northern securities co. v. united states, 193 u.s. 197 (1904)

8/17/2019 Northern Securities Co. v. United States, 193 U.S. 197 (1904)

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193 U.S. 197

24 S.Ct. 436

48 L.Ed. 679

NORTHERN SECURITIES COMPANY et al., Appts.,

v.UNITED STATES.

No. 277.

Argued December 14, 15, 1903.

Decided March 14, 1904.

1 [Syllabus, Complaint, and Answer from pages 197-257 intentionally omitted]

2 Mr. George B. Young argued the cause and filed a brief for appellant the

Northern Securities Company:

3 [Argument of Counsel from Pages 257-265 intentionally omitted]

4 The government is not entitled to maintain this proceeding, nor had the circuitcourt jurisdiction of it; for the conspiracy or combination charged in the

petition and found by the circuit court, if it ever existed, had done all it was

formed to do, and had come to an end, before the proceeding was instituted.

5 The only combination of which there is any evidence is a combination formed

in aid of commerce, to liberate, protect, and enlarge, and not to restrain it, and

which has liberated, protected, aided, and enlarged it, and has not restrained,

and does not threaten to restrain it.

6 All the facts and circumstances are to be considered in order to determine the

fundamental question whether the necessary effect of the combination is to

restrain interstate commerce.

7 Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 245, 44 L. ed. 136,

149, 20 Sup. Ct. Rep. 96; Oregon Steam Nav. Co. v. Winsor , 20 Wall. 64, 68,22 L. ed. 315, 318.

8 The law of self-defense and protection applies to one's business as well as to


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one's person.

9 United States Chemical Co. v. Provident Chemical Co. 64 Fed. 946.

10 The combination here is analogous to the covenant of the seller of a business

that he will not engage in it, which has been declared not to testrain trade.

11 United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 329, 41 L. ed.

1007, 1023, 17 Sup. Ct. Rep. 540.

12 If this combination is to be adjudged a combination and conspiracy in restraint

of commerce, there is scarcely an agreement or contract among business men

that cannot be said to have, indirectly or remotely, some bearing upon interstate

commerce, and possibly to restrain it.

13 Hopkins v. United States, 171 U. S. 578, 600, 43 L. ed. 290, 299, 19 Sup. Ct.

Rep. 40.

14 Congress did not attempt by the antitrust act to limit and restrict the rights of

corporations created by the states, or of citizens of the states, in the acquisition

or disposition of property, or to make criminal the acts of persons in the

acquisition and control of property, which the states of their residence or creation sanctioned or permitted.

15 United States v. E. C. Knight Co. 156 U. S. 1, 16, 39 L. ed. 325, 330, 15 Sup.

Ct. Rep. 249.

16 At common law a cessation or diminution of competition, springing from a

unity of ownership,—as, where one competitor sold his business to another, or both sold out to a third person, etc., was never regarded as a restraint of trade;

such cessation or diminution being incident to the union of property or business

in one ownership, and not a restraint imposed by contract.

17 And so such purchases, or agreements to purchase, have never been held

contracts in restraint of trade.

18 Trenton Potteries Co. v. Oliphant , 58 N. J. Eq. 507, 46 L. R. A. 255, 43 Atl.723; Oakdale Mfg. Co. v. Garst , 18 R. I. 484, 23 L. R. A. 639, 28 Atl. 973.

19 The formation of corporations for business or manufacturing purposes has


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never been regarded as in the nature of a contract in restraint of trade or

commerce. The same may be said of the contract of partnership.

20 United States v. Joint Traffic Asso. 171 U. S. 505, 567, 43 L. ed. 259, 286, 19

Sup. Ct. Rep. 25.

21 The only question is, Does the contract or combination itself, or do the things

the parties contracted to do, restrain commerce? If they do, the parties are

criminals, however good their motives. If they do not, the parties are innocent,

however reprehensible their designs.


1007, 1027, 17 Sup. Ct. Rep. 540; Addyston Pipe & Steel Co. v. United States,

175 U. S. 211, 234, 44 L. ed. 136, 145, 20 Sup. Ct. Rep. 96.

23 The power to suppress competition is not of itself suppression.

24 State v. Northern Securities Co. 123 Fed. 592.

25 The position of the government rests on a wholly erroneons view of the

relations of the shareholders of a railway company to the commerce of the

company, and of the power of a majority of the shareholders to restrain or otherwise control that commerce.

26 Hoyt v. Thompson, 19 N. Y. 207; Burrill v. Nahant Bank, 2 Met. 163, 35 Am.

Dec. 395; Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L.

ed. 499, 6 Sup. Ct. Rep. 194.

27 A monopoly of trade embraces two essential elements: (1) The acquisition of anexclusive right to or the exclusive control of the trade; and (2) the exclusion of

all others from that right and control.

28 United States v. Trans-Missouri Freight Asso. 7 C. C. A. 15, 19 U. S. App. 36,

4 Inters. Com. Rep. 443, 58 Fed. 58.

29 An attempt to monopolize any part of the trade or commerce among the states

must be an attempt to secure or acquire an exclusive right to such trade or commerce by means which prevent or restrain others from engaging therein.

30 Re Greene, 52 Fed. 104.


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31 Monopolies are liable to be oppressive, and hence are deemed to be hostile to

the public good. But combinations for a mutual advantage, which do not

amount to a monopoly, but leave the fleld open to others, are within neither the

reason nor the operation of the rule.

32 Oakdale Mfg. Co. v. Garst , 18 R. I. 484, 23 L. R. A. 639, 28 Atl. 973.

33 The anti-trust act and the regulative power of Congress under the commerce

clause of the Constitution are alike strictly confined to matters which directly

and immediately affect interstate or foreign commerce.

34 United States v. E. C. Knight Co. 156 U. S. 1, 39 L. ed. 325, 15 Sup. Ct. Rep.

249; United States v. Trans-Missouri Freight Asso. 166 U. S. 291, 41 L. ed.

1011, 17 Sup. Ct. Rep. 540; United States v. Joint Traffio Asso. 171 U. S. 505,43 L. ed. 259, 19 Sup. Ct. Rep. 25; Hopkins v. United States, 171 U. S. 578,

594, 43 L. ed. 290, 296, 19 Sup. Ct. Rep. 40; Anderson v. United States, 171 U.

S. 604, 43 L. ed. 300, 19 Sup. Ct. Rep. 50; Addyston Pipe & Steel Co. v. United

States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96.

35 A state may not tax railway earnings from transportation as such, for that is

taxing the commerce, and is a direct regulation of it.

36 Fargo v. Michigan, 121 U. S. 230, 30 L. ed. 888, 1 Inters. Com. Rep. 51, 7

Sup. Ct. Rep. 857; Philadelphia & S. Mail S. S. Co. v. Pennsylvania, 122 U. S.

326, 338, 30 L. ed. 1200, 1202, 1 Inters. Com. Rep. 308, 7 Sup. Ct. Rep. 1118.

37 But it may tax the tolls received by a local railroad company for the use of part

of its road by another company engaged in interstate commerce; for this is a tax

on property, and not on commerce. Any increase of rates by the carrying

company, consequent on a raising of the tolls because of the tax, is 'too remoteand indirect' to make the act a regulation of commerce.

38 New York, L. E. & W. R. Co. v. Pennsylvania, 158 U. S. 431, 39 L. ed. 1043, 15

Sup. Ct. Rep. 896.

39 A state may tax the franchise of a foreign corporation upon a valuation

measured by gross receipts from interstate and foreign as well as domestic

commerce. This is not a direct regulation; the tax is not laid on the commerce

itself.


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. . . . . , . . , . . .

807, 12 Sup. Ct. Rep. 121, 163.

41 A law imposing a privilege tax of $50 on every sleeping car running over the

railroads of the state is void as to cars used in interstate transportation, for it is a

direct regulation of commerce.

42 Pickard v. Pullman Southern Car Co. 117 U. S. 34, 29 L. ed. 785, 6 Sup. Ct.

Rep. 635.

43 But the state may tax the same cars, not because used in commerce, but

because within the state, as property in the state; and the tax may take the form

of a tax on the company's capital. Here the tax is laid directly on the property

of the company,—its cars,—and not on the use of the cars in interstate

commerce; and if it regulates such commerce at all, it does so indirectly.

44 Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 25, 35 L. ed. 613,

617, 3 Inters. Com. Rep. 595, 11 Sup. Ct. Rep. 876.

45 A state may not tax United States bonds as such. It may not tax an individual or

corporation on the value of the bonds held by him, for this would be to tax the

bonds directly. But shares in a national bank are taxable by a state at their full

value, like other property, no matter how much of the bank's capital is investedin United States bonds. Such tax does not fall directly on the bonds.

46 Van Allen v. The Assessors, 3 Wall. 575, 18 L. ed. 229.

47 If the power to regulate interstate commerce applied to all the incidents to

which said commerce might give rise, and to all contracts which might be made

in the course of its transaction, that power would embrace the entire sphere of mercantile activity in any way connected with trade between the states, and

would exclude state control over many contracts purely domestic in their

nature.

48 Hooper v. California, 155 U. S. 648, 655, 39 L. ed. 297, 300, 5 Inters. Com.

Rep. 610, 15 Sup. Ct. Rep. 207; Williams v. Fears, 179 U. S. 270, 278, 45 L.

ed. 186, 190, 21 Sup. Ct. Rep. 128.

49 A complete bar to the government's attempted encroachment on the rights of

the states and their citizens is found in Pearsall v. Great Northern R. Co. 161

U. S. 646, 40 L. ed. 838, 16 Sup. Ct. Rep. 705, and Louisville & N. R. Co. v.


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Kentucky, 161 U. S. 677, 40 L. ed. 849, 16 Sup. Ct. Rep. 714.

50 Congress, when passing the act, knew that the railway system of the country

rested on consolidations, actual or virtual, authorized by state laws, some of

them having existed many years.

