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of the nature above described is now before Congress, in the exercise of its right to regu.
the court, and there is some embarrassment late commerce among the several states, or
in assuming to decide herein just how far the otherwise, has the power to prohibit, as in
act goes in the direction claimed. Neverthe- restraint *of interstate commerce, a contract(669)
less,

we might say that the formation of cor- or combination between competing railroad porations for business or manufacturing pur corporations entered into and formed for the poses has never, to our knowledge, been re- purpose of establishing and maintaining ingarded in the nature of a contract in re-terstate rates and fares for the transportastraint of trade or commerce. The same may tion of freight and passengers on any of the be said of the contract of partnership. It railroads parties to the contract or combinamight also be difficult to show that the ap- tion, even though the rates and fares thus espointment by two or more producers of the tablished are reasonable. Such an agreesame person to sell their goods on commis ment directly affects and of course is intend. sion was a matter in any degree in restrainted to affect the cost of transportation of comof trade.

modities, and commerce consists, among other We are not aware that it has ever been things, of the transportation of commodities, claimed that a lease or purchase by a farm- and if such transportation be between states er, manufacturer, or merchant of an addi- it is interstate commerce. The agreement tional farm, manufactory, or shop, or the affects interstate commerce by destroying withdrawal from business of any farmer, competition and by maintaining rates above merchant, or manufacturer, restrained com: what competition might produce.

merce or trade within any legal definition of If it did not do that, its existence would be (668]that term; "and the sale of a goodwill of a useless, and it would soon be rescinded or

business with an accompanying agreement abandoned. Its acknowledged purpose is to
not to engage in a similar business was in. maintain rates, and, if executed, it does so.
stanced in the Trans-Missouri case as a con. It must be remembered, however, that the act
tract not within the meaning of the act; does not prohibit any railroad company from
and it was said that such a contract was charging reasonable rates. If in the absence
collateral to the main contract of sale, and of any contract or combination among the
was entered into for the purpose of enhanc- railroad companies the rates and fares would
ing the price at which the vendor sells his be less than they are under such contract or
business. The instances cited by counsel combination, that is not by reason of any
have in our judgment little or no bearing provision of the act which itself lowers rates,
upon the question under consideration. In but only because the railroad companies
Hopkins v. United States (post, 290), decided would, as it is urged, voluntarily and at once
at this term, we have said that the statute inaugurate a war of competition among
applies only to those contracts whose direct themselves, and thereby themselves reduce
and immediate effect is a restraint upon in their rates and fares.
terstate commerce, and that to treat the act

Has not Congress with regard to interstate
as condemning all agreements under which, commerce and in the course of regulating it,
as a result, the cost of conducting an inter in the case of railroad corporations, the
state commercial business may be increased, power to say that no contract or combina-
would enlarge the application of the act far tion shall be legal which shall restrain trade
beyond the fair meaning of the language and commerce by shutting out the operation
used. The effect upon interstate commerce of the general law of competition? We
must not be indirect or incidental only. An think it has.
agreement entered into for the purpose of As counsel for the Traffic Association has
promoting the legitimate business of an in. truly said, the ordinary highways on land
dividual or corporation, with no purpose to have generally been established and main.
thereby affect or restrain interstate com- tained by the public. When the matter of
merce, and which does not directly restrain the building of railroads as highways arose,
such conimerce, is not, as we think, covered a question was presented whether the state
by the act, although the agreement may in- should itself build them or permit others to
directly and remotely affect that commerce. do it. The state did not build them, and as
We also repeat what is said in the case their building required, among other things,
above cited, that "the act of Congress must the appropriation of *land, private individ-(570)
have a reasonable construction, or else there uals could not enforce such appropriation
would scarcely be an agreement or contract without a grant from the state.
among business men that could not be said

