45

of competing properties under one management without any agreement amounted to the same thing, and hence was, in and of itself, illegal. The fallacy here is twofold. It is assumed that the fixing of the price is, in and of itself, illegal, when it may just as well be merely prima facie evidence of an assumption of the control of the market, and the purpose to exclude others. Indeed, the contract to maintain a certain price for any considerable period would hardly be sensible except upon these assumptions. But even if price-fixing agreements are, in and of themselves, illegal, it does not follow that the mere combination of the same units is, in and of itself, illegal. The vice of the price-fixing agreement is not merely the elimination of competition between the units. It is the assumption of the fact that the field of the business will not be free to others to enter, and the necessary inference from such an assumption that those combining have control of the market and intend to use their power to keep it. This may be so clear from the actual agreement that it is conclusive. When, however, the units combine without any agreement, the size and preponderant position of the combination in the business may be such as, prima facie to raise the inference that there is a purpose to exclude others and to use excluding practices. But there is nothing in any solemn agreement of the parties which in so many words declares that purpose. Hence the inference is rebuttable.

The Dr. Miles Medical Co. Case 46 clearly goes upon the ground that there was involved a combination of the manufacturer and distributing retailers which eliminated all competition between the retailers and maintained retail prices by agreement. It made no difference that the agreements which effected these objects were between the manufacturer and the retailers. The result was the same as if they had been between the retailers themselves. The that it is difficult to find cases of this sort, for the reason that most of the contracts provide for the fixing of prices from time to time by a central authority.

45 Opinion of the majority of the District Court in United States v. International Harvester Co., 214 Fed. 987, 999 (1914). (“We think it may be laid down as a general rule that if companies could not make a legal contract as to prices or as to collateral services they could not legally unite, and as the companies named did in effect unite the sole question is as to whether they would have agreed on prices and what collateral services they could render, when their companies were all prosperous and they jointly controlled eighty to eighty-five per cent of the business in that line in the United States. We think they could not have made such an agreement." Italics ours.) 46 Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373 (1911).

combination by agreement, therefore, assumed a command of the market, so far as the articles sold were concerned, and the fixing of prices assumed that, with the aid of the manufacturer, all others could be excluded from the retail business, and all competition between the retailers in the combination suppressed. The holding of such a scheme illegal does not in the least support the general proposition that mere elimination of competition by combining properties under a new management, or combining properties and managers in a new industrial unit is, in and of itself, illegal. This is clear, because the court itself tacitly conceded the point made by Mr. Justice Holmes in his dissenting opinion that if title to the goods did not pass, and the retailers were mere agents of the manufacturer, the same restrictions as to price would be valid. But that would have been just as much an elimination of competition between retailers as existed already, and if such elimination of competition be illegal per se, the form would be immaterial. It is clear, therefore, that the illegality of the combination in question arose from the price-fixing arrangement and the control of the market by excluding others which it assumed, and not merely from the elimination of competition between the retailers.

4. It is important to observe that in drawing the line between good and bad labor organizations, the courts have been quick to approve combinations among labor units no matter what the size or preponderant position of the union may be, up to the point where the combination has unlawful and excluding purposes or indulges in unlawful excluding practices, so that the labor market is no longer free to other labor units or to employers. Every labor union eliminates competition between the units combined, and while there may be no agreement as to price, they all have the purpose to secure as high wages as possible. They are not, however, illegal for that reason.47 The interest of society in the freedom of men to combine to better their situation by eliminating too much competition and the doing of business by larger collective units overcomes any interest of the public in having unrestricted competition among labor units. But let the labor union acquire the purpose of excluding all

47 The Master Stevedores' Ass'n v. Walsh, 2 Daly (N. Y.) 1 (1867); Snow v. Wheeler, 113 Mass. 179 (1873); Thomas v. Cincinnati, N. O. & T. P. Ry. Co., 62 Fed. Sɔ3 (1894) (per Taft, Circuit Judge); contra, Hornby v. Close, L. R. 2 Q. B. 153 (1867), not followed. See Collins v. Locke, L. R. 4 A. C. 674 (1879).

others except its members from the labor market, or let the union commence unlawful or unfair excluding practices and methods so as to make the labor market unfree, and the organization becomes illegal at common law,48 and, if interstate commerce is involved, under the Sherman Act. That is the only line attempted. No court has suggested that the mere size of a union or its preponderant position in the labor market makes it, per se, illegal. It has not even been suggested that size and preponderant position is prima facie evidence of an intent to exclude others or to indulge in excluding practices. This is significant because such excluding purposes and practices are quite as likely to follow from the acquisition by a union of a preponderant position in a given labor market as they are from the acquisition of a similar position in industry by the owners or managers of combined properties. More than one court has noted that, so far as the legality of combinations is concerned, combinations of property, or property and managers, are on the same footing as combinations of labor units.49 No difference has been pointed out by anyone. If there is any difference based upon the different standing of labor units to unite and managing units controlling property to unite, it would be entirely satisfied by permitting the labor units to combine to any extent without such combination giving rise to any prima facie inference of an intent to exclude others, while, at the same time, a combination of managing and property units occupying a preponderant position in the business, necessarily gives rise to such a prima facie inference and must sustain the burden of meeting the case so made against it.

