« ForrigeFortsett »
and the progress toward monopoly will be comparatively slight. Such as may occur is entirely outweighed by the public interests which are subserved by permitting the combination.
First, there is the social interest in individual freedom of economic action. As applied to the situation under discussion this means that there is a public policy in favor of freedom to business managers and owners to run their business as they think best, combining with others or not, as they deem advisable. It is not infrequently spoken of as the fundamental policy in favor of freedom of contract, protected by the "due process" clause of our constitutions.18
secures the plaintiff in the exclusive enjoyment of his business as against a single individual, while all the world beside are left at full liberty to enter upon the same enterprise.") The California Steam Navigation Co. v. Wright, 6 Cal. 258, 262 (1856) (last quotation approved).
18 Diamond Match Co. v. Roeber, 106 N. Y. 473, 482, 13 N. E. 19 (1887). (“It is clear that public policy and the interests of society favor the utmost freedom of contract, within the law, and require that business transactions should not be trammeled by unnecessary restrictions.")
Leslie v. Lorillard, 110 N. Y. 519, 533, 18 N. E. 363 (1888). ("The object of government, as interpreted by the judges, was not to interfere with the free right of man to dispose of his property or of his labor.")
Wood v. Whitehead Bros. Co., 165 N. Y. 545, 551, 59 N. E. 357 (1901). (“In the present practically unlimited field of human enterprise there is no good reason for restricting the freedom to contract, or for fearing injury to the public from contracts which prevent a person from carrying on a particular business.")
National Benefit Co. v. Union Hospital Co., 45 Minn. 272, 276, 47 N. W. 806 (1891). ("A contract may be illegal on grounds of public policy because in restraint of trade, but it is of paramount public policy not lightly to interfere with freedom of contract.")
United States Chemical Co. v. Provident Chemical Co., 64 Fed. 946, 949 (1894). (“In discussing this phase of the subject, we must not lose sight of some other principles, the disregard of which would be more harm ul to public interest than monopolies. The right to contract is a cardinal element of constitutional liberty, and, as such, should be jealously guarded.”)
Anchor Electric Co. v. Hawkes, 171 Mass. 101, 105, 50 N. E. 509 (1898). (“The general principle that arrangements in restraint of trade are not favored is, however, firmly established in law, and now, as well as formerly, is given effect whenever its application will not interfere with the right of everybody to make reasonable contracts. Whenever one sells a business with its good will, it is for his benefit, as well as for the benefit of the purchaser, that he should be able to increase the value of that which he sells by a contract not to set up a new business in competition with the old.")
Smith's Appeal, 113 Pa. St. 579, 590, 6 Atl. 251 (1886). (“The principle is this: Public policy requires that every man shall not be at liberty to deprive himself or the State of his labor, skill or talent, by any contract that he enters into. On the other hand, public policy requires that when a man has, by skill or by any other means, obtained something which he wants to sell, he should be at liberty to sell it in the most advantageous way in the market; and in order to enable him to so sell it, it is necessary
Second, there is the use of the combination as a means of eliminating ruinous competition. Competition in trade and industry is constantly inimical to the public interest in two respects: It tends to develop too much competition and consequent loss to everyone in the business.19 Too much competition and the intensity of com
that he should be able to preclude himself from entering into competition with the purchaser.")
Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507, 514, 43 Atl. 723 (1899). (“A tradesman, for example, who has engaged in a manufacturing business and has purchased land, installed a plant, and acquired a trade connection and good will thereby, may sell his property and business with its good will. It is of public interest that he shall be able to make such a sale at a fair price and that his purchaser shall be able to obtain by his purchase that which he desired to buy. Obviously, the only practical mode of accomplishing that purpose is by the vendor's contracting for some restraint upon his acts, preventing him from engaging in the same business in competition with that which he has sold.") Kellogg v. Larkin, 3 Pinney (Wis.) 123 (1851).
19 Leslie v. Lorillard, 110 N. Y. 519, 534, 18 N. E. 363 (1888). ("I do not think that competition is invariably a public benefaction; for it may be carried on to such a degree as to become a general evil.")
Oakdale Mfg. Co. v. Garst, 18 R. I. 484, 487, 28 Atl. 973 (1894). (Agreement found to have been made on account of "a ruinous competition.")
