THE MODERN TRUST MOVEMENT
The decision of the New York and Ohio courts in 1890 and 1892, respectively, showed that even without the prohibitions of the Sherman Anti-trust act the "trust," so far as the law was concerned, was not a permissible form of business organization. The Standard Oil interests, it is true, avoided collision with the law for a time by the development of a community of interest, but this loose for organization proved satisfactory mainly because there already existed among the members an unusual degree of mutual confidence and good will. It appeared, therefore, that unless some new expedient for restraining competition could be hit upon, the manufacturers insistent upon holding competition in check must needs resort once more to pooling agreements. Yet this was even less desirable than before from the manufactures' standpoint, since the Sherman Anti- trust law had been passed in 1890. This act made pools, when effecting a restraint of trade, not only unenforceable, as under the common law, but actually illegal; and their existence would therefore have to be kept secret. By what means then were the manufacturers to secure relief?
The new expedient to restrain competition was the modern trust. The trust was effected in one of two ways: either by means of a security holding corporation, that is, a company owning all or part of the securities of other companies; or by means of a property holding corporation, that is, a company owning outright the plants and other property of the companies to be united in the trust.
First. The holding corporation is a type of business organization employed to combine a group of corporations by owning all or majority of the stock. The holding company, whether a newly created corporation or one already in existence, must