II. The simplest form of union is one in which the proprietors secure concerted action along some one or more lines by a simple agree ment, providing for uniform action upon cer tain stipulated points or for the sharing of privileges or benefits that flow either directly or indirectly from the union.' Agreements pro viding for uniform action upon one or more specified points are called simple combinations; those providing for a sharing of benefits are called pooling combinations, or in the vernacu lar of the trade, pools. Combinations may be compared to a league of nations in that each member retains its independence in full except as it temporarily surrenders a portion of its sovereignty in the interests of the common good for a limited period of time and even then sub ject to withdrawal on notice or without notice at the risk of suffering certain specified or con tingent penalties. Simple combinations embrace the following types of agreements: first, those limiting the territory within which the several parties may do business; second, those limiting the amount of business which may be done; third, those fixing the price at which each may sell its goods or services. Pooling combina tions include: first, agreements providing for a distribution of the business in certain agreed upon proportions, and second, those providing for a sharing of the profits arising from the business over which the pool has jurisdiction. Combinations and pools may also be classified into various categories on the basis of the num ber of specific agreements included within the union, as for example, simplex, duplex, triplex, quadruplex, etc.' A simplex combination is based upon an agreement as to one point only, as price, or output. A duplex combination is based upon an agreement that covers two im portant features, as price and output, or price and percentage of business. As the number of points which the agreement covers increases, the field within which the members are free to act upon their own motion correspondingly diminishes and if in any case all possible points are included, the combination during the period of the agreement would be to all intents and purposes. a single economic unit occupying the field formerly covered by its constituent mem bers.
III. The higher types of union differ from the simpler types in two respects: first, all of the proprietors interests in the several eco nomic units are amalgamated or merged into one completely or nearly completely unified or ganization; and, second, they generally are per manent institutions. Such institutions may be separated into two main classes, first, federated unions and second, centralized unions. The federated unions embrace two classes, trusts and holding combinations. The centralized unions include one class only, viz., the .single corporation owning directly the various plants and properties which formerly were separate economic entities. The trust, the holding cor poration and the single corporation composed of an aggregate of formerly independent eco nomic units are financial unions in contradis tinction with the combinations which are merely incomplete operating unions.
IV. A combination is formed by agreement of the parties and like any contract may be either verbal or written. A financial union on the other hand involves a purchase and a sale either of securities or physical assets and con sequently the formation of such an organization includes first, an agreement as to the terms of the exchange and second, provision for the transference of the several proprietors' inter ests to a newly created body legally authorized to purchase and hold the same. Let it be sup
posed that A, B and C are proprietors of busi ness enterprises manufacturing and selling safety razors. After selling their different products in competition for some years, A con ceives the idea that an agreement as to prices at which each may sell his goods would, by preventing price competition, enable each of the razor makers to increase'his own earnings. A therefore suggests a meeting and after a dis cussion, supplemented in many cases by an in vestigation of costs and the actual prices ob tained for their respective goods, an agreement is reached and a memorandum covering the points agreed upon is drawn up and signed or a verbal contract is entered into according as the combination is a written or verbal one. After the combination is formed, the parties separate and proceed to manage their separate 'business enterprises as before except each of the proprietors causes a new price list to be prepared and issues instruction to his sales managers to sell goods only at the prices thus established. Whenever any one of the parties to the combination desires to change the price list, a meeting of the principals or their agents becomes necessary at which the whole question of price is taken up and a decision reached either to abide by the old price list, to estab lish a new one or failing an agreement on one of the above points to terminate the agreement and resume the former power of price making by individual action. The combination is then by virtue of its structure both incomplete in its scope of action and unstable in point of time. It, therefore, may be used only when• the above features are relatively unimportant. To secure either permanency or completeness or both some form of financial union, that is either a trust, a holding corporation or a single corporation must be selected and adopted.
To create a trust any number of business units as for example, a, b, c, d, etc., transform their individual business establishments into corporations,' formed upon similar plans. They then organize each of the new corporations and thereafter call a meeting of the representatives of the several business units that desire to enter the trust for the purpose of formulating a plan of union. To do this a trust deed is drawn up, a document similar to a corporate charter in its essential features, but peculiar in that it provides (1) that the common stock of the several corporations included in the plan be exchanged for trust certificates and (2) that the trustees (a) manage the several corporations uin the manner they deem most conducive to the best interests of the holders of said trust certificates° and (b) receive all interest and dividends declared upon and paid upon the bonds and stocks which they hold in trust and distribute such receipts including also any receipts from the sale of the trust property by declaring and paying dividends upon the outstanding trust certificates. A trust, then, is a group of corporations tied together into a permanent financial union in accordance with the terms of a trust deed and operating under the control of a board of trustees created and acting under the authority of the said instru ment. To make the above definition conform to the conditions which were present in all of the trusts established during the decade 1879 88, two others must be added, viz. (1) that the corporations thus joined together must be com peting with each other at the time of the union and (2) that practically all of the producing units in the same market must be included in the organization.