34
The Green Bag
cided Nov. 18, the United States Supreme Court sustained the decree of the United States Dis trict Court of Maryland, Mr. Justice McKenna delivering the opinion of the Court. The deci sion abrogated the so-called "license agreements" by which manufacturers of 85 per cent of the sanitary enameled ironware in the United States were bound together in a combination to control output and restrict prices. The Court said:— "Before the agreements the manufacturers of enameled ware were independent and competi tive. By the agreements they were combined, subjected themselves to certain rules and regu lations, among others, not to sell their product to the jobbers except at a price fixed, not by trade and competitive conditions, but by the decision of the committee of six of their number, and zones of sales were created. And the jobbers were brought into the combination and made its subjection complete and its purpose successful. Unless they entered the combination they could obtain no enameled ware from any manufacturer who was in the combination, and the condition of entry was not to resell to plumbers except at the prices determined by the manufacturers. The trade was, therefore, practically controlled from producer to consumer, and the potency of the scheme was established by the co-operation of 85 per cent, of the manufacturers, and their fidelity to it was secured, not only by trade ad vantages, but by what was practically a pecuni ary penalty, not inaptly termed in the argument 'cash bail.' . . . "The agreements clearly, therefore, trans cended what was necessary to protect the use of the patent or the monopoly which the law con ferred upon it. They passed to the purpose and accomplished a restraint of trade condemned by the Sherman Law. . . . "The added element of the patent in the case at bar connot confer immunity from a like con demnation for the reasons we have stated. And this we say without entering into the considera tion of the distinction of rights, for which the Government contends, between a patented article and a patented tool used in the manufacture of an unpatented article. Rights conferred by patents are indeed very definite and extensive, but they do not give any more than other rights an universal license against positive prohibitions. The Sherman law is a limitation of rights, rights which may be pushed to evil consequences and therefore restrained." Merger of Partly Competing Railways through Stock Control — Sherman Act — Competing Traf fic, if of Substantial Volume, Though Relatively
Small, Involves More than Incidental Restraint of Trade. U.S. In a sweeping decision which went much further than the Northern Securities decision, the Supreme Court of the United States unanimously held, Dec. 2, that the Harriman merger of the Union Pacific and Southern Pacific Railroad companies constituted a combination in restraint of trade within the meaning of the Sherman Anti-Trust law, and should be dissolved. U. S. v. Union Pacific Ry. el al., Oct. term, no. 446. Answering the contention that at no time did the Union Pacific acquire a majority of Southern Pacific stock, the court said:— "It may be true that in small corporations the holding of less than a majority of the stock would not amount to control, but the testimony in this case is ample to show that, distributed as the stock is among many stockholders, a compact united ownership of 46 per cent is ample to con trol the operations of the corporation. This is frankly admitted by Mr. Harriman, the prime mover in the purchase of the Southern Pacific. It was purchased, he declared, for the purpose of getting a dominating interest in the Southern Pacific company. "The consolidation of two great competing systems of railroad engaged in inter-state com merce by a transfer to one of a dominating stock interest in the other creates a combination, which restrains inter-state commerce within the mean ing of the statute, because, in destroying or greatly abridging the free operation of competi tion theretofore existing, it tends to higher rates. ( United States v. Joint Traffic Association, supra, 577.) "It directly tends to less activity in furnishing the public with prompt and efficient service in carrying and handling freight and in carrying passengers, and in attention to and prompt ad justment of the demands of patrons for losses, and in these respects puts inter-state commerce under restraint. "Nor does it make any difference that rates for the time being may not be raised and much money spent in improvements after the combina tion is effected. It is the scope of such combina tions and their power to suppress or stifle com petition or create monopoly, which determines the applicability of the act. (Pearsall v. Great Northern Railway Company, 161 U. S. 646, 676; United States v. Joint Traffic Association, supra.) "It is urged that this competitive traffic was infinitesimal when compared with the gross amount of the business transacted by both roads,
