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CONTROL OF CORPORATIONS, PERSONS, AND FIRMS ENGAGED
IN INTERSTATE COMMERCE.
FRIDAY, AUGUST 4, 1911.
UNITED STATES SENATE,
Washington, D.C. The committee met at 10 o'clock a. m. for the purpose of considering Senate bill No. 2941, Sixty-second Congress, second session, introduced by Mr. Newlands on the 5th day of July, 1911, entitled "A bill to create an interstate trade commission, to define its powers and duties, and for other purposes."
Present: Senators Clapp (chairman), Crane, Cummins, Brandegee, Oliver, Lippitt, Townsend, Newlands, Clarke, Watson, and Pomerene.
The CHAIRMAN. The secretary will read the authority under which the committee acts. (The secretary reads as follows:) [In the Senate of the United States, July 26, 1911.)
July 26, 1911. Resolved, That the Committee on Interstate Commerce is hereby authorized and directed. by subcommittee or otherwise, to inquire into and report to the Senate at the earliest date practicable what changes are necessary or desirable in the laws of the United States relating to the creation and control of corporations engaged in interstate commerce, and what changes are necessary or desirable in the laws of the United States relating to persons or firms engaged in Interstate commerce, and for this purpose they are authorized to sit during the sessions or recesses of Congress, at such times and places as they may deem desirable or practicable; to send for persons and papers, to administer oaths, to summon and compel the attendance of witnesses, to conduct hearings and have reports of same printed for ase, and to employ such clerks, stenographers, and other assistants as shall be necessary; and ary expense in connection with such inquiry shall be paid out of the contingent fund of the Senate upon vouchers to be approved by the cha:rolan of the committee. Attest:
CHARLES G. BENNETT,
Secretary. The CHAIRMAN. You.muy proceed, Senator Newlands. What is the number of your original bill?
Mr. NEWLANDS. No. 2941, introduced July 5, 1911. NOTE.—Since the date of this hearing Mr. Newlands withdrew the bill in its original form, and on August 21, 1911, introduced a substitute therefor, bearing the same number (S. 2941), with the same title and purpose. The said substitute bill is as follows:
(S. 2941, Sixty-second Congress, First Session.) A BILL To create an interstate trade commission, to define its powers and duties, and for
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this
act shall be referred to and cited as the interstate trade commission act. Corporations a majority of whose Foting securities is held or owned by any corporation subject to the terms of sections four or sixteen of this act are referred to herein as subsidiaries of such holding or owning corporation.
Sec. 2. That on and after the
nineteen hundred and twelve, the Bureau of Corporations shall be separated from the Department of Commerce and Labor, and shall be thereafter known as the Interstate Trade Commission; and all of the powers, duties, and funds belonging or pertaining to the Bureau of Corporations shall thereafter belong and pertain to the Interstate Trade Commission. And all the officials and employees of said bureau shall be thereupon transferred to the Interstate Trade Commission. The said commission shall also have a secretary, a chief clerk, and such other and additional employees as shall be provided by law.
SEC. 3. That the Interstate Trade Commission shall consist of five members, of whom no more than three shall belong to the same political party. The Commissioner of Corporations holding the office on the said
day of nineteen hundred and twelve, shall be ex officio a member of the commission for the first two years of its existence, and shall also be chairman of the commission for the first year of its existence, and thereafter the chairman shall be selected annually by the commission from its membership; and the then Deputy Commissioner of Corporations shall be the secretary of the commission for the first year of its existence, and thereafter the secretary shall be selected by the commission; and after the organization of the commission the titles and offices of Commissioner of Corporations and Deputy Commissioner of Corporations, respectively, shall cease to exist. The remaining four members of the commission shall be appointed by the President, by and with the advice and consent of the Senate, and the terms of such commissioners so first appointed shall be four, six, eight, and ten years, respectively, and shall be so designated by the President in making such appointments; and thereafter all the commissioners shall hold office for the term of ten years, and shall be appointed by the President, by and with the advice and consent of the Senate. Each member of said commission shall receive a salary of ten thousand dollars a year. The secretary shall receive a salary of thousand dollars a year.
