MONOPOLY AND RESTRAINT OF TRADE IN FEDERAL VIEWDOUBT AS TO MEANING OF TERMS.

Among the things, which appear greatly to have clouded the meaning of the AntiTrust Act, are the common-law terms used to define the offenses it denounces. Lawyers and judges are met by the principle that "when terms which are known to the common law are used in a federal statute, those terms are to be given the same meaning they received at common law." Then there comes a difficulty in doing this, because their application is demanded to a subject as to which the common law furnishes no possible conception.

The common law was the law of one realm and restraint of trade and monopoly affected the trade of a single realm. We hear nothing from the common law of restraint or monopoly of trade depending

on intercourse with other realms. these

When

common-law terms are, therefore, wrenched from their accustomed connection and given a setting away from all common-law concept, difficulty in construction arises. This difficulty is not lessened when the offense defined by the use of such terms is extra-territorial of the realm or sovereignty against whose trade it is committed. Nor do we seem to derive aid in the making of fit application of such terms from the fact that the subject, as to which acts are denounced as offenses, is entirely special in its character. Thus each of our states has its trade, and the intercourse of trade between its own citizens is purely internal and domestic. At common law the trade of citizens with those of other states would be as with those of other nations. But interstate trade is, as the power of Congress to "regulate" it, has been construed, a limitation upon, or, possibly in some way an enlargement of, the freedom of domestic trade. At all events it is a

S.

(1) U. S. v. Trans-Missouri F. Assn., 166 U.

condition that was wholly unknown and inconceivable at common law.

Interstate Commerce Extended by Construction.-It should be remembered that it was only after the enactment of the Sherman Act, that interstate trade was held definitely to include things as to which inclusion was merely, if at all, the subject, of academic discussion. Thus it was contended in the Addyston Pipe Company case that the power to regulate interstate commerce did not extend to prohibition of private contracts at all and Mr. Justice Peckham indulges in extended argument to show that it did. With all of his reasoning, however, he fails to cite a prior case specifically so deciding.2

The contention was, that the power of Congress to regulate interstate commerce was limited to its protection from acts by state legislation or by means of regulation made under state authority, and extracts from many decisions were cited in support of such view. These began with Gibbons v. Ogden, and continued down until it was said in Railroad Co. v. Richmond, that the power of Congress to regulate commerce

was never intended to be exercised so as to interfere with private contracts not designed at the time they were made to create impediments to such commerce.

Reason for Regulation as Viewed by Framers of Constitution.-Thereupon the Justice said: "It is undoubtedly true, that the strongest reason for placing the power in congress to regulate interstate commerce was that which is stated in the extracts from the opinions of the court in the cases above cited. The reasons, which may have caused the framers of the Constitution to repose the power to regulate interstate commerce in Congress do not, however, affect or limit the extent of the power itself."

To understand fully the bearing of this statement, as a principle, let me quote

from the concurring opinion of Mr. Justice Johnson in Gibson v. Ogden: "The power to regulate commerce here meant to be granted was that power to regulate commerce which previously existed in the states. But what was that power? The states were unquestionably supreme; and each possessed that power over commerce, which is acknowledged to reside in every sovereign state. The definitions and features of that power are to be sought among the features of international law." And: "Power to regulate foreign commerce is given in the same words and in the same breath, as it were, with that over the commerce of the states, and with the Indian tribes. But the power to regulate foreign commerce is necessarily exclusive."

Thus it is seen that in order for it to be

ascertained that the power to regulate interstate commerce was exclusive, it was held that it was of the precise nature of foreign commerce. The Addyston Pipe Line case and all others upholding the AntiTrust Act, however, add an element to interstate commerce, which surely does not exist in respect to foreign commerce.

Certainly there does not exist in regulation of foreign commerce restraint of trade or monopoly thereof in a foreign country, but the Addyston Pipe Line case holds there may exist the right to regulate, so as to prevent injurious effect of private contracts on trade when the ultimate result touches interstate commerce as to an article for sale in another state.