Wickens v. Evans, 3 Y. & J. 318, 328 (1829). (Agreement made in view of the fact that the parties "had sustained great loss and inconvenience by reason of exercising their trade in the same places.")
National Benefit Co. v. Union Hospital Co., 45 Minn. 272, 275, 47 N. W. 806 (1891). ("Excessive competition is not now accepted as necessarily conducive to the public good.")
Whitney v. Slayton, 40 Me. 224, 230-231 (1855). ("Whether competition in trade be useful to the public or otherwise, will depend on circumstances. I am rather inclined to believe, that, in this country at least, more evil than good is to be apprehended from encouraging competition among rival tradesmen, or men engaged in commercial concerns. There is a tendency, I think, to overdo trade, and such is the enterprise and activity of our citizens, that small discouragements will have no injurious effect, in checking in some degree, a spirit of competition.
"In this country, particularly, such is the facility with which persons are enabled, without capital, to embark in various enterprises, and such the desire to try experiments therein, that it often turns out, when these experiments have been successful, in some of these undertakings, others will enter into them in such numbers that ruin to most of them so engaged is the consequence. Hence those who retire, and for a proper consideration contract with others not to engage in any particular business for a limited time, and in a particular place, have often, if not generally, been the successful party.") Chappel v. Brockway, 21 Wend. (N. Y.) 157, 164 (1839). ("Competition in business, though generally beneficial to the public, may be carried to such excess as to become an evil.")
Kellogg v. Larkin, 3 Pinney (Wis.) 123, 150 (1851). ("I believe universal observation will attest that for the last quarter of a century, competition in trade has caused more individual distress, if not more public injury, than the want of competition.")
Slaughter v. The Thacker Coal & Coke Co., 55 W. Va. 642, 650, 47 S. E. 247 (1904),
petitive methods may produce too little competition by eliminating others from the business. The competitive system looks to the operation of economic principles under freedom of action to avoid the evils of each extreme.20 The freedom of others to enter the business prevents too little competition; the elimination of some competition from time to time prevents too much. A rule of law which made all sales to competitors, and all combinations of competitors, illegal, would leave the door open wide to an indefinite increase in competition, and at the same time obstruct the healthy lessening of competition. This would promote all the evils of too much competition in order to prevent the evils of too little. It would be a rule which encouraged competition only to require that the status quo of every existing competition be indefinitely retained. The public interest must suffer severely from any such rule. The unsuccessful competitor under it would in most instances be eliminated by a total failure and a maximum loss, instead of having a chance to save his loss by selling out to, or combining with, a more successful rival. Where the competitors were evenly matched all would be subjected indefinitely to a profitless competition or a maximum loss, instead of being permitted to combine and rescue their properties. Industrial depression, due to overproduction and to too many competitors, would necessarily right itself slowly and with a maximum of failures and losses.21
per Poffenbarger, dissenting. ("Competition is said to be the life of trade, but undue or excessive competition has been judicially declared hurtful and injurious to the public.”) 20 Per Pitney, V. C., in Meredith v. New Jersey Zinc & Iron Co., 55 N. J. Eq. 211, 221, 37 Atl. 539 (1897). ("Now, I am unable to find any foundation, either in law or in morals, for the notion that the public have the right to have these private owners of this sort of property continue to do business in competition with each other. No doubt the public has reasonable ground to entertain the hope and expectation that its individual members will generally, in their several struggles to acquire the means of comfortable existence, compete with each other. But such expectation is based entirely upon the exercise of the free will and choice of the individual, and not upon any legal or moral duty to compete, and can never, from the nature of things, become a matter of right on the part of the public against the individual. In fact, the essential quality of that series of acts or course of conduct which we call competition is that it shall be the result of the free choice of the individual, and not of any legal or moral obligation or duty.") Diamond Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 19 (1887), supra.
21 Oakdale Manufacturing Co. v, Garst. 18 R. I. 484, 487, 28 Atl. 973 (1894). ("But it does not follow that every combination in trade, even though such combination may have the effect to diminish the number of competitors in business, is therefore illegal. Such a rule would produce greater public injury than that which it would seek to cure.")
