THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW
 
 CONTROL OF THE MARKET 
 
 A 
 Legal Solution of the Trust Problem
 
 CONTROL OF THE MARKET 
 
 LEGAL SOLUTION of the TRUST PROBLEM 
 
 BY 
 
 BRUCE WYMAN, A.M.,LL.B. 
 
 n\ 
 
 PROFESSOR OF LAW IN HARVARD UNIVERSITY AND 
 LECTURER IN THE DEPARTMENT OF ECONOMICS 
 
 NEW YORK 
 
 MOFFAT, YARD AND COMPANY 
 1911
 
 T 
 
 Copyright, 1911, by 
 
 BRUCE WYMAN 
 
 All Sights Reserved 
 
 Published, October, 1911
 
 CONTENTS 
 
 CHAPTER PAGE 
 
 I. TENDENCIES TOWARD STATE CONTROL . 1 
 
 II. FREEDOM FOR FAIR COMPETITION . . 10 
 
 III. TYPES OF UNFAIR COMPETITION . . 36 
 
 IV. COERCION BY LABOR UNIONS . . .58 
 V. PRESSURE BY TRADE COMBINATIONS . 88 
 
 VI. CONTRACTS IN RESTRAINT OF TRADE . 117 
 VII. MODERN FORMS OF COMBINATION . . 142 
 
 VIII. BUSINESSES AFFECTED WITH A PUBLIC 
 
 INTEREST ...... 167 
 
 IX. UNFAIR PRACTICES IN PUBLIC CALLINGS 190 
 
 X. ENFORCEMENT OF THE ANTI- TRUST 
 
 STATUTE 214 
 
 XL RELIEF AGAINST PREDATORY COMPETITION 242 
 
 XII. EXTENT OF STATE CONTROL . . .268 
 
 TABLE OF CASES DISCUSSED 279
 
 PREFACE 
 
 I HAVE been advocating for many years the 
 regulation of the trusts by law, rather than 
 the persistence in the attempt to destroy 
 by law these aggregations of capital. For I 
 have come to believe in the control by the 
 State of all businesses which have outgrown 
 the regulation of competition. I do not mean 
 by this that the State should undertake to 
 order the conduct of all businesses, which it 
 is apparent would be one form of socialism. 
 Regulation of this extreme sort will be con- 
 fined to those businesses which are affected 
 with a public interest. But it seems certain 
 that other businesses than those now within 
 this classification will eventually be brought 
 within it. And the thesis will be defended 
 in these pages that all businesses which 
 have a virtual monopoly, firmly established 
 in the nature of things, are so affected with 
 a public interest as to be within the class 
 of callings which are considered public em- 
 ployments. What branches of industry will
 
 vi PREFACE 
 
 eventually be considered of such public im- 
 portance as to be included within the cate- 
 gory of public callings, it would be rash 
 to predict. But no one can study the 
 authorities on this subject without feeling 
 their great potentialities. In private busi- 
 nesses, one may sell or not as one pleases, 
 manufacture what qualities one chooses, de- 
 mand any price that can be gotten, and give 
 any rebates that are advantageous. It is 
 because the modern trusts are carrying on a 
 predatory competition under the cover of 
 this law that we have the trust problem. 
 All this time in public businesses one must 
 serve all that apply without exclusive condi- 
 tions, provide adequate facilities to meet all 
 the demands of the consumer, exact only rea- 
 sonable charges for the services that are ren- 
 dered, and between customers under similar 
 circumstances make no discriminations. If 
 this law might be enforced against the trusts, 
 perhaps a solution of the problem would be 
 found. The immediate extension of this coer- 
 cive law of public employment to cover the in- 
 dustrial trusts, I have been urging incidentally 
 in various writings for some time. And it is 
 fitting that I should acknowledge in this place 
 the courtesy of the Boston Book Co., in
 
 PREFACE vii 
 
 permitting me to reprint certain articles 
 of mine in the Green Bag, and the kindness 
 of Baker, Voorhis & Co., in allowing me to 
 take what I pleased from my recent treatise 
 on Public Service Corporations. 
 
 B. W.
 
 CHAPTER I 
 
 TENDENCIES TOWARD STATE CONTROL 
 
 IT has been remarked many times that our 
 common law, by which we are so largely 
 governed, may be relied upon to meet, by the 
 continual development of its fundamental 
 principles, the complex conditions created 
 by the constant evolution in the industrial 
 organization. This continual development in 
 the common law is largely the result of the 
 progressive changes in public opinion. The 
 mere talk of the day has little effect upon the 
 making of the law ; for the law, as established, 
 has too much inertia to be thus moved. But 
 the seasoned opinion of a given era soon be- 
 comes the law of that period; for the judges 
 usually have the same general ideas as other 
 enlightened persons. Not only are they in- 
 spired with the same beliefs, but they have 
 the power to insist that other men shall act 
 according to their notions of social justice. 
 Whenever the mass of men firmly believe that
 
 2 THE CONTROL OF THE MARKET 
 
 approximation to certain ideals is necessary 
 for their salvation, these policies will almost 
 always be found to have become fundamental 
 principles of the law. 
 
 ii 
 
 The underlying causes of most of the 
 changes in the law are really economic. Men 
 suffer from the conditions of the time; and 
 they look to the law to save them from their 
 fate. That men are prone to hope too much 
 from changes in the law is clear; but it is 
 none the less true that they generally appeal 
 to it as to a higher power. The current be- 
 lief in all times is that if almost all men 
 could be compelled to act as the great ma- 
 jority think they ought, there would be as 
 near an approximation to perfection at any 
 given time as is possible in that period of 
 human progress. This notion has been the 
 real support of all governments which have 
 had any permanence since society began; for 
 no constituted authority lasts long which is 
 not responsive to public opinion to some 
 degree. 
 
 From the earliest times some restraint 
 has been exercised over all lines of industry
 
 TENDENCIES TOWARD STATE CONTROL 3 
 
 which are of vital interest to the public. The 
 establishment of the peace, the protection of 
 the weak against the physical violence of the 
 strong, is a fundamental function of govern- 
 ment; but of equal importance and of almost 
 equal antiquity is the protection of the com- 
 mon people against the greed and oppres- 
 sion of the powerful. This is what public 
 opinion has always demanded of the state, 
 that it shall protect equally against physical 
 violence and against oppression that affects 
 the means of living. We get as much protec- 
 tion from the law as the enlightened persons 
 of a given time believe we ought to have 
 from it no more, no less. 
 
 The modern lawyer, who accepts unre- 
 servedly the evolutionary theory of the 
 growth of the law, is as ready as those of 
 the older time, who believed in the eternal 
 principles of natural justice, to begin his 
 investigation of a legal doctrine in the earliest 
 reports of adjudicated cases. A view of the 
 whole course of our law upon a particular 
 subject is as necessary now for those who 
 hope at most to predict what the law is likely 
 to be as for those who once expected to dis- 
 cover what the law had always been from 
 time immemorial. The eternal conflict be-
 
 4 THE CONTROL OF THE MARKET 
 
 f 
 
 tween competition and combination is always 
 bringing cases to the courts for decision. 
 Thus we may know from age to age what 
 were the policies which were currently be- 
 lieved in ; and so we may predict, with more 
 confidence, what the law will be in the future, 
 knowing what its course has been in the past. 
 
 in 
 
 The irresistible advances of the modern 
 competitive system gradually worked the 
 destruction of the mediaeval organization of 
 industry. Great, however, as was this change 
 from the old economic theory to the new, it 
 was gradual, and it was never complete. 
 There was a swing of the pendulum. General 
 but not absolute restriction of freedom of 
 trade was the policy of the Middle Ages; 
 general freedom of trade with the restriction 
 of certain exceptional occupations has become 
 the policy of modern times. Generally speak- 
 ing, a state of free competition has been for 
 several centuries now considered to be for the 
 best interests of society; and, therefore, in 
 modern times almost every business has been 
 opened to almost every man. But at all times 
 in economic history, both restriction and free-
 
 TENDENCIES TOWARD STATE CONTROL 5 
 
 dom are to be found in the law, the propor- 
 tion, however, changing greatly. In one 
 epoch there is much legal limitation, with 
 little freedom left; in another age there is 
 almost universal competition, with some little 
 regulation to be found. And the rule will 
 generally hold true that the more the natural 
 laws of competition regulate service and 
 price, the less the State need interfere in 
 these respects; but, conversely, when com- 
 petition ceases to act efficiently, state con- 
 trol becomes necessary. 
 
 As a result of the economic evolution from 
 mediaeval times to the present day, there have 
 come into being in the last generation a con- 
 siderable number of employments which have 
 gained, if not a legal monopoly, at any rate, 
 as a result of circumstances, a virtual monop- 
 oly in matters of public necessity. The law 
 is the only protection that the public can have 
 in a situation such as this, where there is no 
 competition among the sellers to operate in 
 its favor. So much has our philosophy been 
 permeated with the theory of laissez fcdre, 
 which was but lately so prominent in the 
 policy of our state, that the admission has 
 been made with much hesitation that State 
 control is ever necessary. But the modern
 
 6 THE CONTROL OF THE MARKET 
 
 conclusion, after some bitter experience, is 
 that freedom can be allowed only where con- 
 ditions of virtual competition prevail; for 
 where there is monopoly without stern re- 
 strictions, there is always great mischief. 
 
 It is almost a truism that the spirit of the 
 age molds its law. Those who make the laws 
 are members of the community and share its 
 spirit. The age's ideal of right is their ideal, 
 the method of thought about justice which 
 is prevalent at the time is their method of 
 thought, too; and it therefore follows that in 
 working out legal problems, the lawmakers 
 work along the lines prescribed by the spirit 
 of the age in which they live. Nowhere is 
 the influence of the spirit of the time on the 
 common law more evident and more potent 
 than in this question of the regulation of 
 business dealings. When monopoly prevails, 
 the people call upon the law to save them. 
 When competition is the usual thing, people 
 speak disparagingly of the law. 
 
 IV 
 
 While State regulation is the prevailing 
 philosophy of the people at the beginning of 
 the twentieth century, it must be borne in
 
 TENDENCIES TOWARD STATE CONTROL 7 
 
 mind that this has been the result of a gradual 
 progress of thought, and that this progress 
 has not affected all men equally. Now, as at 
 all times, there are conservatives and radicals, 
 the former as far behind the prevailing spirit 
 of the time as the latter go beyond it. In 
 every change of popular thought there have 
 been those who have been unable to appre- 
 ciate the change; and in every such change 
 there have been those who are unable justly 
 to estimate the true meaning of the change. 
 We have, indeed, three general types of 
 thought at every time: the conservatives, the 
 moderates, and the radicals. Many persons 
 still hold conservative views as to the appli- 
 cation of the law regulating monopoly to 
 modern conditions. They believe that the 
 conductors of every business, however neces- 
 sary to public welfare, should do whatever 
 seems good in their own eyes. Others, thor- 
 oughly radical, believe that the State should 
 take entire control of the whole situation. 
 But, as usually happens, the moderates hold 
 the balance of power with their policy of 
 State regulation only in so far as it may be 
 found to be necessary. 
 
 Undoubtedly, therefore, the spirit of our 
 present age demands that the great business
 
 8 THE CONTROL OF THE MARKET 
 
 enterprises shall be conducted in accordance 
 with the requirements of society. The present 
 programme of organized society is to see 
 to it that those who have gained a substantial 
 control of their market shall not be left free 
 to exploit those who look to them to supply 
 their needs. Men now see clearly that free- 
 dom of action may, even in the industrial 
 world, work injuriously for the public, and 
 it must then be restrained in the public in- 
 terest. We have seen the results of unre- 
 strained power; and we no longer wish those 
 who have control of our destinies left free 
 to do with us as they please. Liberty does 
 not mean to men at the beginning of the 
 twentieth century what it meant to men at 
 the beginning of the nineteenth century. 
 
 No one can carefully study the authorities 
 on this subject without feeling that we are 
 just entering upon a great and important 
 development of the common law. What 
 branches of industry will eventually be of 
 such public importance as to be included in 
 the category of public concerns, and to what 
 extent the control of the courts will be carried 
 in the effort to solve, by law, the modern 
 economic problems, it would be rash to pre- 
 dict. Enormous business combinations, vir-
 
 TENDENCIES TOWARD STATE CONTROL 9 
 
 tual monopolization of the necessaries of life, 
 the strife of labor and capital, now the con- 
 cern of the economist and the statesman, may 
 prove susceptible of legal control through the 
 doctrines of this special law. General doc- 
 trines have been established; and upon this 
 successful working out depends, to a large 
 extent, the future economic organization of 
 the country. Only if the courts can ade- 
 quately control the established monopolies 
 in all contingencies may the business of these 
 concerns be left in private hands.
 
 CHAPTER II 
 
 FREEDOM FOR FAIR COMPETITION 
 
 IN any consideration of industrial prob- 
 lems we are confronted by the long estab- 
 lished condition of free competition, and the 
 still unquestionable desire for its continued 
 maintenance. Even in these present days of 
 elimination of competition by combination, 
 the public policy for free competition is 
 asserted often as vehemently as ever. For 
 the most of men still believe, and the most 
 of judges with them, that by the natural 
 processes of free competition men find their 
 highest development. Of course, there are 
 opposed to an absolutely free competition 
 in fact the natural barriers which necessarily 
 accompany an industrial organization. To 
 such social limitations men may submit them- 
 selves, however unwillingly; but in modern 
 times legal restriction to individual advance- 
 ment would not be endured in ordinary 
 businesses. The final justification of the in- 
 
 10
 
 FREEDOM FOR FAIR COMPETITION 11 
 
 evitable losses, which free competition un- 
 fortunately involves, is to be found in this 
 well founded opinion, that fundamental limi- 
 tations upon free competition are not only 
 wholly impractical, but wholly incompatible 
 with individual liberty. 
 
 H 
 
 That this is all a matter of current opinion 
 may be established by showing that other 
 views were formerly expressed quite as 
 confidently by the courts of law. In the 
 mediaeval system as we see it in our earliest 
 law reports, restriction of competition was 
 the prevalent doctrine. It was conceived 
 that it was better both for producer and 
 consumer to have a special position in the 
 economic order assigned to every man. 
 Each man had a right to his place in the 
 established order according to his rank, with 
 its corresponding duty. So long as this con- 
 dition of affairs gave satisfaction to the most 
 of men, it received the support of the most 
 of courts. 
 
 These special rights in special businesses 
 met one at every turn in mediaeval trade 
 and business. Almost all the crafts and
 
 12 THE CONTROL OF THE MARKET 
 
 manufactures were parceled out by special 
 franchises to various guilds and fraternities, 
 each of which had exclusive right in its own 
 field. So local trading and distant commerce 
 were in the hands of the guilds merchant and 
 trading companies, each with an extensive 
 monopoly by its original constitution. The 
 same arrangements ordered activities within 
 the manor. The course of husbandry and 
 the rotation of the crops were regulated by 
 an established system. The incidental serv- 
 ices, like those of baker, miller, farrier and 
 butcher, were provided for by exclusive 
 franchises. Markets and fairs were estab- 
 lished for the sale of products and legally 
 protected, so that none might barter his goods 
 elsewhere during those periods. And, of 
 course, hunting and fishing were preserved 
 and reserved. 
 
 Times change, however, and the laws 
 with them; when the doctrines of the 
 Renaissance became current, men were no 
 longer content with the older restrictions 
 which so hampered the advancement of the 
 individual. So far as one case can evidence it, 
 the turning point in our law was the School- 
 masters' Case in 1410 (Y. B. 11 Hen. IV. 
 47, 21). The masters of a grammar school
 
 FREEDOM FOR FAIR COMPETITION 13 
 
 of Gloucester brought a writ of trespass 
 against another master, and counted that 
 the defendant had started a school in the 
 same town, so that whereas the plaintiffs 
 had formerly received 40d. a quarter from 
 each child, now they only got 12d. to their 
 damage. The counsel for plaintiffs con- 
 tended that this interference shown and this 
 damage proved made a good action on the 
 case; he cited many instances of exclusive 
 rights, including the claim of the masters 
 of Paul's that there should be no other mas- 
 ters in all London except themselves. But 
 Justice Hill said that there was no ground 
 to maintain this action, since the plaintiffs 
 had no estate, but a ministry for the time; 
 and though another equally competent with 
 the plaintiffs came to teach the children, " this 
 was a virtuous and charitable thing, and an 
 ease to the people, for which he could not be 
 punished by the law." 
 
 This was not accepted as good law with- 
 out a struggle. A generation later in the 
 case of the Prior of Nedeport ( Y. B. 22 Hen. 
 VI. 14 b) we have a long and heated argu- 
 ment between counsel and court over a writ 
 claiming damages for the injury done to the 
 business of the mill of the prior by the estab-
 
 14 THE CONTROL OF THE MARKET 
 
 lishment of a mill by another party without 
 authority. Finally Justice Newton disposed 
 of the argument for the plaintiff by putting 
 supposititious cases. He concluded with this: 
 Let us suppose that there is a freeholder in 
 a certain vill who is making large profits by 
 using his lands for pasturing cattle, and then 
 another turns his arable land into pastures, 
 thereby getting from the inhabitants the 
 agisting of many beasts, will there be a 
 remedy for the first landowner? " Clearly 
 not; for it is lawful for an owner to 
 make the best profit he can from his 
 land." 
 
 Not only did these cases establish for the 
 future, beyond all doubt, that competition 
 was to be free unless an exclusive franchise 
 had been granted in explicit terms, but they 
 declared, with the high hope of new enthu- 
 siasm, that free competition was altogether 
 beneficial. After some centuries of experi- 
 ence, such indiscriminate praise, it may be, 
 would not be given the competitive system. 
 It has been found out that the competitive 
 regime along with its good results has brought 
 deplorable injustices, even to meritorious in- 
 dividuals. But there are few persons, not- 
 withstanding this, who would assert that any
 
 FREEDOM FOR FAIR COMPETITION 15 
 
 practicable method of ordering human affairs 
 would produce better results. 
 
 in 
 
 And, indeed, this belief in free competition 
 is so fundamental in modern opinion that 
 the issue is hardly to be found in litigation 
 in modern books. As a usual thing it is only 
 incidentally that the question comes up, as 
 in Allen v. Flood (1898 A. C. 1) , where Lord 
 James of Hereford supposes this case: An 
 architect seeks to be employed to the exclu- 
 sion of his rivals. He says: "My plans are 
 the best, and following them will produce the 
 best house at the least cost. Therefore, em- 
 ply me and not A. or B." Can this rival 
 sue ? His Lordship says not, clearly : " Be- 
 fore discussing the question it is necessary 
 that some definition of the words ' interfered 
 with ' in their legal sense should be given. 
 Every man's business is liable to be ' inter- 
 fered with ' by the action of another, and yet 
 no action lies for such interference. Competi- 
 tion represents * interference,' and yet it is 
 in the interest of the community that it should 
 exist. A new invention utterly ousting an 
 old trade would certainly ' interfere with ' it.
 
 16 THE CONTROL OF THE MARKET 
 
 If, too, this loose language is to be held to 
 represent a legal definition of liability, very 
 grave consequences would follow." 
 
 Again, in Vegelahn v. Guntner (167 Mass. 
 92), Mr. Justice Holmes propounds by way 
 of illustration the case of rival shopkeepers, 
 a new man endeavoring to drive the old man 
 out of business. The town, he supposes, is 
 too small to support more than one, and the 
 new man succeeds in getting all the business 
 of his rival within a short time. Yet it is the 
 necessary decision that no legal wrong is 
 done: " The reason, of course, is that the 
 doctrine generally has been accepted that 
 free competition is worth more to society 
 than it costs, and that on this ground the 
 infliction of the damage is privileged. Yet 
 even this proposition nowadays is disputed 
 by a considerable body of persons, includ- 
 ing many whose intelligence is not to be 
 denied, little as we may agree with them. 
 I have chosen this illustration partly with 
 reference to what I have to say next. It 
 shows without the need of further authority 
 that the policy of allowing free competition 
 justifies the intentional inflicting of tem- 
 poral damage, including the damage of in- 
 terference with a man's business, by some
 
 FREEDOM FOR FAIR COMPETITION 17 
 
 means, when the damage is done not for its 
 own sake, but as an instrumentality in reach- 
 ing the end of victory in the battle of trade." 
 
 IV 
 
 It is not altogether impossible to find cases 
 where the decision turns upon the fact that 
 what is complained of is nothing more than 
 mere competition; for a judge will sometimes 
 find it a convenient method of disposing of 
 a case to reduce it thus to simplest terms. 
 In Snowden v. Noah (Hopkins Ch. 351), 
 for example, an injunction asked by the pur- 
 chaser of a newspaper property to prevent 
 the former editor, who had set up a new 
 journal, from getting away his subscribers 
 was refused, Chancellor Hopkins saying: 
 * The business of printing and publishing 
 newspapers, being equally free to all, the loss 
 to one newspaper establishment, which may 
 follow from the competition of any rival 
 establishment, is merely a consequence of 
 the freedom of this competition, and gives 
 no claim to legal redress." 
 
 An interesting case, involving much the 
 same point, was Ayer v. Rushton (7 Daly 
 9). The proprietors of Ayer's "Cherry
 
 18 THE CONTROL OF THE MARKET 
 
 Pectoral " sought to enjoin Rushton & Co., 
 an enterprising firm of druggists, who were 
 compounding a " Cherry Pectoral " of their 
 own. Conspicuously placed in the windows 
 were placards with the words, " Ayer's 
 Cherry Pectoral, one dollar Rushton's 
 Cherry Pectoral, fifty cents Which will you 
 have?" Rushton's clerks were carefully in- 
 structed to ask persons inquiring for Cherry 
 Pectoral which they wanted, " Rushton's " or 
 " Ayer's," and to say that " Rushton's " was 
 much better, although they had both in stock. 
 On this evidence the court, of course, could 
 find nothing but fair competition, as every 
 effort had been made to distinguish the 
 preparations for the purpose of inducing 
 customers to buy Rushton's Pectoral instead 
 of Ayer's. 
 
 Another way in which the question comes 
 up is when a person who has been damaged 
 by the construction of the works for a com- 
 peting business claims that he is one of the 
 persons who should have compensation, 
 reparation having been provided for in some 
 general way. Thus in Hopkins v. Great 
 Northern Railway (L. R. 2 Q. B. D. 224),
 
 FREEDOM FOR FAIR COMPETITION 19 
 
 the proprietor of a ferry sued the railway 
 company for damage caused to his business 
 by the construction of the railway bridge 
 across the river, which diverted travel from 
 his ferry. Lord Justice Mellish held that 
 the complainants were not entitled to any- 
 thing: " If owners of ferries are held entitled 
 to compensation, they will certainly form a 
 singular exception to all other persons who 
 were the owners of highways, or had a legal 
 interest in the profits to be derived from the 
 use of highways before railways were in- 
 vented. It can hardly be necessary to 
 enumerate the different classes of persons 
 who had a legal interest in the old highways, 
 and who have suffered loss from the diversion 
 of traffic from those highways to railways: 
 proprietors of canals, turnpike trustees, hold- 
 ers of turnpike bonds, trustees of river navi- 
 gations, and holders of bonds secured on their 
 tolls, have all suffered great losses from 
 the diversion of traffic to railways and have 
 received no compensation. No doubt their 
 rights have not been infringed, though their 
 property has been affected." 
 
 There are several cases, also, where the 
 grantees of a franchise have brought suit 
 against those who are damaging their in-
 
 20 THE CONTROL OF THE MARKET 
 
 terests by conducting a competing business 
 in which the courts, upon the strictest con- 
 struction of the franchise, have held that 
 this particular kind of competition was not 
 in violation of the franchise, and therefore 
 have dismissed the suit, since nothing but 
 mere competition remained as the basis of 
 the complaint. Such were substantially the 
 facts in Illinois and Michigan Canal v. 
 Chicago and Rock Island Railroad (14 111. 
 314), where a canal company complained of 
 the interference with its business by the 
 construction of a railroad paralleling it. In 
 discussing the case, Mr. Justice Caton said: 
 ' Who shall anticipate the new methods of 
 intercommunication which the ingenuity of 
 this wonderful age may devise, or the im- 
 provements which may be made in the old? 
 Who can set bounds to the wants in this 
 respect which new developments may sug- 
 gest? And shall we imply and intend, even 
 with the aid of the most liberal rule of con- 
 struction, that the legislature designed to sur- 
 render the right to allow the people to avail 
 themselves of improved modes of communica- 
 tion or commerce?"
 
 FREEDOM FOR FAIR COMPETITION 21 
 
 VI 
 
 It would seem that the right to cut prices, 
 whatever damage may result to competitors, 
 is a fundamental privilege in competition. 
 In the very important case of the Mogul 
 Steamship Company v. McGregor (L. R. 23 
 Q. B. D. 598), one of the matters of which 
 the tramp steamship owners complained was 
 that the regular steamship companies sent 
 additional ships to Hankow and smashed 
 freights, in order to ruin them or drive them 
 from the field. In holding that this con- 
 stituted no legal wrong Lord Justice Bowen 
 said: "It would impose a novel fetter upon 
 trade. The defendants, we are told by the 
 plaintiffs' counsel, might lawfully lower rates, 
 provided they did not lower them beyond a 
 ' fair freight,' whatever that may mean. But 
 where is it established that there is any such 
 restriction upon commerce? And what is to 
 be the definition of a 'fair freight'? It is 
 said that it ought to be a normal rate of 
 freight, such as is reasonably remunerative to 
 the shipowner. But over what period of time 
 is the average of this reasonable remunera- 
 tiveness to be calculated? All commercial 
 men with capital are acquainted with the
 
 22 THE CONTROL OF THE MARKET 
 
 ordinary expedient of sowing one year a 
 crop of apparently unfruitful prices, in 
 order by driving competition away to reap 
 a fuller harvest of profit in the future; and 
 until the present argument at the bar it 
 may be doubted whether shipowners or 
 merchants were ever deemed to be bound by 
 law to conform to some imaginary ' normal ' 
 standard of freights or prices, or that law 
 courts had a right to say to them in respect 
 of their competitive tariffs, * Thus far shalt 
 thou go, and no further.' To attempt to 
 limit English competition in this way would 
 probably be as hopeless an endeavor as the 
 experiment of King Canute." 
 
 Undoubtedly the excellent opinion just 
 quoted represents the law everywhere. All 
 that there is against it is an interesting 
 dictum in Averrill v. Southern Railway (75 
 Fed. Rep. 736), where the receiver of a rail- 
 way filed a bill asking the aid of the court 
 in protecting the property against a rate 
 war inaugurated by the Southern Railway. 
 A cut of 35 per cent, had been made with 
 notice that, if this was met, a further cut of 
 80 per cent, would be made in the rates. It 
 was alleged that its ultimate object in this 
 was to annihilate competition by the de-
 
 FREEDOM FOR FAIR COMPETITION 23 
 
 struction of its competitors. How deplor- 
 able, in a public service, this seemed to Mr. 
 Justice Simonton, may be seen from his 
 extreme language: "The destructive results 
 of a rate war waged between two great sys- 
 tems of railroads are recognized and depre- 
 cated by men of the greatest ability who 
 have considered the subject. They impair 
 and destroy the usefulness of the railroads 
 themselves, and their ability to serve the 
 public with certainty, efficiency, and safety. 
 The business interests of the community 
 which move the crops and bring supplies to 
 the consumer require that rates be stable. 
 Every precaution has been taken by state 
 legislatures and by the congress to keep 
 them just and reasonable, just and reason- 
 able for the public and for the carriers. A 
 few favored points and a few persons may 
 for a short time receive temporary advan- 
 tage. But the result of such a war is the 
 destruction of values, the disturbance and 
 injury of all business interests, the demoral- 
 ization and confusion of rates, and great 
 public and private loss."
 
 24 THE CONTROL OF THE MARKET 
 
 VII 
 
 The attempt in every modern case of this 
 sort is, therefore, to show something more 
 than mere competition to show in the par- 
 ticular case there are special circumstances 
 which bring the case outside the ordinary 
 course of competition. A striking instance 
 of this is the recent case of Passaic Print 
 Works v. Ely & Walker Dry Goods Com- 
 pany (105 Fed. 163). These manufacturers 
 of various brands of calicoes, which sold 
 usually at fixed prices, complained of a cir- 
 cular sent out by these jobbers, wholly ma- 
 liciously, so it was alleged, offering these 
 prints at cut prices. This injured the manu- 
 facturers' trade; for no other jobber could 
 sell " Central Park Shirtings " at 3 l / 2 cents 
 per yard, the list price, while these jobbers 
 were offering the same goods at 2% cents. 
 The majority of the court Mr. Justice 
 Thayer writing the opinion decided against 
 the complainants; the gist of his opinion 
 being this: "The owner of property, real 
 or personal, has an undoubted right to sell 
 it and to offer it for sale at whatever price 
 he deems proper, although the effect of such 
 offer may be to depreciate the market value
 
 FREEDOM FOR FAIR COMPETITION 25 
 
 of the commodity which he thus offers, and 
 incidentally to occasion loss to third parties 
 who have the same kind or species of prop- 
 erty for sale." 
 
 It should be noted that the decision in 
 this case goes to the extreme of making com- 
 petition an absolute justification, regardless 
 of circumstances. But in Tuttle v. Buck 
 (107 Minn. 145) there is a late authority 
 the other way. It was held in that case that 
 a complaint stated a legal wrong which stated 
 in substance, that the defendant, a banker 
 and a man of wealth and influence in the 
 community, maliciously established a barber 
 shop, employed a barber to carry on the busi- 
 ness, and used his personal influence to 
 attract customers from the plaintiff's barber 
 shop, not for the purpose of serving any 
 legitimate purpose of his own, but for the sole 
 purpose of maliciously injuring the plaintiff, 
 whereby the plaintiff's business was ruined. 
 The opinion of Mr. Justice Elliott shows 
 real insight into the nature of the problem, 
 as even the following extracts abundantly 
 show. " It must be remembered that the 
 common law is the result of growth and 
 that its development has been determined by 
 the social needs of the community which it
 
 26 THE CONTROL OF THE MARKET 
 
 governs. It is the resultant of conflicting 
 social forces, and those forces which are for 
 the time dominant leave their impress upon 
 the law. For generations there has been a 
 practical agreement upon the proposition that 
 competition in trade and business is desirable ; 
 and this idea has found expression in the 
 decisions of the courts, as well as in statutes. 
 But it has led to grievous and manifold 
 wrongs to individuals; and many courts have 
 manifested an earnest desire to protect the 
 individual from the evils which result from 
 unrestrained business competition. The prob- 
 lem has been to so adjust matters as to pre- 
 serve the principle of competition and yet 
 guard against its abuse to the unnecessary 
 injury to the individual. To divert to 
 one's self the customers of a business 
 rival by the offer of goods at lower 
 prices is in general a legitimate mode of 
 serving one's own interest, and justifiable 
 as fair competition. But when a man starts 
 an opposition place of business, not for the 
 sake of profit to himself, but regardless of 
 loss to himself, and for the sole purpose of 
 driving his competitor out of business, and 
 with the intention of himself retiring upon 
 the accomplishment of his malevolent pur-
 
 FREEDOM FOR FAIR COMPETITION 27 
 
 pose, he is guilty of a wanton wrong and 
 an actionable tort." 
 
 VIII 
 
 According to the better opinion at the 
 present time, as expressed in the writings 
 of the many authorities who have turned their 
 attention of late to the problem of the place 
 of competition in the law, fair competition is 
 considered as a matter of justification upon 
 grounds of policy. The accepted theory is 
 that every man engaged in business has a 
 right prima facie to have his custom undis- 
 turbed; in this view a person who diverts 
 trade from him commits a legal wrong prima 
 facie. But if this trade is invaded in the 
 course of fair competition there is a recog- 
 nized justification; while there is no valid 
 excuse in the case of unfair competition. 
 The comparison of two cases may bring this 
 out more clearly. 
 
 In Graham v. St. Charles Street Railway 
 (47 La. Ann. 214) a foreman posted a 
 notice to the effect that he would discharge 
 employees who should continue to deal with 
 Graham, a grocer. The court held that 
 such unjustifiable interference with the 
 grocer's business constituted an actionable
 
 28 THE CONTROL OF THE MARKET 
 
 wrong, Chief Justice Nichols saying: " In 
 so doing the defendants would not only con- 
 trol their own will, action, and conduct, 
 but forcibly control and change, from pure 
 motives of malice the choice and will of 
 others, through fear of non-employment or 
 discharge. This will and power of choice, 
 both the plaintiff and the parties themselves 
 are entitled to have left free, and not coerced 
 in order to simply work the former damage 
 and injury." 
 
 On the other hand, in Robinson v. Texas 
 Pine Land Association (40 S. W. Rep. 843), 
 where the Land Company gave notice that 
 it would discharge employees who did not 
 trade at its store, but bought supplies of 
 Robinson, the court held that there was no 
 actionable wrong. As Chief Justice James 
 said: " If the defendant could so control its 
 employees as to prevent their dealing with 
 plaintiff, or so control their wages as to 
 divert them from the channels of the plain- 
 tiff's business in favor of his own, we know 
 no rule making it actionable. Had the 
 defendant no proper interest of his own to 
 subserve in so doing, but had acted wantonly 
 in causing loss to plaintiff, the rule would 
 have been different. The fact that defend-
 
 FREEDOM FOR FAIR COMPETITION 29 
 
 ant's purpose by the act was to break plain- 
 tiff up in business would not give the cause 
 of action, for that is the natural result of 
 successful competition." 
 
 It is submitted that both of these cases 
 are good law, but it would be impossible 
 to reconcile them without the theory here 
 defended; however, this general theory is 
 now so well accepted that it no longer re- 
 quires an elaborate defense. The right of 
 every man in any business to adequate pro- 
 tection of his probable expectancy is now well 
 established; but equally well recognized is 
 the necessary justification of any damage 
 caused a business rival in the regular course 
 of fair competition. 
 
 IX 
 
 What is not justifiable under these rules 
 is seen in London Guaranty and Accident 
 Company v. Horn (206 111. 493) . One Horn, 
 while in the employ of Arnold, Schwinn & 
 Co., suffered the loss of two fingers on his 
 right hand while attempting to operate a 
 milling machine. At the time of this injury 
 Arnold, Schwinn & Co., carried an indemnity 
 policy in the London Guaranty and Accident
 
 30 THE CONTROL OF THE MARKET 
 
 Company, which provided that the Guaranty 
 Company could cancel the policy at any 
 time upon giving five days' notice. Horn 
 brought suit against Arnold, Schwinn & Co., 
 in which a verdict was subsequently rendered 
 for $3500, from which judgment an appeal 
 was taken, which was pending at the time of 
 the trial of this case. Pending that suit, one 
 Robinett, representing the Guaranty Com- 
 pany, called at the factory of Arnold, 
 Schwinn & Co., where Horn had been em- 
 ployed, and offered Horn $100 in settlement 
 of his claim, telling him that unless he 
 accepted that amount he would have him dis- 
 charged by Arnold, Schwinn & Co. Robinett 
 then said to O'Connell, in the presence of 
 Horn, that O'Connell would have to dis- 
 charge Horn, as he refused to give the 
 company a release. O'Connell at first was 
 much disinclined to discharge Horn; but 
 finally did so upon the threat being made that 
 otherwise the Guaranty Company would 
 cancel the policy. The Illinois Court held 
 that Horn could recover from the Guaranty 
 Company the damages caused him by losing 
 his job. Mr. Justice Scott thus concluded 
 his opinion: " It follows therefore that the 
 act of the defendant complained of was
 
 FREEDOM FOR FAIR COMPETITION 31 
 
 wrongful, and in the legal sense of the term 
 malicious, because without justification." 
 
 To be compared with this is a case upon 
 the other side of the line. The facts are 
 essentially alike, except for the new factor 
 that there is competition between the liti- 
 gants. In this case of Walsh v. Dwight (40 
 N. Y. App. Div. 513) it appeared that the 
 Dwight concern, the proprietors of the Cow 
 Brand of saleratus, sold their product to 
 jobbers upon special terms, giving a rebate 
 to those jobbers who would agree not to sell 
 any saleratus or soda in bulk or in boxes at 
 less price than the list rates for Dwight's 
 Cow Brand. The Walsh concern complained 
 that thereby they were unable to market 
 their products through these jobbers at all, 
 since none would buy their less known goods 
 at these prices; and they added that the 
 prices asked for the Cow Brand were ficti- 
 tious and extortionate, caused by extensive 
 and extravagant advertising. But naturally 
 Mr. Justice Ingraham could see nothing ille- 
 gal in what was being done in this case, since 
 the justification of competition was appar- 
 ent. ' The defendants simply offered to 
 parties purchasing their goods to make a 
 reduction in the price of the goods sold, in
 
 32 THE CONTROL OF THE MARKET 
 
 consideration of the purchasers agreeing not 
 to sell the goods at a less price than that 
 named, and not to sell the goods of other 
 manufacturers at a less price than that at 
 which they agreed to sell the defendants' 
 goods. It is difficult to see upon what ground 
 it can be claimed that such a contract is ille- 
 gal." 
 
 It is because of the underlying public 
 policy that lawful competition justifies in- 
 terference with the business of another. The 
 theory is that free competition is for the 
 best interests of society; for it is believed 
 that the law does its best for all when it gives 
 to every man an equal chance. Enough has 
 been quoted to show how inveterate the be- 
 lief has become that free competition is for 
 the best interests of society. The State acting 
 through the courts is permitting the despe- 
 rate struggle for individual advancement to 
 go on with the fewest possible rules, because 
 the most of us believe that this is for the 
 best for all of us. It is not a perfect way 
 of ordering our world far from it. jJo 
 economist can fail to see that the competi- 
 tive system has not only its costly mistakes,
 
 FREEDOM FOR FAIR COMPETITION 33 
 
 but its inevitable wastes. Moreover, there is, 
 in some lines of production and distribution, 
 a danger that, if the law permits competi- 
 tion to go to every length, the survival only 
 of the fittest may unduly reduce the number 
 of the competitors, so that in the end much 
 of the benefit of competition may be lost. 
 
 II I ~ I I I __! I *fj- ' m ' ~ ' "' ' ' " " '*" '* ~ 
 
 Most of us still believe that the advance in 
 the arts and the march of commerce in mod- 
 ern times have been due to the incentive of 
 competition. More than this, we believe that 
 never in the history of mankind has the ex- 
 ceptional man had such opportunity, nor the 
 average man such return for his industry, 
 as in modern times under the competitive 
 system. And, as we have seen, so long as 
 this is public opinion, the public policy for 
 free competition will remain.
 
