque it does not seem possible a civilized people at the beginning of the twentieth century would tolerate it — yet it is not only tol- erated but meekly accepted as a condition to be dealt with as gingerly as a small boy handles a giant cracker. IX The engineers have scarcely finished presenting their claims when the firemen, through their national organiza- tion, begin formulating theirs, and so it goes, an endless round, as a rule no two unions of national importance formulating demands at the same time. 1 1 Seven men of national reputation, composing the Arbitration Com- mission which is to decide if the fifty-two railroads in the Eastern section of the country shall increase the pay of the engine drivers, will meet to-morrow morning at the Oriental Hotel, Manhattan Beach. THE LABOR PROBLEM 305 Each union enlists the sympathy of the public by mak- ing it appear that its fight is with the companies, whereas it is a self-evident proposition that every increase in the cost of operation is borne in the end by the public. The unions are even cynical ; when the great anthracite coal strike was settled a few years ago by giving the men an advance of so much per ton, it was done with the understanding the companies should profit by the agita- tion by advancing the price of coal far more than the added cost per ton. It was a matter of sober and serious dis- cussion how much both sides could get out of that patient beast — the public — before it would kick. This spring the controversy is renewed with like results. 1 But the public is becoming restive; it is beginning to see that however ardently it takes side with this union and that, somehow it comes out a loser in two ways — it suffers most of the inconveniences and losses of strikes, and in the end pays in higher prices more than all advances in wages. The public is not only beginning to see these things, but it is beginning to inquire if something may not be done to put an end to these periodical "conflicts between capital and labor" — as the phrase goes. There is but one way to bring about peace and har- mony and that is to promote the integration of each indus- try from top to bottom. On their decision depends whether the railroad workers shall divide among themselves annually an additional $7,500,000. It also will be a signal to other labor organizations whether they shall move for more pay. Already the railway firemen have made demands for increases which would amount to $20,000,000 annually. — N. Y. Herald, July 14. 1 Circulars sent out by the great coal operators to-day will bear the glad tidings to the general consumer that the price of domestic an- thracite coal has been advanced 25 cents a ton; and as a result the general public may have the satisfaction of knowing that it, and not the operators, will pay the nominal increase of 10 per cent, recently granted to the striking miners — that and a little more. The little more amounts to about $6,000,000 this year. — From N. Y. Times, May 24th, 1912. 306 THE NEW COMPETITION To return to the controversy now on between the fifty odd railroads and the engineers, the following suggestions are offered with the firm conviction they would tend to a clearing up of the present unsatisfactory conditions that exist between the roads and their employees and ultimately lead to an integration of the latter. When any class of employees, high or low, organized or not organized, asks an advance in wages, the demand af- fects (a) the company, (b) all other employees, inasmuch as an advance to one class may, usually does, mean a dim- inution of the fund available for advances, (c) shippers and all patrons of the road since every increase in cost of opera- tion may mean either an increase in rates or a bar to re- duction in rates, (d) the public, since every increase in cost of operation means a reduction of the fund available for betterment of service. All these classes are so intimately concerned in every proposition that means an advance in the cost of opera- tion they should be consulted at the outset whenever such a project is under consideration. As it is, only (a) the company takes any interest in a demand for increased wages until a strike is threatened. Shippers sit back unconcerned until the roads propose to advance rates, then they are aroused, but too late as they will ultimately find, for the time to act is when things are being done with the approval of the public and repre- sentatives of the government that must sooner or later lead to either advances in rates or such curtailment of opera- tions, improvements and extensions, as will place shippers at a serious disadvantage. The interest of all classes concerned, employees, patrons, the public, can be aroused in this way : THE LABOR PROBLEM 307 1. When any one class of employees asks for higher wages 1 let each company address a formal request to all classes, whether organized or not, to formulate their demands, if they have any, and present them by a date named. 2. Decline to pass upon the demands of any one class until all have filed theirs or announced they have none to present. 3. When the demands of all are in, tabulate and ascer- tain the total — the gross amount that would be added to cost of operation. 4. Call an open meeting at which all classes interested shall be represented: (a) the company which is to disburse the amount; (b) employees, both those who demand a share of the amount and those who have filed no claims but whose future opportunities to get advances will be affected by the allowance; (c) shippers and patrons who really pay the amount; (d) the public through some body such as the Department of Commerce and Labor or the In- terstate Commerce Commission, or a commission yet to be established, and the press. 5. Lay before the meeting first of all the total amount of the demands made and ask the representatives of em- ployees the one question, "Can the road, in your opinion, stand the increased cost of operation represented by this total without advancing rates?" No question of the distribution of the total amount de- manded should be permitted to arise. The total may be so absurdly large that it is apparent to everyone it must be scaled down fifty, seventy-five, ninety per cent, before it is even debatable, and each class may show a disposition to reproach the others for having put in demands that are 'The suggestions apply whether the demand is for higher wages, shorter hours, or any other change in conditions of employment that means increased cost of operation. 308 THE NEW COMPETITION ridiculous, but that is a matter for the men to settle among themselves. The company, shippers and the public have the right to insist employees as a body shall not present demands the footings of which make an amount so absurdly high that the employees themselves concede it must be scaled down. 6. If the employees concede that the aggregate of their demands is in excess of anything the road could possibly afford, it will be for them to retire and scale their de- mands to a total they think the road can pay. 7. On the presentation of the revised demand it will then be for the company to say whether it can and is will- ing to add the sum demanded to its pay-roll, thereby in- creasing the cost of operation. The decision must have the approval of (c) shippers, and (d) the public, inasmuch as both are affected. 8. If the road with the approval of all parties interested says it will appropriate for wages the additional sum de- manded, the employees — all classes — must then retire and distribute this additional amount among themselves as they see fit, settling all their differences among themselves with- out involving the management of the road, shippers, or the public, in any controversy. When they have made the dis- tribution the company will accept the schedule and pay ac- cordingly. 9. If, however, the road reaches the conclusion it can- not pay the amount demanded without increasing rates, a question for arbitration will result, namely : "What amount, if any, can the road pay in increased wages with- out increasing rates?" In this arbitration all parties interested must be heard. Once ascertained, the amount will be distributed by the employees according to paragraph 8. 10. If the employees decline to arbitrate the question "What amount, if any, the road can pay without increas- THE LABOR PROBLEM 309 ing rates," but insist upon the justness of their claim, even if rates must be advanced, the question for arbitra- tion then is two-fold in character, "What amount are the employees entitled to irrespective of any increase in rates?" and, the amount ascertained, "What increase of rates must be allowed to cover the added cost ?" The statement of the question involves the assumption that, all things considered, rates may be lower than they should be, so low, in fact, they do not cover proper cost of operation and maintenance. It is obvious that this question raises an issue between shippers and the public on one side and employees on the other. XI So far so good, but it is plain there is another element involved in all these hypothetical cases and especially in the question last suggested for arbitration, namely, the question of profits to stockholders. The employees may insist that the question to be sub- mitted for arbitration is threefold in character; first, what advance are they entitled to irrespective of rates and divi- dends; second, to what extent, if any, must rates be ad- vanced to pay the amount; third, to what extent, if any, must dividends be reduced to pay the amount. The adjustment of that question, and that is the broad, the fundamental question, presented in every wage and rate controversy, ultimately involves a valuation of the roads, an ascertainment of their fair capitalization, and the allowance of such interest and dividend charges as are necessary to secure capital for improvement and extensions, a fair allowance being made to stockholders for risks as- sumed, since they, in the first instance, assume all the haz- ards ; their dividends fluctuate from year to year, and often 3 io THE NEW COMPETITION disappear entirely long before the prevailing rate of wages is reduced or rates advanced. As things now are both wage controversies with em- ployees and rate controversies with shippers are settled in the dark. This class or that class of employees demand and final- ly get increases in wages regardless of the fair claims of other employees and regardless whether the stockholders of some of the roads affected have ever received any dividends. Likewise the Interstate Commerce Commission settles rate controversies for all the roads in vast sections of the country with no accurate data regarding the actual invest- ment in any one of the roads and, consequently, with no information whatsoever whether the stockholders of any particular road are justly entitled to the benefits of the rates demanded. All questions regarding both rates and wages are now adjusted from year to year in haphazard fashion, with no attempt to reach a scientific basis that will attain lasting results. XII What would be some of the consequences of the course suggested ? Take the demand of the engineers; the fifty odd roads affected could not pursue a wiser and fairer policy than the one outlined in the ten numbered suggestions. The demand made by the engineers involves a large amount, estimated at $7,500,000, added to the cost of operation. That additional amount could not be paid without ab- sorbing — certainly with many of the roads — a large por- tion, possibly the entire amount available for making in- THE LABOR PROBLEM 311 creases in the wages of other classes of employees, hence all classes have a right to be heard before any award is made. There is the further possibility that the amount asked by the engineers could not be given without crippling some or all of the roads, unless they are permitted to advance rates, hence shippers and patrons are interested. And there is, of course, the possibility that to add the amount asked to cost of operation would, if rates are not advanced, affect improvements and extensions, hence the public is keenly interested. In any event and under all circumstances every dollar paid out by a railroad comes out of the public directly or indirectly. A demand for increased wages is as much a demand upon the public as a demand for increased rates — except where increased wages or shorter hours mean such in- creased efficiency of service as to counterbalance the cost — that would be one of the questions for arbitrators to con- sider. But when the engineers of one road who are each mak- ing two hundred or two hundred and fifty dollars a month demand 4^2 cents a mile simply because the engineers of another road get that amount, no question of increased efficiency is involved. XIII The roads involved have proceeded to arbitrate the engineers' demand with the certainty that no sooner is that arbitration over than another union will present its claims, and another, and another, and so on in endless chain. The agitation is constant, systematic, and shrewd; the unions "play the game" incomparably better than the roads; the latter are timid, the former daring; the roads are 312 THE NEW COMPETITION afraid of public opinion, of the press, of adverse legisla- tion — of their own shadows — partly because their shadows have been rather black in the past. If in the present emergency 1 the roads should adopt the course outlined, the Brotherhood of Engineers would hardly be in a position to object to the invitation to all other classes of employees to present their claims, since the move would seem to be a big step in the direction of the federa- tion of labor, the dream of the ardent unionist and the nightmare of the average railroad official. But the ultimate result would be the partial disintegra- tion of labor unions along present artificial lines and in- tegration in the normal vertical line. Public opinion would certainly support the roads in the fair and reasonable requirement that all employees who in- tend to make demands shall do so at the same time so that the sum total may be known by roads, shippers and the pub- lic generally, and so that whatever amount is finally al- lowed by arbitration or by some tribunal shall be equitably distributed among all employees entitled to increases, and not absorbed by some one or two classes to the exclusion of others. Public opinion would also support the proposition that if the amounts demanded foot up to an absurd total, the em- ployees themselves, without troubling either the companies or the public, should scale down their demands until the total is a figure they themselves seriously contend the roads should pay. Again, public opinion would certainly support the prop- osition that after a gross amount has been awarded, the employees should distribute this amount among themselves without troubling the roads or the public; but if the pro- posed distribution is unfair to a class or an individual, ar- 1 Referring to 'the controversy with»the engineers which will prob- ably be settled by the time this book appears — settled only for the time being. THE LABOR PROBLEM 313 bitration would be necessary; the humblest employee must have an opportunity to have his claims heard and con- sidered. XIV It begins to be plain that certain results would quickly follow the adoption of the plan outlined. The requirement that all classes of employees — organ- ized and unorganized — of each road present their claims by a date named would tend to bring the employees of each road in closer contact with one another — national organiza- tions could not formulate demands that would fairly adjust wages to conditions and earnings of particular lines. The presentation, for instance, to a board of arbitra- tors of the demand for a gross sum involves first the allow- ance of a sum in gross against all the roads, then its ap- portionment among the roads. A moment's consideration shows that the one question involves the other, for while it would seem comparatively easy to award a sum in gross based upon the gross earn- ings of all the roads involved, it is not easy when that sum is apportioned, for some roads might not be able to in- crease their operating cost by the amount fixed, while others would scarcely feel the added expense. No arbitration, award and apportionment of the gross amount demanded would be fair that did not take into con- sideration the condition of each road. A road traverses a new and sparsely settled section in the far west; its cost of construction, maintenance and operation is an exceedingly large percentage of the gross receipts as compared with an older road in thickly-settled sections ; its stockholders may get nothing for years ; mani- festly it would be wrong to add a large item to the cost of operating such a road in, say, Oregon, simply because 3 i4 THE NEW COMPETITION the engineers of the Pennsylvania Company demand more pay; just as illogical as it would be to arbitrarily increase the pay of clerks in a dry-goods store in Seattle because the clerks in a similar but larger store in New York are given an advance; just as illogical as it would be to in- crease the pay of deck-hands on Puget Sound simply be- cause deck-hands in Boston harbor get an increase — and so on. What a given industry can pay depends upon what it earns, not upon what some other industry pays. There are statistical averages and levels of wages, rents, inter- est, taxes, etc., etc., and every man in business should study these averages and provide accordingly; he cannot hope to get his labor at lower than the prevailing rates in his locality any more than he can hope to get his in- surance below prevailing rates ; but whether he can stand a sudden increase of either wages or insurance or of any other item of cost, depends not upon what some other man is making in another street or city, but upon what he him- self is making in his own business. XV Assuming, however, that each company knows exactly the gross sum that must be added to its pay-rolls, it is now for the employees of that road to distribute this amount among themselves. The distribution cannot be made by a national confer- ence, or by labor leaders sitting a thousand miles away; it must be made by the men interested. On one road the firemen may be entitled to a ten per cent, advance out of the fund as against two per cent, for the engineers ; on an- other conditions may be reversed, or the brakemen may be entitled to ten per cent, as against but one per cent, for THE LABOR PROBLEM 315 engineers and firemen — and so on, all depending upon conditions of service. The result would be a strong tendency toward integra- tion of employees of each road and a loosening of the artificial ties that now bind men working for one employer to all of a similar class working for competitors. Under existing conditions labor unions recognize the justice of virtually all that has been said by making differ- ent demands for different sections of the country. They do not treat with all roads at a time, but concede that condi- tions east and west, north and south, are different; what one section of the country can afford to do another can- not. In all their agitations for better wages the unions con- cede that what employers in one city can pay those in an- other cannot. They also concede that what one industry can pay is no criterion of what another industry can pay. Carried to their logical conclusions these concessions mean that in all fairness demands made upon a given rail- road should be based upon that particular road's ability to meet the demands and not upon conditions over which the road has no control, such as the earnings of some older and more profitable company. XVI National organizations would by no means disappear, but they would change radically in character. The integration of employees with their industry is one thing; the cooperative association of employees and industries is quite another thing. The one is the intimate union of all interested in a given enterprise to make it a success; the other is the friendly association of all related industries and all related occupations in national organiza- 316 THE NEW COMPETITION tions the prime object of which is the introduction of higher standards and sounder principles in business gen- erally. Each railroad should be completely integrated so that it is an efficient and harmonious economic unit. At the same time all the railroads of the country should be in one great national association, in which employees, ship- pers, and the public through some federal administrative body would be represented. Each class would have its own association, in a spirit, not of antagonism, but of cooperation. Associations of employees and shippers should have their headquarters and meeting places in the same build- ing with the general association, and it should be a funda- mental rule that every meeting of any class is open to all other classes. The result would be that while each road and all interested would be influenced in the consideration of any proposition, primarily, by conditions affecting that road, they would also weigh the effect of their actions upon all other roads and all parties interested in the same. Lines of cleavage which are so sharply and bitterly accentuated now would fade and finally disappear. XVII Unless there is integration the outlook is gloomy, in- deed. As things now are the chasm between employer and employee is widening and deepening; class feeling is be- coming more and more bitter. The stronger the unions the greater the necessity for employers to get together to re- sist demands that frequently have no other basis than the determination to make demands persistently and syste- matically. The time is ripe for a rational and scientific investiga- THE LABOR PROBLEM 317 tion of the entire subject, for the ascertainment of under- lying principles and the formulation of fundamental propositions and rules of conduct that may be given, if necessary, the sanction of law. The strike must go. The lock-out must go. Neither has any place in the civilization of the twen- tieth century. True, the courts have said repeatedly, "Employees have the right to strike," "Employers have the right to dis- charge=lock-out." Legally, yes; morally, economically, no. We must not permit our notions of right and wrong to become confused by what courts say men have the legal right to do ; what is legal may not be right, and what is right may not be legal. Strictly speaking a man has no more right to throw down his tools and quit work at a moment that will cause some one else loss and trouble, than has an employer the right to "fire" a man at a time and under conditions that will cause him loss and trouble. When we talk of rights to do these things we are not in the domain of rights at all but in that of law — of le- gally punishable acts, and every man knows that what is legally wrong to-day may be made legally right to-mor- row by act of a legislature, or by a supreme court revers- ing its own decision, and every one also knows that what is legally right in one state or country may be legally wrong in another owing to differences in laws or decisions — and so on in endless confusion. But what is really right does not depend upon legis- latures or courts but upon conscientious and intelligent conviction, and it is not too much to say that for a body of men to strike for the express purpose of causing ruin and disaster, cold and starvation to the entire community 318 THE NEW COMPETITION is contrary to conscientious and intelligent conviction and therefore wrong; they have no more right to do it than they have to organize a mob and destroy homes. Courts may be powerless, may feel compelled to hold men have the legal right to strike and paralyze industry and commerce, but in their reasoning they should care- fully distinguish between a legal right, which is a very human and uncertain proposition, and the purer, higher, more abstract theory of right which, law or no law, must finally guide men in all their actions and relations. XIX CLASS LEGISLATION AND DISCRIMINATION We come now to the most discreditable and, take it all in all, the most disheartening chapter in American history; discreditable because the facts it relates are so opposed to all our ideals of freedom and equality; disheartening be- cause the tendencies disclosed lead straight toward the ar- raying of class against class in bitter conflict, and the dis- solution of democratic institutions. Not that this country will proceed to such extremes and be wrecked on the rocks that have wrecked every at- tempt heretofore made toward popular government — let us hope we have too much good sense to run blindly into disaster, but that is the way we are heading at the moment, and no impartial observer doubts it. The anarchist, the communist, the radical socialist, ob- serve the trend of events with undisguised satisfaction, they say, "We are nearing the crisis," and stand ready with torch and bomb. x The average American looks upon Russia as the hotbed of anarchy and revolution, yet there is probably far more dynamite systematically used in the United States than in Russia for the destruction of life and property in conflicts between classes ; and certainly far more than is used in any other two civilized countries taken together. Three presidents slain in forty years is a record no 319 3 2o THE NEW COMPETITION other country can show. True, two of these assassinations were by men of more than doubtful sanity, but the same can be said of European crimes of similar character. The point is that in the sane or insane use of dynamite and murderous weapons as part of social or political propa- ganda this country is nowise behind the most despotic of European governments. We think Russia is on the verge of a tremendous social upheaval; we may be quite as near one ourselves. We look with pitying eye upon the disorders in France and gloomily predict the Republic will not last long ; where- as the truth is, that all the disorders reported would add scarce a ripple to the rioting that takes place periodically in our one state of Pennsylvania, to say nothing of the highly inflammable conditions that prevail in Colorado and those western states where the Industrial Workers of the World are strong. In all probability our strength lies in our very indiffer- ence to what is going on about us. We do not take the use of dynamite and the killing of presidents very seriously; our attitude is one of regret that misguided men should do such things, but they mean to us nothing in particular, there is no wider significance, no warning; we think the country is too sound and sane to be carried off its feet. Let us hope that is so; at the same time things are go- ing on that are more significant than the explosion of a bomb or the killing of a president. Class legislation, laws drawn for the avowed purpose of. conferring upon certain favored classes privileges denied others; That is the real menace to our institutions, for that more than anything else encourages the bomb thrower, the rioter, the assassin, lending a certain logical coherence to their dis- ordered ideas, for if the law deals with certain classes as enemies of society why may not they? CLASS LEGISLATION 321 II Equality of all men before the law has been the boast of American civilization from the foundation of the govern- ment. It has ever been an idle boast so far as negroes and In- dians are concerned, sinks to a whisper as regards Chinese and Japanese, rings a little hollow when women are consid- ered — but, then, they are not "all men." Still it is the fundamental theory of our civilization that all men are, certainly should be, equal before the law — that is the ideal toward which we are supposed to be working — are we? The answer to that question is found in the speeches of our public men, in laws proposed and laws passed, and it is that, At no period in the history of the world has there been a more servile catering to classes who have votes. Ill This is a broad, a startling assertion, but it is borne out by facts; that the truth is not more clearly realized is due partly to our extraordinary composure and partly to our peculiar political divisions. In most countries one central legislative body speaks for the nation ; what it does the world notes and criticizes; the result is a strong counter-balance in the influence of public opinion within and without the nation, and that means greater deliberation. In this coun- try there are forty-eight almost sovereign states, each with complete legislative machinery, passing in the twilight of semi-publicity such laws as it sees fit. In addition there 322 THE NEW COMPETITION is the federal government with Congress turning out its quota of statutes. These forty-nine legislative bodies give the demagogue his golden opportunity; he experiments at his leisure and almost without observation. Even if the American people were not over-absorbed in making money, it would be im- possible for them to watch all their legislatures, as it is they pay so little attention that any class with ordinary persist- ence can get somewhere almost any law it desires. So true is this that the courts are kept busy weeding out the laws that are so rank, so unfair, so one-sided they are clearly unconstitutional. Only the courts stand between the people and the de- mand of special classes for favoring laws and now the courts are assailed for their independence and it is seriously pro- posed to subject their decisions to popular vote. IV One reason why the American people have paid com- paratively little attention to laws proposed and passed is because they rely for protection upon federal and state con- stitutions ; they assume that no law which is unfair to any- body can be enforced; they cast upon the courts the bur- den of doing the work they should do themselves through their representatives. It is notorious that our legislative bodies pass many laws they know are not constitutional ; the expression is often heard, "Oh, well, let it go through, the courts will knock it out." But distinguished as our courts are for their courage and independence, they are composed of men and only human. It is not surprising some of them yield and try to CLASS LEGISLATION 323 find ways to sustain laws that others have no hesitation in denouncing as unconstitutional. Steadily and systematically the independence of the ju- diciary is being assailed; under threat of "recall" of either men or decisions, or both, judges are being terrorized into rendering supposedly popular decisions. We say "supposedly" for nothing is more certain than that the thinking masses of the people are not in sympathy with either class legislation or with the efforts that are be- ing made to destroy the independence of the judiciary. V The American Federation of Labor "is composed of 115 national and international unions, representing approxi- mately 27,000 local unions, 4 departments, 39 state branches, 632 city central unions." The paid membership is about 2,000,000. "The affiliated unions publish about 540 weekly or monthly papers devoted to the cause of labor." There are 1,574 organizers of local unions acting under the orders of the central body. There is hardly an employment that does not have its union. Besides the American Federation of Labor there are the Knights of Labor and the Industrial Workers of the World. In addition and not affiliated with the American Federa- tion are the following nation-wide unions : Bricklayers' and Masons' International ; Brotherhoods of Locomotive Fire- men and Engineers; Brotherhood of Railroad Trainmen; Railroad Conductors' Order. While the voting strength of 2,000,000 is not great as compared with a total of over 15,000,000 voters in the country, it is a body the average politician fears and there- fore favors. 