Cornell University Law Library. THE GIFT OF KF 1649. wit"" """'""•^"■"•"^ " miiiiiiSmlSnS:,'"^" "-aw of the United 3 1924 019 913 122 DATE DUE /^/^Yjr lit^^ OATLOBO fRINTBOIHU.K h. (JornpU Katu ^rlyool IGibtatg PREFACE. The discoveries and inventions of the nineteenth cen- tury were the causes of its great increases in commerce and of its high niultipHcations of contracts 'and of cor- porations. Those increases and muhipHcations operated to muhiply yet more highly those opportunities for per- sonal acquirement of disproportionate wealth which the most strong "and the most ctjiining men in every age are eager to seize and. to employ^ As the end of the nine- teenth century drew near, prophetic statesmen could fore- see that this procession of causes, unless checked by law, would ultimately operate to put into the hands of a small minority of men most of the property which labor could evolve from the surface or from the bosom of the earth. And those statesmen could also see that one good way to check that process was by a law to prevent the crafty and strong minority from combining to extort high prices for commodities from the weaker and uncombined majority of the people. At the end of the year 1889 there was no such law on the statute books of the United States, and never had been. But such a law was then proposed by Senator John Sherman, and with his almost Rooseveltian energy was so pressed upon the attention of Congress that it was enacted with only one opposing vote in either house, and was approved by President Harrison on July 2, 1890, and has ever since been known as the Sherman law. That law has never been amended, and is not likely to be repealed or altered. It has been adjudicated in nearly a hundred judicial decisions, and has been held by the Supreme Court to be clearly constitutional and IV PREFACE. broadly comprehensive. Nearly all the statesmen whose votes enacted it have left the Congress, to return no more. Their votes represented -the national will of their time, and the law which they enacted is clearly con- cordant with the national will of the twentieth century. The Sherman law is a Magna Charta among the statutes of the United States. And this history of that law has been written to condense, upon three hundred and twelve pages, the light relevant thereto, which was originally diffused through some thousands of pages of speeches of statesmen and of decisions and opinions of judges. A. H. W. Park Row Building, Manhattan, New York. September 28, 1910. TABLE OF CONTENTS. CHAPTER I. Pages. The Sherman Bili, 1- 26 Career of Senator Sherman 1 Sherman Bill of December 4, 1889 3- 6 Speech of Senator George 7- 8 Finance Committee Substitute 8-10 Reagan Substitute 10- 12 Speech of Senator Sherman 12- 16 Senatorial Debate by Many Senators 16-25 Reference to Senate Judiciary Comrhittee . . , 26 CHAPTER n. The Hoar Substitute 27-46 Reported from Senate Judiciary Committee 27-28 Text of the Sherman Law 29-31 Senatorial Debate by Many Senators 31-34 Passage by the Senate 34 Reported by House Judiciary Committee 35 Debated in the House 36- 41 Bland Amendment 41 Passage by the House 41 Reference to Senate Judiciary Committee 41 Reported from Senate Judiciary Committee 42- 43 Conference Committee Actions 43- 45 Conference Report Adopted by the Senate 44^ 45 Conference Report Adopted by the House 45- Sherman Law Approved by President Harrison 46 vi CONTENTS. CHAPTER III. Packs. The Face of the Sherman Law 47- 62 General Analysis of the Sherman Law 48 Detailed Analysis of the Sherman Law 48-61 First Sentence of the Sherman Law 48- 57 Construction of the Word "Commerce'' 49- SO Construction of the Word "Restraint" SO- S6 Section 2 of the Sherman Law 57 Construction of the Word "Monopolize" _ 57-58 Sections 3, 4 and 5 of the Sherman Law 59 Section 6 of the Sherman Law 60 Sections 7 and 8 of the Sherman Law 61 CHAPTER IV. History During Harrison's Administration 63-86 Jellico Mountain Coal Case 63- 68 Greenhut Case 68-70 Nelson Case 70-72 Trans-Missouri Case 72- 75 Patterson Case 76- 11 Review of Five Public Cases 77- 81 American Biscuit Case 81- 83 American Preservers Case 83- 84 Blindell Case 84-85 Review of Harrison's Administration 85- 86 CHAPTER V. History During Ci,Evei,and's Administration 87-123 Workingmen's Council Case 87- 90 Knight Case 90-98 Elliott Case 98-99 Agler Case 99 Debs Case 99-103 Cassidy Case 103-104 CONTENTS. vii Paces. Joint Traffic Case 104-106 Addyston Case 106-107 Moore Case 108-109 Trans-Missouri Case 109^112 Review of Ten Public Cases 112-113 Locomotive Engineers Case 113-115 Dueber Watch Company Case llS-117 Phelan Case 117 Pidcock Case 118 South Carolina Whiskey Case 118-120 Arizona Central Case 120-121 Wisewall Case 121 Kansas City Live Stock Case 121-122 Review of Cleveland's Administration 122-123 CHAPTER VI. History During McKinujy's Administration 124-161 Addyston Case 125-132 Hopkins Case 132-134 Anderson Case 134-136 Coal Dealers Case 136-138 Chesapeake & Ohio Fuel Case 138-142 Joint Traffic Case 142-146 Review of Six Public Cases 147 Miami Steamship Case 147-148 Express Company Case 148-149 Carter-Crume Case 14^150 Block Case 150 Lowry Case 150-152 Connolly Case 152-153 Chattanooga Foundry & Pipe Case 153-155 Gibbs Case 156-158 Otis Elevator Case 158-159 American School Furniture Case 159 Lackawanna Railroad Case 159-161 Review of McKinley's Administration 161 VUl CONTENTS. CHAPTER VII. Pages. History Prior to Roosevelt's Administration 162-178 Forty Cases in Three Administrations 162 Twenty-two Private Cases 162-164 Eighteen Public Cases 164-165 Ten Successful Public Cases 165-166 Attorney General Harmon's Report of Feb. 8, 1896. . . .167-168 Attorney General McKenna's Report of Nov. 30, 1897.169-170 Three Annual Reports of Attorney General Griggs 170-172 Situation at the End of McKinley's Administration 172-178 Organization of "Holding Companies" 173-174 Substitution of "Holding Companies" for "Trusts" 174-176 CHAPTER VIII. History During Roosevew's Administration 179-269 Northern Securities Case 180-197 Swift Case 197-199 MacAndrews & Forbes Case 199-201 Judge Speer's Charge to a Grand Jury 201-207 Virginia-Carolina Chemical Case 207-210 Standard Oil Case 210-211 American Tobacco Case 211-216 Review of Seven Public Cases 216 Foot Case 217 Lowry Case 217-218 Bement Case 218-219 Chicago Board of Trade Case 219-221 Continental Tobacco Case 221-222 lola Cement Case 222-223 Chattanooga Foundry & Pipe Case 223-225 Booth Case 225-226 — Danbury Hatters Case 226-230 Bobbs-Merrill Case 230-232 Cincinnati Packet Case 232-233 Rubber Tire Wheel Case 233-235 CONTENTS. IX Paces. Case Threshing Machine Case 235-236 Continental Wall Paper Case 236-244 Jayne Case 244-245 Kiittcr Case '. 245-248 Peruna Case 248-250 Banana Case 250-252 Pennsylvania Sugar Refining Case 253-255 Calumet & Hecla Case 256-262 Meeker Case 262-264 Monarch Tobacco Case 265-266 Yale & Towne Case 266-267 Telephone Case 267-268 Review of Twenty-four Private Cases 268-269 CHAPTER IX. History During Taft's Administration 270-294 Naval Stores Case 270-272 Kissel Case 272-273 Union Pacific Coal Case '. 273-274 Standard Oil Case 274-284 People's Tobacco Case 284-285 l''onotipia Case 285-286 Arkansas Brokerage Case 286-288 Northwestern Milling Case 288 Ware-Kramer Tobacco Case 288-290 Creamery Package Case 290-291 Review of Taft's Administration 291 Unadjudicated Cases 292-294 Terminal Railroad Case 292 American Ice Case 292 Reading Company Case 292 DuPont Powder Case 292 Union Pacific Railroad Case 292 National Packing Case 293 Armour Packing Case 293 X CONTENTS. Pack. Missouri-Pacific Railroad Case 293 Southern Wholesale Grocers Case 294 Patten Case 294 Great Lakes Towing Case 294 Standard Sanitary Case 294 CHAPTER X. Past Judiciai, Construction of the Sherman Law 295-298 General Conformity to Natural Construction 29S A Particular View of Judge Lacombe 296 The Prevailing View of Federal Judges 296 A Particular View of Several Judges 297 The Prevailing View of Federal Judges 297 Standard Oil and American Tobacco Construction. .. .297-298 CHAPTER XI. Forecasting the Standard Oii, and American Tobacco DEasioNS 299-313 Judicial Attitude of Justice Harlan 301-302 Judicial Attitude of Justice White 302-303 Judicial Attitude of Justice McKenna 303-^304 Judicial Attitude of Justice Holmes 304-307 Judicial Attitude of Justice Day. 307-308 Judicial Attitude of Justice Lurton 308-312 Public Attitude of Justice Hughes 312 The Supreme Power in the States 312 INDEX OF EXPLAINED CASES. Namss of Cases. Where Reported. Pages. American Banana Co. v. United Fruit Co Fed.Rep.lS3,160,166, U.S.213. 250 American Biscuit Co. v. Klotz. Fed. Rep. 44 81 Ames V. Tel. & Tel. Co Fed. Rep. 166 267 Arkansas Brokerage Co. v. Dunn & Powell Co Fed. Rep. 173 286 Atlanta v. Chattanooga Foun- dry & Pipe Co '. Fed. Rep. 101, 127 153, 223 Bement v. National Harrow- Co U. S. 186 218 Bigelow V. Calumet & Hecla Mining Co Fed. Rep. 155, 167 256 Bishop V. American Preservers' Co Fed. Rep. 51 .- 83 Blindell v. Hagen Fed. Rep. 54 84 Block V. Standard Dis. & Dis. Co Fed. Rep. 95 150 Blount M'fg. Co. V. Yale & Towne Mfg. Co Fed. Rep. 166 266 Board of Trade v. Christie Co.Fed. Rep. 116, 121, 125 219 Bobbs-Merrill Co. v. Strauss. . Fed. Rep. 139 230 Booth & Co. V. Davis Fed. Rep. 127 225 Cincinnati Packet Co. v. Bay. . U. S. 200 232 Continental Wall Paper Co. v. Voight Fed. Rep. 148, U. S. 212 236 Cravens v. Carter-Crume Co. . Fed. Rep. 92 149 Dueber Watch Case Co. v. Howard Watch Co Fed. Rep. 55 115 Fonotipia v. Bradley Fed. Rep. 171 285 Foot v. Buchanan Fed. Rep. 113 217 Gibbs v. McNeeley Fed. Rep. 102 156 Greer Mills & Co. v. Stroller. . Fed. Rep. 77 121 Gulf Railway Co. v. Miami Steamship Co Fed. Rep. 86 147 Indiana Mfg. Co. v. Case Mach. Co Fed. Rep. 148, 154 235 John D. Park & Sons Co. v. Hartman Fed. Rep. 153 248 Xll INDEX 01? EXPLAINED CASES. Namrs 0? Cases. Whsrb Reportsd. Paces. Lackawanna Railroad Co. v. Frank Fed. Rep. 110 159 Lackawanna Railroad Co. v. Kutter Fed. Rep. 147 24S Loder v. Jayne Fed. Rep. 142 244 Loewe v. Lawlor Fed. Rep. 130, 142, 148, U.S. 208. 226 Lowenstein v. Evans Fed. Rep. 69 118 Lowry V. Tile, Mantle & Grate Ass'n Fed. Rep. 98 ISO Meeker v. Lehigh Valley R. R. Co Fed. Rep. 162 262 Metcalf V. Am. School Furni- ture Co Fed. Rep. 108 1S9 Monarch Tobacco Works v. Am. Tobacco Co Fed. Rep. 165 265 Montague v. Lowry Fed. Rep. 115, U. S. 193 217 Moore v. United States Fed. Rep. 85 108 Northwestern Milling Co. v. Callam Fed. Rep. 177 288 Otis Elevator Co. v. Griger. . . Fed. Rep. 107 158 Penn. Sugar Co. v. Am. Sugar Co Fed. Rep. 160, 166 253 Peoples' Tobacco Co. v. Am. Tobacco Co Fed. Rep. 170 284 Phillips V. Tola Portland Ce- ment Co Fed. Rep. 125 222 Pidcock V. Harrington Fed. Rep. 64 118 Prescott R. R. Co. v. Atch. R. R. Co Fed. Rep. 73 120 Rubber Tire Wheel Co. v. Rubber Works Fed. Rep. 142, 154 233 Southern Indiana Exp. Co. v. U. S. Exp. Co Fed. Rep. 88 148 The Chas. E. Wisewall Fed. Rep. 74 121 Thomas v. C. N. O. & T. P. Ry. Co Fed. Rep. 62 li; Union Pacific Coal Co. v. Unit- ed States Fed. Rep. 173 273 Union Sewer Pipe Co. v. Con- nolly Fed. Rep. 99, U. S. 184 152 United States v. Addyston Co. Fed. Rep. 78,85, U. S. 175. .106, 125 United States v. Agler Fed. Rep. 62 99 United States v. Naval Stores Co Fed. Rep. 172 270 INDEX OP UXPLAINfiD CASES. Xlll Names of Cases. Where Reported. Pages. United States v. Am. Tobacco Co Fed. Rep. 164 211 United States v. Anderson. . . . U. S. 171 134 United States v. Investment Co Fed. Rep. ISl 201 United States v. Cassidy Fed. Rep. 67 103 United States v. C. & O. Fuel Co Fed. Rep. 105, US 138 United States v. Coal Dealers' Ass'n Fed. Rep. 85 136 United States v. Debs. ....... Fed. Rep. 64 99 United States v. Elliot Fed. Rep. 62 98 United States v. Greenhut Fed. Rep. 50 68 United States v. Hopkins Fed. Rep. 82, U. S. 171 132 United States v. Jellico Coal Co Fed. Rep. 43, 46 63 United States v. Joint Traffic Ass'n Fed. Rep. 76, U. S. 171. ..104, 142 United States v. Kissell Fed. Rep. 173 272 United States v. Knight Co... Fed. Rep. 60, U. S. 156 90 United States v. MacAndrews. Fed. Rep. 149 199 United States v. Nelson Fed. Rep. 52 70 United States v. Nortliern Se- curities Co Fed. Rep. 120, U. S. 193 180 United 'States v. Patterson. . . Fed. Rep. 55 76 United States v. Standard Oil Co Fed. Rep. 152, 173 210, 274 United States v. Swift & Co.. Fed. Rep. 122, U. S. 196 197 United States v. Trans-Mis- souri Ass'n Fed. Rep. S3, 58, U. S. 166. .72, 109 United States v. Virginia-Caro- lina Co Fed. Rep. 163 207 United States v. Workingmen's Council Fed. Rep. 54, 57 87 Virtue v. Creamery Package Co Fed. Rep. 179 290 Ware-Kramer Co. v. Am. To- bacco Co Fed. Rep. 178 288 Waterhouse v. Comer Fed. Rep. 55 113 Whitwell V. Continental To- bacco Co Fed. Rep. 125 221 CHAPTER I. THE SHERMAN BILL. John Sherman during his life passed through a career of pubhc service, which in continuous length and great value has never been equaled by any other American. That career began when he took the oath of office as a member of Congress in December, 1855, and it contin- ued without any interruption until he resigned the office of Secretary of State forty-three years later at the time of the Spanish War in 1898. During thirty-two of the intervening years he was a United States Senator from Ohio, and was a member of the Senate Committee on Finance during the whole of that time, and during many of those years was the chairman of that committee. His service in the Senate and on its Finance Committee con- sisted of two parts of sixteen years each, which parts were divided by his service of four years as Secretary of the Treasury in the Cabinet of President Hayes. During nearly thirty years, ending with his itransfer from the Senate to the Cabinet of President McKinley in March, 1897, he was generally and, indeed, uniformly reputed to be the ablest and most influential financial statesman in this country. Among his financial achieve- ments, as indeed among all the financial achievements known to the history of the United States, a very high place was immediately reached and will be permanently retained by his initiation, advocacy and execution of the bill to resume specie payments, after the many years through which they were suspended, from the time of the Civil War until the middle of tlje administration of President Hayes. 2 HISTORY OF THB SHERMAN LAW. It was this influential statesman who, after thirty-four years of consecutive service, at the beginning of the first session of the Fifty-first Congress, on December 4, 1889, introduced Senate Bill No. 1 of that Congress, which bill he entitled, "A bill to declare unlawful, trusts and combinations in restraint of trade and production."'^ That Sherman bill was never enacted into law, but Senator Sherman in drawing and introducing that bill, and afterward in powerfully advocating its passage upon the floor of the Senate, initiated and carried far forward the movement which resulted, in the suinmer of 1890, in the passage by both houses of Congress, and the approval by President Harrison, of a more elaborate and comprehensive statute, which in the meantime was drawn by Senator George F. Hoar of Massachusetts, and was substituted for the Sherman bill with the cordial approval of Senator Sherman. Inasmuch as Senator Sherman was the originator of the proposed legislation and was its leading advocate in Congress, the resulting statute has always been known as the Sherman law; although the language of that law was written by Senator Hoar, and was adopted by both houses of Congress without any amendment, as a more comprehensive and accurate ex- pression of the Congressional purpose, than the briefer bill which had been written by Senator Sherman him- self, and introduced by him on December 4, 1889. That Sherman bill of 1889, though never enacted into law, deserves to be read, analyzed and understood be-, cause its provisions, when considered in connection with the four months of consideration which it received in the Senate, furnish several valuable guides to the Con- gressional intention which was finally expressed in the Sherman law of July 2, 1890. For this reason it is the plan of the present chapter to reprint the Sherman bill 1 Congressioxial Record, Fifty-first Congress, first session, page 96. • THE SHERMAN BILL. 3 of December 4, 1889, and to present a brief and proper analysis of its provisions, and to follow that presentation in a brief though comprehensive account of the Senate debates which were based upon that bill, and of the ac- tion of the Senate which resulted from those debates. The Sherman bill of December 4, 1889, was as fol- lows: "Be it enacted by the Senate and House of Represen- tatives of the United States of America in Congress as- sembled : Sec. 1. That all arrangements, contracts, agreements, trusts, or combinations between persons or corporations made with a view or which tend to prevent full and free competition in the importation, transportation or sale of articles imported into the United States, or in the produc- tion, manufacture, or sale of articles of domestic growth or production, or domestic raw material that competes with any similar article upon which a duty is levied by the Unitetd States, or which shall be transported from one State or Territory to another, and all arrangements, contracts, agreements, trusts or combinations between persons or corporations, designed or which tend to ad- vance the cost to the consumer of any such articles, are hereby declared to be against public policy, unlawful and void. Sec. 2. That any person or corporation, injured or damnified by such arrangement, contract, agreement, trust or combination, may sue for and recover in any court of the United States of competent jurisdiction, of any person or corporation a party to a combination de- scribed in the first section of this, act, the full considera- tion or sum paid by him for any goods, wares and mer- chandise included in or advanced in price by said com- bination. 