Chapter XVII: Preface: To the Seventh Volume (16)

"After twenty years of Federal legislation as interpreted by
the courts, directed against the evils of trusts and
combinations, and against railroad rebates, beginning with the
interstate commerce act of 1887 and the anti-trust act of
1890, a general and just conviction exists that the experience
gained in enforcing these federal acts and others succeeding
them demonstrates the necessity of legislation which shall
render more secure the benefits already gained and better meet
the changed conditions which have arisen during a long period
of active progress, both in the enforcement of statute law and
in the removal of grave abuses in the management of railroads
and corporations. These changes now demanded are:

"First—Immediate legislation is required, following the
recommendation of President Roosevelt and the Interstate
Commerce Commission, permitting agreements between railroad
corporations on reasonable freight and passenger rates,
subject in all respects to the approval, supervision, and
action of the Interstate Commerce Commission.

"Second—The enforcement of the Sherman act and the proceedings
under it during the administrations of Presidents Harrison,
Cleveland, McKinley, and Roosevelt have accomplished great
national results in awakening the moral sense of the American
people and in asserting the supremacy and majesty of the law,
thus effectually refuting the impression that great wealth and
large corporations were too powerful for the impartial
execution of law. This great advance has rendered more secure
all property rights, resting, as they must, under a popular
government, on universal respect for and obedience to law. But
now that this work is accomplished, it has revealed the
necessity for legislation which shall maintain all that the
Sherman act was intended to secure and safeguard interests it
was never expected to affect.

{129}

"As the next step in executing the determination of the
American people to secure in all industrial and commercial
relations justice and equality of opportunity for all, with
full sympathy and loyal support for every effort to enforce
the laws in the past, we urge upon Congress without delay to
pass legislation providing for a non-partisan commission, in
which the interests of capital, of labor, and of the general
public shall be represented. This commission, like a similar
commission, which proved most successful in Germany in 1870,
shall consider the entire subject of business and industrial
combinations and report such proposals, as to the formation,
capitalization, management and regulation of corporations (so
far as the same may be subject to federal jurisdiction) as
shall preserve individual initiative competition, and the free
exercise of a free contract in all business and industrial
relations. Any proposed legislation should also include
modification of the prohibition now existing upon combinations
on the following subjects:

"1. National and local organizations of labor and their trade
agreements with employers relating to wages, hours of labor,
and conditions of employment.

"2. Associations made up of farmers, intended to secure a
stable and equitable market for the products of the soil free
from fluctuations due to speculation.

"3. Business and industrial agreements of combinations whose
objects are in the public interest as distinguished from
objects determined to be contrary to the public interest.

"4. Such commission should make a thorough inquiry into the
advisability of inaugurating a system of federal license or
incorporation as a condition for the entrance of certain
classes of corporations upon interstate commerce and also into
the relation to the public interest of the purchase by one
corporation of the franchises or corporate stock of another.

"On no one of these subjects must what has been gained be
sacrificed until something better appears for enactment. On
each, this conference recognizes differences between good men.
On all, it asks a national non-partisan commission to be
appointed next winter to consider the question and report at
the second session of the approaching Congress for such action
as the national legislature, in the light of this full
investigation, may enact.

"Third—The examination, inspection and supervision of great
producing and manufacturing corporations, already begun by the
Department of Commerce and Labor and accepted by these
corporations, should be enlarged by legislation requiring,
through the appropriate bureaus of the Department of Commerce
and Labor, complete publicity in the capitalization, accounts,
operations, transportation charges paid, and selling prices of
all such producing and manufacturing corporations whose
operations are large enough to have a monopolistic influence.
This should be determined and decided by some rule and
classification to be devised by the commission already
proposed.

"Fourth—The conflicts between State and Federal authorities
raised in many States over railroad rates being now under
adjudication and under way to a final and ultimate decision by
the Federal Supreme Court, this conference deems the
expression of an opinion on these issues unfitting, and
confidently leaves this great issue to a tribunal which for
118 years has successfully preserved the balance between an
indissoluble union and indestructible State, defining the
supreme and national powers of the one and protecting the
sovereign and individual powers of the other."

_Proceedings of the National Conference
on Trusts and Combinations,
Chicago, October 22-25, 1907
(New York: National Civic Federation, 1908)._

COMBINATIONS: A. D. 1907-1909.
Thievery of the Sugar Trust.

In the fall of 1907 disclosures were made to the Government
which led to an investigation of the methods whereby imports
of raw sugar for the American Sugar Refining Company, known
commonly as the Sugar Trust, were weighed for the payment of
Customs duties, at the Company’s docks in Williamsburgh and
Jersey City. The result of the investigation was to prove that
this enormously wealthy corporation, not satisfied with
extortions of profit from the public by its monopoly of the
vast sugar trade of the country, had stooped to practices of
systematic theft from the Government, by devices that would
almost shame the professional players of a thimble rigging
game. Several ingenious inventions of trickery with the
weighing scales had been employed at the sugar docks prior to
1904, but the crowning one appears to have been brought to use
in that year. "This," said the New York _Evening Post_ of
April 29, 1909, in a full rehearsal of the story of the Sugar
Trust larcenies, "consisted of a thin steel corset spring,
which was inserted through a hole drilled in the uprights or
stanchions supporting the scales. If inserted at a time when
there was a load on the platform, its pressure against the
walking beam of the scale resulted in creating a false
balance, and in making the load appear considerably lighter
than it really was. This little device proved to be so
satisfactory for the purposes for which it was designed that
it was fitted to all the seventeen government scales at the
Havemeyer & Elder refinery. Holes were drilled in the
stanchions of each of the scales—hence the ‘case of the
seventeen holes’ to which Mr. Stimson called attention. So
successful was the operation of this mechanism that it was
used constantly down to the very day, November 20, 1907, when
a United States Treasury agent found it in use.

