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.

"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.

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 [56] 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, because, as is stated, the decision in that case is quite plainly erroneous, and the consequences of such error are far reaching and disastrous, and clearly at war with justice and sound policy, and the construction placed upon the Anti-Trust Statute has been received by the public with surprise and alarm.

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

suit of the government can be maintained without proof of the allegation that the agreement was entered into for the purpose of restraining trade or commerce or for maintaining rates above what was reasonable. The necessary effect of the agreement is to restrain trade, no matter what the intent was on the part of those who signed it.”

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, injured, and retarded. These allegations were denied by defendants.

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 of the government was the allegation that 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 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. At page 341 of the report the opinion contains the following language:

"The conclusion which we have drawn from the examination above made of the question before us is that the Anti-Trust Act applies to railroads, and that it renders illegal all agreements which are in restraint of trade or commerce as we have above defined that expression, and the question then arises whether the agreement before us is of that nature.

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

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 agreement 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 case, in regard to the nature of the agreement itself, but when the question of con

struction

was finished, the opinion shows that the question as to the nature of the agreement was then entered upon and discussed as a fact necessary to be decided in the case, and that it in fact was decided. An unlawful intent in entering into the agreement was held immaterial, but only for the [56 reason that the agreement did in fact and by its terms restrain trade.

Second. We have assumed that the agree

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-
tate a different result in this case from that
arrived at in the other.

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.

case.

ment, because the purpose of its formation is the establishment and maintenance of reasonable 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 result 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 directors of any one company for a change of the rates as established under the agreement. By reason of this provision the board undoubtedly has authority and power to enforce the uniformity of rates as against the offending company upon pain of an open, rigorous, and relentless war of competition against it on the part of the whole association.

*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 So far as the establishment of rates and or could afford, and such a prospect would fares is concerned, we do not see any sub- be generally sufficient to prevent the inaugu stantial difference between this agreement ration of the change of rates and the conseand the one set forth in the Trans-Missouri quent competition. Thus the power to comIn that case the rates were established mence such a war on the part of the manaby the agreement, and any company violat-gers would operate to most effectually preing the schedule of rates as established un- vent a deviation from rates by any one comder the agreement was liable to a penalty. pany against the desire of the other parties A company could withdraw from the associa- to the agreement. Competition would be tion on giving thirty days' notice, but while prevented by the fear of the united competi it continued a member it was bound to charge tion of the association against the particular the rates fixed, under a penalty for not do- member. Counsel for the association them[563] ng so. In this case the companies are selves state that the agreement makes it the ound to charge the rates fixed upon orig- duty of the managers, in case the defection inally in the agreement or subsequently should injuriously affect some particular recommended by the board of managers, and members more than others, to endeavor to the failure to observe their recommendations furnish reasonable protection to such memis deemed a violation of the agreement. The bers, presumably by allowing them to change only alternative is the adoption of a resolu- rates so as to meet such competition, or by tion by the board of directors of any com- recommending such fierce competition as to pany providing for a change of rates so far persuade the recalcitrant to fall back into as that company is concerned, and the service line. By this course the competition is open, of a copy thereof upon the board of managers but none the less sufficient on that account, as already stated. This provision for chang- and the desired and expected result is to be ing rates by any one company is absent from the other agreement. It is this provision the yielding of the offending company, inwhich 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.

duced by the war which might otherwise be
waged against it by the combined force of
all the other parties to the agreement. Un-
der these circumstances the agreement, taken
as a whole, prevents, and was evidently in-
tended 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 counsel. the managers are to have power to organize The point not being raised and the decisuch joint freight and passenger agencies as sion of that case having proceeded upon an they may deem desirable, and if established assumption of the validity of the act under they are to be so arranged as to give proper either construction, it can, of course, constirepresentation to each company, and no so- tute no authority upon this question. Upon liciting or contracting passenger or freight the constitutionality of the act it is now [865]agency can be maintained by any of the com- earnestly contended that contracts in repanies, except with the approval of the man-straint of trade are not necessarily prejudiagers. 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.

cial 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 It is also said that the agreement in the that kind, then Congress has no power to profirst case conferred upon the association an hibit it, and the act must be declared unconunlimited power to fix rates in the first institutional. It is claimed that the act can stance, and that the authority was not con- be supported only as an exercise of the pofined to reasonable rates, while in the case lice power, and that the constitutional guarnow before us the agreement starts out with anties furnished by the Fifth Amendment rates fixed by each company for itself and secure to all persons freedom in the pursuit filed with the Interstate Commerce Commis- of their vocations and the use of their propsion, and which rates are alleged to be rea-erty, and in making such contracts or ar sonable. The distinction is unimportant. rangements as may be necessary therefor. It was considered in the other case that the In dwelling upon the far-reaching nature of rates actually fixed upon were reasonable, the anguage used in the act as construed while the rates fixed upon in this case are in the case mentioned, counsel contend that 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 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 As examples of the kinds of contracts which
rates at a higher level than would other- are rendered illegal by this construction of
wise prevail, and the differences between the act, the learned counsel suggest all or-
them are not sufficiently important or mate- ganizations of mechanics engaged in the
rial to call for different judgments in the same business for the purpose of limiting
two cases on any such ground. Indeed, the number of persons employed in the busi-
counsel for one of the railroad companies on ness, or of maintaining wages; the formation
this argument, in speaking of the agreement of a corporation to carry on any particular
in the Trans-Missouri case, says of it that line of business by those already engaged
its terms, while substantially similar to therein; a contract of partnership or of em-
those of the agreement here, were less explic-ployment between two persons previously
it 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

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 mer-
chant 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 engag
ing in similar business; and a covenant in
a deed restricting the use of real estate. It
is added that the effect of most business con-
tracts 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. The agreement
affects interstate commerce by destroying
competition and by maintaining rates above
what competition might produce.

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 combina-
tion 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 If it did not do that, its existence would be [568] that term; *and the sale of a goodwill of a useless, and it would soon be rescinded or business with an accompanying agreement abandoned. Its acknowledged purpose is to not to engage in a similar business was in- maintain rates, and, if executed, it does so. stanced in the Trans-Missouri case as a con- It must be remembered, however, that the act tract not within the meaning of the act; does not prohibit any railroad company from and it was said that such a contract was charging reasonable rates. If in the absence collateral to the main contract of sale, and of any contract or combination among the was entered into for the purpose of enhanc- railroad companies the rates and fares would ing the price at which the vendor sells his be less than they are under such contract or business. The instances cited by counsel combination, that is not by reason of any 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, 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 As counsel for the Traffic Association has 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 indirectly 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 bearing 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 restrain 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

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.

The building and operation of a railroad
thus required a public franchise. The state
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
and commerce, and when transported be-
tween states such commerce becomes what is
described as interstate, and comes, to a cer-
tain extent, under the jurisdiction of Con-
gress by virtue of its power to regulate com-
merce among the several states.

tion or in any of the amendments to that in-
strument. Monongahela Nav. Co. v. United
States, 148 U. S. 312-336 [37: 463-471]; In-
terstate Commerce Commission v. Brimson,
154 U. S. 447-479 [38: 1047-1058, 4 Inters.
Com. Rep. 545].

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-
vant.

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