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now pressed upon our attention, are (1) that the conspiracy does not belong to the class in which the members are engaged in interstate trade or commerce, and agree to suppress competition among themselves, (2) that running a corner instead of restraining competition, tends, temporarily at least, to stimulate it, and (3) that the obstruction of interstate trade and commerce resulting from the operation of the conspiracy, even although a necessary result, would be so indirect as not to be a restraint in the sense of the statute.
Upon careful reflection we are constrained to hold that the reasons given do not sustain the ruling, and that the answer to the question must be in the affirmative.
Section 1 of the Act, upon which the counts are founded, is not confined to voluntary restraints, as where persons engaged in interstate trade or commerce agree to suppress competition among themselves, but includes as well involuntary restraints; as where persons not so engaged conspire to compel action by others, or to create artificial conditions, which necessarily impede or burden the due course of such trade or commerce, or restrict the common liberty to engage therein. Löwe v. Lawlor, 208 U. S. 274.
“The context manifests that the statute was drawn in the light of the existing practical conception of the law of restraint of trade, because it groups as within that class, not only contracts which were in restraint of trade in the subjective sense, but all contracts or acts which theoretically were attempts to monopolize, yet which in practice have come to be considered as in restraint of trade in a broad sense.”
It well may be that running a corner tends for a time to stimulate competition; but this does not prevent it from being a forbidden restraint, for it also operates to thwart the usual operation of the laws of supply and demand, to withdraw the commodity from the normal current of trade, to enhance the price artificially, to hamper users and consumers in satisfying their needs, and to produce practically the same evils as does the suppression of competition.
Of course, the statute does not apply where the trade or commerce affected is purely intrastate. Neither does it apply, as this court often has held, where the trade or commerce affected is interstate, unless the effect thereon is direct, not merely indirect. But no difficulty is encountered in applying these tests in the present case when its salient features are kept in view. It was a conspiracy to run a corner in the market.
The commodity to be cornered was cotton,-a product of the Southern States, largely used and consumed in the Northern States.
It was a subject of interstate trade and commerce, and through that channel it was obtained from time to time by the many manufacturers of cotton fabrics in the Northern States. The corner was to be conducted on the Cotton Exchange in New York City, but by means
which would enable the conspirators to obtain control of the available supply and to enhance the price to all buyers in every market of the country. This control and the enhancement of the price were features of the conspiracy upon the attainment of which it is conceded its success depended. Upon the corner becoming effective, there could be no trading in the commodity save at the will of the conspirators and at such price as their interests might prompt them to exact. And so, the conspiracy was to reach and to bring within its dominating influence the entire cotton trade of the country.
As we are of opinion that the statute does' embrace the conspiracy which the Circuit Court treated as charged in counts seven and eight, as construed by it, its judgment upon those counts is reversed and the case is remanded for further proceedings in conformity with this opinion.
Reversed in part.
MR. JUSTICE LURTON and MR. JUSTICE HOLMES dissenting.
UNITED STATES V. SIDNEY W. WINSLOW, EDWARD P. HURD, GEORGE W. BROWN, WILLIAM BARBOUR,
AND ELMER P. HOWE.
UNITED SHOE MACHINERY COMPANY CASE.
227 U. S. 202. February 3, 1913.
A criminal proceeding under the Sherman Anti-Trust Act was begun by the United States government against the defendants, Sidney W. Winslow, Edward P. Hurd, George W. Brown, William Barbour and Elmer P. Howe, in the District Court of the United States for the District of Massachusetts. The facts upon which the prosecution was based were as follows:
For the last twenty-five years practically all the shoes worn in the United States have been made by the help of machines, grouped as lasting machines, welt-sewing machines, and outsole-stitching machines, heeling machines and metallic fastening machines, there being a large variety of machines in each group. (These machines, of course, are not alleged to do all the work of making finished shoes.) There is a great number of shoe factories, and because the machines are expensive and the best of them patented, the manufacturers have had to get them principally from the defendants. Before and up to February 7, 1899, the defendants, Winslow, Hurd and Brown, through the Consolidated and McKay Lasting Machine Company, under letters patent, made 60 per cent. of all the lasting machines made in the United States; the defendants, Barbour and Howe, through the Goodyear Shoe Machinery Company, in like manner made 80 per cent. of all the welt-sewing machines and outsole-stitching machines, and 10 per cent. of all the lasting machines; and the defendant, Storrow (against whom the indictment had been dismissed), through the McKay Shoe Manufacturing Company, made 70 per cent. of all the heeling machines and 80 per cent. of all the metallic fastening machines made in the United States. The defendants all were carrying on commerce among the states with such of the shoe manufacturers as are outside Massachusetts, the state where the defendants made their machines.
On February 7, 1899, the three groups of defendants above named, up to that time separate, organized the United Shoe Machinery Company, and turned over to that company the stocks and business of the several corporations that they respectively controlled. The new company now makes all the machines that had been made in different places, at a single new factory at Beverly, Massachusetts, and directly, or through subsidiary companies, carries on all the commerce among the states that had been carried on independently by the constituent companies before. The defendants have ceased to sell shoe machinery to the shoe manufacturers. Instead, they only let machines, and on the condition that unless the shoe manufacturers use only machines of the kinds mentioned, furnished by the defendants, or if they use any such machines furnished by other machinery makers, then all machines let by the defendants shall be taken away. This condition they constantly have enforced. The defendants were alleged to have done the acts recited with intent unreasonably to extend their monopolies, rights, and control over commerce among the states; to enhance the value of the same at the expense of the public; and to discourage others from inventing and manufacturing machines for the work done by those of the defendants. The organization of the new company and the turning over of the stocks and business to it were alleged to constitute a breach of the Sherman act.
