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 Van Patten v. Chicago, M. & St. P. R. Co. 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 Messrs. James A. Logan and John G. 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 *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 ments in the two cases were substantially | It is obvious, however, that if such deviation The expressed purpose of the agreement in this case is, among other things, "to establish and maintain reasonable and just rates, fares, rules, and regulations on state and interstate traffic." The companies agree that the schedule of rates and fares already duly published and in force and authorized by the companies, parties to the agreement, and filed, as to interstate traffic, with the Interstate Commerce Commission, shall be reaffirmed, and copies of all such schedules are to be filed, with the managers constituted under the agreement within ten days after it be comes effective. The managers may from time to time recommend changes in the rates, etc., and a failure to observe the recommendations is deemed a violation of the agreement. No company can deviate from these rates except under a resolution of its board of directors, and such resolution can only take effect thirty days after service of a copy thereof on the managers who, upon receipt thereof, "shall act promptly for the protection of the parties hereto." For a violation of the agreement the offending company forfeits to the association a sum to be determined by the managers thereof, not exceeding five thousand dollars, or more upon the contingency named in the rule. So far as the establishment of rates and fares is concerned, we do not see any substantial difference between this agreement and the one set forth in the Trans-Missouri case. In that case the rates were established by the agreement, and any company violating the schedule of rates as established under the agreement was liable to a penalty. A company could withdraw from the association on giving thirty days' notice, but while it continued a member it was bound to charge the rates fixed, under a penalty for not do[563] ng so. In this case the companies are ound to charge the rates fixed upon originally in the agreement or subsequently recommended by the board of managers, and the failure to observe their recommendations is deemed a violation of the agreement. The only alternative is the adoption of a resolution by the board of directors of any company providing for a change of rates so far as that company is concerned, and the service of a copy thereof upon the board of managers as already stated. This provision for changing rates by any one company is absent from the other agreement. It is this provision which is referred to by counsel as most material and important, and one which constitutes a material and important distinction between the two agreements. It is said to be designed solely to prevent secret and illegal competition in rates, while at the same time providing for and permitting open competition therein, and that unless it can be regarded as restraining competition so as to restrain trade, there is not even an appearance of restraint of trade in the agreement. *A company desirous of deviating from the [564] rates agreed upon and which its associates desire to maintain is at once confronted with this probability of a war between itself on the one side and the whole association on the other, in the course of which rates would probably drop lower than the company was proposing, and lower than it would desire or could afford, and such a prospect would be generally sufficient to prevent the inaugu ration of the change of rates and the conse quent competition. Thus the power to commence such a war on the part of the managers would operate to most effectually prevent a deviation from rates by any one company against the desire of the other parties to the agreement. Competition would be prevented by the fear of the united competition of the association against the particular member. Counsel for the association themselves state that the agreement makes it the duty of the managers, in case the defection should injuriously affect some particular members more than others, to endeavor to furnish reasonable protection to such members, presumably by allowing them to change rates so as to meet such competition, or by recommending such fierce competition as to persuade the recalcitrant to fall back into line. By this course the competition is open, but none the less sufficient on that account, and the desired and expected result is to be duced by the war which might otherwise be the yielding of the offending company, inwaged against it by the combined force of all the other parties to the agreement. Under these circumstances the agreement, taken as a whole, prevents, and was evidently intended to prevent, not only secret but any competition. The abstract right of a single company to deviate from the rates becomes immaterial, and its exercise, to say the least, very inexpedient, in the face of this power of the managers to enlist the whole associa counsel. tion in a war upon it. This is not all, how-| surface and were not then apparent to those ever, for the agreement further provides that the managers are to have power to organize such joint freight and passenger agencies as they may deem desirable, and if established they are to be so arranged as to give proper representation to each company, and no soliciting or contracting passenger or freight [865]agency can be maintained by any of the companies, except with the approval of the managers. They are also charged with