Trans-Missouri Agreement the association | act promptly upon the same for the protec was only given power to fix reasonable rates, tion of the parties hereto. and the fact that the rates fixed by the association during its existence were fair and reasonable was admitted by the denials and allegations of the answer, which appear in the statement of the case. United States v. Trans-Missouri Freight Asso. 166 U. S. 303, 41 L. ed. 1015.

There is no less power in the Joint Traffic Association than in the Trans-Missouri, indeed more power with respect to rates; and it is with the power alone that the court is concerned, not how the power has been or may be exercised.

Mr. Carter in his argument explained the operation of this clause. Thirty days' notice of the intention of any company, by resolution of its board, to deviate from the rates fixed by the association through its managers, was required in order that the association might have time to determine its course of action. If it could meet the rate proposed by the deviating member, it would do so. If it could not, it would take steps, in Mr. Carter's language, "to exterminate" the recalcitrant company. In no other way, according to Mr. Carter, could ruinous competition be prevented and the interests of all members of the association protected.

13. It may be conceded that the public along each line is interested in the line getting its fair share of the through traffic and earnings; and this it will get under competition. The local public is not entitled, however, to an arbitrary share of the through traffic and earnings. It has a right to no more than the advantages of the line attract. To give it more is to take what belongs to another line and another section. A prosperous section, with an intelligent, pro

In the Trans-Missouri case the association had been dissolved. The only question was the legal effect of the authority conferred by the agreement. If there were no power under the Joint Traffic Agreement to change rates, nevertheless the power to maintain rates arbitrarily would involve the authority to keep them up after progress and invention should render them excessive and unreasonable. But in point of fact, as pointed out, the Joint Traffic Agreement vests in the association, through the managers, with appeal to the board of control, the authority to change rates. This authority is more co-gressive population, makes a good railroad, ercive than that conferred by the Trans-Missouri Agreement.

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and a good railroad attracts through traffic; ard it is not just or right to take this traffic away and give to a poor road, in order to do for it what the public along its line ought to do.

Under the Trans-Missouri Agreement, five days' written notice prior to each monthly meeting was required to be given the chairman of any proposed reduction in rates. 14. The provisions of the interstate comAt each monthly meeting the association vot- merce law preventing discrimination and uned on all changes proposed. All parties due preferences have been discussed; they were bound by the decision of the associa- can be enforced without preventing competion, "unless then and there the parties shall tition. The 10th article of the Joint Traffic give the association definite written notice Agreement provides that "the managers that in ten days thereafter they shall make shall decide and enforce the course which such modification, notwithstanding the vote shall be pursued with connecting companies of the association. Should any not parties to this agreement, which fail or member insist upon a reduction of rates decline to observe the rates, fares, and rules against the views of the majority, and if in established under this agreement," and it is the judgment of said majority the rates so contended that this provision is necessary to made affect seriously the rates upon through prevent discrimination against one company traffic, then the association may, by a major- and in favor of another by connecting lines; ity vote upon such other traffic, put into ef- but a reading of the 3d section of the Interfect corresponding rates to take effect the state Commerce Act shows that the mischief same day.' Moreover, each member of the suggested is fully provided for in its conTrans-Missouri Association might, at its per- cluding paragraph, which provides that il, make a rate without previous notice to every common carrier shall afford equal fameet the competition of outside lines, giving cilities for the interchange of traffic and for the chairman notice of its action, so the good receiving and forwarding freight or passenfaith of the transaction might be passed up-gers from connecting lines, and shall not dison by the association at its next meeting.

Thus, under the Trans-Missouri Agreement each member might, at its peril, make a rate to meet outside competition, and each member might, upon giving ten days' notice make an independent rate notwithstanding the action of the association. But under the Joint Traffic Agreement no company can deviate from the rates as fixed by the managers except by a resolution of its board of directors, and thirty days after a copy of such resolution is filed with the managers. This absolutely prevents competition, and the intention to prevent competition is plain from the provision (art. 7, § 2, close). The managers upon receipt of such notice shall

criminate in their rates and charges between such connecting lines."