Control Over Private Contracts.-Therefore it seems to come to this-either the framers of the constitution intended to include, for regulation by Congress, the power of interference with private contracts, which might affect interstate commerce, or they did not so intend. If the latter, it does not seem that construction should take away from citizens of states a right resting in freedom of contract which was not intended to be surrendered, and such intent should "affect and limit the extent of the power" that was surrendered.

If this view had been held to be correct there would be no federal aspect whereby restraint of commerce and trade or any monopoly thereof arising out of private contract would be met in congressional regulation, and the Sherman Act would have fallen of its own weight.

Federal Aspect, Under Decisions, of Monopoly.-But is there such an aspect even under the decisions rendered in the cases arising under that act. Do not these cases show that those common-law terms have no recognition in their common-law sense, and that there has been a constant struggle to strip them of any such meaning?

It seems to me that the one distinctive result arrived at, in the way of a conclusion from all the cases, is, that nothing arising. out of private contract comes within the prohibition of the Sherman Act, except it directly and substantially, and not mediately and incidentally, affect interstate

merce.

com

The first case coming before the Supreme Court was the Sugar Refineries case. No one disputed that as complete a monopoly was established by the combination there proceeded against, as this country has known, and no one has ever doubted but its effect on interstate commerce was as well shown as in any other case this could be shown, if the influence of private contract on interstate commerce is to be considered at all.

Manufacturers Not Within Interstate Commerce Clause.-The Chief Justice, speaking for eight members of the court, considered it unnecessary to say what the common-law terms meant, as the Sherman Act had nothing to do with manufacturers. Justice Peckham in the Addyston case said: "The direct purpose of the combination in the Knight case was the control of the manufacture of sugar. There was no combination, in terms, fixed, regarding future disposition of the manufactured article; nothing looking to a transaction in the nature of interstate commerce. The

probable intention on the part of the manufacturer of the sugar to thereafter dispose of it by sending it to some market in another state was held immaterial and not to alter the character of the transaction." Without any strain of language the learned justice could have added that the intention was to dictate the price for the sugar by cornering the supply. The like power of dictation was the very thing that brought the Pipe line case within the denouncement of the Sherman Act, but it was inhibited because differently brought about.

The combination, however, in sugar refineries describes very much more accurately what was restraint of trade at common law than that in the Pipe line case. It was an engrossing of the entire supply of a commodity into one hand and making it able to dictate the price therefor as completely as ever did a grant by Queen Elizabeth to one of her favorites. These monopolies were what were declared to be opposed to common right. All that was ever forbidden at common law in the way of forestalling, regrating and engrossing might be said to come within what was done by the sugar refineries combination, from the mere doing of which the common law drew the indisputable presumption of an unlawful restraint of trade. There is nothing said, in speaking of such common law offenses, about sellers of commodities agreeing or binding themselves not to continue in the same business. The commonlaw offense was the gathering of, or as we now say cornering, the necessities of life in one hand and controlling the market. An illegal purpose was conclusively presumed.

Restraints Upon Sellers Not Recognized in Federal View.-But, if the statute did

not apply at all to acquisition, neither might it be said, that it had anything to do with restraints put upon the seller to refrain from trade, a thing collateral merely to the sale of a manufacturing business.

To do such a thing as that, however, be

(6) Italics are mine.

yond the proper protection of the buyer, was restraint of trade at common law, and, if all over the realm, a monopoly. We see, therefore, that in the plainest kind of case of monopoly or restraint of trade the common-law meaning of these terms has no great recognition.

The Effect must be Direct on Sales.The Pipe line case showed that the combination effected an arrangement directly operative on the sale price of a commodity destroying competition between the bidders. Whether the extent of the combination, being such as to smother competition in a substantial way and thereby substantially affect interstate commerce, was a necessary element in the decision of the case, does not seem absolutely to appear. At least the facts were deemed to show a practical smothering or destruction of all competition as to sale of a particular article.

