dislike among English-speaking peoples to monopoly. Couple with this instinctive hostility a unification of industries in monopolistic units, and you have a situation which makes the transition to Socialism apparently a simple matter to the ordinary mind. It is on its face vastly easier for the state to take over the operation of an industry centralized and monopolized than to organize and operate an industry of many competing units. The present system of regulating competition is designed to preserve industrial democracy. The monopolistic system of industry would be the inevitable forerunner of Socialism.21 The difficulties inherent in the regulation of monopoly would almost inevitably lead the masses of the people to believe that government ownership giving to the people directly or indirectly the benefits of all profit equally would be simpler than regulation preserving to very limited private classes the profits of industry. The certain way to bring about government ownership or Socialism in this country, with the power residing in the people to take such action if aroused to the belief that it is desirable, is to repeal the Anti-Trust Acts and permit monopolies to be attained. The present policy of state and federal government regulating competition is designed, on the other hand, to maintain "an equality of fortune among its citizens thought to be so desirable in a Republic." 22

Dangers of Unregulated Competition to the Public.-If on the other hand effect on the public interests involved in the removal of all governmental regulation against restraints of competition be considered, the lack of wisdom of such a policy is apparent. It is of importance to the public and to the business man that those conflicts of massed units in industry which work harm on society should be prevented. The judicial history of the Sherman Law clearly shows that statute to be a reasonably effective measure in preventing and breaking up such situations. Were producers given the unlimited rights to restrain trade and achieve monopoly which the repeal of the AntiTrust Acts would give them, the effects upon society in in

21 See address Hon. Joseph E. Davies, Chairman, Federal Trade Commission before Associated Advertising Clubs of the World, June 20, 1915. 22 State vs Standard Oil Co., 49 Ohio State 147.

creased prices would be appalling as is shown by the history of producers' organizations, which have acquired a complete monopoly of their product. Should the great farmer organizations of this country attempt to secure a monopoly of their product such as wheat or cotton, for example, the effects in increased. prices, in misery to the lower classes, in bitterness between the farmer and other classes of society could scarcely be overestimated. Or were manufacturers and distributors given a freehand so far as restraints of trade are concerned, the clashes between the great branches of an industry striving for control of price, of terms, of quality, of methods of distribution bringing with them great openly organized systematic boycotts, black lists and so on, would until one or the other faction dominated the situation, cause grave artificial dislocations of the processes of manufacture and distribution and work the gravest hardship upon the public. Or were labor freed from all regulations as to restraint of trade, its power to paralyze industry could scarcely be over emphasized. It is the Anti-Trust Acts which. have repeatedly prevented nationwide interference with interstate commerce, which threatened unparalleled injury to the economic life of the nation. These are not imaginary situations but situations which have been prevented or corrected by the AntiTrust statutes. The artificial control of economic forces by great organizations in an industry, the conflicts between great units of industry, cannot be permitted without immeasurable harm to society.

Wastes of Competition.-But the most ardent believer in the competitive system on the other hand must admit that there are numerous wastes of varying importance resulting from competition. There is unnecessary plant duplication resulting in many industries in a producing capacity in excess of demand with a consequent waste of capital and a tendency because of increased overhead to prevent the competitive price from reaching the low level it otherwise would. There is a lack of knowledge of the basic facts of every industry compelling unintelligent and often ruinous competition which may result in an instability in production, in unsteady employment of labor and in violent price fluctuations in reality against the best interest of the public. There are beyond doubt uneconomic processes of

manufacture being utilized and unintelligent policies being followed and working harm to the industry because of a total lack of knowledge of costs. Small manufacturers often turn out a line of goods when a cost analysis would demonstrate that a specialization of their business would be more practical. There is often a freezing of capital through the absence of fixed standards in the industry, not only tying up capital in the manufacturer's warehouse and on the shelves of his distributors, but also confusing the buyer and sometimes operating to his injury. There is sometimes an incomplete development of the uses of products and a failure to utilize the by-products of an industry. The presence of a number of competitive units no doubt may tend to prevent the centralization of patents in such a way as to secure the uniform production of the best product by the most efficient methods. There is beyond question a great duplication of selling expense due to the duplication of advertising and selling efforts. There may be an inflation of credit due to intensive competition. There are also innumerable instances of gross frauds involved in competitive distribution. Our competitive system prior to the passage of the Webb Act may also have weakened American industry in foreign competition. These uncertainties and wastes, increasing the risks of business enterprises, it has also been contended, tend to keep much working capital from entering freely into ordinary industrial concerns, thus not only depriving the public of a steady market for the investment of its capital but also retarding the development of industry.23

But these evils in the main are not incapable of solution. Most of them can be greatly mitigated by proper lawful cooperation between members of an industry. It is the purpose of this treatise first to explain in as plain language as possible the legal rules governing competition and the many forms of concerted actions tabooed by the law as contrary to public policy, and secondly, to outline to business men the varied ac

23 For complete discussions of the defects of the competitive system, see JENKS AND CLARK, “The Trust Problem," Doubleday, Page and Company; CLARK, "The Control of Trusts," Macmillan & Co.; CROWELL, “Trusts and Competition," McClure & Co.; ELY, “Monopolies and Trusts," Macmillan & Co.

tivities in which, coöperating through their trade associations in complete compliance with the law, they can greatly lessen the economic wastes of competition, yet preserve for themselves and for the public the great benefits of competition as a regulating force in American industry.

CHAPTER III

FRAMING THE RULES OF BUSINESS CONDUCT

THE President of the United States in a recent address before the greatest of all American business organizations used this forceful language:

"If I were to bring one admonition to you, I would like to charge you men and women of influence and responsibility with the task of eliminating from American commerce those who do not have conscience, whose conscienceless practices bring that criticism which sometimes attends our American activities." 1

The codification by the responsible business men of an industry of dishonest practices to be tabooed, if supported by the government, can be a powerful factor in ridding industry of such unhealthy conditions.

The ideals of men best project themselves into reality when crystallized in written documents. The barons of England when they forced a reluctant King to sign the great document known as the Magna Charta created a code of basic principles in government on which have developed the two greatest world powers of to-day. These principles restated and amplified in our Constitution dominate and control our whole system of government. The Bible is the great code of moral conduct for all Christian races. In every line of human activity, a united written expression of that which is best for the common good becomes a strong force for progress. The mere expression clarifies the general sentiment. The expressed judgment of men whom he respects powerfully influences the opinion and action of the individual.

Nowhere is a formulation of principles more needed than in business. Business represents perhaps the greatest field of

1 Address of Warren G. Harding, President of the United States, before the Chamber of Commerce of the United States, May 18, 1922.