or other activities are comprehended within the meaning of the law. It is more convenient, however, for a clear outline of the scope of the law to take up the principal branches of business activity separately.

Trading combinations in restraint of trade, as defined by the Supreme Court in recent decisions, as already stated, are within the prohibition of the law, provided they are engaged in interstate

commerce.

In the discussion of the topic of interstate commerce it was shown that at the beginning a distinction was made in the Knight case (see p. 74 above) between manufacture and commerce, and it was held that combinations of manufacturers as such were not necessarily combinations in restraint of interstate trade. Practically all manufacturers and combinations of manufacturers, however, are engaged in trade and commerce, as there is no pecuniary profit in manufacture without the sale of the product. It is quite possible, of course, that a combination of manufacturers might exist which was not engaged in interstate or foreign commerce, and, therefore, would not be within the prohibition of the law. Generally speaking, however, manufacturing combinations are engaged in interstate commerce, and, if so engaged, would doubtless be held obnoxious to the Sherman Act, provided such combinations were in restraint of trade, as defined by the Supreme Court.

Section 10. Labor combinations.

That combinations of labor in so far as they are in restraint of interstate trade and commerce were prohibited by the Sherman Act was decided as early as 1893, but no decision was made on this subject by the Supreme Court until 1908, when this rule was affirmed. Labor combinations generally have not been held unlawful.

LOEWE v. LAWLOR, OR DANBURY HATTERS' CASE (208 U. S., 274), SUPREME COURT, 1908.-A manufacturer of hats at Danbury, Conn., engaged in interstate commerce in the sale of hats, was boycotted by the United States Hatters of North America, a labor union, because he would not agree to employ union labor exclusively. The hat manufacturer brought an action at law for the recovery of damages under section 7 of the Sherman Law. The brief of the defendants made no claim that combinations in restraint of trade, if made by laborers or labor unions, would be excluded from the operation of the act. The court held that the act was applicable to this case, and said in part (p. 301):

Nor can the act in question be held inapplicable because defendants were not themselves engaged in interstate commerce. The act made no distinction between classes. It provided that "every" contract, combination or conspiracy in restraint of trade was illegal. The records of Congress show that several efforts were made to exempt, by legislation, organizations of farmers and laborers from the operation of the act and that all these efforts failed, so that the act remained as we have it before us.

An important case in an inferior Federal court was the following: UNITED STATES v. DEBS ET AL. (64 FED., 724), CIRCUIT COURT, 1894. Debs and others had led a strike which forcibly interfered with the movement of trains and the transportation of the mails and goods. They were enjoined to desist, and failing to do so proceedings for contempt in equity were instituted. The court held that the court below had not exceeded its jurisdiction and that there was a conspiracy in restraint of trade contrary to the Sherman Act which was broad enough to embrace conspiracies of laboring men as well as of capitalists.

While this case was appealed and the judgment affirmed in the Supreme Court, the grounds of the decision were not the same. The Supreme Court, however, expressly stated that it did not thereby intend to deny the correctness of the opinion of the court below. (158 U. S. 564.)

Another case in an inferior Federal court, decided in 1893, was as follows:

UNITED STATES v. WORKINGMEN'S AMALGAMATED COUNCIL OF NEW ORLEANS (54 FED., 994), CIRCUIT COURT, 1893.-A labor combination which comprised workmen in various trades, including draymen, interfered with the shipment of goods in interstate commerce in New Orleans by threats and force to compel the employment of union labor only. The Government brought a suit in equity to obtain an injunction restraining such interference. The court granted the injunction, chiefly on the basis of the Sherman Act, on the ground that the members of the union were guilty of a conspiracy in restraint of interstate commerce.

The court said in part (p. 996):

It is true this statute has not been much expounded by judges, but, as it seems to me, its meaning, as far as relates to the sort of combinations to which it is to apply, is manifest, and that it includes combinations which are composed of laborers acting in the interest of laborers.

The following case is of interest in this connection, as well as in connection with the Clayton Antitrust Act (see p. 138), in regard to the question of the constitutionality of the express exemption of · labor combinations from the operation of the antitrust laws.

