INTERCORPORATE RELATIONS 1. Causes of cOneentration.—It is generally recog nized that concentration in industry, the massing of great quantities of capital under a common owner ship, has been the outstanding feature of the economic development of the United States since the Civil War. The Civil War itself contributed to this move ment, since at that time men were trained for co operative work and the demand for large supplies of manufactured goods began. The movement has been nurtured by the progress made in rapid communica tion and transportation. As units grei,v in size, the advantages of large-scale production became apparent and the Nvastes of competition were more and more realized. Finally, the experience of the promoters in forming combinations showed that profit could be made out of the process of combination, and we find combinations being formed for their own sake.
2. Classes of combination.—There will be occasion to study each kind of interbusiness organization that has been used in America in the last seventy-five years. It will be expedient first to describe each kind and to state to what extent it has been used. The legality of the organization may well be left to a succeeding discussion that will embrace all the forms. During the period mentioned the following forms of interbusiness organization have been used: informal ag,reements, pools, trusts, consolidations, sales of entire operating assets, leases, stockholding, interlocking directorates and communities of interest.
3. Various forms of combination illustrated in the history of ane concern.—Sornetimes one combination 1 will be found to have bad a history in which many of these relationships have existed.
In its brief career the National Cordage Company- illus trated almost every economic and financial problem that could ordinarily present itself in the history of any indus trial consolidation. On the economic side it showed the gradual concentration under one control of upward of ninety per cent of the American production in an industry where every condition favored competition. It dominated the mar
ket for the raw material and controlled, as well, the essen tial machinery used in the process of manufacture. To ac complish these ends every device was resorted to for creat ing a monopoly—the "gentlemen's agreement," the pool, the legal trust, the leased corporation, and the holding corpora tion.2 4. Trade associations.—Almost every trade has its association. Some of these exist chiefly for the bene fit of the trade and some chiefly for the benefit of the individual members. The former are legal; the lat ter are liable to be illegal. Thus, the united efforts of gas companies to increase the consumption of' gas is to be distinguished from cooperation in some other line of trade for the purpose of fixing and maintaining prices. The former kind of organizations have as their chief purpose the collection and dissemination of information regarding the trade ; they accomplish their purpose by the use of trade-papers, conventions and the active work of paid secretaries. The illegal kind have used various devices. For example, a price list may be printed and observed without any definite acfreement mqde altho with a tacit understand ing that it will establish the price in the trade.
Let me say that it is a general broad principle that if a certain price is felt to be a fair and right price, each one for himself feels that Ile ought to maintain that price and not vary from it to the detriment of his fellows, unless he should let them know, but without any agreement, express or implied, to that effect.1 Legitimate trade associations are easily converted illto combinations to control the actions of' the mem bers. Wherever such control does become illegal it takes the form of some method of fixing prices or of restraining the manufacture and marketing of' prod ucts. It is said that in certain lines of trade and in dustry, dealers and manufacturers held weekly meet ings at which a definite understanding was reached regarding operation, output, prices, margins and simi lar matters.