The sun. [volume] (New York [N.Y.]) 1833-1916, 1903-04-24
Undigested Securities and Predatory
Railway Competition.

Among the superficial reasons which
commend the Northern Securities decree
to the minds of some observers, is its
effect in stopping the issue of new rail-
way bonds and shares in excess Of the
needs and capacity of buyers. \
Neither i'm the record of the case nor
in any presentation Of it that We have
seen is the emission Of undigested secu-
rites made ground of complaint against
the Northern Securities defendants.
In his report Of Jan. 3. 1903, to the
Senate Judiciary Committee, Attorney
General KNOX described in detail what
he and tho President deemed the evils in
the Northern Securities combination. 1t
will be edifying now to recall what he
said! II was this:
In this manner. by making the stockholders of
each system Jointly interested In both systems. and
by practically pooling the earnings of both systems
for thu bcHeht OF the former stockholders OF each
and by vesttng the selection OF the directors and
onhcers OF each system In a common body. to wilt.
the holding corporation. with not only the power
but the duty 10 pursue policy which would pro
note the nteres,s not Of one system at n. srp.nse
~ tHr OtHfF. Dut VI NJ Nsp'uS' VI "e puohe
al inducemsuI 10, eonpaaion befuesn the fro systems
'es to be rsmo-ed. a virtual consolidation effected
and a monopoly Of the Interstate and foreign com
merce. formerly carried by the two systems ss in
dependent competitors. established.
tits further con,cnd that the Northern Secu-
rifles Company was not rgsnizcd In good faith to
purchase and pay for the stocks of the Great North
ern and the Northern Pacific Railway companies.
Of the stocks Of said companies. II is mere de
potary. custodian. holder and trustee OF the stocks
Of the Great Northern and the Northern Pacific
Railway companies. and It's shares OF stock are
virtually but beneficial certificates. issued agains,
such railroad stocks. to designate the interest OF The
holders In the pool
AT the time OF the passage ofthe act OF July p 1890.
The method used to combine competing companies
by placing their stocks in the hands OF trustees
and issuing trust certificates In exchange therefor
The interesting question in this case Is whether
substantially the same result can be reached by
creating holding corporation to take the stock
Of companies competing In interstate commerce.
and thus pool their earnings consolidate their con.
troll and remove all lnducemcnt for elective com.
petition between them"
No allusion was made 10 new shares or
bonds, or to new securities, whether di-
gestible or undigestible None were to
be emitted. Pooling the traffic or the
earnings. virtual consolidation, "a then
existed In great groups of railways. was
the gist Of the Attorney-General's ar
raignment.
A contract had been made. which the
Attomey-General represented to be &" in
restraint OF trade because OF the feat
ures Of IT which he exhibited. but he did
not suggest that he proposed to obtain
a judicial decree containing that which
some men in the street now say il the
merit of the Northern Securities decree,
nor did he obtain such decree.
He affirmed that the combination was
made solely to incorporate the pooling
of the stocks Of said companies. as had
been accomplished in so many other vast
interstate railway systems.
The Supreme Court decided in 1897
that the Antitrust law Of 1890 applied to
railways and made illegal every com
bination restraining perfect free trade in
interstate or International commerce "a
decision which came very near to COM
binations under or by virtue Of the
Custom, House tariff. Every one wishes
perfect Interstate free trade, whatever
may be- thought Of international free
fade. II twould BE- preposterous to
ahrm that any of our railway owners
seeRS to check or diminish interstate
FREQ Gadc.s
A result of the law Of 1890, and its
judicial Interpretation. the country is
now confronted with this American doc
trine or dogma relating TO rnilway COM
petition, judioially announced by the
Supreme Court in isss:
The natural. direct and Immediate enect OF /
eonpsHonis however. to lower rates and to thereby
Increase the demand for commodities. the sup.
plying Of which Increases commerce. and an agree.
ment whose nrst and direct Effect Is to prevent
this pav Of oempomon resuaIns Instead of pro-
noting trade and commerce"
- volit icoI