buying victuals on the way to market with the purpose of selling them at higher prices. Under the common law such acts remained criminal until the law was amended by 7 and 8 Victoria, cap. 24 (1844). The only relic of these criminal laws, apparently, is the prohibition against attempts to affect prices by spreading false reports or by preventing goods from being brought to market by force or by threats. There were also ancient criminal statutes against conspiracies and agreements to fix prices and the wages and hours of labor, for example, 2 and 3 Edward VI, cap. 15 (1549). These were repealed

by 5 George IV, cap. 95 (1824).

AGREEMENTS IN RESTRAINT OF TRADE TENDING TO FIX PRICES OR TO CONTROL THE MARKET.-The ancient common-law rule that agreements tending to fix prices or control the market may be null and void as in restraint of trade appears, however, to be still in force in England, though considerably modified by recent decisions.

Most of the cases on restraint of trade relate to covenants for the sale of a business and the subsequent abstention of the seller from competition with such business, or between an employer and an employee, whereby the latter agrees not to compete in certain ways after the expiration of his time of service, and do not relate to the question of control of the market, price fixing, etc. The early rule for such contracts appears to have been that any contract by which a trader or artisan sold his business and agreed not to engage in his occupation in any part of the kingdom was void, because it tended to make him a public charge and deprived the public of his services. Such consequences made it an unreasonable agreement from the point of view of such person, and also made it contrary to public policy. The buyer was held not to be entitled to any more protection from future competition than was necessary to make the contract an equitable one to him. While the particular rules as to what terms were to be regarded as unreasonable and what terms as against public policy were changed considerably in the course of time with changing economic conditions and opinions, these two judicial principles of the reasonableness of the restrictions imposed with respect to the interests of the parties and of the public policy of such restrictions have continued to be regarded by the courts down to the present time. In the development of the doctrine the question of reasonableness was one that related primarily to the contracting parties, and not to the public. However, any decision as to public policy necessarily involved the reasonableness of the terms of the agreement from the public point of view. Restraint of trade in this form is, however, of only incidental importance with relation to the question of monopolistic agreements.

The cases in English law which relate to monopolistic agreements are not numerous, and, although a price agreement has been declared

void, it is not clear how far such agreements are valid or invalid. A brief statement of the recent cases on this subject is given in Chapter V (pp. 233-238).

The connection between the ideas of monopoly, engrossing, and restraint of trade, as they developed in the English law, was set forth in the opinion of Chief Justice White in the Standard Oil case,1 as follows:

(a) It is certain that at a very remote period the words "contract in restraint of trade" in England came to refer to some voluntary restraint put by contract by an individual on his right to carry on his trade or calling. Originally all such contracts were considered to be illegal, because it was deemed they were injurious to the public as well as to the individuals who made them. In the interest of the freedom of individuals to contract this doctrine was modified so that it was only when a restraint by contract was so general as to be coterminus with the kingdom that it was treated as void. That is to say, if the restraint was partial in its operation and was otherwise reasonable the contract was held to be valid:

(b) Monopolies were defined by Lord Coke as follows:

"A monopoly is an institution, or allowance by the King by his grant, commission, or otherwise to any person or persons, bodies politic or corporate, of or for the sole buying, selling, making, working, or using of anything, whereby any person or persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or hindered in their lawful trade."

The frequent granting of monopolies and the struggle which led to a denial of the power to create them, that is to say, to the establishment that they were incompatible with the English constitution is known to all and need not be reviewed. The evils which led to the public outcry against monopolies and to the final denial of the power to make them may be thus summarily stated: (1) The power which the monopoly gave to the one who enjoyed it to fix the price and thereby injure the public; (2) the power which it engendered of enabling a limitation on production; and, (3) the danger of deterioration in quality of the monopolized article which it was deemed was the inevitable resultant of the monopolistic control over its production and sale. As monopoly as thus conceived embraced only a consequence arising from an exertion of sovereign power, no express restrictions or prohibitions obtained against the creation by an individual of a monopoly as such. But as it was considered, at least so far as the necessaries of life were concerned, that individuals by the abuse of their right to contract might be able to usurp the power arbitrarily to enhance prices, one of the wrongs arising from monopoly, it came to be that laws were passed relating to offenses such as forestalling, regrating and engrossing by which prohibitions were placed upon the power of individuals to deal under such circumstances and conditions as, according to the conception of the times, created a presumption that the dealings were not simply the honest exertion of one's right to contract for his own benefit unaccompanied by a wrongful motive to injure others, but were the consequence of a contract or course of dealing of such a character as to give rise to the presumption of an intent to injure others through the means, for instance, of a monopolistic increase of prices.

