contract, enticing employees from the service of competitors, bribery and espionage, and the boycott by trade associations, accompanied by the black list. Section 3. Price cutting. In United States v. Great Lakes Towing Co. et al.,' the court referred to the combination represented by the towing company as "a monopoly created by abnormal and unfair means," specifying as one of these, "unfair rate wars," and stated that "stringent provisions against unfair rate cutting" were contained in the decree.2 In reviewing the evidence of a conspiracy admitted by the trial court in a criminal prosecution of the president and certain officers and agents of the National Cash Register Co., the circuit court of appeals took occasion to comment adversely upon two methods practiced by the defendants in competition with the American Cash Register Co. These methods were (1) cutting prices on machines made by the American Company and secured by the National in the course of business, and (2) cutting prices on their own machines. The court said: The method of attack was to prevent him [an employee of the American Co.] from making sales of American machines and to displace such as he made. The way in which the former was attempted was by offering Hallwoods [the name of the American Co.'s machine], owned by the National Co. at low prices-i. e., 30 cents on the dollar, in competition. The way in which the displacements were brought about was by offering the regular National machines on unusual terms. Both methods were unfair.3 After the judgment of the Supreme Court in United States v. American Tobacco Co. et al., the Circuit Court for the Southern District of New York considered a request that the defendant companies be enjoined "from giving away or selling at or below the cost of manufacture and distribution any of its products, from giving rebates, allowances, or other special inducements to purchasers or users, and from refusing to sell to any jobber any special brand he may require." This request, however, was denied by Lacombe, J., who said: The record in this case shows that these are the common methods of the tobacco business, practiced by all alike. It is only by giving away samples, or by offering on favorable terms, irrespective of cost, that new brands of tobacco products can be introduced or old brands extended into new territory. All other companies are free to employ these methods, which are obnoxious to no statute, and there is no reason why the fourteen companies should be forbidden to do so. 1 217 Fed., 656, 659-661 (D. C. 1914). This case is now pending in the U. S. Supreme Court. 2 See decree, pp. 479, 481, 484. Patterson et al. v. United States, 222 Fed., 599, 636 (C. C. A., 1915). 4 221 U. S., 106 (1911). U. S. v. American Tobacco Co. et al., 191 Fed., 371, 381 (1911). Section 4. Discriminations. The defendants in United States v. Pacific & Arctic Co.1 were indicted under sections 1 and 2 of the Sherman law for conspiring to restrain trade and commerce in the business of transportation in freight and passengers between various ports of the United States and Canada, and Alaska, and for monopolizing trade and commerce in the same business between the same ports. The indictment alleged in substance that the defendant steamship companies operating between Canadian and United States ports and Skagway, Alaska, established through routes and joint rates with the defendant wharves company, which owned the only wharf facilities at Skagway, and with the defendant railroad company which owned the only railroad extending from Skagway to the Yukon River; that by an agreement between the parties the railroad company refused to make any through route or joint rate with independent steamship companies, and charged rates between Skagway and Yukon River points which were much higher than the railroad's pro rata of the through route; and that the wharves company charged $2 a ton for freight if shipped on a vessel not owned by one of the defendant companies as against $1 a ton if shipped on a vessel owned by one of the latter. The defendants demurred to the indictment, and in support of the demurrer it was urged that since the defendants had a common-law right to select their connections and to refuse to establish through routes and joint rates with others no offense was charged. The court held, however, that the indictment showed the existence of something more than a mere attempt on the part of the defendants to exercise these rights; and that since it alleged that the agreement in question had been made for the purpose of restraining trade and destroying competition, it was not demurrable. Section 5. "Fighting ships." In United States v. Hamburg-American Steamship Line et al.,2 Lacombe, circuit judge, said in part: One of the matters complained of is what is called in the testimony the providing of "fighting ships." Upon occasions when some steamship owner or charterer, not a member of the combination, has put a vessel on a berth adjoining one from which vessels of a member of the combination were about to sail, and has offered to carry passengers at a lower rate than that asked by such member, an extra vessel has been put on, ostensibly by one of the lines in the combination, but really by the combination itself, at the same or a lower rate, and all have co-operated to furnish such a "fighting ship" and thereby keep out the competitor. This seems clearly to be within the prohibition of the act. * * * 1228 U. S., 87 (1913). 