SEC. 4. That every corporation heretofore or hereafter organized within the United States or doing business therein whose annual gross receipts, inclusive of the annual gross receipts of its subsidiaries, if any, exceed five million dollars, and engaged in commerce among the several States or with foreign nations, excepting corporations subject to the act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, as amended, but including pipe-line companies, shall within four months after this act takes effect, or, if organized or otherwise becoming subject to this act subsequent to such taking effect hereof, then within two months after so becoming subject to this act furnish to the commission in writing statements showing such facts as to its organization, financial condition, and operations as may be prescribed by regulations to be made in pursuance of this act. Similar statements shall be made by its sikisjúfarjes. . Such estatements shall be made as of such date as may be prescribed by soch jegulations and shall be verified under oath by such officers of 'sůch corporationas may be prescribed by the said regulations. Failure or neglect on the next of any corporation subject to this section to comply with the terms, hereot within sixty days after written demand shall have been made upon such corporrtton:by:the commission, requiring such compliance, shall constituté à pişemea vioa: vid upon conviction such corporation shall be subject to a fine of not niore than one thousand dollars for every day of such failure or neglect.
Sec. 5. That the said commission, upon finding that said statements comply with such regulations so far as applicable to such statements, shall enter such corporation for United States registration upon books to be kept by it for that purpose, and shall also record the statements so filed.
SEC. 6. That all corporations so admitted to registration shall be known as “ United States registered " companies, and shall have the sole and exclusive right to use, in connection with their corporate title, their securities, their operations, and by way of advertisement of their business, the title “ United States registered," or any convenient abbreviation thereof, so long as such registration shall remain in force.
SEC. 7. That any person, corporation, or company willfully using or publishing such title of “United States registered,” or any title or form of words or letters reasonably indicative thereof, in connection with the business or securities or name of any corporation, with intent to represent thereby that such corporation is at that time registered as provided in this act, shall, unless such corporation be at that time duly registered under the terms of this act, be guilty of a misdemeanor, and upon the conviction thereof shall be subject to a fine of not
more than one thousand dollars, and each day of such use or publication shall constitute a separate offense.
Sec. 8. That all corporations subject to this act and their respective subsidiaries shall from time to time furnish to the commission such information, statements, and records of their organization, business, financial condition, conduct, and management, at such times, to such degree and extent, and in such form as may be prescribed by the said regulations to be made under this act, and shall at all reasonable times grant to the commission, or its duly authorized agent or agents, complete access to all their records, accounts, minutes, books, and papers, including the records of any of their executive or other committees.
Sec. 9. That the commission shall from time to time make public the information received under this act, in such form and to such extent as shall be prescribed by the said regulations: Provided, however, That said regulations shall, so far as possible, distinguish between information which is purely private, and the publication of which can serve no public interest, and such information as is not so private and is of importance to the public.
SEC. 10. The said commission may at any time, upon complaint of any person, corporation, or body, or upon its own initiative, revoke and cancel the registration of any corporation registered under this act upon the ground of either violation of any operative judicial decree rendered under an act to protect trade and commerce against unlawful restraints and monopolies, approved July second, eighteen hundred and ninety, or under sections seventy-three to seventyseren, inclusive, of an act to reduce taxation, to provide revenue for the Government, and for other purposes, which became a law August twentyseventh, eighteen hundred and ninety-four, or of the use of materially unfair or oppressive methods of competition, or of the acceptance of discriminations, rebates, and concessions from the lawful tariff rates of common carriers, or on the ground of refusal or neglect to allow the commission access to its records or papers as provided in section eight hereof. The commission shall also carefully investigate the capitalization and assets of the corporations registered under this act, and after due consideration of the information so obtained and otherwise secured, and after allowing reasonable time for the readjustment of corporate organization and security issues in any given case or class of cases, may revoke the registration of any such corporation upon the ground of overcapitalization; that is to say, upon the ground that the par value of the total securities, including shares of stock and all obligations running for a term of
years or more, of such corporation, issued and outstanding at any time elearly exceeds the true value of the property of the corporation at that time. In determining such true value the said commission shall consider the original cost of such property, its present replacement cost, its present market value, including the good will of the corporation's business and the market value of the said securities issued by the corporation, and the fair value of the services rendered in the organization of such corporation, but the said commission shall also, as far as possible, segregate and disallow from such determination all value attaching to such property or business due solely to monopolistic power (other than patent rigbts or other legal franchises, the true value of which shall be considered by the commission). The said commission in considering revocation of registration under this section shall give such notice and have power to take such evidence and hold such hearings as may be prescribed by the regulations issued under this act: Provided, That if any subsidiary of a corporation so registered shall be guilty of conduct hereinbefore specified in this section as ground for cancellation of registration, such conduct on the part of such subsidiary shall be ground for canceling the registration of the corporation to which it is so subsidiary.
