« ForrigeFortsett »
barriers of the law between the powers of its rate board and the people and any one of the roads concerned. It did not profess to look to any other interest than the exclusive interest of the parties themselves; and it will be seen, on a careful study of it, that it was construed and constructed for the sole purpose of keeping and increasing rates, instead of for the purpose of (as in the Joint Traffic Association) of keeping them just and in conformity with law, whether by reduction, increase, or other readjustment.
Other essential differences are stated in my brief, which I need not take the time of the court to enlarge upon.
dently did not intend to impose, the distinct | with the law that each company should have an equitable proportion of the traffic. What does equitable mean? It means that which right and justice and the public interest require. What did justice and public policy require? And what does it still require in respect of the nine great lines connecting the western lakes and the valley of the Mississippi and the whole continent beyond with the Atlantic seaboard? Was it not just and necessary to public interest that each one of these roads passing through great extents of country, and having along them populations and interests to whose welfare the existence of each one of these roads was necessary, should be considered with reference to the through These differences are illustrated by what traffic which should come from beyond? The the pleadings in the two cases show. In our question answers itself. It is obvious, then, case, the practical operation of the agree that just so far as each road should be enament has been to continue the same compe-bled to carry the through traffic that naturtition that existed before. This is admitted. ally belonged to it, by just so far the people It has been to continue the same just and along the whole length of its line would be reasonable rates previously established, and benefited by increasing the income of the line, to give a co-operative and advantageous serv- and thereby contributing to its support and ice upon equal terms to everybody and of to its ability to make lower rates to all its equal benefit to the whole public. The bill people from one end of the line to the other. in the Trans-Missouri case alleged-there be- This provision of the 8th article, then, was ing, it will be remembered, no previously es- wholesome, lawful, and necessary, and it was tablished rates that were agreed upon-that the very thing which one of the clauses in the parties had refused to establish and the Commerce Act and the spirit of all its give their customers just rates. The an- provisions required. swer did not meet the charge, but evaded it in the manner that the court will see stated on page 34 of my brief. The practical constructions by parties to contracts in their operations under them has always been considered an important element in determining the true character and meaning of the contract. What I have now stated shows the operating difference between the two con
The words of the article are as follows: "Article 8. Proportions of competitive traffic. The managers are charged with the duty of securing to each company party hereto equitable proportions of the competitive traffic covered by this agreement so far as can be legally done."
I may be allowed to say a word in respect of the objection that no one of the roads could change its rates without giving thirty days' notice, and therefore that this was a restraint of trade in one sense or another. It will be seen on examining the agreement, that each road had the absolute right, under the agreement and pursuant to its provisions, to change its own rates, and still continue a member of the Association. This being so, The next principal contention of my it seems to me impossible to contend that learned brother is that article 8 of the agree-any part of the agreement was any sort of rement violates the Trust Act by restraining straint, unless it can be established that the trade. thirty days' notice was too long. It is a matter of history that when the Commerce Act was passed there was inserted in it the requirement that no rate should be raised except on ten days' notice, and none should be lowered except on three days' notice, publicly displayed. What was the principle of this? It was that justice and fair play to customThis article provides that the managers ers and to the public and to all persons dishall endeavor so far, and only so far, as obe-rectly or indirectly interested in transportadience to the law-that is to say, conformity tion required that sufficient and timely with the Commerce Act and conformity with knowledge of changes in rates which, as we the Trust Act-will permit, to secure equita- know, affect in a greater or less degree all ble proportions of the competitive traffic to commercial and productive transactions, each one of the companies. It is sufficient an- should be had by every person and communswer to my brother's contention to say that ity interested. I suppose I may properly the very terms of the article do not require state it as a public fact, now known to everyor invite or allow the managers to act under body engaged in business, that the time fixed it at all otherwise than the law shall permit. in the Commerce Act for notice was much If therefore the Trust Act condemns the ef- too short, and that unjust inequalities have forts referred to, then not to make the ef- arisen, again and again, from charges in forts. If the Interstate Commerce Act, ei- rates by particular roads on short notice, ther in terms or spirit, is adverse to such an that favored customers and favorite localeffort, the managers are not authorized to ities, etc.. would get advantages over others, take a step. Does it violate the law to mere- in violation of the spirit and substance of the ly authorize an agent to do something in the Commerce Act. It was for the purpose, course of business so far, and so far only, as then, and with the effect of producing the the law will permit? widest fair play and equality among all persons, all roads, and all communities, that
But I contend that it was in conformity
the Trust Act, I beg Your Honor's careful attention to the suggestions I have ventured to make in my printed points. I need not enlarge upon them, and have only to call your attention, first, to the grammatical construction of the first section, and second to the citations I have made from law writers, showing a distinct and separate classification of the two phrases, "restraint of trade" in general, and restraint of trade." If these
this period of thirty days, instead of ten, was agreed upon. It was obviously right, and being right, it should not be condemned, unless the rigor of a law that cannot be otherwise construed and applied compels it.
