torially without regard to occupation. As one looks back upon what has been going on there can be no doubt that the social order has shifted from a primitive dependence upon the individual industrial unit to the collective unit, and then to the larger collective unit, and that the size of our industrial units has been magnified to an extraordinary degree. A very slight consideration of the matter makes it clear that to put commerce and industry back into the units of fifty, or even twenty-five years ago, would be to disrupt business and do an incalculable harm to the public welfare. Clearly, then, we may rely upon a strong public policy in favor of the shift from the individual and small collective unit to the larger collective unit.24

III

Suppose now that we have, in a business normally free, a combination which on the one hand has no intent to exclude others from the business and is guilty of no unlawful or unfair excluding practices, but which, on the other hand, "embraces units which together occupy a preponderant position in a given industry." Is this a good trust or a bad trust? Is it illegal at common law, and, if interstate commerce be involved, under the Sherman Act?

We may safely assume that when the Sherman Act refers to combinations "in restraint of trade" or attempts to monopolize, it refers to such combinations as were illegal at common law because they restrained trade or were attempts to monopolize.25 But this

24 Jones v. Clifford's Ex'r, 5 Fla. 510, 515 (1854). ("Associations are so common an element, not only in commerce, but in all the affairs of life, that it would be rather perilous on the part of the Court, to assert that they impair competition, destroy emulation and diminish exertion. There is scarcely an occupation in life, scarcely a branch of trade, from the very largest to the smallest, that does not feel the exciting and invigorating influence of this wonderful instrumentality. It made and conducts our government, constructs our railroads, our steam vessels, our magnificent ships, our temples of worship, structures for public and private use, our manufactories, creates our institutions for learning, builds up our cities and towns.

"Its very office is to do what individual exertion may not accomplish, and in a degree distinguishes civilized from savage life. Why then should this important agency be denied to this meritorious class of our citizens? They are in general men of small means, to whom an association may not only be desirable, but necessary and indispensable.")

25 Standard Oil Co. v. United States, 221 U. S. 1 (1900). (After insisting "that some standard should be resorted to for the purpose of determining whether the prohibition contained in the statute had or had not in any given case been violated," the opinion of the court proceeds as follows (p. 60): "Thus not specifying, but indubitably contemplating and requiring a standard, it follows that it was intended

does not carry us very far, because the common law, while it was clear about some results, gave no unequivocal answer to the problem now under consideration. Even if common-law authorities be found dealing with the point, nevertheless the Supreme Court. of the United States is still entitled to declare for itself what the common law may be as a preliminary to applying the Sherman Act.26 Hence the determination of the result in the case put will depend (apart from the question of whether interstate commerce is affected) upon considerations quite as much at large as if the case were being considered at common law.

The solution of our problem is to be attained by balancing the interests of the public and the parties involved.27 In support of the legality of the combination is the public policy in favor of freedom to manage and carry on business, the elimination of ruinous competition, and the development of larger collective units. Against the legality of the combination is the tendency toward monopoly in the fact that competition between the units combined is eliminated. This, however, is minimized by the fact that there are no excluding purposes or unlawful or unfair excluding practices, and the field is free. Apart from the fact of size and preponderant position in the business the balance of interests is clearly in favor of the combination. The entire question is whether that balance is still maintained when we add the fact that the combination has a preponderant position in the business.

that the standard of reason which 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." Again the court says (p. 62) “ . . . the criteria to be resorted to in any given case for the purpose of ascertaining whether violations of the section have been committed is the rule of reason guided by the established law, etc. . . .”)

...

