REPORT OF THE COMMISSIONER OF CORPORATIONS. DEPARTMENT OF COMMERCE, BUREAU OF CORPORATIONS, SIR: The report of the Commissioner of Corporations for the fiscal year ended June 30, 1914, is hereby respectfully submitted. According to an act of Congress of September 26, 1914, providing for a Federal Trade Commission, the Bureau of Corporations will be merged in the said commission immediately upon its organization. This act provides that the Bureau of Corporations shall then cease to exist, that its employees shall become employees of the commission, and that the commission shall take over the records, furniture, and equipment of the Bureau and the conduct of all work and proceedings in which it shall then be engaged, while all appropriations made for the support and maintenance of the Bureau and its work are continued and authorized to be expended by the commission. THE FEDERAL TRADE COMMISSION AND THE BUREAU OF CORPORATIONS. Very early in the administration of the Sherman Law the necessity for an administrative agency representing the whole people, to acquire information and give publicity as to facts concerning interstate commerce, became quite apparent. In the case of Interstate Commerce Commission v. Brimson, 154 U. S., 474 (1893), the late Justice Harlan used this language: All must recognize the fact that the full information necessary as a basis of intelligent legislation by Congress from time to time upon the subject of interstate commerce can not be obtained, nor can the rules established for the regulation of such commerce be efficiently enforced otherwise than through the instrumentality of an administrative body representing the whole country, always watchful of the general interests, and charged with the duty, not only of obtaining the required information, but of compelling, by all lawful methods, obedience to such rules. Early proposals for Federal supervision.-The earliest specific proposal for the establishment of a Federal administrative organ to supervise corporations was apparently that made by Hon. Francis G. Newlands in a letter to the secretary of the Conference on Trusts at Chicago, dated September 20, 1899. Mr. Newlands' suggestion was, in substance, that a Federal bureau similar to the office of the Comptroller of the Currency should be established, which should receive reports from all corporations and act as an organ of publicity and supply information for the guidance of legislation. The first official recommendation for a Federal office to supervise corporations engaged in interstate trade was, apparently, a recommendation made by the Industrial Commission in its final report of February 10, 1902, as follows: That there be created in the Treasury Department a permanent bureau, the duties of which shall be to register all State corporations engaged in interstate or foreign commerce; to secure from such corporations all reports needed to enable the Government to levy a franchise tax with certainty and justice, and to collect the same; to make such inspection and examination of the business and accounts of such corporations as will guarantee the completeness and accuracy of the information needed to ascertain whether such corporations are observing the conditions prescribed in the act, and to enforce penalties against delinquents; and to collate and publish information regarding such combinations and the industries in which they may be engaged, so as to furnish to the Congress proper information for possible future legislation. Shortly after, Hon. P. C. Knox, Attorney General of the United States, in a communication addressed to the Chairman of the Committee on the Judiciary of the United States Senate, dated January 3, 1903, concerning the enforcement of the antitrust laws of the United States, made the following recommendations: A commission should be created to aid in carrying out the provisions of the act of July 2, 1890, and any further legislation relating to commerce. It should be the duty of such commission, among other things, to make diligent investigation into the operations and conduct of all corporations, combinations, and concerns engaged in interstate or foreign commerce, and to gather such information and data as would enable it to make specific recommendations for additional legislation for the regulation of commerce, and annually, and oftener if it shall seem needful, to make report thereon to the President. Such a commission should have authority to inquire into the management of the business of such corporations and concerns, to keep itself informed as to the manner and method in which the same is conducted, and to obtain from such concerns full and complete information necessary to enable the commission to perform the duties and carry out the objects for which it is created; it should have the power, when in its judgment it is necessary, to require reports from them and to require from them and their officers, agents, and employees specific answers to all questions upon which the commission needs information. As there are no means now provided by law for compelling testimony, such a law should provide that no person should be excused from attending and testifying or from producing books, papers, contracts, and documents before such commission or the courts. The foregoing is of especial interest, because the recommendations were largely used as a basis for the provisions of the law regarding the powers of the Bureau of Corporations, established shortly thereafter. Bureau of Corporations first established, 1903.-In the act of Congress of February 14, 1903, which established the Department of Commerce and Labor, provision was made for the organization of a Bureau of Corporations. The organization, functions, and powers of this Bureau are discussed in some detail below, but it may be noted here that its chief functions were those of investigation and publicity. The establishment of the Bureau of Corporations apparently satisfied for a time the demand for further supervision of the activities of corporations engaged in interstate commerce. This attitude may be explained in part by the generally prevailing opinion that further light was needed on this problem before definitive action in the direction of more elaborate Government control should be undertaken. Trade commission bills in Congress.-The first bill introduced in Congress proposing the establishment of an independent commission to supervise corporations engaged in interstate commerce, other than common carriers, was apparently introduced by Hon. Francis G. Newlands in the United States Senate on July 5, 1911 (Senate bill No. 2941). In the same session of Congress, and in subsequent sessions, Senator Newlands introduced several other bills having the same general purpose. Subsequently, in both Senate and House, numerous bills for the establishment of some form of trade commission were introduced, particularly in the second session of the Sixtythird Congress (1913-14). Kinds of trade commissions proposed in Congress.