The building and operation of a railroad to have, indirectly or remotely, some bear, thus required å public franchise. The state ing upon interstate commerce, and possibly would have had no power to grant the right to restrain it.”. To suppose, as is assumed of appropriation unless the use to which the by counsel, that the effect of the decision in land was to be put was a public one. Taking the Trans-Missouri case is to render illegal land for railroad purposes is a taking for a most business contracts or combinations, public purpose, and the fact that it is taken however indispensable and necessary they for a public purpose is the sole justification may be, because, as they assert, they all re- for taking it at all. The business of a rail. strain trade in some remote and indirect de road carrier is of a public nature, and in gree, is to make a most violent assumption, performing it the carrier is also performing and one not called for or justified by the de- to a certain extent a function of government cision mentioned, or by any other decision of which, as counsel observed, requires them to this court.

perform the service upon equal terms to all. The question really before us is whether. This public service, that of transportation 171 U. S.

287

of passengers and freight, is a part of trade tion or in any of the amendments to that in-
and commerce, and when transported be strument. Monongahela Nav. Co. v. United
tween states such commerce becomes what is Statcs, 148 U. S. 312-336 [37: 463-471); In-
described as interstate, and comes, to a cer- terstate Commerce Commission v. Brimson,
tain extent, under the jurisdiction of Con- 154 U. S. 447-479 (38: 1047–1058, 4 Inters.
gress by virtue of its power to regulate com- Com. Rep. 545).
merce among the several states.

Among those limitations and guaranties Where the grantees of this public franchise counsel refer to those which provide that no are competing railroad companies for inter-person shall be deprived of life, liberty, or state commerce, we think Congress is compe- property without due process of law, and tent to forbid any agreement or combination that private property shall not be taken for among them by means of which competition public use without just compensation. The is to be smothered.

latter limitation is, we think, plainly irrele Although the franchise when granted by vant. the state becomes by the grant the property *As to the former, it is claimed that the [572] of the grantee, yet there are some regulations citizen is deprived of his liberty without due respecting the exercise of such grants which process of law when, by a general statute, he Congress may make under its power to regu- is arbitrarily deprived of the right to make late commerce among the several states. a contract of the nature herein involved. This will be conceded by all, the only ques- The case of Allgeyer v. Louisiana, 165 U. tion being as to the extent of the power. 8. 578 [4]: 832], is cited as authority for the

We think it extends at least to the prohi- statement concerning the right to contract bition of contracts relating to interstate com. In speaking of the meaning of the word “lib merce, which would extinguish all conipeti- erty," as used in the Fourteenth Amendment tion between otherwise competing railroad to the Constitution, it was said in that case corporations, and which would in that way to include, among other things, the liberty restrain interstate trade or commerce. We of the citizen to pursue any livelihood or vodo not think that when the grantees of this cation, and for that purpose to enter into all public franchise are competing railroads contracts which might be proper, necessary, seeking the business of transportation of men and essential to his carrying out those ob and goods from one state to another, that jects to a successful conclusion. ordinary freedom of contract in the use and We do not impugn the correctness of that

management of their property requires the statement. The citizen may have the right (571]right to combine *as one consolidatd and i to make a proper (that is, a lawful) con

powerful association for the purpose of sti: tract, one which is also essential and necesAing competition among themselves, and of sary for carrying out his lawful purposes. thus keeping their rates and charges higher The question which arises here is, whether than they might otherwise be under the laws the contract is a proper or lawful one, and of competition. And this is so, even though we have not advanced a step towards its sothe rates provided for in the agreement may lution by saying that the citizen is protected for the time be not more than are reasonable. by the Fifth, or any other amendment, in his They may easily and at any time be in- right to make proper contracts to enable creased. It is the combination of these large him to carry out his lawful purposes. We and powerful corporations, covering vast sec- presume it will not be contended that the tions of territory and influencing trade court meant, in stating the right of the citi. throughout the whole extent thereof, and act. zen,” to pursue any livelihood or vocation," ing as one body in all the matters over which to include every means of obtaining a livelithe combination extends, that constitutes the hood, whether it was lawful or otherwise. Pre alleged evil, and in regard to which, so far cisely how far a legislature can go in declar. as the combination operates upon and re-ing a certain means of obtaining a livelihood strains interstate commerce, Congress has unlawful, it is unnecessary here to speak of. power to legislate and to prohibit.