51 Chesapeake & P. Teleph. Co. v. Manning , 186 U. S. 238, 245, 46 L. ed. 1144,

22 Sup. Ct. Rep. 881.

52 These are also matters within the judicial knowledge of the court.

53 Ohio L. Ins. & T. Co. v. Debolt , 16 How. 416, 435, 14 L. ed 997, 1005;

Baltimore & O. R. Co. v. Maryland , 21 Wall. 456, 469, 22 L. ed. 678, 683;

Brown v. Piper , 91 U. S. 37, 42, 23 L. ed. 200, 202; Phillips v. Detroit , 111 U.S. 604, 606, 28 L. ed. 532, 533, 4 Sup. Ct. Rep. 580; Lehigh Valley R. Co. v.

Pennsylvania, 145 U. S. 192, 201, 36 L. ed. 672, 675, 4 Inters. Com. Rep. 87,

12 Sup. Ct. Rep. 806; Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 699,

40 L. ed. 849, 858, 16 Sup. Ct. Rep. 714; Preston v. Browder , 1 Wheat. 115,

121, 4 L. ed. 50, 51; United States v. Union P. R. Co. 91 U. S. 72, 79, 23 L. ed.

224, 228; Platt v. Union P. R. Co. 99 U. S. 48, 25 L. ed. 424; Chesapeake & P.

Teleph. Co. v. Manning , 186 U. S. 238, 245, 46 L. ed. 1144, 1147, 22 Sup. Ct.

Rep. 881.

54 If Congress had meant to declare such consolidations and stock purchases of

competing companies to be illegal, the securities issued by them void, and the

state legislation unconstitutional, it would have said so in plain, specific, and

apt language.

55 There can be no question but that every combination declared illegal by the act

would have been equally so—no more, no less before the act.

56 Re Debs, 158 U. S. 564, 581, 39 L. ed. 1092, 1101, 15 Sup. Ct. Rep. 900;

Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 229, 44 L. ed. 136,

143, 20 Sup. Ct. Rep. 96.

57 [Argument of Counsel from pages 265-268 intentionally omitted]

58 Mr. John G. Johnson also argued the cause and filed a brief for appellant the

Northern Securities Company:


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60 The acts which can be prevented and restrained by proceedings in equity are

those, and those alone, made criminal by the 1st and 2d sections of the

Sherman act.1 The statute is therefore a penal one, defining a criminal offense,

for which it provides a punishment. It is an indispensable prerequisite to aconviction for a criminal misdemeanor,—especially if there be no criminal

intent, and such did not exist in the present case,—that the offense condemned

shall be clearly defined.

61 United States v. Wiltberger , 5 Wheat. 76, 5 L. ed. 37; United States v. Whittier ,

5 Dill. 35, Fed. Cas. No. 16,688; Andrews v. United States, 2 Story, 213, Fed.

Cas. No. 381; United States v. Hartwell , 6 Wall. 385, 396, 18 L. ed. 830, 832;

Swearingen v. United States, 161 U. S. 446, 451, 40 L. ed. 765, 16 Sup. Ct.Rep. 562; France v. United States, 164 U. S. 676, 682, 41 L. ed. 595, 597, 17

Sup. Ct. Rep. 219; The Paulina v. United States, 7 Cranch, 61, 3 L. ed. 269;

United States v. Reese, 92 U. S. 219, 23 L. ed. 565; United States v.

Comerford , 25 Fed. 902; United States v. Chase, 135 U. S. 255, 261, 34 L. ed.

117, 119, 10 Sup. Ct. Rep. 756; United States v. Goldenberg , 166 U. S. 102, 42

L. ed. 398, 18 Sup. Ct. Rep. 3; Sarlls v. United States, 152 U. S. 570, 575, 38

L. ed. 556, 558, 14 Sup. Ct. Rep. 720.

62 The meaning of the words, 'contracts in restraint of trade,' was thoroughly

understood in jurisprudence and in business when the Sherman act was passed.

It was not the intention of Congress to create any new offense.

63 United States v. Trans-Missouri Freight Asso. 166 U. S. 328, 41 L. ed. 1023,

17 Sup. Ct. Rep. 540.

64 The Sherman act does not apply to the formation of a corporation to carry onany particular line of business by those already engaged therein, or to a contract

of partnership or of employment between two persons previously engaged in

the same line of business.

65 United States v. Joint Traffic Asso. 171 U. S. 567, 43 L. ed. 286, 19 Sup. Ct.

Rep. 25.

66 The idea of monopoly involves something more than a mere acquisition of the

whole, or of the major part, of a commodity or of shares of stock. It involves

the idea of exclusion of other supply, as well as inclusion of what is actually


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acquired.

67 Re Greene, 52 Fed. 104; Charles River Bridge v. Warren Bridge, 11 Pet. 606, 9

L. ed. 847; 20 Am. & Eng. Enc. Law, p. 846; 2 Bouvier, Law Dict. Rawle's ed.

p. 435; 4 Bl. Com. 159; Century Dict. Monopoly; United States v. Joint Traffic

Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct. Rep. 25.

68 The purchase by one person of the property of his rival, with the intention

thereby to destroy his competition, is not illegal, although by the purchase he

will acquire the power to prevent the same.

69 Oregon Steam Nav. Co. v. Winsor , 20 Wall. 64, 22 L. ed. 315.

70 The power of Congress to regulate commerce does not confer upon it a right to prescribe the persons who may engage therein, or to regulate or control the

ownership of shares of stock of corporations which engage therein.

71 United States v. E. C. Knight co. 156 U. S. 1, 39 L. ed. 325, 15 Sup. Ct. Rep.

294.

72 That construction of a statute should be adopted which, without doing violence

to the fair meaning of the words used, brings it into harmony with theConstitution.

73 Grenada County v. Brogden, 112 U. S. 28 L. ed. 704, 5 Sup. Ct. Rep. 125.

74 In interpreting a statute the intention of the law-making power will prevail even

against the letter of the statute. A thing may be within the letter of the statute,

and not within its meaning, or within its meaning, though not within its letter.

75 Hawaii v. Mankichi, 190 U. S. 197, 47 L. ed. 1016, 23 Sup. Ct. Rep. 787.

76 In Baltimore & O. R. Co. v. Maryland , 21 Wall. 456, 22 L. ed. 678, a

stipulation in the charter of a railroad company, that the company should pay to

the state a bonus, or a portion of its earnings, was held, not repugnant to the

Constitution of the United States.

77 In Ashley v. Ryan, 153 U. S. 436, 38 L. ed. 773, 4 Inters. Com. Rep. 664, 14

Sup. Ct. Rep. 865, a state was permitted, in allowing consolidation between

corporations of different states, to charge upon the new consolidated company


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a percentage on its entire authorized stock as a fee, inasmuch as, without the

franchises conferred by the state, it could not exist; and such charge was not an

interference with interstate commerce.

78 The relief decreed was improper under any aspect of the case.


Ct. Rep. 249.

80 Mr. Charles W. Bunn argued the cause and filed a brief for appellant the

Northern Pacific Railway Company:

81 The power of Congress has never been more accurately or completely

described than by Chief Justice Marshall in Gibbons v. Ogden, 9 Wheat. 1,189, 190, 6 L. ed. 23, 68: 'Commerce, undoubtedly, is traffic, but it is

something more,—it is intercourse. It describes the commercial intercourse

between nations and parts of nations, in all its branches, and is regulated by

prescribing rules for carrying on that intercourse.'

82 This definition has been frequently repeated by the court.

83 Passenger Cases, 7 How. 283, 394, 462, 12 L. ed. 702, 748, 777; Henderson v.Wickham, 92 U. S. 259, 270, 23 L. ed. 543, 548; Lottery Case, 188 U. S. 321,

346, 47 L. ed. 492, 497, 23 Sup. Ct. Rep. 321.

84 The power of Congress is only to regulate, and is the power to prescribe the

rule by which commerce is to be governed.

85 Gibbons v. Ogden, 9 Wheat. 196, 6 L. ed. 79.

86 The interstate commerce power of Congress justifies only such regulations as

act upon that commerce directly, and does not authorize regulations abridging

the police powers of the states or the personal rights and privileges of

individuals, if they affect that commerce only indirectly, remotely, incidentally,

and collaterally.

87 Re Greene, 52 Fed. 104; United States v. E. C. Knight Co. 156 U. S. 1, 39 L.ed. 325, 15 Sup. Ct. Rep. 249; Gibbons v. Ogden, 9 Wheat. 203, 6 L. ed. 71;

United States v. Joint Traffic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct.

Rep. 25; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. ed.


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136, 20 Sup. Ct. Rep. 96; Hopkins v. United States, 171 U. S. 592, 43 L. ed.

296, 19 Sup. Ct. Rep. 40; Anderson v. United States, 171 U. S. 615, 43 L. ed.

305, 19 Sup. Ct. Rep. 50; Sherlock v. Alling , 93 U. S. 99, 23 L. ed. 819;

Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 701, 40 L. ed. 849, 16 Sup.

Ct. Rep. 714.

88 If the decision of the circuit court is correct, all the state laws either forbiddingor authorizing consolidations of interstate carriers are and always have been

void.

89 Cooley v. Port Wardens, 12 How. 299, 13 L. ed. 996; Cushing v. The John

Fraser , 21 How. 184, 16 L. ed. 106; Pound v. Turck , 95 U. S. 459, 24 L. ed.

525; Robbins v. Shelby County Taxing Dist. 120 U. S. 492, 30 L. ed. 695, 1

Inters. Com. Rep. 45, 7 Sup. Ct. Rep. 592; Mobile County v. Kinball , 102 U. S.

