POLITICAL SCIENCE OUARTERLY. R FEDERAL CONTROL OF TRUSTS.1 ISING prices of many necessaries of life are stimulating a popular demand for federal control of industrial trusts. The pressure of state laws has induced trusts to make a similar demand. Many persons who advocate federal control of trusts believe that the power of these organizations to limit production and raise prices may be thereby destroyed. Trust advocates, on the other hand, see in national incorporation laws a means of escape from state regulation. It is the purpose here to inquire how far the desires of either the trusts or the public can be met, if Congress is induced to act. merce. Industrial trusts in their present form are simply great corporations, each chartered by a single state, owning land and factories in many states and marketing its products in all the states. The operations of a trust may be divided broadly into two classes, production or manufacturing and interstate comBetween these two classes of operations is the dividing line that separates the field of state regulation from that in which federal authority is well-nigh exclusive. The states may tax, regulate or prohibit the manufacturing operations of foreign corporations within their respective limits, but over interstate commerce the control of Congress is exclusive. On this condition of facts two questions are presented: first, Has Congress power to prevent the limited production and monopoly prices fixed by trusts? second, Can Congress 1 Copyright, 1903, by Alton D. Adams. take from the states their power to tax, regulate and prohibit the manufacturing operations of foreign corporations in their respective limits? I. The Federal Constitution delegates to Congress the power "to regulate commerce with foreign nations, and among the several states, and with the Indian tribes"; "to lay and collect taxes, duties, imposts, and excises";2 and "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers." 3 Chief Justice Marshall, in Gibbons v. Ogden,1 speaking of the power of Congress to regulate interstate commerce, said: This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution. In the past the Supreme Court of the United States has been repeatedly called on to restrain the attempts of individual states to regulate interstate commerce. Several leading and numerous minor cases have decided that states may neither tax, regulate nor prohibit the operations of interstate commerce.5 This is equally true whether the commerce is carried on by natural persons, by domestic corporations or by foreign corporations. Until the last quarter of the nineteenth century, the operations of private persons and corporations in any one case were on too small a scale to affect interstate commerce seriously. Before the final decade of the century, however, it grew evident that agreements or combinations of great corporations might prove to be as great restrictions on commerce as any imposed by individual states. Responding to the popular demand for some protection against this new menace to free commercial intercourse, Congress passed the Trust Act of 1 Article I, 8, 3. 2 Article I, 8, 1. 3 Article I, 8, 18. 9 Wheaton, I. Gibbons v. Ogden, 9 Wheaton, I; Brown v. Maryland, 12 Wheaton, 413; Robbins v. Shelby County Taxing District, 120 U.S. 489. 26 Statutes at Large, 209. 1890. The first sentence in this act is this: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal." The scope of the act, as indicated by this sentence, is evidently very limited, because only those restraints of trade that result from contracts, combinations or conspiracies are declared illegal. It follows that a restraint of trade, however great, that does not result directly from a contract, combination or conspiracy is not within the prohibition of the act. An explanation of so limited a scope is found in the means to restrain trade which were in use at the time of the passage of the act. At that time trusts had not generally assumed their present form of great corporations, each owning most or all of the instruments of production in its particular line. The trust of that date represented an agreement or combination of several distinct corporations, made with a view to control production and to fix prices. Congress, therefore, asserted only so much of its power over interstate commerce as seemed necessary to meet the existing situation. Shortly after the passage of the Trust Act, those who desired to establish monopolies found means to evade its prohibitions. Instead of agreements between distinct corporations, new and larger corporations were formed, each to acquire most or all of the plants in a particular line of industry, and the present form of trust was born. Decisions of the federal courts, in a number of cases brought under the Trust Act, show that this act applies to agreements in restraint of trade, but does not cover such restraint when accomplished by the purchase and ownership of most of the factories in a particular line of industry. This distinction is clearly brought out by a comparison of two cases, United States v. E. C. Knight Co.,1 and Addyston Pipe and Steel Co. v. United States.2. In the Knight case the defendant corporation, with others, owned four sugar refineries in Philadelphia. The American 2 175 U.S. 211. 1 156 U.S. 1. Sugar Refining Company, a corporation of New Jersey, purchased stock of the corporations owning the Philadelphia refineries and thereby established a nearly complete monopoly in the manufacture of refined sugar. The United States brought suit to set aside this transaction, but the Supreme Court declined to interfere, because the sale related to factories for refining sugar, and this is not interstate commerce. The Supreme Court, holding that the Trust Act did not apply to the case, said: Congress did not thereby attempt to assert the power to deal with monopoly directly as such; or to limit and restrict the rights of corporations created by the states or the citizens of the states in the acquisition, control or disposition of property. And again : The act of Congress only authorized the circuit courts to proceed by way of preventing and restraining violations of the act in respect of contracts, combinations or conspiracies in restraint of interstate or international trade or commerce. Evidently the case against the Knight Company failed, not because the monopoly in the manufacture of sugar did not affect interstate commerce, but because the Trust Act does not cover a restraint of commerce obtained through a monopoly in manufacture. The question whether Congress has power to free commerce from the restraint of such a monopoly was not before the court in this case. In United States v. Addyston Pipe and Steel Co. the ample power of Congress to deal with manufacturing and trading monopolies by suitable legislation was well illustrated. The defendants here were six corporations manufacturing cast-iron pipe and selling it in thirty-six states. These corporations entered into an agreement whereby a committee representing all the corporations fixed the lowest price to be made on each job, and the selected company put in a bid at this price, while the other companies put in higher bids to give the appearance of competition. The United States brought suit under the Trust Act to restrain action under this agreement, and the |