had the effect of eliminating or limiting competition between the participants. But the Act said that every such contract, combination, or conspiracy was illegal. If anything was clear from the precedents, it was that a contract might be technically in restraint of trade and yet entirely innocuous and undoubtedly valid and enforceable at common law. Did not Congress mean "every contract or combination or conspiracy in unreasonable restraint of trade"? Or did it mean to send to jail a grocer, living near the state line and delivering groceries in an adjoining state, who retired from business and sold his stock in trade with a covenant not to engage in a similar business in the locality? Did it mean that every regulation of a chamber of commerce or trade association, no matter how reasonable, which limited the manner in which an interstate trade could be transacted by its members, and any trade union rule which affected interstate commerce, had suddenly become an indictable conspiracy? Yet if Congress meant to prohibit only unreasonable restraints, why in the name of good sense did they not say so? Surely the eminent lawyers in the Senate were familiar with the common law distinctions as to restraint of trade.

The explanation, of course, lay in the fact which I have already adverted to, that legislative draftsmen cannot always confine their attention exclusively to legal considerations. Congress was using words to which the precedents ascribed a fairly precise though somewhat irrelevant meaning, but it was using them in a sense which was to be popularly taken to refer to the great trusts and combinations from which the people were understood to be suffering. Was Congress to admit that a trust or monopoly could ever be reasonable? Such a thing was politically impossible. It violated the axiom that all trusts and monopolies were reprehensible. Any qualification or definition or exception tended to weaken the apparently

sweeping and inclusive range of the statute, and hence its rhetorical value.

In the Standard Oil and Tobacco cases the Supreme Court took an important although a limited step toward supplying the legal deficiencies of the text of the Sherman Act. The court announced that certain common law analogies should guide the judiciary in determining whether or not a particular contract or combination was in restraint of trade or was an attempt at monopolization, in the sense in which those words were used in the statute. The test was that applied by the common law to contracts restraining the exercise of a profession or trade, namely, the reasonableness of the scope and terms of the restraint from the point of view of the parties and of the public. It may be conceded that the test is not of itself susceptible of precise and definite application. A court may have good reasons for concluding that it is not proper for a physician to covenant not to practice his profession within 100 miles of the city of York, but they are not very helpful in determining whether or not a consolidation of 40 per cent of the steel industry in the United States is reasonable. The common law analogies do not go far in indicating the principles to be applied in the solution of the modern trust problem. At most they suggest the frame of mind into which the judges should put themselves in arriving at a decision.

The promulgation of the "rule of reason" did, however, bring to the forefront a fundamental question of legislative policy. The Supreme Court had announced, what was doubtless fully appreciated by the legislators of 1890, that the text of the Sherman Act contained no definite rule of decision, but contemplated that the courts themselves, with the aid of common law analogies, should evolve their own rules and precedents as the cases came before them for decision. Was it in the public interest that such a sweeping power, in matters of such vital con

cern, should be entrusted to a judiciary appointed for life and carefully shielded from the influence of public opinion? To put the matter differently, was it possible to develop, out of the storehouse of the common law, a set of legal principles capable of precise application, by which judges could solve all problems of restraint of trade and monopoly by logic and precedent? Or must the decision depend in each case upon the judge's personal notions of expediency and economic policy? At bottom, this was the issue between those who retained their faith in the Sherman Law as interpreted by the Supreme Court, and those who thought that the law should be amended or supplemented by new legislation.

We are fortunate in having, from the pen of the present Chief Justice of the United States, a contemporary defense of the Sherman Law which reveals clearly the issue which the legislators of 1914 were facing. Mr. Taft's book, The Anti-Trust Act and the Supreme Court, was published in 1914, and was doubtless suggested by the prospect of new anti-trust legislation at the current session of Congress. The main thesis of the book was that the Sherman Law, read in the light of common law analogies, contained principles capable of logical formulation and precise application, and afforded a certain guide to the judges charged with administering the law, so that supplementary legislation was unnecessary and might even be harmful. As the argument goes to the root of the justification for the new legislation, it is worth examining with some care.

At common law, Mr. Taft pointed out, a contract entered into with the sole object of restraining the exercise of a trade or profession was void. If a tailor should persuade an obnoxious competitor, in a moment of weakness, to sign a bond to cease exercising his trade, the courts would refuse to enforce the bond, for it is against public policy that a citizen should be deprived of his

means of livelihood, or that the public should be deprived of the advantages of competition. But if a tailor, intending to retire, sells his business, with an undertaking not to exercise his trade in competition with the buyer, the agreement is lawful. There is a restraint, but it is merely incidental. The main purpose of the contract is to secure a fair price for the business sold, and the restraint is only to prevent the vendor by subsequent competition from derogating from the value of his grant. If, however, the restraint is broader than is reasonably necessary for the purpose, it is void, for it then becomes apparent that the purpose of the buyer in exacting the restraint was not merely to protect the property purchased, but to exclude the seller from a legitimate occupation or to deprive the public of his services.

By the mere application of the accepted judicial technique of analogical reasoning this common law distinction could, in Mr. Taft's view, be applied to the decision of the problems of combination and monopoly encountered in the administration of the Sherman Law. Any agreement between two or more competing business concerns, of which the sole purpose is to restrict competition, say by fixing minimum prices, or apportioning territory, or restricting output, is unlawful at common law and indictable under the Sherman Act. It makes no difference how laudable the motive, or how beneficial the result; if restraint alone, whether partial or general, is the sole purpose of the contract, it is void. If, however, the restraint upon competition accompanies a transfer of property, or other legitimate business transaction, it becomes necessary to consider the scope and purpose of the restraint. Every combination of competitors restrains, because it eliminates, the mutual competition of the combining units, but every such combination is not illegal. If the purpose is to promote economy and efficiency, the combination is legal; but if the real purpose is to elimi

nate competition, as a step toward the control of the market, the transaction is illegal. In substance, this was Chief Justice White's view of the rule of reason at common law, which treated as illegal those contracts "which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing trade, but on the contrary were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy.""

The actual decisions of the Supreme Court, in Mr. Taft's view, were in harmony with this principle. In the traffic association cases,10 the Addyston Pipe case," the Nash case,12 and the Bathtub case1s there were agreements between nominally independent competitors, fixing prices, or otherwise restricting the scope of competition. In these cases restraint was the sole purpose, and the agreements or combinations were illegal. In the Northern Securities case,1 there was a formal transfer of securities to a holding company, but the real purpose was to avoid competition and monopolize transportation. In the Standard Oil and Tobacco cases15 there were combinations of 9 Standard Oil Co. v. U.S., 221 U.S. 1, 58.

10 U.S. v. Trans-Missouri Freight Association, 166 U.S. 290; U.S. v. Joint Traffic Association, 171 U.S. 93.

11 U.S. v. Addyston Pipe & Steel Co., 175 U.S. 211.

12 Nash v. U.S., 229 U.S. 373.

13 Sanitary Manufacturing Co. v. U.S., 226 U.S. 20.

14 Northern Securities Co. v. U.S., 193 U.S. 197.

15 Supra, p. 4.