CORNELL UNIVERSITY LIBRARY ^^^^^^^^m University Library HD2780.S787 U53 olin 3 1924 030 066 991 The original of tiiis bool< is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030066991 In the Circuit Court ot tlie United States for the Eastern Division of tlie Eastern Judicial of United States of America, petitioner, V. Standard Oil Company op New Jersey et al., defendants. BRIEF OF THE liAW FOR PETITIONER. GEORGE W. WICKER SHAM, Attorney-General. FRANK B. KELLOGG, CHARLES B. MORRISON, CORDENIO A. SEVERANCE, and J. HARWOOD GRAVES, Special Assistants to the Attorney-General. CONTKNTS, BRIEF OF THE LAW. OUTLINE OF THE FACTS. i'age. History, 1870-1882 6-10 South Improvement Company 7 Combination of other refiners, resulting in trust agreement of 1879 '. 8-9 Secrecy of this combination 10 History of Standard Oil Trust, 1882-1899 10-15 Trust agreement of 1882 10-12 Dissolution of trust in 1892 12-15 Present corporate combination, 1899-1908 15-18 Additional companies secretly owned or controlled by agreements. 18-23 Corsicana Kefining Company 18 Manhattan Oil Company and Indiana Pipe Line and Refining Company 18-20 Security Oil Company 20-21 Waters-Pierce Oil Company ,. 21-22 Tidewater Oil Company and Tidewater Pipe Line Company 22 United OU Company and Florence OU and Refining Company. . 23 Description of Standard's business and its percentage of the total. . . 23-26 Profits of business as indicating monopoly 26-30 Profits of pipe-Une companies 28 Profits of domestic refining and marketing companies 28-29 Profits per gallon 30 Increase in prices of principal products 30-31 Other means used by Standard to monopoUze commerce 31-45 Control of pipe lines 31-34 Railway discrimination - 35-38 Excessive prices for railway lubricating oil 38 Contracts with independent refiners 38 Unfair competition 39-45 Espionage upon competitors' shipments 41-42 Price discriminations 42-43 Bogus independent concerns 43-44 Rebates and other secret arrangements 44 (3) 4 BRIEF AND ARGTIMENT. I. The entire history of the conspiracy may be alleged and proved, as well as all acts tending to throw light on the in- tent with which it was formed 46-54 II. Persons joining an existing conspiracy and aiding in its exe- cution become conspirators ab initio 55 III. This conspiracy is a continuing offense; the statute of limita- tions does not begin to run until the commission of the last overt act; neither can the parties claim a vested right therein 56-61 IV. The acts and declarations of one of the conspirators are admis- sible against all 62-65 V. The trust agreements of 1879 and 1882 were void at common law 65-113 VI. The corporate combination of 1899 was void under the Sher- man Act 114-164 (o) The defendants are engaged in interstate commerce. 121-124 (6) The amalgamation of the stocks of all these companies in 1899 in the Standard Oil Company of New Jersey as a holding corporation was a combination in re- straint of trade within section 1 of the Sherman Act 124-148 (c) The control of the commerce in petroleum and its products by the Standard Oil Company of New Jersey, through its various subsidiary corporations, constitutes a monopoly within section 2 of the Sherman Act 148-164 VII. The imfiled and unpublished rates used by the Standard in the transportation of petroleum were in violation of law as well as discriminatory against its competitors 165-175 VIII. The Standard's pipe lines have refused to comply with the federal law requiring them to act as common carriers 176-183 IX. This court has plenary power to make and enforce such de- cree as may be necessary to secure obedience to the Sher- man Act 184-198 In the Circuit Court of the United States tor tlie Eastern Division of tlie Eastern Judicial District of Missouri. UNrrsp States of America, petitioner, V. Standard Oil Co. of New Jersey et al., defendants. BRIEF OF THE lAW. We shall not attempt an elaborate statement of the facts in this brief, but it may be useful to give a mere outline of the Standard organization and its methods of business. About 1870 John D. Rockefeller, William Rockefeller, and Henry M. Flagler conceived the purpose of controlling the petroleum trade, both domestic and export, and obtaining a monopoly thereof. We believe the evidence fully justifies the statement that these men entered into a conspiracy which from time to time took the form of various combina- tions; that shortly thereafter they were joined in this con- spiracy by Henry H. Rogers, John D. Archbold, Oliver H, Payne, Charles M. Pratt, the other individual defendants, and various other persons. For the piu-poses of this case the history of this conspiracy has been divided into three periods. In the first period, from 1870 to 1882, it took the form of simple combination between a large number of manufactur- ers who acted in harmony and whose stock interests were pooled in the hands of three trustees in 1879. In the second period, from 1882 to 1899, it took the form of a trust under the trust agreement of 1882, whereby the stocks of a large number of corporations and limited partnerships were placed in the hands of nine trustees, of which these defendants were the majority, who controlled the various separate corpora- tions and limited partnerships. In the third period, from (5) 1899 to the present time, the conspiracy has taken the form of a holding corporation, the Standard Oil Company of Ncmt Jersey, which has control of the principal corporations, lim- ited partnerships, and copartnerships engaged in the busmess, by stock ownerships, agreements in restraint of trade, and otherwise. HISTORY OF THE COMBINATION DURING THE FIRST PERIOD, FROM 1870 TO 1882. In 1870 John D. Rockefeller, Samuel Andrews, William Eockefeller, Henry M. Flagler, and Stephen V. Harkness were members of the firms of William Kockefeller & Com- ♦ pany. Rockefeller & Andrews, and Rockefeller & Company. They were engaged in the business of refining and selling petroleum and its products in the city of Cleveland, Ohio. In that year they organized the Standard Oil Company and consoHdated their copartnerships therein. The capital was originally $1,000,000, which was increased on February 10, 1872, to $2,500,000, and on March 10, 1875, to $3,500,000. At this time there were about 200 refineries in the United States, principally situated along the Atlantic seaboard, in western Pennsylvania, and at Cleveland, Ohio. They were separate competing concerns engaged in the manufacture, sale, and transportation, in interstate commerce, of petro- leum and its products. Without going into detail it is well here to notice the means by which these individual defendants were enabled to com- bine the leading corporations, Hmited partnerships and copartnerships engaged in this business. It appears that between 1872 and 1882 the Standard Oil Company, and the various concerns associated with it in the combination from time to time, were favored by rebates and preferential rates extended to them by the railroads, while outside concerns were charged the full rates. Not only were rebates paid to the Standard companies upon its own oil so shipped, but rebates on the oil of independents. The evidence con- tains copies of contracts for the payment of these rebates and establishes beyond question that they were paid. Ths evi- dence also shows that the railroad companies granted to the Standard companies their terminal faciUties, thereby giving the Standard the right to collect terminal charges upon the oil of independent concerns and to share in the rates of trans- portation over the railroads. The detail of this evidence is more specifically stated ia the brief of facts. SOUTH IMPROVEMENT COMPANY. About the end of 1871 John D. Eockefeller and his principal associates caused the South Improvement Company to be organized, which company on January 18, 1872, entered into contracts with the railroad companies fixing the rate of freight on all shipments of crude and refined oil from the oil regions in western Pennsylvania and Ohio to the seaboard, and providing for the payment to the South Improvement Company of rebates of from 25 to 50 per cent of the rates so fixed, which rebates were to be paid not only upon the oil shipped by the combination but upon the oil of independent shippers. This agreement was the first step in the combiaation. Between January and April, 1872, the Standard Oil Company purchased substantially all the refineries in Cleveland, a few of them being purchased during later periods. At least 17 in number were thus conveyed, and contracts were made with two of the other leading Cleveland refiners hmiting their production and dividing their profits. The exposure of the South Improvement agreement caused tremendous excite- ment in the oil regions. Public indignation meetings were held, petitions were sent to the legislature and to Congress, and the railroads were besought to grant equal rates. The charter of the South Improvement Company was repealed in March, but the defendants did not cease their efforts to carry out the scheme of combination and of securing rebates; and, in fact, the testimony shows that the oil rates were about doubled immediately after the making o^ the contract and were not thereafter lowered, and that rebates and discrimina- tions substantially equal to those named in the contracts were for years thereafter paid to the various concerns in the Standard combination. Preliminary to the steps thereafter taken to create the combination, Mr. Rockefeller procured several leading railroad men to take an interest and , become stockholders in the Standard Oil Company. 8 COMBINATION OP OTHER REFINERIES RESULTING IN THE TRUST AGREEMENT OF 1879. After the acquisition of the Cleveland refineries Mr. Rockefeller and his associates turned their attention to those in Pennsylvania and at the seaboard. They went to the owners of a large number of refineries situated in Brooklyn, New York, Philadelphia, Baltimore, Parkersburg, western Pennsylvania, and other places and acquired stock or partnership interests. In the case of the larger concerns this was done by exchanging stock in the Standard Oil Company for stock in these companies. By these means the number of stockholders of the Standard Oil Company of Ohio was increased from time to time by the addition of previous owners of refining concerns. The stocks of these formerly independent manufacturing companies thus ac- quired were put in the names of various individuals, who held them for the benefit of the stockholders of the Standard Oil Company of Ohio. This arrangement continued until 1879, when all stocks thus acquired were turned over to Vilas, Keith & Chester, as trustees for the stockholders of the Standard Oil Company, for control and distribution. To illustrate, take the case of Charles Pratt & Company of New York, a corporation having a refimery situated at Brooklyn. Mr. Charles Pratt, Mr. Horace Pratt, and Mr. Henry H. Rogers were the stockholders. They exchanged their stock for stock of the Standard Oil Company, thereupon becoming stockholders in that company, turning over their stock in the Pratt Company to be held for the benefit not of the old stockholders of the Standard Oil Company, nor for any designated individuals, but for all the stockholders of the Standard Company as they should from time to time come into the combination. In this way, between 1873 or 1874 and 1879, Messrs. Rockefeller, Archbold, Flagler, and Payne made arrangements with most of the leading refiners and pipe-fine owners, whose concerns were situated in New York, western Pennsylvania, Ohio, and various other places. In some cases where the previous concerns were partnerships, as a part of the deal of acquisition, new corporations or limited partnerships (which under the laws of Peimsylvania have stock) were organized, stock issued in Heu of the part- nership property, and this stock turned over to be held for the benefit of the stockholders of the Standard Oil Company in the same manner as with Charles Pratt & Company. In other cases instead of exchanging stock of the Standard for stock of other companies money was paid for such stock interests, which money was acquired from the earnings of these various concerns which had been from time to time thus combined. By these various acquisitions, by April 8, 1879, the stock Ust of the Standard Oil Company of Ohio had grown from three or four stockholders to 37 stockholders, several of which stockholders were firms with several copartners. These men had united these stock interests in a combination, as we have described, all of these concerns being separate competing concerns, and producing, transporting, manu- factming and selhng petroleum and its products. It appears by the testimony that the corporations and copartnerships thus combined controlled a large proportion of the petroleum trade, varying, according to the estimates of different wit- nesses, from 75 to 95 per cent. TEUST AGEEEMEUT OF 1879. On the 8th day of April, 1879, a trust agreement was entered into between aU the stockholders of the Standard Oil Company of Ohio, some 37 in number, whereby the stocks of 30 separate companies named in said trust agree- ment (and other companies not specifically therein described but described in general terms) were turned over to Vilas, Keith & Chester, trustees, to hold, control, and manage the same for the benefit of the various persons therein named, to wit: The 37 indiAdduals and copartnerships who had become from time to time, as we have shown, stockholders in the Standard Oil Company of Ohio. The trustees further agreed, " as soon as they could conveniently do so," to divide and distribute said stocks between said persons according to their respective proportions and interests. It is not clear whether they were actually distributed before entering into the trust agreement of 1882 or not. If they were it was probably shortly before the trust agreement. Between 1879 and 1882 various additional concerns were acquired in the same manner as theretofore, and the addi- tional stock turned over to Vilas, Keith & Chester, as trustees. 10 SECRECY OF THIS COMBINATION. It appears that during these years from 1872 to 1882 this combination was kept secret and it was- designed to hold together the various companies for the purpose of secur- ing a monopoly and to avoid the appearance of the acquisi- tion thereof directly by the Standard Oil Company of Ohio. It appears that during these years, in fact down as late as 1888, the principal defendants appeared and testified before legislative committees of the state legislatures and Con- gress, and in court; and in all of these proceedings of inquiry the nature of this combination was never made public and the trust agreement never produced until it appeared in the case at bar. These men frequently testified before 1882 that these companies whose stocks were then held together in the manner we have described were in no way under the control of or afiiliated with the Standard Oil Company of Ohio; that they were separate, competing concerns. In addition to taking into the combination in the manner we have described about 39 different concerns, the sub- sidiary companies in the combination from time to time, between 1872 and 1882, acquired by direct purchase, a large number of refiaeries, pipe lines, and dock properties, some of which were continued and operated, but most of them dismantled. HISTOBY OF THE STANDARD OIL TRUST PROM 1882 TO 1899. STANDARD OIL TRUST OF 1882. On January 1, 1882, the stockholders of the various cor- porations composing the Standard Oil combination, which had been held together by the secret trust agreement or arrangement of 1879, entered into a new trust, known as the Standard Oil Trust of 1882. This took in all corporations in the trust of 1879 and others which had subsequently joined the combination — about 40 all told. The testimony shows that each of these companies was engaged in its separate business, and several of these defendants had testified during the years preceding 1882 that they were competing with each other; but whether they were or not is immaterial, since, if not, it was because they were held together by the unlawful combination previously existing. 11 By this trust agreement of 1882, which appears in full at pages 40 to 53 of the petition, all of the stockholders and members of 14 corporations and Umited partnerships, and a controlling interest of the stockholders and members of 26 corporations and limited partnerships, turned over their stock and interests and the control of their business to 9 trustees, of whom certain of the individual defendants were the majority. The trustees were as follows: John D. Rocke- feller, O. H. Payne, WiUiam Rockefeller, J. A. Bostwick, H. M. Flagler, W. G. Warden, Charles Pratt, Benjamin Brewster, and John D. Archbold. The trust agreement provided that the stockholders of the 40 corporations should assign their stock in the various corporations and limited partnerships to the trustees and their successors, and the trustees were to issue in exchange therefor trust certificates equal to th6 appraised value of such stocks and interest. The trustees were also authorized to purchase bonds and stock of other companies engaged in "business similar or collateral to the business of the Standard Oil companies." The trust agreement gave the trustees the control over the business and affairs of the various companies and the right to elect directors and officers. The trust was to continue during the Hves of the survivors and survivor of the trustees and for twenty-one years thereafter. By-laws were adopted, and a president secretary, and other officers elected. As of date of January 1, 1882, the trustees issued in ex- change for the stocks thus transferred to them trust certifi- cates to the par value of 170,000,000. It appears, as a mat- ter of fact, that the actual value of these stocks so turned in to the trust, for which certificates were issued, was $55,710,698.24. It appears also that between 1882 and 1892 (the latter being the time of the dissolution of the trust) the trustees continued to acquire additional stocks both in the companies in which they had already owned stock and in ad- ditional companies engaged in the s^me business, so that by 1892 the trustees practically had acquired (counting those entering in 1882) stock in 118 corporations, of which, how- ever, some had been liquidated, so that the trust at that time embraced 84 corporations. Some of those whose stocks were acquired after 1882 had been created by the trustees, some 12 were previously competing concerns, and some were organized by the trustees to take over previously competing concerns. The details of these acquisitions are shown more particularly in the statement of facts. During this period before the dissolution the trustees issued $12,225,400 of additional certificates for property or money paid in, and on May 25, 1887, issued a stock dividend of $15,024,600, so that on March 21, 1892, the amount of trust certificates outstanding was $97,250,000. DISSOLUTION OF THE TEUST, MARCH 21, 1892. It appears that about 1890 the attorney-general of Ohio brought a suit in the nature of quo warranto ia the Supreme Court of Ohio to oust the Standard OU Company of Ohio, on the ground that it had become a party to this trust agree- ment, which was alleged to be void as tending to monopoly. On March 2, 1892, the court declared the trust void as a monopoly and ousted the Standard Oil Company from the right to perform the same in the State of Ohio. The trust was held void as tending to monopoly under the principles of the common law. On March 21, 1892, there was a meeting of the certificate holders. A resolution was passed dissolving and terminating the trust agreement of January 2, 1882, and providing that the affairs of the trust should be wound up by John D. Rock- efeller, Henry M. Flagler, William Rockefeller, John D. Archbold, Benjamin Brewster, Henry H. Rogers, Wesley H. Tilford, and O. B. Jennings, who were appointed liquidating . trustees therefor. These men were the previous trustees. The resolution provided that the property, except stocks of corporations, should be sold and distributed. This amounted to only $1 ,579,400. It then provided that all the stocks held by the trustees should be distributed to the owners of trust certificates in proportion to the respective equitable interests of such owners in the stocks so held m trust, as evidenced by said trust certificates. At the time the resolution was passed the stocks of 84 companies were held by the Standard Oil trustees. On April 1, 1892, shortly after this resolution of distribution and in contemplation thereof, it appears that the stocks of a large number of these companies were transferred by the 13 trustees to other companies whose stocks the trustees held, to wit, of 23 separate companies to the Standard Oil Com- pany of New Jersey, of 11 to the Standard of New York, of 3 to the South Penn Oil Company, of 4 to the Forest Oil Company, of 3 to the Buckeye Pipe Line, of 2 to the Standard Oil Company of Indiana, of 4 to the Standard Oil Company of Kentucky, and of 1 to the Ohio Oil Company; and that during the next month stocks of 11 were transferred to the Anglo-American Oil Company, an English corporation. This makes 64 corporations in all, whose stocks were thus transferred from the trustees to these corporations. This left 20 companies the stocks of which remained in the hands of the trustees for distribution, and these 20 companies in turn controlled all of the others which had formerly been in the hands of the trustees. The 20 companies remaining were then and are to-day the principal companies composing the Standard combination. A list will be found on page 62 of the petition. The trustees then proceeded to distribute a part of the stocks of these 20 companies pursuant to the resolution; but the manner in which this distribution was made and in which the 20 companies were controlled during the next seven years is very suggestive of a scheme to evade the effect of the decision of the Supreme Court of Ohio, while appearing to comply with it. The transfer of the 64 companies was evidently a part of that scheme in order to reduce the num- ber of companies which they undoubtedly intended there- after to operate in harmony. There being $97,250,000 trust certificates of $100 each the hquidating trustees made out a form of assignment which assigned to each certificate holder desiring to cancel his certificate ^t¥?t)t part of the stock of each and all of the corporations held by the trustees. On the receipt of the assignment, if the certificate holder desired, he could convert it into the stock of all the subcompanies but not into the stock of one company without receiving his proportion in all. There were at that time several thousand certificate holders. As a matter of fact during the next six years, until about January, 1898, the nine trustees who were Hquidating the trust and who had been themselves the largest certificate 14 holders, together with the members of their immediate fami- lies and their immediate associates, were practically the only owners who liquidated their trust certificates and obtained stock in the subcompanies ; the large number of small certifi- cate holders did not liquidate their certificates. The result was that these trustees became the holders of the same proportion of the stock of each of the 20 constit- uent companies, and they together with their immediate associates, to wit, Charles W Harkness, the estate of Charles Pratt, and O. H. Payne, a former trustee and one of these defendants, during these six years owned and con- trolled a bare majority of the stock of each of the con- stituent companies. These individuals did not change their proportion of stock in each of the subcompanies, and if they transferred any stock they transferred the same proportion in all the companies. The stock thus transferred from the trust to these few individuals was the stock which was voted at the annual meetings of each of the subcompanies. The remainder of the stock of the subcompanies (with the excep- tion of directors' qualifying shares) was held in the hands of the liquidating trustees as such and not voted, so that the large body of the trust certificate holders had no voice in the management of the companies during the next six years. In the case at bar both Mr. Rockefeller and Mr. Archbold testified that the dissolution took place in compliance with the decree of the Supreme Court of Ohio intending absolutely to dissolve the trust. It appears that about 1897 the attorney-general of Ohio filed a petition in the quo warranto case in the Supreme Court of Ohio alleging that the Standard Oil Company had not obeyed the decree, in substance that the trust had not been dissolved, and that the trustees were still exercising control over it. A trial took place. In that case Mr. Rockefeller testified that the trust had been dis- solved, that each of the companies was competing with the other and each company managed by its own stockholders and directors. He testified substantially to the same thing in the case at bar. During these six years while the property was in course of hquidation the trustees resorted to an ingenious scheme whereby the holders of outstanding certificates unhqui- dated should receive the same income that Mr. Rocke- 15 feller and his associates received who had liquidated their certificates. In order to meet the dividends on the trust certificates for each dividend period, which was ordinarily 3 per cent quarterly, with sometimes 5 per cent additional, the trustees collected from certain of their subcomf)anies dividends at rates sufficient to make up exactly the amount of money needed for that dividend on the trust certificates still outstanding. In order to bring about this exact equiva- lent very irregular rates of dividend were in some instances declared on the shares of the subcompanies. It would have been an easy matter to have ceased paying dividends on these trust certificates and caused them all to be liquidated and the companies completely segregated, but the defendants and their coconspirators evidently did not wish this to be done, but wished themselves to control the twenty companies as the only voting stockholders. PRESENT ORGANIZATION OF THE STANDARD OIL COM- BINATION, 1899 TO 1908. BEOEGANIZATION OF THE STANDARD OIL COMPANY OF NEW JERSEY AND THE TRANSFER TO IT OF THE VARIOUS COM- PANIES PREVIOUSLY HELD BY THE TRUSTEES. On November 8, 1897, the attorney-general of Ohio filed a bill of information in contempt against the Standard Oil Company in the Supreme Court of Ohio alleging that the trust had not been dissolved in obedience to the decree, but that the Standard Oil trustees still controlled the Ohio com- pany. Testimony was taken in this case until about March 20, 1899. In 1898 a petition was also filed against the Buck- eye Pipe Line Company to forfeit its charter on the ground that it was also a member of the trust. Immediately after the fifing of the information of contempt a considerable addi- tional number of outstanding trust certificates were turned in and stocks in the subcompanies issued therefor. Early in 1899 steps were taken to reorganize the Standard Oil Company of New Jersey for the purpose of making it a holding company to hold the stocks previously held by the trustees. This reorganization was apparently the result of these proceedings in Ohio. The stock of the Standard Oil Company of New Jersey was increased to $1 10,000,000. The 16 $10,000,000 theretofore outstanding was made preferred stock and was retired shortly thereafter by exchanging it for common stock in the same manner as the stock of all the other 19 companies was exchanged. This left an authorized issue of $100,000,000. The charter was amended to give the company the power to do all the kinds of business which the sub companies and the trust were doing, and in addition to hold and own stocks. By-laws were adopted which were substantially a copy of the by-laws of the trustees. The liquidating trustees became directors of the Standard Oil Company and were a majority of the board. The several individual defendants, all of whom except Payne had been liquidating trustees, have ever since been directors of the company. Thereupon the remaining trust certificates were liquidated and the stocks of the subcompanies were distrib- uted, and all of these stocks were turned over by the owners thereof, several thousand in number, to the Standard Oil Company of New Jersey as a holding corporation, and $97,250,000 of the common stock of the Standard Oil Com- pany was issued therefor. This was the same amount as the trustees' certificates outstanding prior to March, 1892. Most of these transfers of stock were made during the months of Jime, July, and August, 1899, but a few dragged on for several years thereafter. By these means the Standard Oil Company thereupon came into control not only of the 19 companies, but through them of all the companies which the 19 companies controlled by stock ownership. We have already shown that stock of some 64 corporations had theretofore been transferred to the Standard OU Company of New Jersey, then one of the 20 companies, or to some one of the other 19 companies. Nearly all of these companies were stUl in existence and still so controlled iu 1899. The Standard Oil Company of New Jersey has from that day to this controlled all these corporations. It has organ- ized a few other companies, the stock of which has been taken into its treasury. It has purchased and acquired the stock of other companies. It now controls directly by stock ownership 65 corporations, which companies iu turn control about 49 other corporations, domestic and foreign, makiug about 114 in aU. A detailed history of these various corpo- 17 rations is contained in the brief of facts, together with schedules thereof. It is sufficient here to say that, with the exception of the S. T. Baker Oil Company, the Standard Oil Company of Nebraska, and the Prairie Oil and Gas Company, organized by the Standard Oil Company since the combiner- tion of 1899, and the Standard Oil Company of California (formerly the Pacific Coast Oil Company), whose stock was purchased by the Standard of New Jersey in 1900, all of these corporations engaged in the oil business in the United States, which are now thus owned and controlled by the Standard Oil Company of New Jersey, were in existence and were separate corporate concerns prior to 1899, and were brought together by the combination in the Standard of New Jersey. There are some companies organized in foreign countries which are controlled by the Anglo-American, the American Petroleum Company, and one or two other foreign Standard concerns, and some natural gas companies, which may have been organized since that time, but these com- panies are not defendants. Aside from the large number of previously competing con- cerns which we have shown were brought together by the Standard interests through stock ownership, these same concerns have from time to time bought up directly a still larger number of previously competing concerns and prop- erties in the various branches of the oil industry. We have no idea as to the total number thus acquired; doubtless it far exceeds the number regarding which specific evidence has been introduced in the case. A demand was made upon Mr. Archbold and other officials of the Standard Oil Com- pany and upon the counsel for defendants to produce a complete list of all concerns which have been acquired in any way by Standard interests, but they failed to do so and further claimed that it would involve an immense amount of work. The testimony, however, does show the acquisi- tion of a large number of such companies. We have intro- duced a table in the brief of facts grouping these as follows: (1) Refining and manufacturing concerns, which are the most numerous; (2) marketing concerns; (3) pipe lines. The dates of acquisition are given in most cases, but in a few cases approximately only. The total number, including those heretofore referred to in this brief, is 215. The list 72064— L— 09 2 18 does not, however, include several concerns hereafter men- tioned which are I controlled by agreements. It appears by the testimony that a large number of these refining concerns were dismantled. Mr. Archbold testified in 1888 to as many as fifty so dismantled up to that time, and the testi- mony shows that since then the Standard has bought several plants, some of them new, and dismantled them. ADDITIONAL COMPANIES WHICH THE TESTIMONY SHOWS THE STANDARD OIL COMPANY SECRETLY OWNS OR WHICH IT CONTROLS BY AGREEMENTS OR WORKING ARRANGEMENTS. COESICANA REFINING COMPANY. It appears by the testimony in this case that the Standard Oil Company secretly owns and controls various companies, among others the Corsicana Refining Company, which was constructed at Corsicana, Tex., in the name of the Corsicana Refining Company, a copartnership consisting of Henry C. Folger and Calvin N. Payne, who were employees of some of the Standard companies, the money being nominally loaned to them by the National Transit Company, a pipe line com- pany. This refinery did not appear in the books of the Standard Company, except under the heading of a loan to these individuals. The Standard witnesses claim that in 1906 they sold this refinery to Folger and Payne, but it has been managed and controlled in the same manner since the sale, the earnings go to the Standard Oil Company, and the Stand- ard companies purchase all of the product. The testimony, in our opinion, clearly shows that this company belongs to the Standard Oil Company, and that it was so nominally sold to evade the antitrust laws of Texas. MANHATTAN OIL COMPANY AND THE INDIANA PIPE-LINE AND REFINING COMPANY. It appears that the Manhattan Oil Company was, prior to 1899, a large pipe-line and refining company, situated in Ohio, and in competition with the Standard Oil companies. It had a capital of $2,000,000 and a bonded indebtedness of $800,000. It owned a pipe line, oil wells, a refinery, and about 800 tank cars. It had been established by Anthony 19 N. Brady and E. C. Benedict for the purpose of insuring a supply of gas oil, principally to the People's Gas-Light and Coke Company of Chicago and the Indianapolis Gas Conapany of Indianapolis; but gas oil is a residuum of the refining process, and the company made and sold illuminating oil and other products in competition with the Standard. The stock of this company was sold by Brady and Benedict to the People's Gas-Light and Coke Company in 1898 for sub- stantially $2,000,000, subject to the bonded indebtedness, making a total of about $2,800,000. A year later the People's Gas-Light and Coke Company sold the stock to an English company known as the General Industrials Development Syndicate (Limited), about which nothing whatever is known except that it is represented by a firm of London solicitors, Budd, Johnson & Jecks. The circumstances of this sale are so remarkable that we invite the court's atten- tion to the detailed statement of the facts, the substance being that Mr. Johnson came to Brady with a letter of intro- duction from a London banking firm and bought this stock for $615,363.67, subject to the mortgage bonds, or a total of $1,415,633.67, more than $1,300,000 less than the gas company had paid for it a year before. The consideration for, the $1,300,000, thus deducted from the value of the property, was a contract which Brady testified the London company procured from the Standard Oil Company of Indi- ana, by which that company agreed to supply the People's Gas-Light and Coke Company with gas oil for a period of ten years at an extremely low price, to wit, about If cents per gallon on the basis of the existing price of crude oil, the price which the Standard was charging to other concerns for gas oil at that time averaging about 3 cents per gallon. Brady testified that this contract was worth $1,300,000 to the People's Gas-Light and Coke Company. Furthermore, within a year after the purchase of its stock by the London company the Manhattan sold to Standard concerns all the cars for $468,215.14, the refinery for $250,000, which was dismantled, and the crude-oil wells for $380,521, making a total of these sales, $1,098,736.14. About the same time the Manhattan's pipe line was connected up with the Standard's pipe lines, and the Standard has since purchased all the oil. 20 It appears also that about 1898 the Cudahys of Chicago had established a company known as the Indiana Pipe Line and Refining Company, which had constructed a pipe line about 184 miles long, and completed a refinery at Kankakee, 111., for the refining of the oil from the Indiana field; that by- product works were also in process of construction; that the same London company about 1899 bought the stock of this concern and immediately dismantled the entire refinery and connected its pipes with the Standard Oil Company's pipe lines. Mr. Archbold rather forgot himself on the cross- examination and said that the Standard company bought this property. When confronted with the testimony of the president of the Manhattan Oil Company, who is also the American representative of the London company, to the effect that the London company bought and still held the stock of this concern, Mr. Archbold said he had never heard of it and knew nothing about it. By this means another competitor of the Standard com- pany was eliminated. It is incredible that a bona fide English company not controlled by the Standard would buy for an investment two refineries and dismantle one w-hich was entirely new and sell the other with its appurtenances to the Standard Oil Company. SECTJRITY OIL COMPANY. The Security Oil Company is a corporation organized under the laws of Texas in 1903 with a capital of $1,500,000 and a bonded indebtedness of $2,500,000. It owns a refinery in Texas. Its stock is owned by the London Commercial Trading & Investment Company (Ltd.), another English concern represented by the same firm of Budd, Johnson & Jecks, solicitors, who represent the General Industrials concern. The president of the Security Oil Com- pany is Mr. S. G. Bayne, president of the Seaboard National Bank, where some of the Standard subcompanies keep accounts and in which Mr. Archbold is a stockholder. Mr. Bayne and his son run the Security Oil Company. The Standard furnishes it its crude supply and purchases all the product. It has never paid any dividends to the London company, and Mr. Bayne's son, the manager, testified that 21 he knew nothing about the London company or how it came to go into the oil business or furnish the money for the con- struction of the plant. The explanation, in our opinion, of the control of the Man- hattan Oil Company and the Security Oil Company is a loan appearing on the American books of the Anglo-American Oil Company, amounting to between two and a half and three million dollars, which appears to have had its origin about the time of the acquisition of the Manhattan Oil Company by the first London company, and which increased greatly about the time of the construction of the Security refinery. This loan was made to James McDonald, who was the Lon- don representative of the Standard Oil Company. No explanation could be made by any Standard official what this loan was for. The comptroller, the treasurer, and three or four other leading Standard officials, including Mr. Rocke- feller and Mr. Archbold, were entirely unable to explain why it was made or what it represented, and Mr. Archbold refused to produce the books which would show these facts. The defendants finally stipulated, for the purposes of this case only, and not to be used as evidence in any other case or proceeding, that any decree which the Government should obtain against any of the corporations defendant, it should be entitled to enter against the Security Oil Company and the Manhattan Oil Company. This decree, if rendered, will show that the Standard Oil Company owns and controls cer- tain corporations, and this stipulation authorizes a decree of its ownership and control of these two companies. WATERS-PIEKCE OIL COMPANY. While the Waters-Pierce Oil Company is a defendant, and in this proceeding the Standard Oil Company admits it owns a majority of the stock, it appears that for a number of years after 1900 it denied the ownership and concealed the same. The Waters-Pierce Company is a large selling company for the Standard, including the south half of Missouri, the States of Arkansas, Oklahoma, Texas, Louisiana west of the Mississippi River, and the RepubHc of Mexico. Prior to 1900 there was a Waters-Pierce Company which had been a party to the trust agreement of 1882. It had been excluded from 22 Texas under the state antitrust law about 1899. It was therefore reorganized in May, 1900. Out of the 4,000 shares of stock 2,747 belonged to the Standard Oil Company, but for the evident purpose of concealment these shares were placed in the name of C. M. Pratt and stood on the books as the C. M. Pratt Investment Account. Thereafter, in order to still further cover it up, the stock was transferred to Mr. Van Buren, son-in-law of Mr. John D. Archbold. Mr. Archbold, however, admitted that he held it for the Standard Oil Com- pany. TroE WATER OIL COMPANY AND TIDE WATER PIPE COMPANY. It appears that the Tide Water Oil Company is a large cor- poration having a capital stock of $19,967,000, and owns refineries at Bayonne, N. J., on New York Harbor; that this company owns the stock of the Tide Water Pipe Company, which amounts to $625,000. The latter company has a pipe line from western Pennsylvania to the refineries of the Tide Water Company at Bayonne. With the exception of the Standard, this is the only pipe line reaching New York Har- bor. The Standard owns 31 per cent of the stock of the Tide Water OU Company. The history of the struggle of this company to reach the seaboard with its pipe line, and of the Standard's fight to obtain control of it, is given in detail in the statement of facts. It is sufficient here to say that the Standard purchased and acquired crude-oil wells and refin- eries connected with this concern in order to cut off its supply and its custom, and that it bought stock therein and under- took to get control of the company; that although it failed in this attempt the Standard made a contract with the Tide Water in 1884 to divide all the business of transporting, manufacturing, and selling petroleum in the United States, whereby the Tide Water Company was to have 11^ per cent and the Standard 88 J per cent; that this contract was in existence until a short time after the Sherman Act was passed, when it was canceled as of a prior date; that since that time the Standard has sold the Tide Water Company a large amount of its crude-oil supply and has purchased and marketed substantially all of its product; that the Tide Water has never increased its business and is not to-day a competitor of the Standard companies. 