UNITED STATES v. E.C.
KNIGHT COMPANY.
No. 675.
SUPREME COURT OF THE UNITED STATES
156 U.S. 1; 15 S. Ct. 249; 1895 U.S. LEXIS 2118; 39 L. Ed. 325
Argued October 24, 1894.
January 21, 1895, Decided
PRIOR HISTORY: [omitted]
OPINION: [*9] [**252] MR. CHIEF JUSTICE FULLER,
after stating the case, delivered the opinion of the court.
By the purchase of the stock of the four Philadelphia refineries, with shares
of its own stock, the American Sugar Refining Company acquired nearly complete
control of the manufacture of refined sugar within the United States. The bill
charged that the contracts under which these purchases were made constituted
[***15] combinations in restraint of trade, and that in entering
into them the defendants combined and conspired to restrain the trade and commerce
in refined sugar among the several States and with foreign nations, contrary to
the act of Congress of July 2, 1890.
The relief sought was the cancellation of the agreements under which the stock
was transferred; the redelivery of the stock to the parties respectively; and
an injunction against the further performance of the agreements and further
violations of the act. As usual, there was a prayer for general relief, but
only such relief could be afforded under that prayer as would be agreeable to
the case made by the bill and consistent with that specifically prayed. And as
to the injunction asked, that relief was ancillary to and in aid of the primary
equity, or ground of suit, and, if that failed, would fall with it. That ground
here was the existence of contracts to monopolize interstate or international
trade or commerce, and the restrain such trade or commerce, which, by the
provisions of the act, could be rescinded, or operations thereunder arrested.
In commenting upon the statute, 21 Jac. 1, c. 3, at the commencement of chapter
[***16] 85 of the third Institute, entitled "Against
Monopolists, Propounders, and Projectors," Lord Coke, in language often
quoted, said:
"It appeareth by the preamble of this act (as a judgment in Parliament)
that all grants of monopolies are against the ancient and fundamental laws of
this Kingdome. And therefore it is necessary to define what a monopoly is.
"A monopoly is an institution, or allowance by the King by his grant,
commission, or otherwise to any person or persons, bodies politique, or
corporate, of or for the sole [*10] buying, selling, making,
working, or using of anything, whereby any person or persons, bodies politique,
or corporate, are sought to be restrained of any freedom or liberty that they
had before, or hindred in their lawful trade.
For the word monopoly, (i. vendere,) quod est cum unus solus aliquod genus
mercaturoe universum vendit, ut solus vendat, pretium ad suum libitum statuens:
hereof you may read more at large in that case. Trin. 44 Eliz. Lib. 11, f. 84,
85; le case de monopolies." 3 Inst. 181.
Counsel contend that this definition, as explained by the derivation of the
word, may be applied to all cases in which "one person [***17]
sells alone the whole of any kind of marketable [**253] thing, so
that only he can continue to sell it, fixing the price at his own
pleasure," whether by virtue of legislative grant or agreement; that the
monopolization referred to in the act of Congress is not confined to the common
law sense of the term as implying an exclusive control, by authority, of one
branch of industry without legal right of any other person to interfere
therewith by competition or otherwise, but that it includes engrossing as well,
and covers controlling the market by contracts securing the advantage of
selling alone or exclusively all, or some considerable portion, of a particular
kind of merchandise or commodity to the detriment of the public; and that such
contracts amount to that restraint of trade or commerce declared to be illegal.
But the monopoly and restraint denounced by the act are the monopoly and
restraint of interstate and international trade or commerce, while the
conclusion to be assumed on this record is that the result of the transaction
complained of was the creation of a monopoly in the manufacture of a necessary
of life.
In the view which we take of the case, we need not discuss [***18]
whether because the tentacles which drew the outlying refineries into the
dominant corporation were separately put out, therefore there was no
combination to monopolize; or, because, according to political economists,
aggregations of capital may reduce prices, therefore the objection to
concentration of power is relieved; or, because others were theoretically left
[*11] free to go into the business of refining sugar, and the
original stockholders of the Philadelphia refineries after becoming
stockholders of the American Company might go into competition with themselves,
or, parting with that stock, might set up again for themselves, therefore no
objectionable restraint was imposed.
The fundamental question is, whether conceding that the existence of a monopoly
in manufacture is established by the evidence, that monopoly can be directly
suppressed under the act of Congress in the mode attempted by this bill.
It cannot be denied that the power of a State to protect the lives, health, and
property of its citizens, and to preserve good order and the public morals,
"the power to govern men and things within the limits of its dominion,"
is a power originally and always [***19] belonging to the States,
not surrendered by them to the general government, nor directly restrained by
the Constitution of the United States, and essentially exclusive. The relief of
the citizens of each State from the burden of monopoly and the evils resulting
from the restraint of trade among such citizens was left with the States to
deal with, and this court has recognized their possession of that power even to
the extent of holding that an employment or business carried on by private
individuals, when it becomes a matter of such public interest and importance as
to create a common charge or burden upon the citizen; in other words, when it
becomes a practical monopoly, to which the citizen is compelled to resort and
by means of which a tribute can be exacted from the community, is subject to
regulation by state legislative power. On the other hand, the power of Congress
to regulate commerce among the several States is also exclusive. The
Constitution does not provide that interstate commerce shall be free, but, by
the grant of this exclusive power to regulate it, it was left free except as
Congress might impose restraints. Therefore it has been determined that the
failure of [***20] Congress to exercise this exclusive power in any
case is an expression of its will that the subject shall be free from
restrictions or impositions upon it by the several States, and if a law passed
by a State in the exercise of its acknowledged powers comes into conflict [*12]
with that will, the Congress and the State cannot occupy the position of equal
opposing sovereignties, because the Constitution declares its supremacy and
that of the laws passed in pursuance thereof; and that which is not supreme
must yield to that which is supreme. "Commerce, undoubtedly, is
traffic," said Chief Justice Marshall, "but it is something more; it
is intercourse. It describes the commercial intercourse between nations and
parts of nations in all its branches, and is regulated by prescribing rules for
carrying on that intercourse." That which belongs to commerce is within
the jurisdiction of the United States, but that which does not belong to
commerce is within the jurisdiction of the police power of the State. Bibbons
v. Ogden, 9 Wheat. 1, 189, 210; Brown v. Maryland, 12 Wheat. 419, 448; The
License Cases, 5 How. 504, 599; Mobile v. Kimball, 102 U.S. 691; Bowman v.
Chicago & N.W. Railway, [***21] 125 U.S. 465; Leisy v. Hardin,
135 U.S. 100; In re Rahrer, 140 U.S. 545, 555.
The argument is that the power to control the manufacture of refined sugar is a
monopoly over a necessary of life, to the enjoyment of which by a large part of
the population of the United States interstate commerce is indispensable, and
that, therefore, the general government in the exercise of the power to
regulate commerce may repress such monopoly directly and set aside the
instruments which have created it. But this argument cannot be confined to
necessaries of life merely, and must include all articles of general consumption.
Doubtless the power to control the manufacture of a given thing involves in a
certain sense the control of its disposition, but this is a secondary and not
the primary sense; and although the exercise of that power may result in
bringing the operation of commerce into play, it does not control it, and
affects it only incidentally and indirectly. Commerce succeeds to manufacture,
and is not a part of it. The power to regulate commerce is the power to
prescribe the rule by which commerce shall be governed, and is a power
independent of the power [**254] to suppress monopoly.
[***22] But it may operate in repression of monopoly whenever that
comes within the rules by which commerce is governed or whenever the
transaction is itself a monopoly of commerce.
[*13] It is vital that the independence of the commercial power and
of the police power, and the delimitation between them, however sometimes
perplexing, should always be recognized and observed, for while the one
furnishes the strongest bond of union, the other is essential to the
preservation of the autonomy of the States as required by our dual form of
government; and acknowledged evils, however grave and urgent they may appear to
be, had better be borne, than the risk be run, in the effort to suppress them,
of more serious consequences by resort to expedients of even doubtful
constitutionality.