"The method of use was simple. The scales were placed with the
stanchions in a dark corner, next to the wall, and close
beside this stanchion sat the company’s checker, whose
ostensible duty it was to record in a little book the weight
of each load as it was read off to him by the government
weigher standing at the other end of the scale. The checker’s
really important duty seems to have been, however, to
manipulate the steel spring through the hole in the stanchion,
so that on each truck load, the company which employed him was
saved the payment of duty on some fourteen pounds of sugar.

"Evidence was adduced at the subsequent trial to show that the
company considered this special service on the part of its
checkers worthy of additional compensation. For although there
were seventeen scales, all of which could be used for this
purpose, practically all the weighing was done on six, and the
six reliable checkers who, year in and year out, operated the
little steel springs, all received extra pay in their weekly
pay envelopes for this service."

{130}

Consequent on the discovery of these facts, "several
indictments were found against the Sugar Trust’s employees,
and with that discovery as a basis the government began to
work up its case. … When the government came to work up its
case and to fix approximately the amount out of which it had
been defrauded, it was found possible to present a piece of
evidence which so thoroughly clinched the case that defence,
when it came to be made, was so weak as to be negligible. This
evidence consisted of a tabulation comparing the weights of
sugar on which duty was paid and the weights for which the
company paid the planters between the time the first cargo of
sugar of December, 1901, arrived at the refinery and the
discovery of the fraud in November, 1907.

"It took a score or more of accountants working steadily for
six months to complete the tabulation, but when it was
finished the astonishing corroborative story it told made it
well worth all the time and trouble expended. Never was there
a better example of the deadly parallel. For every entry the
weights on which duties were levied was set alongside of the
weights for which the company paid the planters."

The first result of the proceedings of the Government against
the thievish Trust was a pecuniary settlement with it,
concerning which the following official statement was given
out at Washington, by Attorney-General Wickersham, on the 29th
of April, 1909:

"The Attorney-General, with the concurrence of the Secretary
of the Treasury, has just approved a settlement between the
American Sugar Refining Company and the United States
Government of all the claims which the latter has against it
arising out of the fraudulent weighing on the docks of its
refineries at Brooklyn and Jersey City. In making this
settlement the sugar company pays in full the recent judgment
for the penalty in the amount of $134,411.03, which was
awarded against it by the jury in the case tried in the
federal court last March, with interest, and agrees to take no
appeal from the judgment.

"In addition to this, it pays into the United States treasury
$2,000,000 more, representing the duties which have been
unpaid during the last twelve years, owing to the fraudulent
practices, $1,239,088.97 of this amount has already been paid
in under protest to Collector Loeb on his reliquidation, as a
result of the trial above mentioned, of the duties upon the
cargoes entered at the Havemeyer & Elder refineries between
the years 1901 and 1907, when the frauds were discovered.

"The sugar company abandons its protests on these payments and
gives up its right to appeal from Mr. Loeb’s reliquidation and
in addition to this pays into the United States treasury the
above judgment and over $760,000 more to cover the duties
unpaid at the Havemeyer & Elder docks prior to 1901 and at the
Jersey City refinery between 1896 and 1906.

"This settlement with the sugar company in nowise affects the
criminal prosecution of the individuals who are responsible
for the perpetration of these frauds, and such prosecutions
will be pressed to a finish by the government."

[Soon after this settlement with the Government by the Sugar
Trust for shortage in payment of duties, the firm of Arbuckle
Brothers made a similar settlement, paying $695,573.19.]

A few days after the above announcement of a pecuniary
settlement with the American Sugar Refining Company, the Grand
Jury of the Circuit Court in the New York District presented
indictments against Oliver Spitzer, who was superintendent on
the company’s docks, Thomas Kehoe, Eugene M. Voelker, Edward
A. Boyle, J. R. Coyle, J. M. Halligan, Jr., and Patrick J.
Hennessy.

In November, further indictments were found against these
employees of the company, and James F. Bendernagel, general
superintendent of the Williamsburgh refinery for many years
past, was arrested on an indictment found by the same grand
jury. The trial of the accused, in the United States District
Court, was opened on the 30th of November.

On the 17th of January, 1910, Charles R. Heike, secretary and
treasurer of the American Sugar Refining Company, was
arraigned before Judge Hough in the criminal branch of the
United States Circuit Court, charged with making false entries
and conspiring to defraud the government.

COMBINATIONS: A. D. 1907-1909.
Suit of the Government against the Tobacco Trust.
Decree of Circuit Court restraining the combined
companies from interstate and foreign trade.

On the 10th of July, 1907, the Government began suit at New
York against the so-called Tobacco Trust. The defendants in
the case included 65 corporations and 27 individuals, the
principals, however, being six companies, namely, the American
Tobacco Company, the British-American Tobacco Company, the
Imperial Tobacco Company, the American Snuff Company, the
American Cigar Company, and the United American Cigarette
Company. Of these the parent organization, dominating all the
others, is the American Tobacco Company, which began the
finally gigantic combination in a small way in 1890. The
object sought in the Government’s suit was an injunction to
restrain the combination as such from engaging in interstate
and foreign trade, or for the appointment of receivers to take
the management of the business concerned.

The case was argued before the Second Circuit Court of the
United States in May, 1908, and the decision of the Court was
announced on the 7th of November following, Judges Lacombe,
Noyes, and Coxe agreeing and Judge Ward dissenting. The Court
found that an injunction should issue against some, but not
all, of the principal defendants, to prevent the continuance
of their violation of the Sherman Anti-Trust Law. It acquitted
the Trust, however, of the charge of dishonest and oppressive
practices, and it denied the application for receiverships.
The final decree of the Court was filed on the 15th of
December, 1908.

