of the nature above described is now before | Congress, in the exercise of its right to reguthe 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 ingarded in the nature of a contract in re- terstate rates and fares for the transportastraint 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 combinamight also be difficult to show that the ap- tion, even though the rates and fares thus espointment by two or more producers of the tablished are reasonable. Such an agreesame person to sell their goods on commis- ment directly affects and of course is intendsion was a matter in any degree in restraint ed to affect the cost of transportation of comof trade. modities, and commerce consists, among other things, of the transportation of commodities, and if such transportation be between states it is interstate commerce. The agreement affects interstate commerce by destroying competition and by maintaining rates above what competition might produce. If it did not do that, its existence would be useless, and it would soon be rescinded or abandoned.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 war of competition among themselves, and thereby themselves reduce their rates and fares. Has not Congress with regard to interstate commerce and in the course of regulating it, in the case of railroad corporations, the power to say that no contract or combination shall be legal which shall restrain trade and commerce by shutting out the operation of the general law of competition? We think it has. 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 68]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 in terstate commerce, and that to treat the act as condemning all agreements under which, as a result, the cost of conducting an interstate commercial business may be increased, would enlarge the application of the act far beyond the fair meaning of the language used. The effect upon interstate commerce must not be indirect or incidental only. An agreement entered into for the purpose of promoting the legitimate business of an in- truly said, the ordinary highways on land dividual or corporation, with no purpose to have generally been established and mainthereby 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- should itself build them or permit others to directly and remotely affect that commerce. do it. The state did not build them, and as We also repeat what is said in the case their building required, among other things, above cited, that "the act of Congress must the appropriation of *land, private individ-[570] have a reasonable construction, or else there uals could not enforce such appropriation would scarcely be an agreement or contract without a grant from the state. among business men that could not be said The building and operation of a railroad to have, indirectly or remotely, some bear- thus required a public franchise. The state ing upon interstate commerce, and possibly would have had no power to grant the right to restrain it." To suppose, as is assumed of appropriation unless the use to which the by counsel, that the effect of the decision in land was to be put was a public one. Taking the Trans-Missouri case is to render illegal land for railroad purposes is a taking for a most business contracts or combinations, public purpose, and the fact that it is taken however indispensable and necessary they for a public purpose is the sole justification may be, because, as they assert, they all re- for taking it at all. The business of a railstrain trade in some remote and indirect degree, is to make a most violent assumption, and one not called for or justified by the decision mentioned, or by any other decision of this court. The question really before us is whether As counsel for the Traffic Association has road carrier is of a public nature, and in of passengers and freight, is a part of trade tion or in any of the amendments to that in- Among those limitations and guaranties 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 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 re-ing a certain means of obtaining a livelihood strains 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) contract, one which is also essential and necessary 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 solution 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 livelihood, whether it was lawful or otherwise. Precisely how far a legislature can go in declar 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 obthe 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 principle, the courts might be applied to for relief. 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 Congress may restrain individuals from making contracts under certain circumstances 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 ques tion is, for us, one of power only, and not of policy. We think the power exists in Con- case. 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. the lower courts, led us to the most careful It is not now alleged that the court on the 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 imThat opinion, it will be seen, gives with portant of all, the very grave nature of the great force and ability the arguments against questions argued, called upon the court to the decision which was finally arrived at by again give to those arguments strict and rethe court. It was after a full discussion of spectful attention. It is not matter for surthe questions involved, and with the knowl- prise that we still are unable to see the error edge of the views entertained by the minor-alleged to exist in our former decision or to ity 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 The learned counsel while making the ap: plication 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 U. S., Book 43. 