-The various trade commission bills introduced in Congress presented a great variety of projects, but, in general, they may be classified as either commissions to effect publicity or commissions to regulate commerce. The duties of the commission in the first case were chiefly confined to investigation and publicity, but sometimes included the duty to act as an office of formal registration and public record for corporations engaged in interstate commerce. With respect to the bills which intrusted the commission with regulative powers, two points of view were manifested. In most cases the underlying principle of regulation was that monopoly should not be allowed to exist in any form, and that injurious or unfair methods of competition which tend to promote monopoly should be regulated. In certain other bills, however, the continued existence of monopolistic organization was accepted, and provision was made for the regulation of corporations which possessed monopolistic powers. The latter system, however, found little favor in either House of Congress. Message of President Wilson.-While the establishment of a trade. commission had been urged, it remained for the recommendation of President Wilson contained in his message to the joint session of Congress on January 20, 1914, to finally give such impetus to the idea of the establishment of a commission in the aid of competition as to give promise of its enactment into law. In the message to Congress the President said: And the business men of the country desire something more than that the menace of legal process in these matters be made explicit and intelligible. They desire the advice, the definite guidance and information which can be supplied by an administrative body, an interstate trade commission. The opinion of the country would instantly approve of such a commission. It would not wish to see it empowered to make terms with monopoly or in any sort to assume control of business, as if the Government made itself responsible. It demands such a commission only as an indispensable instrument of information and publicity, as a clearing house for the facts by which both the public and the managers of great business undertakings should be guided, and as an instrumentality for doing justice to business where the processes of the courts or the natural forces of correction outside the courts are inadequate to adjust the remedy to the wrong in a way that will meet all the equities and circumstances of the case. Producing industries, for example, which have passed the point up to which combination may be consistent with the public interest and the freedom of trade, can not always be dissected into their component units as readily as railroad companies or similar organizations can be. Their dissolution by ordinary legal process may oftentimes involve financial consequences likely to overwhelm the security market and bring upon it breakdown and confusion. There ought to be an administrative commission capable of directing and shaping such corrective processes, not only in aid of the courts but also by independent suggestion, if necessary. Final form of Federal Trade Commission Act.-It was by reason of this program that, in the early part of 1914, committee bills were introduced in each House of Congress by the committees having charge of matters relating to interstate commerce in the respective Houses. In the House of Representatives the Committee on Interstate and Foreign Commerce reported a bill (H. R. 15613) known as the Covington bill, which provided for a trade commission which should have extensive powers of investigation, and be an office of publicity and record; while in the Senate a bill was reported by the Committee on Interstate Commerce (S. 4160), known as the Newlands bill, which provided for a commission of a similar character. The Senate committee substituted its provisions for the House bill, amended in the committee in such a manner as to confer upon the commission the power to regulate methods of competition. These bills, having been amended and passed by the respective Houses in which they were introduced, were amended by the conference committee in a manner which combined the essential features of each, including the provisions of the Senate bill respecting the regulation of methods of competition. This conference bill passed both Houses of Congress by practically a unanimous vote, and was approved by the President on September 26, 1914. FUNCTIONS OF THE BUREAU OF CORPORATIONS. The functions of the Bureau of Corporations are defined in the second and fourth paragraphs of section 6 of the act of Congress establishing the Department of Commerce and Labor, approved February 14, 1903, as follows: The said Commissioner shall have power and authority to make, under the direction and control of the Secretary of Commerce and Labor, diligent investigation into the organization, conduct, and management of the business of any corporation, joint stock company or corporate combination engaged in commerce among the several States and with foreign nations excepting common carriers subject to "An Act to regulate commerce," approved February fourth, eighteen hundred and eighty-seven, and to gather such information and data as will enable the President of the United States to make recommendations to Congress for legislation for the regulation of such commerce, and to report such data to the President from time to time as he shall require; and the information so obtained or as much thereof as the President may direct shall be made public. It shall also be the province and duty of said bureau, under the direction of the Secretary of Commerce and Labor, to gather, compile, publish, and supply useful information concerning corporations doing business within the limits of the United States as shall engage in interstate commerce or in commerce between the United States and any foreign country, including corporations engaged in insurance, and to attend to such other duties as may be hereafter provided by law. The functions of the Bureau of Corporations were primarily those of investigation and publicity. The express purpose of its work was to enable the President to make recommendations for legislation for the regulation of interstate commerce. In the third paragraph of the same section certain compulsory powers were conferred on the Commissioner of Corporations to enable him to execute these functions, such compulsory powers being applicable, however, only to those functions which are described in the second paragraph of the section (the first paragraph quoted above). The full text of this section of the law is given in Exhibit A. |