Appeals to the Supreme Court of the United States were taken,
both by the Government and by the defendants, and the case was
pending in that Court at the close of the year 1909. Mean time
the decree has been in suspense.

{131}

COMBINATIONS: A. D. 1907-1909.
Suit to dissolve the alleged Anthracite Coal Combination.

The following statements were made in an Associated Press
despatch from Philadelphia, March 8, 1909:

"Testimony of the Government in its suit against the
anthracite coal-carrying railroads and several coal companies,
to dissolve a so-called Trust agreement, alleged to be
existing among them, has been filed in the Circuit Court of
the United States for the Eastern District of Pennsylvania.

"Suit was begun here on June 12, 1907, and in the course of
three months all the defendants made answer, denying the
allegations of the Government. Subsequently, the court
appointed an examiner to take testimony, and a great part of
last year was taken up in hearing witnesses, sessions being
held mainly in Philadelphia and New York.

"The Government closed its case in New York several weeks ago,
having taken more than its allotted time, and the next move
will be for the Government to file a motion apportioning a
certain amount of time for the defendant companies to present
their witnesses for examination. Much of the testimony thus
far has been documentary, and it is believed this will be the
case with the defendants. After all the testimony is filed
with the court for review, arguments will be had on the case.

"It is impossible at this time to indicate when the case will
be ended, but it seems probable that a year or more will have
elapsed before it is legally decided whether a hard coal
monopoly, as alleged, exists in Pennsylvania."

See, also, proceedings under the "Commodities Clause" of
the Hepburn Act, and decision of United States Supreme
Court, in this Volume, under RAILWAYS: UNITED STATES: A. D.
1906-1909.

COMBINATIONS: A. D. 1908.
Declarations in Party Platforms on Trusts.

See (in this Volume)
UNITED STATES: A. D. 1908 (APRIL-NOVEMBER).

COMBINATIONS: A. D. 1908-1909.
Amending the Sherman Anti-Trust Law.
Action of the National Civic Federation.

The resolutions adopted at the great National Conference of
1907 on the Trust Question, as recited above, were duly
presented to Congress at its next session, and to the
President, with results which were stated at the annual
meeting of the National Civic Federation in December, 1908, by
its President, the Honorable Seth Low, as follows:

"When these resolutions were presented to the two Houses, the
Conference Committee was asked to submit a definite Bill in
legislative form to carry out its proposals. The Conference
itself had given no such authority to any Committee; but, in
view of the situation as it had developed, the Executive
Committee of the Federation took the matter up. The result of
its action was the preparation of a Bill, which was submitted
in due time to Congress, and which became the subject of
numerous hearings before the Judiciary Committees both of the
House and of the Senate, but especially of the House. The Bill
of last spring was based upon the belief that at that time,
and before the approaching Presidential election, it would be
impossible to change the substantive law as embodied in the
Sherman Anti-Trust Act. This being taken for granted, it
became impossible to do more than propose a method by which,
without changing the law, certain restraints of trade, if not
disapproved in advance by some government authority, might be
assured freedom from prosecution. The hearings before the
Congressional Committees made it evident that no relief from
the embarrassments caused by the Sherman Anti-Trust Law can be
looked for along this line of procedure. Perhaps it ought also
to be said that none ought to be looked for, because the
situation really calls for a change in the substantive
provisions of the law. Let no one imagine, however, that it is
an easy thing to say what such changes in the law ought to be.
Your Committee last spring began its work in the hope that it
would be able to submit a law which would command very large
support, not only from employers but also from organized
labor. After working upon the subject for many weeks, the Bill
which it actually presented commanded no large measure of
support from either. The mercantile classes favor amendments
to the law which, instead of forbidding all restraints of
trade, will forbid only unreasonable restraints of trade; and
which will provide amnesty for the past,
(1) on the theoretical ground that what has been done has
often been done without any realization that it was contrary
to the law; and
(2) on the practical ground that to attempt to rip up what has
already been done will destroy the industry of the country. The
representatives of organized labor, on the other hand, ask to
be omitted altogether from the provisions of the Sherman Act.
It is evident to your Committee that the changes desired by
the mercantile classes are going to meet with very serious
objection, unless they are combined with some positive
legislation which will provide some effective method of
assuring to the country, in the future, the power to protect
itself in advance from new combinations in the industrial
sphere, such as have been made in the past, and which
originally created the sentiment which placed the Sherman
Anti-Trust Law upon the statute books.

"In other words, precisely as a city may desire to limit the
height of buildings, for the future, without taking down those
that are already erected, so many persons believe that the
right to make commercial combinations, in the future, should
be under some sort of governmental control, even though those
already formed be left unmolested; and such persons, also,
believe that there is the same inherent right in the body
politic to do the one as the other. On the other hand, the
demand of organized labor to be exempted altogether from the
operations of this Act has been objected to in the past, and
is likely to be objected to in the future, as class
legislation of a kind that has no place on American soil,
because organized labor is believed to be capable of
exercising restraint of trade no less than commercial
corporations.

"These being the terms of the problem, it is apparent, on the
face of things, that the effort to amend the Sherman
Anti-Trust Law in any effective way is beset by difficulties
at every turn. … The whole subject is made infinitely
difficult by the Constitutional limitations upon the power of
Congress, which have led the United States Supreme Court to
decide, in effect, that Congress can regulate inter-State
commerce, but cannot regulate the corporation that does it;
because the corporation that does inter-State commerce is a
creature of the State and not of the United States. The
separate States, on the other hand, can regulate the
corporations that do inter State commerce, because they create
them; but the States cannot regulate the inter-state commerce
that is done, because under the United States Constitution,
inter-State commerce is under National control. It cannot be
too clearly apprehended that the effect of this situation is,
that neither sovereignty—neither the National sovereignty nor
the State sovereignty—can regulate both the agent that does
inter-State commerce and the inter-State commerce that is
done."

