time of a Member of Congress by other matters-to consider very seriously whether I would not ask certain men-and I think there are men who as a matter of public duty and civic pride would do soto prepare and submit for consideration drafts of what they think would accomplish the purpose.

Senator BRANDEGEE. We have done that. The National Civic Federation is going to submit a bill here; I do not know but what they have already done so. They have lucubrated over the question for months. Mr. Untermyer, who is one of the subcommittee of their organization, has been down here and exhaustively submitted his views, and in general he would like to have this sort of commission appointed with authority to legalize trade agreements to allow companies to make agreements with each other regulating prices or fixing a maximum price, etc. What would you think about that? Would that be a desirable thing?

Mr. KRAUTHOFF. The exact way that impresses itself on my mind is this: I am afraid that some arrangements of that kind have existed to so large an extent in the United States secretly that it will be much better for the people at large to know of them publicly.

Senator BRANDEGEE. He stated that the country was full of them now in secret; that before the activity of the Department of Justice against those companies they had been in writing, but now the safes were empty of the written evidence of it, and they had their own. understandings, which were quite as effective, and that if the commission had authority to give them the legal right to make them openly and make them legal that they would stop their secret business, and the commission would only approve such as they thought were for the public interest. What would you think of that?

Mr. KRAUTHOFF. Senator, when you concede the right of competitors to meet and fix upon prices and that such an arrangement should be deemed valid, you must materially amend the Sherman antitrust law.

Senator BRANDEGEE. Well, that of itself would seriously amend it, of course.

Mr. KRAUTHOFF. Very much. It is undoubtedly better-
Senator BRANDEGEE. You would not advise that?

Mr. KRAUTHOFF. I am not prepared to say, but I would undoubtedly advise that if such agreements are to be permitted, it be done in a way that would give their existence the widest publicity. Senator BRANDEGEE. If what was to have the widest publicity? Mr. KRAUTHOFF. If arrangements of that kind are to be permitted, it is undoubtedly better that they should be public than that they should continue to be secret, but the Bureau of Corporations probably has power now to inquire whether there are any such trade agreements and to report to the President, who may direct the facts to be made public. The bureau may not have the machinery or it may not have men enough to cover the field.

Senator BRANDEGEE. But if the agreements are secret and not reduced to writing and are denied by those who made them, the Bureau of Corporations, while it has the power to investigate, unless it has the power of mental telepathy and mind reading, could not ascertain whether such agreements existed.

Mr. KRAUTHOFF. That assumes that there will be a great deal of very strong swearing. The commissioner has the power to examine witnesses, and, in fact, to have hearings.

Senator BRANDEGEE. Do you not think there are ways in which those having the effective control of the policy of corporations can meet, and without making any agreement, can, by their conversations, come to an understanding so that they can say they have not agreed to anything, and are practically all selling at the same prices? Mr. KRAUTHOFF. It is possible.

Senator BRANDEGEE. That is the way they say these things are done, but it is difficult to prove them.

Mr. KRAUTHOFF. When you touch that phase, Senator, you touch what is the underlying difficulty that attends the effort on the part of the United States to be the first country that ever passed a statute of such rigidity and apparent unbending nature in respect of trade matters. The commercial greatness of no country has been built up under such a law. Business in other countries is not conducted under such a restraint.

Senator BRANDEGEE. I realize very well how it has come about, but the question is what, if anything, shall we do to legislate further about it to prevent it?

Mr. KRAUTHOFF. I think the political conditions are such that legislation adapted to commercial needs can hardly be expected until there is a different state of public sentiment on the subject. A trade commission may be successful, but it will be an experiment. If such a body is to be given power to say "every contract," etc., "which is not consented to by this commission shall be illegal," etc., I very much fear public sentiment would not support its enactment. If it did, the legislation would undoubtedly vastly relieve the apprehension of business men.

Senator BRANDEGEE. You are a lawyer and you have had a good deal of experience in these corporation matters. What, in your opinion, would be the effect on business if nothing were done at this session about this matter at all, and if the courts were allowed to go ahead and decide the United States Steel Corporation case and such others as might be presented-what effect is that going to have on business to have Congress adjourn with nothing done on this subject? Mr. KRAUTHOFF. I will answer to that as a practical man, rather than as a lawyer. In view of the fact that 1912 is a presidential year, and that we have become habituated in this country to doing and expecting very little in the way of new legislation in a presidential year, I doubt whether the country expects this pending session of Congress to solve this problem. I am quite sure that if the legislation were attempted, such a bill would not pass both Houses.

