The Liberty to Trade as Buttressed by National Law/Conclusions and Conclusion

by George Howard Earle, Jr.

CHAPTER XII

Conclusions, and Conclusion.

If the theories herein advanced are correct, they should accord with and reconcile the cases, at least those in the Supreme Court.

The Knight case has been examined. It was decided "in the light" of such cases as Oregon vs. Winsor, and the Maxim case. When businesses were bought to add to prosperity, not to stifle competition; when the manifest purpose was only so to profit; when the trust was actually increasing product to fill the channels of trade; and before the real policy of buying productive agencies only to withdraw them from public service, although by those already having enormous capacity idle, was inaugurated by the trusts. The Chief Justice was right because he saw; Mr. Justice Harlan because he foresaw. But with "intent," "interest" and "tendency" in its legal sense added, the decision in the Securities case was a legal necessity of the Knight case, its legitimate offspring; though the misconduct of the trusts had even then only convinced a majority of the court of the extent of individual wrong-doing!

The Joint Traffic and Freight Association cases are likewise beyond criticism. The circuit courts and circuit courts of appeals had largely been misled by Mr. Justice Jackson's exceedingly able but very misleading opinion In re Greene. He there had said:

"The question of its (a contract's) reasonableness depends on the consideration whether it is more injurious to the public than is required to afford a fair protection to a party in whose favor it is secured."^[1]

And a complete misunderstanding of such cases as Mogul vs. McGregor.^[2] It had never been common law that the public might be "reasonably" robbed a little, if the malefactor but profited a great deal. That, as had always been the case, was directly contrary to the law. Judge Taft, Justice Harlan and Judge Lurton concurring, made this, at last, clear in the Addyston case, saying:

"In Mallen vs. May, Baron Parke said:^[3] 'Contracts for the partial restraint are upheld, not because they are advantageous to the individual with whom the contract is made, and a sacrifice pro tanto of the rights of the community, but because it is for the benefit of the public at large that they should be enforced.' Many of these partial restraints on trade are perfectly consistent with public convenience and the general interest and have been supported. Such is the case of the disposing of a shop in a particular place, with a contract on the part of the vendor not to carry on a trade in the same place. It is, in effect, the sale of a good-will, and offers an encouragement to trade," etc.

That so valuable a case as Mogul vs. McGregor should not only have been totally misunderstood, but completely misapplied by the lower courts is almost incomprehensible. For it is the star case for, not against, competition. The lower courts seem to have completely overlooked the fact that such arrangements though made unlawful in all senses by the Sherman Act, were only unlawful in the sense that they would not be enforced—would be treated as nude pacts at common law. However much the parties might proclaim their servitude, the common law simply contented itself by continuing to regard them as free.

But, since the ultimate end in the Mogul case was to restrain trade, though through the legal means of competition, the combination was held in the sense of non-enforceability to be illegal—not legal at all! The difficulty for the plaintiffs in that case, and the sole difficulty, was that, having no Sherman Act, they had to show illegality in means to make it a case of molestation; and without molestation they could not recover damages, for there was no legal "injuria;" and they could but allege savage and unreasonable competition, and see how splendidly they were answered.

Lord Bowen, in the greatest English opinion on this subject, says:^[4] "The truth is that the combination of capital for the purposes of trade and competition (what was thought to be the case in the Greene and the Knight cases) "is a very different thing from the combinations of several against one with a view to harm him as falls under the head of an indictable conspiracy. There is no just cause or excuse in the latter class of cases. There is such a just cause or excuse in the former. * * * To limit combinations of capital when used for purposes of competition * * * would, in the present day, be impossible—would be only another method of attempting to set boundaries to the tides." Which is just the view contended for! To combine to add all the benefits of cooperation to all of those safeguarded by competition, cannot, possibly, be a public evil; but nevertheless the courts have a right and duty to, and do, in the first instance examine each such case critically. The remarks on this decision in the Addyston case should remove all further misunderstanding of it.

Perhaps, after all, it is fortunate that the Supreme Court refused to examine it or the common law critically in the two cases under consideration. For by so doing it has given the common law the tremendous added sanction afforded by like results reached by the independent reasonings of powerful minds. The dissent in those cases is quite as interesting as the prevailing opinions, as it but fortifies the right conclusion.

Mr. Justice White most ably argues along the lines of Mr Justice Jackson—that contracts that reasonably restrained were not contracts properly called contracts in restraint at all; and so were not within the act; but the fallacy of this seems to be in the fact that every contract that really restrained trade itself (and not merely the conduct of a trader that trade might be encouraged by honest dealing) was held to be unreasonable and unlawful, so that "reasonable restraints" were restraints that did not restrain at all, and only "reasonable" because they did not restrain! But it was not the common law, nor is it "reasonable" to say that a restraint is not a restraint because it is a reasonable restraint, while it is both to say "we shall look at substance not names, and if we find a thing is an encouragement we shall not treat it as a resstraint, no matter what it is called. The strange part of the dissent is that there is much in it to prove that Mr. Justice White really had the true distinction in his mind all the while. He even cites Mr. Justice Maule in Rannie vs. Irvine.^[5]

