reasonable penalties as may be imposed upon him by the association." This agreement was held to be in violation of the Sherman Antitrust Act.1

Where, however, the activities of an association were confined to a restricted locality, although partly in one State and partly in another, and where the services rendered by members of the association as commission merchants, acting between prospective purchasers and owners of live stock, were local to the particular stockyard, such transactions were held by the United States Supreme Court not to be interstate commerce. The agreement in this case regulated the terms on which members would render such local services, and therefore was not an agreement in restraint of interstate commerce.2

Consent decrees under the Sherman Antitrust Act have also prohibited price-fixing activities of associations. Thus, the Southern Wholesale Grocers' Association was enjoined from fixing prices, or from coercing manufacturers into price-fixing agreements, or from accepting rebates or bonuses from manufacturers for maintaining prices, or from conspiring to increase prices of commodities sold by the wholesalers and jobbers, and from any agreement which interferes with the free flow of commerce. So, also, the "Association of Coaster Brake Licensees" was enjoined from fixing sale and resale prices, or establishing trade discounts, trade rebates, terms of credit, or any other terms and conditions relating to the sale, shipment, and trade by any

1 The Coal Dealers' Association of California, unincorporated, adopted as a section of its by-laws the agreement above noted, which agreement stated its purpose as, first, the protection of consumers in receiving full amount and kind of coal purchased, and, second, protection to dealers in obtaining sufficient margin to carry on a safe business with justice to consumers. Held, "that commerce among the several States and with foreign nations must be absolutely free and untrammeled, except as it may be regulated by Congress; that no State law, with certain exceptions not necessary here to state, would be allowed to interfere with it, and no contract or agreement on the part of individuals, associations, or corporations, would be permitted, directly or indirectly, to hinder or restrain its natural current or volume * that the constitution and by-laws of the Coal Dealers' Association and the agreement of the wholesale dealers with that association came within the prohibition of the act of July 2, 1890" [Sherman Antitrust Act]. United States v. Coal Dealers' Association of California, 85 Fed., 252 (1898).

*

2 The Kansas City Live Stock Exchange, a voluntary unincorporated association composed of commission merchants, who bought, sold, and handled substantially all of the live stock shipped to Kansas City from several States, operated under an agreement providing that each member should faithfully observe and be bound by articles of association and rules and by-laws. Among the rules were fixed rates of commission for buying and handling in a certain city, live stock, a large proportion of which was from other States, and limitations and prohibitions upon its members in dealing with nonmembers and with persons violating the rules and regulations of the exchange. These rules and regulations were enforceable by fines, penalties, and assessments. Held, as above stated, United States v. Hopkins, 171 U. S., 579 (1898).

A somewhat similar case is found in United States v. Anderson, except that the defendants were themselves purchasers of cattle in the Kansas City stockyard, while defendants in the Hopkins case sold cattle on commission as compensation for services. United States v. Anderson, 171 U. S., 604 (1898).

3 United States v. Southern Wholesale Grocers' Assn., 207 Fed., 445, 446 (1911).

of its members.1 The National Association of Retail Druggists was also enjoined from issuing or aiding in any way in the publication of lists or other documents purporting to contain the names of persons adhering or not adhering to their contracts, or maintaining or refusing to maintain prices, from securing or aiding in securing the adoption of any schedule for the sale of drugs, etc., by the retail dealers of any market to the consumers of said market, and from enforcing the maintenance of any such schedule; and all such lists, documents, schedules, contracts, agreements, and understandings were declared unlawful and ordered recalled.2

Section 23. Prevention of sales.

The prevention of sales to consumers and others is one of the methods of fixing the channels of trade, above referred to, which, in the more recent cases, has been repeatedly condemned by the courts. Trade associations early sought to accomplish this purpose by adopting by-laws or constitutions designed to prohibit members from dealing with manufacturers or wholesalers who sold to consumers, or who sold to such brokers or dealers as were regarded by the association as not entitled to purchase commodities at wholesale prices. Transactions of this nature were penalized by requiring offending manufacturers and wholesalers to pay a commission to the dealers in whose territory such sales were made. Refusals to comply with such demands were to be met with concerted withdrawals of patronage. While one or two early decisions seemed to have upheld the legality of by-laws or agreements of this character, the weight of authority is decidedly against them.

