April 12, 1910

LIB

George Gerald King

Liberal

Mr. KING.

While we have had this growth of mergers and trusts in the United States, we have had a somewhat similar growth, though not on so large a scale, in this country. Before 1909, there was not a large number of these corporations in Canada, although the Montreal Light, Heat and Power Company, the Dominion Textile Company, the Canadian Breweries Company, and the Canadian Consolidated Rubber Company, are large aggregations of capital that will be present in the minds of all here. I have here a statement showing the different mergers that have been effected since 1901, but will pass over that for a moment. Last year, 1909, was a year in which so many mergers and consolidations took place that no less a financial authority than the ' Monetary Times ' refers to the circumstance as constituting the year 1909 ' merger year.' There can be little doubt these consolidations were an outstanding feature of the industrial and financial situation of Canada during the last year. There were formed in that year the Amalgamated Asbestos Corporation, Limited, the Black Lake Consolidated Asbestos Company, Limited, the National Breweries Company,Limited, the Canada Cement Company,Limited, the Carriage Factories Company,Limited, the Canadian Car and Foundry

Company, Limited, the Quebec Railway Light, Heat and Power Company, Limited, the Siemon Company, Limited, the Canadian Consolidated Felts Company, Limited, and we are told of a contemplated merger in the maritime provinces of the Dominion Iron and Steel Company and the Dominion Coal Company. These figures would, I think, bear some careful study, not necessarily as reflecting in any way upon the organizations concerned in these particular mergers, but rather as helping to illustrate an industrial, development in our country, a development which is likely to increase during the years to come; and unless the mergers and trusts are to be wrongly judged by the public, they must in some way be made subject to a larger measure of state control than they are at present. If one will . look over the press since the beginning of the present year, he will find that there is hardly a day when mention is not made of some new consolidation or merger. And these announcements come out simultaneously with the experience every one is having of the increased cost of living. The fact that these two things have come together has brought about an association between them in the minds of the public in the nature of cause and effect. My reason for dwelling at some length on both these points is that a truer discernment may be arrived at of the nature of the phenomena into which we are examining and the results to the community.

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CON

John Graham Haggart

Conservative (1867-1942)

Mr. J. HAGGART.

Do you know whether these combines, or trusts have acted injuriously to the public?

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LIB

George Gerald King

Liberal

Mr. KING.

I have nothing to say in that regard. I have not any evidence at the moment to offer to the House, but 1 would refer hon. members to the report of the select committee appointed in 1888, when the late Mr. Clark Wallace brought up the subject of combines and consolidations I could quote a considerable amount of evidence given before that committee to show that some of these trusts have acted in a manner injurious to the public, and there is strong reason to believe that, without going into details of individual cases, an examination into some, not all of them, would show they had acted in a manner hardly considerate enough of the interests of the vast body of consumers.

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CON

Richard Blain

Conservative (1867-1942)

Mr. BLAIN.

Could my hon. friend give us any figures which would show that since eight or ten years, during which he said some combines have existed, the articles in which they deal have been made dearer to the consumer.

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LIB

George Gerald King

Liberal

Mr. KING.

One might name a great many, but I perhaps would do injustice to individual concerns were I to single any out. I might do injustice for thi3 reason that while there has been a rise in prices, that has been due in many cases to a large number of causes. The legislation we are proposing is legislation which will afford an examination into the business of every large concern, where there is reason to believe that a combine is operating to an undue disadvantage of the public; and until an examination of its business had taken place, I would hesitate to say that it has been acting unfairly. The fact that the increase in prices, and the formation of these large mergers, anid! combines have taken place simultaneously, has created in the minds of the people a strong impression that the two are intimately connected, and the public are demanding some kind of legislation which will enable them to see whether they are right or wrong in that particular.

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?

Some hon. MEMBERS

Hear, hear.

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LIB

George Gerald King

Liberal

Mr. KING.

It has become impossible to disassociate in the popular mind the two outstanding phenomena, the one a matter of daily observation, the other of daily experience, and the public has come to believe that in some way, or to some degree, the increased cost of living which it has had to bear is in some hidden or unfathomable manner linked up with these uncontrollable aggregations of wealth representing gigantic interests and possessing gigantic powers. I was just about to mention

that there are innumerable instances of mergers alleged to have been formed during the present year. In the Halifax ' Chronicle ' of February 21 it is stated that:

The Engineering and Mining Journal of New York, one of the chief authorities of the iron and steel trade says in its current issue that reports come from Montreal and Toronto that negotiations are in progress for consolidation of Canadian iron and steel interests, somewhat on the line of the United States Steel Corporation.

The ' Canadian Miller and Grain Elevator ' of March, 1910, refers to alleged mill mergers. That paper says:

_ It is believed that abont ten mills are being considered in connection with the merger.

The Hamilton ' Times ' of February 21 talks about a proposed consolidation of all the gas companies in the Haldimand field. Various references have been made in the press to a formation of a giant merger of all the canned fruit and vegetable interests of eastern Canada. The Hamilton ' Times ' of March 2 deals at Some length with this merger. The Montreal ' Star ' of February 16 refers to an alleged combine of four of Cobalt's richest silver mines. The Toronto ' World ' 'of December 30 refers to an amalgamation of the leading electrical machinery construction companies in Canada for the purpose of avoiding future cutting of prices. The Montreal ' Star ' of December 19 refers to the big works of the Toronto Bolt and Forging Company, Limited, at Sunnyside and Swansea, employing some hundreds of men, and said to be the centre of a big consolidation that will represent at least $1,000,000 of invested" capital. The Toronto ' Star ' of February 11 talks about several navigation companies alleged to be forming a consolidation. The Toronto ' Globe ' of January 21 refers to a combine in the asbestos trade. The same paper of February 24 refers to a combine among some of the Montreal railway and power companies. The Montreal ' Gazette ' of January 26 refers to mergers of the various properties of the Canadian Electric Company, the Quebec Railway, Light and Power Company, the Jacques Cartier Light and Power Company, the Frontenac Gas Company, and the Quebec Gas Company. The ' Mail and Empire ' of February 1 has a reference to a merger in the fish business on the Atlantic coast. And another reference to that merger is made in the Toronto * Star ' of February 16. The Manitoba ' Free Press ' of December 1 speaks of a grain combine among the grain dealers. Mention is also made in the Toronto ' Star ' of February 11 of an alleged combine among Canadian insurance companies, and the Manitoba ' Free Press ' of December 11 also takes up that question.