The passage in the Freight Association case^[6] on the treatment of intent, should be noted, being of the utmost importance, as are the following illustrations of what may be a direct restraint from the Joint Traffic Association case:^[7] "There can be no doubt that the general tendency of competition among competing railroads is toward lower rates for transportation, and the result of lower rates is generally a greater demand for the articles so transported, and this greater demand can only be gratified by a larger supply, the furnishing of which increases commerce. * * * The natural, direct and immediate effect of competition is, however, to lower rates, and to thereby increase the demand for commodities, the supplying of which increases commerce, and an agreement, whose first and direct effect is to prevent this play of competition restrains instead of promoting trade and commerce." And, of course, identity of reasoning must apply where one of the steps between the act and the result is removed, as where manufacture itself is stopped, and it was so unanimously determined in the Addyston case.^[8] Since this, there has been little difficulty. The Montague case was of a class where recovery has always been allowed, for citizens' freedom as to national trade was limited. It in no way conflicts with the Anderson case, where there was neither tendency nor intent to that effect. The Hopkins case is of the same class as the Anderson.

The Securities case has already been sufficiently noted. It really largely turned, as did the Knight case, upon an inference as to the fact of tendency; but trade had so changed as to demand a new finding on that score in the later case.

One thing that is puzzling, however, in the opinion of Mr. Justice White, may be noticed. Pollock, C. B., in the Egerton case,^[9] says: "Where a contract is directly opposed to public welfare, it is void, though the parties may have a real interest in the matter, and an apparent right to deal with it." That has certainly been the accepted doctrine. Now, if "sole sale," or that tending to it, were the evils aimed at, the evils that constituted illegality in any contract tending to it, what earthly difference in principle does it make that the contract is made in one form rather than another? Every justice agreed that the contract in the Addyston case concerning admitted rights of property of the parties was illegal, because it tended to restrain trade; then why not any other form of contract that tended to the same evil? What special form of sanctity has a sale as contrasted with any other evil contract? Sales in all directions had been limited where tending to evil, and for centuries, and without doubt! With trade as it has since been conducted, the tendency in the Knight sales has been demonstrated to be as deadly as the sale of discretion in the Addyston. Would it not be strange, then, that form alone should be considered of the slightest importance, and is not the true explanation that "sales" had taken on this sacred hue solely because for centuries they had never before been abused? Is there any other logical or sensible explanation? But a man has no unlimited right to sell poisons, and it can make no difference whether the poison was to kill men or kill that trade upon which their lives, comfort, and happiness so largely depend. The truth is, that the trusts have placed what was an unmixed agency for good among the most dangerous instruments of evil, and the courts have ultimately become conscious of the change; and that is the sole difference in the Knight and Securities cases.

It must never be forgotten that "when the acts consist of making a combination calculated to cause temporal damage, the power to punish such acts, when done maliciously, cannot be denied, because they are to be followed and worked out by conduct which might have been lawful if not preceded by the acts. No conduct has such an absolute privilege as to justify all possible schemes of which it may be a part. The most innocent and constitutionally protected of acts or omissions may be made a step in a criminal plot, and if it is a step in a plot neither its innocence nor the Constitution is sufficient to prevent the punishment of the plot by law."^[10] That sales for immoral or illegal uses are illegal has long been settled.^[11]

Such an attempt as this, made by one long withdrawn from practice, and accomplished during a single day's vacation, must necessarily be crude, fragmentary and incomplete. But believing that the common law has received its greatest vindication; that the charge of inconsistency in the decisions of the Supreme Court is unjust and answered by considering that common law; that however little value my own conclusions may have, they may at least have some place as suggestions to those whose opinions have weight and value, I have felt justified in submitting my thoughts, knowing that it can do no harm, and hoping that it may do a little good.

Another consideration that must not be lost sight of, and that warrants every citizen's earnest consideration of this subject, is its danger to our splendid form of government. If that have a unique superiority, it is that ultimate power is vested in a body of men who but decide—not use. Tendency to selfish application is therefore reduced as it has never been in any other country. The keeping of that power there should, therefore, be the highest object of every lover of his country. But all history, from the Roman Emperors down, but demonstrates that any power under which monopolies spring to life or flourish is doomed. Never was Rhinegold so fatal to its possessors. What Zeno, what the absolute Tudors and Stuarts could not maintain in ignorant and despotic ages, can be no less a danger to any modern institution. Fortunately, the common law, and the Sherman Act interpreted by it, require no protection of monopolies by the Supreme Court in their enforcement of law; and it is fortunate and cannot be too well understood, as, were it required, it would inevitably destroy the most important and essential feature of our free government—America's greatest invention in government!

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1. 52 F. 118 (1892).
2. 23 Q. B. D. 598, (1892) A. C. 25.
3. 11 Mees. & W. 653 (1843).
4. 23 Q. B. D. 617 (1889).
5. 7 M. & G. 969 (1844).
6. 166 U. S., at pp. 341-2 (1897).
7. 171 U. S. 576 (1898.
8. 175 U. S. at p. 245 (1899).
9. 4 H. of L. 61.
10. Mr. Justice Holmes, Aikens vs. Wisconsin, 195 U. S. at p. 205 (1904).
11. Pearce vs. Brooks, L. R. 1 Ex. 213.