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 (865]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 pur. 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 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 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 propsion, and which rates are alleged to be rea- erty, and in making such contracts or ar. Bonable. 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 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- (567) 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 imporcant 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 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.

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 (666jas 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 engag.
enforcement 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 con-
that 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 coniract

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(669)
less,

we might say that the formation of cor- or combination between competing railroad porations for business or manufacturing pur corporations entered into and formed for the poses has never, to our knowledge, been re- purpose of establishing and maintaining ingarded in the nature of a contract in re-terstate rates and fares for the transportastraint of trade or commerce. The same may tion of freight and passengers on any of the be said of the contract of partnership. It railroads parties to the contract or combinamight also be difficult to show that the ap- tion, even though the rates and fares thus espointment by two or more producers of the tablished are reasonable. Such an agreesame person to sell their goods on commis ment directly affects and of course is intend. sion was a matter in any degree in restrainted to affect the cost of transportation of comof trade.

modities, and commerce consists, among other We are not aware that it has ever been things, of the transportation of commodities, claimed that a lease or purchase by a farm- and if such transportation be between states er, manufacturer, or merchant of an addi- it is interstate commerce. The agreement tional farm, manufactory, or shop, or the affects interstate commerce by destroying withdrawal from business of any farmer, competition and by maintaining rates above merchant, or manufacturer, restrained com: what competition might produce.

merce or trade within any legal definition of If it did not do that, its existence would be (668]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 provision of the act which itself lowers rates,
upon the question under consideration. In but only because the railroad companies
Hopkins v. United States (post, 290), decided would, as it is urged, voluntarily and at once
at this term, we have said that the statute inaugurate a war of competition among
applies only to those contracts whose direct themselves, and thereby themselves reduce
and immediate effect is a restraint upon in their rates and fares.
terstate commerce, and that to treat the act

Has not Congress with regard to interstate
as condemning all agreements under which, commerce and in the course of regulating it,
as a result, the cost of conducting an inter in the case of railroad corporations, the
state commercial business may be increased, power to say that no contract or combina-
would enlarge the application of the act far tion shall be legal which shall restrain trade
beyond the fair meaning of the language and commerce by shutting out the operation
used. The effect upon interstate commerce of the general law of competition? We
must not be indirect or incidental only. An think it has.
agreement entered into for the purpose of 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 main.
thereby affect or restrain interstate com- tained by the public. When the matter of
merce, and which does not directly restrain the building of railroads as highways arose,
such conimerce, is not, as we think, covered a question was presented whether the state
by the act, although the agreement may in- should itself build them or permit others to
directly and remotely affect that commerce. do it. The state did not build them, and as
We also repeat what is said in the case their building required, among other things,
above cited, that "the act of Congress must the appropriation of *land, private individ-(570)
have a reasonable construction, or else there uals could not enforce such appropriation
would scarcely be an agreement or contract without a grant from the state.
among business men that could not be said

The building and operation of a railroad to have, indirectly or remotely, some bear, thus required å public franchise. The state ing upon interstate commerce, and possibly would have had no power to grant the right to restrain it.”. To suppose, as is assumed of appropriation unless the use to which the by counsel, that the effect of the decision in land was to be put was a public one. Taking the Trans-Missouri case is to render illegal land for railroad purposes is a taking for a most business contracts or combinations, public purpose, and the fact that it is taken however indispensable and necessary they for a public purpose is the sole justification may be, because, as they assert, they all re- for taking it at all. The business of a rail. strain trade in some remote and indirect de road carrier is of a public nature, and in gree, is to make a most violent assumption, performing it the carrier is also performing and one not called for or justified by the de- to a certain extent a function of government cision mentioned, or by any other decision of which, as counsel observed, requires them to this court.

perform the service upon equal terms to all. The question really before us is whether. This public service, that of transportation 171 U. S.

