one decision by the Federal courts armers' combinations in restraint of ... within the prohibitions of the Sherperhaps, very clear on this point. :biter dictum in another case and a titrust statute which supports the ons are not exempted.

2 FED., 1), CIRCUIT COURT OF APtenants delivered four hogsheads of gned to a person in another State, in the vicinity, called the "Society " had arranged to hold all tobacco sales. The farmer was notified by Sot ship the tobacco or it would be e him an order to take the tobacco 、 it to him. A large body of men resion agent and informed him he must A grand jury brought an indict1 Novezan Act against 12 persons, of whom The defense apparently made no combinations from other combina

tions. The court affirmed the judgments of conviction and the sentences imposed.

In the Danbury Hatters' case (Loewe v. Lawlor, 208 U. S., 274), which has been already discussed (see p. 93 above), the court made the statement that "organizations of farmers and laborers" were not exempted from the prohibitions of the law. Apparently, however, this was an obiter dictum so far as farmers' organizations are concerned. A case arose, however, with relation to a State antitrust law, which was adjudicated by the Supreme Court of the United States and which throws some light on this subject. The facts in this case, and the essential part of the decision relating to this subject, were as follows:

CONNOLLY v. UNION SEWER PIPE Co. (184 U. S., 540), SUPREME COURT, 1902. The pipe company brought an action in the Federal courts against one Connolly to obtain payment on his notes for the purchase of pipe. One defense set up was that the pipe company was a trust contrary to the statute of the State of Illinois of July 1, 1893, section 10 of which act provided that the purchaser of articles from a trust could plead this act in a suit to recover payment therefor in bar of such payment. The statute in section 1 prohibited trusts and other combinations to restrict trade, to prevent competition, to limit production, to fix prices, etc. In section 9 the following provision was made:

The provisions of this act shall not apply to agricultural products or live stock while in the hands of the producer or raiser.

The court held that the defense made could not be allowed because this statute of the State of Illinois was unconstitutional.

The conclusions of the court on this matter were as follows (pp. 563-564):

Returning to the particular case before us, and repeating or summarizing some thoughts already expressed, it may be observed that if combinations of capital, skill or acts, in respect of the sale or purchase of goods, merchandise or commodities, whereby such combinations may, for their benefit exclusively, control or establish prices, are hurtful to the public interests and should be suppressed, it is impossible to perceive why like combinations in respect of agricultural products and live stock are not also hurtful. Two or more engaged in selling dry goods, or groceries, or meats, or fuel, or clothing, or medicines, are, under the statute, criminals, and subject to a fine, if they combine their capital, skill or acts for the purpose of establishing, controlling, increasing or reducing prices, or of preventing free and unrestrained competition amongst themselves or others in the sale of their goods or merchandise; but their neighbors, who happen to be agriculturalists and live stock raisers, may make combinations of that character in reference to their grain or live stock without incurring the prescribed penalty. Under what rule of permissible classification can such legislation. be sustained as consistent with the equal protection of the laws? It can not be said that the exemption made by the ninth section of the statute was of slight consequence, as affecting the general public interested in domestic trade and entitled to be protected against combinations formed to control prices for their own benefit; for it 30035°-16-7

The most compacte form of combination which has been held to be within the purview of the Sherman Act is the merger; that is, a combination which consolidates directly in a single ownership all or a large part of the property and business of the various competing infere da comprehended in the combination. No case has yet been decided by the Supreme Court concerning a combination which was a

complete merger, i. e., in which all the properties brought under a common control were owned directly by one corporation. The most important instance of a partial merger was the American Tobacco Co., and the opinion of the court in this case is referred to below. Another important partial merger was that of the du Pont Powder Co. The final judicial decision in this instance was rendered in a circuit court, and the opinion in this case also is referred to below. The clearest case of a merger was decided in a district court (United States v. International Harvester Co.), which is also noted below. This case has been appealed to the Supreme Court and is now pending.

