ments in the two cases were substantially | It is obvious, however, that if such deviation
alike. This the respondents by no means ad- from rates by any company, from those
mit, and they assert that there are such ma- agreed upon, be tolerated, the principal ob-
terial and substantial differences in the pro- ject of the association fails of accomplish-
visions of the two instruments as to necessi- ment, because the purpose of its formation is
tate a different result in this case from that the establishment and maintenance of rea-
arrived at in the other.
sonable and just rates and a general uni-
formity therein. If one company is allowed,
while remaining a member of the association,
to fix its own rates and be guided by them,
it is plain that as to that company the agree
ment might as well be rescinded. This re-
sult was never contemplated. In order,
therefore, not only to prevent secret competi-
tion, but also to prevent any competition
whatever among the companies parties to the
agreement, the provision is therein made for
the prompt action of the board of managers
whenever it receives a copy of the resolution
adopted by the board of director of any one
company for a change of the rates as estab-
lished under the agreement. By reason of
this provision the board undoubtedly has au-
thority and power to enforce the uniformity
of rates as against the offending company
upon pain of an open, rigorous, and relent-
less war of competition against it on the
part of the whole association.

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


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


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

of the nature above described is now before | Congress, in the exercise of its right to regu-
the court, and there is some embarrassment late commerce among the several states, or
in assuming to decide herein just how far the otherwise, has the power to prohibit, as in
act goes in the direction claimed. Neverthe- restraint of interstate commerce, a contract [569]
less, we might say that the formation of cor- or combination between competing railroad
porations for business or manufacturing pur- corporations entered into and formed for the
poses has never, to our knowledge, been re- purpose of establishing and maintaining in-
garded in the nature of a contract in re-terstate rates and fares for the transporta-
straint of trade or commerce. The same may tion of freight and passengers on any of the
be said of the contract of partnership. It railroads parties to the contract or combina-
might also be difficult to show that the ap- tion, even though the rates and fares thus es-
pointment by two or more producers of the tablished are reasonable. Such an agree-
same person to sell their goods on commis-ment directly affects and of course is intend-
sion was a matter in any degree in restraint ed to affect the cost of transportation of com-
of trade.
modities, and commerce consists, among other
things, of the transportation of commodities,
and if such transportation be between states
it is interstate commerce.
affects interstate commerce by destroying
The agreement
competition and by maintaining rates above
what competition might produce.

useless, and it would soon be rescinded or
If it did not do that, its existence would be
abandoned. Its acknowledged purpose is to
maintain rates, and, if executed, it does so.
It must be remembered, however, that the act
does not prohibit any railroad company from
charging reasonable rates. If in the absence
of any contract or combination among the
railroad companies the rates and fares would
be less than they are under such contract or
combination, that is not by reason of any
provision of the act which itself lowers rates,
but only because the railroad companies
would, as it is urged, voluntarily and at once
inaugurate a
themselves, and thereby themselves reduce
war of competition among
their rates and fares.

We are not aware that it has ever been claimed that a lease or purchase by a farmer, manufacturer, or merchant of an additional farm, manufactory, or shop, or the withdrawal from business of any farmer, merchant, or manufacturer, restrained commerce or trade within any legal definition of [568] that term; and the sale of a goodwill of a business with an accompanying agreement not to engage in a similar business was instanced in the Trans-Missouri case as a contract not within the meaning of the act; and it was said that such a contract was collateral to the main contract of sale, and was entered into for the purpose of enhancing the price at which the vendor sells his business. The instances cited by counsel have in our judgment little or no bearing upon the question under consideration. In Hopkins v. United States [post, 290], decided at this term, we have said that the statute applies only to those contracts whose direct and immediate effect is a restraint upon interstate commerce, and that to treat the act as condemning all agreements under which, commerce and in the course of regulating it, Has not Congress with regard to interstate as a result, the cost of conducting an inter- in the case of railroad corporations, the state commercial business may be increased, power to say that no contract or combinawould enlarge the application of the act far tion shall be legal which shall restrain trade beyond the fair meaning of the language and commerce by shutting out the operation used. The effect upon interstate commerce of the general law of competition? We must not be indirect or incidental only. An think it has. agreement entered into for the purpose of

promoting the legitimate business of an in- truly said, the ordinary highways on land
As counsel for the Traffic Association has
dividual or corporation, with no purpose to have generally been established and main-
thereby affect or restrain interstate com-tained by the public. When the matter of
merce, and which does not directly restrain the building of railroads as highways arose,
such commerce, is not, as we think, covered a question was presented whether the state
by the act, although the agreement may in-
directly and remotely affect that commerce.
We also repeat what is said in the case
above cited, that "the act of Congress must
have a reasonable construction, or else there
would scarcely be an agreement or contract
among business men that could not be said
to have, indirectly or remotely, some bear-
ing upon interstate commerce, and possibly
to restrain it." To suppose, as is assumed
by counsel, that the effect of the decision in
the Trans-Missouri case is to render illegal
most business contracts or combinations,
however indispensable and necessary they
may be, because, as they assert, they all re-
strain trade in some remote and indirect de-
gree, is to make a most violent assumption,
and one not called for or justified by the de-
cision mentioned, or by any other decision of

should itself build them or permit others to
do it. The state did not build them, and as
their building required, among other things,
the appropriation of *land, private individ-[570]
uals could not enforce such appropriation
without a grant from the state.

this court.