26 Thus in Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373 (1911), the Supreme Court of the United States decided in effect that the common law forbade such contracts to keep up the price on resale as were there involved in spite of the fact that there were common-law decisions by respectable courts to the contrary: i. e. Grogan v. Chaffee, 156 Cal. 611, 105 Pac. 745 (1909); Elliman, Sons & Co. v. Carrington & Son, [1901] 2 Ch. 275 (damages allowed); Garst v. Charles, 187 Mass. 144, 72 N. E. 839 (1905) (injunction allowed against the defendant who secured a dealer to purchase for the purpose of breaking the contract upon a re-sale to the defendant); Garst v. Harris, 177 Mass. 72, 58 N. E. 174 (1900) (damages allowed); Clark v. Frank, 17 Mo. App. 602 (1885) (contract to maintain the price of thread); New York Ice Co. v. Parker, 21 How. Pr. (N. Y.) 302 (1861) (contract to maintain price of ice).

27 Horwood v. Millar's Timber & Trading Co., [1917] 1 K. B. 305, 317, 318.

Three courses are open to the courts: First, they may hold the fact of size and preponderant position in the industry to be, in and of itself, sufficient to turn the balance against the validity of the combination. This will mean that there can be no good or bad trusts. All trusts, in the sense of large combinations or aggregations of capital, occupying a preponderant position in the business, would be bad trusts. No other combinations would properly be called trusts. Second, the courts, on the other hand, might regard the fact of size and preponderant position as insufficient, in and of itself, to turn the balance of interests against the validity of the combination. This would mean that there might be good and bad trusts. The bad trusts would be those which had the power and the purpose, or used their power, to exclude others by illegal and unfair methods of competition. The others would be good trusts. Third, between these extremes there is an intermediate position. Size and preponderant position may be regarded as prima facie evidence of an intent to exclude others, or to use the power of the combination to effect unlawful and unfair excluding practices, thus shifting to the combination the burden of going forward with evidence to negative such intent and use of power. In this view there will still be good trusts and bad trusts. The line between them will be drawn at the place where they have the excluding purpose or practice illegal and unfair excluding methods. But size and preponderant position are still given an important effect as prima facie evidence of the excluding intent.

A

As to which of these positions the courts have taken, the cases are far from conclusive.

1. Several have adopted the second view, and sustained the legality of the combination.28

8 Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507, 43 Atl. 723 (1899); United States v. Keystone Watch Case Co., 218 Fed. 502, 510 (1915). ("Size does not of itself restrain trade or injure the public; on the contrary, it may increase trade and may benefit the consumer.")

United States v. Prince Line, 220 Fed. 230, 232 (1915). (Agreement between all the shipowners engaged in the same trade as to the number of vessels each should operate, the dates of sailings, exchange of freight between lines, and rates of freight. The court said: "At the time it was formed the parties were in the trade and handled all the trade there was. No one was frozen out by their combination and there was no greater monopoly than existed before.") United States v. United States Steel Corporation, 223 Fed. 55 (1915).

2. The third view was one of the grounds of decision in the Standard Oil Case 29 and was clearly announced in the opinion of the court. In stating the grounds for sustaining the findings and decision of the court below, the Supreme Court said:

"Because the unification of power and control over petroleum and its products which was the inevitable result of the combining in the New Jersey corporation by the increase of its stock and the transfer to it of the stocks of so many other corporations, aggregating so vast a capital, gives rise, in and of itself, in the absence of countervailing circumstances, to say the least, to the prima facie presumption of intent and purpose to maintain the dominancy over the oil industry, not as a result of normal methods of industrial development, but by new means of combination which were resorted to in order that greater power might be added than

United States v. Eastman Kodak Co., 226 Fed. 62, 80 (1915). ("... that the size and varied character of the enterprise do not of themselves constitute a violation of the statute. To this principle I assent. There is no limit in this country to the extent to which a business may grow, and the acquisitions of property in the present case, standing alone, would not be deemed an illegal monopoly; but when such acquisitions are accompanied by an intent to monopolize and restrain interstate trade by an arbitrary use of the power resulting from a large business to eliminate a weaker competitor, then they no doubt come within the meaning of the statute.")

