freedom of action in industrial and commer- | be authorized to combine and prevent compecial 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.

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. Undoubtedly 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profit for any line, it must ultimately be bankrupted, for it cannot stop running nor can the capital invested in it be withdrawn.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 Capital fixed in a valuable plant cannot be withdrawn.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

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 traffic at lower rates than the poorer roads, and it cught to be allowed to in the public interest. The poorer reads 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 ccmpetition 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.

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. It

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 done at the expense of the public and to the restraint of trade.

hibit a carrier from charging one person more or less than another railroad charges 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.

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 agreement to prevent any member of the association from changing the rates from local points; the jurisdiction of the association is restricted to competitive traffic.

Suppose two similar industries located in Pennsylvania, each supplying the New York market, and each equally distant from New York, but one located on the Pennsylvania and the other on the Lehigh Valley system. For one industry the Lehigh Valley is the only line to New York; for the other the Pennsylvania. There is nothing in the Interstate Commerce Act, or in the Joint Traffic Agreement, to prevent the Pennsylvania from reducing the rate to New York; nothing to prevent the Lehigh Valley from reducing Buch rate.

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

The interstate commerce law declares that 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.

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 to preserve the weak roads as going concerns for the benefit of the sections through which they run. What is this but to tax the many for the benefit of the few? It is not the function of the government to neutralize the advantages of locality. The people pay for these and are entitled to them. If I settle in a flourishing region on a good line, I pay for the privilege in the cost of land, in taxes, etc. If I settle in an undeveloped region on a poor road, I pay little for either the privi lege or the land, and must expect to help bear the cost of development.

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 Comission 1887, p. 33.

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 permitted to combine and prevent ruinous competition, 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.

10. The point is made that railways are public highways, and the furnishing of railway transportation is a governmental func-merce Act. The pooling of freights and the tion; 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.

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 Comdivision 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 Ames v. Union P. R. Co. 64 Fed. Rep. 165, case from the Trans-Missouri case by say 4 Inters. Com. Rep. 935; Interstate Com-ing 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

Trans-Missouri Agreement the association | act promptly upon the same for the protec was only given power to fix reasonable rates, tion of the parties hereto. 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.

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.

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.

13. It may be conceded that the public along each line is interested in the line getting its fair share of the through traffic and earnings; and this it will get under competition. The local public is not entitled, however, to an arbitrary share of the through traffic and earnings. It has a right to no more than the advantages of the line attract. To give it more is to take what belongs to another line and another section. A prosperous section, with an intelligent, pro

In the Trans-Missouri case the association had been dissolved. The only question was the legal effect of the authority conferred by the agreement. If there were no power under the Joint Traffic Agreement to change rates, nevertheless the power to maintain rates arbitrarily would involve the authority to keep them up after progress and invention should render them excessive and unreasonable. But in point of fact, as pointed out, the Joint Traffic Agreement vests in the association, through the managers, with appeal to the board of control, the authority to change rates. This authority is more co-gressive population, makes a good railroad, ercive than that conferred by the Trans-Missouri Agreement.

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and a good railroad attracts through traffic; 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. 14. The provisions of the interstate comAt each monthly meeting the association vot- merce law preventing discrimination and uned on all changes proposed. All parties due preferences have been discussed; they were bound by the decision of the associa- can be enforced without preventing competion, "unless then and there the parties shall tition. The 10th article of the Joint Traffic give the association definite written notice Agreement provides that "the managers that in ten days thereafter they shall make shall decide and enforce the course which such modification, notwithstanding the vote shall be pursued with connecting companies of the association. Should any not parties to this agreement, which fail or member insist upon a reduction of rates decline to observe the rates, fares, and rules against the views of the majority, and if in established under this agreement," and it is the judgment of said majority the rates so contended that this provision is necessary to made affect seriously the rates upon through prevent discrimination against one company traffic, then the association may, by a major- and in favor of another by connecting lines; ity vote upon such other traffic, put into ef- but a reading of the 3d section of the Interfect corresponding rates to take effect the state Commerce Act shows that the mischief same day.' Moreover, each member of the suggested is fully provided for in its conTrans-Missouri Association might, at its per- cluding paragraph, which provides that il, make a rate without previous notice to every common carrier shall afford equal fameet the competition of outside lines, giving cilities for the interchange of traffic and for the chairman notice of its action, so the good receiving and forwarding freight or passenfaith of the transaction might be passed up-gers from connecting lines, and shall not dison by the association at its next meeting.

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

criminate in their rates and charges between such connecting lines."

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

souri case, is to be found in the argument of Mr. Carter that railways are public highways, and in furnishing public transportation perform in a sense a governmental function. The right of the government to regulate contracts between carriers and shippers and to place proper restrictions upon contracts among carriers themselves, in order to protect the interests of the public, as affected by these instrumentalities of commerce, has not heretofore been seriously questioned. The states regulate the construction, maintenance, and operation of railroads, prescribing and enforcing maximum rates, preventing the consolidation of competing lines, and securing to the public the benefit of competition.

grain. The farmer sells to the commission
merchant. If the rates are excessive he gets
so much less for his grain, or the purchas-
er from the commission merchant pays so
much more for it. The comunission merchant
who pays the freight has no real interest in
the charge. Of course this is not always
true, but it does apply with respect to the
great shipments handled by middlemen.

Finally, it is questionable under the Inter-
state Commerce Act whether a suit to re-
cover back an excess paid above a reasonable
rate can be maintained, if the rate charged
was that fixed in the schedule filed with the
commission and published under the inter-
state commerce law.

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

19. As the law stands the Commission has no power to prescribe or enforce rates. Competition secures reasonableness; the law enforces uniformity. In Interstate Commerce Commission v. Čincinnati, 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 Commission 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 independent competition will substitute governmental regulation.

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.

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

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 to carry the case through the courts, and no individual shipper would invite the ill will of a powerful railroad by beginning such a contest.

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

of the act, and the question whether the con-
tract then under review was in fact in re-
straint of trade in any degree whatever was
neither made nor decided, while it is plainly
raised in this.

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

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