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but to preserve it and secure its benefits to | 391; Freight Bureau Coses, 167 U. S. 479, all. Competition between independent lines 42 L. ed. 243; Southern P. Co. v. Railroad was preserved, and uniformity enforced to Commissioners, 78 "ed. Rep. 236. secure the benefit of this competition to all. 11. If the railrorus are not to be permitEach carrier was required to treat its ted to combine and prevent ruinous competipatrons with uniform fairness, without pref- tion, and establish and inaintain reasonable erence and without discrimination. The rates by arbitrary methods, then, it is said, only effective arrangement used at that time they must either abandon transportation, or by the trunk lines to stifle competition was consolidate, or persistently violate the law. the pooling agreement, and this was pro- There is a virtual consolidation now of hibited. It was recognized that competition these roads under the agreement. The pubwould keep the rates reasonable, and the lic is not interested in consolidation except long and short haul provision was intended as it affects competition. The Constitutions to secure to all points on each road the bene- and laws of many states prohibit the consolfit of such competition. Unjust discrimina: idation of railroads, but only of competing tion and undue preferences by a railroad railroads. Lines which do not compete may among its patrons was prohibited. Thus the consolidate, and the public thus gains the benefits of open competition were insured benefit of broader and more economical adto all. The policy was, among the patron ministration. Railroads which compete of each road, uniformity, but between the may not consolidate, because it prevents roads open competition.

competition and keeps up rates. First Report of Interstate Commerce Com

Public policy has demanded the prohibiWission 1887, p. 33.

tion of the consolidation of competing lines; 10. The point is made that railways are for the same reason Congress enacted the public highways, and the furnishing of railanti-pooling section of the Interstate Comway transportation is a governmental func merce Act. The pooling of freights and the tion; therefore the government should division of earnings is not bad in itself. It eliminate the advantage of locality by en is bad because used to stile competition. forcing absolute uniformity in rates, or per Equally bad is the Joint Traffic Agreement mit the railroads to do it by preventing before the court, which operates as effectualcompetition and maintaining arbitrary ly as any pooling arrangement ever devised. rates.

The people have not stopped to inquire It may be conceded that the furnishing of whether consolidation would result of necesrailroad transportation is a public function, sity in unreasonable rates; neither have they and therefore the government may regulate stopped to inquire whether pooling would it. Government, state and Federal, has done result necessarily in unreasonable rates. It this by forbidding the consolidation of com- is the tendency, not the absolute result, peting lines, by prohibiting pooling con- which has operated to prohibit consolidation, tracts, and by making illegal all agreements to prohibit pooling, to prohibit contracts in in restraint of trade.

restraint of trade. The absolute uniformity demanded is nei. Pearsall v. Great Northern R. Co. 161 U. ther practicable nor desirable. Absolute S. 646, 676, 40 L. ed. 838, 848; Louisville de uniformity extending to every rate, from N. R. Co. v. Kentucky, 161 U. S. 677, 698, every point, on every railroad, means abso- 40 L. ed. 849, 858. lute consolidation of control and absolute T'he railroads say that if they are not perarbitrary rates, and this is absolutely incon. mitted to prevent competition they will comsistent with competition. It admits of no rete, and in doing so will violate the intercompetition. The desirable uniformity is state commerce law; that they should be per that which goes along with competition, and mitted to combine for the purpose of presupplements it, and secures its benefits to all venting violations of the law, even if in doshippers without distinction. Each railroading so competition be prevented. should be required to treat its patrons-per- But to prevent competition is in itself to sons and places—with fairness and equality, violate the law. Better the chance to viowithout preference or discrimination. it late one law than the certainty of violating should not be required, however, to treat its another. Better the motive to violate one shippers no better than other lines treat law than the mandate to violate another. theirs. On the contrary it should be induced If the ability the railroads employ to cirto treat its shippers the very best it can, and cumvent the law were used to observe it, thereby make it incumbent upon competing neither this agreement nor the arguments in lines to treat their shippers as well. It support of it would be before the court. The should be induced to do this, not only in rates, railroads promise to obey one law if the but in service. The rigid, cast-iron, arbi. court will permit them to violate another. trary rule of absolute uniformity as between Would they keep the compact, if made! railroads, contended for, would logically pre Respect for the law based solely on self-invent all competition, whether in rates or terest is delusire and evanescent. serrice.