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LIB

George Gerald King

Liberal

Mr. KING.

[DOT]eery low. point. With the advent of the modern refrigerator, experience has demonstrated that during this surplus period perishable product can be purchased and stored for later marketing. It has been found that well selected and well stored product, with improved transportation, permits of the shipment of such products to remote markets hitherto little considered. The inevitable effect has been to establish higher buying prices for butter, eggs and poultry during periods when under earlier conditions they broke badly in price. Through these conditions producers have secured much higher prices. Such results are inevitable, indeed, the whole cold storage and refrigerated transportation policy of the present Minister of Agriculture has been * conceived to this end.

The opening of the Northwest and the inrush of new settlers, and the development of the mining camps in New Ontario, have increased in a very remarkable way the demand for farm products in this ' province. Years ago when fowl were abundant in the fall of the year, they were disposed of in large quantities upon this market and Montreal, through commission houses, and sometimes at very cruel prices. They were badly bandied and badly sold. The result was that notwithstanding handsome profits to the retailer, consumers secured poultry for two or three months in the year at very low prices. Now large dealers have their agents through the country instructing farmers how to dress their poultry or are themselves dressing it for them. The market which they first secured for such product was in Great Britain. This year not one bird has been shipped there, hut all the surplus has gone to the Canadian Northwest. I know of one firm alone who made a contract to deliver 42 carloads of poultry for shipment west, for distribution from Winnipeg to the British Columbia coast.

It is noticeable that in this presumably producing country, we have practically no surplus butter for export. By reason of the marked improvement in the quality of butter through manufacture in creameries, the consumption at home has greatly increased. In addition there has been the added demand from New Ontario and the West. The consumption of milk, too, in big towns and cities, owing to the great increase in the use of cereals, has taken cream which otherwise would have gone into butter. A few yeare ago tens of thousands of cases of eggs were exported to Great Britain. During the past years not one case was sent out of the country. All were required for home consumption, the added demand coming from the West and the mining camps in New Ontario.

The real situation in Ontario is that new markets of large dimensions have recently been opened for her products in the West, with its new settlers and railway,construction, and the mining camps in New Ontario. At the same time a greatly increased outlet has developed in the towns and cities of the province, by reason of the steady increase of the non-productive population.

I think this letter states very clearly what has been one of the causes of the improvement of the condition of the farm-Mr. KING.

ers of this country which has helped to make more profitable some of the business in which the farmers have been engaged. But, there have been other factors that have helped to take away in part some of the advantages which the farmers would otherwise have had. The greater difficulty of securing farm labour and the higher cost of labour have taken away much of the advantage which perhaps the farmer would have gained from the better arrangements described in this letter. However, the important point to consider is that much of the increase in prices that has taken place is simply an index of the greater prosperity that has resulted from a better policy in the interest of the farming community of this country.

There are other causes that have also-contributed to the rise in price. First of all, we/ have the great extravagances of tl)e wealthy class. Under the conditions of development and expansion described, opportunities have been afforded to investors, to the possessors of great natural resources, and to those who have had to do with their development and the distribution of products and produce, a means of acquiring wealth such as comes but seldom to a people in the life of a nation. Unfortunately, the riches thus reaped do not always become generally distributed; while the prosperity is real enough, it somehow seems to converge into the hands of a few. This-wealth so suddenly, and in many cases so easily acquired, has given rise, not infrequently, to standards of living to which its possessors were strangers a few years before. Money easily obtained has been lavishly displayed and spent, sometimes on more and better food, sometimes on moTe and better clothes, often on more and dearer luxuries.

This extravagance of the rich considered in all its bearings, and in particular of what it has demanded of its host of imitators, has done much to enhance the cost of living. Wealth centred in the hands of the few has helped to determine the price at which the many have been obliged to pay. The result has been that through the extravagances to which I have referred, we have come to have large demands for certain classes of commodities that are not commodities that are produced for the mass of the people, and capital which would otherwise have been invested in those things in which the mass of the people are more interested has been withdrawn from those occupations and been put into such-businesses as making automobiles and the like in order to supply the demand -of those who have become very wealthy. It is in this sense that it has been well and truly said that the high cost of living is the cost of high living or the cost of living high. So much by the way of general statement.

To examine in a more critical and scien-

tific manner the causes of the increase in the rise of prices, it is necessary to consider first, what prices in reality are. Rightly understood they are the value oi commodities in terms of gold. It follows, therefore, that whatever effects the relation of commodities to gold in the matter of supply or demand of either of these factors will have its effect upon prices. Prices are the result of an equation of which commodities and gold are the two factors; an increase in the former relative to the latter means a lowering of prices, an increase in the latter relative to the former an increase in prices. That the supply of gold has vastly increased is a matter of statistical record. That this increase relatively has been so considerable as to affect prices is the belief of many leading economists, among the number such eminent financiers as Sir Edgar Speyer, who recently paid us a visit, and such eminent authorities as Professor Taussig, of Harvard; Professor Fisher. of Yale, and Professor J. B. Clarke, of Columbia. In fact, there is practical unanimity as to this being one of the main causes.

When we look at the gold side of the question, we find that the total gold production in the world has been doubled in the last decade, and that ten years ago it was practically double what it had been ten years before that again. Against the increasing production there is, of course, to be placed the increased amount of gold necessary to meet the needs of a population vastly larger, and further, the large amount of gold consumed in the arts, though the increase in the amount of gold used in the arts is, I understand, estimated by the best authorities to be considerably less relatively to the amount in use as a medium of exchange.

This is a circumstance of course which sooner or later comes to affect all countries alike, for the flow of the precious metals is such that though invisibly and imperceptibly, they gradually tend to find their level in all parts of the world. This cause may account for relative increases over periods of time, but the causes which account for actual prices in different countries are necessarily of a different nature.