I submit with sincere confidence, as regards the provision I have just spoken of, as well as regards all the other provisions of the contract, that, instead of being even a partial restraint of trade, they are all pro-"partial visions of constraint in support and in pro-writers are correct (as nobody doubts, I motion of trade. Trade is a general word, think, they are), and these two phrases were and its operation, like all other operations known and treated in the law at the time of that require co-operating and associating the passage of the act as separate things, forces and arrangement, are advanced by, the one obnoxious and the other just and and indeed, cannot be carried on truly and hon-wholesome, then I respectfully and earnestly estly for public interest without checks and insist that the universal rule of construction regulations, some of which may restrain and requires that the words in the act shall be regulate the behavior of a particular element assigned to the first class and not carried in the whole operation, and by doing so do over into the second. not restrain, but advance and promote, the whole; just as, to take the simplest of illustrations that occurs to me, in mechanics the safety valve of a locomotive, with its counterweight, regulates and restrains or gives off the accumulating steam in the boiler, in the first place conserving it, restraining it from escape, and in the second place, enabling it to escape. But all this does not restrain the operations of the locomotive; it is necessary to its best and safest performance of duty. A hundred illustrations might be given.
My brother on the other side suggests that the clause in the agreement providing for abolishing soliciting agencies is a. restraint of trade. I have stated in my printed points my answer to this. I may add, how ever, that soliciting trade or ceasing to solicit trade is not trade itself, and does not belong to it even as an incident. Wherever it is practised it is practised apart from any act of trade; it precedes it, and sometimes leads up to it, and sometimes repels it. It was perfectly competent, therefore, and certainly wise, for these roads to agree to abolish such agencies, and to join, so far as it might be convenient to do for the information of the public, in having agencies at various points of importance to assist ship; pers and manufacturers in the most rapid and economical transmission of their productions. The plan, therefore, substituted 2. It is insisted that an agreement in refor the old practice is one far more advan-straint of trade must restrain trade, that tageous to the public who wish for hon- is, reduce, or diminish it; that trade must est and equal dealing than the old prac-be injured.
I refrain from making any observation on the constitutional question arising if the Trust Act is to be construed as forbidding innocent contracts promotive of public policy, which I have insisted upon in my printed points, for the reason that in the division of our subjects of discussion this matter will be ieft entirely to my brother, Mr. Phelps.
In respect to the meaning of the words of
Mr. John K. Richards, Solicitor General, for the United States, appellant in reply:
1. It is claimed that because nothing has been done under the agreement, no irreparable injury has been or can be shown, and therefore no injunction lies. But the antitrust law makes the agreement illegal, and vests the court with jurisdiction to prevent violations of the act. The carrying out of an illegal contract will result in irreparable injury to the public, and this sufficiently appears from the provisions of the law declaring the illegality and authorizing the injunction proceedings.
Mr. Carter said he would not reargue the questions considered in the Trans-Missouri case, and then proceeded to discuss what constitutes an agreement among railroads in restraint of trade, insisting that one which only prevents competition for the purpose of maintaining reasonable rates is not one in restraint of trade.
In the Trans-Missouri case this court held that such an agreement is in restraint of trade, regardless of its purpose and the actual result of its operation. So, after all, the argument of Mr. Carter was directed to a discussion anew of the questions argued and considered and settled by this court in the Trans-Missouri case.
state to another.
tice. But I submit that whatever character An agreement in restraint of trade may or may be imputed to soliciting business, it does may not diminish or reduce trade. The innot fall within the authority of Congress to jury sought to be averted by prohibiting regulate it at all. While it is going on the such agreements is the injury to the public. business solicited has not reached the point The stifling of competition, the creation of of being interstate commerce, and cannot a monopoly, may increase the trade in the reach it until its movement has commenced, product controlled, but nevertheless to the or is about to commence, definitely from one injury of the public. To stifle competition is to create a monopoly and place the public at the mercy of the monopoly. The benefits resulting from cheaper products through monopolies have never been held by courts or legislatures as sufficient to overbalance the evils to the government and people from the creation of monopolies. It is a question of method, rather than result. Trusts and monopolies are forbidden in order to preserve competition, and thereby, as far as possible,
freedom of action in industrial and commer- | be authorized to combine and prevent compe cial life. tition and keep up prices?
