Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow § 222.: The jurisdiction of anti-trust laws, national and State, as affected by the interstate commerce clause.— - A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, vol. 2

Return to Title Page for A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, vol. 2

Search this Title:

Also in the Library:

Subject Area: Law
Topic: The American Revolution and Constitution

§ 222.: The jurisdiction of anti-trust laws, national and State, as affected by the interstate commerce clause.— - 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. 2 [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. 2.

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.

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


§ 222.

The jurisdiction of anti-trust laws, national and State, as affected by the interstate commerce clause.—

The general subject of the prohibition of trade combinations has been very fully treated in a previous section.5 The chief statutory regulations against them are known as “anti-trust laws.” We have such laws in almost every State in the Union; and, in addition, we have a national anti-trust law. It is important to delimit the jurisdictions of these national and State laws against trade combinations. Generally, it might be stated, as an accurate delimitation of their jurisdictions, that the State anti-trust laws can apply only to those cases of trade combinations which do not involve, necessarily and exclusively, the prosecution of interstate commerce. Such a State law cannot be enforced against parties, who violate its provisions by acts committed outside of the State;1 as, for example, by foreign insurance companies who form a combination outside of the State, which combination determines the rates of premium which shall be charged for insurance within the State.2 On the other hand, the national anti-trust law can be enforced only against combinations in restraint of trade, which are engaged in interstate commerce. In its application to railroads and other common carriers, whose lines extend over two or more States, it has never been questioned that the national anti-trust law could be enforced against combinations of such common carriers which included within their sphere of operation more than one State. Thus, since the Trans-Missouri Freight Association and the Joint Traffic Association included among its members railroads, which had extensive trunk lines covering a number of the States, the combination was properly held to be in restraint of interstate commerce; and, so far as I know, this position has never been seriously contested.3

But the jurisdiction becomes less clear, when the subject of local facilities in aid of interstate transportation, such as grain elevators and live stock yards, is broached in its relation to the national and State antitrust laws. In the case of the grain elevators, it has already been shown in the preceding section4 that the Supreme Court of the United States had sustained the constitutionality of State laws which regulated the rates of charges of such elevators, because their business was only incidental to interstate commerce, and not a part of it. The same principle has been adhered to in a subsequent case, in which an attempt was made to enforce the provisions of the national antitrust law against a combination of live stock yard owners at Kansas City, Missouri. The United States Circuit Court held that this association or combination was engaged in interstate commerce; and that their combination, in restraint of such commerce, brought it within the condemnation of the national anti-trust law.1 But this decision was, on appeal, reversed by the Supreme Court, in harmony with its prior decision in the grain elevator cases.2

The practical failure of all the State laws, against trade combinations in restraint of competition, to suppress the formation of gigantic corporate monopolies in the various industries of the country, together with the facilities which some of the States afford for the easy incorporation of such large combinations, led the opponents of the trusts and trade combinations to look to the national anti-trust law for the suppression of those, which were beyond the power of the State laws. The State laws could exclude these industrial monopolies from conducting their business within a State through a local branch office; but the interstate commerce clause of the constitution prevents any interference by a State with the prosecution of their business from an office without the State, or through traveling salesmen and agents. Two cases have been brought into the United States courts, to secure the suppression of these trade combinations by the enforcement of the national anti-trust law. One was directed against a combination of sugar-refineries; the other, against a combination of manufacturers of water and gas pipes. In the case of the sugar refineries, it was held that the combination was not in violation of the national anti-trust laws, although the ultimate effect of a successful combination of the sugar refineries of the State might be a restraint upon interstate commerce. But it was held that the manufacture of sugar was not interstate commerce, and hence did not fall within the provisions of the national anti-trust law.1 In the case of the water and gas pipe combination, the terms of agreement between the manufacturers of pipes involved a partition of the States and Territories between them, and a prohibition against a manufacturer to sell pipe in any State or Territory which had not been allotted to him by the combination. The facts of this case are manifestly different in legal character from the facts of the sugar refineries case, wherein there was no partitioning of territory between rival manufacturers, but a consolidation of the refineries under one corporation. In the United States Circuit Court, it was held that the water and gas pipe combination was not in restraint of interstate commerce, and hence did not come within the condemnation of the national anti-trust law.2 But this decision has been overruled by the United States Court of Appeals and the United States Supreme Court; both courts holding, that the combination was in restraint of interstate commerce, and did violate the provisions of the national anti-trust law.3 Mr. Justice Peckham, in delivering the opinion of the Supreme Court, said in part:—

“The direct and immediate result of the combination was necessarily a restraint upon interstate commerce, in respect of articles manufactured by any of the parties to it to be transported beyond the State in which they were made. The defendants, by reason of this combination and agreement, could only send their goods out of the State upon the terms and pursuant to the provisions of such combination. Was not this a direct restraint upon interstate commerce in those goods? If dealers in any commodity agreed among themselves, that any particular territory bounded by State lines should be furnished with such commodities by certain members only of the combination and that the others would abstain from business in that territory, would not such agreement be regarded as one in restraint of interstate trade? If the price of the commodity was thereby enhanced (as it necessarily would be), the character of the agreement would be still more clearly in restraint of trade.