The lower court held that the alleged acts were not a violation of the anti-trust law, and sustained a demurrer to the indictment. An appeal was then taken to the Supreme Court.
MR. JUSTICE HOLMES delivered the opinion of the court :
The district court construed the indictment as confined to the combination of February 7; that is, simply to the merger of the companies, without regard to the leases subsequently made, and we have no jurisdiction to review this interpretation of the indictment. United States v. Patten, January 6, 1913, 226 U. S. 525. Hence the only question before us is whether that combination, taken by itself, was within the penalties of the Sherman act. The validity of the leases, or of a combination contemplating them, cannot be passed upon in this case.
Thus, limited, the question does not require lengthy discussion, and a large part of the argument addressed to us concerned matters not open here. On the face of it the combination was simply an effort after greater efficiency. The business of the several groups that combined, as it existed before the combination, is assumed to have been legal. The machines are patented, making them is a monopoly in any case, the exclusion of competitiors from the use of them is of the very essence of the right conferred by the patents, Paper Bag Patent Case (Continental Paper Bag Co. v. Eastern Paper Bag Co.,) 210 U. S. 405, and it may be assumed that the success of the several groups was due to their patents having been the best. As, by the interpretation of the indictment below and by the admission in argument before us, they did not compete with one another, it is hard to see why the collective business should be any worse than its component parts. It is said that from 70 to 80 per cent. of all the shoe machinery business was put into a single hand. This is inaccurate, since the machines in question are not alleged to be types of all the machines used in making shoes, and since the defendants' share in commerce among the states does not appear. But taking it as true, we can see no greater objection to one corporation manufacturing 70 per cent. of three non-competing groups of patented machines collectively used for making a single product than to three corporations making the same proportion of one group each. The disintegration aimed at by the statute does not extend to reducing all manufacture to isolated units of the lowest degree. It is as lawful for one corporation to make every part of a steam engine, and to put the machine together, as it would be for one to make the boilers and another to make the wheels. Until the one intent is nearer accomplishinent than it is by such a juxtaposition alone, no intent could raise the conduct to the dignity of an attempt.
Note.-On February 17th, 1913, the United States District Court at Cincinnati, Ohio, sentenced John H. Patterson, President of the National Cash Register Company, and twenty-eight other officials and employees of the said company to pay fines and undergo imprisonment for terms varying from three months to one year for violations of the criminal section of the Sherman Anti-Trust Law. Appeals were taken to the Circuit Court of Appeals on a number of grounds, one being that the Federal Statute of Limitations bars actions under the criminal section after three years. The Government had charged the defendants with acquiring a monopoly by an unfair system of competition whereby they drove their competitors out of the business. It was alleged that the defendants used many schemes to do this, such as harassing their competitors with unfounded patent infringement suits, organizing cash register concerns ostensibly as competitors of the National, but in reality as instruments for use in gaining the confidence and obtaining the business secrets of competitors and putting on the market registers of inferior workmanship which on the surface looked like those of their competitors, etc. The indictment charged the officers of the National Cash Register Company with conspiring to restrain the interstate business of its competitors on the theory that there was a generic conspiracy extending over twenty years against all competitors, which, as the various competitors named in the indictment, came into existence, was directed against them specificly. The Circuit Court of Appeals held that a conviction could be had only in conspiring in restraint of the trade of such competitors as were in existence during the three years prior to the finding of the indictment, and there could be no conviction for conspiring against the competitors who ceased to exist more than three years prior to the finding of the indictment or for the generic conspiracy so far as it existed prior to the three years. As the evidence failed to show that this conspiracy could have been directed against some of the competitors named within three years prior to the indictment for the reason that some of them had ceased to exist prior thereto, and as the lower court had failed to give specific instructions to the jury that the defendants could not be found guilty for conspiring against competitors who had ceased to exist before the period of limitations, and for other technical reasons, the judgment of the lower court was reversed and the case remanded for a new trial. Patterson v. United States, 222 Fed. 599 (March 13th, 1915). The Government attempted to bring this decision up to the Supreme Court for review on a petition for certiorari, but the Supreme Court denied the petition on June 14th, 1915. This in effect sustained the decision of the Circuit Court of Appeals.
6. The Federal Taxing Power as Affecting Commerce.
MCCRAY v. UNITED STATES.
195 U. S., 27.
This case arose in the District Court of the United States for the Southern District of Ohio and was an action brought by the United States against Leo W. McCray to recover a penalty of $50.00 for a violation of the Acts of Congress requiring that internal revenue stamps at the rate of 10 cents per pound be affixed to packages of oleomargarine, artificially colored to look like butter. The Act of Congress of August 2, 1886, after defining butter and oleomargarine, provided, as follows: “That upon oleomargarine which shall be manufactured and sold, or removed for consumption or use there shall be assessed and collected a tax of two cents per pound, to be paid by the manufacturer thereof.
The tax levied by this section shall be represented by coupon stamps, etc. The Act of May 9, 1902, amended the foregoing act by increasing the tax on oleomargarine from two to ten cents per pound, but contained this proviso: "Provided, when oleomargarine is free from artificial coloration that causes it to look like butter of any shade of yellow, the said tax shall be one-fourth of one cent per pound."