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remedial legislation demanded by the public. 51 After a
bitter and corrupt political campaign in 1913, a new public
service commission was established, but the New Haven sys-
tem was already nearly destroyed by its own corruption.
The stockholders began to see the real situation that both
principal and income were endangered because of losses on

49 Ripley, Railroads. Finance and Organization, p. 469.

60 Ibid., p. 252.

61 Ibid., pp. 472-3.



192 Trust Dissolution

all sides. The price of New Haven stock, which for twenty
years prior to 1906 had usually been $200 or more per
share, gradually declined until in 1913, it was worth only
about $60, and the low point of $43 was reached early in
1915.

Efforts to curb the New Haven's rapid concentration of
power had been made in vain. In 1908 a decree of the Su-
preme Court of Massachusetts enjoined the company from
holding stocks in any trolley lines in the state after July
1, 1909. 52 This brought the road to terms and a working
compromise was agreed upon in which the court consented
to the New Haven's continued control of the Boston and
Maine, provided it was accomplished through a Massachu-
setts holding company. In complying with the decree the
New Haven organized the Boston Railroad Holding Com-
pany which took over a majority of the Boston and Maine
stock. The New Haven also agreed to improve its service
and abstain from political activities.

The Federal Government also instituted proceedings
under the Sherman law against the New Haven in 1908,
charging the company with monopolizing the steam and elec-
tric railway systems of New England. In the following year
the proceedings were dismissed after a formal agreement had
been entered into between President Roosevelt and the New
Haven management. In this agreement the latter promised
thereafter to be a "good" monopoly. 53

The absolute failure of the New Haven to fulfill the above
promises has already been shown. In 1914, the Government
began dissolution proceedings. Because of its financial cir-
cumstances the company feared a long and expensive suit
that would likely have resulted in putting the company in
the hands of a receiver. Upon securing a formal agreement
to dissolve 'the New Haven system into its component parts,
the Government withdrew its suit.

The dissolution plan was officially summarized as fol-
lows: 54

"First. The Boston Railroad Holding Company is a

ra Ripley, Railroads, Finance and Organization, pp. 571-2.
68 Ibid., pp. 571-2.
* Ibid., p. 572.



Decisions Since 1911 193

Massachusetts corporation holding a majority of the stock
of the Boston and Maine Railroad, and 90 percent of the
former's stock in turn is owned by the New Haven.
* * * the stock of the holding company will be transferred
at once to five trustees, and, after arrangements have been
made to protect the minority stock of the holding company,
they shall sell the Boston and Maine stock prior to January
1, 1917.

Second. The stock of the companies which control the
Connecticut and Rhode Island Trolleys will be placed in the
hands of trustees five for each state and shall be sold
within five years from July 1, 1914.

Third. The majority stock of the Merchants and Min-
ers Transportation Company, now held by the New Haven,
will be placed in the hands of three trustees and shall be sold
within three years from July 1, 1914.

Fourth. The minority stock in the Eastern Steamship
Corporation, held by the New Haven, shall be sold within
three years from July 1, 1914, and in the meanwhile shall be
deprived of voting power.

Fifth. Whether the New Haven railroad shall be per-
mitted to retain the sound lines will be submitted to the
Interstate Commerce Commission for determination under
the provisions of the Panama Canal Act.

Sixth. The Berkshire trolleys shall be sold within five
years from July 1, 1914." 55

The book value of the various investments of the New
Haven system involved in this dissolution operation amount-
ed to $133,815,082. The dissolution after providing for the
separation of the two territorial monopolies the Boston
and Maine and the New Haven further divests the two com-
panies of the control of the trolley and electric railways,
which represented a very large part of the New Haven
securities. The dissolution also provides for the weakening
if not the breaking of the New Haven's control of water
transportation in New England. The fate of the Long Is-
land Sound lines was left to the decision of the Interstate
Commerce Commission.

Soon after the above decree was entered, the Government
M Ripley, Railroads, Finance and Organization, p. 572.