Third, it can hardly be contended that mere combination and elimination of competition between the units combined creates exorbitant prices. What is the judicial test of an exorbitant or unreasonable price? There seems to have been an impression not entirely wanting in the judiciary that any rise in prices which follows a combination must be unreasonable. This is a shortsighted view. A moment's reflection should make it clear that general condemnation of advances in prices ultimately effects everyone unfavorably. It is equivalent to a general condemnation of prosperity. It is not the advance in prices which is objectionable, but only the unreasonable and excessive advance. In determining what prices are unreasonably high, are the courts to go into cost accounting and then add a percentage of profit and reach a specific finding as to what is an unreasonable price in any business under consideration? Obviously not. Such a course would be absurd and impracticable. The courts must find a workable and practicable general rule, the application of which will provide a wide margin of freedom to the business unit and a chance for the exceptional rewards which come from successful management. This leaves the courts no choice except to rely upon freedom to enter the business and freedom to continue in the business as the means of preventing excessive prices.22 On the other hand they must allow combination to
2 Dolph v. Troy Laundry Machinery Co., 28 Fed. 553, 555 (1886). ("Those who might be unwilling to pay the prices asked by the parties could find plenty of mechanics to make such machines, and the law of demand and supply would effectually counteract any serious mischief likely to arise from the attempt of the parties to get exorbitant prices for their machines. It is quite legitimate for any trader to obtain the highest price he can for any commodity in which he deals. It is equally legitimate for two rival manufacturers or traders to agree upon a scale of selling prices for their goods, and a division of their profits. It is not obnoxious to good morals, or to the rights of the public, that two rival traders agree to consolidate their concerns, and that one shall discontinue business, and become a partner with the other, for a specified term. It may happen, as the result of such an arrangement, that the public have to pay more for the commodities in which the parties deal; but the public are not obliged to buy of them. Certainly, the public have no right to complain, so long as the transaction falls short of a conspiracy between the parties to control prices by creating a monopoly.")
United States v. Nelson, 52 Fed. 646, 647 (1892). ("Unless the agreement involves an absorption of the entire traffic in lumber, and is entered into for the purpose of obtaining the entire control of it with the object of extortion, it is not objectionable to the statute, in my opinion. Competition is not stifled by such an agreement, and other dealers would soon force the parties to the agreement to sell at the market price, or a reasonable price, at least.")
Slaughter v. The Thacker Coal & Coke Co., 55 W. Va. 642, 649, 47 S. E. 247 (1904),
some extent to prevent unprofitable prices and ruinous competition. The highest price which can be obtained while the business is free to all to enter and no one in it occupies, as a result of combination, a preponderant position, must be taken by the courts as fair. The fact that prices are higher than they were as a result of some combination which eliminates some competition, does not make those prices exorbitant.
Finally, and most important of all, is the interest of society in the carrying on of business by larger units. This is not only favored by public policy, but it is a condition to the existence of our present social order. It is as vital to the welfare of the country as that freedom of contract freedom of the managers of business to manage without interference from the Legislature which the due process clause of the Constitution protects.23 In the last century one of the phases of our industrial revolution has been the shift from small to large business units. In a century individuals have been succeeded by partnerships, partnerships by corporations, corporations of small or limited capital by corporations with large capital. Acts which limited corporate capital have been succeeded by acts which place no limit upon the amount of capital. Acts which placed obstructions in the way of increasing capital have been succeeded in some states by acts which allow the corporation to increase its capital stock at will. The large corporation has been succeeded by the parent company which has been allowed already in some states to hold stock controls in subsidiary corporations. If we look at industry and commerce from the outward physical point of view, it is plain that the admittedly legal operating unit of today is, in every line, incredibly large in comparison with the unit of half a century ago. When we turn to the labor units we find the same process going on of shifting from the individual to the collective unit. The individual labor units have been combined to make the local unions, local unions have been combined to make the statewide and country-wide labor units. Unions have been combined not only locally, and nationally, according to occupation, but terri
per Poffenbarger, Pres. ("In the absence of some great combination, virtually controlling the production and price of a commodity in the country, the price is regulated and determined by the law of supply and demand.")
23 "Due Process,' the Inarticulate Major Premise, and the Adamson Act," 26 YALE L. J. 519, (May, 1917).