691, 26 L. ed. 238; United States v. E. C. Knight Co. 156 U. S. 11, 12, 39 L.ed. 328, 329, 15 Sup. Ct. Rep. 249; Addyston Pipe & Steel Co. v. United States,

175 U. S. 230, 44 L. ed. 143, 20 Sup. Ct. Rep. 96.

90 Except as it punishes contracts, combinations, and conspiracies, the statute

intreduces no new rule of law. Whatever is a restraint of commerce now was

such before this statute. The act is new only in making the preliminary

conspiracy a crime.

91 Re Debs, 158 U. S. 564, 39 L. ed. 1092, 15 Sup. Ct. Rep. 900; Addyston Pipe &

Steel Co. v. United States, 175 U. S. 230, 44 L. ed. 143, 20 Sup. Ct. Rep. 96.

92 If a thing restrains interstate commerce, it is immaterial with what innocent

intent it may be done. On the other hand, if the thing complained of does not

restrain interstate commerce, it is immaterial how evil may be the intent.


1007, 1027, 17 Sup. Ct. Rep. 540.

94 If an action be lawful, it is elementary that its purpose is immaterial.

95 Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. ed. 136, 20

Sup. Ct. Rep. 96; Phelps v. Nowlen, 72 N. Y. 39, 28 Am. Rep. 93; Kiff v.

Youmans, 86 N. Y. 324, 40 Am. Rep. 543; Wood v. Amory, 105 N. Y. 278, 11

N. E. 636; Lough v. Outer-bridge, 143 N. Y. 271, 25 L. R. A. 674, 38 N. E.

292; Adler v. Fenton, 24 How. 407, 410, 16 L. ed. 696, 697; United States v.


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Greenhut , 51 Fed. 205; Re Greene, 52 Fed. 104; Randall v. Hazelton, 12 Allen,

412; Brackett v. Griswold , 112 N. Y. 454, 20 N. E. 376; United States v.

Isham, 17 Wall. 496, 21 L. ed. 728; Dickerman v. Northern Trust Co. 176 U. S.

181, 44 L. ed. 423, 20 Sup. Ct. Rep. 311; Fahrney v. Kelly, 102 Fed. 403;

Mogul S. S. Co. v. McGregor [1892] A. C. 25, 41; Allen v. Flood [1898] A. C.

1.

96 If buying and voting the stock restrains interstate commerce, it is illegal. If it

does not restrain interstate commerce, it is legal; and the conspiracy behind the

formation of the company was a conspiracy to do a lawful thing.

97 Bohn Mfg. Co. v. Hollis, 54 Minn. 223, sub nom. Bohn Mfg. Co. v.

Northwestern Lumbermen's Asso. 21 L. R. A. 337, 55 N. W. 1119.

98 A combination may destroy competition without restraining trade.


Rep. 25; United States v. Addyston Pipe & Steel Co. 46 L. R. A. 122, 29 C. C.

A. 141, 54 U. S. App. 744, 85 Fed. 271.

100 The business of a rival in trade may be purchased for the very purpose of being

rid of his competition.

101 Gamble v. Queens County Water Co. 123 N. Y. 91, 9 L. R. A. 527, 25 N. E.

201; Diamond Match Co. v. Roeber , 106 N. Y. 473, 60 Am. Rep. 464, 13 N. E.

419; Rafferty v. Buffalo City Gas Co. 37 App. Div. 618, 56 N. Y. Supp. 288;

Trenton Potteries Co. v. Oliphant , 56 N. J. Eq. 680, 39 Atl. 923; Oakdale Mfg.

Co. v. Garst , 18 R. I. 484, 23 L. R. A. 639, 28 Atl. 973.

102 Mr. John W. Griggs also filed a brief for appellant the Northern Securities

Company:

103 In the division of authority with respect to interstate railways, Congress

reserves to itself the superior right to control their commerce and forbid

interference therewith, while to the states remains the power to create and to

regulate the instruments of such commerce, so far as necessary to the

conservation of the public interests.

104 Louisville & N. R. Co. v. Kentucky, 161 U. S. 702, 40 L. ed. 859, 16 Sup. Ct.

Rep. 714.


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105 The courts of the United States since the passage of the Sherman act have been

called upon to restrain projected consolidations upon the ground that they were

contrary to state statutes, but no suggestion has been made that the legislation of

Congress expressed in the Sherman act had any bearing on the subject.

106 Pearsall v. Great Northern R. Co. 161 U. S. 648, 40 L. ed. 839, 16 Sup. Ct.

Rep. 705; Louisville & N. R. Co. v. Kentucky, 161 U. S. 702, 40 L. ed. 859, 16Sup. Ct. Rep. 714.

107 The power exists in each state, by appropriate enactments not forbidden by its

own or the Federal Constitution, to regulate the relative rights and duties of all

persons and corporations within its jurisdiction, so as to provide for the public

convenience and the public good. State legislation relating to commerce is not

to be deemed a regulation of interstate commerce simply because it may, to

some extent or under some circumstances, affect such commerce.

108 Lake Shore & M. S. R. Co. v. Ohio, 173 U. S. 285, 43 L. ed. 702, 19 Sup. Ct.

Rep. 465.

109 In Missouri, K. & T. R. Co. v. Haber , 169 U. S. 613, 42 L. ed. 878, 18 Sup. Ct.

Rep. 488, it was held that the authority given by § 5258 of the Revised Statutes

of the United States2

to carry 'freight and property' over their respective roadsfrom one state to another state did not authorize a railroad company to carry

into a state cattle known, or which by due diligence might be known, to be in

such condition as to impart or communicate disease to the domestic cattle of

such state.

110 And it has been expressly adjudged that the above statutory provision was not

intended to interfere with the authority of the states to enact such regulations

with respect, at least, to a railroad corporation of its own creation, as were notdirected against interstate commerce, but which only incidentally or remotely

affected such commerce, and were not in themselves regulations of interstate

commerce, but were designed reasonably to subserve the convenience of the

public.

111 Lake Shore & M. S. R. Co. v. Ohio, 173 U. S. 285, 43 L. ed. 702, 19 Sup. Ct.

Rep. 465; Cleveland, C. C. & St. L. R. Co. v. Illinois, 177 U. S. 514, 44 L. ed.

868, 20 Sup. Ct. Rep. 722.

112 All that has been done, even as contended by the government, has been to

concentrate the ownership of a majority of the shares of the two companies into


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one hand, the owner being a corporation controlled by the same men who

would own and control a majority of the capital stock of both railroad

companies if the holding company had not been formed.

113 The companies remain distinct; the stockholders are not the corporation; each

company is just as much subject to all the requirements of the law as though its

stock-holders were entirely different.

114 Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L. ed. 499, 6

Sup. Ct. Rep. 194.

115 When a contract, agreement, or arrangement of any kind is challenged as a

combination in restraint of trade or commerce, the court will look at the form of

the agreement, and if it appears on its face to have as a necessary and directresult the effect of restraining trade or commerce, no inquiry into the intention

or motives of the parties is requisite.


Rep. 25.

117 But if the arrangement is one which in itself is lawful, and is claimed to be

invalid only because its ultimate object is to restrain commerce or competition,then it is necessary to examine the facts and circumstances to see if the forms of

law are being used to further an illegal purpose.


17 Sup. Ct. Rep. 540; Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290,

19 Sup. Ct. Rep. 40; United States v. Workingmen's Amalgamated Council , 26

L. R. A. 158, 4 Inters. Com. Rep. 831, 54 Fed. 994; Addyston Pipe & Steel Co.

v. United States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96; State ex rel. Atty. Gen. v. Shippers' Compress & Warehouse Co. (Tex. Civ. App.) 67 S. W.

1049, 95 Tex. 603, 69 S. W. 58.

119 In every instance where the Supreme Court has had occasion to pass upon the

meaning of the Sherman act, it has been extremely careful to distinguish

between acts which directly restrain commerce, and acts which only indirectly

or incidentally have that effect.

120 United States v. E. C. Knight Co. 156 U. S. 1, 12, 16, 39 L. ed. 325, 330, 15

Sup. Ct. Rep. 249; United States v. Joint Traffic Asso. 171 U. S. 505, 566, 43


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L. ed. 259, 286, 19 Sup. Ct. Rep. 25; Addyston Pipe & Steel Co. v. United

States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96.

121 Over internal commerce and trade Congress has no power of regulation, nor

any direct control. This power belongs exclusively to the states. No interference

by Congress with the business of citizens transacted within a state is warranted

by the Constitution, except such as is strictly incidental to the exercise of powers clearly granted.

122 License Tax Cases, 72 U. S. 462, 18 L. ed. 497.

123 The fact that an article was manufactured for export to another state does not

make it an article of interstate commerce.

124 Coe v. Errol , 116 U. S. 517, 29 L. ed. 715, 6 Sup. Ct. Rep. 475; Kidd v.

Pearson, 128 U. S. 1, 32 L. ed. 346, 2 Inters. Com. Rep. 232, 9 Sup. Ct. Rep. 6.

125 In United States v. Boyer , 85 Fed. 425, acts of Congress empowering the

Secretary of Agriculture to make inspection of cattle, etc., at slaughter houses

located in the several states, the products of which were intended for sale in

other states or foreign countries, were declared to be without any constitutional

warrant, and therefore void, although the government sought to sustain them asa legitimate exercise of the commerce powers.

126 The sale of the stock of the two railroad corporations, no matter to whom it

may be sold, nor how often such sales and transfers of the stock may take

place, cannot, in any proper sense, be said to affect the transportation business

carried on by the company.

127 Clarke v. Central R. & Bkg. Co. 66 Fed. 16; Re Greene, 52 Fed. 104; Pearsall

v. Great Northern R. Co. 161 U. S. 646, 671, 40 L. ed. 838, 846, 16 Sup. Ct.

Rep. 705; Rogers v. Nashville, C. & St. L. R. Co. 33 C. C. A. 517, 62 U. S.

App. 49, 697, 91 Fed. 312.