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 d 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. 0. & T. P. R. Co. v. merce Commission by the companies; while Interstate Commerce Commissioners, 162 U. in the Trans-Missouri case the associatior S. 184, 40 L cd. 935, 5 Inters. Com. Rep.' was given power to fix rates. But in the

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Trans-Missouri Agreement the association | act promptly upon the same for the protee was only given power to fix reasonable rates, tion of the parties hereto. and the fact that the rates fixed by the asso- Mr. Carter in his argument explained the ciation during its existence were fair and operation of this clause. Thirty days' no reasonable was admitted by the denials and tice of the intention of any company, by resallegations of the answer, which appear in olution of its board, to deviate from the rates the statement of the case. United States v. fixed by the association through its manaTrans-Missouri Freight Asso. 166 U. S. 303, gers, was required in order that the associa41 L. ed. 1015.

tion might have time to determine its course There is no less power in the Joint Traffic of action. If it could meet the rate proposed Association than in the Trans-Missouri, in, by the deviating member, it would do so. deed more power with respect to rates; and If it could not, it would take steps, in Mr. it is with the power alone that the court is Carter's language, “to exterminate" the re concerned, not how the power has been or calcitrant company. In no other way, ac may be exercised.

cording to Mr. Carter, could ruinous compeIn the Trans-Missouri case the association tition be prevented and the interests of all had been dissolved. The only question was members of the association protected. the legal effect of the authority conferred by 13. It may be conceded that the public the agreement. If there were no power un along each line is interested in the line getder the Joint Traffic Agreement to change ting its fair share of the through traffic and rates, nevertheless the power to maintain earnings; and this it will get under competirates arbitrarily would involve the authori. tion. The local public is not entitled, how. ty to keep them up after progress and inven- ever, to an arbitrary share of the through tion should render them excessive and unrea- traffic and earnings. It has a right to no sonable. But in point of fact, as pointed more than the advantages of the line at: out, the Joint Traffic Agreement vests in the tract. To give it more is to take what be association, through the managers, with ap- longs to another line and another section. A peal to the board of control, the authority prosperous section, with an intelligent, pro to change rates. This authority is more co- gressive population, makes a good railroad, ercive than that conferred by the Trans-Mis- and a good railroad attracts through traffic; souri Agreement.

ard it is not just or right to take this traffic Under the Trans-Missouri Agreement, five away and give to a poor road, in order to do days' written notice prior to each monthly for it what the public along its line ought to meeting was required to be given the do. 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 compe tion, "unless then and there the parties shall lition. 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 oi 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 Inter fect 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.

criminate in their rates and charges between Thus, under the Trans-Missouri Agree.

such connecting lines.” ment each member might, at its peril, make

15. It is insisted that if Congress had ina rate to meet outside competition, and each tended the anti-trust law to prohibit every member might, upon giving ten days' notice contract in restraint of trade, whether par. make an independent rate notwithstanding it would have used the language "every con

tial or general, reasonable or unreasonable, the action of the association. But under tract in any restraint of trade,” etc., "is the Joint Traffic Agreement no company can hereby declared to be illegal.” It seems to deviate from the rates as fixed by the man me, and I submit to the court, that the ex. agers except by a resolution of its board of pression “every contract in restraint of directors, and thirty days after a copy of trade" is quite as comprehensive as "every such resolution is filed with the managers. contract in any restraint of trade," and This absolutely prevents competition, and much better language. the intention to prevent competition is plain 16. The reply to Mr. Phelps's attack upon from the provision (art. 7, § 2, close). The the constitutionality of the anti-trust law managers upon receipt of such notice shall as construed by this court in the Trans-Mis