The question really before us is whether 171 U. S.

thus required a public franchise. The state
The building and operation of a railroad
would have had no power to grant the right
of appropriation unless the use to which the
land was to be put was a public one. Taking
land for railroad purposes is a taking for a
public purpose, and the fact that it is taken
for a public purpose is the sole justification
for taking it at all. The business of a rail-
road carrier is of a public nature, and in
performing it the carrier is also performing
to a certain extent a function of government
which, as counsel observed, requires them to
perform the service upon equal terms to all.
This public service, that of transportation

of passengers and freight, is a part of trade | tion or in any of the amendments to that in-
and commerce, and when transported be- strument. Monongahela Nav. Co. v. United
tween states such commerce becomes what is Statcs, 148 U. S. 312-336 [37: 463-471]; In-
described as interstate, and comes, to a cer- terstate Commerce Commission v. Brimson,
tain extent, under the jurisdiction of Con- 154 U. S. 447-479 [38: 1047-1058, 4 Inters.
gress by virtue of its power to regulate com- Com. Rep. 545].
merce among the several states.

Among those limitations and guaranties
Where the grantees of this public franchise counsel refer to those which provide that no
are competing railroad companies for inter-person shall be deprived of life, liberty, or
state commerce, we think Congress is compe- property without due process of law, and
tent to forbid any agreement or combination that private property shall not be taken for
among them by means of which competition public use without just compensation. The
is to be smothered.
latter limitation is, we think, plainly irrele-

Although the franchise when granted by the state becomes by the grant the property of the grantee, yet there are some regulations respecting the exercise of such grants which Congress may make under its power to regulate commerce among the several states. This will be conceded by all, the only question being as to the extent of the power.

*As to the former, it is claimed that the [572] citizen is deprived of his liberty without due process of law when, by a general statute, he is arbitrarily deprived of the right to make a contract of the nature herein involved.

The cases cited by the respondents' counsel in regard to the general constitutional right of the citizen to make contracts relating to his lawful business are not inconsistent with the existence of the power of Congress to prohibit contracts of the nature involved in this case. The power to regulate commerce has no limitation other than those prescribed in the Constitution. The power, however, does not carry with it the right to destroy or impair those limitations and guaranties which are also placed in the Constitu

The case of Allgeyer v. Louisiana, 165 U. S. 578 [41: 832], is cited as authority for the statement concerning the right to contract. In speaking of the meaning of the word "liberty," as used in the Fourteenth Amendment to the Constitution, it was said in that case to include, among other things, the liberty of the citizen to pursue any livelihood or vocation, and for that purpose to enter into all contracts which might be proper, necessary, and essential to his carrying out those objects to a successful conclusion.

We think it extends at least to the prohibition of contracts relating to interstate commerce, which would extinguish all competition between otherwise competing railroad corporations, and which would in that way restrain interstate trade or commerce. We do not think that when the grantees of this public franchise are competing railroads seeking the business of transportation of men and goods from one state to another, that ordinary freedom of contract in the use and management of their property requires the [571] right to combine as one consolidatd and powerful association for the purpose of stifling competition among themselves, and of thus keeping their rates and charges higher than they might otherwise be under the laws of competition. And this is so, even though the rates provided for in the agreement may for the time be not more than are reasonable. They may easily and at any time be increased. It is the combination of these large and powerful corporations, covering vast sections of territory and influencing trade throughout the whole extent thereof, and acting as one body in all the matters over which the combination extends, that constitutes the alleged evil, and in regard to which, so far as the combination operates upon and restrains interstate commerce, Congress has power to legislate and to prohibit.

We do not impugn the correctness of that
statement. The citizen may have the right
to make a proper (that is, a lawful) con-
tract, one which is also essential and neces-
sary for carrying out his lawful purposes.
The question which arises here is, whether
the contract is a proper or lawful one, and
we have not advanced a step towards its so-
lution by saying that the citizen is protected
by the Fifth, or any other amendment, in his
right to make proper contracts to enable
him to carry out his lawful purposes. We
presume it will not be contended that the
court meant, in stating the right of the citi
zen," to pursue any livelihood or vocation,"
to include every means of obtaining a liveli-
hood, whether it was lawful or otherwise. Pre-
cisely how far a legislature can go in declar-
ing a certain means of obtaining a livelihood
unlawful, it is unnecessary here to speak of.
It will be conceded it has power to make some
The prohibition of such contracts may in kinds of vocations and some methods of ob-
the judgment of Congress be one of the rea-taining a livelihood unlawful, and in regard
sonable necessities for the proper regulation to those the citizen would have no right to
of commerce, and Congress is the judge of contract to carry them on.
such necessity and propriety, unless, in case
of a possible gross perversion of the princi-
ple, the courts might be applied to for re-

Congress may restrain individuals from
making contracts under certain circumstan-
ces and upon certain subjects. Frisbie v.
United States, 157 U. S. 160 [39: 657].

