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where the public need was manifest and urgent, a fanciful resemblance to the innkeeper or the carrier was often worked out to sustain the constitutionality of regulation by the legislature. Examples of this are to be found in the familiar straining of facts to find a “dedication” to the public; 11 the argument that rates could not be regulated unless the business enjoyed eminent domain; 12 and other instances of artificial reasoning which have continued down to the dissenting opinions in the Pipe Line and Insurance Rate 13 cases.
The significance of the two principal cases is that they discard the formal, threadbare analogy to carrier and innkeeper. The right to regulate prices is restored to its place as a branch of the police power of state and nation.14 In a previous case the Supreme Court had disapproved of any restriction of the police power to legislation promoting public health, morals and safety, and declared that it may be "employed in aid of what is held by the prevailing morality or strong and preponderant public opinion to be greatly and immediately necessary to the public welfare." 15
The apparently wide latitude for price regulation which such an elusive criterion permits might seem to confirm the fears of Mr. Justice Brewer. But a study of the court's method in approaching the insurance rate problem 16 is reassuring as a concrete demonstration of the advantages of such a test. The court, after overthrowing former tests, cited many statutes as evidencing a “strong and preponderant public opinion” that the situation demanded governmental regulation, 7 and anachronistic insurer's liability which was imposed on innkeepers and carriers influenced the courts to think of all their other exacting duties as outgrown historical survivals.
11 Conspicuous in Munn v. Illinois, 94 U. S. 113; and see comment in FREUND, POLICE POWER, $ 372. In the Insurance Case there was no tangible property to be “dedicated” to the public aid, and in the Pipe Line Case there was an express exclusion of the public.
12 Whereas the right of a business to eminent domain is itself dependent on the same considerations as the liability to price regulation. See Harding v. Goodlett, 3 Yerg. (Tenn.) 41; Brown v. Gerald, 100 Me. 351, 61 Atl. 785.
13 The following passage in this opinion strikingly exhibits the constraints of the old analogies: as further pointing out the characteristics of the public use justifying the fixing of prices, it will be noted that, with the exception of toll mills
they all have direct relation to the business or facilities of transportation or distribution. They appear to be grouped around the common carrier as the typical public business.'
14 Wm. Draper Lewis, in 21 HARV. L. Rev. 609, distinguished the police power from the power to regulate prices, on the ground that the police power may be exercised without providing compensation for injury done, while price regulation must be reasonable. But the limits of the police power in a particular case are determined by the extent of the public welfare, which would not be served by requiring carriers, innkeepers or insurance companies to do business at less than a reasonable rate.
15 See Noble State Bank v. Haskell, 219 U. S. 104, 111. Cf. Mutual Loan Co. 0. Martell, 222 U. S. 225, 237,
16 See 26 Harv. L. Rev. 631 for a discussion of the Pipe Line Case after the decision in the lower court.
17 The following cases either sustain or assume the constitutionality of statutes regulating insurance: restricting the business to corporations - People o. Loew, 19 Misc. 248, 44 N. Y. Supp. 42; Com. v. Vrooman, 164 Pa. St. 306, 30 Atl
. 217; State o. Ackerman, 51 Oh. St. 163, 37 N. E. 828; prescribing standard policies-Orient Ins. Co. v. Daggs, 172 U. S. 557; N. Y. L. Ins. Co. v. Hardison, 199 Mass. 190, 85 N. E. 410; Nalley v. Home Ins. Co., 250 Mo. 452, 157 S. W. 769; prohibiting discrimination, People v. Hart L. Ins. Co., 252 Ill. 398, 96 N. E. 1049; N. A. Ins. Co. v. Yates, 214 the reasonableness of this dominant opinion is shown by an analysis of the business itself. Every prudent member of the community, for whom insurance in some form ha ecome a necessity, is at the mercy of a few powerful corporations which frequently act in concert to extort unreasonable rates.18 Here is a situation which amply justifies regulation as far as it has gone, and, the court concludes, measuring the limits of the power by the extent of the public needs, “How can it be said that fixing the price of insurance is beyond that power and the other instances of regulation are not?”
