our civilization as well--our views of the welfare of humanity? That is the point that I am trying to get at.

Mr. KRAUTHOFF. You want me to answer that question?
The ACTING CHAIRMAN. Yes.

Mr. KRAUTHOFF. Suppose it were charged against a given organization that it was everything which the act forbids; for instance, that in performing its duty to obey the first section of the act it had absolutely refused to consider the interests or welfare of its competitors; it believed that it was bound by legislative enactment to effectively compete, and that consequently it had no right to have trade relations with its competitors; that it must compete mercilessly and relentlessly and without regard to the rights of or consequences to competitors; that it was under a statutory spur to do so. As a result, in course of time all of its competitors failed. The survivor did not want any more plants; it had sufficient of its own. As a result, the other plants were sold and dismantled, having been bought by somebody else for the real estate or for some other purpose; and the survivor is indicted under the second section for having attempted to monopolize and for now, at last, having succeeded in actually monopolizing the trade and of henceforth conducting his business without an element of tangible competition. I pass the proposition that he would probably defend a proceeding against him under this statute on the ground that everything he had done had been in strict conformity to the first section, and that logically it was impossible that as a result of conforming to the first section he had subjected himself to an absolutely unanswerable violation of the second section. Suppose he were to answer this wise: "I succeeded because my goods were the best, and every man in the United States who uses them and every merchant and every jobber and the general public concurs in saying that they are the best goods in that line, and that is the reason they buy them and insist on having none other. My prices are reasonable. Everybody says so. My actual cash investment is blank dollars. For the years while I had competition, and for the series of years which have elapsed since I have had no competition, my prices have been precisely the same, my quality has not deteriorated, and my profits have not increased and have never been in excess of 5 per cent on the investment." Could you find him guilty? The ACTING CHAIRMAN. That is just what I am asking. In such a case as that ought the judge to inquire whether the public interest has been injuriously affected?

Mr. KRAUTHOFF. I say that if the statute is intended to exclude that inquiry that it ought promptly to be amended. You can not convict the survivor unless you first declare unrestricted competition to be unlawful, and then enact a code of ethics to be observed in carrying on trade rivalries.

The ACTING CHAIRMAN. I can not tell just what you mean by "unrestricted competition." Abstractly speaking, there is no such thing in the world as unrestricted competition; at least I have never seen it. But suppose you confine yourself to the competition which fixes prices. Would you still be of the same opinion with regard to the effect of the gradual growth of the corporation or person that you had in mind if he should take in gradually, by superior sagacity and management, all the trade in which he was engaged?

Mr. KRAUTHOFF. You are right in saying that unrestricted competition is largely an academic expression. It is also largely academic to say that one man will ever succeed in these United States in getting hold (not speaking of patents) of all the trade in any particular article. But even treating the subject academically, I still make the inquiry, there being no harm to the public resulting from it, whether you are going to say, merely because an organization has the power to do harm: "We are going to vicariously punish you on the score of the power you have, and not because you are exercising it. We are not going to wait until you exercise it, but we are going to punish you now for having accumulated the power." And he answers you by saying: "If I have the power it has come from my complying with the first section of the Sherman law. I have not exercised it and have no intention to do so. I have not deteriorated the quality of my goods. I have not made an unreasonable profit and no harm has been done to the public.'

The ACTING CHAIRMAN. That leads me again to suggest that in that case, suppose I were the judge and it comes up to me. I find nothing to be reprehended in the conduct of the business, nothing that is in violation of the law, so far as its terms are concerned, but, as I understand your general argument, it is that, then, when it comes to me I can say, and can say properly and under the law, that if I believe the public interest is injuriously affected that I may further say that the project or the enterprise, whatever it may be, is illegal.

Mr. KRAUTHOFF. I stated it, of course, the other way; but under present conditions a court might be called upon to determine the question whether undue competition had been exercised by the defendant; and that is harder to determine than it is to decide whether an injury to the public has been done in a given case.

The ACTING CHAIRMAN. I agree with you about that.

Senator NEWLANDS. What do you mean by "undue competition"? The ACTING CHAIRMAN. Nobody knows what " undue " means, any more than we know what the "public welfare" means. And I have supposed that Congress could not depute to any board or could not impose on any court the duty or authority in such a case of inquiring broadly and generally: "Is this for the public welfare?" I have supposed that the duty of legislators was to create or set up a more definite and fixed standard than the general command to do what is right and abstain from doing what is wrong.