 NOTE 
 
 ONE is quite justified by the latest authorities in 
 basing everything upon this fundamental theory, that 
 intentional interference with business rights is prima 
 facie a clear tort, and that, unless plain justification 
 be sufficiently shown, action lies. See, among many 
 others, the following cases: Chipley v. Atkinson, 23 Fla. 
 206; Hollenbeck v. Ristine, 114 Iowa, 358; London 
 Guaranty Co. v. Horn, 206 111. 4p3; Tuttle v. Buck, 
 107 Minn. 145; Klengel v. Sharp, 104 Md. 218; Kirk- 
 wood v. Finnegan, 95 Mich. 543. These principles are 
 most elaborately worked out in the long series of able 
 opinions in Massachusetts, the most informing of which 
 is perhaps Pickett v. Walsh, 192 Mass. 572. And it 
 is stated with the utmost accuracy in the New Jersey 
 decisions, particularly in Jersey City Co. v. Cassidy, 
 63 N. J. Eq. 769. 
 
 This general theory is strongly opposed in recent 
 times by the majority opinions in Allen v. Flood, 1898 
 A. C. 1, and in National Assn. v. Cummings, 170 N. Y. 
 315. But in view of later cases these opinions can 
 hardly be said to represent the law even in their re- 
 spective jurisdictions. Payne v. Railroad, 3 Lea. 507, 
 and Raycroft v. Taynter, 68 Vt. 219, seem to be based 
 upon this opposite theory. But Guethler v. Altman, 
 26 Ind. App. 587 and Heywood v. Tillson, 75 Me. 225, 
 usually cited to the same effect, are plainly distinguish- 
 able, as there was certainly sufficient justification for 
 the interference shown in the facts of those cases. 
 
 86
 
 CHAPTER III 
 
 TYPES OF UNFAIE COMPETITION 
 
 MERE competition, however, is not a suffi- 
 cient justification for taking away business 
 from a rival; it must be fair competition as 
 well. Generally speaking, a customer may 
 be taken away from a rival by any fair in- 
 ducement, but not by any unfair methods. 
 Advertisement and solicitation, for example, 
 are fair; fraud and intimidation, equally 
 plainly, are unfair. That is held fair which 
 the community regards as consistent with its 
 safety; that is held unfair which the State 
 considers dangerous to its peace. What is 
 fair and what is unfair can hardly be more 
 exactly defined without hampering us too 
 much in dealing with new conditions. The 
 predatory tactics of the modern trusts have 
 shown us that there are new wrongs which 
 our law must be prepared to meet. It is 
 not enough to maintain an effective police 
 against the old wrongs. There are new sins 
 
 36
 
 TYPES OF UNFAIR COMPETITION 37 
 
 against industrial society which the law must 
 be capable of reaching. In dealing with the 
 traditional law, however, one may generalize 
 enough to cover the present situation. A 
 narrow conception of the older cases would 
 not give the law scope enough to meet these 
 new conditions. But considered in a broad 
 way the older cases will give us authority 
 enough to deal with the present situation. 
 For thus our common law, as a system of 
 justice, proves itself, from age to age, cap- 
 able of dealing with the wrongs of which that 
 age complains. 
 
 ii 
 
 The most obvious case of unfair competi- 
 tion would seem to arise where a customer 
 who is under contract with one dealer is in- 
 duced by another to break that contract. 
 The first case in which this was held to be 
 unfair competition was, however, the com- 
 paratively recent case of Lumley v. Gye 
 (2 E. & B. 216). A Miss Wagner being 
 under contract to sing for one Lumley, 
 another manager, Gye, induced Miss Wagner 
 to break her contract and sing for him. The 
 court held that this inducement constituted a 
 legal wrong, in analogy to the ancient action
 
 38 THE CONTROL OF THE MARKET 
 
 for the enticement of a servant. Mr. Justice 
 Earle indicated the wider ground upon which 
 the case was decided. " He who maliciously 
 procures a damage to another by violation of 
 his right ought to be made to indemnify, and 
 that whether he procures an actionable wrong 
 or a breach of contract. He who procures the 
 non-delivery of goods according to contract 
 may inflict an injury, the same as he who 
 procures the abstraction of goods after de- 
 livery; and both ought, on the same ground, 
 to be made responsible." 
 
 The most recent case in England reaffirms 
 this doctrine, upon a state of facts so ex- 
 traordinary that it is worth the consideration 
 of every student of present conditions. In 
 Glamorgan Coal Company v. South Wales 
 Miners' Federation (1903 2 K. B. 545), an 
 action was brought by various owners of 
 collieries against a miners' federation, claim- 
 ing damages for wrongfully inducing work- 
 men employed in the collieries to break their 
 contracts of service. By an elaborate agree- 
 ment between masters and men, the wages 
 paid were upon a sliding scale higher when 
 the market for coal was up, lower when it 
 was down; by another clause neither party 
 to the contract could terminate it except by
 
 TYPES OF UNFAIR COMPETITION 39 
 
 notice given on the first of the month. In 
 this state of facts, the executive committee 
 of the Miners' Federation, believing that a 
 restriction of production would raise the 
 price of coal in the market, issued a manifesto 
 that the workmen " should observe Fridays 
 and Saturdays as general holidays." Counsel 
 defended the Federation upon the ground 
 that what was done was solely with the 
 motive of advancing the interests of the 
 men. But the Court of Appeal finally dis- 
 posed of this contention, Lord Justice Ster- 
 ling saying on that point: " The justification 
 set up seems to me to amount to no more than 
 this that the course which they took, al- 
 though it might be to the detriment of the 
 masters, was for the pecuniary interest of 
 the men; and I think it wholly insufficient. 
 The defendants took active steps to carry 
 this policy into effect, and, as I have said, 
 interfered to bring about the violation of 
 legal rights." 
 
 in 
 
 Upon the whole this English doctrine may 
 be said to prevail in America, although there 
 are several jurisdictions which hold that in the 
 course of competition one may go so far as to
 
 40 THE CONTROL OF THE MARKET 
 
 induce the breaking of contracts. In a recent 
 Kentucky case, Chambers & Marshall v. Bald- 
 win (91 Ky. 121), for example, the substance 
 of the cause of action was that the plaintiffs 
 had made a contract with one Wise for his 
 crop of tobacco at five cents per pound, and 
 that thereafter the defendants, with full 
 knowledge of this contract, induced Wise to 
 sell his crop to them at a higher price. But 
 Judge Lewis said: " Competition in every 
 branch of business being not only lawful, 
 but necessary and proper, no person should, 
 or can, upon principle, be made liable in 
 damages for buying what may be freely 
 offered for sale by a person having the right 
 to sell, if done without fraud, merely because 
 there may be a preexisting contract between 
 the seller and a rival in business, for a breach 
 of which each party may have his legal rem- 
 edy against the other. Nor, the right to buy 
 existing, should it make any difference, in a 
 legal aspect, what motive influenced the pur- 
 chaser." 
 
 It should be noted, however, that it is uni- 
 versally agreed that " to induce a servant to 
 leave his master's service at the expiration 
 of the time for which the servant had hired 
 himself, although the servant had no intention
 
 TYPES OF UNFAIR COMPETITION 4*1 
 
 at the time of quitting his master's service," 
 is not actionable, to use the example put by 
 Lord Kenyon in a leading case, Nichol v. 
 Martyn (2 Esp. 732), to illustrate the prin- 
 ciple that " everyone has a right, if he can, 
 to better his situation in the world; and if he 
 does it by means not contrary to law it is 
 damnum sine injuria" 
 
 IV 
 
 Of course, if fraud is used in competition, 
 it is illegal. Unfair competition of this sort 
 has become all too common in modern trade; 
 but the courts bid fair to curb it. One of the 
 earlier cases which put the law on this point 
 beyond all doubt went so far as to decide 
 that men might not use their own names in 
 trade so as to work fraud upon the public. 
 In this case of Croft v. Day (7 Beav. 84) it 
 appeared that a blacking manufactory had 
 long been carried on under the firm name 
 of Day & Martin at 97 High Holborn, Lon- 
 don. A person by the name of Day, with 
 one Martin, set up the same trade at 90^ 
 Holborn Hill. The new concern marked 
 their product as Day & Martin's blacking, 
 using labels of a style similar to that used 
 by the old concern. The Master of the Rolls
 
 42 THE CONTROL OF THE MARKET 
 
 had no doubt of his right to issue an injunc- 
 tion under these circumstances: " It has been 
 very correctly said that the principle in these 
 cases is this, that no man has a right to 
 sell his own goods as the goods of another. 
 You may express the same principle in a dif- 
 ferent form, and say that no man has a right 
 to dress himself in colors or adopt and bear 
 symbols, to which he has no peculiar or ex- 
 clusive right, and thereby personate another 
 person, for the purpose of inducing the public 
 to suppose, either that he is that other per- 
 son, or that he is connected with and selling 
 the manufacture of such other person, while 
 he is really selling his own." 
 
 We have innumerable modern instances 
 to show how far the law will go to protect 
 one manufacturer from fraudulent competi- 
 tion by his rival. One of the best reasoned 
 of these is Waltham Watch Co. v. United 
 States Watch Co. (173 Mass. 85). The 
 plaintiff was the first manufacturer of watches 
 in Waltham, and its watches had acquired a 
 high reputation in the markets of the world 
 as " Waltham watches " before the defendant 
 began to do business there. It was found 
 at the hearing that the public associated the 
 goods of the plaintiff with the name " Wai-
 
 TYPES OF UNFAIR COMPETITION 43 
 
 tham watch " ; and the injunction granted 
 upon this showing restrained the defendants 
 from calling its watches " Waltham watches," 
 although it manufactured them in Waltham. 
 Mr. Justice Holmes, in sustaining the injunc- 
 tion, gave the modern theory with character- 
 istic exactness: " In cases of this sort, as in 
 so many others, what ultimately is to be 
 worked out is a point or line between con- 
 flicting claims, each of which has meritorious 
 grounds and would be extended further were 
 it not for the other. It is desirable that the 
 plaintiff should not lose custom by reason 
 of the public mistaking another manufacturer 
 for it. It is desirable that the defendant 
 should be free to manufacture watches at 
 Waltham, and to tell the world that it does 
 so. The two desiderata cannot both be had 
 to their full extent, and we have to fix the 
 boundaries as best we can. On the one hand, 
 the defendant must be allowed to accomplish 
 its desideratum in some way, whatever the loss 
 to the plaintiff. On the other, we think the 
 cases show that the defendant fairly may be 
 required to avoid deceiving the public to the 
 plaintiff's harm, so far as is practicable in a 
 commercial sense."
 
 44 THE CONTROL OF THE MARKET 
 
 Libelous statements must not be used to 
 turn customers from a rival. Indeed the 
 law has always been unusually considerate of 
 the reputation of tradesmen; and when one 
 publishes of a tradesman or merchant any 
 matter in relation to his calling which, if true, 
 would render him unworthy of patronage, 
 one is liable to an action, even without damage 
 being shown. This was pointed out in the 
 recent case of Davey v. Davey (50 N. Y. 
 Supp. 161), and thus applied to the facts. 
 " The litigants are brothers. The defendant 
 carried on the grocery and tea business at 
 No. 2295 First Avenue, and the plaintiff 
 thereafter opened a similar business at No. 
 2331 First Avenue. The defendant threat- 
 ened that, if the plaintiff opened a rival 
 establishment near the defendant's store, he 
 would break up the business of the plaintiff; 
 and after the latter opened the store the de- 
 fendant caused to be printed, and distributed 
 broadcast, 5000 circulars, in which, after 
 eulogistically describing the superiority of his 
 wares and the advantage the public would 
 derive by patronizing him, he said, of and 
 concerning the plaintiff and his business
 
 TYPES OF UNFAIR COMPETITION 45 
 
 methods, that an unscrupulous grocer of the 
 same name in the immediate vicinity or 
 neighborhood advertises ' Davey's teas and 
 coffees ' with a view to deceive the public, and 
 may sell an inferior article. The words, 
 though cunningly devised and put together, 
 taken in their plain and popular sense, that in 
 which the readers were sure to understand 
 them, bear the construction that the plaintiff 
 was an unprincipled grocer, that he was dis- 
 honest in his business, for he advertised 
 Davey's teas and coffees with a view to de- 
 ceive the public; and that he sold inferior 
 articles, this being one of the characteristics 
 of unscrupulous traders. While the defend- 
 ant had the undoubted right to praise his own 
 wares, he had no right to single out the plain- 
 tiff and not only denounce his wares, but, in 
 connection therewith, impugn his business in- 
 tegrity." 
 
 Furthermore, a false statement in relation 
 to the goods sold by a merchant may so in- 
 jure him in his business as to give him a 
 right of action for damages. There are cases 
 enough in the books of this trade libel, as it 
 is usually called. In the leading English 
 case of Western Counties Manure Company 
 V. Lawes Manure Company (L. R. 9 Exch.
 
 46 THE CONTROL OF THE MARKET 
 
 218) the facts were these: The defendants 
 published fabricated analyses of four artificial 
 fertilizers, showing its own to be the stron- 
 gest and the cheapest, and that of the plaintiffs 
 to be the weakest and the dearest. By reason 
 of these advertisements various persons, who, 
 if they had not been told that which was 
 untrue, would have continued to deal with 
 the plaintiffs, were alleged to have ceased to 
 deal with them. Commenting on these facts 
 in his decision, Lord Bramwell said: " It 
 seems to me, however, that where a plaintiff 
 says, ' You have without lawful cause made 
 a false statement about my goods to their 
 comparative disparagement, which false state- 
 ment has caused me to lose customers,' an 
 action is maintainable." 
 
 VI 
 
 What constitutes unfair competition opens 
 up too large a subject for any considerable 
 discussion here. It is enough to point out that 
 the border line must be overstepped unques- 
 tionably before the competition will be held 
 unfair. One or two cases will illustrate the 
 extent to which competition will be allowed to 
 go before the court will interfere. Perhaps 
 the most interesting is White v. Mellin (1895
 
 A. C. 154) . The respondent was the pro- 
 prietor of Mellin's Food; the appellant was 
 the proprietor of Vance's Food. The original 
 action was brought for the circulation of the 
 following advertisement: "Notice The pub- 
 lic are recommended to try Dr. Vance's pre- 
 pared food for infants and invalids, it being 
 far more nutritious and healthful than any 
 other preparation yet offered." The keen 
 business insight of Lord Herschell was well 
 displayed in his opinion in this case, when 
 he brushed aside all the distinctions of counsel 
 with: "Just consider what a door would be 
 opened if this were permitted. That this sort 
 of puffing advertisement is in use is notori- 
 ous; and we see rival cures advertised for 
 particular ailments. The court would then 
 be bound to inquire, in an action brought, 
 whether this ointment or this pill better cured 
 the disease which it was alleged to cure 
 whether a particular article of food was in 
 this respect or that better than another. In- 
 deed, the courts of law would be turned into 
 a machinery for advertising rival produc- 
 tions by obtaining a judicial determination 
 which of the two was the better." 
 
 In a later case the English courts again
 
 48 THE CONTROL OF THE MARKET 
 
 took the position that they would permit 
 competition to go on without interference, 
 unless something was done so outrageous 
 as to be clearly wrong. In Hubbuck v. 
 Wilkinson (1899, 1 Q. B. 86), it appeared 
 that the plaintiffs and defendants were com- 
 petitors in the paint business, and that de- 
 fendants had advertised that, as the result 
 of certain paint covering experiments con- 
 ducted by them, their paint proved superior 
 in every respect. The plaintiffs in their 
 complaint alleged that the reports were un- 
 true, but the divisional court summarily dis- 
 missed the complaint, which the Court of 
 Appeal held it was right in doing, guarding 
 itself, however, in this wise: " It is not neces- 
 sary to consider how the case would have 
 stood, if the defendants had not been rival 
 traders simply puffing their own goods and 
 comparing theirs with those of the plaintiffs. 
 If the defendants had made untrue state- 
 ments concerning the plaintiffs' goods be- 
 yond saying that they were inferior to, or, 
 at all events, not better than, those of the 
 defendants, or if the defendants were not 
 rivals in trade and had no lawful excuse for 
 what they said, it would not have been right 
 summarily to strike out the statement of
 
 TYPES OF UNFAIR COMPETITION 49 
 
 claim as showing no reasonable cause of 
 action." 
 
 VII 
 
 Intimidation may not be used in competi- 
 tion to frighten a customer from a rival. Our 
 law often speaks in parables; and Keeble v. 
 Hickeringill (11 East 574 note) is undoubt- 
 edly one of the most significant cases in our 
 books. The plaintiff there declared that he 
 was lawfully possessed of a close of land 
 called Minott Meadow, a decoy pond, to 
 which divers wild fowl used to resort and 
 come: and the plaintiff had, at his own costs 
 and charges, prepared and procured divers 
 decoy ducks, nets, machines, and other en- 
 gines for the decoying and taking of the wild 
 fowl, and enjoyed the benefit in taking them: 
 the defendant knowing which, and intending 
 to damnify the plaintiff in his vivary, and to 
 fright and drive away the wild fowl used to 
 resort thither, and deprive him of his profit, 
 did resort to the head of the said pond and 
 vivary, and did discharge six guns laden with 
 gunpowder, and with the noise and stink 
 of the gunpowder, did drive away the wild 
 fowl then being in the pond, whereby the 
 wild fowl were frighted away, and did for-
 
 50 THE CONTROL OF THE MARKET 
 
 sake the said pond. Lord Holt, then Chief 
 Justice, made of this suit one of the leading 
 cases in our law. A few extracts from his 
 opinion will show the fundamental principles 
 upon which it is based: " I am of opinion 
 that this action doth lie. It seems to be new 
 in its instance, but is not new in the reason 
 or principle of it. For, first, this using or 
 making a decoy is lawful. Secondly, this 
 employment of his ground to that use is 
 profitable to the plaintiff, as is the skill and 
 management of that employment. As to the 
 first, every man that hath a property may 
 employ it for his pleasure and profit, as for 
 alluring and procuring decoy ducks to come 
 to his pond. Then when a man useth his art 
 or his skill to take them, to sell and dispose 
 of, for his profit; this is his trade; and he 
 that hinders another in his trade or live- 
 lihood is liable to an action for so hinder- 
 ing him. Where a violent or malicious act 
 is done to a man's occupation, profession, 
 or way of getting a livelihood; there an 
 action lies in all cases. But if a man doth 
 him damage by using the same employment; 
 as if Mr. Hickeringill had set up another 
 decoy on his own ground near the plaintiff's, 
 and that had spoiled the custom of the plain-
 
 TYPES OF UNFAIR COMPETITION 51 
 
 tiff, no action would lie, because he had as 
 much liberty to make and use a decoy as the 
 plaintiff." 
 
 Unfortunately, because of labor disputes, 
 our modern books are filled with cases in- 
 volving force in competition; but fortunately 
 our courts bid fair to check violence in labor 
 competition, as they are curbing fraud in 
 trade competition. A recent case showing the 
 lengths to which labor unions may go is 
 Reinecke Coal Mining Co. v. Wood (112 
 Fed. 477). The United Mine Workers de- 
 termined to make what was significantly 
 called a " striking district " out of certain 
 territory where coal mining was carried on, 
 with the policy of forcing the operators there 
 to yield to their demands by the terror in- 
 spired by the tactics adopted. A large force 
 was encamped in the immediate neighbor- 
 hood of the mines in that territory, and, it 
 was plain enough that by the terror to be 
 thus inspired, they designed to compel non- 
 union labor employed there to join the United 
 Mine Workers, and thereafter to strike if a 
 certain scale of prices was not adopted by 
 their employers. It should be noted that 
 there was no strike then pending at any of the 
 mines in the district; indeed, there appears to
 
 52 THE CONTROL OF THE MARKET 
 
 have been little or no discontent among the 
 laborers employed there. Evans, the district 
 judge, treated the matter with the seriousness 
 that the occasion demanded. The course of 
 his reasoning was this : " It cannot be that 
 this course was not meant to be an attempt 
 to compel the complainant, by force and in- 
 timidation, to yield to the defendants' wishes 
 and demands. The encampment of armed 
 men in the vicinity of the mines was not meant 
 for gentle persuasion or peaceable argument. 
 Peaceable and argumentative persuasion is 
 entirely admissible, but is not accomplished 
 nor intended to be accomplished in that man- 
 ner. The conduct of the defendants, on the 
 contrary, had all the elements of terror and 
 intimidation; and those elements, being in- 
 tentionally present, were indubitably de- 
 signed to compel the complainant to accede 
 to demands it had the lawful right to decline 
 or reject at its option. A court cannot shut 
 its eyes to propositions so palpable." 
 
 VIII 
 
 It should be noted that two theories pre- 
 vail as to the fundamental basis of the action 
 for unfair competition. According to the
 
 TYPES OF UNFAIR COMPETITION 53 
 
 older view, when the act complained of is 
 some recognized form of wrong against some- 
 one, it was formerly vaguely felt that this 
 explained the right of action the injured 
 competitor admittedly had. This idea showed 
 itself most clearly in the great case of Allen 
 v. Flood (1898 A. C. 1), in the House of 
 Lords a few years ago. Briefly the facts in 
 that case were that one Allen, who was rep- 
 resentative of certain workmen, had intention- 
 ally procured the discharge of other workmen, 
 who were working in violation of the policies 
 of the union he represented, among whom 
 was one Flood. Although a great majority 
 of the justices who gave opinions upon this 
 case from first to last were in favor of Flood, 
 a majority of the House of Lords found for 
 Allen. How the matter stood in the minds of 
 this majority is best expressed by Lord Mac- 
 naughton in the following paragraph : " I do 
 not think that there is any foundation in good 
 sense or in authority for the proposition that 
 a person who suffers loss by reason of another 
 doing or not doing some act which that other 
 is entitled to do or to abstain from doing at 
 his own will and pleasure, whatever his real 
 motive may be, has a remedy against a third 
 person who, by persuasion or some other
 
 54 THE CONTROL OF THE MARKET 
 
 means not in itself unlawful, has brought 
 about the act or omission from which the loss 
 comes, even though it could be proved that 
 such person was actuated by malice towards 
 the plaintiff, and that his conduct, if it could 
 be inquired into, was without justification or 
 excuse." 
 
 The newer view of this situation is perhaps 
 best set forth in the recent case of Jersey 
 City Printing Co. v. Cassidy (63 N. J. Eq. 
 759), where, in issuing an injunction to pro- 
 tect an employer from undue interference by 
 his striking employees, Vice Chancellor 
 Stevenson said in part: " In the case before 
 this court the Jersey City Printing Company 
 claims the right, not only to be free in employ- 
 ing labor, but also the right that labor shall 
 be free to be employed by it, the Jersey City 
 Printing Company. A large part of what 
 is most valuable in modern life seems to de- 
 pend more or less directly upon ' probable 
 expectancies.' When they fail, civilization, 
 as at present organized, may go down. As 
 social and industrial life develops and grows 
 more complex these ' probable expectancies ' 
 are bound to increase. It would seem to be 
 inevitable that courts of law, as our system of 
 jurisprudence is evolved to meet the growing
 
 TYPES OF UNFAIR COMPETITION 55 
 
 wants of an increasingly complex social order, 
 will discover, define, and protect from undue 
 interference more of these ' probable expect- 
 
 ancies.' ' 
 
 IX 
 
 We have, therefore, these differing views 
 of the nature of the action for unfair competi- 
 tion, opposed in a fundamental way. By 
 what may be called the earlier theory, it is 
 said that any man can do in trade whatever 
 he pleases to get business away from another, 
 provided he does nothing illegal in itself. 
 But, by what is obviously the current phi- 
 losophy of the matter, the beginning is made 
 at the other end, by saying that every man 
 engaged in business has a right to pursue his 
 calling freely, and that consequently any in- 
 terference with this business of his by another 
 must be justified. What may, therefore, be 
 carried forward into the subsequent discus- 
 sion of various unfair practices in our com- 
 plicated modern commerce, is the idea that 
 to compete as one wills is not an absolute 
 right in our law. On the contrary, competi- 
 tion is only a thing permitted by the State 
 when its operation is for the best interests of 
 established society, forbidden if it is carried
 
 56 THE CONTROL OF THE MARKET 
 
 on under circumstances prejudicial to the so- 
 cial order. It cannot be said, therefore, at 
 the outset in a discussion of competition by 
 combinations, such as this is largely to be, 
 that, when one man has an absolute right to 
 compete as he chooses, thereupon ten men 
 acting together have the same right to com- 
 pete as they choose. The theory which has 
 been developed here cuts in back of all this, 
 by denying to single men the privilege to 
 compete when that is opposed to sound policy. 
 By this theory, whenever the operation of a 
 combination is proved to be detrimental to 
 the best interests of society, its course will be 
 held illegal.
 
 NOTE 
 
 IT would be impossible to cite on this fly leaf even 
 representative cases from the now almost innumerable 
 cases which have arisen as to unfair competition. For 
 the purpose of directing further the reading of any 
 person who may be interested, the following cases where 
 the competition was held fair (although close to the 
 line) are selected from the long list of cases of this 
 sort which might be cited. For example, in Evans v. 
 Harlow, 5 Q. B. 624 (1844), and Young v. Macrae, 3 
 B. & S. 264 (1850), the court held that they would not 
 give judgment against a merchant who was using rather 
 extreme comparative statements in puffing his goods. 
 
 In Parson v. Gillespie (1898), A. C. 239, and Van 
 Camp v. Cruikshank, 90 Fed. 814 (1898), the court re- 
 fused to enjoin a manufacturer from putting out his 
 goods in similar ways to those used by other manufac- 
 turers, on* the ground that these were ways common to 
 the trade. And in Allejo v. Worsley (1898), 1 Ch. 274 
 and West Virginia Transportation Co. v. Standard Oil 
 Co., 50 W. Va. 611 (1902), the court refused to con- 
 sider the damage done by extreme competition as a basis 
 for recovery. The right to build up a business to any 
 size at the expense of one's rivals is sustained in Citi- 
 zens' Light, H. & P. Co. v. Montgomery Light & W. 
 P. Co., 171 Fed. 553 (1909); but as is pointed out in 
 Lubricating Oil Co. . Standard Oil Co., 42 Hun. 153 
 (1886), only fair means can be used in such aggrandize- 
 ment. 
 
 67
 
 CHAPTER IV 
 
 COERCION BY LABOR UNIONS 
 
 IT is sometimes said that, although the 
 working classes were once so unfairly treated 
 by the law that they could do nothing for their 
 own advancement, now the workingmen al- 
 most constitute a privileged class, free to do 
 pretty much as they may choose. To one 
 who follows the diverse currents of opinion 
 that appear upon the surface of present-day 
 discussion, it might seem, for example, that 
 the doctrine of the open shop was in the 
 greatest danger, if indeed the doctrine of 
 the closed shop was not already established. 
 One who fears thus forgets the law, with 
 which is the final decision. Until the mass 
 of men have deliberately changed their 
 theories of society and adopted new ones in 
 their stead, the law does not change funda- 
 mentally. From ancient times our law has 
 been the protection of the freedom of the 
 individual against the oppression of the com- 
 
 68
 
 COERCION BY LABOR UNIONS 59 
 
 bination. So it remains to-day in the midst 
 of alarms the steadfast exponent of the de- 
 sire of the great majority of men for the 
 maintenance of industrial liberty. 
 
 n 
 
 Our law against combinations goes back 
 beyond legal memory. A learned editor of 
 one of the Selden Society's publications (1 
 Pleas of the Crown 125) has found a case for 
 us as early as the year 1225 of an action for 
 interference with an established business by 
 conspiracy. " The Abbot of Lilleshall com- 
 plains that the bailiffs of Shrewsberry do him 
 many injuries against his liberty, and that they 
 have caused proclamation to be made in the 
 town that none be so bold as to sell any mer- 
 chandise to the Abbot or his men upon pain 
 of forfeiting ten shillings, so that Richard, 
 the bedell of the said town, made this procla- 
 mation by their orders. And the bailiffs 
 defend [i.e. deny] all of it, and Richard like- 
 wise defends all of it, and that he never 
 heard such proclamation made by any one. 
 It is considered that he do defend himself 
 twelve handed, and do come on Saturday 
 with his law."
 
 60 THE CONTROL OF THE MARKET 
 
 All through our books from the beginning 
 there are cases both civil and criminal upon 
 combination and conspiracy, as things apart 
 from individual right and wrong. Probably 
 the leading case is Rex v. Journeymen Tai- 
 lors of Cambridge (8 Mod. 10). One Wise 
 and several other journeymen tailors were 
 indicted for a conspiracy amongst themselves 
 to raise their wages and were found guilty. 
 On motion in arrest of judgment the court 
 said : " The indictment, it is true, sets forth 
 that the defendants refused to work under 
 the wages which they demanded; but al- 
 though these might be more than is directed 
 by the statute, yet it is not for the refusing 
 to work, but for conspiring that they are 
 indicted, and a conspiracy of any kind is 
 illegal, although the matter about which 
 they conspired might have been lawful for 
 them, or any of them to do, if they had not 
 conspired to do it." 
 
 in 
 
 Well down into the nineteenth century, if 
 workmen acted in concert in any way against 
 their masters they were in danger of being 
 held conspirators both in England and 
 America. But this law that mere combina-
 
 COERCION BY LABOR UNIONS 61 
 
 tion was a conspiracy, without regard to acts 
 or objects, gradually became obsolete. Com- 
 bination is now permitted for the furtherance 
 of certain ends by certain means; but it is 
 not true to say that it is permitted for any 
 purpose by any method. It is necessary 
 to-day, therefore, to make distinctions before 
 it can be determined what plans may be pur- 
 sued by a combination to advance its interests. 
 The fundamental distinction in the modern 
 law is well shown by a parley between Judge 
 and counsel in the case of Re Doolittle and 
 another, strikers (23 Fed. 544), thus re- 
 ported: "Mr. Charles C. Allen. Do I 
 understand your Honor to say that the act 
 of striking, merely carrying out of the 
 strike was unlawful? The Court (Judge 
 Brewer) : It is not the mere stopping them- 
 selves together, but it is preventing the own- 
 ers of the road from managing their engines 
 and running their own cars that is where 
 the wrong comes in. Anybody has a right 
 to quit work, but in interfering with other 
 persons working, and preventing the owners 
 of railroad trains from managing those trains 
 as they see fit there is where the wrong 
 comes in." 
 
 This distinction is carried to its logical
 
 62 THE CONTROL OF THE MARKET 
 
 extent in the case of the sympathetic strike 
 as may be seen in Old Dominion Steamship 
 Company v. McKenna (30 Fed. 48). This 
 action was brought to recover $20,000 dam- 
 ages, alleged to have been sustained by the 
 plaintiff through the unlawful action of the 
 defendants in a strike of longshoremen, and 
 in their attempt to boycott the plaintiff in 
 its business. The defendants styled them- 
 selves the Executive Board of the Ocean 
 Association of the Longshoremen's Union. 
 Not being in plaintiff's employ, and without 
 any legal justification so far as appeared, 
 they procured plaintiff's workmen in New 
 York and in southern ports to quit work in 
 a body, until it should accede to the de- 
 fendants' demands and pay southern negroes 
 the same wages as New York Longshore- 
 men. Mr. Justice Brown held that such un- 
 warrantable interference by these combined 
 defendants constituted an invasion of the 
 business right of the steamship company. 
 His reasoning is thoroughgoing, as the fol- 
 lowing extract will show: "Associations have 
 no more right to inflict injury upon others 
 than individuals have. All combinations and 
 associations designed to coerce workmen to 
 become members, or to interfere with, ob-
 
 COERCION BY LABOR UNIONS 63 
 
 struct, vex, or annoy them in working, or in 
 obtaining work, because they are not mem- 
 bers, or in order to induce them to become 
 members, or designed to prevent employers 
 from making a just discrimination in the 
 rate of wages paid to the skillful and to the 
 unskillful, to the diligent and to the lazy, 
 to the efficient and to the inefficient, and 
 all associations designed to interfere with 
 the perfect freedom of employers in the 
 proper management and control of their law- 
 ful business, or to dictate in any particular 
 the terms upon which their business shall be 
 conducted, by means of threats of injury or 
 loss, by interference with their property or 
 traffic, or with lawful employment of other 
 persons, or designed to abridge any of these 
 rights, are pro tanto illegal combinations 
 or associations; and all acts done in further- 
 ance of such intentions by such means, and 
 accompanied by damage, are actionable." 
 
 By the present law, then, mere striking 
 is not in itself wrong; and, therefore, merely 
 threatening to strike is permissible in itself. 
 But on the other hand, the trades union is 
 always put to its justification whenever a 
 strike is called or planned. Individuals who 
 interfere with the existing relations of others
 
 64 THE CONTROL OF THE MARKET 
 
 must show some affirmative reason in public 
 policy why they should be excused; and by 
 the same theory whenever the operations of 
 a combination are proved to be subversive of 
 the true interests of society, its actions will 
 be stopped. Moreover, the interests of the 
 strikers must be directly involved in order 
 to justify their intermeddling. In a sym- 
 pathetic strike, as has been seen, anything 
 that they may do will be held illegal. But 
 if the strike is for their own immediate bet- 
 terment, for shorter hours or for higher 
 wages, then their striking, being justifiable 
 in itself, the question arises as to what 
 methods they may be permitted to employ to 
 keep their places open. It is obvious that 
 distinctions must be taken here as to the 
 methods which it is wise to permit in com- 
 petition by combination; and indeed there 
 may well be a departure from the rules which 
 have been laid down as to the methods which 
 individuals may employ in competition. 
 
 IV 
 
 The clearest illustration of this difference 
 is the boycott. About the year 1880, one 
 Captain Boycott was a farmer of Lough
 
 COERCION BY LABOR UNIONS 65 
 
 Mark in the district of Connemara. This 
 Boycott was also agent of the principal land- 
 lord, Lord Erne; and in his capacity as 
 agent in that year had served notice upon 
 several of the tenants. The result is a matter 
 of history. The population of the region 
 for miles around resolved to have nothing to 
 do with him, and, as far as they could prevent 
 it, not to allow anyone else to have anything 
 to do with him. His laborers fled from him; 
 and none would come in their places. No 
 one would supply him with food; he was cut 
 off from every near base of supplies. No 
 one would speak with him; he was excom- 
 municated from all intercourse with his fel- 
 lows. Then the government sent a force of 
 soldiers to Lough Mark, and under their 
 protection the Boycotts returned to their 
 position as citizens in a civilized community. 
 Thus the episode closed, but the language had 
 gotten now a new word boycott to com- 
 memorate that event. A new danger had 
 been made known which spread terror 
 throughout society. A new condition, there- 
 fore, confronted the law, requiring its protec- 
 tion. 
 
 The leading case upon boycott in America 
 is Crump v. Commonwealth (84 Va. 927).
 
 66 THE CONTROL OF THE MARKET 
 
 In this case the strikers dragged the whole 
 community into their dispute. They pub- 
 lished a blacklist upon which they put the 
 names of every hotel, boarding house, trades- 
 man, or shopkeeper who dealt with their 
 former employers in any way, or who had 
 anything to do with the new employees. 
 Finally matters came to such a pass that 
 the ringleaders were arrested; and, being 
 found guilty by the jury, they appealed 
 upon the points of law to the higher court. 
 In dismissing the appeal Mr. Justice Faunt- 
 leroy spoke very sharply: " It was proved 
 that the conspirators declared it their set 
 purpose and persistent effort to ' crush ' 
 Baughman Brothers; that the minions of the 
 boycott committee dogged the firm in all 
 their transactions; followed their delivery 
 wagons, secured the names of their patrons; 
 and used every means short of actual physical 
 force to compel them to cease dealing with 
 Baughman Brothers thereby causing them 
 to lose from one hundred and fifty to two 
 hundred customers and ten thousand dollars 
 of net profit. The acts alleged and proved 
 in this case are unlawful and incompatible 
 with the prosperity, peace, and civilization 
 of the country; and, if they can be perpe-
 
 COERCION BY LABOR UNIONS 67 
 
 trated with impunity, by combinations of ir- 
 responsible cabals or cliques, there will be 
 the end of government, and of society itself. 
 Freedom individual and associated is the 
 boon and boasted policy and peculium of 
 our country; but it is liberty regulated by 
 law; and the motto of the law is: Sic utere 
 tuo, ut alienum non laedas" 
 
 In the ruling case in the British Empire 
 to-day, Quinn v. Leathern (1902 A. C. 495), 
 we have one of the clearest examples of the 
 sort of pressure which it must be obvious 
 that a trades union should be forbidden to 
 use, even to advance its own interests. The 
 complainant in that case was a butcher en- 
 gaged in business near Belfast. His em- 
 ployees organized a union to which they 
 refused to admit one Dickie, a foreman; they 
 later demanded of the plaintiff that he dis- 
 miss Dickie. Upon the plaintiff's refusal to 
 do this the defendants representing the union 
 went to one Munce, who bought meat of the 
 plaintiff, and warned him that unless he 
 stopped buying while the trouble was on, his 
 own men would be called out next. Munce
 
 68 THE CONTROL OF THE MARKET 
 
 at last yielded to this coercion, and notified 
 plaintiff to send no more meat until he set- 
 tled with his men. This interference with 
 his business relations was the cause of the 
 action, in which damages to the trade were 
 claimed. The House of Lords, notwith- 
 standing the contrary tendencies of Allen v. 
 Flood, held for the plaintiff. The best 
 opinion was that of Lord Lindley, who 
 handled the question with characteristic 
 method: "As to the rights of the plaintiff 
 he had the ordinary rights of a British sub- 
 ject. He was at liberty to earn his own 
 living in his own way, provided he did not 
 violate some special law prohibiting him from 
 so doing, and provided he did not infringe 
 the rights of other people. This liberty in- 
 volved liberty to deal with other persons who 
 were willing to deal with him. This liberty 
 is a right recognized by law; its correlative 
 is the general duty of everyone not to pre- 
 vent the free exercise of this liberty, except 
 so far as his own liberty of action may 
 justify him in so doing. But a person's lib- 
 erty or right to deal with others is nugatory, 
 unless they are at liberty to deal with him if 
 they choose to do so. Any interference with 
 their liberty to deal with him affects him."
 