There is, however, a further influence closely associated with the production of gold, which, however, is more impalpable and incalculable, and which comes into play in the shape of credit, by virtue of which one comparatively small quantity of gold does duty for vast movements of currency. The service which credit can render in this connection is enhanced in this country by the splendid system of branch banks which extends throughout the country. Credit, of course, rests primarily on confidence, which in turn, is has-' ed upon the actual or prospective wealth. The extent to which credit is likely to play

a part in affecting prices will depend upon the degree of confidence m the business community. The whole level of prices will be found at intervals to be swayed according to the confidence or timidity of purchasers and investors. The rapid recovery from the panic of 1907 is attributed by many to the increased confidence which this increased organization has been able to produce.

Leaving now the gold and credit side of the equation, and coming to the commodity side, there are a variety of causes connected with the demand and supply of commodities all of which have their effect upon prices, Everything that enhances the demand, the supply remaining the same, is likely to increase prices; everything diminishing the supply and the demand remaining the same will have the same effect.

I have already made mention of the extravagance of the rich, and the increased ostentation in display, in some respects the criminal extravagance ot our wealthy classes, and the great luxury, and higher level of living of all classes. Within a lifetime the scale of living in North America particularly in towns and cities has beep revolutionized. The luxury of yesterday has become the necessity of to-day. For the very wealthy take automobiles alone. What is believed to be a fair estimate of the output in the United States for one year is 160,000, while the output for the past seven years is placed at over 400,000.

But to come to the standard of living of the average man. Our homes are more commodious, and better furnished than they were, equipped with all manner of conveniences unknown to our fathers. Electric light has taken the place of the kerosene lamp, furnaces have replaced box stoves; we travel, not on foot, but by electric car; children enjoy educational advantages which were not within the reach of their parents. Much shopping is done by telephone. Proprietary goods have taken the place of staple food products. Amusements and diversions have gained a hold on the people which they did not possess before. As a slight but forcible illustration of the difference in standards, let me mention one fact brought to light by the prices investigation conducted in the Department of Labour, to which I have already referred. The inquiry shows ,that there has been a' marked 'lifting' of the popular taste in the matter of _ cotton goods. Some coarser lines of goods' which * were in demand twenty years ago are not now manufactured at all, there is no demand for them; the class buying such goods twenty years ago, now buy goods of better quality. The present goods cost more than those of the past, but they are as a matter of fact in most cases of considerably better quality. Unquestion-

ably a change in the standard of living has been brought about with the large increase in our scale of expenditure, an increase which the credit system has helped to enhance.

Intimately associated with the higher or more luxurious standards of living are the changed habits of the people resulting from and in marketing and distribution. To refer to only one we should denote the falling into disuse in all our larger cities and towns, of the old, central markets, and the necessarily increased cost of retail food distribution. Where purchases are made direct from the purchaser the additional middleman profit does not play so important a part, but where goods, are delivered not only at one's door, but in preserved or canned form, some increase in price1 to meet the extra cost of service alone is inevitable. The fact that all retail trade is based on direct purchase from the producer must, unless the purchaser in the first instance is demanding too excessive a profit, entail some enhancement of prices. There are but few commodities to-day as compared with fifteen or twenty years ago, which householders purchase in any way other than through the retail dealer.

Particularly important in this country, however, is the other cause which has already been mentioned, namely, increased poipulation, including immigration, and in this connection the increased demand for goods in remote, and inaccessible parts. Increased population means an increased number of mouths to fill; settlement in remote districts means increased difficulties in satisfying existing needs. Products have to he brought long distances, involving additional elements in handling, transporting, packing and commissions to middlemen.

Those causes are self-evident, but arising out of them are causes of even greater potency, though not as apparent at first blush. The estimated population of Canada according to the census of 1901 was 5,371,315. The estimated population at the beginning of the present year was over 7,000,000, an increase of approximately 33-75 per cent in less than ten years.

But what- is even more important as accounting for the increased demand which has effected prices, is the enormous expenditure in connection wfith industrial expansion which has been going on, expenditures made verv largely out of borrowed capital on railways, towns, public works, and other large undertakings. Corporations and governments, national, provincial and municipal have been particularly borrowing for investment or at least for expenditure in the country. According to Mr. B. E. Walker of the Canadian Bank of Commerce, the amount of foreign capital invested in this country in the year 1909, amounted to $200,000,000. Many of these enterprises have not yet become productive, hence they affect Mr. KING.

almost exclusively for the present, the demand side of the equation. The demand has been in the first instance for the materials consumed in the actual undertaking, then for the labour, and the commodities necessary to supply the labourers engaged upon the work, but the circle of industrial and trade activity once set in motion has gone on widening until it has reached all but the outermost edge of the community.

Reference has been made to farm labour. In that connection, one might quote many statistics to show just how considerable has been the increase in the cost of farm labour. But the increase in the cost of farm labour is only part of the general increase in wages throughout the Dominion. I have here a statement prepared in the Department of Labour, showing the rates of wages prevailing in the building trades in different cities of Canada from 1900 to 1910. In the city of Halifax, taking only the building trades, it would appear that the wages have risen for the different classes of labour in the building trades for those 10 years from 7 per cent to 424 per cent, depending on the particular class affected. In St. John, the increase has been from 10 per cent to 42 -6 per cent. In Montreal, it has been from 24 per cent to 834 per cent for one class, the,average being about 66 per cent for some of the higher classes. In Toronto, the increase has been from 16 per cent to 45 per cent, in Winnipeg, from 11 per cent to 64 per cent, in Regina from 25 per cent to 50 per cent, in Calgary, from 25 per cent to 68 per cent, in Vancouver, from 25 per cent to 66 per cent. These figures, taking all the classes in the building trades for these different cities, considering percentage of increase in wages, go to show an average increase of from 26 -6 per cent to 55 -9 per cent in the several localities or an average of 39:4 per cent, taking the whole, And with this increase in wages has gone a shortening in the hours of labour. Of course, the wage question and the price question are very closely associated. The increase in prices has made the working classes feel the necessity of getting an increase in their wages. They have the smallest income, and with the increase in -prices brought about in this way they have had to supplement their earning capacity in some way, and ^so there has been this increase in wages throughout the building and all trades in Canada. On the other hand, the increase of wages has operated to increase prices. The employers, having to pay more for labour, have found it necessary to tack on something to the prices at which they were selling the goods, and so the two things, wages and prices, have followed each other in what has been described as an upward spiral relationship in 10 years. This in-