souri case, is to be found in the argument of grain. The farmer sells to the commission
Mr. Carter that railways are public high- merchant. If the rates are excessive he gets
vays, and in furnishing public transporta- so much less for his grain, or the purchas-
tion perform in a sense a governmental func- er from the commission merchant pays so
tion. The right of the government to regu. much more for it. The comunission merchant
late contracts between carriers and shippers who pays the freight has no real interest in
and to place proper restrictions upon con the charge. Of course this is not always
tracts among carriers themselves, in order true, but it does apply with respect to the
to protect the interests of the public, as af- great shipments handled by middlemen.
fected by these instrumentalities of com- Finally, it is questionable under the Inter-
merce, has not heretofore been seriously state Commerce Act whether a suit to re-
questioned. The states regulate the construc- cuter back an excess paid above a reasonable
tion, maintenance, and operation of rail. rate can be maintained, if the rate charged
Tüads, prescribing and enforcing maximum was that fixed in the schedule filed with the
rates, preventing the consolidation of com- commission and published under the inter-
peting lines, and securing to the public the state commerce law.
benefit of competition.

Van l'atten v. Chicago, M. & St. P. R. Co.
The doctrine laid down in the case of Munn 81 l'ed. Rep. 545.
v Illinois, 94 U. S. 113, 24 I. ed. 77, applies. 19. As the law stands the Commission has
When a man devotes his property to a public no power to prescribe or enforce rates. Com-
use, to that extent he grants the public an petition secures reasonableness; the law en.
interest in that use. The same policy which forces uniformity. In Interstate Commerce
supports the prohibition against consolida- Commission v. Cincinnati, N. 0. & T. P. R.
tion, and the 5th section of the interstate Co. 167 U. S. 479, 42 L. ed. 243, this court,
commerce law forbidding, the pooling of speaking by Mr. Justice Brewer, held that
freights or the division of earnings, is the if Congress had intended to give the Commis-
justification for the declaration that all con- sio, power over rates it would have done so
tracts in restraint of trade shall be deemed in unmistakable language. So, too, when
illegal. The result of the consolidation, the Congress sees fit to take the railroads out of
pooling, or combination in restraint of trade, the operation of the natural law of trade it
is beside the question. Congress is entitled will do so in plain terms, and for independ.
to pass judgment upon the tendency of a ent competition will substitute governmental
contract in restraint of trade. If it deems regulation.
such a contract reprehensible, injurious in DI essrs. James A. Logan and John G.
its tendencies, it may prohibit it, whether Johnson filed a brief for the Pennsylvania
the act will result in a particular case in the Railroad Company and other railroad com-
establishment of reasonable or unreasona. panies, appellees.
ble rates.

Alessrs. Robert W. de Forest and David 17. As to the remedy in case of an unrea- Willcox filed a brief for the Central Railroad sonably low rate. Judge Cooley, in a well. Company of New Jersey, appellee. corsidered opinion, Re Chicago, St. P. & K. C. R. Co. 2 Inters. Com. Rep. 137, 2 Inters.

*Mr. Justice Peckham, after stating the [558) Com. Com. 231, approved by this court in facts, delivered the opinion of the court: Inierstate Commerce Commission v. Cincin- This case has been most ably argued by nati, N. 0. & T. P. R. Co. 167 U. S. 511, 42 counsel both for the government and the rail. L. ed. 257, held that under the interstate road companies. The suit is brought to obcommerce law the Commission has no power tain a decree declaring null and void the to determine that a rate is unreasonably low, agreement mentioned in the bill. Upon com. and to order the carrier to refrain from paring that agreement with the one set forth charging such rate on such ground.

in the case of United States v. Trans-Mis. 18. As to the remedy in case of an unrea- souri Freight Association, 166 U. S. 290 sonably high rate.

