One of the principal earlier objects of the trust was to evade the corporation law. To-day they specially aim at becoming a legal corporation. In like manner their earliest object and desire was to escape all Federal supervision and interference by legislation or otherwise; to-day they are desirous of such regulation under Federal charters, for the purpose of escaping the more multifarious and radical law-making of the forty-six different States. Before the Industrial Commission in 1897-1900, all the heads of the great "trusts"—Rockefeller, Archbold, Havemeyer—testified in favor of Federal incorporation; almost all other witnesses, except one or two New York or New Jersey corporation lawyers, against it.
In the article in the Harvard Law Review, above referred to, the writer suggested that the evil might be cured by compelling trusts to organize as corporations, thereby bringing them under the regulation and control that the State exercises over corporations. That has come to pass, but the remedy has not seemed adequate. In the early Sugar Trust case, the New York Supreme Court decided that combinations to sell through a common agent, thereby, of course, fixing the price, with other common devices for controlling the market and preventing competition, were illegal at the common law; and also that a corporation which, in order to bring about such a combination, put all its stock in the hands of trustees or a holding company, thereby forfeited its charter, the only result of which decision was to drive the Sugar Trust from its New York charters to a legal organization in the State of New Jersey. It is noteworthy that one or two of the most obvious remedies for this condition of things have never been employed, possibly because they would be too effective. That is to say, there might be legislation that a corporation should not act out of the State chartering it—that a New Jersey corporation, holding no property and doing no business in New Jersey, should not be used to carry on business in New York. We also might have legislated, going back to the strict principles of the common law, to forbid any corporation, any artificial body, from holding shares in another corporation. It is doubtful, to-day, whether this can be done under the common law, and the authors of the Massachusetts corporation law refused expressly to provide for it; on the other hand the proposed Federal Incorporation Act expressly validates it. We do, however, begin to see some legislation on this line of approach, notably in the case of competing companies, several Western States at least having statutes forbidding a corporation from holding stock in such companies; and it was one of the recommendations of President Taft's recent message, at least as to railroad companies not holding half of such stock.
It will well repay us now to make a careful study of all these anti-trust statutes, for the purpose of seeing whether they have introduced any new principles into the law, and also in what manner they express the old. Up to two or three years ago one might have said that not a single case had been decided in the courts of any State or of the Federal government against trusts or combinations, which might not have been decided the same way under common-law principles had there been no anti-trust legislation whatever. As is well known, the great exception to this statement is the interpretation of the Federal Act by the Supreme Court of the United States, declaring that any contract in restraint of trade was unlawful under it, although it would have been reasonable and proper at the common law. Later indications are, as President Taft has said, that the courts will see a way to modify this somewhat extravagant position by reintroducing the common-law test, viz.: Whether the contract is done with the purport (or effect) of making a monopoly for destroying competition, or whether such result is trivial and incidental to a reasonable and lawful business arrangement. The earliest statutes, those of Michigan, Kansas, and Nebraska, in 1889, denounce the following principles: "All contracts, agreements, understandings, and combinations … the purpose or object of which shall be to limit or control the output, to enhance or regulate the price, to prevent or restrict free competition in production or sale." This, the Michigan statute, merely states the common law, but goes on to declare such contract, etc., a criminal conspiracy, and any act done as part thereof, a misdemeanor, and, in the case of a corporation, subjects it to forfeiture of its charter. The law makes the exception, nearly universal in the Southern and Western States, that this anti-trust legislation shall not apply to agricultural products, live stock in the hands of the producer, nor to the services of laborers or artisans who are formed into societies or trades-unions—an exception which, of course, makes it class legislation, and has caused the whole law to be declared unconstitutional, so far as I know, by the highest court of every State where it has been drawn in question, and under the Fourteenth Amendment also by the Supreme Court of the United States; and in this spirit President Taft has just acted in preventing a joint resolution of Congress appropriating money to prosecute trusts from exempting labor unions. The Kansas statute is substantially like the Michigan, but more vague in wording (Kansas, 1889, 257). It denounces arrangements, contracts, agreements, etc., which (also) tend to advance, reduce, or control the price or the cost to the producer or consumer of any productions or articles, or the rate of insurance or interest on money or any other service. The Maine law (Maine, 1889, 266, 1) is aimed only against the old-fashioned trust; that is to say, the entering of firms or incorporated companies into an agreement or combination, or the assignment of powers or stock to a central board, and such trust certificates or other evidences of interest are declared void. The Alabama statute of 1891 is to similar effect.