3

Decisions condemning the performance of association agreements of this character hold that damages resulting therefrom are recoverable, or, in a proper case, their future performance may be restrained by injunction. Thus, where a manufacturer was compelled by a retail lumber dealers' association to pay a penalty for selling lumber to a consumer through a broker in territory supplied by a member of a retail dealers' association, and, as a consequence of such fine, thereafter refused to sell to the broker; held, that the latter could recover damages from the association member who had compelled the payment of the penalty, and that an injunction should issue restraining the defendants from demanding a penalty under the bylaws from anyone who sold to the broker, or through the broker to the consumer, and from interfering with the broker's business in any way other than by fair, open competition. So, also, where a firm of

1 United States v. New Departure Mfg. Co. (1913).

2 United States v. National Assn. of Retail Druggists (1907).

(1893); also Montgomery Ward &

3 Bohn Manufacturing Co. v. Hollis, 54 Minn., 223 Co. v. South Dakota Merchants & Hardware Dealers' Association, 150 Fed., 413 (C. C.,

Jackson v. Stanfield et al., 137 Ind., 592 (1894).

manufacturers suffered a loss of business as a result of a letter circulated by a retail dealers' association notifying members of sales made to consumers by, and requesting them not to deal with, the firm of manufacturers, such letter having been sent presumably as a consequence of by-laws which made it the duty of members to discontinue purchasing from manufacturers or wholesalers who sold to consumers, the Texas Court of Civil Appeals held that said manufacturers could recover damages from members of the association, that members had no right to prevent the manufacturer from selling to consumers, and, further, that such interference with his business served no legitimate purpose connected with their own.1 Likewise the Iowa Supreme Court denounced as unlawful an agreement among retail dealers to prevent farmers' cooperative companies from securing supplies by coercing wholesalers and jobbers in the matter of refusing to sell. So, also, an Iowa district court in the same year granted an injunction restraining the members of the Iowa Implement Dealers' Association from "in any manner whatever interfering with the business of the plaintiff, from preventing or attempting to prevent any jobber, wholesaler, or vender of farm implements * from

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selling to the plaintiff" company." Agreements among the members of associations of retail dealers not to deal with manufacturers or wholesalers who sold to consumers in territory supplied by any of the parties to the agreement have, in a number of cases, been held to violate State statutes prohibiting combinations to restrain trade or to hinder or lessen competition. Thus, where the constitution of an association of retail lumbermen provided that the members, upon notice by the secretary, should discontinue purchasing from any manufacturer or wholesaler who had sold to a consumer, the Supreme Court of Mississippi held the association to be a combination in violation of the State statute. This statute prohibits combinations "intended to hinder competition in the sale or purchase of a commodity."5 Where it clearly

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1 Olive & Sternenburg v. Van Patten et al., 7 Tex. Civ. App., 630 (1894).

2 Funck v. Farmers' Elevator Co., of Gowrie, et al., 142 Iowa, 621 (1909).

Unreported

3 Farmers' Elevator Co. v. Iowa Implement Dealers' Association et al. decision of Wright, J., in the district court of Webster County, Iowa, September term, 1909. Mississippi Code, 1906, sec. 5002.

5 Retail Lumber Dealers' Assn. v. Mississippi, 95 Miss., 337 (1909). This case was appealed to the Supreme Court of the United States, where it was held that the State statute did not violate the Federal Constitution. In discussing the nature of the agreements prohibited by the act, the Supreme Court said:

they * * * have agreed not to deal with anyone who makes sales to consumers, which sales might have been made by any one of the 77 independent members of the association. Thus they have stripped themselves of all freedom of contract in order to compel those against whom they have combined to elect between their combined trade and that of consumers. That such an agreement is one in restraint of trade is undeniable, whatever the motive or necessity which has induced the compact. Whether it would be an illegal restraint at common law is not now for our determination." (Grenada Lumber Co. v. Mississippi, 217 U. S., 433 (1910).

appeared that one of the objects of a similar association was to prevent manufacturers and wholesalers from selling to consumers, and the constitution and by-laws provided for a penalty to be collected from manufacturers or wholesalers who made such sales, the Supreme Court of Nebraska held that such purpose was clearly in contravention of a State statute,1 which prohibited any combination of dealers intended "to prevent others from conducting or carrying on the same business," or which tended "to prevent or preclude a free and unrestrained competition among themselves or others or the people generally." The action of an association of retail lumber dealers in preventing manufacturers and wholesalers from making sales to consumers was also held, in a subsequent Nebraska decision, to be in violation of the State antitrust laws. In this case the secretary took up complaints of members in a manner which left no doubt in the minds of offending wholesalers or dealers that such sales were displeasing. This, apparently, in the opinion of the court, carried the implied threat of the withdrawal of patronage.*

2

The cases just treated involve the prevention of sales to consumers, while the following cases involve efforts to prevent sales to objectionable dealers. The common-law decisions in these, as in the abovecited cases, are not in accord. Thus, a leading decision in Rhode Island denied an injunction to restrain members of an association of master plumbers from notifying dealers in plumbers' supplies that the association members were withdrawing their patronage and would continue to do so unless said dealers refrained from selling the commodities in which they dealt to certain master plumbers who were not members of said association; and where an association of dealers engaged in buying and selling cattle adopted a by-law prohibiting its members from dealing with any trader not a member of the association, or with anyone who dealt with nonmembers, it was held that those outside the association, being only incidentally affected, had no standing in a court of equity to restrain the enforcement of such by-laws.