287

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

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

latter limitation is, we think, plainly irrele Although the franchise when granted by vant. the state becomes by the grant the property *As to the former, it is claimed that the [572] of the grantee, yet there are some regulations citizen is deprived of his liberty without due respecting the exercise of such grants which process of law when, by a general statute, he Congress may make under its power to regu- is arbitrarily deprived of the right to make late commerce among the several states. a contract of the nature herein involved. This will be conceded by all, the only ques- The case of Allgeyer v. Louisiana, 165 U. tion being as to the extent of the power. 8. 578 [4]: 832], is cited as authority for the

We think it extends at least to the prohi- statement concerning the right to contract bition of contracts relating to interstate com. In speaking of the meaning of the word “lib merce, which would extinguish all conipeti- erty," as used in the Fourteenth Amendment tion between otherwise competing railroad to the Constitution, it was said in that case corporations, and which would in that way to include, among other things, the liberty restrain interstate trade or commerce. We of the citizen to pursue any livelihood or vodo not think that when the grantees of this cation, and for that purpose to enter into all public franchise are competing railroads contracts which might be proper, necessary, seeking the business of transportation of men and essential to his carrying out those ob and goods from one state to another, that jects to a successful conclusion. ordinary freedom of contract in the use and We do not impugn the correctness of that

management of their property requires the statement. The citizen may have the right (571]right to combine *as one consolidatd and i to make a proper (that is, a lawful) con

powerful association for the purpose of sti: tract, one which is also essential and necesAing competition among themselves, and of sary for carrying out his lawful purposes. thus keeping their rates and charges higher The question which arises here is, whether than they might otherwise be under the laws the contract is a proper or lawful one, and of competition. And this is so, even though we have not advanced a step towards its sothe rates provided for in the agreement may lution by saying that the citizen is protected for the time be not more than are reasonable. by the Fifth, or any other amendment, in his They may easily and at any time be in- right to make proper contracts to enable creased. It is the combination of these large him to carry out his lawful purposes. We and powerful corporations, covering vast sec- presume it will not be contended that the tions of territory and influencing trade court meant, in stating the right of the citi. throughout the whole extent thereof, and act. zen,” to pursue any livelihood or vocation," ing as one body in all the matters over which to include every means of obtaining a livelithe combination extends, that constitutes the hood, whether it was lawful or otherwise. Pre alleged evil, and in regard to which, so far cisely how far a legislature can go in declar. as the combination operates upon and re-ing a certain means of obtaining a livelihood strains interstate commerce, Congress has unlawful, it is unnecessary here to speak of. power to legislate and to prohibit.

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 Congress may restrain individuals from of a possible gross perversion of the princi- making contracts under certain circumstanple, the courts might be applied to for re- ces and upon certain subjects. Frisbie v. lief.

United States, 157 U. S. 160 (39: 657). The cases cited by the respondents' coun. Notwithstanding the general liberty of sel in regard to the general constitutional contract which is possessed by the citizen right of the citizen to make contracts relat. under the Constitution, we find that there ing to his lawful business are not inconsist. are many kinds of contracts which, while ent with the existence of the power of Con- not in themselves immoral or mala in se. gress to prohibit contracts of the nature in- may yet be prohibited by the ‘legislation of (573) volved in this case. The power to regulate the states or, in certain cases, by Congress. commerce has no limitation other than those The question comes back whether the statute prescribed in the Constitution. The power, under review is a legitimate exercise of the however, does not carry with it the right to power of Congress over interstate commerce, destroy or impair those limitations and guar- and a valid regulation thereof. The quesanties which are also placed in the Constitu-' tion is, for us, one of power only, and not of

case.

policy. We think the power exists in Con. I the lower courts, led us to the most careful
gress, and that the statute is therefore valid. and scrutinizing examination of the argu-