4 HISTOkY OF THE SHSRMAN LAW. Sec. 3. That all persons entering into any such ar- rangement, contract, agreement, trust or combination, de- scribed in section 1 of this act, either on his own account or as an agent or attorney for another, or as an officer, agent or stockholder of any corporation, or as a trustee, committee or in any capacity whatever, shall be guilty of a high misdemeanor, and on conviction thereof in any district or circuit court of the United States, shall be subject to a fine of not more than $10,000, or to imprison- ment in the penitentiary for a term of not more than five years, or both such fine and imprisonment, in the discretion of the court. And it shall be the duty of the District Attorney of the United States of the district in which such persons reside, to institute the proper pro- ceedings to enforce the provisions of this act."^ A primary analysis of this Sherman bill results in showing that its substantive section is Section 1 ; and that Section 2 provides for a civil remedy for violations of Section 1 ; and that Section 3 provides a criminal remedy for violations of Section 1. An analysis of Section 1 results in showing that that section would prohibit all combinations between a plu- rality of persons or corporations, to prevent or even to diminish competition, either in the importation, transpor- tation or sale of imported articles ; or in the manufacture or other production, or the sale of any article of domestic production which competes with any similar article upon which a duty is levied by the United States; or which shall be transpoirted from one state or territory into another. And that section would also prohibit all com- binations between a plurality of persons or corporations, designed to advance, or which would tend to advance the cost to the consumer of any of the articles designated 2 Congressional Record, Fifty-first Congress, first session, page 1765. THE SHERMAN BILL. 5 in the section. Thus the section prohibited all combina- tions to diminish competition or advance prices in re- spect of the importation, transportation or sale of im- ported articles, and in respect of the production or sale of such domestic articles as compete with similar dutiable articles, and in respect of the transportation of any articles from one state or territory to another. Any proper judgment of the provisions of Section 1 of this Sherman bill must begin with a comparison of those provisions with the Constitution of the United States, to ascertain whether it would be adequately based upon that fundamental law. Such a comparison will result in finding that the only constitutional foundation for those provisions resides in the third paragraph of Section 8 of Article 1 of the Constitution, which sec- tion and which paragraph provide that Congress has power "to regulate commerce with foreign nations arjd among the several States and with the Indian tribes." It was Senator Sherman's opinion that that commerce clause of the Constitution justified all parts of Section 1 of the Sherman bill. He thought that it justified its regulation of the importation into the United States and transportation or sale in any state or states of imported articles, on the ground that that provision was a regula- tion of commerce with foreign nations. And he thought that its regulation of the manufacture or other produc- tion or sale of domestic articles that competed with any similar dutiable articles was also justified as a regula- tion of commerce with foreign nations. And he thought that its regulation of transportation of any articles from one state or territory to another was justified as a regu- lation of commerce among the several states. Passing at present over the question whether Senator Sherman was right or was wrong in any or all of these opinions, relevant to the relations between the Sherman bill and the commerce clause of the Constitution, it is 6 HISTORY OP THE SHERMAN LAW. apparent that he wished to prohibit all decreases of com- petition and all increases of prices in respect of the trans- portation and also the sale of as many classes or articles as possible, so far as such decrease of competition or increase of prices might result from combinations be- tween a plurality of persons; and that section 1 of his bill was so comprehensively drawn as to provide for such prohibition in respect of all articles of commerce, ex- cept such domestic articles as would not compete with any dutiable article, and would not be transported from one state or territory into another. Thus it is apparent that Section 1 of the Sherman bill did not propose to regulate any transaction except what might result from combinations between a plurality of persons or corporations; but that it did propose to regu- late all combinations of persons or corporations in re- spect of all transportation and all sales of articles in this country, except such articles of domestic origin as would not compete with dutiable articles, and as would be used up in the same state or territory in which they originated, respectively. An analysis of Section 2 of the Sherman bill will show at once that it proposed to enable any person or cor- poration injured by any transaction forbidden in Section 1, to recover from any person or corporation belonging to the combination causing the injury, whatever money might have been paid by the injured party to any mem- ber of the combination for any articles included in or advanced in price by the combination. An analysis of Section 3 of the Sherman bill will show that it contemplated crime as personal, and that it proposed to punish by a heavy fine or a long imprison- ment, every person who in any capacity might participate in any combination prohibited by Section 1. As soon as the Sherman bill was introduced, it was referred to the Senate Committee on Finance, of which THE SHERMAN BIIvL. 7 Senator Morrill of Vermont at that time was chairman, but of which Senator Sherman was the most active member. On January 14, 1890, Senator Sherman reported the Sherman bill to the Senate from the Finance Committee, and on February 27, 1890, he moved the Senate to pro- ceed to its consideration. That motion having been adopted, Senator George of Mississippi took the floor and made an elaborate speech upon the subject.' Senator George began his speech by saying that he regarded legislation on the subject of this bill as probably the most important to be considered by the Fifty-first Congress, for which reason he had prepared with par- ticular care the remarks which he proposed to submit to the Senate in opposition to the bill as it then stood, and which remarks he said would discuss the question of its constitutionality and also the question of its efficiency. On the first of these heads. Senator George took the ground that the bill was unconstitutional for several rea- sons, including the fact that it proposed to regulate not only interstate and foreign commerce, but also to regu- late, under some circumstances, manufacture or other production within individual states, of some classes of commodities. On the second head he took the ground that the bill was inefficient, because while it proposed to prohibit "arrangements, contracts, agreements, trusts or combinations" that prohibition was confined, as Senator George thought, to plans to decrease competition or in- crease prices, and did not include any overt acts done in pursuance of those plans. In accordance with this view, Senator George argued that representatives of cor- porations or other persons might go to Canada or to any other foreign country, and there make their arrange- 3 Congressional Record, Fifty-first Congress, first session, page 1765. 8 HISTORY OF THB SHERMAN LAW. ments, contracts, agreements, trusts or combinations to decrease competition or increase prices without violating the bill, because the bill if enacted into law would not be in force in Canada; and that having, thus made their plans, they might return to the United States and execute those plans here without violating that bill, because that bill did not prohibit any overt acts which might be done in pursuance of such plans. Mr. George was a very able lawyer and a member of the Judiciary Committee of the Senate; and his speech of February 27, 1890, on this subject was so elaborate and so weighty as to convince many Senators that the Sherman bill required to be materially amended before being passed into law. • The Senate resumed consideration of the Sherman bill on March 21, 1890;* whereupon Senator Sherman stated that upon further consideration, the Committee on Finance had decided to present a substitute for that bill. That substitute proposed to strike out all the bill after the enacting clause, and to insert the following: "Sec. 1. That all arrangements, contracts, agreements, trusts, or combinations between two or more citizens or corporations, or both, of different States, or between two or more citizens or corporations, or both, of the United States and foreign states, or citizens or corporations thereof, made with a view or which tend to prevent full and free competition in the importation, transportation, or sale of articles imported into the United States, or with a view or which tend to prevent full and free com- petition in articles of growth, production or manufac- ture of any State or Territory of the United States with similar articles of the growth, production, or manufac- ture of any other State or Territory, or in the transpor- tation or sale of like articles, the production of any State * Congressional Record, Fifty-first Congress, first session, page 24SS. THE SHERMAN Bllih. 9 or Territory of the United States, into or within any other State or Territory of the United States; and all arrangements, trusts, or combinations between such citi- zens or corporations, made with a view or which tend to advance the cost to the consumer of any such articles, are hereby declared to be against public policy, unlawful and void. And the Circuit Courts of the United States shall have original jurisdiction of all suits of a civil na- ture at common law or in equity arising under this sec- tion, and to issue all remedial process, orders, or writs proper and necessary to enforce its provisions. And the Attorney General 'and the several district attorneys are hereby directed, in the name of the United States, to commence and prosecute all such cases to final judgment and execution. Sec. 2. That any person or corporation, injured or damnified by such arrangement, contract, trust or com- bination defined in the first section of this act, may sue for and recover in any court of the United States of competent jurisdiction, without respect to the amount involved, of any person or corporation a party to a com- bination described in the first section of this act, twice the amount of damages sustained and the costs of the suit, together with a reasonable attorney's fee." A comparison of this amended Finance Committee bill with the original Sherman bill, shows that the Committee on Finance attempted therein to strengthen the constitu- tional foundation of its first section by confining its pro- hibitions to arrangements, contracts, agreements, trusts or combinations between citizens or corporations or both, of different states or territories of the United States and foreign countries ; on the theory that Congress had more power to regulate the doings of combinations of citizens or corporations of different states or countries than it had to regulate the doings of combinations of citizens or 10 HISTORY OF THE SHERMAN I,AW. corporations, all of whom might belong to the same state. And such a comparison will also show that the Finance Committee now proposed to confer upon the Circuit Courts of the United States original jurisdiction in equity to enforce the provisions of the first section by means of writs of injunction; and also to make it the duty of the Attorney General of the United States and of the sev- eral United States district attorneys throughout the United States, to commence and prosecute, in the name of the United States, all such actions in equity, and also all proper actions at common law for enforcing the pro- visions of the first section. And such a comparison will also show that the Finance Committee proposed to sub- stitute a remedy for double damages, with a reasonable attorney's fee, for the other civil remedy which Section 2 of the original Sherman bill provided for the benefit of whatever persons or corporations might be injured by violations of Section 1. And such a comparison will also show that the Finance Committee proposed to omit all criminal proceedings and penalties from among its pro- visions for the enforcement of Section 1 of the bill. The Finance Committee substitute for the Sherman bill being thus before the Senate for consideration. Sena- tor Reagan of Texas offered a substitute for the commit- tee substitute, and which Reagan substitute was as fol- lows: "Sec. 1. That all persons engaged in the creation of any trust, or as owner, or part owner, agent or man- ager of any trust employed in any business carried on with any foreign country, or between the States, or be- tween any State and the District of Columbia, or be- tween any State and any Territory of the United States, or any owner or part owner, agent or manager of any corporation using its powers for either of the purposes specified in the second section of this act, shall be deemed THE SHERMAN BILL,. 11 guilty of a high misdemeanor, and on conviction thereof, shall be fined in a sum not exceeding $10,000, or impri- soned at hard labor in the penitentiary not exceeding five years, or by both of said penalties, in the discretion of the court trying the same. Sec. 2. That a trust is a combination of capital, skill or acts by two or more persons, firms, corporations or association of persons, or of any two or more of them for either, any or all of the following purposes : First. To create or carry out any restrictions in trade. Second. To limit or reduce the production, or to in- crease or reduce the price of merchandise or commodi- ties. Third. To prevent competition in the manufacture, making, purchase, sale or transportation of merchandise, produce or commodities. Fourth. To fix a standard or figure whereby the price to the public shall be in any manner controlled or estab- lished of any article, commodity, merchandise, produce or commerce intended for sale, use or consumption. Fifth. To create a monopoly in the making, manufac- ture, purchase, sale or transportation of any merchan- dise, article, produce or commodity. Sixth. To make, or enter into, or execute, or carry out any contract, obligation or agreement of any kind or description, by which they shall bind or shall have bound themselves 'not to manufacture, sell, dispose of or to transport any article or commodity, or article of trade, use, merchandise or consumption, below a common stand- ard figure, or by which they shall agree in any manner to keep the price of such article, commodity or transpor- tation at a fixed or graduated figure, or by which they shall in any manner establish or settle the price of any article, commodity or transportation between themselves or between themselves and others, so as to preclude free and unrestrained competition among themselves and 12 HISTORY OF THB SHERMAN LAW. others in the sale and transportation of any such article or commodity, or by which they shall agree to pool, com- bine or unite in any interest they may have in connec- tion with the sale or transportation of any such article or commodity, that its price may in any manner be so affected. Sec. 3. That each day any of the persons, associations or corporations aforesaid shall be engaged in violating the provisions of this act, shall be held to be a separate offense." The Finance Committee substitute for the original Sherman bill and the Reagan substitute for both being thus before the Senate, Senator Sherman, on March 21, 1890, made an elaborate speech upon the general sub- ject.