April 12, 1910 (11th Parliament, 2nd Session)

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.

Topic:   COMBINES INVESTIGATION ACT.
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