The Tennessee statute of 1891 is about the same as the Kansas statute of 1889, above referred to, except that it adds the words "which tend in any way to create a monopoly," and the Kansas statute makes trust certificates unlawful, that being still the usual way of organizing a trust at that time. The Nebraska law (Nebraska, 1889, 69) is much the same, except that it also denounces combinations, etc., whereby a common price shall be fixed and whereby any one or more of the combining parties shall cease the sale or manufacture of such products, or where the products or profits of such manufacture or sale shall be made a common fund to be divided among parties to the combination, and goes on to add that "pooling between persons, partnerships, corporations … engaged in the same or like business for any purpose whatever, and the formation of combinations or common understanding" between them is declared unlawful, and the persons are made liable for the full damage suffered by persons injured thereby, and each day of the continuance of any such pool or trust shall constitute a separate offence; this, the doctrine of a continuing conspiracy, being for the first time before the Supreme Court of the United States at the time of writing. North Carolina the same year (N.C., 1889, 374) defines a trust to be an arrangement, understanding, etc. for the purpose of increasing or reducing the price beyond what would be fixed by natural demand, and makes it a felony with punishment up to ten years' imprisonment. Here for the first time appears a statute against unfair competition. "Any merchant, manufacturer … who shall sell any … goods … for less than actual cost for the purpose of breaking down competitors shall be guilty of a misdemeanor." Tennessee the same year (Tennessee, 1899, 250) in its elaborate statute, which is a fairly good definition of the law, also denounces throwing goods on the market for the purpose of creating an undue depression, whatever that may mean. In the next year, 1890, there were many more State statutes, but we should first notice a simple law of New York forbidding any stock corporation from combining with any other corporation for the prevention of competition (N.Y., 1890, 564, 7). The usual statute in other States of that year is addressed against combinations to regulate or fix prices or limit the output, but Texas (4847a, 1) and Mississippi (1890, 36, 1) have elaborate laws, which, however, add hardly any new principles to the common law. They define a trust to be a combination of capital, skill, or acts, by two or more persons or corporations, (1) to create or carry out restrictions in trade; (2) to limit or reduce the output, or increase or reduce the price; (3) to prevent competition; (4) to fix at any standard or figure whereby its price to the public shall be in any manner controlled, any article intended for sale, etc.; (5) to make or carry out any contract or agreement by which they are bound not to sell or trade, etc., below a common standard figure, or to keep the price at a fixed or graduated figure, or to preclude free or unrestricted competition among themselves or others, or to pool or unite any interest. To much the same effect is the statute of South Dakota (1890, 154, 1), but it also denounces any combination which tends to advance the price to the consumer of any article beyond the reasonable cost of production or manufacture. The Louisiana (1890, 36) and New Mexico laws (1891, 10) are aimed particularly at attempts to monopolize, while the Oklahoma statute (6620) was aimed only at corporations, and the broad wording of the Federal act passed this year should be noted: "Every contract, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States or with foreign nations, is hereby declared to be illegal" (U.S., 1890, 647, 1); and in the second section: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty under this act." And in the third section: "Every person who shall make any such contract, or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor." The rest of the legislation provides penalties, manner, and machinery for the enforcement of these laws by prosecuting attorneys, etc., with a usual allowance to informants; and it may be here noted that one great trouble has resulted from this machinery, for it provided injunction remedies and dissolution, which may well be too severe a penalty, and, furthermore, dispenses with a jury and throws unnecessarily upon the court—even now, as in the Standard Oil case, a distant high court of appeal—the burden of determining a complicated and voluminous mass of fact. Our ancestors never would have suffered such matters to be adjudged by the Chancellor!
South Dakota has an extraordinary statute making the agents for agricultural implements, etc., guilty of a criminal offence when their principals refuse to sell at wholesale prices to dealers in the State (S.D., 1890, 154, 2). But beside these remedies, there is a frequent statute dating from the earliest Kansas act of 1889, that debts for goods sold by a so-called trust, contracts made in violation of the law, will not be enforced in favor of the offending person or corporation. That is to say, the person buying the goods of a trust may simply refuse to pay for them; and the constitutionality of this legislation has recently been sustained by a divided opinion in the Supreme Court of the United States.[1] The possession or ownership of trust certificates is in some States made criminal. Corporations offending against the statute are to have their charters taken away, or, if chartered in other States, to be expelled from the State. All contracts or agreements in violation of any of these statutes are, of course, made void.
