tion that it was better to propose a measure leading to immediate action.

The CHAIRMAN. Right there, Mr. Low, if there is no objection, who are the people that actually participated in the preparation of the bill? Who are the men who actually drew it?

Mr. Low. We conferred with Mr. Gary, of the United States Steel Corporation.

The CHAIRMAN. E. H. Gary, president of their board of directors? Mr. Low. E. H. Gary, who is likely to be here this morning. He is in Washington, and I think he came on on purpose for this meeting. The lawyers actually engaged in the drafting of the bill were Mr. Stetson

The CHAIRMAN. That is, Francis Lynde Stetson?

Mr. Low. Francis Lynde Stetson; and Mr. Morawetz.
The CHAIRMAN. Victor Morawetz?

Mr. Low. Victor Morawetz. Professor Jenks, of the Federation, was in constant collaboration upon the subject. We also kept in close touch with the administrative departments of the Government through the Bureau of Corporations.

The CHAIRMAN. That is, Mr. Herbert Knox Smith?

Mr. Low. Mr. Herbert Knox Smith; yes.

With your permission, I should like to read this general presentation of the subject, Mr. Chairman, and afterwards I would be very glad to answer any questions that may be submitted:

The problem with which the bill introduced by Colonel Hepburn, and prepared under the auspices of the National Civic Federation, seeks to deal is not an easy one, but it may be stated very plainly. As a result of a long series of decisions by the Supreme Court of the United States it is at last made clear to everybody doing interstate commerce by the methods of combination which are characteristic of these times that much of such business is done contrary to law. Common carriers, business corporations, and business men, labor organizations and labor men, have all had it brought home to them, one after another, that under the terms of the Sherman antitrust law a large part of the business done in the United States at the present time is being done contrary to law. Cooperative associations and other associations of farmers are subject to the same statute.

"Common carriers should be permitted to combine and to make traffic agreements in proper cases and under suitable governmental supervision, for combination and traffic agreements often mean more effective service of the public. What is wanted is effective public supervision and not an absolute prohibition of the very thing that may secure the best public service. It is singular that a people who have constituted the greatest Republic in history by the combination of many States should, even for a moment, deny to its own commercial agencies the opportunity of giving better service by proceeding along the same lines. Regulation, not prohibition. should be our watchword in all such matters. There is scarcely a line of commercial business, if there be even one, in which combinations in restraint of trade are not sometimes desirable in these days in the public interest no less than in the interest of trade, for modern business is very complex and its problems are often trade problems as distinguished from individual problems. Organized labor is built up upon the rec

ognized right to combine, to strike, and to make trade agreements. A law that raises doubt as to these rights for which labor has successfully contended in other countries, when it was a hanging offense to do so, strikes a blow not only at organized labor but at the whole structure of modern democratic society. The trade agreement which determines for a fixed period by mutual agreement of employer and of employee the rate of wages to be paid and the conditions of employment offers the most hopeful method which has yet been discovered to promote and to make permanent industrial peace under modern industrial conditions, and to classify such agreements as though they were contracts in restraint of trade would be a public calamity. The attempt of cotton growers, wheat growers, and other producers of farm products to protect themselves by combination against the combinations that deal in their products is just as certainly unlawful under the Sherman Act as the business combinations of which they complain, but even a law of the United States, powerful as this country is, can not set aside the universal law that leads men in these days to combine and which leads men to do so precisely in proportion as they are intelligent and free.

"As a further aggravation of the situation, the antitrust law is a penal one. Yet no one is able to be sure as to certain agreements whether they are unlawful or not. Anyone making an agreement of such a sort affecting interstate commerce and who does business under it, does it at his own risk; and long after the agreement has been made he may find out that he has rendered himself liable to imprisonment as well as to a heavy fine. I respectfully submit that this is a situation which is literally intolerable. It inevitably leads to a wide disregard of the statute upon the theory that "necessity knows no law;" because business to be done at the present time must be done by modern methods, and these often involve some restraint of trade. The preservation of our forests, for example, by agreement between the owners as to the amount of timber to be cut year by year is probably impossible under such a law, because such an agreement involves a restraint in trade. Beyond this, the statute itself constantly acts in restraint of trade, for the reason that only what is necessary is likely to be undertaken in the face of the penalties which the statute provides. A better method for sapping enterprise could scarcely be devised.

