CHAPTER IV.

IMPORTANT PROVISIONS OF STATE ANTITRUST LAWS.

Section 1. Introductory.

Since Federal antitrust laws do not reach purely intrastate transactions, there has been left to the States themselves an important field of activity in regulating trade and business practices. In recent years, especially in the past decade, various States have passed a large number of laws relating to trusts, monopolies, and restraint of trade. It seems desirable, therefore, in order that the entire field of antitrust legislation may be covered, to present a digest of State constitutional and statutory provisions relating to this subject. The object of these statutes, speaking broadly, has been twofold-first, to make criminal many contracts and agreements which at the common law were probably void only; second, to specify many practices which may in some cases have been held to be contrary to the principles of the common law, or to be included in the general terms "monopoly" or "restraint of trade," thus meeting, as far as practicable, the demand for more definiteness in the laws relating to this subject. In addition, a number of States have prohibited certain practices, such as local price cutting and demands by manufacturers for exclusive dealing, which the legislative bodies apparently considered would, if permitted, inevitably result in restraint of trade or tend to monopoly.

The plan of this chapter is to group by subjects the more important provisions of these laws to show the extent to which they have been adopted throughout the States and the differences in the terms employed in statutes apparently designed to apply to the same conditions or practices. The broad subjects covered in this presentation are: (1) Monopoly, (2) restraint of trade, (3) restraint of competition, (4) pooling, (5) price control, (6) limitation of output, (7) division of territory, (8) restraints on resales, (9) competitive methods, (10) provisions affecting agricultural interests, (11) provisions affecting labor, (12) holding companies, (13) provisions affecting business of a public nature, (14) recognition of common law principles, (15) administration of the law, (16) evidence, burden of proof, indictments, etc., (17) penalties, (18) stock watering. Wherever possible, a law which is fairly typical has been chosen as a model or basis of comparison for a particular group or subject, followed by a state

ment of the differences, if any, between this and similar laws of other States. This is followed by further laws touching the same subject matter but so dissimilar that they do not admit of being compared in detail. This method of treatment has frequently necessitated separating closely related portions of a statute dealing with a number of specific offenses, and presenting them under separate titles.

An attempt has been made to give the substance of the statutes, but where the use of particular terms appeared to be important the exact wording has been preserved.

In addition to the statutory provisions, the more important decisions construing them, or showing conditions or practices which the courts have declared to be in violation thereof, have been digested and inserted.

With very few exceptions, the chapter includes only provisions clearly directed at the prevention of monopoly and restraint of trade. A section on stock watering, properly a part of the corporation laws, has been inserted because of the fact that this subject is very generally discussed in connection with antitrust legislation.1 Section 2. Monopoly.

CONSTITUTIONAL PROHIBITIONS.-Monopolies are prohibited but not defined in the constitutions of many States. They are prohibited in the constitutions of five of the States (Oklahoma, Arkansas, Tennessee, Texas, and Wyoming) in substantially the following language: Perpetuities and monopolies are contrary to the genius of a free government and shall never be allowed. In North Carolina it is declared that they "ought not to be allowed" (Const., Art. I. sec. 31).

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The constitutions of three States (Arizona, South Dakota, and Washington) declare that monopolies "shall never be allowed."

The Maryland constitution (art. 41) declares that they are "odious, contrary to the spirit of a free government and the principles of commerce and ought not to be suffered."

A section of the constitution of Connecticut (art. 1, sec. 1) declares that "no man or set of men are entitled to exclusive public emoluments or privileges from the community."

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The New Mexico constitution (art. 4, sec. 38) directs the legislature to "enact laws to prevent * * * monopolies * and the constitution of Virginia (sec. 165) commands the legislature to prevent "monopolies inimical to the public welfare."

1 The publication of the House Committee on the Judiciary entitled "Laws on Trusts and Monopolies" (Dec. 1, 1913), which contains reprints of most of the State antitrust laws, has been largely used in the preparation of this chapter, supplemented by extensive reference to the original statutes and reported

cases.

2 Oklahoma, Art. II, sec. 32; Arkansas, Art. II, sec. 19; Tennessee, Art. I, sec. 22; Texas, Art. I, sec. 26; and Wyoming, Art. I, sec. 30.

3 Arizona, Constitution, Art. XIV, sec. 15; South Dakota, Art. XVII, sec. 20, and Washington, Art. XII, sec. 22.

Section 103 of the constitution of Alabama is as follows:

The legislature shall provide by law for the regulation, prohibition, or reasonable restraint of common carriers, partnerships, associations, trusts, monopolies, and combinations of capital, so as to prevent them or any of them from making scarce articles of necessity, trade, or commerce, or from increasing unreasonably the cost thereof to the consumer, or preventing reasonable competition in any calling, trade, or business.1

In the constitution of Minnesota (Art. IV, sec. 35), combinations to monopolize the markets for food products in the State, or to interfere with or restrict the freedom of such markets, are declared criminal conspiracies.