324 THE NEW COMPETITION VI In considering the laws about to be referred to it must be borne in mind that, The prime object of a labor union is to advance prices of labor. The prime object of a farmers' cooperative society is to advance prices of produce. The prime object of a manufacturers' combination is to advance prices of goods. The fundamental proposition underlying any discussion of these attempts of the several classes to benefit themselves is that whatever opportunities are open to one class should, in all fairness, be open to the others, without favor, without discrimination. But they are not. Nearly every state has drastic laws against combina- tions of manufacturers and dealers. Here are some of the exceptions made in favor of labor and farmers : VII The Illinois anti-trust law excepts all parties engaged in mining, manufacture or any industry the cost of the product of which is mainly made up of wages, and also contains a provision that it shall not be unlawful for per- sons or corporations to enter into joint arrangements of any sort, the principal object or effect of which is to maintain or increase wages. The law also provides that "the provisions of this act shall not apply to agricultural products or live-stock while in the hands of the producer or raiser." 1 1 Referring to this exception, a federal court said : "Can it be claimed that, under this clause, every person within the jurisdiction of CLASS LEGISLATION 325 VIII Montana in its law against combinations provides that it shall not apply "To any arrangement, agreement or combination be- tween laborers made with the object of lessening the hours of labor or increasing wages, nor to persons engaged in hor- ticulture or agriculture with a view to fixing the price of their products." Montana and Nebraska both provide that : "Nothing herein contained shall be construed to prevent any assemblies or associations of laboring men from pass- ing and adopting such regulations as they may think proper, in reference to wages and the compensation of labor, and such assemblies and associations shall retain, and there is hereby reserved to them, all the rights and privileges now accorded to them by law, anything herein contained to the contrary notwithstanding." South Dakota has a similar exemption. Montana goes farther than merely protecting labor unions, it expressly provides by law, that state printing shall have thereon the label of the branch of the International Typographical Union of the city in which the printing is done. Other states have laws protecting the use of union labels and trade marks. the state of Illinois has equal protection of the laws? Is not this class legislation? Is it in accordance with section I of the fourteenth amendment to the federal constitution, that those who raise agricultural products or livestock shall be excepted from the provisions of a statute which, by its terms, is binding on every other citizen or person within the state? I think clearly not. I am of the opinion that this statute contains both class and special legislation, and is in contravention of both the federal and state constitutions, and therefore void." 326 THE NEW COMPETITION IX Pennsylvania expressly permits the organization of labor unions and authorizes them "to refuse to work or labor for any person or persons, whenever in his, her or their opinion the wages paid are insufficient, or the treatment of such laborer or laborers, workingman or workingmen, journeyman or journeymen, by his, her or their employer, is brutal, or offensive, or the continued labor by such laborer or laborers, workingman or workingmen, journeyman or journeymen, would be con- trary to the rules, regulations or by-laws of any club, so- ciety or organization to which he, she or they might belong, without subjecting any person or persons so refusing to work or labor to prosecution or indictment for conspiracy under the criminal laws of this commonwealth." X Louisiana has this constitutional provision : "It shall be unlawful for persons or corporations, or their legal representatives, to combine or conspire together, or to unite or pool their interests, for the purpose of forc- ing up or down the price of any agricultural product or article of necessity for speculative purposes, and the legisla- ture shall pass laws to suppress it." But the laws of Louisiana expressly provide : "That the provisions of the act shall not apply to agri- cultural products or live-stock while in the hands of the producer or raiser; nor be construed as to affect any com- bination or confederation of laborers for the purpose of increase of their wages or redress of grievances." CLASS LEGISLATION 327 XI The anti-trust act of Michigan contains this provision: "The provisions of this act shall not apply to agri- cultural products or live-stock while in the hands of the producer or raiser, nor to the services of laborers or artisans who are formed into societies or organizations for the benefit and protection of their members." The Mississippi anti-trust law contains this exception: "But this shall not apply to the associations of those engaged in husbandry in their dealings with commodities in the hands of the producer, nor to the societies of artisans, employees and laborers formed for the benefit and protec- tion of their members." North Carolina's anti-trust law says: "The act does not apply to agricultural products while in the hands of the producer, nor to the lumber interest of the state, neither shall it prevent cotton or woolen mills from regulating the amount of their output or selling the same through an agent." XII The following states have laws which expressly prohibit any employer from discharging or threatening to discharge any employee because of his connection with a labor union : Illinois, Indiana, Kansas, Minnesota, Montana, Tennessee, Missouri, Ohio, Wisconsin. The laws of Massachusetts provide for the organization and incorporation of labor associations, as do also the laws of Maryland. Michigan makes provision for the incorporation and management of workingmen's associations and also for the organization of builders' and traders' exchanges. Also for 328 THE NEW COMPETITION the incorporation of local assemblies of Knights of Labor and Sons of Industry. Stronger and stronger pressure is being brought to bear upon Congress to induce it to exempt labor unions from the operation of the Sherman Act. XIII It would be out of place in a book of this character to enter into an extended discussion of the constitutional ques- tions raised by these attempts to expressly permit certain classes to do things forbidden other classes. The question is not one of law simply, but rather of fair play, of what is right and just. It does not need a lawyer to convince the average citizen that these laws are not right, not fair, not just; and no community can persist long in the course indicated by such legislation and last — it is building, not upon a foundation of justice, but upon the shifting sands of popular prejudice. 1 1 Speaking of the Texas anti-trust law, which is sweeping in its terms and penalties as against certain classes, the federal court had occasion to say (in re Grice, 79 Fed. R. 627) : "The exemption of agricultural products in the hands of the origi- nal producer and raiser exempts, upon a rough estimate, four-fifths of the people of Texas from the operation of this act, because four-fifths of the people of Texas are engaged in the business of producing and raising agricultural products and livestock. The penalties are visited upon the remaining one-fifth of the people, without regard to any par- ticular class. This one-fifth comprises all classes not heretofore ex- empted. And this is in face of the constitutional guaranties, state and federal, of perfect equality of the citizen before the law. Even in the matter of labor, the iniquitous character of the enactment under dis- cussion is apparent. This statute makes no exemption of labor, or of the products of labor. Under its terms and provisions the laborer is subjected to punishment for doing the very act that the land-owner or farmer is authorized to do. The original producer, if a farmer, has authority to combine to fix prices, restrict trade, build up monopolies, while the original producers in other lines of labor are denounced for combining. The agricultural products of the farmer are the fruits of his labor, but no more so than the manufactured articles of the work- CLASS LEGISLATION 329 XIV We have mentioned some of the direct attempts to ex- empt certain favored classes from the operation of laws aimed at other classes, but there is the indirect and more vicious method of accomplishing the same result, which is to pass laws covering- all classes, but not enforce them against the favored classes. ingman are the fruits of his labor. The blacksmith, the carpenter, and all other artisans purchase their raw material, and the manufactured products constitute the fruits of their labor, upon which they must rely for the sustenance of themselves and families, just as the agricul- tural products of the farmer constitute the fruits of his labor, upon which he relies for similar purposes ; yet the statute prescribes total inequality between these classes, and encourages the one to build up monopolies, while denouncing the others, if they make an attempt in the same direction ; or, to apply the provisions of the statute to the matter of livestock, from which application this inequality becomes still more apparent, the cattle king may raise his thousands of head of live- stock each year, and, so long as his stock remains in his hands, he can combine, not only with his neighbors, but with all other similar original producers throughout the state of Texas, or even throughout the United States, for the purpose of fixing the prices and monopoliz- ing markets. Not so, however, with the hands which he employs, and which constitute the ordinary labor of the ranch. The fruits of the labor of the latter class are his day's work. This may be paid him either in money, which he invests in stock, or it may be paid him in stock, on shares, or otherwise; and yet, not being the original pro- ducer, he is forbidden to make any combination of any character whereby the price of the fruits of his labor can be promoted or regu- lated in any manner whatsoever. These common laborers on the ranch can form no agreement among themselves whereby they can maintain the prices of their labor, and yet the ranch owners can combine with other ranch owners with reference to the prices of their products which constitute the fruits of their labor. The demonstration can be carried to a further absurdity by simply calling attention to the fact that, under the terms of the statute, the farmer or stock-raiser may combine with any person, firm or corporation whatsoever, or any number of them, in respect to agricultural products he has produced, or livestock he has raised, without fear of punishment under the law, and yet the party or parties with whom he makes such a combination may be held liable to all the penalties denounced against such combinations. Two citizens may combine, therefore, for the purpose of fixing prices ; one, by doing so, committing a crime, and the other, by doing so, performing a laud- able act. If this is equality before the law, within the meaning of the constitution, we had better revise the constitution." 330 THE NEW COMPETITION The direct method has at least this merit, it is straight- forward and open; the indirect is a cowardly evasion of the issue. The administration of the Sherman law is an illustra- tion in point. There is no question that in its terms that act covers combinations of labor and combinations of farmers when they affect interstate commerce. In the few cases that have arisen the courts have been obliged to so hold, yet prac- tically every prosecution under the act and every bill filed to dissolve a combination have been against combinations of manufacturers, dealers and railroads, notwithstanding violations by other classes have been open, notorious and flagrant. The threat of the Brotherhood of Locomotive Engineers to absolutely stop inter-state traffic on over fifty railroads unless their demands for increased wages are granted, is a case in point. XV The extent to which the cooperative movement is spread- ing among farmers is shown by the following, taken from a comprehensive summary by an authority on the subject ■} "Anyone who does not follow the subject will be sur- prised at the extent of successful cooperation among farm- ers of the United States and the rapidity with which it spreads." "The producers are finding out in every section of the country that it is necessary ; and in every part of the coun- try they are profiting by it." "In Michigan the grape-growers have very efficient associations." 1 "The Cooperative Farmer," by John Lee Coulter, a Minnesota farmer, of Mallory, Minn. ; member of the Faculty of the University of Minnesota, and Supervisor of Agricultural Statistics of the Census Bureau. See World's Work, November, 191 1, pp. 59-63. CLASS LEGISLATION 33^ "In the grain-growing states the farmers own approxi- mately i, 600 grain elevators. These range in value from $4,000 to $10,000, and everyone looks after the market- ing of approximately 150,000 bushels of grain." "There are in this region about 200,000 cooperating farmers," . . . "and they control the sale of nearly 250,000,000 bushels of grain." Many of these societies look after the selling of other farm products, act as live-stock shipping associations, and purchase such twine, fuel, fertilizers, and feed as the farm- ers need. In the same northern states where dairying is import- ant, there are now probably 2,000 cooperative creameries. In the same states the farmers own more than 150 co- operative stores, hundreds of cooperative telephone com- panies, and mutual fire insurance companies. In Colorado the Grand Junction Fruit Growers are well organized. In Idaho, Washington, and Oregon, there are a number of local marketing associations. In California "the fruit growers' exchange controls the marketing of probably three-fourths of the citrus fruits pro- duced. Other smaller organizations control most of the re- mainder." The California Fruit Growers' Exchange is looked upon as the most successful farmers' organization in the United States. "The 10,000 members have about 300 packing houses and produce 50,000 carloads of fruit every year." The California Fruit Exchange, which is very much like the Fruit Growers' Exchange, looks after the marketing of the deciduous fruits. "The recently organized Almond Growers' Exchange, with a dozen local societies, controls the marketing of con- siderably more than half the almonds produced in the United States." "The Walnut Growers' Association, with eighteen local 332 THE NEW COMPETITION y societies, controls the marketing of 15,000,000 pounds of walnuts, which is probably eighty per cent, of the walnuts grown in the United States." In Virginia the farmers of two counties have an ex- change that handled in 19 10 more than 1,000,000 barrels of Irish potatoes and 800,000 barrels of sweet potatoes in ad- dition to thousands of crates of berries and other products. The apple growers of Virginia are organized and the peach growers of Georgia are struggling with their prob- lem. "A successful fruit exchange would know almost ex- actly how much fruit could be shipped from day to day, how many cars would be needed, what the principal rates would be to the different markets, how many cars of peaches the people in the different cities would need from day to day, what outside competition zvould have to be met, and practically what prices should be received." That same organization could purchase crates and ma- terials for members and make a saving. The citrus fruit producers of Florida are trying to fol- low California methods. "It is to the interest of all the people of Florida, and indeed of all consumers of good fruit, to help in every pos- sible way to reduce the cost of fruit by better marketing methods, to carry better fruit to the consumers, and at the same time to make the growers more prosperous by giving them a larger share of what the consumer pays." There are several hundred organizations among the cot- ton growers. "There should be several thousand local cooperative unions tt> control local gins, warehouses, presses, and oil mills." "The time has passed for petty jealousies and indi- vidual bartering. Business must be done in a business-like way." CLASS LEGISLATION 333 There are in the lower South and in Tennessee and Ken- tucky a number of small local societies interested in the marketing of vegetables and such products. "In Tennessee and Kentucky the tobacco growers have been struggling for some years to improve their conditions. They have made some mistakes. 'Night riding' and lim- itation of output — both of these were written about but practiced very little — were serious errors. These farmers should follow the lead of the southern cotton growers. First of all, they must own their warehouses; and they should control the tobacco which they produce until they are able to get fair prices for it." The rice growers in Louisiana and Texas have taken up the new movement. The Louisiana organizations, with headquarters at Crowley, have adopted the methods of the California fruit growers. Texas truck growers along the southern border are in- corporated, membership in 1906 covered 70 per cent, of the crop. Speaking of the advantages of the movement : "Educational and social advantages are everywhere noticeable, but the money gain 'sticks' out clearly or the companies zvould not last long." "The Farmers' Cooperative Elevator Co. of Wheaton, Minn., handled about 100,000 bushels of grain last year and declared a dividend of 40 per cent. Two years ago the company at Clinton, Minn., declared a dividend of 40 per cent. There are many better records than this." We have italicised certain portions of the foregoing paragraphs to emphasize the argument to follow. XVI Cooperation of labor is here to stay. Cooperation of farmers is here to stay. 334 THE NEW COMPETITION Cooperation of manufacturers and dealers is here to stay. Those are three vital facts that cannot be disputed, and the man, or body of men, who fights against any one of those propositions is struggling against an irresistible cur- rent. If any one of the three classes denies the right, the moral, the economic, the legal right of either of the others to co- operate, that class cuts the ground from beneath its own feet. What are the plain truths about the cooperative associa- tions described? With few exceptions all are organized for the express purpose of controlling and restraining interstate commerce. With few exceptions each is a combination in violation of the Sherman law — if the many decisions of the courts against combinations of manufacturers and dealers are ap- plied without fear or favor. Between a combination of fruit growers that controls the price of fruit and a combination of fruit preservers that controls the price of the same fruit canned, the court does not exist that can draw any fair and logical distinction so far as the ultimate consumer and the Sherman law are con- cerned, yet no lawyer would dare advise the preservers they could organize to control the prices of preserves. XVII In the paragraphs quoted substitute the term "manufac- turers" for farmers and try the result on some court that is hearing a case against manufacturers. Take this: "There are in this region about 200 cooper- ating mills (instead of 200,000 farmers) and they control the sale of 2,500,000 barrels of flour" (instead of 250,000,- 000 bushels of grain). CLASS LEGISLATION 335 Does any man doubt the combination of mills would be held illegal and every member be liable to indictment and conviction? Yet where is the distinction? Again : "The recently organized Association of Almond Dealers (instead of almond growers) controls the market- ing of considerably more than half the almonds produced in the United States." The combination of dealers would be illegal, yet where is the distinction? Again: The association of Wholesale Grocers (instead of Walnut Growers) controls the marketing of 80 per cent, of the nuts grown in the United States. A grocers' association has been in trouble for doing less, yet where is the distinction? To paraphrase further — a successful combination of salt companies (instead of fruit exchanges) would know almost exactly how much salt could be shipped from day to day, how many cars would be needed, what the freight rates would be to the different markets, how many cars of salt (instead of peaches) the people in the different cities would need from day to day, what outside competition would have to be met, and practically what prices should be received. The salt makers have tried this and their combination was held illegal, where is the distinction? Lastly, while in the cooperative movement "educational and social advantages are everywhere noticeable, the money gain 'sticks out' clearly, or the companies would not last long." That is precisely the objection urged by the courts against combinations of manufacturers and dealers — the "money gain 'sticks out,' " yet where is the distinction? 336 THE NEW COMPETITION XVIII The foregoing comparisons are made in no spirit of an- tagonism to the cooperative movement among farmers — it is here to stay, and every disinterested man should wish it God-speed. They are made for the purpose of enlisting the friendly interest of the farmers themselves in a broader and less selfish cooperative movement; to induce them to take a wider and fairer outlook and see that what is good for them must be equally good for labor on the one hand and manu- facturers, dealers, and railroads on the other; that if it is good for growers of wheat and cotton to cooperate it must be equally good for makers of flour and cotton-goods to co- operate, and all for substantially the same purposes. XIX It is curious how the abuse of words tends to bias our reasoning. The misuse of the term "capital" is responsible for no end of mischief. In economic literature and every day speech it is com- mon to use the phrase, "labor" and "capital" as if the two were antagonistic, opposed one to another. As a natural result all sympathy veers to the side of labor and a false issue is created. Why? Because labor is human and capital is material, and when the impression is conveyed that labor is arrayed against capital, sympathy inevitably flows to the human side. Capital is simply wealth used to produce more wealth. It is at the service of anybody and everybody ; capital would exist just the same in a socialistic community. CLASS LEGISLATION 337 Labor may have a quarrel with employers, whoever they may be, but not with capital. Labor and capital are required to produce wealth, just as a man and a spade are required to dig, and there is no more antagonism between labor and capital than between a man and the spade which is his capital. Comparatively few laborers do not own some capital. In a sense the clothes on their backs and the dinner pail in their hands, to say nothing of the tools they own, are cap- ital. The farmer is a capitalist to the extent of over 28 bil- lions of dollars in land, over 6 billions of dollars in build- ings and over one and one-quarter billions in implements. The farmers of a single state, Iowa, have over $95,000,- 000 in implements alone. The farmers have about twice as much in lands, build- ings and implements — excluding all other items — as the manufacturers of the country have in their factories. All the trusts put together make a small total as com- pared with farm values. The use of the term "capital" to mark divisions between classes is productive of irreparable mischief. XX There are two great classes in every country — those who work for wages, and those who pay wages — employees and employers. In this connection the term labor may be used — though by no means accurately — for employees, but by no stretch of language is it permissible to use "capital" as the equivalent of employers. Much of the literature and three-fourths of the speeches on the wrongs of labor would lose their seeming force if for the term "capital" wherever used were substituted the 338 THE NEW COMPETITION human term actually meant — manufacturers, contractors, employers generally. There would remain the natural rivalry between those who receive and those who pay wages, but belief in an ir- repressible conflict would disappear, since we all know that in this country most men at some time in their lives work for wages, and most men at different times pay wages. The farmer is not only the greatest capitalist in the coun- try, but he is a great employer of labor. In 1909 he paid out $645,000,000 in wages. An article on farm life says i 1 "In reply to the question, 'What, in your opinion, is the greatest need of the farmer of to-day, or the greatest prob- lem with which he must contend?' one hundred and eleven out of 440 Missouri farmers answered, 'Hired help'." 2 1 "The Farmers on Farm Life," World's Work, November, 191 1. 