{132}

In the _National Civic Federation Review_ of March, 1909,
it was announced that "the Executive Council of the National
Civic Federation has appointed a committee to draft proposed
amendments to the Sherman Anti-Trust act. By request of the
lawyers upon the committee Seth Low will serve as chairman.
The other members are Frederick P. Fish, of Boston; Frederick
N. Judson, of St. Louis; Reuben D. Silliman, of New York, and
Henry W. Taft, of New York.

"No attempt will be made to submit anything to the present
session of Congress. It is proposed to draft a tentative bill
as soon as a careful study of the problems will permit. This
will then be submitted for examination and suggestion to
various representative bodies in all parts of the country, and
with the aid of the comments thus received the final draft of
the bill to be submitted will be prepared."

COMBINATIONS: A. D. 1909.
Report of the Commissioner of Corporations on the
Tobacco Combination, or so-called Trust.

Parts of an elaborate report on the organization of the
Tobacco Combination were published in February, 1909, by the
Commissioner of Corporations, Herbert Knox Smith. It showed
the combination to be composed of "the American Tobacco
Company and its three great subsidiary combinations, the
American Snuff Company, the American Cigar Company, and the
British-American Company, besides eighty two other subsidiary
concerns doing business in the United States, Porto Rico, and
Cuba. The combination represents a total net capitalization of
over $316,000,000. A very small group of ten stockholders
controls 60 per cent. of the outstanding voting stock of the
American Tobacco Company, through which company the entire
combination is controlled."

A list of the subsidiary companies controlled, "including over
twenty hitherto secretly controlled, so-called ‘bogus
independent concerns,'" is given in the report. It is shown
also that the combination is practically the only important
exporter of tobacco manufactures from this country. In 1891
the combination controlled 89 per cent. of the business of
cigarette manufactures, and this proportion practically is
maintained. In cigars its output increased from 4 per cent. of
the business in 1897 to 14.7 per cent, in 1906; while in
manufactured tobacco (chewing, smoking, fine-cut, and snuff)
"the combination’s output increased from 7 per cent. of the
total in 1891 to 77 per cent. in 1906. Finally, in 1906, the
combination controlled of these separate products,
respectively, plug, 82 per cent.; smoking, 71 per cent.;
fine-cut, 81 per cent., and snuff, 96 per cent." In the year
1906 the combination used in the manufacture of its various
products nearly 300,000,000 pounds of leaf tobacco. The report
adds:

"An idea of the absorption of competing plants and of the
changes through combination within the last decade may be had
from the fact that in 1897 the combination had ten plants,
each producing over 50,000 pounds of manufactured tobacco or
snuff per year, while there were 243 independent plants of the
same class. In 1906, on the other hand, the combination had 45
plants of this class, and independent manufacturers 140.
Especially conspicuous has been the absorption of the large
plants. In 1897 the combination had eight plants, each
producing over 1,000,000 pounds of these products per year,
while its competitors had forty-six such plants. In 1906 the
combination had thirty-four plants of this size, and
independent concerns only seventeen."

COMBINATIONS: A. D. 1909.
Merger of Telephone and Telegraph Corporations.

Announcement of one of the most important financial mergers of
recent years was made November 16, 1909, when the American
Telephone and Telegraph Company disclosed its acquirement of
control of the Western Union Telegraph Company. "The American
Telephone and Telegraph Company has obtained the control of a
substantial minority interest in the shares of the Western
Union Telegraph Company," was the wording of the official
statement, but it became known that sufficient voting rights
of other stock had been obtained to give the telephone
interests control of the telegraph company.

According to a statement issued on May 1, 1909, the total
capital and outstanding interest-bearing obligations of the
American Telephone and Telegraph Company and allied systems
was $592,475,400. This amount included capital stock
aggregating $361,636,800, subdivided as follows: American
Telephone and Telegraph Company, $208,393,500; associated
operating companies in the United States and Canada, about
thirty-five in number, $142,674,400; associated holding and
manufacturing companies, $10,668,900. "The Western Union has a
capitalization of $125,000,000 in stock and $40,000,000 in
bonds.

COMBINATIONS: A. D. 1909.
Threatened combination to control the Water Power of the
country.

Speaking at the National Irrigation Congress, convened at
Spokane, Washington, in August, 1909, the National Forester,
Gifford Pinchot, declared that, notwithstanding the
contradictions issued by the parties in interest, a gigantic
combination was forming to seize the sources of the country’s
water power, and be in a position later to dominate all
industry.

"There could be no better illustration," he said, "of the
eager, rapid, unwearied absorption by capital of the rights
which belong to all the people than the Water Power Trust, not
yet formed, but in rapid progress of formation. This statement
is true, but not unchallenged. We are met at every turn by the
indignant denial of the water power interests. They tell us
that there is no community of interest among them, and yet
they appear year after year at these Congresses by their paid
attorneys, asking for your influence to help them remove the
few remaining obstacles to their perpetual and complete
absorption of the remaining water powers. They tell us it has
no significance that the General Electric interests are
acquiring great groups of water powers in various parts of the
United States, and dominating the power market in the region
of each group. And whoever dominates power, dominates all
industry. … The time for us to agitate this question is now,
before the separate circles of centralized control spread into
the uniform, unbroken, nation-wide covering of a single
gigantic Trust. There will be little chance for mere agitation
after that. No man at all familiar with the situation can
doubt that the time for effective protest is very short."

