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without regard to any purpose to monopolize, or excluding practices,12 is an application of the principle which underlies the Standard Oil and Tobacco Cases. Railroads and many other public utilities cannot be constructed and operated without special legislative authority, the exercise of the right of eminent domain, and the right to use or cross the public streets and highways. It follows that the very nature of the business and the special privileges required are such that it is against the public interest to allow anybody and everybody to engage in it. It follows that one who is given the special privileges required is protected by the proper governmental authority from any competition. The exclusion of the public is supplied by the State just as clearly as where an act of Parliament granted to A. the exclusive privilege of carrying on a business and penalized all others who attempted to do it. If several persons are permitted to construct and operate the public utility in question on a competitive basis, they are still protected from any competition on the part of others. The field of this sort of business is unfree. Furthermore, the fact that several are permitted to operate a public utility in competition is a determination by the public authorities that competition between the units in the field is desirable. Under such circumstances the elimination of any existing competition between any of the units is, in and of itself, illegal. It defies the policy determined by the public authorities who have permitted a number of competitors to enter the field. It tends directly to produce monopoly regardless of any excluding purposes or practices because the exclusion of others is provided for by the non-action of governmental authority.
It is entirely possible that the public may be excluded from a given business by the conditions under which it is carried on or by an actual limitation of a natural resource or both. Thus, if several competitors controlled all the known mineral deposits of a certain sort, it might be that any combination between them would be
12 United States v. Trans-Missouri Freight Ass'n, 166 U. S. 290 (1896); United States v. Joint-Traffic Ass'n, 171 U. S. 505 (1898); Northern Securities Co. v. United States, 193 U. S. 197 (1903); United States v. Union Pacific R. Co., 226 U. S. 61, 470 (1912); Gibbs v. Consolidated Gas Co. of Baltimore, 130 U. S. 396 (1888); People v. Chicago Gas Trust Co., 130 III. 268, 22 N. E. 798 (1889); Chicago Gas Light Co. v. People's Gas Light Co., 121 III. 530, 13 N. E. 169 (1887); Chic. M. & St. P. Ry. Co. v. Wabash, St. L. & P. Ry. Co., 61 Fed. 993 (1894); Texas & Pac. Ry. Co. v. Southern Pac. Ry. Co., 41 La. Ann. 970, 6 So. 888 (1889).
illegal. Certainly any combination which resulted in one having a preponderant position in the business might be regarded as, in and of itself, illegal. The field would be inherently unfree at the time the combination occurred. So those who controlled the only mineral deposits which were, on account of the transportation cost from other sources, practically available for a certain considerable area, might not be permitted to combine to the extent of conferring upon one unit a preponderant position in that business.13 The so-called necessaries of life must be had for use at once, or within a brief space of time. There may be a sufficient quantity on hand in the world at large, but the users cannot wait to have reserves brought up from a distance. There will be an ample supply after the next year's crops are harvested, but the population must have the present supply before that time. Such circumstances create the excluding conditions. Hence, a combination which attempts to secure the reserves of such supplies at any given point, and goes so far at least as to secure a preponderant position in the control of the market, has all the elements of an illegal attempt at monopoly. During the time that the supplies acquired are needed, the market is not free. All but those actually in it are excluded. The only protection of the public from monopoly prices is the maintenance of the status quo of existing competitions, or at least the prevention of any sudden and violent change in the competitive status of the units engaged. This is the basis for the illegality of the so-called “corner.” 14 It makes no difference, of course, whether there is involved merely the union of properties by purchase, or of properties and managers by combination.
Where a business is normally free to all to enter and no excluding conditions exist and no excluding practices are indulged in, it is clear that there may be a great deal of lawful combination among competitors which necessarily eliminates competition between the units combined. Indeed, it may safely be affirmed that all such combinations which do not result in a unit occupying a “preponderant position in the industry” are valid. This is clear where the combination
13 See Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 173 (1871); Cummings v. Union Blue Stone Co., 164 N. Y. 401, 58 N. E. 525 (1900).
