319. The Tennessee, California and Ohio Coal cases.

353

320. The Chicago Meat Trust case.

353

321. The Washington Shingle Trust case.

354

322.

Incidental restraint of trade not violative of the Act..

354

323. The Kansas City Live Stock Exchange cases.

355

324. Agreements not within the Act.......

356

325. Certain agreements not to enter into competition not within the Act.....

357

326. Labor combinations....

357

An Act to protect trade and commerce against unlawful restraints and monopolies.

314. Contracts, combinations, conspiracies, in restraint of trade. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled: SEC. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

§ 315. Constitutionality and scope of the Act. As to the circumstances of the passage of this Act, its constitutionality and its general construction and relation to business and labor combinations in interstate commerce, see supra, chap. IV.

The most important case decided under the Act was the socalled Sugar Trust case, United States v. Knight Company, 156 U. S. 1, 39 L. Ed. 328, decided January 18, 1895, as it de

termined not only the construction and application of this Act, but the limitations of the power of Congress in dealing with business combinations or so-called monopolies.

The American Refinery Company had acquired by purchase of stock of other refining companies through shares of its own stock nearly complete control of the manufacture of refined sugar in the United States. The bill filed by the United States charged that the contracts under which these purchases were made constituted combinations in restraint of trade, and the relief sought was the cancellation of the agreements under which the stock was transferred, the redelivery of the stock to the vendors and an injunction against the further performance of the agreement. The Supreme Court affirmed the decree of the Circuit Court, 60 Fed. Rep. 306, and of the Circuit Court of Appeals, 60 Fed. Rep. 934, dismissing the bill (Harlan, J., dissenting). The Court said the monopoly and restraint denounced by the Act were the monopoly and restraint of interstate trade and commerce. Manufacture was not commerce. Commerce succeeded to manufacture and was not a part of it, and sale as an incident of manufacture therefore was distinguished from commerce. See supra, § 68.

§ 316. Interstate transportation is subject to the Act.— Transportation is commerce, and the provisions of the Act are subject to and cover common carriers by railroads. This application of the Act was first made in the Freight Association case, 166 U. S. 290, 41 L. Ed. 1007, decided in 1897, where the court held (Justices White, Shiras, Field and Gray dissenting), that the agreement of the Trans-Missouri Freight Association for the purpose of mutual protection by establishing and maintaining reasonable rates on all freight traffic, both through and local, between competing carriers, was an unlawful combination within the meaning of the Act. It was strongly urged in this case that the Act did not apply to railroads, thatthe House of Representatives in Congress had voted down an amendment making it so applicable, and the Act was passed finally without this amendment. But the Court said that the debates in Congress were not the proper source of information to discover the meaning of a statute, and that as all combinations in the form of trusts or otherwise were prohibited, the

limitation was not confined to any specific form of combination restraining competition.

This ruling was reaffirmed at the following term with the same division of the court (Justice Field having retired and his successor Justice McKenna not sitting), in the Joint Traffic Association case, 171 U. S. 505, 43 L. Ed. 259. This case was sought to be distinguished from the Trans-Missouri Freight Association case, on the ground that the latter conferred an unlimited power to fix rates in the first instance, while in the Joint Traffic Association case the agreement started out with the rates fixed by each company itself and filed with the Interstate Commerce Commission. The Court however said that the distinction was unimportant, as the intent and direct effect of each agreement was the same, that is, to maintain through the elimination of competition, higher rates than would otherwise prevail, and this agreement also was declared violative of the Act.

These rulings as to the applicability of the Act to interstate. railroads were again reaffirmed in the Northern Securities case, 193 U. S. 197, 48 L. Ed. 679, where the Court, four judges dissenting, held that the organization of a New Jersey corporation as a "holding corporation" for the shares of competing interstate railroads was an illegal combination and in restraint of interstate commerce.

