commerce.

I think Mr. Bryan has the right principle in mind, namely, that in order to constitute a monopoly there must be the destruction of reasonably competitive conditions in some branch of commerce; but I do not believe that an arbitrary rule such as he proposes would lead to greater certainty or would always carry out the spirit of the act. The percentage of control would fluctuate and it would be exceedingly difficult, if at all practicable, to determine the percentage of an industry or branch of trade at any one time concentrated under common control.

As I have already stated. there always will be border-line cases, but I believe that in most cases it will not be difficult to decide whether a contract or combination constitutes monopolizing or an attempt to monopolize. A few wellreasoned decisions of the Supreme Court stating clearly the principles governing the court in reaching its conclusions would go far to remove uncertainty as to what constitutes monopolizing within the meaning of the statute.

It has been suggested that a United States incorporation act should be passed. A wise and practicable national incorporation act undoubtedly would be desirable. Trade and commerce are not limited by State lines and they should be governed by national laws. However, I can not see how a national incorporation act would aid in solving the trust problem. The corporations formed under a national incorporation act would be subject to the antitrust act and to all other trust laws to the same extent as other corporations and individuals. Besides, a merely permissive national incorporation act would accomplish nothing. A compulsory act prohibiting State corporations from engaging in interstate commerce I believe would be unconstitutional.

The same applies to the proposal to provide for licensing corporatious engaged in interstate trade or commerce. It is doubtful whether a compulsory licensing law would be constitutional, but even if it were, the antitrust act would continue to apply to the licensed corporations, and the present problems would remain.

Mr. Roosevelt has proposed the creation of a commission having jurisdiction over corporations engaged in interstate trade or commerce, and this proposal was adopted by President Taft in his recent message. This I believe to be a step in the right direction. A national commission similar to the Interstate Commerce Commission should be created with jurisdiction over all interstate and international trade and commerce, except transportation over which the Interstate Commerce Commerce has jurisdiction. This commission should have power

(a) Upon the application of any citizen, or of its own motion, to investigate the interstate commerce transactions of corporations and individuals and to require all contracts and combinations between competitors in interstate commerce to be filed with the commission;

(b) To require reports of any corporation regularly engaged in interstate commerce; and

(c) To determine, after giving a hearing to the parties in interest, whether any contracts, combinations, or other acts complained of are in violation of the antitrust act. Such a finding of the commission should be deemed prima facie evidence that a contract, combination, or other act is or is not in violation of the act; but every such finding of the commission should be subject to review in the Commerce Court upon application of any party in interest or upon application of the Government.

(d) Parties proposing to enter into a contract or combination should have the right to apply to the commission for an order determining whether the proposed contract or combination would be in violation of the antitrust act, and the order of the commission made upon such application should be effective until reversed by the Commerce Court. Upon the approval of a contract or combination by the commission, acts done in pursuance of such approval, prior to a reversal of the order of the commission, should be deemed lawful and not in violation of the civil or criminal provisions of the antitrust act.

The suggestion that Congress should vest in a commission the power to regulate prices of trust-made products that are the subject of interstate commerce should be rejected for two reasons. One reason is that Congress could not constitutionally confer such a power. The power of Congress to regulate or to authorize the Interstate Commerce Commission to regulate the rates of interstate railway carriers is based upon the ground that the railway lines are highways of interstate commerce, that the railway companies are subject to a duty to serve the public at reasonable rates, and that the enforcement of this duty by the legislature or by a legislative commission is not in violation of the con

stitutional provisions for the protection of the liberty and property rights of the people. Power to regulate the prices of commodities can not be supported on these grounds, and I am satisfied that no such power exists.

The other reason for rejecting the proposal to confer upon a commission power to regulate prices of trust-made products is that the exercise of such a power by any governmental commission would be productive of evils far greater than any evils resulting from trusts and monopolies. The wiser and more statesmanlike course is to enforce the policy declared in the antitrust act.

Mr. KRAUTHOFF. While you are on the subject, without meaning to interrupt you, kindly notice on page 1332, near the foot of the page, this sentence:

In the cases of the Standard Oil Co. and of the American Tobacco Co. the evidence showed clearly a continued and successful endeavor to monopolize interstate commerce. Therefore, in deciding these cases the court did not find it necessary to define precisely what constitutes monopolizing or restraining interstate commerce. The question what constitutes monopolizing or restraining interstate commerce still remains an open question, except so far as it has been determined by the actual decisions in prior cases.

That is the sentence I had reference to this morning.

Senator BRANDEGEE. Of course he is one of the best known law writers on the subject in the world, and his book on corporations is a standard authority?

Mr. KRAUTHOFF. It is a classic.