{133}

The same warning has been given by others who are in a
position to speak with knowledge, and heed has been given to
them by the Government. The annual report of the Secretary of
the Interior, the Honorable Richard A. Ballinger, made public
November 28, 1909, contained the following important
announcement: "In anticipation of new legislation by Congress
to prevent the acquisition of power sites on the public domain
by private persons or corporations with the view of
monopolizing or adversely controlling them against the public
interest, there have been temporarily withdrawn from all forms
of entry approximately 603,355 acres, covering all locations
known to possess power possibilities on unappropriated lands
outside of national forests. Without such withdrawals these
sites would be enterable under existing laws, and their
patenting would leave the general government powerless to
impose any limitations as to their use.

"If the Federal government desires to exercise control or
supervision over water-power development on the public domain,
it can only do so by limitations imposed upon the disposal of
power and reservoir sites upon the public lands, the waters of
the streams being subject to State jurisdiction in their
appropriation and beneficial use. I would, therefore, advise
that the Congress be asked to enact a measure that will
authorize the classification of all lands capable of being
used for water-power development, and to direct their
disposal, through this department. …

"Unreasonable or narrow restrictions beyond the necessity of
public protection against monopoly, or extortion in charges,
will, of course, defeat development and serve no useful
purpose. The statute should, therefore, while giving full
protection against the abuses of the privileges extended, so
far as consistent, encourage investment in these projects; and
it must always be borne in mind that excessive charges for the
franchise will fall upon the consumer. Legislation of this
character proceeds upon the theory that Congress can impose
such contractual terms and conditions as it sees fit in the
sale or use permitted of government lands so long as such
limitations do not conflict with the powers properly exercised
by the State wherein they may be situated."

COMBINATIONS: A. D. 1909.
The Sugar Trust settles a conspiracy charge.

While the American Sugar Refining Company, in the spring of
1909, was being forced to make good to the Government its long
cheating of the Custom House, it was being compelled, at the
same time, to indemnify a competitor in business, whom it had
ruined by means which the Sherman Anti-Trust Law forbade. Its
victim was the Pennsylvania Sugar Refining Company, whose
refinery had been established by Mr. Adolph Segal, of
Philadelphia, in 1903. Segal became financially embarrassed,
and was lured into taking a loan of $1,250,000, from a person
who acted secretly in the transaction for the American Sugar
Refining Company. The loan was made on terms which gave the
lender control of a majority of the stock of the Pennsylvania
Sugar Refining Company, and Mr. Segal found, when too late,
that the real lender was the Sugar Trust. It used its power to
shutdown the plant, which was said to be the most perfect of
its kind, and the Pennsylvania Company was wrecked. It brought
a suit for damages to the amount of $30,000,000, inflicted
upon it in contravention of the Anti-Trust Law. Before the
trial ended, the defendants found so much reason to fear its
outcome that negotiations were opened which resulted (June 8,
1909) in a settlement of the claim outside of court. The
settlement was said to involve a cash payment by the American
Company to the Pennsylvania Company of $750,000, the
cancellation of the $1,250,000 loan made by the trust to
Adolph Segal, of Philadelphia, and the return of the
securities given by Segal as collateral for the loan.

Subsequently the Government procured indictments of certain of
the officials of the American Sugar Refining Company for their
participation in the conspiracy; but the prosecution was
blocked in October by a decision from Judge Holt, of the
United States Circuit Court, that the acts charged were
outlawed by the statute of limitations. Later, in November, it
was reported that the Government was preparing an appeal to
the Supreme Court.

COMBINATIONS: A. D. 1909.
Dissolution of a Paper-making Combination.

By a decree of the United States Circuit Court, Judge Hough,
at New York, in May, 1909, the Fiber and Manila Association, a
combination of 25 paper manufacturers, located in many parts
of the country, East and West, was adjudged to be an illegal
combination in restraint of trade, and perpetually enjoined
from further operations in such combination. The members were
enjoined further from fixing prices or the qualities that
shall be manufactured or to maintain any pool or fund made up
of contributions from its members. Counsel for the Association
announced that no appeal would be made.

COMBINATIONS: A. D. 1909.
Chartering of the United Dry Goods Companies.

"Details of the greatest dry goods combination ever attempted
in this country were available to-day for the first time since
the United Dry Goods Companies took out a Delaware charter
last Friday [April 21, 1909], The concern will control many of
the largest dry goods stores in this city and at important
commercial centres of the South and West, acting first as a
holding company and later possibly as an operating concern,
with headquarters here. John Claflin will be the head of the
combination. The present managers of the various absorbed
stores will be continued. J. P. Morgan & Co. are financing the
deal, and public announcement will be made immediately.

"The United Dry Goods Companies will have a capital of
$51,000,000. Of this only $20,000,000 will be immediately
issued in the form of $10,000,000 7 per cent. cumulative
preferred stock and $10,000,000 common stock. The preferred
stock has preference as to both assets and dividends. The new
combination will purchase $8,650,000 of the outstanding
$17,250,000 capital stock of the Associated Merchants’
Company. …

"John Claflin said this afternoon that the new company would
not buy any mills, as it was not the purpose of the
combination to control the sources of production. All the
stores—there are more than forty, which the United Companies
and its allies will own in whole or in part—will be free to
purchase from whatever interests they wish, without being
restricted to any one market or to the product of any special
mills. The general business will be directed from the city,
but resident directors at different centres will have full
charge of the detail work."

_New York Evening Post,
May, 25-26, 1909._

{134}

COMBINATIONS: A. D. 1909.
The illegality of a Trust invalidates a debt to it.

