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Subject Area: Law
Topic: The American Revolution and Constitution

§ 109.: A combination to “corner” the market.— - 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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§ 109.

A combination to “corner” the market.—

One of the commonest cases of combinations in restraint of trade, is where two or more dealers in a staple commodity undertake to “corner the market.” Dos Passos defines “a corner” in the following language: “A scheme or combination of one or more ‘bulls’ who are ‘long’ of certain stocks or securities, to compel the ‘bears,’ or persons ‘short’ of the stock to pay a certain price for the same. Or it may be a combination to force a fictitious and unnatural rise in the market, for the purpose of obtaining the advantage of dealers, purchasers, and all persons whose necessities or contracts compel them to use or obtain the thing ‘cornered.”’1 In New York, Illinois, Georgia, and Nebraska, there are statutes prohibiting “cornering,” and providing remedies for the breach of the statute, but it is safe to assert that the act is unlawful at common law, and independent of statute. A combination to raise funds, or create fictitious prices by the spread of false rumors, is clearly criminal conspiracy, for it injures every one who would have to make purchases of the commodity and were compelled to pay a higher price in consequence of the false rumors.2 So, also, will a combination be void, which is formed for the purpose of enhancing the price of a commodity by the making of fictitious sales. There is as much fraud in these cases as where the combination attained their ends by setting false rumors in motion. In both cases there is a fraud against the public.3 These cases are plain, because in both classes of cases there is a distinct act of deception or fraud. But the illegality of combinations is pushed to the extreme limit, when it is held that a combination to enhance the price of a commodity is always unlawful, even where there is no deception or fraud, and when the combination do nothing more than hold the goods which they control for higher prices. But that is the common-law rule. Such combinations are quite common in later days, and public opinion is very tolerant of them, rarely, if ever, condemning the practice as immoral; but there can be no question concerning their illegality. In Raymond v. Leavitt,1 plaintiff loaned defendant $10,000 for purpose of controlling the wheat market at Detroit for parties called the May deal. The scheme was “to force a fictitious rise in values.” The court held that the money advanced for the purpose of making a “corner” in wheat, could not be recovered by any legal measures and this, too, independently of statute. “There is no doubt that modern ideas of trade have practically abrogated some common-law doctrines which are supposed to unduly hamper commerce.” * * * “But we do not feel called upon to regard so much of the common law to be obsolete as treats these combinations as unlawful, whether they should now be held punishable as crimes or not. The statute of New York, which is universally conceded to be a limitation of the common-law offenses, is referred to in Arnot v. Coal Co.,2 rendering such conspiracies unlawful, and this had been previously held in People v. Fisher,3 where the subject is discussed at length. There may be some difficulty in determining such conduct to be in violation of public policy, where it has not before been covered by statutes as precedents. But in the case before us the conduct of the parties comes within the undisputed censure of the laws of the land, and we cannot sustain the transaction, without doing so on the ground that such dealings are so manifestly sanctioned by usage and public approval, that it would be absurd to suppose the legislature, if attention were called to them, would not legalize them. We do not think public opinion has become so thoroughly demoralized; and until the law is changed, we shall decline enforcing such contracts. If parties see fit to invest money in such ventures, they must get it back by other than legal measures.”4

Of the same character would be an agreement between all the transportation companies of a particular territory, which was made for the purpose of preventing competition, and controlling the rates of charges for transportation. Such agreements are void.1 The only ground upon which the prohibition of combinations in such cases may be justified is that such combinations tend to give to the members of them an undue and dangerous power over the needs and necessities of the people; and for that reason it is a legitimate exercise of police power to prohibit such combinations. Such a law does not interfere with the equal freedom of all to do what they will with their own. Every one is left free to do or act as he pleases, but he is not allowed to deny to others an equal freedom, not even with their consent. Public policy, the public safety, requires the prohibition.

Since the common law made it an indictable offense for one man to “corner” the market, there can be no question that the combination of two or more to buy up any article of merchandise, and force the payment of exorbitant prices, is a criminal conspiracy, and may be punishable without further legislation, if public opinion did not look so leniently upon such transactions.2

[1]Dos Passos on Stock Brokers, p. 454.

[2]Rex v. De Berenger, 3 M. & S. 67. See, also, Hitchcock v. Coker, 6 Ad. & El. 438; Hinde v. Gray, 1 M. & G. 195; Horne v. Ashford, 3 Bing. 322; Com. v. Hunt, 4 Met. 111.

[3]Marsh v. Russell, 2 Lans. 75; Stanton v. Allen, 5 Denio, 434; 2 Kent Com. 699; Bissbane v. Adams, 3 Comst. 129; Hooker v. Vandewater, 4 Denio, 349. See Craft v. McConoughy, 79 Ill. 346.

[1]46 Mich. 447.

[2]60 N. Y. 548.

[3]14 Wend. 9.

[4]See Sampson v. Shaw, 101 Mass. 145; Crawford v. Wick, 18 Ohio, 190; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. 173; Central Ohio Salt Co. v. Guthrie, 35 Ohio, 666. “Whenever a particular staple is essential to the health and comfort of a community, a combination to absorb it, for the purpose of extortion, is invalid.” 1 Hawk. P. C., ch. 80, § 1; 1 Bl. Com. 150; Rex v. Waddington, 1 East, 43; Indian Bagging Co. v. Cock & Co., 14 La Ann. 164; 1 Smith’s Lead. Cas. 307, 381; Lang v. Weeks, 2 Ohio (n. s.), 519; Thomas v. Tiles, 3 Ohio, 74; Barry v. Croskey, 2 Johns. & H. 1.

[1]Maguire v. Smock, 42 Ind. 1; Staunton v. Allen, 5 Denio, 434; Hooker v. Vandewater, 4 Denio, 349; Oregon St. Nav. Co. v. Winsor, 20 Wall. 64.

[2]“By the law of New York, no conspiracies are punishable criminally, except those there stated, and among others the conspiracy of two or more persons ‘to commit any act injurious to the public health, to public morals, or trade or commerce, or for the perversion or obstruction of justice, or due administration of the laws’ shall constitute a misdemeanor. Under this broad and comprehensive language, which is practically the rule in all the States, either by adoption of the common law or express statute, it will not be difficult to punish infamous conspiracies or combinations, whether their object be to affect the necessaries of life, or securities, or other property in which the public have an interest.” Dos Passos on Stock Brokers, 462, 463; Peck v. Gurney, L. R. 6 H. L. C. 377; Pasley v. Freeman, 3 J. R. 51; Bevan v. Adams, 19 W. R. 76; Beatty v. Evans, L. R. 7 H. L. C. 102; Pontifex v. Bignold’s, 3 Scott, N. R. 390; Moore v. Burke, 4 F. & F. 258; Cross v. Lockett, 6 App. Pr. 247; Wakeman v. Dalley, 44 Barb. 498; Cazeaux v. Mali, 25 Barb. 578; Mouse v. Switz, 19 How. 275; In re Chandler, 13 Am. Law Reg. (n. s.) 260; s. c. Biss. C. C. 53; sub. nom. Ex parte Young.