128 The Sherman act is a penal statute; every act which may be prevented by

injunctive order would, if committed and proved, subject the parties to criminal

prosecution. The rule of strict construction must therefore be applied. United

States v. Whittier , 5 Dill. 35, Fed. Cas. No. 16,688; United States v. Sheldon, 2

Wheat. 119, 4 L. ed. 199; United States v. Hartwell , 6 Wall. 395, 18 L. ed. 832;

United States v. Shackford , 5 Mason, 445, Fed. Cas. No. 16,262; United States


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v. Clayton, 2 Dill. 219, Fed. Cas. No. 14,814; United States v. Garreston, 42

Fed. 22; Dwarris, Stat. 641; Hubbard v. Johnstone, 3 Taunt. 177.

129Acquiescence by the government for more than eleven years in the actual

merger and consolidation of many important parallel and competing lines on

railroads and steamships engaged in interstate and international commerce has

given a practical construction to the act of July 2, 1890,3 to the effect that it wasnot intended to forbid, and does not forbid, the natural processes of unification

which are bronght about under modern methods of lease, consolidation, merger,

community of interest, or ownership of stock.

130 Stuart v. Laird , 1 Cranch, 299, 2 L. ed. 115.

131 Mr. M. D. Grover filed a brief for appellant the Great Northern RailwayCompany:

132 The commerce clause of the Constitution of the United States does not take

away from the several states the right to authorize the formation of

corporations, define their business, fix the amount of their capital or purchasing

power, and regulate the issue, sale, and ownership of their capital stock.

133 It has been the practice, since the infancy of railroads in this country, for onerailroad company to purchase or lease the railroad of a competing company, or

to acquire a majority of the shares of a competing company, or of two

companies competing with each other, or to effect the consolidation of

competing companies. This has been done without objection from any branch

of the Federal government, and has invariably proved beneficial to the railway

companies concerned, to their shareholders, and to the public.

134 Unity of ownership of shares of competing corporations engaged in interstatetrade, does not restrain such trade, and is not forbidden by the anti-trust act, nor

is such unity of ownership a regulation of interstate commerce, and thus subject

to exclusive Federal jurisdiction under the commerce clause of the Constitution.

135 If the legislature undertakes to define a new offense by statute, and provide for

its punishment, its will should be expressed in such language as not to deceive

or mislead the common mind.



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. , . . . , . .

United States, 7 Cranch, 61, 3 L. ed. 269; United States v. Reese, 92 U. S. 214,

23 L. ed. 563.

138[Argument of Counsel from pages 287-290 intentionally omitted]

139 Messrs. Francis Lynde Stetson and David Willcox filed a brief for appellantsMorgan, Bacon, and Lamont:

140 Each individual who has transferred his property to the Securities Company has

obtained therefor something entirely different,—namely, an interest in a

company holding stock of the other railway company as well. It is manifest that

in the fullest possible sense this constituted a sale of the property.

141 Berger v. United States Steel Corp. 63 N. J. Eq. 809, 53 Atl. 68.

142 These transactions, being lawful, are not affected by allegations as to the motive

which actuated them. As the means employed were lawful, the only question

must be whether the result accomplished was unlawful.

143 Pettibone v. United States, 148 U. S. 197, 203, 37 L. ed. 419, 422, 13 Sup. Ct.

Rep. 542.

144 All the action taken being authorized by law, the motive clearly is unimportant.

145 United States v. Isham, 17 Wall. 496, 21 L. ed. 728; Adler v. Fenton, 24 How.

407, 410, 16 L. ed. 696, 697; Kiff v. Youmans, 86 N. Y. 324, 40 Am. Rep. 543;

Connolly v. Union Sewer Pipe Co. 184 U. S. 540, 546, 46 L. ed. 679, 684, 22

Sup. Ct. Rep. 431; Randall v. Hazelton, 12 Allen, 412; Dickerman v. Northern

Trust Co. 176 U. S. 181, 190, 44 L. ed. 423, 430, 20 Sup. Ct. Rep. 311; Strait v. National Harrow Co. 51 Fed. 819; Phelps v. Nowlen, 72 N. Y. 39, 28 Am.

Rep. 93; Wood v. Amory, 105 N. Y. 278, 11 N. E. 636; Lough v. Outerbridge,

143 N. Y. 271, 25 L. R. A. 674, 38 N. E. 292; National Protective Asso. v.

Cumming , 170 N. Y. 315, 58 L. R. A. 135, 63 N. E. 369; Mogul S. S. Co. v.

McGregor [1892] A. C. 25, 41, 42; Allen v. Flood [1898] A. C. 1; Pender v.

Lushington, L. R. 6 Ch. Div. 70.

146 No indirect or remote effect of these lawful transactions upon competition between the railway companies could bring them within the Federal anti-trust

act.


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249; Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290, 19 Sup. Ct. Rep.

40; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 246, 44 L. ed.

136, 149, 20 Sup. Ct. Rep. 96.

148 The mere fact that a contract has the effect of restraining trade or suppressingcompetition in some degree does not render it injurious to the public welfare,

and thus bring it within the police power.

149 Oregon Steam Nav. Co. v. Winsor , 20 Wall. 64, 22 L. ed. 315; Gibbs v.

Consolidated Gas Co. 130 U. S. 396, 32 L. ed. 979, 9 Sup. Ct. Rep. 553; Hyer

v. Richmond Traction Co. 168 U. S. 471, 477, 42 L. ed. 547, 549, 18 Sup. Ct.

Rep. 114, 366, Affirming 26 C. C. A. 175, 42 U. S. App. 522, 80 Fed. 839;

Continental Ins. Co. v. Fire Underwriters, 67 Fed. 310; Diamond Match Co. v. Roeber , 106 N. Y. 473, 60 Am. Rep. 464, 13 N. E. 419; Hodge v. Sloan, 107

N. Y. 244, 17 N. E. 335; Leslie v. Lorillard , 110 N. Y. 519, 1 L. R. A. 456, 18

N. E. 363; Matthews v. Associated Press, 136 N. Y. 333, 32 N. E. 981; Lough

v. Outerbridge, 143 N. Y. 271, 25 L. R. A. 674, 38 N. E. 292, 145 N. Y. 601,

40 N. E. 164; Oakes v. Cattaraugus Water Co. 143 N. Y. 430, 26 L. R. A. 544,

38 N. E. 461; Curran v. Galen, 152 N. Y. 33, 37 L. R. A. 802, 46 N. E. 297;

Watertown Thermometer Co. v. Pool , 51 Hun, 157, 4 N. Y. Supp. 861,

Approved in Tode v. Gross, 127 N. Y. 485, 13 L. R. A. 652, 28 N. E. 469;Central Shade Roller Co. v. Cushman, 143 Mass. 353, 9 N. E. 629.

150 This act is a criminal statute pure and simple, and its meaning and effect as now

determined must also be its meaning and effect when made the basis of a

criminal proceeding. Conversely, the act should now receive such construction

only as it would receive upon the trial of those indicted for violating its

provisions.

151 Criminal intent is essential to constitute a crime, and the testimony bearing

thereon is always a question for the jury.

152 People v. Wiman, 148 N. Y. 29, 42 N. E. 408; People v. Flack , 125 N. Y. 324,

11 L. R. A. 807, 26 N. E. 267.

153 Such restraints as result from the sale or the purchase of property are not within

the provisions of anti-trust statutes. Indeed, it is the settled law that the transfer

of a business is not illegal because it restrains trade, even by an express

covenant.


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154 Oregon Steam Nav. Co. v. Winsor , 20 Wall. 64, 22 L. ed. 315; Union Sewer-

Pipe Co. v. Connelly, 99 Fed. 354, Affirmed in 184 U. S. 540, 46 L. ed. 679, 22

Sup. Ct. Rep. 431; Fisheries Co. v. Lennen, 116 Fed. 217; Harrison v. Glucose

Sugar Ref. Co. 53 C. C. A. 484, 116 Fed. 304; Hodge v. Sloan, 107 N. Y. 244,

17 N. E. 335; Leslie v. Lorillard , 110 N. Y. 519, 1 L. R. A. 456, 18 N. E. 363,

13 L. R. A. 652; Oakes v. Cattaraugus Water Co. 143 N. Y. 430, 26 L. R. A.

544, 38 N. E. 461; Watertown Thermometer Co. v. Pool , 51 Hun, 157, 4 N. Y.Supp. 861, Approved in Tode v. Gross, 127 N. Y. 485, 13 L. R. A. 652, 28 N.

E. 469; Wood v. Whitehead Bros. Co. 165 N. Y. 545, 59 N. E. 357; Walsh v.

Dwight , 40 App. Div. 513, 58 N. Y. Supp. 91; John D. Park & Sons Co. v.

National Wholesale Druggists' Asso. 54 App. Div. 223, 66 N. Y. Supp. 615,

175 N. Y. 1, 62 L. R. A. 632, 67 N. E. 136; Diamond Match Co. v. Roeber ,

106 N. Y. 473, 60 Am. Rep. 464, 13 N. E. 419.

155 So, too, it has been ruled precisely that the formation of associations or corporations is not illegal because the result will be to restrain competition.

156 Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290, 19 Sup. Ct. Rep. 40;

United States Vinegar Co. v. Foehrenbach, 148 N. Y. 58, 42 N. E. 403;

Matthews v. Associated Press, 136 N. Y. 333, 32 N. E. 981; Central Shade

Roller Co. v. Cushman, 143 Mass. 353, 9 N. E. 629; Rafferty v. Buffalo City

Gas Co. 37 App. Div. 618, 56 N. Y. Supp. 288; United States v. Greenhut , 51

Fed. 205; Re Terrell , 51 Fed. 213; Trenton Potteries Co. v. Oliphant , 58 N. J.

Eq. 507, 46 L. R. A. 255, 43 Atl. 723; Mogul S. S. Co. v. McGregor [1892] A.