15. It is insisted that if Congress had intended the anti-trust law to prohibit every contract in restraint of trade, whether par it would have used the language "every contial or general, reasonable or unreasonable, tract in any restraint of trade," etc., "is hereby declared to be illegal." It seems to me, and I submit to the court, that the expression "every contract in restraint of trade" is quite as comprehensive as "every contract in any restraint of trade," and much better language.

16. The reply to Mr. Phelps's attack upon the constitutionality of the anti-trust law as construed by this court in the Trans-Mis

much more for it. The commission merchant
who pays the freight has no real interest in
the charge. Of course this is not always
true, but it does apply with respect to the
great shipments handled by middlemen.

souri case, is to be found in the argument of grain. The farmer sells to the commission
Mr. Carter that railways are public high- merchant. If the rates are excessive he gets
ways, and in furnishing public transporta- sc much less for his grain, or the purchas-
tion perform in a sense a governmental func-er from the commission merchant pays so
tion. The right of the government to regu-
late contracts between carriers and shippers
and to place proper restrictions upon con-
tracts among carriers themselves, in order
to protect the interests of the public, as af-
fected by these instrumentalities of com-
merce, has not heretofore been seriously
questioned. The states regulate the construc-
tion, maintenance, and operation of rail-
roads, prescribing and enforcing maximum
rates, preventing the consolidation of com-
peting lines, and securing to the public the
benefit of competition.

The doctrine laid down in the case of Munn ▾ Illinois, 94 U. S. 113, 24 L. ed. 77, applies. When a man devotes his property to a public use, to that extent he grants the public an interest in that use. The same policy which supports the prohibition against consolidation, and the 5th section of the interstate commerce law forbidding the pooling of freights or the division of earnings, is the justification for the declaration that all contracts in restraint of trade shall be deemed illegal. The result of the consolidation, the pooling, or combination in restraint of trade, is beside the question. Congress is entitled to pass judgment upon the tendency of a contract in restraint of trade. If it deems such a contract reprehensible, injurious in its tendencies, it may prohibit it, whether the act will result in a particular case in the establishment of reasonable or unreasona

ble rates.

17. As to the remedy in case of an unreasonably low rate. Judge Cooley, in a wellconsidered opinion, Re Chicago, St. P. & K. C. R. Co. 2 Înters. Com. Rep. 137, 2 Inters. Com. Com. 231, approved by this court in Interstate Commerce Commission v. Cincinnati, N. O. & T. P. R. Co. 167 U. S. 511, 42 L. ed. 257, held that under the interstate commerce law the Commission has no power to determine that a rate is unreasonably low, and to order the carrier to refrain from charging such rate on such ground.

Finally, it is questionable under the Inter-
state Commerce Act whether a suit to re-
cover back an excess paid above a reasonable
rate can be maintained, if the rate charged
was that fixed in the schedule filed with the

commission and published under the inter-
state commerce law.

Van Patten v. Chicago, M. & St. P. R. Co.
81 Fed. Rep. 545.

19. As the law stands the Commission has
no power to prescribe or enforce rates. Com-
petition secures reasonableness; the law en-
forces uniformity. In Interstate Commerce
Commission v. Cincinnati, N. O. & T. P. R.
Co. 167 U. S. 479, 42 L. ed. 243, this court,
speaking by Mr. Justice Brewer, held that
if Congress had intended to give the Commis-
sion power over rates it would have done so
in unmistakable language. So, too, when
Congress sees fit to take the railroads out of
the operation of the natural law of trade it
will do so in plain terms, and for independ-
ent competition will substitute governmental

Messrs. James A. Logan and John G.
Johnson filed a brief for the Pennsylvania
Railroad Company and other railroad com-
panies, appellees.

