by a statement of proportion, as in case of the part owners of a ship, and not by an arbitrary assignment of money value, which is delusive in the case of every corporation whose capital stock has a market value either more or less than its nominal par value.

"Such an amendment, though somewhat radical, is not altogether novel. It embodies a principle adopted in corporation laws in Germany.

"It would relieve any possibility of injury to the public from misleading representations as to the money value of corporate stock, and would also relieve from embarrassment conscientious corporate officers often compelled to deal with legal fiction as to which they have no personal knowledge, as though it were a reality within their own observation.

The suggestion is valuable and would apparently prove effective; but there is no general interest in a change, and it is probably, for the present at least, not practicable.

The effect of over-capitalization upon prices will be discussed briefly in a later chapter.

* Proceedings of New York State Bar Association, January, 1892, p. 148.

CHAPTER VII

METHODS OF ORGANIZATION AND

MANAGEMENT

Before the compact combinations of the present day were known, various forms of specific agreements among independent corporations and individual competitors were common, such agreements often being called pools, although the earnings of the different companies were not put into one common stock from which profits were to be distributed.

For some years before the organization of the Whiskey Trust, competition had been very fierce among the different distillers, and agreements were usually made from year to year which fixed the amount that each distiller should produce during the year. At other times, under agreement, an assessment was levied which each distiller should pay upon each bushel of corn mashed, in order to export the goods at a loss, and thus, by relieving the home market of its surplus, make sufficient provision for selling

the domestic production at a remunerative price. These so-called pools were not stable.

Ordi

narily, within a year, some one of the parties to the agreement would be discovered distilling more than his proportion of the normal output, and the result would be a break in the pool.

Agreements for fixing the price of the product or for dividing territory are perhaps still more common. A noteworthy late case is that of the Addyston Pipe Company,* in which the different parties agreed not to enter into competition with one another. The contract was to be carried out in the following way: a committee consisting of a representative from each corporation entering into the agreement set the price for each job of work, and the corporation that offered the largest bonus for the job, secured it, the others putting in higher bids to make an apparent competition. It will be

seen that, although in this agreement there was no uniform fixing of price or of profits, competition was done away with, and the agreement may fairly be considered as one tending to create a monopoly, or, at any rate, to bring about

* United States v. Addyston Pipe and Steel Co., et al., 78 Fed. 712; 85 Fed. 271; 175 U. S. 211.

all the evil effects of a monopoly and to oppress the consumers.

An agreement of a quite different nature has been formed among coal dealers in one of our cities. A committee of several of the leading dealers determine the price at which coal shall be sold by all wholesalers and retailers. They also keep a supervision of the trade, seeing that full weight is given, that the quality of coal is exactly as represented, and that the consumers are protected against dishonest dealers as well as the dealers against excessive competition. If any dealer cuts the price to any of his consumers, he is heavily fined by the central committee. If he refuses to pay the fine, an agreement with the mines stops his securing a sufficient supply of coal to meet the needs of his customers. The initial cause of this agreement was said to be excessive competition. Some of the dealers finding the prices so low that they could not make a profit, came to the conclusion that some must be giving light weight. An investigation and a re-weighing of several loads proved this. The combination was then formed, which may be said to exist primarily to protect the dealers and incidentally

the consumers against this unfair kind of competition, which resulted in their detriment. Prices are fixed at a rate which is said to give only moderate profits to retailers and wholesalers, and fair prices to the consumers; while the consumers, as has been said, are secure against light-weight loads and poor quality of coal. It should be noted that those who fix the "fair" prices are interested parties; but experience may have shown them what is really wise and fair for all. All those dealers who are willing to conduct their business fairly and honorably at the rates fixed are allowed to make a reasonable profit. Longer experience may perhaps show different results. At present reports are favorable.

Owing to the fact that ordinary pools and agreements of the kind mentioned above cannot usually be well enforced, the Standard Oil Company in 1882 organized the Standard Oil Trust, a form followed afterward by the socalled Whiskey Trust (the Distillers' and Cattle Feeders' Trust), and also by the Sugar Trust. The form of organization is substantially this: the stockholders of each of the separate companies assign their stock to a certain number