In a suit brought by the Continental Wall Paper Company to
recover a debt, payment of which was resisted on the ground
that the Company was an illegal combination in restraint of
trade, the Supreme Court of the United States, on the 1st of
February, 1909, affirmed a judgment of the Circuit Court of
Appeals which had dismissed the suit. The case was so decided
by a bare majority of one. The opinion of the majority,
delivered by Justice Harlan, held that a judgment in favor of
the Company would give effect to agreements constituting the
illegal combination. "Upon the whole case," said Justice
Harlan, "and without further citation of authority, we adjudge
upon the admitted facts that the combination represented by
the plaintiff in this case was illegal under the anti-trust
act of 1890; is to be taken as one intended, and which would
have the effect, directly to restrain and monopolize trade
among the several states and with foreign states; and that the
plaintiff cannot have a judgment for the amount of the account
sued on because such a judgment would, in effect, be in aid of
the execution of agreements constituting that illegal
combination. We consequently hold that the circuit court of
appeals properly sustained the third defense in the case and
rightly dismissed the suit."

In the dissenting opinion by Justice Holmes and others it was
set forth that "whenever a party knows that he is buying from
an illegal trust, and still more when he buys at a price that
he thinks unreasonable, but is compelled to pay in order to
get the goods he needs, he knows that he is doing an act in
furtherance of the unlawful purpose of the trust, which always
is to get the most it can for its wares. But that knowledge
makes no difference, because the policy of not furthering the
purposes of the trust is less important than the policy of
preventing people from getting other people’s property for
nothing when they purport to be buying it."

COMBINATIONS: A. D. 1909-1910.
Morgan & Co. Banking Combination.

See (in this Volume)
FINANCE AND TRADE: UNITED STATES.

COMBINATIONS: A. D. 1910.
Special Message of President Taft
on Legislation touching "Trusts."

An important special Message, recommendatory of legislation on
the two subjects of interstate commerce and the combinations
called "Trusts," was addressed to Congress by President Taft
on the 7th of January, 1910. It had been expected that the
Executive would advise amendments to the Sherman Anti-Trust
Law, so-called, but he did not. On the contrary he favored the
policy of leaving that law untouched, on the ground that its
defects have been cured already to a great extent by judicial
decisions, and that it is safer and better for the business
interests of the country to trust the law to the gradual
molding which the courts are giving it, than to undertake
amendments which would start anew series of judicial
interpretations. But the President’s conclusions on this point
were supplemented by the advocacy of an enactment to provide
for the federal chartering of corporations engaged in
interstate commerce, as a means of substituting continuous
regulation of such organizations for the spasmodic and
disturbing investigations which the Government is now
compelled frequently to institute.

In part, the President’s discussion of these questions is as
follows:—

"The statute has been on the statute book now for two decades,
and the Supreme Court in more than a dozen opinions has
construed it in application to various phases of business
combinations and in reference to various subjects-matter. It
has applied it to the union under one control of two competing
interstate railroads, to joint traffic arrangements between
several interstate railroads, to private manufacturers engaged
in a plain attempt to control prices and suppress competition
in a part of the country, including a dozen States, and to
many other combinations affecting interstate trade. The value
of a statute which is rendered more and more certain in its
meaning by a series of decisions of the Supreme Court
furnishes a strong reason for leaving the act as it is, to
accomplish its useful purpose, even though if it were being
newly enacted useful suggestions as to change of phrase might
be made.

"It is the duty and the purpose of the Executive to direct an
investigation by the Department of Justice, through the grand
jury or otherwise, into the history, organization, and
purposes of all the industrial companies with respect to which
there is any reasonable ground for suspicion that they have
been organized for a purpose, and are conducting business on a
plan which is in violation of the Anti-Trust law. The work is
a heavy one, but is not beyond the power of the Department of
Justice, if sufficient funds are furnished, to carry on the
investigations and to pay the counsel engaged in the work. But
such an investigation and possible prosecution of corporations
whose prosperity or destruction affects the comfort not only
of stockholders, but of millions of wage-earners, employees,
and associated tradesmen, must necessarily tend to disturb the
confidence of the business community, to dry up the now
flowing sources of capital from its places of hoarding, and
produce a halt in our present prosperity that will cause
suffering and strained circumstances among the innocent many
for the faults of the guilty few. The question which I wish in
this message to bring clearly to the consideration and
discussion of Congress is whether in order to avoid such a
possible business danger something cannot be done by which
these business combinations may be offered a means, without
great financial disturbance, of changing the character,
organization, and extent of their business into one within the
lines of the law under Federal control and supervision,
securing compliance with the anti-trust statute.

"Generally, in the industrial combinations called ‘Trusts,’
the principal business is the sale of goods in many States and
in foreign markets; in other words, the interstate and foreign
business far exceeds the business done in any one State. This
fact will justify the Federal government in granting a Federal
charter to such a combination to make and sell in interstate
and foreign commerce the products of useful manufacture under
such limitations as will secure a compliance with the
Anti-Trust law. It is possible so to frame a statute that
while it offers protection to a Federal company against
harmful, vexatious, and unnecessary invasion by the States, it
shall subject it to reasonable taxation and control by the
States, with respect to its purely local business.

{135}

"Many people conducting great businesses have cherished a hope
and a belief that in some way or other a line may be drawn
between ‘good Trusts’ and ‘bad Trusts,’ and that it is
possible, by amendment to the Anti-Trust law, to make a
distinction under which good combinations may be permitted to
organize, suppress competition, control prices, and do it all
legally, if only they do not abuse the power by taking too
great profit out of the business. … Now, the public, and
especially the business public, ought to rid themselves of the
idea that such a distinction is practicable or can be
introduced into the statute. Certainly under the present
Anti-Trust law no such distinction exists. It has been
proposed, however, that the word ‘reasonable’ should be made a
part of the statute, and then that it should be left to the
court to say what is a reasonable restraint of trade, what is
a reasonable suppression of competition, what is a reasonable
monopoly. I venture to think that this is to put into the
hands of the court a power impossible to exercise on any
consistent principle which will insure the uniformity of
decision essential to just judgment. It is to thrust upon the
courts a burden that they have no precedents to enable them to
carry, and to give them a power approaching the arbitrary, the
abuse of which might involve our whole judicial system in
disaster.

