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The case of Strauss vs. American Publishers' Ass'n,1 decided in February, 1904, was an attempt to set aside an agreement between publishers of and dealers in books, whereby they contracted not to sell books of any kind to dealers who shall be suspected of selling copyrighted books at less than the net price fixed by the publishers. The court held that this contract was a violation of the New York statute against monopolies.

One of the most instructive cases is that of the City of Atlanta vs. Chattanooga Foundry & Pipe Works,2 decided in 1903 by the United State Circuit Court of Appeals, Judges Lurton, Severens, and Richards. This was brought under the federal anti-trust law against two companies of the State of Tennessee which made cast-iron pipe and fittings. The declaration averred that the two defendants entered into an unlawful combination with certain other corporations in the same line for the purpose of restricting bidding, so that an Anniston company, which received the contract for furnishing the pipe, got $15,000 more than would have been paid but for the agreement, and this unjust profit was divided among the parties to the pool, including the two defendants. Judge Lurton wrote the opinion, holding that the action would lie under the anti-trust law.

Of Michigan cases probably the most widely known is that of Richardson vs. Buhl. This was a chancery suit to enjoin defendants from selling stock in a manufacturing corporation which was held by them as security. The stock was that of the Diamond Match Company, and the question of its legal integrity was the crucial question in the case. The members of the court wrote individual opinions holding the Diamond Match Company an illegal combination. Judge Champlin said (p. 660), “Such a vast combination as has been entered into is a menace to the public. Its object and direct tendency is to prevent free and fair competition, and control prices throughout the national domain. It is no answer to say that this monopoly has in fact reduced the price of matches. That policy may have been necessary to crush competition. The fact exists that it rests in the discretion of this company at any time to raise the price to an exorbitant degree."

Another Michigan case is that of Lovejoy vs. Michels. The defendant ordered two sets of knives from a concern which was a member of the knife makers' association, one of the principal objects of which was to keep up prices. No price was agreed upon at the time of the order, and the bills were received after the knives were used. The court held that the price fixed by the combination of manufac

1 177 N.Y. 473.

2127 Fed. Rep. 23.

This has been affirmed recently in the Supreme Court, Mr. Justice Holmes writing the opinion. (December 3d, 1906.)

477 Mich. 632.

5 88 Mich. 15.

turers was not the one which should control. Such combinations have been vicious and against public policy, and in them "the odious features of illegal monopolies are plainly apparent."

Another Michigan case on the same line is that of the Detroit Salt Co. vs. National Salt Co.,' decided in 1903. The opinion of Hooker, C. J., holds that no combinations in restraint of trade are lawful in Michigan to-day.

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Hunt vs. Riverside Co-Operative Co. et al.2 was decided in 1905; this was an attempt of plumbers to fix local prices, and in the opinion of Judge Carpenter it is announced that "the mere fact that the monopoly created is not a complete and perfect monopoly, is no defense. We find also the case of the White Star line vs. Star Line of Steamers, decided in November, 1905, in which the complainant and the defendants, with three other steamboat lines, enter into a pool for the purpose of controlling water traffic between Detroit and near-by points. Judge McAlvay says that the purpose of the agreement was to monopolize and control traffic" and is unlawful and invalid as against the provisions of the Sherman Act, known as the federal. anti-trust law.

Taking these statutes and decisions together we may conclude that to-day the American test of the lawfulness or unlawfulness of the combinations of persons or forces (as being of a monopolistic character) is whether or not they tend to control prices. That a concern lowers prices is no defense or shield. As Mr. Pingry says in his work on" Extraordinary Industrial and Interstate Contracts" (Sect. 321), "It is enough to know that the natural tendency of such contracts is injurious."

It is somewhat difficult to reconcile some "trade-union" decisions with the rule of law governing combinations, but it seems fair to assume that the law will soon be shaped by American intelligence so that it will provide for the proper control of these bodies. Agreements or combinations which undertake the absolute control of the labor market should be as unlawful as any trust or monopolies: agreements which provide for a living wage should be legalized, both for labor and capital. The line of demarcation is hard to find, but we are nearing it with each swing of the pendulum.

IV

The last problem suggested in this connection is with relation to "holding companies." This new kind of questionable corporate character is prominent now because of the recent move of some of our monopolistic combinations in transferring the stock of their

1 134 Mich. 103.

2

140 Mich. 538, 12 D. L. N. 265.

3

141 Mich. 604, 12 D. L. N. 586.

subsidiary companies to English corporations. The question of the hour is how to meet this method.

Mr. Beale in his work on "Foreign Corporations" (Sect. 785), lists seven states which permit their corporations to acquire stock in corporations of other states. In most instances this power is limited so as to prevent the encouragement of monopoly, but the plan of transatlantic holding companies must be taken from the other end. We cannot control the power of the holding corporations. Can we attain our purpose by restricting the amount of stock in a domestic corporation which may be held by foreign capital? The District of Columbia has a statute (Compiled Stat. of 1894, p. 43, Sect. 2) providing that corporations having more than twenty per cent of stock owned by aliens are prohibited from holding real estate in the district. Shall it be our policy to adopt a similar method?

Judge Noyes in his book on "Intercorporate Relations" (Sect. 286, p. 416) says "the holding by foreign corporations of the stock of domestic companies for the purpose of destroying competition, is inimical to public policy and consequently void, but in such a case the unlawful purpose is the essential objection rather than the foreign domicile of the corporation." If a transatlantic company undertakes to do something not permitted by law for an American company, is not its purpose avowedly against the public policy of this country and are not its acts here void? Surely our courts have power to interfere, on a proper showing.

