Middle Ages, when the conditions were so different that they could not be compared with existing conditions.

I say it is a false economic policy to require it. For instance, you take the copper industry, as a fair example. In our copper mines we have about finished the stage of exploitation. I do not think there is any room for more exploitation in the copper mines in our country. We have scraped the earth pretty well dry in America. It takes many years to develop a copper mine, and vast amounts of money. The average life of our copper mines to-day is said to be about 35 years-I think it is a little less. There is an overproduction. We supply about four-fifths of the world's production. We export the bulk of our copper. Say there is an overproduction of about 10 or 15 per cent in copper. That 10 or 15 per cent surplus drags down the price of copper so that the producer gets very little profit. We are exhausting the natural resources of the country, taking our wealth out of the earth and sending it abroad and getting nothing by way of return.

That does not look like good business. If these copper mines were permitted to enter into an agreement subject to Federal control, in which the commission could determine what the average cost of producing copper was, add a fair profit, and permit of the elimination of this 10 per cent of surplus, you might get a little more for your copper; no more than the commission would say would be a reasonable profit, but still some sort of profit.

It would not be as it is now, where if by reason of overproduction the mine owner has to take a small profit or no profit one year and the next year there is a deficiency or underproduction the owner jumps the price of copper, and the manufacturer who has his stock of copper in hand is bound to lose unless he allows for these fluctuations in the cost of the goods he makes in which copper forms a part. As a result of this system there is no stability in the markets. It reduces almost every business to a gamble. An agreement permitted among the copper miners (I use them by way of illustration only, because the subject is one with which I have more familiarity than with some other industries) would be a good thing for the country and for all kinds of business. The commission might even allow the miners to sell their copper a little higher abroad than at home, and thus give your home manufacturers some advantage in the markets of the world in the exports of manufactures of which copper forms a part. That is what the other governments are doing when they impose export duties.

Now take other industries. Is it any advantage that barley should be 60 cents a bushel last year and $1.25 or $1.30 this year, or that one year the farmers should have to burn their corn because they can not sell it, there is so much of it, and the next year they have none to sell, or that the cotton grower should get 9 cents this year and 15 cents last year for his cotton? The business of manufacturing cotton goods (and the same rule is applicable to other industries) is nothing but a gamble to-day by reason of that situation. The cotton manufacturer must sell his goods at certain seasons of the year. He must base his selling price on the price of the cotton that constitutes the chief factor. In practice the merchant sells before he can know definitely what will be the market for the raw material. If his goods, on the other hand, are not sold, but are in stock, he never

knows from month to month what is their value or whether he is solvent.

On what basis is he going to sell them? He does not know. He takes a chance that is all. He takes a flyer at it. And so with every business. Every business is made a gamble by this want of stability in prices. Suppose the cotton growers were permitted, under Federal regulation, to carry over, by arrangement between them, the surplus crop from one year to the next and allowed a reasonable profit. on their cotton at a stable price. They ought to be allowed to take advantage of such an agreement. They can not be allowed to get 15 cents one year and be compelled to take 8 cents the next year. It would not be necessary, but the commission might permit the carrying over of the surplus of one year to meet the deficiency of another, under proper restrictions.

The same thing runs through nearly every industry. We have a great deal to learn from the experience of foreign countries. With all due respect to our President, I think we are children in the science of government.

I have seen something of the operation of the German cartels. I have been brought into professional relations with one aspect of that situation, and it is far ahead of our chaotic haphazard system. I suppose if you had a Federal license law instead of a Federal incorporation law in order to minimize the opposition of the States you would have to require that every corporation applying for a license to do interstate business should have a charter, from which there. would have to be eliminated certain of the present improper provisions.

