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§ 358. United States v. E. C. Knight Co.

The first case to reach the Supreme Court was the so-called Sugar Trust Case of United States v. E. C. Knight Co.30

In this case it was contended by the Government that the acquisition by the American Sugar Refining Company of the stock of a number of sugar refining corporations of Pennsylvania was with the object and effect of establishing a substantial monopoly of the industry, and that inasmuch as the product was sold throughout the country and distributed among the States, the provision of the act of 1890 with reference to the monopolization or combination or conspiracy to monopolize trade and commerce among the States was violated. The court, however, applying the doctrine of Coe v. Errol and Kidd v. Pearson,32 held that the act did not, and constitutionally could not, extend to combinations, conspiracies or monopolies relating to the manufacture of commodities, this being a field reserved exclusively to the States. The fact that interstate or foreign trade might be incidentally affected was declared not material.33

The doctrine thus laid down by the court has never been departed from, and is, indeed, one from which there would seem to be no logical escape, if the line which divides federal control of interstate commerce from state regulation of local industries and manufacturing is to be maintained. In applying this doctrine, however, the court, in later cases, has shown a somewhat

30 156 U. S. 1; 15 Sup. Ct. Rep. 249; 39 L. ed. 325.
3: 116 U. S. 517; 6 Sup. Ct. Rep. 475; 29 L. ed. 275.
32 128 U. S. 1; 9 Sup. Ct. Rep. 6; 32 L. ed. 346.

33"The object [of the combination] was manifestly private gain in the manufacture of the commodity, but not through the control of interstate or foreign commerce. It is true that the bill alleged that the products of these refineries were sold and distributed among the several States, and that all the companies were engaged in trade or commerce with the several States and with foreign nations; but this was not more than to say that trade or commerce served manufacture to fulfil its function. . . . It does not follow that an attempt to monopolize, or the actual monopoly of, the manufacture was an attempt, whether executory or consummated, to monopolize commerce, even though, in order to dispose of the product, the instrumentality of commerce was necessarily invoked. . . . That trade or commerce might be indirectly affected was not enough to entitle complainants to a decree."

greater readiness to find in the acts complained of, a direct interference with interstate commerce, and, therefore, a ground for the application of the federal statute.

§ 359. United States v. Trans-Missouri Freight Association. In United States v. Trans-Missouri Freight Association34 the act was held to apply to railroads, and moreover, that contracts or combinations in restraint of trade were by the act prohibited, whether or not those contracts were in themselves reasonable. In this case a contract between several railway companies was held illegal, and the resulting association, the purpose of which was to maintain rates, and prevent competition over a territory including a number of States, was dissolved.35

§ 360. United States v. Joint Traffic Association.

In United States v. Joint Traffic Associations the doctrine of the Trans-Missouri Freight Association case was affirmed. In this case the constitutional power of Congress to prohibit all contracts in restraint of interstate trade, whether reasonable or unreasonable, was questioned, and the possible far-reaching effect of the act invalidating business contracts, partnership agreements, urged. As to this the court say that the formation of corporations simply for business or manufacturing purposes has never been regarded as contracts in restraint of trade, and that the same is true as to partnerships. "We are not aware," the opinion continues, "that it has ever been claimed that a lease or purchase by a farmer, manufacturer, or merchant of an additional farm, manufactory, or shop, or the withdrawal from business of any farmer, merchant, or manufacturer, restrained commerce or trade, within any legal definition of that term." 37

34 166 U. S. 290; 17 Sup. Ct. Rep. 540; 41 L. ed. 1007.

35 Four justices dissented.

26 171 U. S. 505; 19 Sup. Ct. Rep. 25; 43 L. ed. 259.

37 It is to be observed, however, that in the Trans-Missouri Freight Associa tion case, the technical legal definition of the phrase "restraint of trade" as used in the act of 1890 was repudiated.

§ 361. Hopkins v. United States.