"How does it happen that a country like ours, renowned the world over for its freedom of initiative, finds itself in such a situation? If one goes far enough back in history, one reaches a time when even so simple a form of combination as a partnership was held to be illegal under the common law. In the interval, especially in this country, we have broken away so far from the original restraints of the common law concerning combinations as to encounter a new set of evils, chargeable, as many think, to the too great absence of restraint. Combinations in this country have been formed upon so vast a scale, and have so efficiently dominated one line of business after another, as to awaken a genuine fear in the minds of multitudes that the end of individual opportunity is in sight. Acting under such an impulse of apprehension, the Sherman antitrust law was passed in 1890. There is little evidence that the popular fear which placed this law upon the statute books has disappeared. The Sherman antitrust law, as

interpreted by the Supreme Court, reimposed, as it were, all the ancient restraints of the common law concerning combinations, and as to agreements in restraint of trade imposed even greater restraints, for the common law permitted such agreements as were reasonable, and this law has thus placed us, in fact, in the intolerable position already described. If, then, we can not endure the ancient restraints of the common law as to combinations nor the large freedom from restraint as to agreements in restraint of trade, which gave rise to the new evils that proved so alarming to the people, what shall we do? "There are evidently several possible courses: (1) The Sherman antitrust act might be repealed. Every man must judge for himself whether this is possible. To us of the National Civic Federation it seems at the present time out of the question. Popular opinion would not tolerate it. (2) The Sherman antitrust act might be amended, so that only contracts in unreasonble restraint of trade would be forbidden. This undoubtedly would remove the restraints complained of; but what does it offer to quiet the fears which placed the Sherman antitrust act upon the statute book and which keep it there? By many, such an amendment would be considered the equivalent of the repeal of the Sherman antitrust law. It must be

admitted, if such an amendment were made, that it would be difficult to frame a law that would even bring about reasonable publicity. Such an amendment is evidently not in line with the President's recent recommendation. For all of these reasons such an amendment does not seem to us to offer the promise of immediate relief. (3) It is possible to propose the national incorporation of all organizations doing interstate business. Whether that plan may be adopted or not, in the future, no one can say. It will not be disputed that to-day, to use one of Gladstone's phrases, It is hardly above the horizon. (4) The suggestion that everyone doing interstate business should be obliged to take out a national license is another way that has been suggested of dealing with the problem. The National Civic Federation believes that this method also is one as to which public opinion is not yet clear. A bill framed upon such lines would doubtless lead to an interesting constitutional discussion as to the precise limits of State and Federal control of commerce, and that would postpone the very relief that is so imperatively needed without delay. It has been said of the bill under discussion that it is in effect a license bill; but the very essence of the license system is that no one can do business who does not take out a license.

"This bill, on the contrary, is optional, and affects only those who voluntarily place themselves under it. I submit that this is a conservative method of testing how a bill upon new lines is likely to work. If it becomes a law, it is almost certain to lead to a large measure of publicity, and that, in the opinion of many, is likely to be the cure for most of the evils that have brought about too great legal restraint. If so, it will surely lead in the end to greater freedom from such restraints. The advantages of publicity are two-sided. Men whose corporate activities, within proper limits, are to be made matter of public record are likely to be careful not to do anything that they are not willing that the public should know. On the other hand, much of the criticism of corporations on the part of the people at large is due to the fact that they do not understand corporate methods

or corporate procedure. There is much reason to believe that publicity will make the criticism of corporate undertakings more intelligent, and therefore, in the main, more friendly. Rightly or wrongly, people believe that publicity means fair dealing with the public, and they are equally ready to believe, whether justly or unjustly, that secrecy means unfair dealing with the public.

"The National Civic Federation fully understands that there may be honest difference of opinion as to the general scheme of the bill under discussion, but while the bill may not escape criticism we believe it capable of vindication. The reasons why other alternative methods of escape from our present intolerable situation are not available, either now or in the near future, have already been pointed out. Let me now try to make clear the salient features of the Hepburn bill, which is offered as a practicable method of dealing with a situation. which is confessedly exceedingly difficult.