23 UNITED OIL COMPANY AND FLORENCE OIL AND REFINING COMPANY. These two companies own refineries at Florence, in the State of Colorado, where there is a crude oil supply. The Standard Oil Company owns 17 per cent of the capital stock of the United Oil Company, and purchases and markets all of the product of both refineries, the result being that in this Rocky Mountain territory, including the States of Mon- tana, Wyoming, Colorado, New Mexico, and Idaho, there is practically no competition in the marketing of oil, the Standard doing over 99 per cent of the business. DESCRIPTION OF THE BUSINESS TRANSACTED BY THE STANDARD AND ITS PERCENTAGE OF THE TOTAL. A detailed description of the Standard Oil business is too elaborate to be included in this statement, but briefly it may be summarized as follows: The principal oil fields of the coimtry are the Appalachian or Pennsylvania field, situated in southwestern New York, western Pennsylvania, West Virginia, and southeastern Ohio; the Lima-Indiana field, situated in northwestern Ohio and northern Indiana; the Illinois field, situated in southern Illinois and discovered about 1905; the Midcontinent field, situated in Oklahoma and Kansas, the large development of which commenced about 1904; the Texas-Louisiana field; the Colorado field, at Florence, Colo., and the California field. Much of the Texas and California oil is only valuable for fuel and very little of the former is now used for refining, although considerable of the California oil is so used. The Standard's pipe-line systems have gathering lines in the Pennsylvania, Lima-Indiana, Illinois, Midcontinent, and California fields, and trunk lines leading therefrom to its refineries, more particularly as follows: From Oklahoma and Kansas to the refineries at Neodesha, Kans., and Sugar Creek, Mo., near Kansas City; from there the pipe line runs to Upper Alton, 111., where the Standard has recently built a large refinery; from there to Grifiith, Ind., near Whiting, at which latter place the Standard has a large refinery; from Griffith it extends eastward, being joined by a line from southern Illinois; the lines then run through Ohio, 24 Pennsylvania, New York, New Jersey, West Virginia, and Maryland to the seaboard, taking oil from the Lima and Appalachian fields, and reaching the refineries of the Stand- ard at Lima and Cleveland, Ohio; Parkersburg, W. Va.; Pittsburg and Franklin, Pa.; Olean and Buffalo, N. Y.; Brooklyn and Long Island City, N. Y., and Bayonne, N. J., on the New York harbor; Point Breeze, near Philadelphia; and Baltimore, Md. It has, from western Pennsylvania, running through Pennsylvania or New York, four trunk lines which reach the seaboard. The Standard also has pipe lines in California, reaching its refinery at Richmond, near San Francisco. The Standard owns or controls oil wells producing only about one-fourth of the oil it refines; the balance it pur- chases from the producers at the wells. The Standard thus transports crude oil in interstate com- merce. It manufactures this oil at its various refineries into refined illuminating oil, gasoline, paraffin wax, and other products. From the refineries it transports these products, principally in the tank cars of the Union Tank Line, which the Standard controls, to its various marketing stations throughout the United States. The product, for the most part, remains the property of one or another of the Standard companies during such transportation, and is largely delivered into States other than those in which manu- factured. From these marketing stations the products are sold principally to retail dealers, the refined oil and gasoline being largely delivered to such dealers by means of tank wagons. The Standard's marketing business is done in part by separate companies, while in other cases the refining companies have separate marketing departments, the busi- ness of which is kept entirely distinct. The Standard has divided the United States into marketing districts, each marketing company or department selling only in a single district. The territories covered by each company in the marketing business are fully set forth in the brief of facts. The Standard Oil Company also exports large quantities of petroleum products, especially illuminating oil, principally in tank steamers owned and controlled by the Standard companies. The percentage of the total business done by the Standard Oil Company in each branch of the industry is fully stated in 25 the brief of facts, the proportions in the pipe line, marketing, and export business being given for a series of years up to 1906, and in the refining business for the year 1904. The Standard's pipe Hnes (including the Tidewater and Manhat- tan lines) transport from 88.7 per cent to 93.5 per cent of the oil handled by pipe lines from the Appalachian and Lima- Indiana oil fields, and have also substantially a monopoly of the transportation of oil from the Illinois field and until very recently had a complete monopoly as well in the Mid- continent field. Of the oil transported by pipe line to the Atlantic seaboard, the Standard and the afiihated Tide Water Company transport from 95.1 to 97.1 per cent. The oil fields just named are all those which are of any considera- ble importance in producing crude oil suitable for refining and the products of which are actually used through the greater part of the United States. In 1904 the Standard (racluding the aflSliated Tidewater and other companies named above) produced 87.3 per cent of the total illuminating oil manufactured in the United States, and 82.9 per cent of the naphtha, and handled 83.8 per cent of all the crude oil handled by refineries. Of the sale of reiined oil in the United States the Standard had 88.9 per cent in 1907 and 84.8 per cent in 1906, while its proportion of the sales of naphtha is even greater. From 1900 to 1906 the Standard exported from 90.8 per cent to 86.3 per cent of all the od ex- ported from this country. It also sells substantially 97.5 per cent of the railroad lubricating oil. It v/ill thus be seen that for several years past the Standard has controlled from seven-eighths to more than nine-tenths of the different branches of the oU business in the United States. It appears by the evidence that the Standard Oil Company absolutely fixes the prce of crude oil in all of the fields except Texas and California; that there were formerly oil exchanges in western Pennsylvania and in New York which handled oil certificates in pubHc market; that about 1895 the exchanges were done away with and since that time the price of crude oil in all this territory has been fixed by the Standard Oil officials and published by what is called the Seep Agency; that the prices of export oil are fixed at New York in the same manner and are furnished to the Produce Exchange and published as the quoted prices of export oil in New York. It 26 further appears that the Sta^dard Oil Company, through its various marketing companies, practically controls the price of refined oil and gasoline throughout the United States. To be sure there are some districts in which there is some com- petition, but it appears by the testimony that the independ- ents have generally, until the investigation by the Govern- ment and the starting of this proceeding, been compelled to follow the Standard's prices. In most of the country prices are named by the Standard companies and changed from time to time at their will, enabling the Standard thereby to charge very high prices in all the territory where little or no competition exists, and thereby to offset the fact that in limited areas it sells oil at a small profit, and in some cases at a loss, to control the competition. PROFITS OF BUSINESS AS INDICATING A MONOPOLY AND ITS EFFECTS. One of the evidences of the monopoly of the defendants is the enormous earnings of this combination. These earnings are stated in detail in the brief of the facts. They may be summarized as follows: The Standard Oil Trust and the Standard Oil Company, on an investment of $69,024,480.50, had earned up to the end of 1906, $838,783,783.16. Adding the profits of 1907 and 1908 (of which we have no accurate statement, but from the testimony of Mr. Rockefeller we may assume them to be as much as the profits of 1906), we have substantially a billion dollars earned by this company in twenty-seven years, with an original investment of about $69,000,000. But the real significance of these earnings is seen when we take the last ten or twelve years, after the monopoly had been well established. For the ten years ending with 1906 the earnings were $598,226,525.66, or practically $60,000,000 a year on the investment of $69,000,000, the capitalization being $97,250,000 part of the time and a little more the rest of the time. The Standard Oil Trust and the Standard Oil Company paid dividends from 1882 to 1906 amounting to $548,- 436,446.87, an average of 24 per cent per year on the capitalization. During the last eleven years, ending with 27 1906, the annual dividends were from 31 to 48 per cent, being 48 per cent in 1900 and 1901. This, however, repre- sents but little more than one-half of the earnings, for the percentage of net earnings to the capital stock during the last eight years has been from 57 to 84.5 per cent. But it may be said that this is not a fair comparison, that the rate of earnings should be based upon net assets, and that the company is greatly undercapitalized. It is capitalized for about $15,000,000 more than the parties themselves valued the property and assets which they put in, aside from siu-- plus earnings. If the coiu't were regulating the earnings of a public-service corporation there would be some ground for the argument that the net assets should be the basis of calculating the percentage of earnings ; but what we are trying to arrive at is whether the Standard Oil Company is substantially a monopoly, and whether its prices are monopolistic or are the prices incident to a competitive business. On this basis we must remember that the surplus of the company was made out of profits in excess of a very high rate of dividends, in recent years amounting to as much as 40 to 48 per cent. The Supreme Court of the United States lately held, in the Consolidated Gas case, that 6 per cent was a reasonable rate of earnings for the Consolidated Gas Company. We very much doubt if there is more risk in the Standard Oil business than in the Consolidated Gas. The mere magnitude of the business and its wide-reaching character — having its markets throughout the entire world and unaffected by local condi- tions, enabling it to make up in one territory what it ma}" lose by reason of some local competition in another, and having a wide variety of products, enabling it to make up on one what it loses on another* — gives it a stability of which there is no oqual in the manufacturing business in this country. The business of railroads is often spoken of as a stable business and a safe investment, on which a return of 6 per cent is ordinarily con- sidered reasonable. But the railroad business is far more fluctuating and subject to the effect of business depressions than the business of the Standard Oil Company. Even, how- ever, considered on a basis of the relation of net earnings to net assets, the rate of earnings of the Standard Oil Company for the last ten years has on the average exceeded 25 per cent per year. 28 In the foregoing we have stated the aggregate profits and dividends of the Standard Oil Trust and the Standard Oil Company of New Jersey, but the effect of the monopoly of this combination will be more fully appreciated when we come to consider the profits of those companies engaged exclusively in the business of pxu"chasing, transporting, manu- facturiag, and selling petroleum and its products in this country, as distinguished from its export and marketing business in foreign countries. PROFITS OF THE PIPE-LINE COMPANIES. From the detailed tables set forth in the statement of facts it appears that the Standard's pipe-liue companies, the larger ones in particular, are earning enormous profits even on their total net assets. For instance, the Buckeye Pipe Line Company, a large company in Ohio, earned in 1906 70.3 per cent on its capital stock and 57.6 per cent on the value of its net assets. The Indiana Pipe Line Company, owning lines in Indiana, earned 251.4 per cent on its capital stock and 57.6 per cent on its net assets. Taking all of the companies, the profits from 1899 to 1906 usually ranged from 25 to 100 per cent on the capital stock. The foregoing is based upon the balance sheets of the pipe- liae companies. Some of these companies hold a large amount of assets not used in the pipe-line business. The earnings of the Southern Pipe Line Company, for instance, in its pipe line business proper ranged, for the years 1899 to 1906, from 101.3 per cent to 278.1 per cent on the net assets employed in that business, the Indiana Pipe Line Company from 94.1 per cent to 166.3 per cent, and most of the others not less than 60 per cent in any of these eight years. PROFITS OPiTHEJEXCLUSIVELY DOMESTIC REFINING AND MARKETING COMPANIES.] The refining and marketing companies exclusively engaged in the American trade have also enormous profits, with the exception of the Standard Oil Company of Nebraska, which only lately has been organized. The profits of these com- panies on their capital stock in 1906 in most cases exceeded 87 per cent. In the case of the Standard Oil Company 29 of Indiana the profit on its capital stock of $1,000,000 was 1,051 percent in 1907. The Standard Oil Company of Indiana is one of the largest manufacturing companies of the com- bination. It owns large refineries at Whiting, Ind., and is also a marketing company in a large territory. All of the money ever invested in tlais company except from its own surplus earnings was $1,000,000. It commenced business in 1890, and in addition to its dividends it has surplus assets of over $24,000,000 derived fiom net earnings. The Continental Oil Company, which is an important marketing company and sells its oil in a district where there is practically no competition (to wit, the Rocky Mountain States), earned in 1906 191.7 per cent on its capital stock; the Solar Refining Company, 251.7 per cent; the Standard Oil Company of Kentucky (the marketing com- pany throughout the Southern States south of the Ohio River, where there is little competition), 130.8 per cent. We have no statement of the net assets or of the total profits of the Waters-Pierce Oil Company, but we have a statement of the dividends for certain years. In 1904 the dividends were 600 per cent. This company is the Standard's exclusive selling company in certain Southwestern States and the Republic of Mexico. Even on their net assets the profits of the above- mentioned companies from 1899 to 1906 in most cases exceeded 30 per cent per year, and in many instances exceeded 40 per cent. It appears by the tables that the profits of the foreign companies are very much less. For instance, the Anglo- American Oil Company earned in 1906 25.9 per cent upon its capital stock and 11.1 per cent upon its net assets. The prin- cipal German marketing company of the Standard, which ranks next to the Anglo-American in magnitude, earned 13.6 per cent on its net assets. It will thus be seen that those companies engaged in the domestic business are earning rates of profit decidedly in excess of the average rate on the entire business, which is reduced by the lower rate on the foreign business. The average for the entire business is also lowered by reason of the usually moderate rate of profit of the natural gas and crude-oil producing companies. 30 PROFITS PER GALLON. The enormous profits of the defendants appear also from the statistics of the profits per gallon. It appears that half a cent a gallon on the entire output is a very good profit. Compare this with the profit of the Standard Oil Company on its entire business, including the less profitable export sales, and it will be found that the Standard's profits aver- aged in 1903 3.7 cents per gallon on all crude oil handled by its ]:efineries. This, to be sure, was a year of maximum profits, but for the years 1900 to 1906 (taken together) they averaged substantially 3 cents per gallon. Some of the mar- keting companies of the defendants make on the marketing business alone a profit ranging as high as 4 and 5 cents per gallon. The Continental Oil Company, in the Eocky Moun- tain States (where there is practically no competition), during the years 1899 to 1906 made on its reficned illuminating oil profits ranging from 3 to 4.98 cents per gallon. INCREASE IN THE PRICES OF THE PRINCIPAL PRODUCTS. It has usually been claimed for large combinations in this country that they have increased business and decreased the cost to the consumer, but in the case of the Standard Oil Company it has, during ten or fifteen years (which is as far back as we could obtain the figures), actually increased the prices to the retailer, and this a good deal more than the prices of other products throughout the country, although the price of its raw material and the cost of manufacture and sale during these years has increased very ,little, if any. Take, for instance, the combined product of refined oil, naphtha, and paraffin wax (three of the principal products of crude oil). The average price of these three commodities has increased, between the four years 1895 to 1898 and the four years 1903 to 1906, 46 per cent, while the average in- crease of all other principal commodities in the United States combined represents only 26.6 per cent; refined oil and naph- tha combined, without counting paraffin wax, have increased 49 per cent. Furthermore, there is no evidence to show how much the cost of manufacture (including raw materials) of other commodities has increased, while in the case of the Standard Oil the testimony shows there has been no material 31 increase in such costs. This is evident also from the increase in the profits of the Standard Oil Company per gallon of crude oil handled and from the increase of profits of the market- ing companies. The profit of the Standard Oil Company per gallon of crude oil consumed has increased from 1.78 cents per gallon in 1882 to 3.05 cents in 1906, and between 1893 and 1906 the profit has increased from 0.90 cent to 3.05 cents. The marketing companies' profits have also increased in substantially the same way. We have not the marketing companies' profits prior to 1895, but from 1895 to 1906 the profits per gallon on illuminating oil increased from 1 .20 cents to 1.50 cents per gallon, and from 1898 to 1906 from 0.88 cent to 1 .50 cents. The profits on naphtha have increased from 1.06 cents in 1895 to 1.72 cents in 1906, and nearly doubled since 1898. It is significant that with all the resources of the defend- ants they have never undertaken to show in this case by statistics that they have not during aU these years increased the price of oil to the consumer, and we believe that Mr. Archbold's guarded claim to this effect, which he sup- ported by no statistics, is of no value. It can not be shown that this monopoly has cheapened the product to the con- sumer; in fact, the only places in the United States where the product has been cheapened is where the independents are selling. VARIOUS OTHER 3VIEANS TJSED BY THE STANDARD OIL COMPANY TO MONOPOLIZE COMMERCE. It will be unpossible to give more than a mere outhne of the other means, which the evidence shows the Standard has used to monopohze the commerce in oil. Perhaps one of the most potent means of monopoly is the control of trans- portation by pipe line and by railroad. CONTROL OF PIPE LINES. The Standard has practically a monopoly of the pipe-line transportation of crude oil from the principal oil fields of the United States. With the exception of the pipe fines con- trolled by the Pure Oil Company— to wit, the United States Pipe Line, from western Pennsylvania to Marcus Hook, near • Philadelphia, and the Producers' Oil Company (Limited) and the Producers' and Refiners' Oil Company (Limited)— there 32 has until very recently practically been no competition in the United States in pipe-line transportation. We have seen how during the period from 1874 to 1882 the Standard obtained control of practically all of the lines then existing and brought them together under the control of the National Transit Company. Ever since it has sought to prevent or destroy competition in the pipe-line business. It first sought to control the Tidewater Pipe Company, then the only other pipe line to the seaboard, and succeeded in getting an agreement with that company for division of the business. It bought up during the eighties the Pittsburg Pipe Line and the Western and Atlantic Pipe Line, two impor- tant concerns supplying independent refineries at Pittsburg. :; Later it used every possible means to defeat, destroy, or control the Producers' and Refiners' Oil Company and the United States Pipe Line Company, affiliated concerns which projected a local system of pipes and a line to the seaboard. The evidence shows that the Standard Oil Company in every way possible obstructed the construction of these lines, purchased rights of way across the proposed route, inspired railroads to oppose crossing their lines, and finally succeeded in preventing the United States Pipe Line from crossing the State of New York to the Hudson River or the State of New Jersey to the New York Harbor, so that it was compelled to pull up a large mileage of its line and reconstruct it to Phila- delphia. The Standard also undertook to destroy the busi- ness of the refineries connected with these pipe lines by manipulating prices of oil. Finally the Standard undertook to buy up these lines. It succeeded in purchasing a part of their stock, but failed to get control. It now owns $393,000 out of $1,200,000 of the capital of the United States Pipe Line. Failing in its attempt to get control of the United States Company and the affiliated concerns, the Standard purchased in 1895 the only other competitive line to the seaboard, the Crescent Pipe Line, and the Mellon lines connected therewith, which constituted a large gathering system in southwestern Pennsylvania and West Virginia. The parties connected with this enterprise had also conmienced the construction of a refinery at Marcus Hook. In order to purchase this line the Standard Oil Company in 1895 succeeded in obtaining 33 the repeal of a law of Pennsylvania prohibiting the purchase of parallel and competing pipe lines. It will thus be seen that with the exception of the United States line the Standard controls all of the pipe lines to the Atlantic seaboard. We have seen also how the Standard got control of its principal pipe-line competitors in Ohio and Indiana, to wit, the Manhattan Oil Company and the Indiana Pipe Line and Refi n ing Company. This gives the Standard practically a monopoly with the exception of the Oklahoma or Mid- Contiaent field. It had a monopoly there till within the last two years, when two other pipe lines were built from that field to Port Arthur, one by the Texas company and the other by the Gulf Refining Company. By such means we have seen that the Standard has control of about 95 per cent of the transportation of crude oil to the Atlantic seaboard, which by reason of the large percentage of oil exported gives it a tremendous advantage. In order to more effectually control this transportation to the seaboard, the National Transit Company entered into a contract with the Pennsylvania Railroad Company on August 22, 1884, which contract was not canceled until 1905, whereby the Transit Company guaranteed that of the total crude and refined oil. transported by all existing carriers to the seaboard the Pennsylvania should have 26 per cent, the National Trailsit to turn over to the railroad enough crude oil to make up any deficiency. By an agreement of the same date it was pro- vided that instead of dehvering the oil to the Pennsylvania Railroad the Transit Company would carry the oil thi-ough its own pipe lines and pay the railroad company nearly three- quarters of the rate, the Pennsylvania performing no services whatever. Mr. Archbold testified that this eUmiaated all possible inducement for the Pennsylvania Railroad Company to compete for this business. The defendants admit that the pipe lines in Ohio, Penn- sylvania, New York, and West Virginia are by the laws of those States required to be common carriers, and on the passage of the Hepburn bill requiring pipe lines engaged in interstate commerce to act as common carriers, these com- panies filed tariffs, but the tariffs were so filed as to prevent any independent company from shipping thereunder, for three reasons: First, the point of delivery was named at 72064—1^-09 3 34 places where there were no independent refineries; second, the rates were excessive; and third, the miaimum amount of oil that would be transported was so large that no independ- ent refiner could use them. It further appears that just prior to the passage of the Hepburn bill, when it was imder pubhc discussion, the pipe lines organized imder the laws of Pennsylvania and New York owning lines in New Jersey and Maryland transferred their fines in those States to the parent company, the Standard of New Jersey, in order to evade the provisions of the Hepburn bill, and they built delivery stations at inaccessible points on the state lines in order to prevent independent refiners shipping oil to the seaboard. The pipe lines which were not, by the laws of the several States in which they were organized, common carriers have wholly failed to comply with the Federal act and have filed no tariffs and carry no oil for others. These include the only pipe lines of the Standard from the great new Illinois and Mid-Continent fields. Evidence was taken in this case showing the net assets of each pipe line, the charges per barrel for transporting, and the operating expenses per barrel; and this testimony conclu- sively shows that the rates are from three to six times a reasonable charge. Allowing 10 per cent income upon the value of all the net assets actually used in the pipe-line business and 5 per cent additional for depreciation, the fol- lowing would be reasonable rates for the several trunk lines as compared with the actual charges: 190S. Actual average charge per barrel. A rea- sonable charge. Indiana Pipe Line Crescent Pipe Line B uckeye Pipe Line Co. (Cygnet Division) New York Transit Co.: New York Division BuSalo Division National Transit Co. (Millway and Bayonne Division) Bear Creek and Kane Pipe Line Pennsylvania Pipe Line Southern Pipe Line Northern Pipe Line '.','.'.'.'.'.'. Cents. 29.85 43.01 13.08 42.14 22.85 16.80 4.61 38.98 28.66 3.54 Cents. 4.31 11.47 4.20 10.01 3.84 5.16 L64 12.68 8.35 4 37 The Northern Pipe Line is a comparatively unimportant one. 35 RAILWAY TRANSPORTATION. The importance to the Standard of railway transportation is evident. During the last ten years the Standard Oil offi- cials and their associates have been directors in many of the leading railroad systems of the United States. For instance, the Standard interests have in the Chicago, Milwaukee and St. Paul four directors; Union and Southern Pacific and Santa Fe, two each; New York, New Haven and Hartford, New York Central and aUied hues, Missouri Pacific, Boston and Maine, Wisconsin Central, Rutland Railroad, and others, one each. The volume of traffic controlled by the Stand- ard is enormous. It further appears that during the said time the Standard companies have by direct rebates, by the use of combinations of secret intrastate rates on interstate shipments, and by discrimination in the open and published rates, received rates for the transportation of oil from all the leading Standard shipping points very much lower than the independent refiners have been able to procure from their shipping points, and in many cases the amount of the dis- crimination exceeded a reasonable profit upon the oil. It is impossible to believe that without connivance with the Stand- ard Oil Company the railroads of this country should have uniformly made a system of rates whereby with scarcely an exception the independent shipping points were discriminated against in favor of the Standard shipprag points. We can here point out only the principal instances of such discrimi- nation. The Standard's great refinery at Whiting, Ind., for many years supphed substantially all the territory west and south of Chicago, with the exception of the Pacific coast States since 1900 and the Rocky Mountain States. From Whiting the Standard enjoyed secret rates to Evansville, Ind., and Grand Junction, Term., on the basis of which enormous ship- ments were made into all of the territory south of the Ohio River, east of the Mississippi, and west of the Atlantic sea- board, except a strip of territory immediately along the coast. The independents competing with Whiting were located at Cleveland, Toledo, western and northwestern Pennsylvania. To all this vast territory the Standard's rates were so much below the rates from these competing points (taking distance into consideration) that the independents were practically 36 shut out altogether. A few illustrations of such discrimina- tion are as follows : m Cents- To Chattanooga, Tenn.: Independents' rate from Pittsburg, 651 miles 47 Standard's rate from Whiting, 849 miles 25. 9^ To Birmingham, Ala. : Independents' rate from Pittsburg, 794 miles 51. 5 Standard's rate from Whiting, 820 miles 29. 5 To Harriman, Tenn. : Independents' rate from Pittsburg, 572 miles 46 Standard's rate from Whiting, 1,011 miles 31- S We name Pittsburg because the western and northwestern Pennsylvania independent shipping points take the same rate. The discrimination against Cleveland and Toledo was practically the same. The average discrimination against the independents into this entire territory is from 12 to 15 cents a hundred, amounting to nearly a cent gallon, a large profit upon the oil. These rates from Whiting were not only discriminatory but they were secret and illegal departures from the legally pub- lished rates. For years the open published rate of the Chi- cago & Eastern Illinois Railroad and Evansville & Terre Haute Railroad from Whiting, Ind., through Illinois to Evansville, Ind., was 11 cents a hundred pounds; and bills were rendered to the Standard showing that rate, but were settled at unfiled rates of 8i or 6 cents a hundred pounds, according to the destination south of the Ohio River. These shipments were largely made on through consignments to points in other States south of Evansville. These facts as to presentation of the bills at 11 cents per hundredweight and settlement at 8^ and 6 cents are admitted by stipulation and no possible claim can be made that the rates paid by the Standard were legal. The Grand Junction rate combi- nation was equally illegal. Other enormous discriminations were on shipments from Whiting to East St. Louis, on which the Standard for years enjoyed a secret rate of 6 cents a hundred pounds as against the published rate of 18 cents a hundred pounds. The rates from the independent points of northern Ohio and Pennsyl- vania to East St. Louis were nearly double per ton per mile the rate from Whiting, although it is the usual custom of the 37 railroads to make a lower rate per ton per mile for a longer than a shorter haul. Another series of great discriminations were made on the Standard shipments from Olean, N. Y. These included a secret rate from Olean to Eochester and secret rates from Rochester to northern New York points generally. The secret rate from Olean to Rochester and another secret rate from Rochester to Norwood, N. Y., both of them covered by unfiled rate orders marked on their face, "Not to be posted," were used by the Standard on interstate shipments going to Vermont. These various rates from Olean and Rochester gave the Standard a cost of transportation from one-third to two-thirds less than independents could obtain from refineries in western Pennsylvania, which would ordinarily take the same rates as Olean. For these discriminations the Standard Oil Company of New York and the New York Central Railroad have been convicted, and the Pennsylvania Railroad is under indictment. There were also a large num- ber of secret rates from Burlington, Vt., to practically all sta- tions in Vermont, and these were in most cases by the terms of the tariff naming them confined to the Standard alone, and were far below the published rates which other shippers had to pay. Furthermore, for more than ten years prior to the institu- tion of the investigation by the Bureau of Corporations and the starting of this suit, the independents were practically shut out of New England by reason of the fact that the New England railroads refused to prolate on oil shipments com- ing from the west although they were prorating on practi- cally all other commodities. It further appears that the Standard Oil Company shipped its oU into New England by boat and distributed it at low rates from the seaboard towns, such as New London and East Boston, except that Vermont was largely supplied, as we have seen, from Olean, N. Y. We pass over many other secret and open discriminations fully set forth ia the brief of facts. It appears that about the time the Bureau of Corporations investigated these va- rious secret and discriminatory rates and the Government instituted this case, the railroads withdrew nearly all of them. A table of the time of these changes is given in the brief of 38 the facts and they all occurred between June 23, 1905, and' May 29, 1907. If these rates were not made for the benefit of the Standard Oil Company and largely discriminatory as against the competitors, it is remarkable that immediately on the discovery of them the railroads should have with- drawn them and substituted rates more equal. RAILROAD DISCRIMINATION BY THE PAYMENT OF EXCESSIVE PRICES FOR LUBRICATING OIL. The testimony also shows that the Standard Oil Company through a company in which it owns a majority of the stock — the Galena-Signal Oil Company — controls about 97^ per cent of the lubrication of railroads throughout the United States; and that it sells to most railroads at enormous profit. This is evidenced by the net earnings of the company which in 1906 were about 112 per cent on the capital stock actually paid in and about 105 on a liberal valuation of the capital actually used. It is also shown by the further fact that the prices to these raiboads are substantially double the prices charged to a few favored lines, notably the Pennsylvania. For instance, the New York Central Railroad for ten years has paid about 100 per cent per gallon more than the Penn- sylvania. While of course it appears that the Galena-Signal Oil Company gives the roads excellent service and furnishes good oil, nevertheless the testimony is conclusive that other companies could also have furnished good oil and service; and we believe that it would be impossible for the Standard company to obtain this absolute monopoly except through its influence with railways. It further appears that it does not have any such absolute monopoly of the other lubri- cating business — ^for instance, the street railway systems of the country. CONTRACTS WITH INDEPENDENT MANUFACTURERS. It appears that wherever the Standard can do so it has made contracts whereby it has either marketed a part or aU of the product of the independent refineries or has limited the output of the same. The testimony shows that for two or three years prior to the present suit, some 16 inde- pendent refineries in western Pennsylvania were compelled to sell the Standard Oil Company all of their export oil in. 39 consideration of the Standard pipe lines continuing to supply them with crude oil ; that the Standard had contracts with the Puente Oil Company and the Union Oil Company, its two principal competitors in California, whereby it marketed all of the product of the Puente and limited it to 600,000 gallons of water- white oil per year and 360,000 gallons of naphtha per year, and whereby the Union Oil Company ceased to manufacture refined oil and other light products. It appears that it also has contracts for marketing most of the product of the Tidewater Oil Company, and all of the product of the Florence Oil and Refining Company and the United Oil Company, of Colorado, and the Security Oil Company and Corsicana Refining Company, of Texas; and that it has contracts with many producers in California whereby they agree not to sell crude oil to any other concern. By reason of these contracts the Standard markets a larger proportion of the oil than it manufactures. UNFAIR COMPETITION. The testimony in this case shows that the various defend- ants hare pursued a system of unfair competiton against their competitors, whereby the independent companies seUing and marketing petroleimi have either been driven out of busi- ness or their business so restricted that the Standard Oil Company has practically controlled the prices and monopo- lized the commerce in the products of petroleum in the United States. This system has taken the form of price cutting in particular locahties while keeping up high prices, or raising them still higher, in other locahties where no competition exists; of paying rebates to customers as a part of said 'system of price cutting; of obtaining secret information as to competitive business largely through bribing railway employees, and using said secret information to pro- cure the countermanding of orders of independents, and to facihtate the price-cutting pohcy ; of the use of so-called bogus independent companies — that is, companies held out by the Standard Oil Company as independent which are engaged in price cutting, while the Standard Oil Company maintains the prices through its well-known companies, and other abusive competitive methods against the independents. 40 The Standard Oil Company is particularly able to carry on this predatory competition for the reason that it does not sell its product at central markets or through ordinary channels hke most other large manufacturers. It markets its product to the retailer in every village and community in the United States and often directly to consumers. It does from 85 to 90 per cent of the business in the United States, leaving about 10 or 15 per cent for all its com- petitors. It is perfectly obvious therefore that if all the balance of the trade in the United States were in one concern it could not afford to have marketing stations and facilities in every part of the United States. In order to market in effective competition with the Standard Oil Company the independents must of course ship by tank cars, which is much cheaper than shipping by barrel or less than carload lots, and they must also have stations for unloading where tanks are available and tank wagons to meet the trade in competition with the Standard. It would be obviously impossible for such a concern to afford to spread its product over the whole United States. Assuming that all the balance of trade is in the hands of one concern it must confine itself to a particular district where it can have adequate facilities equal to the Standard's, and therefore all of the 10 or 15 per cent being in the hands of a large number of independents these independents must all the more con- fine themselves to small districts. This gives the Standard an opportunity to attack the particular district, as it does, and to either keep the independent concern down to a mini- mum of business or to destroy it entirely. It has undoubt- edly been the policy of the Standard Oil Company to permit the independents to do a small percentage of the business, and this percentage, as we have seen, has run from 10 to 15 per cent for many years. By thus keeping the independents within reasonable bounds it may control the prices, permit them to make a moderate profit and not allow their com- petition to get beyond control, and in most parts of the country make enormous profits itself. There is no question that if this court holds the Standard Oil Company to be a legal organization and not guilty of monopoly — in other words, gives it carte blanche to pursue its own methods — it can eliminate every competitor inside of two years. 