GERMAN TRUST LAWS AND OURS

GAIN and again we read in the newspapers and

magazines about the wonderful aid that the German government is asserted to render to industrial combinations, enabling them to capture foreign trade from countries where such combinations are less efficiently organized or considered illegal. Exemption of combinations in our foreign trade from the operation of the Sherman law has consequently been advocated, in order to enable our manufacturers and exporters to meet German competition in the foreign field on an equal footing. But, suppose that such an amendment should be enacted by Congress, would it offset the advantages alleged to be derived by our German competitors from the support of their government, quite apart from considerations of efficiency of internal management and organization?

Our Bureau of Foreign And Domestic Commerce, in coöperation with the consular service is much better equipped for promoting our foreign trade than the corresponding German bureau. Assertions to the contrary are usually made for the laudable purposes of making our Bureau still more efficient. The service that our daily Commerce Reports render to the exporter is not equalled by that of any German publication. In setting this forth the writer is not biased by the splendid work of the press agent of the Bureau of Foreign and Domestic Commerce and of the Federal Trade Commission. As an illustration of this work, it may be mentioned that for several months after the organization of the Federal Trade Commission not a single week passed without a certain magazine in the electrical field containing an article mentioning the doings or plans of the Commission.

Bureaucracy flourishes in the German consular service and diminishes the efficacy of her commercial attachés.

Lately the attaché in one of our largest cities was in the habit of referring inquiries for American goods from German importers, to an American manufacturers' association located in his city. The association in acting upon such inquiries naturally felt obliged to try first of all to secure any such prospective business for its own members, though the best source of supply, which the German commercial attaché was expected to give to his inquirer in Germany, might not have been among the members of that association. A copy of Thomas' or Hendrick's Directory would have helped him out in many cases. We have a federal department of commerce, while Germany has no such imperial department. Certain divisions. of the department of the interior and of the foreign office are charged with the promotion of Germany's foreign trade. An imperial bureau of foreign commerce has been advocated for almost two decades. The remarkable success of private initiative, and the disagreement of the two leading manufacturers' associations concerning the organization of such a bureau have been the chief obstacles to its establishment. In this connection, we ought not to forget that there is no general association of manufacturers in Germany whose work equals the work for the promotion of foreign trade of the National Association of Manufacturers in this country.

Another great service which the German government is asserted to render to the exporter is the reduction of freight rates on the government-owned railways. We forget, however, that owing to the small area of Germany, these reductions cannot possibly apply to a distance of more than a few hundred miles. Considering the vast distances of our country, we see that a freight deduction. for such short distances as have to be reckoned with in Germany would not be a great boon if granted to the average American exporter. Consequently the service which the German government may render to exporters by a lowering of freight rates does not place the American

exporter at a comparatively great disadvantage in competing with his German rival. We, furthermore, seem to overlook the fact that the Interstate Commerce Commission has not yet abolished low export rates for certain commodities.

What then is it that has made the Germans so efficient in their foreign trade? Will a comparison of our trust laws with their laws reveal the cause? Here, as in the matters above referred to, German activities have been greatly exaggerated, and many inaccuracies regarding the legal status of combinations in Germany have been presented to the American public, not only by individual writers but also in Government publications. A recent report issued at Washington speaks of a difference of opinion among German jurists regarding the legality of combinations. Another Government publication says that in Germany the establishment of monopolies is theoretically illegal and that occasionally a trust has been declared unlawful under the Penal Code because of extortion. All these assertions are contrary to fact. The legality of combinations has always been upheld by the German Supreme Court, and a monopoly would be illegal only if it exploited the consumer, a case which has never come before the courts. It would be extremely difficult for the courts to establish just when a price is extortionate.

According to Dr. J. W. Jenks, a leading American authority on industrial combinations, "trusts are taken to mean manufacturing corporations with so great capital and power that they are at least thought by the public to have become a menace to their welfare, and to have, temporarily at least, considerable monopolistic power." If we were to apply this definition of a trust to conditions in Germany, we should find that there are only two or three trusts in that country. The German Imperial Supreme Court, in a decision handed down last year, defined the nature of a trust to consist in the subjecting of

an industry to a single capitalistic power for the promotion of capitalistic interests. But when we speak of German trusts, we really have in mind the German cartel or syndicate, which is a sort of organized pool, that is, an association of manufacturers or dealers in some particular line of business, for the purpose of lessening or eliminating competition. This may be effected by agreements as to terms of sale and delivery, the grading of goods, the fixing of prices, the allotment of territory, the restriction of output, joint-buying, and joint-selling. The simpler forms of cartel are merely contracts between manufacturers, while the more highly developed cartel - the syndicate which acts as a selling agency for the members of the syndicate, is organized as a partnership, a stock corporation, a limited liability company, or in yet some other form. The individual manufacturers are in this way partners or stockholders in the company. Except for a few very rare cases where competition has been eliminated by legislative means, this factor is never entirely eliminated; it simply takes on a different form, and continues to exist within the cartel, showing itself in the struggle for allotment figures and in other forms.

The most important anti-trust law in this country, the Sherman act of 1890, has been declared by the Supreme Court, in the Standard Oil and American Tobacco decisions, to be the embodiment of the common law, and the court has accordingly held that the first section of the act, which deals with combinations and conspiracies in restraint of interstate and foreign commerce, refers only to unreasonable restraint. The second section of the Sherman act refers to monopolies and attempts to monopolize. Whether or not a preponderating proportion of the business in a certain line means monopoly, and whether or not a corporation possessing the power to hurt the public interest ought to be dissolved, will soon have to be decided by the Supreme Court in the Keystone Watch case, the Harvester case, the Steel Trust case and other cases. The

decisions of the lower courts in these cases are in conflict with each other. In the Harvester case, the Federal District Court decided that the combination must dissolve because it had acquired too large a percentage of the business in its line, although the trust was given a clean bill of commercial conduct. On the other hand, in the Keystone and Steel Trust cases, the District Court refused to dissolve the trust, saying that a business should not be condemned merely because it was large and had the power to hurt the public.

Corners in staple commodities, as well as combinations in interstate trade for the purpose of fixing prices and terms of sale, restricting the output, or allotting business or territory, have been held by the Supreme Court to be in violation of the Sherman act. The fixing of the resale price by the manufacturer of a commodity, be it unpatented, patented, or copyrighted, has been held illegal in the Dr. Miles Medical case, the Sanatogen case, and the Bobbs-Merrill vs. Straus case. Among more recent federal district court decisions, those in the Victor vs. Macy case and the Cream of Wheat case, however, seem under certain circumstances to offer a subterfuge to the manufacturer who wants to control the resale price. It is interesting to note that the company manufacturing Cream of Wheat is still selling its product to the Great Atlantic & Pacific Tea Company, although the court decided that the former company had the right to discontinue selling to the latter company, which as plaintiff had asked the court to enjoin the manufacturer of Cream of Wheat from refusing to sell to the plaintiff. Apparently the Cream of Wheat company cannot get along without the selling services of the Great Atlantic & Pacific Tea Company.

The Clayton Law, which was enacted in 1914, supplements the Sherman act and the minor anti-trust acts. It specifically mentions the following practices as being