Mr. KRAUTHOFF. I agree with the last statement. However, in 1890 the development of what we call now the big business corporations of the country was really in its infancy.

Senator BRANDEGEE. But it had proceeded, if I may be allowed to interrupt you there, to such an extent as to cause a gale all over the country which compelled Congress to pass this statute to prevent it, and the same principles were involved in the corporations and other organizations, although the amount of capital was not as large as it is at the present day.

Mr. KRAUTHOFF. I think, if I may be permitted to say so, that the two concerns which at that time were prominent in the eyes of the public were the Standard Oil Co. and the American Sugar Refining Co. I was referring to the numberless organizations that are to a great or less extent on one side or the other of this act, yet very near the border line, and most of which were organized after the Knight case had been decided. The rulings in that case put most of these corporations outside the pale of the act. It is history that the dealings between certain railroads and the Standard Oil Co. were largely responsible for the passage of the interstate-commerce act.

The American Sugar Refining Co. was composed of elements whose organization had been dissolved by the New York courts as being a pure trust, and was reorganized under the laws of New Jersey, and there may have been one or two others.

I doubt whether in 1888 very many people knew there was an American Tobacco Co. It certainly was not the target it has become in recent times. So that what Senator Edmunds recently said in the North American Review, and in the argument he urged in the Joint Traffic case, largely presupposes that his views will ultimately be a part of the construction which the Supreme Court will place upon the act. In such a case, a part of what he has recently written will justly emphasize

Senator BRANDEGEE. What do you mean? Emphasis as to what part of what he said?

Mr. KRAUTHOFF. That the act was drawn with great care, and intentionally without defining any of its terms. He is asserting a certain definition of those words which has not yet been announced by the Supreme Court. Then, too, you must remember, Senator, that one of the most learned and distinguished lawyers, who was a member of the Senate Judiciary Committee, which framed this act, gave an opinion very shortly after it was passed which was not in accordance with the views subsequently taken by the courts. You must also remember that in the Trans-Missouri case it was pressed on the Supreme Court that certain Senators had construed the language of the bill when it was before the Senate, and that the court held it could not go into the debates of Congress with a view of ascertaining the legal meaning of the language used.

Senator BRANDEGEE. One thing, as I understand it, was thoroughly considered, and that was whether they should proceed to define the different things which should constitute a violation of the act, or which should constitute restraint of trade, and at first they were inclined to do it, and after a lengthy consideration they abandoned the attempt as hopeless and adopted this language. I do not want to misquote the Senator, but that is the idea I derived from a perusal of his article and the interview.

Mr. KRAUTHOFF. I should not differ with him if the act had been authoritatively construed in accordance with his views, and I might not differ with his general proposition, provided there was included as an ingredient in the description of the offense the element which I have said ought to be present.

Senator BRANDEGEE. In other words, provided the people who are to be penalized by the statutes can in advance view it in the light of the same understanding and definition as the court will after they have done the acts?

Mr. KRAUTHOFF. That is one way of stating it.

Senator BRANDEGEE. If a man is also conscious when he is going to injure the public, what doubt is there in the mind of the business man about whether there is going to be an unreasonable restraint of trade or not?

Mr. KRAUTHOFF. It is the element of constructive criminality which causes most of the apprehension.

Senator BRANDEGEE. Is there any case where the court has convicted anybody of a constructive restraint of trade when they were not injuring the people?

Mr. KRAUTHOFF. Yes. In the Trans-Missouri case, the element of constructive wrong, was strongly put forward. Of course, that was a case of public utility, but Mr. Justice Peckham there said the fact that the rates were reasonable was wholly immaterial, and that the wrong was not the exercise of power, but the existence of the power. I am not quoting the language exactly, but merely giving the substance of it. That means constructive criminality. For instance, I am practicing law. I have confidences of all kinds committed to me. I have the power to disclose those confidences. Is that a reason for taking away my license to practice law?

Senator BRANDEGEE. My information is-without knowing anything very much about it-that petroleum is being sold at a fair price and that the public are not being injured by the price. I am not sure about that, but I do not hear any complaint about the price. Now, would you allow a monopoly-would you allow the Standard Oil Co.-to maintain a monopoly of that business in violation of the statutes just because prices were reasonable?

