tion was directly raised whether the prohibitory provisions of the act of 1890 applied to all contracts in respect to interstate or foreign trade or commerce, in respect to whether the restraints were reasonable or unreasonable. The majority of the court, (four judges dissenting,). ruled that the act applied to all restraints, whether reasonable or unreasonable. There was no definite standard of reasonableness of rates, said the prevailing opinion, and if only that kind of traffic which was an unreasonable restraint of trade was within the meaning of the statute, the result would be to leave the question of rates to the companies themselves. This ruling was reaffirmed in the Joint Traffic Association case, supra.

In the Northern Securities case Justice Brewer, who had concurred in the prevailing opinions in the Trans-Missouri Freight Association Case and the Joint Traffic Association case, filed a concurring opinion,' wherein he said that while his conviction was not disturbed that the former cases were correctly decided he thought in some respects the reasons given for the judgment could not be sustained, and that instead of holding that the Anti-Trust act included all contracts, in restraint of interstate trade, reasonable or unreasonable, the ruling should have been that the contracts there presented were unreasonable contracts in restraint of trade, and as such within the scope of the act. The act was leveled at only unlawful restraints and monopolies. Congress, he said, did not intend to reach and destroy those "minor contracts in partial restraint of trade which the long course of decisions at common law had, affirmed were reasonable and ought to be upheld." The purpose rather was to place the statutory prohibition with prescribed penalties and remedies upon those contracts which were in direct restraint of trade, unreasonable and against public policy.

This concurring opinion however, when analyzed, substantially places the construction of the act where it had already been placed in the Stockyards cases, where it was held that the act did not apply to agreements among business men for the better conduct of their own business which incidentally affect interstate commerce. As this concurring opinion holds that the restraint of competition in each of the railroad cases was unreasonable, it would seem to follow under this view that any 11 Supra.

agreement for the restraint of competition by interstate carriers would be an unreasonable restraint of trade, and therefore obnoxious to the law.

$70. Contracts in restraint of trade under the act.Judge Taft, then on the circuit bench, in the opinion of the court of appeals of the sixth circuit, in the Addyston Pipe & Steel Company case, in an exhaustive opinion, holding that the contract in question was violative of the act, and was also unenforcible at common law, laid down the rule that no contractual restraint of trade was enforcible at common law unless it was merely ancillary to some lawful contract involving some such relations as vendor and vendee, partnership, employer and employee, and necessary to protect the covenantee in the enjoyment of the legitimate fruits of the contract, or to protect him from the dangers of those unjust acts by the other parties. The main purpose of the contract suggests the measure of protection needed, and furnishes a sufficiently uniform standard for determining the reasonableness and validity of the restraints. But where the sole object of both parties, in making the contract, is merely to restrain competition and enhance and maintain prices, the contract is void and unenforcible at common law, and where made in interstate commerce is violative of the act of 1890.

In this case there was an allotment of territory comprising a large part of the United States among a number of companies engaged in the manufacture of iron pipe, and in that territory competition was eliminated through this allotment of territory and through a system of pretended bids giving an appearance of active competition at public lettings when there was none. Where the contract is thus for the direct suppression of competition, it is not necessary for trade in the commodity to be completely suppressed in order to render the combination one in restraint of trade. It is sufficient that the contract operates in restraint of trade. In determining whether an association of manufacturers or dealers constitutes a combination in restraint of trade of interstate commerce, the court will consider the whole agreement in all its provisions. Thus, an agree ment between manufacturers of tiles not to sell unset tiles to any one other than members for less than list prices, which 129 C. C. A. 141, and 85 Fed. Rep. 271 (1898).

were fifty per cent higher than the prices to members, and membership was dependent on conditions, one of which was the carrying of at least $3,000 worth of stock, was held to constitute part of a scheme involving the enhancement of prices, and that the whole thing was so bound together that the transactions within the state were inseparable and became part of a scheme which, when carried out, amounted to and was a combination in restraint of interstate commerce.1

The circuit court of appeals for the ninth circuit in a recent case applied the decisions in the Knight and the Addyston cases to a combination which it said occupied a ground intermediate between the other two. The combination was one of manufacturers of red shingles in the state of Washington and provided for the control of production and prices. But it appeared that more than four-fifths of the manufactured articles were produced for interstate trade, and that the purpose of the combination was to diminish competition in the production and to advance the price in that trade. The court said that the act did not require that the combination should by its terms refer to interstate commerce, and that it was enough if its purposes and effect were necessarily to restrain such commerce. If it were otherwise, all combinations in the restraint of interstate trade may be so expressed in words as to avoid the statute. The combination was, therefore, held to be one in restraint of trade at common law and violative of the statute of 1890.

