turers of soda-water apparatus fixing the price thereof, and restraining competition; that in furtherance of this object it had acquired a large number of patents, and that in bringing this suit the complainants sought to harass defendants and destroy their business, because they refused to join the combination.

Opinion.

Held that although this was true it was no defense.

United States v. Addyston Pipe and Steel Co. et al.

78 Fed., 712.

85 Fed., 271.

U. S., Statement.

Circuit Court, 1897. Circuit Court of Appeals, 1898. Supreme Court, 1899.

Defendants are six corporations, manufacturers of cast-iron pipe. They supply such pipe throughout 36 states. An association was formed by them whereby they agreed not to compete with each other. This agreement was to be carried out thus: A committee of a representative from each corporation set the price for each job, and the corporation that would give the largest bonus for the job got it, the others putting in higher bids to make an apparent competition.

The United States brings suit under the Trust Act to break up this association.

Opinion of Circuit Court.

"The object of the bonus and of the association really is not to prevent all members of the association from furnishing and shipping their manufactured products, but to determine among themselves which one of them shall do so. There is certainly no restraint in this." It is held that this agreement does not directly restrain commerce, and that to fall within the Trust Act the combination must directly affect interstate commerce.

The bill is dismissed.

Opinion of Circuit Court of Appeals.

"The subject-matter of the restraint here was not articles of merchandise or their manufacture, but contracts for sale of such articles to be delivered across state lines and the negotiations and bids preliminary to the making of such contracts, all of which ** do not merely affect interstate commerce but are interstate commerce." Within a limit the

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defendants could fix prices as they chose. The restraint imposed was only partial. It did not cover the United States. There was not a complete monopoly. It was tempered by the fear of competition, and it affected only a part of the price. But this fact does not take the contract of association out of the annulling effect of the rule against monopolies. "All the authorities agree that in order to vitiate a contract or combination, it is not essential that its result should be a complete monopoly; it is sufficient if it really tends to that end and to deprive the public of the advantages which flow from free competition." Nor at common law is there any question of reasonableness of price open to the courts with reference to such a contract for monopoly. Its tendency is to give power to charge unreasonable prices if the parties choose to do so. "For the reasons given [that the contracts are monopolistic and are a restraint upon interstate commerce and hence a violation of the Trust Act], the decree of the circuit court dismissing the bill must be reversed with instructions to enter a decree for the United States perpetually enjoining the defendants from maintaining the combination in cast-iron pipe described in the bill."

Opinion of Supreme Court.

Application of statute.

"As has frequently been said, interstate commerce consists of intercourse and traffic between the citizens or inhabitants of different states, and includes not only the transportation of persons and property and the navigation of public waters for that purpose, but also the purchase, sale and exchange of commodities. * If, therefore, an agreement or combination directly restrains not alone the manufacture, but the purchase, sale or exchange of the manufactured commodity among the several states, it is brought within the provisions of the statute. The power

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to regulate such commerce, that is, the power to prescribe the rules by which it shall be governed, is vested in Congress, and when Congress has enacted a statute such as the one in question, any agreement or combination which directly operates not alone upon the manufacture, but on the sale, transportation and delivery of any article of interstate com

merce by preventing or restricting its sale, etc., thereby regulates interstate commerce to that extent, and to the same extent trenches upon the power of the National Legislature and violates the statute."

Regulation of commerce may restrict individual contracts.

It has been declared "that the power of Congress to regulate commerce was never intended to be exercised so as to interfere with private contracts not designed at the time they were made to create impediments to such commerce;" but that "the reason for vesting in Congress the power to regulate commerce was to insure uniformity of regulation against conflicting and discriminating state legislation.

"It is undoubtedly true that among the reasons, if not the strongest reason, for placing the power in Congress to regulate interstate commerce was that which is stated.

"The reasons which may have caused the framers of the Constitution to repose the power to regulate interstate commerce in Congress do not, however, affect or limit the extent of the power itself.

"In Gibbons v. Ogden (supra) the power was declared to be complete in itself and to acknowledge no limitations other than are prescribed by the Constitution.