UNITED STATES v. AMERICAN TOBACCO Co. (221 U. S., 106), SUPREME COURT. 1911.-The American Tobacco Co., formed in 1890, was originally a combination of competing cigarette manufacturers having about 95 per cent of the total production of the United States, who transferred their manufacturing property and business to the American Tobacco Co. in exchange for its stock. This corporation then expanded its business into plug tobacco by purchasing the businesses of several manufacturers, who agreed not to reengage therein. Other more important plug makers were invited to join the combination, and on their refusal a price-cutting competitive policy was adopted which was ended by the purchase of some of them. The combination, with certain other plug manufacturers, organized the Continental Tobacco Co. in 1898, and conveyed to it the property and business pertaining to the plug branch of the business, taking in exchange most of the stock of the company; part of the stock of the Continental Tobacco Co., together with cash, was given in exchange for most of the stock of another important tobacco manufacturing concern-the P. Lorillard Co. From 1900 to 1902 two companies were organized which acquired dominating positions in the snuff and licorice businesses, respectively, while less important combinations were formed in the cigar and stogie branches, all of these being controlled through stock ownership by the combination. Further, in 1901 a few of the leading shareholders of the American Tobacco Co., and a few other large capitalists, organized the Consolidated Tobacco Co., a financial company merely, which acquired most of the common stock of the American Tobacco Co. in exchange for its bonds. In 1904 the American, Continental, and Consolidated Tobacco companies were all merged into a new corporation called the American Tobacco Co., this merger continuing to hold also the stocks of various other tobacco companies. The few capitalists who controlled the Consolidated Tobacco Co. thus became the dominating shareholders in this merger. Throughout the period from 1899 to the time of the suit, 1907, many millions were expended by the combination in buying out competing tobacco companies and closing down their plants, while their former owners agreed not to reenter their respective lines of business.

unreasonable; (2) the question relates to matters of public policy in reference to commerce among the States and with foreign nations, and Congress alone can deal with the subject; (3) this court would encroach upon the authority of Congress if, under the guise of construction, it should assume to determine a matter of public policy; (4) the parties must go to Congress and obtain an amendment of the Antitrust Act if they think this court was wrong in its former decisions; and (5) this court can not and will not judicially legislate, since its function is to declare the law, while it belongs to the legislative department to make the law." Such a course, I am sure, would not have offended the "rule of reason."

But my brethren, in their wisdom, have deemed it best to pursue a different course. They have now said to those who condemn our former decisions and who object to all legislative prohibitions of contracts, combinations and trusts in restraint of interstate commerce, "You may now restrain such commerce, provided you are reasonable about it; only take care that the restraint is not undue." The disposition of the case under consideration, according to the views of the defendants, will, it is claimed, quiet and give rest to "the business of the country." On the contrary, I have a strong conviction that it will throw the business of the country into confusion and invite widely-extended and harassing litigation, the injurious effects of which will be felt for many years to come. When Congress prohibited every contract, combination or monopoly, in restraint of commerce, it prescribed a simple, definite rule that all could understand, and which could be easily applied by everyone wishing to obey the law, and not to conduct their business in violation of law. But now, it is to be feared, we are to have, in cases without number, the constantly recurring inquiry— difficult to solve by proof-whether the particular contract, combination, or trust involved in each case is or is not an "unreasonable" or "undue" restraint of trade. Congress, in effect, said that there should be no restraint of trade, in any form, and this court solemnly adjudged many years ago that Congress meant what it thus said in clear and explicit words, and that it could not add to the words of the act. But those who condemn the action of Congress are now, in effect, informed that the courts will allow such restraints of interstate commerce as are shown not to be unreasonable or undue.

UNITED STATES v. AMERICAN TOBACCO Co. (221 U. S., 106), SuPREME COURT, 1911.-The American Tobacco Co. was a combination of numerous concerns engaged in the manufacture of tobacco products and their sale in interstate commerce. In all the most important. branches of the business (except cigars) it had acquired control of much the greater part of the total business in the United States. Apart from an initial combination of competitors, this was accomplished largely by buying out competitors individually, with the condition that they would not reengage in the business, and merging them into several larger companies. The combination also resorted to the use of bogus independent companies, excessive price cutting, and various other methods of unfair competition.

This combination the court declared to be contrary to both sections 1 and 2 of the Sherman Act, and in this connection defined the meaning of the term "restraint of trade" in the first section, as follows (pp. 179–180):

Applying the rule of reason to the construction of the statute, it was held in the Standard Oil Case that as the words "restraint of trade” at common law and in the law of this country at the time of the adoption of the Antitrust Act only embraced acts or