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In Hopkins v. United States it was held that a live stock commission merchant whose place of business was a certain stock yard and who there bought and sold stock for others, was not engaged in interstate commerce, within the meaning of the act of 1890, although the stock was shipped to him from another State. There fore, it was held, the rules and regulations of an association of live stock commission merchants, fixing the rates to be charged, were not agreements affecting interstate commerce.3 The court, for the evident reassurance of those who had been disturbed by the holding in the Trans-Missouri Freight Association case as to the illegality of all contracts, whether reasonable or not, in restraint of interstate trade, go on to say: "To treat as condemned by the act all agreements under which, as a result, the cost of conducting an interstate commercial business may be increased, would enlarge the application of the act far beyond the fair meaning of the language used. There must be some direct and immediate effect upon interstate commerce, in order to come within the act. Many agreements suggest themselves which relate only to facilities furnished commerce, or else touch it only in an indirect way, while possibly enhancing the cost of transacting the business, and which at the same time we would not think of as agreements in restraint of interstate trade or commerce. They are agreements which in their effect operate in furtherance and in aid of commerce, by providing for it facilities, conveniences, privileges, or services, but which do not directly relate to charges for its trans

38 171 U. S. 578; 19 Sup. Ct. Rep. 40; 43 L. ed. 290.

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39" The selling of an article at its destination, which has been sent from another State," the opinion declares, "while it may be regarded as an interstate sale, and one which the importer was entitled to make, yet the services of the individual employed at the place where the article is sold are not so connected with the subject sold as to make them a portion of interstate commerce; and a combination in regard to the amount to be charged for such services is not therefore, a combination in restraint of trade or commerce. . . . Indirectly, and as an incident, they may enhance the cost to the owner of the cattle in finding a market, or they may add to the price paid by the purchaser, but they are not charges which are directly laid upon the article in the course of transportation and which are charges upon the commerce itself."

portation, nor to any other form of interstate commerce. To hold all such agreements void would, in our judgment, improperly extend the act to matters which are not of an interstate commercial nature."

§ 362. Anderson v. United States.

In Anderson v. United States,40 decided the same day as the Hopkins case, an association of dealers in live stock, providing by its rules that its members should not transact business with nonmembers, nor with commission men who should deal with nonmembers, was held not a combination or conspiracy in restraint of interstate trade, inasmuch as it appeared that membership was open to all dealers, and no attempt was made to control prices or the number of cattle bought nor in any way to prevent full competition between the members. In this case the ground taken by the court was not so much that the combination did not relate to interstate commerce, as that there was no restraint upon commerce imposed by its rules, nor an attempt to monopolize such

commerce.

§ 363. Addyston Pipe & Steel Co. v. United States.

In a series of cases, beginning with Addyston Pipe & Steel Co. v. United States,11 the court has shown that combinations or agreements between manufacturers or dealers do not come within the protection of the doctrine of the Knight case if it appear that the attempt is made in any way directly to control or change what would normally be the course of interstate commerce in the absence of such combinations or agreements.

In the Addyston case six companies, engaged in the manufacture and sale of iron pipe, had formed a combination whereby competition in the sale of pipe throughout the United States was practically destroyed. In the exercise of the power thus possessed, the combination had allotted to its several member companies the territory within which each should have the exclusive right to sell

40 171 U. S. 604; 19 Sup. Ct. Rep. 50; 43 L. ed. 300. 41 175 U. S. 211; 20 Sup. Ct. Rep. 96; 44 L. ed. 136.

its products. By a unanimous opinion the court held the agreement to come within the prohibition of the act of 1890. Distinguishing this combination from that in the Knight case, the court say: "The direct purpose of the combination in the Knight case was the control of the manufacture of sugar. There was no combination or agreement in terms regarding the future disposition of the manufactured article; nothing looked to a transaction in the nature of interstate commerce." As to the Addyston combination, the court say: "The direct and immediate result of the combination was necessarily a restraint upon interstate commerce in respect of articles manufactured by any of the parties to it to be transported beyond the State in which they were made. The defendants, by reason of this combination and agreement, could only send their goods out of the State in which they were manufactured for sale and delivery in another State, upon terms and pursuant to the provisions of such combination."

§ 363. Montague v. Lowry.

In Montague v. Lowry42 was held illegal as a restraint of interstate commerce an association of dealers in the State of California and manufacturers in other States, with the purpose of controlling the sale of their product in California. Here there was no allotment of territory as in the Addyston case, and, except as to the provision of the agreement that the non-resident manufacturers should sell their product only to the members of the association in California, no interstate transactions were regulated. This provision, however, it was held, rendered the entire combination in violation of the act of 1890. "It was not a combination or monopoly among manufacturers simply but one between them and dealers in the manufactured article of commerce between the States."

§ 364. Northern Securities Case.

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In the so-called Merger Case-Northern Securities Co. v. United States the act of 1890 was held applicable to a combination of stockholders in the competing interstate railway com

42 193 U. S. 38: 21 Sup. Ct. Rep. 307; 48 L. ed. 608. 43 193 U. S. 197; 24 Sup. Ct. Rep. 436; 48 L. ed. 679.

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