"In considering violations of the Anti-Trust law, we ought, of
course, not to forget that that law makes unlawful, methods of
carrying on business which before its passage were regarded as
evidence of business sagacity and success, and that they were
denounced in this act, not because of their intrinsic
immorality, but because of the dangerous results toward which
they tended, the concentration of industrial power in the
hands of the few, leading to oppression and injustice. In
dealing, therefore, with many of the men who have used the
methods condemned by the statute for the purpose of
maintaining a profitable business, we may well facilitate a
change by them in the method of doing business. …

"To the suggestion that this proposal of Federal incorporation
for industrial combinations is intended to furnish them a
refuge in which to continue industrial abuses under Federal
protection, it should be said that the measure contemplated
does not repeal the Sherman Anti-Trust law, and is not to be
framed so as to permit the doing of the wrongs which it is the
purpose of that law to prevent, but only to foster a
continuance and advance of the highest industrial efficiency
without permitting industrial abuses. …

"A Federal compulsory license law, urged as a substitute for a
Federal incorporation law, is unnecessary except to reach that
kind of corporation which, by virtue of the considerations
already advanced, will take advantage voluntarily of an
incorporation law, while the other State corporations doing an
interstate business do not need the supervision or the
regulation of a Federal license and would only be
unnecessarily burdened thereby.

"The attorney-general, at my suggestion, has drafted a Federal
incorporation bill embodying the views I have attempted to set
forth, and it will be at the disposition of the appropriate
committees of Congress."

COMBINATIONS: A. D. 1910.
Renewed investigation of the Beef Trust.

A renewed investigation of the business methods of the great
meat-packing concerns at Chicago, by the grand jury of the
United States District Court, Judge K. M. Landis, was begun on
the 24th of January, 1910. It is understood to have special
reference to the causes of the rising prices of meats. The
firms against which the Government is thus preparing to
proceed are: Swift & Co., Armour & Co., and Morris & Co., who,
it is alleged, control the National Packing Company, for their
common benefit.

----------COMBINATIONS: End--------

COMMERCE AND LABOR, The United States Department of.

See (in this Volume)
UNITED STATES: A. D. 1903 (FEBRUARY).

COMMERCIAL UNIVERSITIES, in Germany:
Their recent rise.

See (in this Volume)
EDUCATION: GERMANY: A. D. 1898-1904.

"COMMISSION PLAN," of City Government.

See (in this Volume)
MUNICIPAL GOVERNMENT.

COMMITTEE OF ONE HUNDRED.

See (in this Volume)
PUBLIC HEALTH.

COMMITTEE OF UNION AND PROGRESS.

See (in this Volume)
TURKEY: A. D. 1908 (JULY-DECEMBER), and after.

COMMODITIES CLAUSE, of the Hepburn Act:
Supreme Court decision on.

See (in this Volume)
RAILWAYS: UNITED STATES: A. D. 1906-1909.

COMMUNAL SYSTEM, Russian:
Its modification.

See (in this Volume)
RUSSIA: A. D. 1906 AND 1909 (APRIL).

CONCENTRATION CAMPS.

See (in this Volume)
SOUTH AFRICA: A. D. 1901-1902.

CONCILIATION BOARDS, Canadian.

See (in this Volume)
LABOR ORGANIZATION: CANADA: A. D. 1907-1908.

CONCILIATION COMMITTEE, of National Civic Federation.

See (in this Volume)
LABOR ORGANIZATION: UNITED STATES: A. D. 1902.

CONCORDAT OF 1802, The.

See (in this Volume)
FRANCE: A. D. 1905-1906.

CONFÉDÉRATION GÉNÉRALE DU TRAVAIL.

See (in this Volume)
LABOR ORGANIZATION: FRANCE: A. D. 1884-1909.

CONFERENCE OF STATE GOVERNORS.

See (in this Volume)
CONSERVATION OF NATURAL RESOURCES: UNITED STATES.

CONFERENCES FOR EDUCATION IN THE SOUTH, Annual.

See (in this Volume)
EDUCATION: UNITED STATES: A. D. 1898-1909.

CONGER, Edwin H.: U. S. Minister to China.

See (in this Volume)
CHINA: A. D. 1903 (MAY-OCTOBER).

CONGESTED ESTATES.

See (in this Volume)
IRELAND: A. D. 1909.

{136}

----------CONGO STATE: Start--------

CONGO STATE:
How the natives have been enslaved and oppressed.
The "Domaine Privé."

"The Berlin Conference laid it down that no import dues should
be established in the mouth of the Congo for twenty years. But
in 1890 King Leopold, alleging the heavy expenses to which he
had been put by the campaign against the Arabs in the Upper
Congo, applied for permission to levy import duties. It was
the first disillusionment; and the British Chambers of
Commerce began to wonder whether their opposition to the
Anglo-Portuguese Convention had not been mistaken. The King’s
request was granted (the Powers merely reserving to themselves
the right to revert to the original arrangement in fifteen
years), but not without the bitter opposition of the Dutch,
who had very important commercial interests in the Congo,
backed by the British Chambers of Commerce and all the traders
in the Congo, irrespective of nationality. A representative
gathering was held in London on November 4th, 1900, presided
over by Sir Albert Rollit, to protest against the imposition
of import duties and to denounce the hypocrisy which
attributed to philanthropic motives the desire on the part of
the Congo State so to impose upon them. …