[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 there. therefore left to recover the excess in rate in decided, after holding that the statute ap. paid. I know of no case where the excess plied to railroad *companies as common car-(559) charged over a reasonable rate on interstate riers, was simply that all contracts, whether commerce has been recovered back. The in reasonable as well as in unreasonable reamount involved in any particular transac- straint of trade, were included in the terms tion would be small; it would require years of the act, and the question whether the con. to carry the case through the courts, and no tract then under review was in fact in reindividual shipper would invite the ill will of straint of trade in any degree whatever was a powerful railroad by beginning such a con- neither made nor decided, while it is plainly test.

raised in this. Moreover, the man who actually pays the Again, it is asserted that there are differ. freight is not the man who suffers from the ences between the provisions contained in unreasonable charge. Take the of the two agreements, of such a material and

case

fundamental nature that the decision in the “Does the agreement restrain trade or com-
case referred to ought to form no precedent merce in any way so as to be a violation of
for the decision of the case now before the the act? We have no doubt that it does.
court.

The agreement on its face recites that it is
It is also objected that the statute, if con- entered into for the purpose of mutual pro-
strued as it has been construed in the tection by establishing and maintaining rea-
Trans-Missouri case, is unconstitutional, in sonable rates, rules, and regulations on all
that it unduly interferes with the liberty freight traffic, both through and local.
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 di. vanced in the arguments in the other case. rect, immediate, and necessary effect is *to (561

Finally, a reconsideration of the ques- put a restraint upon trade or commerce as tions decided in the former case is very described in the act. For these reasons the strongly pressed upon our attention, be suit of the government can be maintained cause, as is stated, the decision in that case without proof of the allegation that the is quite plainly erroneous, and the conse agreement was entered into for the purpose quences of such error are far reaching and of restraining trade or commerce or for disastrous, and clearly at war with justice maintaining rates above what was reasonaand sound policy, and the construction ble. The necessary effect of the agreement placed upon the Anti-Trust Statute has been is to restrain trade, no matter what the inreceived by the public with surprise and tent was on the part of those who signed it." alarm.

The bill, of the complainants in that case, We will refer to these propositions in the while alleging an illegal and unlawful intent order in which they have been named. on the part of the railroad companies in en

As to the first, we think the report of the tering into the agreement, also alleged that Trans-Missouri case clearly shows, not only by means of the agreement the trade, traffic, that the point now taken was there urged and commerce in the region of country af. upon the attention of the court, but it was fected by the agreement had been and were then intentionally and necessarily decided. monopolized and restrained, hindered, in. The whole foundation of the case on the part jured, and retarded. These allegations were of the government was the allegation that denied by defendants. the agreement there set forth was a contract There was thus a clear issue made by the

or combination in restraint of trade, and un pleadings as to the character of the agree(660] lawful on that account. If * the agreement ment, whether it was or was not one in re

did not in fact restrain trade, the govern- straint of trade. ment had no case.

The extract from the opinion of the court If it did not in any degree restrain trade, above given shows that the issue so made was it was immaterial whether the statute em- not ignored, nor was it assumed as a conces. braced all contracts in restraint of trade, or sion that the agreement did restrain trade only such as were in unreasonable restraint to a reasonable extent. The statement in thereof. There was no admission or conces- the opinion is quite plain, and it inevitably sion in that case that the agreement did in leads to the conclusion that the question of fact restrain trade to a reasonable degree. fact as to the necessary tendency of the agree Hence, it was necessary to determine the ment was distinctly presented to the mind fact as to the character of the agreement be- of the court, and was consciously, purposely, fore the case was made out on the part of the and necessarily decided. It cannot, theregovernment.