 COERCION BY LABOR UNIONS 69 
 
 In current discussion an attempt is some- 
 times made to distinguish between this ex- 
 treme case of secondary boycott, which has 
 just been illustrated, and the lesser dis- 
 turbance created by the primary boycott, as 
 it is called, where only the members of the 
 affiliated unions are worked upon to break 
 off their business relations with dealers who 
 persist in continuing to deal with the con- 
 cern against which their attack is directed. 
 But almost all courts find this sort of boy- 
 cott practically as dangerous to the industrial 
 peace as the other. In Barr v. Essex Trades 
 Council (53 N. J. Eq. 301) the Council of 
 the affiliated trades had exhorted its mem- 
 bers in this wise: " Friends, one and all, leave 
 this council-boycotting ' Newark Times.' 
 Cease buying it. Cease handling it. Cease 
 advertising in it. Keep the money of fair 
 men moving only among fair men. Boycott 
 the boycotter of organized fair labor." The 
 New Jersey chancery court thought that it 
 would be dangerous to industrial society to 
 permit such appeals to go unchallenged. 
 Vice Chancellor Green discussed the problem 
 broadly thus: "The freedom of business ac- 
 tion lies at the foundation of all commercial 
 and industrial enterprises men are willing
 
 70 THE CONTROL OF THE MARKET 
 
 to embark capital, time, and experience there- 
 in, because they can confidently assume that 
 they will be able to control their affairs 
 according to their own ideas, when the same 
 are not in conflict with law. If this privilege 
 is denied them, if the courts cannot protect 
 them, if the management of business is to 
 be taken from the owner and assumed by, 
 it may be, irresponsible strangers, then we 
 will have come to the time when capital will 
 seek other than industrial channels for in- 
 vestments, when enterprise and development 
 will be cripples, when interstate railroads, 
 canals, and means of transportation will be- 
 come dependent on the paternalism of the 
 national government, and the factory and the 
 workshop subject to the uncertain chances 
 cooperative systems." 
 
 VI 
 
 As our law stands, therefore, in some in- 
 stances concerted action is permitted, while 
 against many kinds of joint action redress 
 may be had. It has been seen that simple 
 striking is permitted in certain cases; a com- 
 bination of laborers may, for example, de- 
 mand higher wages, and then leave in a body
 
 COERCION BY LABOR UNIONS 71 
 
 if the increase is not granted. On the other 
 hand, it has been seen that workmen may 
 not bring their combined force to bear upon 
 persons who have no part in the dispute to 
 induce them not to deal with their former 
 employers. The problem of the legality of 
 the use of its great power by the trade union 
 to force non-union men out of the same em- 
 ployment lies somewhere between these two 
 extremes. As this is one of the most im- 
 portant of modern questions, it might be 
 well to state the leading cases with consider- 
 able detail, so that there may be clear appre- 
 ciation of the precise issue involved. 
 
 In Lucke v. Assembly (77 Md. 396), we 
 have a rather aggravated case of unionizing 
 a shop. The plaintiff was a non-union man; 
 he was non-union against his will, as it were, 
 because the Assembly had repeatedly re- 
 fused to take him in, although he had several 
 times applied for membership. Later the 
 Assembly demanded of their employers, that 
 they discharge this non-union man, Lucke. 
 Rosenfeld Brothers could not withstand the 
 pressure; and they discharged Lucke at this 
 dictation. Lucke then sued the Assembly 
 for damages for the loss of his job; and he 
 was successful in his suit. Upon the final
 
 72 THE CONTROL OF THE MARKET 
 
 appeal Mr. Justice Roberts gave these as 
 the reasons: " In this case, we think the 
 interference of the appellee was in law 
 malicious and unquestionably wrongful. The 
 appellant was a man of family, a good work- 
 man, engaged in a lawful pursuit, perform- 
 ing his duties in an entirely satisfactory man- 
 ner, without objection in any respect, and 
 willing and desirous of becoming a member 
 of the appellee if an opportunity had been 
 afforded him. He was not able to obtain 
 membership with the appellee, nor was he 
 permitted to continue his work with his em- 
 ployers, who would gladly have retained him 
 in their service, if they could have done so 
 without loss or embarrassment to themselves. 
 If, therefore, the appellee sought to bring 
 about the discharge of the appellant under 
 the circumstances detailed in the evidence, 
 if not malicious it was certainly wrongful, 
 and by so doing it has invaded the legal 
 rights of the appellant for which an action 
 properly lies." 
 
 A recent case in point is even more thor- 
 oughgoing in its denunciation of these at- 
 tempts by the unions to force non-union men 
 out of the same employment. In Erdman v. 
 Mitchell (207 Pa. St. 79), there appeared
 
 COERCION BY LABOR UNIONS 73 
 
 in evidence a series of labor difficulties in the 
 construction of a building too involved to 
 relate fully here. Finally the Central Union 
 showed its hand, and threatened a general 
 strike unless certain men engaged on the 
 work, who were not members of an affiliated 
 union, should be immediately laid off. An 
 application was made in time for an injunc- 
 tion, which the lower court granted and the 
 upper court confirmed. Mr. Justice Dean 
 said, in granting the injunction: ;< Trades 
 unions may cease to work for reasons satis- 
 factory to their members, but if they combine 
 to prevent others from obtaining work by 
 threats of a strike, or combine to prevent an 
 employer from employing others by threats of 
 a strike, they combine to accomplish an un- 
 lawful purpose a purpose as unlawful now 
 as it ever was, though not punishable by in- 
 dictment. Such combination is a despotic and 
 tyrannical violation of the indefeasible right 
 of labor to acquire property, which courts are 
 bound to restrain. It is argued that de- 
 fendants, either individually or by organiza- 
 tion, have the right now to peaceably per- 
 suade plaintiffs and others not to work, and 
 their employer not to hire them. So they 
 have. It is further argued that they can
 
 74. THE CONTROL OF THE MARKET 
 
 quit work when they choose. So they can. 
 But neither of these suggested cases is the 
 one before us. Here a strike on a large 
 building was declared because plaintiffs 
 would not join the particular society. The 
 declared purpose of the strike was to cause 
 loss of employment to plaintiffs because they 
 would not join the Allied Building Trades, 
 and chose to remain faithful to their own 
 union, The Plumbers' League." 
 
 The cases brought up for discussion in this 
 section are undoubtedly less extreme than 
 the cases under consideration in the preceding 
 section. It may be admitted that in the 
 case of unionizing, the ultimate motive of 
 the union is to advance its own interests; but 
 so it is in boycotting. In boycotting the 
 end was held not to justify the means; and 
 this may well enough be true of unionizing. 
 The principal question is, then, whether this 
 sort of concerted action is to be held justi- 
 fiable or not. In this respect a difference 
 may be urged between boycotting and union- 
 izing; it may be said that in boycotting the 
 methods employed are indirect, and much 
 unnecessary damage is therefore done to third 
 parties; while in unionizing it may be claimed 
 that the methods are direct, and that there
 
 COERCION BY LABOR UNIONS 75 
 
 is no unnecessary damage. But the fact 
 remains that both in the case of boycotting 
 and in the case of unionizing we see the 
 resistless force of numbers employed against 
 the individuals attacked. The fear of this 
 lies at the bottom of all of our laws against 
 conspiracy from time immemorial. 
 
 VII 
 
 At least it may be made a working hy- 
 pothesis that in unionizing we have the legal 
 wrong of conspiracy against those forced out 
 of the employment. A case so extreme that 
 almost all courts would agree upon it, is 
 Curran v. Galen (152 N. Y. 33). It ap- 
 peared that in Rochester there was an agree- 
 ment between the Ale Brewers' Association 
 and the Brewery Workingmen's Assembly 
 that no person not a member of the associa- 
 tion should be retained in the employment of 
 any member of the association. The plain- 
 tiff got employment in one of the breweries, 
 but declined to join the union. The whole 
 opinion of the Court of Appeals follows: 
 ' The organization of the local assembly in 
 question by the workingmen in the breweries 
 of the city of Rochester may have been per-
 
 76 THE CONTROL OF THE MARKET 
 
 fectly lawful in its general purposes and 
 methods and may, otherwise, wield its power 
 and influence usefully and justly, for all 
 that appears. It is not for us to say, nor do 
 we intend to intimate, to the contrary; but 
 so far as a purpose appears from the defense 
 set up to the complaint that no employee of 
 a brewing company shall be allowed to work 
 for a longer period than four weeks, without 
 becoming a member of the Workingmen's 
 Local Assembly, and that a contract between 
 the local assembly and the Ale Brewers' 
 Association shall be availed of to compel 
 the discharge of the independent employee, 
 is, in effect, a threat to keep persons from 
 working at the particular trade and to pro- 
 cure their dismissal from employment. While 
 it may be true, as argued, that the contract 
 was entered into, on the part of the Ale 
 Brewers' Association, with the object of 
 avoiding disputes and conflicts with the 
 workingmen's organization, that feature and 
 such an intention cannot aid the defense, nor 
 legalize a plan of compelling workingmen 
 not to join it, at the peril of being deprived 
 of their employment and of the means of 
 making a livelihood." 
 
 Plant v. Woods (176 Mass. 492) shows
 
 COERCION BY LABOR UNIONS 77 
 
 one of the latest developments in this general 
 problem. This was a case of a contest for 
 supremacy between two labor unions of the 
 same craft, having substantially the same 
 constitution and by-laws. The chief differ- 
 ence between them was that the plaintiff 
 union was affiliated with one national organi- 
 zation, while the defendant union was affiliated 
 with another. It appeared that the members 
 of the defendant union declared " all painters 
 not affiliated with the Baltimore headquarters 
 to be non-union men," and voted to " notify 
 the bosses " of that declaration. This action 
 was for an injunction to prevent threats 
 being made in pursuance of this vote. Mr. 
 Justice Hammond stated the following rea- 
 sons of the court for confirming the injunc- 
 tion against the defendants: " It is to be ob- 
 served that this is not a case between the 
 employer and the employed, or, to use a 
 hackneyed expression, between capital and 
 labor, but between laborers all of the same 
 craft, and each having the same right as 
 any one of the others to pursue his calling. 
 In this, as in every other case of equal rights, 
 the right of each individual is to be exercised 
 with due regard to the similar right of all 
 others, and the right of one must be said to
 
 78 THE CONTROL OF THE MARKET 
 
 end where that of another begins. The right 
 involved is the right to dispose of one's labor 
 with full freedom. This is a legal right, and 
 it is entitled to legal protection." 
 
 The majority of courts thus believe thut 
 an organized union should not be allowed to 
 work its will, that it would mean disruption 
 of the industrial order if a union could be 
 permitted to dictate who should work and 
 who should not. As a matter of law, the 
 question whether the members of a union are 
 liable when they demand that their shop be 
 unionized depends upon whether the courts 
 will find some basis for justification. But 
 although the public policy is doubtful, most 
 courts seem to be convinced that to allow 
 unionizing would be prejudicial to the best 
 interests of society. The public wants the 
 best services that can be gotten at the lowest 
 wages that will be accepted. If we are to 
 believe much testimony that is brought for- 
 ward in current discussion, unionizing means 
 less efficient services and increasing wages. 
 This, then, is an instance for the assertion 
 of the general policy of the law against com- 
 bination in restraint of trade. Our general 
 law is, of course, opposed to schemes to con- 
 trol the market in any such way.
 
 COERCION BY LABOR UNIONS 79 
 
 VIII 
 
 There is some dissent to these prevalent 
 doctrines; and in order that the discussion 
 may be quite fair it is necessary to give this 
 minority a chance to be heard. The principal 
 case on the other side is undoubtedly National 
 Protective Association v. Cummings (170 N. 
 Y. 315). The facts in this case as they were 
 brought out at the trial were somewhat com- 
 plicated, as the final developments in the in- 
 dustrial organization have become so complex. 
 The complainants were a formal association 
 themselves, who sued both collectively and 
 individually; the defendants were also an 
 association and the individual members of 
 it. The defendant association wanted to 
 put its men at work upon certain works in 
 the place of certain men belonging to the 
 rival association. They were in a position 
 to enforce their demands, as they had strong 
 affiliations with the building trades in New 
 York. The trial court found that the walk- 
 ing delegate of the older association threat- 
 ened to cause a general strike against the 
 members of the newer association, wherever 
 he found them at work upon the same jobs 
 with his men. The opinion in this case de-
 
 80 THE CONTROL OF THE MARKET 
 
 serves respectful consideration, as it is by 
 former Chief Justice Parker; "but the basis 
 of his opinion is the obsolete argument that 
 any single man may quit work alone. " The 
 principles quoted above recognize the legal 
 right of members of an organization to strike, 
 that is, to cease working in a body by pre- 
 arrangement until a grievance is redressed, 
 and they enumerate some things that may be 
 treated as the subject of a grievance, namely 
 the desire to obtain higher wages, shorter 
 hours of labor, or improved relations with 
 their employers, but this enumeration does 
 not, I take it, purport to cover all the ground 
 which will lawfully justify members of an 
 organization refusing in a body and by pre- 
 arrangement, to work. The enumeration is 
 illustrative rather than comprehensive, for 
 the object of such an organization is to 
 benefit all its members; and it is their right 
 to strike, if need be, in order to secure any 
 lawful benefit to the several members of the 
 organization as, for instance, to secure the re- 
 employment of a member they regard as hav- 
 ing been improperly discharged, and to se- 
 cure from an employer of a number of them 
 employment for other members of their or- 
 ganization who may be out of employment,
 
 COERCION BY LABOR UNIONS 81 
 
 although the effect will be to cause the dis- 
 charge of other employees who are not mem- 
 bers." 
 
 Another case that plainly holds for the 
 union is Clemmitt v. Watson, (14 Ind. 
 App. 38). In this case, a body of employees 
 in a coal mine organized as a union and de- 
 manded the discharge of a certain man not 
 a member of their union. The owners refus- 
 ing to discharge him, a strike was called; 
 whereupon the employers yielded, and the 
 man was discharged. A suit was thereupon 
 brought by the man forced out to recover 
 damages caused by the conspiracy. The gist 
 of Mr. Justice Garvin's opinion was this: 
 ' There is no law to compel one man or any 
 body of men to work for or with another who 
 is personally obnoxious to them. We cannot 
 believe it to be in accordance with the spirit 
 of our institutions or the law of the land to 
 say that a body of workmen must respond in 
 damages because they, without malice or any 
 evil motive, peaceably and quietly quit work 
 which they are not required to continue, 
 rather than remain at work with one who is 
 for any reason unsatisfactory to them." 
 
 Whatever weight may be given to these 
 two decisions as authority, they represent
 
 82 THE CONTROL OF THE MARKET 
 
 the view of the minority; for the contrary 
 holding now undoubtedly has the majority. 
 It is, therefore, the general American law 
 that legal wrong is done by a union in pro- 
 curing the discharge of a non-union man. 
 Even if their motive is self-interest, to get all 
 the work for their own members, still most 
 courts hold that the union cannot be allowed 
 to use the force of its members to crush the 
 non-union man. The law of conspiracy from 
 time immemorial has protected the single man 
 against the attack of the combination. This 
 is a modern instance for its application. Any 
 discussion which leaves out the fact of con- 
 spiracy, and defends the union upon the 
 basis of the permission given individuals to 
 compete as they please, misses the real point 
 upon which the issue turns. To maintain 
 free competition in general, the courts must 
 prevent suppression of competition by the 
 action of the combination. 
 
 rx 
 
 To suggest further distinctions, two of the 
 most recent cases, to a certain extent op- 
 posite in tendency, should be considered. 
 One, Pickett v. Walsh (192 Mass. 572), is 
 the most recent of the long line of excellent
 
 COERCION BY LABOR UNIONS 83 
 
 decisions in Massachusetts dealing with the 
 respective rights of capital and labor. The 
 plaintiffs were brick and stone pointers; the 
 defendants were officers and members of 
 bricklayers' unions and stone masons' unions. 
 One ground of complaint was that the plain- 
 tiff was forced out of employment by the 
 threat of the defendant unions that they 
 would do no laying unless the pointing was 
 done by their members. This policy Mr. 
 Justice Loring held justifiable: " It was with- 
 in the rights of these unions to compete for 
 the work of doing the pointing, and in the 
 exercise of their right of competition to re- 
 fuse to lay brick and set stone unless they 
 were given the work of pointing them when 
 laid." The other ground of complaint was 
 that the unions, in order to get these plaintiffs 
 discharged from one job, threatened a strike 
 upon other jobs. The court held that this 
 was not justifiable: " That strike has in it 
 an element like that in the sympathetic strike, 
 in a boycott, and in blacklisting, namely, 
 It is a refusal to work for A, with whom 
 the strikers have no dispute, for the purpose 
 of forcing A to force B to yield to the 
 strikers' demands. In our opinion organized 
 labor's right of compulsion and coercion is
 
 84. THE CONTROL OF THE MARKET 
 
 limited to strikes on persons with whom the 
 organization has a trade dispute; or to put 
 it in another way, we are of opinion that a 
 strike on A with whom the striker has 
 no trade dispute to compel A to force B to 
 yield to the strikers' demands is an unjusti- 
 fiable interference with the right of A to 
 pursue his calling as he thinks best." 
 
 The other case in mind is Pierce v. Stable- 
 men's Union (156 Cal. 70). This was an 
 injunction procured in the course of a strike 
 called to make the plaintiff unionize his 
 stable. Unionizing being legal in itself in 
 California, the upper court was clear that no 
 injunction should be so broad as to prevent 
 the bringing about of this result by mere 
 representations, even when amounting to 
 coercion. The real issue to their mind was 
 whether boycotting and picketing should be 
 allowed. As for the boycotting feature, the 
 California court takes its position with the 
 small minority which permit it in every form, 
 primary as well as secondary. " Each rests 
 upon the right of the union to withdraw its 
 patronage from its employer and to induce 
 by any fair means all persons to do the 
 same; and in the exercise of those means, as 
 the union would have the unquestioned rights
 
 COERCION BY LABOR UNIONS 85 
 
 to withhold their patronage from a third per- 
 son who continued to deal with their em- 
 ployer, so they have the unquestioned right 
 to notify such third person that they will 
 withdraw their patronage if he continues so 
 to deal." But as to picketing, the California 
 court unexpectedly allies itself with the ma- 
 jority of courts, which forbid all picketing, 
 " peaceful " as well as " violent." " A picket 
 in its very nature," said Mr. Justice Henshaw 
 " tends to accomplish and is designed to ac- 
 complish these very things. It tends to and 
 is designed by physical intimidation to deter 
 other men from seeking the places vacated by 
 the strikers. It tends to and is designed to 
 drive business away from the boycotted place, 
 not by the legitimate means of persuasion, but 
 by the illegitimate means of physical intimida- 
 tion and fear." 
 
 The issue is, then, whether what is per- 
 mitted individuals should be permitted a com- 
 bination. The minority say that, as one per- 
 son in competition is permitted to refuse to 
 deal with those who will not deal with them 
 exclusively, even though the ruin of a rival 
 follows, so a union ought to be allowed the
 
 86 THE CONTROL OF THE MARKET 
 
 same course of action. But is it fair to say 
 that concerted action is of the same nature as 
 separate action? Certainly, it is the usual 
 fact that individual competition may be met, 
 while combined action is overwhelming. The 
 truth is with the majority of the courts, that 
 the combination gives to concerted action 
 higher potentiality than separate action by 
 individuals can ever have. Both boycotting 
 and unionizing are conspicuous examples of 
 the resistless force of numbers, and this un- 
 derlying basis of fact is explanation enough 
 of the substantial similarity of the way in 
 which both are treated by the courts. Until 
 individualism shall cease to be the predomi- 
 nant theory, the courts will continue to hold 
 unionizing wrong. Unionizing will not be- 
 come legal unless the arguments for collec- 
 tivism, shall ever command the adherence 
 of the great majority of men. If that time 
 comes, the law, it seems, must regulate the 
 admission to the unions to which it would 
 thus concede the control of the labor market. 
 For regulation, as we shall see throughout 
 this discussion, is the only basis upon which 
 monopoly can be permitted. If, finally, the 
 law should concede the closed shop, it very 
 probably will require an open union.
 
 NOTE 
 
 THE position taken in this chapter that the non-union 
 man is protected against the union is the law of the 
 following jurisdictions at least: Maine Perkins v. 
 Pendleton, 90 Me. 166 (1897); Maryland Lucke v. 
 Clothing Cutters' Assembly, 77 Md. 396 (1893) ; Massa- 
 chusetts Plant v. Woods, 176 Mass. 492 (1900) ; Mich- 
 igan Beck v. Railway Teamsters' Protective Union, 118 
 Mich. 497 (1898) ; Minnesota Gray v. Building Trades' 
 Council, 91 Minn. 171 (1903); Pennsylvania Erdman 
 v. Mitchell, 207 Pa. (1903). 
 
 In the following jurisdictions the issue is in 
 doubt: England Allen v. Flood (1898), A. C. 1 and 
 Perrault v. Gauthier, 28 Can. Sup. 241 (1897), are for 
 the union, but Quinn v. Leathern (1901), A. C. 495 and 
 Giblan v. National Amalgamated Union (1903) 2 K. 
 B. 600, are distinctly for the non-union man; New York 
 Curran t>. Galen, 152 N. Y. 33 (1897) and Davis 
 Machine Company v. Robinson, 41 Misc. 329 (1903) 
 are for the non-union man, but National Protective As- 
 sociation v. Cumming, 170 N. Y. 315 (1902) and 
 Davis v. United Hoisting Engineers, 28 App. Div. 396 
 (1898), hold for the union. 
 
 In the following jurisdictions at least the law permits 
 the union to force the non-union man out: California 
 Pierce v. Stablemen's Union, 156 Cal. 70 (1909); Indi- 
 ana Clemmit v. Watson, 14 Ind. App. 38 (1895); 
 Montana Lindsay v. Montana Federation, 37 Mont. 
 264 (1908); New Jersey Mayer v. Journeymen Stone- 
 cutters' Association, 47 N. J. Eq. 519 (1890). 
 
 87
 
 CHAPTER V 
 
 PRESSURE BY TRADE COMBINATIONS 
 
 EVEN to the most superficial observers of 
 current events, it is clear that the competitive 
 system is much threatened from many quar- 
 ters. Undoubtedly the industrial order in 
 the first half of the twentieth century is going 
 to be a different thing from the business or- 
 ganization of the first half of the nineteenth 
 century; but whether this change is to be 
 one in kind, or one merely in degree, remains 
 to be seen. At the present moment, despite 
 adverse movements, the substance of competi- 
 tion is still to be found in the general course 
 of most of industrial activities for the greater 
 part of the time. This condition can be 
 maintained if all the conservative forces of 
 society are exerted; and among these one 
 of the most potent is the law. The courts 
 are manifesting the greatest activity at the 
 present time at various points where the dis- 
 turbing force of the predatory combination 
 
 88
 
 PRESSURE BY TRADE COMBINATIONS 89 
 
 is making itself felt. The principal issue 
 is whether there is a difference between the 
 methods in competition which may be em- 
 ployed by an individual in competition, and 
 the course of action that may be taken by a 
 combination. For example, may a combina- 
 tion engaged in competition refuse to have 
 any business dealings with those who continue 
 to have commercial relations with its rivals? 
 It is obvious that if the combination be 
 permitted to compete in this way (as in- 
 dividuals may), the ruin of the rival, thus 
 cut off from his sources of supply, will very 
 often result. 
 
 II 
 
 As has been seen in an earlier chapter, the 
 general legal theory of the most accurate ob- 
 servers of these current industrial phenomena 
 is that every person engaged in business has 
 a legal right to his trade; consequently those 
 who interpose themselves between a trader and 
 the persons who would deal with him commit 
 what is prima facie a wrong by this very 
 interference. One who intermeddles with the 
 business relations of another is thus put to 
 his justification; and among the initiated,
 
 90 THE CONTROL OF THE MARKET 
 
 therefore, the problem of legality has be- 
 come a question of justification. As to the 
 grounds upon which such justification may 
 rest, there are many of these, as has already 
 been indicated. For the present purpose it 
 is enough that fair competition is an accepted 
 excuse. But if the motive or the method 
 be bad, it is not fair competition; and the 
 justification consequently fails. A striking 
 case of unfair action under this rule is the 
 blacklist. In the case of Hundley v. Louis- 
 ville & Nashville Railroad (45 S. W. Ky. 
 439), it appeared that many railroads had 
 agreed among themselves to refuse employ- 
 ment to any man who was reported to their 
 blacklist office (jointly maintained) as having 
 ever been party to a strike. The court held 
 that although any railroad might separately 
 have adopted this policy, their combination to 
 stand by this blacklist was another matter. 
 It was thought to be plainly the policy of the 
 law that a man should be free from molesta- 
 tion in his business relations. The only 
 thing lacking was a showing that he had 
 actually been refused employment by reason 
 of this combination against him. For, how- 
 ever evil their intentions may have been, this 
 complainant must show damage to him of
 
 PRESSURE BY TRADE COMBINATIONS 91 
 
 some sort in order to have a standing in 
 court. 
 
 This law is shown again in Doremus v. 
 Hennessy (176 111. 608). It was set forth 
 in this complaint that the members of an 
 organization known as the Chicago Laundry- 
 men's Association had fixed a scale of prices 
 for laundry work, and had conspired to injure 
 the complainant in her good name and credit 
 and to destroy her business because she would 
 not charge prices in accordance with such 
 scale. The court decided in her favor, Mr. 
 Justice Phillips saying : " A combination by 
 them to induce others not to deal with ap- 
 pellee or enter into contracts with her, or 
 to do any further work for her, was an action- 
 able wrong. Every man has a right, under 
 the law, as between himself and others, to 
 full and free disposition of his own labor and 
 capital according to his own free will, and 
 anyone who invades that right without lawful 
 cause or justification commits a legal wrong, 
 and, if followed by an injury caused in con- 
 sequence thereof, the one whose right is thus 
 invaded has a legal ground of action for such 
 wrong." Whenever, therefore, the operations 
 of a combination in the course of competition 
 are proved to be detrimental to the best in-
 
 92 THE CONTROL OF THE MARKET 
 
 terest of society, its members may be held 
 to be wrongdoers by reason of what they 
 have done. For what is to be held fair in 
 competition, and what is unfair, is by this 
 analysis all a question of public policy, which 
 may well be different in the case of concerted 
 action than in the case of individual action. 
 
 in 
 
 It must be remembered that we have 
 always to reckon with the established law 
 for freedom in competition, and the 
 undoubted desire for its maintenance. 
 Competition is firmly believed, by the mass 
 of men, to be worth more to society than its 
 costs; and, therefore, so long as competition 
 by a combination has no different effect upon 
 the course of trade than competition by an 
 individual has, it must be allowed to go on, 
 however ruinous it may be to rivals in busi- 
 ness. Not until we have a plain case where 
 combined effort can be shown to be quite 
 different in its operation from individual 
 action, can the competition of a combination 
 be held unfair, if similar methods are held 
 fair enough for an individual. When this is 
 so it will usually be seen that, in order to
 
 PRESSURE BY TRADE COMBINATIONS 93 
 
 preserve the freedom of the individual in 
 trade, the freedom of a combination must be 
 curbed. 
 
 Perhaps the most noteworthy case in this 
 connection is Mogul Steamship Company v. 
 McGregor (L. R. 23 Q. B. D. 598), because 
 of the great opinion of Lord Justice Bowen. 
 The facts of that case make it a crucial one. 
 The defendants were a number of ship-own- 
 ers who formed themselves into a league or 
 " conference " for the purpose of ultimately 
 keeping in their own hands the control of the 
 tea carriage from certain Chinese ports, and 
 for the purpose of driving the plaintiffs and 
 other competitors from the field. In order to 
 succeed in this object, and to discourage the 
 plaintiffs' vessels from resorting to those 
 ports, the defendants, during the " tea har- 
 vest " of 1885, combined to offer to the local 
 shippers very low freights, with a view of 
 generally reducing or " smashing " rates, and 
 thus rendering it unprofitable for the plain- 
 tiffs to send their ships thither. Moreover, 
 they offered a rebate of five per cent, to all 
 local shippers and agents who would deal 
 exclusively with vessels belonging to the con- 
 ference a rebate which would be forfeited 
 if, at any time, outside ships were used. It
 
 94. THE CONTROL OF THE MARKET 
 
 is impossible to give a fair impression of Lord 
 Bowen's opinion by extracts from it; but his 
 points may be shown. Considered as mere 
 competition he found, as we have seen al- 
 ready, no cause of action. On the point 
 of combination as an element in the case, he 
 could not see that this made any difference. 
 It was perfectly legitimate, he thought, to 
 combine capital for all mere purposes of trade 
 for which capital might, apart from com- 
 bination, be legitimately used in trade. As 
 to his first point, it would seem that the same 
 policy which permits an individual trader to 
 cut prices to any extent, although his rival 
 is thereby ruined, would allow a combination 
 to lower rates in competition against its 
 rivals. Indeed, looked at from one point of 
 view, the public is benefited more when many 
 lower prices than it is when a single man 
 does; and a rival must meet the low price 
 made by his combined rivals as he must the 
 reduced rate of a single opponent, or else go 
 out of business. But as to the second point 
 query. Shall a combination be permitted 
 to take the attitude that they will charge a 
 higher price to those who deal with a rival 
 may a rival who is thus driven out of business 
 say that this is unfair competition? This
 
 PRESSURE BY TRADE COMBINATIONS 95 
 
 issue must again be decided upon the balance 
 of social advantage, and requires, therefore, 
 the fuller discussion which it receives in this 
 and later chapters. 
 
 A rather similar case is John D. Park & 
 Sons Company v. National Wholesale Drug- 
 gists' Association et. all. (175 N. Y. 1). The 
 facts in that case in brief were these: The 
 manufacturers of certain proprietary medi- 
 cines and an association of wholesale dealers 
 therein entered into an agreement to sell 
 the goods at a uniform jobbing price for fixed 
 quantities only to such dealers as would con- 
 form to the manufacturers' price list in mak- 
 ing sales of goods. All wholesale dealers had 
 the right to purchase the goods from the 
 manufacturers upon the same terms as mem- 
 bers of the association, on agreeing to main- 
 tain the prices established by the manufac- 
 turers. The complainants were unwilling to 
 maintain the trade prices upon the medicines 
 they purchased; and they brought this com- 
 plaint for being charged the " long " price, 
 alleging that it was by reason of the conspir- 
 acy of the defendants that they were unable 
 to get the discount rate. The case was 
 finally dismissed in the Court of Appeals, 
 upon a course of reasoning which may be
 
 96 THE CONTROL OF THE MARKET 
 
 seen in the following extracts from the 
 opinion of Mr. Justice Haight: " Is 
 this plan against public policy? An active 
 competition and rivalry in business is 
 undoubtedly conducive to the public wel- 
 fare; but we must not shut our eyes to the 
 fact that competition may be carried to such 
 an extent as to accomplish the financial ruin 
 of those engaged therein, and thus result in 
 a derangement of the business, an incon- 
 venience to consumers, and in public harm." 
 The argument for the validity of special 
 favors by a combination is stated most at- 
 tractively when it is said that there is no real 
 pressure exerted by the combination upon 
 anyone; simply those outside the combination 
 get an advantage if they accept the terms, 
 while they do not get the benefit of the con- 
 cession unless they conform to the rules. 
 
 IV 
 
 Cases now engage our attention where the 
 disturbance of the industrial peace by the 
 coercion exerted by a combination in its com- 
 petition is much more serious. What, un- 
 fortunately, is a typical case is seen in Jack- 
 son v. Stanfeld (157 Ind. 592). Jackson was
 
 PRESSURE BY TRADE COMBINATIONS 97 
 
 a broker engaged in buying and selling lum- 
 ber; Stanfeld was a member of a retail lum- 
 ber dealers' association. The rules of this 
 association provided that, if a wholesale 
 dealer should sell lumber direct instead of 
 through retailers who owned lumber yards, 
 all the members of the association of the re- 
 tailers would, upon notice, refuse to have 
 further dealings with such a wholesaler. In 
 holding this a conspiracy, Mr. Justice Dailey 
 said: "The great weight of authority sup- 
 ports the doctrine, that where the policy 
 pursued against a trade or business is cal- 
 culated to destroy or injure the business of 
 the person so engaged either by threats or 
 by intimidation, it becomes unlawful, and the 
 person inflicting the wrong is amenable to 
 the injured party in a civil suit for damages 
 therefor. It is not a mere passive, let-alone 
 policy, a withdrawal of all business relations, 
 intercourse, and fellowship, that creates the 
 liability, but the threats and intimidation in- 
 volved in it." 
 
 A more recent phase of the same problem is 
 seen in the late case of Brown & Allen v. 
 Jacobs Pharmacy Company (115 Ga. 429). 
 Jacobs, the plaintiff, had formerly been a 
 member of the local branch of the Retailers'
 
 198 THE CONTROL OF THE MARKET 
 
 Association in Atlanta ; but he had withdrawn 
 from it upon charges being preferred against 
 him for violation of its rules. The Atlanta 
 Retailers' Association thereupon sent a letter 
 to the Wholesalers' Association, representing 
 that no retailer in the local association would 
 buy of any wholesaler who sold to the rate 
 cutter. Mr. Justice Fish promptly granted 
 an injunction against such concerted action. 
 ; ' The individual right is radically different 
 from the combined action. The combination 
 has hurtful powers and influences not pos- 
 sessed by the individual. It threatens and 
 impairs rivalry in trade, covets control in 
 prices, seeks and obtains its own advancement 
 at the expense and in the oppression of the 
 public. The difference, in legal contemplation, 
 between individual right and combined action 
 in trade, is seen in numerous cases. To pro- 
 tect the individual against encroachments 
 upon his rights by a greater power is one of 
 the most sacred duties of the courts." 
 
 We have seen, then, that the law, as de- 
 clared by the majority of courts, is to the 
 effect that when a combination exerts its 
 force upon outside dealers to prevent them 
 from having any relations with rivals of the 
 combination, the rivals have an action for the
 
 PRESSURE BY TRADE COMBINATIONS 99 
 
 damages caused by the interference. This 
 law is applied, by the majority of courts, as 
 it seems, consistently, when the power of the 
 combination is brought to bear upon its own 
 members to prevent them from having any 
 dealings with those outside the combination. 
 The same elements of wrong exist whether 
 the attack of the conspirators upon their vic- 
 tim is indirect or direct. And the key to the 
 general problem under discussion seems to 
 be this, that coercion of the sort discussed 
 here is wrong in itself, like fraud, and there- 
 fore, like fraud, an unfair method to use 
 in competition. And conspiracy will always 
 be considered to be a continuing wrong of 
 which the law will take notice so long as it is 
 true that an organized force has the power to 
 overwhelm unorganized individuals. This 
 principle of law that we have under discussion 
 has therefore this foundation of fact, that a 
 concerted refusal to deal disturbs the indus- 
 trial order in a way which an individual 
 refusal never can. 
 
 To be quite fair, it must be admitted that 
 there is conflict of authority upon these mat- 
 ters. There are courts which hold that a
 
 100 THE CONTROL OF THE MARKET 
 
 combination can use its force to drive the 
 customers of a rival away; and these should 
 be given a hearing if this investigation is to 
 be conducted impartially. One of the stron- 
 gest of these cases is MacCauley Bros. v. 
 Tierney (19 R. I. 255). The complainants 
 were master plumbers, engaged in business 
 in Providence; the respondents were officers 
 of the Providence Master Plumbers' Asso- 
 ciation, a body affiliated with a national asso- 
 ciation. This general association had adopted 
 resolutions that they would withdraw their 
 patronage from any firm manufacturing or 
 dealing in plumbing material, which sold to 
 others than members of the affiliated associa- 
 tion. The enforcement of this resolution by 
 the officers was so strict that complainants 
 were almost driven out of business after they 
 had refused to join the local association and 
 be bound by its rules. Chief Justice Matte- 
 son refused to grant an injunction. He said 
 in part: " The cause and excuse for the send- 
 ing of the notices, it is evident, was a selfish 
 desire on the part of the members of the 
 association to rid themselves of the competi- 
 tion of those not members, with a view to in- 
 creasing the profits of their own business. 
 The question, then, resolves itself into this:
 
 PRESSURE BY TRADE COMBINATIONS 101 
 
 Was the desire to free themselves from com- 
 petition a sufficient excuse in legal contem- 
 plation for the sending of the notices? We 
 think the question must receive an affirmative 
 answer. Competition, it has been said, is 
 the life of trade. Every act done by a 
 trader for the purpose of diverting trade 
 from a rival and attracting it to himself is 
 an act intentionally done and, in so far as it 
 is successful, to the injury of the rival in his 
 business, since to that extent it lessens his 
 gains and profits. To hold such an act 
 wrongful and illegal would be to stifle com- 
 petition." 
 
 A more recent case, with more complication 
 in the facts, is Scottish Cooperative Whole- 
 sale Society v. Glasgow Fleshers' Trade De- 
 fense Association (35 Scottish Law Reporter, 
 645). Certain butchers of Glasgow were 
 the members of the defendant association; 
 a system of cooperative stores formed the 
 constituency of the plaintiff association. 
 The fleshers set about it to drive the stores 
 out of the meat business. It appeared that 
 the imported meat market was carried on at 
 only one place in Scotland, at the Yorkhill 
 Wharf in Glasgow, where the meats were 
 sold by the importers at auction. The asso-
 
 102 THE CONTROL OF THE MARKET 
 
 ciation considered that they would attain their 
 object if they could induce the cattle sales- 
 men who were used to sell the cattle at 
 Yorkhill, to refuse to sell to the cooperative 
 stores. The cattle salesmen yielded to the 
 pressure, and the defendants thereby forced 
 the plaintiffs out of that line of business. 
 Lord Kincairney, who heard the case, did not 
 see anything that could be done about it. 
 " After all, the name does not signify. A 
 conspiracy, combination, or association, is, 
 after all, nothing but a kind of contract. 
 But, assuming conspiracy, it is not easy 
 to see what the first defenders did which 
 could subject them in damages. They were 
 entitled to resolve to abstain from bidding 
 at sales at which cooperative bids were re- 
 ceived. It was entirely at their option to 
 do that or not. It appears to me that the 
 fleshers acted within their legal rights. It 
 may be regrettable that they happened to 
 have so much in their power. That is the 
 accident of their position, and of the peculiar 
 character of the foreign cattle market." 
 
 The reasoning of these cases, and of the 
 others that are like them, is obvious too 
 simple in view of the complexity of the prob- 
 lem. It is said that A has a right to refuse
 
 PRESSURE BY TRADE COMBINATIONS 103 
 
 to deal with B, unless he will deal with him 
 exclusively; therefore A and others with him 
 have a right to refuse to deal with B, unless 
 he will deal with them exclusively. So it is 
 said, however outrageous the result, the logic 
 of the law must not be set aside. Under- 
 neath affirmation of this sort lurks doubt; 
 for if the result is wrong the course of reason- 
 ing must be. There is the intermediate as- 
 sumption that the individual refusal by a 
 single man is of the same character as a 
 concerted refusal by many men. This may 
 well be challenged as law, since it is con- 
 trary to fact. Even if it were in the face of 
 the logic of the law, most men would call 
 this competition unfair. For most men 
 firmly believe in the perpetuation of the open 
 market; and they realize that if a combina- 
 tion may work its will in this way, the end of 
 industrial liberty is at hand. 
 
