Act, Sherman antitrust (act of July 2, 1899, Stats. 26, chap. 647). .
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Bills having in view the amendment of the Sherman antitrust act:

S. 6440, introduced by Senator Warner.

S. 6331, introduced by Senator Foraker..

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Later proposed substitute measure submitted on behalf of National Civic Federation to Judiciary subcommittee of House of Representatives.... 322-327 Bucks Stove and Range Company . The American Federation of Labor. Opinion of supreme court of District of Columbia. Carnegie, Andrew, letter to Seth Low..

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Davenport, Daniel:

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Dick bill, so called (S. 6900).
Emery, James A.:

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Foraker bill, so called (S. 6331).
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Hepburn bill, so called (H. R. 19745).


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Loewe v. Lawlor-opinion of Supreme Court of United States.

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Senate Report No. 848, Sixtieth Congress, second session.


JANUARY 26, 1909.-Ordered to be printed.

Mr. NELSON, from the Committee on the Judiciary, submitted the



[To accompany S. 6440]

The Committee on the Judiciary, to whom was referred the bill (S. 6440) to amend the antitrust act of July 2, 1890, having duly considered the same report as follows:

This bill seeks to amend and modify the so-called antitrust act of July 2, 1890 (26 Stat., 209), which act, in brief, prohibits combinations in restraint of foreign and interstate commerce and the monopolization of such commerce, and prescribes remedies for violation of the law.

To understand the scope and effect of the proposed legislation it is well to first consider the law relating to monopolies and combinations in restraint of such trade and commerce existing and in force prior to the passage of said act, and secondly, the changes wrought and the remedies given by the act as construed and applied by the courts.

Prior to the passage of the act such monopolies and combinations were in the main regulated and controlled, so far as regulated and controlled at all, by the principles of the common law as interpreted and applied by the courts of this country, and hence it is well to take a brief view of those principles and ascertain the status of a contract in restraint of trade and of a monopoly in trade prior to the passage of the act.

The earliest doctrine of the common law was that all contracts in restraint of trade were illegal and void. Thus the supreme court of Indiana, in the case of Beard v. Dennis (6 Ind., 202), refers to an old English case as follows:

In one of the earliest cases of which we have an account (Year Book 2, Hen. 5), where a dyer was bound not to exercise his craft for two years, Hall, J., not only held the bond void as against the common law, but added: "By God, if the plaintiff were here he should go to prison till he paid a fine to the King."

The leading case which modified this doctrine and laid down some of the elements of the modern rule is that of Mitchell v. Reynolds (1 Peere Williams, 181), decided in 1711. This case held that an

agreement not to engage in a particular trade in a given parish for five years was not invalid, but it also held that all general restraints of trade were void, and the court in assigning reasons therefor uses the following significant and prophetic language:

Another reason is the great abuses these voluntary restraints are liable to; as, for instance, from corporations, who are perpetually laboring for exclusive advantages in trade, and to reduce it into as few hands as possible.

The rule in Mitchell v. Reynolds was adhered to in the Indiana case cited above. In the case of Oregon S. N. Co. v. Winsor (20 Wall., 66) the Supreme Court of the United States laid down the doctrine in the following terms:

It is a well-settled rule of law that an agreement in general restraint of trade is illegal and void; but an agreement which operates merely in partial restraint of trade is good, provided it be not unreasonable and there be a consideration to support it. In order that it may not be unreasonable the restraint imposed must not be larger than is required for the necessary protection of the party with whom the contract is made. A contract, even on good consideration, not to use a trade anywhere in England is held void in that country as being too general a restraint of trade; but a contract not to use a trade at a particular place, if it be founded on a good consideration and be made for a proper and reasonable purpose, is valid. Of course, a contract not to exercise a trade generally would be obnoxious to the rule, and would be void. *



In accordance with these principles it is well settled that a stipulation by a vendee of any trade, business, or establishment that the vendor shall not exercise the same trade or business or erect a similar establishment within a reasonable distance, so as not to interfere with the value of the trade, business, or thing purchased, is reasonable and valid. In like manner a stipulation by the vendor of an article to be used in a business or trade in which he is himself engaged that it shall not be used within a reasonable region or distance, so as not to interfere with his said business or trade, is also valid and binding.

