The example of the Standard Oil Company was followed by the sugar refiners and the whiskey distillers in 1887 and still later by the principal manufacturers of tobacco, salt, cotton-seed oil, steel, tin plate, etc.

American Public Opposes Centralization.

In the meantime, opposition on the part of the American public to this new form of business monopoly had begun to crystallize and found its culmination in suits against the Sugar Trust in New York in 1890 and against the Standard Oil Trust in Ohio in 1892. As a result of the court decisions holding both trusts to be illegal, the original trusts were dissolved, but only in a legal sense, for the combinations continued under other forms. The Sugar Trust reorganized as the American Sugar Refining Company, under the laws of New Jersey. This single corporation absorbed the several member concerns which had formed the original trust. The Standard Oil Trust reorganized along different lines. A holding company, the Standard Oil Company of New Jersey, was formed. These two types of big business organization-the single corporation, owning outright the properties controlled, and the holding company-have in course of time become the usual forms of trust organizations.

Culmination of Trust Movement.

The year 1898 marks the turning point in the history of the American trust movement. Up to that time the progress of consolidation was slow, approximately eighty-two combinations, with a total capital exceeding $1,000,000,000, having been organized. In the period from 1898 to 1901, however, such a sudden activity developed in the formation of new trusts that that period has come to be known as the "consolidation craze." The

following list contains the leading industrial consolidations formed during that period:1

1901

International Salt Co.

American Can Co.

Consolidated Tobacco Co.

United States Steel Corporation
Eastman Kodak Co.
American Locomotive Co.

The wave of business prosperity which swept over the country at that time unquestionably constituted one of the principal factors which contributed to this remarkable trust movement. Other favorable circumstances, however, affected the organization of trusts materially. Professional promoters and speculators seized upon the opportunity to unload industrial securities upon a public anxious to invest their savings. During the preceding four years of business depression relentless competition had led many to incline to the view that "competition is

1See U. S. Bureau of Corporations. Trust laws and unfair competition. Washington, G. P. O., 1916, p. 12 fol.

the death of trade." The benefits of industrial combination now appeared to many in a rosy light. The wide publicity given to the remarkable success of certain trusts met a ready response on the part of the investing public. Over six billion dollars' worth of securities was marketed by the new industrial trusts before the movement spent itself.

Questionable and, fraudulent financiering coupled with numerous other disappointing results like high prices, etc., contributed to disillusionize the public, and a strong reaction set in throughout the country against the so-called "trust-evils."

LAWS AGAINST MONOPOLIES AND TRUSTS.

The more or less isolated life and almost complete industrial independence of the early American colonists, as well as of the sturdy pioneers and farmers who at a later period built up our vast western territories, produced in the American people a strongly developed sense of individualism. This jealousy of one's rights and independence did not fail to leave its impress upon our industrial and commercial life. It manifests itself in our system of individual activity and free contract, and was an essential factor in establishing the popular belief in freedom of competition which became so firmly rooted in the American mind. Consistent with this attitude, public opinion showed itself strongly opposed to monopolistic practices, whenever they appeared.

This traditional view of the American people concerning monopolies found a welcome support in the common law, under which monopolies are unlawful because of their restrictions upon individual freedom of contract and their injury to the public. Intentional and undue enhancement of prices of the necessaries of life was by common law considered to constitute unlawful restriction of the freedom of the individual, and a contract of an individual unreasonably restraining his own trade or business was void. At the common law this was treated as coming within "monopoly," and monopoly was generally considered as being in restraint of trade.1

1See Chief Justice White in the Standard Oil Case, 221 U. S. 51-55.

Court Rulings Under Common Law.

A considerable number of cases involving agreements in restraint of trade have been decided by courts in the United States under the common law. In the absence of special antitrust laws in certain states or where such statutes have proved ineffective or inapplicable, or as in Massachusetts where they are expressly declaratory of the common law, the latter has served as the legal basis for prosecution of industrial monopolies. The leading common law decisions involve three groups of agreements:2 First, such by which the vendor of a business agrees not to reengage in the business as a competitor of the purchaser. The second group comprises agreements to regulate competition among trade rivals who continue as such subject to the restrictions of the agreement. The third group relates to agreements by which ownership or control of competing business is combined in the same hands.

The decisions of the courts under the common law did not prove an effective check upon the growth of monopolistic practices and agreements. Industrial combinations grew in number and size in spite of their supposed illegality under the common law and notwithstanding that under the constitutions of several states they had been declared unlawful. Finally, in the eighties, when public opinion became more and more aroused and hostile to the new form of business organization represented by the trusts, the legislatures of several states enacted statutes prohibiting trusts and other combinations in restraint of trade or leading to monopoly. During the year 1889 anti-trust laws were passed in Maine, Michigan, Tennessee and Texas, and in the following year in Iowa and Kentucky. In the course of time thirty-two states and two territories passed such laws.

Attempts to remedy the trust evil by state legislation encountered numerous obstacles. As a consequence of the interstate commerce clause of the Federal Constitution and the interpreta

1U. S. Bur. of Corporations. Trust laws and unfair competition, op. cit., p. 24 fol.

2U. S. Bur. of Corporations. Trust laws and unfair competition, op. cit., p. 25.

tion given it by the Supreme Court, effective control of the trusts through state legislation was rendered futile. While the states have power to control intra-state commerce, they have no right to interfere with any interstate commerce in which manufacturing corporations may be engaged. The loose corporation laws of Maine, Delaware, New Jersey and West Virginia, which states either failed to enact anti-trust legislation or deliberately liberalized the same, and where most of the trusts were incorporated, thwarted the anti-trust movement throughout the country. The fact that these "charter granting" states afforded an asylum to trusts and by so doing made the people throughout the country largely helpless victims, accentuated the need of Federal repressive legislation.

The Interstate Commerce Act of 1887, which prohibited pools among railroads, served as a precedent for congressional action against restraints of commerce and trade. Public opinion insisted on further legislation by Congress with the result that the Sherman Anti-trust Act was enacted in 1890. The passage of this law marks the most important step in legislation for the suppression of industrial monopolies in the United States during the nineteenth century. This act registered the formulation and initiation of a national policy calculated to suppress combinations in restraint of trade. It was not, however, until two decades later, that the Sherman Anti-trust law was brought to a searching test and its significance demonstrated.

In the meantime the American public had come to realize that the problem of industrial combinations involved not exclusively legal but also economic questions. The latter began to be placed more in the foreground through investigations and official reports on the economic structure and operation of trusts.

Trust Problem Investigated.

In 1898 Congress created the United States Industrial Commission for the purpose of investigating among other industrial problems the growth of large corporations and trusts.

The