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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

it.

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

rates.

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

tion of the parties hereto.

Trans-Missouri Agreement the association | act promptly upon the same for the protec was only given power to fix reasonable rates, and the fact that the rates fixed by the association during its existence were fair and reasonable was admitted by the denials and allegations of the answer, which appear in the statement of the case. United States v. Trans-Missouri Freight Asso. 166 U. S. 303, 41 L. ed. 1015.

Mr. Carter in his argument explained the operation of this clause. Thirty days' notice of the intention of any company, by resolution of its board, to deviate from the rates fixed by the association through its managers, was required in order that the association might have time to determine its course of action. If it could meet the rate proposed by the deviating member, it would do so. If it could not, it would take steps, in Mr. Carter's language, "to exterminate" the recalcitrant company. In no other way, according to Mr. Carter, could ruinous competition be prevented and the interests of all members of the association protected.

In the Trans-Missouri case the association had been dissolved. The only question was the legal effect of the authority conferred by 13. It may be conceded that the public the agreement. If there were no power un- along each line is interested in the line getder the Joint Traffic Agreement to change ting its fair share of the through traffic and rates, nevertheless the power to maintain earnings; and this it will get under competirates arbitrarily would involve the authori- tion. The local public is not entitled, howty to keep them up after progress and inven- ever, to an arbitrary share of the through tion should render them excessive and unrea- traffic and earnings. It has a right to no sonable. But in point of fact, as pointed more than the advantages of the line at out, the Joint Traffic Agreement vests in the tract. To give it more is to take what beassociation, through the managers, with ap-longs to another line and another section. A peal to the board of control, the authority prosperous section, with an intelligent, proto change rates. This authority is more co-gressive population, makes a good railroad, ercive than that conferred by the Trans-Mis- and a good railroad attracts through traffic; souri Agreement. ard it is not just or right to take this traffic away and give to a poor road, in order to do for it what the public along its line ought to do.

Under the Trans-Missouri Agreement, five days' written notice prior to each monthly meeting was required to be given the chairman of any proposed reduction in rates. At each monthly meeting the association voted on all changes proposed. All parties were bound by the decision of the association, "unless then and there the parties shall give the association definite written notice that in ten days thereafter they shall make such modification, notwithstanding the vote of the association. Should any member insist upon a reduction of rates against the views of the majority, and if in the judgment of said majority the rates so made affect seriously the rates upon through traffic, then the association may, by a majority vote upon such other traffic, put into effect corresponding rates to take effect the same day." Moreover, each member of the Trans-Missouri Association might, at its peril, make a rate without previous notice to meet the competition of outside lines, giving the chairman notice of its action, so the good faith of the transaction might be passed up-gers from connecting lines, and shall not dison by the association at its next meeting. criminate in their rates and charges between such connecting lines."

14. The provisions of the interstate commerce law preventing discrimination and undue preferences have been discussed; they can be enforced without preventing competition. The 10th article of the Joint Traffic Agreement provides that "the managers shall decide and enforce the course which shall be pursued with connecting companies not parties to this agreement, which fail or decline to observe the rates, fares, and rules established under this agreement," and it is contended that this provision is necessary to prevent discrimination against one company and in favor of another by connecting lines; but a reading of the 3d section of the Interstate Commerce Act shows that the mischief suggested is fully provided for in its concluding paragraph, which provides that every common carrier shall afford equal facilities for the interchange of traffic and for receiving and forwarding freight or passen

Thus, under the Trans-Missouri Agreement each member might, at its peril, make a rate to meet outside competition, and each member might, upon giving ten days' notice make an independent rate notwithstanding the action of the association. But under the Joint Traffic Agreement no company can deviate from the rates as fixed by the managers except by a resolution of its board of directors, and thirty days after a copy of such resolution is filed with the managers. This absolutely prevents competition, and the intention to prevent competition is plain from the provision (art. 7, § 2, close). The managers upon receipt of such notice shall

15. It is insisted that if Congress had intended the anti-trust law to prohibit every contract in restraint of trade, whether par it would have used the language "every contial or general, reasonable or unreasonable, tract in any restraint of trade," etc., "is hereby declared to be illegal." It seems to me, and I submit to the court, that the expression "every contract in restraint of trade" is quite as comprehensive as "every contract in any restraint of trade," and much better language.

