UNITED STATES v. JOINT TRAFFIC ASSOCIATION (171 U. S., 505), SUPREME COURT, 1898.-Thirty-one railroad companies engaged in interstate transportation between Chicago and the Atlantic seaboard made an agreement with respect to rates of transportation on their lines, and a suit in equity was instituted by the Government to declare the agreement null and void and to enjoin its performance. One defense set up was that the law as interpreted by the Supreme Court in the Trans-Missouri Freight case, namely, as prohibiting contracts in reasonable restraint of trade, was unconstitutional as depriving the defendants of their liberty and property without due process of law and as depriving them of the equal protection of the laws. The court held that Congress in regulating the interstate commerce of railroad corporations has the power to prohibit all contracts or combinations which restrain trade by shutting out competition.

The court said in part (pp. 572-573):

Notwithstanding the general liberty of contract which is possessed by the citizen under the Constitution, we find that there are many kinds of contracts which, while not in themselves immoral or mala in se, may yet be prohibited by the legislation of the States or, in certain cases, by Congress. The question comes back whether the statute under review is a legitimate exercise of the power of Congress over interstate commerce and a valid regulation thereof. The question is, for us, one of power only, and not of policy. We think the power exists in Congress, and that the statute is therefore valid.

NORTHERN SECURITIES Co. v. UNITED STATES (193 U. S., 197), SUPREME COURT, 1904.-The Northern Securities Co. was organized as a holding corporation. At the time of the commencement of the suit it held more than nine-tenths of the stock of the Northern Pacific Railroad Co. and more than three-fourths of the stock of the Great Northern Railroad Co., corporations having competing and substantially parallel lines from Duluth and St. Paul to the Pacific coast. The shareholders of the two railroad companies in lieu of their stock were to receive, upon an agreed basis, shares in the Securities company. The Securities company voted the stock held, and collected the dividends thereon, and in turn declared dividends on its stock. The management of the two roads was thus placed under the same control, and competition was eliminated. A suit in equity was brought by the Government to declare the combination or conspiracy unlawful, to enjoin the Northern Securities Co. from acquiring, holding, or voting said shares, and to enjoin the stockholders of the two railroad companies from carrying on the scheme to put the two railroad companies under the control of the Securities company. The suit was defended on the ground that the power of Congress to regulate interstate commerce does not give it the right to regulate or to control the ownership of shares of stock of corporations engaged therein.

The court held this combination was contrary to the Sherman Act, and that the prohibition of such a scheme was within the power of Congress.

Section 5. Interstate commerce.

The meaning of interstate commerce with respect to the prohibitions of the Sherman Act has been defined in numerous decisions, but it must suffice in this connection to point out a few of the leading distinctions made in the decisions of the Supreme Court in connection with the interpretation of the Antitrust Law. To present all the distinctions which have been made regarding what is interstate commerce and what is not would require a review of practically all the cases under the Sherman Act as well as many others arising under the commerce clause of the Constitution.

An early decision (Knight case), which is discussed below, made a distinction between "manufacture" and "commerce," and held that a mere combination of manufacturers was not within the purview of the law. The circumstances of the case and its decision were so peculiar that little importance is attached to this decision to-day. (See p. 75.) In so far as a combination of manufacturers is directly engaged in selling goods in interstate or foreign commerce, it may come within the scope of the law.

Further light, moreover, is thrown on this subject by the consideration given to the kinds of business which are covered by the law, which are discussed in a broad way in sections 9 to 12, inclusive, of this chapter.

UNITED STATES v. E. C. KNIGHT Co. (156 U. S., 1), SUPREME COURT, 1895.-The American Sugar Refining Co. at the beginning of 1892 had refineries located in various States, with about two-thirds of the production of refined sugar in the United States under its ownership or control, and during 1892 it obtained all of the remainder except about 2 per cent, by acquiring through separate agreements at different times the shares of four independent refineries by exchanging shares of its own capital stock for the shares of the said companies. The Government sought to compel the cancellation of the agreements under which the shares were exchanged, and to enjoin further violations of the Sherman Act. The court held that the Sherman Act prohibited monopoly of interstate and international commerce, but not monopoly in manufacture, and that the business of refining sugar bore no direct relation to commerce among the States or with foreign nations.

