that, like the gigantic shears in some steel works, they cut in pieces everything that comes between. Section 3 makes the law operative in the District of Columbia and in the various territories, as well as in commerce flowing to, from or between those several jurisdictions. By the provisions of Section 4 the Circuit Courts of the United States are clothed with authority to enjoin each and all these illicit acts; and it is made the duty of the District Attorney located in each district to see that the law is enforced. By construction this section has been limited in scope to restraining orders founded upon petitions prepared and filed by the respective District Attorneys in the public interest, so that anti-trust cases came in time to take on somewhat the nature of "state prosecution;" but while this construction prevents private persons from instituting injunction suits in Anti-trust cases, few, if any, instances have occurred where a worthy cause was denied a judicial hearing. The rights conferred by Section 4 are a great step forward; and much benefit has been derived from the knowledge that acts of oppression may be suppressed. Section 5 provides that, when instituted, prosecutions may be extended to bringing into the case parties residing elsewhere in the United States. Section 6 emphasizes the punitive quality of this drastic law, which was made "to fit the crime," and the time. It may be of interest to state, however, that there is no record of any actual condemnation of property by the means here provided. Actions for three-fold damages may be brought under Section 7; while by Section 8 corporations as well as individuals are included in the terms "person" or "persons."

Such is the Sherman Anti-trust Law.

When the bill was before the Senate, the necessity for exercising supreme skill in its preparation was emphasized by Senator Vest of Missouri: "This bill, if it becomes a law, must go through the crucible of a legal criticism which will avail itself of the highest legal talent throughout the entire Union. It will go through a furnace not seven times, but seventy times heated."

In connection with this prediction by Senator Vest, it is interesting to note how, at a later stage, when the bill had become law, leaders of the American bar at frequent intervals have made earnest efforts to detect some defect in its composition; but it has stood the severe test of thirty years of fairly constant professional investigation and analysis.

Conservative Interests Welcome Restraining Influence of Sherman Act.

Of late years, American business men very generally have accepted the provisions of the Sherman Law as the "law of the land;" and have sought to live up to its requirements in spirit as well as in conformity with its legal terms.

Fortunately for all concerned, there is in existence machinery for applying the anti-trust laws in a modified form; and it is ready to hand. We shall dwell upon this theme in subsequent chapters.

But before dismissing the subject of trusts and monopolies, some study must be given to leading cases which will always occupy an important place in our jurisprudence.

CHAPTER IV.

Anti-trust Cases.

Common Law Precedents Confined to State Courts.

It is a well-known principle of American jurisprudence that although the states have inherited the right to proceed under the authority of the common law as laid down in the English cases, Federal courts must follow and apply equitable principles or statute law. Proceeding by the light and under the authority of the common law, (which, as we have seen in our last chapter, takes cognizance only of trade-restraints which have risen to the magnitude of monopolies), certain of the state courts just prior to the enactment of the Sherman Law rendered decisions that in effect belong in the line of anti-trust cases.

Leading Common Law Cases.

Thus, Richardson v. Buhl, usually styled "The Diamond Match Case," (77 Mich. 632, 6 L. R. A. 457), has a unique interest for us because its authority may be denominated (for want of a better term) a negative-affirmation of anti-trust principles. The facts disclosed by the record display a situation where the parties had agreed among themselves to stifle competition by acquiring and dismantling manufacturing plants that were formerly in active competition, and in other instances to reduce the output by exercising a corrupt influence over factory managers. When the principals fell out, the Michigan court refused to exercise its powers in aid of enforcement of the agreement; and the parties were left to "fry in their own fat," if we may borrow an apt but inelegant expression much employed by diplomatists. This case serves a useful purpose by "brand

ing" monopolists and treating them as outlaws and refusing to recognize their illegitimate schemes.

At the very time when the Sherman Law was in the forming and Congress was acquainting itself with "trusts," and the various forms of restraints and monopolies, the State of New York instituted civil proceedings and by a series of affirmative rulings extending from the trial court to its Court of Appeals, exercised very effectively powers which the states possess under the common law. This series of rulings is both interesting and important; and coming as it did upon the very threshold of Federal legislation, we feel justified in stating the essential facts, with a brief outline of the decision itself.

The North River Refining Company entered a pool which included eighteen sugar plants. The plan adopted was rather crude, and operated principally through the nomination and election of the directors from a list by the pool-managers. Proceeding upon the theory that the statutory requirements as to dissolution were prohibitory of attempts to maintain a separate corporate existence while surrendering every essential of independent action in protecting or promoting its own interests and proceeding upon its own initiative, the State's Attorney brought suit for the forfeiture of the franchise. The court found (People v. North River Refining Company, 54 Hun 354, affirmed 121 N. Y. 582), that the defendant had surrendered its corporate powers by entering into what, in practical effect, was a permanent pool.

The court held:

First: Every incorporated body owes to the state of its creation a certain measure of service, or at least of obedience. Failure to comply with these implied conditions attached to the franchise entails for the offending corporation forfeiture of the charter and dissolution of the business.

Second: As between the State and the corporation, the gist of the inquiry is-"What has been accomplished by the collective action and agency of the officers and stockholders?"

Third: It is an act at once unlawful and injurious to the public interests for a corporation to consummate a merger in a

manner unauthorized by law; and this is equally illicit whether wrought directly or through the indirect medium of a "trust."

Fourth: Corporate grants are always assumed to have been conferred for the public benefit; whereas conduct that prevents free exercise of those corporate functions operates unfavorably to the public interests.

Fifth: That the fact of the merger having been convincingly proven, such a consolidation was (a) in excess of the corporate powers (ultra vires), (b) illegal, and (c) called for a decree of dissolution of the corporation and forfeiture of its franchise.

We have dealt with this case at considerable length because it indicates a road to trust-control through the instrumentality of state courts operating under the common law or by enforcement of state laws. Probably, as a general proposition, the trusts were too extensive in their scope to be dealt with effectually by courts whose jurisdiction was confined within the boundaries of a single state. Whatever the cause, the heavy task of curbing monopolies and restoring freedom in trade was assumed and maintained almost entirely through the departmental machinery of the United States Government. Practically all subsequent anti-trust cases were conducted in the Federal courts, under direction of the Attorney General.

Initial Sherman Law Ruling.

The earliest of the Federal anti-trust cases, American Biscuit & Manufacturing Company v. Klotz (44 Fed. 721), was not instituted with intent to construe or to enforce the provisions of the Sherman Anti-trust Law. The facts are unique and excite our interest.

It appears that in May, 1890, the "Bakeries Trust," after absorbing thirty-five leading establishments in twelve different states, purchased and took over the defendant's plant and business, and, "trust" fashion, engaged him to remain as manager at a large salary. Wearying of the deal, the defendant repudiated it and undertook to rescind the entire transaction, tendered back the purchase price, or at least the shares of stock in the "trust," and after tearing down the plaintiff's sign, resumed