test that we must regard as, for the present at least, firmly established in our jurisprudence. A wrong of this character is commonly known as an act against public policy. Any defini 1120; 21 L. R. A. 337, 339; 40 Am. St. Rep. 319 (1893), it was said: "There is perhaps danger that, influenced by such terms of illusive meaning as 'monopolies,' 'trusts,' 'boycotts,' 'strikes,' and the like, they (the courts) may be led to transcend the limits of their jurisdiction, and, like the court of King's Bench, in Bagg's Case, 11 Coke, 98a (1615), assume that, on general principles, they have authority to correct or reform everything which they may deem wrong, or, as Lord Ellsmere puts it, 'to manage the State."" 2 In Bishop v. Palmer, 146 Mass. 469; 16 N. E. 299; 4 Am. St. Rep. 339 (1888), the invalidity of contracts in restraint of trade was said to rest on the same ground “as if such contracts were forbidden by positive statute." That the court will raise the question that a contract is illegal as against public policy, though it has not been raised by the parties, see Wright v. Cudahy, 168 Ill. 86; 48 N.. E. 39 (1897); Richardson v. Buhl, 77 Mich. 632, 656; 43 N. W. 1102, 1110; 6 L. R. A. 457, 465 (1889); Detroit Salt Co. v. National Salt Co., 134 Mich. 103, 117; 96 N. W. 1, 6 (1903). So, even on appeal, Pasteur Vaccine Co. v. Burke, 22 Tex. Civ. App. 232; 54 S. W. 804 (1899). But an appellate court should not consider the objection, raised for the first time on appeal, unless such illegality appear from the pleadings, the face of the contract, or the confessed facts of the rung, 86 Fed. 439; 30 C. C. A. 174 (6th C., 1898). The rule that the question whether an agreement is contrary to public policy, is one of law for the court has been applied to agreements in restriction upon competition. Thus, in Cummings v. Union Blue Stone Co., 15 App. D. 602; 44 N. Y. Suppl. 787 (1897); affirmed in 164 N. Y. 401; 58 N. E. 525; 52 L. R. A. 262; 79 Am. St. Rep. 655 (1900, holding a request to go to the jury properly denied). So in Kellogg v. Larkin, 3 Pinney (Wis.), 123, 135; 56 Am. Dec. 164, 167 (1851), holding that, in an action on an agreement, judgment for the defendant on demurrer to the plea was not made proper by mere averments in the plea to the effect that the agreement tended to stifle competition, etc. The court said: "No averment could give to the agreement a character which it had not, and no admission could take from it the character which it had." To similar effect, Hoffman v. Brooks, 23 Am. Law Reg. (N. S.) 648 (Super. Ct. Cin., 1884). But in South Florida R. R. Co. v. Rhodes, 25 Fla. 40, 46; 5 So. 633, 635; 3 L. R. A. 733, 737; 23 Am. St. Rep. 506 (1889), the question whetner an agreement was "bona fide and not entered into for the purpose of an oppressive monopoly" was held a mixed one of law and fact, and for the jury. See, as to pleading defense to contract valid on its face as alleged and proved by the plaintiff, Drake v. Siebold, 81 Hun, 178; 30 N. Y. Suppl. 697 (1894). 3 tion of such an act would seem to be of necessity unsatisfactory, and, without attempting to frame one, we content ourselves with the suggestion that an act illegal as against public policy involves, as an essential element, the idea of a wrong committed against a considerable number of persons, such number being commonly incapable of precise determination. It is important to note that so different are the conditions of existence, comparing one time or country with another, that an act, illegal as against public policy, under the conditions of a given time and country, may not be so under the conditions of another. Hence, in applying this test of liability, precedents 3 It was said by Kekewich, J., in Davies v. Davies, 36 Ch. D. 359, 364 (1887), that "public policy does not admit of definition." But in People ex rel. v. Chicago Gas Trust Co., 130 Ill. 268, 294; 22 N. E. 798, 803; 8 L. R. A. 497, 505; 17 Am. St. Rep. 319 (1889), public policy was defined as "that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good." See also Greenhood on Public Policy, p. 2. By Cal. Civil Code, § 1667, which has been copied in several other juris dictions, "that is not lawful which is contrary to the policy of express law, although not expressly prohibited." 