No legislative fiat can force a business into the province where this power is operative, for the elements which warrant its exercise are beyond legislative control. Few employments are of such intrinsic public importance as to make regulation of their prices essential to the public welfare. But in the light of these decisions it must be clear that abstract principles of liberty and antiquated economic theories can no longer be invoked to justify the abuse of an economic advantage, however honestly it may have been acquired.
THE DISSOLUTION OF THE INTERNATIONAL HARVESTER COMPANY. Two things are forbidden in the two famous opening sections of the Sherman Act, - combination in restraint of trade, and monopoly. Prior to 1910 these vital words in the statute were confined to their strict linguistic value and no more, and there are extreme authorities from that period to the effect that any cutting down of competition whatever is ipso facto illegal if the result of combination. But in 1910 the Supreme Court of the United States by its decisions and dicta in the Standard Oil and Tobacco cases wrought a profound change in what was generally understood to be the law, and declared illegal only those combinations which diminish competition and at the same time either in purpose or result jeopardize the business welfare of the general public or of private individuals. In both decisions the key-note is the defendant's unfair methods and abuse of power; in other words, the statute was interpreted in the light of the “rule of reason."
If combinations in restraint of trade as prohibited by the first section of the Act are to be tested by this new standard, it is difficult to find an III. 272, 73 N. E. 423; Equitable L. Assurance Soc. v. Com., 113 Ky. 126,67 S. W. 388; providing for increased recovery penalty in case of rate agreements -- German All. Ins. Co. o. Hale, 219 U. S. 307; regulating rates Citizens' Ins. Co. o. Clay, 197 Fed. 435. adequate basis for dissolving the International Harvester Company, as was done recently by a Federal District Court. United States v. International Harvester Co., 214 Fed. 987 (Dist. Ct. Minn.).* The prosecution failed to prove any undue enhancement of prices, limiting of production, cutting of wages or the prices on raw materials, or any substantial use. of unfair methods toward competitors, although the combination of six formerly independent manufacturers of harvesting machinery had been completed for over ten years. And yet the corporation was dissolved. The majority seem to rest their opinion on the single fact that the corporation controls over 80 per cent of the total product. With due respect, it is submitted that this is a return to the earlier cases, for mere size cannot possibly constitute illegal restraint of trade under the present interpretation until it has been shown that unfair conduct characterized or injurious results flowed from the combination.
A statute requiring insurance companies to charge reasonable rates has been in force in New Hampshire for fifteen years, but has apparently never been passed upon in the courts. New HAMPSHIRE LAWS, 1899, c. 85, § 1.
18 For two instances which have gotten into the reports, see Bell v. Louisville Board of Fire Underwriters, 146 Ky. 841, 143 S. W. 388; State of New Jersey o. Fireman's Ins. Co., 74 N. J. E. 372, 73 Atl. 80.
1 Chap. 647, LAWS OF 1890; 26 U. S. STAT. AT LARGE, 209; 1 Rev. St. U. S. SUPP., 2d ed., 762:
2 United States v. Joint-Traffic Association, 171 U. S. 505; United States v. TransMissouri Freight Association, 166 U. S. 290.
3 Standard Oil Co. v. United States, 221 U. S. 1. See especially the dissenting opinion of Harlan, J., which is based on the argument that the Supreme Court is reversing itself. United States v. American Tobacco Co., 221 U. S. 106. See article by Robert L. Raymond, 25 Harv. L. Rev. 31.
