and the intensity of competitive methods may produce too little competition by eliminating others from the business. The competitive system looks to the operation of economic principles Lunder freedom of action to avoid the evils of each extreme.22 The freedom of others to enter the business prevents too little competition; the elimination of some competition from time to time prevents too much. A rule of law which made all sales to competitors, and all combinations of competitors, illegal, would leave the door open wide to an indefinite increase in competition, and at the same time obstruct the healthy lessening of competition. This would promote all the evils of too much competition in order to prevent the evils of too little. It would be a rule which encouraged competition only to require that the status quo of every existing competition be indefinitely retained. The public interest must suffer severely from any such rule. The unsuccessful competitor under it would in most instances be eliminated by a total failure and a maximum loss, instead of ally beneficial to the public, may be carried to such excess as to become an evil.'') Kellogg v. Larkin, 3 Pinney (Wis.) 123, 150 (1851) [142]. (“I believe universal observation will attest that for the last quarter of a century, competition in trade has caused more individual distress, if not more public injury, than the want of competition.'') Slaughter v. The Thacker Coal & Coke Co., 55 W. Va. 642, 650, 47 S. E. 247 (1904), per Poffenbarger, dissenting. ("Competition is said to be the life of trade, but undue or excessive competition has been judicially declared hurtful and injurious to the public."') 22 Per Pitney, V. C., in Meredith v. New Jersey Zinc & Iron Co., 55 N. J. Eq. 211, 221, 37 Atl. 539 (1897) [81]. ("Now, I am unable to find any foundation, either in law or in morals, for the notion that the public have the right to have these private owners of this sort of property continue to do business in competition with each other. No doubt the public has reasonable ground to entertain the hope and expectation that its individual members will generally, in their several struggles to acquire the means of comfortable existence, compete with each other. But such expectation is based entirely upon the exercise of the free will and choice of the individual, and not upon any legal or moral duty to compete, and can never, from the nature of things, become a matter of right on the part of the public against the individual. In fact, the essential quality of that series of acts or course of conduct which we call competition is that it shall be the result of the free choice of the individual, and not of any legal or moral obligation or duty.") Diamond Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 19 (1887) [55], supra. having a chance to save his loss by selling out to, or combining with, a more successful rival. Where the competitors were evenly matched all would be subjected indefinitely to a profitless competition or a maximum loss, instead of being permitted to combine and rescue their properties. Industrial depression, due to overproduction and to too many competitors, would necessarily right itself slowly and with a maximum of failures and losses.23 § 58. Third, it can hardly be contended that mere combination and elimination of competition between the units combined creates exorbitant prices. What is the judicial test of an exorbitant or unreasonable price? There seems to have been an impression not entirely wanting in the judiciary that any rise in prices which follows a combination must be unreasonable. This is a shortsighted view. A moment's reflection should make it clear that general condemnation of advances in prices ultimately affects everyone unfavorably. It is equivalent to a general condemnation of prosperity. It is not the advance in prices which is objectionable, but only the unreasonable and excessive advance. In determining what prices are unreasonably high, are the courts to go into cost accounting and then add a percentage of profit and reach a specific finding as to what is an unreasonable price in any business under consideration? Obviously not. Such a course would be absurd and impracticable. The courts must find a workable and practicable general rule, the application of which will provide a wide margin of freedom to the business unit and a chance for the exceptional rewards which come from successful management. This leaves the courts no choice except to rely upon freedom to enter the business and freedom to continue in the business as the means of preventing excessive prices.24 23-Oakdale Manufacturing Co. v. Garst, 18 R. I. 484, 487, 28 Atl. 973 (1894) [78]. (But it does not follow that every combination in trade, even though such combination may have the effect to diminish the number of competitors in business, is therefore illegal. Such a rule would produce greater public injury than that which it would seek to cure."') 24-Dolph v. Troy Laundry Machinery Co., 28 Fed. 553, 555 (1886). ("Those who might be unwilling to pay the prices asked by the parties could find plenty of mechanics to make such machines, and the law of demand and supply would effectually counteract any serious mischief likely to arise from the attempt of the parties to get exorbitant prices for their machines. L On the other hand they must allow combination to some extent to prevent unprofitable prices and ruinous competition. The highest price which can be obtained while the business is free to all to enter and no one in it occupies, as a result of combination, a preponderant position, must be taken by the courts as fair. The fact that prices are higher than they were as a result of some combination which eliminates some competition, does not make those prices exorbitant. § 59. Finally, and most important of all, is the interest of society in the carrying on of business by larger units. This is not only favored by public policy, but it is a condition to the existence of our present social order. It is as vital to the welfare of the country as that freedom of contract-freedom of the managers of business to manage without interference from the legislature-which the due process clause of the Constitution