Finally, we are asked to reconsider the ments advanced by both sides, and it was
question decided in the Trans-Missouri case, after such an examination that the majority
and to retrace the steps taken therein, be of the court came to the conclusion it did.
cause of the plain error contained in that It is not now alleged that the court on the
decision and the widespread alarm with former occasion overlooked any argument
which it was received and une serious conse- for the respondents or misapplied any con-
quences which have resulted, or may soon trolling authority. It is simply insisted that
result, from the law as interpreted in that the court, notwithstanding the arguments

for an opposite view, arrived at an erroneous It is proper to remark that an applica- result, which, for reasons already stated, tion for a reconsideration of a question but ought to be reconsidered and reversed. lately decided by this court is usually based As we have twice already, deliberately and upon a statement that some of the arguments earnestly, considered the same argumenta employed on the original hearing of the which are now for a third time pressed upon question have been overlooked or misunder- our attention, it could hardly be expected stood, or that some controlling authority that our opinion should now change from has been either misapplied by the court or that already expressed. passed over without discussion or notice. While an erroneous decision might be in İVhile this is not strictly an upplication for some cases properly reconsidered and overa rehearing in the same case, yet in substance ruled, yet it is clear that the first necessity it is the same thing. The court is asked to is to convince the court that the decision reconsider a question but just decided after was erroneous. It is scarcely to be assumed a careful investigation of the matter in that such a result could be * secured by the [575) volved. There have heretofore been in effect presentation for a third time of the same two arguments of precisely the same ques. arguments which had twice before been untions now before the court, and the same ar. successfully urged upon the attention of the guments were addressed to us on both those court. occasions. The report of the Trans-Missouri

We have listened to them now because the
case shows a dissenting opinion delivered in eminence of the counsel engaged, their ear.
that case, and that the opinion was concurred nestness and zeal, their evident belief in the
in by three other members of the court. correctness of their position, and, most im-

That opinion, it will be seen, gives with portant of all, the very grave nature of the
great force and ability the arguments against questions argued, called upon the court to
the decision which was finally arrived at by again give to those arguments strict and re-
the court. It was after a full discussion of spectful attention. It is not matter for sur-
the questions involved, and with the knowl. prise that we still are unable to see the error
edge of the views entertained by the minor- alleged to exist in our former decision or to
ity as expressed in the dissenting opinion, change our opinion regarding the questions
that the majority of the court came to the therein involved.
conclusion it did. Soon after the decision Upon the point that the agreement is not
a petition for a rehearing of the case was in fact one in restraint of trade, even though
made, supported by a printed argument in its it did prevent competition, it must be ad-
favor, and pressed with an earnestness and mitted that the former argument has now
vigor and at a length which were certainly been much enlarged and amplified, and a gen-
commensurate with the importance of the eral and most masterly review of that ques-

tion has been presented by counsel for the [574] *This court, with care and deliberation, respondents. That this agreement does in

and also with a full appreciation of their fact prevent competition, and that it must
importance, again considered the questions have been so intended, we have already at-
involved in its former decision.

tempted to show. Whether stifling compe-
A majority of the court once more arrived tition tends directly to restrain commerce in
at the conclusion it had first announced, and the case of naturally competing railroads, is
accordingly it denied the application. And with very great ability. They acknowledge

a question upon which counsel have argued
now for the third time the same arguments that this agreement purports to restrain
are employed, and the court is again asked competition, although, they say, in a very
to recant its former opinion, and to decide slight degree and on a single point. They
the same question in direct opposition to the admit that if competition and commerce were
conclusion arrived at in the Trans-Missouri identical, being but different names for the
case.
The learned counsel while making the ap: competition even so far, it would be assum-

same thing, then, in assuming to restrain
plication frankly confess that the argumenting in a corresponding degree to restrain
in opposition to the decision in the case above

Counsel then add (and therein named has been so fully, so clearly, and so we entirely agree with them) that no such forcibly presented in the dissenting opinion identity can be pretended, because it is plain of Mr. Justice White, that it is hardly possi. that commerce can and does, take place on ble to add to it nor is it necessary to repeat it. a large scale and in numerous forms without

The fact that there was so close a division competition. The material considerations of opinion in this court when the matter was therefore turn upon the effects of competifirst under advisement, together with the dif- tion upon the business of railroads, whether ferent views taken by some of the judges of' they are favorable to the commerce in which 171 U. S. U. S., BOOK 43.