It will be conceded it has power to make some The prohibition of such contracts may in kinds of vocations and some methods of obthe judgment of Congress be one of the rea- taining a livelihood unlawful, and in regard sonable necessities for the proper regulation to those the citizen would have no right to of commerce, and Congress is the judge of contract to carry them on. such necessity and propriety, unless, in case Congress may restrain individuals from of a possible gross perversion of the princi- making contracts under certain circumstanple, the courts might be applied to for re- ces and upon certain subjects. Frisbie v. lief.

United States, 157 U. S. 160 (39: 657). The cases cited by the respondents' coun. Notwithstanding the general liberty of sel in regard to the general constitutional contract which is possessed by the citizen right of the citizen to make contracts relat. under the Constitution, we find that there ing to his lawful business are not inconsist. are many kinds of contracts which, while ent with the existence of the power of Con- not in themselves immoral or mala in se. gress to prohibit contracts of the nature in- may yet be prohibited by the ‘legislation of (573) volved in this case. The power to regulate the states or, in certain cases, by Congress. commerce has no limitation other than those The question comes back whether the statute prescribed in the Constitution. The power, under review is a legitimate exercise of the however, does not carry with it the right to power of Congress over interstate commerce, destroy or impair those limitations and guar- and a valid regulation thereof. The quesanties which are also placed in the Constitu-' tion is, for us, one of power only, and not of

policy. We think the power exists in Con- the lower courts, led us to the most careful
gress, and that the statute is therefore valid. and scrutinizing examination of the argu.

Finally, we are asked to reconsider the ments advanced by both sides, and it was
question decided in the Trans-Missouri case, after such an examination that the majority
and to retrace the steps taken therein, be of the court came to the conclusion it did.
cause of the plain error contained in that It is not now alleged that the court on the
decision and the widespread alarm with former occasion overlooked any argument
which it was received and the serious conse for the respondents or misapplied any con-
quences which have resulted, or may soon trolling authority. It is simply insisted that
result, from the law as interpreted in that the court, notwithstanding the arguments
case.

for an opposite view, arrived at an erroneous
It is proper to remark that an applica result, which, for reasons already stated,
tion for a reconsideration of a question but ought to be reconsidered and reversed.
lately decided by this court is usually based As we have twice already, deliberately and
upon a statement that some of the arguments earnestly, considered the same arguments
employed on the original hearing of the which are now for a third time pressed upon
question have been overlooked or misunder our attention, it could hardly be expected
stood, or that some controlling authority that our opinion should now change from
has been either misapplied by the court or that already expressed.
passed over without discussion or notice. While an erroneous decision might be in
While this is not strictly an upplication for some cases properly reconsidered and over-
a rehearing in the same case, yet in substance ruled, yet it is clear that the first necessity
it is the same thing. The court is asked to is to convince the court that the decision
reconsider a question but just decided after was erroneous. It is scarcely to be assumed
a careful investigation of the matter in that such a result could be *secured by the [575]
volved. There have heretofore been in effect presentation for a third time of the same
two arguments of precisely the same ques-arguments which had twice before been un-
tions now before the court, and the same ar. successfully urged upon the attention of the
guments were addressed to us on both those court.
occasions. The report of the Trans-Missouri We have listened to them now because the
case shows a dissenting opinion delivered in eminence of the counsel engaged, their ear.
that case, and that the opinion was concurred nestness and zeal, their evident belief in the
in by three other members of the court. correctness of their position, and, most im-