§ 317. Unlawful combinations in commerce other than transportation-The Addyston Pipe Trust case. The leading case as to the application of the statute to unlawful combinations other than railroads, is Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. Ed. 136, wherein the Court unanimously affirmed the judgment of the Circuit Court of Appeals. 29 C. C. A. 141, 85 Fed. Rep. 271. In this case the Court held the agreement of certain pipe manufacturers void under the Act, on the ground that the purpose of the combination directly and by means thereof was to increase the price at which pipe should be sold within the territory and to abolish all competition between the parties. The Court found that the output and price were regulated so as to deprive the public in a large territory of the advantages accruing from proximity of pipe factories, and that the prices were kept just low

enough to prevent competition by eastern manufacturers, the parties agreeing to sell only at prices fixed by their committee, and the highest bidder at a secret auction became the lowest bidder at a public letting.

The Court laid down the rule in this case that when the direct immediate and intended effect of a contract and combination among the dealers in a commodity was the enhancement of the price and the suppression of competition, it amounted to a restraint of trade in the commodity, even though contracts at the enhanced price were made and it was not a complete monopoly.

§ 318. The California Tile Trust case. The principle laid down in the Addyston case was applied by the Supreme Court in Montague v. Lowry, 193 U. S. 38, 48 L. Ed. 608, where an association formed in California by the manufacturers of and dealers in tiles, mantels and grates was held obnoxious to the Act. Membership in the association was prescribed by rules and dependent on conditions, one of which was the carrying of at least three thousand dollars worth of stock, and whether applicants were admitted or not was a matter of arbitrary decision. The dealers in the association agreed not to purchase materials from manufacturers who were not members and not to sell unset tiles to anyone other than members for less than list prices, which were fifty per cent higher than the prices to members; and the manufacturers who were residents of states other than California agreed not to sell to any one other than members, violations of the agreement rendering the members subject to forfeiture of membership. The Court ruled without dissent, 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, the agreement of the manufacturers without the state not to sell to anyone but members was part of a scheme which included the enhancement of the prices of unset tiles by 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 the purpose which when carried out amounted to and was a combination in restraint of trade and commerce.

The agreement therefore was brought within the

rule declared in the Addyston case and distinguished from the Hopkins and Anderson cases, infra.

$319. The Tennessee, California and Ohio Coal cases.The same construction and application of the Act has been made by the Federal Circuit Courts. In United States v. Jelico Mountain Coal & Coke Co., 46 Fed. Rep. 432, the United States Circuit Court for Tennessee held void an agreement between coal mining companies operating chiefly in one state and the deliveries of the coal in another state, creating a coal exchange and fixing the price for the coal at the mines, and the margin of profit to the dealer, and enforcing the same by fines.

In United States v. Coal Dealers Association of Cal., 85 Fed Rep. 252 (N. D. of Cal. 1898), an unincorporated association of coal dealers, regulating distribution and prices in interstate coal traffic, was adjudged illegal.

In United States v. Chesapeake & Ohio Fuel Co., 105 Fed. Rep. 93, the Circuit Court for the southern district of Ohio followed the Addyston Pipe & Steel Co. case in annulling a contract made by a corporation to take the entire product of a number of producing firms and corporations engaged in the mining of coal, intending to sell the same at not less than a price to be fixed by an executive committee, and to account and pay over to the parties the entire proceeds above a fixed sum to be retained as a compensation, the stated purpose being to enlarge the western market. The Court said that the agreement whereunder shipments were to be made in that and other states was one that affected interstate commerce and subject to the provisions of the Anti-Trust Act, and that it was no defense that the agreement had not in fact been productive of injury to the public, or even that it had been beneficial, enabling the combination to compete for the business of a wider field.

§ 320. The Chicago Meat Trust case.- The Act was applied in the United States Circuit Court for the northern district of Illinois in the so-called Meat Trust case, United States v. Swift, 122 Fed. Rep. 529, decided in April, 1903. The bill in this case set out that the defendants controlled sixty per cent. of the trade and commerce in fresh meats in