The constitution of Louisiana (art. 190, adopted Nov. 22, 1913) prohibits all monopolies or combinations to monopolize trade or

commerce.

The constitution of Georgia (Art. IV, sec. 2) declares that the general assembly shall have no power to authorize any corporation to buy stock in any other corporation or to make any contract or agreement with any corporation, which may have the effect, or be intended to have the effect, to defeat or lessen competition or to encourage monopoly.

The constitution of New Hampshire (art. 82) declares that "free and fair competition in the trades and industries is an inherent and essential right of the people and should be protected against all monopolies and conspiracies which tend to hinder or destroy it," and grants to the general court the power to enact laws "to prevent the operations within the State of all persons and associations, and all trusts and corporations, foreign or domestic, and the officers thereof, who endeavor to raise the price of any article of commerce or to destroy free and fair competition in the trades and industries through combination, conspiracy, monopoly, or any other unfair means."

STATUTORY DEFINITIONS.-The statutes of four of the States define monopoly. The laws of Arkansas and of South Carolina define it as follows:

A monopoly is any union or combination or consolidation or affiliation of capital, credit, property, assets, trade, customs, skill or acts of/or any other valuable thing or

1 Citizens Light, Heat & Power Co. v. Montgomery Light & Water Power Co. (171 Fed., 553 (1909)).—Complainant prayed, among other things, that defendant be enjoined and restrained from any effort to induce any of the customers of complainant to violate any subsisting contract to furnish electricity either for a definite or indefinite term, or from agreeing to indemnify and hold harmless customers of the complainant from liability for damages for breaches of contract; and further asked general relief from such acts as taking business at less than cost to induce customers not to contract with complainant and thus securing a monopoly of business for itself. Held, that the Alabama Constitution of 1901, section 103, had not narrowed competition as defined at the common law; that under this section one man could take over all of another's customers, and thus control a business if it resulted from competition within legal limits; that the court could not restrain the defendant from inducing a breach of complainant's contracts by mere solicitation, for that would be offensive to the policy of the law which was to foster competition, and would be building up rather than destroying monopoly; but that the court could enjoin the defendant from agreeing to indemnify the complainant's customers for breaking their contracts.

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possession, by or between persons, firms or corporations, or association of persons, firms or corporations, whereby any one of the purposes or objects mentioned in this act' is accomplished or sought to be accomplished, or whereby any one or more of said purposes are promoted or attempted to be executed or carried out, or whereby the several results described herein are reasonably calculated to be produced; and a monopoly, as thus defined and contemplated, includes not merely such combination by and between two or more persons, firms and corporations, acting for themselves, but is especially defined and intended to include all aggregations, amalgamations, affiliations, consolidations or incorporations of capital, skill, credit, assets, property, custom, trade or other valuable thing on/or possession whether effected by the ordinary methods of partnership or by actual union under the legal form of a corporation, or any incorporated body resulting from the union of one or more distinct firms or corporations, or by the purchase, acquisition or control of shares or certificates of stocks or bonds, or other corporate property or franchises, and all partnerships and corporations that have been or may be, created by the consolidation or amalgamation of the separate capital, stock, bonds, assets, credit, property, customs, trade, corporate or firm belongings of two or more firms or corporations or companies, are especially declared to constitute monopolies within the meaning of this act, if so created or entered into for any one or more of the purposes named in this act.2 The statutes of Texas define a monopoly as follows:

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A monopoly is a combination or consolidation of two or more corporations when effected in either of the following methods:

1. When the direction of the affairs of two or more corporations is in any manner brought under the same management or control for the purpose of producing, or where such common management or control tends to create a trust as defined in the first section of this act.3

2. Where any corporation acquires the shares or certificates of stock or bonds, franchise or other rights, or the physical properties, or any part thereof, of any other corporation or corporations, for the purpose of preventing or lessening, or where the effect of such acquisition tends to affect or lessen competition, whether such acquisition is accomplished directly or through the instrumentality of trustees or otherwise.1

South Dakota defines a monopoly as a combination of capital or skill, by two or more persons, firms, corporations, or associations of persons

First. To create or carry out restrictions in trade.

Second. To limit the production or to increase or reduce the price of commodities. Third. To prevent competition in the manufacture, transportation, sale or purchase of merchandise, produce or commodities.

1 Briefly, the Arkansas act prohibits agreements to regulate prices or insurance premiums, or to limit output, selling at less than cost of manufacture or giving away products for the purpose of financially injuring competitors, and the law of South Carolina in addition prohibits refusals to buy from or sell to another under certain conditions.

