the confirmation of the court, to ratify or reject plans for the reorganization of the company to conform to the law, to keep such corporations under its general supervision, and to report for the action of the court all subsequent violations of the judgments of dissolution.

The purpose of these provisions would be to have in existence a body that would have the power and the machinery, through its experts and other officials, to supervise the proper enforcement of these judgments and see to it that they are kept enforced.

5. To act upon the petition of persons engaged in competition in any interstate industry, praying that they be permitted to enter into a trade agreement with one another limiting production and fixing the prices of any given commodity which is the subject of interstate commerce, provided that it shall appear from the petition and the data accompanying the same and from the investigations of the commission that are to be made upon the filing of such petition :

(a) That the output is not to be restricted beyond the usual and legitimate demands for the commodity.

(b) That the maximum price chargeable by the petitioners under the terms of the agreement does not allow an undue profit; and

(c) That as a result of competition between the petitioners and with others (if there are others) who do not care to join in the petition, the industry on the whole has been unprofitable for at least one year next preceding the presentation of the petition due to overproduction and ruinous competition.

Upon the filing of such a petition the commission would investigate into the condition of the business, and if satisfied of the truth of the petition and that the business has on the whole been unprofitable due entirely to the causes above stated would be authorized to sanction the agreement for a period of not exceeding two years, but with power to the commission meantime to annul the agreement and withdraw its consent either unconditionally or unless the parties will agree to a reduction in the maximum prices or an increase in production to the extent required by the commission.

The commission should also have power whenever it appears that unfair business methods are being employed against competitors who are not parties to the agreement to cancel its license and to prosecute the offenders. The parties should be at liberty to enforce the performance of the agreement in any court, either by action at law or in equity to enjoin its breach. All persons interested in the industry that is the subject matter of such an agreement should have the right to be heard by the commission in opposition thereto.

The allowance of trade agreements of this character will do away with the plausible pretexts that are being urged in favor of the organization of trusts and consolidations-that they are the only means of preventing business destruction. Their allowance would at the same time obviate the evils of such permanent organizations, with their accompanying stock inflations, oppression of competitors, closing of factories, and like practices, and would render it easy to secure convictions of persons guilty of entering into secret understandings and gentlemen's agreements" to levy tribute upon the people by taking from them the existing excuse that they are pursuing the only course for self-preservation that is open to them.

Under these licensed trade agreements each party would retain the management and control of his own property and the extent of his profit would be measured by the economies he is able to put into effect.

(C) All orders of the commission to be subject to appeal to the commerce court by the parties in interest in like manner as appeals are now authorized from orders of the Interstate Commerce Commission.

Instead of the present spasmodic selection for prosecution by the Attorney General of isolated cases of violation of the Sherman law, we would thus have an organized body, equipped to deal systematically with all violations, and to see to it that they are removed.

In this sketch I have purposely omitted special reference to the treatment of labor unions, preferring that that subject should be first discussed with the subcommittee.

The above is intended only as a brief outline of the general principles governing the legislation that is proposed. If the outline meets with the approval of the full committee I suggest that we then proceed to elaborate it with such modifications as may be suggested by the members of the committee.

Respectfully submitted.

SAMUEL UNTERMYER,

Chairman Subcommittee.

Mr. UNTERMYER. It is a tentative plan which we submitted to the committee.

Senator NEWLANDS. I will ask the reporter, in that part of my inquiry of Mr. Untermyer regarding the provisions of the bill which I introduced as to the organization of an interstate trade commission, that he put in the record the statement that this bill appears on the first page of the hearing, and also wherever I have referred to a particular section, that he insert at that point the complete section. Senator CUMMINS. Pardon me if I suggest that while your conclusion is adverse to mine on the subject of capitalization or capital employed in the business, your argument seems to support my conclusion.

Mr. UNTERMYER. I have not meant to express any conclusion, Senator. It is nothing but an impression.

Senator CUMMINS. The menace of the United States Steel Corporation lies in the fact that it is so big that the men who are interested and control big banks, and who are interested and control big railroads are also interested in and control the United States Steel Corporation. Is that not true?

Mr. UNTERMYER. Yes; and the use they make of the is the menace.

power.