16. The reply to Mr. Phelps's attack upon the constitutionality of the anti-trust law as construed by this court in the Trans-Mis

There is no less power in the Joint Traffic Association than in the Trans-Missouri, indeed more power with respect to rates; and it is with the power alone that the court is concerned, not how the power has been or may be exercised.

souri case, is to be found in the argument of grain. The farmer sells to the commission
Mr. Carter that railways are public high- merchant. If the rates are excessive he gets
ways, and in furnishing public transporta- so much less for his grain, or the purchas-
tion perform in a sense a governmental func- er from the commission merchant pays so
tion. The right of the government to regu- much more for it. The commnission merchant
late contracts between carriers and shippers who pays the freight has no real interest in
and to place proper restrictions upon con- the charge. Of course this is not always
tracts among carriers themselves, in order true, but it does apply with respect to the
to protect the interests of the public, as af- great shipments handled by middlemen.
fected by these instrumentalities of com- Finally, it is questionable under the Inter-
merce, has not heretofore been seriously state Commerce Act whether a suit to re-
questioned. The states regulate the construc- cover back an excess paid above a reasonable
tion, maintenance, and operation of rail-rate can be maintained, if the rate charged
roads, prescribing and enforcing maximum was that fixed in the schedule filed with the
rates, preventing the consolidation of com- commission and published under the inter-
peting lines, and securing to the public the state commerce law.
benefit of competition.

Van Patten v. Chicago, M. & St. P. R. Co.
81 Fed. Rep. 545.

The doctrine laid down in the case of Munn ▾ Illinois, 94 U. S. 113, 24 L. ed. 77, applies. When a man devotes his property to a public use, to that extent he grants the public an interest in that use. The same policy which supports the prohibition against consolidation, and the 5th section of the interstate commerce law forbidding the pooling of freights or the division of earnings, is the justification for the declaration that all contracts in restraint of trade shall be deemed illegal. The result of the consolidation, the pooling, or combination in restraint of trade, is beside the question. Congress is entitled to pass judgment upon the tendency of a contract in restraint of trade. If it deems such a contract reprehensible, injurious in its tendencies, it may prohibit it, whether the act will result in a particular case in the establishment of reasonable or unreasona-panies, appellees. ble rates.

19. As the law stands the Commission has
no power to prescribe or enforce rates. Com-
petition secures reasonableness; the law en-
forces uniformity. In Interstate Commerce
Commission v. Cincinnati, N. O. & T. P. R.
Co. 167 U. S. 479, 42 L. ed. 243, this court,
speaking by Mr. Justice Brewer, held that
if Congress had intended to give the Commis-
sion power over rates it would have done so
in unmistakable language. So, too, when
Congress sees fit to take the railroads out of
the operation of the natural law of trade it
will do so in plain terms, and for independ
ent competition will substitute governmental
regulation.

Messrs. James A. Logan and John G.
Johnson filed a brief for the Pennsylvania
Railroad Company and other railroad com-

17. As to the remedy in case of an unreasonably low rate. Judge Cooley, in a wellconsidered opinion, Re Chicago, St. P. & K. C. R. Co. 2 Inters. Com. Rep. 137, 2 Inters. Com. Com. 231, approved by this court in Interstate Commerce Commission v. Cincinnati, N. O. & T. P. R. Co. 167 U. S. 511, 42 L. ed. 257, held that under the interstate commerce law the Commission has no power to determine that a rate is unreasonably low, and to order the carrier to refrain from charging such rate on such ground.

18. As to the remedy in case of an unreasonably high rate.

Messrs. Robert W. de Forest and David
Willcox filed a brief for the Central Railroad
Company of New Jersey, appellee.

*Mr. Justice Peckham, after stating the [558] facts, delivered the opinion of the court:

This case has been most ably argued by counsel both for the government and the railroad companies. The suit is brought to obtain a decree declaring null and void the agreement mentioned in the bill. Upon comparing that agreement with the one set forth in the case of United States v. Trans-Missouri Freight Association, 166 U. S. 290 [41:1007], the great similarity between them The common law requires that rates suggests that a similar result should be should be reasonable and fair. So does the reached in the two cases. The respondents, interstate commerce law. But this is a mere however, object to this, and give several readeclaration, and there is no adequate remedy sons why this case should not be controlled to enforce the right. The Commission has by the other. It is, among other things, no power to prescribe a reasonable rate and said that one of the questions sought to be enforce it, or to declare that a rate is unrea- raised in this case might have been, but was sonable and prohibit it. The shipper is not, made in the other; that the point theretherefore left to recover the excess in rate in decided, after holding that the statute appaid. I know of no case where the excess plied to railroad companies as common car-[559] charged over a reasonable rate on interstate riers, was simply that all contracts, whether commerce has been recovered back. The in reasonable as well as in unreasonable reamount involved in any particular transac-straint of trade, were included in the terms tion would be small; it would require years of the act, and the question whether the conto carry the case through the courts, and no tract then under review was in fact in reindividual shipper would invite the ill will of straint of trade in any degree whatever was a powerful railroad by beginning such a con- neither made nor decided, while it is plainly test.

raised in this.