Probably you would make provisions just as though you were going to prepare a charter for Federal incorporations; that is, the conditions would be the same, probably, and you would eliminate those abuses that have grown up through the States competing against one another for the privilege of giving these sweeping and unrestricted and improper charter powers. I suppose you would eliminate the holding company-I mean by that the company that does not hold all the stock of another company; I do not mean that you would eliminate the right of one company to acquire another property in the same line of business if it did not amount to a monopoly and was otherwise unobjectionable. You would, I hope, also correct the disgraceful impositions upon minority stockholders that have come from the holding company. I suppose you would also eliminate many of the other illicit immunities that the States are giving them now. If one State grants these privileges the other States have to follow or lose the business. Immunities from stock liability; the right to issue watered capital to an unlimited degreelaws that are so framed that the stockholders have lost their remedy before they knew they had it. I know of a half dozen instances in which laws have been passed in the different States just for the purpose of taking away rights of action based on corporate mismanagement and dishonesty, and have had the effect of taking away meritorious rights of action. If one State gives them such a license, the other State lose the business if it does not follow. They have been forced to follow the lead in order to keep the business of the corporation to which they were fairly and justly entitled.

I do not know that there is very much else in a general way that I can say unless you gentlemen care to ask some questions, which I shall be glad to answer.

The CHAIRMAN. Senator Cummins, you may inquire.

Senator CUMMINS. Mr. Untermyer, you are a member of a committee appointed by the National Civic Federation to consider this subject?

Mr. UNTERMYER. Yes, sir; in the form of a subcommittee.

Senator CUMMINS. You recently made a report to either the full committee or the federation, did you not?

Mr. UNTERMYER. I made a tentative report to the subcommittee that was rather informal. It has not yet been adopted by the committee or by the federation. It is under discussion now.

Senator CUMMINS. I have seen what purported to be the substance of the report published in some of the newspapers. It purports to cover some of the most important and vital things before us, and if you had a copy of that report so that it could go into our record precisely as you made it, I would be very glad if you furnished it.

Mr. UNTERMYER. The federation has the report, and has had it printed. I would be very glad to furnish it, although I ought to say that it was hurriedly prepared for a meeting that was called on a day's notice, and I am amplifying it in an address that I am going to deliver on Wednesday evening before the Economic Club, which will probably more fully express my views. I will send you both, if you like.

Senator CUMMINS. I would be very glad if the record could contain the report already made, because I thought it was rather complete and comprehensive.

Mr. UNTERMYER. I will furnish it for the record.

(The paper referred to appears in a later part of to-day's record.) Senator CUMMINS. I assume that the system of government which you suggest would be as wise in the States, so far as that part of the subject over which the States have control is concerned, as it would be in the Federal affairs, would it not?

Mr. UNTERMYER. Yes; I see no reason why some such general system should not be applicable to the States for strictly State industries. Senator CUMMINS. And the only reason you have limited yourself to interstate commerce in the remarks that you have made before us is because our authority is limited to interstate commerce and commerce with foreign nations?

Mr. UNTERMYER. Not entirely, because I had really not directed my attention to the question of regulation of purely intrastate corporations. I would rather think about that.

Senator CUMMINS. However, if the trade agreements of which you have spoken are necessary to maintain stability in interstate business, whil they might not be so necessary in intrastate business, they would still be wise and effectual?

Mr. UNTERMYER. Not necessarily so, for this reason: All the other States, all the surrounding States, are free to compete with an industry that is in the grip of a monopoly. In one State it can not be because we have free trade among the States, and I do not think it would be quite so necessary. If, for instance, the coal merchants of New York City would get together and raise the price of coal, you

can get all the coal you want from Jersey City or some other section, while that is not applicable to an industry that is nation-wide. The fact is that I have never really considered the intrastate aspect of the question, and would not care to say very much about it just now.

Senator CUMMINS. The purpose of my inquiry was to ascertain whether you believed our systems of government ought to take on that view of things, namely, that competition has ceased to be either a safe or efficient force to regulate prices, and that combination agreements supervised by governmental authority should be substituted for the competition.

Mr. UNTERMYER. Of course there is a limitation on that proposition, to my mind; that is, I believe in the free play of competition up to the point at which there is no profit left in the business. For instance, I do not think the commission should allow those agreements unless it can be satisfied that there is no profit in the business. Senator CUMMINS. You mentioned, however, in your statement, agreements that would fix the maximum price?

Mr. UNTERMYER. Yes, sir.