41 We desire here to describe briefly the various devices to Twhich the Standard has resorted in the pursuit of its methods of unfair competition. The Standard Oil Company keeps a secret department in New York, known as the statistical department. Through this department it has a complete system of espionage upon its competitors all over the United States. It was with great difficulty that the Government succeeded in finally imcovering this system. Many of the leading men connected with the Standard Oil Company were placed on the stand and denied knowing anything about the department until they were confronted with certain reports and statements which had come into the Government's hands. It appears by this testimony that the Standard Oil Company has a system of reports whereby every salesman and local agent procures information as to shipments of oil by independents into his district. These are procured by bribing railway employees to report competitors' shipments; by keeping men around railway stations to learn the ship- ping directions on barrels or cars; by following the tank wagons and salesmen of independents; by employing detec- tives to procure the information from the independents' employees, and by various other equally disreputable means. These reports are sent in immediately to the head office of the Standard's marketing division. From such reports the local salesmen and agents throughout the country are informed of the shipments made into their territory, and at the same time a record of such shipments is preserved to show the proportion of the business done by the inde- pendent concerns. This information is also reported to the head sales agents of the several Standard marketing com- panies at their New York headquarters and is preserved in the statistical department at 26 Broadway, to which we have referred. The greatest secrecy is maintained in regard to this entire system. For instance, railroad employees who furnish a large part of this information do not sign their names to the reports which they furnish or use stationery either of the Standard Oil Company or of the raihoad com- pany. On the basis of this information regarding competitive shipments the Standard Oil Company at this central sta- tistical department keeps complete records showing the per- 42 centage of the business done by independent concerns in each of its large territories and in each of its smaller subdi- Tisions and in individual cities. The Government put in evidence from the records of the statistical department at New York such tables showing the percentage of independent business throughout the country, and also put in evidence numerous reports obtained from railroad employees and summarized reports of individual competitive shipments- This information is obviously of the greatest advantage tO' the Standard in determining where and how far it wiU cut prices in order to destroy competition. Moreover, it appears that the information of competitive shipments is often used in advance of the arrival of the shipments to secure the countermanding of orders and to f acihtate other methods of unfair competition. This same statistical department at New York keeps rec- ords showing the prices at which the Standard sells oil at each town throughout the United States, together with the margin of profit of the marketing company on such oil. Summaries of these records were introduced by the Govern- ment. They show in a most startling manner the practice of local price cutting and price discrimination, the widest possible differences appearing in the prices at different towns even in the same general vicinity, to say nothing of still greater differences between the prices in different parts of the country. These statistics corroborate the testimony of numerous witnesses for the Government regarding local price cutting. The statistics show that in many places where there is a large percentage of independent business and sharp competi- tion, the Standard Oil companies sell oil at a loss, and in. most places where there is any considerable competition at low prices with a small margin of profit, whereas throughout the larger percentage of the territory where competition is substantially or entirely eliminated the Standard companies sell at very high prices with a large margin of profit. The tables contain the prices and the profit per gallon in all the leading main stations throughout the United States and many of the substations, and the averages for the several marketing districts. (See particularly the summarized tables covering this subject. Petitioner's Exhibits 628-635.) 43 These tables show, for example, that in 1899 in the Rocky Mountain territory the Standard Oil Company made an average profit on refined oil in the marketing business alone of 4.36 cents per gallon while the amount of competition was only two-tenths of 1 per cent; in the territory of the Standard Oil Company of Ohio on the other hand (prac- tically the State of Ohio) the average marketing profit was only 0.94 of a cent per gallon while the competition was 14.2 per cent. In the Philadelphia territory, which includes the eastern part of Pennsylvania, ia that year the Standard's marketing profit was 0.52 of a cent per gallon and the compe- tition was 18.7 per cent. Similar variations in profit as be- tween the several marketing divisions appear for other years. Again, to illustrate the extreme difl'erences in the prices in individual cities, it appears that during 1904 in Los Angeles the price of oil was 7^ cents per gallon, while there was a large amount of competition, 33.4 per cent. At the same time in Seattle, where there was no competition, the price was 15.5 cents, and in Portland, where there was also no com- petition, 15 cents. The Standard Oil Company lost 3.41 cents per gallon in Los Angeles, whUe it made a profit of 5.30 cents in Seattle and of 3.87 cents in Portland. Similar conditions exist in various other parts of the United States. Further illustrations of such price discrimination from the statistics are presented in the brief of facts. In the brief of facts also is a review of all the other testi- mony on the subject of unfair competition. This testimony of necessity is very voluminous and complicated, because it covers a large number of small transactions at various points throughout the United States for a series of years. It, how- ever, deserves the careful attention of the court and, in our judgment, establishes beyond question the oppressive meth- ods of the Standard Oil Company in order to monopolize this commerce and control the prices. The oral testimony of the witnesses is amply corroborated by letters of various Standard officials and employees, and other documents. They show substantially the following facts: That prior to the investigation by the Government and the institution of this suit the defendants had a system of what are known as "bogus independent companies," operating in many parts of the country under a wide variety of names, some of them 44 corporations, others mere names adopted to cover the busi- ness, in all cases owned by the Standard Oil Company and held out by it to be independent and used for price cutting and other means of oppression. In nearly all these cases the defendants' witnesses admitted the existence of these companies and that their control was kept secret. These companies were predatory in their operations and were used to oppress the independents as they should establish a business ia one place or another throughout the United States. It appears that when the Government started to investigate the Standard Oil Company and instituted this suit it withdrew all these companies and liquidated them. These companies gave the Standard Oil combination a pecul- iar advantage. They enabled it to cut prices and injure the independents while nominally to the public keeping up their own prices. They were thus able to divert the trade from the independents, particularly that which the latter held by reason of prejudice against the Standard monopoly. This they were enabled to do more effectually because many of these companies had previously been actually independent and the Standard had secretly purchased them. Through these companies and also through its openly con- trolled companies the Standard pursued a system of cutting prices in places where the independents were doing business, in many cases below the cost and to a point which caused loss to competitors. A large amount of testimony was offered by the defendants to show that the independents usually cut prices first. This testimony is contradicted and explained by the Government's witnesses. It is shown that while in many cases the Standard's well-known companies nominally main- tained prices the secret companies were cutting prices, and also that the Standard companies often departed from their public prices by means of secret rebates. In other cases where oil was selling at very high prices and there was no competition the independents would estabHsh a price the same as the Standard had in other surrounding towns, whereupon the Standard would continue to lower prices until there was no profit in the business. There were various other means used by the Standard. The independents frequently, and especially in the southern territory, are compelled to market their oil in barrels. Sales- 45 men go into towns and, as no single merchant would buy a carload, a carload would be made up by aggregating the sales of a number of merchants. The Standard's agent would fol- low and break up the carload by getting some of the orders withdrawn. This was admitted by the vice-president and manager of the Standard Oil Company of Kentucky, and many letters of his were introduced showing this system of business. For this the Standard Oil Company of Kentucky and some of its salesmen were indicted in Tennessee, con- victed, and the Standard Oil Company paid $3,000 fine. In addition, the Standard company was ousted from the State upon a suit of quo warranto by the attorney-general. The testimony shows that the Standard's salesmen were furnished vsdth gauge rods, and went around the country gauging the barrels of their competitors and telling buyers that they were overgauged, that a higher gallonage was stated on the barrels than they really contained. It is unnecessary here to state further in detail this testi- mony. It is elaborated under the head of "Unfair competi- tion" in the brief of facts. We do not wish to be understood as discouraging enter- prise or as taking a position against legitimate competition, but if the Sherman Act means anything in this country, as we argue in another part of this brief, it means a monopoly acquired by such methods of competition as this. Unless it is enforced the small corporation or individual who wishes to engage in business will have absolutely no opportunity at aU. This testimony is valuable as showing the intention of the Standard OU Company to monopolize the commerce in oil throughout the United States. In many districts it has an absolute monopoly. We mean by absolute monopoly that in those districts it does all of the business, and has eliminated every competitor. Practically this is the case throughout the Rocky Mountain country and most of the Pacific coast States. The percentage of independent business throughout the entire Southern States is very small. Moreover, where there is competition the competitors are usually strictly under the control of the Standard, in that they must, in order to be allowed to do business, sell oil at practically the price the Standard dictates and confine themselves to a small percent- age of the trade. IN CASES OF CONSPrRACY IT IS ALWAYS PERMISSIBLE TO ALLEGE AND PROVE THE HISTORY AND VABIOTJS STEPS CULMINATING IN THE FINAL CONSPIRACY, EVEN THOUGH THE PREVIOUS STEPS WERE SEPARATE AND DISTINCT OFFENSES, IF THEY TEND TO THROW LIGHT ON THE PRESENT CONSPIRACY AND TO SHOW THE INTENT WITH WHICH THE FINAL ACTS WERE COMMITTED. Wharton on Criminal Ev., sec. 32. Greenleaf on Ev., sec. 111. 8 Cyc, pp. 677, 678, 684. Swvft <& Co. V. United States, 196 U. S., 395. Umted States v. Greene, 115 Fed., 344. Lincoln v. Clajiin, 7 Wall., 132. N. Y. Mut. Lvfe Ins. Co. r. Armstrong, 117 U. S., 598. Moline-Milbum Co. v. Franklin, 37 Minn., 137, and cases cited. Commonwealth r. Scott, 123 Mass., 222. CarroU v. Commonwealth,, 84 Pa. St., 107. Spies T. People, 122 111., 1. State V. McCahiU, 72 Iowa, 111, 33 N. W., 599. Tarhox v. State, 38 Ohio St., 581. Commonwealth v. O'Brien, 140 Pa. St., 555; 21 Atl., 385. State V. Adams, 20 Kans., 311. Wood V. United States, 16 Peters, 360. Nelson v. State, 67 S. W. (Tex.), 320. Ford Y. State, 34 Ark., 650. Card V. State, 109 Ind., 415; 9 N. E., 591. State r. Greenwade, 72 Mo., 298. People V. Saunders, 25 Mich., 119. Swan V. Commonwealth, 104 Pa. St., 218. Lorenz r. United States, 24 App. D. C, 337. Smith V. Schwed, 9 Fed., 483. People V. Van Tassel, 51 N. E. (Court of App., N. Y.). 274. ^^ ' Davis V. United States, 107 Fed., 753. KeUey et al. v. People, 55 N. Y., 565. Mussina r. Clark, 17 Abb. Pr. (N. Y.), 188. Malony v. Dows, 15 How. Pr. (N. Y.), 261. United States v. Lancaster, 44 Fed., 896. Mussel Slough Case, 5 Fed., 680. United States v. Newton, 52 Fed., 275. ReiUey v. United States, 106 Fed., 896. (46) 47 In 8th Cyc. of Law & Proc, page 684, under the head of ^'Conspiracy," it is said: Where the guilt of a party depends upon the intent, purpose, or design with which an act is done, or upon his guilty knowledge thereof, collateral facts in which he bore a principal part may be examined into for the purpose of establishing such guilty intent, design, pur- pose, or knowledge. It is sufficient that such collateral facts have some connection with each other as a part of the same plan, or as induced by the same motive, and it is immaterial that they show the commission of other crimes. The evidence in a conspiracy is wider than perhaps in any other case. Taken by themselves, the acts of a conspiracy are rarely of an unequivocally guilty character, and they can only be properly esti- mated when connected with all the surrounding cir- cumstances. In the case of Swift v. United States, supra, the petition set forth many of the means by which the commerce was claimed by the Government to have been restrained. Mr. Justice Holmes, in writing the opinion, said: The general objection is urged that the bill does not set forth sufficient definite or specific facts. This objec- tion is serious, but it seems to us inherent in the nature of the case. The scheme alleged is so vast that it pre- sents a new problem in pleading. If, as we must assume, the scheme is entertained, it is, of course, contrary to the very words of the statute. Its size makes the violation of the law more conspicuous, and yet the same thing makes it impossible to fasten the principal fact to a certain time and place. The elements, too, are so numerous and shifting, even the constituent parts alleged are and from their nature must be so extensive in time and space, that something of the same impos- sibUity applies to them. In the case of United States v. Greene (115 Fed., 344), the indictment alleged a conspiracy extending over a term of years from 1891 to and including 1897, culminating in the conspiracy for which the defendants were indicted. The indictment set forth in great detail the entire history of the conspiracy, and the overt acts performed by each of the defendants, including copies of contracts and documents. The indictment was sustained on demurrer. The court followed the well-established rule that in alleging a con- 48 spiracy, either in a civil or a criminal action, the pleader may state the entire history of the conspiracy and each overt act of the parties. To the same effect is Lorenz v. United States (24 App. D. C, 337). New York Life Ins. Co. v. Armstrong (117 U. S., 599) was a suit brought against a life insurance company by the assignee of a policy of life insurance, which policy had been secured at the instigation of the assignee, to recover on the policy after the death of the assured, and it was held that evidence was admissible to show that it was plaintiff's pur- pose to defraud, by showing that he effected insurances upon the life of the assured in other companies at or about the same time for a like purpose. Mr. Justice Field said : So, on an indictment for a conspiracy to create public discontent and disaffection, proof is admissible against the prisoner that at another meeting held for an object professedly similar, at which the prisoner was chairman, resolutions were passed of a character to create such dis- content and disaffection. "In short," said the learned justice, "wherever the intent or guilty knowledge of a party is a material ingredient in the issue of a case, these collateral facts, tending to establish such intent or knowledge, are proper evidence. In many cases of fraud it would be otherwise impossible satisfactorily to establish the true nature and character of the act." Many other authorities might be cited to the same purport. Moline- Milhurn Co. v. Franklin (37 Minn., 137) was an action to recover possession of a lot of buggies obtained from plaintiff by defendant in exchange for a promissory note, by means of false representations as to the solvency of the maker of the note. Evidence was admitted to show that the defendant had on the same or the next day passed off another of the same lot of worthless notes under circum- stances showing that he knew it to be a fraud. The court (Mitchell, J.) said: If this had been a separate and distinct fraud it would have been clearly inadmissible; but it is evident that the acts of defendant and Zimmerman in trading one of these notes to plaintiff, and the attempted trade of the other to Stevens, were parts of one fraudulent scheme committed in pursuance of a common purpose. The acts were so connected as to make it apparent that 49 the defendant had a common purpose in both, viz, to get rid of these notes against S. E. Hart & Co. before their insolvency should become known. The evidence was therefore admissible for the purpose of proving the motive or intention which actuated the defendant in the transaction under investigation in this case. In Commonwealth v. Scott (123 Mass., 222; 25 Am. Kep., 81) it is held that on a prosecution for breaking and entering a bank with intent to commit larceny, testimony of an accom- plice of a general conspiracy previously formed between the accused and others to rob banks, in pursuance of which the robbery in question was planned and carried out, together with the acts of the conspirators in making preparations to carry out the robbery, is admissible. The court said: It was clearly competent for the Government to show the whole history of the robbery with which the de- fendants were charged from the inception of the scheme by them to its final consummation. The evidence excepted to tends to show the beginning of the plot or scneme of this robbery in the summer of 1875. The fact of the general conspiracy, formed in 1873, was so connected with this scheme as to make it competent. It tended to explain and make intelUgible the testimony of Edson as to the beginning of this scheme, as it accounts for the fact of his reporting to the defendants at Wilkes-Barre and furnishing them with the means of duplicating the keys of the vault lock. * * * The evidence was competent as tending to prove the crime charged, and it is not rendered incompetent because it also tends to prove the commission of other crimes. In CarroU v. CommonwealtJi (84 Pa. St., 107), it is held that to show the motive for a crime it is competent for the Commonwealth to prove the existence of a secret criminal organization, and to show that one division of such organi- zation furnished men to commit murder or a like crime by members of another division. The court said: The entire body of the evidence became necessary to show the conspiracy which linked all the prisoners together; to show that they were combined in the most intimate relations, and in a common purpose, * * * and that all these combinations and purposes led directly to the commission of another murder as the return price for the murder in question. * * * The whole net- work of the evidence is so complicated and so clearly 72064— L— 09 4 50 united and connected together in proving the guilt of all the prisoners, and their motives, and the agencies employed, it is not possible to strike out the subsequent facts without destroying to a great extent the unity and relevancy of those which preceded the act. * * * The relevancy of the evidence * * * {g made manifest. In Spies v. Peofle (122 111., 1; 12 N. E., 865), "The An- archists case," the prosecution introduced evidence that the defendants were members of a revolutionary society which had for years publicly advocated the overthrow of social order by violent methods. The entire history of this organization and its mode of operation were introduced in evidence, although the matter in issue was a plot resulting in a murder on May 3, 1886. The court says (p. 976) : We do not agree with the position of counsel that the general conspiracy hereinbefore described and the plot of Monday night. May 3, 1886, were two separate conspiracies. The latter was merely the outgrowth and culmination of the former. The latter merely designated the particular mode in which the objects of the former were to be effected. It was competent to show the acts and declarations of the parties to the general conspiracy which preceded and led up to the formation of the special plot of May 3, with a view of understanding the latter. In State v. McCahill (72 Iowa, 111; 33 N. W., 599), it is held that on the trial of one of a number of conspirators for murder committed in the execution of the conspiracy, it was competent to show the history of the conspiracy from the beginning, even though a considerable part of it occurred before any acts of violence were committed on the part of any one and before it was certain that any such acts were contemplated, for "the character and -purpose of the comlina- tion hefore it hecame unlawful had a tendency to shed light on the facts afterwards." In Tarlox v. State (38 Ohio St., 581) it is held that where in a trial upon an indictment it becomes material to prove upon the part of the State that a conspiracy existed between persons jointly indicted, evidence that the same persons were, shortly prior to the time of the alleged fcrime, engaged in a 51 conspiracy to commit crimes of a similar character, is com- petent. The court said : We think it was competent for the purpose of showing a conspiracy between the defendants, and also to show knowledge of the falsity of the representations at the time when made. In Commonwealths. O'Brien (140 Pa. St., 555; 21 Atl., 385) it is held that on a prosecution for conspiracy to defraud an insurance company by procuring a policy on the life of the father of one of the defendants, by collusion v;ith the com- pany's local agent and misrepresenting the father's age and health in the appUcation for the policy, and the procurement of a third person to personate such father in the medical examination, it is proper to admit in evidence an applica- tion by the father to the poor directors for relief, made two years prior to the insurance application, sworn to by the appMcant before his son, one of the defendants, who was a justice of the peace, and stating therein his age to be greater than that stated in the application for insurance and show- ing his ill health. Such evidence "was directly connected with this transaction, and as an overt act of one of two joint conspirators it was evidence against both." In State v. Adams (20 Kans., 311) the charge was bur- glary. Theinformation was against four persons. A witness was permitted to testify that he saw one of the defendants come out of a store with a carpenter's brace and hide it. Brewer, J., said: The State having offered evidence of a conspiracy and agreement between the parties to commit the crime, might properly show any conduct or acts of either there- after tending to sustain the evidence of the agreement, and indicating prepp-ration to accomplish the crime, or remove the fruits. It is not essential that the State estabhsh beyond peradventure that the acts or conduct were based upon the conspiracy or in reference to the crime; * * * Where there is evidence of a con- spiracy to commit a crime, and of its subsequent com- mission, the State may, in support and corroboration thereof, show any act or conduct of the alleged conspir- ators intermediate the conspiracy and the crime which apparently recognizes the existence of the conspiracy, or reasonably indicates preparation to commit the crime, 52 or preserve its fruits; and this notwithstanding such special act of preparation was not the one discussed and agreed upon by the conspirators and is rendered actually fruitless and unavailing by the unexpected interference of third parties and also involves the com- mission of another and distinct crime. In WoodY. United States (16 Peters, 360) the information filed alleged that the goods were not invoiced according to their actual cost, for the purpose of evading duty thereon. The court said (p. 360) : The next point presented for consideration is whether there was an error in the admission of the evidence of fraud deducible from the other invoices offered in the case. We are of opinion that there was none. The question was one of fraudulent intent or not ; and upon questions of that sort, where the intent of the party is matter in issue, it has always been deemed allowable, as well in criminal as in civil cases, to introduce evidence of other acts and doings of the party of a kindred char- acter in order to illustrate or establish his intent or motive in the particular act directly in judgment. Indeed, in no other way would it be practicable in many cases to establish such intent or motive, for the single act taken by itself may not be decisive either way, but when taken in connection with others of the like char- acter and nature, the intent and motive may be demon- strated almost with a conclusive certainty. In Nelson v. State (67 S. W. (Tex.) 320) it is held, on a prosecution for murder, that evidence of the declarations of four other persons to the effect that decedent must sign "a, lie bill" or leave the country, though made in defendant's absence and prior to the formation of the conspiracy, is admissible as illustrating the animus, purpose, and intent of the parties. In Ford v. State (34 Ark., 650) it is held that when a man is charged with one crime, it is not competent to prove that he committed others; but a witness to a conspiracy may state "the whole plan or purpose of the conspirators" to rob several persons, though it does not appear that they executed their plan except as to the one for the murder of whom the defendant was indicted. 53 In Card v. State (109 Ind., 415; 9 N. E., 591), where a series of notes were forged in pursuance of a system of conspiracy, it was held they were all admissible in evidence to show and explain the system, on trial of one of the conspirators for forg- ing one of such notes. In support the court cites Greenleaf on Evidence (sec. Ill) and Wharton on Criminal Evidence (sec. 32). Wharton (Crimiaal Evidence, sec. 32) says: Suppose that it is alleged that the crime in question was one of a system of mutually dependent crimes, is it admissible on a trial for one of these crimes to put in evidence such other crimes for the purpose of showing this system? In several lines of civil cases such evi- dence has been held admissible. Nor is there any reason why such evidence should not be received in criminal cases. In order to prove purpose on the defendant's part, system is relevant, and in order to prove system, isolated crimes are admissible from which system may be inferred. * * * Conspiracy cases give signal illustrations of the rule here stated. The acts of each conspirator emanate from him individually, yet when they are a part of a system of conspiracy they are admis- sible in evidence against his coconspirators, although each competent act may constitute an independent offense. The reason for the rule in this and ia similar cases is that when once system is proved each particular part of the system may be explained by the other parts which go to make up the whole. Wharton (Criminal Evidence, sec. 32, p. 37) says: When the crime charged is one of a system of mutually independent crimes, executed in pursuance of a precon- certed plan, it is proper to prove such other crimes for the purpose of showing the system or plan and the intent and purpose of the accused in doing the acts which are claimed to constitute the crime charged. In Lorenz v. United States (24 App. D. C, 337) it is held, on page 381, that in all cases where fraud and conspiracy must necessarily be established by circumstantial evidence, a wide range of evidence is permissible. In SmitTi v. Schwed (9 Fed., 483) the action was brought to set aside a judgment by confession, it being alleged to have been in fraud of creditors. The plaintiffs offered to prove 54 another judgment by confession in another State, which it was alleged was also void upon the same ground. The court said: The true rule upon this subject is this: It is not com- petent, for the purpose of showing fraud in a particular transaction, to show that the same party has been guilty of fraud in another separate and independent transaction not in any way connected with the matter in controversy. * * * But, if the transaction sought to be shown in evidence can be connected with the transaction in con- troversy as evidence of a connected scheme of fraud, it is admissible. {Clark v. White, 12 Pet., 193.) Judged by this rule, I think the evidence tending to show fraud in the Pennsylvania transactions is admissible. The two transactions were manifestly but parts of one scheme. In Swan v. Commonwealth (104 Pa. St., 218) the court said: To make one criminal act evidence of another, some connection must exist between them; that connection must be traced in the general design, purpose, or plan of the defendant, or it may be shown by such circumstances of identification as necessarily tends to establish that the person who committed one must have been guilty of the other. The collateral or extraneous offense must form a luik in the chain of circumstances or proofs relied upon for conviction; as an isolated or disconnected fact, it is of no consequence. Kelley et al. v. People (55 N. Y., 565) was a case where the plaintiffs in error had been convicted of the crime of grand larceny, being indicted together. Among the assignments of error were several to the effect that immaterial and irrelevant testimony as to the conspiracy between the parties had been improperly admitted. The court, by Allen, J., said: A conspiracy may be proved, as other facts are proved, by circumstantial evidence, and parties performing dis- connected overt acts, all contributing to the same result and the consummation of the same offense, may, by the circunastances and their general connection, or otherwise, be satisfactorily shown to be conspirators and confeder- ates in the commission of the offense. * * * ***** The declarations were not given in evidence to prove the guilt of the parties on trial, and as the declarations of one conspirator against another, but as a part of the res gestae, a part of the history of the transaction, and as such it was competent. II. A PERSON OR CORPORATION JOINING A CONSPIRACY AFTER IT IS FORMED, AND THEREAFTER AIDING IN ITS EXECXTTION, BECOMES FROM THAT TIME AS MUCH A CONSPIRATOR AS IF HE ORIGINALLY DESIGNED AND PUT IT INTO OPERATION. United States v. Standard Oil Co., 152 Fed., 294 of opinion. Lincoln v. Glaflin, 7 Wall., 132. United States v. BabcocJc, 24 Fed. Cases, 915, No. 14487. United States v. Cassidy, 67 Fed., 698, 702. The Anarchist Case, 122 111., 1. United States v. Johnson, 26 Fed., 682, 684. Peoj^le V. Mather, 4 Wend., 230. (55) . III. THIS CONSPIRACY WAS A CONTINTJING OFFENSE. EVERY OVERT ACT COMMITTED IN FURTHERANCE THEREOF WAS A RENEWAL OF THE SAME AS TO ALL OF THE PAR- TIES. THE STATUTE OF LIMITATIONS DOES NOT BEGIN TO RUN UNTIL THE COMMISSION OF THE LAST OVERT ACT. NEITHER CAN THE PARTIES CLAIM A VESTED RIGHT TO VIOLATE THE LAW. Am. & Eng. Enc. of Law (2d ed.), vol. 19, "Limita- tions of Actions." United States r. Greene, 115 Fed., 343. Ochs Y. People, 124 111., 399. Spies V. People, 122 111., 1. 8 Cyc, p. 678. State V. Pippin, 88 N. ,C., 646. United States v. Bradford et at, 148 Fed., 413. Commonwealth r. Bartilson, 85 Pa. St., 489. People V. Mather, 4 Wend., 261. State V. Kem.p, 87 N. C, 538. American Fire Ins. Co. v. State, 22 So. (Miss.), 99. Lorenz y. United States, 24 App. D. C, 337. People Y. Willis, 23 Misc. (N. Y.), 568. Raleigh y. Coolc, 60 Tex., 438. Commonwealth y. Gillespie, 10 Am. Dec. (Pa.), 480. It is probably unnecessary to discuss this question at length, because it was necessarily passed upon by the court in its refusal to strike out these allegations from the biU. But a brief statement of some of the authorities may be of use to the court in the final consideration of the case. In the case of United States y. Greene and Gaynor the court held that it was proper to plead and prove all the circum- stances leading up to the final conspiracy, although the con- spiracy had its inception many years before. The case of Ochs v. People was an indictment in the Cook County Circuit Court against Ochs and several other county commissioners, charging the defendants with the crime of conspiracy to obtaiu money from Cook County by means of (56) 57 false pretenses. The court, Mr. Justice Sheldon deUvering the opinion, said: The first instruction, as to all the defendants, was faulty and misleading, in telling the jury that the crime of conspiracy was complete and the offense was then committed when the agreement or confederacy was entered into, and that the period of Umitation would commence to run from the time of committing the offense. The instruction was calculated to lead the jury erroneously to think that the period of limitation would commence to run from the time a defendant first became a member of the conspiracy, instead of from the time of the commission of the last overt act in furtherance of the object of the conspiracy. In speaking of the questions of limitations, the learned judge in the same case also said: As respects Ochs and Wasserman, especially, the question is raised whether the statute of limitations was not a shield as to them, arising from the fact that their terms of office as county commissioners expired December 6, 1885, and perhaps most of the transactions in evidence occurred subsequent to that time, and after they had ceased to be members of the board. The period of limitation here was eighteen months. The indictment was found April 2, 1887, so that the bar of the statute would apply to all acts committed prior to October 3, 1885. The existence of the conspiracy prior to October 3, 1885, having been satisfactorily established, as we think it was, it is necessary for the avoidance of the bar of the statute to inquire whether there were any overt acts in furtherance of the conspiracy committed by the defendants subsequent to that time. We think the proof of the comimission, by all the defendants, of such overt acts subsequent to October 3, 1885, is abundant. The evidence shows, satisfactorily, that Ochs and Wasserman were members of the conspiracy previous to October 3, 1885, and that they adhered to it afterwards, during the whole interval of time to December 6, 1885, by their cooperation as members of the board, with their fellow conspirators, in the pass- ing of these false and fraudulent bills. In 8th Cyc, page 678, the author states the law as follows: In the reception of circumstantial evidence great latitude must be allowed. The jury should have before them every fact which will enable them to come to a 58 satisfactory conclusion. And it is no objection that the evidence covets a great many transactions and extends over a long period of time, provided, however, that the facts shown have some bearing upon and tendency to prove the ultimate fact at issue. But much discretion is left to the trial court in a case depending on circum- stantial evidence, and its ruling will be sustained if the testimony which is admitted tends even remotely to establish the ultimate fact. In State v. Pippin (88 N. C, 646), it is held that other offenses, part of the same system, can not be excluded from evidence because sheltered by the statute of limitations. In this case the defendants were charged with adultery dur- ing the two years preceding the finding of the indictment, and on the trial to prove the offense evidence was admitted of adultery at a time protected by the statute of limitations. United States v. Bradford et al. (148 Fed., 413, C. Ct. E. Dist. La.), was an indictment for conspiracy to defraud the United States, under section 5440, Eevised Statutes. The defendants being found guilty, sued out a writ of error to the Circuit Court of Appeals, and Parlange, J., annexed to the bill of exceptions his reasons for the action complained of in the bill. The first question raised by the bill of exceptions was whether the criminal action was barred by the statute of limitations. In discussing the question, the reasoning of the learned judge is very clear, forcible, and to the point. He in substance held that the conspiracy was a continuing offense; that each overt act of the conspirators or any of them tended to renew the conspiracy; that the limitation was from the last overt act; that the jury had a right to go back to the original conspiracy for the purpose of determining whether it was continued or renewed and existed and was in operation within the three years. The opinion reviews the authorities with care and ability, and is too long to quote at length, but among other things the court said : It is well and fully settled that the commission of an overt act is, per se, a renewal of the conspiracy. (Citing authorities.) * * * It is settled that the jury need not have found that the inception 6f the conspiracy took place within the three years. They had a right to go back to its origin for the purpose of determining whether it was continued or renewed and existed and was in operation within the three years. 