3. It is said that competition is not trade, but a mere incident of trade; that what prevents competition does not necessarily injure trade; on the contrary to restrict competition may benefit trade; that the whole world is now groaning under competition; that the hard rule of the survival of the fittest bears heavily upon the masses of the people; that there is a spirit of unrest, of dissatisfaction, and that, to avoid the effects of a ruinous competition among employers and employees, combination is the rule.
Competition drives the weak to the wall; the fittest survive; but the greatest good to the greatest number results. The opening of new mines, the construction of new plants, the establishment of industries with improved methods of production and greater natural advantages, lower the cost of production of the commodity to the benefit of the public; but the person or corporation or region which cannot lower its cost of production to meet the new competition must suffer. Under competition the most improved plant, the best trained labor, the most economical management, the wisest business sagacity and foresight, is not only encouraged but demanded for success.
The best railroad, the one constructed and equipped and managed in the best way, will get the bulk of the competitive business, and it ought to. It can afford to carry the traf fic at lower rates than the poorer roads, and it cught to be allowed to in the public interest. The poorer roads can get the business by putting themselves in shape to do the business. Roads equally fitted to the work will naturally divide the competitive business in equitable proportions. Competition for traffic by improved service and lower rates will result naturally, not in ruining the roads, but in building them up. Under competition the best road fixes the rate; under combination the poorest road.
Is it just to make the public pay rates from Chicago to the east fixed by the_poorest system protected by the Joint Traffic agreement?
5. It is contended that there is no re-. straint on trade, because the railways still exist, with all their facilities for transportation, ready and willing to serve the public, and with no inducement for service weakened; that competition in every desirable aspect remains, the railroads being permitted to compete, but compelled to do it openly, under the provision that a deviation from the association rate cannot be made except by resolution of the board of managers and after thirty days' notice to the managers.
It is true that railways exist, with their original facilities, but the inducement for improvement by cheaper methods of transportation is weakened, the motive for competition removed, the means of competition destroyed, and competition itself absolutely forbidden. The natural result of preventing competition is to keep up rates. An excess in rates over what would obtain under competition amounts in effect to a tax on the things transported. This operates as a burden upon commerce and a restraint of trade.
It may be conceded that the law of the survival of the fittest is a hard one; that the necessity of competition under existing circumstances presses heavily upon the weak. But, after all, competition is not only the life of trade, but the underlying basis of our social and industrial life. There may be a better way, but we have not yet found it. Competition goes along with freedom, with independent action. This country was founded on the principles of liberty and equality. It sought to secure to every citizen an equal chance under the law. That is all the people have demanded or do demand, -a fair show in the race of life. Undoubt edly there is unrest, dissatisfaction, tendencies to anarchy and socialism, but these result, not from competition, but the throttling of competition by trusts and combinations, which seek to control the production and transportation and dominate both workingmen and consumers. Against these the individual citizen protests. He does not demand no competition, but fair competition. Combinations of workingmen accompany aggregations of capital. Thus the masses are arrayed against the classes. If combinations of capital were prevented, if competition among employers of labor were enforced, the independent demand for labor from competing sources would tend to fair wages, such as prices might warrant.
4. It is insisted that this agreement among railroads to prevent competition is not only innocent, but wise and salutary, because in the case of railroads competition is ruinous; that if competition reduces rates below the point of profit for any line, it must ultimately be bankrupted, for it cannot stop running nor can the capital invested in it be withdrawn.
But this argument applies to all great modern industries, in manufacture as well as transportation. Capital fixed in a valuable plant cannot be withdrawn. nor can labor skilled in one industry be readily shifted to another. Both manufacturers and workingmen are subject to the contingencies of competition. The establishment of a new plant with modern improvements may destroy some old one, in which both have virtually risked their all.
Why are not men who put their capital or skill into a manufacturing plant just as much entitled to protection against ruinous competition as those who put their money or skill in a transportation plant? Why should the railroads be singled out from all the great interests of this country, and alone
If a state should levy a tax on goods transported through it, this court would hold such an act unconstitutional because it has laid a burden upon interstate commerce. Moreover, to increase rates and maintain them at a point above what would obtain under competition, decreases the business of railroads, but enhances the cost of it, and thus restrains trade or commerce. Lower rates mean more traffic, both freight and passenger. Higher rates mean less traffic.
may be to the interests of the railroads to in- | carrier from charging one person more than crease the rates and lessen the traffic. The another for the same service; it does not proprofits may be as much or more, but it is hibit a carrier from charging one person done at the expense of the public and to the more or less than another railroad charges restraint of trade. another person for the same distance. The 6. It is insisted that rates must be stable, 3d section forbids a common carrier to give not subject to change; that a manufacturer any undue preference or advantage to any cannot safely make goods or a dealer buy person or locality over any other. But this them unless he knows the rates for trans-only applies to the action of a railroad toporting them to market, and may rely upon ward the people or places served by it. And these rates continuing; therefore agreements so, too, with reference to the long and short for main ining rates at a fixed point should haul provisions in the 4th section. be encouraged.