This last development seems likely to become a feature of international law. A leading French authority, Mons. A. Pillet, in his book on the "Principles of Private International Law," lays down. the general rule that a stranger domiciled in France, or other foreign country, should have no greater rights than he has in his own country. If we may accept this as true, the stranger corporation formed under the laws of England for the purpose of controlling stock in American corporations, which could not be so controlled by an American corporation, is undertaking a business which is contrary to our laws and which can be restrained by our courts.

It has been the boast of the English press that trusts were unknown in Great Britain; therefore we should look for little sympathy in our anti-trust agitation if it were not for a new development in British business circles. This is a trust or combination of the soap manufacturers against which the London Spectator has been wielding the cudgels in its most approved fashion. If this trust becomes popularly obnoxious, or if others are formed, we may find it possible to make an arrangement with England, by treaty or otherwise, providing that no corporation organized in one country shall stand as a holding company for the shares of corporations organized in the other country.

1 Pillet, A., Principes de Droit International Privé, Sect. 220, etc.

Is it not possible that this idea may soon spread? Why should it not be taken up at the next Hague conference, as it is a menace threatening the internal peace of any progressive industrial nation? To summarize may we not say that some of the results of "The Case of the Monopolies" have been (a) the clear establishment of the idea that sole control of a product is against public policy and consequently against fundamental law, (b) the giving a firm base and good outline for our States to start from in their law-making and their courts. One of its suggestions, too, that we need to-day is that the monopolistic idea is against the grain of English thought, and that therefore we should have little real trouble in framing an understanding with all English speaking lands as to an interchange of corporate restriction.

THE STANDARD OIL DECISION: THE RULE OF REASON

BY H. L. WILGUS, OF THE DEPARTMENT OF Law,
UNIVERSITY OF MICHIGAN

(From the Michigan Law Review, June, 1911)

After twenty-one years the Sherman Anti-Trust Act has been applied to the typical combination restraining interstate commerce, which that act was designed to prevent.

In the debate in the United States Senate, on the original bill introduced by Senator Sherman, he said:1

Associated enterprise and capital are not satisfied with partnerships and corporations competing with each other, and have invented a new form of combination, commonly called trusts, that seeks to avoid competition by combining the controlling corporations, partnerships, and individuals engaged in the same business, and placing the power and property of the combination under the government of a few individuals, and often under the control of a single man called a trustee, a chairman or a president. The sole object of such a combination is to make competition impossible. It can control the market, raise or lower prices, as will best promote its selfish interests, reduce prices in a particular locality and break down competition and advance prices at will where competition does not exist. Its governing motive is to increase the profits of the parties comprising it. The law of selfishness, uncontrolled by competition, compels it to disregard the interests of the consumer. It dictates terms to transportation companies, it commands the price of labor without fear of strikes, for in its field it

1 See Congressional Record, Vol. 21, relating to trusts, 1888-1902, pp. 95-96. Oil Co. in the debates: Allison, p. 126;

Mar. 21, 1890; Bills and Debates in Congress There are many other references to the Standard Teller, p. 170; Wilson, p. 337.

allows no competitors. Such a combination is far more dangerous than any heretofore invented, and, when it embraces the great body of all the corporations engaged in a particular industry in all of the states of the Union, it tends to advance the price to the consumer of any article produced, it is a substantial monopoly injurious to the public, and, by the rule of both the common and the civil law, is null and void and the just subject of restraint by the courts, of forfeiture of corporate rights and privileges, and in some cases should be denounced as a crime, and the individuals engaged in it should be punished as criminals. It is this kind of a combination we have to deal with now.

Do I exaggerate the evil we have to deal with? I do not think so. I do not wish to single out any particular trust or combination. It is not a particular trust, but the system I aim at. I will only cite a very few instances of combinations that have been the subject of judicial or legislative inquiry, to show what has been and what can be done by them, as follows:

In Handy vs. C. & M. R. R. Co., 31 Fed. 689, 693. "The Standard Oil Co. and George Rice were competitors in the business of refining oil; the Standard desired to crush Rice and his business, and under threat of building a pipe line, compelled the receiver of the railroad to carry its oil at 10 cents per barrel and charge Rice 35 cents per barrel for a like service, and pay the Standard 25 cents out of the 35 cents thus exacted from Rice."

It also appears in an equity suit in Pennsylvania vs. Penn. R.R. (1897), by testimony of A. J. Cassatt, that the Standard Oil Company were receiving rebates of 49c. per bbl. on crude oil from Bradford Oil region to tide water, 51c. from the lower oil region to tide water, and 64 c. from Cleveland to tide water, or the annual illegal receipts by the Standard Oil Co. would have been $5,480,000. I do not wish to single out the Standard Oil Company. . . . I only refer to them because they are the oldest of these combinations founded upon contracts which have been copied by the other corporations.1 Sir, now the people of the United States as well as of other countries are feeling the power and grasp of these conbinations, and are demanding of every legislature and of Congress a remedy for this evil, only grown into huge proportions in recent times. They had monopolies and mortmains of old, but never before such giants as in our day. You must heed their appeal or be ready for the Socialist, the Communist, and the Nihilist. Society is now disturbed by forces never felt before.2

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after these

The Supreme Court of the United States has now 21 years decided that the Standard Oil Company of New Jersey, is an unlawful combination in restraint of interstate and foreign commerce, in violation of the Federal Sherman Anti-trust act of 1890. The court's decision to this effect is unanimous, affirming the unanimous decision of the Circuit Court.4

The court ruled: (1) That the Anti-trust act makes only con

1 See Congressional Record, Vol. 21, March 24, 1980; Bills & Debates, p. 167.

2 Ibid.

Bills & Debates, p. 101.

United States vs. Standard Oil Co., U.S., (May 15, 1911). 4173 Fed. 177; 152 Fed. 290.

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