United States v. Reading Co., 226 U.S. 324 (1912)

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United States v. Reading Company

No.198, 206, 217
Argued October 10, 11, 1911
Decided December 16, 1912
226 U.S. 324

APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Syllabus

The United States filed a bill to enforce the provisions of the Sherman Anti-Trust Act of July 2, 1890, against an alleged combination of railroad and coal mining companies formed to restrain competition in the production, sale, and transportation in interstate commerce of anthracite coal. The bill alleged a general combination through an agreement between the carrier defendants to apportion the coal tonnage between themselves on a scale of percentages; a combination through the medium of one of the mining companies to prevent the construction of a new competing coal carrying road from the anthracite district to tidewater, a combination by a series of identical contracts with independent coal operators for sale of their total product, and certain contributory combinations between some but not all of the defendants. The bill was filed prior to the enactment of the Commodities Clause of the Hepburn Act of June 29, 1906.

Held that:

Any relief against a continuance of the transportation of carrier-owned coal under the Commodities Clause must be sought in a proceeding based upon that act, and cannot be obtained in this suit.

On the record in this case, this Court agrees with the court below that the Government has failed to show any contract or combination for the distribution of coal tonnage between the carriers.

The defendants did combine to unreasonably restrain interstate commerce in violation of the Sherman Anti-Trust Act through the Temple Iron Company to prevent the construction of the competing coal-carrying railroad.

Although a combination has succeeded in accomplishing one of the purposes for which it was formed, if it is still an efficient agency to prevent competition in other methods, the court may proceed to judgment and decree its dissolution.

A disclaimer on the part of defendants of power of any one of them to control business of the others cannot detract from the significance of documentary evidence bearing on the relations of the defendants to each other.

Although separate acts of the defendants may be legal under the state law when considered alone, they may, when taken together, become parts of an illegal combination under the Anti-Trust Act which it is the duty of the court to dissolve.

Acts absolutely lawful may be steps in a criminal plot. Aikens v. Wisconsin, 195 U.S. 206.

While no one of a number of contracts, considered severally, may be in restraint of trade, each of a series of innocent contracts may be a step in a concerted criminal plot to restrain interstate trade, and if so, may thereupon become unlawful under the Anti-Trust Act. Swift Co. v. United States, 196 U.S. 375.

In this case, held that a series of identical contracts between interstate carriers with a great majority of the independent coal operators to market all the coal of the latter for all time at an agreed percentage of tidewater price were all parts of a concerted scheme to control the sale of the independent output, and were unreasonable contracts in restraint of interstate trade within the prohibition of the Sherman Act.

Where, as in this case, purchase and delivery within a state is but one step in a plan and purpose to control and dominate trade and commerce in other states for an illegal purpose, it is an interference with and restraint of interstate commerce. Loewe v. Lawlor, 208 U.S. 274.

While the Sherman Act does not forbid or restrain the power to make usual and normal contracts to further trade through normal methods, whether by agreement or otherwise, Standard Oil Co. v. United States, 221 U.S. 1, it does forbid contracts entered into according to a concerted scheme, as in this case, to unduly suppress competition and restrain freedom of commerce among the states.

While the law may not compel competition, it may remove illegal barriers resulting from illegal agreements, such as those involved in this case, which make competition impracticable.

Whether a particular act or agreement is reasonable and normal or unreasonable may in doubtful cases turn upon intent, and the extent of control obtained over the output of a commodity may afford evidence of the intent to suppress competition.

Where there is no doubt that the necessary result of an act is to materially restrain trade between the states, intent is of no consequence.

In a suit to restrain all defendants from carrying out an illegal combination under the Sherman Act in which all defendants participated, the Court will not consider minor combinations between less than all of the defendants which did not constitute part of the general combination found to be illegal. To do so would condemn the bill for misjoinder and multifariousness.

In this case, the Court expresses no opinion on such minor combinations, and, as to them, the bill should be dismissed without prejudice.

183 F. 427 affirmed in part and reversed in part.

The facts, which involve the legality under the Sherman Anti-Trust Act of certain combinations of railroad and coal mining companies engaged in the production, sale, and transportation in interstate commerce of anthracite coal, are stated in the opinion.