It is obvious the manufacturer or dealer must not only take into account the rates he will have to pay to market, but the rates his competitors from every quarter by land and water will have to pay. It is impracticable to attain a cast-iron uniformity of this kind, and neither the interstate commerce law nor the Joint Traffic agreement attempts
Moreover, the agreement does not assume to prevent a change of rates. It virtually takes the power to change from the companies, but gives it to the managers of the association. For natural it substitutes arbitrary change. The protest against any change in rates is a protest against progress. The history of railroads shows a constant tendency towards cheaper rates. This has resulted from improvements forced by competition. The interest of the public lies, not in maintaining but in reducing rates, and to effect such reduction competition is essential.
7. Uniformity in rates is declared to be essential, and it is urged that the provisions of the interstate commerce law favoring uniformity cannot be enforced except by suppressing competition through this agreement; and, to illustrate the need of uniformity, it is said that without it an industry in Michigan equidistant from market with a similar industry in Indiana might be wiped out of existence by reduced rates in favor of the Indiana industry.
The interstate commerce law declares tlrat all charges must be just and reasonable. It provides no means for securing this de sideratum except competition. The only method of stifling competition when the law was passed was the pooling agreement, and this was prohibited. Competition between railroads was preserved, and to secure the benefit of competition to all patrons of each road it was provided that the competition should be open and above board, so the people might be advised of the existing rates, and each railroad was required to treat its patrons with uniformity, without discrimination and without preferences.
The object of the law was to secure the benefit of competition to all, and not permit a road to charge those shippers for whose patronage it does not have to compete excessive rates, while secretly granting lower rates to those shippers for whose patronage it does have to compete. The competition was to be restricted to where it belongs; between the railroads, and not between the shippers. If a railroad can afford to carry freight of one shipper for a certain rate, it can afford to carry for the same rate like freight under similar conditions for every other shipper.
Chicago & N. W. R. Co. v. Osborne, 10 U S. App. 430, 52 Fed. Rep. 912, 3 C. C. A. 347, 4 Inters. Com. Rep. 257.
8. It is contended that uniform rates should be maintained on the trunk lines in order to keep the weaker roads in operation for the benefit of the sections through which they run.
But neither the Interstate Commerce Act nor this agreement would prevent the alleged injustice suggested. The case instanced involves a reduction of rates on local traffic, and the agreement only applies to competitive traffic. There is nothing in the agree ment to prevent any member of the association from changing the rates from local points; the jurisdiction of the association is restricted to competitive traffic.
As I have pointed out, the agreement does not apply to local traffic. As to it each road has a monopoly, with power to fix its own rates. The agreement applies only to competitive traffic between great centers. The argument, then, amounts to this, that rates on through traffic are to be kept up in order Suppose two similar industries located in to preserve the weak roads as going conPennsylvania, each supplying the New York cerns for the benefit of the sections through market, and each equally distant from New which they run. What is this but to tax York, but one located on the Pennsylvania the many for the benefit of the few? It is not and the other on the Lehigh Valley system. the function of the government to neutralize For one industry the Lehigh Valley is the only the advantages of locality. The people pay line to New York; for the other the Penn- for these and are entitled to them. If I settle sylvania. There is nothing in the Interstate in a flourishing region on a good line, I pay Commerce Act, or in the Joint Traffic Agree- for the privilege in the cost of land, in taxes, ment, to prevent the Pennsylvania from re- etc. If I settle in an undeveloped region on ducing the rate to New York; nothing to a poor road, I pay little for either the priviprevent the Lehigh Valley from reducing lege or the land, and must expect to help such rate. bear the cost of development.
The uniformity demanded by the Interstate Commerce Act is uniformity in the treatment by each railroad of its own patrons. The 2d section prohibits a common
9. It is said that the Interstate Commerce Act was passed to suppress competition and secure uniformity in rates.
It was not passed to suppress competition,
but to preserve it and secure its benefits to all. Competition between independent lines was preserved, and uniformity enforced to secure the benefit of this competition to all. Each carrier was required to treat its patrons with uniform fairness, without preference and without discrimination. The only effective arrangement used at that time by the trunk lines to stifle competition was the pooling agreement, and this was prohibited. It was recognized that competition would keep the rates reasonable, and the long and short haul provision was intended to secure to all points on each road the benefit of such competition. Unjust discrimination and undue preferences by a railroad among its patrons was prohibited. Thus the benefits of open competition were insured to all. The policy was, among the patrons of each road, uniformity, but between the roads open competition.