° Speaking of Section 1 of the original Sherman bill, Senator Sherman said: "This section will enable the courts of the United States to restrain, limit and control such combinations as interfere injuriously with our for- eign and interstate commerce to the same extent that the state courts Jiabitually control such combinations as interfere with the commerce of the state ;" and that "The first section being a remedial statute, would be construed liberally with a view to promote its object. It defines a civil remedy and the courts will construe it liberally; they will prescribe the precise limits of the constitutional power of the Government. They will distinguish be- tween lawful combinations in aid of production, and un- lawful combinations to prevent competition and in re- straint of trade; they can operate on corporations by restraining orders and rules. They can declare the par- ticular combination null and void, and deal with it ac- cording to the nature and extent of the injuries," and 5 Congressional Recotd, Fifty-first Congress, first session, page 2456. THE SHERMAN BILL. 13 that "This bill does not seek to cripple combinations of capital and labor; the formation of partnerships or cor- porations; but only to prevent and control combinations made with a view to prevent competition or for the re- straint of trade, or to increase the profits of the producer at the cost of the consumer." Speaking of the wrongs which the Sherman bill pro- posed to remedy, Senator Sherman said: "Associated enterprise and capital are not satisfied with partnerships and corporations competing with each other, and have invented a new form of combination commonly called 'trusts,' that seeks to avoid competition by combining the controlling corporations, partnerships and individ- uals engaged in the same business, and placing the power and property of the combination under the government of a few individuals, and often under the control of a single man called a trustee, a chairman or a president. The sole object of such a combination is to make competition impossible. It can control the market, raise or lower prices as will best promote its selfish interests, reduce prices in a particular locality and break down competition, and advance prices at will where competition does not ex- ist. Its governing motive is to increase the profits of the parties composing it. The law of selfishness uncon- trolled by competition, compels it to disregard the in- terest of the consumer. It dictates terms to transporta- tion companies. It commands, the price of labor without fear of strikes, for in its field it allows no competitors. Such a combination is far more dangerous than any here- tofore invented, and when it embraces the great body of all the corporations engaged in a particular industry in all the states of the Union, it tends to advance the price to the consumer of any article produced. It is a substantial monopoly injurious to the public, and by the rule of both the common law and the civil law is null and void and the just subject of restraint by the courts; 14 HISTORY OF THE SHERMAN I Fed. Rep. 438. This was an action at law, begun in 1895, in the United States Circuit Court for the South- ern District of New York. The action was based on the fact that the defendants had refused to accept freight from the plaintiff on through bills of lading, while ac- cepting such freight on such bills from other railroad companies. The case was heard upon a motion by all the defendants except one, to direct a verdict in their favor, while the remaining defendant asked judgment in his favor on demurrer. That motion was decided in favor of the defendants who made it, and that demurrer was sustained on behalf of the defendant who filed it. The judge who rendered this decision was Judge L,acombe, one of the United States Circuit Judges for the Second Circuit. He held that when the defendant railroad com- panies combined to favor certain railroad companies and to discriminate against the plaintiff railroad company in respect of accepting freight for transportation on through bills of lading, those defendant companies did not violate Section 1 of the Sherman law, as the plaintiff claimed they had done. This conclusion was based upon the opin- ion of Judge Lacombe that such a discrimination as that was did not constitute any restraint of trade such as would have been unlawful at common law, and did not, DURING Cleveland's administration. 121 therefore, constitute such a restraint of interstate com- merce as is prohibited by Section 1 of the Sherman law. 7. The Charles E. Wisewall, 74 Fed. Rep. 802. This was a libel in rem in admiralty, by certain tug owners against the steam dredge Charles E. Wisewall to recover the value of certain services rendered by their tugs in towing that dredge. The owner of the dredge defended upon the ground that the owners of the tugs were mem- bers of an association which was illegal under the Sher- man law. The case was decided by Judge Coxe against that contention, on the ground that the existence of an illegal contract between the tug owners in mutual re- straint of interstate commerce did not deprive those individuals of their right to enforce their legal contracts with the owner of the dredge. On this point Judge Coxe said: "An agreement by the owner of the tug 'Mayflower' to tow the dredge 'Wisewall' from Albany to Troy is not void because the 'Mayflower' is associated with other tugs to regulate the price of towing at Albany." 8. Greer, Mills & Co. vs. Stroller and others, 77 Fed. Rep. 1. This was a bill in equity filed in 1896 in the United States Circuit Court for the Western District of Missouri in its Western Division. The complainant was located outside of Missouri. The defendants were the members of the Board of Directors of the Kansas City Live Stock Exchange, a voluntary business association, doing business in Kansas City, Missouri. The case was decided against the complainant by Judge Philips, the United States District Judge for that district, without deciding or even discussing the question whether the Kansas City Live Stock Exchange was violating or had violated the Sherman law, as the comjplainants claimed. That decision was fully justified by the fact that the 122 HISTORY Olf THE SHBRMAN LAW. Sherman law does not confer any right of action in equity for its violation, upon anybody except the United States ; the remedies provided by that law for the benefit of persons, partnerships, corporations or associations, be- ing such judgments for threefold damages and costs of suit and attorney's fees as are obtainable by an action of law under Section 7 of the Sherman act. The foregoing explanation of the eight cases of liti- gations between private parties relevant to the Sherman law, which occurred during President Cleveland's ad- ministration, shows that only two of them produced any affirmative result in pursuance of any provisions of that law. Those two were the railroad labor strike cases which were decided by Judge Spear and Judge Taft re- spectively. When the ten cases which were prosecuted on behalf of the United States for violation of the Sherman law during President Cleveland's administration, and the eight cases which, during that administration, were prosecuted under that law by private parties, are con- sidered collectively, it will be seen that seven of the eighteen were labor strike cases and that six of those seven were successful in applying the Sherman law to combinations of laborers in restraint of interstate com- merce. It will also be seen that ten of the other eleven cases failed to accomplish anything during the adminis- tration of President Cleveland toward any enforcement of the Sherman law, and that the only one of those eleven cases which even nominally produced any such result during that administration was the Trans-Mis- souri Freight Association case, wherein the Supreme Court, by a vote of five justices to four, reversed the de- cision of the Circuit Court of Appeals for the Eighth Circuit, which had been rendered against the United States by a vote of two judges to one in that tribunal. DURING Cleveland's administration. 123 The practical effect of prosecutions under the Sherman law during President Cleveland's administration was, however, reduced even below its nominal effect by the fact that the Trans-Missouri Freight Association was dissolved, by a vote of its members, after it was held by the Circuit Court of Appeals in 1893 to be legal, and be- fore it was held by the Supreme Court in 1897 to have been illegal, as violative of the Sherman law. 166 U. S. Reports, 307. CHAPTER VI. THE SHERMAN LAW DURING m'kINEEY'S ADMINISTRATION. The administration of President McKinley extended from March 4, 1897, to September 14, 1901. The first Attorney General during that administration was Joseph McKenna, of Cahfornia, who had previously been one of the United States Circuit Judges for the Ninth Circuit, and who, during the last twelve years, has been one of the associate justices of the United States Supreme Court. His occupancy of the office of Attorney General extended from March 5, 1897, to January 25, 1898. His successor in that office was John W. Griggs, of New Jersey, who had previously been Governor of that state, and whose occupancy of the office of Attorney General continued more than three years and until March 29, 1901. The next Attorney General was Philander C. Knox, of Pennsylvania, who had previously been a dis- tinguished lawyer in Pittsburg and who was afterward United States Senator from Pennsylvania, and is now oc- cupying the office of Secretary of State of the United States. His incumbency of the office of Attorney Gen- eral continued from April 5, 1901, through the then re- maining five months and nine days of the administration of President McKinley, and continued still longer during nearly three years, and until June 30, 1904, in the admin- istration of President Roosevelt. During the administration of President McKinley, the number of cases which were prosecuted by the United States under the Sherman law was six, including two DURING m'kinley's administration. 125 which had been brought under the administration of President Cleveland, and including one which was not ended until after the beginning of the administration of President Roosevelt. Those six cases were the follow- ing: 1. United States vs. Addyston Pipe & Steel Co. and others, 85 Fed. Rep. 271 and 175 U. S. 211. The be- ginning and the history of this case during the admin- istration of President Cleveland were explained in Chap- ter V of this book, wherein it is stated that this case was decided against the United States by Judge Clark when holding the United States Circuit Court for the Eastern District of Tennessee in February, 1897. Attorney Gen- eral McKenna caused an appeal to be taken from that decision to the United States Circuit Court of Appeals for the Sixth Circuit. And that appeal, on February 8, 1898, wafe decided in favor of the United States by that court, when that court was held by Associate Justice Harlan of the United States Supreme Court, and by Cir- cuit Judges Taft and Lurton. The unanimous opinion of that court was written by Judge Taft, and is printed on pages 278 to 302, inclusive, of volume 85 of the Federal Reporter. That opinion begins by showing that the suit was based upon Section 1 of the Sherman law, and that it involved two questions for decision, and that the first of those questions was whether the association of the defendants constituted a contract, combination or con- spiracy in restraint of trade as those terms are properly to be understood in the Sherman law; while the second of those questions was whether the trade thus restrained was interstate trade. On the first of these questions the defendants con- tended that whatever mutual restraints they exercised upon each other did not embrace all the states and were not unlimited in space, and that such partial restraints 126 HISTORY OF THE SHERMAN LAW. were proper at common law wherever they were reason- able, and that the partial restraints which the defendants had exercised upon each other were reasonable, because without them each of the defendants would be subjected to ruinous competition by some or all of the other mem- bers, and because those restraints did not exceed, either in scope or stringency, what was necessary to enable the defendants to obtain prices for their cast-iron pipe which were fair and reasonable to themselves and to the public, and because those restraints did not operate upon those cast-iron pipe companies which were not members of the defendants' association and which possessed more than double the capacity of all the defendants put to- gether, to manufacture and sell cast-iron pipe in competi- tion with the defendants. On this first question the court decided that the asso- ciation of the defendants, ''however reasonable the prices they fixed, however great the competition they had to encounter and however great the necessity for curbing themselves by joint agreement from committing financial suicide by ill-advised competition, was void at common law, because in restraint of trade and in tending to a monopoly." 85 Fed. Rep. 291, line 16 from the bottom. And the court also said that "it is certain that if the con- tract of association which bound the defendants was void and unenforceable at the common law because in restraint of trade, it is within the inhibition of the statute if the trade it restrained was interstate." 85 Fed. Rep. 278, last three lines and first two lines of page 279. These two adjudicated points in this formulation by Judge Taft of the decision of the Circuit Court of Ap- [leals for the Sixth Circuit, in the Addyston case, consti- tuted a construction of the word "restraint" in Section 1 of the Sherman law and that construction constituted a decision that that word in that law covers mutual re- straint between the members of a combination. DURING m'kini.h;y's administration. 127 There was no evidence in the Addyston case that the defendants' combination, as a whole or any of its mem- bers, had ever exercised any extraneous restraint upon any competitor or other outside party in respect of any making or selHng of any cast-iron pipe, and therefore the court had no occasion to decide and did not decide whether the word "restraint" in addition to being indi- cative of mutual restraint between the members of a combination, is also indicative of extraneous restraint exercised by that combination against one or more other parties. On the second question which was involved in the Ad- dyston case the defendants mainly relied upon the decision of the Supreme Court in the Knight case as applicable to the facts in the Addyston case and as show- ing that those facts did not constitute transactions in interstate commerce. But Judge Taft explained that the defendants and the defendants' counsel misunderstood the decision of the Supreme Court in the Knight case. On that point Judge Taft said : "It seems to us clear that from the beginning to the end of the opinion the Chief Justice draws the distinction between a restraint upon the business of manufacturing and a restraint upon the trade or commerce between the states in the articles after manufacture, with the manifest purpose of show- ing that the regulating power of Congress under the Constitution could only affect the latter, while the former was not under Federal control and rested wholly with the states." 85 Fed. Rep. 297, line 14 from the bottom. On this point Judge Taft also said : "The obstacle in the way of granting the relief asked for in the Knight case was (to use the language of the Chief Justice) that 'the contracts and acts of the defendants related ex- clusively to the acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania, and 128 HISTORY OF THE SHfiRMAN LAW. bore no direct relation to commerce between the states or with foreign nations." Thereupon Judge Taft also said: "That the defend- ants in the present case combined and contracted with each other for the purpose of restraining trade and com- merce among the states covered by their agreement, in the articles manufactured by them, is too clear to admit of dispute." Accordingly, he announced the decision of the Circuit Court of Appeals to be, that the decree of the Circuit Court must be reversed, with instructions to enter a new decree for the United States, perpetually en- joining the defendants from maintaining the combination in the cast-iron pipe business, which was described in the bill and substantially admitted in the answer, and from doing any business under that combination. It was in this case and in this court nearly eight years after the enactment of the Sherman law that the United States first took the judgment of a court upon Section 6 of the Sherman law, which is the section that provides that any property owned under any contract or combina- tion and being the subject of any such restraint of trade or commerce as that forbidden in Setcion 1, and being in course of transportation from one state to another, or to a foreign country, shall be forfeited to the United States. But the judgment of this Circuit Court of Appeals in this case on that point, was announced by Judge Taft to be that that section of the Sherman law could not be enforced in an action in equity and could be enforced only by special proceedings, like those provided by law for the forfeiture of property imported into the United States contrary to law and which proceedings must in- clude a trial by jury. The defendants in this Addyston case appealed from the decision of the Circuit Court of Appeals to the Su- preme Court of the United States, and that appeal was argued in th^t tribunal in April, 1899, by Frank Spur- DURING M^KINL^Y'S ADMINISTRATION. 