2216 Fed., 971, 973, 974 (D. C., 1914). The Allan Line and Canadian Pacific Line withdrew from the fighting ship agreement before the bill was filed. As to both these defendants the bill is dismissed. As to the other defendants injunction will issue against the continuance of the "fighting ships,"1 and as to the other prayers for relief the bill is dismissed. Dismissing the Government's petition against the American-Asiatic Steamship Co. and other members of the Far Eastern Steamship Conference, the same court observed: Defendant's conference agreement contains a provision for "fighting ships." If there were evidence that any steps had ever been taken towards putting one on, we should be inclined to grant an injunction similar to the one we granted in United States v. Hamburg American Co. et al. (D. C.) 216 Fed., 971; but since there is no such evidence in this case, we see no reason for granting that relief. Section 6. "Bogus independents.” In Monarch Tobacco Works v. American Tobacco Co. et al.,3 an action for treble damages, it was alleged, among other things, that the American Tobacco Co. acquired control of the Nall & Williams Tobacco Co., which fact it kept secret; and that by falsely pretending that the Nall & Williams Tobacco Co. remained independent, and by other means set forth, the defendants carried out the conspiracies and combinations complained of and competed under false pretenses with the plaintiff in Indianapolis, Minneapolis, Cumberland, and Louisville, greatly to the plaintiff's injury. The court, considering the defendants' demurrer, said in part: It was contended that it was not unlawful merely to keep one's business affairs secret, nor for one corporation to obtain a controlling interest in another, nor merely to compete with a rival for trade and by mere competition to drive him out of business, nor to offer better terms and inducements than a rival in business offered, and we are by no means inclined to deny either of those propositions in the abstract, for neither is in terms forbidden by the act, nor, possibly, by any moral consideration; but, as we have seen, the seventh section of the act, in most general language, provides that "any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act" shall have a right to recover therefor, and the rulings of the Supreme Court to which we have called attention seem clearly to show that even lawful acts may become agencies of wrongdoing if the motive of doing those acts be to carry into effect a combination made illegal under the statute, and particularly if doing them does in fact effectuate the purposes of the unlawful scheme. Commenting on the secret ownership of D. M. Osborne & Co. by the International Harvester Co., Smith, circuit judge, observed: When the D. M. Osborne & Co. purchase was made, while the International bought all the stock, it permitted the Osborne Co. to continue to appear to be in 1 See decree, p. 483. 2 United States v. American-Asiatic S. S. Co. et al., 220 Fed., 230, 235 (D. C., 1915). 3 165 Fed., 774, 781 (C. C., 1908). 4U. S. v. International Harvester Co., 214 Fed., 987, 992 (D. C., 1914). 30035°-16-30 dependent. It is claimed that this was done to enable the Osborne Co. to collect its bills receivable, which were not acquired by the International. There was commercial advantage in claiming not to be associated with the International. Many persons were opposed to buying from it, and for two years the Osborne Co. persistently advertised that it was independent. While under the old-time law of warranty it might be justifiable for the Osborne Co. to conceal its relations with the International, there can be no excuse for the affirmation upon its part that it was independent after it had been acquired by the International. "The seller may let the buyer cheat himself ad libitum, but must not actively assist him in cheating himself." The International had bought all the stock of the Osborne Co., and it had been transferred to a trustee for it, and there was, in the fact that the Osborne Co. might better collect its bills receivable, no basis to justify the International in making a contract under which the Osborne Co. could continue to advertise falsely that it was an independent concern, when it had in fact been merged with the International. It is safe to say that from January, 1903, the competition of the Osborne Co. was in name only and did not exist in fact. What has been said of the Osborne purchase is true in principle of purchases made by the International of the Keystone Co., the Minnie Harvester Co., and the Aultman-Miller plant. Section 7. Exclusive dealing. REBATES TO INDUCE EXCLUSIVE DEALING.