Evening star., 1946-04-01
death Sentence
Clause in Utility
Act Is Upheld
Wreco Properties Are
Affected by 6-to-0
High Court Decision
BY the Associoied Press

The Supreme Court today up.
held constitutionality of the
death sentence" clause of the
Public Utility Holding Company
Act.
The clause requires interstate gas
and electric holding companies tt
limit their operations to single
lntegrated system.
The court ruled on an appeal BY
the giant North American Co, from
an order by the Securities and EX.
change Commission SEC directed
North American to divest itself o1
Iall but one of its utilities systems
Justice Murphy delivered the
courts 60 opinion Justices Doug.
las, Reed and Jackson disqualified
themselves, leaving a bare lega,
quorum of six judges to decide the
case.
Properties Include WrecO.
North American was organized In
1890. 1t has engaged in acquiring
and holding for investment stocks
and other securities, principally in
the electric utility field It's system
consisted of 30 companies operating
IN II States and the District of Co.
lumbia. The main Office is in New
York.
North Americans many prop
ertles include the Washington
Railway & Electric Co., which
owns the Potomac Electric Power
Co. and controls Capital Transit
Coz
The company said the SEC order
issued in 1342. required it to dispose
OF assets which cost about $3.50 ,00O,-
COO. SEC told North American tc
confine its activities to a system in
the st. Louis area. The Fedora
Circuit Court in New York City up
held the order and affirmed consti-
tutionality of the clause.
North American appealed to the
Supreme Court in February. 1943
But the tribunal was unable to act
previously because it lacked a quor-
UNI in the case.
Justice Department Cites Evils.
The Justice Department told the
Supreme Court the act was passed
in 1885 after Congress found many
evils" grew out of holding company
activities.
The department said these in
cluded "lnflationary write-ups, ac-
luisition OF properties at grossly un-
fair prices and preoccupation OF
management with financial maneu-
vering rather than efficient produc-
ton and distribution of gas and
electricity and the meeting of local
needs"
Justice Murphy, speaking for the
court, said that Congress in enact
ing the death sentence" clause was
concerned with the economic evils
resulting from unco-ordinated and
unintegrated public utility holding
company systems
These evils" Justice Murphy
SAID, were found to be- polluting
the channels of interstate commerce
and to take the form of transac-
tlons occurring in and concerning
more States than one
Found Welfare Harmed.
Congress also found that the
national welfare was thereby
harmed. as well as the interests
of investors and consumers. These
evils, moreover, were traceable in
large part to the nature and extent
OF the securities owned by the hold
ing. companies.
Congress, therefore, had power
under the commerce clause to at
tempt to remove those evils by
ordering the holding companies to
divest themselves of the securities
that made such evils possible"
Justice Murphy said that North
Americans contention that the
ownership of securities is not in
itself interstate commerce and
hence may not be made the basis
of Federal legislation "misconceives
the issue in this case"
He said that the same "miscon-
ception" existed more than 40 years
ago in a case involving the North
ern Securities Co.