Notwithstanding the general liberty of contract which is possessed by the citizen under the Constitution, we find that there are many kinds of contracts which, while not in themselves immoral or mala in se, may yet be prohibited by the legislation of [573] the states or, in certain cases, by Congress. The question comes back whether the statute under review is a legitimate exercise of the power of Congress over interstate commerce, and a valid regulation thereof. The question is, for us, one of power only, and not of

policy. We think the power exists in Congress, and that the statute is therefore valid. Finally, we are asked to reconsider the question decided in the Trans-Missouri case, and to retrace the steps taken therein, because of the plain error contained in that decision and the widespread alarm with which it was received and une serious consequences which have resulted, or may soon result, from the law as interpreted in that


It is proper to remark that an application for a reconsideration of a question but lately decided by this court is usually based upon a statement that some of the arguments employed on the original hearing of the question have been overlooked or misunderstood, or that some controlling authority has been either misapplied by the court or passed over without discussion or notice. While this is not strictly an application for a rehearing in the same case, yet in substance it is the same thing. The court is asked to reconsider a question but just decided after a careful investigation of the matter involved. There have heretofore been in effect two arguments of precisely the same questions now before the court, and the same arguments were addressed to us on both those occasions. The report of the Trans-Missouri case shows a dissenting opinion delivered in that case, and that the opinion was concurred in by three other members of the court.

That opinion, it will be seen, gives with great force and ability the arguments against the decision which was finally arrived at by the court. It was after a full discussion of the questions involved, and with the knowledge of the views entertained by the minority as expressed in the dissenting opinion, that the majority of the court came to the conclusion it did. Soon after the decision a petition for a rehearing of the case was made, supported by a printed argument in its favor, and pressed with an earnestness and vigor and at a length which were certainly commensurate with the importance of the


[574] *This court, with care and deliberation, and also with a full appreciation of their importance, again considered the questions involved in its former decision.

A majority of the court once more arrived at the conclusion it had first announced, and accordingly it denied the application. And now for the third time the same arguments are employed, and the court is again asked to recant its former opinion, and to decide the same question in direct opposition to the conclusion arrived at in the Trans-Missouri

the lower courts, led us to the most careful and scrutinizing examination of the arguments advanced by both sides, and it was after such an examination that the majority of the court came to the conclusion it did.

It is not now alleged that the court on the former occasion overlooked any argument for the respondents or misapplied any controlling authority. It is simply insisted that the court, notwithstanding the arguments for an opposite view, arrived at an erroneous result, which, for reasons already stated, ought to be reconsidered and reversed.

As we have twice already, deliberately and earnestly, considered the same arguments which are now for a third time pressed upon our attention, it could hardly be expected that our opinion should now change from that already expressed.

While an erroneous decision might be in some cases properly reconsidered and overruled, yet it is clear that the first necessity is to convince the court that the decision was erroneous. It is scarcely to be assumed that such a result could be secured by the [575] presentation for a third time of the same arguments which had twice before been unsuccessfully urged upon the attention of the court.

We have listened to them now because the eminence of the counsel engaged, their earnestness and zeal, their evident belief in the correctness of their position, and, most important of all, the very grave nature of the questions argued, called upon the court to again give to those arguments strict and respectful attention. It is not matter for surprise that we still are unable to see the error alleged to exist in our former decision or to change our opinion regarding the questions therein involved.

Upon the point that the agreement is not in fact one in restraint of trade, even though it did prevent competition, it must be admitted that the former argument has now been much enlarged and amplified, and a general and most masterly review of that question has been presented by counsel for the respondents. That this agreement does in fact prevent competition, and that it must have been so intended, we have already attempted to show. Whether stifling competition tends directly to restrain commerce in the case of naturally competing railroads, is with very great ability. They acknowledge a question upon which counsel have argued that this agreement purports to restrain competition, although, they say, in a very slight degree and on a single point. They admit that if competition and commerce were identical, being but different names for the same thing, then, in assuming to restrain competition even so far, it would be assuming in a corresponding degree to restrain commerce. Counsel then add (and therein we entirely agree with them) that no such identity can be pretended, because it is plain that commerce can and does, take place on a large scale and in numerous forms without competition. The material considerations therefore turn upon the effects of competition upon the business of railroads, whether they are favorable to the commerce in which



The learned counsel while making the application frankly confess that the argument in opposition to the decision in the case above named has been so fully, so clearly, and so forcibly presented in the dissenting opinion of Mr. Justice White, that it is hardly possible to add to it nor is it necessary to repeat it. The fact that there was so close a division of opinion in this court when the matter was first under advisement, together with the different views taken by some of the judges of 171 U. S. U. S., Book 43.


« ForrigeFortsett »