It will be perceived how far-reaching the proposition is that the power of
dealing with a monopoly directly may be exercised by the general government
whenever interstate or international commerce may be ultimately affect. The
regulation of commerce applies to the subjects of commerce and not to matters
of internal police. Contracts to buy, sell, or exchange goods to be transported
among the several States, [***23] the transportation and its
instrumentalities, and articles bought, sold, or exchanged for the purposes of
such transit among the States, or pur in the way of transit, may be regulated,
but this is because they form part of interstate trade or commerce. The fact
that an article is manufactured for export to another State does not of itself
make it an article of interstate commerce, and the intent of the manufacturer
does not determine the time when the article or product passes from the control
of the State and belongs to commerce. This was so ruled in Coe v. Errol, 116
U.S. 517, 525, in which the question before the court was whether certain logs
cut at a place in New Hampshire and hauled to a river town for the purpose of
transportation to the State of Maine were liable to be taxed like other
property in the State of New Hampshire. Mr. Justice Bradley, delivering the
opinion of the court, said: "Does the owner's state of mind in relation to
the goods, that is, his intent to export them, and his partial preparation to
do so, exempt them from taxation? This is the precise question for solution. .
. . there must be a point of time when they cease to be governed exclusively by
the [***24] domestic [*14] law and begin to be governed
and protected by the national law of commercial regulation, and the moment
seems to us to be a legitimate one for this purpose, in which they commence
their final movement from the State of their origin to that of their
destination."
And again, in Kidd v. Pearson, 128 U.S. 1, 20, 21, 22, where the question was
discussed whether the right of a State to enact a statute prohibiting within
its limits the manufacture of intoxicating liquors, except for certain
purposes, could be overthrown by the fact that the manufacturer intended to
export the liquors when made, it was held that the intent of the manufacturer
did not determine the time when the article or product passed from the control
of the State and belonged to commerce, and that, therefore, the statute, in omitting
to except from its operation the manufacture of intoxicating liquors within the
limits of the State for export, did not constitute an unauthorized interference
with the right of Congress to regulate commerce. And Mr. Justice Lamer
remarked: "No distinction is more popular to the common mind, or more
clearly expressed in economic and political literature, than
[***25] that between manufacture and commerce. Manufacture is
transformation -- the fashioning of raw materials into a change of form for
use. The functions of commerce are different. The buying and selling and the
transportation incidental thereto constitute commerce; and the regulation of
commerce in the constitutional sense embraces the regulation at least of such
transportation. . . . If it be held that the term includes the regulation of
all such manufactures as are intended to be the subject of commercial
transactions in the future, it is impossible to deny that it would also include
all productive industries that contemplate the same thing. The result would be
that Congress would be invested, to the exclusion of the States, with the power
to regulate, not only manufactures, but also agriculture, horticulture, stock
raising, domestic fisheries, mining -- in short, every branch of human industry.
For is there one of them that does not contemplate, more or less clearly, an
interstate or foreign market? Does not the wheat grower of the Northwest or the
cotton planter of the [*15] South, plaint, cultivate, and harvest
his crop with an eye on the prices at Liverpool, New York, [***26]
and Chicago?The power being vested in Congress and denied to the States, it
would follow as an inevitable result that the duty would devolve on Congress to
regulate all of these delicate, multiform and vital interests -- interests
which in their nature are and must be local in all the details of their
successful management. . . . The demands of such a supervision would require,
not uniform legislation generally applicable throughout the United States, but
a swarm of statutes only locally applicable and utterly inconsistent. Any
movement toward the establishment of rules of production in this vast country,
with its many different climates and opportunities, could only be at the
sacrifice of the peculiar advantages of a large part of the localities in it,
if not of every one of them. On the other hand, any movement toward the local,
detailed and incongruous legislation required by such interpretation would be
about the widest possible departure from the declared object of the clause in
question. Nor this alone. Even in the exercise of the [**255] power
contended for, Congress would be confined to the regulation, not of certain
branches of industry, however numerous, but to those [***27]
instances in each and every branch where the producer contemplated an
interstate market. These instances would be almost infinite, as we have seen;
but still there would always remain the possibility, and often it would be the
case, that the producer contemplated a domestic market. In that case the
supervisory power must be executed by the State; and the interminable trouble
would be presented, that whether the one power or the other should exercise the
authority in question would be determined, not by any general or intelligible
rule, but by the secret and changeable intention of the producer in each and
every act of production. A situation more paralyzing to the state governments,
and more provocative of conflicts between the general government and the
States, and less likely to have been what the framers of the Constitution
intended, it would be difficult to imagine." And see Veazie v. Moor, 14
How. 568, 574.
In Gibbons v. Ogden, Brown v. Maryland, and other cases [*16] often
cited, the state laws, which were held inoperative, were instances of direct
interference with, or regulations of, interstate or international commerce; yet
in Kidd v. Pearson the refusal of a State [***28] to allow articles
to be manufactured within her borders even for export was held not to directly
affect external commerce, and state legislation which, in a great variety of
ways, affected interstate commerce and persons engaged in it, has been
frequently sustained because the interference was not direct.
Contracts, combinations, or conspiracies to control domestic enterprise in
manufacture, agriculture, mining, production in all its forms, or to raise or
lower prices or wages, might unquestionably tend to restrain external as well
as domestic trade, but the restraint would be an indirect result, however inevitable
and whatever its extent, and such result would not necessarily determine the
object of the contract, combination, or conspiracy.
Again, all the authorities agree that in order to vitiate a contract or
combination it is not essential that its result should be a complete monopoly;
it is sufficient if it really tends to that end and to deprive the public of
the advantages which flow from free competition. Slight reflection will show
that if the national power extends to all contracts and combinations in
manufacture, agriculture, mining, and other productive industries,
[***29] whose ultimate result may affect external commerce,
comparatively little of business operations and affairs would be left for state
control.
It was in the light of well-settled principles that the act of July 2, 1890,
was framed. Congress did not attempt thereby to assert the power to deal with
monopoly directly as such; or to limit and restrict the rights of corporations
created by the States or the citizens of the States in the acquisition,
control, or disposition of property; or to regulate or prescribe the price or
prices at which such property or the products thereof should be sold; or to
make criminal the acts of persons in the acquisition and control of property
which the States of their residence or creation sanctioned or permitted. Aside
from the provisions applicable where Congress might exercise municipal
[*17] power, what the law struck at was combinations, contracts,
and conspiracies to monopolize trade and commerce among the several States or
with foreign nations; but the contracts and acts of the defendants related
exclusively to the acquisition of the Philadelphia refineries and the business
of sugar refining in Pennsylvania, and bore no direct [***30] relation
to commerce between the States or with foreign nations. The object 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 no more than to
say that trade and commerce served manufacture to fulfil its function. Sugar
was refined for sale, and sales were probably made at Philadelphia for
consumption, and undoubtedly for resale by the first purchasers throughout
Pennsylvania and other States, and refined sugar was also forwarded by the
companies to other States for sale. Nevertheless 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. There was nothing in the proofs to indicate any intention
to put a restraint upon trade or commerce, and the [***31] fact, as
we have seen, that trade or commerce might be indirectly affected was not
enough to entitle complainants to a decree. The subject-matter of the sale was
shares of manufacturing stock, and the relief sought was the surrender of
property which had already passed and the suppression of the alleged monopoly
in manufacture by the restoration of the status quo before the transfers; yet
the act of Congress only authorized the Circuit Courts to proceed by way of
preventing and restraining violations of the act in respect of contracts,
combinations, or conspiracies in restraint of interstate or international trade
or commerce.
The Circuit Court declined, upon the pleadings and proofs, [*18] to
grant the relief prayed, and dismissed the bill, and we are of opinion that the
Circuit Court of Appeals did not err in affirming that decree.
Decree affirmed.
DISSENTBY: HARLAN
DISSENT: MR. JUSTICE HARLAN, dissenting.