"(1) The benefits and immunities offered by the bill are conditioned upon registration-for common carriers, with the Interstate Commerce Commission; for all others, with the Bureau of Corporations; and registration is optional. Therefore the bill affects only those who choose to register.

"(2) Registration can be denied to no one who gives the information called for by the bill; and no one can be deprived of registry arbitrarily, nor for cause without appeal to the courts.

"(3) All corporations and associations affected by the bill are divided into two classes, (a) those for profit and having capital stock, and (b) those not for profit and not having capital stock. The first class must give such information as may be called for by general regulations, to be prepared by the President, as to their or ganization, their finances, their contracts, and their corporate proceedings. The second class must file their constitutions and by-laws, the address of their head office, and the names and addresses of their officers and standing committees; but this distinction is not arbitrary. Corporations for profit appeal to investors for their money; corporations not for profit do not. At no other point in the bill is any distinction made between the two classes of corporations or associations. The clause relating to strikes and trade agreements is not an exception to this statement. That clause simply makes clear that certain correlative rights of employees and of employers are not affected by the Sherman antitrust law. The necessity for such a clause I shall speak of later.

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What, then, are the benefits to be derived from registration under this bill?

"(1) For the public, reasonable publicity, such as some corporations already give voluntarily.

"(2) For existing combinations and contracts in restraint of trade, the assurance that they will not be attacked by the Government, except upon the ground that they are in unreasonable restraint of trade; and as to everything done prior to the passage of the act a statute of limitations of one year is fixed. I ask you to notice, therefore, that this bill does establish the rule of reasonableness as to restraint in trade, so far as the past is concerned. This is fair because many such agreements were made before the Supreme Court had given its wide and sweeping interpretation to the antitrust act; and

it is wise, because it will lift a great load of anxiety off of men of all sorts, who would not willingly do anything contrary to the laws of the country. I doubt if there be any one thing that will do so much to revive business courage and enterprise at a time when both are so much needed.

"(3) For combinations to be formed hereafter, the bill provides that if not disapproved within thirty days (the President in his message suggests sixty days-the precise period is not important), these combinations can not thereafter be attacked except on the ground of unreasonableness.

"(4) Contracts or agreements in restraint of trade to be made hereafter need not be filed any more than they are now; but if they are filed, the same rule applies; that is to say, if not disapproved within a limited period, they can only be attacked on the ground that they are in unreasonable restraint of trade.

"I apprehend that this proposed grant to an administrative board or department of the power to disapprove combinations or contracts hereafter to be made is the critical feature of this bill. The first question that will be asked is: Why not adopt the same policy toward future combinations and contracts as toward existing ones, and provide that none shall be attacked except for being in unreasonable restraint of trade? The answer is that such a provision would compel us to go into the future with no other protection than the protection which has proved insufficient in the past to avert the very evils which have aroused the strong popular feeling that has placed the Sherman antitrust law upon the statute books and which keeps it there. With such a provision as to future contracts, it is doubtful whether this bill would even bring about publicity; and even if it were to do so, until it is proven by experience that publicity alone is a sufficient protection, it can not certainly be said that no other safeguard is desirable.

"The next question that will be asked is: Why should not the Government's failure to disapprove be final? The answer is that what is reasonable to-day may become, by the changes that time brings, unreasonable say, five or ten years from to-day. The Government should not be prevented from questioning anything that is in unreasonable restraint of trade; but it may properly be compelled, as it is compelled under this bill, to assume the burden of proving the unreasonableness of which it complains.

"The third question that may be asked is, what redress have those whose combinations or agreements are disapproved by these administrative officials? It must be frankly said, none. I know of no way

to secure a review in the courts of an administrative decision of this character. On the other hand, it must be pointed out that disapproval has no other effect than to leave such combinations and contracts under the Sherman antitrust law as it now stands; that is to say, in the position in which all combinations and contracts in restraint of trade now are. Is it worth while to keep all the business activities in the United States under the harrow because a few combinations or contracts may still be left there, with the possibility at least that they ought to be left there? I think our bill as submitted should be amended at this point so as to call for a written statement of reasons in every case of disapproval. This would tend to prevent arbitrary action, and it would often enable persons aggrieved by dis