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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
ways, 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 tho
to protect the interests of the public, as af- great shipments handled by middlemen.
lected 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- curer back an excess paid above a reasonable
tion, maintenance, and operation of rail. rate can be maintained, if the rate charged
Twards, 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 Fed. 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-
ilse, 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. Čincinnati, 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- sioji 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 Ji 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.

Messrs. Robert W. de Forest and David 17. As to the remedy in case of an unrea- Willcox filed a brief for the Central Railroail sonably low rate. Judge Cooley, in a well- Company of New Jersey, appellee. corsidered opinion, Re Chicugo, St. P. & K. C. R. Co. 2 Înters. 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: Interstate Commerce Commission v. Cincin- This case has been most ably argued by naii, N. O. & 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 obcon merce 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-Mis18. 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 theretherefore left to recover the excess in rate in decided, after holding that the statute appaid. I know of no case where the excess plied to railroad *companies as common car-[559] charged over a reasonable rate on interstate riers, was simply that all contracts, whether commerce has been recovered back. The in reasonable as well as in unreasonable reemount 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 conto 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

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


ble rates.



171 U. S.

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.

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-



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 deci.
such 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, consti.
representation 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 (565]agency can be maintained by any of the com- earnestly contended that contracts in re

panies, except with the approval of the man- straint of trade are not necessarily prejudi. agers. They are also charged with the duty cial to the security or welfare of society, and of securing to each company, party to the that Congress is without power to prohibit agreement, equitable proportions of the com- generally all contracts in restraint of trade, petitive traffic covered by the agreement, so and the effort to do this invalidates the act far as can be legally done. The natural, di- in question. It is urged that it is for the rect, and necessary effect of all these various court to decide whether the mere fact that provisions of the agreement is to prevent any a contract or arrangement, whatever its pure competition whatever between the parties to pose or character, may restain trade in some it for the whole time of its existence. It is degree, renders it injurious or prejudicial to probably as effective in that way as would the welfare or security of society, and if be a provision in the agreement prohibiting the court be of opinion that such welfare or in terms any competition whatever. 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 in stitutional. It is claimed that the act can stance, and that the authority was not con- be supported only as an exercise of the po fined to reasonable rates, while in the case lice power, and that the constitutional guar. now 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 prop sion, 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 Sanguage 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 the extent to which it limits the freedom and agreenient the board of managers is in sub- destroys the property of the individual can stance and as a result thereof placed in con- scarcely be exaggerated, and that ordinary trol of the business and rates of transporta contracts and combinations, which are at the tion, and its duty is to see to it that each same time most indispensable, have the effect company charges the rates agreed upon and of somewhat restraining trade and com-(58 receives its equitable proportion of the traf. merce, although to a very slight extent, but fic.

yet, under the construction adopted, they are The natural and direct effect of the two illegal. 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 sanie business for the purpose of limiting two cases on any such ground. Indeed, the number of persons employed in the busicounsel 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 emthose of the agreement here, were less explic- ployment between two persons previously it in making it just and reasonable.

engaged in the same line of business; the Regarding the two agreements as alike in appointment by two producers of the same their main and material features, we are person to sell their goods on commission; brought to an examination of the question the purchase by one wholesale merchant of

of the constitutionality of the act, construed the product of two producers; the lease or (566jas it has been in the Trans-Missouri case. purchase by a farmer, manufacturer, or mer

It is worthy of remark that this question chant of an additional farm, manufactory, was never raised or hinted at upon the argu- or shop; the withdrawal from business of ment of that case, although, if the respon any farmer, merchant, or manufacturer; a dents' presert contention be sound, it would sale of the goodwill of a business with an have furnished a conclusive objection to the agreement not to destroy its value by engagenforcement of the act as construed. The ing in similar business; and a covenant in fact that not one of the many astute and able a deed restricting the use of real estate. It counsel for the transportation companies in is added that the effect of most business conthat case raised an objection of so conclusive tracts or combinations is to restrain trade in a character, if well founded, is strong evi- some degree. dence that the reasons showing the invalid. This makes quite a formidable list. It ity of the act as construed do not lie on the will be observed, however, that no coniraet

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