Mr. KRAUTHOFF. It is hard to answer that yes or no. The vice in the existence of the Standard Oil Co. was its antecedent history. The primary purpose of its organization, its methods and its practices, were not, so said the court, a normal development of the trade. Senator BRANDEGEE. Would you allow any monopoly to exist if it could be broken up by the Sherman law if its prices were reasonable? Mr. KRAUTHOFF. I do not think that the reasonableness of prices is the only element that enters into the inquiry.

Senator BRANDEGEE. Then are you going to admit that a constructive restraint of trade may injure the people although the prices are reasonable?

Mr. KRAUTHOFF. No; a constructive restraint of trade and an existing monopoly would not be the same thing. An actual restraint of trade in general may lead to monopoly. It might be that a given concern would be found to control, say, 51 per cent of the trade, and two judges would conclude that the concern was therefore an unlawful monopoly per se, while the dissenting judge would see no proof of wrong because of a mere given percentage, and declare that

he did not see much difference between 49 per cent and 51 per cent in this respect. That is certainly a border-line case.

Senator BRANDEGEE. But do not border-line cases exist in every department of law and every department of human activity?

Mr. KRAUTHOFF. Not in the same degree as is the case here. Senator BRANDEGEE. Is not the question here whether the man is in the exercise of reasonable care? Is that not a border-line question and a question about which jurymen often differ?

Mr. KRAUTHOFF. That issue ordinarily arises in cases of negligence and other breach of duty, which, at most, can result in a money judgment. It is different where it is contemplated to make investments. The investor may have no thought or purpose of violating the law. As things are, he must face the risk of having the matter questioned years after, a situation which naturally restrains investments and consequent trade extension.

Senator BRANDEGEE. Do you know of any department, or is there any department of the law or of legal organization, where at present people who are engaged in business can go to some commission or court, or administrative body, and in advance get a permit or an O. K., or a special dispensation which shall be a shield and a protection to them forever against anybody making a claim that they are violating the law?

Mr. KRAUTHOFF. Yes.

Senator BRANDEGEE. What department is that?

Mr. KRAUTHOFF. If you will write this act to make it read like this

Senator BRANDEGEE. No; I say is there any at present?

Mr. KRAUTHOFF. Yes; take most of the public-service and publicutility commissions. The statutes creating them have numerous provisions by which public utility companies can obtain certain permits, or are required to obtain certain permits, before they can lawfully do certain things. These permits, when granted, constitute the consent of the State to the doing of the act.

Senator BRANDEGEE. That is one particular act, of course. If they are going to lay a trolley track, they have got to lay it in conformity with the regulations of the municipality?

Mr. KRAUTHOFF. Yes; but that is not an act which in and of itself is in violation of the existing law. The difficulty here would be that the consent of the commission would be valueless in the face of an existing law which forbade the act consented to.

Senator BRANDEGEE. Of course I agree with you on that, but, in view of that fact, do you recommend the establishment of a commission with power to confer on applicants the right to organize in a certain way and proceed to business and take them out from the possibility of being prosecuted under the Sherman law?

Mr. KRAUTHOFF. The men who are actually engaged in business and who are growing older every day would, of course, at once say to you yes. I would be inclined to say to you that until there has been a definite determination by the Supreme Court that that act is not to be construed so as to involve such a risk, the resort to a commission may prove to be unsatisfactory.

Senator BRANDEGEE. I noticed a statement in one of the papers the other day that the annual report of the Secretary of Commerce and Labor contained a recommendation of some sort of administra

tive commission with powers, if I recall them, of investigation, publicity, and regulation. I have not read his report yet, and I do not know what powers of regulation he would confer, but of course powers of regulation may be very broad and wide. Are you prepared to state whether you would want to give an administrative board the power to regulate all corporations engaged in commerce among the States and, in a general way, what sort of regulation or regulatory power they should have?

Mr. KRAUTHOFF. I would not add to the powers of any existing bureau, except as may be necessary to properly carry into effect the existing powers. If the power is to be broadened so as to cover this field the conclusion reached should be given effective force.

Senator BRANDEGEE. I understand that, but now as I understand it, you say that you would be opposed to an independent or new commission with powers of investigation and publicity because the Bureau of Corporations have those now, and you do not care about duplicating the machinery?