 VI 
 
 The true method of approaching this prob- 
 lem, it should be reiterated, is by way of 
 justification; we are not examining absolute 
 rights, but relative rights. This is well put 
 in Delz v. Winfree (80 Tex. 400), where
 
 104 THE CONTROL OF THE MARKET 
 
 the cause of action stated in the petition was 
 that several persons had induced others not 
 to sell to the petitioner live animals for cash, 
 whereby he was greatly injured in his busi- 
 ness as butcher. As to the legality of this, 
 Associate Justice Henry said, in part: " The 
 appellee also asserts the following proposi- 
 tion, which may be conceded to be correct: 
 ' A person has an absolute right to refuse to 
 have business relations with any person 
 whomsoever, whether the refusal is based 
 upon reason or is the result of whim, caprice, 
 prejudice, or malice, and there is no law 
 that forces a man to part with his title to his 
 property.' The privilege here asserted must 
 be limited, however, to the individual action 
 of the party who asserts the right. It is not 
 equally true that one person may, from such 
 motives, influence another person to do the 
 same thing." 
 
 Granted that we have under discussion a 
 case of pure business motive, not of personal 
 spite, it becomes a question, therefore, what 
 course of action shall be justified, and what 
 methods shall be held to be opposed to public 
 policy. An excellent recent case attacks the 
 problem upon that basis Bailey v. Master 
 Plumbers' Association (103 Tenn. 99). This
 
 PRESSURE BY TRADE COMBINATIONS 105 
 
 was one of the typical cases the defendants, 
 members of an association with by-laws for- 
 bidding its members to purchase from deal- 
 ers who sold to outsiders, the plaintiff, one 
 forced out of business by this sort of com- 
 petition. And whether this is fair or unfair 
 competition was again the question. The 
 court Mr. Justice Caldwell writing the 
 opinion says in one place: " In our opinion, 
 it does not follow from this undoubted free- 
 dom of the individual member and individual 
 dealer that all of the members may, as ruled 
 in those cases, lawfully enter into a general 
 and unlimited agreement, in the form of by- 
 laws, that they, and all of them, will make 
 their purchases from only such dealers as 
 will sell to members exclusively. The premise 
 does not justify the conclusion." 
 
 If, then, this is all a matter of justifica- 
 tion, the existing law may be explained by 
 saying that perhaps an individual in com- 
 petition may be allowed to refuse to deal with 
 those who deal with his rival without danger 
 to the industrial order, while certainly a great 
 combination may not be allowed to use the 
 same method without disturbance of the 
 industrial peace. But is the method really 
 the same when there is refusal by an in-
 
 106 THE CONTROL OF THE MARKET 
 
 dividual? It seems the real truth that the 
 very concert gives combined action a higher 
 potentiality for harm than individual action 
 ever can have. Formal logic does not now 
 support the minority view that the combina- 
 tion is as free to act in this way as an in- 
 dividual is. And public policy certainly 
 seems to be with the majority view that the 
 individual trader should be protected against 
 the pressure of the combination which is 
 breaking up his business relations with those 
 who might otherwise deal with him. The 
 reality of such oppression carries with it, in 
 most minds, the conviction of the essential 
 wrongfulness of such dictation by the com- 
 bination. 
 
 VII 
 
 By some observers of these cases a differ- 
 ence is suggested between the situation just 
 under examination, where the coercion of the 
 combination is exercised upon third parties 
 outside of the combination, and what seems 
 to them another state of affairs where an out- 
 side party is injured solely by the pressure of 
 the members of an association upon each 
 other. It is urged here for the last time that 
 what one may do alone, he may join with
 
 PRESSURE BY TRADE COMBINATIONS 107 
 
 others to do. But this is not a safe course 
 of reasoning, as has already been seen. 
 Therefore the cases that present this differ- 
 ence should be scrutinized to see if there 
 really is any such distinction as that which 
 is attempted. 
 
 One of the leading cases of those, which was 
 decided for the combination, is Bohn Manu- 
 facturing Company v. Hollis (54 Minn. 223). 
 It appeared in this case that a large number 
 of retail lumber dealers had formed a volun- 
 tary association, by which they mutually 
 agreed that they would not deal with any 
 manufacturer or wholesale dealer who should 
 sell lumber directly to consumers, not dealers, 
 at any point where a member of the associa- 
 tion had a retail yard; and they provided 
 in their by-laws that, whenever any whole- 
 saler, dealer, or manufacturer made any such 
 sale, the secretary should notify all the mem- 
 bers of the fact. The plaintiff, a wholesaler, 
 having made such a sale directly to a cus- 
 tomer, the secretary threatened to send notice 
 of the fact, as provided in the by-laws, to 
 all the members of the association. The 
 opinion of Mr. Justice Mitchell is such in- 
 teresting reading that another extract may 
 be pardoned: " There is, perhaps, danger
 
 108 THE CONTROL OF THE MARKET 
 
 that, influenced by such terms of illusive 
 meaning as ' monopolies,' * trusts,' ' boy- 
 cotts,' ' strikes,' and the like, the courts 
 may be led to transcend the limits of their 
 jurisdiction, assume that, on general prin- 
 ciples, they have authority to correct or re- 
 form everything which they may deem wrong, 
 or, to manage the State. Now, when reduced 
 to its ultimate analysis, all that the retail 
 dealers, in this case, have done, is to form 
 an association to protect themselves from 
 sales by wholesale dealers or manufacturers, 
 directly to consumers or other non-dealers, at 
 points where a member of the association is 
 engaged in the retail business." 
 
 Another rather extraordinary case to the 
 same effect is Brewster v. Miller's Sons Com- 
 pany (101 Ky. 368). This was a suit against 
 the members of the Funeral Directors' Asso- 
 ciation of Louisville. The wife of the plain- 
 tiff Brewster died; he went to the defendants, 
 C. Miller's Sons, to engage their services for 
 her burial. They refused to act, because, as 
 they claimed, the plaintiff was already in- 
 debted to them. The other defendants re- 
 fused to perform the necessary services be- 
 cause of this claim of C. Miller's Sons that 
 Brewster was indebted to them for previous
 
 PRESSURE BY TRADE COMBINATIONS 109 
 
 services, according to the rules of the Funeral 
 Directors' Association. The court Mr. 
 Justice Paynter wrote the opinion could 
 find nothing wrong in this; it said: " If 
 one has, on a previous occasion, received 
 the services of the undertaker, and his ma- 
 terial, and has refused or failed to pay the 
 bill, it is certainly not unreasonable to re- 
 fuse to permit him services. To afford 
 mutual protection against such persons it 
 is not unlawful for the undertakers of the 
 community to associate themselves together 
 and agree to refuse to render a like service 
 to one who has refused or failed to pay 
 such expenses in the past to some member 
 of the association." 
 
 VIII 
 
 One of the best reasoned cases upon this 
 whole general problem remains to be stated, 
 Martell v. White (185 Mass. 255). It 
 plainly appeared in this case that the Granite 
 Manufacturers' Association, of which de- 
 fendants were members, had a by-law that 
 prohibited under penalty any member from 
 having business transactions with non-mem- 
 bers. Most of the customers of the plain: 
 tiff were members of the association, and
 
 110 THE CONTROL OF THE MARKET 
 
 after some of them had been fined by the 
 association for dealing with him, the rest 
 declined to deal with him further. The opin- 
 ion of Mr. Justice Hammond in this case is 
 so excellent in its grasp of the general sit- 
 uation, as it stands at the present moment, 
 that it would be well if all of it could be 
 printed here : " Nothing need be said in sup- 
 port of the general right to compete. To 
 what extent combination may be allowed in 
 competition is a matter about which there is 
 as yet much conflict, but it is possible that in 
 a more advanced stage of the discussion, the 
 day may come when it will be more clearly 
 seen and will more distinctly appear in the 
 adjudication of the courts than as yet has 
 been the case, that the proposition that what 
 one man lawfully can do, any number of 
 men, acting together by combined agreement, 
 lawfully may do, is to be received with newly 
 disclosed qualifications arising out of the 
 changed conditions of civilized life and of the 
 increased facility and power of organized 
 combination, and that the difference between 
 the power of individuals acting each accord- 
 ing to his preference, and that of an or- 
 ganized and extensive combination, may be 
 so great in its effect upon public and private
 
 PRESSURE BY TRADE COMBINATIONS 111 
 
 interests as to cease to be simply one of de- 
 gree and to reach the dignity of a difference 
 in kind." 
 
 In the latest case in Massachusetts, Davis 
 v. The Publishing Company (203 Mass. 
 470), the matter of combination was reduced 
 to its simplest terms, there being but two in 
 the combination complained of. It appeared 
 from the complaint that the plaintiff express- 
 man had been excluded from the list in the 
 publication of one of the defendants, by the 
 machinations of two of his competitors, the 
 remaining defendants, but Mr. Justice 
 Knowlton said as to the plaintiff " the gist 
 of the plaintiff's action is the wrong done 
 him by intentionally turning away from him 
 those who otherwise would do business with 
 him." And as to the defendants he said 
 " their desire to advance their own interests in 
 competition is not a justification for attempt- 
 ing to interfere with the plaintiff's business 
 by misstatements, and the making of a false 
 and misleading publication." The law will, 
 therefore, move against any combination, 
 large or small, which is in any way, directly 
 or indirectly, seeking to destroy the business 
 of a rival by using the force of its organiza- 
 tion to drive his customers from him.
 
 112 THE CONTROL OF THE MARKET 
 
 IX 
 
 Underlying this refusal to justify the sort 
 of competition which is now under discussion 
 is the general public policy against monopo- 
 lization. It is opposed to present ideals that 
 a combination should be allowed to employ 
 methods which will enable it to gain control 
 of its market. This is the real explanation 
 why the courts, by a considerable majority, 
 have declared that a combination cannot bring 
 its organized force to bear upon an individual 
 rival so as to cut him off from his source 
 of supplies. When it is more or less true 
 that any man may enter any business upon 
 his merits, the perpetuation of the open mar- 
 ket is assured. But if men in business are 
 left at the mercy of the predatory trusts, the 
 combinations would practically have a perma- 
 nent hold upon the industries. And to the 
 majority of men an end of competitive con- 
 ditions in the ordinary businesses would seem 
 the final catastrophe, beyond which there 
 could be nothing but the horror of anarchy 
 or the hopelessness of socialism. It is be- 
 cause of these perils to society that we are 
 finding to-day such agreement as to the pro- 
 priety of regulation of the industrial situa-
 
 PRESSURE BY TRADE COMBINATIONS 113 
 
 tion by law. A very great change this is, 
 from the doctrines of laissez fcdre of the early 
 nineteenth century to the principles of state 
 control in this early twentieth century.
 
 NOTE 
 
 THE plaintiff thus injured in his business was given 
 a remedy in: Georgia Brown v. Jacobs Pharmacy Co., 
 115 Ga. 429 (1902); Illinois Doremus v. Hennessy, 
 176 111. 608; Indiana Jackson v. Stanfeld, 137 Ind. 
 592 (1893); Maryland Klingel v. Sharp, 104 Md. 
 218; Massachusetts Martell v. White, 185 Mass. 255 
 (1906); Minnesota Ertz v. Produce Exchange, 79 
 Minn. 140 (1900); Missouri Walsh v. Assn. of Master 
 Plumbers, 97 Mo. App. 280 (1902); New Jersey Barr 
 v. Essex Trades Council, 53 N. J. Eq. 101 (1894); 
 Ohio Mattison v. L. S. & M. S. Ry. Co., 3 Ohio Dec. 
 526 (1895); Tennessee Bailey v. Master Plumbers' 
 Assn., 103 Tenn. 99 (1899); Texas Olive v. Van 
 Patten, 7 Tex. Civ. App. 630 (1894); Vermont Bout- 
 well v. Marr, 71 Vt. 1 (1896); Wisconsin Hawarden 
 v. Youghiogheny Coal Co., Ill Wis. 545 (1901). 
 
 The defendants were not held liable in: Colorado 
 Master Builders' Ass'n v. Domascio, 16 Col. App. 25 
 (1901); Kentucky Brewster v. Miller's Sons Co., 101 
 Ky. 368 (1897); Minnesota Bohn Mfg. Co. v. Hollis, 
 54 Minn. 223 (1893); Rhode Island MacCauley Bros. 
 v. Tierney, 19 R. I. 255 (1898); West Virginia Trans- 
 portation Co. v. Standard Oil Co., 50 W. Va. 611 
 (1902). 
 
 In certain jurisdictions the decisions are hard to 
 reconcile: England, up to the time of Quinn v. Leathern 
 (1901), A. C. 495, was not opposed to such action by a 
 combination (cf. Boots Co. v. Grundy, 82 L. T. 769); 
 
 115
 
 116 NOTE 
 
 but it now seems that the particular issue here involved 
 would fall under the rule of this latest case and be 
 decided against the combination. The same observations 
 apply to Scottish Cooperative Soc. v. Glasgow Fleshers' 
 Ass'n, 35 Sc. Law Reporter 645, which was decided for 
 the defendants, while Allen v. Flood (1898), A. C. 1, 
 was still good law. New York The courts, upon the 
 whole, have favored the combination in late years (see 
 Park v. Wholesale Druggists' Ass'n, 175 N. Y. I., 
 1903) ; but the latest decision is for the individual thus 
 injured, Straus v. American Publishers' Ass'n, 177 N. Y. 
 473 (1903).
 
 CHAPTER VI 
 
 CONTRACTS IN RESTRAINT OF TRADE 
 
 IT has been remarked that whenever 
 there is an accepted belief among men that 
 strict adherence to certain policies is necessary 
 for their industrial salvation, that belief has 
 already become a principle of the law. In 
 dealing with the eternal problem of com- 
 petition and combination, the judges have the 
 same social imagination as other men. And 
 as the most of men still think that competi- 
 tion in general is a good, the most of courts 
 yet consider combination an evil. Whether 
 or not it is true that a contract in restraint 
 of trade is against the better interests of the 
 community, as the law has always held, may 
 be judged from the many and various in- 
 stances of schemes to control the market re- 
 lated in this chapter. 
 
 ii 
 
 From the Common Pleas in the year 1415 
 this case is reported : ' Writ of debt was 
 
 117
 
 118 THE CONTROL OF THE MARKET 
 
 brought on an obligation of one John Dier, 
 in which the defendant declared upon a cer- 
 tain indenture which he set forth, on con- 
 dition that if the defendant did not use his 
 art of dier's craft within the town where the 
 plaintiff, etc., for a certain time, to wit, half 
 a year, the obligation should lose all force, 
 etc., and said that he did not use his art of 
 dier's craft in the time limited, which he 
 averred and prayed judgment, etc. HULL. 
 In my opinion you might have demurred 
 upon him, that the obligation is void, for that 
 the obligation is against the common law, 
 and by God, if the plaintiff were here, he 
 should go to prison until he paid a fine to the 
 king." From that day to this every contract 
 in total restraint of trade has been held 
 invalid. 
 
 Our law has never been free from the fear 
 that such agreements might result in serious 
 disturbance of the ordinary processes of com- 
 petition. This fear was well founded in 
 ancient times, when the market was small; 
 for England had not yet changed from a 
 local economy, where each community was 
 sufficient to itself, into a national economy 
 which implied interchange of goods between 
 distant communities. It was nearly two cen-
 
 CONTRACTS IN RE3TRAINT OF TRADE 119 
 
 turies before the concession was made that 
 any contracts restraining competition could 
 be legal; but with expanding trade, commer- 
 cial conditions arose which made it necessary 
 that some distinctions should be made. In 
 Jelliet v. Broade, for example (as reported by 
 Noy, page 98), "J sells goods to B for 
 $200, and, in consideration of that bargain, 
 B promises that he will not exercise the trade 
 of a mercer in such a village. But after B 
 uses it there, and J brought an action on the 
 case, and resolved by the court that it well 
 lies, for it was a voluntary promise for a 
 good consideration, and it is restraint as to 
 a place. Otherwise if it had been a general 
 restraint or upon a co-action or without con- 
 sideration." Partial restraint was thus dis- 
 tinguished from total restraint, and this dis- 
 tinction served for centuries to. mark the line 
 dividing what was permissible from what was 
 forbidden. 
 
 In the early days in many a small town 
 it was quite possible for one man to con- 
 trol all of a given commodity in his mar- 
 ket, which he could then sell again at his 
 own price. So restricted were the sources 
 of supply to a given market in those early 
 times that these offenses constituted real dan-
 
 120 THE CONTROL OF THE MARKET 
 
 gers to the local consumers. But with a 
 widening economy these dangers ceased and 
 this law became obsolete as time went on. 
 Practices such as these were indictable of- 
 fenses in these early times. It was against 
 the public peace that the market should be 
 thus disrupted. Hence, in most of the 
 assizes, inquiry was made if such schemes to 
 control the market were on foot in the com- 
 munity. What was feared at the outset was 
 any reversion to monopolistic conditions by 
 artificial restraints upon what would other- 
 wise be the regular course of the competitive 
 market. To keep that market open the law 
 now exercised every diligence, as the rapid 
 development of special law against certain 
 practices abundantly showed. 
 
 It was then that forestalling and regrating 
 became recognized offenses. Forestalling was 
 interference with the course of trade at 
 the earlier stage, where designing persons 
 went out on the roads leading to market and 
 bought whole wagon loads of wheat from a 
 farmer who was bringing it to market, their 
 intention being to resell the wheat in that 
 market at a profit. Similarly regrating was 
 the work of undesirable citizens who 
 went boldly into the market and bought more
 
 CONTRACTS IN RESTRAINT OF TRADE 
 
 provisions than they needed fo? their own 
 consumption, with intent to sell again in the 
 same market. There were two other offenses 
 of this sort against trade, engrossing and 
 monopolizing, which deserve perhaps more 
 attention, as these engaged the business sa- 
 gacity and larger capital of the bigger men. 
 Usually, such only could buy up great quan- 
 tities of a staple to hold until the price should 
 be enhanced or make many forward contracts 
 for the delivery of growing crops. It will 
 be seen presently that this old law against 
 monopolization in all its forms has had re- 
 newed significance in recent times. 
 
 in 
 
 In the earlier cases the policy against any 
 real restraint of trade, and against monopo- 
 lization in any form whatsoever, was main- 
 tained on every occasion, whatever the cir- 
 cumstances. The judges still spoke in un- 
 compromising terms; the time for making 
 distinctions had not come yet. For example, 
 in Claygate v. Batchelor (Owen, 143), in re- 
 fusing to enforce an agreement that one 
 tradesman should not do business in a certain 
 town, Anderson, J., reached the height of
 
 122 THE CONTROL OF THE MARKET 
 
 his fulmination by saying that " he might as 
 well bind himself that he would not go to 
 Church!" 
 
 In the great Case of Monopolies (11 Rep. 
 84) , Popham and all his court resolved against 
 the Queen's grant: "That it is a monopoly, 
 and against the common law. All trades as 
 well mechanical as others which prevent idle- 
 ness (the bane of the Commonwealth) and 
 exercise men and youth in labor for the 
 maintenance of themselves and their families, 
 and for the increase of their substance, to 
 serve the Queen when occasion shall require, 
 are profitable to the Commonwealth, and 
 therefore a monopoly of them is against 
 the common law and the benefit and liberty 
 of the subject." 
 
 Until well toward the end of the eight- 
 eenth century our law dealt with restraint 
 of trade in an uncompromising manner. 
 But before the middle of the nineteenth 
 century it had been discovered that the law 
 could not be too arbitrary without hamper- 
 ing business too much; and it was found 
 necessary to moderate it by making certain 
 distinctions. There thus was brought about 
 in various ways enough modification of the 
 primary rule against contracts affecting com-
 
 CONTRACTS IN RESTRAINT OF TRADE 123 
 
 petition, so that toward the end of the cen- 
 tury the generalization might fairly be made 
 that it was only unreasonable contracts which 
 directly suppressed competition which should 
 be held void, while reasonable arrangements 
 which still left the contracting parties a cer- 
 tain independence might be valid. It was 
 by this modern method of making distinc- 
 tions that it was held in an early Florida 
 case that pilots might make an agreement 
 among themselves that the courts would en- 
 force as to the order in which they should 
 take the station, Judge Baltzell taking occa- 
 sion to extol modern cooperation as that 
 which " distinguished civilized from savage 
 life." 
 
 In the same wise spirit of compromise, 
 Chief Justice Shaw in Massachusetts de- 
 cided that laborers " could not be prosecuted 
 for merely going upon a strike for higher 
 wages, although the preconcert was ad- 
 mitted." Many other illustrations might 
 be cited, if space permitted, of the reasonable 
 modification of the common law during the 
 nineteenth century until it finally presented 
 a working compromise between the two de- 
 sirable policies of safeguarding competition 
 and utilizing combination. And this had
 
 THE CONTROL OF THE MARKET 
 
 come from a general recognition, after ma- 
 ture reflection upon the known course of 
 economic history, that in competition and 
 combination we have two eternal forces, and 
 it should be the object of the law to accom- 
 modate them, with due regard to the vital 
 needs of the business community. 
 
 IV 
 
 An interesting plot in modern times to 
 hold up the market is seen in Pacific Factor 
 Company v. Adler (00 Cal. 110). In that 
 case the plaintiff had got an option from the 
 defendant for the delivery of some 200,000 
 grain bags and was attempting to enforce it. 
 The defense was that the plaintiff entered 
 into contracts with other holders of grain 
 bags in all respects similar to the contract 
 made with the defendant to the amount of 
 30,000,000 bags, with intent to monopolize 
 the market. Mr. Justice Garoutte affirmed 
 the non-suit, making this general argument 
 against the monopolizing company: " It 
 held the bag market in its hands, for com- 
 petition was gone, and the price demanded 
 must be paid. These agreements were not 
 entered into for the purpose of aggregating
 
 CONTRACTS IN RESTRAINT OF TRADE 125 
 
 capital, nor for greater facilities in the con- 
 ducting of their business, nor for the pro- 
 tection of themselves by a reasonable re- 
 straint upon active competitors, but for the 
 purpose of regulating, controlling and with- 
 holding the supply of bags, and thereby to 
 take an unjust advantage of the farmers' 
 necessities, by disposing of the fruits of its 
 unlawful labors at an unreasonable advance 
 in price." 
 
 Even a modern market may be tempo- 
 rarily disturbed by such accumulation, and 
 the normal price may be decidedly enhanced 
 by such monopolization. Occasionally a 
 case like Wright v. Cudahy (168 111. 86) 
 appears in our law reports to remind us of 
 the persistence of the policy against monopo- 
 lization. In that case a pork " corner " was 
 engineered with some success, but the court 
 refused to force one of the parties to divide 
 the ill-gotten gains. Upon the whole those 
 who attempt to corner the modern market 
 usually fail at the very moment of their 
 apparent success. That fate generally over- 
 takes them which almost invariably befalls 
 any one man, however powerful, who at- 
 tempts to injure all. This law has all but 
 disappeared, as the market has expanded
 
 126 THE CONTROL OF THE MARKET 
 
 until it has gotten almost beyond the power 
 of any one man to corner it. But this law 
 remains against aggregations of capital which 
 often are large enough to take control even 
 of the modern market for a time. 
 
 Upon this vexed question of combination 
 in restraint of trade, one of the leading cases 
 in America _ is India Bagging Association v. 
 Kock (14 La. Ann. 168). The facts, as 
 they appear from the finding of the court, 
 are as extreme as can be imagined. An asso- 
 ciation was formed of eight firms in New 
 Orleans, holders of large stocks of India 
 bagging, and by agreement the subscribers 
 bound themselves not to sell any bagging 
 whatever for three months, except by vote 
 of the majority. Mr. Justice Buchanan dis- 
 missed a suit by the association against a 
 member who sold in violation of the agree- 
 ment in a peremptory manner: " This is a 
 case which ought never to have come be- 
 fore us. The agreement between the parties 
 was palpably and unequivocally a combina- 
 tion in restraint of trade, and to enhance 
 the price in the market of an article of pri-
 
 CONTRACTS IN RESTRAINT OF TRADE 127 
 
 mary necessity to cotton planters. Such com- 
 binations are contrary to public order, and 
 cannot be enforced in a court of justice." 
 
 This is a case of total suppression of trade 
 for the time being; nothing, therefore, can 
 save it from the condemnation of the law. 
 And it is obvious in a case like this how 
 necessary it is to have unequivocal law to 
 deal with such a situation. It is hardly too 
 harsh to brand men, who confederate in this 
 way to withhold all supplies from the market, 
 as enemies to society. The courts properly 
 treat such parties when they come before 
 them as outlaws. Upon the whole, few rules 
 in our public policy have been so thorough- 
 going as this against restraint of trade. And 
 it does not change the law if the effects of 
 that agreement may be limited to a certain 
 extent by the competition of parties out- 
 side the agreement. It is enough to con- 
 demn the agreement, if, as between the par- 
 ties, the restraint is total. The law con- 
 siders all contracts between competitors to 
 limit their competition as bad in principle. 
 
 The restraint of trade thus is as obnoxious 
 to a modern court as ever, as Tuscaloosa Ice 
 Company v. Williams (127 Ala. 110), one 
 of the latest cases, shows. The complaint
 
 128 THE CONTROL OF THE MARKET 
 
 recited that by the terms of an agreement 
 between the plaintiff and defendant, the first 
 party was to pay $875 a year and the second 
 party was to shut down his ice machine for 
 five years. The court held the whole con- 
 tract so clearly bad as to be altogether un- 
 enforceable, Mr. Justice McClellan saying: 
 " It tends to injure the public by stifling 
 competition and creating a monopoly. It 
 operated not only to put in the power of 
 the covenantee to arbitrarily fix prices, but 
 directly and necessarily to create a partial 
 ice famine, upon which the defendant com- 
 pany could batten and fatten at its own sweet 
 will. That a monopoly was created is clear 
 beyond all dispute. That ends the case 
 against the validity of the covenant." 
 
 VI 
 
 Against all real restraint of trade the law 
 is still set; and often it frustrates the plans 
 of the conspirators when it is least expected. 
 Take for an example the lowly case of 
 Chapin v. Brown Bros. (83 Iowa, 156). The 
 facts are petty, yet the issue is involved. All 
 that appears is that by an arrangement be- 
 tween the storekeepers in a country town it
 
 CONTRACTS IN RESTRAINT OF TRADE 129 
 
 was agreed that all of them should stop buy- 
 ing butter of the farmers, except one of 
 them, who should share his profits with them. 
 This deprived the farmers of the benefit of 
 the competition of the buyers, as one sees. 
 Justice Rothrock refused to enforce this con- 
 tract; he said: " It plainly tends to monopo- 
 lize the butter trade at Storm Lake, and 
 destroy competition in that business. It is 
 not necessary that the enforcement of the 
 agreement would actually create a monopoly 
 in order to render it invalid, and surely where 
 all the dealers in a commodity in a certain 
 locality agree to quit the business, and the 
 plaintiffs are installed as the only dealers 
 in that line, the tendency is, for a time at 
 least, to destroy competition, and leave the 
 plaintiffs as the only dealers in that species 
 
 of property in that locality." X 
 
 A precious scheme is that disclosed in Mil- 
 waukee Masons and Builders' Association v. 
 Niezerowski (95 Wis. 129). This was an 
 action on a note to which it was pleaded as 
 making out a defense upon grounds of pub- 
 lic policy. That the note was given by the 
 defendant, a builder, to the plaintiff, the 
 association, in pursuance of its requirements 
 that every successful bidder for contracts
 
 130 THE CONTROL OF THE MARKET 
 
 in Milwaukee should pay over to the asso- 
 ciation six per cent, of the contract price. 
 The showing of such a scheme was enough 
 for Mr. Justice Pinney: " The combination 
 in question is contrary to public policy, and 
 strikes at the interests of those of the public 
 desiring to build, and between whom and 
 the association or the members thereof there 
 exist no contract relations. While all reason- 
 able stipulations and means to protect labor 
 or trade are laudable, we must hold that the 
 means here sought to be employed are such 
 as the law will not sanction. We must 
 consider what may be done under such an 
 agreement, and the result which it will neces- 
 sarily produce. As already pointed out, 
 the operation of this combination, under its 
 private by-laws, is to suppress free and fair 
 competition in bidding for contracts, and by 
 delusive and deceptive means members of 
 the association are enabled to exact from 
 owners a higher price for buildings than 
 they would otherwise have to pay." 
 
 VII 
 
 It will have been noted that in the mod- 
 ern cases the attempt has been to draw the
 
 CONTRACTS IN RESTRAINT OF TRADE 131 
 
 line between what is unreasonable and what 
 is reasonable. The time has certainly come 
 in this discussion to bring forward instances 
 of what the modern law will permit as rea- 
 sonable to contrast with the cases of un- 
 reasonable restraint which have been cited. 
 It is desirable that men should be free to com- 
 pete in business; it is desirable also that 
 contracts relating to business should be en- 
 forced. There is a conflict of policies here, 
 and some compromise is the only way out. 
 As in the case of most legal distinctions it is 
 only a difference in degree that separates ar- 
 rangements of the forbidden sort from agree- 
 ments of the permitted kind. But perhaps 
 it will make the discussion clearer to define 
 by catch phrases the two extremes. What, 
 then, is forbidden is unreasonable restraint 
 suppression of competition; while what is per- 
 mitted is reasonable restriction regulation 
 of competition. Phrases these are but they 
 may serve to fix the limits of the inquiry. 
 
 A plain illustration of the social advantage 
 of the reasonable agreement, in ameliorating 
 competition, is Stovall v. McCutcheon (54 
 S. W. 969), where the court enforced an 
 agreement among the merchants in a cer- 
 tain village to close at 6:30 p. M, on certain
 
 132 THE CONTROL OF THE MARKET 
 
 days at certain seasons. The opinion of Mr. 
 Justice White was brief, but to the point: 
 " While it is true that contracts in restraint 
 of trade are to be carefully scrutinized, and 
 looked upon with disfavor, all contracts in 
 restraint of trade are not illegal. The re- 
 straint here put is but partial, very incon- 
 siderable. It is but a few hours, at most, 
 each day, and for three and one-half months, 
 during the extremely hot weather. It has 
 come within the observation of the members 
 of this court that during this season (May 
 15th to September) many merchants close 
 about 6:30 or 7 P. M. This cannot be held 
 an illegal restraint of trade." 
 
 Upon the whole, the courts will go very 
 far to support, as reasonable, commercial 
 agreements which they believe to have been 
 made in good faith, with no idea to control 
 the market. An illustration of this tendency 
 is the leading case of Collins v. Locke (L. 
 R. 4 A. C. 674). The agreement there in 
 question was made between four parties then 
 engaged in carrying on the business of 
 stevedores in the port of Melbourne for the 
 purpose of preventing competition. The 
 principal shipping firms were by the provi- 
 sions of the agreement divided into four sets,
 
 CONTRACTS IN RESTRAINT OF TRADE 133 
 
 one set being allotted to each party to the 
 agreement, if he can get them; if not, an 
 equivalent was to be given; other ships were 
 to be taken in order of arrival, and no other 
 party was to interfere. The House of Lords 
 made a distinction between these two clauses 
 of the agreement. The division of the work 
 for the regular firms, if the arrangement 
 was satisfactory to them, their Lordships 
 held reasonable. " Each party might in turn 
 derive benefit from this clause, and one of 
 the four firms would always get the profit 
 of the ship stevedored, though the work 
 might be done by another of them. As re- 
 gards the merchant, also, he can have his ship 
 stevedored by the party whom he may re- 
 quire to do it; at least there is no prohibition 
 against his having it so done." But the 
 positive restraint against working for the 
 occasional ships except in rotation their 
 Lordships held unreasonable. " Such a re- 
 striction cannot be justified upon any of the 
 grounds on which partial restraints of trade 
 have been supported. It is entirely beyond 
 anything the legitimate interests of the par- 
 ties required, and is utterly unprofitable and 
 unnecessary, at least for any purpose that 
 can be avowed."
 
 134 THE CONTROL OF THE MARKET 
 VIII 
 
 This distinction between reasonable and 
 unreasonable restraint of trade goes back 
 to the leading case of Mitchell v. Reynolds 
 (1 P. Wms. 181), where far too elaborate 
 tests were given to determine whether an 
 agreement should be considered legal or il- 
 legal, the hopeless attempt being made to 
 justify all of the previous decisions, ignoring 
 the fact that the originally absolute rule had 
 at length been modified so as to permit 
 business dealings of certain sorts. The actual 
 decision, however, was clearly sound; and it 
 has been followed in almost countless cases 
 of the same sort ever since. It was that a 
 merchant in selling out his business could 
 agree not to engage in a similar trade within 
 a fair distance for a reasonable time. The 
 policy to make the good-will which a trader has 
 built up a salable asset overbore to that ex- 
 tent the general policy against contracts in 
 restraint of trade. It seems that such ar- 
 rangements should not be permitted to stand 
 when they are being used by a monopo- 
 lizing concern to perpetuate its control of 
 the market. There are conflicting authorities 
 on this point, but the law probably is that
 
 CONTRACTS IN RESTRAINT OF TRADE 135 
 
 such contracts are only permitted on grounds 
 of public policy anyhow; and if they are 
 being used as part of a scheme to monopolize, 
 they should not be enforced. 
 
 No scheme to control the market should 
 be allowed to hide itself behind the doctrine 
 of the reasonable character of an ancillary 
 agreement, as it was attempted to do in 
 Arnot v. Pittston and Elmira Coal Co. (68 
 N. Y. 558). This was an arrangement be- 
 tween Pennsylvania operators and New York 
 dealers by which it was agreed that no coal 
 should be sold in the Elmira market except 
 under the provisions of the contract through 
 the dealers, the operators undertaking that 
 no other coal should come north of the state 
 line during the continuance of the agreement. 
 Later the parties fell out, but the court dis- 
 missed them all, Mr. Justice Rapallo say- 
 ing: "Every producer or vendor of coal or 
 other commodity has the right to use all 
 legitimate efforts to obtain the best price 
 for the article in which he deals. But when 
 he endeavors to artificially enhance prices 
 by suppressing or keeping out of the market 
 the product of others, and to accomplish that 
 purpose by means of contracts binding them 
 to withhold their supply, such arrangements
 
 136 THE CONTROL OF THE MARKET 
 
 are even more mischievous than combinations 
 not to sell under an agreed price. Combi- 
 nations of that character have been held to be 
 against public policy and illegal. If they 
 should be sustained, the prices of articles of 
 pure necessity, such as coal, flour, and other 
 indispensable commodities, might be arti- 
 ficially raised to a ruinous extent far exceed- 
 ing any naturally resulting from the pro- 
 portion between supply and demand." 
 
 IX 
 
 One of the most important applications of 
 this distinction between what is reasonable 
 and what is unreasonable remains for discus- 
 sion the " factor's agreement " so called. 
 A common case is Clark v. Frank (17 Mo. 
 App. 602), where Mr. Justice Thompson 
 said, in passing: "We see no force in the 
 argument that the agreement not to sell the 
 goods at less than the trade price was void as 
 being in restraint of trade, so far as it related 
 to goods which might be purchased of other 
 dealers. If it were void, that fact would not 
 help the defendants, for the plaintiff merely 
 chose to say that he would allow certain 
 drawbacks upon the performance of a certain 
 condition."
 
 CONTRACTS IN RESTRAINT OF TRADE 137 
 
 Another instance of the factor's agreement 
 of equal importance is Houck & Co. v. 
 Wright (77 Miss. 476). The facts here 
 also presented an ordinary business arrange- 
 ment, whereby the manufacturers of a certain 
 piano made an exclusive agency contract with 
 a certain dealer. It was urged in the case 
 cited that this arrangement, excluding as it 
 did other persons from getting a right to sell 
 this piano in this territory, tainted all the 
 surrounding transactions with restraint of 
 trade. But Mr. Justice Terral was clear 
 that this was not at all so. " The arrange- 
 ment between Vose & Sons and Houck & 
 Co., is entirely legal. It does not operate to 
 suppress competition, nor to regulate the 
 production or sale of any commodity. As 
 said by counsel of appellant, its purpose is 
 to facilitate and advance the sale of pianos. 
 It is Vose & Sons regulating their own busi- 
 ness, endeavoring thereby to sell as many 
 pianos as possible, and on the best terms for 
 themselves and their customers." 
 
 All of these cases show that, by a well- 
 devised contract, power is often obtained to 
 control even the modern market, wide as it
 
 138 THE CONTROL OF THE MARKET 
 
 is. It is the recognition of this possibility 
 that makes the law against the conspiracy to 
 control the market so thoroughgoing. Any 
 scheme to monopolize is therefore illegal, 
 whatever may be its outward seeming. 
 Even the exceptions which have been made 
 to the sweeping policy against all restraint 
 of trade cannot be claimed by those who have 
 a scheme to monopolize on foot. In the case 
 of the sale of a plant to a trust the conve- 
 nants not to compete cannot be enforced. 
 And in the case of a trust the factor's agree- 
 ment should not be enforced. Upon this 
 whole matter, however, the operation of the 
 common law, as has been seen, is negative. 
 It denies enforcement to all such arrange- 
 ments; but it can do little if all within the 
 combination are well satisfied. To be sure, 
 it is the common fate of pools that when some 
 of its members can resist the advanced price 
 no longer they will sell out, knowing that 
 their fellow members in the pool will be 
 without legal redress. But some pools are so 
 successful in getting big profits for all con- 
 cerned, or their members are so loyal, that no 
 one breaks away, and prices stay up. Then 
 the public needs affirmative law for its pro- 
 tection; and this is the explanation of these
 
 CONTRACTS IN RESTRAINT OF TRADE 139 
 
 modern statutes, discussed in a later chapter, 
 giving to the prosecuting officers power to 
 initiate proceedings to compel the dissolution 
 of such combinations.
 