Nor does it satisfactorily appear that the Harvester Company has violated the second section of the statute, that “every person who shall monopolize, etc. . . . shall be guilty.” Even if the word “monopoly” be taken strictly, the case against this corporation falls short, for the record shows that its percentage of the total product has materially decreased during the ten-year period, that a new competitor capitalized at $20,000,000 has successfully entered the field, and that other competitors have prospered and grown. But if it is premised, nevertheless, that the percentage of output is so overwhelming as to be conclusive on the question of power to control the industry, the issue is squarely raised of whether within the purview of the Act the essence of monopoly is to be regarded as power or the abuse of power. The conclusion seems irresistible that the rule of reason softens the provisions of the second section of the Act just as it does the first. The language of Mr. Justice White in the Tobacco case indicates that the limitation of reasonableness is a rule of construction for the entire statute, while in the Standard Oil case he describes the Act as purely declaratory, and says that at common law “monopolies were unlawful because of their restriction upon individual freedom of contract and their injury to the public.” 8 He says in the Tobacco case that the majority rest their opinion not on the power and dominion of the corporation, but on its unlawful practices." But the strongest support for this view is to be found in a case decided since 1910, where the Supreme Court declares that the unification of all the terminal facilities in a city is not under all circumstances illegal, but only becomes so when it appears that the control was wrongfully obtained or injuriously exercised.10 Under this interpretation of the
4 The court was composed of three circuit judges, Sanborn, Smith, and Hook. Judge Sanborn dissented vigorously from the majority opinions. For a statement of the case see RECENT CASES, P. 114.
5 The leading majority opinion makes no charge whatever of reprehensible conduct, the concurring judge expressly exonerates the defendants from such a charge, while the dissenting judge quotes at length from the record to show how exemplary have been the operations of the corporation. 6 See , Col. L. REV. 104.
221 U. S. 106, 180. 8 Ibid., pp. I, 54.
9 Ibid., pp. 106, 182. 10 United States v. St. Louis Terminal, 224 U. S. 383, 394, 395. On p. 395 occurs a phrase which appears to be contradictory. The court says, "Whether it is an unreasonable restraint will depend upon the intent to be inferred from the extent of the
Sherman Act the dissolution of the International Harvester Company, or of any other combination that possessed the power to control an industry, could only be justified on proof that the power so held had been, or was about to be, abused to the injury of the public or individuals.
The decision of the Supreme Court will be awaited with widespread interest. To affirm the lower court and hold that mere size and the potential control of an industry constitute a sufficient basis for dissolution would devitalize completely the rule of reason. The case is consequently one of tremendous importance to American industry.
LEGISLATIVE MINIMUM WAGE FOR WOMEN AND MINORS. - The Fourteenth Amendment to the Constitution does not deprive the states of the right, in the exercise of the police powers of government, to take measures for protecting the safety, health, morals and welfare of their citizens. While it is now recognized that a state may upon this ground regulate the conditions of labor in modern industry in the interest of social betterment, the constitutional limitations upon legislation of this character are not in general well defined. As regards limiting the hours of work, however, the prevailing doctrine has come to be that reasonable restrictions may be placed upon the length of daily employment of all women and children workers 2 and of men engaged in particularly dangerous and unhealthful occupations. Decisions to this effect are plainly sound in view of the manifest necessity of protecting the health of such classes of workers from the peculiar risks to which they are subjected. On the other hand, the validity of minimum wage statutes had not been determined until the Supreme Court of Oregon recently held constitutional a statute which authorizes a commission to fix under criminal penalties a legal minimum wage for women and children employed in any industry. Stettler v. O'Hara, 139 Pac. 743.4 control secured”; but the opinion taken as a whole isolates this single clause and justifies regarding the case as an authority for the proposition that it is not power but the abuse of it which constitutes a violation of the Sherman Act.
Harlan, J., in Patterson v. Kentucky, 97 U. S. 504; and see article by Francis J. Swayze in 26 Harv. L. Rev. 1. For an example of the broad application of the police power in another connection, see this issue of the REVIEW, p. 84.