129 lock and John W. Warrington, for the appellants, and by John K. Richards, who was then Solicitor General of the United States, for the appellee. In December, 1899, the Supreme Court unanimously affirmed the decision of the Circuit Court of Appeals in an opinion delivered by Justice Peckham and printed on pages 226 to 248 of vol- ume 175 of the United States Reports. It appears in that opinion that the attorneys for the appellants made in the Supreme Court a different argument from that which they had presented to the Circuit Court of Appeals. That new argument was based upon the contention that by the true construction of the Constitution the power of Con- gress to regulate interstate commerce is limited to pro- tecting such commerce from interference by state legis- lation or by some political subdivision of a state, in- cluding also power over common carriers, elevator com- panies, gas companies and water companies, for reasons peculiar to such common carriers and such companies. Accordingly, the appellants contended that the power of Congress to regulate interstate commerce does not in- clude the general power to prohibit or even to interfere with private contracts between citizens, even though such contracts have interstate commerce for their object, and result in a direct and substantial restraint thereof. Jus- tice Peckham devoted eight pages of the opinion which he delivered to this new argument, beginning as follows : "This argument is founded upon the assertion that the reason for vesting in Congress the power to regulate commerce was to insure uniformity of regulation against conflicting and discriminating state legislation, and the further assertion that the constitution guarantees liberty of private contracts to the citizen, at least upon com- mercial subjects, and to that extent the guaranty operates as a limitation on the power of Congress to regulate com- merce." Thereupon Justice Peckham proceeded to review this 130 HISTORY OF THI-: SHIjRMAN LAW. argument and made an admirable reply thereto, which reply ended as follows : "We conclude that the plain language of the grant to Congress of power to regulate commerce among the sev- eral States includes power to legislate upon the subject of those contracts in respect to interstate or foreign commerce, which directly affect and regulate that com- merce, and we can find no reasonable ground for as- serting that the constitutional provision as to the liberty of the individual limits the extent of that pov/^t as claimed by the appellants. We therefore think the ap- pellants have failed in their contention upon this branch of the subject." The next defense which the appellants asked the Su- preme Court to approve was to the eflfect that their com- bination was only a reasonable restraint among them- selves, which had been made to prevent ruinous mutual competition among the members of the combination, and to secure from the public prices for their cast-iron pipes which were fair to the purchasers as well as to the sellers. In respect of this defense Justice Peckham said : "Even if the objection thus set up would, if well founded in fact, constitute a defense, we agree with the Circuit Court of Appeals in its statement of the special facts upon this branch of the case and with its opinion thereon, as set forth by Circuit Judge Taft. The facts thus set forth show conclusively that the effect of the combina- tion was to enhance prices beyond a sum which was rea- sonable." The third defense which the appellants presented to the judgment of the Supreme Court was to the effect that the mutual combination of the appellants had no direct bearing upon interstate commerce, but related only to transactions conducted locally, within particular states, and that therefore the case ought to be decided in favor DURING m'kinley's administration. 131 of the appellants in accordance with the decision of the Supreme Court in the Knight case. Justice Peckham met and answered this third defense by saying that the direct effect of the cast-iron pipe agreement or combination was to regulate interstate com- merce and that therefore the case was not covered by the Knight case, because the only combination proved in that case related to manufacture in the state of Pennsylvania and did not relate to commerce among the states or with foreign nations. Further speaking of the Knight case, Justice Peckham said that it "was decided upon the prin- dple that a combination simply to control manufacture was not a violation of the act of Congress, because such a contract or combination did not directly control or af- fect interstate commerce, but that contracts for the sale and transportation to other states of specific articles were proper subjects for regulation, because they did form part of such commerce." Thereupon Justice Peckham, in order to distinguish this Addyston case from the Knight case, proceeded to define exactly what was the character of the Addyston combination in the following sentence: "While no particular contract regarding the furnish- ing of pipe and the price for which it should be furnished was in contemplation of the parties to the combination at the time of its formation, yet it was their intention, as it was the purpose of the combination, to directly and by means of such combination increase the price for which all contracts for the delivery of pipe within the territory above described should be made and the latter result was to be achieved by abolishing all competition between the parties to the combination." Thereupon Justice Peckham said that "The direct and immediate result of the combination was therefore nec- essarily a restraint upon interstate commerce, in respect 132 HISTORY OF the; SHERMAN Ijineteen of those forty-four cases were begun under the direction of Attorney General Moody, and the remaining twenty were begun under the direction of Attorney General Bonaparte. Those chapters of this book which record the history of the Sherman law during the administrations of Presi- dents Harrison, Cleveland and McKinley, respectively, contain accounts of all of the cases which were brought and prosecuted under that law, at any time during those three administrations. But the public cases which were prosecuted under that law during the administration of President Roosevelt, and the private cases, which during that administration were Htigated between private parties, relevant to that law, were so numerous, that this chapter win give accounts of only those of them which resulted in the adjudication of important points, which were not adjudicated prior to the beginning of the administration of President Roosevelt. Those public cases which are thus noteworthy were the following: 1. United States vs. Northern Securities Co. and others, 120 Fed. Rep. 721, and 193 U. S. 197. This was an action in equity which was begun March 10, 1902, by the United States, in the Circuit Court of the United States for the District of Minnesota, to enjoin the North- ern Securities Company from holding any of the shares of the capital stock of the Northern Pacific Railway Company, or of the Great Northern Railway Company, and from exercising any control over either of those railway companies. The facts which were established in the case were essentially as follows: The Northern Pacific Railway Company and the Great Northern Railway Company were the owners respectively of two theretofore com- DURING rooseveWs administration. 181 peting railways, which extended from the shores of the Mississippi River and of Lalte Superior to the shores of Puget Sound. In the summer of 1901 certain large stock- holders in the Northern Pacific Company, and certain large stockholders in the Great Northern Company, who had practical control of those two companies respec- tively, combined to make a plan to organize a holding company in New Jersey, with a capital stock of $400,- 000,000, and to transfer most of that stock to the holders of the majority of the stock of the Northern Pacific Company and to the holders of the majority of the stock of the Great Northern Company, in exchange for a majority of the stock of each of those railway com- panies. This plan was executed by the organization of such a holding company in New Jersey, in November, 1901, which holding company was named the Northern Securities Company. When the Securities Company Was organized it assented to the plan which it was organized to promote ; and that plan was thereupon executed to the extent of the acquirement by the Northern Securities Company of about 96 per cent; of all the stock of the Northern Pacific Railway Company, and about 76 per cent, of all the stock of the Great Northern Railway Company. The bill of complaint stated that these facts constituted a contract combination or conspiracy in restraint of in- terstate commerce in violation of the Sherman law, and prayed for a decree to judicially establish that proposi- tion. On February 11, 1903, Congress enacted, and Presi- dent Roosevelt approved, an Act to expedite the hear- ing and determination of suits in equity brought under the Sherman law, or brought under the interstate com- merce law. That act provided that any such suit in equity brought by the United States should, at the request of the Attorney General, be assigned for hearing at the earliest 182 HISTORY OF THE SHERMAN LAW. practical day in the Circuit Court in which it was brought, before not less than three judges; and that whatever ap- peal might be taken from the decision of the Circuit Court, thus held by not less than three judges, must be taken directly to the Supreme Court of the United States. In pursuance of this expediting statute, the Northern Securities case was argued in March, 1903, in the United States Circuit Court for the District of Minnesota, with all the four Circuit Judges of the Eighth Judicial Cir- cuit sitting as that Circuit Court. These were Judges Caldwell, Sanborn, Thayer and Van Devanter. The arguments for the United States were mg.de by Attorney General Knox himself, assisted by four other counsel. The arguments for the defendant were made by John W. Griggs, assisted by five other counsel; Mr. Griggs having been the predecessor of Mr. Knox as Attorney General of the United States. The opinion of the court was delivered by Judge Thayer, without any dissent from any other judge among the four who heard the arguments and participated in the decision of the court. That opinion was among the last of the writings of its distinguished author, for Judge Thayer died in 1905. After stating the facts of the case, somewhat more elaborately than they have been stated in this chapter. Judge Thayer proceeded as fol- lows: "The scheme which was thus devised and consummated led inevitably to the following results : First, it placed the control of the two roads in the hands of a single person, to wit, the Securities Company, by virtue of its ownership of a large majority of the stock of both com- panies; second, it destroyed every motive for competi- tion between two roads engaged in interstate traffic, which were natural competitors for business, by pooling DURING ROOSEVEI-T's ADMINISTRATION. 183 the earnings of the two roads for the common benefit of the stockholders of both companies; and, according to the famihar rule that every one is presumed to intend what is the necessary consequence of his own acts when done wilfully and deliberately, we must conclude that those who conceived and executed the plan aforesaid intended, among other things, to accomplish these ob- jects." "It will not do to say that, so long as each railroad company has its own board of directors, they operate independently, and are not controlled by the owner of the majority of their stock. It is the common experi- ence of mankind that the acts of corporations are dic- tated, ■ and that their policy is controlled by those who own the majority of their stock." "The general question of law arising upon this state of facts is whether such a combination of interests as that above described falls within the inhibition of the anti-trust act or is beyond its reach. The act brands as illegal, 'every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign na- tions.' Learned counsel on both sides have commented on the general language of the act, and the generality of the language employed is, in our judgment, of great significance. It indicates, we think, that Congress, being unable to foresee and describe all the plans that might be formed and all the expedients that might be resorted to to place restraints on interstate trade or commerce, de- liberately employed words of such general import as, in its opinion, would comprehend every scheme that might be devised to accomplish that end." "If the same indivaduals who promoted the Securities Company had transferred their stock in the two railroad companies to a third party, and had agreed to induce other shareholders to do likewise, until a majority of the 184 HISTORY O^ THB SHERMAN LAW. Stock of both companies had been vested in a single in- dividual or association of individuals, and had empowered the holder or holders to vote the stock as their own, receive all the dividends thereon, and divide them among those shareholders of the two companies who had trans- ferred their stock, the result would have been a com- bination in direct restraint of interstate commerce, be- cause it would have placed in the hands of a small coterie of men the power to suppress competition between two competing interstate carriers, whose lines are practically parallel." "It is manifest, therefore, that the New Jersey charter of the Northern Securities Company is about the only shield which the defendants can interpose between them- selves and the law. The reasoning which led to the ac- quisition of that charter would seem to have been that while, as individuals, the promoters could not, by agree- ment among themselves, place the majority of the stock of the two competing and parallel railroads in the hands of a single person, or a few persons, giving him or them the power to operate the roads in harmony and stifle com- petition, yet that the same persons might create a purely fictitious person termed a corporation, which could neither think nor act except as they directed, and, by placing the same stock in the name of that artificial being, could accomplish the same purpose. The manifest unreason- ableness of such a proposition, and the grave consequences sure to follow from its approval, compel us to assume that it must be unsound; especially when we reflect that the law, as administered by courts of equity, always looks at the object accomplished, rather than upon the particular devices or means by which it has been accom- plished." "If the State of New Jersey had undertaken to invest the incorporators of the Securities Company with power to do acts in the corporate name, which would operate DURING ROOSEVEWs ADMINIStRATlON. 