Mr. KRAUTHOFF. I myself think that it would be preferable that all questions of determining the legality or illegality of a particular transaction should be determined judicially. I think it is quite within the power of Congress to leave it to the courts to determine such issues. It has done so in reference to many other questions of a similar character. For instance, courts pass on the question whether certain property is taken for a public use. Some States have constitutional provisions that private property shall not be damaged for public use without just compensation. The phrase "injuriously affected" is to be found in many English statutes.

The ACTING CHAIRMAN. Do you not think that the Congress of the United States should give to the people of this country a more definite law for the judges to apply than to say that they may condemn any arrangement that they believe injuriously affects public

welfare, and may approve any which they may think beneficially affects public interests?

Mr. KRAUTHOFF. I am afraid I do not make myself clear. I agree with you in the natural inference from your question. My point is that the statute should read or be construed to mean a contract, combination, or conspiracy in the form of trust or otherwise, in restraint of trade or commerce, etc., which operates injuriously to the public, is illegal.

The ACTING CHAIRMAN. I have always held the view that the English courts rather argued in a circle. They say that nothing is in restraint of trade that does not injuriously affect the public, and then they say that the public demands the prices generally be fixed. by competitive force. I have never seen that they get anywhere, because you can not define "in restraint of trade" by the effect it has upon the public without committing to the individual judge the duty of determining what is for the benefit of the public.

Mr. KRAUTHOFF. Which is another way of saying, using another phrase, the particular combination oppresses the public by enhancing prices. That is not the phrase in the platform I have quoted from; it is" undue charges.

The ACTING CHAIRMAN. Suppose there were 12 concerns doing business, doing the whole business in a certain field, each doing about the same amount of business; that the 12 would combine into a single management, a single corporation, thus doing all the business, and that at the time prosecution was begun had charged no more than a reasonable price for its product, whatever it might be; would you consider that such an arrangement is either consistent with the public welfare or innocent under the antitrust law?

Mr. KRAUTHOFF. As it is construed now, or as it ought to be construed?

The ACTING CHAIRMAN. Make your own discrimination.

Mr. KRAUTHOFF. So far as there has been an adjudication on that subject, and it has not been finally decided by the Supreme Court of the United States, and all questions of method or manner or means or purpose or intent or the like are eliminated, I do not think the law benefits the public by declaring such a transaction to be unlawful.

The ACTING CHAIRMAN. Well, take a concrete case. Suppose when the United States Steel Corporation, of which we have heard a great deal here, was organized, instead of taking in 50 per cent of the business, it had taken in all of the plants, so that it was at that time doing all the business. Have you any doubts about that arrangement or organization being illegal under the law?

Mr. KRAUTHOFF. I know no more about the United States Steel Corporation than the general public.

The ACTING CHAIRMAN. I am speaking now purely as an abstraction.

Mr. KRAUTHOFF. There might be other aspects which would enter into the specific instance in addition to the mere abstractions which you put.

The ACTING CHAIRMAN. What are the other aspects?

Mr. KRAUTHOFF. I do not know enough about the corporation to enumerate them.

The ACTING CHAIRMAN. Would you regard an arrangement of that kind as in restraint of trade, such a restraint of trade as would injuriously affect the public interest, provided nothing had been done which increased prices above a reasonable point?

Mr. KRAUTHOFF. My apparent hesitation in answering you, Senator, is solely because I do not like to talk about a pending case. The ACTING CHAIRMAN. Of course, this is not a pending case, because what I have supposed was not done.

Mr. KRAUTHOFF. I might have to take into consideration some other elements to answer you fully.

The ACTING CHAIRMAN. Then I withdraw that. I will put it again purely in a supposititious way. Suppose there were 12 concerns doing a business in a certain field, and that all the concerns sell their property to a common corporation and thereafter the business proceeds under one management, and that at the end of a year the Government institutes a suit to dissolve it under the antitrust law. Do you think that an answer which said clearly: "We have sold our product at a fair price," would be a sufficient answer? Mr. KRAUTHOFF. I do not.