2 Arkansas, Laws 1905, Act 1, as amended Mar. 12, 1913; South Carolina, Laws 1902, No. 574, sec. 2.

3 Briefly, a trust is defined under the law to be a combination to (1) create or carry out restrictions of trade; (2) regulate prices of commodities or insurance; (3) prevent or lessen competition; (4) fix any standard to control the price of any commodity; (5) enter into any agreement (a) not to sell or transport, or to prepare for market any commodity, or make any contract of insurance at a price below a common standard, or (b) to keep the price of such commodity, service, transportation or insurance at a fixed or graded figure, or (c) to preclude free competition in the sale, etc., of such commodity, transportation, service or insurance, or (d) to pool any interest they may have in the sale or purchase of any such commodity, service, transportation or insurance whereby its price or the charge therefor is affected; (6) to regulate the output of any article, the amount of insurance to be undertaken, or the amount of work which may be done in the preparation of any product for market or transportation; (7) to abstain from doing business in the State or any part thereof.

4 Texas, Laws 1903, Chap. XCIV, sec. 2.

Fourth. To fix any standard or figure whereby the price to the public shall be in any manner established or controlled.1

STATUTORY PROHIBITIONS.—The statutes of 21 States prohibit monopoly, and in one of these (Oklahoma) the prohibition extends to "virtual monopolies."

In New Mexico the legislature has declared that "perpetuities and monopolies are contrary to the genius of a free government and shall never be allowed." 2

In New York, under certain conditions, corporations are authorized to purchase and hold stock of other corporations, but are prohibited from combining for the creation of a monopoly. This State also prohibits all arrangements, combinations, etc., whereby a monopoly in the manufacture, production, or sale in the State of any article or commodity of common use may be created, or whereby, for the purpose of creating such monopoly, the free pursuit in the State of any lawful business, trade, or occupation is restricted or prevented.

The laws of Montana prohibit any person, corporation, or association of persons in the State, directly or indirectly, from combining or making any contract in any manner whatever to create a monopoly in the manufacture, sale, or transportation of any article of commerce (including gas, water, water power, electric light, and electric power, for whatever purpose used or employed).5

1 South Dakota, Laws 1909, chap. 224, sec. 1.

State v. Fullerton Lumber Co., et al., 152 N. W., 708 (S. Dak., 1915).-The defendants who were engaged in selling lumber, coal, and building material, at Geddes, S. Dak., were charged with a conspiracy in restraint of trade in violation of the laws of 1909, chap. 224. It was alleged that the defendants agreed upon and adopted a maximum and minimum price list, the former, which afforded a large profit, to be followed where the parties had no outside competition, and the latter, which represented the actual cost of the commodities, to be followed in communities where there was such competition. Certain of the defendants were found guilty and, on appeal, the conviction was affirmed, the appellate court holding that the offense was complete upon entering into the agreement and that it was not necessary to prove an overt act under the agreement.

2 New Mexico Stats., 1915, sec. 4770.

2 New York, Cons. Laws, S. C. L., secs. 14, 52.

Burrows v. Interborough Metropolitan Co., 156 Fed., 389 (1907).-In statutes prohibiting contracts or combinations creating monopolies, the word "monopoly" is not used in a strict legal sense, as including the power to legally exclude all others from the field monopolized, but means the obtaining of a substantially complete control of a particular business or article. The acquisition by a corporation of a controlling interest in the stock of corporations owning or controlling and operating all street railway lines in Manhattan and the Bronx, including underground, elevated, and surface lines, is unlawful as creating a monopoly of the means of transportation of passengers in the city in violation of S. C. L., sec. 14. Attorney General v. Consolidated Gas Go., 124 N. Y. App. Div., 401 (1908).-The consolidation of six New York gas companies under the name of the Consolidated Gas Co., and the subsequent acquisition by the latter of the whole or the majority of the capital stock of other gas and electric-lighting companies under S. C. L., sec. 52, did not offend S. C. L., sec. 14, because, even though designed to prevent competition, it did not constitute a monopoly under the statute, as no exclusive right was obtained. Nor could the price of gas or electricity be arbitrarily fixed by the corporation, both of these matters being within the control of the legislature, which may fix the maximum rate and compel the production and sale of gas to consumers. Such companies are distinguished from a corporation or combination dealing in ice, milk, coal, etc., organized to control output or fix prices.

Continental Securities Co. v. Interborough Rapid Transit Co., 165 Fed., 945 (1908).—Competing street railways in New York City combined through transfer of their stock to a holding company. The combination resulted in a monopoly held illegal under S. C. L. 14, which limits S. C. L. 52, and this although it is within the power of the legislature, by enactment or the operations of some commission created by it, to remedy the evils that might result from the monopoly if left undisturbed.

4 New York, Cons. Laws, Gen. Business Law, sec. 340.

• Montana, Laws 1909, chap. 97, sec. 1.