 
 NOTE 
 
 OTHER important cases in addition to those discussed 
 in the text-book holding an unreasonable agreement unen- 
 forceable are: Leighton v. Wales, 3 M. & W. 545 
 (1838); Oliver v. Gilmore, 52 Fed. 562 (1892); Santa 
 Clara Lumber Co. v. Hayes, 76 Cal. 387 (1888); Craft 
 v. McConoughy, 79 111. 346 (1875); Anderson v. Jett, 
 89 Ky. 375 (1889); Cohen v. Envelope Co., 166 N. Y. 
 292 (1901) ; Barataria Canning Co. v. Joulian, 80 Miss. 
 555 (1902); Central Ohio Salt Co. v. Guthrie, 35 Oh. 
 St. 666 (1880); Morris Run Coal Co. v. Barclay Coal 
 Co., 68 Pa. St. 173 (1871) ; Fairbank v. Leary, 40 Wis. 
 637 (1876). But see Perkins v. Lyman, 9 Mass. 523 
 (1813); Manchester & L. R. R. v. Concord R. R., 66 
 N. H. 100 (1889). 
 
 Other important cases not discussed in the text hold- 
 ing a reasonable agreement enforceable are: Wickens 
 v. Evans, 3 Y. & J. 318 (1829); Nordenfelt v. Maxim 
 & Nordenfelt Co. (1894), A. C. 535; Bowling v. Taylor, 
 40 Fed. 404 (1889); Grogan v. Chaffee, 156 Cal. 611 
 (1909); Herriman v. Menzies, 115 Cal. 16 (1896); 
 Willson v. Morse, 117 Iowa, 581 (1902); Central Shade 
 Roller Co. v. Cushman, 143 Mass. 353 (1887); National 
 Benefit Co. v. Union Hospital Co., 45 Minn. 272 
 (1891); Houck & Co. v. Wright, 77 Miss. 476 (1899); 
 Presbury v. Fisher, 18 Mo. 50 (1853); Bancroft v. 
 Union Embossing Co., 72 N. H. 402 (1903); Diamond 
 Match Co. v. Roeber, 106 N. Y. 473 (1887). But see 
 Lawrence v. Kidder, 10 Barb. 641 (1851); Lufkin Rule 
 Co. v. Fringeli, 57 Oh. St. 596 (1898). 
 
 141
 
 CHAPTER VII 
 
 MODERN FORMS OF COMBINATIONS 
 
 NOTWITHSTANDING all the law against 
 agreements in restraint of trade which has 
 just been recited, the present generation has 
 seen in the rise of the trusts the greatest 
 movement toward consolidation which is 
 recorded in economic history. But this con- 
 solidation was not accomplished without a 
 reckoning with the law. In the face of this 
 adverse law the ingenuity of attorneys, act- 
 ing for clients who wished to bring about a 
 community of interests, has been taxed to the 
 utmost; and at best their schemes have proved 
 only temporary expedients. In this era of 
 consolidation there has been a change of base 
 at least four times during this brief period: 
 First, the pool a direct agreement between 
 the corporations concerned for their joint 
 operation to a certain extent; second, the 
 trust an indirect arrangement between the 
 
 142
 
 MODERN FORMS OF COMBINATIONS 143 
 
 shareholders to control the action of their 
 corporations; third, the holding corporation 
 a central company to hold the shares of the 
 constituent companies; and fourth, the single 
 corporation, which buys the properties of the 
 combining corporations outright. Despite 
 the many cases relating to these four typical 
 forms of intercorporate relationship, the 
 problem is still, to a large extent, unsolved 
 as to how various corporations may be con- 
 centrated under one control. 
 
 II 
 
 It is hardly fair to the legal profession to 
 say that it entertained a real expectation for 
 the success of any simple form of pooling 
 arrangement during the last two decades. 
 In the face of so much express authority 
 against combinations in restraint of trade, 
 clients must have been advised that to form 
 pools was to run for luck. Perhaps every 
 member would live up to his agreement; but 
 there was no remedy at law if anyone did 
 not. Perhaps the proceeds of the pooling 
 would be fairly divided; but the court would 
 not order an accounting. And experience 
 showed again and again that, without legal
 
 144. THE CONTROL OF THE MARKET 
 
 obligation, there were always members in any 
 such pool treacherous enough to break with 
 it. Moreover, there was the corporation 
 law to reckon with, as well as the combina- 
 tion law. It has always been held to be 
 against the policy of the corporation law for 
 corporations to surrender their independence 
 by entering a pool. Although the conse- 
 quences of this were not quite so dire as in 
 the case of illegal combinations, still no 
 corporation could be held to any agreement 
 of this sort. 
 
 The leading case on the general principle 
 against the combination of corporations in a 
 partnership or any other association is Whit- 
 tenton Mills v. Upton (10 Gray 582). In 
 that case the court Thomas, J. held that, 
 as a matter of law, a corporation could, under 
 no circumstances, beneficial to it or detri- 
 mental to it, and for no purpose, legal or 
 illegal, be a member of a partnership. ' The 
 effect of all our statutes, the settled policy 
 of our Legislature, for the regulation of 
 manufacturing corporations is that the cor- 
 poration is to manage its affairs separately 
 and exclusively, certain powers to be exer- 
 cised by the stockholders, and others by offi- 
 cers who are the servants of the corporation
 
 MODERN FORMS OF COMBINATIONS 145 
 
 and act in its name and behalf. And the 
 formation of a contract, or the entering into 
 a relation, by which the corporation or the 
 officers of its appointment should be divested 
 of that power, or by which its franchise 
 should be vested in a partner with equal 
 power to direct and control its business, is 
 entirely inconsistent with that policy." 
 
 When, therefore, corporations sign agree- 
 ments to carry on their business in common, 
 the scheme is always held illegal. This is 
 sufficiently shown by the case of Mallory v. 
 Hanaur Oil Works (86 Tenn. 598). This 
 was a " combination syndicate," arranged be- 
 tween four corporations engaged in manu- 
 facturing cottonseed oil at Memphis. The 
 contracting mills agreed to select a commit- 
 tee, composed of representatives from each 
 corporation, and to turn over to this com- 
 mittee the properties and machinery of each 
 mill, to be managed and operated by this 
 committee, through officers, agents, and em- 
 ployees selected by them, for the common 
 benefit, the profits and losses of such opera- 
 tions to be shared in proportions agreed 
 upon. In declaring this arrangement illegal 
 Mr. Justice Lurton said : " The decided 
 weight of authority is that a corporation has
 
 146 THE CONTROL OF THE MARKET 
 
 not the power to enter a partnership, either 
 with other corporations or with individuals. 
 It is unnecessary to consider this contract as 
 constituting a mere traffic arrangement; for 
 the conclusion already announced that it was 
 an effort to form a partnership, determines 
 that in its scope and effect it sought to accom- 
 plish much more than would be understood 
 by the phrase traffic arrangement." 
 
 in 
 
 Emery v. Candle Company (47 Oh. St. 
 320) is a typical form of pooling agreement. 
 An association was shown in that case which 
 included ninety-five per cent, of the manu- 
 facturers of candles in the United States. 
 The members of the association surrendered 
 their freedom of action only to this extent, 
 that they were required to pay into the 
 treasury two and one-half cents per pound 
 on every pound of candles disposed of on 
 their own account. Whether they sold any 
 candles or not, they received a share in the 
 profits of the pool. This plan was thus self- 
 acting; it was to the interest of each member 
 to remain idle when the price was low, to 
 operate only if the price were high. The
 
 MODERN FORMS OF COMBINATIONS 147 
 
 expected result followed; the production of 
 candles decreased, the price of candles in- 
 creased during the whole existence of the 
 association. The court pronounced the ar- 
 rangement bad altogether: "We are of the 
 opinion that the suit cannot be maintained, 
 for the reason that the objects of the associa- 
 tion were contrary to public policy and in 
 no way to be aided by the courts. No re- 
 covery can be had except by giving effect to 
 the terms of the agreement. The action is 
 in substance a suit against the association to 
 recover a sum due the plaintiff under the 
 terms on which the association was formed. 
 Its suit is to recover its portion of the ill- 
 gotten gains." 
 
 The principal rule against restraint of 
 trade thus remains practically unaffected by 
 any further modifications than those which 
 have been mentioned. Nester v. Continental 
 Brewing Company (161 Pa. St. 473) is 
 representative of the class of cases in ques- 
 tion. The bill set forth that a Brewers' 
 Association of Philadelphia had been formed 
 under articles of agreement in writing by 
 forty-five brewers of Philadelphia, individ- 
 uals, firms, and corporations. By the prin- 
 cipal section of the agreement each member
 
 148 THE CONTROL OF THE MARKET 
 
 of the association agreed not to sell any beer 
 to any new trade, or to any customer of any 
 brewer that belonged to the association. A 
 summary from the opinion of Mr. Justice 
 Sterrett follows: " The test question in every 
 case like the present is whether or not a 
 contract in restraint of trade exists which is 
 injurious to the public interests; if injurious, 
 it is void as against public policy. Courts 
 will not stop to inquire as to the degree of 
 injury inflicted. It is enough to know that 
 the natural tendency of such contracts is in- 
 jurious. So if the natural tendency of such 
 contracts is to injuriously affect public in- 
 terests, the form and declared purpose are 
 immaterial. Courts will not lend their aid 
 in illegal transactions no matter how dis- 
 guised." 
 
 It is to be noted again that when a com- 
 bination in restraint of trade is once proved 
 to be such, outlawry is declared. It can 
 bring no suit against those in it; neither can 
 they sue it. The courts will have nothing 
 to do with association or associates. This is 
 the penalty, that the loss must lie where it 
 falls; and this policy is, in itself, often one 
 of the strongest of deterrents. Thus any 
 member of the association may withdraw
 
 MODERN FORMS OF COMBINATIONS 149 
 
 whenever it suits his interest to do so, a re- 
 sult that minimizes the harm that such a 
 combination may effect. For experience 
 shows that the result is that competition still 
 goes on surreptitiously, despite the agree- 
 ment, since every active member is strength- 
 ening his position in preparation for an ulti- 
 mate withdrawal. And at the psychological 
 moment some member, who has accumulated 
 a large stock while production has been cur- 
 tailed, will sell out at near to the top price 
 and break the market, thus causing his asso- 
 ciates irreparable losses. 
 
 IV 
 
 Such was the state of the law when the 
 trust agreement was discovered by a startled 
 community. The material features of that 
 scheme are now well known; the first great 
 case on this scheme, People v. North River 
 Sugar Refining Company (121 N. Y. 582), 
 brought out the details of the whole matter. 
 All the shares of the capital stock of all of 
 the confederating corporations were trans- 
 ferred to a board of trustees. These trustees 
 issued trust certificates in lieu of these shares, 
 thus reserving the voting rights in all of the
 
 150 THE CONTROL OF THE MARKET 
 
 corporations. As a cover for the scheme all 
 of the several corporations remained in exist- 
 ence; and in form each conducted its own 
 business without any cross agreements among 
 themselves. In one of the most perfect opin- 
 ions in our books Mr. Justice Finch held the 
 trust agreement invalid. He concluded thus: 
 " And here, I think, we gain a definite view 
 of the injurious tendencies developed by its 
 organization and operation, and of the public 
 interests which are menaced by its action. 
 As corporate grants are always assumed to 
 have been made for the public benefit, any 
 conduct which destroys their normal func- 
 tions, and maims and cripples their separate 
 activity, and takes away their free and in- 
 dependent action, must so far disappoint the 
 purpose of their creation as to affect un- 
 favorably the public interest. It is not a 
 sufficient answer to say that similar results 
 may be lawfully accomplished by an in- 
 dividual. And so we have reached our con- 
 clusion, and it appears to us to have been 
 established, that the defendant corporation 
 has violated its charter and failed in the per- 
 formance of its corporate duties, and that in 
 respects so material and important as to jus- 
 tify a judgment of dissolution. Having
 
 MODERN FORMS OF COMBINATIONS 151 
 
 reached that result, it becomes needless to 
 advance into the wider discussion over 
 monopolies and competition and restraint of 
 trade and the problems of political economy." 
 A few years later the suit to dissolve the 
 first of all the trusts, the Standard Oil 
 alliance, was decided in favor of the State. 
 In State v. Standard Oil Company (49 Oh. 
 St. 137) the Attorney-General of Ohio 
 commenced this action to oust the defendant 
 of the right to be a corporation on the ground 
 that it has abused its corporate franchises by 
 becoming party to an agreement that is 
 against public policy. The agreement shown 
 in the case provided that almost all the stock- 
 holders in the defendant company had trans- 
 ferred their stocks to certain trustees, as had 
 nearly forty other corporations engaged in 
 the same business in pursuance of the same 
 scheme. All of the stockholders of all the 
 companies involved received in return for 
 their shares trust certificates issued by the 
 trustees. The trustees thereupon elected 
 themselves to be a majority of the directors 
 of each of the constituent companies, and 
 thereby controlled the conduct of each, and 
 so of all. Minshall, who wrote the opinion, 
 rested the decision upon broader grounds of
 
 152 THE CONTROL OF THE MARKET 
 
 public policy than did Finch. " Much has been 
 said in favor of the objects of the Standard 
 Oil Trust, and what it has accomplished. It 
 may be true that it has improved the quality 
 and cheapened the costs of petroleum and its 
 products to the consumer. But such is not 
 one of the usual or general results of a monop- 
 oly; and it is the policy of the law to regard, 
 not what may, but what usually happens. 
 Experience shows that it is not wise to trust 
 human cupidity where it has the opportunity 
 to aggrandize itself at the expense of others. 
 The claim of having cheapened the price to 
 the consumer, is the usual pretext on which 
 monopolies of this kind are defended. It is 
 no answer to say that this monopoly has in 
 fact reduced the price. That policy may have 
 been necessary to crush competition. The 
 fact exists that it rests in the discretion of this 
 company at any time to raise the price to an 
 exorbitant degree. A society in which a few 
 men are the employers and the great body 
 are merely employees or servants, is not the 
 most desirable in a republic; and it should 
 be as much the policy of the laws to multiply 
 the numbers engaged in independent pur- 
 suits or in the profits of production, as to 
 cheapen the price to the consumer. Such
 
 MODERN FORMS OF COMBINATIONS 153 
 
 policy would tend to an equality of fortunes 
 among its citizens, thought to be so desirable 
 in a republic, and lessen the amount of pau- 
 perism and crime. By the invariable laws of 
 human nature, competition will be excluded 
 and prices controlled in the interest of those 
 connected with the combination or trust." 
 
 From the point of view of those who had 
 a scheme to monopolize on foot this trust 
 device was excellent. It was centralized in 
 its control and secret in its doings. It left 
 the power of control with the inner circle, 
 while enabling them to market as many se- 
 curities as they pleased. But after these two 
 decisions it was recognized that it must be 
 abandoned. The case was now hopeless at 
 law. It had been held against the law govern- 
 ing corporations in that it was ultra vires for 
 a company so to surrender its independence. 
 It was also a void arrangement by the law 
 against combinations in restraint of trade. 
 The courts looked through the outer forms 
 into the inner facts. All the cleverness that 
 went to form the trust and all the ingenuity 
 with which it was defended were lost upon 
 the courts. The possibilities of injury to both 
 public and private interests were too great 
 for the scheme to receive any countenance
 
 154 THE CONTROL OF THE MARKET 
 
 from the law. The plight of the minority 
 stockholders was hopeless unless the law 
 should declare the scheme bad; for the trust 
 could close down a plant where there was a 
 large and recalcitrant minority, which would 
 not exchange its shares for trust certificates, 
 until these stockholders were starved out. 
 And from the point of view of the State the 
 scheme was almost beyond control, as its 
 accounts could be juggled, and responsibility 
 for wrong-doing could not be fixed. 
 
 A transition period of a few years followed 
 upon the dissolution of the trusts. The orig- 
 inal owners still had the properties; and the 
 common danger held them together, tem- 
 porarily at least. Meantime the lawyers were 
 casting about for some new scheme for com- 
 bining interests which would have legal sanc- 
 tion. The stress of the situation demanded 
 forms of reorganization which would bear the 
 scrutiny of the courts. The first schemes 
 were rather obvious attempts to make use of 
 some established arrangement as a cover from 
 combination. Rather absurd these were, 
 doomed to early exposure from, the outset.
 
 MODERN FORMS OF COMBINATIONS 155 
 
 For the law making unenforceable contracts 
 which tended to restrain trade could not thus 
 be evaded. What could not be done directly, 
 could not be brought about by any such in- 
 direction. The law is not so easy to evade 
 as laymen think, particularly when there is 
 a public policy behind the law. 
 
 One of the schemes which was tried out was 
 the making of simultaneous exclusive con- 
 tracts with a common central agent. In Cum- 
 mings v. Union Bluestone Company (164 N. 
 Y. 401 ) , for example, the principal producers 
 of this stone were combined in an association 
 to regulate prices, while a separate company 
 was made the exclusive sales agent of each 
 participant. The New York court held this 
 arrangement illegal altogether. Mr. Justice 
 Landon said : ' ' The plaintiff urges that it 
 was a question of fact for the jury, and not 
 of law for the court, whether the contract was 
 simply to secure reasonable prices, or to ex- 
 tort from the public unreasonable prices. It 
 may be conceded that one of its purposes was 
 to enable the parties to obtain reasonable 
 prices, but it gave them the power to fix 
 arbitrary and unreasonable prices. The scope 
 of the contract and not the possible self- 
 restraint of the parties to it, is the test of its
 
 156 THE CONTROL OF THE MARKET 
 
 validity. They could raise prices to what they 
 supposed the market would bear, and as they 
 expected to supply nearly the entire demand 
 of the market, the temptation to extortion 
 was unusually great." 
 
 Another scheme, more ingenious yet, was 
 the " dead lease " seen in Clark v. Need- 
 ham (125 Mich. 84). The arrangements 
 made involved two leases, one from the 
 party who was to sell out one branch 
 of his business, absolute in form at a high 
 rental to be paid by the buyer ; the other from 
 the buyer back to the seller at nominal rental, 
 with covenants against engaging in that line 
 of business. The court was quick to see 
 through this elaborate plan; Mr. Justice 
 Grant said on that point: " The plain object 
 of the agreement was to substantially close 
 this part of plaintiffs' business, and to give 
 defendants a monopoly of it. The parties 
 evidently recognized the invalidity of such a 
 contract, put in plain and unequivocal lan- 
 guage, and sought to evade it by these two 
 so-called leases. The arrangement was a 
 bare subterfuge to evade the law. Such 
 contracts tend to destroy competition and 
 create monopolies, and are void." 
 
 It became altogether a question of legality
 
 which is a thing more desired by the 
 captains of industries than one who reads the 
 sensational magazines might suppose. It is 
 true that without legal sanction much may 
 be done under a gentlemen's agreement; but 
 without legality in organization there is no 
 security. What depends upon individual 
 agreement is subjected to the chances of per- 
 sonality. Nor can there be any permanence 
 unless the arrangement is perpetual, with- 
 out regard to the death of anyone. And 
 what is of more importance, without security 
 and permanence there can be no issue of 
 securities, or market of them. 
 
 Meanwhile the more eminent counsel 
 who had the great interests to advise were 
 engaged in larger plans, more feasible at 
 law because devised with more insight. 
 Their idea was to create a holding corpora- 
 tion, a new central body which should ac- 
 quire a majority of the stocks of the con- 
 stituent companies. This scheme suited their 
 clients well; indeed, it was doubtless the 
 clients that decided upon its adoption. For 
 the holding corporation possessed possibili-
 
 158 THE CONTROL OF THE MARKET 
 
 ties for manipulation pleasant to contem- 
 plate; the marketable issues could be doubled 
 by making the stock of the holding corpo- 
 ration twice that of the constituent com- 
 panies; and as the operations of the business 
 could be concealed between the accounts of 
 the holding company and the constituent 
 companies, there would be nothing to fear 
 from the publication of formal statements. 
 There were obviously legal difficulties. In 
 most states by the common law it was beyond 
 the powers of one corporation to hold the 
 stock of another for the purpose of opera- 
 tion, for the reasons advanced in the brief 
 case which follows. Milbank v. New York, 
 Lake Erie, and Western Railroad (64 How- 
 Pr. 20) was an action brought by minority 
 shareholders of the Buffalo, New York, and 
 Erie Railroad to restrain the defendant rail- 
 road from voting the stock which it had ac- 
 quired to control the railroad in which the 
 plaintiffs held their stock. Haight, the pre- 
 siding judge, gave the relief asked, explaining 
 the case thus: " In the case under considera- 
 tion, the New York, Lake Erie, and West- 
 ern Company have acquired by purchase the 
 majority of all the stock issued by the 
 Buffalo, New York, and Erie Railroad. If
 
 MODERN FORMS OF COMBINATIONS 159 
 
 its officers are permitted to vote thereon, they 
 can elect a board of directors of their own 
 choosing. It would then be for the interests 
 of the New York, Lake Erie, and Western 
 Railroad Company to have the Buffalo, New 
 York, and Erie Company managed and con- 
 trolled in the interests of the former company. 
 This would be liable to result in injury to 
 these plaintiffs and their fellow stockholders, 
 and if so they have a right to complain." 
 
 Although this decision represented the com- 
 mon law, the statute law in some states, and 
 special charters in others, permitted corpora- 
 tions to be organized to hold the stocks of 
 other corporations. This, however, was at 
 best only a solution of one of the difficulties ; 
 another remained. Granted that the cor- 
 poration was enabled to act without violation 
 of the corporation law, there was the com- 
 bination law still to reckon with. Thus in 
 People v. Chicago Gas Trust Company (130 
 111. 268) a corporation organized with power 
 to hold the stocks of gas companies bought at 
 once a majority of all the stocks of the four 
 principal gas companies operating in Chicago. 
 But the court on quo warranto held this 
 scheme to be an abuse of the powers granted 
 in the charter, Mr. Justice Macgruder say-
 
 160 THE CONTROL OF THE MARKET 
 
 ing: " The control of the four companies by 
 the appellee an outside and independent 
 corporation suppresses competition between 
 them, and destroys their diversity of interest 
 and all motive for competition. There is thus 
 built up a virtual monopoly in the manu- 
 facture and sale of gas. Whatever tends to 
 prevent competition between those engaged 
 in a public employment, or business impressed 
 with a public character, is opposed to public 
 policy and, therefore, unlawful. Whatever 
 tends to create a monopoly is unlawful as 
 being contrary to public policy." 
 
 VII 
 
 All this time it had been recognized that 
 there was a safer way, if one chose to take it. 
 The approved form among lawyers during the 
 last few years for making a consolidation 
 of interests is by the formation of a single 
 gigantic corporation intended to take over, 
 by purchase, all the different concerns that 
 are to be brought together. Several courts 
 have already dealt with the legality of this 
 operation. In Trenton Potteries Company v. 
 Oliphant (58 N. J. Eq. 507) a conveyance 
 had been made by the owners of a pottery
 
 MODERN FORMS OF COMBINATIONS 161 
 
 business to the Trenton Potteries Company, 
 which carried with it covenants by the sellers 
 not to compete against the business sold. As 
 the good will was included in the transfer, 
 these covenants would be good, if the whole 
 transaction were unobjectionable. The diffi- 
 culty was that the buying corporation had 
 been formed for the express purpose of tak- 
 ing over various competing plants, and that 
 the object aimed at by the parties was to 
 secure power to suppress competition and to 
 control production. Upon this point Mr. 
 Chief Justice Magie made these observa- 
 tions : " Contracts by independent and un- 
 connected manufacturers or traders looking 
 to the control of the prices of their com- 
 modities, either by limitation o^ production, 
 or by restriction on distribution, or by ex- 
 press agreement to maintain specified prices, 
 are without doubt opposed to public policy. 
 But appellant is a corporation and not 
 an individual. Corporations, however, may 
 lawfully do any acts within the corporate 
 powers conferred on them by legislative grant. 
 Under our liberal corporation laws, corporate 
 authority may be acquired by aggregations of 
 individuals, organized as prescribed to carry 
 on almost every conceivable manufacture or
 
 162 THE CONTROL OF THE MARKET 
 
 trade: such corporations are empowered to 
 purchase, hold, and use property appropriate 
 to their business. Under such powers it is 
 obvious that a corporation may purchase the 
 plant and business of competing individuals 
 and concerns." 
 
 This is not unquestioned law by any means. 
 A case directly opposed is Distilling and 
 Cattle Feeding Company v. People (156 111. 
 448). This case arose after the reorganiza- 
 tion of the Whisky Trust into an operating 
 corporation. The regular forms had been 
 gone through with, and the title to the prop- 
 erties had been duly made over to the new cor- 
 poration in exchange for the outstanding trust 
 certificates. But the Illinois court could see in 
 this change of form nothing that was substan- 
 tial. As Mr. Justice Bailey said: " The trust 
 and its operations are to be carried on in the 
 same way, for the same purposes, and by the 
 same agencies, as before. The trust, then, 
 being repugnant to public policy and illegal, 
 it is impossible to see why the same is not 
 true of the corporation which succeeds to it 
 and takes its place. The control exercised 
 over the distillery business of the country 
 over production and prices and the virtual 
 monopoly formerly held by the trust, are
 
 MODERN FORMS OF COMBINATIONS 163 
 
 in no degree changed or relaxed, but the 
 methods and purposes of the trust are per- 
 petuated and carried out with the same per- 
 sistence and vigor as before the organization 
 of the corporation. There is no magic in a 
 corporate organization which can purge the 
 trust scheme of its illegality, and it remains 
 as essentially opposed to the principles of 
 sound public policy as when the trust was in 
 existence. It was illegal before and is illegal 
 still, and for the same reasons." If this 
 decision be good law, any great corporation 
 can be dissolved by reason of its past history. 
 But even if this can be done, would it not be 
 better to settle the matter upon the basis of 
 its present conduct? 
 
 VIII 
 
 From step to step in this succession there 
 is a movement toward integration. Now that 
 the end of that economic evolution has been 
 reached in the single corporation, the law 
 against combinations in restraint of trade may 
 perhaps cease to operate. It has done a good 
 work in forcing those who wish to bring to- 
 gether various corporations into greater enter- 
 prises to organize in an open manner under 
 the general corporation laws. Now at last
 
 164 THE CONTROL OF THE MARKET 
 
 the State may impose such special regulation 
 upon these industrial concerns as the situation 
 requires. The problem is therefore much 
 simplified since the time of the trusts. It 
 has been reduced to the lowest terms by this 
 praiseworthy activity of the law in insisting 
 that all combinations of every stripe should be 
 destroyed. Now that we have the fruits of 
 that first victory in the enforced form of the 
 large corporation, we may hold a council 
 of war during this armistice. Shall these 
 great corporations be destroyed, or shall 
 they be regulated? That, it is submitted, is 
 the trust problem in its latest phase. All of 
 the law for the destruction of combinations in 
 restraint of trade is to a certain extent super- 
 seded, because the new monopoly is no longer 
 in the form of a combination. On the other 
 hand, the law for the regulation of businesses 
 affected with a public interest can now for 
 the first time be effectively applied to the 
 whole field of virtual monopoly.
 
 NOTE 
 
 As the problems discussed in the text are by no means 
 settled as yet, some leading cases as to each of the four 
 principal types of industrial combination are subjoined. 
 
 I. THE POOL HELD ILLEGAL 
 
 United States v. Trans-Missouri Freight Assn., 166 
 U. S. 290; Addystone Pipe Co. v. United States, 175 
 U. S. 211 (1899) ; Getz v. Federal Salt Co., 147 Cal. 115 
 (1905); Leonard v. Abner Drury Co., 25 D. C. App. 
 Cas. 161 (1905); White Star Line v. Star Line, 141 
 Mich. 604 (1905); Emery v. Ohio Candle Co., 47 Oh. 
 St. 320 (1892); Nester v. Continental Brewing Co., 161 
 Pa. St. 478 (1894); Coquard v. National Linseed Oil 
 Co., 171 111. 480 (1898). 
 
 II. THE TRUSTS HELD ILLEGAL 
 
 American Preserves Trust v. Taylor Mfg. Co., 46 
 Fed. 152 (1891); Georgia Trust Co. v. State, 109 Ga. 
 736 (1899) ; State v. American Cotton Oil Trust, 40 La. 
 Ann. 8 (1888); Southeastern Securities Co. v. State, 91 
 {Miss. 195 (1907); State t>. Nebraska Distilling Co., 29 
 Neb. 700 (1890) ; People v. North River Sugar Refining 
 Co., 121 N. Y. 582 (1890); State v. Standard Oil Co., 
 49 Oh. St. 137 (1892). 
 
 III. HOLDING CORPORATIONS HELD ILLEGAL 
 
 Northern Securities Co. t>. United States, 193 U. S. 
 197 (1904); Standard Oil Co. v. United States, U. S. 
 
 165
 
 166 NOTE 
 
 (1911); Dunbar . American Telephone Co., 224 111. 
 9 (1906); MacGinniss v. Boston & M. Copper Co., 29 
 Mont. 428 (1904); State v. Oil Co., 217 Mo. 1 (1909); 
 State v. Virginia Carolina Chemical Co., 71 S. C. 544 
 (1904). 
 
 IV. AS TO THE ILLEGALITY OP THE SINGLE CORPORATION 
 
 The following cases seem to hold that it is illegal: 
 Distilling Co. v. People, 156 111. 448 (1895); Attorney- 
 General v. Booth, 143 Mich. 89 (1906); National Lead 
 Co. v. Grote Paint Store Co., 80 Mo. App. 247 (1899). 
 But the following cases hold it to be legal: Central 
 Shade Roller Co. v. Cushman, 143 Mass. 353 (1887); 
 Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507 
 (1899); Clancey v. Onondaga Salt Co., 62 Barb. 395 
 (1862) ; Oakdale Mfg. Co. v. Garst, 18 R. I. 484 (1896).
 
 CHAPTER VIII 
 
 BUSINESSES AFFECTED WITH A PUBLIC 
 INTEREST 
 
 THE modern trust will, therefore, soon 
 take the form of the single corporation, 
 dominating its market. Such corporations, 
 however large, will apparently stand before 
 the law as other corporations. There can be 
 no great expectation (even if it were thought 
 desirable) that these great aggregations of 
 capital can be destroyed as illegal in point of 
 organization. But the great corporation with 
 substantial control of its market differs 
 fundamentally from the small one which is 
 simply a factor in competition. Our law 
 from time immemorial has subjected those 
 who had monopoly, whoever they might be, 
 to an extraordinary system of regulation, as 
 compared with the virtual freedom accorded 
 to those who had no control of their market. 
 That great corporations are to play a great 
 part in the industries of this country for an 
 
 167
 
 168 THE CONTROL OF THE MARKET 
 
 indefinite future, anyone who has observed 
 the course of economic evolution during the 
 past generation must see. And now that they 
 have arrived at substantial dominance over 
 their respective markets, they should be regu- 
 lated, as established monopolies have always 
 been regulated. This regulation by law has 
 always been the policy of the State in dealing 
 with any business which has so far attained 
 control of its market as to be affected with 
 a public interest. Indeed, such businesses 
 have been spoken of from time immemorial 
 as public employments; and such public serv- 
 ices have always been subject to a special law 
 compelling their proprietors to deal fairly with 
 their public. 
 
 II 
 
 The mediaeval system involved almost uni- 
 versal regulation of all the doings of men, 
 and therefore its commercial policy was almost 
 completely restrictive. The ideal held was a 
 society in which all things were ordered, the 
 full conception being that every man had a 
 right to his place in this established order. 
 This state of affairs was by most men greatly 
 desired. Indeed, a regulated monopoly with 
 the corresponding obligation of public service
 
 PUBLIC BUSINESSES 169 
 
 seemed in that age, to the great majority of 
 people, far better than an unregulated com- 
 petition without public obligation. It was 
 thought that things were put in a true bal- 
 ance by requiring each person to perform 
 his part, and allowing no person to interfere 
 with the employment of another. And all 
 of this control of industrial affairs was felt 
 to be ultimately for the benefit of the whole 
 public, who could obtain thereby, without 
 favor, at reasonable prices proper service in 
 accordance with their requirements. Thus 
 the baker and the miller were by the medieval 
 law bound to serve all that applied, or else 
 they were answerable for it in the courts. 
 Likewise the surgeon and the smith were 
 bound to serve all with due diligence; and so 
 were the barber and the tailor. Innkeepers, 
 carriers, ferrymen, and wharfingers were held 
 to be at the service of the public then as now. 
 
 The common law persists from age to age, 
 and though the instance of its rules may be 
 seen to change as old conditions pass away 
 and new conditions arise, its fundamental 
 principles remain. The early cases which have 
 just been cited are illustrations of this course 
 of events. Barber, surgeon, smith, and tailor 
 are no longer in common calling because the
 
 170 THE CONTROL OF THE MARKET 
 
 situation in the modern times does not require 
 it; but innkeeper, carrier, ferryman, and 
 wharfinger are still in that classification since 
 even in modern business the conditions require 
 them to be so treated. With changed eco- 
 nomic conditions in modern times, new call- 
 ings have come into being with such poten- 
 tialities that this special law has been utilized 
 as never before in regulating them. Indeed, 
 from the point of view of one who believes in 
 our common law, the class of public callings 
 is capable of indefinite extension whenever 
 new conditions bring new employments within 
 its scope. In all times our law has held to the 
 principle that this peculiar regulation was 
 necessary in certain kinds of business. And 
 it depends largely upon the opinion current 
 at the time how far this law shall be 
 extended. 
 
 The principle of law which permits the 
 regulation of these callings has never been 
 abandoned, though the conditions calling for 
 its application at various times have greatly 
 changed. Whenever the public is subjected 
 to a monopoly, the power of oppression in- 
 herent in a monopoly is restricted by law. 
 Whenever, on the other hand, competition 
 becomes free, both in law and in fact, the
 
 PUBLIC BUSINESSES 171 
 
 need of governmental regulation ceases ; public 
 opinion ceases to demand such regulation, 
 and the law withdraws it. At the beginning 
 of the nineteenth century was the extreme 
 swing of the pendulum. In this fortunate 
 time, when in most businesses the field seemed 
 free to all, the belief was that the ordinary 
 processes of competition would produce with 
 sufficient certainty adequate service at fair 
 prices. But an absolutely free competition 
 is practically an impossible economic condi- 
 tion; and to this men later awoke when, with 
 the growth in the power of the proprietors of 
 the industries, the people still demanded pro- 
 tection from the State in many ways. 
 
 As the prevalence of competitive conditions 
 in business limits the application of the prin- 
 ciples of public service law, so the prevalence 
 of monopolistic conditions extends their ap- 
 plication. Such a change came about in 
 the latter part of the nineteenth century. 
 About a generation ago a change in com- 
 mercial practice showed with remarkable dis- 
 tinctness the advantage of combination. 
 Great enterprises took the place of small 
 ones, and great enterprises required co- 
 operation and combination. As the people 
 became accustomed to look upon combination
 
 172 THE CONTROL OF THE MARKET 
 
 as the price of success, they came more and 
 more to regard it as a blessing rather than 
 an evil; and public opinion has gradually 
 turned away from the individualistic ideal 
 until to-day it has been fairly discarded by 
 the current philosophy. With the principle 
 of combination as the spring of action has 
 come a corresponding need of controlling the 
 action of such combinations for the good of 
 the whole public. As the rights of the in- 
 dividual trader yield to the rights of the 
 great corporation, so in the view of the man 
 of the present day, the rights of the cor- 
 poration should in their turn yield to the 
 rights of the whole people. 
 
 in 
 
 The case for State control is plainest in those 
 few utilities where there are natural limita- 
 tions upon the sources of supply which are 
 essential to the business. This situation in 
 itself gives some degree of monopoly to those 
 who control the sources of supply most 
 accessible to their market, in that it prevents 
 effective competition with the local service. 
 Thus those who control the most advan- 
 tageous waterpower have a natural monopoly;
 
 PUBLIC BUSINESSES 173 
 
 and so it seems that they must deal fairly 
 with all to the extent of their undertaking. 
 For the same reason those who have pre- 
 empted the natural gas fields must deal with- 
 out discrimination with the public which they 
 have assumed to serve therefrom. It would 
 be going too far doubtless, at the present 
 time, to claim that it is accepted law that 
 natural limitation of a public necessity neces- 
 sarily makes its general sale public employ- 
 ment. So long as those who have virtual 
 monopoly of the anthracite coal fields are 
 left free to charge what prices they please, 
 the principle is in abeyance. And so long 
 as those who have virtual control of the 
 petroleum oil wells are left free to discrimi- 
 nate as they please between their customers, 
 the duty is not recognized. But it may be 
 that in the fullness of time these now all too 
 powerful purveyors to public needs will be 
 brought within this law, and subjected to 
 public regulation. 
 
 One of the earliest needs of a community 
 is a supply of water for domestic uses; and 
 it has been always obvious that this is a 
 public utility in a true sense of that term. 
 Said Mr. Justice Lord, in an important Ore- 
 gon case (21 Ore. 211) : " How can the de-
 
 fendant, upon the tender of the proper com- 
 pensation, refuse to supply water without 
 distinction to one and all whose property 
 abuts upon the street in which its pipes are 
 laid? If the supplying of a city or town 
 with water is not a public purpose, it is 
 difficult to conceive of any enterprise in- 
 trusted to a private corporation that could 
 be classed under that head." 
 
 An equally plain public service is the 
 irrigation system, so obvious indeed that the 
 propriety of State aid to such an undertaking 
 has never been doubted. In Cummings v. 
 Hyatt (54 Neb. 35). Chief Justice Harri- 
 son held a taking for irrigation to be a pub- 
 lic use: " It must be concluded that it has 
 been established by both legislative and 
 judicial determination that the use, in con- 
 templation of law and designated thereby, 
 was a public one, and with the further con- 
 siderations that all members of the public 
 within the range of the operations of the 
 work might demand and command service 
 by the company by payment of the usual and 
 customary rates for such service, and that 
 the company was of such a nature as would 
 subject it in its transactions to legislative 
 control, it was not improperly classed as an
 
 PUBLIC BUSINESSES 175 
 
 internal improvement and entitled to the 
 rights and privileges of such a work." 
 
 IV 
 
 Another natural limitation results from 
 the character of the product. If the physical 
 characteristics of the product are such that 
 it can only have a local distribution, the 
 barrier against outside competition may 
 fairly be said to be natural. What, after 
 all, is that element in the situation which 
 makes the sale of gas a public employment, 
 while the vending of candles is a private 
 business? Is it not this that the box of 
 candles may be sent from any factory into 
 any market, a condition which preserves vir- 
 tual competition in every market, while a 
 thousand cubic feet of gas can only be got 
 from the pipes of the local company, which 
 gives it control of the situation? The sit- 
 uation is substantially the same as to the 
 distribution of electricity as compared with 
 the sale of coal. Electricity can practically 
 only be supplied from the local wires, even 
 though transmission over considerable dis- 
 tances is now practicable. It cannot be 
 transported independently and stored for
 
 176 THE CONTROL OF THE MARKET 
 
 long periods as coal may be. When the 
 market is thus limited by the nature of the 
 product, it may fairly be said that the mo- 
 nopoly of the local company is natural. 
 