185 to restrain interstate commerce, we have no doubt that such a grant would have been void, under the provisions of the anti-trust act, or at least that the charter could not be permitted to stand ki the way of the enforcement of that act." After Judge Thayer had thus discussed and settled that one of the arguments of the defendant which was based upon the New Jersey charter of the Securities Company, he proceeded to state and upset several other arguments, the original equilibrium of which was quite unstable, and all of which are quite obsolete now. Hav- ing disposed of those minor matters, Judge Thayer reached the final contention of the defendant, which was that the Northern Securities combination was not formed to restrain commerce, but to promote commerce and to enlarge the volume of interstate traffic, and thus to benefit the public. After stating the defendant's argument in support of this defense, and of the propositions upon which it was based, in terms extremely favorable to that argument and to those propositions, Judge Thayer concluded his discussion of the whole case with the following para- graph : "We shall neither affirm nor deny either of these propositions, because they present issues which we are not called upon to determine, and some of them are issues which no court is empowered to hear or decide, involving, as they do, questions of public policy which Congress . must determine. It is our duty to ascertain whether the proof discloses a combination in direct re- straint of interstate commerce ; that is to say, a combina- tion whereby the power has been acquired to suppress competition between two or more competing and parallel lines of railroads engaged in interstate commerce. If it does disclose such a combination — and we have little hesitation in answering this question in the affirmative — 186 HISTORY OP THE SHERMAN LAW. then the anti-trust act, as it has been heretofore inter- preted by the court of last resort, has been violated, and the government is entitled to a decree." The decree which was accordingly made, was entered on April 9, 1903. That decree adjudged in substance, that the defendants had theretofore entered into a com- bination or conspiracy in restraint of trade and commerce among the several states, in violation of the Sherman law; and that all the stocks of the Northern Pacific Railway Company, and all the stocks of the Great North- ern Railway Company, then claimed to be owned and held by the Northern Securities Company, were acquired and were being held in virtue of said combination or con- .spiracy; and that the Northern Securities Company was thereby enjoined from acquiring, or attemptinf,' to acquire, any more stock of either of those railway companies, and from voting any of the stock which it then held, at any meeting of the stockholders of either of the said railway companies, and from exercising, or attempting to exer- cise, any control, direction, supervision or influence over any of the acts or doings of either of said railway com- panies, by virtue of holding said stock therein ; and that the Northern Pacific Railway Company and the Great Northern Railway Company be likewise enjoined from paying any dividends to the Northern Securities Com- pany on account of any stock in either of said railway companies, claimed to be owned or held by the Northern Securities Company. This decree expressly omitted to provide what was to be done with the stocks of the Northern Pacific Railway Company and the Great Northern Railway Company, respectively, which the decree prohibited the Northern Securities Company from using any more, cither as means of controlling the Northern Pacific Railway Com- pany and the Great Northern Railway Com])any, or as DURING ROOSUVEW'S ADMINISTRATION. 187 means of collecting dividends from those railway com- panies, respectively. An appeal to the Supreme Court of the United States was taken by the defendants from the adverse decree of the Circuit Court for the District of Minnesota, and that appeal in December, 1903, was argued in the Su- preme Court by Mr. Griggs and other counsel for the appellants, and by Attorney General Knox for the United States. Condensations of those arguments are printed on pages 257 to 317 of Volume 193 of the United States Reports, where they can be read by those who wish to ascertain in detail what views of the Sherman law were held, or at least were stated in 1903 T)y those distin- guished lawyers, respectively. The decision of the Supreme Court, in pursuance of that appeal and those arguments, was announced by Justice Harlan on March 14, 1904, in the following sen- tence : "The judgment of the court is that the decree below be and hereby is affirmed, with liberty to the Circuit Court to proceed in the execution of its decree, as the circumstances may require." Justice Harlan also delivered a written opinion, stating the reasons which caused him to favor that judgment of the court which he announced; and justices Brown, McKenna and Day concurred in that written opinion of Justice Harlan. Justice Brewer also delivered a written opinion in which he stated that he concurred in the judgment of the court, which Justice Harlan had announced, but that he did not concur with every part of the opinion which Justice Harlan had delivered. Justice White delivered a written opinion in which Chief Justice Fuller, Justice Peckham and Justice Holmes concurred, and which opinion dissented from the 188 HISTORY Ot THE SHERMAN LAW. judgment of the court; and set forth one particular line of argument, in support of that dissent. Justice Holmes also delivered a written opinion in which Chief Justice Fuller, Justice White and Justice Peckham concurred, and which opinion also dissented from the judgment of the court; and set forth another particular line of argument in support of that dissent. These four written opinions comprised about forty thousand words, and are printed on pages 317 to 411 of Volume 193 of the United States Reports. They are all very learned and very able writings which require careful analysis, followed by careful comparison, in order to be fully understood. Such an analysis of the opinions of Justice Harlan and Justice Brewer, respectively, when followed by such a comparison of those opinions, will show that the points which both of those opinions agreed in adjudicating, can be accurately stated as follows : The Northern Securities Company was organized as a holding company to acquire a majority of the stock of the Northern Pacific Railway Company, and also a ma- jority of the stock of the Great Northern Railway Com- pany, in exchange for its own stock, which was issued to those stockholders of the two railway companies, re- spectively, from which the Northern Securities Company acquired such stock in the two railway companies. The purpose of the parties to this transaction was to stop forever all competition between the two railway companies, relevant to transporting freight or passengers over the theretofore competing railroads, which were owned by those two railway companies, respectively, and used by them in very extensive interstate commerce. The foregoing purpose, followed by the foregoing transaction, constituted a violation of Section 1 of the Sherman law; because it amounted to a "combination DURING Roosevelt's administration. 189 or conspiracy in restraint of trade and commerce among the several states." Section 1 of the Sherman law is violated wherever a holding company is organized and used to acquire a majority of the corporate stock of two or more there- tofore competing operating companies, for the purpose of stopping their competition, and thereafter managing those operating companies, without any mutual competi- tion, in some business which includes some form of inter- state or international commerce. An analysis and comparison of the dissenting opinions which were written by Justices White and Holmes, re- spectively, will show that those two opinions comprise two independent but harmonious arguments, both of which were concurred in by both of their authors, re- spectively, and also by Chief Justice Fuller and Justice Peckham. Justices White and Holmes simply divided between themselves the work of setting forth in writing all the grounds upon which the dissents of the four minority justices were based: Justice White formulating one ar- gument, which was thought by all four justices to be fatal to the case of the United States; and Justice Holmes formulating another argument, which all four of the minority justices likewise thought to be fatal to that construction to the Sherman law, which the majority of the court held to be its true construction. The pivotal point in the argument which Justice White made in the dissenting opinion which he wrote, was to the effect that the constitutional power of Congress to regulate interstate commerce does not include any power to regulate the acquirement of instrumentalities suitable for use in interstate commerce; though it does include the power to regulate the use of those instrumentalities. 190 HISTORY OF THE SHERMAN LAW. after they have been acquired. Holding this view of constitutional law, Justice White quite logically concluded that the decree of the Circuit Court ought to be reversed, because none of the defendants were shown in the record to have taken part in any overt act in restraint of inter- state commerce, in pursuance of any combination or con- spiracy to that end, which may have been comprised in the organization and business of the Northern Securities Company. The written opinion of Justice White comprises an elaborate and animated argument in support of his view, that the Sherman law is not violated by any combination or conspiracy to restrain interstate commerce, unless that combination or conspiracy is followed by some actual restraint of interstate commerce. One of the places wherein Justice White stated that view is near the middle of page 393 of Volume 193 of the United States Reports, where he inserted the following two sentences: "True, the instrumentalities of interstate commerce are subject to the power to regulate commerce, and therefore such instrumentalities, when employed in interstate com- merce may be regulated by Congress as to their use in said commerce. But this is entirely distinct from the power to regulate the acquisition and ownership of such instrumentalities, and the many forms of contracts from which such ownership may arise." The pivotal point in the argument which Justice Holmes made in the dissenting opinion which he wrote, was to the effect that the word restraint in Section 1 of the Sherman law should be construed as confined to ex- traneous restraint, exercised against strangers to the con- tract, combination or conspiracy which is used to produce that restraint. The written opinion of Justice Holmes covers only eleven pages, and is characterized by the charming and DURING Roosevelt's administration. 191 luminous literary style of its accomplished author. Its argument is that the words "contract, combination, or conspiracy in restraint of trade or commerce," should be construed in the light of the common law, rather than in the light of the dictionary ; and that when those words are thus construed, it will be found that "contracts in restraint of trade" occur only when a contract is made between two strangers, which provides that one of them shall not compete with the other in a particular business, or which at least restricts his previously existing freedom to engage in such competition; and that it will likewise be found that the words "combination or conspiracy in restraint of trade" occur only when two or more other- wise independent parties make a combination or con- spiracy for the purpose of keeping strangers to the agree- ment from competing with the parties to the agreement. These views are vividly set forth in those two para- graphs of the written opinion of Justice Holmes, the first of which begins with line 12 from the bottom of page 403, and the second of which ends with line 19 from the top of page 405 of Volume 193 of the United States Reports. Holding this view of the proper construction of the Sherman law. Justice Holmes concluded that the decree of the Circuit Court ought to be reversed, because the Northern Securities combination first established a per- manent community of interest between the Northern Pacific Railway Company and the Great Northern Rail- way Company, after which it would be impossible for either of those railway companies to make a "contract" with the other to restrict the freedom of competition of either with the other; for that community of interest being established, the two railway companies were no longer strangers ; and because the combination of the two railway companies, by means of the Northern Securities Company, did not include any purpose of extraneous re- ' straint upon strangers to that combination. 192 HISTORY OF THE SHERMAN LAW. Justice Holmes recognized the probability that some readers of his written opinion might find that opinion inconsistent with the decisions of the Supreme Court in the Trans-Missouri case and in the Joint Traffic Asso- ciation case. He therefore distinguished the decisions of the court in those two cases from the decision which he thought ought to be made by the court in the North- ern Securities case, by pointing out that the combination which was made in each of those two cases was confined to regulating interstate commerce, and left the parties to that combination quite independent in other respects; whereas the combination which was made in the North- ern Securities case practically operated to unite the par- ties thereto, not only in respect of their interstate com- merce business, but also in all respects whatever. On this point, Justice Holmes, in speaking of the Trans- Missouri case and the Joint Traffic Association case, said : "I accept those decisions absolutely, not only as bind- ing upon me, but as decisions which I have no desire to criticise or abridge." This analysis of the dissenting opinion of Justice Holmes reduces the ground of his dissent to the propo- sition that where two railroad companies combine to mutually restrain their interstate commerce, but do not combine in any other respect, they thereby violate the Sherman law; but that where two railroad companies combine to mutually restrain all their businesses, includ- ing their interstate commerce, they do not violate the Sherman law. It was not necessary to the argument of Justice Holmes for him to say that he accepted absolutely, as binding upon him, the prior decisions of the Supreme Court in the Trans-Missouri case and in the Joint Traf- fic Association case. But he did insert that proper and loyal statement in his dissenting opinion in the Northern DURING Roosevelt's administration. 193 Securities case, though he knew that the decision of the Supreme Court in each of the cases to which he re- ferred was concurred in by only five of the nine justices, who constituted the Supreme Court, when that decision was rendered. In like manner it is to be expected that hereafter Justice Holmes will accept the decision of the Supreme Court in the Northern Securities case as bind- ing upon him, though that decision was concurred in by only five of the nine justices who constituted the Supreme Court when that decision was rendered. Three of the five justices who constituted the majority of the Supreme Court when the Northern Securities case was decided, are still members of that tribunal, while only two of the four justices who dissented from that decision are now members of that court. It is not to be expected that hereafter any of those three justices will dissent from the proposition of law which they helped to establish in the Northern Securities case; whereas it is to be expected that both of the justices who dissented from that decision, and who still remain upon the bench, will hereafter acquiesce in that proposi- tion of law, on the ground that though they were origin- ally unable to agree thereto, it was established by a ma- jority vote of the court, and has now stood so long un- reversed and unmodified by any other decision, that it would be unjust to the people to modify it or reverse it now. After the decision of the Supreme Court of March 14, 1904, was rendered in this Northern Securities case, it became necessary for the Northern Securities Com- pany to dispose, in some way or another, of the shares which it had been holding of the capital stock of the Northern Pacific Railway Company, and also the shares which it had been holding of the capital stock of the Great Northern Railway Company, and thereupon to dis- 194 HISTORY OF THE SHERMAN LAW. tribute the proceeds among its own stockholders. In pursuance of this duty, the Board of Directors of the Northern Securities Company, on March 22, 1904, adopt- ed certain preambles and resolutions, reciting that the company had acquired and then held 1,537,594 shares in the capital stock of the Northern Pacific Railway Com- pany, and 1,181,242 shares in the capital stock of the Great Northern Railway Company, and that there was then outstanding 3,954,000 shares of its own capital stock, and that it was going to distribute those shares of North- ern Pacific stock pro rata among its own stockholders, and was also going to distribute those shares of Great Northern stock pro rata among its own stockholders, in exchange for outstanding shares of its own stock, which when thus recovered was going to be retired. This plan would not operate to return the Northern Pacific stock to the Northern Pacific stockholders, nor the Great Northern stock to the Great Northern stock- holders, who had respectively transferred those stocks to the Northern Securities Company at the time of its organization. Quite otherwise, this plan would operate to give to the original Northern Pacific Stockholders, and also to the original Great Northern stockholders about one-third more Northern Pacific stock than Great North- ern stock. That method of distribution resulted in giv- ing the men who controlled the Great Northern Com- pany, prior to the organization of the Northern Securi- ties Company, control of both railway companies. But this arrangement was not admired by Mr. E. H. Harri- man, for it left him the leader of only a minority interest in the two railway companies, instead of being, as he had formerly been, the leader of the majority interest in the Northern Pacific Company. But Mr. James J. Hill liked the scheme immensely, because it gave the in- terests of which he was the leader control of both rail- way companies, whereas before the organization of the DURING ROOSBVELT'S ADMINISTRATION. 