other hand, to sell to member dealers only. Lowry, an independent dealer, brought an action for damages under section 7 of the Antitrust Act. The court held that although the sales of unset tiles were within the State of California, and although this scheme aimed at an enhancement of prices in California, it was so bound up with the agreement of manufacturers in other States not to sell to nonmembers that it amounted to a restraint of interstate commerce within the meaning of the Sherman Act.

The court said in part (pp. 45-48):

It is urged that the sale of unset tiles, provided for in the seventh section of the by-laws, is a transaction wholly within the State of California and is not in any event a violation of the act of Congress which applies only to commerce between the States. The provision as to this sale is but a part of the agreement, and it is so united with the rest as to be incapable of separation without at the same time altering the general purpose of the agreement. The whole agreement is to be construed as one piece, in which the manufacturers are parties as well as the San Francisco dealers, and the refusal to sell on the part of the manufacturers is connected with and a part of the scheme which includes the enhancement of the price of the unset tiles by the San Francisco dealers. The whole thing is so bound together that when looked at as a whole the sale of unset tiles ceases to be a mere transaction in the State of California, and becomes part of a purpose which, when carried out, amounts to and is a contract or combination in restraint of interstate trade or commerce.

*** the combination, if carried out, directly effects a restraint of interstate

The purchase and sale of tiles between the manufacturers in one State and dealers therein in California was interstate commerce within the Addyston Pipe case, 175 U. S., 211. It was not a combination or monopoly among manufacturers simply, but one between them and dealers in the manufactured article, which was an article of commerce between the States.

GIBBS v. MCNEELEY (118 FED., 120), CIRCUIT COURT OF APPEALS, 1902. An association comprising manufacturers of and dealers in red-cedar shingles existed in the State of Washington, which was the only State in which red-cedar shingles were produced, and the members thereof sold such shingles chiefly to residents in other States. The said association restricted the output of shingles and fixed the prices at which they were sold. A dealer brought an action under the Sherman Law for damages sustained from the said acts. The court held the association to be a combination in restraint of interstate commerce, and said in part (p. 126):

The defendants in error were engaged in manufacturing a product of which, as they well knew, more than 80 per cent was to be sold, delivered, and used in States other than that of its manufacture. They were in the business of selling and delivering shingles to purchasers in other States. In fixing a list of prices they fixed it not alone for domestic trade, but for external commerce as well. The inevitable result of the combination is to enhance the price and restrain the trade of shingles in all the States. In the E. C. Knight Co. case it was held that a monopoly to manufacture did not necessarily affect interstate commerce. The reason for so holding is apparent. From the creation of a monopoly to manufacture, it does not necessarily follow that interstate commerce in the monopolized article will in any degree be interfered with. The

total production of the manufactured article and its price may, notwithstanding the monopoly, remain unaffected. In that case it was said, "There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce." But this can not be said of a combination of manufacturers in one State who agree to arbitrarily increase the price and diminish the total output of a manufactured product which is made only in that State, but which is principally bought and used in other States. The intention to put a restraint upon interstate commerce in such a case is evident, and the restraint is not indirect, but direct, and it is the necessary and inevitable result of the combination.

Section 6. Foreign commerce.

The decisions of the courts with respect to what constitutes commerce "with foreign nations" in connection with the interpretation of the Sherman Law are few in number, and the two decisions rendered by the Supreme Court involving an exposition of the law on the subject touch this matter in an almost incidental way. While in the first opinion (United Fruit Co. case, see p. 80 below) the court discussed the question very briefly, it was held that acts committed in a foreign country and not repugnant to its laws, although done in pursuance of a conspiracy entered into in the United States with intent to restrain the importation of goods into the United States by the plaintiff afforded it no ground for a private action for damages. It may be pointed out in this connection that no reference was made to the provisions of the Wilson Tariff Act of 1894, sections 73 to 77 (see pp. 125–126), regarding restraint of trade in the importation of goods from foreign countries. It is noteworthy, however, that in a suit by the Government to restrain the execution of a contract in restraint of foreign commerce (see p. 81) the circuit court in its opinion specifically referred to the fact that it contemplated the commission of acts in this country. In a case in the Circuit Court of Appeals (see below) prior to the above-mentioned decision of the Supreme Court, no distinction of this character appears to have been made, and the opinion does not show where the acts held to be a violation of the law were committed. According to the opinion of the circuit court above referred to, the execution of a contract to restrain the export trade of the United States, entered into in a foreign country but involving acts done in this country, may be prevented.