Messrs. Robert W. de Forest and David
Willcox filed a brief for the Central Railroad
Company of New Jersey, appellee.

*Mr. Justice Peckham, after stating the [558] facts, delivered the opinion of the court:

This case has been most ably argued by counsel both for the government and the railroad companies. The suit is brought to obtain a decree declaring null and void the agreement mentioned in the bill. Upon comparing that agreement with the one set forth in the case of United States v. Trans-Mis18. As to the remedy in case of an unrea- souri Freight Association, 166 U. S. 290 sonably high rate. [41:1007], the great similarity between them The common law requires that rates suggests that a similar result should be should be reasonable and fair. So does the reached in the two cases. The respondents, interstate commerce law. But this is a mere however, object to this, and give several readeclaration, and there is no adequate remedy sons why this case should not be controlled to enforce the right. The Commission has by the other. It is, among other things, no power to prescribe a reasonable rate and said that one of the questions sought to be enforce it, or to declare that a rate is unrea- raised in this case might have been, but was sonable and prohibit it. The shipper is not, made in the other; that the point theretherefore left to recover the excess in rate in decided, after holding that the statute appaid. I know of no case where the excess plied to railroad companies as common car-[559] charged over a reasonable rate on interstate riers, was simply that all contracts, whether commerce has been recovered back. The in reasonable as well as in unreasonable reamount involved in any particular transac-straint of trade, were included in the terms tion would be small; it would require years to carry the case through the courts, and no individual shipper would invite the ill will of a powerful railroad by beginning such a contest.

Moreover, the man who actually pays the freight is not the man who suffers from the unreasonable charge. Take the case of

of the act, and the question whether the con-
tract then under review was in fact in re-
straint of trade in any degree whatever was
neither made nor decided, while it is plainly
raised in this.

Again, it is asserted that there are differ-
ences between the provisions contained in
the two agreements, of such a material and

fundamental nature that the decision in the
case referred to ought to form no precedent
for the decision of the case now before the

"Does the agreement restrain trade or commerce in any way so as to be a violation of the act? We have no doubt that it does. The agreement on its face recites that it is entered into for the purpose of mutual protection by establishing and maintaining reasonable rates, rules, and regulations on all freight traffic, both through and local.

It is also objected that the statute, if construed as it has been construed in the Trans-Missouri case, is unconstitutional, in that it unduly interferes with the liberty of the individual, and takes away from him "To that end the association is formed and the right to make contracts regarding his a body created which is to adopt rates for own affairs, which is guaranteed to him by all the companies, and a violation of which the Fifth Amendment to the Constitution, subjects the defaulting company to the paywhich provides that "no person shall be ment of a penalty, and although the parties deprived of life, liberty, or property have a right to withdraw from the agreement without due process of law; nor shall private on giving thirty days' notice of a desire so to property be taken for public use without just do, yet while in force and assuming it to be compensation." This objection was not ad-lived up to, there can be no doubt that its divanced in the arguments in the other case. rect, immediate, and necessary effect is to [561] Finally, a reconsideration of the ques- put a restraint upon trade or commerce as tions decided in the former case is very described in the act. For these reasons the strongly pressed upon our attention, be- suit of the government can be maintained cause, as is stated, the decision in that case without proof of the allegation that the is quite plainly erroneous, and the conse-agreement was entered into for the purpose quences of such error are far reaching and of restraining trade or commerce or for disastrous, and clearly at war with justice maintaining rates above what was reasonaand sound policy, and the construction ble. The necessary effect of the agreement placed upon the Anti-Trust Statute has been is to restrain trade, no matter what the inreceived by the public with surprise and tent was on the part of those who signed it." alarm.

We will refer to these propositions in the order in which they have been named.

The bill, of the complainants in that case, while alleging an illegal and unlawful intent on the part of the railroad companies in entering into the agreement, also alleged that by means of the agreement the trade, traffic, and commerce in the region of country affected by the agreement had been and were monopolized and restrained, hindered, injured, and retarded. These allegations were denied by defendants.