2 More than ten years ago, in a work on "The Law of Combina- tion," the writer said: "In the production of wheat, for instance, the farmer has his capi- tal invested in land and improvements thereon, tools and implements, horses, wagons, seed, etc. ; it is still necessary for him to hire more or less labor in the course of the year, and especially about harvest time, in order to make his wheat ready for the market and dispose of same; so far as the cost of production of the wheat is concerned, both the items of labor and consumption of capital are outlays which must be recouped in the price, otherwise the production of the wheat is a loss. So far as the farmer is concerned, it is immaterial whether a combination of labor advances the wages of his harvest hands, or a combination of manufacturers advances the cost of his reaping and threshing machinery: both advances must be recouped in the price of the wheat. Confining our view for the moment to the hypothetical farmer, it would be manifestly unjust to forbid him by law from com- bining with other farmers to get a better price for his wheat, if the law permits labor to combine to make him pay higher wages, and manu- facturers to combine to make him pay higher prices for his reaping and threshing machinery. What is true in this connection concerning the producer of wheat is true of the producer of every other com- modity." CLASS LEGISLATION 339 XXI In all these cooperative movements farmers are capital- ists just as much as makers of iron and steel are capitalists. In the article referred to it is said the farmers of certain grain-growing states own 1,600 grain elevators and "have invested about $15,000,000." Few steel companies have that investment. The Tamarack cooperative association of Michigan on February 18th, 191 1, declared to purchasers of goods its twentieth annual dividend, $104,821.60, equal to 162 per cent, on its capital stock. Since its organization this so- ciety has done a business of $8,113,917.85 and returned to its members rebates of $938,033.67. Few manufacturing or mercantile concerns of anything like the same size can make equal showing. In January, 1906, the Texas truck growers organized their association "with a capital of $10,000. Shares were to be sold at $1 each, but every member was required to buy at least five shares, he was required, however, to pay only thirty per cent, of his subscription at the beginning. Thus any farmer could easily join the organization. Growers of about seventy-five per cent, of the crop for 1906 became members, and that year the association marketed 900 car- loads. In 1909 it handled 2,500 carloads with an approxi- mate value of $1,500,000." In its capitalization, paying in of only thirty per cent., its control of the industry, and its rapid development, the history of this association reads like the story of a New Jersey trust in the deft hands of Wall street promoters — but it is nothing of the kind, it is simply the natural and logical banding together of a number of farmers to get better prices for what they raise. 340 THE NEW COMPETITION XXII In this cooperative movement the farmer — though he may not realize it — stands shoulder to shoulder with the manufacturer ; the labor unionist shoulder to shoulder with his employer. The problem is a large one and demands the harmonious efforts of all to solve it. Just now the farmer clamors for a more drastic Sher- man law. The labor unionist has been hurt by that same law and clamors for some amendment or interpretation that will exempt his union, and yet smash the employers' combina- tion. The far-seeing labor-leader is already calling a halt upon indiscriminate assaults upon associations of employers, he sees that their cooperation is essential if his union is to sur- vive. A century ago the labor union was as obnoxious to the public and to legislatures as a trust is to-day. The union has outlived all that odium, and is condemned to-day only for what it does that is unfair or criminal. The time will come when unions of manufacturers and other classes will be treated as legal and natural and be con- demned only for what they do that is unfair or criminal. Union per se will not be a crime in any class. XXIII Not only have legislatures, as already shown, recognized the legal and economic status of labor unions, but the courts in almost countless cases have approved their existence, ap- proved them as combinations for the purpose of control- ling wages. , CLASS LEGISLATION 34 1 The Court of Appeals of New York said : "In the general consideration of the subject, it must be premised that the organization or the cooperation of workingmen is not against any public policy. Indeed, it must be regarded as having the sanction of the law when it is for such legitimate purposes as that of obtaining an ad- vance in the rate of wages or compensation or of maintain- ing such rate. It is proper and praiseworthy, and perhaps falls within that general view of human society which perceives an underlying law that men should unite to achieve that which each by himself cannot achieve, or can achieve, less readily." 1 President Taft when on the bench said : "It may be conceded in the outset that the employees of the receiver had the right to organize into or to join a labor union which should take joint action as to their terms of employment. It is of benefit to them and to the public that laborers should unite in their common interest and for lawful purposes. They have labor to sell. If they stand together they are often able, all of them, to com- mand better prices for their labor than when dealing singly with rich employers, because the necessities of the single employee may compel him to accept any terms offered. The accumulation of a fund for the support of those who feel that the wages offered are below market prices is one of the legitimate objects of such an organization. They have the right to appoint officers who shall advise them as to the course to be taken by them in their relations with their employer. They may unite with other unions. The officers they appoint, or any other person to whom they choose to listen, may advise them as to the proper course to be taken by them in regard to their employment, or, if they choose to repose such authority in any one, may order them, on pain of expulsion from their union, peaceably to leave the employ of their employer because any of the terms of their employment are unsatisfactory." 1 1 Curran vs. Galen et al. (1897), 152 N. Y. 33, 46 N. E. R. 297. 2 Thomas vs. Cin. N. O. & T. P. Ry., 62 Fed Rep. 803. 342 THE NEW COMPETITION Labor has achieved its emancipation, it has won the right to combine to control wages. Farmers have practically, though not so explicitly, achieved their emancipation, they are tacitly conceded the right to combine to advance prices. It is certain that in the near future employers generally — manufacturers, merchants, producers of all classes, will achieve their emancipation, will win the right to combine to regulate the prices of what they have to sell. At present the country is in the anomalous and highly unstable condition of being half free, half slave. Labor- ers are entirely free to combine; farmers are half free, half slave; manufacturers, merchants and dealers are all slave. Even railroads are better off than manufacturers and dealers; they combine to fix rates, though the law in terms forbids. Railroads must act in concert regarding rates and therefore they do. Because of this fact President Roose- velt twice urged Congress to amend the law so as to per- mit the roads to do legally what they are now forbidden to do, but compelled by conditions to accomplish indirectly. XXIV Manufacturers and dealers are punished for simply com- bining; courts even go so far as to point out that the par- ticular combination under investigation may have done no one any harm, may even have done good. The State of Missouri filed suit against the Interna- tional Harvester Company of America. 1 When the case 1 The International Harvester Company of America is a Wisconsin corporation ; it is the selling corporation for the products of the Inter- national Harvester Company of New Jersey, the manufacturing com- pany. The New Jersey company owns all the stock of the Wisconsin CLASS LEGISLATION 343 reached the Supreme Court the several judges in their opin- ion found : "In 1902, when the negotiations which led up to the organization of the International Harvester Company were begun, competition between the large harvester machine companies in the United States was such as to reduce the market to a condition that was deplorable from the stand- point of the competing companies and it is not certain that its tendency was toward the ultimate advantage of the consumer of those machines. Whilst the tendency of fair competition is to produce a wholesome condition of the market, yet competition may be of such a character and so designed as to destroy the weaker competitors, leaving only the giant in the field, who then would have a monopoly of the market." "The evidence also shows that the price of harvester machines was not materially higher after the New Jersey corporation entered the field than it was before, until 1908, when it was increased eight or ten per cent., whilst in the meantime there had been a greater increase in the price of the material and labor used in their construction. The evidence also shows that whilst harvesting machines were the chief products of the companies absorbed by the Inter- national Harvester Company, that company has greatly enlarged its business and extended it to many other farm implements and has thus put itself in competition with the many concerns that theretofore were and still are engaged in manufacturing such other farm implements, and the farmers generally have profited thereby. The evidence also shows that the machines manufactured by the International Company have been greatly improved in quality, and the item of repair material has been reduced in price and placed within closer reach of the farmer. On the whole, the evidence shows that the International Harvester Com- pany has not used its power to oppress or injure the farmers who are its customers/' "In this case the court is required by the statute to pro- nounce a judgment of condemnation upon a combination corporation. The New Jersey company had no plant, and maintained no office in Missouri, consequently was not a party to the suit. 344 THE NEW COMPETITION which is proved by the facts as they appear in this record to have been so far beneficial to the community." ' *In Cote vs. Murphy et al. (1894), !S9 P a - St. 420, the court said: "The fixed theory of courts and legislators then was that the price of everything ought to be, and, in the absence of combination, neces- sarily would be, regulated by supply and demand. The first to deny the justice of this theory, and to break away from it was labor; and this was soon followed by the legislation already noticed, relieving workmen from the penalties of what for more than a century had been declared unlawful combinations or conspiracies. Wages, it was argued, should be fixed by the fair proportion labor had contributed to produc- tion ; the market price, determined by supply and demand, might or might not be fair wages, often was not, and as long as workmen were not free, by combination, to insist on their right to fair wages, oppres- sion by capital, or, which is the same thing, by their employers, fol- lowed. It is not our business to pass on the soundness of the theories which prompt the enactment of statutes. One thing, however, is clear: the moment the legislature relieves one, and by far the larger number of the citizens of the commonwealth from the common-law prohibitions against combinations to raise the price of labor, and by a combina- tion the price was raised, down went the foundation on which the com- mon-law conspiracy was based, as to that particular subject. Before any legislation on the question, it was held that a combination of work- men to raise the price of labor, or of employers to depress it, was un- lawful, because such combinations interfered with the price, which would otherwise be regulated by supply and demand. This interfer- ence was in restraint of trade or business and prejudicial to the public at large. Such (a) combination made an artificial price. Workmen, by reason of the combination, were not willing to work for what, other- wise they would accept. Employers would not pay what otherwise they would consider fair wages. Supply and demand consist in the amount of labor for sale, and the needs of the employer who buys. If more men offered to sell labor than are needed, the price goes down, and the employer buys cheap. If fewer than required offer, the price goes up, and he buys dear. As every seller and buyer is free to bargain for himself, the price is regulated solely by supply and demand. On this reasoning was founded common-law conspiracy in this class of cases. But, in this case, the workmen, without regard to the supply of labor, or the demand for it, agreed upon what, in their judgment, is a fair price, and then combined in a demand for payment of that price. When refused, in pursuance of the combination they quit work, and agree not to work until the demand is conceded. Further, they agree, by lawful means, to prevent all others, not members of the combination, from going to work until the employers agree to pay the price fixed by the combination. And this, as long as no force was used, or menaces to person or property, they had a lawful right to do; and so far as is known to us, the rise demanded by them may have been a fair one. But it is nonsense to say that this was a price fixed by supply and demand. It was fixed by a combination of workmen on their combined CLASS LEGISLATION 345 XXV Enough has been said to satisfy the impartial reader that the drift is toward larger and larger cooperation, and that, too, despite attempts to legislate to the contrary. Naturally manufacturers are timid about entering any form of association, for they cannot know at what moment they may be indicted as criminals. As a result more or less demoralization prevails in almost every industry, demora- lization of prices, demoralization of methods. All the evils, all the unfair, oppressive and vicious practices of the old competition prevail. The basic proposition of the Open-Price Association, namely, that men have the right to publish prices and make known all conditions surrounding business, is so far be- yond debate or question that it is practically axiomatic; if they have that right it goes without saying they have the right to cooperate in any manner necessary to gather and publish the information. Spreading of knowledge of facts and conditions is one of the enlightened efforts of the age. The theory is that if a man can be fully informed regarding all he has to con- tend with, he will be in a better position to get fair wages and fair prices. The prime object of the Department of Agriculture is to enable farmers to get better crops and better prices. The judgment as to its fairness; and, that the supply might not lessen it, they comhined to prevent all other workmen in the market from accept- ing less. Then followed the combination of employers, not to lower the wages theretofore paid, but to resist the demand of a combination for an advance ; not to resist an advance which would naturally follow a limited supply in the market, for the supply, so far as the workmen belonging to the combination were concerned, was, by combination, wholly withdrawn, and as to workmen other than members, to the ex- tent of their power, they kept them out of the market. By artificial means the market supply was wholly cut off." 346 THE NEW COMPETITION prime object of the Department of Commerce and Labor is to enable labor to get better terms and better wages. It ought to be the object of some department to help manufacturers and dealers to get better returns for better products. But so far the only solicitude betrayed by any depart- ment of the government regarding manufacturers and deal- ers is to force them to sell at the lowest prices under the most adverse conditions. Class legislation and discrimination must go. XXVI Since this chapter was written, Congress has passed section 6 of the Clayton Law, and the Supreme Court of the United States has held constitutional exemptions of labor, agricultural, and horticultural organizations from anti-trust statutes. 1 1 International Harvester Co. of America vs. State of Missouri. For a very complete review of the decisions pro and con on this, see the briefs filed in that case and the authorities cited from the briefs in the report of the opinion, 234 U. S. Sup. Ct., Lawyers' Ed., pp. 197-202. CHAPTER XX CONSTRUCTIVE LEGISLATION We are on the eve of great things. For more than ten years the country has been tugging at the leash of legislation that hinders progress. 1 The Sherman law is destructive in purpose and applica- tion. State "anti-trust" acts are framed to tear down and destroy — what ? Cooperative movements that are the logical, the inevi- table results of economic conditions. II Law has so little meaning to most men they look upon it as a cure-all and give it in large doses for every ill, where- as of all remedies it is the most difficult to rightly adminis- ter. 1 "In my judgment, the present law against pools, trusts, and combinations is ineffective to protect the people against combinations of capital. The courts may dismember an organization, but they will hardly attempt to confiscate its property; so that, after dismemberment, the ownership and control will continue substantially as before. To permit combinations to exist, and at the same time secure to the people the natural and legitimate benefits of such combination, is a problem not yet solved. To forbid, as the law in question does, the existence of all combinations that lessen competition compels a halt in the natural march of industrial development, and deprives the people of the benefits which should result from improved business methods." — By Judge Ferriss, in State vs. International Harvester Co. of America, 237 Mis- souri 369. 347 348 THE NEW COMPETITION Men are so perversely constituted they seem to prefer compulsion to cooperation ; they call upon the state to com- pel them by law to do what they ought to do for them- selves, to frame rules of conduct they should voluntarily devise for their own protection. While it is true the rise of freedom is the development of law, it is also true that the history of the law is one long story of man's fight for liberty. Which is but another way of saying that the rules of conduct which define — and by defining, create — liberty, yield slowly and stubbornly to the irresistible forces of progress, thereby making law to appear a laggard in the march of events, but that is its value, for if it yielded to every passing impulse, every wave of opinion, it would not be law, but anarchy. Is it not strange how men in all ages appeal to this conservative force to accomplish the most radical things — appeal to law to overturn law, pass laws to do things repug- nant to the fundamental concepts of law? Except for mischief, a law is of no effect unless it ex- presses what the people really want and what they believe to be fair and right. Ill This is a big country and does things in a big way ; it is a rich country and it does things with the reckless prodigal- ity of suddenly acquired wealth. Whatever we do is done on the scale of ninety millions of people and one hundred and thirty billions of riches. We have grown so fast, made money so fast, that we are wasteful, extravagant, careless. We do things we ought not to do both in the making and in the spending. We have taken little thought of the morrow because the day is filled with such golden opportunities. CONSTRUCTIVE LEGISLATION 349 But our speed has become so headlong - , developments have piled upon developments so fast, changes followed changes with such breathless rapidity, the people are fright- ened ; the very size of things startles them. As fortunes got bigger and bigger, and corporations became more and more powerful, and trusts were formed, it was thought time to call a halt, and laws were passed to curt> — progress! IV These laws are not well drawn because what they were aimed at was not well understood. The "trust" was looked upon as a thing apart, as a mon- ster to be annihilated. It was not clearly seen that the trust is just as legitimate, just as logical a development of eco- nomic conditions in this marvelous country as are the cor- poration and the partnership. The trust is simply one of our big ways of doing things, and in and of itself the billion dollar corporation doing business in the world at large is no more to be feared than the million dollar corporation doing business in a small town, or the ten thousand dollar part- nership doing business in the country village, each may dominate its particular sphere, and dominate it in the same way and by precisely the same methods, and each may abuse its powers. V Of all peoples on the face of the globe the American people ought to be the least fearful of mere sice. But we are — or rather have been, for fear of size is pass- ing. We have framed laws aimed not at methods but at magnitude. We passed the Sherman Act which is aimed at size, and for many years the courts applied that act to 350 THE NEW COMPETITION combinations irrespective whether the things they did were fair and reasonable or not, but of late a change has come over the country, our eyes are becoming accustomed to magnitude, no longer do we jump at the sight of a trust like a small boy at a shadow in the dusk; we are beginning to see that size has its advantages as well as its disadvan- tages; that it enables men to do things on a scale com- mensurable with the wealth, the resources, the power of the country — in short that the much feared, much hated trust may have its place in the economy of national and international trade. VI When the Sherman law was passed there were so few trusts in existence no one knew much about them; now — twenty odd years after — there are so many in every state, in every city, in almost every country town that the aver- age school boy knows all about them. They have been so denounced, debated, discussed that no one is ignorant of their number, their steady increase, and their uses. The common people have come to see clearly that there is very little difference between combinations — trusts — of labor, and combinations of farmers, merchants, manufactur- ers. They all have in view the one end — better returns for their efforts. As a natural result the old destructive laws have fallen into disrepute, and there is a wide demand for constructive legislation. VII Many so-called progressives, or radicals, loudly oppose the repeal of the Sherman law, but even they admit the absolute need of supplemental legislation, and it is quite CONSTRUCTIVE LEGISLATION 35 i apparent from the bills they have introduced or advocated in Congress that while they oppose all direct attacks on the Sherman law, they concede it is obsolete and mischievous in its operations. The more the entire subject is debated, the clearer it is that public sentiment is crystallizing in favor of legislation that will regulate instead of destroy, that will get all there is of good in trusts and large combinations and suppress all there is of evil, and out of this sentiment will spring the much more vital conviction that before trusts and large corporations can be effectually dealt with all that is evil, oppressive and unfair in the practices of the individual must be suppressed. In other words, we are on the road that leads straight toward the adoption of higher standards of conduct in commerce and industry. VIII The agitation against trusts has led to a critical ex- amination of the conduct of the individual and men see to-day as they have never seen before that the trouble lies within and not without. A law aimed at a ten million dollar corporation or a billion dollar trust because of its size is no law at all, it is merely an expression of blind prejudice since the corpora- tion or trust half the size may do things far more oppressive and unfair. The large corporation may need more careful watching, greater publicity, because its power is so great, and without watchfulness on the part of the public and publicity in all its operations it may be tempted to abuse its advantages, but kept within the bounds of fair and straightforward dealing, its size may be of great value to the community. 352 THE NEW COMPETITION IX It is easy and instinctive to condemn what we do not understand. It is much easier to pass a law aimed at this, that or the other object, than it is to frame a law that will reach and correct abuses. It is far easier to frame a law that will hit the Standard Oil Company than it is to frame one that will search out and condemn oppressive and unfair methods zvhether used by a corporation or an individual. X Anti-Trust legislation has been drawn along the lines of least resistance ; it is safe to say that no law has been passed against trusts and monopolies that has not been framed with some conspicuous trust in mind, and in probably every in- stance, the Standard Oil Company. That legislation so im- portant and far-reaching in its general consequences should turn on popular hatred for one large company is a confes- sion of weakness. XI But the tide has turned, there is a loud and louder de- mand for laws that will remedy abuses — no matter by whom practiced. There is a demand for better standards of busi- ness morality, for a better business code. There is an op- portunity for statesmanship of the highest order. Our Rep- resentatives and Senators may not realize the extent and the character of this golden opportunity; most of them may cling close to the ground to catch the murmurings of shift- ing public opinion; most of them may try to talk and vote as they think the people would like to have them talk and vote; few may understand that in the long run the people CONSTRUCTIVE LEGISLATION 353 love and respect the men who talk and vote as their con- sciences dictate. But there are men who are looking far ahead, who are anxious to have a part in doing things that will help make the history of their country, who wish to have a part in the adoption of an enlightened constructive policy and the future depends upon their conscientious efforts. The much vaunted Sherman law will pass into economic history along with such English laws as those against "re- grating," "forestalling," and "engrossing," and laws against labor unions — as one of man's many futile attempts to check evolution. Its chief value lies in the fact it has aroused the country, made men see the necessity of doing something of affirmative value. XII More than once in the preceding chapters we have indi- cated some of the things the new laws will provide for and against; a brief summary, however, will not be out of place in these concluding pages. Any law that is formed should be comprehensive in its scope and with two prime objects in view. A. Publicity — the frank and free disclosure of all com- petitive practices. B. Reform — the suppression of all dishonest, fraudu- lent, oppressive and unfair business methods. Publicity will accomplish three-fourths of the reforms. The law should provide for: 1. A Federal Commission to hear and adjust all con- troversies arising under the law. Inasmuch as the principles governing the deliberations of the proposed commission would be essentially the same as the principles controlling the decisions of the Interstate Commerce Commission, the two should be branches of the one tribunal; this would be 354 THE NEW COMPETITION all the more appropriate in view of the additional fact that many important trade and industrial questions could not be determined without taking into consideration rates and questions of transportation. This Commission would need to have branch courts or divisions in different sections, with, possibly, agents or dep- uty commissioners in every city of importance; say every federal judicial district — these are matters of detail. 