crease in wages in towns and industries has operated again on the wages on the farms. Wages being on such a high level in the cities men have left the farms to go into the cities, and in doing so they have not only diminished the supply of labour on the farms, but have created an extra demand in the cities for the produce which the farmer turns out, and in that way the farmer has been handicapped in part from two sides. It is really startling when we consider all these things to see how, while we have had all this great increase, this rise of prices in the city, this increased prosperity for different classes, the movement in some parts of the Dominion has been away from the farms into the cities. We have been getting more men on the land in the west. But let us take Ontario. Mr. James, the deputy Minister of Agriculture in Ontario, recently prepared an estimate of the population of the cities and towns of the province, and he estimated that while the population of the cities and towns had increased during the past decade by 295,400, there had been an actual decrease of 61,858 in the rural population. The rural population of Ontario decreased from 1,108,874 in 1899 to 1,047,016 in 1909, while during the same period the population of the cities increased from 901,874 to 1,197,274. Those figures of themselves would help to explain part of the difference of one of the causes of the rise in prices, and help to answer the question as to whether the farmer has or has not really gained all the advantage which has come from increased prices.

Mr. BL4IN- That is not a new condition of things as I understand it. The former census showed exactly the same thing for Ontario for the last 35 years.

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LIB

George Gerald King

Liberal

Mr. KING.

That would only go to emphasize the significance of that fact. If the farm labour had become relatively less in the previous years, it would, of course, intensify any effect which a reduction in farm labour at the present time would have.

There are other causes which might be mentioned also. There are causes which in the long run are going to be of great service to the mass of the people. For example, the widening of markets in different parts of the world. European countries were formerly receiving much of their grain from other countries than Canada; to-day they find the supply in these countries diminishing, while the demand is increasing at home, and they are looking to this country to supply them with the necessities of life in a larger measure than ever before, and with improved transportation and cold storage facilities, with commercial agencies scattered about in the world, the general policy of trade development which the government has taken up, there is bound to be a greater demand for the goods of this country, and as the demand becomes greater, naturally the prices, for the time being at least, will soar a little higher. But I think so far as the increases may be due to causes of that kind, it is an increase which is shared in by the comunity generally, and it is a price which I believe every citizen of the Dominion is prepared to pay as long as he can be assured it has been brought about through such legitimate causes.

There are other causes which might be mentioned, exceptional in their nature, such as the large expenditures in the last few years in connection with war and the preparation for war in different countries. We have had in the last decade three important wars, the Russo-Japanese war, the Spanish-American war, and the South African war. All of these wars have caused a large amount of capital, which might otherwise have gone into productive industry, to be diverted from it. And the expenditures and preparations which different nations have been making in the last few years in the way of preparations for war have also helped to remove from productive uses a certain amount of capital which might otherwise have been productively employed. Of course, one nation doing one thing necessitates a like action on the part of another, and in that way one nation cannot hope to escape part of the general toll which all nations are helping to exact.

That brings me to one other class of causes. The causes which I have mentioned are largely . natural causes operating in accordance with the general run of things throughout the world. There are two classes of causes, closely associated, though somewhat different in kind, which I shall describe as artificial, because they are not absolutely necessary from one point of view although they may be of very great service from another. These causes are the tariff and the combines. The tariff undoubtedly contains the possibility of increasing prices, in this way, that it limits the field of competition over which the sale of goods may take place. _ If by a tariff wall you exclude commodities up to a certain point, naturally the possibility will arise of an increase in the price of some commodities produced in the country within the tariff wall. It does not follow that this will necessarily in the long run be injurious or harmful to any one; the effect of a moderate tariff, may be to so stimulate industry generally that in the long run the people will be better off, having regard to their condition, than they weould be without it. I do not want to argue at the moment the advantages of tariff pro and con, but only to point out that we have on

this side of the Atlantic, so far as the United States and Canada are concerned, prices ranging at a much higher rate than they do in a free trade country like Great Britain, and the difference while not wholly attributable to these causes may be due in part to them, and this is one factor that should be considered. One feature that should also be considered is that where you limit competition from without and manufacture is carried on within by only a limited number of producers, a very strong inducement is nut in the way of the men controlling these industries to unite their forces and to see that they get to themselves as far as they can, the full benefit of any increased price which the tariff may permit. A large number of persons have tue impression that, the tariff in this way has become responsible in part for the formation of these trusts and combines, and a large number of persons feel that what the trusts and combines have done has been to seek to gather within their own group the industries that are protected, and then to take care to see that the full advantage which the tariff gives them goes to themselves as a consequence. What we are seeking to do in this measure is to see that where an advantage comes to an industry through the tariff, the whole of that advantage shall not necessarily accrue only to the persons who are engaged in the manufacture, but that some of it should be reserved for the general public in whose interests, as a whole, the tariff has been framed.

That brings me then to the other phase of this question. I hope I have shown that this legislation, in so far as it relates to prices, is not based on a belief that trusts and combines are the sole causes of the increases in price that have taken place. The most that is urged in that connection is that .trusts and combines may have caused and possibly are one of the causes in some cases for the increase in price, and if that can be shown in any direction, then the government, in view of the general feeling throughout the country, owes it to the community to give some means of finding out whether such a cause actually exists or not and if so of providing the necessary protection to the consumer.

_ Another point I would like to make clear is that trusts and combines may not be infurious, that in some respects they may be profitable. That is a point that has been raised. This legislation is in no way aimed against trusts, combines and mergers as such, hut rather only at the possible wrongful use or abuse of their power, of which certain of these combinations may be guilty. To illustrate the possible advantage of these large combinations of capital, I shall quote an advertisement Mr. KING.

which I find in one of the local papers, relating to what is sometimes spoken of as a combine, the Canada (Cement Company, Limited. I find in the ' Citizen ' of December 11, 1909, the following advertisement:

WHAT IS THE CANADA CEMENT COMPANY, LIMITED?