INTERNATIONAL HARVESTER Co. v. COMMONWEALTH OF MISSOURI (234 U. S., 199), SUPREME COURT, 1914.-Quo warranto proceedings against the International Harvester Co. in the supreme court of Missouri under the antitrust laws of that State were carried to the United States Supreme Court. The appellant company contended that the Missouri statute was unconstitutional because it exempted from its operation and penalties all "combinations of persons engaged in labor pursuits" and was limited to "persons and corporations dealing in commodities." The United States Supreme Court

held that the courts can not disturb the power of classification which a legislature may exercise "unless the courts can clearly see that there is no fair reason for the law that would not require with equal force its extension to others whom it leaves untouched."

After citing a number of cases the court went on to say (pp. 214215):

*

Other cases might be cited whose instances illustrate the same principle and in which this court has refused to accept the higher generalizations urged as necessary to the fulfillment of the constitutional guaranty of the equal protection of the law, and in which we, in effect, held that it is competent for a legislature to determine upon what differences a distinction may be made for the purpose of statutory classification between objects otherwise having resemblances. Such power, of course, cannot be arbitrarily exercised. The distinction made must have reasonable basis. * * And so in the case at bar. Whether the Missouri statute should have set its condemnation on restraints generally, prohibiting combined action for any purpose and to everybody, or confined it as the statute does to manufacturers and vendors of articles and permitting it to purchasers of such articles; prohibiting it to sellers of commodities and permitting it to sellers of services, was a matter of legislative judgment and we cannot say that the distinctions made are palpably arbitrary, which we have seen is the condition of judicial review. It is to be remembered that the question presented is of the power of the legislature, not the policy of the exercise of the power. To be able to find fault, therefore, with such policy is not to establish the invalidity of the law based upon it.

It is said that the statute as construed by the Supreme Court of the State comes within our ruling in Connolly v. Union Sewer Pipe Co., 184 U. S. 540, but we do not think so. If it did we should, of course, apply that ruling here.

The Federal antitrust laws have been modified with respect to labor combinations by certain provisions of the Clayton Act which is described below. (See pp. 138, 141-142.)

Section 11. Railroad combinations.

The application of the Sherman Law to common carriers by railroad was established at a comparatively early date, namely, by a decision of the Supreme Court in 1897.

UNITED STATES v. TRANS-MISSOURI FREIGHT ASSOCIATION (166 U. S., 290), SUPREME COURT, 1897.-The facts in this case have been set forth above (p. 84), which, briefly stated, are that a rate-fixing pool had been formed by certain interstate railway companies, and continued to operate after the passage of the Sherman Act. The Government sought to have the railroad companies enjoined from further combinations of this character. The railroad companies claimed that the Sherman Law did not apply to them. The court held that contracts in restraint of interstate commerce made by railroad companies were within the prohibitions of the law. The court said in part (pp. 312-314):

A contract therefore that is in restraint of trade or commerce is by the strict language of the act prohibited even though such contract is entered into between competing

Τ common carriers by railroad, and only for the purposes of thereby affecting traffic rates for the transportation of persons and property.

* * * An act which prohibits the making of every contract, etc., in restraint of trade or commerce among the several States, would seem to cover by such language a contract between competing railroads, and relating to traffic rates for the transportation of articles of commerce between the States, provided such contract by its direct effect produces a restraint of trade or commerce.

*

*

*

But it is maintained that an agreement like the one in question on the part of the railroad companies is authorized by the Commerce Act, which is a special statute applicable only to railroads, and that a construction of the Trust Act (which is a general act) so as to include within its provisions the case of railroads, carries with it the repeal by implication of so much of the Commerce Act as authorized the agree

The first answer to this argument is that, in our opinion, the Commerce Act does not authorize an agreement of this nature. It may not in terms prohibit, but it is far from conferring either directly or by implication any authority to make it.