59 The case of American Fire Ins. Co. v. 8tate (22 South. (Miss.), 99), cited with approval in United States v. Bradford, supra, was an indictment for criminal conspiracy under the Mississippi Code. On demurrer to the indictment it was urged that the oflfense charged was barred by the statute of limitations. The Supreme Court of the State, Whitfield, J., deUvering the opinion, said : The well-settled doctrine is that every overt act is a renewal of the original conspiracy then and there — a re- peating of the conspiracy as a new offense. But where, in conspiracy, an overt act is done within two years, and said act is but one of a series of acts com- mitted by the parties, evidently in pursuance of a com- mon design and to carry out a common purpose, such acts would be evidence, provided they tend to show that the last act was part of the series and the result of an unlawful combination; and such evidence may satisfy a jury of the existence of a conspiracy at the latter period. And this though some of the prior acts may have oc- curred at a time when, as an independent conspiracy, it would have been barred by the statute; for, as before said, the overt acts are the evidence from which a con- spiracy may be inferred. Lorenz v. United States (24 App. D. C, 337) was an appeal from a judgment of conviction of the Supreme Court of the District of Columbia, sitting as a criminal court, entered upon the verdict of a jury finding the defendants guilty on an indictment for an offense against the United States. It is worthy of note in this case that the indictment contained a general recital that on and before 1900 there were in use in the postal service throughout the United States a large number of letter boxes, which were fastened by devices called letter-box fasteners; that there was an Assistant Postmaster-General; that there was a division known as the free-delivery division; what the duties of that division were; and various other matters, giving the details and progress of the conspiracy from its inception. With rela- tion to the wide range of evidence allowed in the trial court, the Court of Appeals said: The leading exceptions embraced in the ninth assign- ment of error, relating to the order of the introduction of 60 evidence of the acts and statements of the defendants, have been heretofore considered. Of those remaining all that need be said is that the wide range of the evi- dence concerning the purchase of fasteners, and the receipt and division of the money paid therefor, was no more than has generally been permitted in all cases where fraud and conspiracy must necessarily be established by circumstantial evidence. With regard to when the statute of limitations begins to run against a conspiracy, the court said : The contention on behalf of the appellants is that, if the conspiracy was in fact formed, and a single act in aid of its object committed, more than three years before the finding of the indictment, then the offense was barred by the statute of limitations, and that no other like act or acts committed within three years would amount to a renewal or continuance of the conspiracy so as to remove the bar. We can not agree with this contention. Undoubt- edly, as argued, the conspiracy is the gist of the offense defined in section 5440, Revised Statutes (U. S. Comp. Stat., 1901, p. 3676), though it is not indictable until some act shall have been done by one or more of the conspirators to effect the object of the corrupt agree- ment. The offense is then complete as to that act, and the statute at once begins to run ; but it does not fol- low that all similar acts thereafter may be committed with impunity. Through the repetition of such acts^ overt acts, as they are commonly called — the conspiracy is made a continuing offense. By each subsequent act it is repeated and entered into anew. The appellants petitioned the Supreme Court of the Unitpd States for a writ of certiorari in this case, which petition was denied. The authorities we have cited to show that the conspiracy is a continuing offense and that the statute of limitations only runs from the last overt act are not cited because the question of the statute of hmitations is important in this case, for we are not at this time seeking a conviction under the criminal statute ; we are seeking, rather, to prevent the continuance of the conspiracy in restraint of trade and in monopohzation thereof — in other words, to stop the restraint and monopoly. The effect of the prior stages in assisting the court to draw its conclusions as to the legality of the present 61 acts is equally great, whether or not in a criminal prosecu- tion the statute of limitations has interposed a bar. The con- clusion to be drawn from the history is as effectual in the one case as in the other. Any other construction would work absurdities. The result would be that a criminal con- spiracy to restrain commerce, continued for more than three years, enlarged, made more effective, and extended over the country from time to time, would, by the very lapse of time, become legal, although giving the history of the conspiracy would tend to show more than anything else its present illegahty. This is simply another way oi arguing that we have a right to state the whole conspiracy, although what we are seeking to enjoin is its present stage. There never has been a time when the conspiracy was at an end or completed. There never was a time when the conspiracy was so far completed that the statute of hmitations could be said to have com- menced to run, or that the conspiracy could be alleged with- out stating the antecedent steps ; and the reason is that it is a continuing conspiracy, constantly operating upon the com- merce of the country and constantly changing and shifting to suit the conditions as they present themselves. IV. IT IS AN ELEMENTARY PRINCIPLE OF EVIDENCE THAT WHERE TWO OR MORE PERSONS ARE ASSOCIATED TO- GETHER FOR SOME ILLEGAL PURPOSE THE ACTS OR DECLARATIONS OF ONE OF THEM IN REFERENCE TO THE COICMON OBJECT ARE ADMISSIBLE AGAINST THEM ALL. 1 Greenleaf on Evidence, sec. 111. "2 Wigmore on Evidence, sec. 1079. American Fur Co. v. United States, 2 Peters, 358; 8 Curtis, 138. Olune V. United States, 159 U. S., 593. Wiborg v. United States, 163 U. S., 656. Lincoln v. Olajiin, 7 Wall., 138. Conn. Mutual Life Ins. Co. v. Hillmon, 188 U. S., 219. United States v. Newton, 48 Fed., 218. United States v. Gooding, 7 Curtis, 286; 12 "lYheaton. 460. Nudd V. Burrows, 91 U. S., 427. United States v. McKee, 26 Fed. Cases, No. 15685. State V. Winner, 17 Kans., 305. State V. Thompson, 69 Conn., 720; 38 Atl. Eep., 869. Hunter v. State, 112 Ala., 77; 21 So. Rep., 65. Lee V. Lamprey, 43 N. H., 1. Apthorp V. ComstocTc, 2 Paige's Chancery, 482. Jackson v. Summerville, 13 Pa. St., 359. Bums c& Stevens v. McOabe, 72 Pa. St., 309. Confer et al. v. McNeal, 74 Pa. St., 112. All of the acts therefore done by the agents and administra- tive officers of these companies during all these years, and all the declarations not only of the defendants but of all parties who from time to time were parties to the conspiracy, are evidence in this case against the defendants. We are aware of the general rule that ordinarily some prima facie evidence of the conspiracy must be offered before the declarations of the coconspirators can be received in evi- dence. The facts in this case, in our opinion, clearly show that the conspiracy had been proved long before the questions concerning the declarations of witnesses were offered in evi- (62) 63 dence. Even if this were not so, the general rule is always relaxed where proof of the conspiracy depends upon a vast amount of circumstantial evidence or a number of isolated and independent facts. 1 Greenleaf on Evidence, 111. State V. Thompson, 69 Comi., 720; 38 Atl., 870. State V. Winner, 17 Kans., 305. In cases of conspiracy the admissions of the accused con- spirators are always a fruitful source of evidence. Only in exceptional cases is the conspiracy shown by direct and posi- tive evidence. The proof is usually indirect and circum- stantial, and courts are bound to rely in large measure upon the admissions made by the conspirators either during or after the accomplishment of the common purpose. State V. Thompson, 69 Conn., 720. Clune V. United States, 159 U. S., 592. United States v. Hutchins, 26 Fed. Cases, No. 15430. United States v. Hamilton, 26 Fed. Cases, No. 15288. The Mussel Slough case, 5 Fed., 680. United States v. Bahcoclc, 3 Dillon, 581. United States v. Lancaster, 26 Fed. Cases, No. 15557. Bavis V. United States, 107 Fed., 753. In Statev. Grant (53 N. W., 120, Iowa) it is held that evidence of the acts or declarations of the employees of conspirators is admissible against such conspirators when it proves that the acts were done and the declarations made during the progress of the conspiracy and in furtherance of its objects. It was not necessary that the defendants should in person have made the alleged false pretenses, or obtained the notes. They might employ others to act for them in that respect, and, if their acts and repre- sentations were authorized by defendants, they would be admissible in evidence against them in case they were made during the progress of the conspiracy. (Cit. Con V. Barley, 3 Metcalf, Mass., 462, 2d Wharton Criminal Law, 8th ed., 1171-1202.) In State v. StocTcover (58 Atl., 769, Conn.) it has been held that on a trial for a criminal conspiracy "evidence of acts of defendants and of their agents in endeavoring to accomplish the purpose of the conspiracy is admissible as evidence of the manner in which it was designed to be accomplished." 64 In Commonwealth y. Rogers (63 N. E., 421, Mass.) it was held that on a joint trial of several defendants for a conspiracy evidence of declarations by the several defendants is admis- sible as against each individually so testifying, though not admissible against the other defendants, but evidence afterward introduced of the conspiracy authorizes the con- sideration of these declarations against all persons shown to have been parties to the conspiracy. In the case at bar the Government introduced testimony of various of the defendants and others connected with them, given before committees of legislatures and of Con- gress, the Committee on Manufactures, the Industrial Com- mission, and in various cases pending in the courts of Penn- sylvania. The defendants stipulated waiving proof that the witnesses had testified as therein set forth (vol. 6, p. 3235 et seq.). The testimony of such witnesses as John D. Archbold (vol. 6, pp. 3236-3286), Daniel O'Day (vol. 6, pp. 3286-3293), Henry H. Rogers (vol. 6, pp. 3293-3305), Benjamin Brewster (vol. 6, pp. 3306-3308), J. A. Bostwick (vol. 6, pp. 3308-3319), John E. Campbell (vol. 6, pp. 3319- 3325), Edward Hopkins (vol. 6, pp. 3325-3328), A. J. Cassatt (vol. 20, p. 2, et seq.), Oliver H. Payne (vol. 20, p. 341, Petitioner's Exhibit 1004), Henry M. Flagler (vol. 20, p. 341, Petitioner's Exhibit 1005), and John D. Rockefeller (vol. 20, p. 342, Petitioner's Exhibit 1006). It is unnecessary to here review the testimony to show the conspiracy or the connection of these individuals therewith. It may be proper, however, to refer to the fact that Arch- bold, Rogers, Brewster, Bostwick, Payne, and Flagler were parties to the first trust agreement of 1879 and the second trust agreement of 1882. Daniel O'Day was general manager of the pipe lines, first of the American Transfer Company, then of the United Pipe Lines, then of the National Transit Company, and closely connected with the Standard institu- tions down to the time of his death in 1906. When A. J. Cassatt was vice-president in charge of traffic on the Pennsylvania Raihoad he signed the agreement for the payment of rebates with Daniel O'Day (Exhibit 8 to the petition) ; and the testimony is clear that the Pennsylvania Raih-oad Company was for years— in fact down to 1905— a 65 party to the conspiracy with various of the Standard Oil com- panies. Mr. Cassatt was present and took part in the nego- tiations for the sale of the Empire Transportation Company pipe Imes and refineries, to the Standard Oil Company, ii^ 1878, and had a hand in making the agreement at the same time whereby it was agreed to refund the Standard Oil Com- pany 10 per cent of all the freight charges paid by it and providmg that no other shipper should pay less than the full rate. (Exhibit 7 to the petition.) Further than that a pool agreement between the Pennsylvania Raihoad Company and the National Transit Company was made August 22, 1884, dividing the traffic in oil and guaranteeing the Pennsylvania 26 per cent of the oil shipments from western Pennsylvania and Ohio to the seacoast, another agreement being made on the same date whereby the Standard Oil Company agreed to pipe the Pennsylvania Raih-oad's share of the oil through its own pipes and pay the Pennsylvania Railroad three-quarters of the rate, without the Pennsylvania Company performing any service whatever. The execution of this contract is admitted in the answer (2nd answer 27), and it appears by the testimony of Jefferson Justice, of the Pennsylvania Railroad Company, that it was not actually cancelled until 1905, al- though he claims that it was not acted under for several years prior thereto. John R. Campbell was treasurer of the United Pipe Lines and Hopkins was superintendent and general manager thereof. The foregoing rules also apply to a large amount of other testimony and declarations of various railway officials and parties in the employ of the Standard Oil companies, whose testimony appears from time to time in this case. 72064— L— 09 5 V. THE TRUST AGREEMENTS OF 1879 AND 1882 WERE IN TTNREASONABIiE RESTRAINT OF TRADE, TENDED TO monopoly, and were void at common law. (a) it is immaterial that this conspieaot had its in- ception PRIOR TO THE ENACTMENT OF THE SHERMAN LAW, OR THAT MANY OF THE REBATES AND DISCRIMINATIONS GRANTED BY THE RAILROADS, WHICH ENABLED THE DE- FENDANTS TO MONOPOLIZE THE COMMERCE IN PETROLEUM, ANTEDATED THE ENACTMENT OF THE INTERSTATE-COM- MERCE law; the principles of the common law AP- plied to interstate commerce as well as to intrastate commerce. Western Union Tel Co. v. Call Pub. Co., 181 U. S., 92. Murray v. C. <& N. W. R. Co., 62 Fed., 24. Interstate Com. Com. v. B. & 0. R. Co., 145 U. S., 263. Bank of Kentucky v. Adams Exp. Co., 93 U. S., 174. In the case of the Western Union Telegraph Company v. Call Publishing Company the Supreme Court of the United States held that the principles of the common law are opera- tive upon all interstate commercial transactions except so far as modified by congressional enactment, and that it was unlawful at common law for a telegraph company to unrea- sonably discriminate between patrons of the telegraph company. The court said: Can it be that the great multitude of interstate com- mercial transactions are freed from the burdens created by the common law as so defined and are subject to no rule except that to be found m the statutes of Congress? We are clearly of opinion that this can not be so, and that the principles of the common law are operative upon all interstate commercial transactions except so far as they are modified by congressional enactment. In this case the court cited and approved the opinion of Judge Shiras, of the northern district of Iowa (62 Fed., 224), which is an exceedingly able review of the subject of the appli cation of the common law to interstate transactions. (66) 67 These authorities settle the question that the discrimina- tions, rebates, and preferences granted by the raihoad com- panies by which the defendants in the early days were aided in building up a monopoly were unlawful at common law. The authorities are equally conclusive that unreasonable restraints and monopolies of interstate commerce were unlaw- ful at common law. The power of .Congress to modify the rules of the common law so far as carriers are concerned is granted by the same provision of the Constitution which empowers Congress to change the common law in relation to restraints and monop- ohes and to authorize affirmative actions to enjoin and pre- vent the continuance of such restraints and monopolies; both come under the commerce clause of the Constitution. At common law a raihoad could not be prosecuted crimi- nally for discriminating or paying rebates which might constitute a discrimination, but contracts for such discrimi- nations were void. At common law the Government could not prosecute criminally unreasonable restraints of trade and monopohes, but the court would not enforce contracts therefor. It is clear, therefore, that the common law was, prior to the enactment of the Sherman Act and the interstate- commerce act, appKcable to the great body of interstate commerce. (b) the trust agreements of 1879 and 1882 were in unreasonable restraint of trade, tended to monop- oly, and were void at common law. State V. Standard Oil Co., 49 Ohio St., 137. Pocahontas CoTce Co. v. Powhatan Coal <& Coke Co., 60 W. Va., 508; 50 S. E. Rep., 264. Charleston Nat. Gas Co. v. Kanawha Nat. Gas Light & Fuel Co., 58 W. Va., 22; 50 S. E. Rep., 877. Slaughter v. Thacker Coal Co., 55 W. Va., 642. Finclc V. Schneider Granite Co., 86 S. W. Rep., 213. Shawnee Compress Co. v. Anderson, 209 U. S., 423. Bigelow v. Calumet A Eecla Min. Co., 155 Fed., 869. Continental Wall Paper Co. v. Louis Voight & Sons Co., 148 Fed., 939. . a 7 /> / • • United States v. Addyston Pipe & Steel Co. (opimon by Judge Taft), 85 Fed., 279. ^ „. xt -n, Dunbar v. Am. Telegraph & Telephone Co., 79 JN. H,. (111.), 423. 68 Texas Standard Cotton Oil Co. v. Adoue, 83 Texas, 650; 19 S. W., 274. Pacific Factor Co. v. Adler, 90 Cal., 110; 27 Pac, 36. Nesterr. Continental Brewing Co., 161 Pa. St., 473; 20 Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St., 173. Butchers Union Co. v. Crescent City Co., Ill U. S., 746. Stanton v. AUen (1848), 5 Denio, 434. Watsonx. H. & N. Y. Nav. Co. (1887), 52 How. Pr., 348. Anderson Y. Jett (1889), 80 Ky., 375; 12 S. W., 670. Leslie v. Lorillard (1886), 40 Hun., 392. India Bagging Co. v. Kock (1848), 14 La. Ann., 168. Craft et al. v. McConougTiy (1875), 79 111., 346. Cumming v. Union Bluestone Co. (1897), 44 N. Y. Supp., 787. People V. Sheldon, 66 Hun., 590. People Y. SheUon (1893), 139 N. Y., 251. PeopU V. Milk Exchange (1895), 145 N. Y., 267. Emery y. Ohio Candle Co., 47 Ohio St., 320. Judd Y. Harrington (1893), 139 N. Y., 105. Leonard y. Poole, 114 N. Y., 371. Central Ohio Salt Co. y. Guthrie, 35 Ohio St., 666. D. & E. Chaplin y. Brown Bros, et al., 83 Iowa, 156; 48 N. W., 1074. Pittsburg Carbon Co. v. McMiUin, 119 N. Y., 46. Santa Clara Valley Mill and Lbr. Co. v. Hayes, 76 Cal., 387. DeWitt Wire Cloth Co. y. N. J. Wire Cloth Co., 14 N. Y. Supp., 277. Hoffman y Brooks, 23 Am. Law Reg., 648. State Y. Armour Packing Co., 73 S. W., 652. State Y. SwartzschieU, 73 S. W., 1132. Clark Y. Needham, 83 N. W., 1027. State V. Portland Nat. Gas. Co., 53 N. E., 1089. City of Chicago v. Rumpff^, 45 111., 90. Amot Y. Coal Co., 68 N. Y., 558. The decisions of the various courts, which we shall proceed to cite and comment upon, estabUsh the invalidity of the Standard Oil Trust at common law. This trust was the first one to be organized. It was conceived by Mr. Rockefeller and his counsel in order to avoid the illegaUty of combining all of these concerns in the Standard Oil Company of Ohio. It was followed, as is always the case in attempts to evade the law, by other combinations of a like form, notably the Sugar Trust, the Whisky Trust, and the Paint and Lead 69 Trust, each of which was respectively declared void by the courts of New York, Nebraska, Ohio, Ilhnois, and Missouri. These decisions have been cited and approved by many of the State courts of the country, by the United States circuit courts, and by the Supreme Court of the United States. They have become the settled law of the land. The Standard Oil Trust, as we have seen, was first organ- ized in a public form in 1882, and between that and the pas- sage of the Sherman Act in 1890 it was followed by these other trusts, which threatened to absorb all the industries of the country. There was during these years widespread alarm because of the encroachments of these large combinations upon private industry and capital. Various investigations took place, commencing with the Hepburn committee of the New York legislature in 1879, and including among others the Committee on Manufactures of the Fiftieth Congress in 1888, and the New York senate committee in 1888. These investigations, in each of which the Standard Oil combina- tion was one of those principally taken up, showed the monopohstic character of such combinations, and they were followed by suits in the various States. In 1890 the Attorney-General of Ohio filed a bill in the nature of quo warranto against the Standard Oil Company of Ohio, claiming that the company had abused its corporate franchise in becoming a party to the trust agreement of 1882, which agreement evidenced an intent to monopolize and control the commerce in oil, and was in restraint of trade and void. The case came before the Supreme Court of Ohio upon demurrer to the answer of the corporation and the petition of the attorney-general, and the court held that while the corporation did not sign the agreement, it had effectually become a party thereto through the signa- ture of all of its stockholders, its officers, and directors; that the agreement was void as in restraint of trade and as an attempt to monopoHze the trade and commerce in oil. The importance of this case, lying at the very threshold of the question we are considering, leads us to quote at length from the decision. Judge Minshall said: It therefore follows, as we think, from the discussion we have given the subject, that where all or a majority of the stockholders comprising a corporation do an act which is designed to affect the property and business of 70 the company, and which, through the control their num- bers give them over the selection and conduct of the corporate agencies, does affect the property and business of the company in the same maimer as if it had been a formal resolution of its board of directors, and the act so done is ultra vires of the corporation and against public policy, and was done by them in their individual capacity for the purpose of concealing their real purpose and object, the act should be regarded as the act of the corporation; and, to prevent the abuse of corporate power, may be challenged as such by the State in a pro- ceeding in quo warranto. That the nature of the agreement is such as to preclude the defendant from becoming a party to it is, we think, too clear to require much consideration by us. In the first place, whether the agreement should be regarded as amounting to a partnership between the several com- panies, limited partnerships, and individuals who are parties to it, it is clear that its observance must subject the defendant to a control inconsistent with its character as a corporation. Under the agreement all but 7 of the shares of the capital stock of the company have been transferred by the real owners to the trustees of the trust, who hold them in trust for such owners; and being enjoined by the terms of the agreement to endeavor to have "the affairs" of the several companies managed in a manner most conducive to the interests of the holders of the trust certificates issued by the trust, have the right, in virtue of their apparent legal ownership and by the terms of the agreement, to select such directors of the company as they may see fit; nay, more, may in fact select themselves. The law requires that a corporation should be controlled and managed by its directors in the interest of its own stockholders, and conformable to the purpose for vsrhich it was created by the laws of its State. By this agreement, indirectly it is true, but none the less effectually, the defendant is controlled and managed by the Standard Oil Trust, an association with its prmcipal place of business in New York City, and organized for a purpose contrary to the policy of our laws. Its object was to establish a virtual monopoly of the business of producing petroleum and of manufacturing, refining, and dealing in it and all its products, throughout the entire country, and by which it might not merely control the production but the price at its pleasure. All such as- sociations are contrary to the policy of our State and void. {Salt Co. v. Guthrie, 35 Ohio St., 666; Emery v. Ohio Candle Co., 47 id., 320.) "The word 'trust,' " says Mr. Cook, "was first used to mean an agreement between many stockholders in many corporations to place all 71 their stock in the hands of trustees and to receive there- for trust certificates from the trustees. The stockholders thereby consolidated their interests and became trust certificate holders. The trustees own the stock, vote it, elect the officers of the various corporations, control the business, receive all the dividends on the stock, and use all these dividends to pay dividends on the trust certifi- cates. The trustees are periodically elected by the trust certificate holders. The purpose of the ' trust' is to con- trol prices, prevent competition, and cheapen the cost of production. The Standard Oil Trust, the American Cot- ton Seed Oil Trust, and the Sugar Trust are examples of this method of combination." (Cook on Stock and Stockholders, sec. 503a; see also Wait on Insolvent Corporations, sec. 478.) Much has been said in favor of the objects of the Standard Oil Trust, and what it has accomplished. It may be true that it has improved the quality and cheapened the cost of petroleum and its products to the consumer. But such is not one of the usual or general results of a monopoly; and it is the policy of the law to regard, not what may, but what usually happens. Experience shows that it is not wise to trust human cupidity where it has the opportunity to aggrandize itself at the expense of others. The claim of having cheapened the price to the consumer is the usual pretext on which monopolies of this kind are defended, and is well answered in Richardson v. Buhl (77 Mich., 632). After commenting on the tendency of the combiaation, known as the Diamond Match Company, to prevent fair competition and to control prices, Champlm, J., said: "It is no answer to say that this monopoly has in fact reduced the price of friction matches. Ihat policy may have been necessary to crush competition. The fact exists that it rests in the discretion of this company at any time to raise the price to an exorbitant degree." Monopolies have always been regarded as contrary to the spirit and policy of the common law. The objec- tions are stated in "The Cases on Monopolies" {Daraj v. AUein, Coke's Reports, part XI, 84b). They are these: '"1. That the price of the same commodity will be raised, for he who has the sole selling of any commodity may well make the price as he pleases. 2. The incident to a monopoly is, that after the monopoly is granted, the commodity is not so good and merchantable as it was before; for the patentee, having the sole trade, regards only his private benefit, and not the common- wealth. 3.' It tends to the impoverishment of divers artificers and others, who before, by the labor of their 72 hands in their art or trade, had maintained themselves and their families, who will now of necessity be con- strained to live in idleness and beggary." The third objection, though frequently overlooked, is none the less important. A society in which a few men are the employers and the great body are merely employees or servants is not the most desirable in a republic; and it should be as much the policy of the laws to multiply the numbers engaged in independent pursuits or in the profits of production as to cheapen the price to the consumer. Such policy would tend to an equality of fortunes among its citizens, thought to be so desirable in a republic, and lessen the amount of pauperism and crime. It is true that in the case just cited, the monop- oly had been created by letters patent. But the objec- tions he not to the manner in which the monopoly is created. The effect on industrial liberty and the price of commodities will be the same whether created by patent or by an extensive combination among those engaged in similar industries, controlled by one manage- ment. By the invariable laws of human nature, com- petition will be excluded and prices controlled in the interest of those connected with the combination or trust. We have quoted at length from this decision because of its importance, the court having considered the identical con- tract involved in the case at bar. It may be said that the contract was simply held void under the law of Ohio. We do not so understand the decision. No statute of Ohio is invoked prohibiting restraints in domestic commerce » or monopolization thereof. The court placed the decision upon the broad grounds of public policy, and public policy as much inhibits corporations doing business in a State and entering into contracts when monopolizing interstate com- merce as when monopolizing intrastate commerce. (See also Waters-Pierce Oil Co. v. Texas, 212 U. S. 86, decided Jan. 18, 1909.) But, however this may be, if the contract was void in restraint of intrastate commerce, it was equally void in restraint of interstate commerce if the various cor- porations were engaged at the time in such commerce. Subsequently the attorney-general of the State of Ohio brought suits of quo warranto in the Supreme Court of Ohio against the Buckeye Pipe-Line Company, the Solar Refining "The Valentine antitrust act was not passed until_1898; 56 N. E., 467. 73 Company, the Ohio Oil Company, and the Standard Oil Company, claiming they had violated the laws of Ohio upon two grounds: First, executing the trust agreements, which were set out in full in the Standard Oil case which we have just considered; second, that the separate corporations had entered into a combination with nineteen others named for the purpose of preventing competition in the production, transportation, and refining of petroleum and of fixing and maintaining the prices at which its various products should be sold. It was alleged that the same persons were elected directors of each of the different corporations and that it "entered into a combination with nineteen others named," etc. This second allegation of the bill seems to have been also based upon the trust agreement which by the pleading was made a part of the second cause of action. It was claimed by the defense that the trust statute of Ohio was invalid. Speaking of this contract the court said (56 N. E., 467): The agreement, according to the allegations of the petition, has no purpose whatever except to prevent competition in the production, transportation, and re- fining of petroleum, to the end that there may be received from the consumers of its products higher prices than would prevail imder the condition of open competition. Counsel for the defendants admit that such a contract is within the inhibitions of the act, but deny the power of the legislature to inhibit it * * * Tijg definite proposition of counsel upon this point is that, although the act is an exercise of legisla- tive power, it transcends the provisions of the state and federal constitutions which render inviolable the rights of liberty and property, which include the right to make contracts. It would be difficult to place too high an estimate upon these guaranties, and they in- clude the right to make contracts. But it is settled that these guaranties are themselves limited by the public welfare or the exercise of the police power. Although that power may not be conclusively defined, its nature and attributes have been the subject of much investigation. In all considerate discussions of the subject it is conceded that in the exercise of this power the legislature can prohibit only those uses of property which are hurtful to the public, and the inhibited use must be hurtful in a legal sense. That contracts like 74 these are hurtful in that sense has been held in more cases than it would be practicable to cite. They abound throughout nearly three centuries of the development and administration of the common law in England and America. This case is important more because of the fact that the court had under consideration this Standard Oil Trust agree- ment than for any new principle enunciated. Following this conspicuous example of combination through a trust agreement, other like agreements were made by which the authors undertook to control the various cor- porations, firms, and limited partnerships engaged in compe- tition with each other in varioiis branches of industry, not- ably the Sugar Trust, the Whisky Trust, the Glucose Trust, and the National Lead Trust. We shall consider these cases, because it will be seen that they are not only important in that they follow the Ohio case, and hold trust agreements like the one in question void as in- restraint of trade and an attempt to monopolize trade and commerce, but some of these cases are extremely important upon the legality of a holding corporation. In several of the cases, notably the whisky, glucose, and lead trust cases, after the decision holding the Standard Oil Trust invalid, the trustees or parties in control of the trust organized corporations to hold the stocks of the various companies in the trust, transferred the stocks to a central holding company, and the court held that the holding company was invalid upon the same ground that the trust was invalid. In the case of Peo-ple v. North River Sugar Refining Co. (54 Hun., 354; s. c. 3 N. Y. Supp., 401) quo warranto proceed- ings were brought in the Supreme Court of New York to oust the North Eiver Sugar Refining Company from the right to exercise its franchises in the State of New York, on the ground that it had abused its corporate powers in becom- ing a party to a trust agreement in all material respects hke the Standard Oil Trust agreement. In that case it was claimed, as it was afterwards in the Ohio case, that the cor- poration had not executed the agreement, but that it was simply a transfer of the stock of the individual stockholders to the trustees. The court held, however, that all of the stockholders having turned their stock over, authorized the 75 trustees to elect the boards of directors, to manage and con- trol the corporations, take all of the income, and declare dividends upon the trust certificates, the practical effect was the surrender to the board of trustees of the right and power to manage the separate corporations, which was an abuse of the franchises of the corporation. But the case is important upon the second ground that the agreement tended to create a monopoly, and was therefore void as in restraint of trade. We invite attention to the very able opinion by Judge Barrett, who reviewed many of the leading cases upon this subject, and summed up his conclusions as follows : The principles established by these cases seem to cover and fully meet the main position taken in support of the present agreement. There are, however, one or two minor considerations which should be noticed. The first is that this agreement seems to avoid the pitfall of many of the cases by carefully omitting any specific authority to fix prices. Such authority, however, is plainly covered by the enormous general power conferred upon the trust board. The greater includes the less, and any specification on this head would have been superfluous. Even Mr. Carter finally yielded this point. "I agree," he says, "in the broadest manner, that the power exists there to fix a price eventually; it is for the interests of the parties to fix the price." The truth is that, under this agreement, the trust board can direct the business movements of these 17 or 18 corporations as absolutely as the general of a great army can direct the movements of its various corps d'armee. But a director may rebel, say the learned counsel. Well, even in war there is a bare possibility that a corps com- mander may disobey the orders of his chief, but dis- cipline and change of military agency speedily follow. There is stiU less likefihood of mutiny in boards of directors who practically take office under the trust board (and subject to the provisions of the trust deed), who are appointed by the trust chiefs, and removed by a mere re transfer of stock "upon request" at any time, and, above all, who are spurred to active and zealous obedience by the hope, nay, by the substantial cer- tainty, of gain; for there is nothing whatever to prevent the trustees from filling these corporate boards with their own members or with other holders of their own trust certificates. The trust board is, indeed, clothed with power far in excess of the ordinary stockholders of a corporation. It is, in substance, both stockholders 76 and directors, and this union of force embraces every share of stock and ererj director in every corporation. What need, then, for specific detail in the general dele- gation of power ? The board, under this executed deed, can close every refinery at will, close some and open others, limit the purchase of raw material (thus jeopard- izing and in a considerable degree controlling its pro- duction), artificially limit the production of refined sugar, enhance the price to enrich themselves and their associates at the public expense, and depress the price when necessary to crush out and impoverish a fool- hardy rival; in brief, can come as near to creating an absolute monopoly as is possible under the social, political, and economic conditions of to-day. We are told that this can not be accomphshed with regard to an article like sugar, which can be indefinitely produced by the appUcation of capital and labor, and that monopoly is possible only where the supply of the arti- cle is restricted by nature. This position has been main- tained in an argument of exceeding brilliancy, which I confess to have enjoyed as one always enjoys a per- suasive manner of presentation. But while the argu- ment was most ingenious it was neither sound, nor — I say it with respect — plausible. Of course, a monopoly, in the strict, technical, and absolute sense, can not be thus created, but a monopoly in a legal sense can. The monopoly with which the law deals is not limited to the strict equivalent of royal grants or people's patents. Any combination the tendency of which is to prevent competition in its broad and general sense, and to con- trol and thus at will enhance prices to the detriment of the public, is a legal monopoly; and this rule is appH- cable to every monopoly, whether the supply be restricted by nature or susceptible of indefinite pro- duction. The difficulty of efl'ecting the unlawful pur- Eose may be greater in the one case than in the other, ut it is never impossible. Nor need it be permanent or complete. It is enough that it may be even tem- porarily and partially successful. The question in the end is, does it inevitably tend to public injury? Why, then, does not this trust board combine all of these unlawful purposes with ample power of accom- plishment? Theoretically, it can not prevent other capitalists from coming forward and utilizing their means in combination vi^ith labor, but practically it can. The struggle would be an unequal, and, exceptunder powerful, unusual, and extraordinary conditions, impossible. A vast harvest could be reaped at the expense of the public before the foundation of the competitive edifice could be 77 thoroughly laid. Nor could the power of the comhina- tion be defeated by outside forces. The undue enhancing of prices might draw to the locality the attention of the foreign commercial world. But the argument here overlooks the laws of the United States, and the duties imposed by those laws upon imports. It overlooks, too, the expense of transportation and handling and the delays incident thereto. 'The harvest could again be reaped at the public expense before the advent of com- petition, and that harvest could then be utilized by the sudden lowering of prices, to the repression of the foreign competitor. Such, at least, is the tendency of the com- bination, and such its practical power. The defendant's whole argument on this head is based upon theory rather than fact, just as its earlier argument, with regard to the corporations, is based upon legal form rather than sub- stance. The doctrines of political economy which have been pressed upon us are based upon normal conditions, and have no bearing whatever upon combinations organ- ized for the express purpose of surmounting and subvert- ing those conditions. Lastly, this appeal to the law is criticised as an inter- ference with a natural state of things. The unnatural thing is said to be the law when it attempts to check the natural order. Unfortunately for this argument it is the combination which has resorted to what it calls the unnatural thing. It was not content with natural part- nerships or associations of individuals, but resorted to the device of corporate artificiality to effect its ends. Having asked and accepted the favor of the law, it can not complain that it is taken to task for grossly offending its letter and spirit. Fortunately, the law is able to protect itself against abuses of the privileges which it grants; and while further legislation, both preventive and disciplinary, may be suitable to check and punish exceptional wrongs, yet there is existing, to use the phrase of a distinguished English judge in a noted case, "plain law and plain sense" enough to deal with corjpo- rate abuses like the present — abuses which, if allowed to thrive and become general, must inevitably lead to the oppression of the people, and ultimately to the subver- sion of their pohtical rights. Again, the legal results justly follow forfeiture and dissolution. Let me say, in conclusion, that it would quite unnecessarily belittle the discussion of this momentous question to consider the minor charges presented by the people. The judg- ment should rest upon the broad and main issue. There it rests with a sense of fittmg proportion, and there it should be left. For these reasons the defendant's motion must be denied, and the plaintiff's granted. 