The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1907-07-10
STARTLED
By NEW PLAN
TO BUST TRUSTS
Idea of Receivers Said
to Be Invention of
Purdy.
Pupilzof Philander Knox
Knows Difficulties of
Prosecution.

The proposal Of the Government to
throw into receivers hands the trusts
which cannot otherwise be reached ef-
fectiveIy has been in considerable de-
gree misunderstood; but none the less IT
is accepted as the most startling thing In
trust busting" policy yet invented
1t is understood pretty definitely that
this proposal is the invention of Assist
ant Attorney General Milton d. Purdy.
Mr.. Purdy is a pupil of Philander c.
Knox in the trust prosecution business.
He has been at the head Of this division
Of work in the department for several
years. and 1t is probable there is not to-
day a man in the country better in
formed of law and practice OF INTERIOR
porate relationship than be. He knows
trust and monopoly decisions and laws
by rote, and has given much study to
the problems involved in big CONNER
. ciaI organizations. entirely aside from
the mere incident of enforcing present
laws. Mr.. Purdy has found out at close
iRnge the difficulties of the "trust-bust-
ing" business, and in devising the
. scheme of receiverships for trusts he Is
believed TO have made a real contribu-
siion.
Not for All Trusts.
1t must not be understood that all
trusts. or even all bad ones. can be thus
treated. Neither is it to be assumed that
the Government is certain TO achieve it's
real end even II the courts permit it to
place trusts in control of receivers. A
brief recounting in outline Of the develop
ments. step by step. in the race between
the trusts and the busters" will show
just what this means.
First came the simple agreement
Fumong competitors not TO compete-the
'gentlemen's agreement" 1t failed be-
! cause the gentlemen would compete on
the sly when they saw a chance to do"
. each other. So next came the trust
proper; that is. the arrangement by
which the owners of competing estab-
lishments turned their manageu emit over
to agreed trustees, TO be operated in the
( common interest. This was the old
: Standard oil trust Of 1Ss3-1S99. 1t was
a great success until the courts out
lawed il.
Holding Company Plan.
Next came the holding company plan.
tested and defeated in the Northern Sc
Curities case The holding company
owned control of the competing concerns
and dictated their policies, suppressing
competition.
Next was the plan Of unified owner
ship, illustrated very well in the To-
bacco and Harvester trusts. Take the
international Harvester Company. At
first 1t owned the stock of subsidiary
companies. as a holding concern. This
became dangerous, and so one by one
the International absorbed the actual
property Of these subsidiary concerns
and dissolved them. This has been car
ried so far that the Harvester trust is
understood now TO have ceased, prac-
tically. TO be a holding company ar
rangement. The International simply
owns directly the properties once owned
by the various subsidiary corporations.
Tobacco Trust Variation.
There is a variation Of this scheme
in the Tobacco trust. Here. out Of a
large number Of subsidiary corporations
held by the holding concern. one was
selected to become an operating COM
pany. This operating company gradually
took over the properties OF the other
subsidiary concerns, and dissolved them,
Until the operating company had come
into control of about all the underlying
property. The stock of the operating
company, meanwhile, was held by the
holding company. There was thus
reached situation in which the num-
Der of corporations had been reduced
10 two; and as the holding company
Is unnecessary in this situation. il could
easily agree TO a decree dissolving it:
the effect on the property would not be
important because the one operating
company has by this time come to own
all the physical property. The holding
company could go out Of business with
out jar 10 the business or any change
In the control.
Dissolution of STANDARD Oil.
This is just what the Government sus-
poets the Standard Oil Company will
undertake to do if it is defeated in the
St Louis litigation. In that case the
Government demands the dissolution of
the Standard on Company of New Jer-
sey-the 500, 100000 holding company. The
Government expects confidently to ac-
COmplish this end. But meanwhile the
Rogers groSp is expected to
reorganize the property by having one
Of The subsidiary corporations buy up
the actual properties of the others,
dissolve the other corporations, and
come forth as tho actual owner Of all
the property that now stands in the
name of some seventy underlying cor
porations Of the Standard system.
Then, when the Government secured an
order OF court to dissolve the Standard
Oll company of Indiana. the managers
would smile cheerfully, comply. and dis
tribute to themselves, in lieu Of their
Cancelled holdings in Standard Oil OF
Sew Jersey, the shares of the Standard
llfuAAnn-Qgfnn1 hr.r7a lav-
or the whole property that once was
held by The seventy subsidiary concernsl