2. Every corporation engaged in interstate commerce should be required to take out a license and file certain gen- eral information regarding capitalization, capacity, output, etc., etc., and such other details as the development of the new plan shows to be important. Federal incorporation may be desirable but is not essential. Whether individuals and partnerships engaged in inter- state commerce should come under all the provisions of the law is a matter of serious consideration, the law may, and very properly should, recognize the distinction that ex- ists between the individual or the partnership and the cor- poration. The latter being a legal entity and wholly de- pendent upon the law for permission to do business at all, may be subjected to more rigid requirements. In fact, if it should be so desired, the law at first might be made to in- clude only corporations, leaving individuals to come under its provisions later as they become convinced of the value of publicity and frankness. But if individuals are to be allowed to complain of the acts of corporations, they, in turn, should be subject to the same rules of fair conduct, for an individual, having less at stake, may hurt a corporation by unfair competition more than the corporation can hurt him. 3. Require the use of a uniform system of accounting, especially of cost accounting, and make any intentional fail- ure to keep absolutely truthful and accurate records of all purchases and all sales a punishable offense. CONSTRUCTIVE LEGISLATION 355 4. Make the following acts punishable : (a) Billing at other than actual terms. (b) Secret rebates, terms, commissions. (c) Shipping of quantities or qualities of goods other than those described in invoices. (d) False or misleading statements regarding (a) costs, (b) sales, and (c) prices charged others. (e) Refusal to tell one buyer when lower prices have been charged others for similar goods. This provision would do more than anything else to bring about fair and frank trading. 5. Make the following acts subject to rigid investigation on complaint of any party claiming to be injured, and make them punishable if it should appear they were done with intent to injure anyone. (a) Selling at, or below, cost. (b) Selling to one man on better terms than are charged his competitor. (c) Selling in one locality at different prices from those charged in another — all other conditions being equal. The foregoing general provisions constitute a business code appropriate to all, whether individuals, partnerships, corporations or trusts — it would tend toward fair trade and higher business standards. 1 The following have to do with the formation of associa- tions to help trade conditions, and which would be useful m applying the principles of the new code. In fact, without associations it would be impossible for a federal commis- sion to enforce the proposed provisions which are general in character. Only the parties engaged in a trade or industry are in a position to work out the details, and formulate the rules necessary to compel obedience. The public does not realize how eager the best business men are to do some of these very things, how gladly they would "blacklist" the 1 See German code, appendix, pp. 358, 359. 356 THE NEW COMPETITION manufacturer or dealer who resorts to tricky or unfair prac- tices, but the law as it stands does not permit them to get to- gether and act as a unit ; the following suggestions are made to meet this condition : 6. Remove all restrictions upon the organization of as- sociations and combinations to control occupations, trades and industries; on the contrary directly encourage such organizations, encourage men to do for themselves the things that should be done, but under the following condi- tions : (a) Each association shall file its articles of agreement and the details of its organization with the proper federal department. (b) Its meetings shall be open to any representative of the government who, in the performance of his duties, wishes to attend, and he shall have power to examine all records, files and papers, and to question officers and mem- bers regarding not only the transactions of the association, but their own acts in furtherance of the objects of the asso- ciation. (c) Power in the federal commission, upon complaint of any party, to review the acts of the association, if neces- sary revise and fix prices and conditions of purchases and sales, award damages, enforce penalties, dissolve the asso- ciation. (d) Power, also, to require publicity and to name con- ditions under which representatives of (a) employees, (b) parties who sell to members of association, and (c) cus- tomers, may attend the meetings of the association. With these broad general provisions the country would have nothing to fear from combinations however large. Their influence would be beneficial, and each would work out for its own occupation, trade or industry such rules as would be necessary for compliance with the letter and spirit of the new code. CONSTRUCTIVE LEGISLATION '357 Every objection that can be urged against these sugges- tions was urged with no greater force against the interstate commerce law, yet sharply as that law has been criticized by railroad men here and there, the railroad world as a whole would not go back to the old demoralized conditions that prevailed in the days of unfettered competition, the days of secret rebates, of arbitrary and unfair discrimina- tion in rates. Ten years from now manufacturers will look back upon existing conditions in the industrial world as equally bar- baric. XIII It is gratifying to note that in the Clayton and Trade Commission Laws some of the things urged in this chapter are on the way to accomplishment. The danger ahead is that the country has taken so advanced a forward step the reaction may be great. Reaction ever follows action, and already the signs are unmistakable that the country is not only disposed to call a halt on further economic experiments, but even inclined to retrace its steps. For six or eight years a radical spirit prevailed; at the moment 1 a conservative tendency is obvious. The future of the two new laws depends almost entirely upon the wisdom of the new Trade Commission. It will be only too easy for that Commission to so admin- ister the law as to court the fate of the unlucky Commerce Court, for, like the Commerce Court, the Commission faces a feeling of distrust due to the underlying feeling of uncer- tainty regarding what it will do and what the laws mean. Its powers are so great people are afraid. This feeling of apprehension may be easily and quickly allayed, and it is safe to assume that the Commission, com- posed as it is of lawyers, experts, and business men, will 1 Spring of 1915. 358 THE NEW COMPETITION lose no time in demonstrating its power for good — and the power is there. The personnel of the Commission is excellent and its Chairman is not only a lawyer, but his experience as head of the Bureau of Corporations has given him wide and intimate knowledge of business and competitive conditions. APPENDIX I CONDITIONS IN CANADA The Canadian Criminal Code makes it an indictable offense, punishable by fine and imprisonment, for any one to conspire, combine or agree with any person or any transpor- tation company to unduly limit the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any article or commodity which may be the subject of trade or commerce ; or, to restrain or injure trade or commerce in relation to any such article or commodity; or, to unduly pre- vent, limit, or lessen the manufacture or production of any such article or commodity, or to unreasonably enhance the price thereof; or, to unduly prevent or lessen competition in the production, manufacture, purchase, barter, sale, transpor- tation, or supply of any such article or commodity, or in the price of insurance upon person or property. In 1910 an Act was passed providing for the investigation of combinations, monopolies, trusts, and mergers. This Act is a step in advance of anything attempted in this country. It provides, first of all, for the appointment of a Registrar of Boards of Investigation. It then goes on : "Where six or more persons, British subjects resident in Canada and of full age, are of opinion that a combine exists, and that prices have been enhanced, or competition restricted by reason of such combine, to the detriment of consumers or producers, such persons may make an application to a judge for an order directing an investigation into such alleged combine. "2. Such application shall be in writing, addressed to the judge, and shall ask for an order directing an investigation into the alleged combine, and shall also ask the judge to fix a time and place for the hearing of the applicants or their representative. 359 3 6o THE NEW COMPETITION "3. The application shall be accompanied by a statement setting" forth : "(a) The nature of the alleged combine and the persons be- lieved to be concerned therein. "(b) The manner in which the alleged combine affects prices or restricts competition, and the extent to which the alleged combine is believed to operate to the detriment of con- sumers or producers. "(c) The names and addresses of the parties making the application and the name and address of one of their number, or of some other person whom they authorize to act as their representative for the purposes of this Act and to receive com- munications and conduct negotiations on their behalf. "4. The application shall also be accompanied by a statu- tory declaration from each applicant, declaring that the alleged combine operates to the detriment of the declarant as a con- sumer or producer, and that to the best of his knowledge and belief the combine alleged in the statement exists, and that such combine is injurious to trade, or has operated to the detri- ment of consumers or producers in the manner and to the extent described, and that it is in the public interest that an investigation should be had into such combine." Within thirty days after receiving the application, the judge is to fix a time and place for hearing applicants. At such hearing applicants may appear in person or by counsel. "If, upon such hearing, the judge is satisfied that there is reasonable ground for believing that a combine exists which is injurious to trade, or which has operated to the detriment of consumers or producers, and that it is in the public interest that an investigation should be held, the judge shall direct an investigation under the provisions of this Act; or, if not so satisfied, and the judge is of opinion that in the circumstances an adjournment should be ordered, the judge may adjourn such hearing until further evidence in support of the applica- tion is given, or he may refuse to make an order for an investigation." The order of the judge directing investigation is transmit- ted to the Registrar by registered letter, "and shall be accompanied by the application, the statement, a certified copy of any evidence taken before the judge, and the statutory declarations. The order shall state the matters to be investigated, the names of the persons alleged to be con- CONDITIONS IN CANADA 361 cerned in the combine, and the names and addresses of one or more of their number, with whom, in the opinion of the judge, the Minister should communicate, in order to obtain the recom- mendation for the appointment of a person as a member of the Board, as hereinafter provided." Thereupon, a Board of Investigation is appointed, consist- ing of three members, one of whom is appointed on the recom- mendation of the persons who made the complaint, the second on the recommendation of the persons against whom the com- plaint is made, and the third on the recommendation of the two members so chosen. Provision is made for failure of parties to agree on mem- bers. The third member of the Board acts as its chairman. Before entering upon their duties, each member is required to take an oath, the form of which is prescribed in the Act. "Upon the appointment of the Board, the Registrar shall forward to the chairman copies of the application, statement, evidence, if any, taken before the judge, and order for investi- gation, and the Board shall forthwith proceed to deal with the matters referred to therein. ''The Board shall expeditiously, fully and carefully inquire into the matters referred to it, and all matters affecting the merits thereof, including the question of whether or not the price or rental of any article concerned has been unreasonably enhanced, or competition in the supply thereof unduly re- stricted, in consequence of a combine, and shall make a full and detailed report thereon to the Minister, which report shall set forth the various proceedings and steps taken by the Board for the purpose of fully and carefully ascertaining all the facts and circumstances connected with the alleged combine, includ- ing such findings and recommendations as, in the opinion of the Board, are in accordance with the merits and requirements of the case. "2. In deciding any question that may affect the scope or extent of the investigation, the Board shall consider what is required to make the investigation as thorough and complete as the public interest demands. "The Board's report shall be in writing, and shall be signed by at least two of the members of the Board. The report shall be transmitted by the chairman to the Registrar, together with the evidence, taken at such investigation certified by the chair- man, and any documents and papers remaining in the custody 362 THE NEW COMPETITION of the Board. A minority report may be made and transmit- ted to the Registrar by any dissenting member of the Board." In the event the persons charged are found guilty of any of the acts complained of the statute provides (i) that the Governor in Council may direct that competing goods be ad- mitted into Canada free of duty. (2) That if the exclusive rights and privileges granted under a patent have been abused, information may be filed in the Exchequer Court praying for judgment revoking such patent. (3) A penalty not exceeding $1,000.00 and costs, for each day after the expiration of ten days, or such further extension of time as in the opinion of the Board may be necessary, from the date of the publication of the report of the Board in The Canada Gazette, during which such person so continues to offend. "The object of this legislation, as expressed in the last an- nual report of the Department of Labour, is to 'place at the disposal of the people a readier and, it is believed, a more effective means than is now available in Canada of disclosing and of remedying the abuses of combines which may be formed, whether as corporations, monopolies, trusts, or mer- gers, or in the looser forms of agreements, understandings, or arrangements, for the purpose of unduly enhancing prices or of restricting competition to the detriment of consumers or producers.' In the last annual report of the Department of Labour, a chapter was devoted to this measure, and the text of the same was also published in the form of an appendix." x Up to the present time (July 1, 1912) only one applica- tion has been made and one Board established, and that in the case of the United Shoe Machinery Company, a Canadian corporation. Application was made on November 10, 1910, but proceedings were stayed by various judicial orders until November, 191 1, when the investigation proceeded at Mon- treal, Toronto, and Quebec, and subsequently completed, but the report of the Board is not yet filed. 1 Report of Proceedings under The Combines Investigation Act for the year ended March 31, 191 1, being an Appendix to Annual Report of the Department of Labor, 1910-11. APPENDIX II CONDITIONS IN ENGLAND The law in England regarding combinations to maintain prices is in a peculiar condition. It neither approves nor con- demns. It simply declines to enforce such agreements. In so far as they restrain trade, they are "unlawful," because monopolies are repugnant to English law, but there is no provision by law for their suppression. The English courts are committed to this general propo- sition : "Parties engaged in trade have the right to push their trade by all lawful means, and to endeavor by all lawful means to keep their trade in their own hands and exclude others from participating therein. It is lawful to make profitable offers to attract customers from competitors, and they may induce cus- tomers to deal with them exclusively, by giving notice that to such exclusive customers only will they give the benefit of their more favorable terms." In a celebrated case, Mogul Steamship Company vs. Mc- Gregor, et al., it was decided that certain ship owners might combine and threaten shippers, that if they patronized the ships of a competing company the combination would refuse to handle their freight. This was held to be the meeting of competition by competition. In the course of his opinion, Lord Watson said : "I have never seen any reason to suppose that the parties to the agreement had any other object in view than that of defending their carrying trade during the tea season against the encroachments of the appellants and other competitors and of attracting to themselves custom which might otherwise have been carried off by these competitors. This is an object which is strenuously pursued by merchants, great and small, in every branch of commerce, and it is in the eye of the law 363 364 THE NEW COMPETITION perfectly legitimate. If the respondents' combination had been formed, not with a single view to the extension of their busi- ness and the increase of its profits, but with the main and ulte- rior design of effecting an unlawful object, a very different question would have arisen for the consideration of your lord- ships. But no such case is presented by the facts disclosed in this appeal. I cannot for a moment suppose that it is the proper function of English courts of law to fix the lowest prices at which traders can sell or hire for the purpose of pro- tecting or extending their business without committing legal wrong which may subject them in damages. Until that be- comes the law of the land, it is, in my opinion, idle to suggest that the legality of mercantile competition ought to be gauged by the amount of the consideration for which a competing trader thinks fit to part with his goods or to accept employ- ment. The withdrawal of agency first appeared to me to be a matter attended with difficulty, but, on consideration, I am satisfied that it cannot be regarded as an illegal act. In the first place, it was impossible that any honest man could im- partially discharge his duty in finding freights to parties who occupied the hostile position of the appellants and respondents ; and, in the second place, the respondents gave the agents the option of continuing to act for one or other of them, in cir- cumstances which placed the appellants at no disadvantage." Another judge said : "I cannot see why judges should be considered specially gifted with the prescience of what may hamper or what may increase trade, or of what is to be the test of adequate remu- neration. In these days of instant communication with almost all parts of the world, competition is the life of trade, and I am not aware of any stage of competition called 'fair' interme- diate between lawful and unlawful. The question of 'fairness' would be relegated to the idiosyncrasies of individual judges. I can see no limit to competition, except that you shall not in- vade the rights of another." The Lord Chancellor said : "There are two senses in which the word 'unlawful' is not uncommonly, though, I think, somewhat inaccurately used. There are some contracts to which the law will not give effect ; and, therefore, although the parties may enter into what, but for the element which the law condemns, would be perfect contracts, the law would not allow them to operate as con- tracts, notwithstanding that, in point of form, the parties have CONDITIONS IN ENGLAND 365 agreed. Some such contracts may be void on the ground of immorality ; some on the ground that they are contrary to public policy ; as, for example, in restraint of trade, and con- tracts so tainted the law will not lend its aid to enforce. It treats them as if they had not been made at all. But the more accurate use of the word 'unlawful,' which would bring the contract within the qualification which I have quoted from the judgment of the Exchequer Chamber, namely, as contrary to law, is not applicable to such contracts. It has never been held that a contract in restraint of trade is contrary to law in the sense I have indicated. 1 The legal status of combinations to competition is summed up as follows : "The non-recognition of associations by the law has im- pressed on them a character of great fragility. Whatever may have been the period for which an association was origi- nally formed, no member need belong to it or observe its rules a day longer than he likes. Nothing can keep him to his con- tract except a sense of honourable obligation, and that does not always resist the temptation of an advantageous order. This fragility is increased by the almost invariable incomplete- ness of an association which very rarely includes all the com- petitors in a district. Some are always left outside to profit by cutting prices a shade below the association rates, or it becomes profitable for another district to invade the territory of the combined traders. Disintegrating forces are always at work, and when trade is bad, and there is a mad rush for orders at any price, so as to reduce costs by a large output, they work with double violence until at length a point comes when, by common consent, the association is allowed to lapse until the frenzy has ended in exhaustion. The history of price associations, pools, and similar bodies will show how they 'rose, and stoop'd, and rose again, wild and disorderly.' " 2 "Repressive legislation could only affect the outward form of combination. Amalgamation cannot be prohibited without forbidding the union of even two firms, while to make mo- nopoly illegal would be fruitless where no formal monopoly exists, and there is no way of determining the greater effective- ness for evil of a merger including eighty per cent, of the trade over one containing only fifty. No law can suppress 1 See "The Trust Movement in British Industry," by H. W. Ma- crosty, p. 19. 2 "The Trust Movement in British Industry," by H. W. Macrosty, pp. 22-23. 3 66 THE NEW COMPETITION the Gentlemen's Agreement, where there are no rules, no con- stitution, no contract, but common action is effected verbally and informally, and yet some of the most oppressive combina- tions have been of that form. Neither combination nor agita- tion should be driven underground, and it is significant that to-day complaints are generally raised in the United King- dom, not against the legally recognized amalgamations, but against associations which have no existence in the eyes of the law, and work in secret. To strike at the methods adopted by combinations is not easy without at the same time repress- ing measures blamelessly adopted by the individual trader. Boycotting, dumping, selling at a loss to crush competition, maintaining prices at the highest level which the market per- mits — these are no monopoly of combinations, but are weapons in everyday use by manufacturers, merchants, and shop- keepers. It would be, indeed, an extraordinary thing to strike at competition in the name of competition." 1 "The effects of trusts and cartels in England have not been so marked as to provoke popular opposition, and, in conse- quence, they have aroused little political discussion. In 1908 Sir G. Parker asked in Parliament whether a committee of inquiry was not desirable, and was informed by the Prime Minister that he was aware of the existence of such combina- tions, and that in some cases their effect might be prejudicial to the public, but that he was not at present prepared to grant an inquiry." 2 "It is safe to assume that British 'trusts' keep prices on the whole somewhat above what they would be under free competition, but, before attributing this to them as blame, we must be sure that competition prices are healthy prices, an assumption which cannot be made. Close investigation be- tween prices and costs before and after amalgamation would be necessary to determine this question, and, needless to say, the information is not at our disposal. Speaking broadly, there have been very few complaints of price extortion on the part of our great amalgamations, and where made they have generally been supported only by the scantiest of evidence. When the Bradford merchants were at odds with the Brad- ford Dyers' Association they nevertheless admitted that the price policy of the great combine had been moderate." 3 1 "The Trust Movement in British Industry," by H. W. Macrosty, PP- 344-345- '"Monopoly and Competition," by Hermann Levy, p. 315. •"The Trust Movement in British Industry," by H. W. Macrosty, P- 335- CONDITIONS IN ENGLAND 367 "In 1833 a parliamentary committee inquired into the state of manufacturers, commerce and shipping, and the extensive evidence taken showed that in the manufacturing of finished goods — which alone were, in fact, considered — a vigorous com- petitive struggle was going on. This had produced in the bad years which preceded 1820 such a lowering of prices that the profits of most undertakings were exceptionally small, and in some cases no longer covered the cost of production. The opinions of the experts heard by the committee were charac- teristically expressed by a textile worker: 'We have long considered that part of our grievances was caused by the steam looms and by the competition of foreign manufacturers ; but we consider that a very trifling matter in comparison with the home competition that exists among our masters, and till there is some remedy for that we shall never be better.' Em- ployers and workers seemed equally convinced of the oppres- sive results of competition ; but there is no trace throughout the evidence of any united action to restrict or abolish it. Rather, in all branches of industry, competition was regarded as an evil, as inevitable as it was harmful, and the survivors regarded it as little more than a natural consequence of the struggle for existence that the weaker gradually became en- tirely submerged. Adam Smith had taken the ruin of such men as a completely natural fact, unimportant compared with all the advantages of the competition he championed. He had in mind the condition of affairs which an expert stated in 1833 to be prevalent in England, when he said: T should ascribe to increased competition the misfortunes of many people in England. If too many people run into one line of busi- ness, of course the weaker portion must give way.' " 1 '"Monopoly and Competition," by Hermann Levy, pp. 103-104. APPENDIX III CONDITIONS IN GERMANY Trade combinations in Germany are not organized under special, but are formed and operated under general laws. It is the policy of the Government to encourage syndicates and what are known as "cartels," which are neither more nor less than hard and fast agreements to restrict outputs and main- tain prices. The Prussian State is a member of the potash syndicate, because it is a large miner of potash, and the draft of the potash law originally provided that all the German potash mines should be compelled to join the syndicate, but that com- pulsory feature was not embodied in the imperial act as finally passed. 1 The several trade syndicates may be defined as follows : "The Selling Agreement" cartel, or combination under which producers agree not to sell their products below a speci- fied minimum price, which price is changed from time to time in accordance with the varying cost of production and general requirements of market. "These rather loosely organized combinations were the original type of German trade syndicates, and served their purpose very well in prosperous times, but in periods of de- pression and diminished demand it was found difficult to hold certain members to the agreement, and it was decided to adopt a more binding form of organization, and put the business of selling under direct control of a central authority." 1 See "Legal Status of Trusts in Germany," Consular Trade Re- ports, January 25, 191 1, pp. 305-312. A German authority says : "Kartell and Trust are very different, not in degree, but in their nature. I know of no case in the thirty years of active kartell movement in Europe in which the one form has passed over into the other." 368 CONDITIONS IN GERMANY 369 Sales Syndicates, in which all members to the "cartel" pool their products, to be sold through a central committee which fixes the selling price and apportions among the mem- bers orders as they are received in proportion to the capacity of each. "In a syndicate of this class the individual firms and com- panies which it includes retain their corporate autonomy, pay dividends on their own stock according to earnings, and unless otherwise agreed in the cartel, purchase independently the raw materials of manufacture." A third class includes the trusts, or closely organized syn- dicates, which purchase original corporations and issue new stock, consolidating the management under the control of the central organization. 