SEC. 11. That in case of revocation of the registration of any corporation the rommission may also order that such corporation thereafter shall not engage in interstate commerce. For every day's continuance in such commerce contrary to such order such corporation shall be subject to a fine of not more than one thousand dollars. The district courts of the United States, upon the application of said commission, alleging a failure to comply with such order of the commission, or alleging a failure to comply with or a violation of any of the provisions of this act, by any corporation subject thereto, shall have jurisdiction to issue a writ or writs of mandamus or injunction, or other order enforcing such order of the commission or commanding such corporation to comply with the provisions of this act.
SEC. 12. That the said commission may at any time, upon application by a corporation whose registration has been previously canceled, reinstate said corporation for registration and grant it registration anew : Provided, That the
said commission is satisfied that the cause or causes for which registration was revoked no longer exist and that the commission shall find that all the requirements for registration as set forth in section four shall have been complied with anew as of the date of the new application for registration.
Sec. 13. That the said commission may at any time, if in the opinion of the commission public necessity requires such action, order and require any corporation engaged in commerce among the several States or with foreign nations, except corporations subject to the act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, as amended, but including pipe-line companies, to make such statements and give such information as is prescribed in sections four and eight of this act, which information shall be published in accordance with the provisions of section nine hereof. The commission may also obtain from any such corporation, through the powers granted in section fourteen hereof, such information as shall enable said commission to determine whether such corporation is subject to the terms of this act. The decisions of the said commission made under the powers conferred upon it in this act shall be final except as to matters involving the taking of private property without due process of law and involving the extent and character of the said powers so conferred herein: Provided, however, That an appeal may be taken in equity to any district court of the United States from any order or decision of the said commission made under section eleven of this act.
SEC. 14. That in order to accomplish the purposes declared in sections eight and thirteen of this act the said commission shall have and exercise the same power and authority in respect to corporations subject to this act as is conferred on the Interstate Commerce Commission in said act to regulate commerce and the amendments thereto in respect to common carriers, so far as the same may be applicable, including the right to subpæna and compel the attendance and testi. mony of witnesses and the production of documentary evidence and to administer oaths. All the requirements, obligations, liabilities, and immunities imposed or conferred by said act to regulate commerce and by an act in relation to testimony before the Interstate Commerce Commission, and so forth, approved Feb. ruary eleventh, eighteen hundred and ninety-three, supplementary to said act to regulate commerce, and the act defining immunity, approved June thirtieth, nineteen hundred and six, shall also apply to all persons who may be subpænaed to testify as witnesses or to produce documentary evidence in pursuance of the authority conferred by sections eight and thirteen hereof. SEC. 15. That the said commission shall, on or before the
day of in each year, make a report, which shall be transmitted to Congress. This report shall contain such information and data collected by the commission as it may deem of value in the determination of questions connected with the regulation of commerce, together with such recommendations as to additional legislation relating thereto as the commission may deem necessary.