[Footnote 1: Continental Wall Paper Co. v. Voight, 212 U.S. 227.]
There are special statutes in Kansas, Nebraska, and North Dakota against trusts in certain lines of business, as, for instance, the buying or selling of live-stock or grain of any kind.
In the twenty years that have elapsed since this early legislation there has been considerable clarifying in the legislative mind; modern statutes, and especially constitutional provisions, stating the offence much more concisely, with a simple reliance upon the common law, leaving it, in other words, for the courts to define. The Southern State constitutions generally enact that the legislatures shall enact laws to prevent trusts. New Hampshire says: "Full and fair competition in the trades and industries is an inherent and essential right of the people, and should be protected against all monopolies and conspiracies which tend to hinder or destroy." Oklahoma provides that "the legislature shall define what is an unlawful combination, monopoly, trust, act, or agreement, in restraint of trade, and enact laws to punish persons engaged in any unlawful combination, monopoly, trust, act, or agreement, in restraint of trade, or composing any such monopoly, trust, or combination." In Wyoming, monopolies and perpetuities, in South Dakota and Washington, monopolies and trusts, are "contrary to the genius of a free State and should not be allowed." The constitutional provisions of North Dakota, Minnesota, and Utah are again a mere repetition of the common law. The New Hampshire statute grants "all just power … to the general court to enact laws to prevent operations within the State of … trusts …," or the operations of persons and corporations who "endeavor to raise the price of any article of commerce or to destroy free and fair competition … through conspiracy, monopoly or any other unfair means to control and regulate the acts of all such persons." This last clause, though a clear statement of the common law, would, of course, render hopeless Mr. Gompers's crusade in favor of the boycott, the object of a boycott invariably being to control the acts of somebody else. Alabama directs the legislature to provide for the prohibition of trusts, etc., so as to prevent them from making scarce articles of necessity, trade, or commerce, increasing unreasonably the cost thereof, or preventing reasonable competition; and to much the same effect in Louisiana.
We may well close this brief survey by a study of the volume of such legislation. We have, for instance, in 1890, seven anti-trust laws; in 1891, six; in 1892, one; in 1893, eight. In 1894, doubtless as a consequence of the panic, anti-trust legislation absolutely ceased, and in 1895 there is only one law, passed by the State of Texas, its old law having been declared unconstitutional. In 1896, under the influence of President Cleveland's administration, we find four such statutes, and in 1897, with reviving prosperity, thirteen. Still, we find no new principle, except, indeed, the somewhat startling statement in Kansas that it is unlawful to handle goods made or controlled by monopolies. The Illinois statute of that year permitted combinations as to articles whose chief cost is wages when the object or effect is to maintain or increase wages, a qualification which led to the whole law's being declared unconstitutional. In Tennessee there is a special statute penalizing combinations to raise the price of coal, a statute with good old precedents in early English legislation. By this time most of the States had adopted anti-trust statutes. In 1898 we find only one law, that of Ohio, giving the same five-fold definition of the trust that we found above in Alabama, but it adds the somewhat startling statement that "the character of the combination may be established by proof of its general reputation as such," and again it is made criminal to own trust certificates, with double damages in all cases to persons injured. A constitutional lawyer might well doubt whether a conviction under the last half of this statute would be sustained. In 1899 eleven of the remaining States adopted anti-trust laws. In 1900 there is a new statute in Mississippi prohibiting, among other things, the pooling of bids for public work, this again being a mere statement of the common law, although a law which has possibly grown uncommon by being generally forgotten.
In 1901 there are four statutes, that of Minnesota also including a prohibition of boycotts, and the first piece of legislation upon the subject in the old Commonwealth of Massachusetts—an ordinary statute against exclusive dealing; that is to say, the making it a condition of the sale of goods that the purchaser shall not sell or deal in the goods of any other person. In 1902 both the Georgia and Texas laws were declared unconstitutional because they exempted agricultural pursuits. South Carolina has a statute actually prohibiting any sale at less than the cost of manufacture, doubtless also unconstitutional. In Ohio corporations are forbidden to own stock in competing companies. The Illinois anti-trust act was declared unconstitutional in 1903, while Texas amended its statute to meet the constitutional objection, and followed South Carolina in prohibiting the sale of goods at less than cost.