C. 25; Lough v. Outerbridge, 143 N. Y. 283, 25 L. R. A. 674, 38 N. E. 292;

State ex rel. Crow v. Continental Tobacco Co. (Mo.) 75 S. W. 737.

157 If the result of restricting competition should follow from the lawful

transactions involved herein, it would not be their direct result, but only an

incidental and collateral result, such as must always follow when business

interests of a similar character pass into the same ownership. It would be

precisely such a result as those recognized as lawful by the court in United

States v. Joint Traffic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct. Rep. 25.

158 It has been denied, and it is very doubtful whether in any case the 2d section of

the anti-trust act applies to railroads.

159 16 Harvard Law Rev. 545, June, 1903.

160 It has generally been deemed wise and safe to use rather a process of exclusion,

and determine what is not a monopoly, so far as the case in hand required.


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161 Laredo v. International Bridge Co. 14 C. C. A. 1, 30 U. S. App. 110, 66 Fed.

246.

162Corporations can invoke the benefits of the provisions of the Constitution and

laws which guarantee to persons the enjoyment of property, or afford to them

the means for its protection, or prohibit legislation injuriously affecting it.

163 Minneapolis & St. L. R. Co. v. Beckwith, 129 U. S. 26, 28, 32 L. ed. 585, 586, 9

Sup. Ct. Rep. 207.

164 Corporations are persons within the meaning of the constitutional provision

forbidding the deprivation of property without due process of law, as well as a

denial of the equal protection of the laws.

165 Covington & L. Turnp. Road Co. v. Sandford , 164 U. S. 578, 592, 41 L. ed.

560, 565, 17 Sup. Ct. Rep. 198; Gulf, C. & S. F. R. Co. v. Ellis, 165 U. S. 150,

154, 41 L. ed. 666, 668, 17 Sup. Ct. Rep. 255; Lake Shore & M. S. R. Co. v.

Smith, 173 U. S. 684, 690, 43 L. ed. 858, 861, 19 Sup. Ct. Rep. 565; Santa

Clara County v. Southern P. R. Co. 9 Sawy. 165, 18 Fed. 385; San Mateo

County v. Southern P. R. Co. 8 Sawy. 238, 13 Fed. 722.

166 This constitutional provision protects the right to acquire property, equally withthe right to hold the same after it has been acquired.

167 Holden v. Hardy, 169 U. S. 366, 391, 42 L. ed. 780, 790, 18 Sup. Ct. Rep. 383;

State v. Goodwill , 33 W. Va. 179, 6 L. R. A. 621, 10 S. E. 285; State v. Julow,

129 Mo. 163, 29 L. R. A. 257, 31 S. W. 781.

168 These rights are not affected by the statute now invoked.


Ct. Rep. 249.

170 The 5th Amendment to the Federal Constitution secures all persons in their

'liberty,' and invalidates any legislation by Congress depriving them of liberty

'without due process of law.'

171 As thus used, 'liberty' means not merely bodily liberty, freedom from physical

duress,—but in effect comprehends substantially all those personal and civil

rights of the citizen which it is meant to place beyond the power of the general


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government to destroy or impair.

172 Slaughter-House Cases, 16 Wall. 36, 122, 127, 21 L. ed. 394, 423, 425; Munn

v. Illinois, 94 U. S. 113, 142, 24 L. ed. 77, 90; People ex rel. Annan v. Walsh,

117 N. Y. 621, 22 N. E. 682; Reg. v. Druitt , 10 Cox C. C. 592; Butchers' Union

S. H. & L. S. L. Co. v. Crescent City L. S. L. & S. H. Co. 111 U. S. 746, 28 L.

ed. 585, 4 Sup. Ct. Rep. 652; Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed.832, 17 Sup. Ct. Rep. 427; United States v. Joint Traffic Asso. 171 U. S. 505,

572, 43 L. ed. 259, 288, 19 Sup. Ct. Rep. 25; Addyston Pipe & Steel Co. v.

United States, 175 U. S. 211, 228, 229, 41 L. ed. 136, 143; 20 Sup. Ct. Rep. 96;

Bertholf v. O'Reilly, 74 N. Y. 509, 30 Am. Rep. 323; Re Jacobs, 98 N. Y. 98,

50 Am. Rep. 636; People v. Gillson, 109 N. Y. 389, 17 N. E. 343; People v.

King , 110 N. Y. 418, 1 L. R. A. 293, 18 N. E. 245; Godcharles v. Wigeman,

113 Pa. 431, 6 Atl. 354.

173 As used in the 5th constitutional Amendment, 'liberty' includes equality of

rights under the law, and secures citizens similarly situated against

discriminations between them, which are arbitrary and without foundation in

reason.

174 United States v. Cruikshank , 92 U. S. 542, 554, 555, 23 L. ed. 588, 592; Yick

Wo. v. Hopkins, 118 U. S. 356, 369, 30 L. ed. 220. 6 Sup. Ct. Rep. 1064; Gulf,

C. & S. F. R. Co. v. Ellis, 165 U. S. 150, 160, 41 L. ed. 666, 670, 17 Sup. Ct.

Rep. 255.

175 This court has held invalid statutes singling out railroad companies and

requiring them to pay attorneys' fees to successful adverse litigants (Gulf, C. &

S. F. R. Co. v. Ellis, 165 U. S. 150, 41 L. ed. 666, 17 Sup. Ct. Rep. 255), and

singling out a single stockyard company, under pretense of classification, for

reduction of charges (Cotting v. Kansas City Stock Yards Co. 183 U. S. 79, 46

L. ed. 92, 22 Sup. Ct. Rep. 30), and permitting two or more live-stock raisers to

combine to prevent competition, while making it criminal for two or more

persons holding property for sale or exchange to combine for the same purpose

(Connolly v. Union Sewer Pipe Co. 184 U. S. 540, 46 L. ed. 679, 22 Sup. Ct.

Rep. 431).

176 One of the objects of this suit is to annul all sales of stock of the railway

companies to the Securities Company, and to cancel all certificates of stock of the latter company issued in purchase thereof. Even if there were any

prohibition in the premises on the railway companies, it would not apply to

their stockholders.


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177 A corporation and its stockholders are entirely different entities.

178 Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L. ed. 499, 6

Sup. Ct. Rep. 194; Watson v. Bonfils, 53 C. C. A. 535, 116 Fed. 157; American

Preservers' Co. v. Norris, 43 Fed. 711; Electric R. Co. v. Jamaica & B. R. C0.

61 Fed. 655.

179 Any effort to limit the right to sell would necessarily deprive these defendants

of their property without due process of law.

180 Cleveland, C. C. & St. L. R. Co. v. Backus, 154 U. S. 439, 445, 38 L. ed. 1041,

1046, 4 Inters. Com. Rep. 677, 14 Sup. Ct. Rep. 1122;

181 Any combination 'for the purpose of 146 N. Y. 304, 40 N. E. 996; Ingersoll v. Nassau Electric R. Co. 157 N. Y. 453, 43 L. R. A. 236, 52 N. E. 545; People ex

rel. Manhattan Sav. Inst. v. Otis, 90 N. Y. 48; Holden v. Hardy, 169 U. S. 366,

391, 42 L. ed. 780, 790, 18 Sup. Ct. Rep. 383; People v. Marx, 99 N. Y. 377,

52 Am. Rep. 34, 2 N. E. 29; People v. Gillson, 109 N. Y. 389, 17 N. E. 343;

Forster v. Scott , 136 N. Y. 577, 18 L. R. A. 543, 32 N. E. 976; Purdy v. Erie R.

Co. 162 N. Y. 42, 48 L. R. A. 669, 56 N. E. 508; Buffalo v. Collins Baking Co.

39 App. Div. 432, 57 N. Y. Supp. 347; Rochester & C. Turnp. Co. v. Joel , 41

App. Div. 43, 58 N. Y. Supp. 346; People v. Meyer , 44 App. Div. 1, 60 N. Y.Supp. 415; Ingraham v. National Salt Co. 72 App. Div. 582, 76 N. Y. Supp.

1016; Janesville v. Carpenter , 77 Wis. 288, 8 L. R. A. 808, 46 N. W. 128.

182 Whatever view be taken of the character of the transaction, the decree of the

circuit court transcended the authority of the court under the statute, which was

the sole ground and source of its jurisdiction.

183 Thorndike on the Merger Case (Boston, 1903).

184 Attorney General Knox argued the cause, and, with Mr. W. A. Day, filed a brief

for appellee:

185 The anti-trust act is not primarily a criminal statute.

186 The civil remedy by injunction, and the liability to punishment under thecriminal provisions of the act, are entirely distinct.



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17 Sup. Ct. Rep. 540.

189 In its remedial aspect it ought to be construed liberally and given the widest

effect consistent with the language employed. It ought not to be frittered away

by the refinements

190 Broom, Legal Max. 5th Am. ed. 3d London ed. 80; Potter's Dwarr. Stat. &

Const. p. 234.

191 And it makes no difference in the application of these rules that the statute has

a penal as well as a remedial side.

192 Dwarris, Stat. 653, 655; Sedgw. Stat. & Const. Law, 2d ed. p. 309, 310; Hyde v.Cogan, 2 Dougl. 702.

193 Every contract, combination, or conspiracy in restraint of interstate of foreign

commerce is illegal. The method adopted in bringing about the combination is

immaterial; and the device of a holding corporation for the purpose of

circumventing the law can be no more effectual than any other means.

194 Noyes, Intercorporate Relations, § 393.

195 The anti-trust act applies to and covers common carriers by railroad, as well as

all other persons, natural or artificial.


17 Sup. Ct. Rep. 540.

197 The words, 'in restraint of trade or commerce,' as used in the anti-trust act, are

not confined to unreasonable or total restraints only, but extend to any and all

direct restraints of trade or commerce, even if reasonable or only partial.

198 Ibid; United States v. Joint Traffic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup.

Ct. Rep. 25.