The court, however, held that directly affecting sales was directly affecting interstate commerce. As said by Judge Peckham: "The direct and immediate result (abolishing competition between the parties) was necessarily a restraint upon interstate commerce." So at common law a combination to control by consolidation, all pipe manufacture would have the direct and immediate result of abolishing competition, and directly abolishing competition was directly in restraint of trade, amounting or not to a monopoly.

But it is not true that abolishing competition is in restraint of interstate trade, unless it is abolished in a particular way, that is, by a combination to affect directly the price of an article in a particular sale and not in sales generally by controlling the supply. The common law seems particularly antagonistic to controlling the general supply. Interstate commerce seems especially to regard particular sales.

But is it absolutely true that a combination which directly affects the sale of a commodity that has been transported or is to be transported from one state to another,

(7) Mitchel v. Reynolds, 1 P. Wms. 181.

other market. In the Danbury Hat case the owner had to yield or his trade might be affected in every market.

The combination in the Hopkins case did not seek to drive anybody out of business, but wished to take its own toll therefrom, and if a particular shipper resisted he would be compelled to pay or be denied commercial facilities usual in respect to the disposiion of an article of interstate trade.

Combination Not Engaged in Interstate Trade. The court in the Hopkins case seemed to think that the commission men, not being themselves engaged in interstate trade, was somewhat material, while in the Danbury Hat case this idea is pointedly repudiated.

I agree, that if directly affecting sales is the test, the Danbury Hat case was properly ruled, but it is exceedingly close refinement which breaks the chain of causation on sales in the facts of the Hopkins case, when it is unbroken in the Danbury Hat case. In some ways it might be argued, that the combination in the Hopkins case acted more directly on sales than did the combination in the Hat case. The sale to be acted on in the former case was of an article already a part of interstate trade. In the latter case there might, as a result of several intervening links in the chain of causation, be an ultimate effect on interstate commerce.

Consolidation Exempt from Act.-But this ultimate effect might not be said to be any more certain, if indeed it were half as certain, as affecting such commerce by consolidation, as in the Sugar case, or by laying a charge on the article, as in the Hopkins case. After all, however, it seems as I have already said, that restraint of trade as such, or monopoly as such, is not the test of what is forbidden by the Sherman Act. A contract, a combination or a conspiracy must directly affect interstate trade. But what is the import of directly is the criterion of decision in each case.

In the Trans-Missouri Freight case,12 the Supreme Court considers the meaning of

(12) U. S. v. Trans-Mo. F. Assn., 166 U. S.

these common-law terms, and the majority disagree with the minority as to what, at common law, amounted to a contract in restraint of trade. Justice Peckham, speaking for the majority, said: "Contracts in restraint of trade have been known and spoken of for hundreds of years, both in England and in this country, and the term includes all kinds of those contracts which in fact restrain or may restrain trade. Some of such contracts have been held void and unenforceable in the courts by reason of their restraint being unreasonable, while others have been held valid because they were not of that nature." Then he goes on and holds that by the statute every contract, reasonable or unreasonable, which interferes with interstate commerce, is by "the plain, ordinary meaning" of the words of the statute forbidden. Justice White, speaking for the minority of four justices, contended that no contract in restraint of trade was valid at common law, and there was no restraint the law noticed which was not a substantial detriment to trade.

Mitigating General Language of Act.This case appeared to make of the statute a tyrant, into whose grasp of literalness almost any transaction connected with interstate commerce might fall. We see this construction, however, mitigated most materially in the railroad freight case next before the court,13 and as I view the matter, the court completely cut away from their common law moorings the terms used to define the offenses denounced.

Thus, the court again speaking through Justice Peckham, for the majority, said: "The statute applies only to those contracts whose direct and immediate effect is a restraint under which, as a result, the cost of conducting an interstate commercial business may be increased. The effect upon interstate commerce must not be indirect or incidental only."

* * *

Monopoly of No Concern to Interstate Commerce.-We see here at least that monopoly is not important, and the court does

(13) U. S. v. Joint Traffic Assn., 171 U. S.