Then it describes it as:

an amalgamation of eleven of the twenty-three cement plants as follows:-(enumerating them.)

It continues in large letters:

Note the territorial distribution of these plants-from the St. Lawrence to the Kocky Mountains. Obviously in a business where the demand extends from ocean to ocean, there are economies in filling orders from the nearest available plant instead of shipping half across the continent. This explains one purpose of the organization of this company.

Clearly what is stated in the advertisement is absolutely correct. There are obvious economies in filling orders from the nearest plant instead of shipping half across the continent. But the question the country is asking is: Where have we seen of the result of that obvious advantage? That is one of the questions which we hope this legislation will help to answer. In the Ottawa ' Citizen ' of December 14, 1909, other advantages are set out in an advertisement headed:

Useful vs. useless competition.

It says:

But there is a form of competition that, is wasteful, useless and harmful. To illustrate from our 'own business. If each of eleven cement mills maintains selling agencies in every part of Canada and ships its products to the most remote points, the aggregate cost on this score is obviously greater than if there were only one selling organization, and all orders were filled from the nearest mill.

Who pays the cost of excessive competition? Ultimately the consumer must pay it. Eliminating the excessive cost of this wasteful competition will enable business to he done at a reasonable profit with ultimate savings to the consumer through reductions in price.

These are obvious examples of the good which large consolidations of that kind could bring with them, and I think that if the public find they are getting some of the benefits of these obvious and inevitable consequences of large organizations, they will take no exception to them; but they want to feel sure that the machinery exists somewhere whereby they can be assured that they are getting, within reasonable bounds, some of the advantages -which are so inevitable.

The Hamilton ' Times,' referring to the alleged projected merger to be known as the ' Dominion Canners' Association, Limited,' has the following:

In regard to the object of the merger, it is said by the manager of the Canadian Canners' Association, that the purpose is to keep the cost 'of productoin down, by which the consumer would also benefit. One of the reasons of the merger, is, he said, that competition had greatly affected the trade, the race having been for the cheapest product, but not the best. That would be overcome as more advanced methods would be applied and only the best .produced, so that the public would be assured of the quality of what they received.

Similarly, an article in the Toronto ' Globe ' of January 31, referring to the new combine to be known as the Amalgamated Asbestos Corporation, Limited, has the following :

One of the chief aims of the association will he the exploitation of the use of asbestos in fireproof construction.

There is no doubt that these large organizations have opportunities of furthering the business in which they are engaged that would not be open to a smaller concern. They have facilities to get into otheT markets, and if they use those facilities in such a, way that the general public get some benefit out of it, as well as the organization itself, the public antipathy to them should, be greatly lessened.

An article of the Toronto ' Star ' of February 16, referring to the alleged combine of large firms engaged in the fish business on the Atlantic coast, has the following:

The authorized capital of the new company will be $1,000,000, and it will aim to make the fresh fish business of Nova Scotia of national importance. The Bank of Montreal is behind the scheme, aud controls the Atlantic Fisli Company.

Clearly it is the interests of the fish trade on the Atlantic coast to in every way get for its product as large a market as possible. The more the fish business is developed in the maritime provinces, the better it should be, other things being equal, for the people of these provinces, and the more you look into the question of these organizations the greater the reason for belief in the possibility of good to the consumer provided there be some means of effective control.

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LIB

George Frederick Hodgins

Liberal

Mr. HODGINS.

The hon. gentleman mentioned the Canada Cement Company. I might say that in November last the International Cement Company of Hull were charging $1.50 per barrel of cement delivered at the railway station in my place, but as soon as the merger was formed the price was raised to $2.09 per barrel. I simply mention this in order to draw the attention of the House to the effect which such mergers are likely to have.

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LIB

George Gerald King

Liberal

Mr. KING.

That information has come to me from other sources. In speaking with some gentlemen associated with this merger, they contended that the cement 217

people were being much misrepresented in popular opinion, and that if the public could see what had taken place, they would be perfectly satisfied that no unfair profits were being charged. I propose to let any compa.ny which has reasonable ground for believing that the public is under a misconception have the facts brought out so that the public may be in a position to form an accurate opinion. If the consumers feei that they are not getting justice, we ought to give them an opportunity of finding out whether or not the facts justify their beliefs. These are some of the advantages claimed for the trusts, and it will be to the public interest that, in cases where the public consider they are not being fairly treated, the evidence as to the facts should be made known.

Perhaps no one has given a more thorough study to the whole question of trusts and combines than Mr. Jeremiah W. Jenks of the United States, professor of Cornell University, and who for some years was an expert agent of the United States Industrial Commission. Mr. Jenks has also been engaged in several important investigations for the American government. On this question he is recognized as the leading authority on this continent at present. In his book entitled ' The Trust Problem ' he states what are the main advantages of trusts, and in considering this legislation it would be well to place his views on record in order that the public may not be mistaken as to the attitude in which this matter is being approached by the government. On pages 212 and 213, Professor Jenks says:

Combination saves a waste of capital by tlie prompt abandonment of poor or badly situated plants and the concentration of energy in the best ones which can be run to their full capacity and all of the time; by making the best possible use of waste material through the production of by-products; by pushing, often at much expense, markets into new fields, both at home and abroad, through the employment of the ablest men and the best advertising devices, which could not so well be afforded by smaller institutions. There is great saving of energy in the elimination of cross freights; in the best possible division of labour, and in the organization of correlated branches to the best advantage; in the securing of the best ability to manage industries; in making the best distribution of managing ability, giving each person the work for which he is best adapted; in furnishing opportunities fit for the employment of the greatest capacity in all fields of business management, opportunities which could not be furnished without the enormous power that comes from the concentration of capital.

Similarly another authority on Trusts, Mr. Wm. E. Collier, sets forth the results of his experiences. Mr. Collier is New York state civil service commissioner, and has made a complete investigation into this

phase of industrial development. At page 3 of the preface, Mr. Collier says :

The great advantages of .mammoth business organizations should not be overlooked. Such organizations are necessities in the present condition of American industries. They seem to be the only effective agencies whereby we can develop our much needed foreign markets, whereby we can dispose of our surplus products, and thus give constant employment to our workers and toilers. Much of our anti-trust legislation has overlooked this fact. There is, indeed, a danger that in our attempts to stop monopolies we may cripple our productive energies and stifle enterprise and bring our country into a condition of industrial degradation and into bankruptcy.

