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advisory way, come in touch with quite a number of business problems that arose and that were affected in one way or another by the antitrust act, and I represented a collateral interest, or, rather, two collateral interests, in the plan involving the disintegration of the American Tobacco Co. and the entry of the decree by the Circuit Court of the United States for the Southern District of New York, approving the plan a month or so ago.

The most thorough investigation and study of this question which I have been called upon to make was in connection with the preparation and argument of United States . Hopkins. The defendants were the members of the Kansas City Live Stock Exchange, which was the ordinary type of exchange, whose by-laws embodied the elements of limiting the privileges of the exchange to its members, a schedule of fixed commissions, and various rules against soliciting trade by means of telegrams or the employment of solicitors. The Government alleged that it had succeeded in so firmly intrenching itself that it controlled or monopolized the entire business of the live-stock commission merchants at the Kansas City stockyards, it being a conceded fact that the business of the live-stock commission merchants of those yards was done almost exclusively by the members of that live-stock exchange, the exchange itself, of course, engaging in no business at all. It was attacked probably as the result of some antecedent litigation instituted by a number of members who had been disciplined by the exchange, who, having failed in their individual suits, presented their complaints to the Attorney General. A decree was rendered in the circuit court sustaining the contentions of the Government and dissolving the exchange. Certain questions were certified by the circuit court of appeals to the Supreme Court, which ordered the entire record certified up, and the case was argued, as I have said, at the same time the Joint Traffic Association case was argued.

I confess that I went into this work with much interest and keen enthusiasm, and I have kept up my study of the subject ever since. The case was argued in the Supreme Court at a time when all the general remarks and dicta that had been made in the Trans-Missouri case stood unexplained and unqualified.

The problem that is involved in this general subject has been the occasion of judicial consideration as far back as the English Year Books. Nearly 500 years ago an English judge in profane terms expressed his opinion as to a contract which was held to be in restraint of trade--an ordinary contract between two individuals, buyer and seller, by which the seller agreed not to continue in business or engage in the business again for a limited time within a limited territory. The growth of the doctrine through the English cases is very interesting, and at times the cases are confusing. I w! not take up your time by going into details.

A contract in restraint of trade made between buyer and selle where the alleged restraint of trade is incident to the main transa tion, is valid or not valid, dependent upon whether it is reasonab or unreasonable; and, in my judgment, that is the only stage in th law on the subject of restraints of trade and monopolies in whic the word or phrase "reasonable" or "unreasonable " has any prope place. I do not believe that there can be a true contract in restrain of trade-speaking of restraint of trade in general-which can be

reasonable. I do not believe that there can be a monopoly, otherwise illegal, which can be sustained as being reasonable.

The development of the English law was obscured for a time very much by the fact that during the days of Henry VIII, but more so during the days of Elizabeth, there were so many royal grants, monopolistic in their nature-strictly monopolistic in their nature— which produced ultimately during the reign of James I-I think it was in the twenty-third year of his reign-the English act against monopolies, which declared generally that monopolies were against the policy of the law of England. There was quite a good deal of litigation during the following years on the subject of monopolies in one form and another which largely obscured in the minds of the English judges the conception of a relation between the rule against contracts in restraint of trade in general and the law of monopolies; and here I use the phrase " in general" and the word "monopolies in their strict sense.

Of course, we all know that what Justice Hull laid down in 1415 was practically overruled in Mitchell v. Reynolds (1 P. Wms., 181). It is interesting to study the great case of the East India Co. v. Sandys (10 How. St. Trials, 371), perhaps one of the greatest cases that is to be found in the books anywhere. It involved the validity of the grant to the East India Co. of the exclusive right to trade with the East Indies, an alleged violation of the English act against monopolies. It is a very interesting case, and one which I think deserves more attention in the discussion of appropriate legislation to be had upon the subject, as well as in the proper construction of the act of 1890, than has apparently been given to it.

