12. Advantages of pools.—It must not be thought, because old pooling agreements have been discussed here, that pools do not exist today. They do exist in spite of all legal and political attempts to prevent them. That they have had important advantages for those engaged in them cannot be denied. They are simple, quickly formed, and involve no great ac cumulation of capital; they therefore do not place the industry under the burden of paying income on huge capital liabilities representing promoters' profits.
Frequently they have fixed prices, not exorbitantly high, but simply high enough to insure sufficient profit to prevent the extinction of invested capital. By the influence of pools marketing costs have been reduced; cooperation in the granting of credit has diminished losses from bad debts ; and cross freights have been saved.
13. Disadvantages of the chief disad vantage of the pools is their instability. As will be shown, they are generally illegal and therefore lack the power to compel obedience to the contractual obli gations undertaken by the members of the pool. Moreover, they have in some cases handicapped am bition and encouraged deceit and falsehood.
14. Trusts.—Because pools were unstable, the vot ing trust agreement was adopted and was applied to competing companies each of which selected the same group of trustees. The method was originated in 1879 by the general solicitor for the Standard Oil Company; he perfected it in 1882. Soon afterward trusts were formed in the whiskey, sugar, cotton-seed oil, linseed-oil and white-lead industries.
15. A typical legal trust.'—It will be well to de scribe very briefly the largest legal trust that has ever come into existence in the United States—the Standard Oil trust.
The trust agreement was dated January 2, 1882, and included three classes of parties. In the first class were all the stockholders and members of the so-called Standard Alliance and Association of Re finers, in which the members were stockholders of the several companies that up to this time had controlled the oil business. This class also included members of certain other companies outside the alliance.
The second class included all the, more important officers and stockholders of the various companies.
In the third class were certain of the stockholders and members of other corporations and partnerships. The agreement provided for the admission of new companies and for the formation, whenever possible and advisable, of a branch of the Standard Oil Com pany in any state or territmy in the Union. All the parties were to transfer all their property to the Stand ard Oil companies in the several states, and to re ceive in return stock equal, at par value, to the ap praised value of the properties so transferred. This
stock was then to be transferred to the trustees, and no additional issues of stock could be made by the companies to anyone except the trustees.
The trustees were to deliver to the owners of the properties trust certificates equal in amount to the amount of stock which the trustees had received for the several properties. As the trustees collected divi dends from the several companies they were to dis burse the amounts to the holders of the trust certifi cates. In March, 1892, the Ohio courts compelled the dissolution of the Standard Oil trust.
16. Community of interest.—The most recent form of interbusiness relation is that represented hy the so-called community of interest plan. Control rests primarily in interlocking directorates, but it is exer cised in many other Nvays; there is, for example, the control of banking facilities, as well as the control of' important customers. A large community of inter est is found in the water-power development com panies, many of which arc controlled by the General Electric Company of New York thru direct owner ship of the stock of many companies by itself and by its subsidiaries, thru interlocking directorates with only a minority stock control, and thru interlocking directorates without stock ownership. The extent of this community of interest is described in a special . .
report of the Commissioner of Corporations as fol lows: The General Electric companies have a very extensive in fluence in the water-power business of the United States. As shown in the table on page 15, the total water-power, developed and under construction, of the companies involved in these interests is almost 940,000 h.p. Adding to this 62,500 h.p. developed by the Canadian Niagara Power Com pany, on the Canadian side of Niagara Falls, and sold in the United States, makes a grand total of over 1,000,000 h.p., developed and under construction, coming under the in fluence of the General Electric Company. The companies included in the General Electric group own water-power in 18 states. These states have 2,325,757 "commercial" horsepower, developed and under construction. Of this, 40 per cent is in the General Electric group described. In Pennsylvania, they control nearly 80 per cent, in Colorado 72 per cent, in New Hampshire 61 per cent, in Oregon 58 per cent, and in Washington 55 per cent.