 It is interesting to note that in the first 
 cases which arose as to the supply of gas, 
 the courts held that the proprietors of a 
 gas works were as free as the owners of any 
 factory to sell gas to some and refuse to 
 supply others. But it was soon seen that 
 the business was one which could not be left 
 without control. It is universal law now that 
 a gas company must serve all who apply. 
 One of the earlier instances of this rule in 
 the United States is to be found in Shepard 
 V. Milwaukee Gas Light Company (6 Wis. 
 539). The plaintiff complained of the re- 
 fusal by the established gas works to supply 
 him. The defendant claimed that under the 
 circumstances of the case it was not bound 
 to serve the plaintiff. Mr. Justice Smith 
 held that the gas company was bound to 
 sell its gas to every citizen of Milwaukee 
 upon compliance with such regulations only 
 as the company might rightfully impose. 
 His argument was this: "It is sufficient for 
 the purposes of this case to know that the 
 company had the exclusive right to manu-
 
 PUBLIC BUSINESSES 177 
 
 facture and sell gas, and that hence the only 
 means of supply available to citizens was 
 through the agency of the company. Cor- 
 porations of this kind are not like trading 
 or manufacturing corporations whose produc- 
 tions may be transported from market to 
 market throughout the world. Its manu- 
 facture depends upon the consumption of 
 the immediate neighborhood for its profit 
 and success, and upon no other place. From 
 the nature of the article, the objects of the 
 company, their relations to the community, 
 and from all the considerations before men- 
 tioned, it is to me apparent that the com- 
 pany is not at all analogous to an ordinary 
 manufacturing or trading corporation." 
 
 It is most. significant that no electric light 
 company has ever squarely denied that there 
 rested upon it the primary obligation to serve 
 all. It shows that the law of public service 
 has now such general acceptation that in 
 a new instance where it is obvious it will 
 be applied by the courts without hesitation. 
 In holding for the consumer in an Illinois 
 case (196 111. 626), Mr. Justice Carter thus 
 stated the fundamental propositions involved: 
 ' There is no statute regulating the manner 
 under which electric light companies shall
 
 178 THE CONTROL OF THE MARKET 
 
 do business in this state. They are therefore 
 subject only to the common law, and such 
 regulations as may be imposed by the mu- 
 nicipality which grants them privileges. Ap- 
 pellee, being organized to do a business af- 
 fected with a public interest, must treat all 
 customers fairly and without unjust discrimi- 
 nation. Both reason and authority deny to 
 a corporation clothed with such rights and 
 powers, and bearing such a relation to the 
 public, the power to arbitrarily fix the price 
 at which it will furnish light to those who 
 desire to use it." 
 
 Another obvious restriction upon effective 
 competition results from limitation of time. 
 When the need of the applicant is immediate, 
 the person from whom he asks service has the 
 upper hand. This monopoly may only be 
 temporary; but it is none the less real. This 
 insistent need for present service largely ex- 
 plains why the innkeeper dealing with the 
 wayfarer, and the hackman bargaining with 
 the traveler, have always been held subject 
 to special law governing their dealings. 
 The weary wayfarer would pay an exorbitant 
 price rather than be turned back into the
 
 PUBLIC BUSINESSES 179 
 
 night, even although another inn were 
 nearby; and it is notorious that a hackman 
 can extort an outrageous fare from a passen- 
 ger in haste, although another hackman may 
 be around the corner. It is the instant need 
 also which gives to those agencies established 
 for the rapid transmission of intelligence 
 that virtual monopoly which the telegraph 
 and telephone obviously have. There are 
 other ways of sending communications by 
 mail or by messenger, but they are not 
 effective substitutes. 
 
 In the case of the telephone it is shown 
 plainly that there is a common law principle 
 applicable to all businesses which are monopo- 
 listic in character. From the first the courts 
 held the business subject to the public serv- 
 ice law. Said a Nebraska judge in a leading 
 case (17 Neb. 126) : " While there is no law 
 giving it a monopoly of the business in the 
 territory covered by its wires, yet it must 
 be apparent to all that the mere fact of this 
 territory being covered by the plant of the 
 respondent, from the very nature and char- 
 acter of the business, gives it a monopoly of 
 the business which it transacts. No two 
 companies will try to cover this same terri- 
 tory. The demands of the commerce of the
 
 present day make the telephone a necessity. 
 All the people, upon complying with the 
 reasonable rules and demands of the owners 
 of the commodity, patented as it is, should 
 have the benefit of this new commerce. The 
 wires of the respondent pass the office of the 
 relator. The relator never can be supplied 
 with this new element of commerce, so neces- 
 sary in the prosecution of all kinds of busi- 
 ness, unless supplied by the respondent." 
 
 A fundamental case that comes to mind 
 at this point is the Illinois case (184 111. 438) 
 putting the Associated Press in public em- 
 ployment, where Mr. Justice Phillips said: 
 " The Associated Press, from the time of its 
 organization and establishment in business, 
 sold its news reports to various newspapers 
 who became members, and the publication 
 of that news became of vast importance to 
 the public, so that public interest is at- 
 tached to the dissemination of that news. 
 The manner in which that corporation has 
 used its franchise has charged its business 
 with a public interest. It has devoted its 
 property to a public use, and has, in effect, 
 granted to the public such an interest in its 
 use that it must submit to be controlled by 
 the public for the common good, to the extent
 
 PUBLIC BUSINESSES 181 
 
 of the interest it has thus created in the 
 public in its private property." 
 
 VI 
 
 The sites upon which certain services can 
 be conducted to best advantage are few in 
 number. The necessity of these locations 
 to proper conduct of the business may be 
 so great that those who are possessed of these 
 sites may well be said to enjoy a natural 
 monopoly, since if others venture to establish 
 themselves at all at such disadvantage, their 
 competition will be comparatively ineffectual. 
 At all events those in the favorable locations 
 could exact higher prices than would be 
 fair, were it not for the fact that the law 
 intervened. Of course the importance of 
 the site depends upon the character of the 
 business. Terminal facilities operated in 
 connection with railway systems furnish the 
 most striking examples of this importance of 
 particular sites. To a lesser extent this is 
 true of those services which although not 
 dependent upon an exact location are oper- 
 ated with peculiar advantage in particular 
 areas, such as warehouses in business dis- 
 tricts and cold storage in market-places.
 
 182 THE CONTROL OF THE MARKET 
 
 The grain elevator furnishes the principal 
 case upon the subject of the legal regulation 
 of established monopoly. Any discussion of 
 the foundations of our industrial relations 
 must give chief place to the case of Munn v. 
 Illinois (94 U. S. 113). Upon the right un- 
 derstanding of this case depends the true 
 conception of our general theory of the 
 function of State regulation. It was in that 
 case that Mr. Justice Waite announced the 
 doctrine of State control over public busi- 
 nesses in language which has been quoted 
 so often as to be familiar to all: " This brings 
 us to inquire as to the principles upon which 
 this power of regulation rests, in order that 
 we may determine what is within and what 
 without its operative effect. Looking, then, 
 to the common law, from whence came the 
 right which the constitution protects, we find 
 that when private property is ' affected with 
 a public interest, it ceases to be juris privati 
 only.' Property does become clothed with 
 a public interest when used in a manner to 
 make it of public consequence, and affect the 
 community at large. When, therefore, one 
 devotes his property to a use in which the 
 public has an interest, he, in effect, grants 
 to the public an interest in that use, and
 
 PUBLIC BUSINESSES 183 
 
 must submit to be controlled by the public 
 for the common good to the extent of the 
 interest he has thus created." 
 
 Any business which must be conducted 
 within a certain location is thus public in 
 character by reason of this limitation. In 
 the case of the stockyards, for example, its 
 monopoly is largely due to position, as Chief 
 Justice Johnson pointed out in a Kansas 
 case (74 Kans. 1): "Because of the nature 
 of the business and the railroad facilities, the 
 establishment of other markets at or near 
 Wichita is impracticable, and hence these 
 stockyards are, and of necessity will be, the 
 only available place where the breeders, 
 feeders, and dealers of a great scope of 
 country can conveniently market their live 
 stock. The company has, therefore, a prac- 
 tical monopoly of a vast business affecting 
 thousands of people who are almost obliged 
 to deal at that market and at the rates which 
 the company may choose to charge." 
 
 VII 
 
 Whether the monopolistic conditions found 
 in a given business are permanent or tem- 
 porary, is the essential question. Where the
 
 184 THE CONTROL OF THE MARKET 
 
 monopoly is natural, it is a case for regula- 
 tion by law. Where the monopoly is tem- 
 porary, its destruction should be hastened 
 by the law. If this programme is to be 
 adopted the lawyers must be trained to dis- 
 tinguish between conditions establishing that 
 permanent condition of monopoly, which 
 makes State control the better course, and 
 the adventitious corner, where condign pun- 
 ishment of the members of the pool is called 
 for. Other circumstances than natural limi- 
 tation in its strictest sense inevitably produce 
 monopoly. Economic forces of various sorts 
 may, either singly or in combination with 
 others, naturally result in monopoly. Such, 
 for instance, would be the case in a business 
 where production upon a large scale progress- 
 ively decreased cost. In such a business it 
 is inevitable that the business will be concen- 
 trated in the hands of a few concerns. Such 
 seems to be the case in a high ratio in the 
 petroleum business and in gas supply. 
 
 Another usual characteristic of a virtual 
 monopoly is the relatively large cost of the 
 plant. In very many instances this runs 
 high into millions which must be invested 
 before the service can be begun. This neces- 
 sity of getting together so much capital limits
 
 PUBLIC BUSINESSES 185 
 
 fundamentally the amount of such construc- 
 tion. Canals and railroads furnish the chief 
 examples of this. It would take perhaps 
 twenty billion dollars to duplicate the present 
 facilities for transportation; and it is, there- 
 fore, practically inconceivable that it will 
 be done. Moreover, in most monopolies there 
 is still another reason why capital is kept 
 from investment in a competing service. 
 The capital invested must be sunk at the 
 risk of failure in this one market. For ex- 
 ample, an investment made in a foundry or 
 an electric plant cannot be changed. Thus 
 to the enormous cost as a deterrent to com- 
 petition is added the imminent risk of total 
 loss in a desperate competition in which one 
 competitor must perish. 
 
 Still another characteristic of virtual mo- 
 nopoly is that the applicant who wishes an 
 individual service of the kind rendered by 
 the established company is almost always at 
 great disadvantage relatively in supplying 
 himself. It is, of course, rare that the pos- 
 sibilities in any given case will be so re- 
 stricted that if the applicant is refused service 
 by the particular company no alternative is 
 open to him; usually, in some way or other, 
 he could hit upon some way out in such a
 
 186 THE CONTROL OF THE MARKET 
 
 case. But the alternative offered will often 
 be an inadequate substitute, disadvantageous 
 to a greater or lesser degree. In such a sit- 
 uation there is no effectual competition to 
 regulate the action of the original company, 
 and without the interposition of the law 
 there might be great oppression. A farmer, 
 charged an exorbitant price for a harvester, 
 may keep to his scythe, but only at great 
 disadvantage. The mere fact that there are 
 two gas companies in a town is not enough 
 to alter the fact that the situation is essen- 
 tially monopolistic, for if one may refuse 
 service, the other may also. 
 
 The common fact in all the instances of 
 public employment which have been dis- 
 cussed is virtual monopoly. It matters not 
 by what conditions this situation is estab- 
 lished. The conditions which may produce 
 virtual monopoly are various; and some of 
 them will suffice alone. The effect of various 
 natural limitations, such as available sources 
 of supply, restricted opportunities of access, 
 limited time at disposal, and difficulties in 
 distribution have just been discussed. But 
 of almost equal importance are other factors 
 producing true economic monopoly by de- 
 terring effectual competition, such as the
 
 PUBLIC BUSINESSES 187 
 
 cost of the plant, the large scale upon which 
 the business is done, the absence of effectual 
 substitutes, and the dependent position of 
 the particular service. With all the factors 
 which may produce virtual monopoly in mind 
 it will be evident enough that in this general 
 situation, however established, there is real 
 danger to society calling for regulation by 
 the State. 
 
 VIII 
 
 A review of all of the instances of public 
 employment which have thus far been cited 
 in the course of this whole discussion will 
 show that this conception of virtual monopoly 
 will cover everything. Nothing narrower will 
 do, as for example the difference sometimes 
 put forward between the undertaking of a 
 public service in contradistinction to the fur- 
 nishing of a public supply. Now, it is true 
 that most of the cases are cases of service 
 the railway and the warehouse, for example; 
 but other of the cases are of supply, the 
 waterworks and gas works, for instance. 
 Indeed, there is nothing in this distinction, 
 either in economics or in law. It is sub- 
 mitted that any business is made out to be 
 public in character where there is a virtual
 
 188 THE CONTROL OF THE MARKET 
 
 monopoly inherent in the nature of things. 
 If virtual monopoly is made out as the 
 permanent condition of affairs in a given 
 business, then the law, it seems, will consider 
 that calling public in its nature. On the 
 other hand, if effective competition is proved 
 as the regular course of things in a given in- 
 dustry, the law will hold all businesses within 
 it as private in their character. Under our 
 constitutional system a distinction is made 
 upon this line. In the public calling, regu- 
 lation of service, facilities, prices and dis- 
 criminations is possible to any extent. 
 Monopolistic conditions demand such policy; 
 and at no period in history has this been 
 more apparent than now. In the private 
 callings no such legislation should be per- 
 mitted. Where competitive conditions pre- 
 vail there should be freedom; and at no epoch 
 in our industries has it been more important 
 to insist upon this. But wherever there is 
 established monopoly in a business of public 
 importance at any time and from any cause, 
 the law is requisite that all shall be served 
 on a reasonable basis.
 
 NOTE 
 
 A FEW of the now numerous cases are subjoined where 
 public employment has been found after elaborate dis- 
 cussion of the situation: Waterworks Haugen v. Al- 
 bina Water Co., 21 Ore. 411 (1891) ; Irrigation System 
 Slosser v. Salt River Canal Co., 7 Ariz. 876 (1901); 
 Natural Gas State v. Consumers Gas Co., 157 Ind. 345 
 (1901); Waterpowers Sammons v. Keirney Power Co., 
 77 Neb. 580 (1906); Stockyards Wichita Stockyards 
 Co. v. Ratcliff, 74 Kas. 1 (1906); Gas Works Opinion 
 of the Justices, 150 Mass. 592 (1890) ; Electric Plants 
 Snell w. Clinton Electric Co., 196 111. 626 (1902); 
 Electric Power Jones v. No. Georgia Electric Co., 125 
 Ga. 618; Telegraph Green v. Telegraph Co., 136 N. C. 
 489 (1904); Telephone State v. Nebraska Telephone 
 Co., 17 Neb. 126 (1885); Railroads Raleigh R. R. v. 
 Davis, 2 Dev. & Bat. 451 (1837); Pipe Lines West 
 Virginia Co. v. Volcanic Co., 5 W. Va. 382 (1872); 
 Saw Mills State v. Edwards, 86 Me. 102 (1893); 
 Grist Mills Gaylord . District, 204 111. 576 (1903); 
 Docks Barrington v. Commercial Dock Co., 15 Wash. 
 170; Grain Elevator Munn v. Illinois, 94 U. S. 113. 
 
 In the following cases among others, the business in 
 question was held private: Skating Rink Tombler 
 v. Koelling, 60 Ark. 62 (1894); Theaters Percell t>. 
 Daley, 19 Abb. N. C. 301 (1886); Foundry Loan 
 Ass'n. v. Topeka, 20 Wai. 655 (1874); Mill Allen v. 
 Jay, 60 Me. 124 (1872); Coal Yard Opinion of the 
 Justices, 182 Mass. 605 (1882); Apartment House 
 Davis 7-. Gay, 141 Mass. 531 (1886).
 
 CHAPTER IX 
 
 UNFAIR PRACTICES IN PUBLIC CALLINGS 
 
 ALTHOUGH from the earliest times some 
 restraint has been exercised over such lines 
 of activity as are of vital interest to the 
 public, in recent times there undoubtedly is 
 an increasing need of stricter regulation of 
 those important employments which are 
 affected with a public interest. Indeed, in 
 the case of the public services, their power 
 over all commercial activities has become so 
 apparent that the necessity for the control 
 of that power for the protection of the whole 
 people is generally conceded. Undoubtedly 
 it is now thoroughly understood by all who 
 conduct businesses which are affected with 
 a public interest, that they must not un- 
 justifiably refuse applications for service, 
 willfully neglect to provide adequate facilities, 
 unreasonably demand unusual prices, or 
 capriciously discriminate between their pa- 
 trons. Nevertheless it is occasionally as- 
 
 190
 
 UNFAIRNESS IN PUBLIC CALLINGS 191 
 
 serted by the managers of a public employ- 
 ment that they may refuse to give service 
 when it becomes necessary to protect their 
 business interests; and more frequently the 
 right is claimed to make differences in their 
 prices in order to promote their business in- 
 terests. 
 
 ii 
 
 To meet the exigencies of the trust situation 
 at present, positive law is required. Abusing 
 the freedom which those in private business 
 enjoy, those who have had control of the 
 industrial trusts have adopted various poli- 
 cies to force other competitors out of busi- 
 ness, which would never have been allowed 
 had the law of public business been applied 
 to the situation. One of the most repre- 
 hensible methods of building up monopoly 
 has been by adopting an exclusive policy, 
 refusin'g to sell to dealers who handled the 
 goods of their competitors. This almost in- 
 evitably forces a smaller competitor to the 
 wall. It is true that such competition is not 
 held unfair where individuals only are con- 
 cerned. But concerted action of this sort, 
 as has been seen, is generally considered to 
 be an actionable conspiracy. In open com-
 
 192 THE CONTROL OF THE MARKET 
 
 petition this business policy may be per- 
 mitted; but when monopoly is present, it 
 becomes too oppressive to be borne. From 
 a business standpoint it may be an effective 
 policy at times to refuse to have any deal- 
 ings with a customer who persists in patron- 
 izing a rival. The employment of such 
 policies is forbidden those who conduct pub- 
 lic services largely because in public busi- 
 nesses virtual monopoly is usually present. 
 
 In any case of public employment, how- 
 ever, it is really impossible to justify in any 
 way the outright refusal to serve an appli- 
 cant, who wishes service, on the ground that 
 he is dealing with a rival. One example 
 of this is Chicago & Alton Railroad v. 
 Suffern (129 111. 274), where the court 
 held that a railroad could not refuse to 
 receive coal from a shipper who had begun 
 to make shipments by another route, basing 
 its decision upon the ground that serious in- 
 jury would result to the business interests of 
 the people if shippers could be compelled 
 by such arbitrary measures to patronize one 
 railroad to the exclusion of others. As the 
 court said, since fair competition between 
 roads is for the public interest, if a road could 
 do so it could establish the most odious sort
 
 UNFAIRNESS IN PUBLIC CALLINGS 193 
 
 of monopoly. Another leading case is Ben- 
 nett v. Button (10 N. H. 481). There one 
 stage line refused to take passengers coming 
 for a part of the way by a rival line; but the 
 court held this to be a plain violation of 
 public duty. 
 
 in 
 
 It has been pointed out that the power of 
 the trusts to crush efficient competitors is 
 dependent to a large extent upon various 
 kinds of discrimination. It will be profitable 
 to see how the courts have dealt with this 
 sort of thing in the case of the public call- 
 ings in general, since the establishment of 
 any business as public in its nature depends 
 in the last analysis upon the existence of 
 virtual monopoly. Indeed, the modern rule 
 requiring service to all who apply, without 
 discrimination against any, is founded upon 
 the absolute necessity of preventing those 
 who have control of the market from exer- 
 cising that power to the disruption of the 
 industrial order. 
 
 The promptness with which the courts act 
 in recent years to prevent personal discrimi- 
 nation in the case of an admitted public em- 
 ployment is shown in a decision like Menacho
 
 194 THE CONTROL OF THE MARKET 
 
 V. Ward (27 Fed. 529), where Mr. Justice 
 Wallace said of a discriminating rate against 
 those who shipped goods by another line: 
 " Its tendency is to deprive the public of 
 their legitimate opportunities to obtain car- 
 riage upon the best terms they can. If 
 it is tolerated it will result practically in 
 giving the defendants a monopoly of the 
 carrying trade between these places. Mani- 
 festly it is enforced by the defendants in 
 order to discourage all others from attempt- 
 ing to serve the public as carriers between 
 those places. Such discrimination is not only 
 unreasonable, but is odious." 
 
 There is a telephone case in South Carolina 
 (61 S. C. 83) where one telephone com- 
 pany made its patrons agree not to use the 
 rival system. One of its patrons violated 
 this agreement; but the court held that his 
 service could not be cut off. " A telephone 
 company," said the court, " would have no 
 more right to refuse service for this cause, 
 than a railway company would have to refuse 
 to transport the goods of a shipper, unless 
 he would agree to patronize its lines ex- 
 clusively, and not to give any of his business 
 to any competing railway line." The neces- 
 sity of compelling those in public employ-
 
 UNFAIRNESS IN PUBLIC CALLINGS 195 
 
 ment to serve without discrimination is thus 
 apparent; it is no less obvious in every case 
 of virtual monopoly. 
 
 It seems to be an almost conclusive argu- 
 ment for treating as public-service companies 
 all great corporations that have established 
 control of their market, that by no other 
 law than that of public calling can the sit- 
 uation be met. In private calling factors' 
 agreements of this sort are supported, which 
 shows that the present conditions in the con- 
 duct of these great businesses have out- 
 grown this law. In public callings every 
 restrictive condition is void; and this points 
 to this law as the way out. In private busi- 
 ness this sort of competition is properly held 
 fair; in public business it is properly held 
 unfair. It is the modern desire to protect 
 the small manufacturers from such competi- 
 tion by the large manufacturers. There can 
 be no doubt about this to anyone at all in- 
 formed of present public opinion upon this 
 crucial question. 
 
 IV 
 
 Another policy, which is often of such 
 obvious advantage as to be common in ordi-
 
 196 THE CONTROL OF THE MARKET 
 
 nary business, is to make lower proportionate 
 rates to larger than to smaller customers, 
 and even occasionally to decline to deal with 
 very small customers, who may be more 
 trouble than they are worth. The latter is a 
 small matter, perhaps, while the former is a 
 matter of great moment to the managers of 
 public services, who may often see the op- 
 portunity to get large amounts of valuable 
 business, highly profitable in the aggregate, 
 even at lower proportionate rates, if they can 
 still maintain higher proportionate rates upon 
 the regular business which they get from 
 smaller customers who are not in a position 
 to dictate their terms. It should be obvious 
 that in a public employment all applicants 
 must be served at fair rates, even if in a par- 
 ticular case it is especially bothersome or even 
 particularly expensive. 
 
 It is common knowledge that, in the con- 
 ducting of many large public services, dis- 
 counts have been made to large customers in 
 order to get their trade and to retain it; and 
 although this practice is not often made public 
 at the present time, still it is the policy some- 
 times adopted and, when attacked, openly 
 defended. That this policy may be often 
 advantageous in public, as it is in private
 
 UNFAIRNESS IN PUBLIC CALLINGS 197 
 
 business, may be admitted. But it has already 
 been seen that public duties may conflict with 
 business policies; and that such a policy does 
 conflict with public business may be argued 
 from its deplorable results. The undue favor- 
 ing of large customers will give them such 
 commercial advantages that they will crush 
 out their smaller competitors; and this is 
 particularly true when a railroad company 
 adopts the policy of making lower propor- 
 tionate rates to large customers as such. 
 
 Such discrimination is opposed to a sound 
 public policy. It would build and foster 
 monopolies, add largely to the accumulated 
 power of capital and money, and drive out 
 all enterprise not backed by overshadowing 
 wealth. This was the line of argument relied 
 upon by the court in the leading case of Hays 
 v. Pennsylvania Railroad (12 Fed. 309), 
 where the rather plausible scheme was 
 adopted of a sliding scale by which the 
 amount of rebate was graduated by the 
 quantity of freight furnished by each ship- 
 per, a scheme which the railroad urged was 
 adopted in good faith for the purpose of 
 stimulating production and increasing its 
 tonnage. But the court said that if the rate 
 was fixed by the business furnished the rail-
 
 198 THE CONTROL OF THE MARKET 
 
 way, " the small operator must sooner or 
 later be forced to abandon the unequal con- 
 test and surrender to his more opulent 
 rival." 
 
 Although this case now represents the 
 great weight of authority, it must be admit- 
 ted that there is still a respectable minority 
 which holds that lower relative rates may be 
 made to large customers despite the injury 
 which small customers must suffer thereby. 
 In the case of Silkman v. Water Commis- 
 sioners (152 N. Y. 327), for example, it was 
 held that lower water rates might be given 
 to large consumers than to small consumers, 
 the court saying that to make such differ- 
 ence was a " business principle of general ap- 
 plication." The courts which take this view 
 profess to limit their doctrine by the quali- 
 fication that the differences between the 
 rates for large and small customers must 
 not to be unreasonable, but it is difficult to see 
 any standard by which that difference may 
 be tested if it is once permitted; and indeed 
 it may be asserted with confidence that it is 
 opposed to fundamental principles whenever 
 the services to large customers and to small 
 customers are practically identical, as they 
 usually are.
 
 UNFAIRNESS IN PUBLIC CALLINGS 199 
 
 In pursuance of the same policy of in- 
 creasing the total profits by reaching out 
 for additional business, which may be ob- 
 tained by making concessions from the ordi- 
 nary rates charged regular customers, many 
 managers of public services claim the right 
 to make special concessions for special kinds 
 of business, in which the ordinary prices 
 could not be afforded. The same argument 
 is made here which is made elsewhere, that 
 handling this additional business will nor- 
 mally tend to the benefit of regular cus- 
 tomers, since the additional business, if 
 rightly managed in their interest, will relieve 
 the regular business of a share of the fixed 
 charges. This is the argument the apologists 
 for the trusts make in justifying a lower 
 price for export, which is making the Ameri- 
 can people so restive. 
 
 If public companies may not refuse to 
 deal with persons who want services for one 
 purpose, while they profess to serve others 
 who want the same services for another pur- 
 pose, it would seem to follow that, in their 
 dealings with their patrons who ask the same 
 service, a public company ought to charge
 
 200 THE CONTROL OF THE MARKET 
 
 all alike, without regard to the need they 
 have of the service. It is true that the re- 
 sults are not so deplorable when the dis- 
 crimination is between patrons who put the 
 service to different usage as they are when 
 the discrimination is between applicants 
 who are competitors; but it is submitted 
 that from a logical point of view there is 
 substantially the same illegality, and from a 
 practical point of view there is much the 
 same injustice. Nevertheless it is strongly 
 urged by the railroad companies, for ex- 
 ample, that they should be allowed to make 
 different rates for commodities which are 
 destined for different purposes. It is, again, 
 pointed out that this policy may be necessary 
 in order to get more traffic, and that this by 
 the law of increasing returns may be for 
 the benefit of all concerned. 
 
 Moreover, the railroad managers some- 
 times make here an argument, which they 
 elaborate in other situations, that upon 
 grounds of public policy they should be per- 
 mitted to make such lower rates as they did 
 in Hoover v. Pennsylvania Railroad (156 
 Pa. St. 220), where they exacted one rate 
 for coal to be sold at retail for domestic con- 
 sumption and a lower rate for coal to be
 
 UNFAIRNESS IN PUBLIC CALLINGS 201 
 
 used for manufacturing purposes. And, in- 
 deed, in that case the court was persuaded 
 that there was a public policy to support 
 such concessions for special purposes, in view 
 of the encouragement given to productive 
 industries by such preferential rates. But 
 despite the economic argument, the legal 
 principle remains that to charge different 
 customers who wish the same service dif- 
 ferent prices, when there is no difference in 
 the conditions under which the service is ren- 
 dered, is plain inequality, and therefore out- 
 right discrimination. 
 
 Singularly enough, this was the basis of 
 the decision in another Pennsylvania case, 
 Bailey v. Fayette Gas-Fuel Company (193 
 Pa. St. 175), which was decided only a few 
 years later. In that case a higher price per 
 cubic foot was charged to customers who 
 used gas simply for illuminating than was 
 charged to such customers as used gas also 
 for fuel. This was properly held to con- 
 stitute unjustifiable discrimination, and so 
 sweeping was the language of the court as to 
 cover the less obvious case of making different 
 prices for illuminating gas and fuel gas. 
 But it would seem that the discrimination 
 was unjustifiable, since it was not claimed
 
 202 THE CONTROL OF THE MARKET 
 
 that there is any difference in the .cost of 
 the product to the company, the expense of 
 supplying it at the point of delivery, or its 
 value to the company in the increase of 
 business or other ways. 
 
 VI 
 
 The law of public calling is thus a solu- 
 tion for the worst wrong in the present sit- 
 uation discrimination. It is also the way 
 out for the only other element in the situa- 
 tion that is of first importance extortion. 
 In private business one may demand any 
 price one can get. Not so in public business; 
 there only a reasonable price can be exacted. 
 That there is danger of unreasonable prices 
 in the present situation is quite evident. 
 Control of the market leads to power to put 
 up price; and power inevitably leads to 
 action. No law can effectively deal with 
 monopoly without the right to restrict to 
 reasonable prices; the law governing the 
 public services has that right. The elemental 
 principles thus far noted in the public serv- 
 ice law may be summarized as, on the one 
 hand, the right of the company to derive a 
 fair income, based upon the fair value of
 
 UNFAIRNESS IN PUBLIC CALLINGS 203 
 
 the property at the time it is being used 
 for the public, taking into account the cost 
 of maintenance or depreciation, and current 
 operating expenses; and, on the other hand, 
 the right of the public to have no more ex- 
 acted than the services in themselves are 
 worth. But the public service law has ad- 
 vanced beyond these generalizations, until it 
 has now become a working code. 
 
 It will be generally agreed that the law of 
 public calling is dealing with much success 
 with this difficult problem of the determina- 
 tion of the reasonable rate. The scientific 
 nature of the subject is now beginning to be 
 apprehended. Elaborate rules are being 
 framed; for at last the rights of both sides 
 are appreciated. On the one hand the full 
 right of the public to restrict a public serv- 
 ice company to reasonable charges is recog- 
 nized; on the other hand the corresponding 
 right of the public service company to a fair 
 return upon its capital is admitted. The case 
 of Brymer v. Butler Water Company (179 
 Pa. St. 231) shows how a late decision deals 
 with this troublesome conflict of interests. 
 A schedule of rates fixed by a water com- 
 pany came up for examination under a 
 statute which gave the court the power to
 
 204 THE CONTROL OF THE MARKET 
 
 revise a water schedule; and the court thus 
 stated the general principles upon which it 
 would proceed in judging the rates the com- 
 pany was charging: " By what rule is the 
 court to determine what is reasonable and 
 what is oppressive? Ordinarily that is a 
 reasonable charge or system of charges which 
 results in a fair return upon the investment. 
 Fixed charges and the costs of maintenance 
 and operation must first be provided for, then 
 the interests of the owners of the property 
 are to be considered. They are entitled to 
 a rate of return, if their property will earn 
 it, not less than the legal rate of interest; 
 and a system of charges that yields no more 
 income than is fairly required to maintain the 
 plant, pay fixed charges and operating ex- 
 penses, provide a suitable sinking fund for 
 the payment of debts, and pay a fair profit 
 to the owners of the property, cannot be 
 said to be unreasonable." 
 
 The law of public employment is certainly 
 ready to deal effectively with a most danger- 
 our phase of the trust problem. It is com- 
 mon knowledge that in most cases the capital- 
 ization of an industrial trust is many times 
 the actual amounts ever invested in the enter- 
 prises consolidated; and, indeed, the depre-
 
 UNFAIRNESS IN PUBLIC CALLINGS 205 
 
 dated quotations show that they are capital- 
 ized at many times their present value. This 
 sort of thing would not confuse the Supreme 
 Court of the United States in the determina- 
 tion of the propriety of rates. Smyth v. 
 Ames (169 U. S. 466) makes that point clear. 
 In that important case Mr. Justice Harlan 
 said in part: "If a railroad corporation has 
 bonded its property for an amount that may 
 not impose upon the public the burden of 
 such increased rates as may be required for 
 the purpose of realizing profits upon such 
 excessive valuation or fictitious capitalization; 
 and the apparent value of the property and 
 franchises used by the corporation, as rep- 
 resented by its stocks, bonds, and obliga- 
 tions, is not alone to be considered when de- 
 termining the rates that may be reasonably 
 charged. We hold, however, that the basis 
 of all calculations as to the reasonableness 
 of rates to be charged by a corporation main- 
 taining a highway under legislative sanction 
 must be the fair value of the property being 
 used by it for the convenience of the public." 
 Plainly there is no safe basis for the de- 
 termination of the rate except the actual 
 values. It may be urged that the result of 
 this rule will be to give to the public the
 
 advantage of operation under monopolistic 
 conditions, in particular the elimination of 
 the wastes of competition. The reply is that 
 this is precisely the method that should be 
 pursued in dealing with the trust problem. 
 If the state permits monopoly it may demand 
 in return that the monopolist serve at a 
 reasonable price. This has always been the 
 law of public callings when the statement 
 of it is made with discrimination. It will 
 not do for the United States Steel Corpora- 
 tion to demonstrate that its outstanding 
 issues represent no more than the proper 
 capitalization of its proved earning capacity. 
 This argument is too obviously circular, since 
 it very probably would not have this earning 
 power, were it not for its virtual monopoly. 
 It is not an answer for the Standard Oil 
 Company to point to the fact that upon 
 the whole it has not advanced the price of 
 kerosene above the price at which it would 
 have been fixed from time to time had com- 
 petitive conditions prevailed during the whole 
 period. It is still open to the general public 
 to point to the forty-eight per cent, dividends 
 in the last years, to say that these are the 
 proofs of the contention that, notwithstand- 
 ing, the price of kerosene has been too high
 
 UNFAIRNESS IN PUBLIC CALLINGS 207 
 
 during the whole period. Under the public 
 service law, therefore, the State could scruti- 
 nize the issue of securities by the trusts, and 
 limit the size of their dividends. 
 
 VII 
 
 It should now be apparent that the funda- 
 mental question under discussion is how far 
 public duty must necessarily deprive those who 
 conduct public employments from basing their 
 business policies upon the elementary principle 
 of the law of increasing returns. That the net 
 returns tend to increase with the volume of 
 business in the industrial enterprises under 
 consideration is obvious; and the question is 
 whether a public service is to be permitted 
 without hindrance to shape all things so as 
 to hold its present business, and to add to it. 
 Some managers of public services assert this 
 boldly, and a few say frankly, for example, 
 that they base their rates upon what the 
 traffic will bear, making high charges against 
 business from which high rates can be got, 
 conceding low rates in order to get business 
 which could not otherwise be obtained. Of 
 course this consideration has some place in 
 every philosophy of price-making, but it is
 
 208 THE CONTROL OF THE MARKET 
 
 submitted that it is a dangerous principle, 
 which may often operate to the disadvantage 
 of the public where the public interest is 
 involved. 
 
 The real truth of the matter seems to be 
 that, while in private business nothing need 
 be considered except the law of decreasing 
 cost, in public business there is the law 
 against discrimination to be reckoned with. 
 As the court said in the case of Tift v. 
 Southern Railway (138 Fed. 753) it is no 
 excuse for raising the rate upon a particular 
 article, as lumber, that it will bear the 
 advance; the question is rather what price 
 it is fair lumber should pay in comparison 
 with other commodities. It must be ad- 
 mitted, however, that the view of many 
 economists, that it will be to the advantage 
 of all concerned if railroad managers are 
 permitted to adopt any schedule of rates 
 which will produce the most tonnage, because 
 that policy will by the law of decreasing 
 costs tend with an enlightened management 
 to the lowering of all rates, is occasionally 
 adopted by lawyers, and, indeed, has never 
 been stated more strongly than recently, in 
 the case of Interstate Commerce Commission 
 V. The Chicago Great Western Railway
 
 UNFAIRNESS IN PUBLIC CALLINGS 209 
 
 (141 Fed. 1003). But if railway managers 
 are left practically unrestrained by law, it 
 is sufficiently plain that they will maintain a 
 high schedule of rates between localities 
 where they have control of the situation and 
 for valuable goods which will bear high rates, 
 while at the same time making disproportion- 
 ate concessions from this standard to get busi- 
 ness at competitive points or to induce the 
 movement of low grade commodities. 
 
 The authorities upon these questions are 
 a seething mass, particularly in the case of 
 railroad rates. The various commissions 
 which are near to actual conditions seem to 
 show a tendency to condemn the fixing of the 
 differing rates between localities and the 
 differential rates between commodities solely 
 by economic principles of demand and sup- 
 ply, the unequal and unjust results of which 
 the courts are apparently too far removed 
 from the vital facts to realize or appreciate. 
 But even in the courts a reaction seems to 
 to be at hand: in the Naval Stores case (118 
 Fed. 613) the court seemed to be much 
 shocked, at least, by the disproportion be- 
 tween the locality rates there disclosed; and 
 in the Window Shade case (64 Fed. 72) the 
 court considered the proportion to be ob-
 
 210 THE CONTROL OF THE MARKET 
 
 served between the rate established on raw 
 material and the rate on the finished product. 
 It is not enough to say that this power to 
 make preferential rates may be used for the 
 benefit of a railway's territory as a whole 
 or the industries of the whole country, the 
 fact remains that it is a power which may be 
 abused. So long as this power is left in the 
 hands of the managers of these great 
 companies without power of review by any 
 authority upon any fundamental principle, 
 it is in the hands of the railroad officials to 
 build up an artificial market where the nat- 
 ural conditions are adverse, or to turn an 
 industrious city into a wilderness again; and, 
 without restrictions by law, it is within their 
 power to protect certain lines of industry 
 and to crush out others. It is believed that 
 these are too great powers to intrust to 
 private hands without governmental control 
 based upon some recognized standards. 
 