United States v. American Can Co., 230 Fed. 859, 901 (1916), 234 Fed. 1019 (1916). (The court, though finding the American Can Co. was originally organized with the intent to exclude others, indulged in unlawful excluding practices, yet by reason of the fact that it had for a considerable period had no illegal purposes or used any excluding practices, a dissolution was refused, and the bill merely retained for a possible future action.)

United States v. Nelson, 52 Fed. 646, 647 (1892). ("Unless the agreement involves an absorption of the entire traffic in lumber, and is entered into for the purpose of obtaining the entire control of it with the object of extortion, it is not objectionable to the statute, in my opinion.")

See also Queen Ins. Co. v. State of Texas, 86 Tex. 250, 24 S. W. 397 (1893). (Combination of fifty-seven foreign insurance corporations doing business in the State of Texas.) Oakdale Mfg. Co. v. Garst, 18 R. I. 484, 28 Atl. 973 (1894); Skrainka ». Scharringhausen, 8 Mo. App. 522 (1880).

29 Standard Oil Co. v. United States, 221 U. S. 1, 75 (1911). In Texas Standard Oil Co. v. Adoue, 83 Tex. 650, 19 S. W. 274 (1892), where the combination was held illegal, the court, nevertheless, intimated that under certain circumstances it might appear that the same combination would be perfectly legal — thus indicating that the inference in favor of illegality arising from the combination's preponderant position in the industry might be rebutted. So in Jones v. Clifford's Ex'r, 5 Fla. 510 (1854), a combination of all the pilots serving a certain port, but merely for the purpose of apportioning their duties and earnings, was sustained. The facts rebutted any inference of an intent to exclude others. In Skrainka v. Scharringhausen, 22 Mo. App. 522 (1880), any intent to exclude others was rebutted by proof that the combination was necessary in order to stop a ruinous competition and promote the business.

would otherwise have arisen had normal methods been followed, the whole with the purpose of excluding others from the trade, and thus centralizing in the combination a perpetual control of the movements of petroleum and its products in the channels of interstate commerce." 30

Then the court justifies the decree below:

"Because the prima facie presumption of intent to restrain trade, to monopolize and to bring about monopolization, resulting from the act of expanding the stock of the New Jersey corporation, and vesting it with such vast control of the oil industry, is made conclusive, etc. . . ."

A little later the court, in referring to certain facts which were urged as rebutting any monopoly tendency, said:

they might well serve to add additional cogency to the presumption of intent to monopolize which we have found arises from the unquestioned proof on other subjects."

Practically all the cases where the combination has been held illegal at common law or under the Sherman Act, without actual proof of any excluding purposes or practices, may be explained consistently with the third view. Thus in the Addyston Pipe Case 31 the facts relied upon by the United States Supreme Court to hold the combination illegal were those quoted from the opinion of Taft, J., in the Circuit Court of Appeals. These disclosed merely a combination occupying a preponderant position in a given market, and effected by a contract which provided for the making of sales, and the fixing of prices by a central authority or committee. It may be assumed that this is a case where size and preponderant position in the business without any excluding purposes or practices, caused the combination to be illegal.32 Neither the opinion of the Court 30 This is a particularly strong statement, because in the Standard Oil Case the combination attacked and dissolved was the Standard Oil of New Jersey reorganized as a holding company in 1899. It was not a combination of competing units. The subsidiaries had been non-competing (except perhaps in a few instances not disclosed in the cases reported) since a time prior to the passage of the Sherman Act. It could fairly be said that the units combined in the Standard Oil of New Jersey in 1899 never had competed. Hence, the prima facie evidence of intent to exclude others arose from size and preponderant position in the industry brought about by combination without the suppression of any existing competition between the units combined.

31 United States v. Addyston Pipe & Steel Co., 85 Fed. 271 (1898); 175 U. S. 211 (1899).

32 Taft, J., in the Circuit Court of Appeals relied upon the illegal practice of the combination in suppressing competitive bidding on municipal contracts. This, the Supreme Court omitted all reference to, no doubt, upon the ground that if relied upon