7. Trust legislation in Canada there is not the elaborate anti-trust legislation which is to be found in the United States. Frequently the Do minion government in incorporating companies by letters patent specifically authorizes them to control or amalgamate with other companies similar in na ture. Tho the intercorporate control which may result from the exercise of these powers rnay, and does, ac tually cause abuses, this leniency indicates the sense of Parliament to be that in itself intercorporate con trol is not against public policy. It assumes the bona fides of the applicants. If, however, the power is abused, as for example, if it is found that companies had used the right to amalgamate for the express pur pose of accomplishing one or more of the things pro hibited by the Criminal Code, the merger or amalga mation could probably be invalidated. What the of fenses are will appear from Section 498 Of the Crim inal Code which provides a penalty of not more than $10,000 and not less than $1,000 where a, company conspires, combines, agrees or arranges with any other person, or with any railway, steamship or trans portation company,— (a) To unduly limit the facilities for transport ing, producing, manufacturing, supplying, storing or dealing in any article or commodity which may be a subject of trade or commerce; or (b) To restrain or injure trade or commerce in relation to any such article or commodity; or (c) To unduly prevent, limit, or lessen the manu facture or production of any such article or commod ity, or to unreasonably enhance the price thereof ; or (d) To unduly prevent or lessen competition in the production, manufacture, purchase, barter, sale, transportation or supply of any such article or com modity, or in the price of insurance upon person or property.
In 1910, also, the Dominion Parliament passed a statute known as an "Act to provide for the investiga tion of Combines, Monopolies, Trusts and Mergers." An investigation is initiated upon an application of a number of persons to a judge, who may issue an order that an investigation be held into the alleged combine. The order being granted, it is trans mitted to the 'Minister of Labor who thereupon ap points an investigating board of three members. The act provides forfeitures and penalties in ease the report of the board establishes that illegal conditions exist.
8. Federal Trade Commission Law. In the political campaign of 1912 the trust evils were much discussed, and the general opinion was that the prob lem had not yet been solved. More legislation was promised, and the promises were fulfilled in the Fed eral Trade Law and the Clayton Law. The former, besides creating the. Federal Trade Commission, de scribed below, prohibited "unfair methods of com petition." But the law does not define unfair meth ods of competition. It was felt, however, that mon9polies were frequently created not by buying up competitors or combining with them, but by ruin ing them ; this inhibition was therefore directed at one of the causes of monopoly.
9. Clayton Laze). — The Clayton Law specifically mentions and prohibits four practices, and prescribes penalties for infringement.
(a) Discrimination in price, as between different purchasers, is prohibited "where the effect of such dis crimination may be to substantially lessen competi tion or to tend to create a monopoly in any line of com merce." Allowance is made for differences in grade or quality, location of markets and for "discrimina tion in price in the same or different communities made in good faith to meet competition." Moreover, the law does not prohibit merchants from "selecting their own customers in bona fide transactions and not in restraint of trade." (b) Tying or conditional contracts are prohibited. The section that sets this limitation is intended to prevent manufacturers from resorting to a practice that has been used to extend the monopoly of a patent for an invention beyond the manufacture and use of the patented article. Thus, machinery, the possession of which is protected by patents of great importance, has been leased or sold under contracts which pro vided that they should be used only in connection with other goods of manufacture by the maker of the patented machine. These tying contracts are now under the ban of the law.
(c) The law specifically prohibits corporate stock holding when its effect "may be to substantially les sen competition." Certain express exceptions are made. For example, the holding of stock for in vestment, the forming of subsidiaries to carry on branches or extensions of a business, and the owning of branch railroads are specifically permitted. It is generally felt, in view of the decisions in the 'Northern Securities case that this provision adds nothing to the S h erm an L a w.
(d) Interlocking directorates are prohibited. This restriction applies in the case of : (1) directors of two or more corporations engaged in interstate commerce and having capital, surplus and undivided profits amounting to more than $1,000,000; (2) di rectors, officers and employes of national banks with deposits, capital, surplus and imdivided profits of more than $5,000,000; the restriction applies also to those holding these positions in national banks in cities of' more than 200,000 inhabitants. This provision does not apply to railroads. One section of the law, however, prohibits railroads from buying more than $50,000 a year worth of goods from supply houses with which they have interldcking directorates, unless the purchases be made as the result of a successful bid ding that was open to competitors. The corporations were given two years within which to comply with the provisions of the law in regard to interlocking direc torates.