195 Northern Securities Company, the Hill interests con- trolled only the Great Northern Railway Company. Under these circumstances, Mr. Harriman and his associates promptly filed a bill in equity in the United States Circuit Court for the District of New Jersey, stating the facts and praying that his party should some- how be enabled to get back its original Northern Pacific stock, leaving the original Great Northern stock to go to those who had contributed it to the Northern Securities combination. The defendants to this bill in equity were the Northern Securities Company and others, the presi- dent of the Northern Securities Company being James J. Hill, who was also president of the Great Northern Rail- way Company. This case was decided in favor of Har- riman and his associates on July 15, 1904, by Judge Bradford, then holding the United States Circuit Court for the District of New Jersey, 132 Fed. Rep. 464. But the Circuit Court of Appeals for the Third Circuit in pursuance of an opinion of Judge Dallas, concurred in by Judge Acheson, but dissented from by Judge Gray, reversed the decision of Judge Bradford on Janury 5, 1905, 134 Fed. Rep. 331. And the Supreme Court of the United States on April 3, 1905, delivered an opinion through its Chief Justice, affirming the decision of the Circuit Court of Appeals, and directing the Circuit Court to dismiss the bill of complaint, 197 U. S. 244. The pivotal point in this opinion of the Supreme Court was its decision that when the stocks of the Great North- ern Railway Company and the Northern Pacific Railway Company were assigned to the Northern Securities Com- pany at the time of its organization, the Northern Securi- ties Company took the unconditional ownership of those stocks, and did not take them as trustee for the parties who assigned them to the Northern Securities Company in exchange for shares of Northern Securities stock. 196 HISTORY 01? THE SHERMAN LAW. That decision was therefore to the effect that the North- ern Securities Company was a holding company which owned the stocks which it held, and was not a trustee or a "trust." The result of the entire Northern Securities scheme was to confer upon the interests of which James J. Hill was the leader the control of both the Great Northern Railway Company and the Northern Pacific Railway Company; and while he lives to lead those interests, and while a majority of the stock of each of those railroad companies is owned or controlled by various combinations of men or corporations, who will follow his leadership, he will constitute a confederating bond of the two rail- way companies, perhaps nearly as effective as the North- ern Securities Company would have constituted, if it had been permitted to continue to act as such a bond. But the charter of the Northern Securities Company provided that that corporation was to live forever; whereas, Mr. James J. Hill is an old man whose extraordinary powers of leadership cannot long continue. For this reason the practical difference between the government of two naturally competing corporations by one immortal holding corporation, on the one hand, and the government of those two competing corporations by one man on the other hand, is the difference between the continuance of such an arrangement for a short time and its continuance forever. Whether the Sherman law words "combination in the form of trust or otherwise," constitutionally can, or con- structively do, cover the present combination of the Great Northern Railway Company and the Northern Pacific Railway Company in the form of James J. Hill, is a question, the answer to which cannot be positively deduced from the decision of the Supreme Court in the DURING ROOSEVieLT's ADMINISTRATION. 197 Northern Securities case, for such a question was not involved in that case. 2. United States vs. Swift & Co. and others, 122 Fed. Rep. 529, and 196 U. S. 375. This was an action in equity, brought by the United States in the Circuit Court for the Northern District of Illinois, in its northern divi- sion, in May, 1902, against seven corporations, one part- nership and twenty-three individuals. The petition stated that the defendants, in violation of the Sherman law, and in order to restrain competition among themselves in the purchase of live stock necessary to the production of the meats produced by them, had made a combination and conspiracy between themselves to refrain from bid- ding against each other when buying live stock from owners who sent such stock from different states to the Chicago Stock Yards for competitive sale; and had also combined to execute other schemes in restraint of inter- state commerce in live stock and also in meat. The defendants filed a demurrer to this petition, and that demurrer having been argued before Judge Gross- cup, one of the Circuit Judges for the Seventh Circuit, he overruled it on April 18, 1903, and immediately grant- ed a preliminary injunction against the defendants, in pursuance of Section 4 of the Sherman law. The written opinion of Judge Grosscup in deciding this case against the defendants, contained several strong paragraphs such as are characteristic of much of Judge Grosscup's judicial writing. Among those paragraphs were the following: "Commerce, briefly stated, is the sale or exchange of commodities. But that which the law looks upon as the body of commerce is not restricted to specific acts of sale or exchange. It includes the intercourse — all the initia- tory and intervening acts, instrumentalities and dealings 198 HISTORY OF THE SHERMAN LAW. — that directly bring about the sale or exchange. Thus, though sale or exchange is a commercial act, so also is the solicitation of the drummer, whose occupation it is to bring about the sale or exchange. The whole trans- action from initiation to culmination is commerce." "When commerce, thus broadly defined, is between parties dealing from different states — ^to be effected so far as the immediate act of exchange goes by transporta- tion from state to state — it is commerce between the states, within the meaning of the Constitution and the statute known as the Sherman Act." "The statute has no concern with prices, but looks solely to competition, and to the giving of competition full play, by making illegal any effort at restriction upon competition. Whatever combination has the direct and necessary effect of restricting competition, is, within the meaning of the Sherman Act as now interpreted, re- straint of trade." "Thus defined, there can be no doubt that the agree- ment of the defendants to refrain from bidding against each other in the purchase of cattle, is combination in re- straint of trade ; so also their agreement to bid up prices to stimulate shipments, intending to cease from bidding when the shipments have arrived. The same result fol- lows when we turn to the combination of defendants to fix prices upon, and restrict the quahties of meat shipped to their agents or their customers. Such agree- ments can be nothing less than restriction upon competi- tion, and, therefore, combination in restraint of trade; and thus viewed, the petition, as an entirety, makes out a case under the Sherman Act." "The Sherman Act, as interpreted by the Supreme Court, is the law of the land, and to the law as it stands, both court and people must yield obedience." DURING Roosevelt's administration. 199 An appeal from Judge Grosscup's decision was prompt- ly taken by the defendants to the Supreme Court of the United States, and was argued and decided in that tribu- nal in January, 1905. The Supreme Court opinion was written by Justice Holmes, and was concurred in by all the other justices of the Supreme Court. The writ of injunction which had been issued in pursuance of the decision of Judge Grosscup, prohibited the defendants from doing a considerable number of illegal things therein specified; and also prohibited the defendants from re- stricting competition by "any other method or device." The Supreme Court decided that the injunction ought to be modified by striking out that non-specific provision and that being thus modified, it was right and should be affirmed. This modification was ordered on the ground that the writ of injunction was complete enough without those words, and that it is improper, in a writ of injunction, to command a defendant to obey the law without telling him wherein disobedience would consist. 3. United States vs. MacAndrews & Forbes Co. and others, 149 Fed. Rep. 823. This was a decision ren- dered by Judge Hough in December, 1906, in the United States District Court for the Southern District of New York, overruling a demurrer to an indictment, which was based on alleged violations of Sections 1 and 2 of the Sherman law. The first eight pages of Judge Hough's decision were devoted to stating his reasons for overruHng five objections to the form of the in- dictment; and which objections, though elaborately ex- plained in those pages, were too technical to be suitable for explanation here. The last three pages of Judge Hough's decision were devoted to overruling five objec- tions to the substance of the indictment; and his deci- sions on those five objections were respectively as fol- lows: 200 HISTORY OF The SHERMAN LAW. "The defendants' doing did directly affect interstate commerce. Commerce among the states is not a tech- nical legal coneeption, but a practical one drawn from the course of business. The criterion as to whether any given business scheme falls within the prohibition of the statute, is its effect upon interstate commerce, which need not be a total suppression of trade, nor a complete monopoly; it is enough if its necessary operation tends to restrain interstate commerce, and to deprive the pub- lic of the advantages flowing from free competition. Applying these general considerations to the case in hand, I have no doubt that the arrangement alleged in the in- dictment immediately, directly, and of intention, re- strained interstate commerce." "A corporate act may also be an act of whatever officer or officers actively performed that act, for the corpo- ration chargeable therewith." "Those officers of a corporation which is engaged in in- terstate commerce, who conduct that business as officers of that corporation, are themselves engaged in interstate commerce." "A corporation can conspire; and the old notion has long since vanished, that a corporation is not responsible for doing anything which is not authorized by its charter." "The monopolization or attempt to monopolize which is prohibited by Section 2 of the Sherman law, can be committed by one person alone ; whereas a contract, com- bination or conspiracy to violate the Sherman law can- not be made by one person only." The trial of the defendants in this case was begun by Judge Hough with a jury on December 19, 1906; and on January 10, 1907, two corporations defendant were found guilty, while a verdict of acquittal of the individual defendants was rendered. Thereupon the two corpo- DURING ROOSEVELT'S ADMINISTRATION. 201 rations defendant made motions in arrest of judgment, and also to set aside the verdict on the ground that that verdict found them guilty of violating Section 1 and also of violating Section 2 of the Sherman law, and thus sub- jected them to double punishment for what was really only one offense; although that offense was not only a contract, combination or conspiracy in restraint of inter- state commerce, contrary to Section 1, but was also an attempt to monopolize some interstate commerce contrary to Section 2 of the Sherman law. Judge Hough over- ruled those motions on January 17, 1907, on the ground that the offenses prohibited by Sections 1 and 2 of the Sherman law, respectively, are diiiferent in substance and effect, and are different in law. Thereupon Judge Hough rendered a judgment fining one of the corporations defendant $5,000 for its viola- tion of each of Sections 1 and 2 of the Sherman law, making $10,000 in all; and fining the other corporation defendant $4,000 for its violation of Section 1 of the Sherman law and $4,000 for its violation of Section 2 of that law, making $8;000 in all. 149 Fed. Rep. 836. Those two corporations defendant thereupon sought to avoid their punishment by taking their cases to the Su- preme Court of the United States" by means of writs of error; but on October 13, 1908, they themselves asked and secured from that court dismissals of their own cases from that tribunal. 212 U. S. 585. 4. Judge Speer's charge to a Grand Jury in the United States District Court for the Eastern District of Georgia, of February 7, 1907, printed on pages 834 to 846, inclusive, of Volume 151 of the Federal Reporter, was a valuable contribution to the history of the Sherman law, in that it delineated much of the history of the law of England, relevant to restraints of business by means of combinations and monopolies ; and in that it set forth 202 HISTORY OF THE SHERMAN LAW. some account of the efforts which during many years had been made by the people of the United States to protect themselves from trusts and combinations; and in that it quoted important statements from the writings of great thinkers in England and America relevant to the same subject; and in that it commented instructively upon some of the decisions which had been rendered by the Supreme Court relevant to the Sherman law. Some of the additions of Judge Speer to the judicial literature of the subject were the following: "The anti-trust laws of the United States are but the evolution of the ancient laws of our law-loving race against the monopolies which oppressed the people. Monopolies are equally obnoxious to the philosophy of Thomas Jefferson and of Sir Edward Coke; the shib- boleth of the former — equal rights to all and special priv- ileges to none — is often heard. The latter, three hundred and fifty years ago denounced them." "The efforts of the people of this country to protect themselves against the injurious results of trusts and combinations have lasted now for many years. This is true of constitutional as of statutory law. Modern state Constitutions of Illinois, Arkansas, Califorina, Colorado, Georgia, Massachusetts, Nebraska, Pennsylvania, Texas and West Virginia have provisions on the general sub- ject." "Monopolies first began in a large way to betray their injustice to the masses of the people in the reign of Queen Elizabeth. She granted her courtiers and ser- vants the privileges of certain monopolies. These they sold to others, who were thereby enabled to raise com- modities to what prices they pleased and to put invin- cible restraints upon commerce and industry. Currants, salt, iron, powder, leather, oil, potash, vinegar, steel, brushes, pots, bottles, saltpetre, lead, glass, paper, starch, tin, sulphur, were some but not all of the commodities DURING rooseveWs administration. 