§ 13. The industrial trust - a natural evolution? The policy that one is inclined to favor regarding industrial trusts depends very much on one's answer to the question: Are or are not industrial trusts natural growths ? In this bare form the question is somewhat vague, but the thought of those who answer it in the affirmative is positive if not always entirely clear. They (at least, the extreme representatives of this view) declare that trusts have been, are, and will continue to be the results of a "natural evolution" of business conditions, as inevitable as the great changes in the physical world. If this is so, man and society must recognize the facts, must waste no efforts vainly in fighting against fate, but must accept the trusts and realize their possibilities for good. And these are declared to be great, for it is assumed that without the trusts all of the economies of large production must be sacrificed. Irresistible economic forces, it is said, are creating larger and larger units of business; friendly cooperation and unified action must take the place of competition in business.

18 See further, ch. 32, §§ 5-9.

19 See ch. 29, § 3, on state commissions.

The outcome must be monopoly in every important line of manufacturing industry and perhaps of commerce. In view of public opinion toward monopoly, its acceptance necessitates its regulation. This argument is supported by appeal to the experience in the field of railroads and other local utilities, where public opinion has, after long hesitation, recognized competition to be impracticable and the acceptance of monopoly as inevitable. As extremes often meet, the view of the industrial trust as a natural evolution is most favored, on the one hand, by men of " big business," already interested financially in trusts, and, on the other hand, by the most radical communists (or socialists) whose ideal is the complete monopolization of industry under the government.

§ 14. Artificial versus natural growth. Opposed to this view is a deep and widespread popular opinion, or prejudice, against the trust and in favor of competition. General opinion in this case (as not always) finds much support in special economic studies of the methods by which the existing industrial trusts came into being. First the question properly is raised: Just what is meant by "natural" ? In a sense, everything has been the natural outcome of evolution - the steam engine, the submarine, the boycott, militarism. In an equally good if not better sense, every mechanical invention and every method of industrial organization is artificial, has been the result of man's choice and effort. In any case, men may choose as good, or reject as unsuitable or bad, any particular mechanical device, and society may decide to adopt any particular policy toward a certain form of business organization and certain business practices (unless, indeed, our philosophy be that of automatism, crude determination or fatalism, regarding all human affairs).

Now, when one examines the methods that the notable trusts actually did employ, and apparently had to employ,even when they were already powerful single enterprises, in order to destroy their competitors and to attain their monopolistic power, the word "natural" seems hardly to describe the process. The evidence is not a matter of hearsay, but is embodied in a long line of judicial decisions, and in numerous special inquiries by governmental commissions and officials.

§ 15. Kinds of unfair practices. This evidence is a startling array of "unfair practices" and "unfair" forms of competition, which, however novel in appearance, are essentially of the kind that have been illegal under the common law for the past five hundred years. Many of these practices were baldly dishonest, many of them were contemptibly mean. The manifold varieties of unfair competition may be roughly grouped under three headings, according as they are connected with (1) illegal favors received from public or quasi-public officials; (2) discrimination against, or control of, customers; (3) foul tactics against competitors.

(1)   Among the practices in the first group are discriminatory rates and rebates from railroads, favoritism in matters of taxation, undue influence in legislatures, special manipulation of tariff rates through powerful lobbies or paid agents, undue influence in the courts through the employment of lawyers of the highest talent, who often later became judges.

(2)   Among the unfair practices toward customers are discriminations among them by the various forms of price-cutting, grants of credit, and kinds of service. The liberty of retail dealers is limited in a variety of ways, such as fixing resale prices, requirement of exclusive dealing, and full-line forcing.

• (3) All the methods just mentioned as employed in dealings with customers are likewise unfair toward competitors. Many other methods are used to the same end, such as: enticing away their employees, or corrupting and bribing them to act as spies, paying secret commissions, false advertising, misrepresenting competitors, imitating their patterns in goods of defective workmanship, shutting off their credit or their supplies of materials, acquiring stock in competing companies, malicious suits, infringement of patents, intimidation by threats of business injury or of scandalous exposures, operation of bogus independent companies.

§ 16. Growing conception of fair competition. Any industrial trust that was able to gain domination and monopoly power only by the use of such practices, or any part of them, can hardly be deemed the result of a "natural evolution." If " artificial" means the use of artifices, surely this development deserves the adjective. Yet, even if not natural, this development may be thought to be "inevitable," human nature being as it is. But the bald fact is that while the great trust movement was in progress no effort worthy of the name was being made to enforce even the then existing laws and to oppose this artificial development. The same allegation of inevitableness was once commonly made of discriminatory railroad rates and rebates, evils that have been in large part remedied only since the period 1903-1906, when at last intelligent action was taken.

To those who came to see the problem in this light, acceptance of industrial monopoly, with its complex task of fixing by public commission the prices on innumerable kinds and qualities of goods, seemed at least premature. Rather, the first step toward a solution seemed to be the vigorous prevention of unfair practices, and the next step a positive regularizing of "fair competition." The fundamental idea in this is the enforcement of a common market price (plus freights) at any one time to all the customers of an enterprise. By this plan, potential competition would become actual, and. small enterprises that were efficient might compete successfully within their own fields with large enterprises that maintained prices above a true competitive level. Even general lowering of prices by a large enterprise with evident purpose of killing off smaller competitors is unfair competition under this conception. It was for years recognized that the realization of this policy required legislation regarding uniform prices and the creation of a commission for the administration of the law.