Senator BRANDEGEE. I may have a similar idea, but that does not relieve us from our duty. We are instructed to report to the Senate what, in our opinion, should be done. You have pictured a condition of apprehension among business men. You see the sword of Damocles over their heads, and you say that they do not know what is in restraint of trade and what is not. And I infer from your statement that business activity would be promoted if they felt at liberty to go ahead and felt that they were safe in doing it within the law. Now, if no legislation is passed, what is going to be the effect upon the business world, in view of this state of apprehension?

Mr. KRAUTHOFF. It is human nature for those who have been in suspense for a long time, when the suspense is relieved, to feel that

henceforth the pendulum will swing far the other way. Too high a degree of speculation might be engendered. That has been the experience on other occasions.

Senator BRANDEGEE. Do you apprehend any panic would ensue if no legislation on this subject were enacted at this session?

Mr. KRAUTHOFF. No; I do not. I do not think it is as serious as that. Of course it is not my foot that is being pinched. I told you this morning that I represented no interest, that I headed no propaganda, and led no campaign. Naturally the man who feels the apprehension keenly will differ from me. It is largely a question of point of view.

I think it is better to legislate intelligently than to do it in a hurry. I still believe that if this thing were thrashed out as has been the case in respect of some important English legislation—that is, after thorough consideration by a royal commission composed in part of eminent counsel, in part of members of Parliament, and in part of experts better permanent results would ensue. If you will read the opinions of the various Justices of the Supreme Court who have expressed themselves as to the meaning of the present statute, you will readily realize how exceedingly difficult it was to prepare these opinions, and also how to a layman some of the opinions appear to be, with due respect, exceedingly labored.

Senator BRANDEGEE. I agree with you on that.

Mr. KRAUTHOFF. It inheres in the difficulty of the subject. For 500 years England has had this question, and you will find the question in England still measurably unsettled.

Senator BRANDEGEE. Right on that point, just for a moment, and then I have done. There appears in the record here, on page 969, in the testimony of Mr. Stetson, an extract from the opinion of Judge Taft in the Addyston Pipe case, 85 Federal Reporter, 271, 279, and 286, as to the common-law meaning of restraint of trade, in which the Mogul Steamship Co. against McGregor, Gow & Co. is cited, and so forth. I want it to appear in the record in your testimony that that extract is there on that page 969, and that the Supreme Court decision in the same case is in 175 United States Supreme Court Reports, at page 211.

I simply put that in for convenience of reference.

That is all I care to ask you.

Mr. KRAUTHOFF. And the Addyston Pipe case, I may say, to complete the statement, marks the typical case, on its facts, to which the antitrust act should be applied in all its severity.

The ACTING CHAIRMAN. Senator Watson, you may inquire. Senator WATSON. Pressing a little further Senator Brandegee's question. He said we are going to be up to the point of making some recommendation to the Senate. We are charged with that duty. Instead of this committee making these recommendations of any changes in this law, do you think we should recommend that we have a commission to look after these matters?

Mr. KRAUTHOFF. I would not recommend that. I would feel that the subject was of such importance and required such complete, if you please, exclusive attention that I would prefer, if I were put to it, to have somebody who would-if it must be for a compensationconfer with the committee as to the views of its various members and then undertake to formulate them in language which will be legally

precise. You have a Judiciary Committee, and I do not make any reflections on that committee. It could be done by counsel in much the same way in which the draft of corporate mortgage or some

other instrument of difficulty is prepared. Senator WATSON. That is all.

The ACTING CHAIRMAN. Senator Pomerene, you may inquire. Senator POMERENE. Unfortunately, I did not hear all the statement of the witness. I have just one matter, to which you referred as I came in. You may have gone into it and explained the matter I had in mind, but if not, I want to call it to your attention. You suggested the possibility of this situation arising, namely, that by a strict and proper compliance with section 1 of the Sherman Antitrust Act the business of a concern might resolve itself into a monopoly in violation of the second section of the act and the conduct of the parties be such that there was in reality no restraint of trade, but that the country was benefited by reason of the prices and that the returns from the business was reasonable. Do I correctly state your position?