199 And while this rule applies with equal force to restraints upon individuals, private corporations, and quasi-public corporations, such as railroads, there is a

peculiar reason for its application to restraints upon the latter.


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17 Sup. Ct. Rep. 540.

201 In exercising the powers over commerce vested in the Federal government,

Congress may to some extent limit the right of private contract, the right to buy

and sell property, without violating the 5th Amendment. It may declare that no

contract, combination, or monopoly which restrains trade or commerce by

shutting out the operation of the general law of competition shall be legal.


Rep. 25; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. ed.

136, 20 Sup. Ct. Rep. 96.

203 Any combination 'for the purpose of avoiding the effects of competition' ininterstate or international trade or commerce is within the prohibition of the act.


17 Sup. Ct. Rep. 540; United States v. Joint Traffic Asso. 171 U. S. 505, 43 L.

ed. 259, 19 Sup. Ct. Rep. 25; Addyston Pipe & Steel Co. v. United States, 175

U. S. 211, 244, 44 L. ed. 136, 148, 20 Sup. Ct. Rep. 96.

205 As used in the act, the word 'monopoly' is not confined to its common-lawmeaning of an exclusive grant to one or a few to do that which before had been

free and open to all in common.


17 Sup. Ct. Rep. 540.

207 The term, as used by modern legislators and judges, signifies the combining or bringing together, in the hands of one person or set of persons, of the control, or

the power of control, over a particular business or employment, so that

competition therein may be suppressed.

208 People ex rel. Peabody v. Chicago Gas Trust Co. 130 Ill. 294, 8 L. R. A. 497,

22 N. E. 798; People v. North River Sugar Ref. Co. 54 Hun, 377, 2 L. R. A. 33,

3 N. Y. Supp. 401; United States v. E. C. Knight Co. 156 U. S. 1, 39 L. ed.

325, 15 Sup. Ct. Rep. 249.

209 A combination or consolidation of two competing railroads, brought about by

transferring to one road a majority of the stock of the other, is such a monopoly.


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210 Pearsall v. Great Northern R. Co. 161 U. S. 646, 677, 40 L. ed. 838, 16 Sup.

Ct. Rep. 705; Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 40 L. ed. 849,

16 Sup. Ct. Rep. 714.

211 To prove that a combination or monopoly exists within the meaning of the act,

it is not necessary to show that the immediate effect of the acts complained of is

to suppress competition or to create a complete monopoly. It is sufficient toshow that they tend to bring about those results.

212 People v. North River Sugar Ref. Co. 54 Hun, 377, 3 N. Y. Supp. 401; United

States v. E. C. Knight Co. 156 U. S. 1, 39 L. ed. 325, 15 Sup. Ct. Rep. 249;

Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 237, 44 L. ed. 136,

146, 20 Sup. Ct. Rep. 96; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 672.

213 The very existence of the power to restrain trade constitutes a restraint.

214 United States v. Joint Traffic Asso. 171 U. S. 505, 571, 43 L. ed. 259, 288, 19

Sup. Ct. Rep. 25; United States v. Trans-Missouri Freight Asso. 166 U. S. 290,

41 L. ed. 1007, 17 Sup. Ct. Rep. 540; Addyston Pipe & Steel Co. v. United

States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96; Pearsall v. Great

Northern R. Co. U. S. 646, 40 L. ed. 838, 16 Sup. Ct. Rep. 705.

215 It is not necessary in order to bring a combination or conspiracy within the

operation of the act, that the members bind themselves each with the other to do

the acts alleged to be in restraint of trade. It has always been held to be enough

that they act together in pursuance of a common object, and while, of course,

this presupposes agreement between them in a broad sense, an agreement or

contract in the technical sense is not at all essential.

216 Reg. v. Murphy, 8 Car. & P. 397.

217 If in point of law the effect or the tendency of the combination is to restrain

trade or commerce the combination is unlawful, and the motive behind it,

however beneficent, does not alter that fact in the slightest degree.


1028, 17 Sup. Ct. Rep. 540; Addyston Pipe & Steel Co. v. United States, 175 U.

S. 234, 44 L. ed. 145, 20 Sup. Ct. Rep. 96; Chesapeake & O. Fuel Co. v.

United States, 53 C. C. A. 256, 115 Fed. 623.

-


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,

interstate and foreign commerce, is an exercise of the power granted to

Congress to regulate commerce.

220 Lottery Case, 188 U. S. 321, 47 L. ed. 492, 23 Sup. Ct. Rep. 321.

221 The term 'commerce,' as used in that grant, embraces the instrumentalities bywhich commerce is or may be carried on.

222 Chicago & N. W. R. Co. v. Fuller , 17 Wall. 560, 568, 21 L. ed. 710, 714;

Welton v. Missouri, 91 U. S. 275, 280, 23 L. ed. 347, 349; Pensacola Teleg.

Co. v. Western U. Teleg. Co. 96 U. S. 1, 24 L. ed. 708; Gloucester Ferry Co. v.

Pennsylvania, 114 U. S. 196, 203, 29 L. ed. 158, 161, 1 Inters. Com. Rep. 382,

5 Sup. Ct. Rep. 826.

223 The commerce powers of the Federal government are broad and ample enough

to prevent the restraint or obstruction of interstate commerce by combinations

and monopolies of competing lines or instrumentalities of interstate

transportation.

224 Gibbons v. Ogden, 9 Wheat. 1, 6 L. ed. 23; Brown v. Maryland , 12 Wheat. 419,

6 L. ed. 678; Passenger Cases, 7 How. 283, 12 L. ed. 702; Re Debs, 158 U. S.

564, 39 L. ed. 1092, 15 Sup. Ct. Rep. 900; Lottery Case, 188 U. S. 321, 47 L.ed. 492, 23 Sup. Ct. Rep. 321; Stockton v. Baltimore & N. Y. R. Co. 1 Inters.

Com. Rep. 411, 32 Fed. 11; Boardman v. Lake Shore & M. S. R. Co. 84 N. Y.

157; Noyes, Intercorporate Relations, § 19; Louisville & N. R. Co. v. Kentucky,

161 U. S. 701, 40 L. ed. 859, 16 Sup. Ct. Rep. 714.

225 Of the various reasons for investing the Federal government with the power to

regulate commerce among the several states, the one uppermost in the minds of

the members of the constitutional convention was to keep the channels of such

commerce open and free from obstructions and restraints.

226 Pensacola Teleg. Co. v. Western U. Teleg. Co. 96 U. S. 1, 24 L. ed. 708.

227 The exclusive jurisdiction of the Federal government over commerce with

foreign nations and among the states, and over the instrumentalities of such

commerce, includes the power of police, or that which is its equivalent, over those subjects in all its undefined breadth and fullness.

228 Cooley, Const. Lim. 722, 723; Thayer, Cases on Const. Law, p. 742, note.


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229 The police power—or equivalent power—of the Federal government over

interstate and foreign commerce is not less plenary and complete because, as to

those commercial subjects which are local and do not admit of uniform

regulation, the states are permitted to exercise the power until Congress, by its

legislation, covers the same field.

230 Cooley, Const. Lim. 723.

231 Laws against combinations for the purpose of restricting production,

maintaining prices, or suppressing competition have a relation to the end of all

police regulations,—the comfort, welfare, or safety of society.


233 Anti-trust statutes therefore are enacted in the exercise of the police, or an

analogous, power.

234 State ex rel. Crow v. Firemen's Fund Ins. Co. 152 Mo. 46, 45 L. R. A. 363, 52

S. W. 363; State ex rel. Astor v. Schlitz Brewing Co. 104 Tenn. 715, 59 S. W.

1033; Waters-Pierce Oil Co. v. State, 19 Tex. Civ. App. 1, 44 S. W. 936.

235 The police powers or the reserved powers of the states, are not, for any purposes, paramount to the powers of Congress in fields wherein the Federal

government has been invested by the Constitution with complete and supreme

authority.

236 New Orleans Gaslight Co. v. Louisiana Light & H. P. & Mfg. Co. 115 U. S.

650, 661, 29 L. ed. 516, 520, 6 Sup. Ct. Rep. 252.

237 When, in Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 40 L. ed. 849, 16

Sup. Ct. Rep. 714, the court said that to the states remains the power to regulate

the instruments of interstate commerce, it had in mind those regulations of a

local character which the states are permitted to make in the absence of Federal

legislation covering the same subjects, and did not intend to change any old

principle, or to enunciate any new principle, of constitutional construction.

238 California v. Central P. R. Co. 127 U. S. 1, 32 L. ed. 150, 2 Inters. Com. Rep.153, 8 Sup. Ct. Rep. 1073; Welton v. Missouri, 91 U. S. 275, 23 L. ed. 347;

Cooley v. Port Wardens, 12 How. 299, 320, 13 L. ed. 996, 1005; Sherlock v.

Alling , 93 U. S. 99, 104, 23 L. ed. 819, 821; Morgan's L. & T. R. & S. S. Co. v.


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Louisiana Bd. of Health, 118 U. S. 455, 463, 30 L. ed. 237, 241, 6 Sup. Ct.

Rep. 1114; Smith v. Alabama, 124 U. S. 465, 31 L. ed. 508, 1 Inters. Com. Rep.

804, 8 Sup. Ct. Rep. 564; Nashville, C. & St. L. R. Co. v. Alabama, 128 U. S.

96, 32 L. ed. 352, 2 Inters. Com. Rep. 238, 9 Sup. Ct. Rep. 28; Hennington v.

Georgia, 163 U. S. 299, 41 L. ed. 166, 16 Sup. Ct. Rep. 1086; New York, N. H.

& H. R. Co. v. New York , 165 U. S. 628, 631, 41 L. ed. 853, 854, 17 Sup. Ct.

Rep. 418 Missouri, K. & T. R. Co. v. Haber , 169 U. S. 613, 626, 42 L. ed. 878,882, 18 Sup. Ct. Rep. 488.

