National Cotton Oil Co. v. Texas
197 U.S. 115 (1905)

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U.S. Supreme Court

National Cotton Oil Co. v. Texas, 197 U.S. 115 (1905)

National Cotton Oil Co. v. Texas

No. 37

Argued November 1-2, 1904

Decided February 27, 1905

197 U.S. 115

Syllabus

The Anti-Trust Acts of Texas of 1889, 1895, and 1899, are all directed to the prohibitions of combinations to restrict trade, to in any way limit competition in the production or sale of articles, or to increase or reduce prices in order to preclude free and unrestricted competition; and, as the legislature of a state may ordain that competition, and not combination, shall be the law of trade, and may prohibit combinations to control prices, the statutes as they now stand are not in conflict with the Fourteenth Amendment, and do not, as against corporations dealing in cotton oil and combining to regulate the price of cotton seed, work a deprivation of property without due process of law, or impair their liberty of contract.

The idea of monopoly is not now confined to a grant of privileges, but is understood to include a condition produced by the acts of individuals and the suppression of competition by unification of interest or management or through agreement and concert of action. It is the power to control prices which makes both the inducement to make such combinations and the concern of the law to prohibit them.

The Supreme Court of Texas having construed the act of 1895 as invalid so far as it was discriminatory by excepting from its operation combinations of agriculturists and organized laborers and fell within the terms of Connolly v. Union Sewer Pipe Co.,184 U. S. 540, and sustained the act in other respects, and having also held that the act of 1899, although cumulative, did not continue the invalid discriminatory provisions of the

Page 197 U. S. 116

act of 1895, this Court follows the state court in holding that, under the laws of Texas as they now exist, combinations described in the Anti-Trust laws are forbidden and penalized, whether by agriculturists, organized laborers, or others, and there is therefore no discrimination against oil companies, and the latter are not deprived of the equal protection of the laws.

This suit was brought under the antitrust acts of the State of Texas to forfeit the license of the National Cotton Oil Company to do business in the State of Texas, for violating those acts. The defense is that they are repugnant to the Fourteenth Amendment of the Constitution of the United States.

The suit was instituted by the attorney general of the state and the District Attorney of the Twenty-sixth Judicial District, and the petition alleged the following facts: the National Cotton Oil Company and the Southern Cotton Oil Company are New Jersey corporations, doing and transacting business in the State of Texas by reason of a permit issued to them respectively on the second day of May, 1900, and the third day of June, 1897.

The Taylor Cotton Oil Works is a Texas corporation doing business in the state under a charter granted August 25, 1898. The said foreign corporations, from the date of their respective permits, and the Taylor Cotton Oil Works from the date of its charter, have been and are

"engaged in the business of the manufacture and sale of cotton seed oil, cotton seed meal, and the other byproducts of cotton seed; that the business in which each and all of such corporations were engaged necessitated the purchased of cotton seed from which the products which they manufactured and sold were made, and that said cotton seed was an article and commodity of merchandise."

Each of them on or about the first of November, 1901, and on every day prior and subsequently thereto, has been engaged in the business of buying cotton seed in the various counties of the state, and on the first of November, 1901, the National Cotton Oil Company made and entered into a combination with each of the other companies, and they with it, and each

Page 197 U. S. 117

of them with various other persons, firms, and corporations, whose names are to the defendant in error unknown, and the said corporations

"became members of and parties to a pool, trust, agreement, confederation, and understanding with each of the other of said corporations, firms, and persons, whereby they did each for itself and with each other and all together agree to regulate and fix, and did regulate and fix, the price at which they would buy cotton seed; that they especially regulated and fixed the price of cotton seed throughout the State of Texas at $14.00 per ton, and agreed amongst and with each other that they would not give more than said $14.00 per ton for cotton seed in any of the towns and communities of the State of Texas."

Whereby,

"and by maintaining the agreement to regulate and fix the price of cotton seed aforesaid, the defendant (the National Cotton Oil Company) was guilty of a violation of the laws of the State of Texas,"

and in consequence has forfeited its permit to transact business in the state.

The cancellation and forfeiture of the permit was prayed, and that the oil company be enjoined from transacting business in the state. A demurrer was filed to the petition for insufficiency in law to entitle the state to any relief, and alleged against each of the antitrust acts of the state and the provisions of the Penal Code based thereon, that they violated section 1, Art. XIV, of the Amendments to the Constitution of the United States in that the Act of March 30, 1889, and the Code provisions based thereon, deprived the company of the equal protection of the laws, because it was provided by section thirteen of said act and article 988 of the Penal Code that the said statutes "shall not apply to agricultural products or livestock while in the hands of the producer or raiser." And that the Act of April 30, 1895, and certain sections of the Revised Statutes of Texas and of the Penal Code were likewise discriminatory because of the same exceptions, and the further exception that said statutes should not be held to "be understood or considered to prevent the organization of laborers for the

Page 197 U. S. 118

purpose of maintaining any standard of wages," and the Act of May 25, 1899, because it was cumulative and a mere supplement to the others, and carried therefore the same unconstitutional discriminations.

All of the acts and code provisions are charged with depriving the oil company of its property without due process of law and in violation of the Fourteenth Amendment in that the penalties are excessive and their provisions so vague and uncertain that the company is denied a resort to the tribunals of the country to defend its rights except on the condition that, if not successful, it shall subject its property to confiscation and forfeit its right to do business in the state.

It is also urged as a ground of demurrer that the act of 1895 violated a provision of the Constitution of the state which prohibited a bill to contain more than one subject.

The demurrer was overruled. The company declined to answer further, and judgment was entered forfeiting the license or permit of the company, and enjoining the company from transacting any business in the state, "except such business as may be and constitute interstate commerce." The judgment was affirmed by the court of civil appeals. A rehearing was denied and a writ of error from the supreme court refused. This writ of error was then granted.

Page 197 U. S. 127

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