time exercising the power to examine the basis for the results which other courts have obtained and possibly reaching a different conclusion. Characterizing the standard as that of the common law really is not different from describing it in the other two ways, because the Supreme Court of the United States must always remain the final judge of what the common law which it adopts may be. That introduces into the standard the fiat of the court or the technique of judicial reasoning used by common law courts. Referring to the standard as the fiat of the court is not different in fact from describing it as based upon a certain technique of judicial reasoning. It is objectionable because it suggests arbitrary action by the court instead of action based upon a recognized judicial process of reasoning. The three methods of describing the standard outside the act, therefore, really come to the same thing, but the third method is the most complete and the fairest way to describe the standard referred to. We may call it for the sake of brevity "the standard of reason which had been applied at common law."

§ 111. Our principal question of construction of the Sherman Act then is: does the act by its terms prohibit any specified conduct, or does it simply induct the federal courts into a new federal jurisdiction, there to operate and obtain results in accordance with "the standard of reason which had been applied at common law''? The latter view has now been accepted, but not before the court seemed to have committed itself to the former. The decisions of the United States Supreme Court will therefore be examined with a view to showing that the results reached are consistent with the application of the standard of the common law and the standard of reason which had been applied at common law, and inconsistent, in some instances at least, with the view that the Sherman Act on its face specified the conduct prohibited without reference to any standard outside the act. Then the dicta of the court will be examined 4 to show how the court, after first taking the view that the act specified the conduct prohibited without reference to any outside standard, abandoned that position and adopted the view that the conduct prohibited

3-Post chap. VIII.

4-Post chap. IX.

was to be determined in accordance with the "standard of reason which had been applied at common law."

§ 112. The principal difficulty in applying the Sherman Act is, therefore, not strictly one of construing its terms, but in determining what acts in restraint of trade and in the furtherance of monopoly are illegal according to "the standard of reason which had been applied at common law." How shall the judicial discretion which the act vests in the court to declare some contracts, combinations, and conspiracies in restraint of trade to be legal and others illegal be exercised? The uncertainty which arises from the operation of such a judicial function is no greater than that which attends any new course of decision by common law courts.5

5-It is of course arguable that the results reached by the court, while arrived at slowly and piecemeal, and with considerable expense to the individuals who litigate, are

better and will last longer than if Congress had attempted a priori to prohibit certain definite acts, or to break up any clearly defined status.

CHAPTER VIII

THE DECISIONS OF THE UNITED STATES SUPREME COURT UNDER THE SHERMAN ACT

SECTION 1

CONTRACTS ACCOMPANYING THE SALE OF A BUSINESS

§ 113. Cincinnati Packet Co. v. Bay 1 presents the question of the validity of a restrictive covenant accompanying the sale of a business. The covenant is limited in time, and not broader than the scope of the seller's business. It is just the sort that would have been valid at common law. It was held valid under the Sherman Act.2 If the Sherman Act prohibited all contracts which restrained trade, however slightly, surely this would have been one of those that would be void.

§ 114. In Shawnee Compress Co. v. Anderson 3 we have a plain case (so far as the record in the Supreme Court of the United States is concerned) of many leases with restrictive covenants, all secured for the purpose of creating a combination and with the intent to monopolize the business. At common law this would have been an illegal attempt at monopoly. It was held illegal under the Sherman Act.

SECTION 2

EXCLUSIVE CONTRACTS OF SALE AND PURCHASE

§ 115. Continental Wall Paper Co. v. Voight is of little value so far as the application of the Sherman Act is concerned.

1-200 U. S. 179 (1906) [781]. 2-United States v. Trans-Missouri Freight Association, 166 U. S. 290 (1897) [878] (“A contract which is a mere accompaniment of the sale of property and thus entered into for the purpose of enhancing the price at which the vendor sells it, which, in effect, is

collateral to such sale; and where the main purpose of the whole contract is accomplished by such sale, might not be included within the letter or spirit of the statute in question."')

3-209 U. S. 423 (1908) [785]. 4-212 U. S. 227 (1909).

The case arose on demurrer to a defense which set out a combination of 98 per cent of the manufacturers of wall paper which entered into exclusive contracts with jobbers and retailers all over the United States. This made in fact a combination between the manufacturers, jobbers, and retailers with the intent to monopolize and exclude from the business everybody else. The case is so plainly one of an attempt to monopolize which would have been illegal at common law that the court spends only a few lines in stating in substance that it assumes the illegality of the combination.5

SECTION 3

CONTRACTS TO KEEP UP THE PRICE ON RESALE

§ 116. Dr. Miles Medical Co. v. Park & Sons Co. might appear to be a case where the supreme court had held contracts, or a combination, to be in violation of the Sherman Act which would not have been invalid at common law. It might be used, therefore, to indicate that the Sherman Act was broader than the common law. But this is not so. The Supreme Court of the United States is the sole judge of what is the common law which it recognizes as the standard to be used in applying the Sherman Act. It may have determined, as it had a right to do, what it considered to be the common law applicable, and that this common law required the result reached in the Dr. Miles case.

In the same way, if the Supreme Court of the United States should, operating under the Sherman Act, hold that a contract by the purchaser of a mule not to use any currycombs on it except those furnished by the seller was illegal; that a contract by the purchaser of a picture not to use any cleaning or preservative material upon it except that furnished by the seller was illegal; and that similarly a contract by the purchaser or licensee of a patented article that he would use with it only unpatented accessories sold by the seller or licensor was illegal, we should

5-[820, 821].

6-220 U. S. 373 (1911) [838]. See ante §§ 32 et seq., where this case is fully dealt with.

7-Ante § 32.

8-See ante §§ 41 et seq.

not have a decision that the Sherman Act is broader than the common law, but merely that the United States Supreme Court is the final judge of what the common law, which it purports to follow, may be.

SECTION 4

COMBINATIONS

Of Transportation Units

§ 117. The basis for the decisions in the Trans-Missouri Freight Association Case and the Joint Traffic Association Case 10 is clear. The railroads operated under special franchises. The public was excluded from the business in general. If two were let into the business, the public policy was made plain that they should compete, and as all the rest of the public was excluded, the two had a monopoly except for the competition between themselves. When, therefore, they united, they not only violated the declared public policy in favor of competition, but they achieved an actual monopoly. All combinations of public utilities which can operate only under special franchises so that the public generally is excluded from the business, are therefore illegal per se at common law. Hence, such combinations are illegal per se under the Sherman Act where interstate or foreign commerce is involved. So far, therefore, as railroads are concerned, the proposition is literally true, that under the Sherman Act every restraint of trade by combination and every attempt to monopolize by combination is illegal. This, however, is not because of any language of the Sherman Act, but because of the standard of the common law or the standard of the rule of reason which the Sherman Act adopts.

This ground for the decision in the Trans-Missouri Freight Association case appears rather vaguely in the opinion of the court.11 If the case had been put squarely and solely upon this ground much subsequent difficulty would have been avoided.

9-166 U. S. 290 (1897) [862]. 10-171 U. S. 505 (1898) [765,

11-[881, 882, 883, 884, 885].

904].