That

Senator CUMMINS. Now, if the United States Steel Corporation were employing $200,000,000 of capital in its business instead of $1,500,000,000, the men who operate the big banks and the big railroads could not, to the same extent anyhow, be interested in and control the United States Steel Corporation to the exclusion of other steel corporations, could they?

Mr. UNTERMYER. I do not follow your sequence at all.

Senator CUMMINS. Suppose instead of a business being divided in the way in which it is that there were 15 corporations engaged in the steel business, each having a capital of $200,000,000. These tremendous forces which control the banks and the railroads could not be especially interested in, or probably would not be especially interested in, the welfare and prosperity of any particular corporation engaged in the steel business. Is that not true?

Mr. UNTERMYER. Not necessarily, Senator. Because if those gentlemen could control one corporation of $1,500,000,000, why could they not control five of $300,000,000?

Senator CUMMINS. They might.

Mr. UNTERMYER. It is their outside power and interests that make for the danger.

Senator CUMMINS. But the outside power is now, or might be, exercised entirely in favor of the one corporation.

But if they owned five, would it not be the same thing, and if they owned five they would be interested in the prosperity of each? I am assuming they would be independent of each other, for I agree with you that no limit on capital can take the place of a suitable prohibition against agreement and combinations and things of that sort. We are simply trying to reduce the motive for these things. Mr. UNTERMYER. Is it a workable thing? How are you ever going to determine how much capital may be permitted to be invested in a given industry?

Senator CUMMINS. I do not know. It was simply tentative on my part. I wanted to call to your attention the fact that the power which you so graphically described, used in behalf of a single corporation, is a power that grows in a measure, anyhow, out of the bigness of that corporation.

Mr. UNTERMYER. But my answer would be, if those gentlemen set out to control the steel industry, as they did when they organized this company, that instead, if the law prohibited any corporation of more than $200,000,000 of assets-we will say by way of illustration, that is a mere arbitrary figure-then if they had made up their minds to control that industry they would simply, instead of putting it all under one cover, have made separate companies-the tinplate company and the steel and wire company would be one, and a Carnegie would be another, etc. The limitation of capitalization does not seem to meet the situation.

Senator CUMMINS. I agree that it would not cover the whole difficulty. All that we can do is to prepare a system that would make the discovery of an unlawful act as certain as possible, and to remove, as far as we can, the motive for an unlawful act. I want to ask you a question on another point. I will not pursue that.

Mr. UNTERMYER. I am afraid I am putting myself in the unconsciously unfortunate position of having very pronounced views on this subject. I have simply impressions on the subject. I do not want to be understood as endeavoring to lay down any pronounced ideas.

Senator CUMMINS. Oh, no; I think the views held by all reasonable and intelligent people will yield to superior force of reason whenever that force is applied. Because we are positive in our statements I do not think indicates that we are not open to reason and argument.

Mr. UNTERMYER. It is the manner more than anything else.

Senator CUMMINS. You recognize, do you not, that while you very justly eulogized and applauded the antitrust law, that if the statute were passed which you suggested, it would most radically amend or change the antitrust law?

Mr. UNTERMYER. I do not concede that except in one particular. It would radically amend it at the point at which ruinous competition set in, because that is on the principle of unrestricted competition, and this certainly would change it to the principle of qualified competition.

Senator CUMMINS. Whenever you give to any commission or body of men the authority, if you can give it, or to a Government board, to approve agreements which fix prices and limit the output of the production, you are providing for a power which can not now be lawfuly exercised.

Mr. UNTERMYER. Unquestionably; you are reserving the policy of the State to that extent.

Senator CUMMINS. Precisely. So that in that respect you believe the antitrust law ought to be amended?

Mr. UNTERMYER. Ought to be supplemented or amended, as you please.

Senator CUMMINS. Well, its effect would be to amend it. But aside from that, aside from such agreements as might be approved

by such a commission or board, you believe the prohibitions of the antitrust law and the provisions with respect to its penalties for violations should be preserved.

Mr. UNTERMYER. Yes; aside from that and aside from providing a method of disintegration to meet the existing situation.

Senator CUMMINS. Yes; that disintegration means simply that the corporations which are proceeded against, or single corporation, if that be the case, shall bring themselves, or itself, into harmony with the law, as it is finally determined to be.

