Jeremiah Whipple Jenks

“ When the reputation of a certain brand of goods of this nature becomes established, consumers make no further efforts to test its quality, and the retail price often becomes a customary price. If a manufacturer of such goods finds his trade injured by a rival, his most effective means of competition will often be, not a lowering of the price, but an increase of the outlay on advertising. ”

“ On the other hand, if the element of monopoly enters into the business to any noteworthy extent, the prices of the product may be kept so high that fair dividends may be paid even on this high capitalization. That the tendency towards increasing the capital has been very strong there can be no question, and a penalty is apt to be paid for this somewhat reckless financiering. ”

“ The great mass of producers remained vigorously competing with one another, some making larger, others smaller profits, but all except a few at the lower margin making at least a living. Under modern business conditions competitors are often, relatively speaking, few in number, of substantially equal ability, and controlling substantially equal facilities for managing the business economically. Consequently, in such circumstances, modern competition differs greatly from that form which was familiar to the earlier economists. ”

“ Other evils come through the power that is sometimes exercised by combinations in the corruption of legislatures; in the control over industries of such a nature that it tends to destroy the spirit of individual activity and independence on the part of many persons who would otherwise enter business independently; and evils also come through the increased force of any improper or dishonourable business practices, since this added force for evil
is given to any combination by virtue of its greater influence in the community. ”

“ In other industries not protected by the tariff the same fierce competition leads to the formation of combinations. The tariff is simply an encouraging condition. The removal of the tariff would not destroy the combination unless it destroyed the industry at the same time; but, on the other hand, the removal of a protective tariff might very easily prevent the abuses of exorbitant prices which might be exacted by a combination protected by the tariff. ”

“ Experience has shown that when combinations are made in industries that from their nature do not seem well suited for consolidation, failure follows. In many individual instances corporation lawyers, who have had much practice in forming combinations, advise their clients in lines of business especially fitted for competition not to enter a combination, but to remain independent, assuring them that an individual is able to compete in such lines of industry with any combination, however large. ”

“ The laws that have been most strict on the subject attempt to limit the capitalization to the "actual cash value" of the business, by that being understood at times simply the cost of the plant itself with the running cash capital needed. On the other hand, most business men think that it is a wiser plan, and on the whole equally just, to capitalize a business on the basis of its earning capacity, regardless of what the plant may have cost. ”

“ On the other hand, labour organizations are also rapidly increasing in strength, and their leaders are of the opinion that within a comparatively short time they will be so thoroughly organized in all of the chief industries that a strike can be instituted and supported not merely in one or two establishments, but throughout the entire industry. Whenever this condition of affairs shall have been reached, the employes will be substantially on an equality with their employers in such cases of conflict, so that the advantage now resting with the combination will be largely removed. ”

“ The competition among the different railways also for the freights which an important customer can furnish leads to cutting of the rates in their favour. These special rates, however, whether justified from the business point of view or not, are beyond any question from the social point of view, often a very grave injury. A manufacturer who receives these special favours can build up a business substantially monopolistic in its extent, whereas his rival of equal or even of greater ability, and equally skilful as a manufacturer, would be ruined if he did not receive like rates. ”

“ The ambition thus to dominate in a great industry is akin to that of a statesman, and there can be little question that this pride of power and the desire to control the destinies of others has been a more or less conscious element in the formation of many of the most successful and most skilfully managed combinations. ”

“ As soon as a slight depression in business comes, so that it is perfectly evident not merely that dividends cannot be paid on the common stock, but that in all probability both the deferred stock and the bonds, if any have been issued, will also have to go without interest, it may be necessary to reorganize many of these combinations and to start them anew on a much lower capitalization. ”

“ The entire profit of an establishment frequently depends upon the skill of the manager. When many different establishments are organized into one, it is possible to select the most skilful manager of all and Jo put him in charge of the combination, thus securing in many cases, if the trust includes practically all of the establishments in the entire industry, the ablest manager in the country for them all. ”

“ Those industries in which the competition becomes a matter of cutting of prices can by combination remove rivals from the field, and then put prices up to a remunerative rate. Competitors in industries of the second class by combination can save many of the costs of selling, and thus without any increase in the price of the product may save enough of the cost to make the business profitable. ”

“ From what has been said earlier, it is evident that certain classes of industries, especially those that require the investment of fixed capital to large amounts, are especially adapted for combination. Very little tendency towards consolidation is found in the farming industry, and, relatively speaking, little in industries that require the investment of but small capital. It is perhaps, however, not too much to say that in nearly all lines of industry which from their nature are adapted for consolidation combinations more or less firm have been made during the last few years. ”

“ In one or two cases where the government is itself a producer, as of soda, it is a member of a combination. Indeed, a Prussian minister in a speech in the Landtag has expressed himself favourably regarding the coal and iron combinations. The facts seem to show that the coal combination, at any rate, has used its power of fixing prices in a conservative way, and it has at times held prices somewhat lower than they probably would have been had free competition existed in that industry. ”

“ When, as has been frequently the case of late years, in addition to this cash value of the plant and the cash itself which may have been paid in, large sums of stock are issued also for properties which may be in themselves highly over-valued, and for the services of the promoter, the financier and others, we can see that the capitalization must be far above what may ordinarily be considered a paying basis. ”