SEC. 16. That any corporation engaged in commerce among the several States or with foreign nations the amount of whose gross annual receipts, inclusive of those of its subsidiaries, shall be less than five million dollars and more than one million dollars may also, by complying and continuing to comply with the terms of sections four, eight, and nine hereof, acquire and maintain United States registration as provided in sections five and six, subject to the provision for cancellation thereof prescribed in section ten; and the information furnished by such corporation shall be subject to the provisions of section nine.
SEC. 17. That the said commission shall have power to make any and all regulations necessary and proper to carry out the purposes of this act, and at any time to alter, amend, or repeal the same or any part thereof.
SEC. 18. That any person willfully making or furnishing to said commission any statement, return, or record required by this act, when knowing such statement, return, or record to be false in any material particular, shall be guilty of a misdemeanor, and upon conviction shall be fined not more than one thousand dollars or imprisoned not more than one year, or both.
Mr. NEWLANDS. Gentlemen of the committee, for some years I have been giving consideration to this particular question and have frequently expressed the conviction that it was imperatively necessary to create an administrative tribunal vested with the powers of investigation, publicity, correction, and recommendation in the case of large industrial corporations similar to those exercised by the Interstate Commerce Commission over railroads. On several occasions I have
spoken upon this subject on the floor of the Senate; particularly just before the decision in the Standard Oil case was rendered. (The decisions in the Standard Oil and American Tobacco Co. cases were handed down May 15 and May 29, 1911, respectively.)
In a speech in the Senate on January 11, 1911, upon the Tariff Commission I outlined my views as to an Interstate Trade Commission. With the permission of the committee, I will insert these remarks in the printed hearing:
Mr. NEWLANDS. * The railroad-commission bill furnishes a model for the action of Congress upon matters involving minute and scientific investigation. Had we followed the same method regarding trusts that we followed regarding railroads, we would have made much better progress in trust regulation. The antitrust act was passed 21 years ago, about the same time that the railroad commission was organized. The railroad question is practically settled; the settlement of the trust question has hardly been commenced. Had we submitted the administration of the antitrust act to an impartial quasi-judi. cial tribunal similar to the Interstate Commerce Commission instead of to the Attorney General's office, with its shifting officials, its varying policies, its lack of tradition, record, and precedent, we would by this time have made gratifying progress in the regulation and control of trusts, through the quasijudicial investigations of a competent commission and through legislation based upon its recommendations. As it is, with the evasive and shifting incumbency and administration of the Attorney General's office, oftentimes purely political in character, we find that the trusts are more powerful to-day than when the antitrust act was passed, and that evils have grown up so interwoven with the general business of the country as to make men tremble at the consequence of their disruption.
After the call of the extra session, but before its convening, I wrote to the Hon. Champ Clark, who was destined to be the Speaker of the House of Representatives at the extra session, a letter, which appears in the Senate proceedings (Congressional Record) of May 15, 1911, and in which I outlined a legislative program for the extra session.
The purpose of the program and the necessity for thorough legislation upon the question of interstate transportation, or the railroads; interstate trade, or the trusts; and interstate exchange, or banking all of them interrelated as parts of interstate commerce-were referred to in this letter; but I will insert in the record simply that part which is relevant to this present discussion and to interstate trade:
UNITED STATES SENATE,
Washington, D. C., March 15, 1911. Hon. CHAMP CLARK,
House of Representatives, Washington, D. C. MY DEAR MB. CLARK: The extra session is now approaching; the House is Democratic, the Senate and the Executive department are Republican. Under this condition of divided responsibility the question arises as to what policy the Democratic Party shall pursue. It has already been practically determined that the House will take up, in addition to the reciprocity treaty, the tariff ; and the question is whether it will take up other matters of reform and constructive legislation and, with a view thereto, select the committees necessary to the consideration of such measures. The Senate will probably follow the lead of the House in this particular.
I hope, therefore, that it will not be regarded as intrusive if I, in common with other Democrats, venture a few suggestions on this score, as the question is of the highest importance to Democracy generally.
INTERSTATE TRADE, OR THE TRUSTS.
The interstate-commerce act for the regulation of railroads and the antitrust act for the prohibition of trusts were passed about the same time. The administration of the former was given to a quasi-judicial board; the administration