1 "The majority of German business men and economists are not opposed to such syndicates and the creation of monop- olies, in which the State itself sometimes participates in com- bination with private producers, is lawful if the creators com- mit no injurious act, a limitation so difficult to define and comprehend that practically the only difficulties with which the ordinary cartels come into contact are difficulties arising between the members themselves. The courts have frequently recognized the perfect right of producers to control their product in a monopolistic organization as a right somewhat akin to the right to make use of a highway, and only subject to correction of abuses of power. "The profound difference between the German and the American conception of sound business conditions is best ex- plained, perhaps, by the racial difference between the two peoples — the German, with strong collectivist tendencies which manifest themselves in society, in government, and in trade, and the American, with a deeply rooted individualism, which remains even when he engages in a collectivist enter- prise. Thus it happens that the capitalistic classes of Ger- many, although opposing socialism in their public life, never- theless drift in the direction indicated by their natural ten- dencies in their business life, and, in so doing, they have the tacit approval of the avowed socialistic classes, who perceive in the steady accumulation of the producing powers in a few hands a movement tending logically and inevitably toward the 'See Daily Consular and Trade Reports, January 25, 191 1, p. 306, 370 THE NEW COMPETITION eventual realization of their dogma — that is, the State in supreme control." 1 "The German courts have repeatedly ruled, according to Richard Cahver, the socialistic writer, in his 'Kartelle und Trusts,' that the syndicates do not violate the principles of trade liberty, as they tend to protect the interests of the whole nation against the selfishness of individuals, and to protect the products of industry from the many disadvantages which arise from price cutting. "Under these rulings, absolute or partial monopolization by many cartels has been brought about, the national output be- ing reduced, with a consequent lifting of prices to a remunera- tive level. The danger point would be reached, from the point of view of the law, should a cartel of this character, on the possible refusal of one outside producer to accept its terms, undertake by unfair means to drive him into its fold or crush him if he refused its terms, and the difficulty of the prosecu- tion would be to prove that any such result had been contem- plated, even though its effect had been attained. "The very forms of commercial organization most common in Germany and America correspond to the temperamental qualities of the two peoples. In Germany the commercial trust, or cartel, is usually a federation in which each member retains its commercial identity while abandoning its freedom of action to the federation for a contractual period of three or five or ten years, or perhaps longer, but expecting eventually to get it back, and then, perhaps, make another contract, if the results of the first have been satisfactory. A German cartel is, as a rule, open to all those who submit to its provisions, and the control of the members is confined to the limits traced in the federal pact. In the typical American trust, instead of this association of units with influence usually rated according to productive capacity, we observe generally the permanent own- ership of a large part of the enterprise by a small group of persons, in which there is ordinarily some dominating personal element. "The basic notion of the German organizer has been to control production definitely, leaving it to the resourcefulness of the individual producers in the cartel to make more or less profit out of the proportion of the production allotted to them ; the basic notion of the American organizer has been, usually, to create a perfected and consolidated instrument, success fol- lowing naturally as a result of its well-balanced and skill- 1 "Legal Operation of Trusts in Germany," Daily Consular and Trade Reports, September 15, 191 1, pp. 1217-1218. CONDITIONS IN GERMANY 371 fully organized proportions. German cartel organization has contemplated that all its constituent firms should remain in business ; American commercial centralization usually has meant that the weaker, or for any reason undesirable, elements should go out of business, suggesting that the strong native individualism of our people rises to the surface, even when an effort tending toward pure collectivism is attempted." x A high German Court, after reviewing authorities in France, Russia, and the United States, made the following comments : "If, in any branch of the business, the prices so decline that a profitable trade is made impossible thereby, or that the trade is seriously endangered, the crisis at the start is not only injurious to the individual person, but also from a national economic point of view, and it lies, therefore, in the interest of the whole that the inadequately low prices in a certain branch of business should not permanently exist. Therefore, formerly, and at the present time, legislators have aimed to increase prices of certain products by inaugurating protective tariff's. "It cannot, therefore, be looked upon as generally contrary to the interests of the whole, if manufacturers of a certain article form a cartel in order to prevent or to modify the mu- tual underbidding and the decline of prices for their products caused thereby ; on the contrary, if the prices are continually so low that the manufacturers are threatened with financial ruin, their forming a cartel is not only to be looked upon as a justified manifestation of self-preservation, but also as an act which lies in the interest of the whole. "The formation of the syndicates and cartels in question, therefore, has been designated in various quarters as a means which, if reasonably applied to national economics, is especially adapted to prevent uneconomic overproduction, yielding no profit and resulting in catastrophes." 2 "The Imperial German Government issued statistics in 1905, showing that there were 385 cartels existing at that time in Germany, but these figures are said not to contain the Konditionskartelle (those, e. g., fixing terms of sale other than prices) and numerous other confederations, the existence of which was not then within the knowledge of the authorities. 1 "Legal Operation of Trusts in Germany," Daily Consular and Trade Reports, September 15, 191 1, pp. 1218-1219. 2 Daily Consular and Trade Reports, September 15, 19IX, p. 1219. 372 THE NEW COMPETITION When these statistics were made up, it was understood that about 12,000 establishments were members of syndicates. The following recapitulation shows the variety of industries cov- ered by commercial combinations in 1905 : Coalmining 19 Textiles 31 Stones and earth 27 Paper industry 6 Brick industry 132 Leather trade 6 Earthenware industry . 4 Wood industry 15 Glass industry 10 Food products 7 Iron industry 62 Miscellaneous 7 Metal trade 11 Machinery, electricity.. 2 Total 385" x Chemical industries ... 46 Germany has a statute 2 prohibiting unfair competition. It provides that whoever is guilty in industrial deals of trans- actions which offend against good morals, may be held liable in damages. The courts have so interpreted the law that it not only covers unfair actions, but if a party refrains from doing something he ought to do, he is liable. The German Courts go much further than the courts of this country in carefully weighing transactions to determine whether or not they are contrary to good morals and fair play, and in enforcing the laws against practices and actions which are not looked upon as decent and reputable. Individuals are protected against oppression by parties who are greedy for gain. Damages are awarded where things are done to influ- ence a man's business prospects or his connections with his customers. If a man, in the exercise of a technical legal right, damages a third person, he may find himself liable under the very broad statute. Prevailing standards of good morals and commercial ethics are taken into consideration. In mercantile affairs the views of customers and of honorable merchants in their commercial intercourse are used to measure the guilt or innocence of specific acts. A member of a combination wrote a certain customer that unless such customer refrained from making purchases from 1 Daily Consular and Trade Reports September 15, 191 1, p. 1222. 2 A translation of this statute is on file at Washington in the Bu- reau of Manufactures. CONDITIONS IN GERMANY 373 firms outside of the combination, the combination would refuse to sell him goods. An outsider caused the arrest of the mem- ber, and he was convicted. The court held the combination legal, but it also held that in threatening a customer unless he ceased dealing with parties outside the combination, the threat amounted to oppression. The spirit of this decision is directly opposed to that of the Mogul Steamship case, referred to on page 349- "The German Civil Code, paragraph 138, says that a trans- action which offends against good morals is void. The form- ing of a cartel, or syndicate, is not held to come under this paragraph, but, when formed, it may bring itself under the operation of this provision by the means which it may choose to attain its purposes, such as, for instance, boycotting, the cutting of prices with competitors to such an extent as to bring about the financial ruin of the latter, misuse of their monopoly and franchises, and the like. Concerning boycot- ting, there are decisions of the Imperial Supreme Court in the years 1903 and 1906 on this point. "The German Civil Code contains certain paragraphs touching 'treu und glauben,' or truth and good faith, and perhaps these paragraphs may be designated as containing equitable principles in contradistinction to the more fixed legal rules, there being in Germany no system of equity law and no equity courts. The Supreme Court at Leipzig decided in the year 1904 that a stricter moral standard must be applied to cartels and syndicates ; that is, that they must be held to a stricter accounting for the moral quality of their acts, because of the preponderance of economic interest which they repre- sent." * The German law to remedy the abuses of unfair com- petition came into force October 1st, 1909. The law con- tains both a general principle which supplies a weapon against unfair practices generally and an enumeration of a number of unfair practices specifically. 2 1 Daily Consular and Trade Reports. January 25, 1911, p. 310. 2 The summary of this law is taken from an admirable report made by Sir Francis Oppenheimer, England's Commercial Attache for Germany; the report was presented in January, 1913, and is printed in Diplomatic and Consular Reports, No. 683, Miscellaneous Series. 374 THE NEW COMPETITION This is in line with advanced thought, and in accord with the principles of the New Competition. The law is a step in advance of older laws in that it ex- tends to the employer, under certain circumstances, the liabil- ity for unfair practices by his employee. Furthermore, the law has increased the maximum fines ; it has added the possible punishment of imprisonment and payment of compensations to a maximum of 10,000 marks. Remedies are by way of civil as well as criminal procedure. The civil remedies are actions for damages and for injunction. Criminal actions may be instituted either officially or privately. Foreigners doing business within the German Empire are entitled to the benefits of this law only in so far as the laws of their own country give German merchants similar protection against unfair competition. One of the most notorious cases of foreigners using the law of unfair competition for the protection of their business inter- ests is connected with the famous Pilsen brewery. The origi- nal Pilsen brewery is an Austro-Hungarian firm. It has, under paragraph 16, succeeded before the German courts in a claim to the exclusive right to use the word "Pilsen for the beer brewed at its own brewery. Where the name "Pilsen" is to be used as a trade designation of a beer lightly brewed and in taste like the original "Pilsen," but brewed outside the original Pilsen brewery, the word "Pilsen" must be accompanied by some visible word or words clearly indicating the "non-Pilsen" origin of the beer. In some cases the law treats acts committed abroad as offences committed within the German jurisdiction, e. g., let- ters containing offences against the law posted abroad, but received in Germany, or advertisements inserted in the foreign Press circulating in Germany. The following is a schedule of paragraphs against unfair competition. 1. General clause; acts in course of business committed contra bonos mores. CONDITIONS IN GERMANY 375 2. What applies to "goods" applies also to agricultural produce, etc. 3. Action for injunction against unfair advertisements. 4. Penalty and (or) imprisonment for intentionally decep- tive advertising. 5. Exception in case of "traditional" designations. 6. Sale of bankrupt's assets, if no longer part of bank- rupt's estate, must contain no reference to the fact of bank- ruptcy. 7. (a) Advertisements of sale must announce reason of sale. (b) Regulations concerning sales to be issued by supe- rior administrative bodies. 8. Penalty and (or) imprisonment in case of restocking for the purpose of a sale. 9. (a) Selling off is to be regarded as a sale for the pur- poses of this law. (b) Except in case of customary season sales, to be fixed by the superior administrative authorities. 10. Penalties or imprisonment for infringement of para- graphs 7 and 9. 11. Regulations for the retail sale of certain commodi- ties to be fixed by the Federal Council. 12. (a) Penalty and (or) imprisonment in the case of wrongfully bribing employees for the purposes of competition. (b) The same penalty and (or) imprisonment to be inflicted upan employee accepting bribes. 13. (a) Persons entitled to bring action for injunction (under paragraphs 1 and 3; also under paragraphs 6, 8, 10 and 12). (b) Liability to pay damages (sub-paragraph 3; also sub-paragraphs 6, 8, 11 and 12). (c) Liability of employer for acts of employee com- mitted (under paragraphs 6, 8, 10, 11 and 12). 14. (a) Statements capable of injuring business of a competitor, if not substantiated, give rise to actions for dam- ages and injunctions. 376 THE NEW COMPETITION (b) Confidential information supplied for reasons of a justifiable interest gives rise to an action for injunction only if untrue, and to an action for damages if the information is known to be incorrect by the person supplying it. 15. (a) Penalty and (or) imprisonment in case of false information concerning another's business given mala fide. (b) Employer liable for such information given on the part of employee if made with employer's knowledge. 16. (a) Action for injunction against a person using another's name, etc., whereby a wrong impression might arise. (b) Action for damages if person using such name ought to have known that a wrong impression might arise. (c) These remedies are granted also if certain other business contrivances are used. 17. (a) Penalty and (or) imprisonment for employe betraying business secret. (b) Same consequences fall upon persons having (sub-paragraph 17 [a]) acquired knowledge of a secret to use it for purposes of competition. 18. Liability to penalty and (or) imprisonment if the per- son who is confidentially entrusted in course of business with a person's models utilizes them for purposes of competition, or communicates them to others. The general principle of the law is stated in the first para- graph which is as follows : "Whosoever commits in commercial intercourse for the purposes of competition acts which are contrary to 'good faith' can be brought before the courts, for the purposes of an injunction and the payment of damages." It has been held that "acts" are deemed to be contrary to "good faith" if they are contrary to the sense of decency of the fair and just-minded among the class concerned; an act to fall within the operation of this general paragraph must have been committed in commercial intercourse, which is intended to embrace all acts which are undertaken for the purposes of "business"; the act must have been undertaken CONDITIONS IN GERMANY 377 with a view to competition. The value of this general clause is often questioned, chiefly because the judges are said to be inexperienced in commercial practices and have shown, as a rule, little ability in putting such general principles to practical use. The very fact that a later part of the law enumerates specific abuses increased at first the hesitation of the bench ; it concentrates its attention upon these specific provisions, which, it argues, would be superfluous if the gen- eral clause were really intended for general application. But for the purpose of litigation the general clause is the most important provision of the law. Probably 99 per cent, of all actions against unfair competition are based upon it, solely, or jointly with other paragraphs. Its wording applying to all "acts contrary to good faith" is exceptionally elastic ; it has in practice received a very wide interpretation by the higher courts, more especially the Reichsgericht, which is the Court of final instance. In consequence, this paragraph is now introduced into all pleadings, even if the action relies upon one of the other and more definite paragraphs. As a result of the decisions given by the Reichsgericht the lower courts are becoming more thoroughly imbued with the spirit of paragraph 1. The criminal features of the law are not frequently resorted to, and cases of imprisonment are exceedingly rare. The penalties imposed are generally low. Regarding the practical benefits of the law there is, natur- ally, a diversity of opinion, but that the law has a very pro- nounced effect in deterring unfair competitive practice there can be no doubt. APPENDIX IV CLAYTON LAW An Act To supplement existing laws against unlawful restraints and monopolies, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress Assembled, That "antitrust laws," as used herein, includes the Act entitled "An Act to protect trade and commerce against unlawful restraints and monopolies," approved July second, eighteen hundred and ninety; sections seventy-three to seventy-seven, inclusive, of an Act entitled "An Act to reduce taxation, to provide revenue for the Government, and for other purposes," of August twenty-seventh, eighteen hundred and ninety-four ; an Act entitled "An Act to amend sections seventy-three and seventy- six of the Act of August twenty-seventh, eighteen hundred and ninety-four, entitled 'An Act to reduce taxation, to provide revenue for the Government, and for other purposes,' " approved February twelfth, nineteen hundred and thirteen ; and also this Act. "Commerce," as used herein, means trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State, Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States : Provided, That nothing in this Act contained shall apply to the Philip- pine Islands. The word "person" or "persons" wherever used in this Act shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country. 378 CLAYTON LAW 379 Sec. 2. That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly to discriminate in price between different pur- chasers of commodities, which commodities are sold for use, consumption, or resale within the United States or any Terri- tory thereof or the District of Columbia or any insular posses- sion or other place under the jurisdiction of the United States, where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce : Provided, That nothing herein contained shall pre- vent discrimination in price between purchasers of commodi- ties on account of differences in the grade, quality, or quan- tity of the commodity sold, or that makes only due allowance for difference in the cost of selling or transportation, or dis- crimination in price in the same or different communities made in good faith to meet competition: And provided further, That nothing herein contained shall prevent persons engaged in sell- ing goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade. This section, to the word, Provided, is in line with laws more or less similar in nineteen states, and standing by itself would be quite drastic in application. The section contains, however, the following important pro- visions: (a) Nothing contained therein shall prevent discrimina- tion in price between purchasers on account of differences in grade, quality or quantity. (b) Or that makes only due allowance for difference in the cost of selling, or transportation. (c) Or discriminations in price in the same or different communities made in good faith to meet competition. (d) Provided further that nothing therein contained shall prevent persons, partnerships or corporations from selecting their ozvn customers in bona fide transactions and not in restraint of trade. These provisions practically nullify the attempt to make discriminations in price illegal, inasmuch as it will be very easy for any party who wishes to discriminate in price to do so on the ground of grade, quality or quantity, or for some other 3 8o THE NEW COMPETITION reason contained in those express provisions, and it is to be feared that the law will not reach the unfair practices it seeks to condemn. The state laws call for fines and imprisonment and do not contain all of these exceptions; they are, therefore, more drastic. While these exceptions may provide a door of escape for any party charged with illegal discrimination in prices, it is the firm opinion of the writer that it is to the interest of both sellers and buyers, and to the interest of the public, that this section be lived up to in letter and in spirit. Unfair discrimination is not made a criminal offense. The enforcement of this section is left to the Trade Commission (see section n), but in section 4 remedy is given any person who may be damaged in his business by anything forbidden in the anti-trust laws. Sec. 3. That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies or other commodities, whether patented or unpatented, for use, consumption or resale within the United States or any Territory thereof or the District of Polumbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged there- for, or discount from, or rebate upon, such price, on the con- dition, agreement or understanding that the lessee or pur- chaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condi- tion, agreement or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. The enforcement of this section is also committed to the Trade Commission (see section 11), but section 4 which fol- lows gives a remedy to any person who may be damaged. The acts described in this section 3 are not made criminal offenses. This section does not forbid the exclusive contracts therein described where the effect does not substantially lessen compe- CLAYTON LAW 381 tit ion, or does not tend to create a monopoly, but whether such acts do lessen competition or tend to create a monopoly would be a question of fact, hence the business world will be exceed- ingly cautious in making such contracts. Sec. 4. That any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attor- ney's fee. This is an extension of section 7 of the Sherman law. Sec. 5. That a final judgment or decree hereafter ren- dered in any criminal prosecution or in any suit or proceeding in equity brought by or on behalf of the United States under the antitrust laws to the effect that a defendant has violated said laws shall be prima facie evidence against such defendant in any suit or proceeding brought by any other party against such defendant under said laws as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto : Provided, This section shall not apply to consent judgments or decrees entered before any tes- timony has been taken: Provided further, This section shall not apply to consent judgments or decrees rendered in crim- inal proceedings or suits in equity, now pending, in which the taking of testimony has been commenced but has not been concluded, provided such judgments or decrees are rendered before any further testimony is taken. Whenever any suit or proceeding in equity or criminal prosecution is instituted by the United States to prevent, restrain or punish violations of any of the antitrust laws, the running of the statute of limitations in respect of each and every private right of action arising under said laws and based in whole or in part on any matter complained of in said suit or proceeding shall be suspended during the pendency thereof. Sec. 6. That the labor of a human being is not a com- modity or article of commerce. Nothing contained in the anti- trust laws shall be construed to forbid the existence and opera- tion of labor, agricultural, or horticultural organizations, insti- tuted for the purposes of mutual help, and not having capital 382 THE NEW COMPETITION stock or conducted for profit, or to forbid or restrain indi- vidual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organiza- tions, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. The adoption of this exemption is significant, in that it is a step in the direction of relieving labor and agricultural organ- izations from the operation of laws which restrain commercial and industrial organizations. Strictly construed the exemp- tion means nothing. As a matter of fact there was nothing in the anti-trust laws that ever has been construed "to forbid the existence and operation of labor, agricultural, or horticul- tural organizations, instituted for the purposes of mutual help," etc., or "to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof." No labor or agricultural union has been held contrary to the Sherman law simply because it was a combi- nation. The courts, however, have dealt with the illegal acts and criminal conspiracies of such organizations. There is nothing in this section 6 of the Clayton law to prevent the pros- ecution of any union or member of a union for criminal con- duct. It is a matter of common knowledge that labor unions are organized for the express purpose of advancing wages, and agricultural organizations are frequently organized for the express purpose of advancing prices, but no such organizations have ever been prosecuted on that ground, therefore the prac- tical situation is not altered by this section. The ultimate effect may be to awaken the country to the economic truth that all classes should not only be permitted, but encouraged to organize, in an open and public way, to better their conditions. The broad economic proposition contained in the first clause of the section, namely, "The labor of a human being is not a commodity or article of commerce," meets with the hearty approval of the writer. Nothing but confusion of thought can result from attempts to deal with labor as if it were identical with the products of labor. 