First Report of Interstate Commerce ComDission 1887, p. 33.
10. The point is made that railways are public highways, and the furnishing of railway transportation is a governmental functien; therefore the government should eliminate the advantage of locality by enforcing absolute uniformity in rates, or permit the railroads to do it by preventing competition and maintaining arbitrary
It may be conceded that the furnishing of railroad transportation is a public function, and therefore the government may regulate it. Government, state and Federal, has done this by forbidding the consolidation of competing lines, by prohibiting pooling contracts, and by making illegal all agreements
in restraint of trade.
The absolute uniformity demanded is neither practicable nor desirable. Absolute uniformity extending to every rate, from every point, on every railroad, means absolute consolidation of control and absolute arbitrary rates, and this is absolutely inconsistent with competition. It admits of no competition. The desirable uniformity is that which goes along with competition, and supplements it, and secures its benefits to all shippers without distinction. Each railroad should be required to treat its patrons-persons and places-with fairness and equality, without preference or discrimination. It should not be required, however, to treat its shippers no better than other lines treat theirs. On the contrary it should be induced to treat its shippers the very best it can, and thereby make it incumbent upon competing lines to treat their shippers as well. It should be induced to do this, not only in rates, but in service. The rigid, cast-iron, arbitrary rule of absolute uniformity as between railroads, contended for, would logically prevent all competition, whether in rates or service.
391; Freight Bureau Ceses, 167 U. S. 479, 42 L. ed. 243; Southern P. Co. v. Railroad Commissioners, 78 Fed. Rep. 236.
11. If the railroads are not to be permit ted to combine and prevent ruinous competi tion, and establish and maintain reasonable rates by arbitrary methods, then, it is said, they must either abandon transportation, or consolidate, or persistently violate the law.
There is a virtual consolidation now of these roads under the agreement. The public is not interested in consolidation except as it affects competition. The Constitutions and laws of many states prohibit the consolidation of railroads, but only of competing railroads. Lines which do not compete may consolidate, and the public thus gains the benefit of broader and more economical administration. Railroads which compete may not consolidate, because it prevents competition and keeps up rates.
Public policy has demanded the prohibition of the consolidation of competing lines; for the same reason Congress enacted the anti-pooling section of the Interstate Commerce Act. The pooling of freights and the division of earnings is not bad in itself. It is bad because used to stifle competition. Equally bad is the Joint Traffic Agreement before the court, which operates as effectually as any pooling arrangement ever devised. The people have not stopped to inquire whether consolidation would result of necessity in unreasonable rates; neither have they stopped to inquire whether pooling would result necessarily in unreasonable rates. It is the tendency, not the absolute result, which has operated to prohibit consolidation, to prohibit pooling, to prohibit contracts in
restraint of trade.
Pearsall v. Great Northern R. Co. 161 U. S. 646, 676, 40 L. ed. 838. 848; Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 698, 40 L. ed. 849, 858.
The railroads say that if they are not permitted to prevent competition they will compete, and in doing so will violate the interstate commerce law; that they should be per mitted to combine for the purpose of preventing violations of the law, even if in doing so competition be prevented.
But to prevent competition is in itself to violate the law. Better the chance to violate one law than the certainty of violating another. Better the motive to violate one law than the mandate to violate another. If the ability the railroads employ to circumvent the law were used to observe it, neither this agreement nor the arguments in support of it would be before the court. The railroads promise to obey one law if the court will permit them to violate another. Would they keep the compact, if made? Respect for the law based solely on self-interest is delusive and evanescent.
12. An attempt is made to distinguish this case from the Trans-Missouri case by say
Ames v. Union P. R. Co. 64 Fed. Rep. 165, 4 Inters. Com. Rep. 935; Interstate Coming that here the association simply adopted merce Commission v. Baltimore & O. R. Co. the admitted fair and reasonable rates then 145 U. S. 276, 36 L. ed. 703, 4 Inters. Com. in force and filed with the Interstate ComRep. 92; Cincinnati, N. O. & T. P. R. Co. v. merce Commission by the companies; while Interstate Commerce Commissioners, 162 U. in the Trans-Missouri case the association S. 184, 40 L ed. 935, 5 Inters. Com. Rep. was given power to fix rates. But in the