As to the first, we think the report of the Trans-Missouri case clearly shows, not only that the point now taken was there urged upon the attention of the court, but it was then intentionally and necessarily decided. The whole foundation of the case on the part of the government was the allegation that the agreement there set forth was a contract or combination in restraint of trade, and un[560]lawful on that account. If the agreement did not in fact restrain trade, the govern-straint of trade. ment had no case.

There was thus a clear issue made by the pleadings as to the character of the agreement, whether it was or was not one in re

The extract from the opinion of the court above given shows that the issue so made was not ignored, nor was it assumed as a concession that the agreement did restrain trade to a reasonable extent. The statement in

If it did not in any degree restrain trade, it was immaterial whether the statute embraced all contracts in restraint of trade, or only such as were in unreasonable restraint thereof. There was no admission or conces-the opinion is quite plain, and it inevitably sion in that case that the agreement did in fact restrain trade to a reasonable degree. Hence, it was necessary to determine the fact as to the character of the agreement before the case was made out on the part of the government.

The great stress of the argument on both sides was undoubtedly upon the question as to the proper construction of the statute, for that seemed to admit of the most doubt, but the other question was before the court, was plainly raised, and was necessarily decided. The opinion shows this to be true. At page 341 of the report the opinion contains the following language:

"The conclusion which we have drawn from the examination above made of the question before us is that the Anti-Trust Act applies to railroads, and that it renders illegal all agreements which are in restraint of trade or commerce as we have above defined that expression, and the question then arises whether the agreement before us is of that nature.

leads to the conclusion that the question of
fact as to the necessary tendency of the agree-
ment was distinctly presented to the mind
of the court, and was consciously, purposely,
and necessarily decided. It cannot, there-
fore, be correctly stated that the opinion only
dealt with the question of the construction
of the act, and that it was assumed that the
agreement did to some reasonable extent re-
strain trade. In discussing the question as
to the proper construction of the act, the
court did not touch upon the other aspect of
the case, in regard to the nature of the agree
ment itself, but when the question of con-
struction was finished, the opinion shows
that the question as to the nature of the
agreement was then entered upon and dis-
cussed as a fact necessary to be decided in
the case, and that it in fact was decided. An
unlawful intent in entering into the agree-
ment was held immaterial, but only for the [562
reason that the agreement did in fact and by
its terms restrain trade.

Second. We have assumed that the agree

ments in the two cases were substantially | It is obvious, however, that if such deviation
alike. This the respondents by no means ad-
mit, and they assert that there are such ma-
terial and substantial differences in the pro-
visions of the two instruments as to necessi-
tate a different result in this case from that
arrived at in the other.

The expressed purpose of the agreement in this case is, among other things, "to establish and maintain reasonable and just rates, fares, rules, and regulations on state and interstate traffic." The companies agree that the schedule of rates and fares already duly published and in force and authorized by the companies, parties to the agreement, and filed, as to interstate traffic, with the Interstate Commerce Commission, shall be reaffirmed, and copies of all such schedules are to be filed, with the managers constituted under the agreement within ten days after it be comes effective. The managers may from time to time recommend changes in the rates, etc., and a failure to observe the recommendations is deemed a violation of the agreement. No company can deviate from these rates except under a resolution of its board of directors, and such resolution can only take effect thirty days after service of a copy thereof on the managers who, upon receipt thereof, "shall act promptly for the protection of the parties hereto." For a violation of the agreement the offending company forfeits to the association a sum to be determined by the managers thereof, not exceeding five thousand dollars, or more upon the contingency named in the rule.

from rates by any company, from those agreed upon, be tolerated, the principal object of the association fails of accomplishment, because the purpose of its formation is the establishment and maintenance of reasonable and just rates and a general uniformity therein. If one company is allowed, while remaining a member of the association, to fix its own rates and be guided by them, it is plain that as to that company the agree ment might as well be rescinded. This result was never contemplated. In order, therefore, not only to prevent secret competi tion, but also to prevent any competition whatever among the companies parties to the agreement, the provision is therein made for the prompt action of the board of managers whenever it receives a copy of the resolution adopted by the board of directors of any one company for a change of the rates as established under the agreement. By reason of this provision the board undoubtedly has authority and power to enforce the uniformity of rates as against the offending company upon pain of an open, rigorous, and relentless war of competition against it on the part of the whole association.