194 Trust Dissolution

instituted a criminal suit against Mr. Rockefeller and twenty
others, each at some time a director or officer, or both, of
the New Haven company, charging them with conspiring
to monopolize the transportation facilities of New England.
A three months' trial in 1916 of eleven of the principal de-
fendants resulted in the acquittal of six and a disagreement
as to the other five.

THE NATIONAL CASH REGISTER COMPANY

^The National Cash Register Company has excelled all
American trusts, with the possible exception of the Standard
Oil, in the use of unfair methods of suppressing competition.
It was chiefly due to the vigorous employment of such meth-
ods that the company early obtained almost complete con-
trol of the cash register business of the country. }

The National Cash Register Company was organized in
Ohio in 1882 and was reorganized as a New Jersey company
in 1899. The present company under the same name was
organized in 1906 by the Paterson interests which con-
trolled the former organizations. The usefulness of cash
registers as record-keeping and cash receptacle devices gave
rise to such an increased demand for the machines that many
other concerns came into existence for their manufacture
and sale. However, the National Cash Register Company"
was determined to permit no competition to exist for any
length of time. Its intention to monopolize the cash regis-
ter business was freely published in the literature sent by
the company to its agents. From time to time meetings of
its officers and agents were held to discuss plans for the
elimination of all competition. To accomplish this purpose
a special department was created, which was designated as
the "Competition Department" or the "Ways and Means"
department. It was aided by the information obtained from
hired agents who resorted to bribery and other practices par-
alleling those of the Standard Oil to accomplish their pur-
pose. Among the various methods of suppressing competi-
tion employed by the company were: the use of "knock out"
men whose business it was to interfere with the sales made by



Decisions Since 1911 195

competitors and to make threats, intimidations and assaults,
if necessary, to prevent such sales ; persistent and nation-
wide espionage upon the business of competitors ; buying
over the salesmen of competing firms ; circulating among its
agents a black list containing the names and latest informa-
tion gathered concerning competitors ; selling cash regis-
ters known as "knockers," which closely resembled those of
competitors, at ruinous prices until the competitors were
eliminated ; instituting costly suits whose only intent was to
delay, wear out, and discredit competitors ; bringing actions
for alleged infringements of patents ; intimidating purchasers
of competitors' goods and inducing them to break their con-
tracts and to refuse payment of sums owed such competitors,
the National agreeing to assist such purchasers if suits
were brought against them; misrepresenting competitors'
registers and even destroying their mechanism in order to
make purchasers dissatisfied with them; defaming and ruin-
ing the credit of competing companies ; and the common
practice of operating many bogus or secretly owned com-
panies which posed as independents in order to secure the
patronage of those hostile to the trust and to obtain inside
information relating to competitors. 56

The foregoing list is not complete. The federal grand
jury declared that the unfair, oppressive, and illegal means
used by the company were so numerous in kind and so shift-
ing in character as to make description impossible. Only a
few of these predatory practices call for further comment.
The sale of specially made registers at ruinous prices was
effective in destroying competitors. Whenever a new com-
pany entered the field, registers similar to those made by the
new company were sold at low prices by the National until
the new company was eliminated. Cash registers, purchased
from competitors or secured by forcing them but of business,
were advertised and sold below cost of production, thus in-
timidating both dealers and manufacturers through danger
of financial loss. The effectiveness of bogus independent
companies has frequently been mentioned. Such companies,

50 55 Fed. Rep. 605-6; 201 Fed. Rep. 701-4; Stevens, Quart. Jour, of
Econ., V. 26, pp. 625-630.



196 Trust Dissolution

pretending to compete with the National, were common and
were used to wage local price cutting wars against competi-
tors or to secure trade secrets and inside information con-
cerning them. Two other methods of intimidation may be
described. In the factory at Dayton, Ohio, the National
maintained a display room known as the "Grave Yard" or
"Midway" in which the company exhibited the registers of
vanquished competitors. Display cards gave the name of
the company which made the register, the date of its disso-
lution, the amount of money lost, etc. Manufacturers, mer-
chants, and other visitors were shown through the "Grave
Yard." Another device was the publication and distribution
of lists purporting to give the names of concerns eliminated
from the cash register business. One list, issued in January
1910, contained the following statement: "Within the past
fifteen years, 158 cash register companies have been organ-
ized to compete with the National Cash Register Company.
Of these, 153 have failed in business. Their combined capi-
tal was $5,735,000. Their combined loss was $1,970,000.
According to the sworn affidavit of its officers, the Boston
Cash Register Company alone lost $192,750.08. Of every
20 cash registers sold, 19 are Nationals." 57

