CHAPTER XII TRUST METHODS NOTE A DISPROPORTIONALLY large share of space in this volume has been devoted to readings on the above subject. The editor has felt that this is a most vital question. It bears directly on the issue between Competition and Combination. It is the theory of the editor that the advantages of combination are to be found chiefly in certain methods and not in the frequently alleged economies of saving of cross freights, saving in advertising and in salesmen, superior managerial ability, etc. etc. It is a very serious question whether, should certain practices be prevented, the alleged natural tendency to combination would not vanish into thin air. The exhibits given need no comment. They are made up of excerpts drawn from Government investigations and from the briefs, petitions, indictments and other documents in the various suits brought by the Government under the Sherman Act. For the purpose of affording greater convenience of study they have been subdivided into a series of groups each under a particular heading.-Ed. In September, 1910, defendants, in pursuance of their general purpose, through quired the business of manufacture of machines G. Company, of New Jersey, acwho was engaged in the designated and adapted for use in performing all the principal operations in the manufacture of and — which can be performed by the aid and use of machinery. 1 United States of America v. Court of the United States for the District of Co. Petition, In the -, pp. 66-70. For at least two years immediately preceding September, 1910, said had invented, and had taken out letters patent of the United States and of foreign countries covering the same, machines designed and adapted for performing all the principal operations in the manufacture of Among such machines, which are too numerous to be referred to specifically in this petition, were machines, and machines, machines, and machines, machines, and many others. On or about factory of G. May 1, 1910, the said installed in the Company, a corporation of New Jersey, issued capital $3,750,000, with its factory and principal offices at Boston, Mass., with a daily capacity of 17,000 of -, a complete set of the machines so owned and controlled by him, the said being the owner or in control of a majority of the capital stock of the Company. For several years prior to the installation and use in the factory of the Company of the machines owned and controlled by G., defendants, through Company, of New Jersey, or some one or more of the corporations owned and controlled by them, had furnished and supplied all of the principal machines used in the factory of the Company in the manufacture of and. Upon the installation in said factory of the machines owned and controlled by -the officials of the Company caused the machines owned and controlled by defendants to be dismantled and removed and discontinued the payment of royalties on the same. Thereupon defendants instituted proceedings against G. Company in the Supreme Judicial Court of Massachusetts, in which Company, of New Jersey, was the party plaintiff, to enjoin the Company from using the machines which had been supplied to it by G.; to enjoin said from supplying or furnishing to the Company other machines to be used in the place of machines owned and controlled by defendants, and to recover rents and royalties on defendants' machines during the period that's machines had been used in the factory of the Company. This proceeding was never prosecuted to a final determination for the reasons hereinafter stated. G. had advertised extensively, through the public press and otherwise, for several months prior to September, 1910, the machines which he had invented for use in the manufacture of and had solicited among manufacturers in various parts of the United States orders for the sale and lease of and such machines. and however, experienced difficulty in obtaining orders for his machines on account of the arbitrary, oppressive, unreasonable, and unlawful lease and license agreements, containing exclusive-use and provisions, hereinbefore mentioned and described, which defendants had theretofore required manufacturers to sign, in order to obtain machines from defendants, and under which such manufacturers then held all of the essential machines necessary in the manufacture of — and However, a concerted effort was made by a number of prominent and manufacturers engaged in business in various States of the United States to acquire the inventions and machines owned and controlled by, or an interest therein. Among such and manufacturers who were so interested wereCompany, St. Louis, Mo.; Company, St. Louis, Mo.; St. Louis, Mo.;- Boston, Mass. & Company, Company, Chicago, Ill.; and G. with a Representatives of the above companies on September 22, 1910, were in Boston, Mass., in conference with view to either purchasing an interest in his inventions and machines or to make some arrangement which would enable them to obtain machines for use in their factories, and thereby be relieved from the domination and control of defendants. Defendants, being advised