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Subject Area: Law
Topic: The American Revolution and Constitution

§ 96.: Regulation of prices and charges.— - Christopher G. Tiedeman, A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, vol. 1 [1900]

Edition used:

A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint (St. Louis: The F.H. Thomas Law Book Co., 1900). Vol. 1.

Part of: A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, 2 vols.

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§ 96.

Regulation of prices and charges.—

A most interesting question, somewhat like, and resting upon the same grounds as the one discussed in the preceding section, is the right of the government to regulate prices and charges for things and services. The exercise of this power was quite common in past ages; and there appeared to be no well defined limitations upon the power, if any at all were recognized. But under a constitutional and popular government, there must necessarily be some limitation. It is a part of the natural and civil liberty to form business relations, free from the dictation of the State, that a like freedom should be secured and enjoyed in determining the conditions and terms of the contract which constitutes the basis of the business relation or transaction. It is, therefore, the general rule, that a man is free to ask for his wares or his services whatever price he is able to get and others are willing to pay; and no one can compel him to take less, although the price may be so exorbitant as to become extortionate. No one has a natural right to the enjoyment of another’s property or services upon the payment of a reasonable compensation; for we have already recognized the right of one man to refuse to have dealings with another on any terms, whatever may be the motive for his refusal. But there are exceptions to the rule which can be justified on constitutional grounds. This general freedom from the State regulation of prices and charges can only be claimed as a natural right so far as the business is itself of a private character, and is not connected with, or rendered more valuable by, the enjoyment of some special privilege or franchise. Whenever the business is itself a privilege or franchise, not enjoyed by all alike, or the business is materially benefited by the gift by the State of some special privileges to be enjoyed in connection with it, the business ceases to be strictly private, and becomes a quasi public business, and to that extent may be subjected to police regulation. A special privilege or franchise is granted to individuals because of some supposed benefit to the public, and in order that the benefit may be assured to the public, the State may justly institute regulations to that end. The regulation of prices in such cases will, therefore, be legitimate and constitutional.1

But the regulation of prices will not be justified in any case where the law merely declares the prosecution of the business to be a privilege or franchise. If it be without legislation a natural right, no law can make it a privilege by requiring a license. The deprivation of the natural right to carry on the business must be justifiable by some public reason or necessity. Otherwise the general or partial prohibition is unconstitutional and furnishes no justification for the regulation of prices and charges, incident to the business.1

But some of the courts are inclined to extend the exercise of this power of control to other cases, which do not come within the classes mentioned, viz.: those in which no special privilege or franchise is enjoyed, and in which there is no legal monopoly, but in which the circumstances conspire to create in favor of a few persons a virtual monopoly out of a business of supreme necessity to the public. The leading case is that of Munn v. Illinois, already mentioned in the preceding section.2 It has so important a bearing upon the question under discussion, that we will quote again Chief Justice Waite’s statement of the rule laid down in that case. He says: “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.’ This was said by Lord Chief Justice Hale, more than two hundred years ago, in his treatise De Portibus Maris,3 and has been accepted without objection as an essential element in the law of property ever since. 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 must submit to be controlled by the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use; but, so long as he maintains the use, he must submit to the control.”1 Although the application of these principles to the case in question only constitutes a precedent for justifying the regulation of prices in those cases, where the business is a virtual monopoly and of great necessity to the public,2 yet the language is broad enough to justify almost any case of regulation of prices. Under this rule, the attainment of the object of all individual activity, viz.: to make oneself or one’s services indispensable to the public, furnishes in every case the justification of State interference. Only the more or less unsuccessful will be permitted to enjoy his liberty without governmental molestation. We feel with Mr. Justice Field, who dissents from the opinion of the court, that “if this be sound law, if there be no protection, either in the principles upon which our republican government is founded, or in the prohibitions of the constitution against such an invasion of private rights, all property and all business in the State are held at the mercy of a majority of its legislature.”3 For the same reasons, we find the Supreme Court of Alabama justifying an act of the legislature which authorized the town council of Mobile to license bakers, and regulate the weight and price of bread. In declaring the act to be constitutional, the court said: “There is no motive, however, for this interference on the part of the legislature with the lawful actions of individuals or the mode in which private property shall be enjoyed, unless such calling affects public interests, or private property is employed in a manner which directly affects the body of the people.”

“Upon this principle, in this State, tavern keepers are licensed and required to enter into bond, with surety, that they will provide suitable goods and lodgings for their guests, and stabling and provender for their horses. The county court is required, at least, once a year, to settle the rates of innkeepers, and upon the same principle is founded the control which the legislature has always exercised in the establishment and regulation of mills, fences, bridges, turnpike roads and other kindred subjects.”1

Chief Justice Waite relies upon Lord Hale as an authority for his recognition of the rule as of common-law origin. But there is nothing in Lord Hale’s writings to support the broad application which the Chief Justice makes of his language. In every case to which Lord Hale applies this doctrine, there is a grant of a special privilege or franchise, and the enjoyment of it is regulated by law so that the public may derive from it the benefit which constituted the consideration of the grant. Thus, in respect to ferries, he says, the king “has a right of franchise or privilege, that no man may set up a common ferry for all passengers without a prescription time out of mind, or a charter from the king.” And he proceeds to make the claim that “every ferry ought to be under a public regulation, viz.: that it give attendance at due times, keep a boat in due order, and take but reasonable toll.” So, also, in respect to wharves and wharfingers, the same writer says:—

