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Senator BRANDEGEE. Has not Congress just as much power to regulate instrumentalities of commerce as to regulate commerce itself?

Mr. WALKER. No, I think not; because the instrumentalities used in interstate commerce may have other uses also, and as soon as Congress regulates them in toto, that regulation applies to matters disconnected with interstate commerce as well as those connected with interstate commerce.

Senator BRANDEGEE. Has it not plenary power as to the instrumentalities of commerce, so far as they pertain to commerce?

Mr. WALKER. So far as they pertain to interstate commerce, then the power is plenary.

Senator BRANDEGEE. That is all.

The CHAIRMAN. Senator Newlands, do you care to ask any questions ?

Senator NEWLANDS. I have not heard all of Mr. Walker's statements, and am not really qualified to ask any questions.

Mr. Walker was thereupon excused.

STATEMENT OF VICTOR MORAWETZ, LAWYER, NEW YORK, N. Y.

The CHAIRMAN. Mr. Morawetz, you may proceed.

Mr. MORAWETZ. My name is Victor Morawetz; I am a lawyer, and I reside in New York.

Before undertaking to propose new legislation amending or supplementing the existing laws relating to interstate and foreign commerce it is essential to consider the existing laws in the light of the decisions of the Supreme Court of the United States. A great deal has been said about the prevailing doubt and uncertainty as to the meaning and effect of the antitrust act of 1890, but I think that, on examing the decisions of the Supreme Court, it will be found that this doubt and uncertainty relates only to one class of cases that may arise under the act. The zone of uncertainty existing to-day is a very narrow one. The cases arising under the act may be classified under three heads.

The first class of cases consists of those in which there is a contract, combination, or conspiracy restraining the trade or commerce of other persons or of the public generally. Contracts, combinations, or conspiracies by means of force or duress, or by threats of injury to the property or business of others, or by boycotts in any form, to prevent or hinder other persons or the public generally in the free transaction of trade or commerce, were unlawful at common law, and it was eminently proper that such contracts, combinations, or conspiracies when in restraint of interstate or foreign commerce should be prohibited by an act of Congress furnishing adequate remedies for its enforcement.

The decisions of the Supreme Court clearly establish that all contracts, combinations, or conspiracies of the class to which I now refer are a violation of the antitrust act of 1890. In the Debs case (158 U. S., 564) it appeared that certain railway employees had entered into a combination or conspiracy to stop the interstate commerce of the people of the United States on interstate railways until certain demands of these employees had been complied with. The stoppage or destruction of the highways of interstate commerce necessarily

operated as a direct restraint of the interstate commerce of the public, and was in violation of the first section of the antitrust act.

In the Danbury Hatters case (Loewe v. Lawlor, 208 U. S., 274) there was a combination or conspiracy of laborers by means of a boycott to restrain or hinder the interstate commerce between certain manufacturers of hats and the dealers in hats produced by those manufacturers. That also was declared by the Supreme Court of the United States to be a restraint of commerce prohibited by the first section of the act.

In the case of Montague v. Lowry (193 U. S., 38) it appeared that the manufacturers of tiles in the Eastern States had entered into an agreement of association with certain dealers of tiles in San Francisco and the neighborhood, by the terms of which the manufacturers agreed that they would not sell tiles on any terms to any dealers who were not members of the association, and the dealers agreed that they would not sell tiles to nonmembers of the association except at specified prices more than 50 per cent higher than those charged to members. This agreement was condemned by the Supreme Court as in violation of the antitrust act. The agreement in effect created a commercial boycott against dealers in tiles who refused to join the association and was in restraint of their trade. It is fair to say, however, that this case may also be classed under another head, to which I shall refer in a moment, where there was an attempt to monopolize commerce in a certain article for the benefit of a certain group of persons.

In all these cases, it is clear that the question of reasonableness or unreasonableness never can arise. There can not be a reasonable forcible restraint of commerce of the public on the interstate highways of commerce. There can not be such a thing as a reasonable boycott. There can never be a reasonable interference, or attempt to interfere with the freedom of any person to carry on interstate trade or commerce. In the cases of this class it seems to me that there can not be the slightest doubt or uncertainty as to the meaning of the application of the act.