the duty of securing to each company, party to the agreement, equitable proportions of the competitive traffic covered by the agreement, so far as can be legally done. The natural, direct, and necessary effect of all these various provisions of the agreement is to prevent any competition whatever between the parties to it for the whole time of its existence. It is probably as effective in that way as would be a provision in the agreement prohibiting in terms any competition whatever. It is also said that the agreement in the first case conferred upon the association an unlimited power to fix rates in the first stance, and that the authority was not confined to reasonable rates, while in the case now before us the agreement starts out with rates fixed by each company for itself and filed with the Interstate Commerce Commission, and which rates are alleged to be reasonable. The distinction is unimportant. It was considered in the other case that the rates actually fixed upon were reasonable, while the rates fixed upon in this case are also admitted to be reasonable. By this agreement the board of managers is in substance and as a result thereof placed in control of the business and rates of transportation, and its duty is to see to it that each company charges the rates agreed upon and receives its equitable proportion of the traf fic. The point not being raised and the decision of that case having proceeded upon an assumption of the validity of the act under either construction, it can, of course, constitute no authority upon this question. Upon the constitutionality of the act it is now earnestly contended that contracts in restraint of trade are not necessarily prejudicial to the security or welfare of society, and that Congress is without power to prohibit generally all contracts in restraint of trade, and the effort to do this invalidates the act in question. It is urged that it is for the court to decide whether the mere fact that a contract or arrangement, whatever its purpose or character, may restain trade in some degree, renders it injurious or prejudicial to the welfare or security of society, and if the court be of opinion that such welfare or security is not prejudiced by a contract of that kind, then Congress has no power to prohibit it, and the act must be declared unconinstitutional. It is claimed that the act can be supported only as an exercise of the police power, and that the constitutional guaranties furnished by the Fifth Amendment secure to all persons freedom in the pursuit of their vocations and the use of their property, and in making such contracts or ar rangements as may be necessary therefor. In dwelling upon the far-reaching nature of the anguage used in the act as construed in the case mentioned, counsel contend that the extent to which it limits the freedom and destroys the property of the individual can scarcely be exaggerated, and that ordinary contracts and combinations, which are at the same time most indispensable, have the effect of somewhat restraining trade and com- [567] merce, although to a very slight extent, but yet, under the construction adopted, they are illegal. The natural and direct effect of the two agreements is the same, viz., to maintain rates at a higher level than would otherwise prevail, and the differences between them are not sufficiently important or material to call for different judgments in the two cases on any such ground. Indeed, counsel for one of the railroad companies on this argument, in speaking of the agreement in the Trans-Missouri case, says of it that its terms, while substantially similar to those of the agreement here, were less explicit in making it just and reasonable. Regarding the two agreements as alike in their main and material features, we are brought to an examination of the question of the constitutionality of the act, construed [566]as it has been in the Trans-Missouri case. It is worthy of remark that this question was never raised or hinted at upon the argument of that case, although, if the respondents' presert contention be sound, it would have furnished a conclusive objection to the enforcement of the act as construed. The fact that not one of the many astute and able counsel for the transportation companies in that case raised an objection of so conclusive a character, if well founded, is strong evidence that the reasons showing the invalidity of the act as construed do not lie on the As examples of the kinds of contracts which are rendered illegal by this construction of the act, the learned counsel suggest all or ganizations of mechanics engaged in the same business for the purpose of limiting the number of persons employed in the business, or of maintaining wages; the formation of a corporation to carry on any particular line of business by those already engaged therein; a contract of partnership or of employment between two persons previously engaged in the same line of business; the appointment by two producers of the same person to sell their goods on commission; the purchase by one wholesale merchant of the product of two producers; the lease or purchase by a farmer, manufacturer, or merchant of an additional farm, manufactory, or shop; the withdrawal from business of any farmer, merchant, or manufacturer; a sale of the goodwill of a business with an agreement not to destroy its value by engaging in similar business; and a covenant in a deed restricting the use of real estate. It is added that the effect of most business contracts or combinations is to restrain trade in some degree. This makes quite a formidable list. It will be observed, however, that no contract |