 All that has been said in this section as 
 to railway rates applies without much modi- 
 fication to trust prices. It has been a com- 
 mon policy with a national trust to lower 
 prices temporarily in particular districts 
 within which competition has appeared. 
 There has been practically no limit to which
 
 UNFAIRNESS IN PUBLIC CALLINGS 211 
 
 price would not be cut. in this competitive 
 district to accomplish the ruin of a com- 
 petitor. And often the campaign would be 
 supported by raising the price in the country 
 at large. Such local discrimination would be 
 held illegal by the law now developing 
 against disproportionate charging. Even at 
 the present time that law has developed 
 enough to declare illegal serving at a loss 
 in one locality, while demanding a com- 
 pensatory price in another. If the law of 
 public employment were applied to the trusts, 
 therefore, most of the tactics pursued in their 
 predatory campaigns would be held to be al- 
 together illegal. For against discrimination, 
 whether personal or local, the law is now set. 
 
 VIII 
 
 There is a clash of interests here; and 
 there has been an inclination on the part 
 of those who conduct these monopolistic 
 businesses to contest every issue. This is 
 hardly an enlightened selfishness; for it seems 
 to many who appreciate the temper of the 
 public, that the time has come when exten- 
 sion of the law and enforcement of it should 
 be the avowed attitude of all conservative
 
 THE CONTROL OF THE MARKET 
 
 persons who wish the perpetuation of the 
 present condition of individual enterprise. 
 This memorable year has seen the beginning 
 of a great compromise between the public 
 and the monopolies. The Attorney General 
 of the United States has called for the regu- 
 lation of the trusts by laws similar to those 
 now in force against the carriers; and the 
 chairman of one of the greatest combinations 
 has openly declared that the trusts are ready 
 to accept legislation going even to that ex- 
 tent. Regulation, it is agreed, is the neces- 
 sary concomitant of monopolization. Those 
 who conduct a business affected with a public 
 interest, it is admitted, may not adopt to the 
 prejudice of the public the business policies 
 which will get them the most. The law, 
 it is conceded, must see to it that the power 
 of the monopolist over the market is not 
 abused. And the industrial wrongs of the 
 last generation, it is recognized, must not 
 be repeated.
 
 NOTE 
 
 THE following cases of illegal discrimination will bring 
 the policy out more clearly: Wight v. United States, 
 167 U. S. 512 (1886); Wester Union Telegraph Co. v. 
 Call Publishing Co., 181 U. S. 92 (1901); Mobile v. 
 Binville Water Co., 130 Ala. 379 (1901) ; Snell v. Clin- 
 ton Electric Co., 196 111. 626 (1902); Louisville & E. 
 St. Ry. Co. v. Wilson, 132 Ind. 517 (1892); Messenger 
 v. Pennsylvania Ry. Co., 17 Vroom. 407 (1874); Griffin 
 v. Goldsboro Water Co., 122 N. C. 206 (1898); Scofield 
 v. Lake Shore Ry., 43 Oh. St. 571 (1885); Lorraine v. 
 Pittsburg J. E. & E. R. R. Co., 205 Pa. St. 132 (1903) ; 
 Fitzgerald v. Grand Trunk Ry. Co., 63 Vt. 169 (1891). 
 
 For the distinction by which differences based upon 
 cost are held justifiable see, among other cases, Wight v. 
 United States, 167 U. S. 512 (1886); Savitz v. Ohio & 
 M. Ry. Co., 150 111. 208 (1894); Root v. Long Island 
 R. R. Co., 114 N. Y. 330 (1889); State v. Cincinnati, 
 N. O. & T. P. R. R. Co., 47 Oh. St. 130 (1890). 
 
 213
 
 CHAPTER X 
 
 ENFORCEMENT OF THE ANTI-TRUST STATUTE 
 
 IT has been seen in the earlier chapters 
 of this book what was the common law 
 for the regulation of combinations in re- 
 straint of interstate commerce in recent 
 times. That law was adequate enough on 
 the substantive side, in its definition of what 
 was legal and what was illegal; but it was 
 too weak on the remedial side, in that 
 the existing processes had shown themselves 
 wholly ineffectual to deal with the new con- 
 ditions. It had been apparent for some time 
 that there had arisen in very many of those 
 important industries which purvey the neces- 
 sities of life, great leaders who, with those 
 whom they had associated with them, were 
 with startling success taking advantage of 
 those economic forces which had long been 
 making for greater concentration. It was 
 just before 1880 that these captains won in 
 their respective industries the battles which 
 
 214
 
 THE ANTI-TRUST STATUTE 215 
 
 had assured their power. And long before 
 1890 these new conditions became generally 
 understood by reason of the many abuses of 
 which those who had gained this great power 
 were guilty. The country finally awoke to 
 the fact that these captains of these indus- 
 tries were doing about as they pleased. It 
 was at this critical time that the allied in- 
 terests insolently challenged the public by 
 the open announcement of the industrial 
 trusts, which have given their name to the 
 whole problem, although these original 
 trusts have long since been dissolved. 
 
 n 
 
 To the most superficial observers of cur- 
 rent events it thus became evident that the 
 very existence of the competitive system 
 was threatened by the industrial reorganiza- 
 tion which was being worked out so suddenly. 
 In a great fear that, if this movement should 
 be allowed to gather more momentum, the 
 very foundations of industrial society might 
 be shaken, there was a widespread appeal 
 from all classes for remedial legislation, upon 
 the justifiable ground of the demonstrated 
 inadequacy of the common law to grapple
 
 216 THE CONTROL OF THE MARKET 
 
 with the chief offenders. As generally hap- 
 pens under our Federal system, legislation 
 began in the states before the Federal 
 statute was enacted; and as has usually been 
 the outcome, the Federal legislation is more 
 thoroughgoing than in some states, but less 
 extreme- than in others. It cannot be denied 
 that in some respects this anti-trust legisla- 
 tion was absolutely necessary, for unless 
 effective processes had been promptly pro- 
 vided, there would have been no way to deal 
 with those commercial brigands who were 
 making further plans for predatory raids 
 upon a helpless population. It has been the 
 fashion of late years to sneer at the anti- 
 trust legislation as the unintelligent attempt 
 of a visionary people who confidently under- 
 took the hopeless task of putting an imme- 
 diate end to an irresistible evolution by legis- 
 lative fiat. But in view of the existing condi- 
 tions it was obvious enough that immediate 
 provision was necessary for the effective 
 prosecution of such extreme cases as should 
 seem to the administration to demand action, 
 so that the situation might not get beyond 
 all control. 
 
 This Federal anti-trust law of 1890 the 
 so-called Sherman Act begins by sum-
 
 THE ANTI-TRUST STATUTE 217 
 
 marizing briefly what constitutes illegal re- 
 straint of trade and concludes by somewhat 
 more elaborately setting forth the new 
 remedies provided. On the substantive side 
 it first declares illegal " every contract, com- 
 bination in the form of trust or otherwise, 
 or conspiracy, in restraint of trade 'of com- 
 merce among the several states or with 
 foreign nations." It next declares against all 
 who shall " monopolize or attempt to mo- 
 nopolize " interstate or foreign commerce. 
 On the remedial side, the act provided two 
 wholly new processes. The first was a spe- 
 cial proceeding to be brought under the 
 authority of the Attorney General to have 
 ordered the dissolution of a combination in 
 restraint of trade. The second was a special 
 action for treble damages available to any 
 person injured in his business by the machi- 
 nations of a combination. 
 
 As matters have worked out so far, it is 
 to these new remedies that chief importance 
 has attached. There has been some consid- 
 eration given to these other provisions, for 
 example the problem whether the statute in 
 thus condemning every contract and com- 
 bination made void and illegal all arrange- 
 ments reasonable as well as unreasonable.
 
 218 THE CONTROL OF THE MARKET 
 
 And again, what constitutes monopolizing has 
 been brought up, but not settled. But it is 
 rather those special proceedings, initiated by 
 the Attorney General, to have dissolved the 
 most notorious of the great combinations, 
 which have engaged public interest. It is, 
 therefore, chiefly the story of the progression 
 of these proceedings that will be told here. 
 But, incidentally, reference will be made to 
 the suits that have been brought for treble 
 damages under the other provision, although 
 these have been few, as private citizens have 
 thus far been content generally to leave it to 
 the Government to bear the brunt of working 
 out through the injunction proceedings the 
 real scope of the legislation. 
 
 in 
 
 The Federal authorities met such serious 
 reverses in the first campaign against the 
 trusts under the Sherman Act that it seemed, 
 for the time being, that the anti-trust legis- 
 lation was destined to prove wholly ineffect- 
 ual. The department of justice after some 
 delays picked out two of the most notorious 
 trusts for its first attack the Sugar Trust 
 and the Whisky Trust. In the proceedings
 
 THE ANTI-TRUST STATUTE 219 
 
 against the Sugar Trust the E. C. Knight 
 Company (156 U. S. 1) was named first, as 
 its absorption into that trust was of recent 
 notoriety. And the proof adduced was, if 
 anything, too elaborate as to the formation of 
 this combination among the sugar refiners 
 but very little was brought forward in the 
 direct evidence as to the interstate trade of 
 these refiners. When therefore the Supreme 
 Court of the United States passed upon the 
 case, being necessarily confined to the record 
 submitted, the majority of the court held 
 that, although the combination in the form of 
 a trust was certainly within the terms of the 
 statute, no more appeared upon the record 
 than a restraint of manufacturing thereby. 
 " Commerce succeeds to manufacture, and is 
 not a part of it," said Chief Justice Fuller. 
 And, as manufacturing was of necessity 
 within particular states, such restraint did 
 not fall within the scope of a Federal statute, 
 no restraint of commerce between states 
 being shown. The real truth seems to be 
 that the Government attorneys were no 
 match for the trust lawyers; and the Su- 
 preme Court had not as yet learned to 
 appreciate the real scope of the new legis- 
 lation.
 
 220 THE CONTROL OF THE MARKET 
 
 Other proceedings against commercial 
 combinations failed. These " stock-yard 
 cases," as they are known (171 U. S. 578, 
 604) ; one against Hopkins as a member of 
 the Kansas City Live Stock Exchange; the 
 other against Anderson, as a member of the 
 Traders' Live Stock Exchange, were sub- 
 stantially similar. The by-laws of both 
 associations disclosed restrictions upon the 
 compensation to be taken. But the Supreme 
 Court adhered to their principle that in order 
 to come within the provision of the statute, 
 the direct effect of the combination must be 
 to restrain interstate commerce. ' There 
 must be some direct and immediate effect 
 upon interstate commerce in order to come 
 within the act," said Mr. Justice Peckham. 
 It has since been appreciated that these cases 
 do not really diminish the proper scope of 
 Federal legislation. These cases now stand 
 simply for the proper distinction that those 
 things which only indirectly affect interstate 
 commerce do not fall within the Federal 
 jurisdiction. There have been several ex- 
 amples of this alternative in recent decisions 
 which are generally accepted as entirely 
 sound. But it seemed at the time that the 
 Supreme Court was still persistently refus-
 
 THE ANTI-TRUST STATUTE 221 
 
 ing to give to the anti-trust statute the ex- 
 pected application. 
 
 IV 
 
 Strange often are the events by which 
 progress is made. The Sherman Act had 
 thus within a few years apparently been con- 
 signed to a subsequent career of innocuous 
 desuetude by the trust lawyers when an in- 
 dustrial crisis suddenly arose in which the 
 aid of the eminent lawyers of this higher 
 coterie was given to the Government side. 
 This railroad strike of 1894 soon threatened 
 a social upheaval. And as conditions grew 
 worse it was felt that only by an appeal to 
 the Federal Government was its course to be 
 stayed. It was under the Federal law that 
 its leaders were seized and its forces finally 
 disorganized. In these Federal proceedings 
 the point was made prominent that unions 
 were combinations plainly designed to re- 
 strain commerce between the States, by in- 
 terfering with the movement of inter- 
 state trains. For contempt of an in- 
 junction based largely upon the Federal 
 anti-trust statute Debs (158 U. S. 564) 
 went to his spectacular imprisonment. But 
 these proceedings were not confirmed with-
 
 222 THE CONTROL OF THE MARKET 
 
 out great argument in support of the juris- 
 diction of the Federal Government; and in 
 accepting these arguments the courts went 
 far towards holding that any combination 
 whose action really affected interstate com- 
 merce was within the Sherman Act. 
 
 We are used to this doctrine now, par- 
 ticularly since the case of the boycott against 
 the Danbury hatters (208 U. S. 274) ; but 
 at the time it seemed the irony of fate that 
 the anti-trust law should thus far be found 
 without effect against combinations of capital, 
 but directly applicable to combinations of 
 labor. There have been other instances where 
 the anti-trust laws have been employed against 
 combinations of labor; and there will be more 
 now that it is appreciated that the thing most 
 abhorrent to the statute is monopolization. 
 For nothing can be more clearly monopoliza- 
 tion than the unionizing policies of many of 
 the present unions. To exclude others from 
 a market is the very definition of monopoliza- 
 tion; and the unions are more frank in avow- 
 ing this to be their object than the trusts are. 
 The managers of the trusts make much talk 
 of the savings of large scale production as the 
 basis of their profits, to conceal the fact that 
 much of this profit is the direct result of their
 
 THE ANTI-TRUST STATUTE 
 
 monopoly. The labor leaders say frankly 
 that they must have monopoly in order to get 
 better wages; they seldom argue with con- 
 viction that union labor is more economical. 
 
 The railroad pools were the first commer- 
 cial combinations to feel the force of the act; 
 railroads, indeed, were indisputably engaged 
 in interstate commerce. The Trans-Missouri 
 Freight Association (166 U. S. 290) was the 
 first to be attacked. This was a railroad pool 
 of the typical sort, providing for a distribu- 
 tion of traffic and a division of its freights 
 upon a pro rata basis. Any arrangement of 
 this kind plainly does away with real com- 
 petition; and as such combinations have al- 
 ways been regarded as illegal at common law, 
 it was plainly right to hold this pool a com- 
 bination in restraint of trade within the words 
 of the statute. Still the railway bar, arrayed 
 now in behalf of its own patrons, made a 
 desperate attack upon the application of the 
 statute. But the Supreme Court, now be- 
 come more sophisticated, held that, as the 
 direct effect of this combination was to con- 
 trol competition in transportation between the
 
 224 THE CONTROL OF THE MARKET 
 
 states, its continuance constituted a plain 
 restraint of interstate commerce. A little 
 later the case of the Joint Passenger Traffic 
 Association (171 U. S. 505) came on for 
 disposition. The draftsmen of that agreement 
 had seen to it that the pooling did not go so 
 far as formerly, and indeed, out of abundant 
 caution, had put in a clause that nothing 
 therein should be construed as in violation of 
 the anti-trust law. But, as the substance 
 of competition was really touched by the 
 agreement, the Supreme Court said that this 
 pool, too, should be dissolved for its direct 
 restraint of interstate commerce. 
 
 In the opinions in these cases the court 
 went much further than was necessary in con- 
 struing the statute to apply to all arrange- 
 ments in restraint of trade, whether reason- 
 able or unreasonable. Unnecessary as it 
 was to the decision, Justice Peckham said in 
 the first case: " By the simple use of the term 
 contract in restraint of trade, all con- 
 tracts of that nature, whether valid at 
 common law or otherwise, would be included, 
 and not alone that kind of contract which 
 was invalid or unenforceable as being un- 
 reasonable restraint of trade." Before this 
 dictum was overruled it was destined to cause
 
 THE ANTI-TRUST STATUTE 225 
 
 the public unnecessary alarm and the court 
 itself much trouble. 
 
 VI 
 
 At this stage some people may have thought 
 that all the future had in store had been dis- 
 closed. It might have been said that proceed- 
 ings against the industrial trusts would con- 
 tinue to fail, as all the cases against them 
 had already failed, because the Supreme 
 Court would be satisfied with nothing less 
 than the direct restraint of interstate com- 
 merce, which could be found in its pure form 
 only in the very conduct of interstate trans- 
 portation. But closer readers of these deci- 
 sions would have seen that the current of 
 opinion in the court had now set in a new 
 direction. 
 
 At all events this new appreciation by the 
 Supreme Court of the real scope of the 
 Sherman Act was soon made manifest to all 
 in the decision against the Addystone Pipe 
 Company (175 U. S. 211) and the other foun- 
 dries associated with it. This combination in- 
 cluded the principal makers of iron pipe in 
 large sizes between the Appalachian Moun- 
 tains and the Rocky Mountains. By the 
 rules of the association, no sales could be
 
 THE CONTROL OF THE MARKET 
 
 made by any member of the association until 
 he had bought the right to do so from the 
 association. These rights were sold over the 
 table at secret auctions, regularly conducted. 
 Did Omaha advertise for more pipe for its 
 waterworks; Omaha was put up at auction. 
 The concern that thus bought the right to 
 sell to Omaha could then charge Omaha any 
 price it pleased. Indeed, other members on 
 request were bound to put in bids higher still. 
 It is needless to say that this pool was a 
 combination in restraint of trade by any test. 
 In view of what had previously been de- 
 cided, the important question still remained 
 whether the Supreme Court would hold this 
 to be restraint of interstate commerce. But 
 the doctrine which was now laid down by 
 the Supreme Court in the Addystone case 
 was that, as real suppression of previous com- 
 petition in actual selling across state lines 
 was shown, these facts made out a sufficient 
 restraint of interstate commerce. And the 
 Addystone case thus marks a great advance 
 in Government's offense, especially as, in the 
 course of the final decision, Mr. Justice Peck- 
 ham said: " Total restraint of trade in the 
 commodity is not necessary in order to render 
 the combination one in restraint of trade."
 
 THE ANTI-TRUST STATUTE 227 
 
 Since this decision there has been no 
 doubt that whenever those who are engaged 
 in interstate commerce by making a com- 
 bination substantially put an end to their 
 competitive dealings, this constitutes such re- 
 straint of interstate commerce as to be within 
 the Federal jurisdiction. In the Swift case 
 (196 U. S. 375) this was made plain beyond 
 all doubt. To be sure, the decision of 
 this case might seem to a layman to be 
 made easier by the fact that Swift & Com- 
 pany and its alleged confederates admitted 
 by their demurrer all of the sinister acts 
 attributed to them. But granted that these 
 Chicago packers had an arrangement among 
 themselves not to bid against each other in 
 the regular sales at the stock-yards, the 
 question of Federal jurisdiction still re- 
 mained. And the Supreme Court held that 
 it does not matter that the combination acted 
 within a single state, if that action really 
 suppressed previous competition in inter- 
 state trade. Mr. Justice Holmes well 
 brought out the essential point in restraint 
 of trade when he said : ' ' The scheme as a 
 whole seems to us within the reach of the 
 law. It is suggested that the several acts 
 charged are lawful, and that intent can make
 
 228 THE CONTROL OF THE MARKET 
 
 no difference. But they are bound together 
 as parts of a single plan. The plan may 
 make the parts unlawful." 
 
 It makes no practical difference whether 
 you say baldly that the Knight case has 
 really been overruled by the Addystone case, 
 because the court has acquired a new point of 
 view, or whether you say that it is the 
 prosecuting officers who have learned, as 
 this case of Swift & Company has abundantly 
 showed, how to present their case so as to 
 bring an industrial combination within the 
 Trans-Missouri case. The real truth is that 
 all concerned have been greatly influenced 
 by the indignant opinion of an outraged 
 public, for ordinary laymen could not but 
 feel that the anti-trust statute was inexpli- 
 cably nullified if it could reach various of- 
 fenders, but never the trusts themselves. 
 
 VII 
 
 The law against the earlier forms of com- 
 bination without central incorporation, there- 
 fore, can be considered settled. But the great 
 problem remains whether these newer forms 
 which have central incorporation should be 
 held legal. Such a combination was destined
 
 THE ANTI-TRUST STATUTE 229 
 
 soon to be tested by the organization in 
 1901 of the Northern Securities Company of 
 New Jersey to take over the majority of the 
 stocks of the Northern Pacific and the Great 
 Northern after the bitter campaign of that 
 year in the stock market. This is no place 
 to retell the story of that bloody campaign 
 for the control of the borderland between the 
 Hill territory and the Harriman territory 
 which terminated in this treaty of peace. 
 The outcome is too recent history to require 
 restatement. In the Northern Securities 
 case (193 U. S. 197) the Supreme Court 
 ordered that the New Jersey holding cor- 
 poration should divest itself of its holdings 
 of these stocks of these railways, as the 
 holding was in violation of the Sherman 
 Act. And in the Harriman case (197 U. S. 
 244) the Supreme Court ordered that the 
 Northern Pacific shares should be distributed 
 pro rata to the stockholders in the Northern 
 Securities Company, thus giving the final 
 victory to the Hill allies. 
 
 The decision in the Northern Securities 
 case was a peculiar one. Four of the justices 
 thought the holding scheme wholly bad; four 
 thought it no violation of the Sherman Act. 
 Mr. Justice Brewer held the balance of
 
 230 THE CONTROL OF THE MARKET 
 
 power, taking the position that the arrange- 
 ment was bad as involving total suppression 
 of competition, but saying clearly that, if 
 the scheme had been a reasonable one, it 
 would not have been within the prohibition of 
 the act. Thus the Northern Securities case 
 was the handwriting upon the wall. All who 
 could have read its message must have seen 
 that the Federal Government was now given 
 full power under the Sherman Act to deal 
 with any combination unreasonably restrict- 
 ing interstate commerce. After the Northern 
 Securities case it must have been plain what 
 the outcome was to be as to any form of 
 combination designed to suppress competi- 
 tion. The Addystone case had shown that 
 the Sherman law applied to the case of an 
 industrial combination engaged in inter- 
 state commerce as much as it did to a 
 railroad pool, such as was held illegal in the 
 Trans-Missouri case. The Northern Securi- 
 ties, having settled the matter for interstate 
 traffic, was consequently a direct precedent 
 for condemning such a holding scheme as 
 the combination by which the Standard Oil 
 concern restrained interstate trade. Although 
 there are many laymen and lawyers who 
 have inveighed against the Northern Se-
 
 THE ANTI-TRUST STATUTE 231 
 
 curities decision, and all that it may work, 
 still the weight not only of public opinion 
 but also of legal acceptation seems to be 
 with it, and what it fairly means. The sud- 
 den elimination of existing competition, 
 without asking leave of anybody, which the 
 holding corporation brings about, is still re- 
 garded by the mass of men as a social 
 danger. Moreover, from a technical point of 
 view, the Securities decision appeals to the ma- 
 jority of lawyers, although there are various 
 dissenters. Indeed, to a reflecting lawyer 
 the decision against the holding corporation 
 logically follows from the decision against 
 the trust arrangement. For in both the 
 salient fact is that former competitors, still 
 existing, are now bound together so that they 
 will no longer compete. It will not do to tell 
 courts which look into the substance of things 
 that there is no direct contract between these 
 constituent companies. The fact remains 
 that the scheme complained of makes them 
 substantially participants in a combination. 
 This constitutes an overt combination sup- 
 pressing competition, notwithstanding that 
 the combination is the work of an interme- 
 diate corporation.
 
 232 THE CONTROL OF THE MARKET 
 
 VIII 
 
 To one writing of the history of this 
 long campaign against the trusts in this 
 present year, the previous decisions which 
 have just been detailed seem all to be lead- 
 ing up to the great Standard Oil decision, 
 just announced after long consideration by 
 the Supreme Court in the last term. In the 
 Standard Oil prosecution there was shown 
 such a combination as to eliminate all possi- 
 bility of competition. Indeed, through the 
 New Jersey holding corporation all of the 
 operations of the constituent companies were 
 so centralized that the business was con- 
 ducted practically as that of one concern with 
 divers departments. It is needless to rehearse 
 the facts. Every reader of our periodicals 
 knows more about the rise of the Standard 
 Oil Company than of that of any dynasty 
 in all history; and, indeed, the rise of the 
 Standard Oil Company is one of the most 
 interesting stories in economic history. 
 Despite all that was said in its behalf, the 
 Supreme Court was unanimously of the 
 opinion that its organization was in flagrant 
 violation of the Sherman Act. Hitherto the 
 Standard Oil concerns have survived litiga-
 
 THE ANTI-TRUST STATUTE 233 
 
 tion in some form or other, but now without 
 the consent of the law this combination can- 
 not any longer perpetuate its monopoly as 
 its designers planned it. 
 
 The most important point in the decision 
 was the insistence upon the doctrine that not- 
 withstanding the sweeping language against 
 schemes to restrain trade in the Act, it is 
 only unreasonable restraint that is meant. 
 This is but following the well recognized 
 canon of statutory interpretation that, in 
 construing a statute using common law 
 phrases, these shall receive their common law 
 meaning. Now, the common law against 
 restraint of trade, from time immemorial, as 
 has been seen, has distinguished between 
 undue restraints and reasonable arrange- 
 ments. As the Supreme Court now appre- 
 ciates, it should have thus construed the 
 Sherman law from the outset. 
 
 In the Standard Oil case the Supreme 
 Court (all but the radical Harlan) frankly 
 disavowed this dictum in wise and states- 
 manlike language sanctioned by every prin- 
 ciple of law and justice. " Not specifying 
 but indubitably requiring a standard," said 
 the Chief Justice, " it follows that it was 
 intended that the standard of reason which
 
 234 THE CONTROL OF THE MARKET 
 
 had been applied at the common law and 
 in this country in dealing with subjects of 
 the character embraced by the statute, 
 was intended to be the measure used for 
 the purpose of determining whether in a 
 given case a particular act had or had not 
 brought about the wrong against which the 
 statute provided." 
 
 The Standard Oil case thus will stand 
 in the history of this long campaign against 
 the trusts as establishing the sound doctrine 
 of reasonableness. By the enforcement of 
 this standard the " good " trusts may ulti- 
 mately be separated from the " bad " ; for 
 there is a long course of judicial decisions 
 dating back to the mediaeval year-books dis- 
 tinguishing illegal restraint from reasonable 
 arrangements. Those who have faith in the 
 essential justice of our common law will 
 wish no amendment of the Sherman Act, now 
 that it has adopted the common law standard. 
 
 IX 
 
 In the later Tobacco decision of this memo- 
 rable year, we have a fuller revelation of the 
 new trust policy. What is in violation of the 
 trust law is now become a question of sub-
 
 THE ANTI-TRUST STATUTE 235 
 
 stance rather than of form. Mere combina- 
 tion is no longer wrong in itself it is mo- 
 nopolization which the law seeks to prevent. 
 Those who are enlarging their business in 
 normal ways need no longer fear the trust 
 law; it is the abnormal policy of driving 
 others out of the business which must be 
 abandoned. As the Supreme Court has just 
 said, in view of the general language of the 
 statute and the public policy which it mani- 
 fests, there is no possibility of frustrating 
 that policy by resorting to any disguise or 
 subterfuge of form, since resort to reason 
 as the standard renders it impossible to escape 
 by any indirection the prohibitions of the 
 law. We are to be governed by this rule 
 of reason thenceforth in any judicial deter- 
 mination as to the character of any com- 
 bination the legality of which is brought 
 in issue. 
 
 As for the Tobacco Trust itself, it would 
 be hard for anyone not retained by it to 
 defend its practices so often laid bare in con- 
 temporary litigation. Its history is one of 
 combination upon combination, of scheme 
 after scheme to secure its market and that of 
 its competitors by fair means or foul. It was 
 the undoubted policy of those who were in
 
 236 THE CONTROL OF THE MARKET 
 
 control to make it impossible for anyone else 
 to do any considerable business in their 
 territory or within what they considered their 
 sphere of influence. Smoking tobacco and 
 chewing tobacco, cigarettes and cigars, stogies 
 and snuff, tinfoil and licorice they bought 
 out the principal companies engaged in these 
 lines and forced out the others. The most 
 ruthless of their policies was their insistence 
 upon exclusive dealings; they would often 
 practically refuse to sell their long-estab- 
 lished brands (which a retailer must have in 
 stock) to any dealer who carried the goods 
 of a competitor. 
 
 Again, if they decided to enter a new 
 field, as when they took on plug tobacco, they 
 would not hesitate to lose millions in under- 
 selling to accomplish the ruin of those recal- 
 citrant firms which would not come in. The 
 tobacco decision at least teaches what prac- 
 tices to avoid. People who have still the 
 older notion of industrial freedom may not 
 be shocked by this recital. But according to 
 modern ideas such predatory tactics are pun- 
 ishable offenses against the industrial peace. 
 Such schemes conclusively establish the de- 
 liberate purpose to restrain the freedom 
 of a trade by monopolizing it. And it
 
 THE ANTI-TRUST STATUTE 237 
 
 is against such monopolization that the 
 trust law is to be directed primarily hence- 
 forth. 
 
 There is always some feature in every note- 
 worthy case which prevents one from saying 
 that no more was decided than could have 
 been predicted. In the Tobacco case this sur- 
 prise comes in the final decree. The Supreme 
 Court directed the court below to hear and 
 advise the parties to the combination for the 
 purpose of ascertaining and determining 
 upon some plan or method of dissolving the 
 combination and re-creating out of the ele- 
 ments now comprising it a new condition, 
 which shall be honestly in harmony with and 
 not repugnant to the law as declared by the 
 court. This order is undoubtedly the salient 
 feature of the Tobacco decision. It is most 
 unusual for courts to undertake to show 
 parties how they may conform with the law; 
 but destructive measures are giving way to 
 constructive policies. One must not, however, 
 expect too much; there must be other deci- 
 sions before we shall know with real cer- 
 tainty what is reasonable and what is un- 
 reasonable. But by adopting this policy of 
 taking charge of the reorganization, the 
 courts will let us know what their distinction
 
 238 THE CONTROL OF THE MARKET 
 
 is to be years before we could know it through 
 the ordinary course of decisions. 
 
 The Supreme Court has therefore prom- 
 ised us that we are to have the rule of reason 
 henceforth in enforcing the anti-trust law. 
 Very probably we shall have more legislation 
 on the subject of the trusts, but the lines 
 upon which this legislation will proceed have 
 been laid down by the courts already. Fed- 
 eral registration or incorporation, if it comes, 
 will simply protect a trust in acting reason- 
 ably. Federal control or regulation, if it 
 comes, will see to it that the good trusts are 
 not punished with the bad. The proof that 
 this is a practicable programme may be 
 found in the fact that the Supreme Court 
 has from the beginning acted upon this 
 principle, while professing up to this year 
 not to be free to be reasonable in enforcing 
 the law. The Supreme Court has never 
 decided against any combination which the 
 great majority of people have not felt de- 
 served its fate. The Trans-Missouri Freight 
 Association, the Addystone pipe pool, the 
 Northern Securities Company, the Chicago
 
 THE ANTI-TRUST STATUTE 239 
 
 packers, the railway strikers, the Federated 
 boycotters one and all so defied public opin- 
 ion that few persons could be found who 
 would defend their conduct as reasonable. 
 In ordering the dissolution of Standard Oil 
 and American Tobacco this year, the Su- 
 preme Court has simply passed sentence on 
 two of the most notorious offenders against 
 our industrial peace, long ago found guilty 
 by the country. If, then, the Supreme Court 
 has in fact only decided against the most out- 
 rageous trusts in the past, need any concern 
 which is acting reasonably have fear in the 
 future?
 
 NOTE 
 
 THE discussion in this chapter has been confined to 
 United States Supreme Court cases under the Federal 
 Anti-Trust Law. Certain cases in the Federal courts 
 which never reached the Supreme Court are too impor- 
 tant to ignore altogether. Such as: American Biscuit 
 Co. v. Klotz, 44 Fed. 721 (1891); United States v. 
 Jellico Coal Co., 46 Fed. 432 (1891); United States v. 
 Patterson, 55 Fed. 605 (1893); Chesapeake & O. Fuel 
 Co. v. United States, 115 Fed. 610 (1902). 
 
 The cases under the State anti-trust laws have been 
 quite similar to those under the Federal law. See 
 Chicago Coal Co. v. People, 214 111. 421; Beechley v. 
 MulviUe, 102 Iowa 602 (1897); State v. Phipps, 50 
 Kans. 609 (1893); State v. Fireman's Fund Ins. Co., 
 152 Mo. 1; Fire Ins. Co. v. State, 75 Miss. 24 (1897); 
 People v. Sheldon, 139 N. Y. 251 (1893); State v. 
 Buckeye Pipe Line Co., 61 Oh. St. 520 (1899) ; State v. 
 Virginia-Carolina Chemical Co., 71 S. C. 544 (1904); 
 State v. Witherspoon, 115 Tenn. 138 (1905); Waters- 
 Pierce Oil Co. v. State, 19 Tex. Civ. App. 1 (1898). 
 
 241
 
 CHAPTER XI 
 
 BELIEF AGAINST PREDATORY COMPETITION 
 
 OUR law reports during the last two dec- 
 ades have furnished us abundant evidence 
 of the industrial wrongs that the trusts are 
 perpetrating. What those who bear the brunt 
 of these new conditions feel most strongly 
 is the discriminations that these great cor- 
 porations make in their dealings. These 
 predatory raids which the robber trusts make 
 into the field of peaceful competition raise 
 the chief outcry against them. And this just 
 complaint will not be stopped by pointing 
 out that this sort of thing has been done all 
 along by men in ordinary businesses, and has 
 not been held unfair. This may be said to 
 be the most important of the recent discov- 
 eries about the potentialities of the trusts, 
 that a course of dealing which was fair enough 
 in carrying on the former smaller businesses 
 is essentially unfair in the conduct of the 
 later larger businesses. This is the real 
 
 242
 
 PREDATORY COMPETITION 243 
 
 explanation of the cases which have already 
 been considered to some extent, which pro- 
 tected an individual trader against the aggres- 
 sions of a combination that brought coercion 
 to bear upon his customers. To be sure, 
 in competition between individuals it was held 
 permissible to threaten a customer that, unless 
 he gave his trade exclusively, he would not 
 be sold anything. But for a combination to 
 make the same statement to customers was 
 held to be a legal wrong by the majority 
 of cases. Back of all the technique employed 
 to explain these cases, lies the idea that it is 
 essentially wrong to abuse monopolistic power 
 in any such manner. 
 
 II 
 
 In view of the authorities, it may be pre- 
 dicted that the courts are going to do some- 
 thing to protect the individual in business 
 from such competition by such combinations. 
 The will to do this was seen in People v. Duke 
 (44 N. Y. Supp. 336), where a lower New 
 York Court held that the group of men who 
 were in control of the American Tobacco 
 Company could be held guilty of criminal 
 conspiracy, if it could be shown that they were 
 attempting to monopolize the tobacco busi-
 
 244 THE CONTROL OF THE MARKET 
 
 ness by coercing and compelling dealers and 
 jobbers to deal exclusively in the goods of 
 their company. Upon the general issue 
 Judge Fitzgerald said: "A trading corpora- 
 tion is entitled to all the advantages it can 
 secure under fair and free competition, but 
 its officers and agents may become criminally 
 liable if they confederate to secure a monopoly 
 by threats and menaces directed against 
 competitors, to force and coerce them to re- 
 linquish the rights to the fullest enjoyment 
 of which all are entitled. If, then, the proof 
 in the case at bar should establish the allega- 
 tions of the indictment, might not the re- 
 fusal to sell to jobbers and dealers except 
 upon the required conditions, be properly 
 found to constitute menace, coercion, and 
 intimidation? And if such methods or de- 
 vices were resorted to by defendants to re- 
 strain lawful trade and commerce, and 
 create a monopoly, are they not guilty of con- 
 spiracy? " 
 
 In Massachusetts recently legislation was 
 passed making it a criminal offense to make 
 it the condition of the sale of goods that 
 the purchaser should not sell or deal in the 
 goods of any person other than the seller. 
 In holding this restrictive legislation to be
 
 PREDATORY COMPETITION 245 
 
 within the police power (Commonwealth v. 
 Strauss, 191 Mass. 545), the Chief Justice 
 of Massachusetts said, for his court: "We 
 may infer that the Legislature was providing 
 for cases in which this particular kind of 
 contract would be unfair competition as 
 against weaker dealers, and would be in- 
 jurious to the public as tending to crush 
 ordinary competitors, and thus create a mo- 
 nopoly, from which the community as con- 
 sumers would ultimately suffer. If, at the 
 time of the enactment of this statute, there 
 were dangers of this kind confronting the 
 people of this Commonwealth, and if this 
 prohibition is a reasonable way of averting 
 such dangers, we find justification for the 
 legislation unless it involves a serious injury 
 to those who are restrained by it." 
 
 in 
 
 The Federal Anti-Trust Law, as will have 
 been noted, declares against two lands of in- 
 dustrial wrongs, which it is very difficult to 
 separate, as they commonly appear together. 
 Not only does it declare against combination 
 in restraint of trade, but also, if its clauses 
 be sufficiently analyzed, it will be seen that
 
 246 THE CONTROL OF THE MARKET 
 
 it declares against monopolization by anyone. 
 The emphasis was formerly placed upon the 
 first of these sections, but now it has ap- 
 parently been shifted to the second. Per- 
 haps this will finally result in showing that 
 the statute is in true balance, the restraint 
 of trade necessarily involving monopolization. 
 It is restraint of trade that the law de- 
 clares against. The act has nothing to say 
 against the mere curtailment of competition. 
 Monopolization was adverted to by the 
 Supreme Court in the famous Wallpaper 
 case of a few years ago (212 U. S. 227). 
 The Continental Wallpaper Company, it ap- 
 peared, had concentrated into its control all 
 the business of more than thirty wallpaper 
 concerns producing upwards of 98 per cent, 
 of the wallpaper in the United States. To 
 perpetuate the monopoly, which had thus been 
 acquired, all jobbers in their purchases were 
 virtually compelled to sign a jobbers' agree- 
 ment which bound them to buy from the 
 Continental Company all the wallpaper they 
 should handle at certain prices, and not to re- 
 sell except on certain conditions. If the job- 
 ber should not buy of others, and should ad- 
 here to the conditions named, he would get 
 a rebate from the purchase price originally
 
 PREDATORY COMPETITION 247 
 
 charged, so startling a reduction as to make 
 it plain that the original price was a fictitious 
 price, and the loss of the rebate virtually a 
 penalty for breaking away from the monopo- 
 listic scheme. The Supreme Court would not 
 therefore hold a jobber to the contract price 
 for goods sold him, Mr. Justice Harlan sum- 
 marizing the reasons of throwing it out of 
 court briefly : ' The plaintiff comes into 
 court admitting that it is an illegal com- 
 bination whose operations restrain and mo- 
 nopolize commerce and trade among the 
 states, and asks a judgment that will give 
 effect, so far as it goes, to agreements that 
 constituted that combination, and by means 
 of which the combination proposes to accom- 
 plish forbidden ends. We hold that such a 
 judgment cannot be granted without depart- 
 ing from the rule long established in the 
 jurisprudence of both this country and Eng- 
 land, that a court will not lend its aid in 
 any way to a party seeking to realize the 
 fruits of an agreement that appears to be, 
 tainted with illegality, although the result 
 of applying that rule may sometimes be to 
 shield one who has got something for which, 
 as between man and man, he ought perhaps 
 to pay, but for which he is unwilling to pay."
 