fore, be correctly stated that the opinion only The great stress of the argument on both dealt with the question of the construction sides was undoubtedly upon the question as of the act, and that it was assumed that the to the proper construction of the statute, agreenient did to some reasonable extent re for that seemed to admit of the most doubt, strain trade. In discussing the question as but the other question was before the court, to the proper construction of the act, the was plainly raised, and was necessarily decided. The opinion shows this to be true. court did not touch upon the other aspect of At page 341 of the report the opinion con- ment itself, but when the question of con

the case, in regard to the nature of the agreetains the following language:

"The conclusion which we have drawn struction was finished, the opinion shows from the examination above made of the that the question as to the nature of the question before us is that the Anti-Trust Act agreement was then entered upon and disapplies to railroads, and that it renders il. cussed as a fact necessary to be decided in legal all agreements which are in restraint the case, and that it in fact was decided. An of trade or commerce as we have above de unlawful intent in entering into the agreefined that expression, and the question then ment was held immaterial, *but only for the(562 arises whether the agreement before us is reason that the agreement did in fact and by of that nature.

its terms restrain trade.

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 obterial and substantial differences in the project of the association fails of accomplishvisions 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 reaarrived at in the other.

sonable and just rates and a general uni. The expressed purpose of the agreement in formity therein. If one company is allowed, this case is, among other things, “to estab- while remaining a member of the association, lish and maintain reasonable and just rates, to fix its own rates and be guided by them, fares, rules, and regulations on state and in- it is plain that as to that company the agree terstate traffic.” The companies agree that ment might as well be rescinded. This rethe schedule of rates and fares already duly sult was never contemplated. In order, published and in force and authorized by the therefore, not only to prevent secret competicompanies, parties to the agreement, and tion, but also to prevent any competition filed, as to interstate traffic, with the Inter- whatever among the companies parties to the state Commerce Commission, shall be reaf- agreement, the provision is therein made for firmed, and copies of all such schedules are to the prompt action of the board of managers be filed, with the managers constituted under whenever it receives a copy of the resolution the agreement within ten days after it be adopted by the board of directors of any one comes effective. The managers may from time company for a change of the rates as estabto time recommend changes in the rates, etc., lished under the agreement. By reason of and a failure to observe the recommenda- this provision the board undoubtedly las autions is deemed a violation of the agreement. thority and power to enforce the uniformity No company can deviate from these rates ex of rates as against the offending company cept under a resolution of its board of direct upon pain of an open, rigorous, and relentors, and such resolution can only take effect less war of competition against it on the thirty days after service of a copy thereof on part of the whole association. the managers who, upon receipt thereof,

*A company desirous of deviating from the (564) "shall act promptly for the protection of the rates agreed upon and which its associates parties hereto.” For a violation of the agree desire to maintain is at once confronted with ment the offending company forfeits to the this probability of a war between itself on association a sum to be determined by the the one side and the whole association on managers thereof, not exceeding five thous- the other, in the course of which rates would and dollars, or more upon the contingency probably drop lower than the company was named in the rule.

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 conse. and the one set forth in the Trans-Missouri quent competition. Thus the power to com.

In 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

vound 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 mem-
is deemed a violation of the agreement. The bers, presumably by allowing them to change
only alternative is the adoptior 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 resuit is to be
ing rates by any one company is absent from the yielding of the offending company, in:
the other agreement. It is this provision
which is referred to by counsel as most ma- duced by the war which might otherwise be
terial and important, and one which consti. waged against it by the combined force of
tutes a material and important distinction all the other parties to the agreement. Un-
between the two agreements. It is said to be der these circumstances the agreement, taken
designed solely to prevent secret and illegal as a whole, prevents, and was evidently in.
competition in rates, while at the same time tended to prevent, not only secret but any
providing for and permitting open competi- competition. The abstract right of a single
tion therein, and that unless it can be re- company to deviate from the rates becomes
garded as restraining competition so as to immaterial, and its exercise, to say the least,
restrain trade, there is not even an appear- very inexpedient, in the face of this power
ance of restraint of trade in the agreement. of the managers to enlist the whole associa-

case.

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