239 Ownership of a majority of its stock constitutes the control of a corporation,

when the inquiry is whether a combination or monopoly has been formed to

stifle competition between two or more rival and competing railroads.

240 Noyes, Intercorporate Relations, § 294; Farmers' Loan & T. Co. v. New York &

N. R. Co. 150 N. Y. 410, 34 L. R. A. 76, 44 N. E. 1043; People ex rel. Peabodyv. Chicago Gas Trust Co. 130 Ill. 268, 8 L. R. A. 497, 22 N. E. 798; Pearsall v.

Great Northern R. Co. 161 U. S. 646, 671, 40 L. ed. 838, 846, 16 Sup. Ct. Rep.

705; Pennsylvania R. Co. v. Com. (Pa.) 4 Cent. Rep. 495, 7 Atl. 368.

241 There is no great difficulty in getting at what Congress meant by a 'trust.'

Century Dict.; State ex rel. Watson v. Standard Oil Co. 49 Ohio St. 137, 15 L.

R. A. 145, 30 N. E. 279; Eddy, Combinations, § 582; Noyes, Intercorporate

Relations, § 304; Dodd, Combinations; Their Uses & Abuses.

242 The trustee in a trust combination may be either a natural or an artificial person.

243 Beach, Monopolies & Industrial Trusts, § 159; Eddy, Combinations, § 582;

People ex rel. Peabody v. Chicago Gas Trust Co. 130 Ill. 275, 8 L. R. A. 497,

22 N. E. 798.

244 The charter of a corporation is the unanimous agreement of its stockholders,

declaring the nature and conditions of the trust relation between them and the

corporate entity.

245 Morawetz, Priv. Corp. § 237.

246 While a written trust agreement between the stockholders is a usual element of

the trust form of combination, it is not an essential one. It is sufficient to show

that the stockholders acted in pursuance of any understanding, plan, or scheme,

written, verbal, or otherwise.


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247 Harding v. American Glucose Co. 182 Ill. 551, 55 N. E. 577.

248 The Securities Company constitutes a 'combination in the form of a trust.'

249 Beach, Monopolies & Industrial Trusts, § 159; Noyes, Intercorporate Relations,

§§ 310, 393; People ex rel. Peabody v. Chicago Gas Trust Co. 130 Ill. 268, 8L. R. A. 497, 22 N. E. 798; Harding v. American Glucose Co. 182 Ill. 551, 55

N. E. 577.

250 The disguise by which the defendants sought to hide the fact of a combination

of the Great Northern and Northern Pacific, and their connection therewith,

appears so thin and transparent that it is a cause of wonder that they should

ever have adopted it.

251 Atty. Gen. v. Great Northern R. Co. 6 Jur. N. S. 1006, 1 Drew. & S. 159;

Stockton v. Central R. Co. 50 N. J. Eq. 52, 17 L. R. A. 97, 24 Atl. 964.

252 Devices of exactly the same character had already been repudiated by courts of

high standing.

253 Ford v. Chicago Milk Shippers' Asso. 155 Ill. 166, 27 L. R. A. 298, 39 N. E.

651; Distilling & Cattle Feeding Co. v. People, 156 Ill. 448, 41 L. ed. 188.


255 Fictions of law, invented to promote justice, can never be invoked to

accomplish its defeat.

256 Mostyn v. Fabrigas, Cowp. 177; Morris v. Pugh, 3 Burr. 1243.

257 It is well settled that, when it is in the interest of the administration of justice to

do so, courts may and will ignore the fiction that a corporation is a legal being

apart from the stockholders, and will consider its acts as the acts of its

constituent members; and this is emphatically the case when the state—the

sovereign authority—is the complaining party.

258 People v. North River Sugar Ref. Co. 121 N. Y. 582, 9 L. R. A. 33, 24 N. E.

834; Morawetz, Private Corp. §§ 1, 227; Taylor, Priv. Corp. § 50; Clark & M.

Private Corp. pp. 17, 22; State ex rel. Watson v. Standard Oil Co. 49 Ohio St.

137, 15 L. R. A. 145, 30 N. E. 279; Ford v. Chicago Milk Shippers' Asso. 155


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Ill. 166, 27 L. R. A. 298, 39 N. E. 651; Atty. Gen. v. Great Northern R. Co. 6

Jur. N. S. 1006, 1 Drew & S. 157; Pennsylvania R. Co. v. Com. (Pa.) 4 Cent.

Rep. 495, 7 Atl. 368; Stockton v. Central R. Co. 50 N. J. Eq. 52, 17 L. R. A. 97,

24 Atl. 964.

259 'To monopolize' signifies the combining or bringing together, in the hands of

one person or set of persons, of the control of, or the power to control, severalrival and competing businesses, to the end that competition between them may

be suppressed.


249; United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 41 L. ed.

1007, 17 Sup. Ct. Rep. 540.

261 By acquiring a majority of the shares of the Great Northern and Northern

Pacific the Securities Company has obtained the control of, and therefore the

power to suppress competition between, two rival and competing lines of

railway engaged in interstate commerce, and in that way has monopolized a

part of interstate commerce.

262 Pearsall v. Great Northern R. Co. 161 U. S. 646, 40 L. ed. 838, 16 Sup. Ct.

Rep. 705; People ex rel. Peabody v. Chicago Gas Trust Co. 130 Ill. 268, 8 L.R. A. 497, 22 N. E. 798.

263 In the exercise of its regulative and police powers over interstate commerce,

Congress may suppress monopolies in restraint thereof, by whomsoever

created, notwithstanding that in doing so it restricts the right of private contract

to some extent.

264 United States v. Joint Traffic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct.Rep. 25; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. ed.

136, 20 Sup. Ct. Rep. 96.

265 Even if a natural person could lawfully have done what the Securities Company

has done, that would be no argument to prove that the Securities Company, in

so doing, has not violated the law against monopolies.

266 People v. North River Sugar Ref. Co. 121 N. Y. 625, 9 L. R. A. 33, 24 N. E.

834.


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stockholders of two or more competing corporations can combine among

themselves and with such person to sell him their stock and induce others to do

the same, so as to center the controlling stock interests of the several

corporations in a single head, in violation of statutes against combinations,

consolidations, and monopolies.

268 Noyes, Intercorporate Relations, § 36; Pennsylvania R. Co. v. Com. (Pa.) 4

Cent. Rep. 495, 7 At1. 373.

269 The failure to observe the distinction between an actual, bona fide sale, and

what is nominally a sale, but in reality only a cloak under which to accomplish

a combination of corporate properties or interests, has sometimes led to

confusion of language, if not of thought, in the discussion of trade

combinations.

270 Trenton Potteries Co. v. Oliphant , 58 N. J. Eq. 507, 46 L. R. A. 255, 43 Atl.

723; Noyes, Intercorporate Relations, § 354.

271 Even if it were true that the government had acquiesced for eleven years in the

creation of combinations like the one now in issue, it would not thereby be

estopped from prosecuting the case at bar; nor could its inaction for that period

be considered a contemporaneous or practical construction of the act.

272 Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 689, 690, 40 L. ed. 849, 855,

16 Sup. Ct. Rep. 714.

273 That a combination or monopoly of competing interstate carriers affects

interstate commerce directly, and not incidentally or remotely, is universally

conceded.


275 The court below, as a court of equity, had ample power to decree the relief it

did, and in the form it did.

276 Pomeroy, Eq. Jur. 2d ed. § 111, p. 115; § 170, p. 192; Taylor v. Salmon, 4 Myl.

& C. 141; Chicago, R. I. & P. R. Co. v. Union P. R. Co. 47 Fed. 15.

277 Mr. Justice Harlan announced the affirmance of the decree of the circuit court,

and delivered the following opinion:


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278This suit was brought by the United States against the Northern Securities

Company, a corporation of New Jersey; the Great Northern Railway Company,

a corporation of Minnesota; the Northern Pacific Railway Company, a

corporation of Wisconsin; James J. Hill, a citizen of Minnesota; and William P.

Clough, D. Willis James, John S. Kennedy, J. Pierpont Morgan, Robert Bacon,

George F. Baker, and Daniel S. Lamont, citizens of New York.

279 Its general object was to enforce, as against the defendants, the provisions of

the statute of July 2d, 1890, commonly known as the anti-trust act, and entitled

'An Act to Protect Trade and Commerce Against Unlawful Restraints and

Monopolies.' 26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200. By

the decree below the United States was given substantially the relief asked by it

in the bill.

280 As the act is not very long, and as the determination of the particular questionsarising in this case may require a consideration of the scope and meaning of

most of its provisions, it is here given in full:

281 '§ 1. Every contract, combination in the form of trust or otherwise, or

conspiracy, in restraint of trade or commerce among the several states, or with

foreign nations, is hereby declared to be illegal. Every person who shall make

any such contract, or engage in any such combination or conspiracy, shall be

deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished

by fine not exceeding five thousand dollars, or by imprisonment not exceeding

one year, or by both said punishments, in the discretion of the court.

282 '§ 2. Every person who shall monopolize, or attempt to monopolize, or combine

or conspire with any other person or persons to monopolize, any part of the

trade or commerce among the several states, or with foreign nations, shall be

deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished

by fine not exceeding five thousand dollars, or by imprisonment not exceeding

one year, or by both said punishments, in the discretion of the court.

283 '§ 3. Every contract, combination in form of trust or otherwise, or conspiracy, in

restraint of trade or commerce in any territory of the United States or of the

District of Columbia, or in restraint of trade or commerce between any such

territory and another, or between any such territory or territories and any state or

states or the District of Columbia, or with foreign nations, or between theDistrict of Columbia, and any state or states or foreign nations, is hereby

declared illegal. Every person who shall make any such contract or engage in

any such combination or conspiracy shall be deemed guilty of a misdemeanor,


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and, on conviction thereof, shall be punished by fine not exceeding five

thousand dollars, or by imprisonment not exceeding one year, or by both said

punishments, in the discretion of the court.