The court said in part (pp. 12, 16-17):

Doubtless the power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but this is a secondary and not the primary sense; and although the exercise of that power may result in bringing the operation

of commerce into play, it does not control it, and affects it only incidentally and indirectly. Commerce succeeds to manufacture, and is not a part of it. The power to regulate commerce is the power to prescribe the rule by which commerce shall be governed, and is a power independent of the power to suppress monopoly. But it may operate in repression of monopoly whenever that comes within the rules by which commerce is governed or whenever the transaction is itself a monopoly of commerce. * * * It was in the light of well-settled principles that the act of July 2, 1890, was framed. Congress did not attempt thereby to assert the power to deal with monopoly directly as such; or to limit and restrict the rights of corporations created by the States or the citizens of the States in the acquisition, control, or disposition of property; or to regulate or prescribe the price or prices at which such property or the products thereof should be sold; or to make criminal the acts of persons in the acquisition and control of property which the States of their residence or creation sanctioned or permitted. Aside from the provisions applicable where Congress might exercise municipal power, what the law struck at was combinations, contracts, and conspiracies to monopolize trade and commerce among the several States or with foreign nations; but the contracts and acts of the defendants related exclusively to the acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania, and bore no direct relation to commerce between the States or with foreign nations. The object was manifestly private gain in the manufacture of the commodity, but not through the control of interstate or foreign commerce. It is true that the bill alleged that the products of these refineries were sold and distributed among the several States, and that all the companies were engaged in trade or commerce with the several States and with foreign nations; but this was no more than to say that trade and commerce served manufacture to fulfill its function. Sugar was refined for sale, and sales were probably made at Philadelphia for consumption, and undoubtedly for resale by the first purchasers throughout Pennsylvania and other States, and refined sugar was also forwarded by the companies to other States for sale. Nevertheless it does not follow that an attempt to monopolize, or the actual monopoly of, the manufacture was an attempt, whether executory or consummated, to monopolize commerce, even though, in order to dispose of the product, the instrumentality of commerce was necessarily invoked. There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce, and the fact, as we have seen, that trade or commerce might be indirectly affected was not enough to entitle complainants to a decree.

A strong dissenting opinion was rendered by Justice Harlan.

While the Knight case has never been expressly overruled, recent decisions have held similar combinations of manufacturing companies. which sold their products in interstate commerce to be within the prohibitions of the Sherman Act.

In Standard Oil Co. v. United States (221 U. S., 1), 1911, and in United States v. American Tobacco Co. (221 U. S., 106), 1911, the Knight case was relied on by the defendants to exclude them from the operation of the law. In the former case, however, the court in referring to this argument, said (pp. 68-69):

That the act, even if the averments of the bill be true, can not be constitutionally applied, because to do so would extend the power of Congress to subjects dehors the reach of its authority to regulate commerce, by enabling that body to deal with mere questions of production of commodities within the States. But all the structure upon which this argument proceeds is based upon the decision in United States v. E. C. Knight Co., 156 U. S., 1. The view, however, which the argument takes of

that case and the arguments based upon that view have been so repeatedly pressed upon this court in connection with the interpretation and enforcement of the Antitrust Act, and have been so necessarily and expressly decided to be unsound as to cause the contentions to be plainly foreclosed and to require no express notice.

The Standard Oil Co. was directly engaged in transportation between the States, so that the Knight case would seem to have no application. In the Tobacco case, however, the transactions in question related purely to manufacturing tobacco and selling the same, but in spite of insistent argument by the defendants based on the Knight case the court disregarded this aspect of the question.

ADDYSTON PIPE & STEEL Co. v. UNITED STATES (175 U. S., 211), SUPREME COURT, 1899.-Six corporations manufacturing iron pipe and selling the same in interstate commerce entered into various agreements intended to enhance the price of pipe in such commerce, such as dividing the markets for the purpose of eliminating bidding on public contracts, etc. These concerns enjoyed the bulk of the trade in iron pipe in a large number of States. The Government sought an injunction against the continuation of this combination. It was contended that the agreements in question had no direct relation to interstate commerce, and under the precedent of the Knight case should not be held unlawful. The court held that agreements whereby all competition was eliminated from bidding on public contracts, so far as they related to sales for delivery beyond the State in which the sales were made, had a direct relation to interstate commerce and were within the prohibition of the Sherman Act.

