number of ovens owned by all the parties. The company was to receive a commission of 5 cents per ton and guaranteed payment at the average price for all coke handled by it. The agreement was to continue in force three years and to be renewed for like periods unless terminated by notice. The Pocahontas Coke Co. sought to enjoin the Powhatan company from withdrawing from contract B. The injunction was awarded, and from an order overruling a motion to dissolve the same, the defendant appealed. The court held that the combination established by contracts A and B was in unreasonable restraint of trade and against public policy; that when all the powers of the contracts were exercised the direct and necessary or natural effect was to restrain competition and control prices; and that such effect was not merely incidental, commensurate, or necessary to the protection of the parties in the enjoyment of the legitimate fruits of a lawful undertaking. It was held, further, that contract A, which constituted the basis of the suit, was void, because against public policy. In reaching this result, the court said:

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It is no defense to the illegality of a contract or combination which is in unreasonable restraint of trade to show that in the particular case a complete monopoly has not been formed, or that no control of prices has been exercised, or that prices have been lowered and not raised. A contract which is charged to be in restraint of trade is not to be tested by what has been done under it, but by what may be done under it; not by its performance, but by its powers of performance when fully exercised.

Agreements among producers to employ common marketing arrangements were involved in Central Ohio Salt Co. v. Guthrie1 and McBirney & Johnston White Lead Co. v. Consolidated White Lead Co. In the first of these two cases, practically all the salt manufacturers in a large salt-producing territory had formed a voluntary association known as the Central Ohio Salt Co. for the express purpose of regulating the prices and sustaining the quality of salt. All salt made or owned by the members became the property of the company as soon as packed into barrels. Members were bound to sell only at retail, and then only to actual consumers at the place of manufacture, and at prices fixed from time to time by the directors. The proceeds of sales were paid to members in proportion to the amount of salt received from each. Defendant for some time complied with the terms of the agreement but subsequently refused to deliver to the company certain salt manufactured by him. In an action by the association to obtain possession of this salt, the court, in holding that such agreement was in restraint of trade and void as against public policy, said:

The clear tendency of such an agreement is to establish a monopoly, and to destroy competition in trade, and for that reason, on grounds of public policy,

135 Ohio St., 666 (1880).

28 Ohio Decisions reprint, 762 (1883).

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courts will not aid in its enforcement. It is no answer to say that competition in the salt trade was not in fact destroyed or that the price of the commodity was not unreasonably advanced. Courts will not stop to inquire as to the degree of injury inflicted upon the public; it is enough to know that the inevitable tendency of such contracts is injurious to the public. We think that the provision that "the manner and time of receiving and distributing salt shall be under the control of the directory" confers upon the company ample power to embarrass the freedom of the members as to the quantity of salt which they might wish to manufacture. There is no agreement that the company will receive all the salt manufactured and at the time when it may be ready for sale. On the whole case, we are clearly of the opinion that this agreement is void, as against public policy.

In the White Lead case, decided in the superior court of Cincinnati in 1883, it was shown that the manufacturers of white lead in the United States west of Buffalo had formed a corporation in which each was to have a certain amount of stock, and agreed that each member should be entitled to manufacture a certain amount of white lead proportionate to the amount of stock held by him, and no more; that they should sell at prices fixed by the corporation; that members failing to sell as much as they were entitled to should have the right to turn the surplus over to the corporation for the average price that they received from others, and that members disposing of more than their allotted proportion should receive from the corporation the amount turned in by the unsuccessful dealers. The plan was to be carried out by means of contracts with members of the corporation similar to the one upon which this action was brought, which, upon its face, was merely a provision between the plaintiff and the defendant as to the price to be obtained for lead turned in. In an action to recover a balance alleged to be due on account, the court found that the scheme was entered into for the purpose of controlling and restricting the manufacture and production of white lead and controlling the prices so that they should not fall below a certain figure, and held that the contract, being an essential part of an unlawful scheme, could not be enforced.

In Craft et al. v. McConoughy, five competing grain dealers entered into an agreement "for the purpose of systematically pursuing the grain trade in Rochelle and for mutual protection against losses." It was provided in substance that the several grain houses should be put into the business, each firm receiving a specified number of shares; that each firm should conduct its own business as heretofore, keep its own accounts, pay its own expenses, ship its own grain, and furnish its own funds; that reports of all grain handled should be made to a general bookkeeper; that the account. of each individual should be balanced monthly, showing the profit or loss, which was to be divided pro rata, according to the number

30035°-16- 4

179 III., 346 (1875).

of shares held by each; and that prices and grades should be fixed from time to time. The combination purchased or leased all the warehouses in the city and every lot suitable for the erection of such buildings. The price to be paid for grain and the rates for storage and shipment were fixed at secret meetings. The parties were held out to the public as competitors. Following the execution of the agreement one of the parties died, and his son, the complainant, who claimed to have taken his place under the contract by mutual consent, brought a bill in equity for an accounting and distribution of the profits of the alleged partnership. The court held that the contract was in restraint of trade, unreasonable, oppressive, and injurious to the public, and that a court of equity would not lend its aid in the division of the profits of the illegal transaction. In its opinion the court said:

While these parties were in business, in competition with each other, they had the undoubted right to establish their own rates for grain stored and commissions for shipment and sale. They could pay as high or low a price for grain as they saw proper and as they could make contracts with the producer. So long as competition was free, the interest of the public was safe. The laws of trade in connection with the rigor of competition was all the guaranty the public required; but the secret combination created by the contract destroyed all competition and created a monopoly against which the public interest had no protection.