*A company desirous of deviating from the [564] rates agreed upon and which its associates desire to maintain is at once confronted with this probability of a war between itself on the one side and the whole association on the other, in the course of which rates would probably drop lower than the company was proposing, and lower than it would desire So far as the establishment of rates and or could afford, and such a prospect would fares is concerned, we do not see any sub- be generally sufficient to prevent the inaugu stantial difference between this agreement ration of the change of rates and the conse and the one set forth in the Trans-Missouri quent competition. Thus the power to comcase. In that case the rates were established mence such a war on the part of the manaby the agreement, and any company violat- gers would operate to most effectually preing the schedule of rates as established un- vent a deviation from rates by any one comder the agreement was liable to a penalty.pany against the desire of the other parties A company could withdraw from the association on giving thirty days' notice, but while it continued a member it was bound to charge the rates fixed, under a penalty for not do[563] ng so. In this case the companies are ound to charge the rates fixed upon originally in the agreement or subsequently recommended by the board of managers, and the failure to observe their recommendations is deemed a violation of the agreement. The only alternative is the adoption of a resolution by the board of directors of any company providing for a change of rates so far as that company is concerned, and the service of a copy thereof upon the board of managers as already stated. This provision for changing rates by any one company is absent from the other agreement. It is this provision which is referred to by counsel as most material and important, and one which constitutes a material and important distinction between the two agreements. It is said to be designed solely to prevent secret and illegal competition in rates, while at the same time providing for and permitting open competition therein, and that unless it can be regarded as restraining competition so as to restrain trade, there is not even an appearance of restraint of trade in the agreement.

to the agreement. Competition would be
prevented by the fear of the united competi-
tion of the association against the particular
member. Counsel for the association them-
selves state that the agreement makes it the
duty of the managers, in case the defection
should injuriously affect some particular
members more than others, to endeavor to
furnish reasonable protection to such mem-
bers, presumably by allowing them to change
rates so as to meet such competition, or by
recommending such fierce competition as to
persuade the recalcitrant to fall back into
line. By this course the competition is open,
but none the less sufficient on that account,
and the desired and expected result is to be
duced by the war which might otherwise be
the yielding of the offending company, in-
waged against it by the combined force of
all the other parties to the agreement. Un-
der these circumstances the agreement, taken
as a whole, prevents, and was evidently in-
tended to prevent, not only secret but any
competition. The abstract right of a single
company to deviate from the rates becomes
immaterial, and its exercise, to say the least,
very inexpedient, in the face of this power
of the managers to enlist the whole associa-

tion in a war upon it. This is not all, how-| surface and were not then apparent to those ever, for the agreement further provides that counsel. the managers are to have power to organize The point not being raised and the decisuch joint freight and passenger agencies as sion of that case having proceeded upon an they may deem desirable, and if established assumption of the validity of the act under they are to be so arranged as to give proper either construction, it can, of course, constirepresentation to each company, and no so- tute no authority upon this question. Upon liciting or contracting passenger or freight the constitutionality of the act it is now [865]agency can be maintained by any of the com- earnestly contended that contracts in repanies, except with the approval of the man-straint of trade are not necessarily prejudiagers. They are also charged with the duty of securing to each company, party to the agreement, equitable proportions of the competitive traffic covered by the agreement, so far as can be legally done. The natural, direct, and necessary effect of all these various provisions of the agreement is to prevent any competition whatever between the parties to it for the whole time of its existence. It is probably as effective in that way as would be a provision in the agreement prohibiting in terms any competition whatever.