The court said in part (pp. 240-242, 246, 247):

While no particular contract regarding the furnishing of pipe and the price for which it should be furnished was in the contemplation of the parties to the combination at the time of its formation, yet it was their intention, as it was the purpose of the combination, to directly and by means of such combination increase the price for which all contracts for the delivery of pipe within the territory above described should be made, and the latter result was to be achieved by abolishing all competition between the parties to the combination. The direct and immediate result of the combination was therefore necessarily a restraint upon interstate commerce in respect of articles manufactured by any of the parties to it to be transported beyond the State in which they were made.

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As has frequently been said, interstate commerce consists of intercourse and traffic between the citizens or inhabitants of different States, and includes not only the transportation of persons and property and the navigation of public waters for that purpose, but also the purchase, sale and exchange of commodities. Gloucester Ferry Co. v. Pennsylvania, 114 U. S., 196, 203; Kidd v. Pearson, 128 U. S., 1, 20. If, therefore, an agreement or combination directly restrains not alone the manufacture, but the purchase, sale or exchange of the manufactured commodity among the several States, it is brought within the provisions of the statute. * any agreement or combination which directly operates, not alone upon the manufacture, but upon the sale, transportation and delivery of an article of interstate commerce, by preventing or restricting its sale, etc., thereby regulates interstate commerce to that extent and to

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the same extent trenches upon the power of the national legislature and violates the statute. We think it plain that this contract or combination effects that result.

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Where the contract is for the sale of the article and for its delivery in another State, the transaction is one of interstate commerce, although the vendor may have also agreed to manufacture it in order to fulfil his contract of sale. In such case a combination of this character would be properly called a combination in restraint of interstate commerce, and not one relating only to manufacture.

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In regard to such of these defendants as might reside and carry on business in the same State where the pipe provided for in any particular contract was to be delivered, the sale, transportation and delivery of the pipe by them under that contract would be a transaction wholly within the State, and the statute would not be applicable to them in that case. They might make any combination they chose with reference to the proposed contract, although it should happen that some nonresident of the State eventually obtained it.

HOPKINS v. UNITED STATES (171 U. S., 578), SUPREME COURT, 1898. The Kansas City Live Stock Exchange was an unincorporated association of commission men doing business at stockyards partly located on each side of the boundary line between the States of Missouri and Kansas. The commission men, individually, received consignments of cattle from the said States and various other States and Territories and sold them for account of the owners. Members of the exchange were prohibited from employing agents except at a fixed salary, or sending prepaid telegrams or information as to the condition of the market. They were also prohibited from buying cattle from commission men in Kansas City who were not members of the exchange. The commission men, to a large extent, loaned money to the cattle raisers and took mortgages on the cattle for security; they also undertook to feed the cattle consigned, to prepare them for the market, etc. The Government brought a suit to dissolve the exchange and to enjoin further combination of like character, as in violation of the Sherman Act.

The court held that the location of the stockyards was not material with respect to the question of interstate commerce, and that the business of commission men was not interstate commerce.

The court said in part (pp. 590, 591):

The selling of an article at its destination, which has been sent from another State, while it may be regarded as an interstate sale and one which the importer was entitled to make, yet the services of the individual employed at the place where the article is sold are not so connected with the subject sold as to make them a portion of interstate commerce, and a combination in regard to the amount to be charged for such service is not, therefore, a combination in restraint of that trade or commerce.

MONTAGUE & Co. v. LOWRY (193 U. S., 38), SUPREME COURT, 1904.An association of dealers in tiles in California and manufacturers of tiles in other States was formed, whereby the dealers agreed to buy from such manufacturers only and to sell unset tiles to other dealers at list prices, which were more than 50 per cent higher than the prices they paid the manufacturers, the manufacturers agreeing, on the