Prior to the 4th day of March, 1892, the [**256] American Sugar
Refining Company, a corporation organized under a general statute of New Jersey
for the purpose of buying, manufacturing, refining, and selling sugar in
different parts of the country, had obtained the control [***32] of
all the sugar refineries in the United States except five, of which four were
owned and operated by Pennsylvania corporations -- the E.C. Knight Company, the
Franklin Sugar Refining Company, Spreckels' Sugar Refining Company, and the
Delaware Sugar House -- and the other, by the Revere Sugar Refinery of Boston.
These five corporations were all in active competition with the American Sugar Refining
Company and with each other. The product of the Pennsylvania companies was
about thirty-three per cent, and that of the Boston company about two per cent,
of the entire quantity of sugar refined in the United States.
In March, 1892, by means of contracts or arrangements with stockholders of the
four Pennsylvania companies, the New Jersey corporation -- using for that
purpose its own stock -- purchased the stock of those companies, and thus
obtained absolute control of the entire business of sugar refining in the
United States except that done by the Boston company, which is too small in
amount to be regarded in this discussion.
"The object," the court below said, "in purchasing the
Philadelphia refineries was to obtain a greater influence or more perfect
control over the business [***33] of refining and selling sugar in
this country." This characterization of the object for which this
stupendous combination was formed is properly accepted in the opinion of the
court as justified by the proof. I need not therefore analyze the evidence upon
this point. In its consideration of the important constitutional question
presented, this court assumes on the record before us [*19] that
the result of the transactions disclosed by the pleadings and proof was the
creation of a monopoly in the manufacture of a necessary of life. If this
combination, so far as its operations necessarily or directly affect interstate
commerce, cannot be restrained or suppressed under some power granted to
Congress, it will be cause for regret that the patriotic statesmen who framed
the Constitution did not foresee the necessity of investing the national
government with power to deal with gigantic monopolies holding in their grasp,
and injuriously controlling in their own interest, the entire trade among the
States in food products that are essential to the comfort of every household in
the land.
The court holds it to be vital in our system of government to recognize and
give effect to both [***34] the commercial power of the nation and
the police powers of the States, to the end that the Union be strengthened and
the autonomy of the States preserved. In this view I entirely concur.
Undoubtedly, the preservation of the just authority of the States is an object
of deep concern to every lover of his country. No greater calamity could befall
our free institutions than the destruction of that authority, by whatever means
such a result might be accomplished. "Without the States in union,"
this court has said, "there could be no such political body as the United
States." Lane County v. Oregon, 7 Wall. 71, 76. But it is equally true
that the preservation of the just authority of the General Government is
essential as well to the safety of the States as to the attainment of the important
ends for which that government was ordained by the People of the United States;
and the destruction of that authority would be fatal to the peace and
well-being of the American people. The Constitution which enumerates the powers
committed to the nation for objects of interest to the people of all the States
should not, therefore, be subjected to an interpretation so rigid, technical,
[***35] and narrow, that those objects cannot be accomplished.
Learned counsel in Gibbons v. Ogden, 9 Wheat. 1, 187, having suggested that the
Constitution should be strictly construed, this court, speaking by Chief
Justice Marshall, said that when the original States "converted their
league into a [*20] government, when they converted their Congress
of Ambassadors, deputed to deliberate on their common concerns, and to
recommend measures of general utility, into a legislature empowered to enact
laws on the most interesting subjects, the whole character in which the States
appear underwent a change, the extent of which must be determined by a fair
consideration of the instrument by which that change was effected."
"What do gentlemen mean," the court inquired, "by a strict
construction? If they contend only against that enlarged construction, which
would extend words beyond their natural and obvious import, one might question
the application of the term, but should not controvert the principle. If they
contend for that narrow construction which, in support of some theory not to be
found in the Constitution, would deny to the government those powers which the
words of the grant, as usually [***36] understood, import, and
which are consistent with the general views and objects of the instrument --
for that narrow construction, which would cripple the government, and render it
unequal to the objects for which it is declared to be instituted, and to which
the powers given, as fairly understood, render it competent -- then we cannot
perceive the propriety of this strict construction, not adopt it as the rule by
which the Constitution is to be expounded." p. 188. On the same occasion
the principle was announced that the objects for which a power was granted to
Congress, especially when those objects are expressed in the Constitution
itself, should have great influence in determining the extent of any given
power.
Congress is invested with power to regulate commerce with foreign nations and
among the several States. The power to regulate is the power to prescribe the
rule by which the subject regulated is to governed. [**257] It is
one that must be exercised whenever necessary throughout the territorial limits
of the several States. Cohens v. Virginia, 6 Wheat. 264, 413. The power to make
these regulations "is complete in itself, may be exercised to its utmost
extent, and [***37] acknowledges no limitations, other than are
prescribed in the Constitution." It is plenary because vested in Congress
"as absolutely as it [*21] would be in a single government
having in its constitution the same restrictions on the exercise of the power
as are found in the Constitution of the United States." It may be
exercised "whenever the subject exists." Gibbons v. Ogden, 9 Wheat.
1, 195, 196. In his concurring opinion in that case, Mr. Justice Johnson
observed that the grant to Congress of the power to regulate commerce carried
with it the whole subject, leaving nothing for the State to act upon, and that
"if there was any one object riding over every other in the adoption of
the Constitution, it was to keep commercial intercourse among the States free
from all invidious and partial restraints." p. 231. "In all
commercial regulations we are one and the same people." Mr. Justice
Bradley, speaking for this court, said that the United States are but one
country, and are and must be subject to one system of regulations in respect to
interstate commerce. Robbins v. Shelby Taxing District, 120 U.S. 489, 494.
What is commerce among the States? The decisions of this court fully
[***38] answer the question. "Commerce, undoubtedly, is
traffic, but it is something more: it is intercourse. It does not embrace the
completely interior traffic of the respective States -- that which is
"carried on between man and man in a State, or between different parts of
the same State and which does not extend to or affect other States" -- but
it does embrace "every species of commercial intercourse" between the
United States and foreign nations and among the States, and, therefore, it
includes such traffic or trade, buying, selling, and interchange of commodities,
as directly affects or necessarily involves the interests of the People of the
United States. "Commerce, as the word is used in the Constitution, is a
unit," and "cannot stop at the external boundary line of each State,
but any be introduced into the interior." "The genius and character
of the whole government seem to be, that its action is to be applied to all the
external concerns of the nation, and to those internal concerns which affect
the States generally."
These principles were announced in Gibbons v. Ogden, and have often been
approved. It is the settled doctrine of this [*22] court that
interstate commerce [***39] embraces something more than the mere
physical transportation of articles of property, and the vehicles or vessels by
which such transportation is effected. In County of Mobile v. Kimball, 102 U.S.
691, 702, it was said that "commerce with foreign countries and among the
States, strictly considered, consists in intercourse and traffic, including, in
these terms, navigation and the transportation and transit of persons and
property, as well as the purchase, sale, and exchange of commodities." In
Gloucester Ferry Co. v. Pennsylvania, 114 U.S. 196, 203, the language of the
court was: "Commerce among the States consists of intercourse and traffic
between their citizens, and includes the transportation of persons and
property, and the navigation of public waters for that purpose, as well as the
purchase, sale, and exchange of commodities. The power to regulate that
commerce, as well as commerce with foreign nations, vested in Congress, is the
power to prescribe the rules by which it shall be governed, that is, the
conditions upon which it shall be conducted; to determine when it shall be
free, and when subject to duties or other exactions." In Kidd v. Pearson,
128 U.S. 1, 20, it was said [***40] that "the buying and
selling, and the transportation incidental thereto constitute commerce."
Interstate commerce does not, therefore, consist in transportation simply. It
includes the purchase and sale of articles that are intended to be transported
from one State to another -- every species of commercial intercourse among the
States and with foreign nations.
In the light of these principles, determining as well the scope of the power to
regulate commerce among the States as the nature of such commerce, we are to
inquire whether the act of Congress of July 2, 1890, c. 647, entitled "An
act to protect trade and commerce against unlawful restraints and
monopolies," 26 Stat. 209, is repugnant to the Constitution.