As by the statutes providing against engrossing the quantity engrossed was not required to be the whole or a proximate part of the whole of an article, it is clear that there was a wide difference between monopoly and engrossing, etc. But as the principal wrong which it was deemed would result from monopoly, that is, an enhancement of the price, was the same wrong to which it was thought the prohibited engross

1221 U. S., 51–55.

ment would give rise, it came to pass that monopoly and engrossing were regarded as virtually one and the same thing. In other words, the prohibited act of engrossing because of its inevitable accomplishment of one of the evils deemed to be engendered by monopoly, came to be referred to as being a monopoly or constituting an attempt to monopolize.

And by operation of the mental process which led to considering as a monopoly acts which although they did not constitute a monopoly were thought to produce some of its baneful effects, so also because of the impediment or burden to the due course of trade which they produced, such acts came to be referred to as in restraint of trade.

Generalizing these considerations, the situation is this: (1) That by the common law monopolies were unlawful because of their restrictions upon individual freedom of contract and their injury to the public. (2) That as to necessaries of life the freedom of the individual to deal was restricted where the nature and character of the dealing was such as to engender the presumption of intent to bring about at least one of the injuries which it was deemed would result from monopoly, that is an undue enhancement of price. (3) That to protect the freedom of contract of the individual not only in his own interest, but principally in the interest of the common weal, a contract of an individual by which he put an unreasonable restraint upon himself as to carrying on his trade or business was void. And that at common law the evils consequent upon engrossing, etc., caused those things to be treated as coming within monopoly and sometimes to be called monopoly and the same considerations caused monopoly because of its operation and effect, to be brought within and spoken of generally as impeding the due course of or being in restraint of trade.

Section 3. Law regarding monopolies and restraint of trade in the United States prior to the Antitrust Act.

COMMON LAW REGARDING RESTRAINT OF TRADE AND MONOPOLY.The common law in the United States has been interpreted to restrict the right of contract more extensively than in England, particularly in regard to the limitations imposed by public policy.

Prior to 1890 the usual kind of contract in restraint of trade with the purpose of limiting competition and obtaining control of the market, or monopoly, was an agreement regarding production or prices, or a pool. The legal "trust," which was first applied to this purpose about 1880, as well as the method of holding companies, which came into use a few years after, will be considered below. Such agreements or pools took various forms, but generally provided for some system of restricting output, cornering the supply, dividing markets, fixing prices, dividing profits, or establishing a common selling agency. Buying out competitors in a wholesale way was apparently of rare occurrence. Such agreements have almost always been held in restraint of trade and void as against public policy. A large number of the decisions made in the United States under the common law, covering various forms of combination, are briefly discussed in Chapter II of this report. (See p.24.)

The development in the United States of the doctrine of restraint of trade and of monopoly at the common law, particularly with relation to such acts as were contrary to public policy and therefore

void, has been stated by Chief Justice White in the opinion of the Supreme Court in the Standard Oil case:1

In this country also the acts from which it was deemed there resulted a part if not all of the injurious consequences ascribed to monopoly, came to be referred to as a monopoly itself. In other words, here as had been the case in England, practical common sense caused attention to be concentrated not upon the theoretically correct name to be given to the condition or acts which gave rise to a harmful result, but to the result itself and to the remedying of the evils which it produced. The statement just made is illustrated by an early statute of the Province of Massachusetts, that is, chap. 31 of the laws of 1778-1779, by which monopoly and forestalling were expressly treated as one and the same thing.