1 1 See also Chapter XIX, especially page 346. CLAYTON LAW 383 Sec. 7. That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce. No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition between such corporations, or any of them, whose stock or other share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce. This section shall not apply to corporations purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall any- thing contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary cor- porations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such for- mation is not to substantially lessen competition. Nor shall anything herein contained be construed to pro- hibit any common carrier subject to the laws to regulate com- merce from aiding in the construction of branches or short lines so located as to become feeders to the main line of the company so aiding in such construction or from acquiring or owning all or any part of the stock of such branch lines, nor to prevent any such common carrier from acquiring and own- ing all or any part of the stock of a branch or short line constructed by an independent company where there is no substantial competition between the company owning the branch line so constructed and the company owning the main line acquiring the property or an interest therein, nor to pre- vent such common carrier from extending any of its lines through the medium of the acquisition of stock or otherwise of any other such common carrier where there is no substan- tial competition between the company extending its lines and 384 THE NEW COMPETITION the company whose stock, property, or an interest therein is so acquired. Nothing contained in this section shall be held to affect or impair any right heretofore legally acquired: Provided, That nothing in this section shall be held or construed to authorize or make lawful anything heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided. The several qualifications and exemptions contained in the above section very materially lessen its force, but inasmuch as it would be a question of fact whether the acquisition of cer- tain stock substantially lessened competition, or restrained interstate commerce, or tended to create a monopoly, corpora- tions will be exceedingly cautious in acquiring and holding the stocks of other corporations. Sec. 8. That from and after two years from the date of the approval of this Act no person shall at the same time be a director or other officer or employee of more than one bank, banking association or trust company, organized or operating under the laws of the United States, either of which has depos- its, capital, surplus, and undivided profits aggregating more than $5,000,000; and no private banker or person who is a director in any bank or trust company, organized and operat- ing under the laws of a State, having deposits, capital, surplus, and undivided profits aggregating more than $5,000,000, shall be eligible to be a director in any bank or banking association organized or operating under the laws of the United States. The eligibility of a director, officer, or employee under the foregoing provisions shall be determined by the average amount of deposits, capital, surplus, and undivided profits as shown in the official statements of such bank, banking association, or trust company filed as provided by law during the fiscal year next preceding the date set for the annual election of directors, and when a director, officer, or employee has been elected or selected in accordance with the provisions of this Act it shall be lawful for him to continue as such for one year thereafter under said election or employment. No bank, banking association or trust company, organized or operating under the laws of the United States, in any city or incorporated town or village of more than two hundred thousand inhabitants, as shown by the last preceding decennial census of the United States, shall have as a director or other CLAYTON LAW 385 officer or employee any private banker or any director or other officer or employee of any other bank, banking associa- tion or trust company located in the same place : Provided, That nothing in this section shall apply to mutual savings banks not having a capital stock represented by shares : Pro- vided further, That a director or other officer or employee of such bank, banking association or trust company may be a director or other officer or employee of not more than one other bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in the other: And provided fur- ther, That nothing contained in this section shall forbid a director of class A of a Federal reserve bank, as defined in the Federal Reserve Act from being an officer or director or both an officer and director in one member bank. That from and after two years from the date of the approval of this Act no person at the same time shall be a director in any two or more corporations, any one of which has capital, surplus, and undivided profits aggregating more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associations, trust companies and common carriers subject to the Act to regulate commerce, approved February fourth, eighteen hundred and eighty- seven, if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competi- tors, so that the elimination of competition by agreement between them would constitute a violation of any of the provi- sions of any of the antitrust laws. The eligibility of a director under the foregoing provision shall be determined by the aggre- gate amount of the capital, surplus, and undivided profits, exclusive of dividends declared but not paid to stockholders, at the end of the fiscal year of said corporation next preceding the election of directors, and when a director has been elected in accordance with the provisions of this Act it shall be lawful for him to continue as such for one year thereafter. When any person elected or chosen as a director or officer or selected as an employee of any bank or other corporation subject to the provisions of this Act is eligible at the time of his election or selection to act for such bank or other corpora- tion in such capacity his eligibility to act in such capacity shall not be affected and he shall not become or be deemed amenable to any of the provisions hereof by reason of any change in the affairs of such bank or other corporation from whatsoever cause, whether specifically excepted by any of the provisions hereof or not, until the expiration of one year from the date of his election or employment. 386 THE NEW COMPETITION Sec. 9. Every president, director, officer or manager of any firm, association or corporation engaged in commerce as a common carrier, who embezzles, steals, abstracts or willfully misapplies, or willfully permits to be misapplied, any of the moneys, funds, credits, securities, property or assets of such firm, association or corporation, arising or accruing from, or used in, such commerce, in whole or in part, or willfully or knowingly converts the same to his own use or to the use of another, shall be deemed guilty of a felony and upon con- viction shall be fined not less than $500 or confined in the penitentiary not less than one year nor more than ten years, or both, in the discretion of the court. Prosecutions hereunder may be in the district court of the United States for the district wherein the offense may have been committed. That nothing in this section shall be held to take away or impair the jurisdiction of the courts of the several States under the laws thereof ; and a judgment of conviction or acquittal on the merits under the laws of any State shall be a bar to any prosecution hereunder for the same act or acts. This section may cover political and similar contributions of the funds of corporations and, therefore, requires careful consideration when such contributions are solicited. Sec. 10. That after two years from the approval of this Act no common carrier engaged in commerce shall have any dealings in securities, supplies or other articles of commerce, or shall make or have any contracts for construction or main- tenance of any kind, to the amount of more than $50,000, in the aggregate, in any one year, with another corporation, firm, partnership or association when the said common carrier shall have upon its board of directors or as its president, manage** or as its purchasing or selling officer, or agent in the particular transaction, any person who is at the same time a director, manager, or purchasing or selling officer of, or who has any substantial interest in, such other corporation, firm, partnership or association, unless and except such purchases shall be made from, or such dealings shall be with, the bidder whose bid is the most favorable to such common carrier, to be ascertained by competitive bidding under regulations to be prescribed by rule or otherwise by the Interstate Commerce Commission. No bid shall be received unless the name and address of the bidder or the names and addresses of the officers, directors and general managers thereof, if the bidder be a corporation, or of CLAYTON LAW 387 the members, if it be a partnership or firm, be given with the bid. Any person who shall, directly or indirectly, do or attempt to do anything to prevent anyone from bidding or shall do any act to prevent free and fair competition among the bidders or those desiring to bid shall be punished as prescribed in this section in the case of an officer or director. Every such common carrier having any such transactions or making any such purchases shall within thirty days after making the same file with the Interstate Commerce Commis- sion a full and detailed statement of the transaction showing the manner of the competitive bidding, who were the bidders, and the names and addresses of the directors and officers of the corporations and the members of the firm or partnership bidding; and whenever the said commission shall, after investi- gation or hearing, have reason to believe that the law has been violated in and about the said purchases or transactions it shall transmit all papers and documents and its own views or findings regarding the transaction to the Attorney General. If any common carrier shall violate this section it shall be fined not exceeding $25,000; and every such director, agent, manager or officer thereof who shall have knowingly voted for or directed the act constituting such violation or who shall have aided or abetted in such violation shall be deemed guilty of a misdemeanor and shall be fined not exceeding $5,000, or confined in jail not exceeding one year, or both, in the discre- tion of the court. This section does not go into effect until after October 15, 1916. After that date railroad buying will be on an entirely different footing. No doubt prior to that date the Interstate Commerce Commission will issue the regulations contemplated by this particular section. Sec. 11. That authority to enforce compliance with sec- tions two, three, seven and eight of this Act by the persons respectively subject thereto is hereby vested: in the Interstate Commerce Commission where applicable to common carriers, in the Federal Reserve Board where applicable to banks, bank- ing associations and trust companies, and in the Federal Trade Commission where applicable to all other character of com- merce, to be exercised as follows: Whenever the commission or board vested with jurisdic- tion thereof shall have reason to believe that any person is 3 88 THE NEW COMPETITION violating or has violated any of the provisions of sections two, three, seven and eight of this Act, it shall issue and serve upon such person a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said com- plaint. The person so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission or board requir- ing such person to cease and desist from the violation of the law so charged in said complaint. Any person may make application, and upon good cause shown may be allowed by the commission or board, to intervene and appear in said pro- ceeding by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in the office of the commission or board. If upon such hearing the com- mission or board, as the case may be, shall be of the opinion that any of the provisions of said sections have been or are being violated, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person an order requiring such person to cease and desist from such violations, and divest itself of the stock held or rid itself of the directors chosen contrary to the provisions of sections seven and eight of this Act, if any there be, in the manner and within the time fixed by said order. Until a transcript of the record in such hearing shall have been filed in a circuit court of appeals of the United States, as here- inafter provided, the commission or board may at any time, upon such notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any report or any order made or issued by it under this section. If such person fails or neglects to obey such order of the commission or board while the same is in effect, the commis- sion or board may apply to the circuit court of appeals of the United States, within any circuit where the violation com- plained of was or is being committed or where such person resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the commission or board. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting CLAYTON LAW 389 aside the order of the commission or board. The findings of the commission or board as to the facts, if supported by the testimony, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evi- dence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the commission or board, the court may order such additional evidence to be taken before the commission or board and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The commis- sion or board may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if sup- ported by testimony, shall be conclusive, and its recommenda- tion, if any, for the modification or setting aside of its original order, with the return of such additional evidence. The judg- ment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided in section two hundred and forty of the Judicial Code. Any party required by such order of the commission or board to cease and desist from a violation charged may obtain a review of such order in said circuit court of appeals by filing in the court a written petition praying that the order of the commission or board be set aside. A copy of such petition shall be forthwith served upon the commission or board, and thereupon the commission or board forthwith shall certify and file in the court a transcript of the record as hereinbefore pro- vided. Upon the filing of the transcript the court shall have the same jurisdiction to affirm, set aside, or modify the order of the commission or board as in the case of an application by the commission or board for the enforcement of its order, and the findings of the commission or board as to the facts, if supported by testimony, shall in like manner be conclusive. The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify orders of the commis- sion or board shall be exclusive. Such proceedings in the circuit court of appeals shall be given precedence over other cases pending therein, and shall be in every way expedited. No order of the commission or board or the judgment of the court to enforce the same shall in any wise relieve or absolve any person from any liability under the antitrust Acts. Complaints, orders, and other processes of the commission 390 THE NEW COMPETITION or board under this section may be served by anyone duly authorized by the commission or board, either (a) by deliver- ing a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served; or (b) by leaving a copy thereof at the principal office or place of business of such person; or (c) by register- ing and mailing a copy thereof addressed to such person at his principal office or place of business. The verified return by the person so serving said complaint, order or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. This section is important in that it confers authority upon the Federal Trade Commission to enforce compliance with sections 2, 3, 7 and 8 of the Clayton law, insofar as those sections apply to every character of commerce except common carriers; authority over common carriers being vested in the Interstate Commerce Commission. It is also important in that it indicates in simple terms the procedure. Sec. 12. That any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found. Sec. 13. That in any suit, action, or proceeding brought by or on behalf of the United States subpoenas for witnesses who are required to attend a court of the United States in any judicial district in any case, civil or criminal, arising under the antitrust laws may run into any other district : Provided, That in civil cases no writ of subpoena shall issue for witnesses living out of the district in which the court is held at a greater distance than one hundred miles from the place of holding the same without the permission of the trial court being first had upon proper application and cause shown. Sec. 14. That whenever a corporation shall violate any of the penal provisions of the antitrust laws, such violation shall be deemed to be also that of the individual directors, officers, or agents of such corporation who shall have author- CLAYTON LAW 391 ized, ordered, or done any of the acts constituting in whole or in part such violation, and such violation shall be deemed a misdemeanor, and upon conviction therefor of any such direc- tor, officer, or agent he shall be punished by a fine of not exceeding $5,000 or by imprisonment for not exceeding one year, or by both, in the discretion of the court. This section makes personal the guilt of officers and agents of a corporation who may authorize, or order, or do any acts in violation of the anti-trust laws ; really does not substantially change existing laws. Sec. 15. That the several district courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this Act, and it shall be the duty of the several district attorneys of the United States, in their respect- ive districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition set- ting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties com- plained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition, and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises. Whenever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned whether they reside in the district in which the court is held or not, and subpoenas to that end may be served in any district by the marshal thereof. Sec. 16. That any person, firm, corporation, or associa- tion shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, including sections two, three, seven and eight of this Act, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue: Provided, 392 THE NEW COMPETITION That nothing herein contained shall be construed to entitle any person, firm, corporation, or association, except the United States, to bring suit in equity for injunctive relief against any common carrier subject to the provisions of the Act to regu- late commerce, approved February fourth, eighteen hundred and eighty-seven, in respect of any matter subject to the regu- lation, supervision, or other jurisdiction of the Interstate Commerce Commission. Sec. 17. That no preliminary injunction shall be issued without notice to the opposite party. No temporary restraining order shall be granted without notice to the opposite party unless it shall clearly appear from specific facts shown by affidavit or by the verified bill that immediate and irreparable injury, loss, or damage will result to the applicant before notice can be served and a hearing had thereon. Every such temporary restraining order shall be indorsed with the date and hour of issuance, shall be forth- with filed in the clerk's office and entered of record, shall define the injury and state why it is irreparable and why the order was granted without notice, and shall by its terms expire within such time after entry, not to exceed ten days, as the court or judge may fix, unless within the time so fixed the order is extended for a like period for good cause shown, and the reasons for such extension shall be entered of record. In case a temporary restraining order shall be granted without notice in the contingency specified, the matter of the issuance of a preliminary injunction shall be set down for a hearing at the earliest possible time and shall take precedence of all matters except older matters of the same character; and when the same comes up for hearing the party obtaining the temporary restraining order shall proceed with the application for a pre- liminary injunction, and if he does not do so the court shall dissolve the temporary restraining order. Upon two days' notice to the party obtaining such temporary restraining order the opposite party may appear and move the dissolution or modification of the order, and in that event the court or judge shall proceed to hear and determine the motion as expeditiously as the ends of justice may require. Section two hundred and sixty-three of an Act entitled "An Act to codify, revise, and amend the laws relating to the judiciary," approved March third, nineteen hundred and eleven, is hereby repealed. Nothing in this section contained shall be deemed to alter, repeal, or amend section two hundred and sixty-six of an Act entitled "An Act to codify, revise, and amend the laws relating CLAYTON LAW 393 to the judiciary," approved March third, nineteen hundred and eleven. Sec. 18. That, except as otherwise provided in section 16 of this Act, no restraining order or interlocutory order of injunction shall issue, except upon the giving of security by the applicant in such sum as the court or judge may deem proper, conditioned upon the payment of such costs and dam- ages as may be incurred or suffered by any party who may be found to have been wrongfully enjoined or restrained thereby. Sec. 19. That every order of injunction or restraining order shall set forth the reasons for the issuance of the same, shall be specific in terms, and shall describe in reasonable detail, and not by reference to the bill of complaint or other document, the act or acts sought to be restrained, and shall be binding only upon the parties to the suit, their officers, agents, servants, employees, and attorneys, or those in active concert or participating with them, and who shall, by personal service or otherwise, have received actual notice of the same. Sec. 20. That no restraining order or injunction shall be granted by any court of the United States, or a judge or the judges thereof, in any case between an employer and employees, or between employers and employees, or between employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concern- ing terms or conditions of employment, unless necessary to prevent irreparable injury to property, or to a property right, of the party making the application, for which injury there is no adequate remedy at law, and such property or property right must be described with particularity in the application, which must be in writing and sworn to by the applicant or by his agent or attorney. And no such restraining order or injunction shall prohibit any person or persons, whether singly or in concert, from terminating any relation of employment, or from ceasing to perform any work or labor, or from recommending, advising, or persuading others by peaceful means so to do; or from attending at any place where any such person or persons may lawfully be, for the purpose of peacefully obtaining or com- municating information, or from peacefully persuading any person to work or to abstain from working; or from ceasing to patronize or to employ any party to such dispute, or from recommending, advising, or persuading others by peaceful and lawful means so to do ; or from paying or giving to, or with- holding from, any person engaged in such dispute, any strike benefits or other moneys or things of value ; or from peaceably 394 THE NEW COMPETITION assembling in a lawful manner, and for lawful purposes; or from doing any act or thing which might lawfully be done in the absence of such dispute by any party thereto; nor shall any of the acts specified in this paragraph be considered or held to be violations of any law of the United States. Sec. 21. That any person who shall willfully disobey any lawful writ, process, order, rule, decree, or command of any district court of the United States or any court of the District of Columbia by doing any act or thing therein, or thereby for- bidden to be done by him, if the act or thing so done by him be of such character as to constitute also a criminal offense under any statute of the United States, or under the laws of any State in which the act was committed, shall be proceeded against for his said contempt as hereinafter provided. Sec. 22. That whenever it shall be made to appear to any district court or judge thereof, or to any judge therein sitting, by the return of a proper officer on lawful process, or upon the affidavit of some credible person, or by information filed by any district attorney, that there is reasonable ground to believe that any person has been guilty of such contempt, the court or judge thereof, or any judge therein sitting, may issue a rule requiring the said person so charged to show cause upon a day certain why he should not be punished therefor, which rule, together with a copy of the affidavit or information, shall be served upon the person charged, with sufficient promptness to enable him to prepare for and make return to the order at the time fixed therein. If upon or by such return, in the judg- ment of the court, the alleged contempt be not sufficiently purged, a trial shall be directed at a time and place fixed by the court: Provided, however, That if the accused, being a natural person, fail or refuse to make return to the rule to show cause, an attachment may issue against His person to compel an answer, and in case of his continued failure or refusal, or if for any reason it be impracticable to dispose of the matter on the return day, he may be required to give rea- sonable bail for his attendance at the trial and his submission to the final judgment of the court. Where the accused is a body corporate, an attachment for the sequestration of its prop- erty may be issued upon like refusal or failure to answer. In all cases within the purview of this Act such trial may be by the court, or, upon demand of the accused, by a jury; in which latter event the court may impanel a jury from the jurors then in attendance, or the court or the judge thereof in chambers may cause a sufficient number of jurors to be selected and summoned, as provided by law, to attend at the CLAYTON LAW 395 time and place of trial, at which time a jury shall be selected and impaneled as upon a trial for a misdemeanor; and such trial shall conform, as near as may be, to the practice in criminal cases prosecuted by indictment or upon infor- mation. If the accused be found guilty, judgment shall be entered accordingly, prescribing the punishment, either by fine or imprisonment, or both, in the discretion of the court. Such fine shall be paid to the United States or to the complainant or other party injured by the act constituting the contempt, or may, where more than one is so damaged, be divided or appor- tioned among them as the court may direct, but in no case shall the fine to be paid to the United States exceed, in case the accused is a natural person, the sum of $1,000, nor shall such imprisonment exceed the term of six months : Provided, That in any case the court or a judge thereof may, for good cause shown, by affidavit or proof taken in open court or before such judge and filed with the papers in the case, dispense with the rule to show cause, and may issue an attachment for the arrest of the person charged with contempt ; in which event such person, when arrested, shall be brought before such court or a judge thereof without unnecessary delay and shall be admitted to bail in a reasonable penalty for his appearance to answer to the charge or for trial for the contempt ; and there- after the proceedings shall be the same as provided herein in case the rule had issued in the first instance. Sec. 23. That the evidence taken upon the trial of any per- sons so accused may be preserved by bill of exceptions, and any, judgment of conviction may be reviewed upon writ of error in all respects as now provided by law in criminal cases, and may be affirmed, reversed, or modified as justice may require. Upon the granting of such writ of error, execution of judgment shall be stayed, and the accused, if thereby sentenced to imprison- ment, shall be admitted to bail in such reasonable sum as may be required by the court, or by any justice, or any judge of any district court of the United States or any court of the Dis- trict of Columbia. » Sec. 24. That nothing herein contained shall be construed to relate to contempts committed in the presence of the court, or so near thereto as to obstruct the administration of justice, nor to contempts committed in disobedience of any lawful writ, process, order, rule, decree, or command entered in any suit or action brought or prosecuted in the name of, or on be- half of, the United States, but the same, and all other cases of contempt not specifically embraced within section twenty-one 396 THE NEW COMPETITION of this Act, may be punished in conformity to the usages at law and in equity now prevailing. Sec. 25. That no proceeding for contempt shall be in- stituted against any person unless begun within one year from the date of the act complained of ; nor shall any such proceed- ing be a bar to any criminal prosecution for the same act or acts ; but nothing herein contained shall affect any proceedings in contempt pending at the time of the passage of this Act. Sec. 26. If any clause, sentence, paragraph, or part of this Act shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered. Approved, October 15, 1914. APPENDIX V FEDERAL TRADE COMMISSION LAW i An Act To create a Federal Trade Commission, to define its powers and duties, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That a commission is hereby created and established, to be known as the Federal Trade Commission (hereinafter referred to as the commission), which shall be composed of five commis- sioners, who shall be appointed by the President, by and with the advice and consent of the Senate. Not more than three of the commissioners shall be members of the same political party. The first commissioners appointed shall continue in office for terms of three, four, five, six, and seven years, respectively, from the date of the taking effect of this Act, the term of each to be designated by the President, but their successors shall be appointed for terms of seven years, except that any per- son chosen to fill a vacancy shall be appointed only for the unexpired term of the commissioner whom he shall succeed. The commission shall choose a chairman from its own mem- bership. No commissioner shall engage in any other business, vocation, or employment. Any commissioner may be removed by the President for inefficiency, neglect of duty, or malfeas- ance in office. A vacancy in the commission shall not impair the right of the remaining commissioners to exercise all the powers of the commission. The commission shall have an official seal, which shall be judicially noticed. Sec. 2. That each commissioner shall receive a salary of $10,000 a year, payable in the same manner as the salaries of the judges of the courts of the United States. The commis- 1 First members of Federal Trade Commission: Joseph E. Davies, Chairman, Edward N. Hurley of Illinois, William J. Harris of Wash- ington, D. C, William H. Parry of Washington, George Rublee of New Hampshire. 