was then manifested in the efforts to save economic waste in the protection and distribution by the concentration of capital in business enterprises, resulted in different forms of combinations for the restriction of competition in business, which aroused public hostility and led to the enactment by many states of anti-trust laws more or less drastic, prohibiting all combinations in restraint of competition. Such laws, however, proved inadequate, as they could have no extra-territorial operation beyond state lines, and the freedom of commerce secured under the constitution of the United States precluded the states from excluding "trust-made "goods imported from other states. Public opinion, which has found frequent expression in judicial opinions, was firmly convinced that the repression of competition tended to monopoly, and that the control of production and prices by the elimination of competition in any industry was dangerous to the public welfare. It was recognized that the control of prices could be exercised not merely in raising, but also at certain times in certain localities in unduly depressing them so as to crush competitors by underselling. The evil aimed at was the unregulated power of control over industries resulting from the successful elimination of competition through the extension of the principle of business association.

This agitation in congress and out of it resulted in the passage of the so-called Sherman Anti-Trust Act, which was approved July 2, 1890. While the occasion of the act was clearly the popular outcry against business combinations, it will be seen that in its judicial construction and practical working its main effectiveness has been in its application to interstate railroads and labor combinations.

$65. The Anti-Trust Act of 1890.- This act which was entitled "An Act to protect trade and commerce against unla wful restraints and monopolies," declared illegal and criminal, punishable by fine or imprisonment or both, every contract or combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign nations. The act provided penalties for its violation, included contracts made in any territory or the district

1 The Tariff Act of 1894 contained continued in force by the Tariff Act the same prohibition of combinations of 1897, 3 Comp. Stats. p. 3202. in the import trade, and this was

of Columbia, and provided for seizure and condemnation of property in the course of transportation owned under any contract made in violation of the act, gave an action to private persons injured by such combinations with threefold damages, and a summary procedure in equity at the suit of the United States to prevent and restrain violations of the act.'

§ 66. Relation of act to common law of interstate commerce. - Contracts in interstate commerce, and subject as such to the regulating power of congress, in the absence of congressional regulation are controlled by the rules of the common law. There are no common law crimes in the United States, and at common law contracts in restraint of trade, that is in general restraint of trade, are not illegal except in the sense that the law will not enforce them. "It does not prohibit the making of such contracts, it merely declines after they have been made, to recognize their validity." This statute therefore changes the common law, in that it makes contracts in restraint of trade in interstate commerce both illegal and criminal.

It was declared by the supreme court however in the Debs case, that the power of the national government over interstate commerce and its right to invoke the power of the courts to remove any obstructions to such commerce, did not depend upon the statute, but on the broader ground of the attributes of sovereignty possessed by the government within the limit of its enumerated powers. It seems also that there is a jurisdiction in equity which may be invoked by private citizens irrespective of the statute, on general principles of equitable jurisprudence, to afford preventive relief against threatened injury about to result to an individual from any unlawful agreement, combination or conspiracy in restraint of trade irrespective of the statute." It would follow, therefore, that without the statute, or if the statute was repealed, the public

1 See infra. § 314 et seq., for act in full, with the judicial construction and application of the several provisions, and procedure for enforcement. 2 Supra, § 43.

3 Lord Bowen in Mogul Steamship Co. v. McGregor, 23 Q. B. Div. 598 (1889).

4158 U. S. 564, 39 L. Ed. 1092.

5 Gulf, Colo. & S. F. R. Co. v. Miami S. S. Co., 5th Circuit Court of Appeals, 30 C. C. A. 142, L. c. 156, and 86 Fed. Rep. 407 (1898). See supra, § 43.

interests and private property rights, could be protected by the civil courts against unlawful combinations in interstate

commerce.

§ 67. Constitutionality of the act. The constitutionality of the Anti-Trust Act has been sustained by the supreme court. Even as construed in the Trans-Missouri Freight Association case and in the Joint Traffic Association case, that no contract or combination, whether reasonable or unreasonable, restraining trade or commerce in interstate commerce is legal, the act was adjudged not violative of the freedom of contract guaranteed by the fifth amendment of the constitution of the United States. The court said that notwithstanding the general liberty of contract possessed by citizens under the constitution, there were many kinds of contracts which were not themselves immoral or mala in se, which may yet be prohibited by the legislatures in the states, or in certain cases by congress. The power existed in congress and the statute was the legitimate exercise of the power of congress to regulate interstate commerce, and the question for the court was one of power only and not of policy, as the latter question was determined by congress.

