Trustbusting or Trustbunk?

Last week, the U. S. Senate adopted a resolution directing the Federal Trade Commission to undertake an investigation of the General Electric Co. to determine whether it and its subsidiaries have acquired a monopoly or exercise a control in restraint of trade. Another resolution was adopted providing for an investigation of the American Tobacco Co. to determine similar facts and also whether there was a conspiracy to boycott tobacco growers' cooperatives. Senator Trammell of Florida proposed an inquiry into the rise in gasoline prices. A proposal has been made for an investigation in wheat and bread prices because of recent increases. Senator Howell threatens a similar inquiry into the railroad consolidations of the Van Sweringens. All these things would seem to indicate that there is to be a revival of "trustbusting."

This ancient and honorable sport dates back to three decades ago. It was in 1882 that Samuel C. T. Dodd, onetime anti-big-business lawyer employed by the Standard Oil Co., drew up a type of trust* agreement which later made the name of trust odious as a loose term applied to any large business organization. It connoted the idea of securing monopolies by unscrupulous practices. There were two principal evils which were combatted in that third decade ago. One was the formation of pools and price-fixing agreements with the aim of driving smaller competitors out of business. The other was a form of connivance between certain favored companies and various railways so that those companies might have lower freight rates than their competitors.

In 1887, the Interstate Commerce Commission was set up to prevent the latter. In 1890, the Sherman Anti-Trust Act was passed to prevent the former. Later, the Federal Trade Commission was set up to aid in suppressing such practices and the Clayton Act to prevent interlocking directorates was passed. Meanwhile, the trusts were continuing. Things were getting bad and the country was getting frightened. Arthur T. Hadley, then President of Yale, conservative as he was, admitted, along about 1900, his fear that within 25 years the country would be ruled by an economic emperor at Washington.

It was only after the anti-trust law had been on the statute books for about a dozen years that action was taken. Theodore Roosevelt was in the White House. He gave the word to Attorney General Knox. First there were investigations and publicity, then prosecutions. One after another, trusts were knocked on the head and compelled to disintegrate. In 1904 and 1905, the Northern Securities, the Beef Trust, the Addyston Pipe Co. were dispatched. Later came the Standard Oil case (which lasted for five years before the company lost and was dissolved) and the American Tobacco Co. case.

And so it went.

But even at that time, President Roosevelt was compelled to make a distinction between "good trusts" and ''bad trusts," between the trusts which were the instruments of "malefactors of great wealth" and those which had grown great simply because they were captained by capable business men. The vital quality of big business is apparent from the fact that, since "dissolution." most of the "trusts" have prospered, indicating either that the old practices were unnecessary or that legal attack was ineffectual.

Now, in large measure, the old trusts, the old trust builders and also , the old fear of trusts has gone. Big business still takes its toll of small, : but it does so mostly by the greater efficiency which comes from mass operation and this is regarded as legitimate. The old trust masters, ambitious egoists, often unscrupulous, . have either died or retired. In their place is a new generation who overbid their competitors in efficiency, of which Henry Ford is an example. The public fear of trusts has gone likewise, because the public understands that big business is a necessity under modern conditions and, especially in the last decade, because the public is becoming more and more a security holder. The U. S. Steel Corporation, for example, today has 159,000 stockholders, almost four times as main' as in 1901; the American Telegraph & Telephone Co. has 343,000 stockholders, including 22,000 housewives, 10,000 clerks, 24,000 laborers.

So the situation is very much changed, not only as regards public opinion, but also as regards the "captains of industry" who must be dealt with and the organization of industry itself, at this time when Congress is apparently launching on a new trust-busting career.

The General Electric Co., where the first investigation strikes, was not in existence when the Sherman Anti-Trust Law was passed. Two years later, in 1892, Charles A. Coffin founded it by combining the Edison General Electric Co. and the Thompson-Houston Electric Co. Even after this combination, it was a comparatively small concern engaged in the manufacture of electrical apparatus. Now it has plants in 40 cities, em ploys over 74,000 men and its stock approaches $200,000,000.

