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act of Congress, so far as it applied to sales for delivery beyond the state in which the sale was made.

Contrasting in the court's opinion this case with the Knight case, Mr. Justice Peckham said, in part:

"The direct purpose of the combination in the Knight case was control of the manufacture of sugar. There was no combination or agreement, in terms, regarding the future disposition of the manufactured article; nothing looking to a transaction in the nature of inter-state commerce. The probable intention on the part of the manufacturer of the sugar to thereafter dispose of it by sending it to some market in another state was held to be immaterial and not to alter the character of the combination. The combination (of the pipe manufacturers) thus had a direct, immediate, and intended relation to and effect upon the subsequent contract to sell and deliver pipe. It was to obtain that particular and specific result that the combination was formed, and, but for the restriction, the resulting high prices would not have been obtained."*

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The attorneys for the pipe manufacturers refined the constitutional question, raised in the Traffic Association case, by arguing that although Congress might have constitutional right to deal with contracts of such quasi-public corporations as common carriers, elevators, gas and water companies, it has no constitutional right to interfere with or prohibit private contracts between citizens even though such contracts have interstate commerce for their object and result in a substantial obstruction of that commerce. An essential part of the court's answer to this argument, in Justice Peckham's words was: "Congress, in our judgment, may en

*175 U. S. 240, 243.

act such legislation as shall declare void and prohibit the performance of any contract between individuals or corporations where the natural and direct effect of such a contract will be, when carried out, to directly, and not as a mere incident to other and innocent purposes, regulate to any substantial extent interstate commerce."*

The Northern Securities case,† decided in March, 1904, was of importance because it put aside arguments based on the decision in the Knight case and applied the Sherman Act effectively to dissolve a masterful holding company device in the railway world.

The Northern Securities Company had been organized in New Jersey in November, 1901, with a capital stock of $400,000,000 as a holding company to unite the railway interests of the Great Northern and the Northern Pacific railways. It exchanged its stock at par for Great Northern stock at $180 a share, and for Northern Pacific stock at $115. By the time the suit was brought in the Circuit Court (April, 1903) the Northern Securities Company was the owner of some 96 per cent. of all the stock of the Northern Pacific Company and some 76 per cent. of all the stock of the Great Northern Company. These two companies had already in the spring of 1901 purchased about 98 per cent. of the stock of the Chicago, Burlington and Quincy Railway Company. The Northern Securities Company thus became owner of all the leading railway lines in the northwestern part of the United States.

The court divided again, five to four. Mr. Justice

*175 U. S. 228.

†United States v. Northern Securities Company et al. 120 Fed. 721, 193 U. S.

197.

Harlan delivered the opinion of the majority. To the plea that the holding company had simply purchased stocks of other companies, a parallel to the operations of the American Sugar Refining Company as presented in the Knight case, and that this was not an act in restraint of interstate commerce, the court responded by looking past the form of the business deal to its natural consequences. In part, on this holding company issue, Justice Harlan said:

"No scheme or device could more certainly come within the words of the act-combination in the form of trust or otherwise in restraint of commerce among the several states and with foreign nations' or could more effectively and certainly suppress free competition between the constituent companies, this combination is, within the meaning of the act, a 'Trust'; but if not, it is a combination in restraimt of inter-state and inter-national commerce; and that is enough to bring it under the condemnation of the act. The mere existence of such a combination and the power acquired by the holding company, as its trustee, constitute a menace to, and a restraint upon, that freedom of commerce which Congress intended to recognize and protect, and which the public is entitled to have protected. If such combination be not destroyed all the advantages which would naturally come to the public under the operation of the general laws of competition, as between the Great Northern and the Northern Pacific Railway companies, will be lost, and the entire commerce of the immense territory in the northern part of the United States between the Great Lakes and the Pacific at Puget Sound will be at the mercy of a single holding corporation, organized in a state distant from the people of that territory.'

*193 U. S. 327, 328.

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As a basis for affirmation of the decree of the Circuit Court that the Northern Securities Company should be enjoined from exercising any control whatsoever over the two great railway systems whose stock it had acquired, Justice Harlan gave a clear summary of the decisions of the court in leading anti-trust cases up to that date, March, 1904. That summary deserves presentation here since it is the official statement of the court status of Federal anti-trust legislation after nearly fourteen years of elaborate consideration:

"We will not encumber this opinion by extended extracts from the former opinions of this court. It is sufficient to say that from the decisions in the above cases certain propositions are plainly deducible and embrace the present case. Those propositions are:

"That although the act of Congress known as the Anti-Trust Act has no reference to the mere manufacture or production of articles or commodities within the limits of the several states, it does embrace and declare to be illegal every contract, combination, or conspiracy, in whatever form, of whatever nature, and whoever may be parties to it, which directly or necessarily operates in restraint of trade or commerce among the several states or with foreign nations;

"That the act is not limited to restraints of interstate and international trade or commerce that are unreasonable in their nature, but embraces all direct restraints imposed by any combination, conspiracy, or monopoly upon such trade or commerce;

"That combinations even among private manufacturers or dealers whereby interstate or international commerce is restrained are equally embraced by the act;

"That Congress has the power to establish rules by which interstate and international commerce shall be governed, and, by the Anti-Trust Act, has prescribed

the rule of free competition among those engaged in such

commerce;

"That every combination or conspiracy which would extinguish competition between otherwise competing railroads engaged in interstate trade or commerce, and which would in that way restrain such trade or commerce is made illegal by the act;

"That the natural effect of competition is to increase commerce, and an agreement whose direct effect is to prevent this play of competition restrains instead of promotes trade and commerce;

"That to vitiate a combination, such as the act of Congress condemns, it need not be shown that the combination, in fact, results or will result in a total suppression of trade or in a complete monopoly, but it is only essential to show that by its necessary operation it tends to restrain interstate or international trade or commerce or tends to create a monopoly in such trade or commerce and to deprive the public of the advantages that flow from free competition:

"That the constitutional guarantee of liberty of contract does not prevent Congress from prescribing the rule of free competition for those engaged in interstate and international commerce; and,

"That under its power to regulate commerce among the several states and with foreign nations, Congress had authority to enact the statute in question."

Mr. Justice Brewer, in a concurring opinion, stated that he regarded the contracts presented as "unreasonable restraints of interstate trade and, as such, within the scope of the Act."†

The dissenting opinion, held by Chief Justice Fuller, and Justices White, Peckham, and Holmes emphasized

*193 U. S. 331, 332. †198 U. S. 361.

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