2

§ 68. Construction of the act by the Supreme Court.-The construction of the act by the supreme court disappointed many of the anticipations of its effectiveness, as it was held in the Sugar Trust Case that the statute did not reach a state manufacturing company which was acquiring by purchase of the 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 reasoning of the opinion went beyond the construction of the act, and indicated that the power of congress was exhausted in its designation of the contracts and combinations which were made illegal. Manufacture precedes commerce but is not a part of it, and sale as an incident to manufacture, therefore, was distinguished from commerce. The monopolies denounced by the act are those in interstate and foreign commerce, and not

1 United States v. Joint Traffic Association, 171 U. S. 505 (1898). 43 L. Ed. 259; Addyston Pipe & Steel Co.

v. United States, 175 U. S. 211 (1899), 44 L. Ed. 136.

2 United States v. Knight Company, 156 U. S. 1 (1895), 39 L. Ed. 325.

those in the manufacture of the necessaries of life or anything manufactured. The court said that if the term "commerce" were held to include the regulation of all such manufactures as were intended to be subject to commercial transactions in the future, the result would be that congress would be invested to the exclusion of the states with power to regulate, not only manufactures, but all domestic industries, as they all contemplated more or less clearly interstate or foreign markets.

Combinations between interstate railroads for the suppression of competition are included in the act. In the last cited case it was held that the New Jersey corporation organized as a "holding corporation" for holding the shares of competing interstate railroads was an illegal combination and in restraint of interstate commerce. The Interstate Commerce Act and the Anti-Trust Act are not inconsistent and both statutes stand. Prior to the passage of the Interstate Commerce Act, combinations had some times endeavored to regulate competition and rates by pooling, and that form of combination was specifically forbidden by section 5 of the Interstate Commerce Act.2

While the act has been construed to include combinations where the direct, immediate and intended effect is for the suppression of competition in interstate business, it does not include agreements and regulations which are nothing more than charges for local facilities provided for the transaction of commerce, or which only incidentally affect interstate commerce. It is not restraint of trade that is made illegal by the statutes, as that may be the incidental effect of a valid agreement, or conduct, but it is the making of a contract which is, or is intended to be, in direct restraint of trade.

1 United States v. Freight Association, 166 U. S. 290 (1897), 41 L. Ed. 1007; United States v. Joint Traffic Association, 171 U. S. 505, 43 L. Ed. 259 (1898); United States v. Northern Securities Co., 193 U. S. 197 (1903), 48 L. Ed. 679. See infra, § 314, et sq, for fuller statement of these cases.

2 United States v. Trans-Missouri Freight Ass'n, 166 U. S. 1. c. 314, 41 L. Ed. 1007.

3 Addyston Pipe and Steel Co. v.

United States, 175 U. S. 211 (1899), 44 L. Ed. 136; Montague v. Lowry, 193 U. S. 38 (1904), 48 L. Ed. 608.

4 Hopkins v. United States, 171 U. S. 578, 43 L. Ed. 290 (1898); Anderson v. United States, 171 U. S. 604 (1898), 43 L. Ed. 300.

3 In opinion of Attorney General Griggs to the Interstate Com. Com., of Dec. 30, 1899, 2d Annual Rep. of Com. for 1899, p. 16. it is said that the consultation by the representa

The distinction is illustrated in the cases cited. In the Addyston Pipe case there was a direct agreement for the restraint of trade; in the Stockyards case there was a restraint of trade resulting indirectly from the exercise by the parties of their lawful rights in business associations. The former was therefore obnoxious to the act, while the latter was not.

A commodity may be the subject of an illegal agreement in restraint of trade, in violation of the act, although it is still subject to the taxing power of a state.1

A combination is subject to the act which includes the suppression of competition in the purchase of cattle in different states, and also the suppression of competition in the sale of meats in different states, where all these acts were part of a single purpose to control and monopolize commerce. Commerce between the states, the court said, was not a technical legal conception, but a practical one drawn from the course of business. When cattle are sent for sale from a place in one state with the expectation that they will end their transit after purchase in another, and when in effect they do so with only the necessary interruption to find a purchaser at the stockyards, and when this is the typical and constantly recurring course, the current thus existing is a current of commerce among the states, and the purchase of the cattle is a part and incident of such commerce.' The court could not order the defendants to compete, but it could enjoin them from combining not to compete.

§ 69. Reasonable and unreasonable restraints of trade.— In the Trans-Missouri Freight Association case, supra, the ques

tives of interstate railroads in committee concerning the changes in classification, and subsequent independent action by the railroad companies in the adoption of a new classification recommended by the committee where there is no evidence that any railroad company acted under compulsion of a combination, does not show a combination or conspiracy within the meaning of the act. See also In re Tyrrell, 51 Fed. Rep. 213.

1 Addyston Pipe & S. Co. v. United

States, supra ; United States V.
Swift. 122 Fed. Rep. 529 (1903).

2 Swift v. United States (Beef Trust Case), 25 Sup. Ct. Rep. 276, decided January 30, 1905, by the Supreme Court of the United States. In this case the facts charged in the petition were in effect confessed by the demurrer whereon the injunction was granted. The practical difficulty of proving an agreement not to compete from the fact of non-competition was not presented.