-It has been urged in a number of cases that contracts which provide for the payment by a vendor of a deferred rebate to such purchasers as deal only in his goods are in violation of the Sherman law. It was early decided by the Federal Circuit Court for the Southern District of Ohio,1 that contracts of this description did not contravene the act. The Distilling & Cattle-Feeding Co. promised to pay a rebate to those who purchased its distillery products exclusively for a period of six months and who would not sell the same at prices less than those fixed by the company. It had been previously decided by two other courts, on the same facts, that such an arrangement did not amount to a contract to purchase exclusively from the cattle-feeding company, and in this case the court took the same view, but said that, granting that it did constitute a contract to purchase exclusively from the distilling company, it was not an attempt to monopolize nor did it operate to restrain trade within the meaning of the Sherman law. The following is an excerpt from the opinion by Jackson, J.: * * there was nothing in such an agreement unlawful or in contravention of the statute. The promise of a rebate, as an inducement for exclusive trading, certainly does not constitute an "attempt to monopolize," when the purchaser is left at liberty to buy where he pleases, and when all other sellers of the article are left unrestrained in offering the same, or greater, inducements. 1 In re Greene, 52 Fed., 104, 117, 118 (1892); see also Olmstead v. Distilling & CattleFeeding Co., 77 Fed., 265 (C. C., 1896). 2 In re Corning, 51 Fed., 205 (D. C., 1892); In re Terrell, 51 Fed., 213 (C. C., 1892). As to the remaining condition upon which the rebate was to be payable, the same observation may be made. The purchasers were placed under no contractual or other restraint in respect to the price at which they should sell. They were simply offered a rebate, as an inducement not to undersell the vendor's distributing agents, two of whom were located at Boston, Mass. The arrangement relied on, considered either in detail or as a whole, involved no "attempt to monopolize any part of the trade or commerce among the States." * It is well settled that contracts in general restraint of trade are contrary to public policy, and therefore unlawful. The arrangement under consideration can not possibly be considered as one in general restraint of trade. Where the restraint is partial, either as to time or place, its validity is to be determined by its reasonableness and the existence of a consideration to support it. The question of its reasonableness depends on the consideration whether it is more injurious to the public than is required to afford a fair protection to the party in whose favor it is secured. No precise boundary can be laid down as to when, and under what circumstances, the restraint would be reasonable, and when it would be excessive. ** In the present case, the arrangement treated as a contract was founded upon a valid consideration, and only secured to the vendors a reasonable protection in their business. * The giving of a deferred rebate by steamship lines in consideration of exclusive patronage was recently declared lawful by the district court for the southern district of New York in the Government's suit against the Prince Line, Hamburg-American Line, and other members of the Brazilian Steamship Conference, Lacombe, J., saying: It is contended that the system of rebates adopted by the combination was a restraint of trade. Rebates at a stated percentage were given to exclusive shippers. Their payment was deferred so that it could be determined at the close of a rebate period whether the shipments of the concern asking for it had really been exclusive. It is, of course, desirable for a shipper to know in advance what rates he is to be charged; in like manner, it is desirable for a carrier to know as definitely as it can what amounts of cargo it may expect it will have to handle in a given period. These rebates were not secret, nor were they confined to a favored few; they were uniform, were open to all, and all were invited to avail of them. The arrangement is probably as old as trade itself. One natural result of it would seem to be stability in sailings and service both desirable for trade-which might not otherwise be maintained.1 Still more recently, in Wilder Manufacturing Co. v. Corn Products Refining Co., the validity of a contract or arrangement for exclusive dealing entered into in consideration of a promised rebate was upheld by the Supreme Court. This was an action by the plaintiff refining company to recover the purchase price of goods sold to the defendant manufacturing company. It appeared that before the sale in question was consummated, the plaintiff, in conformity with a so-called profit-sharing scheme which it had devised, offered in writing to pay to the defendant a certain percentage on the amount of purchases made by the latter in any one year, payment to be made 1 United States v. Prince Line (Ltd.) et al., 220 Fed., 230, 233 (D. C., 1915). |