14 Raymond v. Leavitt, 46 Mich. 447, 9 N. W. 525 (1881); Samuels v. Oliver, 130 Ill. 73, 22 N. E. 499 (1889).
of properties occurs by the purchase of the business of one competitor by another, and where not only is the sale valid, but a restrictive covenant on the part of the seller not to carry on the same business is also upheld.15 So where the combination occurs by uniting not only the properties which formerly competed, it is valid and restrictive covenants on the part of the managers combining not to compete have been upheld.16 These cases indicate that where
15 Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co., (1894) A. C. 535; Diamond Match Co. v. Roeber, 106 N. Y.473, 13 N. E. 419 (1887); Leslie v. Lorillard, 110 N. Y. 519, 18 N. E. 363 (1888); Wood v. Whitehead Bros. Co., 165 N. Y. 545, 59 N. E. 357 (1901); United States Chemical Co. v. Provident Chemical Co., 64 Fed. 946 (1894); Kellogg v. Larkin, 3 Pinney (Wis.) 123 (1851); Chappel v. Brockway, 21 Wend. (N. Y.) 157 (1839); Van Marter v. Babcock, 23 Barb. (N. Y.) 633 (1857); Moore & Handley Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 6 So. 41 (1888); Beard v. Dennis, 6 Ind. 200 (1855); California Steam Navigation Co. v. Wright, 6 Cal. 258 (1856); Hubbard v. Miller, 27 Mich. 15 (1873); Mapes v. Metcalf, 10 N. D. 601, 88 N. W.713 (1901); National Benefit Co. v. Union Hospital Co., 45 Minn. 272, 47 N. W. 806 (1891); Wickens v. Evans, 3 Y. & J. 318 (1829).
16 Dolph v. Troy Laundry Machinery Co., 28 Fed. 553 (1886); United States t. Nelson, 52 Fed. 646 (1892); Robinson o. Suburban Brick Co., 127 Fed. 804 (1904); United States v. Quaker Oats Co., 232 Fed. 499 (1916) (especially opinion of Mack, J.); Ontario Salt Co. v. Merchants Salt Co., 18 Grant (U. C.) 540 (1871); Central Shade Roller Co. v. Cushman, 143 Mass. 353, 19 N. E. 629 (1887); Gloucester Isinglass & Glue Co. v. Russia Cement Co., 154 Mass. 92, 27 N. E. 1005 (1891); Anchor Electric Co. v. Hawkes, 171 Mass. 101, 50 N. E. 509 (1898); Skrainka v. Scharringhausen, 8 Mo. App. 522 (1880); Meredith v. Zinc & Iron Co., 55 N. J. Eq. 211, 37 Atl. 539 (1897); Marsh v. Russell, 66 N. Y. 288 (1876); Oakdale Mfg. Co. v. Garst, 18 R. I. 484, 28 Atl. 973 (1894); Queen Ins. Co. o. State of Texas, 86 Tex. 250, 24 S. W. 397 (1893); Sayre v. Louisville Union Benevolent Ass'n, 1 Duvall (Ky.) 143 (1863); Jones o. North, L. R. 19 Eq. 426 (1875). In United States v. International Harvester Co., 214 Fed. 987 (1914), the court said, p. 999: “If the five companies which formed the International had been small, and their combination had been essential to enable them to compete with large corporations in the same line, then their uniting would, in the light of reason, not have been in restraint of trade, but in the furtherance of it; ...” In the brief of the government presented to the United States Supreme Court in the same case it is conceded: "Nor was it intended to prohibit all combinations of competing units, but only such as are sufficiently important and comprehensive to bear some reasonable relation to the evils — the breakdown of the competitive system, etc. against which the Act was designed to guard.” On page 99, in summing up, the same brief states: “It [the Sherman Act] permits combinations of competitive units within limits.” Contra, Slaughter o. The Thacker Coal & Coke Co., 55 W. Va. 642, 47 S. E. 247 (1904) (where, however, the opinion of the court was delivered by the dissenting member, who sets forth in full the reasons against the decision).
Not infrequently it is difficult to say whether there has been a combination by the sale of properties to a competitor, or a combination of properties and managers as well. For instance, when a new corporation is formed and the properties of several competing units are transferred to it in return for stock which is distributed to the stockholders or the owners of the property sold, the transaction may be looked upon as a combina
the combination does not occupy a preponderant position in the business, and there are no excluding purposes or practices, the mere elimination of competition between the units is not a ground for holding it illegal. The common law certainly has never attempted to put out a rule which would compel the maintenance of the status quo of every existing competition by enforcing general restraints on alienation to, and upon the freedom to contract and unite with, competitors. Neither has any court suggested that any difference of result could be made between a combination of properties which had competed, and a combination both of competing properties and managers as well. Imagine anyone objecting that all the partnerships of competing lawyers, bankers, and corner groceries were necessarily illegal because they were combinations of competing properties and managers which eliminated competition between them! Imagine anyone upholding a public policy in favor of the owner of a business having the privilege of selling his property with the greatest freedom at the best price obtainable, who would not admit the existence of the same policy in favor of a man in business selling his services and experience on the same terms!