It was largely through the practice of unfair methods
that the National Cash Register Company was able to domi-
nate the business so completely. The percentage of the total
business controlled by the National Cash Register Company
which was about 82 in the early nineties was later increased
to 95. 58 Such complete and increasing control in a large
and growing business, which required small capital to enter,
is evidence of the effectiveness of the National's methods of
restricting competition.

In 1893 a criminal suit under the Sherman law was
brought against John H. Patterson and others of the Na-
tional Cash Register Company, charging them with enter-
ing into a combination for the purpose of controlling the
price of cash registers. The indictments contained counts

w Stevens, Quart. Jour, of Econ., V. 26, p. 629.
68 201 Fed. Rep. Wl, _

v^ v



Decisions Since 1911 197

against nearly all the methods described above. 59 The prose-
cution of the case was allowed to lapse because the complain-
ing witness entered into the combination of the defendants.

It was nearly two decades before other action was
brought against the company. In the meanwhile, it con-
tinued the unfair and predatory practices and was able to
derive large earnings from its control of 95 percent of the
entire cash register business. In 1912 a second criminal *\*
suit was brought against President Patterson and twenty-
nine others of the National Cash Register Company, charg-
ing a conspiracy in restraint of trade and commerce which
resulted in an unlawful monopoly of the industry. The evi-
dence showed the use of nearly every method of suppressing
competition enumerated above. 60 The trial resulted in a
verdict of guilty against twenty-nine of the thirty defend-
ants and fines aggregating $135,000 and jail sentences rang-
ing from nine months to one year were imposed. 61 Mr. Pat-
terson was sentenced to serve one year in jail and pay a
fine of $5,000. The defendants appealed to the Circuit
Court of Appeals. This court, after a lengthy review of the
case, reversed the judgment of the lower court on rather
technical grounds and remanded the case back for retrial.
The Government applied to the Supreme Court for a review
but this was denied. 62 The retrial was not pushed, and early
in 1916 the criminal proceedings were dropped when a de-
cree, described below was entered in a civil case against sub-
stantially the same defendants.

The civil case against the National Cash Register Com-
pany and others was filed about six weeks before the filing of
the above mentioned criminal suit. 63 Both of these actions
under the Sherman law were against substantially the same
defendants and contained similar charges of restraint and
monopolization in the cash register business. A consent
decree was entered in the Circuit Court by the attorneys for

59 55 Fed. Rep. 805-6.

60 201 Fed. Rep. 701-4.

"The Federal Antitrust Laws, Washington, 1916, pp. 73-4.

82 238 U. S. 635.

63 The Federal Antitrust Laws, Washington, 1916, p. 70.



198 Trust Dissolution

the defendant and the Government in February, 1916. 64 By
the terms of the decree the Government secured practically
every change asked for in its civil suit against the company.
It was established that the defendants had combined to
restrain and to monopolize the cash register trade in viola-
tion of the Sherman law, by one or the other of the means
which the decree enjoined.

The restraining provisions covered over seven pages of
the decree and included the following acts : 65 ( 1 ) inducing
a purchaser of a competitor's cash register to break his sale
or agreement with such competitor; (&) espionage for the
purpose of obtaining information concerning a competitor's
purchasers or business; (3) illegally securing a competitor's
business secrets; (4) buying up or inducing agents of com-
petitors to leave their employers; (5) using any informa-
tion obtained from an employee of a competitor relating to
trade secrets or business confidences of his employer; (6)
manufacturing or offering to sell any cash register resem-
bling a competitor's register for the purpose of preventing
sales of such competing machines, or selling any registers
without regard to its cost of manufacture with intent to
drive out competitors; (7) disposing of any cash register
of a competitor, no matter how obtained, for the purpose of
preventing sales by such competitor or for any other pur-
pose mentioned; (8) disposing of second-hand registers for
the special purpose of underselling a competitor and driving
him from business; (9) employing any person whether
known as a "special man" or "competition man," whose
principal business is to prevent sales of cash registers of a
competitor, or his agent, or dealer; (10) following from
place to place competitors or their agents for the purpose
of hindering their attempts to sell or to ascertain the names
of persons, places of business, and dealers they may call
upon; (11) circulating any statement reflecting upon the
solvency or responsibility of a competitor, or upon the effi-
ciency of a competing register when such statement is a mis-
representation or is made for the purpose of preventing the