"They were able to show that … King Leopold, notwithstanding
his formal assurances to the commercial world that the Congo
State would never directly or indirectly itself trade within
its dominions, was buying, or rather stealing, ivory from the
natives in the Upper Congo and retaining the proceeds of the
sale on the European market. They proved that, profiting by
the silence of the Berlin Treaty on the subject of export
duties, the Congo State had already imposed taxes amounting to
17½ per cent. on ivory, 13 per cent, on rubber and 5 per cent.
on palm kernels, palm-oil and ground-nuts, the total taxation
amounting to no less than 33 per cent. of the value of the
whole of the trade. Finally they had no difficulty in
demonstrating that, with all his professed wish to stamp out
the slave-raiding carried on by the half-caste Arabs in the
Upper Congo, His Majesty was himself tacitly encouraging the
slave trade by receiving tribute from conquered Chiefs in the
shape of slaves, who were promptly enrolled as soldiers in the
State army. …

"Five months after the termination of the Berlin Conference
King Leopold issued a decree (July, 1885) whereby the State
asserted rights of proprietorship over all _vacant lands_
throughout the Congo territory. It was intended that the term
vacant lands should apply in the broadest sense to lands not
_actually occupied_ by the natives at the time the decree
was issued. By successive decrees, promulgated in 1886, 1887
and 1888, the King reduced the rights of the natives in their
land to the narrowest limits, with the result that the whole
of the odd 1,000,000 square miles assigned to the Congo State,
except such infinitesimal proportions thereof as were covered
by native villages or native farms, became _‘terres
domaniales.'_ On October 17th, 1889, the King also issued a
decree ordering merchants to limit their commercial operations
in rubber to bartering with the natives. This decree was
interesting merely as a forewarning of what came later,
because at that time the rubber trade was very small. In July,
1890, the same year as the Brussels Conference, the Congo
State went a step further. A decree issued in that month
confirmed all that was advanced in November of the same year
by the speakers at the London Conference held to protest
against the imposition of import duties by the State. By its
terms King Leopold asserted that the State was entitled to
trade on its own account in ivory—the first open violation of
his pledges. Moreover the decree imposed sundry extra taxes
upon all ivory bought by merchants from the natives, which,
since the State had become itself a trading concern,
constituted an equally direct violation of the Berlin Act, by
establishing differential treatment in matters of trade. Such
were the plans King Leopold made, preparatory to obtaining
from the Powers the power to impose import duties. Everything
was ready for the great _coup_, which should also
inaugurate the Fifth Stage of His Majesty’s African policy.

"The Brussels Conference met. The Powers with inconceivable
fatuity allowed themselves to be completely hoodwinked, and
within a year the greatest injury perpetrated upon the
unfortunate natives of Africa since the Portuguese in the XVth
century conceived the idea of expatriating them for labour
purposes had been committed, and committed too by a Monarch
who had not ceased for fifteen years to pose as their
self-appointed regenerator. On September 21st, 1891, King
Leopold drafted, in secret, a decree which he caused to be
forwarded to the Commissioners of the State in the
Uban-ghi-Welle and Aruwimi-Welle districts, and to the Chiefs
of the military expeditions operating in the Upper Ubanghi
district. This decree never having been published in the
official Bulletin of the State, its exact terms can only be a
matter of conjecture, but we know that it instructed the
officials to whom it was addressed ‘to take urgent and
necessary measures to preserve the fruits of the domain to the
State, especially ivory and rubber.’ By ‘fruits of the domain’
King Leopold meant the products of the soil throughout the
‘vacant lands’ which he had attributed to himself, as already
explained, by the decree of 1885. The King’s instructions were
immediately followed, and three circulars, dated respectively
Bangala, 15th December, 1891, Basankusu, 8th May, 1892, and
Yokoma, 14th February, 1892, were issued by the officials in
question. Circular Number 1 forbade the natives to hunt
elephants unless they brought the tusks to the State’s
officers. Circular Number 2 forbade the natives to collect
rubber unless they brought it to the State’s officers.
Circular Number 3 forbade the natives to collect either ivory
or rubber unless they brought the articles to the State’s
officers, and added that ‘merchants purchasing such articles
from the natives, whose right to collect them the State only
recognised provided that they were brought to it, would be
looked upon as receivers of stolen goods and denounced to the
judicial authorities.’ Thus did the Sovereign of the Congo
State avail himself of the additional prestige conferred upon
him by the Brussels Conference. …

{137}

"In theory, then, the decrees of September, 1891, and October,
1892, made of the native throughout the _Domaine Privé_ a
serf. In theory a serf he remained, for a little while. But as
the grip of Africa’s regenerator tightened upon the _Domaine
Privé_, as the drilled and officered cannibal army, armed
with repeating rifles, gradually grew and grew until it was
larger than the native forces kept up by any of the great
Powers of Europe on African soil, as the radius of the rubber
taxes was extended, as portions of the country began to be
farmed out to so-called 'Companies' whose agents were also
officials of the King, the native of the _Domaine Privé_
became a serf not in theory only but in fact, ground down,
exploited, forced to collect rubber at the bayonet’s point,
compelled to pay onerous tribute to men whose salaries depend
upon the produce returns from their respective stations—the
punishment for disobedience, slothfulness or inability to
comply with demands ever growing in extortion, being anything
from mutilation to death, accompanied by the destruction of
villages and crops."

_E. D. Morel,
The Belgian Curse in Africa
(Contemporary Review, March, 1902)._

CONGO STATE: A. D. 1903-1905.
The alleged oppressiveness, barbarity, and rapacity of its
administration under King Leopold.
Observations of Lord Cromer on the Nile border.
Reports of a British Consular Officer, and of King Leopold’s
Belgian Commission.
Action of the British Government.