4 Thus, it was said in U. S. v. Trans-Missouri Freight Assoc., 58 Fed. 58, 68; 7 C. C. A. 15, 72; 24 L. R. A. 73, 82 (8th C., 1893), with reference to public policy in connection with contracts in restraint of trade: "Public policy changes with the changing conditions of the times. It is hardly to be expected that a people who are transported by steam with a rapidity hardly conceived of a century ago, who are in constant and instant communication with each other by electricity, and who carry on the most important commercial transactions by the use of the telegraph, while separated by thousands of miles, will entertain precisely the same views of what is conducive to the public welfare in commercial and business transactions as the people of the last century, who lived when commerce crept slowly along the coasts, shut out of the interior by the absence of roads, and hampered by an almost impassable ocean. It is with the public policy of to-day, as illustrated by public statutes and judicial decisions, that we have now to deal. In considering that subject we are not to be governed by our own views of the interests of the people, or by general considerations tending to show what policy would probably be wise or unwise. Such a standard of determination might be unconsciously varied by the personal views of the judges who constitute the court. The public policy of the nation must be determined by its constitution, laws and judicial decisions. So far as they disclose it, it is our province to learn and en 5 based on different conditions of time and place should be employed with great caution. So, too, the lack of precedents furnishes no sufficient ground for refusal to pronounce illegal, acts performed under radically new conditions of time and place, and, as will hereafter be seen, this statement is peculiarly applicable to the development of the doctrine against restrictions upon competition resulting from the acts of individuals. Obviously the public policy of a given jurisdiction may be determined by the legislative power, subject to constitutional restriction, if any." § 107. Application of doctrine to restrictions upon competi tion. The combinations presently to be considered are such as produce or tend to produce restrictions upon competition. Whatever be the specific ground on which such restrictions are held to be illegal, the underlying ground will be found to be that they are against public policy. There is authority, however, for saying that it is with reluctance that the doctrine of public policy will be applied for the purpose of condemning such restrictions.7 force it; beyond that it is unnecessary and unwise to pursue our inquiries." See also Davies v. Davies, 36 Ch. D. 359 (1887). 5 This is peculiarly applicable to precedents concerning the validity of contracts in restraint of trade. See note 4, supra; also, Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co., App. Cas. (1894), 535, 553; Diamond Match Co. v. Roeber, 106 N. Y. 473; 13 N. E. 419; 60 Am. Rep. 464 (1887). 6 People ex rel. v. Chicago Gas Trust Co., 130 Ill. 268, 296; 22 N. E. 798, 804; 8 L. R. A. 497, 506; 17 Am. St. Rep. 319 (1889). 7 In Ives v. Smith, 3 N. Y. Suppl. 645, 653; affirmed in 8 Id. 46 (Supm. Ct., Gen. T., 1889), where were sustained traffic contracts between railroad companies, the court said: "A court should not stamp with invalidity contracts which have ex isted for years, and under which rights have been created and obligations assumed, without the clearest conviction that they come within the condemned or illegal class. The avoidance of contracts on the ground that they are against public policy, is reluctantly ordered by the courts." Compare the frequently quoted remarks of Jessel, M. R., in Printing & Numerical Registering Co. v. Sampson, 19 L. R. Eq. Cas. 462 (1875), that "if there is one thing which, more than another, public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into freely and voluntarily, shall be held sacred, and shall be enforced by courts of justice." See article in 13 Harv. Law Rev. 198, 265, 277 (18991900) by E. Q. Keasbey. CHAPTER XIII RESTRICTION UPON COMPETITION AS RESULTING FROM ACT OF GOVERNMENT § 108. Restriction upon competition as resulting from act of government. 