THOMSEN V. UNION CASTLE MAIL S. S. Co. ET AL. (166 FED. 251), CIRCUIT COURT OF APPEALS, 1908.-This was an action for treblo damages under the Sherman Law. The plaintiff alleged that defendants, carriers in the South African trade, had united as "The South African Lines," fixed rates and required shippers to pay a percentage in addition to a reasonable freight rate which they should receive back if they did not ship by other lines. The court held that the manifest purpose of the combination was to prevent competition between members by maintaining uniform rates and to eliminate competition

with other lines by requiring shippers to pay that which was equivalent to forfeit money; that the fact that the combination was formed in a foreign country was immaterial, as it affected the foreign commerce of this country and was put into operation here. The combination was, therefore, unlawful under the Sherman Act.

AMERICAN BANANA Co. v. UNITED FRUIT Co. (213 U. S. 347), SUPREME COURT, 1909.-Both parties to this action to recover treble damages under the Sherman Act were corporations organized in the United States. It was alleged in substance that the defendant was organized in 1899 and was engaged in importing bananas into the United States from Central and South America; that for the purpose of monopolizing such trade between such countries, of regulating prices, controlling production, and preventing competition, the defendant acquired the property and business of several competitors, entered into contracts regulating prices and restricting business with other competitors, acquired the controlling interest in others, and organized a common selling agent for all; that in 1903 one McConnell started a banana plantation in Panama and began to build a railway to the nearest port, affording the only practicable means of access to the plantation; that he was notified by the defendant that he must either combine or stop; that the plaintiff corporation, organized for the purpose of growing and buying bananas in Central America and importing them into the United States, purchased said plantation and railroad concession from McConnell; that subsequently Costa Rican soldiers and officials, instigated by the defendant, seized a portion of the plantation and a cargo of supplies, and stopped the construction of the railway; that the plaintiff tried to induce Costa Rica to withdraw its soldiers and officials and tried to induce the United States to interfere but was thwarted in both by the defendant; that the defendant purchased an alleged title to the plaintiff's plantation; that the defendant and its associates combined to prevent the sale of bananas to other exporters than themselves and made such arrangements with growers that there was no market in which bananas could be purchased by the plaintiff for export, and had prevented the plaintiff from buying for export and sale; and that the defendant had sought to injure the plaintiff's business by offering positions to its employees and by discharging or threatening to discharge its own employees who were stockholders of the plaintiff corporation.

The circuit court dismissed the complaint upon motion, as not setting forth a cause of action. This judgment was affirmed by the Circuit Court of Appeals and the case was brought to the Supreme Court by writ of error. The judgment was again affirmed, the court holding that damages can not be recovered for injury resulting from the acts of a foreign sovereignty, done within its own territory, though induced by defendants in furtherance of a conspiracy to restrain the

foreign commerce of the United States; nor for acts of defendants done in foreign territory but permitted by local law, though done pursuant to a conspiracy entered into in this country.

Regarding the acts of representatives of the United Fruit Co., done in Panama, the court says (p. 359):

As to the buying at a high price, etc., it is enough to say that we have no ground for supposing that it was unlawful in the countries where the purchases were made. Giving to this complaint every reasonable latitude of interpretation we are of opinion that it alleges no case under the act of Congress and discloses nothing that we can suppose to have been a tort where it was done. A conspiracy in this country to do acts in another jurisdiction does not draw to itself those acts and make them unlawful, if they are permitted by the local law.

UNITED STATES v. HAMBURG-AMERIKANISCHE PACKET-FAHRTACTIEN-GESELLSCHAFT ET AL. (200 FED. 806), CIRCUIT COURT, 1911.The Government filed its bill to restrain the further execution of an agreement to form an association called the Atlantic Conference, relating to the carriage of steerage passengers between the United States and Europe.