By that act "every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the several
States or with foreign nations," is declared to be illegal, and every
person making any such contract, or engaging in any such combination or
conspiracy, [*23] is to be deemed guilty of a misdemeanor, and
punishable, on conviction, by a fine not exceeding five thousand dollars, or by
imprisonment not exceeding one [***41] year, or by both said
punishments in the discretion of the court. § 1. It is also made a misdemeanor,
punishable in like manner, for any person to "monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons to
monopolize, any part of the trade or commerce among the several States or with
foreign nations." § 2. The act also declares illegal "every contract,
combination in form of trust or otherwise, or conspiracy, in restraint of trade
or commerce in any Territory of the United States or of the District of Columbia,
or in restraint of trade or commerce between any such Territory and another, or
between any such Territory or Territories or any State or States or the
District of Columbia, or with foreign nations, or between the District
[**258] of Columbia and any State or States or foreign
nations," and prescribes the same punishments for every person making any
such contract, or engaging in any such combination or conspiracy. § 3.
The fourth section of the act is in these words: "Sec. 4. The several
Circuit Courts of the United States are hereby invested with jurisdiction to
prevent and restrain violations of this act; and it shall be
[***42] the duty of the several district attorneys of the United
States, in their respective districts, under the direction of the Attorney
General, to institute proceedings in equity to prevent and restrain such
violations. Such proceedings may be by way of petition setting forth the case
and praying that such violation shall be enjoined or otherwise prohibited. When
the parties complained of shall have been duly notified of such petition the
court shall proceed, as soon as may be, to the hearing and determination of the
case; and pending such petition and before final decree, the court may at any
time make such temporary restraining order or prohibition as shall be deemed
just in the premises."
It would seem to be indisputable that no combination of corporations or
individuals can, of right, impose unlawful restraints upon interstate trade,
whether upon transportation or upon such interstate intercourse and traffic as
precede transportation, [*24] any more than it can, of right,
impose unreasonable restraints upon the completely internal traffic of a State.
The supposition cannot be indulged that this general proposition will be
disputed. If it be true that a combination of corporations [***43]
or individuals may, so far as the power of Congress is concerned, subject
interstate trade, in any of its stages, to unlawful restraints, the conclusion
is inevitable that the Constitution has failed to accomplish one primary object
of the Union, which was to place commerce among the States under the control of
the common government of all the people, and thereby relieve or protect it
against burdens or restrictions imposed, by whatever authority, for the benefit
of particular localities or special interests.
The fundamental inquiry in this case is, What, in a legal sense, is an unlawful
restraint of trade?
Sir William Erle, formerly Chief Justice of the Common Pleas, in his essay on
the Law Relating to Trade Unions, well said that "restraint of trade,
according to a general principle of the common law, is unlawful;" that
"at common law every person has individually, and the public also have
collectively, a right to require that the course of trade should be kept free
from unreasonable obstruction;" and that "the right to a free course
for trade is of great importance to commerce and productive industry, and has
been carefully maintained by those who have administered the common [***44]
law." pp. 6, 7, 8.
There is a partial restraint of trade which, in certain circumstances, is
tolerated by the law. The rule upon that subject is stated in Oregon Steam Nav.
Co. v. Winsor, 20 Wall. 64, 66, where it was said that "an agreement in
general restraint of trade is illegal and void; but an agreement which operates
merely in partial restraint of trade is good, provided it be not unreasonable
and there be a consideration to support it. In order that it may not be
unreasonable, the restraint imposed must not be larger than is required for the
necessary protection of the party with whom the contract is made. Horner v.
Graves, 7 Bing. 735, 743. A contract, even on good consideration, not to use a
trade anywhere in England is held void in that country as being too general a
restraint of trade."
[*25] But a general restraint of trade has often resulted from
combinations formed for the purpose of controlling prices by destroying the
opportunity of buyers and sellers to deal with each other upon the basis of
fair, open, free competition. Combinations of this character have frequently
been the subject of judicial scrutiny, and have always been condemned as
illegal because [***45] of their necessary tendency to restrain
trade. Such combinations are against common right and are crimes against the
public. To some of the cases of that character it will be well to refer.
In Morris Run Coal Co. v. Barclay Coal Co., 68 Penn. St. 173, 184, 186, 187,
the principal question was as to the validity of a contract made between five
coal corporations of Pennsylvania, by which they divided between themselves two
coal regions of which they had the control. The referee in the case found that
those companies acquired under their arrangement the power to control the entire
market for bituminous coal in the northern part of the State, and their
combination was, therefore, a restraint upon trade and against public policy.
In response to the suggestion that the real purpose of the combination was to
lessen expenses, to advance the quality of coal, and to deliver it in the
markets intended to be supplied in the best order to the consumer, the Supreme
Court of Pennsylvania said: "This is denied by the defendants; but it
seems to us it is immaterial whether these positions are sustained or not.
Admitting their correctness, it does not follow that these advantages
[***46] redeem the contract from the obnoxious effects so
strikingly presented by the referee. The important fact is that these companies
control this immense coal field; that it is the great source of supply of
bituminous coal to the State of New York and large territories westward; that
by this contract they control the price of coal in this extensive market, and
make it bring sums it would not command if left to the natural laws of trade;
that it concerns an article of prime necessity for many uses; that its
operation is general in this large region, and affects all who use coal as a
fuel, and this is accomplished by a combination of all the companies engaged in
this branch of business [*26] in the large region where they
operate. The [**259] combination is wide in scope, general in its
influence, and injurious in effects. These being its features, the contract is
against public policy, illegal, and therefore void." Again, in the same
case: "The effects produced on the public interests lead to the
consideration of another feature of great weight in determining the illegality
of the contract, to wit, the combination resorted to by these five companies. Singly
each might have [***47] suspended deliveries and sales of coal to
suit its own interests, and might have raised the price, even though this might
have been detrimental to the public interest. There is a certain freedom which
must be allowed to every one in the management of his own affairs. When
competition is left free, individual error or folly will generally find a
correction in the conduct of others. But here is a combination of all the
companies operating in the Blossburg and Barclay mining regions, and controlling
their entire productions. They have combined together to govern the supply and
the price of coal in all the markets from the Hudson to the Mississippi rivers,
and from Pennsylvania to the lakes. This combination has a power in its
confederated form which no individual action can confer. The public interest
must succumb to it, for it has left no competition free to correct its baleful
influence. When the supply of coal is suspended the demand for it becomes
importunate, and prices must rise. Or if the supply goes forward, the price
fixed by the confederates must accompany it. The domestic hearth, the furnaces
of the iron master, and the fires of the manufacturer, all feel the restraint,
[***48] while many dependent hands are paralyzed and hungry mouths
are stinted. The influence of a lack of supply or a rise in the price of an
article of such prime necessity cannot be measured. It permeates the entire
mass of community, and leaves few of its members untouched by its withering
blight. Such a combination is more than a contract; it is an offence. 'I take
it,' said Gibson, J., 'a combination is criminal whenever the act to be done
has a necessary tendency to prejudice the public or to oppress individuals, by
unjustly subjecting them to the power of the confederates, and giving effect to
the purpose of the [*27] latter, whether of extortion or of
mischief.' Commonwealth v. Carlisle, Brightly, (Penn.,) 40. In all such
combinations where the purpose is injurious or unlawful, the gist of the offence
is the conspiracy. Men can often do by the combination of many what severally
no one could accomplish, and even what when done by one would be
innocent." "There is a potency in numbers when combined, which the
law cannot overlook, where injury is the consequence."
This case in the Supreme Court of Pennsylvania was cited with approval in Arnot
v. Pittston & Elmira Coal Co., [***49] 68 N.Y. 558, 565, which
involved the validity of a contract between two coal companies, the object and
effect of which was to give one of them the monopoly of the trade in coal in a
particular region, by which the price of that commodity could be artificially
enhanced. The Court of Appeals of New York held that "a combination to
effect such a purpose is inimical to the interests of the public, and that all
contracts designed to effect such an end are contrary to public policy, and
therefore illegal. . . . If they should be sustained, the prices of articles of
pure necessity, such as coal, flour and other indispensable commodities, might
be artificially raised to a ruinous extent far exceeding any naturally
resulting from the proportion between supply and demand. No illustration of the
mischief of such contracts is perhaps more apt than a monopoly of anthracite
coal, the region of the production of which is known to be limited." See
also Hooker v. Vandewater, 4 Denio, 351, 352; Stanton v. Allen, 5 Denio, 434;
Saratoga Bank v. King, 44 N.Y. 87.
In Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666, 672, the principal
question was as to the legality of an association of substantially
[***50] all the manufacturers of salt in a large salt producing
territory. After adverting to the rule that contracts in general restraint of
trade are against public policy, and to the agreement there in question, it was
said: "Public policy, unquestionably, favors competition in trade to the
end that its commodities may be afforded to the consumer as cheaply as
possible, and is opposed to monopolies, which tend to advance market prices, to
the injury of the general public. [*28] . . . The clear tendency of
such an agreement is to establish a monopoly, and to destroy competition in
trade, and for that reason, on grounds of public policy, the courts will not
aid in its enforcement. It is no answer to say that competition in the salt
trade was not in fact destroyed, or that the price of the commodity was not
unreasonably advanced. Courts will not stop to inquire as to the degree of
injury inflicted upon the public; it is enough to know that the inevitable tendency
of such contracts is injurious to the public."
In Craft v. McConoughy, 79 Illinois, 346, 349, 350, which related to a
combination between all the grain dealers of a particular town to stifle
competition, and to obtain control [***51] of the price of grain,
the Supreme Court of Illinois said: "While the argument, upon its face,
would seem to indicate that the parties had formed a copartnership for the
purpose of trading in grain, yet, from the terms of the contract, and the other
proof in the record, it is apparent that the true object was, to form a secret
combination which would stifle all competition, and enable the parties, by
secret and fraudulent means, to control the price of grain, cost of storage,
and expense of shipment. In other words, the four firms, by a shrewd,
deep-laid, secret combination, attempted to control and monopolize the entire
grain trade of the town and surrounding country. That the effect of this
contract was to restrain the trade and commerce [**260] of the country,
is a proposition that cannot be successfully denied. We understand it to be a
well-settled rule of law, that an agreement in general restraint of trade is
contrary to public policy, illegal and void, but an agreement in partial or
particular restraint upon trade has been held good, where the restraint was
only partial, consideration adequate, and the restriction reasonable."
"While these parties were in [***52] business, in competition
with each other, they had the undoubted right to establish their own rates for
grain stored and commissions for shipment and sale. They could pay as high or
low a price for grain as they saw proper, and as they could make contracts with
the producer. So long as competition was free, the interest of the public was
safe. The laws of trade, in connection with the right of competition, were all
the [*29] guaranty the public required, but the secret combination
created by the contract destroyed all competition and created a monopoly
against which the public interest had no protection."
These principles were applied in People v. Chicago Gas Trust Co., 130 Illinois,
269, 292, 297, which involved the validity of a corporation formed for the
purpose of operating gas works, and of manufacturing and selling gas, and
which, for the purpose of destroying competition, acquired the stock of four
other gas companies, and thereby obtained a monopoly in the business of
furnishing illuminating gas to the city of Chicago and its inhabitants. The
court, in declaring the organization of the company to be illegal, said:
"The fact that the appellee, almost immediately after [***53]
its organization, bought up a majority of the shares of stock of each of these
companies, shows that it was not making a mere investment of surplus funds, but
that it designed and intended to bring the four companies under its control,
and by crushing out competition to monopolize the gas business in
Chicago." "Of what avail," said the court, "is it that any
number of gas companies may be formed under the general incorporation law, if a
giant trust company can be clothed with the power of buying up and holding the
stock and property of such companies, and, through the control thereby
attained, can direct all their operations and weld them into one huge
combination?"
So, in India Bagging Association v. Kock, 14 La. Ann. 168, where the court
passed upon the legality of an association of various commercial firms in New
Orleans that were engaged in the sale of India bagging, it was said: "The
agreement between the parties was palpably and unequivocably a combination in
restraint of trade, and to enhance the price in the market of an article of
primary necessity to cotton planters. Such combinations are contrary to public
order, and cannot be enforced in a court of justice."
In Santa [***54] Clara Mill & Lumber Co. v. Hayes, 76
California, 387, 390, which related to a combination, the result of certain
contracts among certain manufacturers, the court found that the object,
purpose, and consideration of those contracts was to form a combination among
all the manufacturers of lumber [*30] at or near a particular
place, for the sole purpose of increasing the price of that article, limiting
the amount to be manufactured, and giving certain parties the control of all lumber
manufactured near that place for the year 1881, and of the supply for that year
in specified counties. It held the combination to be illegal, observing that
"among the contracts illegal under the common law, because opposed to
public policy, were contracts in general restraint of trade; contracts between
individuals to prevent competition and keep up the price of articles of
utility." It further said that while the courts had nothing to do with the
results naturally flowing from the laws of demand and supply, they would not
respect agreements made for the purpose of "taking trade out of the realm
of competition, and thereby enhancing or depressing prices of
commodities."
A leading case on the question [***55] as to what combinations are
illegal as being in general restraint of trade, is Richardson v. Buhl, 77
Michigan, 632, 635, 657, 660, which related to certain agreements connected
with the business and operations of the Diamond Match Company. From the report
of the case it appears that that company was organized, under the laws of
Connecticut, for the purpose of uniting in one corporation all the match
manufactories in the United States, and to monopolize and control the business
of making all the friction matches in the country, and establish the price thereof.
To that end it became necessary, among other things, to buy many plants that
had become established or were about to be established, as well as the property
used in connection therewith. Chief Justice Sherwood of the Supreme Court of
Michigan said: "The sole object of the corporation is to make money by
having it in its power to raise the price of the article, or diminish the
quantity to be made and used, at its pleasure. Thus both the supply of the
article and the price thereof are made to depend upon the action of a half
dozen individuals, more or less, to satisfy their cupidity and avarice, who may
happen to have the controlling [***56] interest in this corporation
-- an artificial person, governed by a single motive or purpose, which is to
accumulate money regardless of the wants or necessities [*31] of
over 60,000,000 people. The article thus completely under their control, for
the last fifty years, has come to be regarded as one of necessity, not only in
every household in the land, but one of daily use by almost every individual in
the country. It is difficult to conceive of a monopoly which can affect a
greater number of people, or one more extensive in its effect on the country,
than that of the Diamond Match Company. It was to aid that company in its
purposes and in carrying out its object that the contract in
[**261] this case was made between those parties, which we are now
asked to aid in enforcing. Monopoly in trade, or in any kind of business in
this country, is odious to our form of government. It is sometimes permitted to
aid the government in carrying on a great public enterprise or public work
under governmental control in the interest of the public. Its tendency is,
however, destructive of free institutions and repugnant to the instincts of a
free people, and contrary to [***57] the whole scope and spirit of
the Federal Constitution, and is not allowed to exist under express provisions
in several of our state constitutions. . . . All combinations among persons or
corporations for the purpose of raising or controlling the prices of
merchandise, or any of the necessaries of life, are monopolies and intolerable;
and ought to receive the condemnation of all courts."
In the same case, Mr. Justice Champlin, with whom Mr. Justice Campbell
concurred, said: "There is no doubt that all the parties to this suit were
active participants in perfecting the combination called 'The Diamond Match
Company,' and that the present dispute grows out of that transaction, and is
the fruit of the scheme by which all competition in the manufacture of matches
was stifled, opposition in the business crushed, and the whole business of the
country in that line engrossed by the Diamond Match Company. Such a vast
combination as has been entered into under the above name 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 [***58] price of friction
matches. That policy may have been necessary to crush competition.
[*32] The fact exists that it rests in the discretion of this
company at any time to raise the price to an exorbitant degree. Such
combinations have frequently been condemned by courts as unlawful and against
public policy." See also Raymond v. Leavitt, 46 Michigan, 447, and Texas
Standard Oil Co. v. Adoue, 83 Texas, 650.