Its growth is intimately connected with the growth of electrical public utilities in this country, for these utilities were badly in need of money for development. The General Electric, through its subsidiary, the Electric Bond and Share Co., helped to finance them and in return took a large measure of their business. This fact incidentally accounts in large part for the present investigation; because of this aid in financing public utilities, the General Electric is indirectly a large security holder in many companies.

Whether or not this situation actually constituted a legal or other monopoly, it undoubtedly would furnish a convenient talking point for our trustbusting statesmen, and the General Electric knew it. Therefore, while Senator Norris fulminated in Washington, the company's Board of Directors met, and voted to turn over the Electric Bond & Share Co. to a new corporation, whose stock would then be distributed share for share to the existing General Electric stockholders. This was, in a general way, the method adopted by the Government in breaking up the old "Standard Oil Trust" in 1911; its employment by the General Electric gave that company a powerful alibi to any official charges of monopoly.

Not to be balked by this procedure, Senator Norn's worded his resolution so that not only the General Electric Co. but its stockholders may be investigated. Since the Electric Bond and Share Co.'s stock is for the moment held exclusively by the stockholders of the General Electric, there should still be something for radical senators to inveigh against, although there is probably nothing legally actionable.

This is the company which is being investigated. Its president is Cerard Swope.* The chairman of its board of directors is Owen D. Young. It is hard to imagine a greater contrast than that between Mr. Young and the trust masters of two and three decades ago. He was born on a farm in New York State, 50 years ago. He had trouble in financing a college career,/- but his father borrowed $1,000 and put him through St. Lawrence University by the time he was 20. Then he went on to Boston University and, earning his way, took a three-year law course in two years.

He emerged a lanky boy of 22 and started practicing law in Boston, specializing in corporate and public utility law. His work brought him into contact with the firm of Stone & Webster, electrical engineers, and he began to diverge into the electrical industry. He attracted the notice of Charles A. Coffin, who, in 1912, made him general counsel of the "G. E." In 1922, when Mr. Coffin, after 30 years as head of the company resigned, Mr. Young was made Chairman of the Board--a lawyer at industry's top.

Still the farm boy, with his hair parted in the middle, straightforward eyes, six feet tall, loosely built, a tireless worker, deliberate in manner, he bad become a power in the country; the father of five children, still owner of the old Young farm, he had enlarged it, stocked it with thoroughbred cattle. Yet none of these things were enough for him.

He organized the Radio Corporation of America. When for a time it seemed that British interests would control the U. S. radio field, the British Marconi Wireless Co. went to.the General Electric and offered $4,000,000 for a certain patent (the Alexan-derson alternator). Mr. Young refused the offer. Instead, he organized the Radio Corporation, bringing in the American Telegraph & Telephone Co., the General Electric Co., the Western Electric Co., the Westinghouse Electric Co., the International Radio Telegraph Co. (its subsidiary), the American Marconi Co., the Tropical Radio Co. (subsidiary of the United Fruit Co.). Thus he built up the largest radio company in the world.

Then, in 1923, he entered into an entirely new field. He became one of the Committee of Experts on German Reparations, where he worked with General Dawes and Henry M. Robinson. He was fully as responsible for the Experts' plan as was General Dawes.

It is this man's organization that is to be investigated as, presumably, the preliminary of a trustbusting campaign. Is his company a trust and, if so, is it a goblin? Or is it what an efficient organization adapted to the new conditions of the industrial scene should be? Inasmuch as the investigation is entrusted to the Federal Trade Commission rather than a committee of Congress, there will probably be little pyrotechnic display: and the country may arrive at a still more up-to-date conception of what is proper and what is improper, what is necessary and what is efficient in modern industry.

--By this type of agreement, stockholders in a number of companies gave their stock into the hands of trustees, who issued trust certificates. The trustees ran the companies much as if they had been amalgamated and divided the profits among the holders of the certificates. This type of organization was very popular for a time; but long before the Standard Oil Co. was dissolved-or divided rather-it had abandoned the trust agreement and become a single large corporation.

*Brother of Herbert B. Swope, editor of The New York World.

/- The story is that one sweltering summer's day, the boy Young went to Cooperstown and entered the Court House. There he saw lawyers sitting, talking in cool ease and straightway he resolved that such a life was infinitely preferable to sweating in the fields.