of the agreement was not to regulate, obstruct, or restrain that commerce, but that it was entered into with the object of properly and fairly regulating the transaction of the business in which the parties to the agreement were engaged, such agreement will be upheld as not within the statute, where it can be seen that the character and terms of the agreement are well calculated to attain the purpose for which it was formed, and where the effect of its formation and enforcement upon interstate trade or commerce is in any event but indirect and incidental, and not its purpose or object. As is said in Smith v. Alabama, 124 U. S. 465, 473, 8 S. Ct. 564, 31 L. Ed. 508, 510, 1 Interst. Com. R. 804: "There are many cases, however, where the acknowledged powers of a state may be exerted and applied in such a manner as to affect foreign or interstate commerce without being intended to operate as commercial regulations.' The same is true as to certain kinds of agreements entered into between persons engaged in the same business for the direct and bona fide purpose of properly and reasonably regulating the conduct of their business among themselves and with the public. If an agreement of that nature, while apt and proper for the purpose thus intended, should possibly, though only indirectly and unintentionally, affect interstate trade or commerce, in that event we think the agreement would be good. Otherwise there is scarcely any agreement among men which has interstate or foreign commerce for its subject that may not remotely be said to, in some obscure way, affect that commerce and to be therefor void."

In Whitwell v. Continental Tabacco Co., 125 F. 454, 60 C. C. A. 290, 64 L. R. A. 689, Judge Sanborn, after discussing contracts and agreements which would constitute a combination or conspiracy in restraint of trade adds: "If, on the other hand, it promotes or but incidentally or indirectly restricts competition, while its main purpose and chief effect are to foster the trade and to increase the business of those who made and operate it, then it is not a contract, combination, or conspiracy in restraint of trade, within the true interpretation of this act, and it is not subject to its denunciation." *

* *

The jury passed on the evidence, and its verdict was approved by the trial court. To our minds the verdict was right.

The cause should be affirmed.

PER CURIAM. Adopted in whole.

STANDARD FASHION CO. v. MAGRANE-HOUSTON CO.

(Supreme Court of the United States, 1922. 258 U. S. 346, 42 S. Ct. 360, 66 L. Ed. 653.)

DAY, J. Petitioner brought suit in the United States District Court for the District of Massachusetts to restrain the respondent from, violating a certain contract concerning the sale of patterns for garments worn by women and children, called "Standard patterns." The bill was dismissed by the District Court, and its decree was affirmed by the Circuit Court of Appeals. 259 F. 793, 170 C. C. A. 593. Petitioner is a New York corporation engaged in the manufacture and distribution of patterns. Respondent conducted a retail dry goods. business at the corner of Washington street and Temple Place in the city of Boston. On November 25, 1914, the parties entered into a

contract by which the petitioner granted to the respondent an agency for the sale of Standard patterns at respondent's store for a term of two years from the date of the contract, and from term to term thereafter until the agreement should be terminated as thereinafter provided. Petitioner agreed to sell to respondent Standard patterns at a discount of 50 per cent. from retail prices, with advertising matter and publications upon the terms stated, and to allow respondent to return discarded patterns semiannually between January 15th and February 15th, and July 15th and August 15th, in exchange for nine-tenths cost for other patterns to be shipped from time to time thereafter. The contract provided that patterns returned for exchange must have been. purchased from the petitioner and must be delivered in good order to the general office of the seller in New York. Respondent agreed to purchase a substantial number of Standard fashion sheets, to purchase and keep on hand at all times, except during the period of exchange, $1,000 value in Standard patterns at net invoice prices, and to pay the petitioner for the pattern stock to be selected by it on terms of payment which are stated. Respondent agreed not to assign or transfer the agency, or to remove it from its original location, without the written consent of the petitioner, and not to sell or permit to be sold on its premises during the period of the contract any other make of patterns, and not to sell Standard patterns except at label prices. Respondent agreed to permit petitioner to take account of pattern stock whenever it desired, to pay proper attention to sale of Standard patterns, to conserve the best interests of the agency at all times, and to reorder promptly as patterns were sold. Either party desiring to terminate the agreement was required to give the other party three months' notice in writing, within thirty days after the expiration of any contract period, the agency to continue during such three months. Upon expiration of such notice respondent agreed to promptly return to the petitioner all Standard patterns, and petitioner agreed to credit the respondent for the same on receipt in good order at three-fourths cost. Neglect to return the pattern stock within two weeks after the expiration of the three months' notice to relieve the petitioner from all obligation to redeem the same. It was further stipulated that in the event the business property of the respondent, or a substantial part thereof, should be disposed of by respondent for business other than that of dry goods or as a general department store, the respondent should have the privilege of terminating the contract by giving the petitioner due notice of such change. Two weeks after the change in the premises had been made the respondent might deliver its stock of Standard patterns to the petitioner for repurchase under the repurchase clause of the contract.