That opinion, it will be seen, gives with portant of all, the very grave nature of the
great force and ability the arguments against questions argued, called upon the court to
The decision which was finally arrived at by again give to those arguments strict and re-
the court. It was after a full discussion of spectful attention. It is not matter for sur.
the questions involved, and with the knowl. prise that we still are unable to see the error
edge of the views entertained by the minor. alleged to exist in our former decision or to
ity as expressed in the dissenting opinion, change our opinion regarding the questions
that the majority of the court came to the therein involved.
conclusion it did. Soon after the decision Upon the point that the agreement is not
a petition for a rehearing of the case was in fact one in restraint of trade, even though
made, supported by a printed argument in its it did prevent competition, it must be ad-
favor, and pressed with an earnestness and mitted that the former argument has now
vigor and at a length which were certainly been much enlarged and amplified, and a gen-
commensurate with the importance of the eral and most masterly review of that ques-
case.

tion has been presented by counsel for the (574) *This court, with care and deliberation, respondents. That this agreement does in

and also with a full appreciation of their fact prevent competition, and that it must
importance, again considered the questions have been so intended, we have already at-
involved in its former decision.

tempted to show. Whether stilling compe-
A majority of the court once more arrived tition tends directly to restrain commerce in
at the conclusion it had first announced, and the case of naturally competing railroads, is
accordingly it denied the application. And with very great ability. They acknowledge

a question upon which counsel have argued now for the third time the same arguments that this agreeinent purports to restrain are employed, and the court is again asked competition, although, they say, in a very to recant its former opinion, and to decide slight degree and on a single point. They the same question in direct opposition to the admit that if competition and commerce were conclusion arrived at in the Trans-Missouri identical, being but different names for the case.

same thing, then, in assuming to restrain The learned counsel while making the ap. competition even so far, it would be assumplication frankly confess that the argument ing in a corresponding degree to restrain in opposition to the decision in the case above

Counsel then add (and therein named has been so fully, so clearly, and so we entirely agree with them) that no such forcibly presented in the dissenting opinion identity can be pretended, because it is plain of Mr. Justice White, that it is hardly possi- that commerce can and does, take place on ble to add to it nor is it necessary to repeat it. a large scale and in numerous forms without

The fact that there was so close a division competition. The material considerations of opinion in this court when the matter was therefore turn upon the effects of competi. first under advisement, together with the dif- tion upon the business of railroads, whether ferent views taken by some of the judges of' they are favorable to the commerce in which 171 U. S. U. S., BOOK 43.

19

289

commerce.

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merce.

the roads are engaged, or unfavorable and are competing railroads and are not acting
in restraint of that commerce. Upon that under any agreement or combination with

question it is contended that agreements be their competitors upon the subject of rates. (676]tween railroad companies of the nature of It appears from the brief of counsel in this

that now before us are promotive instead of case that the agreement in question does not in restraint of trade.

embrace all of the lines or systems engaged This conclusion is reached by counsel after in the business of railroad transportation an examination of the peculiar nature of between Chicago and the Atlantic coast. railroad property and the alleged baneful It cannot be said that destructive competi. effects of competition upon it and also upon tion, or, in other words, war to the death, is the public. It is stated that the only re-bound to result unless an agreement or comsort open to railroads to save themselves bination to avoid it is entered into between from the effects of a ruinous competition otherwise competing roads. is that of agreements among themselves to It is not only possible, but probable, that check and control it. A ruinous competition good sense and integrity of purpose would is, as they say, apt to be carried on until prevail among the managers, and while makthe weakest of the combatants goes to de- ing no agreement and entering into no comstruction. After that the survivor, being bination by which the whole railroad intere relieved from competition, proceeds to raise est as herein represented should act as one its prices as high as the business will bear combined and consolidated body, the manaCommerce, it is said, thus finally becomes re- gers of each road might yet make such reastrained by the effects of competition, while sonable. charges for the business done by it at the same time otherwise valuable railroad as the facts might justify. An agreement property is thereby destroyed or greatly re- of the nature of this one, which directly and duced in value. There can be no doubt that effectually stifles competition, must be re the general tendency of competition among garded under the statute as one in restraint competing railroads is towards lower rates of trade, notwithstanding there are possibilfor transportation, and the result of lower ities that a restraint of trade may also fol. rates is generally a greater demand for the low competition that may be indulged in unarticles so transported, and this greater de- til the weaker roads are completely destroyed mand can only be gratified by a larger sup- and the survivor thereafter raises rates and ply, the furnishing of which increases com- maintains them.