Mr. UNTERMYER. That there should be an administrative power under judicial direction to do it.

Senator CUMMINS. And that shall be governed under the administration, or administrative branch of the Government rather than through the judicial branch.

Mr. UNTERMYER. Yes, sir; but subject to the control of the judicial branch.

Senator CUMMINS. And that shall be done through the administration or the administrative branch of the Government rather than through the judicial branch?

Mr. UNTERMYER. Yes; but subject to the control of the judicial branch.

Senator CUMMINS. You do not think, do you, that there ought to be an appeal from the action of the board or commission in approving or disapproving a given contract that was presented to it?

Mr. UNTERMYER. No; but I do think that the court which rendered the judgment in the dissolution should have the right to review the acts of the commission.

Senator CUMMINS. You did not mean to be understood, when you answered the question of another Senator, as saying that there shall be a review of the action of the board in approving or disapproving this agreement?

Mr. UNTERMYER. No; I think you are right. My language was capable of that construction, but I did not intend it that way. I had in mind the other thing at the time.

Senator CUMMINS. There is one other suggestion in which I think that you might, among your answers, be misunderstood. You were asked whether the decree of the circuit court of appeals in New York approving the plan of the reorganization of the American Tobacco Trust resolved it into its component parts. You did not mean to say that it did.

Mr. UNTERMYER. No; it did not.

Senator CUMMINS. It simply provided for the creation of three new corporations, leaving the American Tobacco Co. in charge of one branch of the business in which it already is engaged.

Mr. UNTERMYER. No. It left the American Tobacco Co. in charge of all the branches in which it was engaged, and each of the other companies also in charge of all branches.

Senator CUMMINS. Precisely. But it did not attempt to return. to the various corporations and associations which already made up the American Tobacco Co.?

Mr. UNTERMYER. No; it could not. I believe the site of one of them is a church now. It would not have been possible to bring them back to their original form.

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The CHAIRMAN. Are there any other questions?

Senator TOWNSEND. I have just one. Supposing the Supreme Court shall reverse the court of appeals down there on this reorganization plan and send it back, what would you have to suggest as a proper means would you still think the law ought to be amended in that respect?

Mr. UNTERMYER. You mean in order to give a commission power to superintend the disintegration?

Senator TOWNSEND. Should the commission have the power, if the Supreme Court settles this question?

Mr. UNTERMYER. I think so, because it is impossible for any court to supervise such a decree. The ramifications of it are so great. It ought to be a tribunal that can summarily take hold at any time when any violation occurs.

Senator NEWLANDS. In that case, you would have a commission act simply as an officer of the court?

Mr. UNTERMYER. In effect, yes, sir; with summary powers to investigate and make complaint and to keep the decree in force. Judicial processes would be too indirect, too long drawn out, to accomplish any such results.

Senator CUMMINS. It seems to me when a decree of a court commands a corporation to quit because it is violating the law, or holds that it is in violation of the law, that then whatever corporations come out of that should appear before this commission and be admitted to interstate business precisely as any other corporations are admitted. Mr. UNTERMYER. Certainly.

Senator CUMMINS. Would not that be a good plan?

Mr. UNTERMYER. Yes; but first it seems to me that the method of disintegration should be approved. The plans to be adopted should be approved. Then, of course, each separate corporation will have to comply with the law to get a license.

Senator NEWLANDS. Just one question: You spoke of an appeal to the Supreme Court from the decision of the circuit court as to the reorganization of the American Tobacco Co. being desirable. Can you suggest any method of accomplishing that?

Mr. UNTERMYER. The Attorney General, I assume, can do so. I think he has the right of appeal. None of the independents, nobody else has, because they were not allowed to intervene.

Senator NEWLANDS. You understand that the Attorney General and the President have determined that no appeal shall be taken-at least, that is the press report.

Mr. UNTERMYER. Yes; unless they reverse that determination. It seems to me that the voice of the country may be strong enough to reverse it. That is a mere administrative conclusion that can be reconsidered.

The CHAIRMAN. The committee will stand adjourned until 10.30 Monday morning.

(The committee thereupon, at 3.40 p. m. o'clock, adjourned until Monday, November 20, 1911, at 10.30 a. m.)