Company case and the Northern Securities case, the court had made clear the way for effective and sweeping application of the law. The deluge of prosecutions followed, more than a hundred cases being filed in the Federal Courts in the eight years beginning 1905.

In May, 1911, came the famous decisions of the Federal Supreme Court in the Oil and the Tobacco cases. These established definitely the interpretative doctrine of the "rule of reason." This doctrine had been used in application of the common law against monopolies and combinations in restraint of trade before the Sherman Act was passed. It had been invoked in dissenting opinions in the leading cases in 1904 and 1905 under the Sherman Act. It required, however, the almost unanimous decision of the Supreme Court in these elaborately prepared 1911 cases to give to the Sherman Act, authoritatively, its present meaning.

A brief review of eight leading cases under the Sherman Act will show the evolution of the court's interpretation of this law.

The Knight case,* instituted in the Circuit Court in Pennsylvania in January, 1894, and finally decided by the Supreme Court January 21, 1895, was the first case in which the law was given full consideration by the Supreme Court.

The bill in the Knight case charged that the American Sugar Refining Company, a New Jersey corporation, prior to March, 1892, had obtained control of all the sugar refineries in the United States with the exception of the Revere, of Boston, and four refineries in Philadelphia owned respectively by the E. C. Knight Com

*United States v. E. C. Knight Co., et al. 60 Fed. 306 and 934; 156 U. S., 1.

pany, Spreckels' Sugar Refining Company, Franklin Sugar Refining Company, and the Delaware Sugar House; that these five refineries were competitors of the American and of one another, independently engaged in the manufacture and sale of refined sugar and in trade with the several states and with foreign nations; that the Revere refined annually about 2 per cent., and the four Philadelphia refineries, about 33 per cent. of the total sugar refined in the United States; that in March, 1892, the American Sugar Refining Company, by exchanging shares of its own stock for the stock of the four Philadelphia refineries, came into control of these four refineries and thus became the refiner of 98 per cent. of all the sugar refined in the United States; that to get this control the American Sugar Refining Company had entered into an unlawful scheme to purchase the stock of these competing companies for the purpose of restraining trade and that it monopolized the manufacture and sale of refined sugar in the United States and controlled the price of sugar.

The bill asked that the unlawful agreements be declared void, that the stock of the four companies be returned, and that injunctions be issued preventing the further carrying out of the unlawful contractual agreement and the further violations of the Sherman Act.

In final decision of this case, January 21, 1895, the Supreme Court held that the result of the action of the American Sugar Refining Company in purchasing the four Philadelphia refineries was the creation of a monopoly in the manufacture of a necessary of life which could not be suppressed under the provisions of the

Sherman Act, in the mode attempted in this suit, and that the acquisition of Philadelphia refineries by a New Jersey corporation, and the business of sugar refining in Pennsylvania, bore no direct relation to commerce between the states or with foreign nations.

In stating the opinion of the court, Mr. Chief Justice Fuller said in part:

"The relief of the citizens of each state from the burden of monopoly and the evils resulting from the restraint of trade among such citizens was left with the states to deal with. On the other hand, the power of Congress to regulate commerce among the several states is also exclusive. Commerce succeeds to manufacture, and is not part of it. The power to regulate commerce is the power to prescribe the rule by which commerce shall be governed, and is a power independent of the power to suppress monopoly. The fact that an article is manufactured for export to another state does not of itself make it an article of interstate commerce, and the intent of the manufacturer does not determine the time when the article passes from the control of the state and belongs to commerce if the national

power extends to all contracts and combinations in manufacture, agriculture, mining, and other productive industries, whose ultimate result may affect external commerce, comparatively little of business operations and affairs would be left for state control.

There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce and the fact, as we have seen, that trade or commerce might be indirectly affected was not enough to entitle the complainants to a decree."*

*156 U. S. 11, 12, 13, 16, 17.

Justice Harlan alone dissented, holding that "the object in purchasing the Philadelphia refineries was to obtain a greater influence or more perfect control over the business of refining and selling sugar in this country," and that Federal authority should therefore be asserted over it since its monopoly, achieved by these purchases, gave it power to control, throughout the country, the price of a life necessity.

The effect of the Knight decision was to shatter the popular belief that the great industrial combinations were to be destroyed or controlled under the Sherman · Act. The decision seemed to leave all control of manufacturing enterprises to the individual states.

The next important decision by the Supreme Court, under the Sherman Act, was in the Trans-Missouri Freight Association case,† in which the Government filed suit to enjoin certain railroads on the ground that their rate-fixing agreement violated the Trust Act. Eighteen railroads had contracted to fix rates, by agreement, for all traffic west of the Missouri River. The original bill, filed in the Circuit Court of the District of Kansas, November 28, 1892, asked for the dissolution of the association and for an injunction to restrain the several companies from carrying into effect the agreement. This bill was dismissed by the Circuit Court, whose ruling was affirmed by the Circuit Court of Appeals, but was reversed by the Supreme Court.

The railroads claimed: (1) That Congress did not intend the Trust Act to apply to railroads because the

*156 U. S. 18.

†United States v. Trans-Missouri Freight Association. 53 Fed. 440; 58 Fed. 58; 166 U.S. 290.

Inter-State Commerce Act impliedly gave railroads the right to fix rates. (2) That the Trust Act did not apply to reasonable restraint of trade and that their rate-agreement provided for reasonable restraint of trade.

opinion of the

Mr. Justice Peckham delivered the divided court, representing five justices. This majority opinion held: (1) That the Commerce Act and the Trust Act are consistent with each other and therefore the Trust Act applies to railroads just as if there were no Commerce Act. (2) That the Trust Act says every contract is in restraint of trade. Therefore, the courts have no right to confine the scope of the Act to contracts in unreasonable restraint of trade. It includes all contracts in restraint of trade whether reasonable or unreasonable. (3) That the agreement, therefore, violated the Trust Act and an injunction was proper, and that the case should be remanded to the Circuit Court for further proceedings in conformity with this opinion.

Covering the first of the above points in the opinion, and relating this case to the Knight case, Justice Peckham said, in part:

"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 and commerce. What amounts to a restraint within the meaning of the act, if thus construed, need not now be discussed.