*

*

*

The principal question in the case, and the one upon which the writ of certiorari was granted, involves the construction of section 3 of the Clayton Act. 38 Stat. 731 (Comp. St. § 8835c). That section, so far as pertinent here, provides:

"It shall be unlawful *

tract for sale of goods, * *

to lease or make a sale or conor fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement or understanding that the lessee or purchaser thereof shall not use or deal in the goods * * * of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, or agreement or understanding may be to substantial

ly lessen competition or tend to create a monopoly in any line of commerce."

The contract contains an agreement that the respondent shall not sell or permit to be sold on its premises during the term of the contract any other make of patterns. It is shown that on or about July 1, 1917, the respondent discontinued the sale of the petitioner's patterns and placed on sale in its store patterns of a rival company known as the McCall Company.

It is insisted by the petitioner that the contract is not one of sale, but one of agency or joint venture, but an analysis of the contract shows that a sale was in fact intended and made. It is provided that patterns returned for exchange must have been purchased from the petitioner. Respondent agreed to purchase a certain number of patterns. Upon expiration of the notice of termination the respondent agreed to return all Standard patterns bought under the contract. In the event of the disposition of the business property of the respondent at Washington street and Temple Place, the respondent might deliver its stock of Standard patterns to the petitioner for repurchase under the repurchase clause of the contract.

Full title and dominion passed to the buyer. While this contract is designated one of agency, it is perfectly apparent that it is one of sale. * * * The contract required the purchaser not to deal in goods of competitors of the seller. It is idle to say that the covenant was limited to the premises of the purchaser, and that sales might be made by it elsewhere. The purchaser kept a retail store in Boston. It was not contemplated that it would make sales elsewhere. The covenant, read in the light of the circumstances in which it was made, is one by which the purchaser agreed not to sell any other make of patterns while the contract was in force. The real question is: Does the contract of sale come within the third section of the Clayton Act, because the covenant not to sell the patterns of others "may be to substantially lessen competition or tend to create a monopoly"?

The Clayton Act, as its title and the history of its enactment disclose, was intended to supplement the purpose and effect of other anti-trust legislation, principally the Sherman Act of 1890 (Comp. St. §§ 88208823, 8827-8830). The latter act had been interpreted by this court to apply to contracts, combinations and conspiracies which unduly obstruct the free and natural flow of commerce.

* *

As the Sherman Act was usually administered, when a case was made out, it resulted in a decree dissolving the combination, sometimes with unsatisfactory results so far as the purpose to maintain free competition was concerned. The Clayton Act sought to reach the agreements embraced within its sphere in their incipiency, and in the section under consideration to determine their legality by specific tests of its own which declared illegal contracts of sale made upon the agreement or understanding that the purchaser shall not deal in the goods of a competitor or competitors of the seller, which "may substantially lessen competition or tend to create a monopoly." *

* *

Section 3 condemns sales or agreements where the effect of such sale or contract of sale "may" be to substantially lessen competition or tend to create a monopoly. It thus deals with consequences to follow the making of the restrictive covenant limiting the right of the purchaser to deal in the goods of the seller only. But we do not think the purpose in using the word "may" was to prohibit the mere possibility

of the consequences described. It was intended to prevent such agreements as would under the circumstances disclosed probably lessen competition or create an actual tendency to monopoly. That it was not intended to reach every remote lessening of competition is shown in the requirement that such lessening must be substantial.

Both courts below found that the contract, interpreted in the light of the circumstances surrounding the making of it, was within the provisions of the Clayton Act, as one which substantially lessened competition and tended to create monopoly. These courts put special stress upon the fact found that, of 52,000 so-called pattern agencies in the entire country, the petitioner, or a holding company controlling it and two other pattern companies, approximately controlled two-fifths of such agencies. As the Circuit Court of Appeals summarizing the matter pertinently observed:

"The restriction of each merchant to one pattern manufacturer must in hundreds, perhaps in thousands, of small communities amount to giving such single pattern manufacturer a monopoly of the business. in such community. Even in the larger cities, to limit to a single pattern maker the pattern business of dealers most resorted to by cus tomers whose purchases tend to give fashions their vogue, may tend to facilitate further combinations; so that the plaintiff, or some other aggressive concern, instead of controlling two-fifths, will shortly have almost, if not quite, all, of the pattern business."