The same writer, at page 300 of the same volume, cites other advantages:

We are living in a day of great things. Business opportunities are gigantic, industrial undertakings are enormous, commercial projects are vast, and great, business organizations have become a necessity since the dawn of industry, there has been a constant tendency for them to increase in size. Next, the present system of business is characterized by excessive competition, there seems to be a tendency to carry the struggle of competition to such an extent that it becomes injurious to the consumers as well as ruinous to the competitors themselves. Modern competition is destructive and self-destructive; it has a tendency to end in monopoly itself. Modern competition if often unreasonable, and if it were not for the possibility of unreasonable restraints, agreements for its discontinuance would command themselves to the public as being highly proper. Consolidation and combination render possible cheaper production and infinitely cheaper distribution; the competitive system is so expensive in its operation that the price we pay for many articles is far in excess of the cost of actual production plus what would be a fair profit, if the best and most perfect methods of organization were adopted. There are gigantic evils resulting from the lack of regulation of industry ; consolidation makes possible a better control and will enable those adopting this form of organization to sell goods at lower prices.

If matters were to end there, we would probably have no need for the kind of legislation we are n'ow introducing. The advantages of large combinations of capital are so obvious, that, I say again, if these large combines had regard to the public interest as well as to the private interests of their shareholders, there would be no need of any legislation to watch or control their operations. Unfortunately, human nature being what it is, we cannot believe that these organizations consider primarily the good of the nation as a whole as opposed to the interests of those whose capital is in their hands; and it is the business of the government, therefore, to see that no private interests shall be allowed to operate against the public good. Where, through the development of an industry, or other cause, we Mr. KING. '

have the growth of a great power in the hands of individuals, with the possibility of that power being used to further private ends at the expense of the public good, there is the strongest demand on the government to see that the interests of the community are protected.

I was asked further if we had any reason for believing that any of these combines were operating in a manlier detrimental to public interest. I replied that I did not wish to make any individual charges one way or the other. But the government is forced jto recognize such representations as come to it from reliable sources. * . ,

On February 26, 1909, a deputation waited upon the hon. the Minister of Finance, and the right hon. the Minister of Trade and Commerce, with a view to invoking the aid of the government of Canada in the control of combines. The deputation, accompanied by a number of members of parliament, included Mr. F. C. Drury, master of the Dominion Grange; Mr. James McEwing, M.P.P.; Mr. H. J. Pettipeice, ex-M.P.P.; Mr. J. W. Currie, K.C.; Mr. W. L. Smith, editor of the ' Weekly Sun ', and Mr. J. Woods, of Gordon McKay & Co. I shall not read the memorandum at length, but simply say that these gentlemen represented that there was an inevitable tendency, as a consequence of the tariff of this country, towards consolidation in the shape of trusts and combines, and that they had reason to believe that, in a very large number of industries in ' this country, such combines were operating to the detriment of consumers. They cited a number of commodities produced, and went on to state that there were at least one hundred trade combines in Ontario which were collecting in the aggregate millions of dollars per year in the form of exorbitant profits. They also urged that the government should take further action towards the control of these combines, and pointed out that their representations had been also voiced by the newspapers of all shades vof political belief, the Orillia 'Packet'; Windsor 'Record', Woodstock ' Sentinel-Review ', Hamilton ' Herald ', Calgary ' News ', London ' Advertiser', St. Thomas ' Journal ', Moncton ' Transcript ', and that other papers had been particularly outspoken. Organized bodies such as the Dominion Grange, they further pointed out, had also pronounced upon the matter, and, by formal resolution, had called for thq relief which the situation demanded.

Then hon. gentlemen will remember that some few years ago there were certain disclosures in Toronto, arising out of prosecutions which were begun under the Criminal Code regarding a number of combines, which, it was alleged, were then carrying on their business in a manner detrimental to the interests of the people.

I might remind the House of the select committee of inquiry into the question of trade combines appointed as far back as 1888. That committee, during a sitting of two and a half months, discovered the existence of thirteen combines which, it represented, were not operated wholly to the advantage of the people, but were taking a rather unfair advantage of the organizations they had formed. Then we have had in the last few years several cases in the courts in different parts of the Dominion brought against parties alleged to be interested in these industrial combines.

1 might refer to one or two extracts which set out the other side of the case. I have referred to the advantages which these trusts may exercise. Let me now point out briefly the disadvantages. When the subject was discussed some years ago, my hon. friend from East Grey (Mr. Sproule) read from a pamphlet written by Mr. Wm. W. Cook of New York, and I would like to put the extract which he read before the House again as presenting another point of view:

The modern trust is a monopoly in its purpose, its plans and its culmination. It is a combination that strikes down all competitors. The parties combine to control the market and to control it without competition.

To all these the public at each end of the industry, the producer and consumer is, and is intended to be, in a certain sense at the mercy of the syndicate or combination. The main purpose,_ management and effect of all upon the public is the same, to wit: the aggregation of capital, the power of controlling the manufacture and output of various necessary commodities. The acquisition or destruction of competitive properties all leading to the final and conclusive purpose of annihilating competition and enabling the industries represented in the combination to fix the prices at which they would purchase the raw material from the producer, and at which they would sell the product, refined or useful, to the consumer.

Mr. Jenks, in the book from which I have quoted, giving the advantages of these large combines, has given, at page 213 a summary of the disadvantages. In this connection he points out as follows:

Enormous as these benefits to society may be from this better organization of capital under the new regime, no less pronounced are the evils. (1) Investors of capital are often grievously wronged through concealment of facts and deception practised by promoters and directors at the time an industry is organized, and, later, through mis-representation_ of the condition of business and methods in which a business is carried on.

(2) A second class of persons injured is that of the stockholders. Directors not infrequently manage the business in their own interests, regardless of those of the stockholders. At times it is really made less profitable, or is so managed as apparently to be less profitable, in order to depress the stock 2171

on the market and to enable the directors through gambling speculations to reap large profits.