“ Owing to the fact that the introduction of goods into new markets, especially into foreign markets, is a matter of time, expenditure of energy, and of money, the large establishment with great capital has in this particular also a decided advantage. The Standard Oil Company, and American Tobacco Company, and other similar establishments, have thus been able to open up new markets in Europe, in Japan, China and other portions of the Far East more readily by far than individual producers along those lines could have done. ”

“ Owing to the fact that competitive selling is in certain cases largely done away with, it has in some, perhaps in many, cases been possible for fewer travelling salesmen, of less skill and with lower wages, to do the work than before the combination, so that not merely has the total expense been lessened, but also the average salary paid to those retained in the business. ”

“ Industries manufacturing comparatively inexpensive articles for the retail trade, put them up in packages which become well known to customers; and those industries whose goods are sold under brands or trade-marks, or in some other form so that they are familiar to buyers, afford an example of competition of an entirely different kind. ”

“ In certain instances, especially when the combination has first been made, wages have been increased. The Trust and Wages. On the whole, however, it is probable that as yet the wage-earners have succeeded in getting an increase of wages in circumstances substantially similar to those under which their wages would be increased by single corporations. An increase of wages comes only through pressure on their part. Under a prosperous condition of industry it is possible, without materially lowering profits, to increase the wages. ”

“ Of late years there has been a marked tendency towards the formation of large corporations that buy up a very large proportion of competing manufacturing plant, and in this way secure at least a temporary monopoly of the market. ”

“ Among competitors of such great resources, the struggle may last long after the business has become unprofitable to all before any will fail. Among competitors so nearly equal in strength, the entire industry may be very seriously injured by competition before enough are forced out to affect materially the severity of the competition. ”

“ By the protection which a protective duty gives against foreign competition, it doubtless often furnishes the occasion for the formation of trusts. If a large amount of capital is tempted into the industry through the profits promised by the tariff, and therefore competition amongSpecial Favours to Combinations. the various establishments becomes fierce, it is much easier for them to form a combination with the certainty of good profits, provided the domestic competition can be overcome, if they are certain that foreign competition also is to be excluded. ”

“ In case of disputes arising between the combination and the operatives, the position of the combination is stronger than that of an individual corporation. It is possible to close one or two works where troubles have arisen, and to transfer orders to the other works without any material injury to the business, provided the closing of the one or two establishments is not for too long a period. ”

“ It is not intended to convey the impression that managers of combinations are less moral than other business men, but merely that whenever they are dishonourable in their practices the influence reaches more widely. ”

“ Inasmuch as the holding of the voting power of the majority of the stock of each of the different constituent companies gave to the trustees absolute power of election of directors, and consequently the power of guiding harmoniously the affairs of all of the plant entering into the combination regardless of the will of the stockholders, the United States courts held that the corporations entering into such an agreement had gone beyond their powers, and that such a trust was illegal. ”

“ For example, the Distilling Company of America, which controls probably 90% of the entire product of corn spirits, found it to its advantage to add to its plant several rye distilleries, and to purchase a number of the leading brands of whiskies for consumption as beverages, in order that they might supply the needs along different lines of practically all dealers in spirits and whiskies, in this way saving for themselves many customers who otherwise might have been lost. ”

“ The expense involved in making attractive show-windows in stores or shops, and in calling the attention of the public to popular wares by posters scattered about the country and by legends painted on rocks, on buildings along the lines of railways, &c., are other common examples.
2. The salaries of commercial travellers, together with their hotel and travelling expenses, are of a similar nature. This competitive advertising in many cases does not increase to any noteworthy extent the consumption of the products in question, but merely attracts customers from one manufacturer to another. ”

“ The dictum of Stephenson, that “where combination is possible, competition is impossible,” has a much wider application now than in the early days of railways. The modern facilities for the transportation of goods, for the rapid transmission of intelligence by fast mail, and especially for the instantaneous exchange of information by the telegraph and telephone, have made it possible to manage easily a large business, however widely separated its different plants or establishments may.be. ”

“ Most strong men like to take responsibility and to be dominant in The Industrial Manager.affairs. When, owing to the advantages of combination that have been enumerated above, the prospect of a virtual monopoly seems certain, provided due skill in management is exercised, it is natural that the manager should wish to bring about the combination in order that he may himself have the satisfaction of being in substantially absolute control of the entire industry in a country, or possibly even in the world. ”

“ Most of these large corporations have been in existence for such a short time that one cannot yet judge accurately regarding their permanent success. Many of them seem to have been over-capitalized and their dividends have not always met shareholders' anticipations. There has been no active popular movement against consolidation in England, and the government has passed no laws opposed to it. Parliament, however, has passed stringent amendments to the Companies Acts, changes enforcing publicity regarding the organization of all limited liability companies and their methods of management. ”

“ A promoter engaged in the formation of a combination and needing a certain fixed sum in cash, would make an arrangement with a bank to sell to it at a price agreed upon such portions of a named amount of stock as were not disposed of to other customers before a certain fixed date. ”

“ The advantage of unifying in one establishment the manufacture of products somewhat allied in nature appears also in selling goods. If customers can buy all of the various kinds of related goods in one establishment, much of their time and energy will be saved. Some of the larger combinations, therefore, in order to make this saving for their customers and thus to be sure of retaining their orders, add to their plant facilities for making products which a smaller establishment could hardly manufacture. ”