78 In the trust agreement commonly known as the "Whiskey Trust," which was considered in the case of State v. Nebraska Distilling Co. (29 Nebr., 700), and in the case of Distilling cfc Cattle Feeding Co. v. People (156 111., 449), the agreement in all substantial parts, so far as the questions involved in this case are concerned, was the same, and evidently prepared after the plan of the Standard Oil Trust agreement. It was made in 1887, some five years after the Standard Oil agree- ment was made and the trust organized. The validity of this trust agreement was first questioned in the case of State V. Nebraska Distilling Co. (29 Nebr., 700; 46 N. W., 155). It appeared by the trust agreement in the findings in that case, that the Nebraska Distilling Company was a corpora- tion organized under the laws of Nebraska, for the purpose of manufacturing and selling alcoholic spirits; that in 1887, the Distilling and Cattle Feeding Company trust agreement was made, by which the stockholders of various corporations transferred their stocks to certain trustees, named therein^ under an agreement by which the trustees wers to issue trust certificates to the stockholders of the various subsidiary cor- porations, and the trustees were to elect boards of directors, and control through stock ownership the various corporations and associations. It appeared by the findings of the court as follows : Sixth. That prior to the formation of said trust, various distillers had formed what is called "pools," the object of which was to prevent an overproduction of alcohol, spirits, and liquors. In the absence of such a combination there was a tendency to overproduction, and to furnish a supply beyond the demands, the conse- quence of which was to lower the price of the produc- tion and make the business unprofitable. Owing to an inherent infirmity in the pooling system it failed to ac- complish its full purpose, and, as a substitute therefor, said trust was formed. The trustees of the trust have almost unlimited power and control over all distilleries that enter it. They can limit their production, or sus- pend their operation altogether. From 90 to 110 dis- tilleries are located north and west of the Ohio River of which number about 75 or 80 have entered the trust, and of the number under the control of the trust about 14 are kept running. The trustees confine the produc- tion of the distilleries under their control to the large houses situated in favorable locaKties, which can be run 79 at less expense than small houses located in unfavorable places. Of the distillery plants in actual operation, about 6 are located in Peoria, the headquarters of the trust. That the corporate stock assigned and trans- ferred to said trustees is owned and held by them in common, and they acquire thereby the rights and powers of shareholders, and exercise full control and direction of the action, management, and business of the com- panies whose stock has been so assigned and transferrsd to them as aforesaid; and they are enabled thereby to regulate, and do to a great extent regulate, at will, the production and price of alcohol, spirits and other liquors, m the State of Nebraska and in the United States. The said trustees can and do at will restrict and Umit the jjroduction and supply of alcohol, spirits and other liquors, and thereby enhance their value. It is unnecessary to state all the details of the elaborate imdings of the court. It is sufficient to say that the stock- holders of the Nebraska Distilling Company transferred their stock to the trustees, who thereafter controlled and managed the corporation as they saw fit. The decision of the court, rendered in 1890, is an able exposition of the law of monopoHes and contracts which destroy competition and restrain trade. It is worthy of note that the court cited and approved the case of Richardson v. BvM (known as the Dia- mond Match case), which we cite, and various other cases on the question of monopoly and contracts in restraint of trade. In summing up the discussion, the court said (p. 161): The findings in this case, to which no objection is made, clearly show that the object of the distilling com- pany in entering into the illegal combination was to de- stroy competition and create a monopoly, not only by limiting the production of alcohol, but by dismantling as many distilleries as the trust saw fit, absolutely pre- vent the manufacture of the article, except in the few estabhshments controlled by the trust; and thus it would be enabled to control prices, prevent production, and create a monopoly of the most offensive character. Any contract entered into with such an object in view is, under the laws of this State, null and void, and the conveyance from the distilling company to the trust was in contravention of the authority conferred by the statutes on that company, in excess of the powers granted by its charter, and against public pohcy and void, and no title passed by such conveyance. 80 The decision in this Nebraska case was filed in May, 1890. Evidently the parties anticipated this unfavorable decision. These trust agreements had been attacked in several places in the country; the Sugar Trust had been declared invalid in New York and litigation had been instituted by the attorney-general of Ohio against the Standard Oil Trust. This litigation had been going on in Nebraska, involving a like agreement, in the Cattle Feeding case, so that in Febru- ary, 1890, the trust certificate holders of the Cattle Feeding Company (for convenience, called the "Whisky Trust") met to consider the advisability of changing the form of the organization into a corporation. {Distilling cfc Oatfle Feeding Co. V. People, 156 111., 458 of opinion.) It is sufficient to say that a corporation was organized, under the laws of Illinois, called the "Distilling and Cattle Feeding Company," with a capital stock of $35,000,000, which acquired the properties formerly controlled by the trust. The attorney- general of the State of Illinois brought quo warranto pro- ceedings against the corporation to oust it from the right to exercise its franchises in Illinois because the corporation was an unlawful combination in restraint of trade and a monopoly. The bill alleged, in substance, the execution of the trust agreement and the organization of the trust. The agreement is set out in full in the statement of facts. The bill further alleged that the trustees acquired the stock of various corporations, controlling about 81 different dis- tilleries throughout the various States, a large number being in Illinois; that in February, 1890, a special meeting of the certificate holders was held, to consider the advisability of organizing a corporation to succeed the trust, and a preamble and resolution was adopted which in substance called for the formation of a corporation known as the "Distilling and Cattle Feeding Company," with a capital stock of $35,000,000, and the transfer to the DistUling and Cattle Feeding Company of aU of the property of the subsidiary corporations the stock of which the trustees held, and that the stock of the Distilling and Cattle Feeding Company should be exchanged, share for share, for the outstanding trust certificates, which represented the property of the subsidiary corporations. The bill alleged that the persons who were the trustees also constituted the majority of the directors of the new cor- 81 poration, and at the same time they were directors in the subsidiary corporations whose stock they held; also that they caused the property of all the subsidiary corporations to be conveyed to the Distilling and Cattle Feeding Company, simply leaving the shell of the subsidiary corporations, the stock of which was in their hands. In this respect the Distilling and Cattle Feeding Company was stronger than the Standard Oil Company. It actually did purchase the properties of the various distilleries which were owned by the subsidiary corporations in the trust, while the Standard Oil Company stepped into the shoes of the trustees and holds the stocks of these separate, distinct subsidiary cor- porations and controls them in the same manner as the trustees held and controlled them. The bill alleged that the corporation acquired, by purchase and otherwise, the distillery property of two certain distillery companies in Illinois, and exacted from them a contract that they would not within five years thereafter engage in the business of distilling in any place in the United States within 1,000 miles of Chicago; that the corporation had been so managed that it had come into control of a substantial monopoly of the manufacture of spirits; that it controlled 95 per cent of the production of the United States. There were other allegations tending to show the intent to monopolize, to wit, that the company had acquired various plants engaged in the business of distilling and had dismantled them; that it sold its products under a system of rebate voucher, by which, if the purchaser should buy all of his supply of spirits from the company for a period of six months, he should, at the end of that period, be entitled to a rebate, this system forcing a purchaser to continue to give his exclusive patron- age to the corporation, etc. To this bill pleas were filed. It will be unnecessary in this brief to detail the particulars of these pleas. The first plea admits the making of the trust agreement, and that within one year from the date of said agreement it embraced about 81 different distillery companies, persons and firms, and that many of them were Illinois corporations; that those corporations had become parties to the agreement prior to February 11, 1889, and had all conveyed their real estate to the same persons, to be held in trust for the stockholders of 72064— L— 09 6 to 82 their respective corporations, and that the stock of the cor- porations had been sold to trustees with the exception of enough to qualify boards of directors. The organization of the DistilHng and Cattle Feeding Company was admitted. All manner of combination, conspiracy, and monopoly, dis- mantUng of plants and unfair means in the sale of the product, were denied by the pleas. It was alleged that the corporation had purchased the property of all these corpo- rations for a valuable consideration; that it did not monop- olize trade and commerce in alcohol, spirits, and high wines, and did not produce over 65 per cent of the product. There was a demurrer to the plea, and the pleas were held insufficient for lack of particularity and other technical grounds; but it was held by the court that the sufficiency of the bill might also be considered in the case. The substantial facts appeared to the court. The court held the trust agree- ment void, as in restraint of and an attempt to monopolize trade and commerce, and that the corporation which suc- ceeded to the property of all these subsidiary corporations in the trust was also void, and judgment was ordered for the State. The court said (p. 486) : There can be no doubt, we think, that the Distillers and Cattle Feeders' Trust, which preceded the incorpo- ration of the defendant, was an organization which con- travened well-established principles of public policy, and that it was therefore illegal. No one who intelligently considers the scheme of this trust, as detailed in the information, can for a moment doubt that it was de- signed to be and was in fact a combination in restraint of trade, and that it was organized for the purpose of getting control of the manufacture and sale of aU dis- tillery products, so as to stifle competition, and to be able to dictate the amount to be manufactured, and the prices at which the same should be sold, and thus to create, or tend to create, a virtual monopoly in the manufacture and sale of products of that character. No other business principle can be suggested upon which the development of such an elaborate and far-reaching scheme can be accounted for. No rational purpose for such organization can be shown consistent with an in- tention to allow business to run in its normal channels, to give competition to its legitimate operation, and to allow both production and prices to be controlled by the natural influence of supply and demand, and;^the 83 results, as shown by the information, were such as might be anticipated. The trust obtained possession of nearly all the distilleries and of nearly the entire distillery product of the United States, thus enabling it to dictate prices and the amount of production, and to thus draw to itself the substantial control of the distillery business of the country. The court reviewed the case from Nebraska, which held the very trust agreement under consideration void; the case of State V. Standard Oil Company (49 Ohio St., 137), People v. North River Sugar Ref. Co. (54 Hun., 354, 121 N. Y., 578), Richardson v. Buhl (77 Mich., 632, Imown as the "Diamond Match case"), and People v. Chicago Gas Trust (130 111., 268), all of which cases sustain the position we take. Upon the question of the validity of the corporation, the court held that there was no magic in a corporation, and that the scheme was evidently an attempt to perpetuate the power of the trustees — merely a substitution of the corporation for the trustees. The court said (pp. 490-492) : But the defendant contends that, while this may all be so, the change in organization from an unincorporated association to a corporation, and the change in the mode of holding the distillery properties of the various corpo- rations formerly belonging to the trust by surrendering the stock of the corporations, by means of which the con- trol of those properties was formerly maintained, and having the properties themselves transferred and con- veyed directly to the defendant corporation, have purged the combination of its illegality. It must be admitted that these changes, so far as they have any effect upon the rights or interests of the former stockholders in those corporations or of the public, are formal rather than substantial. The same interests are controlled in sub- stantially the same way and by the same agencies as be- fore. The nine trustees of the trust, who, as the holders of all capital stock of the corporations and as a majority of the directors of each, controlled such corporate prop- erty, became the subscribers for aU the stock of the new corporation, and its board of directors. The conveyance and transfer of the properties of the constituent com- panies to the new corporation was merely a transfer by the trustees to themselves, though in a slightly different capacity, and the former stockholders in the constituent companies simply exchanged their trust certificates, share for share, for stock in the new corporation. That corpo- ration thus succeeds to the trust, and its operations are 84 to be carried on in the same way, for the same purposes, and by the same agencies as before. The trust, then, being repugnant to public policy and illegal, it is impos- sible to see why the same is not true of the corporation which succeeds to it and takes its place. The control exercised over the distillery buisiness of the country — over production and prices — and the virtual monopoly formerly held by the trust, are in no degree changed or relaxed, but the methods and purposes of the trust are perpetuated and carried out with the same persistence and vigor as before the organization, of the corporation. There is no magic in a corporate organization which can purge the trust scheme of its illegality, and it remains as essentially opposed to the principles of sound public policy as when the trust was in existence. It was illegal before and is illegal still, and for the same reasons. But it is urged that the defendant, by its charter, is authorized to purchase and own distillery property, and that there is no limit placed upon the amount of property which it may thus acquire. By its certificate of organization it is authorized to engage in a general distiirery business in Illinois and elsewhere, and to own the property necessary for that purpose. It should be remembered that grants of powers in corporate char- ters are to be construed strictly, and that what is not clearly given is, by implication, denied. The defendant is authorized to own such property as is necessary for carrying on its distillery business, and no more. Its power to acquire and hold property is limited to that purpose, and it has no power, by its charter, to enter upon a scheme of getting into its hands and under its control all, or substantially all, the distillery plants and the distillery business of the country for the purpose of controlling production and prices, of crushing out competition, and of establishing a virtual monopoly in that business. Such purposes are foreign to the powers granted by the charter. Acquisitions of property to such extent and for such purpose do not come within the authority to own the property necessary for the purpose of carrying on a general distillery business. In acquiring distillery properties in the manner and for the purposes shown by the information, the defendant has not only misused and abused the powers granted by its charter, but has usurped and exercised powers not conferred by, but which are wholly foreign to, that instrument. It has thus rendered itself liable to prose- cution by the State by quo warranto, and we are of the opinion that, upon the facts shown by the information, the judgment of ouster is clearly warranted. It will accordingly be affirmed. 85 There are other IlHnois cases which have a strong bearing upon the case, because, while they did not involve a trust agreement like the one in question, there was an attempt to monopohze commerce through corporate combination. The leading cases on this point are Harding v. American Glucose Co. (55 N. E. Rep., 577), and People v. Chicago 6as Trust (130 111., 268). Peofle V. Chicago Gas Trust (130 111., 268). »— This case involved the legality of the Chicago Gas Trust Company, a corporation formed under the general incorporation law of Illinois, the stated object of which was to operate gas plants in the city of Chicago and elsewhere in the State of Illinois — and to purchase and hold or sell the capital stock, or pur- chase or lease or operate the property, plant, good will, rights, and franchises of any gas works, or gas company or companies, or any electric company or electric com- panies, in said city of Chicago, Cook County, III, or else- where in said State of Illinois, as said corporation may, by vote of the majority of the stockholders, elect; and to purchase, hold, sell, operate, or in any wise become interested in coal or other properties productive of ma- terial necessary or useful in the supply or manufacture of gas, or other agency or medium of light, heat, power, or fuel, and to sell, improve, enlarge, extend, maintain, operate, or demise any and all property so purchased or leased. Prior to the formation of this corporation, there were foxir separate and independent gas companies doing business in the city of Chicago, and the new corporation acquired and held a taajority of the capital stock of these four gas companies, thereby controlling the same. Upon information in the nature of a quo warranto, the question presented was, whether or not the gas company had the right to purchase and hold the stock of the other gas companies. The court held that the power to purchase and hold stocks of other com- panies could not be regarded as incidental to the power to operate gas works and to make and sell gas and that therefore the power to hold stock could only be exercised if it were ex- pressly granted. The court further held that this power could not be obtained under a general corporation law unless « Cited and approved in Northern Securities case (193 U. S., 341). 80 the pui'pose in view was a lawful purpose. It was held that the purpose of the gas trust company in acquiring the capital stock of the four independent concerns was illegal, and the groimds of the decision may be seen from the following extracts from the court's opinion: What results must necessarily follow from such owner- ship of a majority of the shares of stock of these four companies ? One result is that the Chicago Gas Trust Company can control the four other companies. The question is not whether it has attempted to exercise such control; the law looks to the general tendency of the power conferred. (Greenhood on Public Policy, p. 6; Richardson v. CrandaU, 48 N. Y., 343; Salt Co. v. Guthrie, 35 Ohio St., 666.) The sixth section of the general incorporation act provides that the corporate powers shall be exercised by a board of directors or managers, and that the number of such directors or managers, and their terms of office, shall depend upon the "consent of the owners of a ma- jority of the shares of stock." It can not be denied that the appellee, as owner of the majority of the shares of stock of these four companies, can control them, in the exercise of all their corporate powers, through a board of managers of its own selection. In WeideTiger v. Spruance (101 111., 278) this court, speaking through Mr. Justice Scholfield, said: "The stockholders elect the directors, and through them carry into effect the corporate functions. Presumably, the directors act in obedience to the aggregate wishes of the stockholders," etc. {MiTbanTc v. N. Y.,L. E. cfe W. R. R. Co., 64 How. Eep., 29.) The control of the four companies by the appellee — an outside and independent corporation — suppresses com- petition between them, and destroys their diversity of mterest and all motive for competition. There is thus buUt up a virtual monopoly in the manufacture and sale of gas. ***** Whatever tends to prevent competition between those engaged in a public employment, or business impressed with a public character, is opposed to public pohcy, and, therefore, unlawful. Whatever tends to create a monpoly is unlawful as being contrary to pubhc policy. (2 Addison on Cont., 743; Greenhood on Public Policy, pp. 180, 643, 654, 655, 670; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St., 173; Craft v. McConoughy, 87 79 111., 346; Cmtral It. R. Co. v. Collins, 40 Ga., 582; Hazelliurst \. Savannah R. iJ. Co., 43 id., 13; Trans. Go. V. Pipe Line Co., 22 W. Va., 600.) ***** If contracts and grants whose tendency is to create monopolies are void at common law, then where a cor- poration is organized under a general statute, a provision in the declaration of its corporate purposes, the necessary effect of which is the creation of a monopoly, will also be void. ***** Butof whatavail is it that any number of gas companies may be formed under the general incorporation law, if a "iant trust company can be clothed with the power of buying up and holding the stock and property of such companies, and, through the control thereby attained, can direct all their operations and weld them into one huge combination? The several privileges or franchises intended to be exercised by a number of companies are thus vested exclusively in a single corporation. To create one corporation for the express purpose of enabling it to conti'ol all the corporations engaged m a certain kind of business, and particularly a business of a public char- acter, is not only opposed to the public policy of the State, but is in contravention of the spirit, if not the letter, of the Constitution. That the exercise of the power attempted to be con- ferred upon the appellee company must resiilt in the creation of a monopoly results from the very nature of the power itself. If the privilege of purchasing and holdmg all the shares of stock in all the gas companies of Chicago can be lav/fuUy conferred upon the appellee under the general incorporation act, it can be lawfully conferred iipon any other corporation formed for the purpose of buying and holding all the shares of stock of said gas companies. The design of that act was that any number of corporations might b'e organized to engage in the same business if it shoiild be deemed desirable. But the business now under consideration could hardly be exercised by tvfo or three corporations. Suppose that after appellee had purchased and become the holder of the majority of shares of stock of the four companies in Chicago, another corporation had been organized with the same object in view — that is to say, for the purpose of purchasing and holding a majority of the shares of stock of the gas companies in Chicago. There being only four such companies, what would there be for the cor- 88 poration last formed to do? It could not carry out the object of its creation, because the stock it was formed to buy was already owned by an existing corporation. Hence to grant to the appellee the privilege of purchas- ing and holding the capital stock of any gas company in Chicago is to grant to it a privilege which is exclusive in its character. It is making use of the general incor- poration law to secure a special "privilege, immunity, or franchise;" it is obtaining a special charter, under the cover and through the machinery of that law, for a pur- pose forbidden by the Constitution. To create one cor- poration that it may destroy the energies of all other corporations of a given kind, and suck their life blood out of them, is not a "lawful purpose." :(: * * * * We held, in Chicago Gas Light Co. v. People's Gas Light Co., swpra, that, for the reasons tliere stated, a contract between two of these four companies, the effect of which was to stifle competition between them and necessitate an abandonment of their public duties, v/as against public policy and could not be eiiforced. The attempt to consolidate the two companies, by placing the majority of their stock in the hands of the appellee, would accom- plish the same unlawful result which was sought to be attained by the forbidden contract. Harding v. American Glucose Company (55 N. E. Rep., 577) . — Prior to the organization of the Glucose Sugar Eefin- ing Company, of New Jersey, in 1897, certain option con- tracts had been secured upon the various plants and proper- ties afterwards taken in by that company. These options ran to a Chicago trust company, and in some instances pro- vided that the purchase price was to be paid partly in cash and partly in stock, and in other instances that the price might be paid in stock and cash. They further provided that the vendor corporation should not engage in the han- dUng or manufacture of glucose for certain terms of years within 1,000 miles of Chicago. Upon the formation of the new corporation the options were turned over to it, and sev- eral properties of the vendor corporations were also trans- ferred. A stoclcholder of the American Glucose Company, a New Jersey corporation, doing business in Peoria, and one of the above-mentioned vendor corporations, objected to the transfer of the plant, and filed a bill to enjoin the same. The American Glucose Company and several of its officers filed 89 their answers, to which replications were also filed, and some evidence was taken on behalf of the plaintiff. Subse- quently the answers were withdrawn, and the complainants were enabled to take a decree pro confesso. The decision of the court, however, was based not merely upon the allega- tions of the bill, but also upon the answers, replications, and evidence. The Supreme Court of Illinois, in sustaining the complaint and granting the relief, said, among other things: A trust has usually appeared in the form of an agree- ment between stockholders in many corporations to place all their stock in the hands of trustees, and to receive trust certificates therefor from the trustees. But the question in the present case is whether a trust is created where a majority of stockholders consolidate their interests by conveying all their property to a cor- poration organized for the purpose of takmg their prop- erty. Any combination of competing corporations for the purpose of controlling prices, or limiting production, or suppressing competition, is contrary to puolic policy, and is void. (2 Cook, Corp. (4th ed.), 503a.) It makes no difference whether the combination is effected through the instrumentality of trustees and trust certificates, or whether it is effected by creating a new corporation and conveying to it all the property of the competing corpo- rations. The test is whether the necessary consequence of the combination is the controlling of prices, or limit- ing of production, or suppressing of competition, in such a way as thereby to create a monopoly. ***** The public policy of a State is to be found in its stat- utes, and when they have not directly spoken, then in the decisions of the courts, and in the constant practice of government officials. When the legislature speaks upon a subject upon which it has the constitutional power to legislate, public poficy is what the statute passed by it indicates. (U. S. v. Trans- Missouri TreigU Assn., 166 U. S., 290; 17 Sup. Ct., 240.) The public policy of the State of Illinois has always been against trusts and combinations organized for the pur- pose of suppressing competition and creating monopoly. ***** The contention of counsel for the Glucose Sugar Re- fining Company that the American Glucose Company had a right to make a sale of its plant to the new corpo- ration, and that this transaction must be regarded by the court merely as a valid sale, is not supported by the 90 allegations of the pleadings or by the proofs herein. The transfer of its property made by the American Glucose Company was a transfer to a corporation created for the express purpose of taking its property and the property of other corporations, so as to use them in the suppression of competition, and in the creation of a monopoly in the manufacture of glucose and grape sugar and their products and by-products. The whole scheme, as devised and consummated, was a fraud, not only on the pubUc, but upon the dissenting stockholder filing this bill. We are therefore of the opinion that the bill was not demurrable because brought by a stockholder, and that the court below erred in sustaining the demur- rer, if it was sustained upon that ground alone. While we are thus discussing the Illinois cases, it might be important to refer to a very late case in the Supreme Court of Illinois bearing upon this question, the case of Dunbar v. American Telephone & Telegraph Co. (79 N. E., 423). In that case three of the principal companies engaged in manu- facturing switchboards, instruments, and other apparatus f-or conducting electricity, were the American Telephone and Telegraph Company, the Kellogg Switch Board and Supply Company, and the Stromberg-Carlson Company. It appears by the case that the American Company, in order to get con- trol of the business and for the purpose of monopolizing the same, purchased the majority of the stock of the Kellogg Company; and this was a suit by the minority stockholders to have the purchase declared void, one of the principal grounds being that it tended to a monopoly. In the decision the court said : We think, however, that it sufficiently shows, against a general demurrer, that the American Company, through defendant Barton and others, became the pur- chaser of the shares of stock with the unlawful purpose and intention of putting the Kellogg Company out of business, or so using and controUing it as to prevent rivalry in business and creating a monopoly, and it called for an answer from defendants. If such was the purpose and object of the purchase, the decisions of this court are full to the effect that the law wiU not lend its aid to accomplish the object. That is to say, if the American Company had purchased a majority of the capital stock of the Kellogg Company in its own name for the purpose of controlhng the latter and thereby pre- venting competition between itself and the latter corpo- ration, the transaction would have been one which the courts of this State would not uphold. {People- v. Chi- cago Gas Trust Co., 130 111., 288, 22 N. E., 798, 8 L. R. A., 497, 17 Am. St. Rep., 319; Distilling Co. v. People, 156 111., 448, 41 N. E., 188, 47 Am. St. Rep., 200; Bishop v. American Preservers' Co., 157 111., 284, 41 N. E., 765, 48 Am. St. Rep., 317; Harding v. American Glucose Co., 182 111., 561, 55 N. E., 577, 64 L. R. A., 738, 74 Am. St. Rep., 189.) Nor can it be seriously contended that a pur- chase by the company in the name of others, as agents or trustees, will relieve the transaction of its illegality. To hold otherwise would be to sustain a transaction illegal in its character, accomplished by indirection, when it could not be done if the methods were direct. Northern Securities Co. v. United States (193 U. S., 197; 24 Sup. Ct., 436; 48 L. Ed., 679), affirming the decision of the Circuit Court in the same case in 120 Fed., 721. The American Company and its subcompany, the Western Electric Company, must be considered as one in deter- mining whether the tendency of the purcliase alleged in the bill would be to suppress the competition existing be- tween the Kellogg Company and the Western Electric Company in the manufacture and sale of telephone ap- pliances, etc. Neither is it material that the Kellogg and Western Electric companies were not the only par- ties engaged in manufacturing such appliances, for the reason that, if such was the case, while a complete monopoly or a compl ^te restraint of competition would not necessarily result, the tendency would be in that direction, which is sufficient to condemn the transaction as unlawful. (People v. Chicago Gas Trust Co., supra; More V. Bennett, 140 111., 69, 29 N. E., 888, 15 L. R. A., 361, 33 Am. St. Rep.. 216.) In the case of the National Lead Company v. The Grote Paint Store Company (80 Mo. App., 247), a trust agreement had been in existence which was evidently based upon the Standard Oil agreement. The authors of this trust agree- ment were, undoubtedly, aware of the decision in the Cattle Feeding case, which was rendered in February, 1890, and the decision in the Sugar Refining case in New York, which was rendered in January, 1889, for it appears that in August, 1891, the holders of the trust certificates of the National Lead Trust made and adopted a resolution authorizing the trustees of the National Lead Trust to carry out a plan of reorganization. The substance of this plan involved the creation of a new corporation to take over the property and 92 assets of the constituent members of the trust. The transfer of properties to the new corporation was accomphshed as follows: The corporations whose stocks had been turned over to the National Lead Trust conveyed their plants and assets to the plaintiff corporation through the medium of a con- veyance to the secretary of the reorganization committee and a conveyance by him to the new corporation. The prop- erties transferred were paid for by the stock of the new cor- poration which was dehvered to the reorganization commit- tee, to be handed by the committee to the parties entitled to the certificates issued by the trust which had been deposited with the committee. In this way the new corporation be- came the owner of the assets and stock of all the corporations in Missouri engaged in the lead business. The case arose in this way : A suit for a sum of money upon account stated was brought by the National Lead Company against the pur- chasers of goods, and the principal defense was that the plain- tiff was the corporate successor of the illegal combination formed by the stockholders of 12 corporations to establish a trust designed to limit the price and production of goods of the kind sued for, and that the corporation was organized to effectuate that end. This defense was authorized by the statute of Missouri. The trial court overruled the defense interposed, and on appeal this decision was reversed and the case remanded with instructions to proceed in accordance with the opinion. The case was decided by the Court of Appeals of Missouri, and, while not the highest court of the State, the opinion is an able exposition of the law on this subject. The principal point in the case is discussed in the following extracts from the court's opinion (p. 266 et seq.): The crucial qiiestion in this case is whether the plain- tiff corporation, either in its organization or business operations in this State, has offended any of the provi- sions of its laws? That the prbdecessor of the plaintiff, the "National Lead Trust," was an unlawful combi- nation, both in purpose and fact, is sufficiently estab- lished by the nature of the agreement under which it was created and the methods and practices resorted to in furtherance of that agreement. The agreement irk question can only be construed as a contract to suppress competition, fix the prices of commodities and limit their production, and to restrain trade. Unless some one or 93 all of these purposes had been entertained by the signers of the trust agreement, it would have not contained provisions looking to the acquisition by the trustees of the entire lead business of the country, nor would it have united in the accomplishment of that end a majority of the stockholders of the largest corporations dealing in that product. That it had these objects in view and practically accomplished them is evident from the fact that it started with a concert of 8 corporations and terminated after having issued ninety million of trust certificates, and after it formed a combination of 30 corporations, constituting a large majority of the lead dealers of the country, who had united themselves together in the effort to realize dividends upon the afore- said capitalization out of assets of less than one-fourth in value of the amount for which trust certificates had been issued. While the conclusion of the illegal purpose of the trust agreement is irresistible upon a considera- tion of its several provisions and the manner in which they were carried out, it will appear from an examina- tion of the cases that this result has been declared by every court called upon to review that agreement, or others substantially like it. {State ex rel. v. Standard Oil Co., 49 Ohio St., 137; Distillers, etc., Co. v. The People, 156 111., 448; Bishop 'v. A. Preserving Co., 157 lU.loc. cit., 311; People v. N. R. S. R. Co., 121 N. Y., 582; Uncles v. Colgate, 148 N. Y., 529; U. S. v. Freight Ass'n., 166 U. S., 290; U. S. v. Joint Traffic Ass'n., 171 U. S., 505.) But the illegality of the organization and operation of the National Lead Trust does not involve the conclusion that the purchaser of its assets, whether a natural or artificial person, succeeded also to the status of that illegal combination imder the laws enacted in this State for the punishment of pools, trusts, and con- spiracies. For the mere purchase by one of the assets which another has employed for an illegal purpose does not of itself imply that they will be used by the purchaser for the purpose of effectuating the objects to which they had been devoted by the seller. Such an intent on the part of the purchaser, if mferable, must be gathered from proof of all the circumstances characterizing the transaction, as well as his subsequent conduct. As to these sources of proof, the record in the case tmder review shows that the beneficial owners of the prop- erty were the subscribers to the National Lead Trust and holders of its certificates, and that these same per- sons remained the beneficial owners of _ the same prop- erty after it was converted into the capital of the plain- tiff corporation, the only difference being that each 94 holder of a trust certificate received in lieu thereof shares of stock in the new corporation at an agreed rate of exchange, and the further fact that the legal title to the property was put into a corporate entity of a body of 9 trustees appointed under the trust agree- ment. The sale itself was titular, rather than real. The corporation was professedly created to acquire the assets of the preceding trust. It was formed by the express authorization of the members of the trust and required to have "such purposes" and "such powers" as should be approved by the agents of the trust. In all other respects the fullest details of the or- ganization of the future corporation were exactly de- fined and strictly prescribed in the formal resolution, adopted by the members of the Na,tional Lead Trust, directing certain agents (reorganizing trustees) to secure the specified charter of incorporation. By the terms of this resolution the projected corporation was not permitted to be formed independently ot the capital fiKuished by the Lead Trust, nor was it permitted to be endowed with any "purposes" or "powers" which were not approved by the reorganizing trustees directed to obtain its charters. Moreover, in point of fact, it was actually created and organized in the strictest con- formity with the requirements of said resolution and under a charter empowering it to carry on the business of manufacturing lead and its kindred products with- out restriction, and winch expressly authorized it "to piirchase * * * all such stocks, bonds, securities, and obligations of other companies or corporations" as might be convenient in the prosecution or its business. By the obtention of the latter and other grants of power (in its charter) the plaintiff corporation se- cured for itself every faculty possessed by its prede- cessor (the National Lead Trust) , for engrossing the en- tire business of the country in the commodities in which it was authorized to deal. For it can not be maintained that the trust had any power to acquire the stocks and bonds of other corporations engaged in the same busi- ness — and thus stifle competition — which was not ex- pressly granted to the plaintiff in the amplest measure by the above-quoted clause in its charter empowering it, in effect, to do the same thing. If, therefore, the pre- ceding trust was an unlawful combination under the laws of this State as declared in the acts of 1891 (then in force), it must follow that the plaintiff corporation is equally amenable to said acts, if, as the record shows the fact to be, it actually engaged through the same methods and for identical objects in a similar business to that of 95 the former trust, unless there is something in the mere fact of the plaintiff's corporate character which exempts it from the application of the law prohibiting combina- tions to fix the price or quantity of products, or to re- strain trade. The learned counsel for respondent seems to claim such an exemption for the plaintiff. In dis- cussing the question thus presented we will concede for argument only that a private business or manufacturing corporation, which has no implied power as such to pur- chase shares of stock in rival corporations, may acquire such a right under the laws of New Jersey if provided for in the articles of incorporation. The first section of the act of 1891, supra, provides that any corporation, wher- ever created, which is "organized to do business in this State, or any * * * individual or other association of persons whatsoever who shall create, enter into, become a member of or a party to any pool, trust agreement, combination, confederation, or understanding with any other corporation * * * individual or any person or association of persons, to regulate or fix the price of any article of merchandise or commodity," or in the same manner "to fix or limit the amount or quantity of any article, commodity, or merchandise to be manufactured, mined, produced, or sold in this State, shall be deemed and adjudged guilty of a conspiracy to defraud, and be subjected to penalties as provided in this act." Can it be rationally held that the legislature had in view the com- mission of the criminal offense created in the foregoing section by a corporation as such, separate and apart from the individuals composing it? There is no legal ground upon which such a view can be entertained. A corporation can only act through its members or their agents. The corporate entity with which the law clothes it for special purposes is not self-acting, hence there was no thought of its action only, in the mind of the framers of the statute. The evident purpose of the legislature was to specify certain acts, which, if done by its stockholders or governing bodies, should constitute a crime on the part of the corporation. It did not con- template the commission of an offense by an impalpable abstraction, which could neither think nor act; but it intended to bind this corporate entity by the imputed actions of its human agencies. In other words, the legislature referred to the corporation in its true essence as an association of persons without which it could not exist, and through whom alone it must perform all its functions as a corporate being. (Morawitz on Corpora- tions, sec. 227; Taylor on Corporations, sec. 51; State y. Standard Oil Company, 49 Ohio St., 137 ; Buffalo Oil Com- 96 pany v. Standard Oil Company, 106 N. Y., 699; Boogher v. Life Association of America, 75 Mo., 319.) Hence it must follow that if the stockholders and governing officers of the plaintiff corporation combined with each other to violate any of the provisions of the section under review through the instrumentality of their corporate entity, then the corporation composed by them was a party to such illegal combination within both the letter and the spirit of the above section of the act of 1891. Or concretelj^ stated, that a combinaton which is illegal under the anti- trust law can not be operated under the cloak of a corpora- tion by its constituent members or governing bodies. This conclusion is believed to be irresistible in reason and has received the unwavering support of the courts and the text writers. {Ford v. Milic Shippers' Assn., 155 111., 166; People v. Gas Co., 130 111., 275; Distilling Co. v. Peoyle, 156 111., 448; Strait v. National Harrow Co., 18 N. Y. Supp.,224; Beach on Monopolies, sec. 159; Hirsch on Com. Corp., p. 86; Am. Biscuit & Mfg- Co. v. Klotz, 44 Fed. Kep., 723; National Harrow Co. v. Quick, 67 Fed., 130; Merz Capsule Co. v. TJ. S. Capsule Co., 67 Fed. Rep., 414.) In the case of Ford v. Milk Shippers' Assn., supra, the members of a milk trust subsequently incorporated brought action against a purchaser of the commodity sold by the corporation, who deffended on the ground that it was formed in furtherance of a trust scheme and transacting business in contravention of an antitrust act substantially the same as that pleaded in defendant's answer in the present action. It was insisted for the plaintiff that being a corporation it could not violate the statute, to which defense the supreme court of Illinois answered as follows : ' ' The corporation as an entity may not be able to create a trust or combination with itself, but its individual shareholders may, in con- trolling it, together with it, create such trust or combi- nation that will constitute it, with them, alike guilty." The point in judgment in that case is identical with the issue presented in the one before us. The conclusion reached by the Illinois court is logical, fully sustained by the above and other authorities, and in exact accord with the views heretofore expressed in this opinion." The illegality of the original combination known as the "National Lead Trust "was assumed, if not expressly decided, in Unckles v. Colgate, 148 N. Y., 529. This Missouri case was cited and approved in the late case of Finck v. Schneider Granite Co. (86 S. W., 213). 