CHAPTER 4 Antitrust Legislation Foes of organized labor acquired a powerful weapon when Congress passed the Sherman Act in 1890.1 The Act provided, in Section 1, that "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal." Violations of the Act were to be dealt with in three ways: (1) through criminal prosecution, (2) through the use of injunctions when suit was brought by the Attorney General, and (3) through awards of triple damages in favor of injured private parties. These sanctions could be applied against labor simply by holding that labor's activities were "in restraint of trade." The logic was so clear that it could easily be followed by workers and employers alike, but particularly by employers who had dedicated themselves to destroying the effectiveness of some union. The courts promptly put this logic to work, with the result that the Sherman Act became a potent influence in counteracting unionism.2 The Sherman Act was so effective that Congress eventually heeded the appeals of labor and passed the Clayton Act in 1914 and the Norris-La Guardia Act in 1932, statutes which included provisions designed to disarm the employers if not completely to shield the employees in their labor disputes. The story of how the courts construed the Sherman Act in the light of the Clayton Act and the Norris-La Guardia Act so as practically to reverse their earlier decisions is a fascinating demonstration of the judicial process and judicial responsiveness to social change. In attempting to trace the full picture, this chapter will deal with the congressional purpose of the Sherman Act and discuss significant court decisions (1) in the early period of the Act, (2) in the period after the passage of the Clayton Act but before the Norris-La Guardia Act, and (3) in the period since 1932, when the 1 26 Stat. 209. 2 Edward Berman, Labor and the Sherman Act, Foreword by Felix Frankfurter, Harper & Brothers, New York, 1930, p. 14. 3 38 Stat. 730; 47 Stat. 70. 55 Sherman, Clayton, and Norris-La Guardia Acts were construed as “interlacing statutes." Congressional Purpose of the Sherman Act. The title of the Sherman Act is "An Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies." At the time of its passage, the public had become perturbed over the actions of combinations of businesses and of capital which were created for the purpose of attempting to control the marketing of goods and services through eliminating competition. Alarmed at the rapid development of gigantic business organizations which seemed to threaten the existing system of market-place competition of numerous business units, and fearful of restricted production, increased prices, and the shackling of freedom of trade, the Senate on July 10, 1888, adopted a resolution offered by Senator Sherman directing the Finance Committee to consider "such measures as it may deem expedient to set aside, control, restrain, or prohibit all arrangements, contracts, agreements, trusts, or combinations between persons or corporations, made with a view or which tend to prevent free and full competition . . . with such penalties . . . as will tend to preserve freedom of trade and production, the natural competition of increasing production, and the lowering of prices by such competition. ." When the antitrust bill came before the Senate for debate, Senator George spoke against trusts which crush out competition and declared: "That is the great evil at which all this legislation ought to be directed." It is clearly established from the legislative history of the Sherman Act that its compelling purpose was to deal with the problem of business competition and to prevent restraints of trade having a significant effect on such competition. The Intent of Congress to Include Labor. Although some of the earlier writers on this question believed that it was the intention of Congress to include labor within the scope of the Sherman Act, more recent investigators have taken the opposite view. The view that the Act was designed to include labor rests largely on the fact that an early draft of the antitrust bill was expressly amended so as to exempt labor, whereas the bill as finally drafted omitted this amendment. In addition Senator Edmunds, chairman of the Senate Judiciary Committee and alleged author of the Act, made a number of public statements to the effect that the Act was intended to apply to labor. On the other hand, it is pointed out that the p. 6041. 4 Congressional Record, Vol. 19, 1888, 6 For the view that the Act was intended to include labor, see Alpheus T. Mason, Organized Labor and the Law, Duke University Press, Durham, N.C., 1925, Chaps. 