284 '§ 4. The several circuit courts of the United States are hereby invested with

jurisdiction to prevent and restrain violations of this act; and it shall be the duty

of the several district attorneys of the United States, in their respective districts,under the direction of the Attorney General, to institute proceedings in equity to

prevent and restrain such violations. Such proceedings may be by way of

petition setting forth the case and praying that such violation shall be enjoined

or otherwise prohibited. When the parties complained of shall have been duly

notified of such petition the court shall proceed, as soon as may be, to the

hearing and determination of the case; and, pending such petition, and before

final decree, the court may at any time make such temporary restraining order

or prohibition as shall be deemed just in the premises.

285 '§ 5. Whenever it shall appear to the court before which any proceeding under

section four of this act may be pending, that the ends of justice require that

other parties should be brought before the court, the court may cause them to

be summoned, whether they reside in the district in which the court is held or

not; and subpoenas to that end may be served in any district by the marshal

thereof.

286 '§ 6. Any property owned under any contract or by any combination, or

pursuant to any conspiracy (and being the subject thereof) mentioned in section

one of this act, and being in the course of transportation from one state to

another, or to a foreign country, shall be forfeited to the United States, and may

be seized and condemned by like proceedings as those provided by law for the

forfeiture, seizure, and condemnation of property imported into the United

States contrary to law.

287 '§ 7. Any person who shall be injured in his business or property by any other

person or corporation by reason of anything forbidden or declared to be

unlawful by this act may sue therefor in any circuit court of the United States in

the district in which the defendant resides or is found, without respect to the

amount in controversy, and shall recover threefold the damages by him

sustained, and the costs of suit, including a reasonable attorney's fee.

288 '§ 8. That the word 'person,' or 'persons,' wherever used in this act shall be

deemed to include corporations and associations existing under or authorized by

the laws of either the United States, the laws of any of the territories, the laws


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of any state, or the laws of any foreign country.'

289 Is the case as presented by the pleadings and the evidence one of a combination

of a conspiracy in restraint of trade or commerce among the states, or with

foreign states? Is it one in which the defendants are properly chargeable with

monopolizing or attempting to monopolize any part of such trade or commerce?

Let us see what are the facts disclosed by the record.

290 The Great Northern Railway Company and the Northern Pacific Railway

Company owned, controlled, and operated separate lines of railway,—the

former road extending from Superior, and from Duluth and St. Paul, to Everett,

Seattle, and Portland, with a branch line to Helena; the latter extending from

Ashland, and from Duluth and St. Paul, to Helena, Spokane, Seattle, Tacoma

and Portland. The two lines, main and branches, about 9000 miles in length,

were and are parallel and competing lines across the continent through thenorthern tier of states between the Great Lakes and the Pacific, and the two

companies were engaged in active competition for freight and passenger traffic,

each road connecting at its respective terminals with lines of railway, or with

lake and river steamers, or with seagoing vessels.

291 Prior to 1893 the Northern Pacific system was owned or controlled and

operated by the Northern Pacific Railroad Company, a corporation organized

under certain acts and resolutions of Congress. That company becoming

insolvent, its road and property passed into the hands of receivers appointed by

courts of the United States. In advance of foreclosure and sale a majority of its

bondholders made an arrangement with the Great Northern Railway Company

for a virtual consolidation of the two systems, and for giving the practical

control of the Northern Pacific to the Great Northern. That was the arrangement

declared in Pearsall v. Great Northern R. Co. 161 U. S. 646, 40 L. ed. 838, 16

Sup. Ct. Rep. 705, to be illegal under the statutes of Minnesota which forbade

any railroad corporation, or the purchasers or managers of any corporation, toconsolidate the stock, property, or franchises of such corporation, or to lease or

purchase the works or franchises of, or in any was control, other railroad

corporations owning or having under their control parallel or competing lines.

Minn. Gen. Laws, 1874, chap. 29, 1881, chap. 109.

292 Early in 1901 the Great Northern and Northern Pacific Railway Companies,

having in view the ultimate placing of their two systems under a common

control, united in the purchase of the capital stock of the Chicago, Burlington,

& Quincy Railway Company, giving in payment, upon an agreed basis of

exchange, the joint bonds of the Great Northern and Northern Pacific Railway

Companies, payable in twenty years from date, with interest at 4 per cent per


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annum. In this manner the two purchasing companies became the owners of

$107,000,000 of the $112,000,000 total capital stock of the Chicago,

Burlington, & Quincy Railway Company, whose lines aggregated about 8,000

miles, and extended from St. Paul to Chicago, and from St. Paul and Chicago to

Quincy, Burlington, Des Moines, St. Louis, Kansas City, St. Joseph, Omaha,

Lincoln, Denver, Cheyenne and Billings, where it connected with the Northern

Pacific Railroad. By this purchase of stock the Great Northern and NorthernPacific acquired full control of the Chicago, Burlington, & Quincy main line

and branches.

293 Prior to November 13th, 1901, defendant Hill and associate stockholders of the

Great Northern Railway Company, and defendant Morgan and associate

stockholders of the Northern Pacific Railway Company, entered into a

combination to form, under the laws of New Jersey, a holding corporation, to

be called the Northern Securities Company, with a capital stock of $400,000,000, and to which company, in exchange for its own capital stock

upon a certain basis and at a certain rate, was to be turned over the capital

stock, or a controlling interest in the capital stock, of each of the constituent

railway companies, with power in the holding corporation to vote such stock

and in all respects to act as the owner thereof, and to do whatever it might deem

necessary in aid of such railway companies or to enhance the value of their

stocks. In this manner the interests of individual stockholders in the property

and franchises of the two independent and competing railway companies wereto be converted into an interest in the property and franchises of the holding

corporation. Thus, as stated in article 6 of the bill, 'by making the stockholders

of each system jointly interested in both systems, and by practically pooling the

earnings of both for the benefit of the former stockholders of each, and by

vesting the selection of the directors and officers of each system in a common

body, to wit, the holding corporation, with not only the power, but the duty, to

pursue a policy which would promote the interests, not of one system at the

expense of the other, but of both at the expense of the public, all inducementfor competition between the two systems was to be removed, a virtual

consolidation effected, and a monopoly of the interstate and foreign commerce

formerly carried on by the two systems as independent competitors established.'

294 In pursuance of this combination, and to effect its objects, the defendant, the

Northern Securities Company, was organized November 13th, 1901, under the

laws of New Jersey.

295 Its certificate of incorporation stated that the objects for which the company

was formed were: '1. To acquire by purchase, subscription, or otherwise, and to

hold as investment, any bonds or other securities or evidences of indebtedness,


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or any shares of capital stock created or issued by any other corporation or

corporations, association or associations, of the state of New Jersey, or of any

other state, territory, or country. 2. To purchase, hold, sell, assign, transfer,

mortgage, pledge, or otherwise dispose of any bonds or other securities or

evidences of indebtedness created or issued by any other corporation or

corporations association or associations, of the state of New Jersey, or of any

other state, territory, or country, and while owner thereof to exercise all therights, powers, and privileges of ownership. 3. To purchase, hold, sell, assign,

transfer, mortgage pledge or otherwise dispose of shares of the capital stock of

any other corporation or corporations, association or associations, of the state of

New Jersey, or of any other state, territory, or country, and while owner of such

stock to exercise all the rights, powers, and privileges of ownership, including

the right to vote thereon. 4. To aid in any manner any corporation or association

of which any bonds or other securities or evidences of indebtedness or stock are

held by the corporation, and to do any acts or things designed to protect, preserve, improve, or enhance the value of any such bonds or other securities or

evidences of indebtedness or stock. 5. To acquire, own, and hold such real and

personal property as may be necessary or convenient for the transaction of its

business.'

296 It was declared in the certificate that the business or purpose of the corporation

was from time to time to do any one or more of such acts and things, and that

the corporation should have power to conduct its business in other states and inforeign countries, and to have one or more offices, and hold, purchase,

mortgage, and convey real and personal property, out of New Jersey.

297 The total authorized capital stock of the corporation was fixed at $400,000,000,

divided into 4,000,000 shares of the par value of $100 each. The amount of the

capital stock with which the corporation should commence business was fixed

at $30,000. The duration of the corporation was to be perpetual.

298 This charter having been obtained, Hill and his associate stockholders of the

Great Northern Railway Company, and Morgan and associate stockholders of

the Northern Pacific Railway Company, assigned to the Securities Company a

controlling amount of the capital stock of the respective constituent companies

upon an agreed basis of exchange of the capital stock of the Securities

Company for each share of the capital stock of the other companies.

299 In further pursuance of the combination, the Securities Company acquired

additional stock of the defendant railway companies, issuing in lieu thereof its

own stock upon the above basis, and, at the time of the bringing of this suit,

held, as owner and proprietor, substantially all the capital stock of the Northern


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Pacific Railway Company, and, it is alleged, a controlling interest in the stock

of the Great Northern Railway Company, 'and is voting the same and is

collecting the dividends thereon, and in all respects is acting as the owner

thereof, in the organization, management, and operation of said railway

companies and in the receipt and control of their earnings.'

300 No consideration whatever, the bill alleges, has existed or will exist, for thetransfer of the stock of the defendant railway companies to the Northern

Securities Company, other than the issue of the stock of the latter company for

the purpose, after the manner, and upon the basis stated.

301 The Securities Company, the bill also alleges, was not organized in good faith

to purchase and pay for the stocks of the Great Northern and Northern Pacific

Railway Companies, but solely 'to incorporate the pooling of the stocks of said

companies,' and carry into effect the above combination; that it is a meredepositary, custodian, holder, or trustee of the stocks of the Great Northern and

Northern Pacific Railway Companies; that its shares of stock ar

northern securities co. v. united states, 193 u.s. 197 (1904)

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