Senator BRANDEGEE. I notice in one place that he was one of the organizers of the Steel Trust, and in his opinion it was, and is, a legal corporation and does not violate the Sherman law. You have just referred to the Tobacco and Standard Oil cases as laying emphasis upon the fact that, while they decided that those combinations violated the Sherman law, they did not pretend to define the terms as used in that law for future use. I assume that it is the practice of courts to decide as little outside of the case presented before them as possible, and I assume that the question before them was the particular combinations complained as violative of the statutes, was it not?

Mr. KRAUTHOFF. You are quite right, and that is emphatically true when the particular case after all involves a question of fact.

Senator BRANDEGEE. If they are able to sustain the statute of the Government conclusively and upon ample proof, they find that the bill is well taken and order the corporation dissolved, and say just as little as possible to avoid embarrassment in the future; is that not so?

Mr. KRAUTHOFF. That is particularly true; and the courts have been compelled to lay down the emphatic and warning rule that general expressions contained in an opinion in a given case are not to be regarded as axiomatic propositions and as such rigidly applicable in all other cases.

Senator BRANDEGEE. They are obiter dicta?

Mr. KRAUTHOFF. They are obiter dicta, or a statement of general propositions which will not necessarily have binding force when another state of facts is presented.

You will notice the paragraph in Mr. Morawetz's address which appears at the top of page 1333:

That the language of the antitrust act must be construed, not literally or technically, but in the light of reason so as to accomplish the purposes of the act. In order to render the act applicable there must be what may fairly be described as a restraint upon commerce, or an attempt to monopolize commerce and not

merely a lessening of competition in commerce.

The act does not prohibit restraints of competition, and a restraint of competition is within the prohibition of the act only if it fairly can be said to constitute monopolizing or restraining interstate trade or commerce.

Senator BRANDEGEE. The word "competition" is not used in the Sherman law in any part of it?

Mr. KRAUTHOFF. No, sir; that paragraph is a summary of what was decided in the Standard Oil and Tobacco cases.

Senator BRANDEGEE. Passing that now, in relation to the proposition for a national incorporation act, I want to read into the record here this sentence on page 1335, the third paragraph from the bottom of the page, as follows:

It has been suggested that a United States incorporation act should be passed. A wise and practicable national incorporation act undoubtedly would be desirable. Trade and commerce are not limited by State lines and they should be governed by national laws. However, I can not see how a national incorporation act would aid in solving the trust problem. The corporations formed under a national incorporation act would be subject to the antitrust act and to all other trust laws to the same extent as other corporations and individuals. Besides, a merely permissive national incorporation act would accomplish nothing. A compulsory act prohibiting State corporations from engaging in interstate commerce, I believe, would be unconstitutional.

The same applies to the proposal to provide for licensing corporations engaged in interstate trade or commerce. It is doubtful whether a compulsory licensing law would be constitutional, but even if it were, the antitrust act would continue to apply to the licensed corporations and the present problems would remain.

Do you agree with what I have just read, or perhaps I have too many different subjects there to ask you about in one question. You might agree with some and not with others.

Mr. KRAUTHOFF. I should prefer to scan the language more closely, because much of it is expressed in the language of legal accuracy. Senator BRANDEGEE. I would not want you to adopt some one else's testimony.

Mr. KRAUTHOFF. I have not gathered anything from your reading which is strikingly at variance with what I have already said to Senator Newlands.

Senator BRANDEGEE. It seems to be substantially in accord with your view. You see nothing to be gained by a permissive national incorporation?

Mr. KRAUTHOFF. No, sir; I think that what are classed as undesirable combinations would, if they thought it to their interest, become Federal corporations; otherwise not.

Senator BRANDEGEE. Well, whether it is constitutional or not, what do you think of the expediency of passing a national incorporation act-I mean if it be constitutional compelling corporations to incorporate under penalty of being prohibited from engaging in commerce among the States?

Mr. KRAUTHOFF. That is purely a question upon which a man primarily has political views.

Senator BRANDEGEE. I mean, what do you think of it in view of your political views or with respect to your views of any kind-what, in your opinion, would be the advisability or expediency of doing it? Mr. KRAUTHOFF. As things stand at present, I do not believe in the expediency of it.

Senator BRANDEGEE. Now, without quoting exactly, I can state substantially that Mr. Morawetz takes the view that the Sherman law should not be amended, and that after a few more decisions from the Supreme Court, and especially the decision in the Steel Corporation, he prophesies that the interpretation of the law will be so much clarified that it will be safer to proceed to amend it ther than now.