This extended reference to adjudged cases relating to unlawful restraints upon
the interior traffic of a State has been made for the purpose of showing that a
combination such as that organized under the name of the American Sugar
Refining Company has been uniformly held by the courts of the States to be
against public policy and illegal because of its necessary tendency to impose
improper restraints upon trade. And such, I take it, would be the judgment of
any Circuit Court of the United States in a case between parties in which it
became necessary to determine the question. The judgments of the state courts
rests upon general principles of law, and not necessarily upon statutory
provisions expressly condemning restraints of trade imposed by or resulting
from combinations. [***59] Of course, in view of the authorities,
it will not be doubted that it would be competent for a State, under the power
to regulate its domestic commerce and for the purpose of protecting its people
against fraud and injustice, to make it a public offence punishable by fine and
imprisonment, for individuals or corporations to make contracts, form combinations,
or engage in conspiracies, which unduly restrain trade or commerce carried on
within its limits, and also to authorize the institution of proceedings for the
purpose of annulling contracts of that character, as well as of preventing or
restraining such combinations and conspiracies.
But there is a trade among the several States which is distinct from that
carried on within the territorial limits of a State. The regulation and control
of the former is committed by the national Constitution to Congress. Commerce
among the States, as this court has declared, is a unit, and in respect of that
commerce this is one country, and we are one people. It may be regulated by
rules applicable to every part of the United States, and state lines and state
jurisdiction cannot [*33] interfere with the enforcement of such
rules. The [***60] jurisdiction of the general government extends
over every foot of territory within the United States. Under the power with
which it is invested, Congress may remove unlawful obstructions, of whatever
kind, to the free course of trade among the States. In so doing it would not
interfere with the "autonomy of the States," because the power thus
to protect interstate commerce is expressly given by the people of all the
States. Interstate intercourse, trade, and traffic is absolutely free, except
as such intercourse, trade, or traffic may be incidentally or indirectly
affected by the exercise by the States of their reserved police powers.
Sherlock v. Alling, 93 U.S. 99, 103. It is the Constitution, the supreme law of
the land, which invests Congress with power to protect commerce among the
States against burdens and exactions arising from unlawful restraints by
whatever authority imposed. Surely a right secured or granted by that instrument
is under the protection of the government which that instrument creates. Any
combination, therefore, that disturbs or unreasonably obstructs freedom in
buying and selling articles manufactured to be sold to persons in other States
or to be carried [***61] to other States -- a freedom that cannot
exist if the right to buy and sell is fettered by unlawful restraints that
crush out competition -- affects, not incidentally, but directly, the people of
all the States; and the remedy for such an evil is found only in the exercise
of powers confided to a government which, this court has said, was the
government of all, exercising powers delegated by all, representing all, acting
for all. McCulloch v. Maryland, 4 Wheat. 316, 405.
[**262] It has been argued that a combination between corporations
of different States, or between the stockholders of such corporations, with the
object and effect of controlling not simply the manufacture but the price of
refined sugar throughout the whole of the United States -- which is the case
now before us -- cannot be held to be in restraint of "commerce among the
States" and amenable to national authority, without conceding that the
general government has authority to say what shall and what shall not be manufactured
in the several States. [*34] Kidd v. Pearson, 128 U.S. 1, was cited
in argument as supporting that view. In that case the sole question was,
whether the State of Iowa [***62] could forbid the manufacture
within its limits of ardent spirits intended for sale ultimately in other
States. This court held that the manufacture of intoxicating liquors in a State
is none the less a business within the State subject to state control because
the manufacturer may intend, at his convenience, to export such liquors to
foreign countries or to other States. The authority of the States over the
manufacture of strong drinks within their respective jurisdictions was referred
to their plenary power, never surrendered to the national government, of
providing for the health, morals, and safety of their people.
That case presented no question as to a combination to monopolize the sale of
ardent spirits manufactured in Iowa to be sold in other States -- no question
as to combinations in restraint of trade as involved in the buying and selling
of articles that are intended to go, and do go, and will always go, into
commerce throughout the entire country, and are used by the people of all
States, and the making or manufacturing of which no State could forbid
consistently with the liberty that every one has of pursuing, without undue
restrictions, the ordinary callings of life. [***63] There is no
dispute here as to the lawfulness of the business of refining sugar, apart from
the undue restraint which the promoters of such business, who have combined to
control prices, seek to put upon the freedom of interstate traffic in that
article.
It may be admitted that an act which did nothing more than forbid, and which
had no other object than to forbid, the mere refining of sugar in any State,
would be in excess of any power granted to Congress. But the act of 1890 is not
of that character. It does not strike at the manufacture simply of articles
that are legitimate or recognized subjects of commerce, but at combinations
that unduly restrain, because they monopolize, the buying and selling of
articles which are to go into interstate commerce. In State v. Stewart, 59
Vermont, 273, 286, it was said that if a combination of persons "seek to
restrain trade, or tend to the destruction of the material property
[*35] of the country, they work injury to the whole people."
And in State v. Glidden, 55 Connecticut, 46, 75, the court said: "Any one
man, or any one of several men acting independently, is powerless; but when several
combine and direct their united energies [***64] to the
accomplishment of a had purpose, the combination is formidable. Its power for
evil increases as its numbers increase. . . . The combination becomes dangerous
and subversive of the rights of others, and the law wisely says it is a
crime." Chief Justice Gibson well said in Commonwealth v. Carlisle,
Brightly, (Penn.,) 36, 41: "There is between the different parts of the
body politic a reciprocity of action on each other, which, like the action of
antagonizing muscles in the natural body, not only prescribes to each its
appropriate state and action, but regulates the motion of the whole. The effort
of an individual to disturb this equilibrium can never be perceptible, nor
carry the operation of his interest or that of any other individual beyond the
limits of fair competition; but the increase of power by combination of means,
being in geometrical proportion to the number concerned, an association may be
able to give an impulse, not only oppressive to individuals, but mischievous to
the public at large; and it is the employment of an engine so powerful and
dangerous that gives criminality to an act that would be perfectly innocent, at
least in a legal view, when done by an individual." [***65]
These principles underlie the act of Congress, which has for its sole object
the protection of such trade and commerce as the Constitution confides to
national control, and the question is presented whether the combination
assailed by this suit is an unlawful restraint upon interstate trade in a
necessary article of food which, as every one knows, has always entered, now
enters and must continue to enter, in vast quantities, into commerce among the
States.
In Kidd v. Pearson we recognized, as had been done in previous cases, the distinction
between the mere transportation of articles of interstate commerce and the
purchasing and selling that precede transportation. It is said that manufacture
precedes commerce and is not a part of it. But it is equally true that when
manufacture ends, that which has been manufactured [*36] becomes a
subject of commerce; that buying and selling succeed manufacture, come into
existence after the process of manufacture is completed, precede
transportation, and are as much commercial intercourse, where articles are
bought to be carried from one State to another, as is the manual transportation
of such articles after they have been so purchased. [***66] The
distinction was recognized by this court in Gibbons v. Ogden, where the
principal question was whether commerce included navigation. Both the court and
counsel recognized buying and selling or barter as included in commerce. Chief
Justice Marshall said that the mind can scarcely conceive a system for
regulating [**263] commerce, which was "confined to
prescribing rules for the conduct of individuals in the actual employment of
buying and selling, or of barter." pp. 189, 190.
The power of Congress covers and protects the absolute freedom of such
intercourse and trade among the States as may or must succeed manufacture and
precede transportation from the place of purchase. This would seem to be
conceded; for, the court in the present case expressly declare that
"contracts to buy, sell, or exchange goods to be transported among the
several States, the transportation and its instrumentalities, and articles
bought, sold, or exchanged for the purpose of such transit among the States, or
put in the way of transit, may be regulated, but this is because they form part
of interstate trade or commerce." Here is a direct admission -- one which
the settled doctrines of this court justify [***67] -- that
contracts to buy and the purchasing of goods to be transported from one State
to another, and transportation, with its instrumentalities, are all parts of
interstate trade or commerce. Each part of such trade is then under the
protection of Congress. And yet, by the opinion and judgment in this case, if I
do not misapprehend them, Congress is without power to protect the commercial
intercourse that such purchasing necessarily involves against the restraints
and burdens arising from the existence of combinations that meet purchasers,
from whatever State they come, with the threat -- for it is nothing more nor
less than a threat -- that they shall not purchase what [*37] they
desire to purchase, except at the prices fixed by such combinations. A citizen
of Missouri has the right to go in person, or send orders, to Pennsylvania and
New Jersey for the purpose of purchasing refined sugar. But of what value is
that right if he is confronted in those States by a vast combination which
absolutely controls the price of that article by reason of its having acquired
all the sugar refineries in the United States in order that they may fix prices
in their own interest [***68] exclusively?