397 398 THE NEW COMPETITION sion shall appoint a secretary, who shall receive a salary of $5,000 a year, payable in like manner, and it shall have author- ity to employ and fix the compensation of such attorneys, spe- cial experts, examiners, clerks, and other employees as it may from time to time find necessary for the proper performance of its duties and as may be from time to time appropriated for by Congress. With the exception of the secretary, a clerk to each com- missioner, the attorneys, and such special experts and exam- iners as the commission may from time to time find necessary for the conduct of its work, all employees of the commission shall be a part of the classified civil service, and shall enter the service under such rules and regulations as may be pre- scribed by the commission and by the Civil Service Com- mission. All of the expenses of the commission, including all neces- sary expenses for transportation incurred by the commis- sioners, or by their employees under their orders, in making any investigation, or upon official business in any other places than in the city of Washington, shall be allowed and paid on the presentation of itemized vouchers therefor approved by the commission. Until otherwise provided by law, the commission may rent suitable offices for its use. The Auditor for the State and Other Departments shall receive and examine all accounts of expenditures of the com- mission. Sec. 3. That upon the organization of the commission and election of its chairman, the Bureau of Corporations and the offices of Commissioner and Deputy Commissioner of Cor- porations shall cease to exist; and all pending investigations and proceedings of the Bureau of Corporations shall be con- tinued by the commission. All clerks and employees of the said bureau shall be trans- ferred to and become clerks and employees of the commis- sion at their present grades and salaries. All records, papers, and property of the said bureau shall become records, papers, and property of the commission, and all unexpended funds and appropriations for the use and maintenance of the said bureau, including any allotment already made to it by the Secretary of Commerce from the contingent appropriation for the Department of Commerce for the fiscal year nineteen hundred and fifteen, or from the departmental printing fund for the fiscal year nineteen hundred and fifteen, shall become funds and appropriations available to be expended by the com • TRADE COMMISSION LAW 399 mission in the exercise of the powers, authority, and duties conferred on it by this Act. The principal office of the commission shall be in the city of Washington, but it may meet and exercise all its powers at any other place. The commission may, by one or more of its members, or by such examiners as it may designate, prosecute any inquiry necessary to its duties in any part of the United States. Sec. 4. That the words defined in this section shall have the following meaning when found in this Act, to wit : "Commerce" means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation. "Corporation" means any company or association incor- porated or unincorporated, which is organized to carry on business for profit and has shares of capital or capital stock, and any company or association, incorporated or unincorpo- rated, without shares of capital or capital stock, except part- nerships, which is organized to carry on business for its own profit or that of its members. •^ "Documentary evidence" means all documents, papers and * correspondence in existence at and after the passage of this Act. "Acts to regulate commerce" means the Act entitled "An Act to regulate commerce," approved February fourteenth, eighteen hundred and eighty-seven, and all Acts amendatory thereof and supplementary thereto. "Antitrust acts" means the Act entitled "An Act to pro- tect trade and commerce against unlawful restraints and monopolies," approved July second, eighteen hundred and ninety ; also the sections seventy-three to seventy-seven, inclu- sive, of an Act entitled "An Act to reduce taxation, to provide revenue for the Government, and for other purposes," ap- proved August twenty-seventh, eighteen hundred and ninety- four; and also the Act entitled "An Act to amend sections sev- enty-three and seventy-six of the Act of August twenty- seventh, eighteen hundred and ninety-four, entitled 'An Act to reduce taxation, to provide revenue for the Government, and for other purposes,' " approved February twelfth, nine- teen hundred and thirteen. Sec. 5. That unfair methods of competition in commerce are hereby declared unlawful. 4 oo THE NEW COMPETITION The commission is hereby empowered and directed to pre- vent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from using unfair methods of competition in commerce. These two paragraphs are the most important provisions of the law. The use of the word prevent in the second paragraph is significant, in that it would seem to give the Commission authority to consider plans of cooperation and proposed com- petitive practices prior to any overt act, and either approve or condemn. It might not have been the intent of Congress to vest in the Commission this power, but it is needless to say that if unfair methods of competition are to be prevented they must be considered in advance of their use, otherwise they are simply condemned. Prior to the enactment of this law Unfair Competition had a more or less technical and limited meaning ; it has been defined as follows : "Unfair competition consists essentially in the conduct of a trade or business in such a manner that there is an express or implied representation that the goods or business of one man are the goods or business of another. This is a legal wrong for which the courts will afford a remedy. The remedy proceeds upon the theory that the reputation and good will which a man acquires in business are property, and as such entitled to protection against invasion, and also in part upon the theory of protection to the public against fraud. It may be likened to the case of a wrong against the public resulting in special damage to an individual." 1 The new law is much broader in its application, and com- petitive methods which the courts have heretofore been power- less to reach will now be investigated and exposed by the Commission. The business world is naturally in great doubt as to the scope and meaning of this new law. Considerable light may be gained by reading chapter V. Happily Chairman Davies of the Commission, while Chair- 1 Am. & Eng. Ency. of Law (2nd Ed.), Vol. 28, p. 34§- TRADE COMMISSION LAW 401 man of the Bureau of Corporations, realizing the necessity of some source of information, compiled a volume which will shortly appear. In his letter to the President, speaking of the scope of the volume he said: "Among the chief subjects dis- cussed are federal anti-trust legislation, the judicial decisions thereunder, and the influence of such legislation on forms of business organization, the anti-trust laws of the several states, the legislation of foreign countries with regard to combina- tions, and the laws and judicial decisions in the United States and various foreign countries with regard to unfair or unlaw- ful competition." And regarding the meaning of unfair methods of compe- tition he says : "This report shows what practices have gen- erally been regarded as unfair methods of competition by busi- ness men, economic writers, and public men in the United States, and also what practices have been characterized as such by the Department of Justice or by the courts in the administration of the anti-trust laws. Furthermore, it shows various competitive practices which at common law the courts have termed unfair competition, or which they have held could not be justified. These decisions give a much wider scope to the term than has been generally recognized. In presenting this information, however, it is not intended, in this report, to limit or define the term unfair methods of competition. "A broad survey is also made of legislation on the sub- ject of unfair competition in the chief European countries with some illustrations of the applications of these laws in the juris- prudence of the respective countries. In some countries reli- ance is chiefly placed on general provisions of the civil codes, while other countries have elaborate special laws prohibiting particular practices. The present tendency is to combine both of these systems. In most foreign countries the basic idea of unfair competition is an act which unjustly injures a com- petitor and comparatively little consideration is given to the question of the effects on the general public." It is to be hoped that when the work in its complete state is issued, Chairman Davies will cause to be printed in pamphlet form a condensed statement of the competitive methods which 402 THE NEW COMPETITION have been held or charged to be unfair. Such a compilation would prove a most useful manual of business ethics. Whenever the commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition in commerce, and if it shall appear to the commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The person, partnership, or corporation so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission requiring such person, partnership, or corporation to cease and desist from the violation of the law so charged in said complaint. Any person, partnership, or corporation may make application, and upon good cause shown may be allowed by the commission, to intervene and appear in said proceeding by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in the office of the com- mission. If upon such hearing the commission shall be of the opinion that the method of competition in question is prohibited by this Act, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person, partnership, or corporation an order requiring such person, partnership, or corporation to cease and desist from using such method of competition. Until a tran- script of the record in such hearing shall have been filed in a circuit court of appeals of the United States, as hereinafter provided, the commission may at any time, upon such notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any report or any order made or issued by it under this section. If such person, partnership, or corporation fails or neglects to obey such order of the commission while the same is in effect, the commission may apply to the circuit court of appeals of the United States, within any circuit where the method of competition in question was used or where such person, part- nership, or corporation resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceed- ing, including all the testimony taken and the report and order of the commission. Upon such filing of the application and TRADE COMMISSION LAW 403 transcript the court shall cause notice thereof to be served upon such person, partnership, or corporation and thereupon shall have jurisdiction of the proceeding and of the question deter- mined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the commission. The findings of the commission as to the facts, if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evi- dence in the proceeding before the commission, the court may order such additional evidence to be taken before the commis- sion and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The commission may modify its findings as to the facts, or make new findings, by reason of the additional evi- dence so taken, and it shall file such modified or new findings, which, if supported by testimony, shall be conclusive, and its recommendation, if any, for the modification or setting aside of its original order, with the return of such additional evi- dence. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided in section two hundred and forty of the Judicial Code. Any party required by such order of the commission to cease and desist from using such method of competition may obtain a review of such order in said circuit court of appeals by filing in the court a written petition praying that the order of the commission be set aside. A copy of such petition shall be forthwith served upon the commission, and thereupon the commission forthwith shall certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court shall have the same jurisdic- tion to affirm, set aside, or modify the order of the commis- sion as in the case of an application by the commission for the enforcement of its order, and the findings of the commission as to the facts, if supported by testimony, shall in like manner be conclusive. The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify orders of the commission shall be exclusive. Such proceedings in the circuit court of appeals shall be given precedence over other cases pending therein, and shall 404 THE NEW COMPETITION be in every way expedited. No order of the commission or judgment of the court to enforce the same shall in any wise relieve or absolve any person, partnership, or corporation from any liability under the antitrust acts. Complaints, orders, and other processes of the commission under this section may be served by anyone duly authorized by the commission, either (a) by delivering a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served ; or (b) by leaving a copy thereof at the principal office or place of busi- ness of such person, partnership, or corporation; or (c) by registering and mailing a copy thereof addressed to such per- son, partnership, or corporation at his or its principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. Sec. 6. That the commission shall also have power — (a) To gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any corporation en- gaged in commerce, excepting banks and common carriers sub- ject to the Act to regulate commerce, and its relation to other corporations and to individuals, associations, and partnerships. (b) To require, by general or special orders, corporations engaged in commerce, excepting banks, and common carriers subject to the Act to regulate commerce, or any class of them, or any of them, respectively, to file with the commission in such form as the commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the commission such information as it may require as to the organization, business, conduct, practice, management, and relation to other corporations, partnerships, and individuals of the respective corpora- tions filing such reports or answers in writing. Such reports and answers shall be made under oath, or otherwise, as the commission may prescribe, and shall be filed with the com- mission within such reasonable period as the commission may prescribe, unless additional time be granted in any case by the commission. (c) Whenever a final decree has been entered against any defendant corporation in any suit brought by the United States TRADE COMMISSION LAW 405 to prevent and restrain any violation of the antitrust Acts, to make investigation, upon its own initiative, of the manner in which the decree has been or is being carried out, and upon the application of the Attorney General it shall be its duty to make such investigation. It shall transmit to the Attorney General a report embodying its findings and recommendations as a result of any such investigation, and the report shall be made public in the discretion of the commission. (d) Upon the direction of the President or either House of Congress to investigate and report the facts relating to any alleged violations of the antitrust Acts by any corporation. (e) Upon the application of the Attorney General to in- vestigate and make recommendations for the readjustment of the business of any corporation alleged to be violating the antitrust Acts in order that the corporation may thereafter maintain its organization, management, and conduct of busi- ness in accordance with law. (f ) To make public from time to time such portions of the information obtained by it hereunder, except trade secrets and names of customers, as it shall deem expedient in the public interest ; and to make annual and special reports to the Con- gress and to submit therewith recommendations for additional legislation ; and to provide for the publication of its reoprts and decisions in such form and manner as may be best adapted for public information and use. (g) From time to time to classify corporations and to make rules and regulations for the purpose of carrying out the pro- visions of this Act. (h) To investigate, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable. Sec. 7. That in any suit in equity brought by or under the direction of the Attorney General as provided in the antitrust Acts, the court may, upon the conclusion of the testimony therein, if it shall be then of opinion that the complainant is entitled to relief, refer said suit to the commission, as a master in chancery to ascertain and report an appropriate form of decree therein. The commission shall proceed upon such notice to the parties and under such rules of procedure as the court may prescribe, and upon the coming in of such report such exceptions may be filed and such proceedings had in relation thereto as upon the report of a master in other 4 o6 THE NEW COMPETITION equity causes, but the court may adopt or reject such report, in whole or in part, and enter such decree as the nature of the case may in its judgment require. Sec. 8. That the several departments and bureaus of the Government when directed by the President shall furnish the commission, upon its request, all records, papers, and informa- tion in their possession relating to any corporation subject to any of the provisions of this Act, and shall detail from time to time such officials and employees to the commission as he may direct. Sec. 9. That for the purposes of this Act the commission, or its duly authorized agent or agents, shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any corporation being investigated or proceeded against; and the commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such docu- mentary evidence relating to any matter under investigation. Any member of the commission may sign subpoenas, and mem- bers and examiners of the commission may administer oaths and affirmations, examine witnesses, and receive evidence. Such attendance of witnesses, and the production of such documentary evidence, may be required from any place in the United States, at any designated place of hearing. And in case of disobedience to a subpoena the commission may invoke the aid of any court of the United States in requiring the at- tendance and testimony of witnesses and the production of documentary evidence. Any of the district courts of the United States within the jurisdiction of which such inquiry is carried or may, in case of contumacy or refusal to obey a subpoena issued to any cor- poration or other person, issue an order requiring such cor- poration or other person to appear before the commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof. Upon the application of the Attorney General of the United States, at the request of the commission, the district courts of the United States shall have jurisdiction to issue writs of mandamus commanding any person or corporation to comply with the provisions of this Act or any order of the commis- sion made in pursuance thereof. The commission may order testimony to be taken by depo- sition in any proceeding or investigation pending under this TRADE COMMISSION LAW 407 Act at any stage of such proceeding or investigation. Such depositions may be taken before any person designated by the commission and having power to administer oaths. Such tes- timony shall be reduced to writing by the person taking the deposition, or under his direction, and shall then be subscribed by the deponent. Any person may be compelled to appear and depose and to produce documentary evidence in the same man- ner as witnesses may be compelled to appear and testify and produce documentary evidence before the commission as here- inbefore provided. Witnesses summoned before the commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States, and witnesses whose depositions are taken and the persons taking the same shall severally be entitled to the same fees as are paid for like services in the courts of the United States. No person shall be excused from attending and testifying or from producing documentary evidence before the commis- sion or in obedience to the subpoena of the commission on the ground or for the reason that the testimony or evidence, docu- mentary or otherwise, required of him may tend to criminate him or subject him to a penalty or forfeiture. But no natural person shall be prosecuted or subjected to any penalty or for- feiture for or on account of any transaction, matter, or thing concerning which he may testify, or produce evidence, docu- mentary or otherwise, before the commission in obedience to a subpoena issued by it: Provided, That no natural person so testifying shall be exempt from prosecution and punishment for perjury committed in so testifying. Sec. 10. That any person who shall neglect or refuse to attend and testify, or to answer any lawful inquiry, or to pro- duce documentary evidence, if in his power to do so, in obedi- ence to the subpoena or lawful requirement of the commission, shall be guilty of an offense and upon conviction thereof by a court of competent jurisdiction shall be punished by a fine of not less than $1,000 nor more than $5,000, or by imprisonment for not more than one year, or by both such fine and impris- onment. Any person who shall willfully make, or cause to be made, any false entry or statement of fact in any report required to be made under this Act, or who shall willfully make, or cause to be made, any false entry in any account, record, or memo- randum kept by any corporation subject to this Act, or who shall willfully neglect or fail to make, or to cause to be made, full, true, and correct entries in such accounts, records, or 4 o8 THE NEW COMPETITION memoranda of all facts and transactions appertaining to the business of such corporation, or who shall willfully remove out of the jurisdiction of the United States, or willfully muti- late, alter, or by any other means falsify any documentary evidence of such corporation, or who shall willfully refuse to submit to the commission or to any of its authorized agents, for the purpose of inspection and taking copies, any documen- tary evidence of such corporation in his possession or within his control, shall be deemed guilty of an offense against the United States, and shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000, or to imprison- ment for a term of not more than three years, or to both such fine and imprisonment. If any corporation required by this Act to file any annual or special report shall fail so to do within the time fixed by the commission for filing the same, and such failure shall con- tinue for thirty days after notice of such default, the corpora- tion shall forfeit to the United States the sum of $100 for each and every day of the continuance of such failure, which for- feiture shall be payable into the Treasury of the United States, and shall be recoverable in a civil suit in the name of the United States brought in the district where the corporation has its principal office or in any district in which it shall do business. It shall be the duty of the various district attor- neys, under the direction of the Attorney General of the United States, to prosecute for the recovery of forfeitures. The costs and expenses of such prosecution shall be paid out of the appropriation for the expenses of the courts of the United States. Any officer or employee of the commission who shall make public any information obtained by the commission without its authority, unless directed by a court, shall be deemed guilty of a misdemeanor, and, upon conviction thereof, shall be pun- ished by a fine not exceeding $5,000, or by imprisonment not exceeding one year, or by fine and imprisonment, in the discre- tion of the court. Sec. 11. Nothing contained in this Act shall be construed to prevent or interfere with the enforcement of the provisions of the antitrust Acts or the Acts to regulate commerce, nor shall anything contained in the Act be construed to alter, modify, or repeal the said antitrust Acts or the Acts to regulate commerce or any part or parts thereof. Approved, September 26, 1914. INDEX Accounting, uniform system of, recommended, 354. Esthetic efforts, 43. Aggregation of labor discussed, 298. Alexander, 42. Almond Growers' Exchange, 331- Altruism and generosity found- ed on cooperation, 29. Amalgamated Association of I. & S. workers opposed to shorter hours, 169 note. American Society of Equity, 36 note. American Sugar Refining Co., 46. American Federation of Labor, 323- Anarchism and certain trade maxims, 212. Anarchist in trade, 121. Annihilation, competition and struggle for, 20. Anti-trust laws, see Trusts; amendments to, proposed, 36; contrary to spirit of age, 47; drawn along the lines of least resistance, 352; not en- forced against certain classes, 329, 346; theory of, 205. Association, see Open-price association. Associations, certain meetings of, not illegal, 124; indirect agreements of, 124; meetings of, for luncheon, 123; of rail- road employes and shippers suggested, 316; under pro- posed Federal Law, 356. Balance of trade, 42. Baldwin, Prof. James Mark, 20. Bargain days, 57. Beauty not a wholesale propo- sition, 43. Beyer, David S., 165 note. Bids, calling for, with no in- tention to let to lowest, 196; false representations concern- ing, 199; method of govern- ment purchases and contracts on, criticized, 228. Biological competition, II, 21. Black list, use of, 56, 355. Bricklayers and Masons' In- ternational, 323. Broom-corn combination, 37 note. Brutal buying, see Buying; government purchases and, 228. Brutal competition, see Com- petition brutal. 