“A man, for his own private advantage, may, in a port or town, set up a wharf or crane, and may take what rates he and his customers can agree for cranage, wharfage, housellage, pesage; for he doth no more than is lawful for any man to do, viz., make the most of his own. * * * If the king or subject have a public wharf, unto which all persons that come to that port must come and unlade or lade their goods, as for the purpose, because they are the only wharves licensed by the king, * * * or because there is no other wharf in that port, as it may fall out where a port is newly erected; in that case there cannot be taken arbitrary and excessive duties for cranage, wharfage, pesage, etc., neither can they be enhanced to an immoderate rate; but the duties must be reasonable and moderate, though settled by the king’s license or charter. For now the wharf and crane and other conveniences are affected with a public interest, and they cease to be juris privati only; as if a man set out a street in new building on his own land, it is now no longer a bare private interest, but is affected by a public interest.”1 At common law, the right of property in a wharf or pier was a franchise. Lord Hale, therefore, cannot be cited in support of the doctrine that the State may regulate the prices charged in a business which from the circumstances becomes a virtual monopoly. And even if he did justify such regulations, his opinions can hardly be set up in opposition to the rational prohibibition of the American constitution. By all the known rules of constitutional construction the conclusion must be reached that the regulation of prices in such a case is unconstitutional; and while the common law is still authority for the propriety and justification of laws, which antedate the American constitutions, it cannot be cited to defeat the plain meaning of the constitution in respect to laws subsequently enacted.

[1]Chicago, etc., R. R. Co. v. Iowa, 94 U. S. 155; Peik v. Chicago, etc., R. R. Co., 94 U. S. 164; Ames v. Un. Pac. Ry., 64 Fed. 165; Chicago, M. & St. P. Ry. Co. v. Becher, 32 Fed. 849; Smith v. Lake Shore & M. S. Ry. Co., 114 Mich. 460; Slaughterhouse Cases, 116 Wall. 36; Waterworks v. Schotler, 110 U. S. 347. Judge Cooley classifies the cases as follows:—

“1. Where the business is one, the following of which is not a matter of right, but is permitted by the State as a matter of privilege or franchise. Under this head may be classed the business of setting up lotteries, of giving shows, and of keeping billiard-tables for hire; of selling intoxicating drinks, and of keeping a ferry or toll bridge.

“2. When the State on public grounds renders to the business special assistance by taxation, or under the eminent domain, as is done in the case of railroads.

“3. When for the accommodation of the business special privileges are given in the public streets, or exceptional use allowed of public property or public easements, as in the case of hackmen, draymen, etc. Commonwealth v. Gage, 114 Mass. 328.

“4. When exclusive privileges are granted in consideration of some special return to the public and in order to secure something to the public not otherwise attainable.” Cooley’s Principles of Constitution, p. 234. See post, § 212, on the regulation of railroad rates of charges.

[1]See post, § 102.

[2]Munn v. People, 69 Ill. 80; s. c. 94 U. S. 113.

[3]1 Harg. Law Tracts, 78.

[1]Munn v. Illinois, 94 U. S. 125, 126.

[2]In the case in question, the use of the Chicago elevator was necessary to all dealers in grain in that city, and was controlled by nine firms, who annually established rates of charges for the regulation of the business. Says Chief Justice Waite: “Thus it is apparent that all the elevating facilities through which these vast productions ‘of seven or eight great States of the West’ must pass on the way ‘to four or five of the States on the seashore’ may be a virtual monopoly.” p. 131.

[3]“The public has no greater interest in the use of buildings for the storage of grain than it has in the use of buildings for the residences of families, nor, indeed, anything like so great an interest; and, according to the doctrine announced, the legislature may fix the rent of all tenements used for residences, without reference to the cost of their erection. If the owner does not like the rates prescribed, he may cease renting his houses. He has granted to the public, says the court, an interest in the use of the buildings, and ‘he may withdraw his grant by discontinuing the use; but, so long as he maintains the use, he must submit to the control.’ The public is interested in the manufacture of cotton, woolen and silken fabrics, in the construction of machinery, in the printing and publication of books and periodicals, and in the making of utensils of every variety, useful and ornamental; indeed, there is hardly an enterprise or business engaging the attention and labor of any considerable portion of the community, in which the public has not an interest in the sense in which that term is used by the court in its opinion; and the doctrine which allows the legislature to interfere with and regulate the charges which the owners of property thus employed shall make for its use, that is, the rates at which all these different kinds of business shall be carried on, has never before been asserted, so far as I am aware, by any judicial tribune in the United States.” Dissenting opinion of Justice Field in Munn v. Illinois, 94 U. S. 136.

[1]Mayor v. Yuille, 3 Ala. 137 (36 Am. Dec. 441). See Page v. Fazackerly, 36 Barb. 392; Guillotte v. New Orleans, 12 La. Ann. 432.

[1]De Portibus Maris, 1 Harg. Law Tracts, 78.