The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. MONDAY, OCTOBER 30, 1911. IN RESTRAINT OF TRADE.

Auckland Star, Volume XLII, Issue 258, 30 October 1911, Page 4

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

MONDAY, OCTOBER 30, 1911. IN RESTRAINT OF TRADE.

yor the cause that lacks asiijtauaa, .For th'} \crong that nccdi rcjlstartctSu For the future In t7iti distance, jdi»d t/tt good that ice ocn do.

President Ta-ft's longstanding threat to enforce the Sherman Act against the Steel Trust appears likely to be carried into efl'cet without further delay. The indictments which the Federal Government is laying against this Trust mark the climax of the great effort that President Taft has recently made to check unfair commercial and industrial competition. Six months ago the Supremo Court of the United States gave its decision as to the legal status of the Standard Oil Company, on which it had been asked to pronounce a judicial opinion; and this decision, lif enforced in its literal meaning, should effectually destroy the whole Trust system, in America. For not only did. the Court order the Standard Oil Company to dissolve within six months. It gave also an interpretation of tlio Sherman Ixuv which, if applied generally, will render it practically impossible to justify the existence or the methods of any of the grea.t industria:! combines. According to the Supreme ! Court's decision, any corporate act involving "unreasonable" restraint of trade should bo a bar to the continued operations of the Trust in question. Hitherto it has Ixien found impossible to induce the Courts to condemn the Trusts on the general ground of restraint of trade; for any kind of competition might conccivcdly be construed in this way. Many times Congress has been urged to amend the Sherman Act by inserting the simple word "unreasonable" before the phrase "restraint of trade"; 'but all in vain. Now tho Supreme Court —one judge alone dissenting—has virtually amended tho law in this war. And the practical consequence of this decision was seen at once in tho injunction issued on similar lines, demanding tho dissolution of tlio Tobacco Trust, and the investigation promptly ordered by Government into tho affairs of the Steel Trust.

The great Steel Combine, as everyone knows, was founded by Pierpont Morgan on the purchase of Carnegie's iron and steel business ten years back. A lew months ago Commissioner Knox published a report upcra tho operations of the Trust, which gives som;| idoa of

its magnitude and the scope of its activity. In the first place, the Morgan underwriting syndicate financed the Trust to the extent of about £3,600,000 in cash, receiving in return stock, which it' sold for £13,100,000 —leaving a profit of £12,500,000, of -which Pierpont Morgan seems to have secured about two and a-half millions sterling. This sum was obviously, as the report states, "greatly in excess of a reasonable payment"; and the Trust seems to have be6n overloaded from the first. To-day its tangible assets are put down by Commissioner Knox at £238,000,000, agairnst a capitalisation of £293,000,000. These figures have been challenged by the Company, hut there seems to 'be no doubt that while the Steel Trust ten .years ago turned out GO per cent of the country's steel, it now turns out not much over 50 per cent. This would indicate that, so far as the monopoly of the trade goes, the Trust has not been a success. But it certainly holds 75 per cent of the steel ores in the United States, and tho methods it has followed in endeavouring to secure control of tho market have roused (bitter public resentment. Possiibly, however, the Taft administration would not have taken any active steps against this combine just now if it had not been for the provocation received from Judge Gary. This enterprising financier, the president of the Trust, while a test case against the American Wire and Steel Company was pending, announced the formation of an International Steel Association, which has been described as "the first great world-trust," and further stated that tits headquarters would be fixed at Brussels, with the obvious intention of evading the Sherman Act once more. This defiant challenge to public opinion and the law of the land seems to have exasperated popular feeling in the State 3, and to have determined President Taft to put the law tin motion against the Steel Trust at once. Apart from the general ground of infringing the Sherman Act, there is a specific charge against the directors of tho Steel Trust in connection with its purchase of Tennessee Coal and Iron Company. The story of this "deal" provided the most interesting evidence elicited by tho Stanley Committee which has been investigating the Steel Trust's affairs. During the great panic of 1907 the Trust Company of America was in imminent danger of collapse, because of its heavy loans to the Tennessee Coal and Iron Company. Mr. Pierpont Morgan advised the Steel Combine to purchase the stock of the Tennessee Company, giving its own stock in exchange. Tho Trust Company was then able to realise upon Steel stock, and the situation was saved. Now, Mr. J. W. Gates, the steel millionaire, who died a few weeks ago on the Continent, stated in evidence that this vvas a. forced saie; that Morgan, who practically controlled Wall-street at the time, refused to allow the banks to advance money on Tennessee stock; thus driving tho Trust Company to the verge of collapse, and compelling it to surrender tho stock at a "bargain price." Judge Gary, on the other hand, maintains that the Steel Trust gave full market value for the Tennessee Company's stock, and that their only object in purchasing was to prevent a panic by saving the liust Company. Put tlsc position was admitted at the time to be rather dubious; so much so that Gary insisted on interviewing President RooseVclt before the bargain was completed. Gary pointed out to Morgan that by taking over the Tennessee stock; they were lendering themselves liable to the anti-monopoly law, and therefore with Morgan's permission he and Frick, Carnegie's old lieutenant, put the ease before Roosevelt They urged that if the Trust Company of America collapsed, the panic would spread, and very serious results must ensue; and Roosevelt therefore gave a carefully guarded consent to the Steel Trust's proposal. But in the light of subsequent developments and of Gates's evidence, there seems to be some ground for the suspicion that the Morgan syndicate either worked up the panic or deliberately aggravated it so as to add to its own holdings; and this is the line taken in the charge now laid against the Steel Trust.

There is one recent development of the Trust movement which, at this juncture, is well worth considering. When Judge Gary was asked by tlv) Stanley Committee what he thought would 'be the outcome of this process of centralisation, he replied that, in his opinion, the old era of destructive competition was at an end, but that was now time to establish Government supervision over all commercial transactions, to check over-capitalisa-tion, to control the methods of administration, and even to fix maximum prices. Such an admission from one of the most powerful of America's "Money Kings" has naturally produced soma sensation. It has been hailed with enthusiasm by the advocates of Socialism; for, as the New York "Call" claims, "if what Judge Gary describes as Government regulation and supervision does not lead to Government ownership, it 'leads nowhere and changes nothing." The Socialist would have the State | regulate prices and organise industry; but he would transfer to the State the ownership of • capital as well; and here the "Money Kings'' ar o not likely to agree with him. However, the fact remains that on the admission of the ( official head of one of the greatest trusts, not less but more Government supervision and control is needed to direct the country's trade 011 safe and satisfactory lines. But this ultimate phase of capitalistic evolution lies still in the distance. For tiie present interest centres chiefly on the immediate prospects of the trusts that the Supreme Court decision affects, The Standard [Oil Trust is to be diißolvcd:, at least in

name; the Tobacco Trust must follow suit; and any one of the 1200 combines registered in the United States with a gross capital of ten billion dollars is apparently liable to the same treatment. But not the least significant feature of the new interpretation of the Sherman Act is that it practically gives the Courts power to prosecute the heads of trusts personally on criminal charges. As the New York, "American" puts it, in discussing the judgment: "The one great fact that looms clear and unmistakable in this maze of words is that the antitrust law i 3 a criminal statute; that guilt is personal, and that the only practical method of enforcing the Anti-Trust Act so that criminal trusts will fear it, and honest men will respect it, is to punish in the criminal courts those who axe guilty of violating it." Clearly there are troublous times in store for tho trusts and the Money Kings in the near future.