We agree with these conclusions, and have no doubt that the contract, properly interpreted, with its restrictive covenant, brings it fairly within the section of the Clayton Act under consideration.

Affirmed.

SECTION 2.-RIGHT TO COMPETE

TUTTLE v. BUCK.

(Supreme Court of Minnesota, 1909. 107 Minn. 145, 119 N. W. 946, 22 L. R. A. [N. S.] 599, 131 Am. St. Rep. 446, 16 Ann. Cas. 807.)

Action by Edward C. Tuttle against Cassius M. Buck. Verdict for plaintiff. From an order denying a new trial, defendant appeals.

This appeal was from an order overruling a general demurrer to a complaint in which the plaintiff alleged: That for more than 10 years last past he has been and still is a barber by trade, and engaged in business as such in the village of Howard Lake, Minn., in said county, where he resides, owning and operating a shop for the purpose of his said trade. That until the injury hereinafter complained of his said business was prosperous, and plaintiff was enabled thereby to comfortably maintain himself and family out of the income and profits thereof, and also to save a considerable sum per annum, to wit, about $800. That the defendant, during the period of about 12 months last past, has wrongfully, unlawfully, and maliciously endeavored to destroy plaintiff's said business and compel plaintiff to abandon the same. That to that end he has persistently and systematically sought, by false and malicious reports and accusations of and concerning the plaintiff, by personally soliciting and urging plaintiff's patrons no longer to employ plaintiff, by threats of his personal displeasure, and by various other

unlawful means and devices, to induce, and has thereby induced, many of said patrons to withhold from plaintiff the employment by them formerly given. That defendant is possessed of large means, and is engaged in the business of a banker in said village of Howard Lake, at Dassel, Minn., and at divers other places, and is nowise interested in the occupation of a barber; yet in the pursuance of the wicked, malicious, and unlawful purpose aforesaid, and for the sole and only purpose of injuring the trade of the plaintiff, and of accomplishing his purpose and threats of ruining the plaintiff's said business and driving him out of said village, the defendant fitted up and furnished a barber shop in said village for conducting the trade of barbering. That failing to induce any barber to occupy said shop on his own account, though offered at nominal rental, said defendant, with the wrongful and malicious purpose aforesaid, and not otherwise, has during the time herein stated hired two barbers in succession for a stated salary, paid by him, to occupy said shop, and to serve so many of plaintiff's patrons as said defendant has been or may be able by the means aforesaid to direct from plaintiff's shop. That at the present time a barber so employed and paid by the defendant is occupying and nominally conducting the shop thus fitted and furnished by the defendant, without paying any rent therefor, and under an agreement with defendant whereby the income of said shop is required to be paid to defendant, and is so paid in partial return for his wages. That all of said things were and are done by defendant with the sole design of injuring the plaintiff, and of destroying his said business, and not for the purpose of serving any legitimate interest of his own. That by reason of the great wealth and prominence of the defendant, and the personal and financial influence consequent thereon, he has by the means aforesaid, and through other unlawful means and devices by him employed, materially injured the business of the plaintiff, has largely reduced the income and profits thereof, and intends and threatens to destroy the same altogether, to plaintiff's damage in the sum of $10,000.

ELLIOTT, J. (after stating the facts as above). It has been said that the law deals only with externals, and that a lawful act cannot be made the foundation of an action because it was done with an evil motive. In Allen v. Flood, [1898] A. C. 151, Lord Watson said that, except with regard to crimes, the law does not take into account motives as constituting an element of civil wrong. In Mayor v. Pickles, [1895] A. C. 587, Lord Halsbury stated that if the act was lawful, "however ill the motive might be, he had a right to do it." In Raycroft v. Tayntor, 68 Vt. 219, 35 Atl. 53, 33 L. R. A. 225, 54 Am. St. Rep. 882, the court said that, "where one exercises a legal right only, the motive which actuates him is immaterial." In Jenkens v. Fowler, 24 Pa. 318, Mr. Justice Black said that "mischievous motives make a bad case worse, but they cannot make that wrong which in its own essence is lawful." * * * Such generalizations are of little value in determining concrete cases. They may state the truth, but not the whole truth. Each word and phrase used therein may require definition and limitation. Thus, before we can apply Judge Black's language to a particular case, we must determine what act is "in its own essence lawful." What did Lord Halsbury mean by the words "lawful act"? What is meant by "exercising a legal right"? It is not at all correct to say that the motive with which an act is done is always immaterial, providing the act itself is not unlawful. Numerous illustrations of the contrary will be found in the civil as well as the criminal law.