In my judgment, the citizens of the several States composing the Union are
entitled, of right, to buy goods in the State where they are manufactured, or
in any other State, without being confronted by an illegal combination whose
business extends throughout the whole country, which by the law everywhere is
an enemy to the public interests, and which prevents such buying, except at
prices arbitrarily fixed by it. I insist that the free course of trade among
the States cannot coexist with such combinations. When I speak of trade I mean
the buying and selling of articles of every kind that are recognized articles
of interstate commerce. Whatever improperly obstructs the free course of
interstate intercourse and trade, as involved in the buying and selling of
articles to be carried from one State to another, may be reached by Congress,
under its authority to regulate commerce among the States. The exercise of that
authority so as to make trade among the States, in all recognized articles of
commerce, absolutely free from unreasonable or illegal restrictions imposed by
combinations, is justified by an express grant of power to Congress and would
redound to the welfare [***69] of the whole country. I am unable to
perceive that any such result would imperil the autonomy of the States,
especially as that result cannot be attained through the action of any one
State.
Undue restrictions or burdens upon the purchasing of goods, in the market for
sale, to be transported to other States, cannot be imposed even by a State
without violating the freedom of commercial intercourse guaranteed by the
Constitution. But if a State without whose limits the business of refining
sugar is exclusively carried on may not constitutionally impose
[*38] burdens upon purchases of sugar to be transported to other
States, how comes it that combinations of corporations or individuals, within
the same State, may not be prevented by the national government from putting
unlawful restraints upon the purchasing of that article to be carried from the
State in which such purchases are made? If the national power is competent to
repress State action in restraint of interstate trade as it may be involved in
purchases of refined sugar to be transported from one State to another State,
surely it ought to be deemed sufficient to prevent unlawful restraints
attempted to be imposed by combinations [***70] of corporations or
individuals upon those identical purchases; otherwise, illegal combinations of
corporations or individuals may -- so far as national power and interstate
commerce are concerned -- do, with impunity, what no State can do.
Suppose that a suit were brought in one of the courts of the United States --
jurisdiction being based, it may be, alone upon the diverse citizenship of the
parties -- to enforce the stipulations of a written agreement, which had for
its object to acquire the possession of all the sugar refineries in the United
States, in order that those engaged in the combination might obtain the entire
control of the business of refining and selling sugar throughout the country,
and thereby to increase or diminish prices as the particular interests of the
combination might require. I take it that the court, upon recognized principles
of law common to the jurisprudence of this country and of Great Britain, would
deny the relief asked and dismiss the suit upon the ground that the necessary
tendency of such an agreement and combination was to restrain, not simply trade
that was completely internal to the State in which the parties resided, but
trade and commerce [***71] among all the States, and was,
therefore, against public policy and illegal. If I am right in this view, it
would seem to follow, necessarily, that Congress could enact a statute
forbidding such combinations so far as they affected interstate commerce,
[**264] and provide for their suppression as well through civil
proceedings instituted for that purpose, as by penalties against those engaged
in them.
[*39] In committing to Congress the control of commerce with
foreign nations and among the several States, the Constitution did not define
the means that may be employed to protect the freedom of commercial intercourse
and traffic established for the benefit of all the people of the Union. It
wisely forbore to impose any limitations upon the exercise of that power except
those arising from the general nature of the government, or such as are
embodied in the fundamental guarantees of liberty and property. It gives to
Congress, in express words, authority to enact all laws necessary and proper
for carrying into execution the power to regulate commerce; and whether an act
of Congress, passed to accomplish an object to which the general government is
competent, is within the [***72] power granted, must be determined
by the rule announced through Chief Justice Marshall three-quarters of a
century ago, and which has been repeatedly affirmed by this court. That rule
is: "The sound construction of the Constitution must allow to the national
legislature the discretion with respect to the means by which the powers it
confers are to be carried into execution, which will enable that body to
perform the high duties assigned to it in the manner most beneficial to the
people. Let the end be legitimate, let it be within the scope of the
Constitution, and all means which are appropriate, which are plainly adapted to
that end, which are not prohibited, but consistent with the letter and spirit
of the Constitution, are constitutional." McCulloch v. Maryland, 4 Wheat.
316, 421. The end proposed to be accomplished by the act of 1890 is the
protection of trade and commerce among the States against unlawful restraints.
Who can say that that end is not legitimate or is not within the scope of the
Constitution? The means employed are the suppression, by legal proceedings, of
combinations, conspiracies, and monopolies, which by their inevitable and
admitted tendency, [***73] improperly restrain trade and commerce
among the States. Who can say that such means are not appropriate to attain the
end of freeing commercial intercourse among the States from burdens and
exactions imposed upon it by combinations which, under principles long
recognized in this country as well as at the [*40] common law, are
illegal and dangerous to the public welfare? What clauses of the Constitution
can be referred to which prohibits the means thus prescribed in the act of
Congress?
It may be that the means employed by Congress to suppress combinations that
restrain interstate trade and commerce are not all or the best that could have
been devised. But Congress, under the delegation of authority to enact laws
necessary and proper to carry into effect a power granted, is not restricted to
the employment of those means "without which the end would be entirely
unattainable." "To have prescribed the means," this court has
said, "by which government should, in all future time, execute its powers,
would have been to change entirely the character of that instrument, and give
it the properties of a legal code. It would have been an unwise attempt to
provide, by immutable rules [***74] for exigencies which, if
foreseen at all, must have been seen dimly, and which can be best provided for
as they occur. To have declared that the best means shall not be used, but those
alone without which the power given would be nugatory, would have been to
deprive the legislature of the capacity to avail itself of experience, to
exercise its reason, and to accommodate its legislation to circumstances."
Again: "Where the law is not prohibited, and is really calculated to
effect any of the objects entrusted to the government, to undertake here to
inquire into the degree of its necessity would be to pass the line which
circumscribes the judicial department, and to tread on legislative ground."
McCulloch v. Maryland, 4 Wheat. 316, 415, 423.
By the act of 1890, Congress subjected to forfeiture "any property owned
under any contract or by any combination, or pursuant to any conspiracy, (and
being the subject thereof,) mentioned in section one of this act, and being in
the course of transportation from one State to another, or to a foreign
country." It was not deemed wise to subject such property to forfeiture
before transportation began or after it ended. If it be suggested that Congress
[***75] might have prohibited the transportation from the State in
which they are manufactured of any articles, by whomsoever at the time owned,
that had been [*41] manufactured by combinations formed to
monopolize some designated part of trade or commerce among the States, my
answer is that it is not within the functions of the judiciary to adjudge that
Congress shall employ particular means in execution of a given power, simply
because such means are, in the judgment of the courts, best conducive to the
end sought to be accomplished. Congress, in the exercise of its discretion as
to choice of means conducive to an end to which it was competent, determined to
reach that end through civil proceedings instituted to prevent or restrain
these obnoxious combinations in their attempts to burden interstate commerce by
obstructions that interfere in advance of transportation with the free course
of trade between the people of the States. In other words, Congress sought to
prevent the coming into existence of combinations, the purpose or tendency of
which was to impose unlawful restraints upon interstate commerce.