In Fairbanks v. Leary,1 the facts were as follows: Five individuals had entered into a copartnership agreement wherein each agreed not to transact on his individual account, within 20 miles of the place in which such partnership was to operate, the kind of business for the transaction of which it was created, namely, handling produce, live stock, wool, coal, lime, salt, hides, etc. Other provisions related to the conduct of the business, payment of expenses, division of profits, etc. It was alleged that the parties operated independently and in the same manner as they had theretofore done and as though the partnership did not exist, but adjusted their business transactions as provided in the agreement. The arrangement was discontinued by mutual consent. Plaintiffs subsequently sought an accounting for money belonging to the firm, alleged to have been received by defendant, who resisted payment, claiming that the agreement was void as it operated in unreasonable restraint of trade; that by prohibiting the transaction of business by the partners individually it tended to create a monopoly and to reduce prices paid for produce; that it was a conspiracy to maintain a false appearance of competition, while in reality the members of the firm were laboring for the common interest, seeking to depress the market; that the agreement was therefore void; and that the plaintiffs, as parties to an illegal contract, were not entitled to the aid of a

140 Wis., 637 (1876).

court of equity. The court held that the clause wherein each partner had agreed not to transact the same kind of business on his individual account within 20 miles was unobjectionable; but if the copartnership was in fact formed (though not so expressed in the articles) to prevent competition in the markets in which the firm was to operate, that the deception upon the public involved in keeping the existence of the agreement secret and the maintenance of an appearance of competition, tainted the agreement, rendering it void. The court was of the opinion, however, that the averment that the firms operated independently and in the same manner as they had theretofore done, etc., would not of itself show any secrecy as to the true relations of the parties and would not make the complaint bad on demurrer.

The common-law principle against agreements in restraint of trade has also been held applicable to agreements among competing buyers in Chapin v. Brown Bros.1 and in the People v. Milk Exchange.2

In Chapin v. Brown Bros. it appeared that all the grocery men at Storm Lake, Iowa, decided that the handling of butter was burdensome and entered into an agreement with D. & E. Chapin, the plaintiffs (who were to establish a store in Storm Lake to sell butter), not to buy any butter nor to take any in trade, except for the use of their families; provided the grocery men should not be prevented from buying butter to retail from any regular butter buyer who bought for cash all his butter in Storm Lake. In refusing to enforce the agreement, the court said it was invalid, lacking consideration, and that

It plainly tends to monopolize the butter trade at Storm Lake, and destroy competition in that business. It is not necessary that the enforcement of the agreement would actually create a monopoly in order to render it invalid, and surely where all the dealers in a commodity in a certain locality agree to quit the business, and the plaintiffs are installed as the only dealers in that line, the tendency is, for a time at least, to destroy competition, and leave the plaintiffs as the only dealers in that species of property in that locality.

In People v. Milk Exchange, the milk exchange when organized, or shortly thereafter, had ninety-odd stockholders, a large majority of whom were milk dealers in the city of New York or creamery or milk-commission men doing business in that vicinity. A by-law provided that the board of directors should have power to fix the market price at which milk should be purchased by the stockholders. The directors accordingly fixed the price of milk, and the prices so fixed largely controlled the market in and about New York and the milk-producing territory contiguous thereto. An action was brought by the attorney general to dissolve the corporation and vacate its charter. The court, among other things, held that the facts sup

183 Iowa, 156 (1891).

2145 N. Y., 267 (1895).

ported a verdict or finding that the combination being inimical to trade and commerce was unlawful. In reaching this decision the court said:

It may be claimed that the purpose of the combination was to reduce the price of milk, and that it being an article of food such reduction was not against public policy. But the price was fixed for the benefit of the dealers, and not the consumers, and the logical effect upon the trade of so fixing the price by the combination was to paralyze the production and limit the supply, and thus leave the dealers in a position to control the market, and at their option to enhance the price to be paid by the consumers. This brings the case within the condemnation of the authorities to which we have referred.

In National Bank of the Metropolis v. Sprague et al., it was decided that where there is no agreement not to compete, it is not unlawful for persons to join to make a purchase for their common benefit. In that case, upon a petition of the complainant, a judgment creditor of the defendant, Sprague, to set aside a sale of valuable real estate sold by a master under a decree of foreclosure, it appeared that the bidder to whom the property was struck off was acting as agent of the complainant and was unable to comply with the terms of the sale. The master thereupon required a deposit of $5,000 before bids would be received and again offered the property, which was finally sold to an agent of a large number of creditors. It did not appear that any one of these creditors who agreed to purchase for their common benefit would have been willing or able to purchase on his own account. One of the grounds on which the complainant urged that the sale be set aside was that the combination of creditors to purchase it together was against the policy of the law as preventing competition. The court held that it was not unlawful for persons to join to make a purchase for their common benefit without an agreement not to compete. In reaching this decision the court expressed its opinion as follows:

There is no doubt that it is illegal for two purchasers, or intended purchasers at an auction sale, to combine not to bid against each other, and to divide in any way the profits of purchases made under such an agreement. But all the authorities and decisions in this matter which have been brought to my notice are confined to cases in which there is an agreement between the parties not to bid or enter into competition to bid against each other, and where this agreement is the foundation of the combination to purchase for their common benefit. And the principle upon which the rule is based would apply only to such cases, and not to cases where parties joined to make a purchase for their common benefit without an agreement not to compete, although the effect of such joint purchase might be to prevent competition. And it seems * * * that creditors in a case like this should be permitted to unite, because it is calculated to enhance the price, and not to injure the sale.

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Agreements regulating competition among those bidding for furnishing the public with goods, supplies, or services, or for the services

120 N. J. Equity, 159 (1869).