(3) Persons, not members of a corporation, may be injured as consumers by high prices, which can be kept high, provided the combination can secure monopolistic power. The temptation to keep prices above former competitive rates, is, of course, greatly increased when the corporation has issued large amounts of watered stock.

(I) The producer of raw material may be injured by low prices, which the combination, by virtue of its being the largest, if not almost the sole buyer, can compel the producer to accept.

(5) The combination may so increase its power as to* injure the wage earners by compelling them to accept lower wages or to work under less favourable conditions than would be granted by competing concerns. So, too, the power exercised, apparently arbitrarily at times, of closing part of the plants to avert a strike, or even to affect the stock market, is dangerous.

(6) It may happen at times that the larger organizations will exert so powerful an influence on our political organizations that the purpose of the state will be directed away from the common weal.

(7) The mental tone of the business community may be lowered by depriving individuals of the privilege and of the power to enter independently into business as readily as could be done were capital less concentrated.

(8) And, again, the moral tone of business may be lowered. If the larger organizations employ unscrupulous methods in dealing with competitors, or customers, or labourers, their greater power, especially if it is great enough to give them a partial or complete monopoly for a time, will have a much more detrimental influence than the same acts of an individual, both on account of the range of its application and of the more powerful influence of its example. . . The power of the manager of the large corporation is greater, and the injuries, both economic and moral, to the public from his selfish acts may be much more severe.

So you see, from the extracts I have read, that this writer, who speaks from a very wide range of experience, sees possibility of evil from these large organizations to all classes-investors, stock holders, consumers, producers, wage earners, political organizations and the mental and moral tone of the business community.

It is apparent that no single act can hope to cope with all these possible evils, and the most that can be reasonably expected is that individual forms shall be dealt with as the special need asserts itself. In this legislation it is the interests of the consumer and producer, rather than the interests of the investor or stockholder that it is hoped to protect.

Sufficient has been shown to make quite clear that through large combinations of capital, in the form of corporations of one kind or another, enormous power has become concentrated in the hands of a few

men; that the faculty for forming combinations increases as the scope is narrowed, and that that power becomes more easily wielded as the numbers controlling it become fewer. At the same time this consolidation of power in the hands of a few, has lessened their personal responsibility for the proper use of that power; sense of personal obligation to the community becomes submerged in vast corporate entities. The possible resulting abuses call for some restraint that shall take the place of the old personal obligation. Government supervision and publicity must be that substitute. The man who conducts a small business thinks of the obligation he owes to his customers and to the community in which his small business is carried on. Too often, it happens that engaged in one of these large organizations, the persons so employed think only of their obligations to the corporation which employs them, it is so vast, its demands absorb all their attention. A sense of obligation to consumers or society generally is lost. This makes it imperative upon the government to safeguard the community against undue encroachments on the part of these powerful concerns.

But there is an additional reason for government supervision and publicity at the instance of the state. The .form of organization which enables wealth to become concentrated in the hands of a few, and secures great commercial powers to these few, is itself rendered possible only through conditions created by society, of whose interests the state is the guardian, and by the direct agencies of government itself.

All organization on a large scale is alone rendered possible by the peace and security which the state assures, and in the maintenance of which the heaviest expenditures of government are incurred. Without the concessions made by the public, and guaranteed by the state, the agencies of transportation and communication, the railway, the telegraph, and telephone, the postal service, could not exist for a day, and the fact that personal responsibility, in the case of these large organizations, tends to become less, is a very strong reason why the government should step in and see that something is established in the nature of a control which will bring back that sense of responsibility to the public which every one engaged in any industry should experience and exercise.

I would like to point out the relation which the legislation we are introducing bears to that adopted in other countries. In the first place the government has sought, in the Bill brought down, to avoid some of the limitations which experience has shown to have been prejudical in the case of some legislation adopted in other lands. For example, take the experience Mr. KING.

of our neighbours to the south. The Sherman Anti-Trust Act was introduced about twenty years ago. The United States has had the experience of that legislation for that period of time, and their experience ought to be helpful to us; it ought to be helpful at least in preventing us from making the mistake which they have admittedly made. The great mistake which was made by the Sherman Anti-Trust Act, and a mistake which has been made I think in discussions on the subject even in this House, has been that the measure was aimed against trade combinations as such. In looking over the debates that have taken place in this parliament I find that speaker after speaker has said that these combinations must be stopped, we must put them down, we -must have legislation that will suppress them. Now, that is ignoring altogether the inevitable tendency of the present day, which is consolidation and co-operation of forces, for one cause or another. Section 1 of the Sherman Act reads:

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. Every person who 6hall make any such contract or engage in any such combination or conspiracy shall be deemed guilty of a misdemeanour, and, on conviction thereof, shall be punished by fine not exceeding $5,000, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

The effect of that legislation was that for the first few years, under the Harrison administration, the courts interpreted the law as meaning, and no doubt that is what the framers had 'in mind, that a combination had to be formed with the deliberate intent of limiting competition against the public interest, and unless intent could be proved, the Act became of no service. Then a decision was given in an important case, the Trans-Missouri Freight Association case, in which the Supreme Court held that the matter of intent was secondary, that all it was necessary to prove was that the combination existed, and that would bring the parties under the law: That interpretation actually made nine-tenths of the business of the United States illegal, and the courts found that unless they were going to make the law ridiculous altogether, it was better to leave it alone. The effect was this, that when it was realized that a trust in the nature of two or three concerns operating together under a joint agreement was an illegal thing, the lawyers at once got to work and said: Let us form 'holding corporations', instead or having these agreements, let us bring our forces to-

gether and have one concern. The result was the, formation in larger numbers than had ever been known before in the United States of these great aggregations of wealth into one concern. Then came the Roosevelt administration, in which the one concern itself was held to come undeT the Sherman Anti-Trust law, and we all remember the experience the United States had in trying to work out the law under that interpretation placed unon it bv the courts in the case of the Northern Securities Company. In effect this decision outlawed every industrial concern of first importance. They tried then to make a distinction 'between the good trust and the bad trust. The administration claimed for itself the right to say that a certain trust was good and really did not come under the Act, and another trust was bad and should come under the Act. This has been the history of that legislation up to the present time. Since President Taft has come into power he has had to be his own interpreter in a measure, and has had to say frankly that the Act as interpreted by the courts would put out of business nine-tenths of the concerns in the United States, and that so far as his administration was concerned they were not going to administer the law according to the interpretation the courts have given it, but according to their own interpretation. Now that is a kind of error which this parliament should seek to avoid; let us not place on the statutes anv act which will necessitate a contradiction between the wording of an act itself and the interpretation of those who administer it.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. R. L. BORDEN.