cial to the security or welfare of society, and that Congress is without power to prohibit generally all contracts in restraint of trade, and the effort to do this invalidates the act in question. It is urged that it is for the court to decide whether the mere fact that a contract or arrangement, whatever its purpose or character, may restain trade in some degree, renders it injurious or prejudicial to the welfare or security of society, and if the court be of opinion that such welfare or security is not prejudiced by a contract of It is also said that the agreement in the that kind, then Congress has no power to profirst case conferred upon the association an hibit it, and the act must be declared unconunlimited power to fix rates in the first institutional. It is claimed that the act can stance, and that the authority was not con- be supported only as an exercise of the pofined to reasonable rates, while in the case lice power, and that the constitutional guarnow before us the agreement starts out with anties furnished by the Fifth Amendment rates fixed by each company for itself and secure to all persons freedom in the pursuit filed with the Interstate Commerce Commis- of their vocations and the use of their propsion, and which rates are alleged to be rea-erty, and in making such contracts or ar sonable. The distinction is unimportant. rangements as may be necessary therefor. It was considered in the other case that the In dwelling upon the far-reaching nature of rates actually fixed upon were reasonable, the anguage used in the act as construed while the rates fixed upon in this case are in the case mentioned, counsel contend that also admitted to be reasonable. By this agreement the board of managers is in substance and as a result thereof placed in control of the business and rates of transportation, and its duty is to see to it that each company charges the rates agreed upon and receives its equitable proportion of the traf


the extent to which it limits the freedom and
destroys the property of the individual can
scarcely be exaggerated, and that ordinary
contracts and combinations, which are at the
same time most indispensable, have the effect
of somewhat restraining trade and com-[567]
merce, although to a very slight extent, but
yet, under the construction adopted, they are

The natural and direct effect of the two
agreements is the same, viz., to maintain As examples of the kinds of contracts which
rates at a higher level than would other- are rendered illegal by this construction of
wise prevail, and the differences between the act, the learned counsel suggest all or-
them are not sufficiently important or mate- ganizations of mechanics engaged in the
rial to call for different judgments in the same business for the purpose of limiting
two cases on any such ground. Indeed, the number of persons employed in the busi-
counsel for one of the railroad companies on ness, or of maintaining wages; the formation
this argument, in speaking of the agreement of a corporation to carry on any particular
in the Trans-Missouri case, says of it that line of business by those already engaged
its terms, while substantially similar to therein; a contract of partnership or of em-
those of the agreement here, were less explic-ployment between two persons previously
it in making it just and reasonable.

Regarding the two agreements as alike in their main and material features, we are brought to an examination of the question of the constitutionality of the act, construed [566]as it has been in the Trans-Missouri case. It is worthy of remark that this question was never raised or hinted at upon the argument of that case, although, if the respondents' presert contention be sound, it would have furnished a conclusive objection to the enforcement of the act as construed. The fact that not one of the many astute and able counsel for the transportation companies in that case raised an objection of so conclusive a character, if well founded, is strong evidence that the reasons showing the invalidity of the act as construed do not lie on the

engaged in the same line of business; the
appointment by two producers of the same
person to sell their goods on commission;
the purchase by one wholesale merchant of
the product of two producers; the lease or
purchase by a farmer, manufacturer, or mer-
chant of an additional farm, manufactory,
or shop; the withdrawal from business of
any farmer, merchant, or manufacturer; a
sale of the goodwill of a business with an
agreement not to destroy its value by engag
ing in similar business; and a covenant in
a deed restricting the use of real estate. It
is added that the effect of most business con-
tracts or combinations is to restrain trade in
some degree.

This makes quite a formidable list. It
will be observed, however, that no contract

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