The authorities which uphold the legality of combinations, whether of properties alone, or of properties and managers, where the combination does not result in a unit occupying a preponderant position in the business, are clearly sound.
Of course there is in every such case the elimination of competition between the competing units combined. This is not less in the case of the union of the properties by sales and the restriction by covenants not to compete, exacted from the sellers, than it is where the properties and the managers themselves are united. In both alike competition between the property and the managers is ended, at least for the time being. This, of course, tends in some degree toward monopoly. So long, however, as the combination does not
tion of properties merely, the managers of the selling units going out of the business, or it may be that the managers of the selling units remain in the business, taking part as officers of the new corporation. Oakdale Mfg. Co. v. Garst, 18 R. I. 484, 28 Atl. 973 (1894). So where two units in the same business agree to divide the territory and make reciprocal covenants with each other not to do business in the territory assigned to the other, the transaction may be looked at either as a sale of part of the business of each, and therefore a combination of properties only, or it may be looked at as a combination of properties and managers serving the entire field in a manner mutually arranged between them. Wickens v. Evans, 3 Y. & J. 318 (1829); National Benefit Co. v. Union Hospital Co., 45 Minn. 272, 47 N. W. 806 (1891).
occupy a preponderant position in the business and there are no excluding purposes or practices,17 much competition will remain,
17 In the following cases, the absence of any exclusion of others from the business was noted as minimizing the tendency toward monopoly from the elimination of competition between the units combined.
Diamond Match Co. v. Roeber, 106 N. Y. 473,483, 13 N. E. 19 (1887). (“But the business is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry';) Leslie v. Lorillard, 110 N. Y. 519, 534, 18 N. E. 363 (1888) (same language).
Wood v. Whitehead Bros. Co., 165 N. Y. 545, 551, 59 N. E. 357 (1901). (“But contracts between parties, which have for their object the removal of a rival and competitor in a business, are not to be regarded as contracts in restraint of trade. They do not close the field of competition, except to the particular party to be affected.")
Oakdale Mfg. Co. v. Garst, 18 R. I. 484, 487, 28 Atl. 973 (1894). (“But combinations for mutual advantage which do not amount to a monopoly, but leave the field of competition open to others, are neither within the reason nor the operation of the rule.” Page 488: “But even so, not only is the field open to the other company, equal in strength to either of these, but it is also open to competition from companies in other parts of the country and to the formation of new companies.")
Wickens v. Evans, 3 Y. & J. 318,329 (1829). (“Not a monopoly, except as between themselves; because every other man may come into their districts and vend his goods.” Page 330: “If the brewers or distillers of London were to come to the agreement suggested, many other persons would soon be found to prevent the result anticipated; and the consequence would, perhaps, be, that the public would obtain the articles they deal in at a cheaper rate.")
National Benefit Co. v. Union Hospital Co., 45 Minn. 272, 275, 47 N. W. 806 (1891). (“Neither one nor both of these companies have any exclusive right to engage in this business, it being one open to all. Hence this contract does not, and cannot, create any monopoly.”)
United States Chemical Co. v. Provident Chemical Co., 64 Fed. 946, 949 (1894). (“The facts of this case disclose no tendency to monopoly. Monopoly implies an exclusive right, from which all others are debarred, and to which they are subservient.")
Kellogg v. Larkin, 3 Pinney (Wis.) 123, 139 (1851). (“And while we have no privileged classes here, but little individual, and less associated capital, and while our resources are so imperfectly developed, while the avenues to enterprise are so multiplied, so tempting and so remunerative, giving to labor the greatest freedom for competition with capital, perhaps, that it has yet enjoyed, I question if we have much to fear from attempts to secure exclusive advantages in trade, or to reduce it to few hands.” Page 145: “Now could the parties possibly have intended by this simple contract, to vest in the mill owners the sole exercise of the traffic in wheat, throughout the State of Wisconsin? . . . I say there was no monopoly intended, none effected. We cannot fail to perceive, that in spite of this contract, all the rest of Wisconsin was an open and unrestricted market for the sale of wheat. And even in Milwaukee, the market was open to the fiercest competition of all the world, except these obligors.")
Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507,523, 43 Atl. 723 (1899). (“The entire capital of the country, except theirs, is free to be employed in the manufacture.”)
Chappel v. Brockway, 21 Wend. (N. Y.) 157, 163 (1839). (“The defendant can gain nothing by giving the transaction a bad name, unless the facts of the case will bear him out. He calls this a monopoly. That is certainly a new kind of monopoly which only