203 which were monopolized in England during the reign of Queen Elizabeth." Judge Speer thereupon set forth to the Grand Jury a sketch of the history of a bill which was introduced into Parliament before the end of the reign of Elizabeth for the purpose of checking her exercise of the royal prerog- ative in respect of granting monopolies to particular per- sons among her subjects. During the debate in the House of Commons on that bill Sir Francis Bacon de- livered a speech in opposition thereto wherein he said : "With regard to monopolies, the case hath ever been to humble ourselves unto Her Majesty and by petition desire to have our grievancs remedied, especially when the remedy touched her so nigh in point of prerogative. I say, and I say it again, that we ought not to deal, to judge or meddle with Her Majesty's prerogative. I wish, therefore, every man to be careful of this busi- ness." Other members, who were less famous, but more brave than Sir Francis Bacon, advocated the bill, among these Mr. Montague said: "The grievances are great and I would note only unto you thus much that the last Parlia- ment we proceeded by way of petition, which had no suc- cessful effect." And Mr. Francis More said: "I know the Queen's prerogative is a thing curious to be dealt withal ; yet all grievances are not comparable. I cannot utter with my tongue or conceive with my heart the great grievances that the town and country for which I serve, suffereth by some of these monopolies. It bringeth the general profit into a private hand and the end of all this is beggary and bondage to the subjects. Out of the spirit of humiliation do I speak it, there is no act of hers that has been or is more derogatory to her own majesty, more odious to the subjects, more dangerous to 204 HISTORY OF THB SHERMAN LAW. the commonwealth, than the granting of these mon- opolies." Mr. Martin, with even higher spirit, declared: "I do speak for a town that grieves and pines, for a country that groaneth and languisheth, under the burden of monstrous and unconsciencable monopolies of starch, tin, cloth, oil, vinegar, salt and I know not what; nay, what not! The principalest commodities, both of my town and country, are engrossed into the hands of these bloodsuckers of the commonwealth. Such is the state of my own town and country ; the traffic is taken away, the inward and private commodities are taken away and dare not be used without the license of these monopolitans. If these bloodsuckers be still let alone to suck up the best and principalest commodities which the earth there hath given us, what will become of us, from whom the fruits of our own soil and the commodities of our own labor shall be taken by warrant of supreme authority, which the poor subject dare not gainsay." But the "monopolitans" of the Elizabethan age were powerful enough to prevent the passage of the bill which had been introduced into the House of Commons by Mr. Lawrence Hyde, and which had been thus eloquently ad- vocated by Mr. Montague, Mr. More and Mr. Martin, and no such bill was enacted by Parliament prior to the end of the reign of Queen Elizabeth. Having traced the subject of monopolies down to this point of time. Judge Speer imparted to the Grand Jury the following information : "It was not until the reign of her successor, James I, that relief to the people was afforded. In the first Parlia- ment of this King a Committee of Grievances was ap- pointed, of which Sir Edward Coke was the chairman, and it is doubtless ascribable to the labors of this great lawyer that the English statute was enacted which to this DURING rooseveWs administration. 205 day stands in all its original vigor among the laws of Eng- land. Of this act against monopolies our own anti-trust law is intended to be the equivalent, as affecting all mat- ters to which the legislative and judicial power of the United States may extend. The heart of man to-day is much the same as in the days of Elizabeth and James. The greed and avarice of the powerful sometimes take little thought of the losses they entail on others not so powerful. Not only do such combinations tend to de- stroy all healthy rivalry and competition among those who purchase or sell the products of the people, but they sometimes little reck the miseries and destitution inflicted on the producers themselves, the stories of whose lives are often told in the short and simple annals of the poor." The English statute, referred to by Judge Speer in the last paragraph, was the "Statute of Monopolies," which was passed by Parliament and approved by King James I on March 24, 1624. Section 1 of that statute was as follows : "All monopolies and all commissions, grants, licenses, charters and letters patent to any person or persons, bodies politic or corporate, whatsoever, of or for the sole buying, selling, making, working or using anything within the realm or walls, or of any other monopolies, and all proclamations, exhibitions, restraints, warrants of assist- ance, and all other matters whatsoever anyway tending to the instituting, strengthening, furthering or countenanc- ing of the same or any of them, are altogether contrary to the laws of the realm, and so are and shall be utterly void, and of none effect, and in nowise to be put in exe- cution." Judge Speer followed his delivery to the Grand Jury of the last paragraph quoted from him by making to them the following additional statements : "Like the Parliament of England the Congress of the 206 HISTORY 01* THE SHERMAN tAW. United States has enacted the present law, prohibiting modern combinations in restraint of trade. These are not the result of patents granted by a partial monarch, but they are the outgrowth of far-reaching schemes, planning combinations to seize a suitable occasion to op- press by unlawful compacts the many for the aggran- dizement and enrichment of the few. The law finds its authority in the power of Congress, granted by the Con- stitution, to regulate commerce with foreign nations and among the several states." "Congress passed the act, approved July 2, 1890, en- titled 'An Act to protect trade and commerce against unlawful restraints and monopolies,' commonly known as the Sherman anti-trust law." Thereupon Judge Speer read to the Grand Jury Sec- tions 1 and 2 of the Sherman law and followed that reading by expositions of the decisions of the Supreme Court in the Trans-Missouri case and the Joint Traffic Association case, and the Addyston case, and the Swift case, and the Northern Securities case. He closed his explanation of the Northern Securities case by speaking of that Justice of the Supreme Court who delivered the judgment of that tribunal in that case as "that renowned and venerable American jurist, Mr. Justice Harlan, ever insistent to protect the rights of those who cannot help themselves." The admirable charge of Judge Speer to the Grand Jury from which these extracts have been taken to adorn and illuminate this book, was followed by evidence which was presented to that Grand Jury by the United States. That charge and that evidence resulted in an indictment of the Atlantic . Investment Company and three other corporations, and of two individuals for violating the Sherman law through restraint of interstate commerce in turpentine. Each of those defendants made a plea of guilty to that indictment and then Judge Speer announced DURING roossvelt's administration. 207 the judgment of the court to be that each defendant must be punished by the maximum fine of $5,000. He could also have ordered each of the individual defendants to be imprisoned for a year, but he refrained from doing that on their assurance that they would never violate the Sherman law again. 5. United States vs. Virginia-Carolina Chemical Co. and others, 163 Fed. Rep. 66. This was an indictment found on May 25, 1906, by the Grand Jury of the United States Circuit Court for the Middle District of Tennes- see, upon information furnished by the Department of Justice, under the direction of Attorney General Moody. The defendants were fifty-six in number, and were charged in the indictment with having violated Section 1 of the Sherman law by combining to restrain inter- state commerce in agricultural fertilizers in many of the states of the Union, including Tennessee. In support of this charge the indictment stated that the defendants were all engaged in interstate commerce in fertilizers and that they had combined to fix the price of fertilizers in eight specified states of the Union, and to apportion the trade in fertilizers between those states among them- selves, according to an agreed percentage. Of course, the indictment, if true in its statements of fact, was sound in its charge that the facts thus stated constituted violation of the Sherman law and it does not appear in the case that any of the defendants denied that the indictment was true in its statements of fact. What the defendants did under these circumstances was to employ seven lawyers to get them out of their trouble on some technical ground or other. The techni- cal defenses which those seven lawyers combined to make were three in number, namely, first, a motion to quash the summons which had been issued against each of that class of the defendants which were corporations 208 HISTORY of THB SHERMAN LAW. chartered under the laws of other states than Tennessee and which had not compHed with the laws of Tennessee in relation to such corporations doing business within that state, and which had no agents and were not doing business in Tennessee ; and second, a demurrer to the in- dictment on behalf of all the defendants, except those attempted to be protected by the motion to quash; and third, a plea in abatement, filed on behalf of the same defendants as those attempted to be protected by the demurrer. The question of the validity of each of these various defenses was argued in the fore part of 1908 by three lawyers for the United States and seven for the defend- ants before Judge McCall, who was then the United States District Judge for the Western District of Tennes- see, temporarily holding the United States Circuit Court for the Middle District of Tennessee. Judge McCall decided the case on July 3, 1908. That decision denied the motion to quash the summons on the ground that Section 716 of the Revised Statutes of the United States, operated to validate each summons which had been issued for service in another state upon a cor- poration defendants which could not be found in Tennes- see. That decision overruled the demurrer on the ground that the indictment charged the defendants with apt lan- guage and with certainty of meaning, with acts pro- hibited by the Sherman law. But that decision sustained the plea in abatement on the ground that the facts stated therein and admitted by the United States to be true, operated to make the indictment illegal. Those facts were that Mr. E. T. Sanford and Mr. J. H. Graves as- sisted the Grand Jury in their investigation which resulted in the finding of the indictment by the Grand Jury, though neither of those gentlemen was present in the Grand Jury room after the testimony had been taken DURING ROOSBVEWs ADMINISTRATION. 209 there or when the Jury was deliberating as to its find- ings, or was voting upon the question of whether to indict or not indict the defendants, Sanford and Graves' gave to the Grand Jury what assistance they did give in pursuance of a written commission, which was given by the Attorney General of the United States to each of them and which commissions appointed Sanford and Graves special assistants to the United States Attorney for Middle District of Tennessee, to do what they did do toward assisting the Grand Jury. Judge McCall decided that when the Attorney General issued those commissions, he was mistaken in supposing that the law authorized him so to do; and that when Sanford and Graves acted as assistants to the Grand Jury in pursuance of those commissions, they were in error in supposing that the commissions and their acting thereunder, were authorized by law. Judge Mc- Call recognized the fact that when the case was argued before him, there was an existing statute which auth- orized such commissions as those which the Attorney General had issued to Sanford and Graves, and which authorized the doing, under such commissions, of the very things which Sanford and Graves had done in the Grand Jury room. But the judge pointed out that though that statute was more than two years old when he was deciding the case, it was not enacted until June 30, 1906, which was thirty-five days after the indictment had been found by the Grand Jury in the case before him. Under these circumstances, Judge McCall decided that when the Grand Jury was investigating the conduct of the defendants, the then existing law of the United States prohibited the presence in the Grand Jury room of anybody and everybody, exicept the Grand Juroirs and the witnesses, and the United States District Attor- ney for the Middle District of Tennessee, and that there- 210 HISTORY OF THE SHERMAN LAW. fore the presence of Sanford and Graves in the Grand Jury room invalidated the indictment which resulted •from the investigations which they assisted the Grand Jury to make; though that assistance was rendered in good faith in pursuance of especial appointment by the Attorney General of the United States, and was not claimed to have included any false or misleading state- ments or suggestions to the Grand Jury. But they were in the Grand Jury room when the law did not permit them to be there; and their presence there was held by Judge McCall to invalidate the indictment, which the Grand Jury, after they had gone away, deliberated upon and decided to return as a true bill. And this was how the seven lawyers of the fifty-six defendants in this case, contrived to avert punishment from all those defendants, except the few who could not be found in Tennessee, and therefore could not be punished there. 6. United States vs. Standard Oil Company of New Jersey and others, 152 Fed. Rep. 290. This was a bill in equity, filed November 15, 1906, under the direction of Attorney General Moody, by the United States, in the United States Circuit Court for the Eastern District of Missouri, against the Standard Oil Company of New Jersey, and about seventy subsidiary corporations, and seven individual defendants. The bill stated that the defendants had made and were maintaining a combina- tion and conspiracy contrary to the Sherman law, to restrain commerce in petroleum and its products, among the states and territories of the United States, and with foreign nations; and the bill prayed the court to make a decree to stop all further violation of that law by the defendants. After the filing of the bill, the court made an order that the non-resident defendants should be brought before the court, in pursuance of Section 5 of DURING ROOSEVELT'S ADMINISTRATION. 211 the Sherman law, by means of subpoenas to be served upon them in the districts in which they respectively existed or resided. Thereupon seven lawyers appeared before the court, when held by all four of the Circuit Judges of the United States for the Eighth Circuit, and moved to vacate that order, and to quash the service of subpoenas which had been actually made upon the non-resident defendants, in pursuance of that order. But this dilatory motion was overruled on March 7, 1907. Thereupon, after one more dilatory defense was made and was over- ruled by the Court, the defendants filed their answers to the bill of complaint. The taking of evidence in the case thereupon occupied more than a year, and continued until nearly the end of President Roosevelt's administra- tion. The argument of the case before the Circuit Court, when held by the four Circuit Judges in St. Louis, Mis- souri, and the decision of the case by that court, and the transfer of the case from that court to the Supreme Court of the United States, and the first argument of the case in that tribunal, all occurred in the first year of the administration of President Taft, and when the case was being prosecuted under the direction of At- torney General Wickersham. Therefore, those great transactions are explained in the next chapter of this book, which chapter is devoted to that part of the history of the Sherman law which occurred during Taft's ad- ministration. 7. United States vs. American Tobacco Company "^^ and others, 164 Fed. Rep. 700. This was a bill in equity filed July 10, 1907, by the United States under the direc- tion of Attorney General Bonaparte, in the United States Circuit Court for the Southern District of New York, for alleged violation of the Sherman law, by the Amer- 8 212 HISTORY OF THB SHERMAN LAW. ican Tobacco Company, and many other corporations, including the United Cigar Stores Company, the R. P. Richardson, Jr., Company, and the Imperial Tobacco Company; the latter company being a British corpora- tion. The bill of complaint stated that the defendants had made and were maintaining a combination in restraint of interstate and international trade in tobacco; and the bill prayed that a writ of injunction might be issued to restrain the defendants from conducting inter- state or international commerce in tobacco, unless and until they should have dissolved the illegal combination between them. And the bill also prayed that receivers should be appointed by the court to conduct their respective tobacco businesses under competitive condi- tions. Voluminous testimony and other evidence was taken in the case during the later months of 1907 and the early months of 1908, and the case was argued in May, 1908, in the Circuit Court, when that court was held by all four of the Circuit Judges of the Second Circuit, sitting together. Those were Judges Ivacombe, Coxe, Ward and Noyes. The argument for the United States was made by J. C. McReynolds and Edwin P. Grosvenor, special assistants to the Attorney General. The argu- ment for the Imperial Tobacco Company was made by William B. Hornblower and three other lawyers; that for the United Cigar Stores Company was made by S. M. Stroock, and that for the R. P. Richardson, Jr., Company was made by Charles R. Carruth; while the argument for all the other defendants, which were the American Tobacco Company and its constituent corpora- tions, was made by ex-Judge William J. Wallace and three other lawyers. The case was decided on November 7, 1908. That decision was not adverse to the United Cigar Stores DURING Roosevelt's administration. 