"Under this grant of power to Congress that body, in our judgment, may enact such legislation as shall declare void and prohibit the performance of any contract between individuals or corporations where the natural and direct effect of such a contract will be, when carried out, to directly and not as a mere incident to other and innocent purposes regulate to any substantial extent interstate commerce. (And when we speak of interstate we also include in our meaning foreign commerce.) We do not assent to the correctness of the proposition that the constitutional guaranty of liberty to the individual to enter into private contracts limits the power of Congress and prevents it from legislating upon the subject of contracts of the class mentioned.

"The power to regulate interstate commerce is, as stated by Chief Justice Marshall, full and complete in Congress, and there is no limitation in the grant of the power which excludes private contracts of the nature in question from the jurisdiction of that body. Nor is any such limitation contained

in that other clause of the Constitution which provides that no person shall be deprived of life, liberty, or property without due process of law. It has been held that the word liberty, as used in the Constitution, was not to be confined to the mere liberty of person, but included, among others, a right to enter into certain classes of contracts for the purpose of enabling the citizen to carry on his business. (Allgeyer v. Louisiana, 165 U. S., 578; United States v. Joint Traffic Association, 171 id., 505, 572.) But it has never been, and in our opinion ought not to be, held that the word included the right of an individual to enter into private contracts upon all subjects, no matter what their nature, and wholly irrespective (among other things) of the fact that they would, if performed, result in the regulation of interstate commerce and in the violation of an act of Congress upon that subject. "The provision in the Constitution does not, as we believe, exclude Congress from legislating with regard to contracts of the above nature while in the exercise of its constitutional right to regulate commerce among the states. On the contrary, we think the provision regarding the liberty of the citizen is, to some extent, limited by the commerce clause of the Constitution, and that the power of Congress to regulate interstate commerce comprises the right to enact a law prohibiting the citizen from entering into those private contracts which directly and substantially, and not merely indirectly, remotely, incidentally, and collaterally, regulate to a greater or less degree commerce among the states."

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"If certain kinds of private contracts do directly limit or restrain, and hence regulate interstate commerce, why should not the power of Congress reach those contracts just the same as if the legislature of some state had enacted the provisions contained in them? The private contracts may in truth be as far-reaching in their effect upon interstate commerce as would the legislation of a single state of the same character."

"The power of Congress over this subject seems to us much more important and necessary than the liberty of the citizen to enter into contracts of the nature above mentioned, free from the control of Congress, because the direct results of such contracts might be the regulation of commerce among the states possibly quite as effectually as if a state had passed a statute of like tenor as the contract. * * * We conclude

that the plain language of the grant to Congress of power to regulate commerce among the several states includes power to legislate upon the subject of those contracts in respect to interstate or foreign commerce which directly affect and regulate that commerce, and we can find no reasonable ground for asserting that the constitutional provision as to the liberty of the individual limits the extent of that power."

Arbitrary increase in price is a restraint.

It

"If iron pipe cost $100 a ton instead of the prices which the record shows were paid for it, no one, we think, would contend that the trade in it would amount to as much as if the lower prices prevailed. The higher price would operate as a direct restraint upon the trade, and therefore any contract or combination which enhanced the price might in some degree restrain the trade in the article. It is not material that the combination did not prevent the letting of any particular contract. Such was not its purpose. On the contrary, the more contracts to be let the better for the combination. was formed not for the object of preventing the letting of contracts, but to restrain the parties to it from competing for contracts and thereby to enhance the prices to be obtained for the pipe dealt in by those parties. And when by reason of the combination a particular contract may have been obtained for one of the parties thereto, but at a higher price than would otherwise have been paid, the charge that the combination was one in restraint of trade is not answered by the statement that the particular contract was in truth obtained and not prevented. The parties to such a combination might realize more profit by the higher prices they would secure than they could earn by doing more work at a much less price. The question is as to the effect of such combination upon the trade in the article, and if that effect be to destroy competition and thus advance the price, the combination is one in restraint of trade."

Contract may be in restraint of trade among states though articles are subject to taxation in one state.

"Decisions regarding the validity of taxation by or under state authority, involving sometimes the question of the point of time that an article intended for transportation beyond the state ceases to be governed exclusively by the