I do not quite understand how they administer it on a different principle to that which the courts have adopted.

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LIB

George Gerald King

Liberal

Mr. KING.

They do it in this way. The federal government enters the prosecutions, and the federal government has refused to take up any prosecutions unless its own interpretation is satisfied in the first instance. I will read on this point an extract from President Roosevelt's message to Congress in 1906:

The actual working of our laws has shown that the effort to prohibit all combination, good or bad, is noxious where it is not ineffective. Combination of capital, like combination of labour, is a necessary element in our present industrial system. It is not possible completely to prevent it; and if it were possible, such complete prevention would do damage to the body politic. What we need is not vainly to try to prevent all combination, but to secure such rigorous and adequate control and supervision of the combinations as to prevent their injuring the public, or existing in such forms as inevitably to threaten, injury. . . . It is fortunate that our present laws should forbid all combinations, instead of sharply discriminating between those combinations which do good and those combinations which do evil. ...

There is a curious admission for the chief executive of a great nation, that their present laws forbid all combinations instead of sharply discriminating between those who do good and those who do evil. President Taft found, I think, that he would be undertaking more than he cared to handle in this endeavour to distinguish between good and bad trusts; because in his special message to Congress on January 7, of the present year, he gives his interpretations of the law, and has something to say about distinguishing between good and bad trusts:

The increase in the capital of a business for the purpose of reducing the cost of production and effecting economy in the management has become as essential in modern progress as the change from the hand tool to the machine. When, therefore, we come to continue the object of congress in adopting the so-called ' Sherman Anti-Trust Act' in 1890, whereby in the first section every contract, combination' in the form of a trust or otherwise, or conspiracy in restraint of inter-6tate or foreign trade or commerce is condemned as unlawful and made subject to indictment and restraint by injunction; and whereby in the second section every monoply or attempt to monopolize, and every combination or conspiracy with other persons to monopolize any part of inter-state trade or commerce, is denounced as illegal and made subject to similar punishment or restraint, we must infer that the evil aimed at was not the mere bigness of the enterprise, but it was the aggregation of capital and plants with the express or implied intent of restrain inter-state or foreign commerce, or to monopolize it in whole or in part.

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CON

John Graham Haggart

Conservative (1867-1942)

Mr. J. HAGGART.

How are you to find out the abuse of the combination? .

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LIB

George Gerald King

Liberal

Mr. KING.

By investigation, I think investigation is the only way-where there is a prima facie reason for believing that the combination is doing injury, and I can think of no other method of discovering whether that assumption is correct. But I will go into that point later. The President continues:

The object of the anti-trust law was to suppress the abuses of business of the kind described. It was not to interfere with a great volume of capital, which, concentrated under one organization, reduced the cost of production and made its profit thereby, and took no advantage of its size by methods akin to duress to stifle competition with it.

I wish to make this distinction as emphatic as possible, because I conceive that nothing could happen more destructive to the prosperity of this country that the loss of that great economy in production which has been and will be effected in all manufacturing lines by the employment of large capital nnder one management.

Elsewhere:

It is the duty and purpose of the executive to direct an investigation by the Deoartment of Justice, through the grand jury or otherwise, into the history, organization, and purposes of all the industrial companies with respect to which there is any reasonable ground for suspicion that they have been organized for a purpose, and are conducting business on a plan which is in violation of the anti-trust law. The work is a heavy one, but it is not beyond the power of the Department of Justice, if sufficient funds are furnished, to carry on the investigations and to pay the counsel engaged in the work.

So that the United States, after an experience of twenty years, has come now to the conclusion that the only manner in which to deal with large combinations, as President Taft says, where there is any reasonable ground for suspicion that they have been organized in a manner which violates the anti-trust law, is to investigate and find out whether or not, as a result of that investigation, the suspicion is well founded: [DOT]

Many people conducting great businesses have cherished a hope and a belief that in some way or other a line may be drawn between ' good trusts ' and ' bad trusts/ and that it is possible by amendment to the antitrust law to make a distinction under which good combinations may be permitted to organize, suppress competition, control prices, and do it all legally if only they do not abuse the power by taking too great profit out of the business. They noint with force to certain notorious trusts as having grown into power through criminal methods by the use of illegal rebates and plain cheating, and by various acts utterly violative of business honesty or morality, and urve the establishment of some legal line of separation by which ' criminal trusts ' of this kind can be punished, and they, on the other hand, be permitted under the law to carry on their business. Now the public, and especially the business jiublic, ought to rid themselves of the idea that such a distinction is practicable or can be introduced into the statute.

At one o'clock, House took recess.

House resumed at three o'clock.

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LIB

George Gerald King

Liberal

Mr. KING.

When the House adjourned, I was referring to the legislation affecting trusts and combines in other countries and speaking more particularly with reference to legislation in the United States. I shall spare the House a detailed description of legislation in other countries. I "would briefly mention that in England trusts are held to be illegal only where competition is shown to have been wholly removed or prices raised excessively. In such a case the combination is antagonistic to the English conception of freedom of trade, and is *consequently judged as void. From this it follows that the decision, whether the com-

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LIB

George Gerald King

Liberal

Mr. KING.

bination has the force of legal contract or not, depends according to the English court upon the merits of each case. But while the law in England and on the continent has left the development of trusts to be shaped by economic conditions, it is guarding more and more closely the incorporation and supervision of corporations.

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CON

John Graham Haggart

Conservative (1867-1942)

Mr. J. HAGGART.

In England can you not punish a corporation for enhancing prices? '

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LIB
CON

April 12, 1910