protects.25 In the last century one of the phases of our industrial revolution has been the shift from small to large business units. In a cen It is quite legitimate for any trader to obtain the highest price he can for any commodity in which he deals. It is equally legitimate for two rival manufacturers or traders to agree upon a scale of selling prices for their goods, and a division of their profits. It is not obnoxious to good morals, or to the rights of the public, that two rival traders agree to consolidate their concerns, and that one shall discontinue business, and become a partner with the other, for a specified term. It may happen, as the result of such an arrangement, that the public have to pay more for the commodities in which the parties deal; but the public are not obliged to buy of them. Certainly, the public have no right to complain, so long as the transaction falls short of a conspiracy between the parties to control prices by creating a monopoly.") United States v. Nelson, 52 Fed. 646, 647 (1892). ("Unless the agreement involves an absorption of the entire traffic in lumber, and is entered into for the purpose of obtaining the entire control of it with the object of extortion, it is not objectionable to the statute, in my opinion. Competition is not stifled. by such an agreement, and other dealers would soon force the parties to the agreement to sell at the market price, or a reasonable price, at least."') Slaughter v. The Thacker Coal Co., 55 W. Va. 642, 649, 47 S. E. 247 (1904), per Poffenbarger, Pres. ("In the absence of some great combination, virtually controlling the production and price of a commodity in the country, the price is regulated and determined by the law of supply and demand."') tury individuals have been succeeded by partnerships, partnerships by corporations, corporations of small or limited capital by corporations with large capital. Acts which limited corporate capital have been succeeded by acts which place no limit upon the amount of capital. Acts which placed obstructions in the way of increasing capital have been succeeded in some states by acts which allow the corporation to increase its capital stock at will. The large corporation has been succeeded by the parent company which has already been allowed in some states to hold stock controls in subsidiary corporations. If we look at industry and commerce from the outward physical point of view, it is plain that the admittedly legal operating unit of today is, in every line, incredibly large in comparison with the unit of half a century ago. When we turn to the labor units we find the same process going on of shifting from the individual to the collective unit. The individual labor units have been combined to make the local unions, local unions have been combined to make the statewide and country-wide labor units. Unions have been combined not only locally, and nationally, according to occupation, but territorially without regard to occupation. As one looks back upon what has been going on there can be no doubt that the social order has shifted from a primitive dependence upon the individual industrial unit to the collective unit, and then to the larger collective unit, and that the size of our industrial units has been magnified to an extraordinary degree. A very slight consideration of the matter makes it clear that to put commerce and industry back into the units of fifty, or even twenty-five years ago, would be to disrupt business and do an incalculable harm to the public welfare. Clearly, then, we may rely upon a strong public policy in favor of the shift from the individual and small collective unit to the larger collective unit.26 26-Jones v. Clifford's Ex'r, 5 Fla. 510, 515 (1854). ("Associations are so common an element, not only in commerce, but in all the affairs of life, that it would be rather perilous on the part of the Court, to assert that they impair competition, destroy emulation and diminish exertion. There is scarcely an occupation in life, scarcely a branch of trade, from the very largest to the smallest, that does not feel the exciting and invigorating influence of this wonderful instrumentality. It made and conducts our government, constructs our railroads, our steam vessels, our magnificent ships, our temples of SECTION 3 COMBINATIONS WHICH HAVE A PREPONDERANT POSITION BUT NO EXCLUDING PURPOSES OR PRACTICES § 60. Suppose now that we have, in a business normally free, a combination which on the one hand has no intent to exclude others from the business and is guilty of no unlawful or unfair excluding practices, but which, on the other hand, "embraces units which together occupy a preponderant position in a given industry." Is this a good trust or a bad trust? Is it illegal at common law, and, if interstate commerce be involved, under the Sherman Act? § 61. Even if we assume that when the Sherman Act refers to combinations "in restraint of trade" or attempts to monopolize, it refers to such combinations as were illegal at common law because they restrained trade or were attempts to monopolize 27 we do not get very far, because the common law, while it was clear about some results, gave no unequivocal answer to the problem now under consideration. Even if common-law authori worship, structures for public and private use, Our manufactories, creates our institutions for learning, builds up our cities and towns. "Its very office is to do what individual exertion may not accomplish, and in a degree distinguishes civilized from savage life. Why then should this important agency be denied to this meritorious class of our citizens? They are in general men of small means, to whom an association may not only be desirable, but necessary and indispensable."') 27-Post 88 108 et seq. Standard Oil Co. v. United States, 221 U. S. 1 (1900) [780, 1072]. (After insisting that some standard should be resorted to for the purpose of determining whether the prohibition contained in the statute had or had not in any given case been vio lated," the opinion of the court 66. the criteria to be resorted to in any given case for the purpose of ascertaining whether violations of the section have been committed is the rule of reason guided by the established law, etc. .") J |