 248 THE CONTROL OF THE MARKET 
 
 In the Standard Oil case of this year, the 
 Chief Justice in his opinion has made it plain 
 that the Supreme Court believes that both of 
 the principal sections of the Sherman Act 
 are to be taken together, the first clause 
 against combination and the second clause 
 against monopolization. The second section 
 he says was intended to supplement the first, 
 and to make sure that by no possible guise 
 could the public policy embodied in the first 
 section be evaded. Having in the first sec- 
 tion forbidden all means of restraining trade, 
 the second section, according to the Chief 
 Justice, seeks, if possible, to make the pro- 
 hibition of the act the more complete by em- 
 bracing all attempts to reach monopoly, even 
 though the acts by which such results are 
 brought about be not embraced within the 
 general enumeration of the first section. 
 " And it is worthy of observation," continues 
 the Chief Justice, " that although the statute 
 by the comprehensiveness of the enumerations 
 embodied in both the first and second sections 
 makes it certain that its purpose was to pre- 
 vent undue restraints of every kind or nature, 
 nevertheless, by the omission of any direct 
 prohibition against monopoly in the concrete, 
 it indicates consciousness that the freedom o
 
 PREDATORY COMPETITION 249 
 
 the individual right to contract, when not un- 
 duly or improperly exercised, was the most 
 efficient means for the prevention of mo- 
 nopoly, since the operation of the centrifugal 
 and centripetal forces resulting from the 
 right to freely contract was the means by 
 which monopoly would be inevitably pre- 
 vented if no extraneous or sovereign power 
 imposed it, and no right to make unlawful 
 contracts having a monopolistic tendency were 
 permitted." 
 
 IV 
 
 To what extent this regulation by law 
 should go is indicated by the great abuses of 
 their powers which the cases which have been 
 decided have disclosed. It is plain that the 
 law is primarily directed now against exclu- 
 sive policies. For example in the case of 
 Montague & Co. v. Lowry (193 U. S. 38), 
 the Supreme Court confirmed a judgment for 
 treble damages in favor of a dealer in tiles 
 who had been greatly injured in his business 
 by the machinations of a dealers' association, 
 membership in which was refused him. It 
 appeared that this dealers' association had 
 adopted the policy of refusing to sell to any 
 dealers not members for less than the retail
 
 250 THE CONTROL OF THE MARKET 
 
 price, while the manufacturers of tiles asso- 
 ciated with them agreed not to sell to persons 
 not members at any price. As the court 
 pointed out, this was not the simple case of a 
 refusal to deal with a customer, it was the 
 action of a combination bent upon perpetuat- 
 ing its monopoly by bringing pressure upon 
 others to prevent them from dealing with a 
 rival dealer. The object of what was done 
 was plainly to gain monopoly by excluding 
 others. And for the disastrous effects of 
 this policy to the business of the inde- 
 pendent dealer the court held he had legal 
 redress. 
 
 In the Patent Medicine case, recently de- 
 cided by the Supreme Court (220 U. S. 373), 
 this point is even more strongly made. There 
 was shown in evidence in this case a system 
 of contracts between manufacturers of patent 
 medicines and wholesale and retail dealers, 
 by which the manufacturers planned to con- 
 trol the prices at which the medicines should 
 be sold at wholesale and at retail, so that there 
 would be no possibility of price cutting at 
 any stage. As an aid to the maintenance of 
 the prices thus fixed the company devised a 
 system of tracing and identifying through 
 serial numbers each wholesale and retail pack-
 
 PREDATORY COMPETITION 251 
 
 age of its products. The Supreme Court, 
 being convinced that the various contracts 
 were all parts of a general scheme to destroy 
 competition, held that the contracts were void- 
 able at the option of a dealer who had bought 
 the goods with the agreement to maintain the 
 price named. Once the product is sold, said 
 the court succinctly, the public is entitled to 
 whatever advantage may be derived from 
 competition in the subsequent traffic. 
 
 Two cases in the state courts of late will 
 serve to bring out the present unfairness in 
 the trust competition in a striking way. In 
 Standard Oil Company v. Doyle (118 Ky. 
 622) there were extraordinary allegations of 
 unfair competition made by a competitor of 
 the Standard Oil Company against it. He 
 alleged that, after he had successfully estab- 
 lished a local business, a special representative 
 of the company was sent to destroy it. A 
 local wagon line was established; and the 
 drivers of these wagons were apparently in- 
 structed to follow the wagons of the inde- 
 pendent concern, the drivers of the Standard 
 wagons even following the other drivers into
 
 252 THE CONTROL OF THE MARKET 
 
 the houses and stores where the independent 
 concern was selling, offering to sell oil and 
 gasoline at reduced rates or practically for 
 nothing. Moreover, threats were made 
 against customers of the independent concern 
 that they would be put out of business if they 
 continued to deal with it; and various other 
 methods were employed to destroy the credit 
 of the independent concern and estrange its 
 customers. In holding this to be unfair com- 
 petition, Mr. Justice Nunn said: "It was 
 most assuredly unlawful to obstruct, harass, 
 and annoy appellee's employees when en- 
 gaged in the discharge of their duties in sell- 
 ing and distributing oils to appellee's cus- 
 tomers; to threaten customers of appellee to 
 shut them up in their business if they con- 
 tinued to deal in appellee's oils; to cause and 
 procure false and injurious reports concern- 
 ing appellee and his business to be circulated 
 in Lexington and vicinity; and to procure 
 appellee's arrest and prosecution on false 
 charges in connection with his business in the 
 sale of oils, the purpose of estranging and 
 alienating the acquaintances, customers and 
 patrons of appellee." There is too much on the 
 records of courts against the Standard Oil 
 Company to let one believe all its protesta-
 
 PREDATORY COMPETITION 253 
 
 tions of the advantages of a benevolent 
 despotism. 
 
 In Cilley v. United Shoe Machinery Com- 
 pany (152 Fed. 726) it was alleged that this 
 corporation was monopolizing the shoe ma- 
 chinery business of the United States by com- 
 pelling shoe manufacturers throughout the 
 United States, in leasing shoe machinery from 
 it, to agree to use no other shoe machinery in 
 their respective factories except that made by 
 it. Cilley further alleged that he was the 
 manufacturer of a certain machine used in 
 making shoes, but that by reason of these 
 exclusive contracts manufacturers throughout 
 the United States who would otherwise have 
 bought from him were prevented from doing 
 so. He urged that he had been thus deprived 
 of the open market to which he was entitled 
 as the maker of a meritorious machine; and 
 he asked damages for this loss of business 
 and depreciation of his property. The Fed- 
 eral Court unfortunately did not discuss his 
 complaint on its merits. It was thrown out of 
 court primarily because the complaint was 
 not sufficiently definite. That this controversy 
 between this corporation and its competitors 
 is settled, no one really believes who follows 
 the current news.
 
 254 THE CONTROL OF THE MARKET 
 
 VI 
 
 It is sufficiently plain that dealers who are 
 damaged in their business by the exclusive, or 
 rather excluding, policies of the trusts may 
 bring action against these combined concerns 
 for the recovery of such damages so inflicted. 
 One of the most striking cases of this under 
 the state anti-trust laws is Cleland v. An- 
 derson, a Nebraska case (66 Neb. 252). It 
 appeared in that case that a lumber dealer 
 had been driven out of the lumber business 
 by force of threats made by members of a 
 lumber dealers' association to wholesale lum- 
 ber dealers, of whom this particular dealer 
 had been purchasing. It appeared that the 
 principal idea in maintaining this association 
 was to prevent the members of the association 
 from being subjected to competition from 
 dealers who were not members. And it 
 further appeared that the wholesale dealers 
 made " honorary members " were subjected to 
 fines if they sold to retailers not " regular." 
 In holding that the attack of this combination 
 upon the dealer constituted a legal wrong 
 for which recovery could be had under the 
 statute, Pound, Commissioner, said: " Com- 
 binations and conspiracies in restraint of
 
 PREDATORY COMPETITION 255 
 
 trade are unlawful and actionable at common 
 law, and it has been held that combinations 
 between independent dealers which have the 
 effect of preventing competition are within 
 that rule without regard to what may be done 
 in pursuance of them, and although the object 
 is merely to protect against ruinous rivalry 
 without any attempt to charge undue and ex- 
 cessive prices. While persons have a right to 
 withdraw their trade from whom and as they 
 please, they have no right to unite in restraint 
 of competition; and when they go beyond 
 mere withdrawal of business and employ 
 coercion or intimidation to prevent free deal- 
 ing a different question is presented." 
 
 A strong opinion to the same effect was 
 recently handed down in Illinois: Purington 
 v. Hinchliff (219 111. 159). In this case a 
 manufacturer and dealer in bricks was injured 
 by the operation of an agreement between a 
 brick manufacturers' association, a builders' 
 association and a bricklayers' union, that they 
 would not use, purchase, or lay bricks made 
 by any concern which had not subscribed to 
 the rules of the builders' association. In hold- 
 ing this to be an unlawful conspiracy against 
 this manufacturer, Mr. Justice Wilkin said: 
 " No person or combination of persons can
 
 256 THE CONTROL OF THE MARKET 
 
 legally, by direct or indirect means, obstruct 
 or interfere with another in the conduct of 
 his lawful business, and any loss willfully 
 caused by such interference will give the 
 party injured a right of action for all 
 damages sustained. All parties to a con- 
 spiracy to ruin the business of another be- 
 cause of his refusal to do some act against 
 his will or judgment are liable for all overt 
 acts illegally done pursuant to such conspiracy 
 and for the subsequent loss, whether they were 
 active participants or not." 
 
 VII 
 
 If the present emphasis upon monopoliza- 
 tion as the gist of the wrong continues, the 
 law will very probably, in distinguishing be- 
 tween what is unreasonable and what is reason- 
 able, take the distinction which has been es- 
 tablished in Rhode Island. In that state the 
 whole law turns upon whether monopolization 
 is shown or not. This court said recently in 
 the Coal Case (29 R. I. 254) : " Although the 
 list of common-law offenses in this State may 
 be said to include that of engrossing, our his- 
 tory does not disclose any prosecutions made 
 thereunder; it may therefore be considered as
 
 PREDATORY COMPETITION 257 
 
 dormant, but ready to be called into activity 
 whenever the occasion may require. When it 
 becomes necessary, the law relative to engross- 
 ing in this state will be applied, with due 
 regard to the circumstances and conditions 
 existing at the time of its enforcement. The 
 danger to be apprehended from engrossing 
 is monopoly. A monopoly, as now under- 
 stood, " embraces any combination the tend- 
 ency of which is to prevent competition in 
 its broad and general sense and to control 
 prices to the detriment of the public." 
 
 But the court approved the language of an 
 earlier case (18 R. I. 484) where it was in- 
 sisted that monopolization must be shown: 
 " Undoubtedly there may be combinations so 
 destructive of the right of the people to buy 
 and sell and to pursue their business freely 
 that they must be declared to be void upon 
 the ground of public policy. In such cases 
 the injury to the public is the controlling con- 
 sideration. But it does not follow that every 
 combination in trade, even though such com- 
 bination may have the effect to diminish the 
 number of competitors in business, is there- 
 fore illegal. Such a rule would produce 
 greater public injury than that which it 
 would seek to cure. It would be imprac-
 
 258 THE CONTROL OF THE MARKET 
 
 ticable. It would forbid partnerships and 
 sales by those engaged in a common business. 
 It would cut off consolidations to secure the 
 advantages of united capital and economy of 
 administration. It would prevent all restric- 
 tions and exclusive privileges, and hamper the 
 familiar conduct of commerce in many ways. 
 There may be many such arrangements which 
 will be beneficial to the parties and not in- 
 jurious to the public. Monopolies are liable 
 to be oppressive, and hence are deemed to be 
 hostile to the public good. But combinations 
 for mutual advantage which do not amount 
 to a monopoly, but leave the field of com- 
 petition open to others, are neither within the 
 reason nor the operation of the rule." 
 
 VIII 
 
 Despite the protests of the managers of the 
 trusts, that prices have been lowered under 
 their auspices, there is a growing suspicion 
 of overcharging. At all events it would be 
 comforting to believe that the law could reach 
 outrageous cases of overcharging. On this 
 point there is a significance in the decision 
 of the United States Supreme Court in 
 Chattanooga Foundry Co. v. Atlanta (203
 
 PREDATORY COMPETITION 259 
 
 U. S. 390) which has not generally been ap- 
 preciated. In that case it was held that the 
 city could recover from the foundry the 
 amount it was compelled to pay the foundry 
 for iron pipe above what it was worth. The 
 purchase was made, after a simulated com- 
 petition, at a price fixed by the trust of which 
 the foundry was member. It was held that 
 the loss to the city was within the Sherman 
 Anti-Trust Law. Said Mr. Justice Holmes, 
 " A person whose property is diminished by 
 a payment of money wrongfully induced is 
 injured in his property." It is good to see 
 that the Supreme Court appreciates that over- 
 charging by a monopoly works a definite 
 legal wrong for which redress may be had. 
 
 Discrimination in price may also come 
 within the ban of the law where that dis- 
 crimination is put in force as part of a 
 scheme to monopolize, as has been seen in 
 many cases already. One more may be added* 
 Aikens v. Wisconsin (195 U. S. 194). In 
 this case the extraordinary facts appeared 
 that a combination of newspapers, to prevent 
 a rival paper from raising its rates, announced 
 that they would charge similarly advanced 
 rates to merchants who paid these advanced 
 rates, while continuing to charge its adver-
 
 260 THE CONTROL OF THE MARKET 
 
 tisers generally their regular rates. Proceed- 
 ings were brought against the combination 
 under the Wisconsin statute for criminal con- 
 spiracy. In point of constitutionality the case 
 was taken to the Supreme Court of the 
 United States, where the conviction was sup- 
 ported. Said Mr. Justice Holmes: " It would 
 be impossible to hold that the liberty to com- 
 bine to inflict mischief is among the rights 
 which the Fourteenth Amendment was in- 
 tended to preserve." With these two cases 
 in mind one can assert confidently that legis- 
 lation providing further remedies for over- 
 charging and discrimination by the trusts 
 would be held constitutional. 
 
 rx 
 
 Regulation not destruction will soon be 
 shown to be the policy of the twentieth cen- 
 tury. No enlightened person could wish to 
 see the industrial progress which these great 
 combinations have fostered set back. Rather 
 upon economic grounds these efficient organi- 
 zations should be turned to the common good. 
 From this point of view these continual at- 
 tacks by which the dissolution of particular 
 trusts is successively attempted, have no
 
 PREDATORY COMPETITION 261 
 
 policy behind them that will eventually be 
 justified, aside from that of driving the trusts 
 into organizing in the final form of a single 
 corporation. Perhaps for the present, when 
 the proper method of legal regulation has 
 not been worked out, it is necessary to visit 
 this punishment upon those trusts which out- 
 rage public opinion. But very soon the time 
 will come when the principal trusts will have 
 fully reorganized as single corporations. And 
 then the fundamental problem of legal regu- 
 lation must be squarely faced. Lcdssez faire 
 has unquestionably permitted great abuses by 
 these industrial combinations which it encour- 
 aged. State control is therefore now indis- 
 putably necessary, however much it may be 
 opposed by those who had their ideas fixed 
 under the older regime. 
 
 What has been attempted in this book is 
 to follow the course of the development of 
 the policy of the law from the recent past 
 into the near future. There are those who 
 believe that the solution will come, not by such 
 development in the common law, but by new 
 legislation of a different sort. But let them 
 remember that legislation which is out of 
 touch with the existing law usually comes to 
 naught. It is not impossible for the Legis-
 
 262 THE CONTROL OF THE MARKET 
 
 lature to make legal that which has always 
 been held by men of our race in modern 
 times to be illegal, an unreasonable combina- 
 tion in restraint of trade but it is improb- 
 able. It is not impossible that the Executive 
 may be given a power to dispense with law 
 in favor of good trusts but it is almost un- 
 thinkable. This dispensing power to those 
 who are good, as a rebuke to those who are 
 thought to be bad, is not, to a lawyer, a 
 practicable substitute for general regulation 
 of all trusts, good and bad. Under proper 
 regulation the trusts which are found to be 
 acting reasonably will not be disturbed, while 
 those which are acting unreasonably will be 
 summarily dealt with. If the common law 
 is as well developed as the writer believes, 
 no new substantive law is needed. But Con- 
 gress may well provide better methods for its 
 enforcement, such as the Interstate Trade 
 Commission which has been proposed recently. 
 Let it not be said that the administration 
 has too great powers, which it is likely to 
 abuse. There is proof enough that it is a 
 workable programme in the fact that the 
 successive administrations, with full authority 
 from the Supreme Court in that early dic- 
 tum to cause punishment to be imposed upon
 
 PREDATORY COMPETITION 263 
 
 almost any large corporation in the land, have 
 never invoked the statute against any com- 
 bination which was not beyond question an 
 illegal combination by the common law dis- 
 tinction which the court has now adopted. 
 The time has come for the recognition of the 
 permanence of these great aggregations of 
 capital as such. It would be a grave mis- 
 take, from an economic point of view, to 
 force the dissolution of the corporate 
 organizations which, without abusing their 
 power, now control many industries. It may 
 even be hoped that the time will soon come 
 when it may be seen that these effective 
 concerns may work for the common good. 
 It is high time that the old policy directed to 
 the impossible end of destroying the trust 
 should make way for the new idea to regu- 
 late the business conduct of these great in- 
 dustries. Regulation not destruction 
 should be the programme of the future. 
 
 It has indeed been a long campaign which 
 the law has been waging against the trusts. 
 And it has been conducted with varying for- 
 tunes. It is a matter of flow and flux, as is 
 the nature of progress. We think we know 
 the limits of the application of the law to-day 
 in reading this latest decision. But, if the
 
 264 THE CONTROL OF THE MARKET 
 
 history of this matter is to teach us anything, 
 it is that one never can be sure of the future. 
 However, all that enterprising men want is 
 reasonable certainty to go ahead on; and this 
 they have in the decisions of this year. He 
 who is not willing to risk his fortunes upon 
 fair probabilities has no place in the higher 
 realms of American business. Peace we may 
 have for a time with these latest decisions in 
 evidence. But it is an armed peace without 
 immediate prospect of final disarmament. 
 For this present century at least there can 
 be no long respite from social warfare, 
 bellum omnium contra omnes. 
 
 It is very likely that the problems which 
 have been discussed in this chapter will receive 
 greater attention in the immediate future than 
 they have hitherto. Unquestionably we are 
 going to have law enough to redress the wrongs 
 done others in business by the monopolistic 
 concerns. It should be the abuse not the 
 possession of monopoly which will subject a 
 concern to prosecution under the law in the 
 future. The essence of the wrong of mo- 
 nopolization is the exclusion of others from 
 the market, not mere growth of the concern
 
 PREDATORY COMPETITION 265 
 
 itself. In other words, it is unnatural growth 
 by unreasonable tactics which will be pun- 
 ished, not natural growth by deserved success. 
 Monopolization by exclusive policies and un- 
 justifiable discriminations is the thing to be 
 prevented. With an open market a rival con- 
 cern may succeed on its merits, but not if the 
 trusts are allowed to control the market. If 
 this opportunity is preserved, there will be al- 
 most protection enough against any injury to 
 the public, if not by competition itself, by the 
 potentiality of competition. If unfair com- 
 petition is forbidden, fair competition will al- 
 ways be possible. The market should be so 
 free from unnatural restraints that by natural 
 competition one may always succeed.
 
 NOTE 
 
 FOR other examples of suits brought under the Fed- 
 eral anti-trust statutes by a competitor injured by the 
 force of the monopoly, see Rice v. Standard Oil Co., 
 134 Fed. 464 (1905); Loder v. Jayne, 142 Fed. 1010 
 (1906). 
 
 The decisions under the State anti-trust laws are to 
 the same effect, see Finck v. Schneider Granite Co., 
 187 Mo. 244 (1904); Straus v. Am. Publishers' Ass'n, 
 177 N. Y. 473 (1904). 
 
 267
 
 CHAPTER XII 
 
 EXTENT OF STATE CONTROL 
 
 ALT, businesses affected with a public inter- 
 est are subject to State control in a peculiar 
 degree. Whether a business is public or not 
 depends in last analysis upon the situation 
 of the public with respect to it. Are there 
 enough of such purveyors to serve the pub- 
 lic? or are there, for permanent reasons, never 
 enough? If so, there will be virtual competi- 
 tion; if not, there will be virtual monopoly. 
 It will be found that in many of the great 
 businesses such competition, although from a 
 legal point of view possible, is from the 
 economic point of view improbable. So far 
 as one can see, virtual competition is at an 
 end in these industries, and virtual monopoly 
 will henceforth prevail. Therefore it must be 
 said that the public has now an interest in the 
 conduct of these businesses by their owners. 
 They are affected with a public interest, since 
 
 268
 
 EXTENT OF STATE CONTROL 269 
 
 these agencies are carried on in a manner to 
 make them of public consequence. Having 
 devoted their property to a use in which the 
 public has an interest, they in effect have 
 granted to the public an interest in that use, 
 and must submit to be controlled by the pub- 
 lic for the common good to the extent of 
 the interest they have created. Plainly we 
 have in the accepted use of these phrases the 
 manifestation of a deep-seated change in 
 habits of thought. Only twenty-five years 
 ago the general feeling as to every sort of 
 industrial relation was that it was better to 
 leave all alone, that it was better to leave 
 people to work out their own salvation. But 
 of late years we have been calling upon the 
 State to save us from monopoly in all its 
 forms; and we are impatient if it delays. 
 
 In recent times there undoubtedly is an 
 increasing need of this stricter regulation of 
 all employments which appear to be affected 
 with a public interest. The most of men 
 appreciate that the law has already taken con- 
 trol of the situation for all time. It is hardly 
 too much to say that the efficient regulation
 
 270 THE CONTROL OF THE MARKET 
 
 of the monopolistic concerns by sufficient law 
 is the most pressing problem confronting this 
 nation. Great power brings as its conse- 
 quence the need of control of that power for 
 the good of the whole people. It is urged 
 that the time has come when extension of the 
 law and enforcement of it should be the 
 avowed attitude of all conservative persons 
 who wish the perpetuation of present condi- 
 tions. 
 
 It would be well if the restless and the 
 doubting who see many abuses and many 
 wrongs in the conduct of the great monopolies 
 without prompt remedy or adequate redress, 
 might be relieved and heartened by being 
 shown that the common law is adequate to 
 deal with all real industrial wrongs, and that 
 with the aid of remedial statutes the adminis- 
 tration of the law can be relied upon. The 
 proprietors of these great businesses should 
 be told sharply that they may not adopt to 
 the prejudice of their public various profitable 
 policies, and then justify them as inherent 
 rights which other men in ordinary business 
 may use in the advancement of their interests. 
 
 All businesses both great and small are sub- 
 ject, to be sure, to that general police power 
 of the State whereby in any civilized society
 
 EXTENT OF STATE CONTROL 271 
 
 the effort is made to so order things that one 
 may not use his own so as to injure another. 
 But the comparison of the large amount of 
 regulation which it is considered proper for 
 the State to impose upon a monopolized 
 business with the small amount of regulation 
 which it is considered proper for the State to 
 enforce in regard to competitive business is 
 in itself significant enough. The difference 
 which is shown is more than one of degree; it 
 becomes one in kind. In the ordinary business 
 where regulation by competition is still suffi- 
 cient, the law cannot question the decision 
 of the proprietor to refuse to sell to a par- 
 ticular applicant, or to discriminate in his 
 prices. But where the business is in the hands 
 of a monopolistic combination, refusal to sell 
 may become conspiracy, and discrimination 
 may be held illegal. 
 
 m 
 
 There is now fortunately almost general 
 assent to State control of the established mo- 
 nopolies. Two ways only can be found to 
 exercise such control. One way is govern- 
 ment ownership. The other way is the con- 
 trol of their practices. One or the other of 
 these methods must be finally adopted. The
 
 272 THE CONTROL OF THE MARKET 
 
 conservative method is now on trial. It be- 
 hooves us to see to it that it be so intelli- 
 gently tried, and that the law applicable to 
 the case be so accurately enforced, that we 
 may not be driven perforce to the radical 
 alternative of public ownership. If govern- 
 ment ownership should be made necessary by 
 the failure of State regulation, we should be 
 face to face with socialism. For that a people 
 once accustomed to seeing all great business 
 operated by the government would be stopped 
 by any legal distinction between them and 
 ordinary concerns, is too much to hope. 
 
 This principle of State control does not 
 lead one to socialism; indeed, it saves one 
 from socialism if truly understood. It is only 
 in those few businesses where the conditions 
 are monopolistic that dangerous power over 
 their public has been attained by those who 
 have the control. In most businesses the 
 virtual competition which prevails puts the 
 distributors at the mercy of their public. In 
 current opinion the recognition of this dis- 
 tinction is manifest. Men are as eager for an 
 open market as ever; but they wish the control 
 of monopoly to insure it. The demand is for 
 freer trade where competition prevails and 
 stricter regulations where monopoly is found.
 
 EXTENT OF STATE CONTROL 273 
 
 So long as virtual competition prevails there is 
 no necessity for coercive law, since there is 
 then no power over the purchasing public, 
 But where in any business virtual monopoly 
 is permanently established the people will not 
 be denied in their deliberate policy of effectual 
 regulation of such public service for the 
 common good. 
 
 Only to this extent the individualistic ideal 
 of society gives place to the collective policy. 
 It is with true appreciation of the real issue 
 that we are contending for State control to 
 gain individual liberty. It may once have 
 been the ideal of industrial freedom that a 
 man might do as he pleased with his own; in 
 any event that is no longer our notion of 
 social justice. It is believed now that with 
 increase in power over the particular market 
 comes increase in responsibility to the depend- 
 ent public. Socialism would destroy all 
 private interests in the name of the public; 
 regulation would preserve private interests by 
 reconciling them with public right. Socialism 
 attacks all capital to whatever business it is 
 devoted; regulation grapples monopoly only 
 when it is convinced that there is no 
 other way to safeguard the interests of the 
 public.
 
 274. THE CONTROL OF THE MARKET 
 
 IV 
 
 It seems to the writer that these occasional 
 decisions, in recent years, by which the dis- 
 solution of some one great corporation is at- 
 tempted in turn, are as futile as the anarchist's 
 bomb, and that the programme of destruction 
 of these established monopolies is as unin- 
 telligent as the terrorist propaganda. No 
 thinking person, for example, would wish to 
 see the American steel industry revert to scat- 
 tered forges. This is especially true, as it is 
 quite probable that what evils there may be 
 in the conduct of the present company could 
 be met by effective regulation of its dealings 
 of the sort to which monopolies have been 
 subjected from time immemorial. No one 
 proposes to abolish gas companies because 
 they usually have a monopoly; but everyone 
 agrees that such companies should be com- 
 pelled to serve all that apply with adequate 
 facilities for reasonable compensation and 
 without discrimination. And this law is al- 
 ways ready to include new businesses within 
 its scope, as it did unhesitatingly in the case 
 of the electric companies, for example. 
 
 It is not pretended that all that is urged in 
 this book should be taken as established in
 
 EXTENT OF STATE CONTROL 275 
 
 the present law. It is put forth seriously by 
 one somewhat versed in the whole subject 
 as a working hypothesis, that the solution of 
 the trust problem may be found in the law 
 governing the public callings. It is contended 
 that the operations of the greatest of these 
 trusts have become of such public conse- 
 quence as to affect them with a public interest 
 within the meaning of the law. Moreover, 
 these trusts have, in their control of their re- 
 spective markets, an assured permanence from 
 the conditions prevailing, so that they are not 
 to be dispersed as those trade combinations 
 which are aiming at temporary cornering of 
 the market may be. These great industrial 
 organizations should not be swept away by 
 dissolution of these new corporations. It is 
 rather to be desired upon social grounds that 
 these effective producers in their special fields 
 should be turned to the common advantage. 
 A sufficient regulation to secure this general 
 good, it is submitted, is to be found in the 
 law governing public employment, which re- 
 quires, with elaborate detail for the enforce- 
 ment of the general principles, that those who 
 conduct a business in which the public has an 
 interest serve without discrimination and for 
 reasonable compensation. If this law of pub-
 
 276 THE CONTROL OF THE MARKET 
 
 lie employment could be enforced against 
 the industrial trusts, a solution, it may be 
 hoped, would be found for the trust problem; 
 for it would reach the two complaints most 
 seriously made against the trusts their 
 predatory competition and their excessive 
 capitalization. 
 
 The impartial enforcement of this pro- 
 gramme ought to accommodate all the con- 
 flicting interests involved in this issue. The 
 legality of these corporations in point of or- 
 ganization being fully recognized, the present 
 danger from a sudden attack by legal proceed- 
 ings which may eventuate in the dissolution of 
 the corporation would no longer exist. On the 
 other hand, with the prohibition of discrimina- 
 tory prices effectively enforced by the admin- 
 istration, enough competition would be pre- 
 served to modify the monopoly so that the 
 right of the State to regulate prices need 
 seldom be resorted to. This solution would 
 result in an industrial peace, with the con- 
 tinual attacks upon the monopolistic cor- 
 porations generally abandoned and the 
 right of the public, for example, to 
 prevent the unfair tactics of that cor- 
 poration fully recognized. Regulation even 
 to this extent is already sufficiently sue-
 
 EXTENT OF STATE CONTROL 277 
 
 cessful in dealing with those corporations 
 now held to be in public service by reason of 
 their virtual monopoly, while under modern 
 conditions the attempt at permanent sup- 
 pression of industrial concentration in cer- 
 tain businesses is really hopeless. The pres- 
 ent policy of destruction should be abandoned 
 in favor of the programme of regulation. 
 The law for regulating the trusts is already 
 developed, if only we have the insight to 
 realize it. 
 
 THE END
 
 AIKENS v. WISCONSIN, 259 
 
 ALLEN v. FLOOD, 15, 53, 68 
 
 ARNOT v. PITTSTON & ELMIRA COAL CO., 135 
 
 AVERRILL v. SOUTHERN RY., 22 
 
 AYER v. RUSHTON, 17 
 
 B 
 
 BAILEY v. FAYETTE GAS-FUEL CO., 201 
 BAILEY v. MASTER PLUMBERS' ASSOC., 104 
 BARR v. ESSEX TRADES COUNCIL, 69 
 BENNETT v. DUTTON, 193 
 
 BOHN MANUFACTURING CO. v. HOLLIS, 107 
 BREWSTER v. MILLER'S SONS CO., 108 
 BROWN & ALLEN v. JACOBS PHARMACY CO., 97 
 BRYMER v. BUTLER WATER CO., 203 
 
 CHAMBERS & MARSHALL v. BALDWIN, 40 
 
 CHAPIN v. BROWN BROS., 128 
 
 CHATTANOOGA FOUNDRY CO. v. ATLANTA, 258 
 
 CHICAGO & A. R. R. v. SUFFERN, 192 
 
 CILLEY v. UNITED SHOE MACH. CO., 253 
 
 CLARK v. FRANK, 136 
 
 CLARK v. NEEDHAM, 156 
 
 CLAYGATE v. BATCHELOR, 121 
 
 CLEMMITT v. WATSON, 81 
 
 CLELAND v. ANDERSON, 254 
 
 COLLINS v. LOCKE, 132 
 
 COMMONWEALTH v. STRAUSS, 245 
 
 CONTINENTAL WALLPAPER CO. v. VOIGHT, 246 
 
 CROFT v. DAY, 41 
 
 CRUMP v. COMMONWEALTH, 65 
 
 CUMMINGS v. HYATT, 174 
 
 CUMMINGS v. UNION BLUESTONE CO., 155 
 
 CURRAN v. GALEN, 75 
 
 279
 
 280 TABLE OF CASES DISCUSSED 
 
 D 
 
 DAVEY v. DAVEY, 44 
 DAVIS v. THE PUBLISHING CO., Ill 
 DEBS, IN RE, 221 
 DELZ v. WINFREE, 103 
 
 DISTILLING & CATTLE FEEDING CO. v. PEOPLE, 162 
 DOREMUS v. HENNESSY, 91 
 
 E 
 
 EMERY v. CANDLE CO., 146 
 ERDMAN v. MITCHELL, 72 
 
 G 
 
 GLAMORGAN COAL CO. v. MINERS' FEDERATION, 38 
 GRAHAM v. ST. CHARLES ST. RY., 27 
 
 H 
 
 HARRIMAN v. NORTHERN SECURITIES CO., 229 
 HAUGEN v. ALBINA WATER CO., 173 
 HAYS v. PENNSYLVANIA R. R. CO., 197 
 HOOVER v. PENNSYLVANIA R. R., 200 
 HOPKINS v. GREAT NORTHERN RY., 18 
 HOUCK & CO. v. WRIGHT, 137 
 HUBBUCK v. WILKINSON, 48 
 HUNDLEY v. LOUISVILLE & N. R. R., 90 
 
 I 
 
 ILLINOIS & M. CANAL v. CHICAGO & R. I. R. R., 20 
 INDIA BAGGING ASSOC. v. KOCK, 126 
 INTERSTATE COMM. v. CHICAGO GT. W. RY., 208 
 INTERSTATE COMM v. DELAWARE, L. & W. RY., 209 
 INTERSTATE COMM. v. LOUISVILLE & N. RY., 209 
 
 J 
 
 JACKSON v. STANFELD, 96 
 JELLIET v. BROADE, 119 
 
 JERSEY CITY PRINTING CO. v. CASSIDY, 54 
 JOHN D. PARK CO. v. NAT'L DRUGGISTS' ASSOC., 95 
 
 K 
 KEEBLE v. HICKERINGILL, 49 
 
 L 
 
 LOEWE v. LAWLOR, 222 
 
 LONDON GUARANTY & A. CO. v. HORN, 29 
 LUCKE v. CLOTHING ASSEMBLY, 71 
 LUMLEY v. GYE, 37
 
 TABLE OF CASES DISCUSSED 281 
 
 M 
 
 MAcCAULEY v. TIERNEY, 100 
 
 MALLORY v. HANAUR OIL WORKS, 145 
 
 MARTELL v. WHITE, 109 
 
 MENACHO v. WARD, 193 
 
 MILBANK v. NEW YORK, L. E. & W. R. R., 158 
 
 MILWAUKEE ASSOC. v. NIEZEROWSKI, 129 
 
 MITCHELL v. REYNOLDS, 134 
 
 MOGUL STEAMSHIP CO. v. McGREGOR, 21, 93 
 
 MONOPOLIES, CASE OF, 122 
 
 MONTAGUE & CO., v. LOWRY, 249 
 
 MUNN v. ILLINOIS, 182 
 
 MYLES MEDICINE CO. v. SIMMONS CO., 247 
 
 N 
 
 NATIONAL PROTECTIVE ASSOC. v. CUMMINGS, 79 
 NESTER v. CONTINENTAL BREWING CO., 147 
 NICHOL v. MARTYN, 41 
 NORTHERN SECURITIES CO. v. UNITED STATES, 229 
 
 O 
 
 OAKDALE MFG. CO. v. GARST, 257 
 
 OLD DOMINION STEAMSHIP CO. v. McKENNA, 62 
 
 PACIFIC FACTOR CO. v. ADLER, 124 
 
 PASSAIC PRINT WORKS v. ELY & WALKER CO., 24 
 
 PEOPLE v. CHICAGO GAS TRUST CO., 159 
 
 PEOPLE v. DUKE, 243 
 
 PEOPLE v. NORTH RIVER SUGAR REFINING CO., 149 
 
 PICKETT v. WALSH, 82 
 
 PIERCE v. STABLEMEN'S UNION, 84 
 
 PLANT v. WOODS, 76 
 
 PRIOR OF NEDEPORTS CASE, 13 
 
 PURINGTON v. HINCHLIFF, 255 
 
 QUINN v. LEATHEM, 67 
 
 R 
 
 RATCLIFF v. WICHITA STOCKYARDS, 183 
 REINECKE COAL MINING CO. v. WOOD, 51 
 REX v. JOURNEYMEN TAILORS, 60 
 ROBINSON v. TEXAS LAND ASSOC., 28
 
 282 TABLE OF CASES DISCUSSED 
 
 SCHOOLMASTERS' CASE, 12 
 
 SCOTTISH SOCIETY v. GLASGOW ASSOC., 101 
 
 SHEPARD v. MILWAUKEE GAS LIGHT CO., 176 
 
 SILKMAN v. WATER COMMISSIONERS, 198 
 
 SMYTH v. AMES, 205 
 
 SNELL v. CLINTON ELECTRIC CO., 177 
 
 SNOWDEN v. NOAH, 17 
 
 STANDARD OIL CO. v. DOYLE, 251 
 
 STANDARD OIL CO. v. UNITED STATES, 234 
 
 STATE v. ASSOCIATED PRESS, 180 
 
 STATE v. CITIZENS' TELEPHONE CO., 194 
 
 STATE v. NEBRASKA TELEPHONE CO., 179 
 
 STATE v. RHODE ISLAND COAL CO., 256 
 
 STATE v. STANDARD OIL CO., 151 
 
 STOVALL v. McCUTCHEON, 131 
 
 TIFT v. SOUTHERN RY., 208 
 TRENTON POTTERIES CO. v. OLIPHANT, 160 
 TUSCALOOSA ICE CO. v. WILLIAMS, 127 
 TUTTLE v. BUCK, 25 
 
 U 
 
 UNITED STATES v. ADDYSTONE PIPE CO., 225 
 
 UNITED STATES v. AMERICAN TOBACCO CO., 233 
 
 UNITED STATES v. ANDERSON, 220 
 
 UNITED STATES v. HOPKINS, 220 
 
 UNITED STATES v. JOINT TRAFFIC ASSOC., 294 
 
 UNITED STATES v. E. C. KNIGHT CO., 219 
 
 UNITED STATES v. SWIFT & CO., 227 
 
 UNITED STATES v. TRANS-MISSOURI ASSOC., 223 
 
 V 
 
 VEGELAHN v. GUNTNER, 16 
 
 W 
 
 WALSH v. DWIGHT, 31 
 
 WALTHAM WATCH CO v. U. S. WATCH CO., 42 
 
 WESTERN COUNTIES CO. v. LAWES CO., 45 
 
 WHITE v. MELLIN, 46 
 
 WHITTENTON MILLS v. UPTON, 144 
 
 WRIGHT v. CUDAHY, 125
 
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