The ACTING CHAIRMAN. Why?

Mr. KRAUTHOFF. Because the recent rulings require us to start by first ascertaining the intent and purpose with which that organization was formed. If the court should find that the primary purpose had been to arrogate to itself monopolistic power, independent of any other consideration, the ruling would be that the organization was illegal in its inception.

The ACTING CHAIRMAN. But I understood you to say a few minutes ago that our Supreme Court had not yet reached the point of saying that the mere possession of monopolistic power on the part of a corporation would render it liable under the second section of the act.

Mr. KRAUTHOFF. I think that is true, too. But the court has said that the Northern Securities Co. was conceived to accomplish that which was directly prohibited by State law, namely, the consolidation of two competing and parallel railroads, and therefore undertook to accomplish the same result through the instrumentality of a holding company, which could have no other purpose than to accomplish, in effect, a consolidation prohibited by law. The opinion of Mr. Justice Harlan in that case takes the most extreme view in this respect to be found in the United States Supreme Court Reports. If the purpose of the 12 manufacturers mentioned in your hypothetical question was to get together for the sole purpose of more economically conducting their business, reducing their expenses by decreasing the amount paid out for advertising, or to obviate the duplication of stores in the same town, or the like, then the mere fact that by getting together they acquired the power, but which they never exercised, of raising prices or, for illustration, of transforming 5 and 10 cent stores into 10 and 15 cent stores, I do not think their conduct was illegal.

The ACTING CHAIRMAN. But necessarily, of course, the motive must be to take in all the business.

Mr. KRAUTHOFF. The motive is not necessarily to take in all the business. The question is one of exercising the power which results from getting all the business.

The ACTING CHAIRMAN. But when the 12 stores which I have spoken about do consolidate, it is not possible to conceive that they did not have the purpose of uniting the whole business in one concern. Now, assuming that they exercised the power which was thus given them fairly and reasonably, and did not enhance the prices of the product, I gather from what you say that you believe that that would not be injurious to the public interests.

Mr. KRAUTHOFF. I firmly believe that in a case of that kind the elimination of the competitor is not an injury to the public.

The ACTING CHAIRMAN. What would injure the public then? Mr. KRAUTHOFF. The result

The ACTING CHAIRMAN. Here is the one concern in full possession of the field. Suppose there is no competitor arises at all. It goes on with the business. What would injure the public?

Mr. KRAUTHOFF. Speaking broadly, either a deterioration of the quality of the goods or an increase in the prices. Otherwise the germ of competition, which, after all, is the best protection to the public, will develop an investment of capital and the establishment of competitors in the business, quite as much so as would be the competition of those who might be left as independent concerns, so to speak, and more so if the so-called independents were ineffective as competing factors.

The ACTING CHAIRMAN. Then you would attach some importance to potential or latent competition?

Mr. KRAUTHOFF. That is the reason that I say it is not the possession of the power alone that is dangerous. It is the exercise of it. The ACTING CHAIRMAN. I am assuming that it exercises no power; that is, it does not exercise the power of increasing prices beyond a reasonable point.

Mr. KRAUTHOFF. It does not increase them at all.

The ACTING CHAIRMAN. Then you are of the opinion that that is a harmless and innocent commercial or industrial arrangement? Mr. KRAUTHOFF. Within the limits I have stated.

The ACTING CHAIRMAN. And consistent with our policy?

Mr. KRAUTHOFF. It ought to be.

The ACTING CHAIRMAN. And that the Government ought not to prohibit such arrangements, but ought to take steps to interfere if they increase the prices unduly?

Mr. KRAUTHOFF. Yes.

The ACTING CHAIRMAN. NOW, suppose it has been running five years and it then increases prices beyond a point at which it would be generally regarded as reasonable. What could the Government do with it then?

Mr. KRAUTHOFF. Enjoin it from exercising the power.

The ACTING CHAIRMAN. Then, if it would immediately decrease its prices to a reasonable point, it would satisfy the demands of the public interests?

Mr. KRAUTHOFF. It would be subject to injunction in respect of the wrongful act it had done, and it could not repeat it.

The ACTING CHAIRMAN. The injunction would have to go against the prices that it had charged?

Mr. KRAUTHOFF. It might go against the act that it did.