97 A very recent case in the Supreme Court of the United States, affirming the decision of the Supreme Court of Okla- homa, has a very strong bearing upon this question. We refer to the case of Anderson v. Shawnee Compress Company (17 Okla. 231, affirmed 209 U. S. Supreme Court, 423). The Shawnee Company owned and operated a cotton compress in the State of Oklahoma. The Atlanta Compress Company operated in the States of Alabama, Georgia, and Florida, and the Gulf Compress Company in the States of Alabama, Mis- sissippi, Tennessee, Louisiana, Arkansas, Indian Territory, and Oklahoma. One C. C. Hanson was the president of both the Gulf and the Atlanta companies, and he and Stubbs and Beattie were stoclcholders and directors in each of these com- panies. The Shawnee Company was financiaUy embarrassed, and a majority of the board of directors leased all of the prop- erty to the Gulf Company and agreed not to " directly or indi- rectly engage in the compressing of cotton within 50 miles of any plant operated by the tenant." Upon a suit by minority stockholders the lease was held void. A writ of error was sued out to the Supreme Court of the United States, and the court held the lease void both at common law and under the Sherman Act. The court said (p. 434): This case presents something more than the lease of property by the Shawnee Company, induced or made necessary by financial embarrassment. It presents something more than the acquisition by the Gulf Com- pany of another compress or the mere addition to its business. It presents acts in aid of a scheme of mo- nopoly. ***** It does not appear whether the Supreme Court based its judgment upon the common law, the Sherman law (act of July 2, 1890, chap. 647, 26 Stat., 209), or the statutes of Oklahoma. The appellees insist that the law applicable to the case comes from all three sources. The court then considered the Sherman Act, the principles of the common law as appUcable to such contracts, and affirmed the judgment of the Supreme Court of Oklahoma, holding in substance that, whether judged by the Sherman Act or by the principles of the common law, the contract was void. 72064— L— 09 7 98 The court stated the rule of the common law to be: The restraint upon one of the parties must not be greater than protection to the other party requires, and it needs no further explanation than is given in Oibhs v. Baltimore Gas Co. (130 U. S., 396). The Supreme Court of the Territory recognized the principle, but said : "Tested by the general principles applicable to contracts of this character, this agreement is far more extensive in its out- look and more onerous in its intention than is necessary to afford a fair protection to the lessee." The opinion of Judge Taft in the Circuit Court of Appeals, in United States v. Addyston Pipe & Steel Co. (85 Fed., 279), is a very able analysis of the common law as applied to combinations in restraint of trade and of the Sherman Act. Judge Taft reviewed the authorities with great care, and we submit that within the reasoning of that opinion the trust agreements of 1879 and 1882 are void. He held, of course, that at common law agreements in restraint of trade were only void when unreasonable, and that certain partial restraints of trade were upheld by the courts, but only when they were incidental to a lawful business. Judge Taft said: For the reasons given, then, covenants in partial restraint of trade are general^ upheld as valid when they are agreements (1) by the seller of property or business not to compete with the buyer in such a way as to derogate from the value of the property or business sold; (2) by a retiring partner not to compete with the firm; (3) by a partner pending the partnership not to do anything to interfere, by competition or otherwise, with the business of the firm; (4) by the buyer of prop- erty not to use the same in competition with the business retained by the seller; and (5) by an assistant, servant, or agent not to compete with his master or employer after the expiration of his time of service. Before such agreements are upheld, however, the court must find that the restraints attempted thereby are reasonably necessary (1,2, and 3) to the enjoyment by the buyer of the property, good will, or interest in the partnership bought; or (4) to the legitimate ends of the existing partnership; or (5) to the prevention of possible injury to the business of the seller from use by the buyer of the thing sold; or (6) to protection from the danger of loss to the employer's business caused by the unjust use on the part of the employee of the coirfidential knowledge acquired in such business. 99 Then follows a careful review of the cases upon this subject. The combination in the case at bar does not come within any of the conditions named by Judge Taft and supported by the authorities. In the case at bar it appears that the primary object of the combination was the restraint of trade, the combination of a large number of independent, separate concerns engaged in the manufacture, shipment, and sale of oil. It can not be claimed that the restraint of trade was simply incident to the legal acqiiisition of property, for there was no purchase of property; there was simply an amalga- mation or combination of stock interests. But even if it be assumed, for the purpose of the argument, that there was a purchase of the property, it is nevertheless well-settled law that where property is acquired for the purpose of sup- pressing competition the acquisition is void. This rule is clearly stated by Judge Taft, on page 291, as follows: But in recent years even the fact that the contract is one for the sale of property or of business and good wiU, or for the making of a partnership or a corporation, has not saved it from invalidity if it could be shown that it was only part of a plan to acquire all the property used in a business by one management with a view to estab- lishing a monopoly. Such cases go a step further than those already considered. In them the actual intent to monopohze must appear. It is not deemed enough that the mere tendency of the provisions of the contract should be to restrain competition. In such cases the restraint of competition ceases to be ancillary and becomes the main purpose of the contract, and the transfer of property and good will, or the partnership agreement, is merely ancillary and subordinate to that purpose. The principal cases of this class are Rich- ardson V. Buhl (77 Mich., 632; 43 N. W., 1102), Arnot V. Coal Co. (68 N. Y., 558), People v. Millc Exchange (145 N Y., 267; 39 N. E., 1062), People v. Refimng Co. (54 Hun, 366; 7 N. Y. Supp., 406), State v. Nebraska Distilling Co. (29 Nebr., 700; 46 N. W., 15b) State y Standard Oil Co. (49 Ohio St., 137; 30 N E 279), Manufacturing Co. v. Klotz (44 Fed., 721), D%stilling & Cattle Feeding Co. v. People (156 111. 448; 41 N E., 188), CarlonCo. v. McMitlin (119 N. Y., 46; 23 N. E., 530) Harrow Co. v. Bench (83 Fed., 36), Factor Co. v. Adlir (90 Cal., 110; 27 Pac, 36), Lumber Co. v. Hayes (76 Cal., 387; 18 Pac, 391). 100 It will be noted that Judge Taft here cites and approves many of the cases cited in this brief, such as Richardson v. Buhl (77 Mich., 632), StaU v. Staiidard Oil Co. (49 Ohio St., 137), State v. Nebraslca Distilling Co. (29 Nebr., 700), Dis- tilling <& Cattle Feeding Co. v. People (156 111., 448), all of which cases have been cited and the doctrines therein announced approved by the Supreme Court of the United States. The case of Pocahontas Coke Co. v. Powhatan Coal & Coke Co., supra, directly bears upon the invalidity of the trust agreements of 1879 and 1882. In that case the Pocahontas Coke Company was organized with a capital of $150,000 for the purpose of facilitating the manufacture, inspection, and shipment of coke from the Pocahontas field, and to regulate^ improve, and standardize the quality of coke manufactured in the district. The operators of the coke ovens, some 20 corporations, subscribed to the stock, one share for each oven operated. Immediately upon the allotment of the stock the Pocahontas Company took a contract with each one of the coke ovens for the sale of its coke, for a period of three years, on a commission of 5 cents a ton. It was provided that no one could subscribe for stock until he had entered into such a three-year contract. The corporation was to be controlled by three trustees elected by the stockholders. The surplus, after the payment of the operating expenses, was to be di- vided among the stockholders, "each stockholder to have the same proportion of such surplus as the number of tons of coke furnished by him bears to the whole number of tons of coke furnished to said company for sale." The court held this to be in unreasonable restraint of trade and void at common law, and also to be a monopoly. The court said (56 S. E., p. 270): It may be said in this connection that the determina- tion of the question whether or not a contract is in re- straint of trade is to be arrived at in exactly the same way and under exactly the same rules, whether the case falls under the provisions of the act of Congress or under the rules of the common law. The difference between the act and the common law does not he in the manner of ascertaining whether or not restraint exists, but in the degree of restraint required to render the contract illegal. Under the act of Congress any restraint is ille- gal, while under the common law only unreasonable restraint is illegal. 101 Commenting upon this contract the court said (p. 272): For the purposes of these contracts the 20 coke man- ufacturing and producing corporations were welded into a single concern so far as the market was concerned, ■\Tithout any endeavor to transfer their several proper- ties. We do not think that anyone can carefully read the t'lvo contracts, in the light of the allegations of the bill, without coming to the conclusion that the appellee, the new corporation, was merely an instrument or means to an end, operated, owned, and controlled by the 20 corporations parties to contract A. Every act of this new agent corporation within the powers of these con- tracts is merely the act of the 20 corporations in con- junction. The practical effect is that the majority of the stock of the appellee, which is apportioned among the 20 corporations according to the ovens owned by them, controls its operations. Each of the parties to contract A has a voice in the control of appellant to the extent only of the stock of such party, which, unless a majority, is insufficient to control. If one of these corporations has a majority of stock, it may fix the selhng price, not only of its own production but of the production of the others by controlling the agent corporation. If one of these corporations has less than a majority, it may not control the selling price of its own production, or the price of the production of any of the others. The effect of the combination created by means of the contracts mentioned would not be different if the 20 corporations had agreed to exercise the powers con- ferred by the contracts in conjunction in their own names without an agent, or if a natural person had been made the agent instead of the ne .v corporation. It may be said that the agent corporation agrees to guarantee the price to each of the parties; but, in its analysis, it is the guaranty of an incorporated company, the stock- holders of which are the 20 corporations mentioned. It clearly appears to us that all competition is destroyed among the 20 corporations by these contracts and this combination, and that they tend to restrain competition between the 20 corporations and others engaged in the same business. Illustrating how competition is de- stroyed among the 20 con^orations, let us suppose that a contract for furnishing coke is to be let at a given time and place. V/ho is to be there to represent each of the 20 corporations separately in competition for that con- tract ? Evidently no one, for this is an exclusive agency. The agent of the combination is to be there; but is it to be there for the purpose of having these several corpo- 102 rations compete with each other? No; it is to be there for the purpose of acting as agent for the combination, making a single negotiation for the contract, without competition among these corporations. The court also held this void as a monopoly. The court said (p. 271) : It is no defense to the illegaUty of a contract or com- bination which is in unreasonable restraint of trade to show that in the particular case a conaplete monopoly has not been formed, or that no control of prices has been exercised, or that prices have been lowered and not raised. (Z7. S. V. Addyston Pipe & Steel Co., supra; Brannon, 14th Amend., supra; 20 Am. & Eng. Enc. Law, 850.) If a contract or combination in unreasonable restraint of trade could not be attacked until a complete monopoly had been formed, then the law against monopolies would be unavailing. In this country it would be almost im- possible to combine all the interests in any line of indus- try into a single and complete monopoly. If only com- plete monopoUes could be reached under the law, a combination could then be formed tending to monopoly and embracing substantially all the evil results of a comiDlete monopoly, intentionally leaving out of the combination some one or more of those engaged in the industry, for the verj?- pui'pose of rendering the com- bination legal. ***** (P. 273.) It is claimed that this contract can not be declared illegal because it does not appear what part or per cent of the total production of the Pocahontas-Flat Top coal field is produced by the 20 corporations. It is said that together they may produce onty 1 per cent of the total production of the field. As we have said before, it is not essential that the monopoly be complete before it is illegal. Unreasonable restraint of trade, which is only partial, is illegal. {Charleston Nat. Gas Co. v. EanawTia Nat. Gas, LigU & Fuel Co., supra.) As to this feature of the case, and upon the question of the reasonableness of the restraint of trade, we are as- sisted in reaching our conclusion by cases previously decided by this and other courts. In the case of Slaughter v. Thacker Coal & CoTce Co., supra, the com- bination was composed of only 3 coal companies, and the contract was held illegal and void, because it tended to suppress conrpetition and restrain trade contrary to pubUc policy. In Charleston Nat. Gas Co. v. Kanawha 103 Nat. Gas, Light & Fuel Co., supra, a contract between 2 gas companies, restraining competition and controlling prices, was held illegal. In the case of C. c& 0. Fuel Co. Y. TJ. S., supra, the combination was among 14 firms, persons, and corporations producing and deaUng in coal, and the combination was held illegal under the act of Congress, and according to the principles there announced would no doubt have been held illegal under the common law. It is hard to distinguish the foregoing case from the Standard Oil Trust of 1879 and 1882. The combination of aU these stocks, of some 40 different, independent, manu- facturing, shipping, and selling concerns, in the hands of Vilas, Keith & Chester in 1879, and in the hands of the nine trustees in 1882, more effectively controlled the corporations, regulated the production and prices, and suppressed com- petition between them, than could the organization of a selling company which only controlled a small percentage of the total production of this coal field. Furthermore, as said by the court in this case, it is not a complete monopoly, but that which tends to monopoly, which the common law prohibits. In the case of Continental Wall Paper Co. v. Lewis Voighl & Sons Co. (148 Fed., 939; affirmed in the Supreme Court of the United States, not yet reported) , about 98 per cent of the wall-paper manufacturers entered into a combination whereby a corporation was to purchase all of the output of the manu- facturers at a uniform price, subject to the agreed scale of discounts. The difference between the price at which the manufacturers sold to the plaintiff and the price it re- ceived was divided as a dividend to the shareholders, who were composed exclusively of the combining manufacturers. There are various other provisions of the contract. The stock of the wall-paper company was distributed in propor- tion to the size of the manufacturer's product the year before the plaintiff was organized. This was a suit to recover for paper sold. The opmion is written by Judge Lurton, and concurred in by Judges Severens and Cochran. The court held that the combination was void, both at common law and under the Sherman Act. The court said : As to the first pomt, it need only be said that the legality of the contract between the combining com- panies at common law, as imposing only a reasonable 104 restraint upon the freedom of competition, is not a de- fense if the dominant purpose of the agreement and the direct result of its operation is to directly, and not in- cidentally, restrain freedom of commerce between the States or with foreign nations. Until the Supreme Court shall otherwise hold, we feel concluded by the meaning placed upon the act by United States v. Freight Associa- tion (166 U. S., 290; 17 Sup. Ct. 540, 41 L. Ed., 1007), United States v. Joint Trajfic Association (171 (J. S., 505; 19 Sup. Ct. 25, 43 L. Ed. 259), (JhesafeaTce <& 0. Fuel Company v. United States (115 Fed., 610; 53 C. C. A., 256) , and not departed from in Northern Securities Company V. United States (193 U. S., 197, 331; 24 Sup. Ct., 436, 48 L. ed., 679) . But we think the combination and agree- ment shown by Exhibit 1 comes within the prohibition of the act of Congress, whether that act be aimed only at unreasonable restraints or not. That contract and agreement is one between 98 per cent of all the wall- paper makers in the United States, who cooperate through a corporation organized by them for the single purpose of selling their gross product. That there shall be no competition between the combined companies is insured by the agreement that each manufacturer shall sell his entire product at an agreed price to the plaintiff corporation, wnich is to nominally make all sales, either directly or indirectly, at a uniform price, subject to an agreed scale of discounts, varying only according to an arbitrary classification of buyers. The difference be- tween the price at which the so-called "vendors" sell to the plaintiff company and the price exacted from those who buy from it will be profit, and the profits will constitute the dividends to be distributed to plaintiff's shareholders, and plaintiff's shareholders are exclusively composed of the combining companies, called "vendors;" its comparatively insignificant amount of stock being placed with these vendors in proportion to the product of the year before the combine took effect. To prevent the enlargement of the product of any one of the ven- dors, it is provided, in effect, that there shall be no en- largement of plant, though new machinery may be used to replace old or that destroyed. * * * A more complete monopoly in an article of universal use has probably never been brought about. It may be that the wit of man may yet devise a more complete scheme to accomplish the stifling of competition; but none of the shifts resorted to for suppressing freedom of commerce and securing undue prices, shown by the reported cases, is half so complete in its details. None of the schemes with which this may be compared is more 105 certain in results, more widespread in its operation, and more evil m its purposes. It must fall within the definition of a ''restraint of trade," whether we confine ourselves to the common-law interpretation of that term, or apply that given to the term as used in the federal act by the cases we have cited above."- The judgment in this case was affirmed by the Supreme Court of the United States February 1, 1909, not yet re- ported. Mr. Justice Harlan in the opinion quoted the above language with approval. In the case of Bigelow v. Calumet cfe Hecla Co. and Osce- ola Co. (155 Fed., 869) each of the companies was engaged m mining, manufacturing, and selling copper in competition with the other. These two companies were producing about 75 per cent of what is called "prime lake copper." Of all grades of copper about 1,000,000,000 pounds are produced in the United States, of which Michigan products form about one-fourth or one-fifth. The Calumet and Hecla bought a part of the stock, and through the acquisition of proxies undertook to control the Osceola Company. The court held that the object was to suppress competition, and that it was void both at common law and under the federal statute. The court said: The bill plainly alleges a violation of law, unless the transaction complained of is made lawful by the fact that the alleged attempted monopoly is proposed to be accomplished by means of a control of stock in a com- peting company, rather than by direct previous agree- ment between the two companies. The allegation is, in substance, that the stock has been purchased, and the proxies obtained, for the purpose of suppressing com- petition between two otherwise competing companies, and that the proposed control will in fact enable the creation of a monopoly. The formation of a monopoly for the purpose or suppressing trade or commerce is unlawful, both at common law {Richardson v. Buhl, 77 Mich., 632, 43 N. W., 1102, 6 L. E. A., 457; Hunt v. Riverside Co-operative Club, 140 Mich., 548, 104 N. W., 40, 112 Am. St. Eep., 420; Chesapeake <& Ohio Fuel Co. V. U. S., 115 Fed., 610, 53 C. C. A., 256), and under both the federal and state anti-trust laws. The federal act provides that every combination in restraint of trade or commerce is illegal. * * * <^ The italics are ours. 106 It is not necessary under either the federal or state statutes that a complete monopoly be effected. It is sufficient if it tends to that end, and to deprive the pub- lic of the advantages which flow froin free competition. (J7. S. V. E. C. Knight Co., 156 U. S., 16, 15 Sup. Ct., 249, 39 L. Ed., 325; Northern Securities Co. v. U. S., 193 U. S., 332; 24 Sup. Ct., 436, 48 L. Ed., 679; Hunt v. Riverside Co-operative Club, 140 Mich., 547, 104 N. W., 40, 112 Am. St. Rep., 420.) The above-quoted lan- guage of both the federal and state statutes is in terms broad enough to cover any means purposely adopted for, and manifestly adapted to, the accomplishment of the unlawful purposes. It seems clear that, under the de- cision in Northern Securities Co. v. U. S. (193 U. S., 197; 24 Sup. Ct., 436; 48 L. Ed., 679), the creation of a monopoly by way of stock purchase and control offends against the statute. The case of Finclc v. Schneider Granite Co. (Missouri, 86 S. W., 213) sustains the proposition laid down in the Poco- hontas Coal case, that such an agreement or combination is void at common law. In this case the owners of five crushed stone plants organized a selHng company and made a con- tract to sell all their product to this company at a stipulated price. The contract was somewhat similar to the contract in the Pocahontas Coal case. The court held the same to be void at common law and also under the statutes of Missouri. Among other things the court said (86 S. W., p. 219-20) : Taking up these propositions separately, the referee is of the opinion that the defense does not necessarily assail the validity of the charter. The validity of the contract in suit is assailed on the ground that it is in violation of the policy of the law of this State as de- clared by both the common law, the statute of the State, and the statute of the United States. It is the use to which the corporate organization is put which is here assailed. The corporation is a valid corporate entity. It can carry out in good faith the purposes declared m its articles of association, which, as declared, are legiti- mate enough. The corporation simply departs from these declared purposes, and suffers itself to be used as a cover for making effective a conspiracy against the law, admitting, of course, that there is such a conspiracy. That is the real question. If this is such an illegal conspiracy, then the referee is of the opinion that this contract is plainly beyond the powers and scope of the corporation. In so holding, no objection is made to 107 the validity of its corporate existence. It can proceed to do all things that are legal and proper for it to do. But, if it were necessary, there is not wanting authority to sustain the proposition that the very validity of the corporation organization may be collaterally assailed where the unlawful conspiracy exists in the articles of association of the corporation. This point was dis- tinctly decided by the St. Louis Court of^Appeals in the controlling case of National Lead Co. v. Urate (80 Mo. App., 247). The court cites ample authorities to sustain its position in that case. TThe referee is not satisfied that the proposition of the learned counsel for the plaintiffs can be sustained — that the combination shown in this case is not illegal under the principles of common law. In determining the validity at common law of such combinations, and con- tracts which are essential parts of them, the true test is whether they afford fair and just protection to the parties, or whether they are so broad as to "interfere with the interests of the public." {Morris v. Barclay, 68 Pa., 173, 8 Am. Rep., 159; Crawford v. WicTc, 18 Ohio St., 190; 98 Am. Dec, 103; Bennett v. Button, 10 N. H., 481; WUte v. Hunter, 23 N. H., 134; Weld r. Lancaster, 56 Me., 453.) Certainly the combination in tliis case was such as to seriously injure those who wished to buy crushed granite in the city of St. Louis and the neighbor- ing markets. It will be unnecessary to review the large number of other cases cited to show that these agreements were void at com- mon law. The different devices adopted to suppress com- petition and to obtain a monopoly which have been declared void by the courts are many. They frequently took the form of selling agencies like the case ot the United States v. General Paper Company (201 U. S., 117) ; the case of Slaugh- ter V. TucJcer Coal Company; Finclc v. Schneider Granite Company; Pocahontas coal case, and Continental Wall Paper Co. V. Voight, supra. In the case of the Morris Run Coal Company v. Barclay Coal Company (68 Pa. St., 173) the agreement was to pool all the coal mined in a certain district and divide the terri- tory. In Judd V. Harrington the agreement was between certain brokers, dealing in sheep and lambs, in New York City, whereby they agreed to pool their commissions. In the case of Fairhank v. Leary (40 Wis., 637) a number of persons formed a copartnership, the same being kept secret 108 and the parties ostensibly operating as separate concerns. It appeared that this was done for the purpose of suppress- ing competition and the court held it void. To the same effect was Craft et al. v. McConoughy (79 111., 346), cited and approved in the case of Arnold & Company v. Jones Cotton Company (44 So. Rep. Ala., p. 663 of opinion). There are many other cases which we shall cite when we come to discuss the subject of corporate combinations, as dis- tinguished from the trust agreement, which bear directly upon this case, and in which such corporate combinations are held void at common law. They tend irresistibly to the conclusion that the Standard Oil Trust was void at common law, being in unreasonable restraint of trade and tending to monopoly. No case can be cited, nor a well established principle of common law invoked, to sustain this trust agreement. We have seen that this agreement and others in similar form have been declared void in the Supreme Court of Ohio, of New York, of Missouri, of Nebraska, and of Illinois. These cases have been many times cited and ap- proved by the circuit courts of the United States and by the Supreme Court of the United States. They have become a part of the well established law of the country. But a moment's consideration of the circumstances sur- rounding the enactment of the trust agreement will show beyond question that it was intended to combine all the leading manufacturers for the purpose of suppressing com- petition. Mr. Eockefeller and his associates started out with the determination to control the petroleum trade. Aided by enormous rebates and unfair contracts with railroads which crushed out their competitors, they started on their course, either acquiring and dismanthng plants or combining them into one great aggregation. The first attempt was the acqui- sition of some eighteen or twenty plants in Cleveland and the execution of contracts with certain other plants to restrict their output and sphere of operation. Following this they entered Pennsylvania and the fields of New York, not openly, but secretly, making arrangements which the pubhc sus- pected, but the real facts of which were never disclosed until Mr. Rockefeller and Mr. Archbold in the case at bar produced the contract of 1879. We have seen that the out- rageous discriminations by railroads, as evidenced by the 109 South Improvement contract, the contracts with the Penn- sylvania road, subsequently entered into, and the terminal contracts, aroused the highest indignation in Pennsylvania and Ohio ; that they were the cause of great pubhc gatherings in which these methods were bitterly denounced ; that finally the Commonwealth of Pennsylvania caused Mr. Rockefeller and his associates to be indicted for conspiracy to obtain un- lawful rebates and to prevent others than themselves from buying, refining, and seUing oil, and that suits were brought against the Pennsylvania Railroad and the United Pipe Lines, controlled by the Standard Oil Company, to oust them from the State of Pennsylvania, on the same ground. It is admitted by Mr. Rockefeller that competition between the refiners was strong during these periods, and it appears beyond question that the object of this combination was to crush out the competitors, which was so effectually done that in 1878 and 1879 nearly all the independent refineries had been driven out of business or had been bought and dis- mantled; Mr. Archbold admitted that at least 50 had been bought up and dismantled by the Standard interests. The others were in the Standard Oil combination, which the testi- mony shows was secret in its operations. Mr. Rockefeller, Mr. Rogers, Mr. Archbold, and Mr. Payne frequently testified in proceedings during those years that the Standard Oil Com- pany did not directly or indirectly control or operate any of these refineries, intending undoubtedly to convey to the pubhc mind that they were separately owned, controUed, and operated. It appears also that these refineries so entering this combination were the principal refineries in the country. Mr. Rogers testified on October 14, 1879, that "the people that are now working in harmony with us comprise, I should think, about 90 to 95 per cent of the refiners." He named the leading ones as "The Standard Oil Company, Charles Pratt & Company, the Sone & Fleming Manufactioring Company, Warden, Frew & Company, of Philadelphia, the Standard Oil Company of Pittsburg, the Acme Oil Refming Company of Titusville, the Imperial Refining Company of Oil City, the Baltimore United Oil Company of Baltimore." It appears by his testimony that he evaded the question as to what he meant by being in harmony, and neither he nor any of his associates in all of these examinations disclosed 110 what this combination was. He testified, however, that the Standard Oil Company did not control his business; that he had no written agreement with the Standard Oil Company, but one of a personal nature with certain officers of the Standard Oil Company (vol. 6, p. 3202). It also appears by the testimony of Mr. Archbold and Mr. Rockefeller that each and every one of these separate con- cerns which entered the trust through the transfer of their stocks, was engaged in some branch of the manufacture, transportation, or sale of petroleum and its products in com- petition with each of the others, and that after the combina- tion each of the concerns was operated by the officers and persons who had previously controlled them. No statement was made to the pubhc of the acquisition or combination; there was no transfer of the property, no purchase of prop- erty in the ordinary course of business, biit a gigantic com- bination, conceived by Mr. Rockefeller and his associates and secretly and ruthlessly carried out, taking competitors into the combination when it could be done advantageously; purchasing their property or crushing them out, and dis- mantling their plants when combination was not advisable. We venture to say that there never was a combination be- fore the court bearing so many earmarks of oppression, sup- pression of competition, and monopoly, a9 this Standard combination. The trust agreement of 1882 was a trust pure and simple. The stocks of the various corporations and Umited partnerships were transferred to nine men who where authorized to control, through this stock ownership, aU of the corporations and Umited partnerships engaged in this business. By article 2, section 2, they were authorized "to purchase honds and stocks of other companies engaged in business similar or collateral to the business of said Standard Oil companies." It provided for the election of their succes- sors by the registered holders of trust certificates, by vote in person or by proxy, one vote for each share, the majority of shares represented at each election to elect. It provided for annual and special meetings, the adoption of by-laws; for filling vacancies in the board; that the legal title of the stocks should be in the trustees and their successors; that the trustees were to receive and keep the dividends declared on the bonds and stocks so in their hands and distribute the Ill same to the certificate holders; that the trustees were to exercise general supervision over the affairs of the corpora- tions and partnerships whose stock was to be held in trust ; to elect officers and directors thereof, and they might elect themselves to such positions; that a majority of the trustees were to control and they were authorized to employ agents and attorneys in the management of the business. The trustees did adopt by-laws which were substantially the same as the by-laws the Standard Oil Company of New Jersey adopted when it became the successor to the Trust. If the lease of a competing cotton compress company in Oklahoma to the Gulf Company was void at' common law as in unreasonable restraint of trade and tending to monop- oly, why does not the amalgamation of the stocks of these competing concerns in the hands of trustees equally restrain trade and equally tend to monopoly? If we are looking at the degree of suppression of competition, no combination of modern times in that respect approaches the Standard Oil combination in all its forms. If we are looking to the evidences of oppression and unfair dealing, no combination is equal in its obnoxious features. One thing clearly appears by all these authorities. It makes no difference at common law or under the statutes the form the combination takes. The question always is, does it really unreasonably restrain and suppress competi- tion and tend to monopoly ? It was held in the Paper Trust case, in the Pocahontas coal case, in the Slaughter Coal Com- pany case, that where various separate concerns organized a selling company, each taking stock in proportion to the output, the selling company to be the exclusive selling agent or to purchase all the products of the different manufac- turers, this was another means of controlling the market and suppressing competition. It was a more modern inven- tion than the Standard Oil Trust, and certainly less open in its features. If it was illegal, however, to control the sale of the products, is it not equally illegal