The second class of cases consists of those involving contracts or combinations of public carriers to increase the rates or charges to be paid by the public in respect of interstate trade or commerce. If, as was decided in the Debs case, a forcible stoppage or obstruction of the highways of interstate commerce was in violation of the act, because a restraint of interstate commerce, it would seem to follow for the same reason that any contract of combination to make interstate commerce on those public highways more difficult or more costly, would also be a restraint of interstate commerce.

In the Traffic cases, the Trans-Missouri Freight Association case (166 U. S., 290) and the Joint Traffic Association case (171 U. S., 505), the Supreme Court decided that a contract between railway companies to establish or to maintain rates upon interstate traffic was in violation of the act, because it was in restraint of interstate trade or commerce, and the ground upon which the court based its conclusion was that the natural and the direct effect of such an agreeinent was to maintain at a higher level than otherwise would prevail, the rates payable by the public for the privilege of doing interstate business on those railway lines.

It should be observed that those traffic cases are not authority for the doctrine that every contract or combination limiting or destroying competition between the parties contracting or combining would constitute a restraint of commerce prohibited by the antitrust act. Railway companies own and operate the highways of interstate commerce, the highways upon which the public carries on interstate commerce, but the railway companies are not themselves engaged in interstate commerce. In those traffic cases the stoppage of competition was material, not because it restrained commerce between the railway companies which entered into the contract or combination, but because its effect was to restrain the commerce of the public by imposing additional burdens in the form of higher transportation charges upon the trade or commerce of the public. At stated by the Supreme Court in those cases, the contracts were in violation of the act and in restraint of commerce because their natural and direct effect was to maintain the rates payable by the public at a higher level than otherwise would prevail.

In the Northern Securities case the Supreme Court decided that a combination between the stockholders of two railroad lines owning and operating competing and parallel routes of commerce was also within the prohibition of the act. This decision, in my judgment, was a necessary sequence of the decisions in the traffic cases. If, as decided in the traffic cases, a contract between competing interstate railway companies was a restraint of commerce because its natural effect was to maintain rates at a higher level than otherwise would prevail, it seems to follow that a combination bringing about the same result by vesting in one company the ownership and control of the competing interstate carriers would equally be a restraint of commerce and prohibited by the act.

In these cases again the question of reasonableness or unreasonableness is not material. It was argued in the Joint Traffic Association case that the contract was to maintain only reasonable rates, but the Supreme Court held that this was not material.

It has been urged by some of the representatives of railway carriers that railway companies ought to be allowed to enter into contracts and combinations to maintain reasonable rates subject to the approval of the Interstate Commerce Commission. My own opinion is that permission to enter into such contracts would be of very little value to railway companies. Railway rate wars are a thing of the past. Whatever view may be taken of the correctness of the decision of the Supreme Court in the traffic cases, the importance of this decision has been greatly diminished by the enforcement of the law, which has been on the statute books for a great many years, prohibiting the railway companies from granting secret rebates or from departing from their published rate schedules. Contracts and combinations among railway companies to fix and maintain rates, or to pool competitive traffic, were common long before the antitrust act was passed, but such contracts never were considered practically enforceable, and I believe that they were generally considered unlawful under the State laws governing the railway companies. If Congress should undertake to legalize such contracts to-day, it would not merely have to limit the application of the antitrust act, but, in addition, I think it would have to override the prohibitions against such contracts contained in the laws of many of the States.

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The only remaining class of cases to be considered consists of cases involving contracts, combinations, or conspiracies to diminish or to destroy competition among those contracting or combining. The cases of this class range from those in which there is a simple lessening of competition to a minor degree to those in which there is such a destruction of competition as would constitute what is called "monopolizing."