109. Monopoly as resulting from act of government. 110. Monopoly as exclusive of new right or franchise not previously possessed by community at large. 111. Restriction created in exercise of police power. 112. Right under patent. 113. Constitutional restrictions upon power of legislature to create monopolies. 114. Monopoly as resulting from act of municipal corporation. 1 § 108. Restriction upon competition as resulting from act of government.-Competition has been defined as "the act of seeking or endeavoring to gain what another is endeavoring to gain at the same time; common contest or striving for the same object." As applied to competition in trade, it is, generally speaking, the action of two or more traders in seeking at the same time to deal with the same customer. The existence of a restriction upon competition implies diminution of competition, or, at least, a tendency to such diminution. Thus, if there have previously been three traders seeking at the same time to deal with the same customer, whatever causes the number of such competing traders to be reduced from three to two results in a diminution of competition. If the number be so reduced to one, there is a complete restriction upon competition; that is to say, a destruction of competition. Until within a comparatively recent period a complete or an approximately complete restriction upon competition has usually been the result, not of the acts of mere individuals, but of a grant, that is, 1 Century Dictionary. the act of government, conferring upon a single individual or set of individuals the exclusive right of buying or selling a given article within a given area. 2 § 109. Monopoly as resulting from act of government.-Re striction upon competition resulting from an act of government, as distinguished from the acts of individuals, has commonly taken the form of what has been known as a monopoly, which, "in its original sense, was an exclusive right granted by the State to one or a few of something which was before of common right." Thus a monopoly has been defined as a "license or privilege allowed by the king for the sole buying and selling, making, working or using of anything whatsoever, whereby the subject in general is restrained from that liberty of manufacturing or trading which he had before." So as "an institution by the king, by his grant, commission or otherwise to any persons or corporations of or for the sole buying, selling, making, working or using of everything, whereby any persons or corporations are sought to be restrained of any freedom or liberty they had before, or hindered in their lawful trade." 4 In England the power of creating monopolies was, as indicated in the above quoted definitions, for a long time in the crown, but was so abused by the appointing power that, by virtue of statute, it is 2 Pocahontas Coke Co. v. Powhatan Coal & Coke Co., 60 W. Va. 508, 520; 56 S. E. 264, 269; 10 L. R. A. N. S. 268, 280; 116 Am. St. Rep. 901 (1907). 84 Blackstone's Commentaries, p. 159. 4 ♦ Dissenting opinion of Story, J., in Charles River Bridge v. Warren Bridge, 11 Peters (U. S.), 420, 607; 9 L. Ed. 773 (1837), citing East India Co. v. Sandys, 10 Howell's State Trials, 371, 386, 425 (1684). To the same effect, City of Memphis v. Memphis Water Co., 5 Heisk. (Tenn.) 495, 529 (1871); Leeper v. State, 103 Tenn. 500, 514; 53 S. W. 962, 964; 48 L. R. A. 167, 170 (1899). See also Darcy v. Allein, 11 Coke, 84b (1602); U. S. v. E. C. Knight Co., 156 U. S. 1, 9; 15 Supm. 249, 252; 39 L. Ed. 325 (1895); Re Charge to Grand Jury, 151 Fed. 834 (D. C. Ga., 1907); Birmingham & Pratt Mines St. Ry. Co. v. Birmingham Street Ry. Co., 79 Ala. 465; 58 Am. Rep. 615 (1885); Transportation Co. V. Standard Oil Co., 50 W. Va. 611; 40 S. E. 591; 56 L. R. A. 804; 88 Am. St. Rep. 895 (1902); 3 Coke's Inst. 181; Hawkins' Pleas of the Crown, c. 79; Eddy on Combinaarticle in 33 Am. (1899) by Lionel tions, §§ 29-33; |