The bill alleged a contract providing for a division of traffic, the pooling of receipts, and the enforcement of the agreement. The fixing of rates, it was charged, was left to individual discretion, though the holders of 75 per cent of the shares of traffic could direct any party to raise or reduce its charges. The bill also alleged excessive and arbitrary rates as a result of the combination and a virtual monopoly of the steerage passenger traffic covered by the agreement. A demurrer interposed by the defendants was overruled, the court holding that (1) the agreement directly and materially affected the foreign commerce of the United States in that it diverted a part thereof, viz, the business of carrying steerage passengers (the court limiting its remarks to eastbound traffic) from the natural channels of free competition and prescribed what percentage each line should carry; (2) it was immaterial where the agreement was entered into; (3) the averments made. out a combination and conspiracy in violation of the Sherman Act. The court, in part, said (p. 807):

The agreement directly and materially affects foreign commerce and is partly intraterritorial because it is to be carried out in part in the United States. Confining ourselves to eastbound traffic, it is evident that the contract contemplates the solicitation of business, the making of contracts of carriage, the taking on board of passengers, and the actual commencement of transportation within the territory of the United States. It requires acts to be done in this country; such acts are as material and essential as those to be performed abroad, and the part of the contract requiring them can not be separated from the remainder

When this case came up for trial in the district court the terms of the conference agreement were held to be reasonable and not in violation of the Sherman Law, but an injunction issued restraining

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the defendants from combining to place special vessels, called "fighting ships," near the vessels of steamship lines not members of the defendant combination and bidding below their own rates in order to take the traffic away from a rival line.1

UNITED STATES v. PACIFIC & ARCTIC RAILWAY & NAVIGATION CO. ET AL. (228 U. S., 87), SUPREME COURT, 1913.-In this case four corporations, one organized under the laws of West Virginia, one under the laws of Canada, and two under the laws of British Columbia, together with certain of their officers, were indicted for a conspiracy to monopolize and for a monopolization of the transportation between ports in the United States, British Columbia, and Alaska. The route over which the traffic moved was by steamship lines from ports in the United States and Vancouver to Skagway, thence via railroad to the headwaters of the Yukon River, thence by boat down the Yukon River to Dawson and other places. It was urged on demurrer to the indictment that as part of the transportation route was outside of the United States the Sherman Act did not apply. Respecting this contention, the Supreme Court, in reversing a judgment sustaining the demurrer, said in part (pp. 105-106):

*

The next contention of defendants is that as part of the transportation route was outside of the United States the Antitrust Law does not apply. The consequences and, indeed, legal impossibility are set forth to such application, and, it is said, "make it obvious that our laws relating to interstate and foreign commerce were not intended to have any effect upon the carriage by foreign roads in foreign countries, and * * it is equally clear that our laws cannot be extended so as to control or affect the foreign carriage." This is but saying that laws have no extra-territorial operation; but to apply the proposition as defendants apply it would put the transportation route described in the indictment out of the control of either Canada or the United States. These consequences we cannot accept. The indictment alleges that the four companies which constitute the White Pass & Yukon Route (referred to as the railroad) and owned and controlled by the same persons, entered into the combination and conspiracy alleged, with the intention alleged, with the Wharves Company and the defendant steamship companies. In other words, it was a control to be exercised over transportation in the United States, and, so far, is within the jurisdiction of the laws of the United States, criminal and civil. If we may not control foreign citizens or corporations operating in foreign territory, we certainly may control such citizens and corporations operating in our territory, as we undoubtedly may control our own citizens and our own corporations.

UNITED STATES v. PRINCE LINE ETAL.; UNITED States v. AMERICANASIATIC S. S. Co. ET AL. (220 FED., 230), DISTRICT COURT, 1915.— These cases were both suits to dissolve steamship conferences similar in many respects to that involved in the Hamburg-American The traffic of the lines was between the United States and foreign countries, and in the Prince Line case, at least, the defendant steamship lines were all alien corporations or copartnerships, with their principal places of business in foreign countries. While

case.

1 U. S. v. Hamburg-American S. S. Line et al., 216 Fed., 971 (1914).