409 4io INDEX Burley Tobacco Society, 2>7 note. Burton, Senator Theodore E., 63 note. Business, a lottery, 192; re- ducing the speculative ele- ments of, 224. Buyers, all men both buyers and sellers, 52; secret price policy and, 112; sellers and, most men both, 33; two classes of, 215 ; who have fixed incomes, 7>7', open-price association of, 153. Buying, brutal, 190. Buyers' open-price associations, 153-155- Csesar, 42. California and oriental labor, 5. Calwer, Richard, 370. Canada, conditions in, 359. Capital and labor, conflict be- tween, 4; misuse of term capital, 336. Capitalists, combinations of, and politicians and judges, 9. Carnegie, Andrew, 168. Carnegie Company, 104. Carpenters, association of, 105. Cartels in Germany, 368. Census statistics inadequate, 168. City of London case, 7. Clark, Prof. John B., The Con- trol of Trusts, 14. Class discrimination by indirect methods, 329. Class legislation and fair play, 328; no distinction be- tween combination of farm- ers and labor and combina- tions of manufacturers and employers, 334; unconstitu- tional, 328 note 1. Clayton law, 80; beneficial, 82; in full, 378-396; opposed to Sherman law, 82. Community your partner, 156. Coal strikes, results of, 305 note. Collier, Wm. M., 50 note. Collusion, effect of, 98. Collusive competition, see Competition, collusive. Colorado Fruit Growers' Asso- ciation, 331. Combination, line of normal, in industries, 279. Combinations, see also Trusts; and pools in Eng- land and Germany, 127; and unfair competition, 63; con- flict between, 54; forms of, 45; fruit growers', 54; great era of, 34; here to stay, 10; inevitable, 35 ; large and friendless, 63 ; marketing or- ganizations, 54; of employ- ers, 53; of labor and farm- ers, 53; of railways, 53; of sellers, 53 ; old line and open- price associations, 147; on a selfish basis, 54; question of mere size, 349; to advance prices, effect of, 157; which include customers, 57. Commerce, international dump- ing of goods, 261 note 1. Commonwealth vs. Strauss, yj note. Community, all losses unpro- ductive enterprises borne by, INDEX 411 252; and wasteful competi- tion, 1 ; attitude of, toward industries and men who are waiting for a normal de- mand, 262; economic organ- ization of, wasteful, 256; in- difference of, towards fail- ures, 265 ; must prevent strikes, 204; should control certain so-called economic laws, 249. Competition, a fetish, 2, 22; a relentless force, 1 1 ; and bar- baric conditions, 10; and its professed friends, 80; and labor unions, 8; and politi- cians, 5 ; and secret prices and rebates, 101 ; and struggle for annihilation, 20 ; as af- fected by trusts, 51; attitude of labor unions towards, 2 ; attitude of the public towards, 16; attitude of socialists to- wards, 3; benefits of, 27; be- tween retail merchants, 91 ; between towns, 38; biolog- ical, 11; blind, vicious, un- reasoning, 2; blind worship of, 26; cause of distress, 7; collusive, 97; competitive or cooperative basis of, 35; contracts to prevent un- healthy, 6; cut rate drug stores and, 31 ; cutthroat, 31 ; death of trade, 1 ; definitions of, 19; destructive, 29; disap- pearance of small competitor in, 64; disintegrating force, 26; essence of the old, 73; excessive, 6; extensive, 40; in products of the soil, sup- pressed, 9; in the labor world, 89; iri Tin Plate in- dustry, 208 ; independent, against an integrated indus- try, 282; intensive, 40; is in- human, 11; is war and war is hell, 23; leads to combina- tions, 44; life of trade, 1; line of normal, in industries, 279; lumber companies and, 65; mail order houses and, 31 ; moral and economic rights of, 65 ; mother of trusts, 50,104; nature's, 15; new, court decree bearing upon, 69; new, interest of third party and, 73 ; new, versus old, 62; not the life of trade, 7; of isolation, 5; old fashioned, 285; piratic, merciless, cutthroat, 5 ; pro- duction of quantity and, 44; real and beneficial, 86; reck- less and ignorant, 94; rivals in a race, 85 ; suppressed, 95, 109 ; suppressed, and fixed prices, 116; suppressed, gen- tlemen's agreements and, 101 ; survival of the fittest and, 13; synonymous with struggle, contest, rivalry, 21 ; wasteful, and the community, 1 ; what is, 12; when buyers would prefer to have prices fixed, 99; will the fittest survive? 32. Competition, brutal, 59; and Congress, 61 ; and size of a trust, 80; and vicious, 60; and the courts, 80; between blacksmiths, 61 ; instances of. 412 INDEX 64; is natural and instinc- tive, 61 ; progress toward higher ideals, 62; time hon- ored practice, 59; to small competitor, 60. Competition, false, 85, 86, 95, 97; and secret prices, 116; basis of, secrecy, 105; be- tween blacksmiths, 90; be- tween carpenters, 87; be- tween crane builders, 92; bidding in the dark and, 93; in the contracting and manu- facturing world, 89; oriental method of, ill; shoddy and adulteration logical results of, 216; wide differences in bids in, 93. Competition, true, see Open- price associations ; and open prices, 116; as com- pared with old, in theory, 227 ; conditions of, 87; eliminates secrecy, 91 ; factors of, 67, 94; helps the small producer, 114; knowledge, 94; prices more nearly alike in, 89; re- sults of, 109. Competition, unfair, 32, 59; and monopolies, 79; between country dealers, 60; between jobbers and manufacturers, 60; between peddlers, 60; by integrated industries, 283 ; business methods in, must be suppressed, 6j, 353 ; decree against, 68 ; false statements and disburse- ments and, 56; favored cus- tomers in, 102; goods "just as good" in, 67; law in Ger- many against, 372; mail or- der and department stores and, 60; Massachusetts law against, 76; misrepresenta- tions in, 102; practices of the individual in, must be sup- pressed, 351; secret prices and, 102; under-selling rivals and, 74. Conflicts worldwide, 41. Congress and brutal competi- tion, 61 ; and corporations, 80. Consolidations, 52. Constitutional law, Massachu- setts, against unfair competi- tion, 76. Constitutionality of all class legislation, 324 note. Consumer interested in coop- eration, 54. Consumer, the ultimate, 218. Constructive legislation, 347, 350. Contest and competition, 21. Contractors generally, unfair practices by, 195. Contracts, constitutional right to make, yy; illustrating brutal buying, 192; in re- straint of trade, 33; standard forms a provision, 201. Cooperation and buyers and sellers, 53; and integration of labor, 297; and over ca- pacity, 261 ; and state super- vision, 80; basis of altruism, 29; basis of our national ex- istence, 24; cannot be pro- hibited, 125; constructive, 29; danger is towards larger and INDEX 4i3 larger, 345 ; era of, 5 ; forms of, 45 ; foundation of prog- ress, 18; foundation of so- ciety, 24; growth of, 38; is progress, 11, 24; is trade, 10; means a broader outlook, 157; midway between selfish individualism and socialism, 164; more of, needed, 103; of labor, farmers and manufac- turers here to stay, 333; pro- duction and prices and, 49; promoted by true competi- tion, 30; railway associations and, 53; rise and fall of, in history, 25 ; sellers' organiza- tions and, 53; societies for, urged by President Taft, Colonel Roosevelt, 37 note; suppressed by anti-trust laws, 28; to reduce prices, 52; to reduce speculative elements of business, 214; to take in consumer, 54. Corporations, see also Trusts ; and brutal competi- tion, 61 ; laws limiting size of, 48. Cost, a scientific system, 153; selling below, 82, 267-270; false statements regarding, 356 ; no man should sell goods below, 203 ; of living, 67; price should never fall below, 265; relation of, to a fair price, 243 ; rise and fall of price with relation to, 256; rules should be established for sci- entific ascertainment of, 267; selling at or below, punish- able, 355 ; selling goods below, 57; the element of labor and, 163 ; Texas law against sell- ing below, 75 ; uniform system of, recommended, 354. Cote vs. Murphy, 344. Cotton growers' organizations, 332. Cotton growers restrain com- petition, 9. Coulter, J. L., 330. Courts, and brutal competition, 80; attitude of English, to- wards combinations, 363 ; attitude of German, towards unfair competition, 372; at- titude of German, towards trusts, 370; being terrorized, 323 ; class legislation uncon- stitutional, 324 note, 328 note ; have already approved combi- nations of labor, fixed wages, 340; opinions of, referring to competition, 6; Sugar Refin- ing Co. case and, 6. Crane builders, competition be- tween, 92. Curran vs. Galen, 341. Customers, relations with, 158. Declaration of independence, 211. Demagogues, 47. Demand and supply analyzed, 258; shifting from object to object, or from all objects to money, 259. Department stores, 60, 66. Disintegration and integration, 30, 274. Distances, annihilation of, 39. 4H INDEX Dollar diplomacy, 42. Drug stores, cut rate, 31. Dumping of goods, 261 note 1. Economic laws, control of, 205 ; under control of com- munity, 249. Economic progress, this coun- try backward in, 184. Economic rights discussed, 290. Economists of old school and competition, 22. Electric lamps, decree concern- ing, 68. Ely, Prof. R. T., 39 note, 48 note. Employers and employes, competition between, 30; the two great classes, 337. Employers, combinations of, here to stay, 10; debt of, to employes, 172; deny interest of labor in industry, 296; fight against labor, 163; or- ganizations, 53 ; relations of, with employes, 158, 162; right of, to combine as against labor unions, 344 note ; welded together by at- titude of labor, 128. Employers' liability, 173; a question for actuaries, 179; changes in law of, 178; the economic view, 178; the law in New York, 175. Employes and provision for in- jury and pension, 164; as members of employers' as- sociations, 57; economy to provide for welfare of, 165; sex, age, and nationalities of, 164; wages and hours of la- bor of, 164. Encyclopaedia Britannica, defin- ition of competition in, 19. Engineers' attitude toward re- duction of hours of labor, 172. Engineers' threatened strike, 302. England, conditions in, 364; Parliamentary inquiry of 1833 in, 367. Ethical significance, open-price policy, 122. Ethical standards, 17. Ethics, competition contrary to, 13 ; fair trade and higher business standards and, 355 ; sacrificed at the basis of progress, 14; tendency of, towards higher standards in trade, 351. Evolution and social relations, 14; of competition, 11; rights of the strong against the weak and, 15; struggle for existence and, 61 ; survival of the rich and powerful and, 16; the human law survival of all, 16; will the fittest sur- vive? 32. Exchange builders, 107. Exchange, industrial, 101. Exemption of labor and agricul- tural associations from anti- trust laws, 346, 382. See Chap. XIX. Factory system, 43. Failures, liabilities, 266. Family a cooperative unit, 24. INDEX 4i5 Farmers are partly free to combine, 342; as capitalists, 337; as employers of labor, 338; associations of, in grain growing states, 331 ; cooper- ative creamery, 331 ; cooper- ative societies of, 33, 36, 51, 330; organization of, in Illi- nois, 37 note. Federal trade commission, see Trade commission. Firemen and engineers, brother- hoods of, 323. Fires, losses by, 268. Fitch, John A., 165 note, 169 note, 168 note. Fixing re-sale prices, 67. Florida Fruit Producers' Asso- ciation, 332. Foreign trade illusion, 42. Fraud, false representations concerning bids and prices, 199. Freedom, rise of, the develop- ment of law, 348. Fruit and grocery associations, 54- Fruit Growers' Associations in various Western states, 331. Fruit Exchange in California, 331- General contractors, unfair practices by, 195. General Electric Company, U. S. vs., 68. Gentlemen's agreements, 101. Georgia Peach Growers' Asso- ciation, 332. Germany, combination of steel manufacturers in, 127 note; conditions in, 368; law pro- hibiting unfair competition in, 372; number of syndicates in, 372; socialistic conditions in, 181 note. Gilds, Medieval, 40, 109. Government and competition, 27, 219 note; duty of, to see that prices are maintained, 218; it should be the object of some department of, to help manufacturers and dealers, 346; maintains railroad rates, 218; method of purchasing supplies and letting contracts by, criticized, 228; work for, bidding on, 198. Governors and cotton grow- ers, 9. Hadley, President, 18-20, 27, 246 note. History, the story of the rise and fall of cooperation, 25. Hoffman, F. L., 179 note. Holmes, Justice, opinion by, 6. Hospitals, 165. Huxley on evolution and social progress, 13. Ideals, progress towards, 62. Ignorant competition, see Competition. Illinois, class legislation in, 324- Incorporation, federal, 291. Individual power to run his business will be curtailed, 221. Industrial Commission and Federal, 215. 4i6 INDEX Industrial Commission sug- gested, 353. Industrial Workers of the World, 323. Industries, different, which pay different wages and prof- its according to earnings, 314; integrated, in competi- tion with independents, 282; liability of, to all employed, 173; over-capacity of, is normal, 258. Industries, vanishing, 232. Industrial peace versus indus- trial war, 109. Integration, 30, 293; in steel industry, 277; of labor would not do away with national organizations, 315. Intensive and extensive compe- tition, 40. International Harvester Com- pany case, 342, 347 note. Interstate commerce law, 27, 215; forces railroads into traffic associations, 172. Interstate industries, parties and corporations engaged in, 354- Inventions not due to competi- tion, 28. Iowa, law against unfair com- petition in, yy. Jay, John C, Jr., article by, 153-155- Kansas class legislation, 327. Kellogg vs. Larkin, 7. Kentucky, farmers of, organ- izing, 36 note; tobacco asso- ciations in, 333; vegetable associations in, 333. Knights of Labor, 323. Knowledge, and stability of prices, 126; the basis of true competition, 94. Labor, aggregation of, 297; and capital, conflict between, 4; and the farmer, 338; and the industry it works for, 162; conditions of, and asso- ciations of employers and employes, 171 ; conditions of, twelve hour shifts, 168; di- vision of, is cooperation, 25 ; in connection with peak loads, 255; is free, 342; in- tegration of, a natural devel- opment, 300; interest of, in an industry, 293; opposition of employers to advancement of, 163; problem of, integra- tion versus aggregation, 293; provisions for injury, disa- bility or death, 172; scheme of integration of, 297; short- er hours opposed by certain associations of, 169; the eight hour day and, 170; troubles in, underlying propositions, 3I7- Labor unions, 51, 53; and competition, 8, 89; and me- dieval gilds, 40; and social- ism, 3; approved by courts, 340; as aggregates, 299; at- titude of, regarding interest of employes in industries, 296; attitude of, towards competition, 2; compel em- INDEX 4i7 ployers to combine, 128; dic- tate wages, 33 ; exemption of, from anti-trust law, 346, 382 ; shrewd programme of, in presenting demands, 304 ; strength of, 323 ; wages and, 295- La Follette, Senator, 59-60-61- 63, 80. Law, a conservative force, 348; a federal, industrial, like Interstate Commerce Law, 215; as a rule of conduct, 168; has little meaning to most men, 347; passed to curb progress, 349; splitting hairs with, 124; to regulate instead of destroy, 341. Laws, anti-trust, and social- ism, 4; confusion of, 76; de- mand for constructive, 274, 350; destructive, fallen into disrepute, 350; encourage brutal competition, 15; favor- ing labor and farmers' combi- nations, but denouncing manufacturers, 314; new, sug- gested, 353; of Canada regarding trusts and combina- tions, 359; of England regard- ing trusts, 354; theory of anti- trust, 28. Legislation, constructive, 347. Levy, Hermann, 366-367. Lockout must go, 317. Lottery, business as a game of chance, 203. Louisiana, rice growers' associ- ations in, 333; class legisla- tion in, 326. Lumber company, convicted of unfair competition, 78; un- fair practices of, 65. Lumber industry integrated, 287. Lying, ancient practice of, 57. Macrosty, H. W., 276 note, 365. Mail order houses, 39, 60, 66; and competition, 31. Manufacturers and dealers are not free to combine, 342; caught between farmers' or- ganizations and labor unions, 34; timid, 345. Marketing organizations, 54. Market price, no tangible exist- ence, 250. Massachusetts law against un- fair competition, 76. Master and servant notion, 57. McVey, F. L., 207 note. Men no longer wish to fight, 10. Methods of business changing, 10. Michigan, class legislation in, 327; Grape Growers' Associa- tion in, 330; Tamarack Asso- ciation in, 339. Middleman, 55, 64. Miles Medical Co. case, 6. Mill, John Stuart, 20. Minnesota, class legislation in, 327; Farmers' Elevator Com- pany in, 333 ; law against un- fair competition in, yy. Missouri law limiting size of corporations, 48. Mogul Steamship Company case, 364. 4i8 INDEX Monopolies, artificial, 28; and unfair competition, 79; a few real exist, 29 note ; when trusts are, 48. Montana, class legislation in, 325- Napoleon, 42. Nature is merciless, 15. Nebraska, class legislation in, 325 ; law against unfair com- petition in, yy. New competition, see Compe- tition, NEW. North Carolina, class legisla- tion in, 327. Ohio, class legislation in, 327. One-price policy, 57, 113. Open-price association, 105, 122, 1 51-156; advances the in- terests of the public, 227; by buyers, 153; and labor, no, 166, 172; better prices not cer- tain under, 152; blanks used, 144; brutal buying, 190; Com- mittee on Relations with Em- ployes and, 164; complaints, 140; control of manner of bidding and, 198; control of prices and, 227; danger ahead of, 109; deals with actual transactions, 126; definite economic method, 122; de- mands concerted action, 120; discussion of business, 139; distribution of information, 134; effect of, on competition, 103; ethical significance of, 122; experiment worth trying, 107; failures of, 155; filing of contracts is the final step, 139 ; formed for not less than one year, 146; form of organiza- tion of, 132; frankness and truthfulness, 161 ; industrial exchanges, 106; legal, 125, 345 ; means a higher individ- ualism, 151-156; means stable prices, 115; means that sellers and buyers cooperate to con- trol fluctuation, 228; method of operation, 132; notification of revision of bids, 136; not like old line pools, 127; open bidding, 135; order of busi- ness, 147; parties interested, 108; pension and workmen's compensation, 188 ; promotes fair, uniform, and stable prices, 218; promotes har- mony between employer and employe, 163; publicity, 148; record of proceedings of, 149; relations among mem- bers of, 158; relations of, with competing plants, 160; relations of, with employers and employes, 162; relations of, with customers, 190; re- lations of, with sellers, 203 ; relations of, to the public, 158, 225; results of, 114, 150; retail trade and, no; revision of bids not fair to customer, 137; secret advan- tages and, 141 ; small manu- facturer and, 113; some of the difficulties in organizing, 142; steps to establish, 128; suppression of unfair prac- tices by, 218; the big fellow INDEX 419 and the little fellow, 161 ; un- fair competition and, 161 ; vanishing industries, 241. Open-price policy, advantages of, 146; in America and Europe, in; false statements regarding bids and, 200. Oriental customs prevail with manufacturers and contract- ors, in, 112. Over-capacity normal, 255. Panics and cooperation, 265; cost of, 259; money proposi- tions, 260. Partnerships, 45. Patents, utilization of, to con- trol trade, 70. Peak load and its demand upon merchants and manufac- turers, 254; and the question of idle labor, 255; in rela- tion to price and capacity, 256. Pennsylvania, class legislation in, 326. Pennsylvania railroad, 187. Pensions, 164, 172, 183; paid by certain corporations, 185; government protection of funds, 188; paid by state in industries a socialistic propo- sition, 187; to soldiers and sailors, 185. People vs. Sugar Refining Co., 6. Perfection, rivalry incentive towards, 18. Philosophy of trade, 203. Playgrounds, 165. Political economy, approval of brutal maxims of, 287; dis- mal science, 204. Politicians and combinations of capitalists, 10; and com- binations of labor, 9; and competition, 5 ; suppression of competition in products of soil favored by, 9. Pools, see Combinations. Post, parcel, 39. Price, see Open-price policy; arbitrary adjustment of, to cost, 263 ; and cooperation, 49; and cost discussed by Adam Smith, 243; as af- fected by integrated indus- tries, 282; as affected by open-price associations, 106, 141, 151 ; buying below cost, 230; consumer and a stable, 216; development of large establishments, 121 ; discrimi- nation in, between parties and localities condemned, 355 ; distinction between fair and right, 263; fair, uniform, and stable, essential, 6y, 213 ; false statements regarding, 355 ; federal regulation of, chimerical, 291; fixed, 119; fixed by farmers' societies, 51 ; fixed, may be very desir- able, 213; ignoring the man who pays, 57; implied agree- ments to control, 125 ; impos- sible to keep men to a fixed, 138; inspection of, by gov- ernment agents, 230; knowl- edge regarding, keeps prices stable, 126; marking in cipher, 112, 117; matter of 420 INDEX social concern, 217; meetings to compare, 124; on stock ex- change, 120; open, as a labor saving device, 117; oriental method, 11 1; peak load and, 252 ; rise and fall of, with relation to cost, 256; scien- tific proposition, 264; .secret, is cumbersome, 117; secret, is wasteful, 121 ; should never fall below cost, 265; should vary with cost, 257; stable, as compared with stable wages, 228; storms like wind storms, 119; suppressed, 119; and trusts, 51; unions to advance, 52; what is a fair, 243 ; what is a fixed, 116; what is an open, 115; where stable, 120. Price discrimination, 81 ; see also Clayton Law and Trade Commission ; also Unfair Methods of Competition. Production and cooperation, 49. Profit an individual matter, price of social concern, 216. Progress and large producers, 62; and morality, 17; is co- operation, 11, 18; in last fifteen years, 62; signs of change, 68. Protection as opposed to cer- tain trade maxims, 209. Public and strikes, 305 ; atti- tude of, towards competition, 16; bears all costs of operat- ing railroads, 305 ; distrusts secrecy, 225 ; interested in de- mands for increased wages by railroad employes, 311; profits to, from disaster to in- dividuals, 72; relations of, to open-price associations, 225 ; suffers from secret methods, 101. Publicity, a remedy, 353; cardinal principle of the new competition, 148. Pure food law of commerce, 81. Railroad Conductors' Order, 323- Railroads, employes of, de- mands by, parties interested, 306; employes of, scheme of integration, 297 ; employes of, suggested programme on presentation of demands, 307; firemen of, demands by, 305 note; questions of, in rate controversies, 219; Sherman Law and, 172; strike pend- ing, 302; under Interstate Commerce Law, 215; vicious conditions in, under old com- petition, 221 ; workings of traffic associations, 221 note. Railway associations, 53. Rebates and secret prices eliminated by open price policy,; 1 50J Remedies proposed, 291. Re-sale prices, 67, 69, 83. Restraint of competition rea- sonable, 6. Retail stores, 48 note. Retail trade, associations and customers, 57; association in- cluding employes, 57; mail order and department stores, INDEX 421 66; one-price policy, 91, no; unfair competition and, 55. Rights, dependent upon rela- tions, 211 ; discussed in con- nection with so-called right to strike, 317; of a man to do as he pleases with his own, 288 ; supposed, to sell below cost, 289; what sellers should not do, 217. Ripley, W. Z., 207 note. Rivalry and competition, 21 ; in brute competition, 18; true, 18. Roosevelt urges formation co- operative societies, 37 note. Safety appliances, 164, 168. Sahlin, Axel, 276 note. Sales, false statements regard- ing. 355- Sanitary conditions, 164. Saw mills, combination of, 280. Scheme of steel industry, 275. Science of trade not yet writ- ten, 203. Seager, H. R., 179 note. Secrecy, basis of false compe- tition, 105 ; eliminated in true competition, 87; yielding to publicity, 10. Segregation, what it means, 274. Sellers and buyers, see Buyers and sellers. Sherman act, 34, 74, 76; aimed at size, 349; a cooper- ation of farmers and labor- ers > 3345 destructive in pur- pose, 36, 274, 347; does it ap- ply to existing conditions, 340; exemption labor unions and, 328; repeal of, opposed, 350; not enforced against certain classes, 34, 330; obsolete and mischievous, 351; railroads and, 172, 215; railroad associations and, 224 note ; results of enforc- ing, against large corpora- tions, 269; standard forms of contracts and, 201 ; strikes by railroad unions and, 303. Signs of change, 69. Smith, Adam, discussion of price and cost, 243. Smuggling, 46. Social progress and evolution, 13; Social relations in advance of biological evolution, 14. Socialism and anti-trust laws, 4; and competition, 3; growth of, 3 ; labor unionism and, 3. Society, foundation of, is co- operation, 24. South Dakota, class legislation m > 3 2 5 > baw against unfair competition in, 78. Spencer, Herbert, 46 note. Squier, L. W., 179 note. Standard Oil Company, 28, 59, 60, 63, 104, 124, 187, 272. State vs. Brayton, 78. State vs. Central Lumber Com- pany, 78. Statistics, mortality, in U. S., 179 note. Steel industry, interdepend- ence of several units of, 276; line of normal competition, 279 ; scheme of, 275. 422 INDEX Steel manufacturers, combina- tion of, in Germany, 127 note. Strikes, attitude of govern- ment toward, 302; contrary to social progress, 304; must S°> 3°7> strike breakers and, Struggle and competition, 21. Supply and demand as de- scribed by Adam Smith, 244; theory of, criticised, 248; wide fluctuations in, under old competition, 251. Suppressed competition illegal, 95- Syndicates, number of, in Ger- many, 372. Taft, President, on right of labor to strike, 341 ; urges formation cooperative so- cieties, 37 note. Tamarack Association of Michi- gan, 339. Tariff and Tin Plate Industry, 207; as opposed to certain trade maxims, 209. Tennessee, class legislation in, 327; tobacco associations of, 333 ! vegetable associations oi> 333- Texas, law against selling be- low cost or giving away in, 75; Rice Growers' Associa- tion in, 333 ; Truck Growers' Association in, 333, 339. Thomas vs. C. N. O. & T. P. Ry., 341. Times are changing, 10. Tin plate Industry, attitude of government toward, 209; and the tariff, 207. Tobacco company, 130, 272. Tobacco growers' associations, 333- Tobacco Society, 37 note. Trade anarchist, 121. Trade, maxims of, 204; max- ims of, certain anarchistic, 212; philosophy of, 204; science of, not yet written, 203 ; tricks of, 58, 67 ; vicious conditions in, under old com- petition, 221. Trade Commission, 69, 80, 84, 357; law in full, 397-408; per- sonnel of, 358, 397; and re- sale prices, 69, 83 ; preventive rather than punitive, 84, 400; trade commissioners, 397. Traffic associations, workings of, 221 note. True competition, see Compe- tition, true. Trusts, see also Corporations, combinations and, in Ger- many, 368; condemned, even though they have benefited the community, 342; disin- tegration and, 272; have their birth in competition, 105; hypocrisy of those who assail, 47; laws against, 34; logical development, 45 ; prices and, 51; problem of, 271 ; the result of competi- tion, 45, 50 note; rights of, as against small competitors, 14; segregation versus disin- tegration, 271 ; shortcomings of, 46; socialism and anti- INDEX 423 trust laws, 4; what to do with, 271. Turmoil and upheaval, 62. Truth as a labor saving device, 117. Unfair buying, see Brutal buying. Unfair competition, see Com- petition, unfair; laws of Iowa, Minnesota, Nebraska, and South Dakota against, 78; practices of, enumerated and condemned, 355. Unfair competitive methods, 67, 69, 80-84, 4 00 > 4 01 ! selling be- low cost, 267-270; state laws against, 83 ; see also Clayton Law, and Trade Commission. United Shoe Machinery Com- pany, Canadian investigation of, 362. United States and economic progress, 184. U. S. Steel Corporation, 29, 63, 104; integrated industry, 278; safety appliances and, 268 note ; Tin Plate Industry and, 208. U. S. vs. General Electric Com- pany, 68. U. S. vs. Joint Traffic Associa- tion, 224 note. U. S. vs. Trans - Missouri Freight Association, 227 note. Vanishing industries, 232; attitude of biologist towards, 240; illustrations of, 234; neglect of, by government, 239 ; open-price associations and, 241 ; suggestions how to help, 236. Virginia Apple Growers' Asso- ciation, 332. Virginia Farmers' Association, 332. Wages, fixing, 51 ; fixed by unions, 295. Walnut Growers' Association, 33*- Walsh, C. M., 247 note. War is competition, 23. War, the present, 42. Wealth, our reckless prodigal- ity, 348. Whitwell vs. Continental To- bacco Co., yy note. Wisconsin class legislation 327- Woman and child labor, 32. Workmen's compensation, a new principle, 180; and pen- sions, laws of different coun- tries, 179. Young men progressive, old men reactionary, 156. UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 125 512 2