Mr. KRAUTHOFF. He and I undertake to say substantially the same thing, but we are not stating it from the same standpoint. If we are to await judicial decisions and permit the present unsatisfactory conditions to remain, and his prophecy comes true, it may be that my suggestion was wholly unnecessary. I was thinking more as to the present, and it is perhaps also proper to say that the word "amend" is sometimes used in a narrow sense and sometimes used in a broader sense.

Senator BRANDEGEE. Well, I will modify it in this way—
Mr. KRAUTHOFF. He puts it in this way:

I believe it to be true that some additional legislation for the regulation of corporations and trusts is needed.

Additional legislation which qualifies an existing statute comes within my definition of the term "amend."

Senator BRANDEGEE. Of course, when I say amend the Sherman law I assume that he and you both would like to leave that law as it is now, whatever other laws were passed to supplement it.

Mr. KRAUTHOFF. Not necessarily. I think it would be safer to revise it and avoid the possibility of judicial doubt as to its proper

construction.

Senator BRANDEGEE. Would you advocate now our repealing the Sherman law and substituting a new statute drafted upon the lines involving the ideas that you have suggested; making the question whether it was injurious to the public or not the test, instead of whether it was in restraint of trade?

Mr. KRAUTHOFF. No, sir; so much has been settled under this act that I would not repeal it in toto and begin with an entirely new enactment. I would revise the present act.

Senator BRANDEGEE. What would you do now, if you were on this committee, instructed to report to the Senate at the earliest possible day what changes in the laws of the United States relating to the organization and control of corporations were necessary?

Mr. KRAUTHOFF. I think, speaking my first thought, that a proviso in the act would accomplish it.

Senator BRANDEGEE. You would recommend to Congress that the act "be amended by inserting the following proviso, to wit"? —

Mr. KRAUTHOFF. Yes; a proviso that the terms "restraint of trade" and "monopoly " or "attempt to monoplize," as used in this act, shall be held and construed to mean and be confined to such contracts, etc., in restraint of trade, or such monopolies or attempts to monopolize, as have produced or will necessarily produce actual injury to the public, is one way of reaching the result. I have not used accurate language in stating the terms of the proviso, and doubtless my suggestion is verbally incomplete. I should hesitate long if there were pending before the Supreme Court of the United States what might be called a border-line case, a case of an organization

which is claimed to mark a mere technical violation of the Sherman antitrust law, but which is not, in popular parlance, a "bad trust,” and the facts disclosed that its existence and doings were a real public benefit-or, putting it in the other way, negatively, that there was an absence of a public injury. In such a case the court would be free to determine whether the Sherman law is applicable to a state of facts which involves no public wrong, no public injury, where the combination is either innocent or beneficial to the public. Such a case has not yet been decided by the court. Until there has been a decision covering this phase of the matter, a revision of the existing law would necessarily have to be on the basis of what the law ought to affirmatively say in respect of such a case. Senator BRANDEGEE. Mr. Morawetz says:

I believe that the antitrust act should remain on the statute book as it stands and that no attempt should be made to amend it. It has been urged that the word "monopolize "should be defined by statute. In his recent article in the North American Review ex-Senator Edmunds used the following language. I shall not read that.

Any statutory definition probably would give rise to as much uncertainty and litigation as the term "to monopolize," and judicial decisions would be necessary to define the definition itself.

Mr. KRAUTHOFF. In that paragraph Mr. Morawetz is evidently leading up to state what percentage of control, or what proportion of control, may be exercised by an organization before it can be said to have become a monopoly. I agree that the term "monopoly ought not to be defined in detail.

Senator BRANDEGEE. Would you say that "restraint of trade" ought to be defined?

Mr. KRAUTHOFF. I do not; but mere constructive restraint of trade or monopoly should not

Senator BRANDEGEE. Should not be an offense?

Mr. KRAUTHOFF. Should not be an offense. In each case there should exist and be found by the trier of the facts to exist, whether it be court or jury, the element of public harm.

Senator BRANDEGEE. You think now they are liable to be convicted of constructive restraint of trade?

Mr. KRAUTHOFF. It is the apprehension that there may be such a case which causes uncertainty in the minds of some of the larger business men, and which causes so many of them to come before you and tell you (and no doubt truthfully tell you) what effect this apprehension has on preventing extensions of their operation.

Senator BRANDEGEE. Among these recommendations of Mr. Morawetz, he recommends that a commission should be created and they should have power

to determine, after giving a hearing to the parties in interest, whether any contracts, combinations, or other acts complained of are in violation of the antitrust act. Such a finding of the commission should be deemed prima facie evidence that a contract, combination, or other act is or is not in violation of the act; but every such finding of the commission should be subject to review in the Commerce Court upon application of any party in interest or upon application of the Government.

You would agree to that, would you not?