Undoubtedly, as Senator Edmunds in his argument in the Joint Traffic Association case pointed out-and he stated it as a fact that the Senate of the United States, or, rather, the Judiciary Committee of the Senate of the United States, in framing the Sherman Act had that distinction most clearly in mind, and that the language of that statute so disclosed-it was never the intention to apply the act to what were known to the law as contracts in partial restraint of trade and which were subject to the test of reasonableness, but that it was only intended to apply to that class of contracts which had come before the English as well as the American courts and which had been judicially stamped as contracts in restraint of trade in general (171 Ú. S., 544). Perhaps it is unfortunate that the words "restraint of trade" were used in describing two things that are widely dissimilar: A contract between A and B, or buyer and seller, may not have any effect on trade whatever and may have no effect whatever on public interests and may involve no element which calls for any legislation whatsoever, while the maintenance or promotion and the development of trade as such, and the removal of restraints thereon, is a matter of grave public concern.

Nevertheless, we find much confusion and ambiguity running through the cases, and we find distinctions made which, perhaps, throw more light on the question than can be developed at this hearing. For instance, some of the cases in England involved the validity of rules of guilds and various associations which were upheld as regulations of trade, although, in point of fact, they placed burdens upon nonmembers and affected the development and conduct of trade, be

cause the trade, as conditions were, necessarily had to be conducted under the operation of these guild rules.

These cases, practically without an exception, upheld the guild rules, because they were merely regulative of trade. The rules of the Royal Exchange and, later on, those of clearing houses were upheld. Since that time countless thousands of similar organizations have come into existence in the great commercial centers of Europe, as well as in this country. The clearing house is an association to which usually all bankers in a given city or territory belong, and which fixes the rate of exchange to foreign countries in some instances; in other instances it fixes the rate of exchange on local points in the United States; in some instances it fixes the rate of interest; and in some instances it fixes the charges to be made for collecting checks on distant points. The United States is a member of the New York Clearing House, and it has repeatedly given great tribute to the New York Clearing House for saving situations in time of panicand, indeed, for saving the United States as a Nation itself, in having advanced money when the Government had no other place to go for it.

These are all questions of combinations, if you please, of people engaged in business who place restraints of one kind or another to regulate their business, the operation of which necessarily affects the carrying on of the trade or commerce in which they happen to be engaged.

The foregoing has been outlined as preliminary to the proposition which has always been in my mind in connection with the Sherman antitrust law, namely, that it ought to be so construed, or, if the language is so rigid that it can not be thus construed, that it ought to be revised so as to provide, not that the things declared to be illegal thereunder either under the first or the second section-depend upon considerations of constructive illegality, but involve the question fact whether injury to the public has resulted therefrom.

I belong to the school that believes that that government is best which regulates and legislates least. I believe that governmental action in respect of the matters of trade and commerce should be limited to the things which are necessary either to facilitate its proper conduct and to promote it, or to protect the interests of the public against injury. I do not say a reasonable or an unreasonable injury; that is, an injury in its legal sense; it must be directly harmful.

Cases of combinations to enhance prices are merely illustrations of what I mean. I do not confine what I say to these, but they serve to illustrate the thought of what I include in the word "injury." I never have believed that the fact that because an organization exist and has power to work harm it is necessarily and unanswerab illegal without regard to whether it exercises or intends to exercis that power, or not, and that it must be dissolved although the powe is never exercised or intended to be exercised. I call that "co structive criminality"; that is to say, to rule that because an organ ization has the power to do a thing which, if done, would prove in jurious to the public the organization is illegal and to be treated · such, is a reiteration in these modern days of civilization of whe: we have hitherto prided ourselves to be long since extinct, the do

trine of constructive criminality-"the wild and impious nonsense of constructive criminality," Curran characterized it

We say in our Constitution that there shall be no such thing as constructive treason. We have destroyed by statute the doctrine of the Stuarts-that there can be such a thing as constructive conspiracy-by requiring that conspiracy to be criminal must be accompanied by overt acts precisely as in the case of treason.

Some profess to doubt, after considering the recent Standard Oil and Tobacco deliverances, and what has been said by many learned men on the subject, whether it is now the law that an association or combination is illegal merely because its tendency is to create a monopoly; whether it is necessary there shall be an actual tendency, a necessary tendency, or an inherent tendency to create a monopoly. If there is doubt in the law on that subject, I think it ought to be ruled that a mere probable tendency or a mere imaginary tendency or a mere possible tendency can not make a thing illegal unless there is at least a substantial basis for the tendency, nor even then unless there be a natural, direct, inherent, and intrinsic, and perhaps it is best to say a necessary, tendency to monopolize.