171 U. S. change our opinion regarding the questions 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 a question upon which counsel have argued that this agreement purports to restrain with very great ability. They acknowledge slight degree and on a single point. They competition, although, they say, in a very 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 19 289 the roads are engaged, or unfavorable and in restraint of that commerce. Upon that question it is contended that agreements be[576]tween railroad companies of the nature of that now before us are promotive instead of in restraint of trade. This conclusion is reached by counsel after an examination of the peculiar nature of railroad property and the alleged baneful effects of competition upon it and also upon the public. It is stated that the only resort open to railroads to save themselves from the effects of a ruinous competition is that of agreements among themselves to check and control it. A ruinous competition is, as they say, apt to be carried on until the weakest of the combatants goes to destruction. After that the survivor, being relieved from competition, proceeds to raise its prices as high as the business will bear. Commerce, it is said, thus finally becomes restrained by the effects of competition, while at the same time otherwise valuable railroad property is thereby destroyed or greatly reduced in value. There can be no doubt that the general tendency of competition among competing railroads is towards lower rates for transportation, and the result of lower rates is generally a greater demand for the articles so transported, and this greater demand can only be gratified by a larger supply, the furnishing of which increases commerce. This is the first and direct result of competition among railroad carriers. In the absence of any agreement restraining competition, this result, it is argued, is neutralized, and the opposite one finally reached by reason of the peculiar nature of railroad property which must be operated and the capital invested in which cannot be withdrawn, and the railroad managers are therefore, as is claimed, compelled to, not only compete among themselves for business, but also to carry on the war of competition until it shall terminate in the utter destruction or the buying up of the weaker roads, after which the survivor will raise the rates as high as is possible. Thus, the indirect but final effect of competition is claimed to be the raising of rates and the consequent restraint of trade, and it is urged that this result is only to be prevented by such an agreement as we have here. In that way alone it is said that competition is overcome, and general uniformity and reasonableness of rates securely established. (577) *The natural, direct, and immediate effect of competition is, however, to lower rates, and to thereby increase the demand for commodities, the supplying of which increases commerce, and an agreement whose first and direct effect is to prevent this play of competition restrains instead of promoting trade and commerce. Whether, in the absence of an agreement as to rates, the consequences described by counsel will in fact follow as a result of competition, is matter of very great uncertainty, depending upon many contingencies and in large degree upon the voluntary action of the managers of the several roads. Railroad companies may and often do continue in existence and engage in their lawful traffic at some profit, although they are competing railroads and are not acting under any agreement or combination with their competitors upon the subject of rates. It appears from the brief of counsel in this case that the agreement in question does not embrace all of the lines or systems engaged in the business of railroad transportation between Chicago and the Atlantic coast. It cannot be said that destructive competition, or, in other words, war to the death, is bound to result unless an agreement or combination to avoid it is entered into between otherwise competing roads. It is not only possible, but probable, that good sense and integrity of purpose would prevail among the managers, and while making no agreement and entering into no combination by which the whole railroad interest as herein represented should act as one combined and consolidated body, the managers of each road might yet make such reasonable charges for the business done by it as the facts might justify. An agreement of the nature of this one, which directly and effectually stifles competition, must be regarded under the statute as one in restraint of trade, notwithstanding there are possibilities that a restraint of trade may also follow competition that may be indulged in until the weaker roads are completely destroyed and the survivor thereafter raises rates and maintains them. Coming to the conclusion we do, in regard to the various questions herein discussed, we think it unnecessary to further allude to [578] the other reasons which have been advanced for a reconsideration of the decision in the Trans-Missouri case. The judgments of the Circuit Court of the United States for the Southern District of New York and of the Circuit Court of Appeals for the Second Circuit are reversed and the case remanded to the Circuit Court with directions to take such further proceedings therein as may be in conformity with this opinion. Mr. Justice Gray, Mr. Justice Shiras and Mr. Justice White dissented. Mr. Justice McKenna took no part in the decision of the case. HENRY HOPKINS et al., Appts., V. UNITED STATES. (See S. C. Reporter's ed. 578-604.) Buying and selling live stock by members of a stock exchange is not interstate commerce-by-law as to commissions-stock sent from another state-by-law as to telegrams-agents soliciting consignmentsstock yards partly in one state and partly in another refusal to do business with persons not members-when agreement or combination is within the statute. 