There is nothing in conflict with these views in Coe v. Errol, 116 U.S. 517,
[***76] 529. There the question was whether certain logs cut in New
Hampshire, and hauled to a river that they might be transported
[**265] to another State, were liable to be taxed in the former
State before actual transportation to the latter State began. The court held
that the logs might be taxed while they remained in the State of their origin
as part of the general mass of property there; that "for this
purpose" -- taxation -- the property did not pass from the jurisdiction of
the State in which it was until transportation began. The scope of the decision
is clearly indicated by the following clause in the opinion of Mr. Justice
Bradley: "How can property thus situated, to wit, deposited or stored at
the place of entrepot for future exportation, be taxed in the regular way as
part of the property of the State?The answer is plain. It can be taxed as all
other property is taxed, in the place where it is found, if taxed or assessed
for taxation in the usual manner in which such property is taxed; and not
singled out to be assessed by itself in an unusual and exceptional manner
because of its situation." As we have now no question as to the taxation
of articles manufactured by one [***77] of the combinations
condemned by the act of Congress, and [*42] as no one has suggested
that the State in which they may be manufactured could not tax them as property
so long as they remained within its limits, and before transportation of them
to other States legal, I am at a loss to understand how the case before us can
be affected by a decision that personal property, while it remains in the State
of its origin, although it is to be sent at a future time to another State, is
within the jurisdiction of the former State for purposes of taxation.
The question here relates to restraints upon the freedom of interstate trade
and commerce imposed by illegal combinations. After the fullest consideration I
have been able to bestow upon this important question, I find it impossible to
refuse my assent to this proposition: Whatever a State may do to protect its
completely interior traffic or trade against unlawful restraints, the general
government is empowered to do for the protection of the people of all the
States -- for this purpose one people -- against unlawful restraints imposed
upon interstate traffic or trade in articles that are to enter into commerce
among the several States. [***78] If, as already shown, a State may
prevent or suppress a combination, the effect of which is to subject its
domestic trade to the restraints necessarily arising from their obtaining the
absolute control of the sale of a particular article in general use by the
community, there ought to be no hesitation in allowing to Congress the right to
suppress a similar combination that imposes a like unlawful restraint upon
interstate trade and traffic in that article. While the States retain, because
they have never surrendered, full control of their completely internal traffic,
it was not intended by the framers of the Constitution that any part of
interstate commerce should be excluded from the control of Congress. Each State
can reach and suppress combinations so far as they unlawfully restrain its
interior trade, while the national government may reach and suppress them so
far as they unlawfully restrain trade among the States.
While the opinion of the court in this case does not declare the act of 1890 to
be unconstitutional, it defeats the main object for which it was passed. For it
is, in effect, held that the statute would be unconstitutional if interpreted
as embracing [***79] [*43] such unlawful restraints
upon the purchasing of goods in one State to be carried to another State as
necessarily arise from the existence of combinations formed for the purpose and
with the effect, not only of monopolizing the ownership of all such goods in
every part of the country, but of controlling the prices for them in all the
States. This view of the scope of the act leaves the public, so far as national
power is concerned, entirely at the mercy of combinations which arbitrarily
control the prices of articles purchased to be transported from one State to
another State. I cannot assent to that view. In my judgment, the general
government is not placed by the Constitution in such a condition of
helplessness that it must fold its arms and remain inactive while capital
combines, under the name of a corporation, to destroy competition, not in one
State only, but throughout the entire country, in the buying and selling of
articles -- especially the necessaries of life -- that go into commerce among
the States. The doctrine of the autonomy of the States cannot properly be
invoked to justify a denial of power in the national government to meet such an
emergency, involving [***80] as it does that freedom of commercial
intercourse among the States which the Constitution sought to attain.
It is said that there are no proofs in the record which indicate an intention
upon the part of the American Sugar Refining Company and its associates to put
a restraint upon trade or commerce. Was it necessary that formal proof be made
that the persons engaged in this combination admitted, in words, that they
intended to restrain trade or commerce? Did any one expect to find in the
written agreements which resulted in the formation of the combination a
distinct expression of a purpose to restrain interstate trade or commerce? Men
who form and control these combinations are too cautions and wary to make such
admissions orally or in writing. Why, it is conceded that the object of this
combination was to obtain control of the business of making and selling refined
sugar throughout the entire country. Those interested in its operations will be
satisfied with nothing less than to have the whole population of America pay
tribute to them. That object [*44] is disclosed upon the very face
of the transactions described in the bill. And it is proved -- indeed, is
conceded [***81] -- that that object has been accomplished to the
extent that the American Sugar Refining Company now controls ninety-eight per
cent of all the [**266] sugar refining business in the country, and
therefore controls the price of that article everywhere. New, the mere
existence of a combination having such an object and possessing such
extraordinary power is itself, under settled principles of law -- there being
no adjudged case to the contrary in this country -- a direct restraint of trade
in the article for the control of the sales of which in this country that
combination was organized. And that restraint is felt in all the States, for
the reason, known to all, that the article in question goes, was intended to
go, and must always go, into commerce among the several States, and into the
homes of people in every condition of life.
A decree recognizing the freedom of commercial intercourse as embracing the
right to buy goods to be transported from one State to another, without buyers
being burdened by unlawful restraints imposed by combinations of corporations
or individuals, so far from disturbing or endangering, would tend to preserve
the autonomy of the States, and protect [***82] the people of all
the States against dangers so portentous as to excite apprehension for the
safety of our liberties. If this be not a sound interpretation of the
Constitution, it is easy to perceive that interstate traffic, so far as it
involves the price to be paid for articles necessary to the comfort and
well-being of the people in all the States, may pass under the absolute control
of overshadowing combinations having financial resources without limit and an
audacity in the accomplishment of their objects that recognizes none of the
restraints of moral obligations controlling the action of individuals;
combinations governed entirely by the law of greed and selfishness -- so
powerful that no single State is able to overthrow them and give the required protection
to the whole country, and so all-pervading that they threaten the integrity of
our institutions.
We have before us the case of a combination which absolutely controls, or may,
at its discretion, control the price of all [*45] refined sugar in
this country. Suppose another combination, organized for private gain and to
control prices, should obtain possession of all the large flour mills in the
United States; another, [***83] of all the grain elevators;
another, of all the oil territory; another, of all the salt-producing regions;
another, of all the cotton mills; and another, of all the great establishments
for slaughtering animals, and the preparation of meats. What power is competent
to protect the people of the United States against such dangers except national
power -- one that is capable of exerting its sovereign authority throughout
every part of the territory and over all the people of the nation?
To the general government has been committed the control of commercial
intercourse among the States, to the end that it may be free at all times from
any restraints except such as Congress may impose or permit for the benefit of
the whole country. The common government of all the people is the only one that
can adequately deal with a matter which directly and injuriously affects the
entire commerce of the country, which concerns equally all the people of the
Union, and which, it must be confessed, cannot be adequately controlled by any
one State. Its authority should not be so weakened by construction that it
cannot reach and eradicate evils that, beyond all question, tend to defeat an
[***84] object which that government is entitled, by the
Constitution, to accomplish. "Powerful and ingenious minds," this
court has said, "taking, as postulates, that the powers expressly granted
to the government of the Union, are to be contracted by construction into the
narrowest possible compass, and that the original powers of the States are
retained if any possible construction will retain them, may, by a course of
well digested, but refined and metaphysical reasoning, founded on these
premises, explain away the Constitution of our country, and leave it, a
magnificent structure, indeed, to look at, but totally unfit for use. They may
so entangle and perplex the understanding as to obscure principles which were
before thought quite plain, and induce doubts where, if the mind were to pursue
its own course, none would be perceived." Gibbons v. Ogden, 9 Wheat. 1,
222.
While a decree annulling the contracts under which the [*46]
combination in question was formed, may not, in view of the facts disclosed, be
effectual to accomplish the object of the act of 1890, I perceive no difficulty
in the way of the court passing a decree declaring that that combination imposes
an unlawful restraint [***85] upon trade and commerce among the
States, and perpetually enjoining it from further prosecuting any business
pursuant to the unlawful agreements under which it was formed or by which it
was created. Such a decree would be within the scope of the bill, and is
appropriate to the end which Congress intended to accomplish, namely, to
protect the freedom of commercial intercourse among the States against
combinations and conspiracies which impose unlawful restraints upon such
intercourse.
For the reasons stated I dissent from the opinion and judgment of the court.