It

It is in dealing with this class of cases that the only doubt or uncertainty evists as to the meaning and effect of the antitrust act. I think that this doubt and uncertainty, to a very large degree, is due to the decision of the Supreme Court in the Knight case (U. S. v. E. C. Knight Co., 156 U. S., 1), and to the dicta of judges of the Supreme Court in a number of later cases. The Knight case was the first case of importance arising under the antitrust act, and it was decided in 1895. It appeared that the American Sugar Refining Co. had purchased the stock control of four independent sugar refining companies, paying therefor with its own stock; that refined sugar was an article of interstate commerce and that all the companies were engaged in interstate commerce in refined sugar. further appeared that by such purchase the American Sugar Refining Co. acquired a monopoly-98 per cent of the business of manufacturing and selling refined sugar throughout the United States. The Supreme Court held that this transaction was not in violation of the antitrust act, and the grounds upon which the court based its decision were briefly as follows: (1) That commerce succeeds to manufacture and is not a part of it, and, therefore, although a combination or a conspiracy to control the business of manufac turing an article of interstate commerce may tend to restrain interstate commerce, the restraint in such case would only be an indirect result, however inevitable and whatever might be its extent; (2) that under the power to regulate commerce Congress could only prescribe the rules by which commerce should be governed and could not regulate the use or disposition of property or prohibit monopolizing a manufacturing business merely because ultimately interstate or international commerce in the product of the business might be affected; and (3) that, in view of these constitutional limitations, Congress did not attempt to limit or restrict the righs of corporaions or of citizens of the States in the acquisition, control, or disposition of property merely because the result might be to create a monopoly in a branch of interstate commerce.

It is obvious that, if that was the law, the main purpose of the antitrust act would be defeated, because the most effective way of monopolizing interstate commerce in any article is to vest in a corporation or common ownership the control of the sources of production of this article. The Supreme Court never, in terms, has overruled the decision in the Knight case. However, in the subsequent cases the Supreme Court departed from the principles upon which its decision was based, so that I think to-day the case no longer can be considered an authority.

In 1899, four years after the decision of the Knight case, the case of the Addyston Pipe Co. (175 U. S., 211) came before the Supreme Court. In that case it appeared that the manufacturers of iron pipe in 36 States and Territories had entered into an agreement to pool

among themselves the pipe business in those 36 States and Territories, and in effect to monopolize the entire business in pipe in those States and Territories for the benefit of the parties to the agreement. The Supreme Court decided that this contract was in violation of the antitrust act and unlawful, but, as I have stated, they did not expressly limit their former decision in the Knight case.

This was the state of the law during the period between 1901 and 1904, when the United States Steel Corporation and a great many other large industrial combinations were formed. The decision in the Knight case stood unreversed, and the Department of Justice during that period took no steps to prevent those combinations which since then have been attacked by the Government.

It seems, therefore, unjust to criticize those who entered into these combinations as willfully acting in violation of the law. They did only what the Supreme Court of the United States in the Knight case had said they could do lawfully, and when they formed these combinations they were not interfered with by the Department of Justice, whose duty it was to enforce the law.

The other source of doubt and uncertainty to which I have referred consists of certain dicta in the opinions of the Supreme Court which have been commonly understood, though I believe improperly understood, as meaning that every contract or combination diminishing to any extent competition in interstate commerce is in violation of the antitrust act because a restraint of trade.

However, the doubt and uncertainty resulting from the decision in the Knght case, and from these dicta, to which I have referred, have been, in great measure, removed by the decisions of the Supreme Court in the cases of the Standard Oil Co. and of the American Tobacco Co., and the way is now cleared for a reasonable and scientific construction of the antitrust act and for its enforcement in the future according to its true intent and purpose.

According to my understanding, the decisions of the Supreme Court in these recent cases establish two points, namely:

(1) That the decision in the Knight case was wrong and will not be followed. I think it must now be considered settled that Congress had constitutional power to prohibit, and that by the antitrust act it did prohibit, the monopolizing or restraining of interstate commerce by combining in a corporation or trust the ownership or control of competitive businesses for the purpose or with the effect of monopolizing interstate commerce in any article of commerce. The means resorted to for the purpose of accomplishing the prohibited results are not material. To monopolize or to attempt to monopolize or to restrain interstate or foreign commerce by buying up the property of competitors, or the stocks of competing companies, or by contracts or combinations in any form to fix prices, or to limit production, or by apportioning or pooling business, either as to territory or as to products, or by destroying the business of competitors through the practices which sometimes are called unfair competition, or by any other scheme or device, would be equally within the prohibition of the antitrust act.

The other point which I regard as established by these recent decisions is that the antitrust act must be construed not literally or technically, but in the light of reason, to accomplish the purposes for which the act was passed. In order to constitute a violation of the

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