Mr. KRAUTHOFF. Almost, Senator. I said that as a result of the compliance with the demands of the first section he might find himself the sole competitor who survived. I did not use the word "monopoly "; I said he could not justly be called a monopolist within the meaning of the second section.

Senator POMERENE. Have you in mind any such situation which has in fact occurred?

Mr. KRAUTHOFF. No. I was simply putting an extreme case so as to bring out the real purpose of the statute.

Senator POMERENE. Well, I assumed so. So that the difficulty which you apprehend in that respect was a theoretical one rather than a practical one?

Mr. KRAUTHOFF. It was one not based on an existing condition of facts. It was based upon the considerations which, from a legal standpoint, should determine the proper construction of the act. Senator POMERENE. In other words, the case was purely hypothetical?

Mr. KRAUTHOFF. The case was hypothetical in the sense that no such actual condition exists, to my knowledge.

Senator POMERENE. Under this statute, then, there could be no action by anyone of the public for damages. That would take away one of the remedies or penalties, if we may call it such. There would be practically no necessity for the enforcement of the equitable remedies provided for in this statute, and so far as the criminal provisions of the statute are concerned, it would be one of those cases where, if there was a conviction, a court in its wisdom would assess a nominal fine, if any.

Mr. KRAUTHOFF. In the case I assumed there would be no occasion for a remedy, unless, indeed, the Government should undertake to subsidize a competitor and protect him against competition.

Senator POMERENE. But the point I am trying to make is that the difficulty which you seem to see is rather imaginary than real, is it not?

Mr. KRAUTHOFF. Oh, that particular illustration was only an argument which I suggested in connection with the proper construction

of the statute, namely, that the two sections had to be construed together.

Senator POMERENE. I think that is all.

Senator BRANDEGEE. I want to ask you one more question that I omitted to ask. In your examination by Senator Newlands he asked you about holding companies, and you said you did not condemn them wholesale and in every case, and you started to say that you had in mind an instance, and then he diverted you to something else. Have you in mind any instance of holding companies that you could give us that you think are good things?

Mr. KRAUTHOFF. I have in mind instances of quite a number of companies. Without mentioning names, I have one that was recently financed. It is a perfectly and highly reputable concern, which can not under any conceivable view of the law be deemed to be tainted with illegality. It is organized under the laws in one State and it openly and publicly does business in several other States. All the stock representing these establishments belongs to the same people. Under the varying statutes on the subject it can not qualify in all these other States. It would necessarily have to keep out of some of them were it not that it can meet the situation by means of auxiliary companies. I do not call that company an obnoxious holding company. I understand that a holding company such as has been condemned here must have been a company formed for the purpose of acquiring the stocks of competitive concerns and thereby controlling the competitive concerns, being in and of itself the combination or the organization which evidences the control-say the Northern Securities Co. In that sense I can understand the condemnation of a holding company; but Senator Newlands suggested that every holding company, without regard to circumstances, had been condemned by the Attorney General and many others.

Senator BRANDEGEE. Of course, I can not speak for him, but I assume that he meant that every one of these holding companies that was organized for the purpose of holding the securities of other companies and not doing any business itself, but simply holding the securities of other companies. I assume that is what we all mean by holding companies.

Mr. KRAUTHOFF. I think the condemnation is addressed to corporations, more particularly, which are, in another form, a combination previously declared to have been illegal.

Senator BRANDEGEE. Was it necessary, in the instance you have in mind, for the successful transaction of the business of the company to arrange it in that legal form to have a holding company? Mr. KRAUTHOFF. Yes, sir.

Senator BRANDEGEE. My impression was that the States by comity did not recognize the right of a corporation to do business in other States if the State of its creation denied it the right to exercise its functions in its parent State.

Mr. KRAUTHOFF. There is legislation in some States in the way of what are called reciprocity statutes, and particularly, I think, in reference to life-insurance companies. For instance, one State may not admit an insurance company of another State unless the laws of the State under which it is incorporated will admit an insurance