The cases have now settled, I imagine, that the mere lessening of competition is not per se a restraint of trade. We have not yet had a definite and express deliverance from the Supreme Court whether that doctrine is to lead to the ruling that there must be unrestricted competition or whether there is to be evolved a doctrine undertaking to draw the line between what is called fair and unfair competition. The common law knows no distinction based upon a characterization of a competition as being unfair unless it is illegal. The competition is unfair if it is accompanied by certain acts which are tortious in their nature, or if it is effectively asserted by means of a conspiracy to accomplish an unlawful act, or a lawful act in an unlawful manner, or by resort to unlawful means.

You have, perhaps, all that can be said on the subject in the leading case of the Mogul Steamship Co. v. McGregor (21 Q. B. D., 544; 23 Q. B. D., 598; 1892, App. Cas., 25), so fully argued, and in which the greatest legal minds of the day-certainly in England-have exhausted all the learning there is on the subject, and we find in the recent Standard Oil decision a reference by the Chief Justice to the effect that that case is to be taken as a fair statement of the rule of the common law on the subject.

In recent time a theory is advanced that the law requires an ethical or a fair competition. To me competition is lawful or unlawful for considerations other than ethical. It seems quite certain that we are past the days of Sir Philip Sidney, and that he, with his cup of water, represented a counsel of perfection, which, if applied by injunctive process to the conduct of trade in the United States, would probably result in there being no trade at all.

While I believe that commerce is peace and not war, I also believe that competition between individuals to be real must be aggressive; and if it is aggressive it necessarily means, in the course of time, the survival of the fittest. I deny entirely the proposition that a successful competitor who may, as a result of his competition or of his superior ability and skill, ultimately become practically in absolute control of the trade in a given article. is thereby ipso facto subject

to a charge of having violated the second section of the act. I think there must be some act or conduct which the law stamps as illegal between his start upon his career of competition and the ultimate accomplishment of the natural result of all competition that is wholly successful. The ethical question of what is to be called fair does not, in my opinion, enter into the legal aspect of the question. I do not believe it is possible to construe an act of Congress-even if you can uphold its constitutionality-that a man is subject to prosecution criminally [I prefer to put the criminal phase of it so as to bring that aspect of the matter to bear upon the proposition] if he has merely engaged in an unethical act of competition, leaving the question whether the particular act was ethical or not as a question of opinion for a jury. I do not believe that a law which is undertaken to be carried into effect along lines of that kind is one that ought to be passed; and I think that the greater part of the apprehension there is in the public mind on the subject of the Sherman antitrust law grows out of the dread of what effect will be given to that statute, especially in the light of propositions of this character.

Let me call your attention for a moment to a quotation from the case involving the East India Co.'s charter. It is interesting to note that the grant of this monopoly to the East India Co. had its ultimate fruition in the wonderful Indian Empire which now pertains to the British Crown and as illustrating that this is a case in which the flag followed trade.

The Chief Justice in that case said:

A monopoly is no immoral act, but only against the politic part of our law. If it happen to be of advantage to the public. as this trade is, then it ceases also to be against the prohibitive part of the law, and so not within the law of monopolies.

I call your attention, in that connection, to what Senator Edmunds has recently said-not that I can say that I agree with everything he has said in his article in the December, 1911, issue of the North American Review, but as emphasizing precisely the same thought:

If in a particular community there be two gristmills grinding the grain brought by surrounding farmers, and each does it well, but the supply of grain will permit the mills to run only half time, the owners, in order to pay their employees fair wages and make a living profit, are compelled to charge the farmers too high prices for grinding or else fail. They contract to combine forces and do all the grinding in one of the mills and use the other for sawing lumber, and thus save the farmers from excessive tolls, pay the employees full wages, and make a fair profit themselves. Is that a contract in restraint of trade? Common sense says no. Public policy says no. Both say that it is the reverse, and that it helps business, labor, and the public.

The same thought was expressed by Judge Shiras, of Iowa, in his dissenting opinion in the Trans-Missouri case-a sentence which Mr. Justice Peckham quoted in deciding the case and which Mr. Justice Harlan afterwards, I think in the Northern Securities case, referred to with approval:

Touching contracts between private parties in regard to pursuits essentially private in their nature, the test of validity we thus find to be the actual effect thereof on the public welfare.

I give you those three quotations simply to illustrate the thought that there is in my mind. I am confirmed, I think, in my view by the fact that the machinery for the enforcement of this act, barring the civil remedy given by section 7 to an injured party, is placed in

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