5

Taking a decidedly opposite view, the Supreme Court of Tennessee declared obnoxious to the common law a by-law which prohibited members of an association of master plumbers from purchasing from any manufacturer or dealer who did not comply with the rules of the association, or from any jobber who purchased from a manufacturer who sold to master plumbers who were not members of the association. In another case the Supreme Court of Wisconsin held

1 Cobbey's Annotated Stats., sec. 11510; Comp. St. 1901, ch. 91a, sec. 11.

2 Cleland v. Anderson, 66 Nebr., 252 (1902).

Nebraska Laws, 1905, ch. 162; Comp. St., 1901, ch. 91a.

4 State v. Adams Lumber Co., 81 Nebr., 392 (1908).

Macauley Bros. v. Tierney et al., 19 R. I., 255 (1895).

Downs v. Bennett et al., 63 Kans., 653 (1901).

7 Bailey v. Master Plumbers, 103 Tenn., 99 (1899).

on demurrer that an action for damages would lie against the parties to an agreement, in favor of a retailer whose business had been destroyed as the result of the performance of the agreement, between wholesale coal dealers and certain retail dealers, binding the former to sell coal to the latter only. This agreement was made for the purpose, among others, of forcing out of business all retail dealers not parties thereto.1

The action of associations in similarly preventing sales to nonmembers has also been held in violation of State antitrust laws.2

to

The stifling or elimination of competition by prohibiting or unduly influencing mine owners, manufacturers, wholesale dealers, or others, to refuse or to desist from selling to nonmembers, to consumers, so-called "objectionable" dealers, or to others has been at issue in a number of cases involving interpretation of the Sherman Antitrust Act. Briefly stated, the judicial decisions in the cases herein selected under the Sherman Act covering this class of association activities. condemned the following: A written agreement among members, binding them under penalty not to sell in a certain city, coal imported from another State, except to members; an agreement binding members not to purchase materials from manufacturers located in other States, who were not members, and not to sell unset tiles to nonmembers, except at 50 per cent more than the price charged members; an agreement prohibiting members from selling books to anyone who cut prices or to anyone who should be known to have

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1 Hawarden v. The Youghiogheny & Lehigh Coal Co., 111 Wis., 545 (1901).

2 Nebraska Comp. St., 1901, chap. 91a. See Cleland v. Anderson, 66 Nebr., 252 (1902), and State v. Adams Lumber Co., 81 Nebr., 392 (1908).

For violations of Missouri statutes see State v. Arkansas Lumber Co., 169 S. W., 145, 179 (1913); Walsh v. Association of Master Plumbers, 97 Mo. App., 280 (1902).

For violation of Michigan laws (Mich. Public Acts, 1899; act No. 255, sec. 1) see Hunt v. Riverside Cooperative Club, 104 N. W., 40, Supreme Court of Michigan (1905). The "Nashville Coal Exchange," composed of a number of companies mining coal in Kentucky and Tennessee and a number of coal dealers in Nashville, Tenn., was formed for the purpose of regulating the price of coal at Nashville. Its members agreed not to ship coal to Nashville or to sell coal therein except to members, and, under penalty of fine, also agreed not to sell except at prices established by the exchange or association. This was held to be in violation of the act of July 2, 1890, and the members were enjoined from further violations of that act. United States v. Jellico Mountain Coal Co., 46 Fed., 432 (1891).

A substantially identical case is found in United States v. Coal Dealers' Assn., 85 Fed., 252 (1898).

4 In an action for treble damages against an unincorporated association of wholesale dealers residing in California, having as nonresident members manufacturers in other States, held that although the sales of unset tiles were within the State of California, and although such sales constituted a very small portion of the trade involved, agreement of manufacturers without the State not to sell to anyone but members was part of a scheme which included the enhancement of the price of unset tiles by the dealers within the State, and that the whole thing was so bound together that the transactions within the State were inseparable and became a part of a purpose which, when carried out, amounted to and was a combination in restraint of interstate trade and commerce. Montague & Co. v. Lowry, 193 U. S., 38 (1904).