§ 71. Contracts restricting sales by rebates not within the act. The distinction between contracts directly and substantially restricting free competition, and those which only incidentally and indirectly restrict competition, was illustrated in a recent decision of the circuit court of appeals for the eighth circuit, composed of three of the four judges who rendered the opinion in the circuit court construing the act in the Northern Securities case. In this case a tobacco company sold its goods to jobbers by allotting to the intending purchaser an amount which he was required to buy during each succeeding period

3

1 Montague v. Lowry, 193 U. S. 38 Co.. 125 Fed. Rep. 454 (November, (1904), 48 L. Ed. 608. 1903), 60 C. C. A. 290; Phillips v. Iola

2 Gibbs v. McNeeley, 55 C. C. A. 70, Portland Cement Co., 125 Fed. Rep. 118 Fed. Rep. 120 (1902). 593 (1903), 61 C. C. A. 19.

3 Whitwell v. Continental Tobacco

of four months, this allotment being in excess of the amount which he would be able to sell during that time. The price of the goods comprising the allotment was fixed so high that if the purchaser paid the price, he could not make any profit by buying and selling the goods. The requirement was made that each purchaser should refrain from dealing with tobacco made by competitors. If the purchaser complied with the requirements, his allotment was reduced to the amount he was able to sell and he was paid back such a percentage of the ag gregate price of the goods he bought by way of rebate that the handling of the commodities was by this repayment alone made profitable to him. If the purchaser refused to comply with the requirement, the allotment and price was not reduced so that the purchase was necessarily unprofitable. The jobber who did deal with the plaintiffs on this basis refused to refrain from handling the goods of competitors, and plaintiff refused to reduce the allotment or prices and thereupon the plaintiff, being unable to purchase the goods elsewhere, brought suit for treble damages under § 7 of the act. The court said that the parties were not dealing in articles of prime necessity, such as grain and coal, nor were they rendering public or quasi public services, like railroads and gas corporations. Each therefore had the right to sell its commodities at any price and to fix the prices and terms upon which it would sell them, and the persons with whom it made contracts of sale, and that they were deprived of none of these rights by the Anti-Trust Act. There was no competition between the plaintiff and defendant and therefore no restraint of competition by the contract. The court said that it had been settled by repeated decisions of the Supreme Court whether the contract was in restraint of trade and in violation of the act must be tried not by the intent with which the combination was made, nor by its effect upon traders, purchases or consumers, but by the necessary effect which it has in defeating the purpose of the law.1 As the contract in question before the court did not defeat the purpose of the act, but only enabled the vendor to extend his own business and it was open to his competitiors to do the same, it was held not violative of the act.

1 See also decision of the circuit court (Judge Jackson, afterwards of the Supreme court), in the case of In re Greene, 52 Fed. Rep. 104.

The reasoning of the opinion excludes from the act the socalled factors' agreements or any form of agreements whereby the seller seeks to control, through rebates or otherwise, the trade of his own customers.1 It is not restraint of trade in the ordinary use of the term, but restraint of competition tending to monopolization of the market in interstate or foreign commerce which is condemned by the act.

§ 72. Monoply within the meaning of the act.- The second section of the act makes unlawful and punishable the monopolizing, or attempting to monopolize, or combining or conspiring to monopolize any part of trade or commerce among the several states. The meaning of the term "monopolize" in this connection was discussed by Mr. Justice Jackson, then circuit judge, afterwards of the supreme bench, in an early case under the act. He said it was not very clear what congress meant in this second section, but that it was very certain that congress could not and did not by this enactment attempt to prescribe limits to the acquisition either by a private citizen or state corporation, of property which might become subject to interstate commerce, or to declare that when the accumulation or control of property by legitimate and lawful methods reached such magnitude or proportions as enabled the owner or owners to control the traffic therein, or any part thereof among the states, criminal offence was committed by such owner or owners. In other words, it is not the magnitude of a party's business with the incidental or indirect powers thereby acquired, which constitutes the monoply or attempt to monopolize. Monopoly, in a legal sense therefore as it is intended in the

The same court in Passaic Print Goods Co. v. Ely & Walker Dry Goods Co., 44 C. C. A. 426, and 105 Fed. Rep. 163. also 62 L. R. A. 673, held that a merchant did not subject himself to liability of an action for damages to a manufacturer by send ing circulars to the retail trade offering a small quantity of such manufacturer's products, which he owned, at a cut price for the purpose of destroying or injuring such manufacturer's trade and depressing his goods in the market, and that merchants could not be held liable for a con

spiracy by offering goods of a certain

manufacturer. which they owned, at a cut price for the purpose of injuring his trade or depressing the market price of his product, Sanborn, J., dissenting. The court in this case discussed and applied the rule of Allen v. Flood, 1 A. C. (1898), 1.

2 In re Greene, 52 Fed. Rep. 104 (1892). The court in this case cited approvingly Mogul Steamship Co. v. McGregor, Appeal Cases, part 1, p. 25, decided by the house of lords in December, 1891.