to place the control of all the stocks of these companies in the hands of nine trustees dm-ing the life of the survivor and twenty-one years thereafter, whereby all the operations of these con- cerns could be controlled and competition entirely eHmina ted? It was said in one of these cases "that the determination of 112 the question whether or not a contract is in restraint of trade is to be arrived at in exactly the same way and under exactly the same rules whether the case falls under the provisions of the act of Congress or under the rules of the common law. The difference between the act and the com- mon law does not lie in the manner of ascertaining whether or not restraint exists, but in the degree of restraint required to render the contract illegal. ' ' (Pocahontas coal case, supra. ) Does anyone doubt that this trust agreement would be void under the Sherman Act? If it is simply a question of degree, the suppression of competition and the monopoly imder the trust of 1882 was almost complete. This was not a purchase of properties; but even that would not change the situation. As Judge Taft said in the Court of Appeals in the Addyston Pipe case: But in recent j^ears, even the fact that the contract is one for the sale of property or of business and good will, or for the making of a partnership or a corporation, has not saved it from invalidity if it could be shown that it was only part of a plan to acquire all the property used in a business by one management with a view to estab- lishing a monopoly. Such cases go a step fiirther than those already considered. In them the actual intent to monopolize must appear. He cited many cases for this position, notably State v. Standard Oil Company (49 Ohio St., 137), involving this very trust agreement; the Nebraska case, and the Illinois cases involving a trust agreement exactly like this. It was perfectly evident from the coxu-se of the testimony that the defendants intend to claim that the acquisitions of these stocks from 1872 to 1882 were in the nature of pur- chases of properties and plants in the usual course of busi- ness, and that the suppression of competition was only such as would be incident to a legal acquisition of property. We invite the court's careful attention to the testimony of Mr. Kockefeller and Mr. Archbold in this respect, and we would be willing to rest this case on that testimony alone. But many circumstances and conditions surrounding the busi- ness at that time point with irresistible force to the con- clusion that the sole object in acquiring these stocks was to suppress competition and to obtain a monopoly. When 113 questioned on direct examination, Mr. Rockefeller frequently speaks of having purchased the property of various of these concerns which entered the Trusts of 1879 and 1882, but on further examination and on cross-examination he squarely admits that in no instance was the property of any of these concerns purchased, but rather the stocks were acquired, and as the stocks were acquired the Hst of the stock- holders of the Standard Oil Company was increased to take in the principal persons from whom the stocks were thus acquired. It was but another ingenious scheme of exchanging stocks and of holding together all of the stock- holders of these concerns. Would it make any difference to this case whether all of the stocks of these 39 corporations thus put together during these years were directly amalga- mated in the hands of certain trustees, or were amalgamated in pvirsuance of a plan whereby each became a stockholder in the Standard Oil and each stockholder in the Standard Oil Company became a stockholder in the outside company ? It was alleged in the bill that this latter was the scheme, and the testimony shows such to be the case. (Bill of Com- plaint, p. 38, 39.) It appears that as to some of these corporations which after- wards went into the trust of 1882, the property at the time of the negotiation was owned by individuals or copartnerships, and as a part of the plan of combination they were organized into corporations and the stock of the corporations was acquired by the combination of 1879. This explains the tables and a large amount of Mr. Archbold's testimony, in which he says that these corporations were organized "by Standard Oil interests." They were organized by Standard Oil interests, but as a part of the combination and scheme to obtain an amalgamation of the stocks of all of the leading companies engaged in the business during these years. We submit that the trust agreements of 1879 and 1882 were void at common law. 72064^L— 09 8 VI. THE CORPORATE COMBINATION OF 1899 WAS VOID UNDER THE SHERMAN ACT AS A COMBINATION IN RESTRAINT OF TRADE AND AS A MONOPOLY. A discussion of the foregoing proposition necessarily in- volves the condition of the "Trust at the time the corporate combination was made and the relation of the constituent companies to each other. We believe we have demonstrated that from the earliest date these various corporations were held together by trust agreements which were void at com- mon law; but whether they were void or not is manifestly im- material in view of the decisions of the Supreme Court of the United States. The combination was a continuing one. There was no vested right by reason of the acquisition of these stocks by the trustees, and when the Sherman Act was passed the continuance of the combination became illegal. United States v. Freight Association, 166 U. S., 290, cited and approved in Waters-Pierce Co. v. State of Texas, 212 U. S., 86, decided Jan. 18, 1909. Thomson v. Union Castle Steamship Co., U. S. Cr. Ct. Appeals 2d Ct., not yet reported. tfnited States v. Am. Tobacco Co., 164 Fed., 700. ' Finck Y.Schneider Granite Co., 86 S.W., 221 of opinion. FordY. Chicago Milk Association, 155 lU., 166. In the Waters-Pierce case it appeared that the Supreme Court of Texas had excluded that corporation from the State and imposed a large fine, partly at least by reason of the fact that the Waters-Pierce Company was dominated and con- trolled in its business by the Standard Oil Company of New Jersey from the date of its permit to do business in the State, which was May 31, 1900, one of the objects of which control was to create a monopoly to control the price of petroleum and prevent competition in its sale in a large and specified ter- ritory, including the State of Texas. The Waters-Pierce Com- pany defendant in that case is the same company defendant in this case. {Waters-Pierce Co. v. Texas, 177 U. S., p. 28). After the old Waters-Pierce Company, the majority of whose (114) 115 •stock was owned or controlled by the Standard Oil trustees, was ousted from the State of Texas, a new corporation was formed, a majority of whose stock was held in trust for the Standard Oil Company of New Jersey. It was claimed in the Texas case that the antitrust act of the legislature of Texas was given a retroactive effect and made to apply to this company because of agreements of the old company for division of territory, which were carried out by the Waters-Pierce Company. The court said (pp. 107-8) : _ It is contended that the acts in this case were given a retroactive effect in violation of the Federal Constitution (art. 1, sec. 10). This argument is predi- cated largely upon the contention that the conviction in this case was because of the old agreement of the former Waters-Pierce Oil Company, made long before the passage of the present statute, at a time when it was legal, and before the creation of the defendant company. But ia view of the facts found in the state court, to which we have already referred, there was ground for conviction, not because of the making of the old agreement for the division of the territory and the suppression of competition while the old company was in existence, but because the new company was found to have carried out the old agreement and made itself a party thereto, and by continuing the old arrange- ment after the passage of the law, had brought itself within its terms. Of a similar contention this court said in Trans- Missouri Traffic Association case (166 U. S., 290): "It is said that to grant the injunction prayed for in this case is to give the statute a retroactive effect. That the contract at the time it was entered into was not prohibited or declared illegal by the statute, as it had not then been passed; and to now enjoin the doing of an act which was legal at the time it was done would be improper. We give to the law no retroactive effect. The agreement in question is a continuing one. The parties to it adopt certain machinery, and agree to cer- tain methods for the purpose of establishing and main- taining in the future reasonable rates for transportation. Assuming such action to have been legal at the time the agreement was first entered into, the continuation of the agreement, after it had been declared to be illegal, becomes a violation of the act. The statute prohibits the continuing or entering into such an agreement for the future, and if the agreement be continued it then becomes a violation of the act." 116 These cases are conclusive of the proposition that the com- bination was a continuing one and the passage of the Sherman Act immediately rendered it invalid. But it is not very material whether this was so or not. The defendants volun- tarily dissolved the Standard Oil Trust, segregated all of these corporations, and thereafter combined them again in the Standard Oil Company of New Jersey. We now wish to call the court's attention to the facts leading up to this last combination. The Supreme Court of New York at the November term, 1889, had held the Sugar Trust agreement void as creating a monopoly. This was followed by the decision of the Supreme Court of Nebraska in May, 1890, holding the DistilUng and Cattle Feeding Trust void upon the same ground. On March 2, 1892, the decision and judgment was rendered in the Supreme Court of Ohio in the Standard Oil case. On the 21st of March, 1892, the certificate holders met in New York and passed a resolution (pp. 64, 65 of the petition) providing that the Standard Oil Trust agreement of January 2, 1882, and the supplement thereto, dated January 4, 1882, "be, and are hereby, terminated this 21st day of March, 1892." The resolution then provides for the appointment of a committee to wind up the affairs and distribute all of the stocks held by the trustees to the owners of the trust certificates in pro- portion to the respective equitable interests of the said owners in the stock so held as evidenced by the trust certifi; cates, etc. Mr. Arihbold and Mr. Eockefeller swore that this trust agreement was terminated and the trust dissolved in obedi- ence to the decree of the Supreme Court of Ohio holding it void. (J. D. RockefeUer, vol. 16, pp. 3184, 3185; Archbold, vol. 17, p. 3385.) Mr. Archbold wobbled a little, but in sub- stance he testified that the dissolution took place absolutely for the purpose of complying with the decree of the Supreme Court of Ohio. Mr. Rockefeller testified that after the dis- solution each of the corporations was controlled by its own stockholders, engaged in its own branch of the business of purchasmg, refining, transporting and selling oil, and that they were each competing with the other. (Rec, vol. 16, 3190, et seq.) It appears that when this dissolution took 117 place there were several thousand trust certificate holders (Archbold, vol. 17, p. 3386; Rockefeller, vol. 16, p. 3186); that the large owners, to be sure, were these defendants, who were the majority of the liquidating trustees, and that the liquidating trustees inunediately converted the trust certifi- cates which they personally owned into the stock of the sub- companies, and during the seven years from 1892 to 1899 they were thus enabled to control these subcompanies by voting their stock. The larger number of the 2,000 or 3,000 certifi- cate holders, not having converted their certificates into stock, did not vote. In 1897 the attorney-general of Ohio started a proceeding in the Ohio Supreme Court by filing a petition in the quo warranto case heretofore referred to, charging the Standard Oil Company and its oflacials with contempt of court because it had failed to withdraw from the trust agreement, which had been declared to be invalid. In that proceeding Mr. Rockefeller and his associates, as wUl appear, took the position that the trust had been absolutely dissolved ; that the corporations had been segregated to their separate control by their own stockholders; that each corporation was piu-suing its own business, governed by its own stockholders and board of directors and competing with each other in business. Mr. Rockefeller swore to this in that case, as it wUl appear in the record introduced in the case at bar. When asked on cross-examination if he did so testify he admitted it (vol. 16, p. 3190, 3191). The substance of that testimony was that each of the constituent companies was competing with all the others; that they were controlled by their own stock- holders and not by the trust; they did not report to 26 Broadway (vol. 16, pp. 3191, 3192). We have in the brief of facts shown how this elaborate scheme of dissolution was carried out in order to dissolve the trust and yet to hold the companies together, but they did actually dissolve the trust and did segregate the com- panies. The defendants have testified they did so. They procured the dismissal of the case for contempt in the supreme court of Ohio on the ground that they had in good faith carried out the dissolution and that the trustees had no control over the companies. The condition was, therefore, that each of these separate companies was in fact equitably 118 owned by two or three thousand stockholders, the majority of the stock of course being owned in all the companies by twelve or fifteen men and their immediate associates. The defendants are in no position to claim that there was not a dissolution and that the Standard Oil combination was but a continuance of a previous amalgamation which was legal when it was made. Daniels v. Teamey (102 U. S., 415). Hamilton v. Zimmerman (37 Tenn., 47). In the case of Daniels v. Teamey (102 U. S., 415) it appeared that the ordinance of secession having been passed by the convention of Virginia, another ordinance was passed to provide against the sacrifice of property and to suspend proceedings in certain cases. Pursuant to this ordinance a bond was given to suspend the collection of a debt. Suit having been brought upon the bond the Supreme Court of the United States held that although the ordinance of seces- sion was void the parties were estopped to deny the validity of the ordinance and of the bond. In Hamilton v. Zimmerman (37 Tenn., p. 48) it was said: This doctrine is said to have its foundation in the obligation under which every man is placed to speak and act, according to the truth of the case; and in the policy of the law to suppress the mischiefs from the de- struction of all confidence in the intercourse and dealings of men, if they were allowed to deny that, which by their solenm and deliberate acts, they have declared to be true. To be sure, just prior to the dissolution (on April 1, 1892, and in contemplation of the dissolution), it appears that the stock of a large number of the companies, which was held and controlled by the Standard Oil trustees, was transferred to the Standard Oil Company of New Jersey, to wit : 23 separate companies (Rec, Exhibit 253, vol. 7; p. 448), and that the stock of various other companies was transferred to the Standard of New York or other of the 20 companies remain- ing in the trust, so that the 20 companies remaining consti- tuted all of the separate companies engaged in the oil business which were controlled by the trust, and these companies by stock ownership controlled the balance. The 20 companies are the principal companies to-day engaged in this business, and will be found on page 62 of the petition. This, however. 119 was a part of the scheme of dissolution, and was after the passage of the Sherman Act. The institution of the contempt proceedings in 1897 and of a second suit by the attorney-general of Ohio against the Buckeye Pipe Line, one of the constituent companies, on Novemeber 3, 1898, undoubtedly stimulated the formation of the last combination. The present Standard Oil Company was organized by increasing the capital stock of the Stand- ard Oil Company of New Jersey; and the stock of all these 20 companies was turned over by the stockholders thereof to the Standard Oil Company of New Jersey, for which it issued its corporate certificates. It appears, therefore, that the Stand- ard Oil Company of New Jersey became the trustee, holding the stock of these constituent companies in exactly the same manner as the trustees held them, and whatever illegality may have originally attached also attached to the acquisition by the Standard Oil Company of New Jersey; and, in addi- tion thereto, it was a new combination formed to take the place of one declared void and which was dissolved pursuant to the decree of the court, intending to evade that decree and to substitute one combination for another in order to continue the grip upon the commerce of the country. What distinction can there be between the control of the sub- sidiary corporations by the trust certificate holders through the trustees and the control of the subsidiary corporations by the stockholders of the Standard Oil Company through its board of directors ? The points of similarity are numer- ous and obvious. Some of them may be briefly summarized as follows : (c) The powers of the trustees and the powers of the Stand- ard Oil Company over the subsidiary corporations were the same. (6) The ownership and control of the stocks of all of the corporations were placed in each. (c) Each had power to organize additional corporations, and to acquire the stocks and bonds of other corporations engaged in like business. (d) Each had the power to consolidate the property and assets of any of the corporations the stocks of which they held. 120 (e) Each issued certificates of shares, one called trustees' certificates and the other called stock certificates, which were exchanged for the stock of subsidiary corporations. (/) The owners of such certificates voted for the election of trustees under the trust agreement, and for the election of directors under the corporate organization. (g) Vacancies in the board of directors and vacancies in the board of trustees were filled in the same manner. (h) Each elected the boards of directors of the subsidiary corporations; controlled them; managed them; directed their policies ; and such ownership and control necessarily removed all inducement to competition. (i) Each adopted by-laws substantially similar, providing for the election of trustees and directors, president, secretary, treasurer, executive committee; and provided for the manner of voting, by person or by proxy. (j) Each had a system of registration and transfer of cer- tificates, the trust certificates being handled exactly like stock certificates. (Tc) The majority of the trustees exercised their powers, and the majority of the directors of the corporation did the same. The trust was declared void as in restraint and monopoli- zation of commerce, the corporation took its place, and con- tinues identically the same business, in the same manner, exercising the same control, and restraining and monopo- lizing commerce in exactly the same manner. And the same men controlled each. In effect it was the same conspiracy. In fact, except by the exchange of the corporation certificates for the trustees' certificates upon the markets, the world knew no difference. This combination was void under the Sherman Act and as a monopoly. United States v. Northern Securities Co., 193 U. S., 197. United States v. American Tohacco Co., 164 Fed., 700. Shawnee Compress Co. v. Anderson, 209 U. S., 423. Smft & Co. V. United States, 196 U. S., 375. Loewe v. Lawlor, 208 U. S., 274. Continental WaU Paper Co. v. Voight, 148 Fed., 939. Bigelow v. Calumet & Hecla Mn^. Co., 155 Fed., 869. Burrows v. Inter. Met. Co., 156 Fed., 389. Penn. Sugar Refng Co. v. Am. Sugar Befng Co., Court of Appeals, second circuit, not yet reported, re- versing 160 Fed., 114. 121 Noyes on Incorporate Relations, sees. 331, 332, 383. Eddy on Combinations, chaps. 15, 16, and 18, sees. 606 and 607. Montague <& Co. v. Lowry, 193 U. S., 38. Harriman v. Northern Securities Co., 197 U. S., 244.'"-' Distilling and Cattle Feeding Co. v. People, 156 111., 448. People V. Chicago Gas Trust Co., 130 111., 268. Harding v. Am. Glucose Co., 55 N. E., 577. Dunbar v. Am. TelepJi. and Telegr. Co., 79 N. E., 427. National Lead Co. v. Grote Paint Co., 80 Mo. App., 247. Richardson v. Buhl, 77 Mich., 632. American Biscuit Co. r. Klots, 44 Fed., 721. Addyston Pipe and Steel Co. v. United States, 175 U. S., 211. Addyston Pipe c& Steel Co. v. United States, 85 Fed., 271. National Harrow Co. v. Hench, 76 Fed., 667. National Harrow Co. v. Hench, 83 Fed., 36. Bement v. Nat. Harrow Co., 186 U. S., 70. Merz Capsule Co. v. United States Capsule Co., 67 Fed., 414. The foregoing authorities establish the following proposi- tions: (a) That the defendants are engaged in interstate com- merce. (&) That the amalgamation of the stocks of aU these com- panies in 1899 in the Standard Oil Company^of New Jersey as a holding corporation was a combination in restraint of trade within section 1 of the Sherman Act. (c) That the control of the commerce in petroleum and its products by the Standard Oil Company of New Jersey through its various subsidiary corporations constitutes a monopoly within section 2 of the Sherman Act. (a) THAT THE DEFENDANTS AKE ENGAGED IN INTERSTATE COMMERCE. U. S. V. Swift & Co., 196 U. S., 375. U. S. V. American Tolacco Co., 164 Fed., 700. Shavmee Compress Co. r. Anderson, 209 U. S., 423. Loewe v. Lawtor, 208 U. S., 274. The foregoing cases are conclusive of this proposition. Little argument is needed to illustrate them. It appears that the Standard Oil Company, through its various sub- sidiary corporations, is engaged in producing and purchasing 122 crude petroleiim in Pennsylvania, West Virginia, Ohio, Indi- ana, Illinois, Oklahoma, and Kansas; in transporting the same by pipe line from the States in which the same is pro- duced into the various other States to the manufactories of the various defendants ; in manufacturing the same into the products of petroleum; in transporting those products, largely in the tank cars of the Union Tank Line Company, controlled by the defendant the Standard Oil Company of New Jersey, to the various marketing places throughout the United States, and of selling and disposing of the same there. This much stands admitted. The defendants, however, make some point that the sale of the products, particularly refined oil and gasoline, in the va- rious States is not interstate commerce, because the refined oil and gasoline are, for the most part, first unloaded into tanks at various towns within each State and thence distributed to retail dealers and consumers mostly by tank wagon, and that, after being so unloaded into such tanks at the local stations, it does not again cross a state line except in very small quan- tities. The fact is, however, that except in 13 States (Texas, CaUfornia, Colorado, Kansas, Missouri, Illinois, Indiana, Ohio, Pennsylvania, West Virginia, Maryland, New York, and New Jersey) where the Standard has refineries, all the refined oil and gasoline which it sells in each State is first transported into that State from some other State, remaining the prop- erty of the Standard Oil Company during such transportation and until sold. Moreover, it appears that even in the 13 States named the Standard sells a great deal of oU which it ships thither from other States. Thus most of the lubricat- ing oil which it manufactures and sells to railroads through- out the United States is manufactured at Franklin, Pa. It also appears that a large percentage of the oil manufactured by the defendants is exported. We submit that the business of the Standard Oil Company and its subsidiary companies is one unit, and that as a whole, and therefore in every part, it constitutes interstate and inter- national commerce. The authorities are clear on this point. In the Simft case (196 U. S.) the defendants were engaged in purchasing cattle at the various marketing places, Kansas City, St. Joseph, Omaha, and Chicago; in killing these cattle; in transporting the products to their various stations through- 123 out the United States and selling the same at wholesale and retail. The court held that this was interstate commerce. (Opm 196. U. S., 399, 400.) The court held, moreover, that sales by persons m one State to persons in another constituted interstate commerce. In Loewe v. Lawlor, the plaintiffs manufactured hats in the State of Connecticut and sold them in other States. The de- fendants, members of a labor organization, were not engaged in interstate commerce, but were attempting to boycott the trade in hats made by the plaintiff manufacturers. The court held this to constitute an obstruction of interstate commerce. In CaldweU v. North Carolina (187 U. S., 622, 632) the court said: Transactions between manufacturing companies in one State, through agents, with citizens of another constitute a large part of interstate commerce. In United States v. American Tobacco Co., supra, the court held that the purchase by defendants of leaf tobacco and the shipment thereof by means of common carriers to factories or warehouses in the other States; the manufac- ture thereof by its subsidiary corporations, and the sale thereof throughout the United States and in foreign coun- tries, constituted interstate commerce, although the de- fendants themselves were not engaged in transportation. (Opin. of Judge Noyes, 164 Fed., 712, 713.) In Rolibins v. Shelby Taxing District, the court held (120 U. S., 489, 497) : The negotiation of sales of goods which are in another State, for the purpose of introducing them into the State in which the negotiation is made, is interstate commerce. The case at bar is much stronger than the tobacco case because the defendants are themselves common carriers. They admit that ia the States of Ohio, Pennsylvania, and New York they are common carriers by pipe line. The law of Congress, we have seen, requires them to act as common carriers everywhere. This they have evaded and refused to comply with. They transport the greater part of their refined oils, gasolines, and lubricating oUs in their own tank-liae cars, and have arrangements with raihoads to allow them a mileage 124 upon their cars. Whether these tank cars are common carriers is immaterial. The defendants are clearly engaged in commerce between the States, and more than 90 per cent of their business is interstate or foreign business. They purchase the oil at the wells in a few States; they own and control the product in every state of transition until it reaches the retail dealer or consumer throughout every town, village, and community of the United States. If this commerce is not interstate, over which Congress, and conse- quently the federal courts, have control, there is no such thing as control by Congress of interstate commerce except in respect to common carriers. (b) THAT THE AMALGAMATION OF THE STOCKS OF ALL THESE COMPANIES IN 1899 IN THE STANDARD OIL COMPANY OP NEW JERSEY AS A HOLDING CORPORATION WAS A COMBINA- TION IN RESTRAINT OF TRADE WITHIN SECTION ONE OF THE SHERMAN ACT. We have reviewed, probably at too great length, the authori- ties bearing on these various forms of combination for the purpose of showing — 1. That they make no distinction between the control and management of corporations by trustees under trust agree- ments and the same control by a holding company; and such combinations, if unreasonable in their restraint of inter- state commerce, or if they tend to monopoly as understood in American jurisprudence, are void at common law. 2. When it comes to restraint of trade and the monopoli- zation thereof, the instrumentality is immaterial. 3. The trust combination which immediately preceded the corporate combination shows the history, the growth, and the development of the Standard Oil combination, and is evidence of the intent with which the latter corporation was organized. We believe that the Northern Securities case and the other authorities cited by us under this head are conclusive of the proposition that this is a combination in restraint of trade. We shall not, of course, review at length all of these cases, but content ourselves with pointing out their salient features and application to the case at bar. 125 Certain propositions were laid down in the Northern Securities case by Mr. Justice Harlan (p. 331) : That every combination or conspiracy which would extinguish competition between otherwise competing railroads engaged in interstate trade or commerce, and which would in that way restrain such trade or com- merce, is made illegal by the act. That the natural effect of competition is to increase commerce, and an agreement whose direct effect is to prevent this play of competition restrains instead of promotes trade and commerce. That to vitiate a combination, such as the act of Congress condemns, it need not be shown that the com- bination, in fact, results or will result in a total sup- pression of trade or in a complete monopoly, but it is only essential to show that by its necessary operation it tends to restrain interstate or international trade or commerce, or tends to create a monopoly in such trade or commerce and to deprive the public of the advantages that flow from free competition. In stating the contention of the Government, that Congress had power to protect the freedom of interstate commerce by any means which were appropriate, which was sustained in this case, it was said: It does contend that no state corporation can stand in the way of the enforcement of the national will, legally expressed. What the Government particularly complains of — indeed, all that it complains of here — is the existence of a combination among the stockholders of competing raUroad companies which, in violation of the act of Congress, restrains interstate and international commerce through the agency of a common corporate trustee designated to act for both companies in repress- ing free competition between them. (r. 335.) ***** Again, the court held that — No device in evasion of its provisions, however skill- fully such device may have been contrived, and no combination, by whomsoever formed, is beyond the- reach of the supreme law of the land, if such device or combination by its operation directly restrains com- merce among the States or with foreign nations in vio- lation of the act of Congress. (P. 347.) 126 And again, quoting from the Joint Traffic case, the court said: It is the combination of these large and powerful cor- porations, covering vast sections of territory and influ- encing trade throughout the whole extent thereof, and acting as one body in all the matters over which the combination extends, that constitutes the alleged evil, and in regard to which, so far as the combination operates upon and restrains interstate comnfierce, Congress has power to legislate and to prohibit. These are the leading features of this opinion, upon which the courts have based the decisions and decrees that have effectuated the Sherman Act and made it a potent statute rather than a dead letter. This decision has not been applied to railroads alone. The language applies to all corporations; to all restraints of interstate commerce which tend to lessen competition; to every device, however skillfully contrived. Let us now apply this decision to the case at bar. It will be claimed that these corporations were not at the time of the corporate combination in 1899 competing with each other, but the stocks of these companies were mutually owned by the same men who controlled the trust prior to the enact- ment of the Sherman Act. Does this make any difference? If they were not competing it was because of an unlawful combination in the form of the Trust, or, during the liqui- dation period, because of the conspiracy of the individual stockholders. We have seen that this trust was void. Cer- tainly the conspiracy between the stockholders of these sub- sidiary corporations was directly inhibited by the Sherman Act. During the seven years from 1892 to 1899 the stock of these subsidiary corporations was owned or equitably owned by the 2,000 or 3,000 certificate holders of the Standard Oil trust. The corporations to be sure were controlled by 15 or 20 men who owned the controlling interest. In this respect the case does not differ from the Northern Securities case. It appears in that case that a few men controlled both roads. The opinion of Judge Brewer illustrates the difference be- tween ownership of stock in two corporations by the same individuals and the perpetual control thereof in a single cor- porate entity. The fact is that during all the years preced- ing this corporate combination in the Standard Oil Company 127 of New Jersey, by one device or another, these separate con- cerns were held together as a great combination; they were segregated pursuant to the decree of the court in obedience to the laws of the land. Does it make any difference that Rockefeller and his associates had organized some of these corporations and not purchased them? That they had con- structed some of the refineries controlled by the subsidiary corporations? That they had changed the ownership of some of the properties from one corporation to another or from individual to corporate control? Most of the corpora- tions had been obtained by stock ownership and held together by concerted action of a large number of stockholders. It will probably be claimed that these individuals had purchased the stocks of these companies one after another, and that therefore whatever restraint there was in the com- bination was merely that which was incident to the purchase and acquisition of property. Call it a purchase, an exchange of stocks, exercised under the laws of the State of New Jersey, or what you please, the object to be accomplished, and which has been accomphshed, was the same as in the Northern Securities case, where the various stockholders sold or exchanged their stock for the stock of the Northern Securities Company. The same de- fense was made in that case. It was contended that that was a purchase of securities, authorized by the laws of New Jer- sey; that it was not interstate commerce; that the antitrust act only referred to those direct restraints upon interstate commerce which arose by reason of contracts between rail- way companies tending to suppress the freedom of competi- tion, and not to restraints which were incident to the owner- ship of shares of stock in each of the lines. Here it is likewise claimed that the antitrust act refers only to those direct re- straints upon trade and commerce which arise from contracts between separate, individual manufacturers and dealers, and not to restraints which are incidental to the acquisition of shares of stock and the ownership thereof in competing manu- facturing or transportation companies engaged in the same branch of business. It is only necessary to refer the court to the very able briefs of counsel in that case and to the opinion of the court and the dissenting opinions to show that this was the controlling point. (See brief of Mr. Johnson, p. 34 et 128 seq.; brief of Mr. Grover, p. 125 et seq.; brief of Mr. Bunn^ p. 22 et seq., nearly all of which was upon this point.) It was argued by counsel that there was no distinction in the act between the suppression of competition between commercial companies and railroad companies, and many instances were cited to show that the act could not have been intended to inhibit the restraint of trade which is incidental to the pur- chase of property. (See especially the brief of Mr. Bunn, pp. 24-25.) The court, however, held that the inhibitions of the Sherman Act were not limited to those direct restraints upon trade and commerce evidenced by contracts between inde- pendent lines of railway to fix rates or to maintain rates, or manufacturing or other corporations to limit, supply, or con- trol prices; that the power of suppression of competition, and therefore of restraint of trade, exercised or which could be exercised by reason of stock ownership and control of the various corporations was as much in violation of the antitrust act as this direct restraint mentioned by counsel. There is nothing in the act which can be construed to prohibit the suppression of competition by reason of the stock control of railways, and to permit it in manufacturing industries, pipe- line companies, or car-line companies engaged in the manu- facture and transportation of oil. It is our contention, therefore, that the contracts, combinations in the form of trusts or otherwise, or conspiracies in restraint of trade which are inhibited by the first section of the act, as appUed to these classes of corporations, can not be distinguished from those contracts, combinations in the form of trusts or other- wise, or conspiracies in restraint of trade when applied to railway companies. The thing inhibited is the restraint of interstate commerce, the thing to be accomplished is tJie maintenance of the freedom, of trade. The inhibition against the suppression of competition by any instrumentahty, scheme, plan, or device to evade the act applies to all cor- porations and all devices. The real point is, not the instru- mentahty or the scheme used to suppress the competition, but whether competition is thus suppressed and trade re- strained and monopolized. The very learned argument and the very careful consideration given this question in the Northern Securities case renders it unnecessary to repeat the argument here. 129 It may be argued that the Northern Securities Company did not purchase these stocks, but that it was a combination or scheme for the exchange of stocks, and that the Northern Securities Company was the mere holdiag company or trus- tee, Uke the Standard Oil Trust. The court did not base its opinion upon this point; in fact, in the subsequent case, the court held that this was a sale of the stocks to the Northern Securities Company, and, whether a sale or a mere device, it was equally void under the Sherman law. (See Harriman V. Nor. Sec. Co., 197 U. S., 297 of opinion.) In reply to this contention Chief Justice Fuller said: In speaking of the situation as between the Govern- ment and the defendants, the Securities Company is sometimes referred to as the custodian of the shares and sometimes as the absolute owner, but in the sense that in either view the combination was illegal. For the purposes of that suit it was enough that in any capacity the Securities Company had the power to vote the rail- way shares and to receive the dividends thereon. The objection was that the exercise of its powers, whether those of owner or of trustee, would tend to prevent com- petition, and thus to restrain commerce. •^•i| Some of our number thought that as the Securities Company owned the stock the relief sought could not be granted, but the conclusion was that the possession of the power, which, if exercised, would prevent competi- tion, brought the case within the statute, no matter what the tenure of title was. Treating the question as an open one, it seems to us indisputable that, as between these parties, the transac- tion was one of purchase and sale. ***** And it is clear enough that the delivery to com- plainants of a majority of the total Northern Pacific stock and a ratable distribution of the remaining assets to the other Securities stockholders would not only be in itself inequitable, but would directly contravene the object of the Sherman law and the purposes of the Gov- ernment suit. The latter remark in the opinion is directed to the acquisi- tion of the stocks of the Northern Pacific by the Union Pacific. It was there held that the Union Pacific Company could not acquire the controlling interest in stocks of the Northern Pacific, because it would be in violation of the Sherman Act. 72064r— L— 09 9 130 And this is sound in reason. Can it be possible that a hold- ing company which exchanged its stocks for the stocks of competing railway companies would tend to suppress inter- state commerce, while the acquisition of the control of one competing line by another through direct purchase would not tend to suppress competition? The combination in this case, however, has none of the elements of a sale of property such as would at common law be valid and where the suppression of competition was sec- ondary and merely an incident to the sale. Even in the early days, from 1872 to 1882, the transaction was, as to the leading concerns combined, an exchange of stocks in the Standard Oil Company for stocks in various corpora- tions and limited partnerships which were thus combined, the number of the stockholders of the Standard Oil Company being increased from time to time in this manner. And as said by Judge Noyes in the case of TJ. S. v. American