1. The business of buying and selling live stock at stock yards in a city by members of a stock exchange as commission merchants is not Interstate commerce, although most of the purchases and sales are of live stock sent from other states, and the members of the stock | for decision. Reversed, and case remitted to See same case below, 82 Fed. Rep. 529. Statement by Mr. Justice Peckham: *This suit was commenced by the United [579] 2. A by-law of the Kansas City Live-Stock Exchange, which regulates the commissions to States attorney for the district of Kansas, be charged by members of that association acting under the direction and by the aufor selling live stock is not in restraint of in- thority of the Attorney General of the Unitterstate commerce, or a violation of the acted States, against Henry Hopkins and the of July 2, 1890, to protect commerce from un- other defendants, residents of the state of lawful restraints. Kansas and members of a voluntary unincorporated association known and designated as the Kansas City Live Stock Exchange. The purpose of the action is to obtain the dissolution of the exchange and to perpetually enjoin the members from entering into or from continuing in any combination of a like character. 8. A commission agent who sells cattle at their place of destination, which are sent from another state to be sold, is not engaged in interstate commerce; nor is his agreement with others in the same business, as to the commissions to be charged for such sales, void as a contract in restraint of that com merce. 4. In order to come within the provisions of the statute, the direct effect of an agreement of combination must be in restraint of trade or commerce among the several states or with foreign nations. 5. Restrictions on sending prepaid telegrams live-stock exchange, when these restrictions the act of Congress. 7. The fact that a state line runs through a lot of stock in the yards which may be partly in one state and partly in another, has no effect to make the business of selling stock stock yards, and that sales may be made of interstate commerce. 8. A combination of commission merchants at stock yards, by which they refuse to do business with those who are not members of their association, even if it is illegal, is not subject to the act of Congress of July 2, 1890, to protect trade and commerce, since their business is not interstate commerce. [No. 210.] Argued February 28, March 1, 1898. cided October 24, 1898. As a foundation for the relief sought it was alleged in the bill that the members of this association, known as the Kansas City Live Stock Exchange, have adopted articles of association, rules, and by-laws which they have agreed to be bound by; that the business of the exchange is carried on and conducted by a board of directors at the Kansas City stock yards, which are situated partly in Kansas City in the state of Missouri and partly in Kansas City in the state of Kansas, the building owned by the stock-yards company being located one half of it in the state of Missouri and the other half in the state of Kansas, and half of the defendants have offices and transact business in these stock yards and in that part of the building which is within the state of Kansas and the other half in that part of the building which is in the state of Missouri; that the Kansas City Stock Yards Company is a corporation owning the stock yards, where the business is done by the members of the exchange; that substantially all the business transacted in the matter of receiving, buying, selling and handling their live stock at Kansas City is carried on by the defendants herein and by the other members of the exchange as commission merchants, and that large numbers of the live stock, consisting of cattle and [580] hogs and sheep bought and sold and handled at the stock yards by the defendants and their fellow members in the exchange, are shipped De- from the states of Nebraska, Colorado, Texas, Missouri, Iowa, and Kansas and the territories of Oklahoma, Arizona, and New MexA WRIT OF CERTIORARI to the Unit-ico; that when this stock is received at the ed States Circuit Court of Appeals for stock yards it is sold by the defendants, memthe Eighth Circuit to bring up the whole bers of the exchange, to the various packing case in which that court had certified cer- houses situated at Kansas City, Missouri, tain questions. The suit was brought by the and Kansas City, Kansas, and it is also sold United States against Henry Hopkins et al., for shipment to the various other markets, members of the Kansas City Live Stock Ex- particularly Chicago, St. Louis, and New change, to obtain the dissolution of the ex-York; that vast numbers of cattle, hogs, and change and perpetually enjoin the members other live stock are received annually at from entering into or from continuing in any the stock yards and handled by the members combination of a like character. The Circuit of the exchange. Court of the United States for the District of Kansas, First Division, granted the injunction, and from the order granting it an appeal was taken by the defendants to said Circuit Court of Appeals, and upon a writ of certiorari the whole case was brought here ON The bill also alleges that large numbers of the live stock sold at the stock yards by the defendants are encumbered by mortgages thereon, executed by their owners in the various states and territories, which mortgages have been given to various defendants as se |