"Final Decree, Washington, 1916.
Ibid., pp. 3-10.






Decisions Since 1911 199



sale of competing registers, or of driving such competitors
from business; (12) publishing any circular or letter with
the purpose of recommending or suggesting to agents any
act or means of accomplishing any act which is forbidden
in the decree; (13) intimidating any competitor or would-be
competitor by displaying models of competing registers
along with registers made in imitation of them, or by dis-
playing quantities of second-hand registers of competitors,
or by displaying statements or placards purposing to show
the names of ruined competitors and the amounts lost by
them in attempting to compete with the National, or by
intimidating investors in the stocks and securities of com-
peting companies formed or to be formed; (14) maintain-
ing bogus or secretly owned companies posing as independ-
ent competitors; (15) intimidating competitors or purchas-
ers by threats of patent infringement suits; (16) acquiring
control or ownership of the business, patents or plants of
competitors without the consent of the court and the ap-
proval of the Attorney General.

By the terms of the decree the court retained jurisdic-
tion of the case for the purpose of enforcing the injunction
and enabling the parties to apply to the court for modifica-
tions of the decree should changed conditions or changes of
law make the decree unnecessarily oppressive to the defend-
ants, or inadequate to maintain competitive conditions in
the industry. The defendants were assessed with the costs
which amounted to about $40,000. With the filing of the
decree the Government announced that no further proceed-
ings would be taken against the directors and officers of the
company. If there be any persons who deserve criminal
punishment under the provisions of the Sherman law, it
would appear that some of the defendants, who for over
thirty years had used the most unfair, oppressive, and il-
legal means of maintaining a monopoly, should not have been
allowed to escape so easily. Undoubtedly the generosity
shown by President Patterson and his associates during the
Dayton flood disaster, which occurred soon after their con-
viction, helped to weaken the popular demand for their
punishment.



200 Trust Dissolution

The injunction entered against the defendants appears
very sweeping and covers the chief means of suppressing
competition employed by them. However, many of the pro-
hibitions will be difficult to enforce, especially since the de-
fendants are experienced in methods of violating the law
and have established habitual fear on the part of competi-
tors. Perhaps the most important and the most promising
of the restraining provisions is the one forbidding the de-
fendants to acquire control or ownership in the business or
patents of a competitor without the consent of the court.
The retention of jurisdiction over the case for the purpose
of enforcing the decree and maintaining competitive con-
ditions, though uncommon, is not new. In some of the earlier
dissolutions the independent interests asked the court to re-
tain jurisdiction of the case so that they might subsequently
apply for relief if necessary, but the request was usually de-
nied.

The most serious defect of the decree was that it left a
monopoly control of about 95 percent of the business in the
hands of the company which had built it up by illegal meth-
ods and secured large profits from it for about thirty years.
Such a degree of control gives power in itself which can be
used without any apparent violation of the law. Since the
capital required for entrance into the business was not
large, there could have been some equitable division of the
business without serious loss in productive efficiency. Even
if the restraining features of the decree be successfully en-
forced, the company will for many years have the advan-
tages, illegally secured for the most part, which arise from
control of a large proportion of the business, patents, sell-
ing agencies, and established trade connections throughout
the country. However, if unfair methods are prevented there
is hope that existing competitors may rapidly expand their
business. But the conclusion is inevitable that the defend-
ants got off easily. By the terms of the decree all prosecu-
tion against them was dropped. They lost no gains or ad-
vantages illegally secured during the past three decades.
The promise of the defendants to be good in the future while
the court retained jurisdiction of the case is an interesting



Decisions Since 1911 201

experiment with some of the most persistent violators of the
trust laws. It may be noted that in the fixing of the decree
the court did not call upon the assistance of the Federal
Trade Commission.