This is the first and direct result of Coming to the conclusion we do, in regard competition among railroad carriers. to the various questions herein discussed, we

In the absence of any agreement restrain think it unnecessary to further allude to (578) ing competition, this result, it is argued, is the other reasons which have been advanced neutralized, and the opposite one finally for a reconsideration of the decision in the reached by reason of the peculiar nature of Trans-Missouri case. railroad property which must be operated The judgments of the Circuit Court of the and the capital invested in which cannot be United States for the Southern District of withdrawn, and the railroad managers are New York and of the Circuit Court of Apa therefore, as is claimed, compelled to, not peals for the Second Circuit are reversed and only compete among themselves for business, the case remanded to the Circuit Court with Out also to carry on the war of competition directions to take such further proceedings until it shall terminate in the utter destruc- therein as may be in conformity with this tion or the buying up of the weaker roads, opinion. after which the survivor will raise the rates as high as is possible. Thus, the indirect but Mr. Justice Gray, Mr. Justice Shiras final effect of competition is claimed to be and Mr. Justice White dissented. Mr. Jus. the raising of rates and the consequent re- tice McKenna took no part in the decision straint of trade, and it is urged that this of the case. result is only to be prevented by such an agreement as we have here. In that way alone it is said that competition is overcome, HENRY HOPKINS et al., Appts., and general uniformity and reasonableness of rates securely established.

UNITED STATES.
(677) *The natural, direct, and immediate effect
of conipetition is, however, to lower rates,

(See S. C. Reporter's ed. 578-604.)
and to thereby increase the demand for com-
modities, the supplying of which increases Buying and selling live stock by members
commerce, and an agreement whose first and

of a stock exchange is not interstate comdirect effect is to prevent this play of compe- merce--by-lavo as to commissions-stock tition restrains instead of promoting trade sent from annther state-by-law as to teleand commerce. Whether, in the absence of

grams--agents soliciting consignments an agreement as to rates, the consequences stock yards partly in one state and partly described by counsel will in fact follow as a in another-refusal to do business with result of competition, is matter of very great persons not memberswhen agrecment or uncertainty, depending upon many contin- comhiration is within the statute. gencies and in large degree upon the voluntary acti of the managers of the several 1. The business of buying and selling live stock roads. Railroad companies may and often

at stock yards in a city by members of a stock do continue in existence and engage in their

exchange as commission merchants Is not In.

terstate commerce, although most of the pur lawful traffic at some profit, although they chases and sales are of live stock snnt froin

V.

merce.

other states, and the members of the stock | for decision. Reversed, and case remitted to
exchange are employed to sell by letter from the said Circuit Court, with directions to
the owners of the stock in other states, and dismiss the suit with costs.
send agents to other states to solicit business,
and advance money to the cattle owners, and

See same case below, 82 Fed. Rep. 529.
pay their drafts, and aid them in making the
cattle it for market.

Statement by Mr. Justice Peckham: 2. A by-law of the Kar City Live-Stock Ex

*This suit was commenced by the United (579) change, which regulates the commissions to States attorney for the district of Kansas, be charged by members of that association acting under the direction and by the au: for selling live stock is not in restraint of in- thority of the Attorney General of the Unitterstate commerce, or a violation of the acted States, against Henry Hopkins and the of July 2, 1890, to protect commerce from un other defendants, residents of the state of lawful restraints.