It is also true that while the principles concerning contracts in restraint of trade, that is, voluntary restraint put by a person on his right to pursue his calling, hence only operating subjectively, came generally to be recognized in accordance with the English rule, it came moreover to pass that contracts or acts which it was considered had a monopolistic tendency, especially those which were thought to unduly diminish competition and hence to enhance prices-in other words, to monopolize--came also in a generic sense to be spoken of and treated as they had been in England, as restricting the due course of trade, and therefore as being in restraint of trade. The dread of monopoly as an emanation of governmental power, while it passed at an early date out of mind in this country, as a result of the structure of our Government, did not serve to assuage the fear as to the evil consequences which might arise from the acts of individuals producing or tending to produce the consequences of monopoly. It resulted that treating such acts as we have said as amounting to monopoly, sometimes constitutional restrictions, again legislative enactments or judicial decisions, served to enforce and illustrate the purpose to prevent the occurrence of the evils recognized in the mother country as consequent upon monopoly, by providing against contracts or acts of individuals or combinations of individuals or corporations deemed to be conducive to such results.

* * *

It will be found that as modern conditions arose the trend of legislation and judicial decision came more and more to adapt the recognized restrictions to new manifestations of conduct or of dealing which it was thought justified the inference of intent to do the wrongs which it had been the purpose to prevent from the beginning. *** Without going into detail and but very briefly surveying the whole field, it may be with accuracy said that the dread of enhancement of prices and of other wrongs which it was thought would flow from the undue limitation on competitive conditions caused by contracts or other acts of individuals or corporations, led, as a matter of public policy, to the prohibition or treating as illegal all contracts or acts which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing trade, but on the contrary were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy. It is equally true to say that the survey of the legislation in this country on this subject from the beginning will show, depending as it did upon the economic conceptions which obtained at the time when the legislation was adopted or judicial decision was rendered, that contracts or acts were at one time deemed to be of such a character as to justify the inference of wrongful intent which were at another period thought not to be of that character. But this again, as we have seen, simply followed the line of development of the law of England.

1 221 U. S., 56-59.

TRUSTS. The fact that agreements for fixing prices, or otherwise attempting to control the market, were generally held invalid at the common law was apparently the cause for the perversion of the legal "trust" to accomplish the same purpose.

The trust was an ancient device by which the legal ownership and management of property could be put in the hands of one person (trustee) while the beneficial interest remained in another person (cestui que trust). This device was largely employed for the benefit of minors cr for the management of property in which there were several beneficiaries, or a beneficiary with a limited interest.

The first application of this device for the purpose of forming a combination to control the market is attributed to the Standard Oil Co. Before 1879 this combination had been held together very largely by means of exchanging the stock of the Standard Oil Co. for the stock of other companies, such stock being held in the name of some individual connected with the Standard and for the Standard's benefit.

On April 8, 1879, a trust agreement was made among all the stockholders of the Standard Oil Co. of Chio whereby the stocks of 30 separate companies named in the agreement were turned over to three trustees to hold temporarily for the benefit of said stockholders. This trust agreement was succeeded by a more elaborate one dated January 2, 1882. This named nine trustees for specified terms, and also provided the means of electing their successors. To these trustees were confided the ownership and management of all the property of the various individuals who as stockholders or partners were associated together in the Standard Oil combination. In respect to some companies, only a part of the stock was owned by such persons. It was provided that the trustees should issue "Standard Oil trust certificates" of a par value of $100 each, such certificates to be issued to each person joining in the agreement in proportion to the value of the interest which he conveyed to the trust. Such certificates were to represent the beneficial interests of the parties to the trust agreement. The distribution of dividends was to be made at the discretion of the trustees to the holders of the trust certificates. It was provided that the trust might continue during the lives of the survivors and survivor of the trustees named in the agreement and for 21 years thereafter, but that it could be terminated under certain conditions at an earlier date, but not before a period of 10 years.

The Standard Oil Trust was organized substantially like the holding company of later date, which is discussed below. It was imitated by several other great monopolistic combinations, namely, the Whiskey Trust, the Cotton Seed Cil Trust, and the Sugar Trust. The procuring of a monopoly by a "trust" agreement was held by the courts to be contrary to law and against public policy.