THE BURROUGHS ADDING MACHINE COMPANY

The Burroughs Adding Machine Company practiced
many of the methods of unfair competition followed by the
National Cash Register Company in its efforts to monopolize
the trade in adding and listing machines. The profits of the
company have been very large. Although a 900 percent
stock dividend was declared in 1906 the cash dividends rose
rapidly from 7 percent in that year to 16 percent in
1913. 66 In 1913, the Government filed a petition against
the company and others, charging a conspiracy to monopo-
lize trade and commerce in adding and listing machines. A
consent decree was immediately entered, enjoining the de-
fendants from doing the various acts complained of, in-
cluding misrepresentation of competitors and their machines
by act or word, espionage through corruption or bribery of
employees, and inducing breach of competitors' contracts.

Since the decree was entered in 1913, dividends of 16
percent have been paid by the company and in 1916 an-
other stock dividend of 200 percent was declared. This case
furnishes additional evidence that control and profits once
established by unfair methods may be maintained even though
the illegal practices are later abandoned, and therefore a
dissolution decree which merely prevents the repetition of
the criminal tactics and leaves the guilty persons in posses-
sion of the spoils hardly meets the demands of justice.

THE ALUMINUM COMPANY OF AMERICA

Aluminum is a metal that has many valuable properties

and the invention of cheaper processes of production within

comparatively recent years has given it an important place

in modern industry. It is widely used in metallurgy and for

"Moody's Manual, 1916.



202 Trmt Dissolution

the manufacture of cooking utensils, castings in automobiles,
engines, airships and aerial crafts, submarines and boats,
wire cables and transmission wires, foil for candy and to-
bacco. Bauxite is the chief aluminum ore and this is pro-
duced mainly by the United States and France. Cheap
power is essential to its reduction on a commercial scale. In
1886, only 1.5 tons were produced; in 1891, 75 tons; in
1901, 3575 tons; in 1911, 23,062 tons. The price declined
from $90 per pound in 1855 to $12 in 1870; $2 in 1890; 33
cents in 1904, and in 1910-11 it ranged from 19 to 24
cents. 67

The Aluminum Company of America was organized in
1888 as the Pittsburg Reduction Company, with a plant
near that city. 68 It used Hall's process of electrolysis which
greatly reduced the cost of production. Later, the com-
pany utilized the water power at Niagara Falls, and built or
acquired other water power plants in this country and Can-
ada. It also obtained a very complete control of bauxite
ore, the raw material, by means of which it dominated the
production of aluminum, as well as its manufactured prod-
ucts. Various unfair methods were used by the company to
secure and maintain its control. Many of these are de-
scribed in the decree of the court, which is given below. In
1906, control was acquired over four other companies, the
largest being the St. Laurence River Power Company which
had outstanding $3,500,000 of common stock and $3,000,-
000 of cumulative preferred stock. 69 In 1907, the name of
the company was changed to the present title and in 1911 it
was the only producer of aluminum in the country. 70 Enor-
mous profits were obtained by the company. The old capital
stock was $1,000,000, and its assets had increased by 1915
to $27,000,000, on which it earned 17 percent. In 1909
a stock dividend of 500 percent was declared. The out-
standing stock was $19,000,000 in 1916.

Late in 1912, the Government filed a petition against
the Aluminum Company of America to prevent a further mo-

67 International Encyclopedia.

""Moody's Manual, 1916, p. 2029?

89 Ibid., p. 2029.

70 New International Encyclopedia.






Decisions Since 1911 203



nopoly of and restraint upon the trade and commerce in
aluminum and aluminum wares. It charged that the com-
pany owned from 80 to 90 percent of the raw material in
this country and controlled by contract the disposition of
the remainder; that it prevented through contracts with
foreign companies the importation of raw material ; and


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