To- bacco Co. (164 Fed., 718), "an exchange of one plant for an interest in united plants possesses all the elements of combination." The court has noticed from the brief of facts that in this manner the stockholders of the Standard Oil Company of Ohio increased from three or four stockholders to about forty, the capital stock of the Standard Oil Company being increased from 11,000,000 to $3,500,000 for that purpose. Moreover, the value of the property acquired by such ex- change of stocks far exce'eded $3,500,000; they, together with some stocks acquired by direct purchase, were turned in to the Trust in 1882 for $70,000,000 in, trust certificates, and were actually valued at about $56,000,000. This shows that the stock of the Standard Oil Company was not used merely as so much money to pay for stocks, but that there was an exchange whereby all of the stockholders of these outside concerns became stockholders in the Standard Oil Company and the stockholders in the Standard Oil Company became stockholders in these companies, their ownership being exercised ordinarily through individuals who held the stock in trust for their benefit. This scheme of common ownership through trustees was further carried out by the trust agreements of 1879 and 1882. When it was desired to take in copartnerships or individuals, their business was 131 reorganized in the form of corporations, and a part or all of the stock was taken "for the benefit of the Standard Oil interests." Occasionally money was paid for stock so acquired, instead of an exchange of stocks, this money being taken from the profits of the various companies which had theretofore been acquired. After 1882, to be sure, some corporations were organized by the trustees themselves, notably the Standard Oil Companies of New York, New Jer- sey, and Indiana, but these companies in general took over properties which had previously belonged to companies which had been combined in the manner we have described and whose stocks were held by the Standard Oil trustees. The case of TJ. S. v. American Tobacco Co. is directly in point upon this question. We especially invite the court's attention to the opinion of Judge Noyes, which is a very able exposition of the law on this subject. Judge Noyes is the man who wrote "Intercorporate Relations," and has given a great deal of thought to the subject of combinations and monopolies. An examination of the briefs of counsel and of the record in that case will show that the acquisition of the various corporations, partnerships and concerns engaged in the branches of the tobacco business was carried on in much the same manner as was the original combination in this case preceding 1882. Judge Noyes said: The testimony in this case shows repeated instances where, upon the transfer of a competing business, the vendors merely changed the form of their investment. They transferred their property and received in exchange stoclt in the transferee corporation. They exchanged large interests in a small property for small interests in a large property. Instead of standing by themselves, they combined, and, in combining, violated the federal statute. It appears by the record in the tobacco case that in other cases where the business of individuals and partnerships was acquired, corporations were organized, and the combination took a part or all of the stock. In other cases properties were bought in exchange for stock; others purchased for cash. In fact, the combination was made in the same maimer as the original combination in this case, the only distinction between the two cases being that the case at bar is immensely stronger because the parties reduced to writing their trust agreements 132 in 1879 and 1882, which last trust agreement was practically in effect until 1899, and was in direct violation both of the com- mon law and of the Sherman Act, and has been so held by many courts. There is no question about the case at bar being a combination in restraint of trade if the tobacco case was. Judge Noyes said: There is no especial merit in the corporate form of combination. A corporation without statutory author- ity, express or incidental, to acquire property can not take it at all. With such authority, it has only the power which an individual enjoys of natural right. Both may purchase and otherwise acquire property for lawful purposes; but neither can acquire property for a purpose forbidden by law. The corporation formed by the defendants, with the ordinary power to acqune all kinds of property, had no right to acquire property in order to form an unlawful combination. The grant of power would not be construed as authorizing any such acquisition; and any grant which went further and did attempt to authorize the formation of a combination in violation of the federal statute would be wholly void. No State can authorize any individual or corporation to break a law of the United States. See the Northern Securities Case, supra. Upon the defendants' own presentation of their acts, therefore, I cannot avoid the conclusion that they have, with certain exceptions, engaged in a combination contrary to the first section of the federal antitrust statute. In the case of Anderson v. Shawnee Compress Co. (209 U. S., 423), we have seen that a lease of all of the property of the Shawnee Company to its competitors and an agree- ment not to directly or indirectly engage in the compressing of cotton within 50 miles of the plant operated by the tenant was void both at common law and under the Sherman Act. If it was an unreasonable restraint of trade at common law, of course it needs no argument to show that it was a re- straint under the Sherman Act, where all restraints or sup- pression of competition are held unlawful whatever mav be the degree. There are various other cases having a direct bearing upon the question at bar. We have seen that after the Standard Oil Trust agreement, the National Lead Trust agreement, the Sugar Trust agreement, and the Whiskey Trust agreement were respectively declared void, the people interested in 133 these combinations set about immediately to find some other means of combination to take the place of the trust agree- ment. The decision in the Sugar Trust case was in 1889. Shortly thereafter, and evidently in anticipation of a like decision in the Nebraska case, the trust certificate holders in the Whiskey Trust organized a corporation under the laws of Illinois. The only distinction between that case and the case at bar is that the subsidiary corporations of the trust actually conveyed all of the property to the Distilling and Cattle Feeding Company, the stock of this company being issued in lieu of the trust certificates theretofore outstanding. In the case at bar the corporation as a holding company simply took the place of the trustees and exercised the same control by virtue of the stock ownership. The court held the trust agreement invalid, and said (156 111. 486, 490): There can be no doubt, we think, that the Distillers and Cattle Feeders Trust, which preceded the incorpora- tion of the defendant, was an organization which con- travened the well-established principles of public policy, and that it was therefore illegal. No one who intelli- gently considers the scheme of this trust, as detailed in the information, can for a moment doubt that it was designed to be and was in fact a combination in restraint of trade, and that it was organized for the purpose of getting control of the manufacture and sale of all dis- tillery products. * * * * But the defendant contends that, while this may all be so, the change in organization from an unincorpo- rated association to a corporation, and the change in the mode of holding the distillery properties of the various corporations formerly belonging to the trust by surren- dering the stock of the corporations, by means of which the control of those properties was formerly maintained, and having the properties themselves transferred and conveyed directly to the defendant corporation, have purged the combination of its illegality. It must be admitted that these changes, so far as they have any effect upon the rights or interests of the former stock- holders in those corporations or of the public, are formal rather than substantial. The same interests are con- trolled in substantially the same way and by the same agencies as before. The nine trustees of the trust who at the holders of all capital stock of the corporations and as a majority of the directors of each, controlled such corporate property, became the subscribers for all the 134 stock of the new corporation, and its board of directors. The conveyance and transfer of the properties of the constituent companies to the new corporation was merely a transfer by the trustees to themselves, though in a slightly different capacity, and the former stock- holders in the constituent companies simply exchanged their trust certificates, share for share, for stock in the new corporation. That corporation thus succeeds to the trust, and its operations are to be carried on in the same way, for the same purposes, and by the same agencies as before. The trust then, being repugnant to pubhc policy and illegal, it is impossible to see why the same is not true of the corporation which succeeds to it and takes its place. The control exercised over the dis- tillery business of the country — -over production and prices — and the virtual monopoly formerly held by the trust, are in no degree changed or relaxed, but the methods and purposes of the trust are perpetuated and carried out with the same persistence and vigor as be- fore the organization of the corporation. There is no magic in a corporate organization which can purge the trust scheme of its illegality, and it remains as essentially opposed to the principles of sound public policy as when the trust was in existence. It was illegal before and is illegal still, and for the same reasons. The same principle was enunciated in the case of Harding V. American Glucose Co. (55 N. E., 577), in Dunbar v. Am. TelepTi. & Telegr. Co. (79 N. E., 427), where one of two rival companies purchased the majority of the stock of the other. The court held that it was in restraint of trade and void, citing the Distilling and Cattle Feeding case, the American Glu- cose case, the Chicago Gas Trust case, and others. There are other Illinois cases substantially the same. In the case of the National Lead Co. v. Grote Paint Co. (80 Mo. App., 247), cited and approved in the case of FincTc v. Schneider Granite Co. (86 S. W., 318), the Missouri Court of Appeals held that a corporation organized to succeed the trust was illegal. The court cited the Ilhnois cases, the Standard Oil case from Ohio, the Freight Association and Joint Traffic cases in the Supreme Court of the United States, and said: * * * A combination which is illegal under the antitrust law can not be operated under the cloak of a corporation by its constituent members or governing bodies. 135 In the case of Ford v. Milk Shippers' Association, supra, the members of a milk trust subsequently incorporated brought action against a purchaser of the commodity sOld by the corporation, who defended on the ground that it was formed in furtherance of a trust scheme and transacting business in contravention of an antitrust act. The Supreme Court of IlUnois said (155 111,180) : The corporation, as an entity, may not be able to create a trust or combination with itself, but its indi- vidual shareholders may, in controlhng it, together with it, create such trust or combination that will constitute it, with them, ahke guilty. In the case of Richardson v. Buhl (77 Mich., 632), which was cited and approved in the Northern Securities case, a corporation was organized under the laws of Connecticut for the purpose of uniting by purchase aU of the match factories in the United States. Thirty-one concerns went into this combination and out of these all except 13 were closed and ceased to manufacture. The court held the agreement for the acquisition of certain properties void. This was not a case of combination of stock interests, but the purchase of the principal match factories in the country. To be sure, many of them were paid for by the issuance of stock. That part of the opinion of Chief Justice Campbell dealing with this (question is contained on pages 656 to 659: I think no one can read the contract in question and fail to discover that considerations of public policy are largely involved. The intention of the agreement is to aid in securing the objects sought to be attained in the formation and organization of the Diamond Match Com- pany. This object is openly and boldly avowed. Not only does this appear m its organization, and in the business it proposes to conduct, and in the modes and manner of carrying it on, but the testimony of General Alger himself avers it and settles its character beyond question. The organization is a manufacturing com- pany. The business in which it is engaged is makmg friction matches. Its articles provide for the aggrega- tion of an enormous amount of capital, sufficient to buy up and absorb all of that kind of business done m the IMited States and Canada, to prevent any other person or corporation from engaging in or carrying on the same, thereby preventing all competition ia the sale of the 136 article manufactured. This is the mode of conducting the business and the manner of carrying it on. The sole object of the corporation is to make money by having it in its power to raise the price of the article, or diminish the quantity to be made and used, at its pleasure. Thus both the supply of the article and the price thereof are made to depend upon the action of a half dozen individuals, more or less, to satisfy their cupidity and avarice, who may happen to have the con- trolling interest in this corporation, an artificial person, governed by a single motive or purpose, which is to accumtdate money regardless of the wants or necessities of over sixty millions of people. The article thus com- pletely under their control for the last fifty years has come to be regarded as one of necessity not only in every household in the land but one of daily use by almost every individual in the country. It is difficult to conceive of a monopoly which can affect a greater number of people, or one more extensive in its effect on the country, than that of the Diamond Match Company. It was to aid that company in its purposes and in carry- ing out its object that the contract in this case was made between these parties, and which we are now asked to aid in enforcing. Monopoly in trade or in any kind of business in this country is odious to our form of government. It is sometimes permitted to aid the Government in carrying on a great public enterprise, or public work under governmental control, in the mterest of the public. Its tendency is, however, destructive of free institutions, and repugnant to the instincts of a free people, and contrary to the whole scope and spirit of the Federal Constitution, and is not allowed to exist under express provisions in several of our state consti- tutions. Indeed, it is doubtful if free government can long exist in a country where such enormous amounts of money are allowed to be accumulated in the vaults of corporations, to be used at discretion in controlling the property and business of the country against the mterest of the pubhc and that of the people, for the personal gain and aggrandizement of a few mdividuals. It is always destructive of individual rights, and of that free competition which is the life of business, and it revives and perpetuates one of the great evils which it was the object of the framers of our form of govern- ment to eradicate and prevent. It is alike destructive to both individual enterprise and individual prosperity, whether conferred upon corporations or individuals, and therefore pubhc pohcy is, and ought to be, as well as public sentiment, against it. All combinations among 137 persons or corporations for the purpose of raising or controlling the prices of merchandise, or any of the necessaries of life, are monopolies and intolerable, and ought to receive the condemnation of all courts. In my judgment not only is the enterprise in which the Diamond Match Company is engaged an unlawful one, but the contract in question in this case, being made to further its objects and purposes, is void upon the ground that it is against pubhc policy. The decree at the cir- cuit should be reversed and the complaiuant's bill dis- missed, with costs. This case was cited and approved in the Northern Securi- ties case and has been reaffirmed by a very late decision in the Supreme Court of Michigan, Hunt v. Riverside Coopera- tive Club (140 Mich., 538), in which the court held that an arrangement between the wholesale dealers and the plumbers of Detroit, whereby the plumbers were to purchase their sup- plies at a fixed price, tended to monopoly and was against public policy. American Biscuit & Mfg. Co. v. Klotz (44 Fed. Rep., 721). — This was an application for a receiver and an accoimting- The facts were these: The defendant, Klotz, and his partner, composing the firm of B. Klotz & Company, sold to the American Biscuit and Manufacturing Company their biscuit and confectionery business for the price of $259,000 and an assumption of the debts of the firm amounting to $42,000, which were to be paid out of the income from future business. The purchase price was paid in stock of the complainant company. After the sale was completed, Klotz continued to carry on the business as agent of the purchaser. At length, however, Klotz repudiated the sale, erased the name of the complainant from the bakery, transferred the policies of in- surance from the complainant to himself, and resumed possession of the property and the conduct of the business; all of this without resort to any legal proceedings. Out of this situation grew the application of the complainant for an injimction and accounting and for a receiver. The pre- liminary application for a receiver was deaied, but in the course of its general consideration of the merits of the case the court said, Pardee and Billings, JJ. : We are not satisfied that the complainant's business is legitimate. While the nominal purpose of the complain- 138 ant's corporation, as stated in its charter, is the manu- facture and sale of biscuit and confectionery, its real scope and purpose seems to be to combine and poolthe large competing bakeries throughout the county into practically what is known and called a ' 'trust, ' ' the effect of which is to partially, if not wholly, prevent competition, and enhance prices of necessary articles of food, and secure, if not a monopoly, a large control of the supply and prices in leading articles of breadstuffs. The case shows that an insignificant number of shares of com- plainant's stock was unconditionally subscribed for, apparently enough to qualify directors; but the great mass was taken and held by irresponsible parties, to be used in parceling out as full-paid stock to such leading and successful bakeries throughout the country as could be induced to come in on an agreed value of the property and a large estimate of good will. Each bakery, when secured, to be carried on by its former managers, subject, however, as to control of funds, territory, prices, and competition, to the central management, all profits Eooled, and of course division thereof to be made on the asis of the stock assigned to each bakery. Under this arrangement complainant has already secured the con- trol, and pooled the business, of 35 of the leading bakeries in 12 different States of the West and South, and is evi- dently seeking more constituents. The act of Congress approved July 2, 1890, entitled "An act to protect trade and commerce against unlawful restraints and monopo- hes," expressly prohibits, under severe penalties, "every contract, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States," and declares punishable "every per- son who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the common trade or commerce among the several States." The enforcement of this act is, by the statute, devolved upon the circuit courts of the United States. The first and third sections of an act of the legislature of Louisiana, approved July 5, 1890, en- titled "An act to protect trade and commerce against unlawful restraints and monopolies, and provide penal- ties for the violation of this act," declare: "Section 1. That every contract, combination in the form of trust, or conspiracy in restraint of trade or commerce, or to fix or limit the amount or quantity of any article, commodity, or merchandise to be manu- factured, mined, produced, or sold in this State, is here- by declared illegal. 139 Sec. 3. That every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the trade or commerce within the limits of this" State, shall be deemed guilty of a misdemeanor, and, on con- viction thereof, shall be punished by a fine not exceed- ing five thousand dollars, or by imprisonment not ex- ceeding one year, or by both said punishments, in the discretion of the court." In construing the federal and state statutes, we ex- clude from consideration all monopolies which exist by legislative grant; for we think the word "monopo- lize" can not be intended to be used with reference to the acqtiisition of exclusive rights under government concession, but that the lawmaker has used the word to mean "to aggregate" or "concentrate" in the hands of few, practicafly, and, as a matter of fact, and accord- ing to the known results of human action, to the ex- clusion of others; to accomplish this end by what, in popular language, is expressed in the word "pooling," which may be defined to be an aggregation of property or capital belonging to different persons, with a view to common liabilities and profits. The expression in each law, "combination in the form of trust," would seem to point to just what, in popular language, is meant by pooling. Now, it is to be observed that these statutes outline an offense, but require for its complete commission no ulterior motive, such as to defraud, etc.; and, further, that the language is altogether silent as to what means must be used to constitute the offense. The offense is defined to " combine, in the form of trust, or otherwise, in restraint of trade or commerce," and "to monopo- lize, or atterrrpt to monopolize, any of the trade or commerce." To compass either of these things, with no other motive than to compass them, and by any means, constitutes the offense. One just and decisive test of the meaning of the expression "to monopolize" is obtained by getting at the evil which the law maker has endeavored to abohsh and restrict. The statutes show that the evil was the hindrance and oppres- sion in trade and commerce wrought by its absorp- tion in the hands of the few, so that the prices would be in danger of being arbitrarily and exhorbitantly fixed, because all competition would be swallowed up, so that the man of small means would find himself excluded from the restraint or monopolized trade or commerce as absolutely as if kept out by law or force. If this is the meaning of the defining words, does not this 140 corporation, thus glutted with the 35 industries of 12 States, disclose an "attempt to monopohze?" So far, therefore, as the complainant's business is a combination in restraint of trade, or is an " attempt to monopolize, or combine, in the form of a trust, or otherwise, any part of trade or commerce," as these words are properly defined, the law stamps it as vmlawful, and the courts should not encourage it. A very late case from the Circuit Court of Appeals of the Second Circuit is the case of the Pennsylvania Sugar Refining Co. V. American Sugar Refining Co., opinion not yet reported, reversing the opinion of Judge Holt in the same case (160 Fed., 144). This was a case where the Pennsylvania Sugar Refining Company had, from 1883 to 1898, been engaged in the business of importing, refining, and selling sugar. From 1898 to 1901 it ceased to do business, and in 1901 it com- menced the erection of a new and enlarged refinery, which was completed in 1903. About the time of its completion and before it commenced to do business, the American Sugar Refining Company, through Gustave E. Kissel, and certain others of the defendants, entered into a conspiracy pursuant to which Kissel, as agent for the American Sugar Refining Company, but without disclosing his principal, loaned to Siegel a million and a quarter dollars, and took from him collateral as security, among which was $2,600,000 of the stock of the plaintiff company. He agreed that four of the seven direct- ors would resign and their places be filled by Kissel's prin- cipal. The agreement was carried out. The four new direct- ors, constituting a majority of such board, pursuant to the conspiracy, voted not to operate the plaintiff's plant until the further order of the board. Suit was brought against the defendants for damages under the Sherman Act. Judge Holt held that this could not be distinguished from United States V. Eniyht. Judge Noyes, with whom concurred La- combe and Cox, reversed this decision, distinguished the case from the Knight case on the ground that this plaintiff had been engaged and was intending to engage not only in im- porting raw sugar but in manufacturing and selling it in other States, and that the allegation showed an intention to sup- press competition by neglecting to start a sugar refinery con- structed to continue the business. The American Sugar Re- fining Company procm-ed the suppression of competition by 141 the acquisition of the stock of the competitive company. The board of directors, pursuant to this stock ownership, voted not to operate the plant. The power to suppress com- petition came through the control incident to the ownership of this stock. There are various cases where selling agencies have been organized for the purpose of selling jointly the output of manufacturers or producers. Such cases are — Continental Wall Paper Co. v. Voiglit, 148 Fed., 939, affirmed in the Supreme Court of the United States February 1, 1909, not yet reported. United States v. General Paper Co., 201 U. S., 117. Pocahontas Coal Co. v. Powhatan Coal & Coke Co., 60 W. Va., 508. Slaughter v. Thacker Coal Co., 55 W. Va., 642. Finck V. Schneider Granite Co., 80 S. W., 213. These cases are aU very similar. The scheme adopted was a modern scheme to evade the combination of stock owner- ships similar to the Northern Securities case, and direct agreements dividing territory and fixing prices, like the Addyston Pipe case, and various other devices which had been theretofore declared void. In aU of these cases we have seen that the court held it but another device for the suppression of competition. We can not see that there is any material distiQction between them and the case at bar. The seUing company controlled the price. In the case at bar the holding company not only controls the price but regulates all of the affairs of the sub- sidiary companies. In the National Harrow cases (76 Fed., 667; 83 Fed., 37) corporations were organized for the purpose of receiving assignments of the various patents under which the manu- facturers were engaged in making harrows, and of granting Mcenses to the manufacturers allowing them to continue making the same kind of harrows they had previously made, and for the purpose of fixing the price at which the harrows should be sold. The court held that this was in violation of the Sherman Act. The same combination came before the Supreme Court of New York in the case of Strait et al v. National Harrow Co. (18 N. Y. Supp., 224), and was the^e held void. See also Park & Sons v. Hartman (153 Fed., 24). 142 A CONSIDERATION OF THE KNIGHT CASE. The case of United States v. E. C. Knight has been cited and relied on in all of these cases for the proposition that the acquisition of manufacturing plants could not be held to create a monopoly of interstate commerce within the Sherman Act; in fact, for the broad proposition that what- ever the motive and intent of the combination might be, if it took the form of purchase of properties engaged in manu- facture, shipping, selling or transporting commodities, the right of purchase and acquisition of property carried with it the right to restrain commerce or to monopolize the same. In every case that we know of, including the Northern Securities case, the Swift case, the National Cotton Oil case, the National Harrow case, and the Addyston Pipe case, the argument has been iterated and reiterated that to hold to the contrary would render invalid partnership enterprises and acquisition of property in the enlargement of business, rights guaranteed and sacred under the Constitution. As said by Mr. Justice McKenna in National Cotton Oil Co. V. Texas (197 U. S., 129): "By arguing from extremes almost every exercise of government can be shown to be a deprivation of individual liberty." A careful consideration of what was involved in the Knight case and of the opinions of the court in subsequent cases, will show, in our opinion, that all the court decided in that case was that manufactur- ing was not necessarily interstate commerce, and that the mere acquisition of manufacturing plants, although it might tend to monopoly under the state laws, only indirectly affected interstate commerce, in that the articles thus manu- factured might be sold with the intention that part of them would be shipped out of the State. Certain it is that if any language was used in the opinion which goes beyond this, it has been construed and limited by subsequent decisions; for the court has several times held, upon the most careful con- sideration and elaborate argument, as we have seen, not only that the suppression of competition which results from the purchase and acquisition of property is within the inhibition of the Sherman Act, but that the power to suppress compe- tition thus acquired is equally in violation thereof. The court did not decide in the Knight case that the acquisition of sugar refineries was not a monopoly, but that it was not 143 a monopoly of interstate commerce. In the first place, the acquisition in that case was simply of the stock and property of four companies engaged in the State of Pennsylvania in manufacturing sugar. It was found — that there was no understanding or concert of action between the stockholders of the several Philadelphia companies respecting the sales, but that those of each company acted independently of those of the others and in ignorance of what was being done by such others. It will be noted that the opinion of the court in that case is strictly limited to deciding the question as to whether the acquisition of the manufacturing plants entirely within the State of Pennsylvania was under the circumstances of that case, interstate commerce. The court said: But the monopoly and restraint denounced by the act are the monopoly and restraint of interstate and inter- national trade or commerce, while the conclusion to be assumed on this record is that the result of the transac- tion complained of was the creation of a monopoly in the manufacture of a necessary of life. Again: The fact that the 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 or product passes from the control of the State and belongs to com- merce. And again: There was nothing in the proofs to indicate any inten- tion 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 complain- ants to a decree. Again, the court said (p. 16): Contracts, combinations, or conspiracies to control domestic enterprise in manufacture, agriculture, mining, production in all its forms, or to raise or lower prices or wages, might imquestionably tend to restram external as well as domestic trade, but the restraint would be an indirect result, however inevitable and whatever its extent, and such result would not necessarily determme the object of the contract, combination, or conspiracy. Again, all the authorities agree that in order to vitia,te a contract or combination it is not essential that its 144 result should be a complete monopoly; it is sufficient if it really tends to that end and to deprive the public of the advantages which flow from free competition. Slight reflection will show that if the national power extends to all contracts and combinations in manufacture, agri- culture, mining, and other productive industries whose ultimate result may affect external commerce, compara- tively little of business operations and aflfairs would be left for state control. It was in the light of well-settled principles that the act of July 2, 1890, was framed. Congress did not attempt thereby to assert the power to deal with monopoly directly as such; or to hmit and restrict the rights of corporations created by the States or the citizens of the States in the acquisition, control, or disposition of prop- erty; or to regulate or prescribe the price or prices at which such property or the products thereof should be sold; or to make criminal the acts of persons La the acquisition and control of property which the States of their residence or creation sanctioned or permitted. This language must be taken ia connection with the facts of the case then being considered, for it certainly was not the intention of the court to hold that contracts to raise or lower prices or to fix prices, or to hmit production or to divide ter- ritory, where the subject involved was interstate commerce, were not within the Sherman Act. The Addyston Pipe case was simply an agreement for the division of territory for the sale of the products of the various manufactories. The General Paper Company case {Alexander v. TJ. S., 201 U. S., 117) was a scheme to control prices through a general corpo- rate seUing agency. Montague v. Lowry was a case where an association of dealers ia tiles in California and manufac- turers ia other States entered into an agreement whereby the Cahfomia dealers agreed not to purchase from anyone except certain manufacturers, and the manufacturers agreed not to sell to anyone except those dealers who were members of the association. The Swift Company case was a case where the large packers undertook to restrain trade and monopoUze commerce by means of rebates from railroads, by means of agreement at local cattle markets to raise and lower prices of cattle, division of sales of their products, etc. Again, when it is said ia the Knight case that Congress did not attempt to deal with monopoly directly as such, the 145 eourt had under consideration monopoly within the States. No one will claim that Congress did not by section 2 of the act attempt to deal with monopoly in interstate commerce. And again, when it is said that Congress did not attempt to "limit and restrict the rights of corporations created by the States or the citizens of the States in the acquisition, control, or disposition of property, and to regulate or prescribe the price or prices at which such property or the products thereof should be sold," etc., the court was dealing with purely domestic commerce, for it has since been held that when the acquisition of property by a state corporation tended to suppress or control interstate commerce, the superior power of the Federal Government interposed; and that "in regulating commerce with foreign nations the power of Congress does not stop at the jurisdictional lines of the several States." Gibbons v. Ogden, 9 Wheaton, 1. Northern Securities Co. v. United States, 193 U. S., 334. But the distinction between the Knight case and this case is obvious. Here there was a combination to place the con- trol of all these corporations in the Standard Oil Company. These subcompanies were engaged not only in purchasing and refining oil, but in transporting the same through pipe lines which they owned and operated, manufacturing the same, transporting the products by car-line companies in the same combination into all the various States, and selling the same. They were individually and collectively engaged directly in interstate commerce as distinct from the mere manufacture and local sale of products. This combination comes squarely within the decision in the Northern Securi- ties case in its unification of these interests for the purpose of restraining commerce and monopolizing the same. Within that decision it is a combination in the form of a trust or conspiracy in restraint of trade. The court there said: No scheme or device could more certainly come within the words of the act— " combination in the form of a trust or otherwise * * * in restraint of commerce among the several States or with foreign nations —or could more effectively and certainly suppress free com- petition between the constituent compames. ihis com- 72064— L— 09 10 146 ." bination is, within the meaning of the act, a "trust; but if not, it is a combinaiion in restraint of interstate and international commerce;'^ and that is enough to bring it under the condemnation of the act. The mere exist- ence of such a combination and the power acquired by the holding company as its trustee constitute a menace to, and a restraint upon, that freedom of commerce which Congress intended to recognize and protect, and which the pubhc is entitled to have protected. It comes within the Swift case in various of the means used to effectuate the monopoly, to wit, obtaining rebates and discriminatory rates, unfair methods of competition, and division of territory between the various companies. In the latter respect it is analogous to the Addyston Pipe case. As we have seen, it was argued in the Northern Securities case that the right to purchase properties was inherent in every individual; that Congress could not forbid a single individual from disposing of his stock or a state corporation from acquir- ing it. It was suggested that the mere acquisition and ownership of stock in a state corporation was not interstate commerce, even though such corporation itself might be en- gaged in that commerce. (See pages 333 and 334 of opinion.) The Knight case, the Joint Traffic cases, and other cases were cited in support of this authority. In relation to the Knight case, the court said: In United States v. E. C. Knight Co. it was held that the agreement or, arrangement there involved had reference only to the manufacture or production of sugar by those engaged in the alleged combination, but if it had directly embraced interstate or international commerce it would then have been covered by the antitrust act, and would have been illegal. That this was the limit the court considered that case to go as an authority is perfectly evident from the subsequent dis- cussion of the subject, for in answering these various argu- ments which had been advanced, based upon the Knight case and others, the court said that the discussion of mere ab- stract propositions of the right of an individual or a corpora- tion to purchase property under the laws of the State was un- necessary; that the Government made no contention that the Congress had a right to control the mere ownership of stock o The italics are ours. 147 in state corporations, or that this was interstate commerce; but when the acquisition of stock in corporations organized in the States gave the combination or corporation controlhng the stocks the power to suppress competition or monopolize commerce, then Congress has a right to enforce the rule of the freedom of competition. The court said : It does contend that no state corporation can stand in the way of the enforcement of the national will, legally expressed. In the Swift case (196 U. S., 397), the court said: Therefore, the case is not like United States v. E. C. KnigM Co. (156 U. S., 1), where the subject-matter of the combination was manufacture and the direct object mo- nopoly of manufacture within a State.'^ However likely monopoly of commerce among the States in the article manufactured was to follow from the agreement, it was not a necessary consequence nor a primary end. Here the subject-matter is sales and the very point of the com- bination is to restrain and monopolize commerce among the States in respect of such sales. The two cases are near to each other, as sooner or later always must happen where lines are to be drawn, but the line between them is distinct. In the Addyston Pipe Case (175 U. S., 246), speaking of the Knight case, the court said : It is almost needless to add that we do not hold that every private enterprise which may be carried on chiefly or in part by means of interstate shipments is therefore to be regarded as so related to interstate commerce as to come within the regulating power of Congress. Such enterprises may be of the same nature as the manuf actiu"- ing of refined sugar in the Knight case — that is, the par- ties may be engaged as manufacturers of a commodity which they thereafter intend at some time to sell, and possibly to sell in another State; but such sale we have already held is an incident to and not the durect result of the manufacture, and so is not a regulation of or an illegal interference with interstate commerce. Ihat principle is not affected by anything herem decided. In the case of Loewe v. Lawlor (208 U. S., 274), the