Moreover, the man who actually pays the freight is not the man who suffers from the unreasonable charge. Take the case of

Again, it is asserted that there are differences between the provisions contained in the two agreements, of such a material and

"Does the agreement restrain trade or commerce in any way so as to be a violation of the act? We have no doubt that it does. The agreement on its face recites that it is entered into for the purpose of mutual protection by establishing and maintaining reasonable rates, rules, and regulations on all freight traffic, both through and local.

fundamental nature that the decision in the case referred to ought to form no precedent for the decision of the case now before the court.

It is also objected that the statute, if construed as it has been construed in the Trans-Missouri case, is unconstitutional, in that it unduly interferes with the liberty of the individual, and takes away from him "To that end the association is formed and the right to make contracts regarding his a body created which is to adopt rates for own affairs, which is guaranteed to him by all the companies, and a violation of which the Fifth Amendment to the Constitution, subjects the defaulting company to the pay. which provides that "no person shall be ment of a penalty, and although the parties deprived of life, liberty, or property have a right to withdraw from the agreement without due process of law; nor shall private on giving thirty days' notice of a desire so to property be taken for public use without just do, yet while in force and assuming it to be compensation." This objection was not ad-lived up to, there can be no doubt that its divanced in the arguments in the other case. rect, immediate, and necessary effect is *to [561] Finally, a reconsideration of the ques- put a restraint upon trade or commerce as tions decided in the former case is very described in the act. For these reasons the strongly pressed upon our attention, be-suit of the government can be maintained cause, as is stated, the decision in that case without proof of the allegation that the is quite plainly erroneous, and the conse- agreement was entered into for the purpose quences of such error are far reaching and of restraining trade or commerce or for disastrous, and clearly at war with justice maintaining rates above what was reasonaand sound policy, and the construction ble. The necessary effect of the agreement placed upon the Anti-Trust Statute has been is to restrain trade, no matter what the inreceived by the public with surprise and tent was on the part of those who signed it."

alarm.

We will refer to these propositions in the order in which they have been named.

The bill of the complainants in that case, while alleging an illegal and unlawful intent on the part of the railroad companies in entering into the agreement, also alleged that by means of the agreement the trade, traffic, and commerce in the region of country affected by the agreement had been and were monopolized and restrained, hindered, in

As to the first, we think the report of the Trans-Missouri case clearly shows, not only that the point now taken was there urged upon the attention of the court, but it was then intentionally and necessarily decided. The whole foundation of the case on the part|jured, and retarded. These allegations were of the government was the allegation that denied by defendants. the agreement there set forth was a contract or combination in restraint of trade, and un[560]lawful on that account. If the agreement did not in fact restrain trade, the govern-straint of trade. ment had no case.

If it did not in any degree restrain trade, it was immaterial whether the statute embraced all contracts in restraint of trade, or only such as were in unreasonable restraint thereof. There was no admission or concession in that case that the agreement did in fact restrain trade to a reasonable degree. Hence, it was necessary to determine the fact as to the character of the agreement before the case was made out on the part of the government.

The extract from the opinion of the court above given shows that the issue so made was not ignored, nor was it assumed as a concession that the agreement did restrain trade to a reasonable extent. The statement in the opinion is quite plain, and it inevitably leads to the conclusion that the question of fact as to the necessary tendency of the agree ment was distinctly presented to the mind of the court, and was consciously, purposely, and necessarily decided. It cannot, therefore, be correctly stated that the opinion only dealt with the question of the construction of the act, and that it was assumed that the agreement did to some reasonable extent restrain trade. In discussing the question as to the proper construction of the act, the court did not touch upon the other aspect of

The great stress of the argument on both sides was undoubtedly upon the question as to the proper construction of the statute, for that seemed to admit of the most doubt, but the other question was before the court, was plainly raised, and was necessarily decided. The opinion shows this to be true. the case, in regard to the nature of the agreeAt page 341 of the report the opinion con-ment itself, but when the question of contains the following language: "The conclusion which we have drawn was finished, the opinion shows from the examination above made of the that the question as to the nature of the question before us is that the Anti-Trust Act agreement was then entered upon and disapplies to railroads, and that it renders il-cussed as a fact necessary to be decided in legal all agreements which are in restraint the case, and that it in fact was decided. An of trade or commerce as we have above de- unlawful intent in entering into the agreefined that expression, and the question then ment was held immaterial, but only for the [562] arises whether the agreement before us is reason that the agreement did in fact and by of that nature. its terms restrain trade.

struction

There was thus a clear issue made by the pleadings as to the character of the agreement, whether it was or was not one in re

Second. We have assumed that the agree

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