“Is there any substantial difference where by agreement among themselves the parties choose one of their number to make a bid for the supply of the pipe for delivery in another State, and agree that all the other bids shall be for a larger sum, thus practically restricting all but the member agreed upon from any attempt to supply the demand for the pipe, or to enter into competition for the business? It is useless for the defendants to say they did not intend to regulate or affect interstate commerce. They intended to make the very combination and agreement which they, in fact, did make, and they must be held to have intended the necessary and direct result of their agreement.” * * *

“We have no doubt that, where the direct and immediate effect of a contract or combination among particular dealers in a commodity is to destroy competition between them and others, so that the parties to the contract or combine may obtain increased prices for themselves, such contract or combination amounts to a restraint of trade in the commodity, even though contracts to buy such commodity at the enhanced price are continually being made. Total suppression of the trade in the commodity is not necessary, in order to render the combination one in restraint of trade. It is the effect of the combination, in limiting and restricting the right of each of the members to transact business in the ordinary way, as well as its effect upon the volume or extent of the dealing in the commodity, that is regarded.” * * *

“It is almost needless to add that we do not hold every private enterprise, which may be carried on chiefly or in part by means of interstate shipments, is therefore to be regarded as relegated to interstate commerce, so as to come within the regulating power of Congress. Such enterprises may be of the same nature as the manufacturing of refined sugar; that is, the parties may be engaged as manufacturers of a commodity which they thereafter intend at some time to sell, and possibly to sell in another State; but such sale we have already held is an incident to and not the direct result of the manufacture, and so is not a regulation of or an illegal interference with interstate commerce. The principle is not affected by anything herein decided.”

It seems to me very clear that this latest decision from the Supreme Court of the United States, especially in the light of the Wisconsin decision, cited in a preceding note, paves the way to a very decided national check upon trade combinations in declaring that all corporate combinations, which do in the judicial sense restrain competition and tend to the creation of industrial monopoly, fall within the condemnation of the national anti-trust law, whenever the combination oversteps the boundaries of a State, and include members or industrial plants, that reside or are located in different States. For example, if in the formation of a corporate combination, the manufacturers who are individually doing business in several States, should transfer their plants to the corporation, and they receive shares of stock in return, there is as manifest an intention to restrain competition in interstate commerce, as was evident in the articles of agreement of the water and gas pipe combination. If this ruling were made by the Supreme court of the United States, very few of the large industrial monopolies, so-called, could successfully plead want of jurisdiction, in a suit against them in the United States Courts for the enforcement of the national anti-trust law. The United States Circuit Court has practically taken this position in a recent case,1 which a combination, formed of importers and dealers in other States and foreign countries and of local dealers’ associations, for the purpose of maintaining prices and preventing ruinous competition, was held to be a violation of the anti-trust law. If this ruling is ultimately sustained by the Supreme Court of the United States, all combinations of foreign or extra-state manufacturers and local dealers will be within the jurisdiction of the United States courts, and in violation of the national anti-trust law.

[5]§§ 110-113.

[1]In re Grice, 79 Fed. 627.

[2]State v. Lancashire Fire Ins. Co. (Ark. ’99), 51 S. W. 633.

[3]See United States v. Trans-Missouri Freight Association, 166 U. S. 290; United States v. Joint Traffic Association, 171 U. S. 505.

[4]§ 221.

[1]United States v. Hopkins, 82 Fed. 529.

[2]Hopkins v. United States, 171 U. S. 578.

[1]United States v. E. C. Knight Co., 156 U. S. 1; affl’g 9 C. C. A. 297; 60 Fed. 934. See, also, National Distilling Co. v. Cream City Importing Co., 86 Wis. 352, wherein it was held that where both parties to a contract of sale were corporations of the State in which the sale was made, the transaction did not come within the provisions of the national antitrust law.

[2]United States v. Addystone Pipe and Steel Co., 78 Fed. 712.

[3]United States v. Addystone Pipe and Steel Co., 85 Fed. 271; 29 C. C. A. 141; s. c. Addystone Pipe and Steel Co. v. United States (1900), 20 Sup. Ct. Rep. 96.

[1]United States v. Coal Dealers Association, 85 Fed. 252.