Other important cases showing the applicability of the Sherman Law to railroads are the United States v. Joint Traffic Association; 1 Northern Securities Co. v. United States; and United States v. Union Pacific Railroad Co. The first two have already been discussed under other aspects of the question (see pp. 72-73, 85-86), while the second is also important in connection with forms of combination and is discussed below under the subject of holding companies. (See p. 103.) Section 12. Farmers' combinations.

There has been, apparently, only one decision by the Federal courts touching the question whether farmers' combinations in restraint of interstate commerce are included within the prohibitions of the Sherman Act, and this case is not, perhaps, very clear on this point. Besides this, however, there is an obiter dictum in another case and a decision with regard to a State antitrust statute which supports the inference that farmers' combinations are not exempted.

STEERS v. UNITED STATES (192 FED., 1), CIRCUIT COURT OF APPEALS, 1911.—A farmer and two tenants delivered four hogsheads of tobacco at a railway station consigned to a person in another State, although a pool of tobacco growers in the vicinity, called the "Society of Equity" or the "Burley Society," had arranged to hold all tobacco at that time and opposed such sales. The farmer was notified by certain neighbors that he must not ship the tobacco or it would be destroyed, and they procured from him an order to take the tobacco from the station agent and return it to him. A large body of men recovered the tobacco from the station agent and informed him he must not ship any unpooled tobacco. A grand jury brought an indictment for violation of the Sherman Act against 12 persons, of whom 8 were convicted and fined. The defense apparently made no attempt to distinguish farmers' combinations from other combina

1 171 U. S., 505 (1898).

2 193 U. S., 197 (1904).

3 226 U. S., 470 (1912).

tions. The court affirmed the judgments of conviction and the sentences imposed.

In the Danbury Hatters' case (Loewe v. Lawlor, 208 U. S., 274), which has been already discussed (see p. 93 above), the court made the statement that "organizations of farmers and laborers" were not exempted from the prohibitions of the law. Apparently, however, this was an obiter dictum so far as farmers' organizations are concerned. A case arose, however, with relation to a State antitrust law, which was adjudicated by the Supreme Court of the United States and which throws some light on this subject. The facts in this case, and the essential part of the decision relating to this subject, were as follows:

CONNOLLY v. UNION SEWER PIPE CO. (184 U. S., 540), SUPREME COURT, 1902. The pipe company brought an action in the Federal courts against one Connolly to obtain payment on his notes for the purchase of pipe. One defense set up was that the pipe company was a trust contrary to the statute of the State of Illinois of July 1, 1893, section 10 of which act provided that the purchaser of articles from a trust could plead this act in a suit to recover payment therefor in bar of such payment. The statute in section 1 prohibited trusts and other combinations to restrict trade, to prevent competition, to limit production, to fix prices, etc. In section 9 the following provision was made:

The provisions of this act shall not apply to agricultural products or live stock while in the hands of the producer or raiser.

The court held that the defense made could not be allowed because this statute of the State of Illinois was unconstitutional.

The conclusions of the court on this matter were as follows (pp. 563-564):

Returning to the particular case before us, and repeating or summarizing some thoughts already expressed, it may be observed that if combinations of capital, skill or acts, in respect of the sale or purchase of goods, merchandise or commodities, whereby such combinations may, for their benefit exclusively, control or establish prices, are hurtful to the public interests and should be suppressed, it is impossible to perceive why like combinations in respect of agricultural products and live stock are not also hurtful. Two or more engaged in selling dry goods, or groceries, or meats, or fuel, or clothing, or medicines, are, under the statute, criminals, and subject to a fine, if they combine their capital, skill or acts for the purpose of establishing, controlling, increasing or reducing prices, or of preventing free and unrestrained competition amongst themselves or others in the sale of their goods or merchandise; but their neighbors, who happen to be agriculturalists and live stock raisers, may make combinations of that character in reference to their grain or live stock without incurring the prescribed penalty. Under what rule of permissible classification can such legislation be sustained as consistent with the equal protection of the laws? It can not be said that the exemption made by the ninth section of the statute was of slight consequence, as affecting the general public interested in domestic trade and entitled to be protected against combinations formed to control prices for their own benefit; for it 30035°-16-7