19

289

case.

commerce.

merce.

the roads are engaged, or unfavorable and, are competing railroads and are not acting in restraint of that commerce. Upon that under any agreement or combination with

question it is contended that agreements be their competitors upon the subject of rates. (576]tween railroad companies of the nature of It appears from the brief of counsel in this

that now before us are promotive instead of case that the agreement in question does not in restraint of trade.

embrace all of the lines or systems engaged This conclusion is reached by counsel after in the business of railroad transportation an examination of the peculiar nature of between Chicago and the Atlantic coast. railroad property and the alleged baneful It cannot be said that destructive competi. effects of competition upon it and also upon tion, or, in other words, war to the death, is the public. It is stated that the only re-bound to result unless an agreement or comsort open to railroads to save themselves bination to avoid it is entered into between from the effects of a ruinous competition otherwise competing roads. is that of agreements among themselves to It is not only possible, but probable, that check and control it. A ruinous competition good sense and integrity of purpose would is, as they say, apt to be carried on until prevail among the managers, and while mak. the weakest of the combatants goes to de- ing no agreement and entering into no comstruction. After that the survivor, being bination by which the whole railroad inter. relieved from competition, proceeds to raise est as herein represented should act as one its prices as high as the business will bear. combined and consolidated body, the manaCommerce, it is said, thus finally becomes re- gers of each road might yet make such reastrained by the effects of competition, while sonable, charges for the business done by it at the same time otherwise valuable railroad as the facts might justify. An agreement property is thereby destroyed or greatly re- of the nature of this one, which directly and duced in value. There can be no doubt that effectually stifles competition, must be rethe general tendency of competition among garded under the statute as one in restraint competing railroads is towards lower rates of trade, notwithstanding there are possibil. for transportation, and the result of lower ities that a restraint of trade may also fol. rates is generally a greater demand for the low competition that may be indulged in unarticles so transported, and this greater de- til the weaker roads are completely destroyed mand can only be gratified by a larger sup- and the survivor thereafter raises rates and ply, the furnishing of which increases com- maintains them.

This is the first and direct result of Coming to the conclusion we do, in regard competition among railroad carriers. to the various questions herein discussed, we

In the absence of any agreement restrain think it unnecessary to further allude to (578] ing competition, this result, it is argued, is the other reasons which have been advanced neutralized, and the opposite one finally for a reconsideration of the decision in the reached by reason of the peculiar nature of Trans-Missouri case. railroad property which must be operated The judgments of the Circuit Court of the and the capital invested in which cannot be United States for the Southern District of withdrawn, and the railroad managers are New York and of the Circuit Court of Ap. therefore, as is claimed, compelled to, not peals for the Second Circuit are reversed and only compete among themselves for business, the case remanded to the Circuit Court with but also to carry on the war of competition directions to take such further proceedings until it shall terminate in the utter destruc- therein as may be in conformity with this tion or the buying up of the weaker roads, opinion. after which the survivor will raise the rates as high as is possible. Thus, the indirect but Mr. Justice Gray, Mr. Justice Shiras final effect of competition is claimed to be and Mr. Justice White dissented. Mr. Jug. the raising of rates and the consequent re- tice McKenna took no part in the decision straint of trade, and it is urged that this of the case. result is only to be prevented by such an agreement as we have here. In that way alone it is said that competition is overcome, HENRY HOPKINS et al., Appts., and general uniformity and reasonableness of rates securely established.

UNITED STATES. (677) . *The natural, direct, and immediate effect of conipetition is, however, to lower rates,

(See S. C. Reporter's ed. 578-604.) and to thereby increase the demand for commodities, the supplying of which increases Buying and selling live stock by members commerce, and an agreement whose first and

V.