Senator CUMMINS. You meant, did you not, the minimum price? Mr. UNTERMYER. No; there is certainly bound to be a maximum, otherwise the public would be subject to the same sort of imposition that exists to-day. I do not think the commission should ever approve any agreement that has not a maximum price in it.

Senator CUMMINS. If, however, an agreement simply fixes a maximum price, the ruinous effect of competition would still be found in the business?

Mr. UNTERMYER. I mean to fix prices which should be a maximum. Senator CUMMINS. Then, you believe that corporations or individuals engaged in a common business should be permitted to make agreements fixing a price that is both maximum and minimum? Mr. UNTERMYER. Yes, sir.

Senator CUMMINS. And that the power thus given them should be one subject to the supervision or review of the Government? Mr. UNTERMYER. Subject to approval in the first instance.

Senator CUMMINS. And it necessarily follows, I take it, that if the Government finds the price fixed too high or too low it must have the power to say what the price shall be?

Mr. UNTERMYER. Well, it would have the power to reject the agreements and not permit the combination.

Senator CUMMINS. But indirectly, of course

Mr. UNTERMYER. That would be the result.

Senator CUMMINS. That is, the power to fix the price?

Mr. UNTERMYER. Yes, sir.

Senator CUMMINS. Because agreements could be rejected until a price was determined upon that would be satisfactory to the governmental authority after that was organized.

Mr. UNTERMYER. Oh, yes; that is the logical result of it.

Senator CUMMINS. That is, of course, the absolute exclusion of competition from the business, or from such business as would be covered by this agreement, is it not?

Mr. UNTERMYER. It is the exclusion of competition between the people who choose to enter the agreement. Nobody is compelled to enter the agreement.

Senator CUMMINS. As I say, so far as the business covered by the agreement or agreements is concerned, it would be the annihilation of competition?

Mr. UNTERMYER. Yes, sir; in the result, of course, the amount of profit which each man would get out of it would depend upon the skill with which he conducted his own business.

Senator CUMMINS. Precisely. It does not entirely eliminate the articles produced, but it does tend to eliminate competition as far as prices are concerned?

Mr. UNTERMYER. Yes, sir. But only when the point has been reached at which ruinous competition has set in.

Senator CUMMINS. Then you believe that is the form in which our business should be carried on, I take it?

Mr. UNTERMYER. I believed that that is the form in which the Government will be forced to permit it to be carried on, rather than to look on at the present secret evasions by which it is carried on in that form, and the public has no protection at all. The suggestion is to correct existing abuses from secret price agreements that levy tribute on the public.

Senator CUMMINS. To adopt a system of that kind, or to enact a law of that kind, is to substantially repeal the first section of the antitrust law, is it not?

Mr. UNTERMYER. No, not as applied to consolidations and aggregations of capital in a consolidation.

Senator CUMMINS. You started out with the statement that you really thought that the antitrust law was a wise and beneficent and helpful statute?

Mr. UNTERMYER. Yes, sir.

Senator CUMMINS. Now, the first section seems to prohibit and make unlawful agreements and combinations in restraint of trade or commerce?

Mr. UNTERMYER. Yes, sir.

Senator CUMMINS. As now construed, unreasonable restraint of trade or commerce; but if those agreements or those combinations can fix, themselves, a price to fix and limit the production and distribution of their products, then I do not see how any chance is left for the operation of the first section of that law.

Mr. UNTERMYER. May I explain what I have in mind?

Senator CUMMINS. I do see that you would transfer to a commission, or a body of men, the authority to say whether any such agreement or combination is injurious to the public welfare, but what room would there be left for the operation of the first section of the law as it now is?

Mr. UNTERMYER. May I explain?

Senator CUMMINS. Yes; certainly.

Mr. UNTERMYER. I think the Sherman law, as I have said, is a very wholesome statute, and should be enforced up to the point to which it can be enforced. For instance, I think that all the great aggregations of capital in the nature of monopolies that have been consolidated under it that can be dissolved should be dissolved and that all future aggregations of capital in the form of consolidations should be prevented. We have certain vicious conditions inherent in many of these consolidated companies that do not pertain to trade agreements at all; the former are accompanied by a mass of watered capi