5. Our view of the state of the authorities should not be concluded without considering the relation between a certain class of cases arising under the "due process" clause and under the Sherman Act. Suppose in cases where the question is whether an act of the Legislature is "due process" which interferes with the management of business by prescribing hours of labor or methods

48 People v. Fisher, 14 Wend. (N. Y.) 9 (1835).

49 Queen Ins. Co. v. State of Texas, 86 Tex. 250, 271, 24 S. W. 397 (1893). (“It follows, therefore, that if insurance companies are to be brought within the rule that makes agreements to increase the price of merchandise illegal, upon the ground that the public have an interest in their business, agreements among laborers and among professional men not to render services below a stipulated rate should be held contrary to public policy and void upon the same ground "); Sayre v. Louisville Union Benevolent Ass'n, I Duvall (Ky.) 143 (1863) (semble).

of payment of wages or the amount of wages, four judges out of nine are clear that the fundamentals of the social order are in jeopardy, and the act must be set aside. When these same judges come to draft or approve a judicial rule proscribing business organizations as illegal, they would consistently with their views on "due process" be inclined to impose only such restraint as seemed clearly to be called for to meet an undoubted evil having in mind always the limits of such a judicial prohibition, and the avoidance of any rule founded upon doubtful or speculative economic data or results. Such judges might be expected to adopt as the test of illegality the existence of the excluding purposes or illegal excluding practices. Suppose in the same "due process" cases five judges are inclined to sustain the act. Three go upon a social bias in favor of the legislative restriction upon business. That is, upon balancing the interests, they regard the restriction upon business as for the general welfare. Two, however, if they exercised independent judgment in balancing the interests, would have regarded the legislation as opposed to the general welfare and inimical to the social order in accordance with the views of the minority. But they have felt bound to sustain the act in accordance with the rule that it must be upheld if any rational basis for it can be found after resolving all doubts in favor of the act. The moment these two come to consider the test of legality of business organizations they are released at once from the obligation of sustaining anything, if a rational basis can be found for it. With regard to a judge-made rule prohibiting certain business organizations, they are not only free to balance the interests for and against the prohibition involved, but they are subject to a counsel of caution that, when in doubt, they shall not extend the prohibition, but restrict it to cover only that generality of situations where the public interest is indubitably affected unfavorably.

B

In 1911 Mr. Brandeis in testifying before the Senate Committee,50 said: 51

"You may have an organization in the community which is so powerful that in a particular branch of the trade it may dominate by mere size. Although its individual practices may be according to rules, it may be, nevertheless, a menace to the community; . . .

Mr. Brandeis' experience and authority have been so great, and his views before the Senate Committee are expressed so fully and frankly, that it is worth considerable trouble to ascertain just what were the grounds for this opinion, and how far they may require a holding by a court that mere size is, in and of itself, illegal, rather than prima facie evidence of illegal excluding purposes and practices.

1. It is clear from Mr. Brandeis' testimony that he does not condemn mere size because it, in and of itself alone, tends to exclude others from the business. The main thesis of his testimony is that size and he is referring particularly to the size of our so-called American Trusts — results in such economic inefficiency that without any excluding practices and purposes they must fail, or at least lose their relative position in the market by reason of successful competition carried on by smaller and more efficient units. His language to this effect is so strong and to the point that it should be read. After setting out the records of certain trusts,52 he says:

50 Reference is here and in succeeding paragraphs made to the testimony of Louis D. Brandeis before the Committee on Interstate Commerce of the United States Senate, 62d Congress. It was given on December 14, 15, 16, 1911. Mr. Brandeis is referred to in the capacity in which he testified.

51 Report of hearing before Senate Committee on Interstate Commerce, supra, 1167. 52 Report of hearing before the Senate Committee on Interstate Commerce, supra, 1148: "Now, that mere size does not bring efficiency, does not produce success, appears very clearly when you examine the records of the trusts.

"In the first place, most of the trusts which did not secure a domination of the industry that is, the trusts that had the quality of size, but lacked the position of control of the industry, lacked the ability to control prices - have either failed or have shown no marked success. The record of the unsuccessful trusts is doubtless in all your minds. One of the earliest of the trusts which did not secure control was the Whisky Trust. It was not successful. The plight of the Cordage Trust and of the Malting Trust was worse. Consider other trusts now existing, the Print Papers Trust (the International Paper Co.); the Writing-Paper Trust (the American Writing-Paper Co.); the Upper Leather Trust (the American Hide & Leather Co.); the Union Bag Trust, the Sole Leather Trust; those trusts and a great number of others which did