· State v. Buchanan, 29 Wash. 602, 70 Pac. 52; Muller v. Oregon, 208 U. S. 412; Wenham o. State, 65 Neb. 394, 91 N. W. 421; Commonwealth v. Hamilton Co., 120 Mass. 383; Ritchie Co. o. Wayman, 244 Ill. 509; People v. Elderding, 254 Ill. 579; Commonwealth v. Riley, 210 Mass. 387; State v. Somerville, 67 Wash. 638, 122 Pac. 324. Ritchie v. People, 155 Ill. 98, contra, has been distinguished by the later Illinois Statutes regulating wages seem to differ somewhat radically from those which limit the hours of labor. The latter may constitutionally restrict the bargaining of employer and employee only to an extent determined by the harmful effects of the occupation upon the class of workers in question; whereas the minimum wage acts fix the pay a worker must receive by the sum needed to meet adequately the local cost of living, a sum which may vary in different localities. Regulation of the hours of labor may be considered as preventing the employer from using his superior economic position to injure the health of his employees. Fixing the minimum wage seems rather like compelling him affirmatively to assist them in order to correct social evils which, in a sense, he has not caused. The employer may compare himself to the keeper of a restaurant, whom the state may legitimately prohibit from selling harmful food, but who cannot be ordered to lower his prices in order to solve the social problem of under-feeding.
3 Holden v. Hardy, 169 U.S. 366; Ex parle Boyce, 27 Nev. 299, 75 Pac. 1. Re Morgan, 26 Colo. 415, 58 Pac. 1071, contra. In the following case the nature of the employment was held not to justify the regulation: Lochner v. New York, 198 U. S. 45; and see Ex parte Westerfield, 55 Cal. 550. Without resorting to the exercise of the police power, the state may as a condition of letting its contracts enforce more stringent regulations as to hours of labor upon work done for itself or its municipalities. Atkin 0. Kansas, 191 U. S. 207; Byars v. State, 2 Okla. Cr. 481. People v. Coler, 166 N. Y. 1, contra. On the same ground a minimum wage may be enforced in public employment. Malette v. Spokane, 137 Pac. 496 (Ore.). But see Street v. Varney Co., 160 Ind. 338, 66 N. E. 895.
* A statement of the facts of this case appears in RECENT CASES, p. 105.
Such arguments, it is submitted, exaggerate the difference between the two methods of regulation by minimizing the claim which the workers have upon the industry that employs them. The manufacturer who underpays is in fact affirmatively injuring his employees by utilizing the economic pressure for employment as a club. The wages paid an employee are as much the effect of the industry upon him as the hours he is made to work, and settle in large measure his whole condition in life. Moreover, if the state is to reduce the amount of labor the worker may daily offer for sale, it must for his protection prevent the employer from reducing correspondingly the price paid for it.? It would seem therefore that the police power must extend so far. That it does is indicated by the analogous case of the usury laws. Fixing the return a lender may exact for the use of his money seems not essentially different from fixing the return an employer must give for the labor he receives.
The minimum wage, then, seems fundamentally similar in principle to other accepted applications of the police power. To be constitutional, it must also appear reasonably adapted to improve the welfare of the
5 For this reason it would appear that if the minimum wage is constitutional in any case for men workers, there could be no ground for limiting it to dangerous occupations.
Cf. COOLEY, Const. Lim., 7 ed., p. 870; TIEDEMAN, LIMITATIONS OF THE POLICE POWER, $ 178; FREUND, POLICE POWER, $ 318; see also a pamphlet by Rome G. Brown entitled “THE MINIMUM WAGE."
? Although this argument applies only to a minimum wage for such workers as are now subject to legal regulation of the hours of labor, — namely, those employed in hazardous occupations and women and children, - it is serviceable in the Oregon case, since there is an Oregon hours-of-labor statute applying to the same classes of employees as the act here in question.
3 See an article by Learned Hand in 21 Harv. L. Rev. 495, 505, n. 2. As is there pointed out, the usury statutes, with a continuous history since the days of Tudor paternalistic legislation, are one of the few forms of governmental regulation of business which came unscathed through the period of the laissez faire economic doctrine. Although anomalous in this respect, they are none the less legitimate instances of the sort of thing thať represented "due process of law” at an early period. See in this connection articles by E. S. Corbin in 24 Harv. L. Rev. 366, 460, and Prof. Roscoe Pound in 18 YALE L. J. 454. Wages were also regulated by statute as long ago as 5 Eliz., but such laws had become a dead letter before the adoption of our Constitution. The recent statutes are probably the first attempt to fix wages by law since colonial days.