of the purpose and intent of said manufacturers, and well knowing that if any arrangement were made between them and -G. whereby they could obtain for use in their factories machines not owned and controlled by defendants, such action would result in defendants' machines being dismantled and removed, as had been done in the factory of the Company, and that competition would be created in the sale, lease, and use of such machines, defendants, for the purpose of preventing such competition and to monopolize trade and commerce in - machinery, on or about September 23, 1910, entered into agreements with said whereby they acquired all the inventions, letters patent of the United States and of all foreign countries relating thereto, together with all machinery, mechanisms, tools, and devices owned and controlled by said, designed and adapted for use in the manufacture of and -; and defendants acquired also the holdings of the capital stock, which constituted a majority thereof, which the said owned and controlled in said G. Company. The issued capital stock of said G. Company is $3,750,000, of which defendants acquired $2,250,000. For the inventions, improvements, letters patent of the United States and foreign countries, machines, machinery, mechanisms, and devices designed and used in the manufacture of and including the $2,250,000 of capital stock of said G. Company, defendants paid G. $6,000,000, part in cash and part in stock of defendant corporations. For the purpose of maintaining their monopoly, defendants required and took from said covenants, in substance, that he should assign, transfer, set over, and deliver to defendants all inventions, improvements, letters patent of the United States and of foreign countries, applications for letters patent, and interest and rights therein, which he might make, own, or acquire, within 15 years thereafter, relating to the manufacture of and or to machinery, mechanisms, tools, or devices, processes, methods, or things intended or adapted for use in the manufacture of or in the working or manipulation of leather, or relating to or of any description whatsoever, or to the manufacture thereof, together with any and all rights which the said might, within said period, by agreement or otherwise, acquire or take over, covering any such inventions, improvements, letters patent of the United States and of other countries, applications for letters patent, and interest and rights therein. In December, 1902, I. and certain other persons were engaged in the promotion of a corporation which they intended should erect a manufacture with farmers for factory at Menominee, Michigan, and and were engaged in making contracts to be delivered to said company; and they intended that said company should engage independently in interstate trade and commerce in Company, to prevent this proposed competition, entered into 1 United States of America v. nal Petition, In the , PP. 111-112. The Company and others. Origi- Court of the United States for the negotiations with said 30,000 shares of the capital stock of said proposed company, and in December, 1902, The and B. which resulted in its subscribing for Company, I. caused defendant Company to be incorporated, and thereupon The chased 30,000 shares of its capital stock, which it has held and voted ever since, and through such stock has, in conjunction with said dominated and controlled said company. EXHIBIT 3 GENERAL ELECTRIC COMPANY 1 The Government alleges that: On February 10, 1906, and thereafter, from time to time, contracts were entered into between the Siemens & Halske Aktiengesellschaft, of Berlin, Germany, as vendor, and defendants, General Electric Company and National Electric Lamp Company, as the lamp companies, whereby said defendant lamp companies acquired the exclusive right to manufacture, use, and sell throughout the United States, its territories, possessions, and dependencies, "tantalum filament" incandescent electric lamps (excluding the manufacture of filaments therefor) under the patents, applications, and inventions of the said vendor, said defendant lamp companies in consideration therefor making a cash payment of $250,000 (60 per cent of which said sum was paid by defendant, General Electric Company, and 40 per cent by defendant, National Electric Lamp Company) and giving a certain share of the profits on "tantalum filament" lamps sold by said defendants in the United States, and buying from said Siemens Company all "tantalum filaments" required by said defendants in the manufacture of all said lamps so sold. On August 17, 1906, defendant, General Electric Company made an agreement with the Deutsche Gasgluhlicht Aktiengesellschaft (Auer Gesellschaft) of Berlin, Germany, whereby it, said General Electric Company, secured an option from the said Auer Company covering the exclusive rights for the United States to the "tungsten filament" lamp, hereinbefore described, that might follow the 1 United States of America v. General Electric Company and others. the Circuit Court of the United States for the Northern District of Ohio, In Equity, pp. 27-30. In |