213 Company, nor to the R. P. Richardson, Jr., Company, nor to the Imperial Tobacco Company; but it was adverse to the American Tobacco Company and its constituent American corporations. That adverse decision resulted from the harmonious opinions of three of the judges of the court, but Judge Ward dissented from the judgment of the majority of the court. The written opinions of all four of the judges of the court are printed on pages 701 to 728 of Volume 164 of the Federal Reporter; and the substance of the decree which was made by the court in pursuance of the opinions of its three majority judges is printed on pages 1024 and 1025 of the same volume. The facts in the case were stated in the written opinion of Judge Coxe in the following paragraph : "The 'Tobacco Trust,' so called, consists of over 60 corporations, which since January, 1890, have been united into a gigantic combination, which controls a greatly preponderating proportion of the tobacco busi- ness in the United States in each and all its branches; in some branches the volume being as high as 95 per cent. Prior to their absorption, many of these corpora- tions had been active competitors in interstate and for- eign commerce. They competed in purchasing raw materials, in manufacturing, in jobbing and in selling to the consumer. To-day those plants, which have not been closed, are, with one or two exceptions, under the absolute domination of the supreme central authority. Everything directly or indirectly connected with the manufacture and sale of tobacco products, including the ingredients, the packages, the bags and boxes, are largely controlled by it. Should a party with moderate capital desire to enter the field, it would be difficult to do so against the opposition of this combination. That many of the associated corporations were not coerced into 214 HISTORY OP THE SHERMAN LAW. joining the combination but entered of their own volition is quite true, but in many other instances it is evident that, if not actually compelled to join, they preferred to do so, rather than face an unequal trade war, in which the odds were all against them and in which success could only be achieved by a ruinous expenditure of time and money." The evidence in the case did not convince any of the judges that the defendants had made any contract, com- bination or conspiracy in extraneous restraint of inter- state or international trade or commerce; but Judges Lacombe, Coxe and Noyes all agreed in finding that the evidence proved that the American Tobacco Company and its constituent American corporations constituted a combination in mutual restraint of interstate commerce in tobacco. In this respect, the American Tobacco case is identical with the Northern Securities case, wherein two railway companies had made a combination in mu- tual restraint of interstate commerce, but had not made any combination in extraneous restraint of interstate commerce, exercised or to be exercised upon any other party. Judges Lacombe, Coxe and Noyes also agreed in hold- ing that the combination in mutual restraint of inter- state commerce in tobacco, which the American Tobacco Company and its constituent American corporations were proved to have made and to be maintaining, was a combination contrary to Section 1 of the Sherman law. Speaking of that section. Judge Lacombe said: "This language is to be construed as prohibiting any contract or combination whose direct effect is to prevent the free play of competition." And Judge Coxe said: "The natural effect of competition is to increase com- merce, and an agreement whose direct effect is to prevent this play of competition, restrains trade and commerce." DURING Roosevelt's administration. 215 And Judge Noyes said that "Every combination restrain- ing competition in interstate trade is a combination in restraint of interstate commerce." The dissenting opinion of Judge Ward was primarily based upon his idea that the American Tobacco case was substantially like the Knight case, wherein no inter- state or international commerce was proved to have occurred or to have been restrained. But Judge Ward overlooked the fact that the Knight case was based only upon the manufacturing part of the "Sugar Trust" busi- ness, whereas the Tobacco case was based upon the whole business of the "Tobacco Trust," but particularly upon its doings relevant to interstate commerce. Assuming, however, that the Knight case should not be held to control the decision of the American Tobacco case. Judge Ward took the secondary and independent ground that the combination in the Tobacco case did not violate Section 1 of the Sherman law, because, in his view of the evidence, it was not organized to restrain any trade or commerce, but was organized to increase trade and commerce in tobacco throughout the United States and although that organization did incidentally prevent competition between the members of the combination, that result was unimportant. And Judge Ward held that the American Tobacco Company and its subsidiary cor- porations had not violated Section 2 of the Sherman law, because they had not done anything to prevent other parties from engaging in interstate or international com- merce in tobacco and therefore had not monopolized or attempted to monopolize that business or any part of it, as he understood the legal meaning of the word "mon- opolize" as that word is used in that section. The American Tobacco Company and its constitutent American corporations took an appeal from the decision of the Circuit Court in this case to the Supreme Court of 216 HISTORY OF THE SHERMAN tAW. the United States, but that appeal was not reached for argument in that tribunal until after the end of President Roosevelt's administration.^An explanation of what has occurred in that case in the Supreme Court will be found in the next chapter of this book, which is devoted to the history of the Sherman law during the administration of President Taft. The seven cases which have thus far been explained in this chapter were not all the cases which were brought or prosecuted by the United States for violation of the Sherman law during the administration of President Roosevelt. But they do comprise all of those cases which were adjudicated during that administration and which adjudications included points having enough novelty and enough importance to be noteworthy contributions to the history of the Sherman law. The United States was successful in all of the seven cases, except that against the Virginia-Carolina Chem- ical Company and others, and its failure in that case was not due to any defect or weakness in the Sherman law, nor to any innocence among the defend- ants who were indicted for violating that law ; "for that failure was entirely due to the harmless but then illegal presence in the Grand Jury room of two special assistants of the Attorney General of the United States when the Grand Jury was receiving the evidence upon which after- ward, in the absence of those two gentlemen, the Grand Jury based its indictment of the defendants. Cases of litigation between private parties relevant to the Sherman law which occurred during Roosevelt's ad- ministration were between twenty and thirty in number, and those of them which involved any new and important points relevant to the Sherman law were the following: DURING Roosevelt's administration. 217 1. Foot vs. Buchanan, 113 Fed. Rep. 156. This was a petition which was presented in January, 1902, to the United States Circuit Court for the Northern District of Mississippi in its Western Division, for a writ of habeas corpus to discharge the petitioner, Lawrence Foot, from the custody of the United States Marshal Buchanan, Foot having been committed to that custody by the Dis- trict Court for the Northern District of Mississippi for contempt of court, claimed to have been committed by him in refusing to answer certain questions which had been put to him by the District Attorney before the Grand Jury of that court when that Grand Jury was engaged in investigating alleged violations of the Sher- man law. When the witness refused to answer those questions he stated as a reason for his refusal that "in answering the questions he would incriminate himself and put the Government in possession of information which might supply the means of convicting him of the same offense." Judge Shelby decided that in Grand Jury investigations based upon the Sherman law a witness could not be com- pelled to answer questions the answers to which would criminate him, and therefore he ordered the petitioner to be discharged from the custody of the United States Marshal. But Judge Shelby also held that a witness can- not avoid answering questions upon his own mere state- ment that the answers to them would tend to criminate him, it being for the judge to decide whether any answer might probably have that tendency. 2. Montague & Co. and others vs. Lowry and others, 115 Fed. Rep. 27; 193 U. S. 38. This was the decision in the Circuit Court of Appeals for the Ninth Circuit of that Lowry case which is No. 5 of the litigations be- tween private parties relevant to the Sherman law, which are explained in Chapter VI of this book and which case 218 HISTORY O^ THB SHERMAN LAW. is therein shown to have been decided by the Circuit Court for the Northern District of California in favor of the plaintiffs. The judgment of that Circuit Court was affirmed on February 17, 1902, by the Circuit Court of Appeals in an opinion delivered by Judge Gilbert, the chief judge of that court. Thereupon the defendants took the case to the United States Supreme Court by means of a writ of error. But the Supreme Court, on February 23, 1904, affirmed the judgment of the courts in California in an opinion de- livered by Justice Peckham. That opinion began with the statement that the qustion in the case was whether the association of the defendants constituted a combina- tion in restraint of trade within the meaning of the Sherman law. The Supreme Court unanimously answered that question in the affirmative and Justice Peck- ham said that they regarded the case as a plain one, being analagous to the Addyston case and not analagous to the Knight case. The Supreme Court also decided that the judgment of the Circuit Court in awarding to the plain- tiffs $750 as an attorney's fee under Section 7 of the Sherman law was not unreasonable, the trial of the case having taken about five days. 3. Bement vs. National Harrow Company, 186 U. S. 70. This case was brought to the Supreme Court of the United States from the Court of Appeals of the State of New York to settle a Federal question which was in- volved in a suit which the National Harrow Company had brought against Berrient to recover damages for alleged violation of certain contracts executed between the parties in relation to the manufacture and sale of certain harrows under a considerable number of patents owned by the Harrow Company. That Federal ques- tion was whether those contracts were void because vio- lative of the Sherman law. DURING ROOSfiVIlLT's ADMINISTRATION. 219 The Supreme Court decided on May 19, 1902, that if those contracts were violative of the Sherman law that fact would constitute a good defense to the action. But that court also decided that those contracts were not violative of the Sherman law, because that statute does not refer to that kind of restraint of interstate commerce which may result from contracts between patentees, lim- iting the terms upon which the articles covered by their patents may be sold and regulating the prices to be received therefor. On that point Justice Peckham said that the very object of the patent laws is monopoly and that Congress never intended or expected that the Sher- man law would be construed as prohibiting the exercise by patentees of the exclusive right granted to them in pursuance of those laws. 4. Board of Trade of Chicago vs. Christie Grain & Stock Co. and others, 116 Fed. Rep. 944; 121 Fed. Rep. 608; 125 Fed. Rep. 161. This was an action in equity which was brought in 1901 in the United States Circuit Court for the Western District of Missouri in its West- ern Division to restrain the defendants from appropri- ating to its own use certain information of the prices at which, from moment to moment, grain was bought and sold between members of the Board of Trade on the floor of the exchange hall, owned and main- tained by that board. That certain informatiofn was delivered from moment to moment by employees of the Board of Trade to telegraph companies with authority to send that information by telegraph to certain parties, not including the defendants. Nevertheless, the defendants had somehow been obtaining that information from the Telegraph Company and the suit was brought to enjoin the defendants from receiving such information in the future. The defendants interposed several defenses to the suit, 220 HISTORY Olf THE SHERMAN LAW. all of which were overruled by Judge Hook, who was then the United States District Judge for the District of Kansas, temporarily holding the Circuit Court for the Western District of Missouri. The opinion of Judge Hook was delivered on July 5, 1902, but it does not ap- pear therein that the Sherman law was invoked at that time by either party to the litigation. But that decision of 1902 was based upon a preliminary hearing and that preliminary was followed by a final hearing in the fol- lowing year. At that final hearing the defendants took the ground that the Board of Trade, in making an ar- rangement with the telegraph companies for the trans- mission and distribution of the information covered by that agreement, had violated the Sherman law, because that agreement provided for furnishing that information to many parties while withholding it from other parties, and therefore operated to restrain interstate commerce. Judge Hook overruled this defense in the opinion which he delivered March 19, 1903, and which is printed on page 608 of volume 121 of the Federal Reporter. An appeal from Judge Hook's decision was taken by the Christie Grain & Stock Company and the other de- fendants to the United States Circuit Court of Appeals for the Eighth Circuit. On October 8, 1903, that court, when it was held by Circuit Judges Sanborn and VanDevanter and by District Judge Shiras, reversed the decree of Judge Hook and ordered the complainant's bill to be dismissed. The opinion which resulted in that reversal was delivered by Judge Shiras and is printed on pages 161 to 169 of volume 125 of the Federal Reporter. That opinion states that the defendants asked for a re- versal of the decree on several grounds, including their contention that the doings of the complainant -constituted a violation of the Sherman law. But the Circuit Court of Appeals based its reversal of the decision of Judge \ DURING ROOSEVEW'S ADMINISTRATION. 221 Hook on one of the other grounds, which were pre- sented by the defendants without deciding anything about the Sherman law. Thereupon the case was taken to the United States Supreme Court by means of a writ of certiorari and was decided in that tribunal on May 8, 1905, in an opinion which was delivered by Justice Holmes and is printed on pages 245 to 253 of volume 198 of the United States Reports, but which opinion was dissented from by Jus- tices Harlan, Brewer and Day. That opinion overruled all the defenses which had been made in the Circuit Court and thereupon ordered a reversal of the decree of the Circuit Court of Appeals, which had itself reversed both the decisions of Judge Hook in the Circuit Court. In overruling that one of the defendants' defenses, which was based on the Sherman law, the Supreme Court held that the information which the Board of Trade communicated to some parties, while withholding it from the defendants, was information which the Board of Trade had a right to withhold from everybody, or to com- municate to everybody, or to withhold from some people while communicating to other people; and that a con- tract to communicate it to some people, while withhold- ing it from some others, was not a contract in restraint of trade, and therefore was not violative of the Sher- man law. 5. Whitwell vs. Continental Tobacco Co. and others, 125 Fed. Rep., 454. This was an action at law which was originally brought by Whitwell against the Tobacco Company in the United States District Court of the Dis- trict of Minnesota and having been decided against the plaintiff in that tribunal was taken by him to the Circuit Court of Appeals for the Eighth Circuit, where the judg- ment of the Circuit Court was affirmed on November 12, 222 HISTORY OF THE SHERMAN I