7, 8; James A. Emery, “Labor Organizations and the Sherman Law," Journal of Political Economy, Vol. 20, No. 6, June, 1912, pp. 599-612. Also see Edwin E. Witte, The Government in Labor Disputes, McGraw-Hill Book Company, Inc., New York, 1932, pp. 61-62. language of the Sherman Act as finally adopted was so different from the wording of the earlier draft amended to exempt labor that it was clearly no longer necessary to include such an amendment. Furthermore it is contended that the real author of the Act was not Senator Edmunds, but Senator Hoar, and since Senator Hoar had spoken out in favor of the amendment of the earlier draft expressly exempting labor, it would be unrealistic to believe that he would author a bill intending the opposite of his expressed convictions. Louis B. Boudin has pointed out that Senator Hoar made the following statement concerning the intent and purpose of the Judiciary Committee in recommending to the Senate adoption of the proposed law: "We have affirmed the old doctrine of the common law in regard to all interstate and international commercial transactions, and have clothed the United States courts with authority to enforce that doctrine by injunction." Reasoning from the premise that it was the intention of the authors of the Sherman Act to affirm the "old doctrine of the common law" in regard to all interstate and international commercial transactions, Boudin argues that it would follow logically that it was their intention not to include labor organizations in the operation of the Act if the common-law doctrine of restraint of trade did not include such organizations. Entirely apart from the intention of the authors of the Act, however, it is useful to consider the meaning of restraint of trade at common law to see if this phrase, as so included in the Act, applied to labor organizations. 8 Restraints of Trade at Common Law. Restraints of trade at common law fell generally into two classes: (1) contracts in restraint of trade and (2) combinations or conspiracies in restraint of trade. A contract in restraint of trade was one in which one of the parties agreed not to engage in a particular trade, business, occupation, or profession within a specified area, for a specified time, or both. Such agreements were usually entered into as part of a larger contract involving the sale of a business. The doctrine of restraint of trade was applied with limitations of reasonableness. For example, when the good will of a business was sold and the agreement of the seller not to compete was reasonably necessary to protect the sale of the good will, such an agreement was not regarded as being in restraint of trade. On the other hand, if the seller agreed not to engage in any business whatsoever and thereby threatened to make himself and his family public charges, and at the same time deprived the community of his special services or skills, such an agree 7 For the view that the Act was not intended to apply to labor, see Berman, op. cit.; Harry Shulman, "Labor and the Anti-trust Laws," 34 Illinois Law Review 769 (1940); Louis B. Boudin, "The Sherman Act and Labor Disputes," 39 Columbia Law Review 1283 (1939); and 40 Columbia Law Review 14 (1940). 8 Congressional Record, Vol. 21, 1890, p. 3146. ment was regarded as not being reasonable, as being a contract in restraint of trade and thus void or unenforceable at common law. Combinations or conspiracies in restraint of trade at the common law involved monopolistic behavior or attempts to control the supply or price of a commodity. Punishable as crimes were the following offenses: (1) regrating, which consisted of buying up goods at a market for the purpose of reselling at a higher price; (2) forestalling, or obtaining merchandise on the way to market with the intent to resell at higher prices; (3) engrossing, or buying up large quantities of merchandise in order to raise prices. If two or more persons attempted to control the supply or price of a commodity by agreeing to trade only with specified persons or at certain prices, such a combination would be in restraint of trade; and if the parties to the combination agreed to pay a penalty or forfeit in the event they were to violate the agreement, such an agreement was regarded as void and unenforceable. The ideas of monopoly and combinations in restraint of trade were tied together by Justice Holmes in the Northern Securities antitrust case, in which he stated: "I repeat that in my opinion there is no attempt to monopolize and what, as I have said, in my judgment amounts to the same thing that there is no combination in restraint of trade until something is done with the intent to exclude strangers to the combination from competing with it in some part of the business which it carries on." Implicit in the idea. of combinations in restraint of trade is the dealing in commodities, and this idea as applied in the common law did not include labor organizations.10 It should be noted, however, that the doctrine of criminal conspiracy at the common law was available for use against combinations of workers acting for illegal purposes or acting for legal purposes in an unlawful manner. 11 The Sherman Act Applied to Labor Organizations. Although there were a number of lower-court decisions giving effect to the Sherman Act in labor cases,11 it was not until 1908 that the United States Supreme Court in the Danbury Hatters' Case 12 definitely and clearly decided that employee organizations were included within the scope of the Act. The facts in this case were as follows. A labor organization representing employees in seventy out of eighty-two hat-manufacturing companies in the country was attempting to unionize the company of D. E. Loewe in 9 Northern Securities Co. v. United States, 193 U.S. 409 (1904). Also see Boudin, op. cit. 10 Charles O. Gregory, Labor and the Law, W. W. Norton & Company, Inc., New York, 1946, p. 205; and Boudin, op. cit. 11 For example, Blindell v. Hagen, 54 Fed. 40 (1893); United States v. Amalgamated Council, 54 Fed. 994 (1893); Waterhouse v. Comer, 55 Fed. 149 (1893); and United States v. Debs, 64 Fed. 724 (1894). 12 Loewe v. Lawlor, 208 U.S. 274. |