Kansas and members of a voluntary unincor. 8. A commission agent who sells cattle at porated association known and designated as their place of destination, which are sent the Kansas City Live Stock Exchange. The from another state to be sold, is not engaged in interstate commerce ; nor is his agreement purpose of the action is to obtain the diswith others in the same business, as to the solution of the exchange and to perpetually commissions to be charged for such sales, enjoin the members from entering into or void as a contract in restraint of that com- from continuing in any combination of a

like character. 4. In order to come within the provisions of As a foundation for the relief sought it

the statute, the direct effect of an agreement was alleged in the bill that the members of of combination must be in restraint of trade this association, known as the Kansas City or commerce among the several states or with Live Stock Exchange, have adopted articles of foreign nations.

association, rules, and by-laws which they have 8. Restrictions on sending prepaid telegrams agreed to be bound by; that the business of or telephone messages, made by a bo-law.tina the exchange is carried on and conducted by

these restrictions are merely for the regulation of the business a board of directors at the Kansas City stock of the members, and do not affect the business yards, which are situated partly in Kansas of the telegraph company, are not void as City in the state of Missouri and partly in regulations of interstate commerce.

Kansas City in the state of Kansas, the 6. The business of agents in soliciting con- building owned by the stock-yards company

signments of cattle to commission merchants being located one half of it in the state of in another state for sale, is not interstate Missouri and the other half in the state of commerce; and a by-law of a stock exchange Kansas, and half of the defendants have of. restricting the number of solicitors to three fices and transact business in these stock does not restrain that commerce, or violate yards and in that part of the building which the act of Congress.

is within the state of Kansas and the other 7. The fact that a state line runs through half in that part of the building which is in stock yards, and that sales may be made of a lot of stock in the yards which may be part the state of Missouri; that the Kansas City ly in one state and partly in another, has no Stock Yards Company is a corporation owneffect to make the business of selling stock ing the stock yards, where the business is

done by the members of the exchange; that 8. A combination of commission merchants at substantially all the business transacted in

stock yards, by which they refuse to do busi. the matter of receiving, buying, selling and ness with those who are not members of their handling their live stock at Kansas City is association, even if it is illegal, is not subject carried on by the defendants herein and by to the act of Congress of July 2, 1890, to pro the other mernbers of the exchange as comtect trade and commerce, since their business mission merchants, and that large numbers is not interstate commerce.

of the live stock, consisting *of cattle and (580)

hogs and sheep bought and sold and handled (No. 210.)

at the stock yards by the defendants and their

fellow members in the exchange, are shipped Argued February 28, March 1, 1898. De from the states of Nebraska, Colorado, Texas, cided October 24, 1898.

Missouri, Iowa, and Kansas and the terri.

tories of Oklahoma, Arizona, and New Mexed States Circuit Court of Appeals for stock yards it is sold by the defendants, memthe Eighth Circuit to bring up the whole bers of the exchange, to the various packing case in which that court had certified cer- houses situated at Kansas City, Missouri, tain questions. The suit was brought by the and Kansas City, Kansas, and it is also sold United States against Henry Hopkins et al., for shipment to the various other markets, members of the Kansas City Live Stock Ex-particularly Chicago, St. Louis, and New change, to obtain the dissolution of the ex- York; thať vast numbers of cattle, hogs, and change and perpetually enjoin the members other live stock are received annually at from entering into or from continuing in any the stock yards and handled by the members coinbination of a like character. The Circuit of the exchange. Court of the United States for the District The bill also alleges that large numbers of of Kansas, First Division, granted the in the live stock sold at the stock yards by the junction, and from the order granting it an defendants are encumbered by mortgages appeal was taken by the defendants to said thereon, executed by their owners in ti:e vari. Circuit Court of Appeals, and upon a writ of ous states and territories, which mortgages certiorari the whole case was brought here have been given to various defendants as se

interstate commerce.

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