Mr. KRAUTHOFF. I would not object to enlarging the machinery if necessary.

Senator BRANDEGEE. But I mean another one.

Mr. KRAUTHOFF. Oh, I would not duplicate the agencies.

Senator BRANDEGEE. My impression is that was Secretary Nagel's recommendation, that the Bureau of Corporations should be enlarged having those powers conferred upon the Bureau of Corporations. Of course, at present they have no power of regulation. As I say, I have not read Secretary Nagel's report.

Mr. KRAUTHOFF. I have not either. I would regard that as a logical suggestion

Senator BRANDEGEE. You have not read it? I will leave it out of it then.

Mr. KRAUTHOFF. I do not know just what the word "regulation" would mean in that connection. As the law stands there could not be very much regulation by such a body. It would have no power of regulation, except as was specially conferred by Congress. That would raise the question with Congress, "Shall we confer upon that body power to regulate and to pass upon matters of compliance or noncompliance with the Sherman Antitrust Act?"

Senator BRANDEGEE. Your theory is if we are going to confer, and if we can constitutionally confer upon this administrative board the power to say to these corporations from day to day, "You may do this, and you shall not be prosecuted for it," and, "You may do the other with safety," that of course takes them out from the liability of prosecution under the Sherman law. You want them taken out? Mr. KRAUTHOFF. The natural tendency of those who are actively in business is to fret at the law's delays. They would feel the immediate advantage of being able to speedily get a certificate of approval or consent which would be a protection to them. I think the conservative legal mind would be more inclined to think that the step was so radical a departure from the general scheme of government which has hitherto prevailed in the United States that it would first want to be convinced that such legislation was an absolute necessity before undertaking to recommend it. I agree that it is desirable, assuming that certain results are sure to follow. Certain gentlemen take the view that every question which can arise under the Sher

man Antitrust Act has now been settled. Such announcements naturally frighten the people who are connected with business organizations, and they want to be relieved of that apprehension promptly. It does not reassure them, from their point of view, to advise them that certain questions have not yet been decided and to wait until they are decided adversely before crying out.

I am inclined, as I said this morning, to think that the tendency of public thought is that when Congress comes to put this situation in proper shape it will have to be done along the lines of gradual steps. In other words, I doubt whether a bill to repeal the Sherman Act, or a bill to substitute something for the Sherman Act could be enacted.

Senator BRANDEGEE. Do you mean that these gradual steps of enlightenment and progress ought to be legislative steps, or ought to be judicial steps?

Mr. KRAUTHOFF. When I spoke last I meant legislative steps. My mind is drifting to the idea that in reflecting the sentiment of the people because that is what after all Congress should do-it will come nearer reflecting the views of the majority of the people to proceed by gradual approaches. From this point of view the best suggestion which has been made is undoubtedly that of a trade commission.

Senator BRANDEGEE. Would you take the first of those steps now, if you were a member of this committee?

Mr. KRAUTHOFF. I had not thought of answering that. I would want to give it serious thought.

Senator BRANDEGEE. We are going to try to. My idea is that you are here to help the committee if you can-and we are very glad to have you here and you can not glance at this record without seeing that there is a large amount of information that has been furnished us, of varying degrees of value

Senator POMERENE. That is very properly expressed.

Senator BRANDEGEE. And there are some discrepancies of view, and if any gentleman who has made such an intelligent study of this subject as you have, and as Mr. Morawetz has, has some definite views and believe in them to the extent that they would act them themselves if they had the responsibility as we have, they are just the kind of men we want to hear from. Therefore, I ask you finally, whether, if you were a member of the committee, you, in your own mind, are firmly enough satisfied as to the expediency and legality of any particular step that you would be willing to recommend Congress to take it, and stand up on the floor of the Senate and advocate it?

Mr. KRAUTHOFF. I feel this way about that: I regard the drafting of anything that affects this statute as a matter of very great delicacy and as involving a painstaking and exhaustive study of the law on the subject in all its various phases, and a very close scrutiny of the cases and of matters that are found in other statutes and the works of writers, so that there might be no mistake in respect of the fact that the new statute had been drafted in the light of all the available information and expressions of view, and particularly with a view to clearly defining the language used.

If I had the great honor which you assume in your question, I would be inclined-especially considering the many demands on the

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