But these cases, and nearly all the older common-law cases, relate to instances where one party sells his trade or business to another party and agrees not to engage in the same in a particular locality, or for a limited period, or anywhere at any time, and they were, in the main, considered from the standpoint of the parties and of the effect upon them rather than in respect to their bearing and effect upon the general public, or rather their effect upon the public interests were of such a limited character as not to militate against their validity.

But where there is a combination which chiefly and in the main affects the public welfare a different rule is applied and governs. Judge Taft, in his opinion in the case of United States v. Addyston Pipe Line Co. (85 Fed.), clearly points out and defines the proper rule in such cases.

After discussing and summarizing the various decisions and authorities bearing on the case Judge Taft adds:

Upon this review of the law and the authorities we can have no doubt that the association of the defendants, however reasonable the prices they fixed, however great the competition they had to encounter, and however great the necessity of curbing themselves by joint agreement from committing financial suicide by ill-advised competition, was void at common law, because in restraint of trade and tending to a monopoly.

And in response to the contention that the combination in question was a reasonable one the judge declares:

We do not think the issue an important one, because, as already stated, we do not think that at common law there is any question of reasonableness open to the courts with reference to such a contract. Its tendency was certainly to give defendants the power to charge unreasonable prices had they chosen to do so.

The distinction pointed out by Judge Taft is also illustrated in the case of Gibbs v. Consolidated Gas Co. (130 U. S., 396). The first two paragraphs of the syllabus in this case epitomize the doctrine as follows:

Courts decline to enforce contracts which impose a restraint, though only partial, upon business of such character that restraint to any extent will be prejudicial to the public interest. But where the public welfare is not involved and the restraint upon one party is not greater than protection to the other party requires a contract in restraint of trade may be sustained.

The facts in the case are, in brief, as follows: The defendant gas company and the Equitable Gas Company, of Baltimore, were competitors in business, and felt that they wasted much money and failed to get enough money for their gas. Plaintiff proposed to the Equitable Gas Company to make some arrangement with the defendant company whereby the rivalry could be done away with and a certain price for gas be agreed upon. He was employed and accomplished his purpose. Now he brings this action to recover for services rendered. A specific price for gas was agreed on and many other things which destroyed the competition between the companies. On page 408 the court says:

The supplying of illuminating gas is a business of a public nature to meet a public necessity. It is not a business like that of an ordinary corporation engaged in the manufacture of articles that may be furnished by individual effort. * * * Hence, while it is justly urged that those rules which say that a given contract is against public policy should not be arbitrarily extended so as to interfere with the freedom of contract, * yet in the instance of business of such character that it presumably can not be restrained to any extent whatever without prejudice to the public interest, courts decline to enforce or sustain contracts imposing such restraint, however partial, because in contravention of public policy.



Further on the court adds:

Innumerable cases, however, might be cited to sustain the proposition that combinations among those engaged in business impressed with a public or quasi public character, which are manifestly prejudicial to the public interest, can not be upheld.

The case of Gwynn v. Citizens Telephone Co. (69 S. C., 434) is also in point. In this case Gwynn ordered a telephone put into his store. The defendant company refused to give him a telephone unless he would agree not to use the telephone of the Bell Telephone Company in his store. This plaintiff refused to agree to. On page 463 the court says:


The modern doctrine is that contracts between individuals are not void on the ground that they are in restraint of trade, unless the provisions thereof are unreasonable. * * But as is said in 9 Cyc., 533, 534: "The reasonableness of contracts in restraint of trade as between the parties is the sole test in those cases only where the public interests are not also involved. Although the contract may be fair and reasonable between the parties, yet if it is so injurious to the public interest that public policy requires that it should not be enforced it will be held void." The contract alleged in the counterclaim was unreasonable because its tendency was to stide competition between common carriers and to create a monopoly in favor of the defendant.

* *


The case of the Texas and Pacific Railway Company et al. v. The Southern Pacific Railway Company (41 La. Ann., 970) still further illustrates the doctrine. In this case the defendant agreed to pay over to the plaintiffs any pool balance to which plaintiffs were entitled under an arrangement to divide their joint earnings in traffic between El Paso and Galveston and that between New Orleans and El Paso.

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