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
MR. JUSTICE McKENNA, after stating the case as above, delivered
the opinion of the Court.
The charges made against the statutes of Texas are that they
deny the oil company the equal protection of the law, and take its
property without due process of law. The answer to the first
depends upon the effect of the statutes. The answer of the second
involves their validity and broader considerations. We will deal
with it first.
The specification in the demurrer of wherein the statutes
deprive the oil company of its property without due process of law
is indefinite and peculiar. It may be different from an attack on
the validity of the statutes, but counsel have treated it as
tantamount to such attack, and we will so treat it.
Defendant in error contends that it is not open to the oil
company to attack the constitutionality of the statutes, either as
discriminating against it or as depriving it of property without
due process of law, and cites
Waters-Pierce Oil Company v.
Texas, 177 U. S. 28.
Counsel for the company contests the application of that case, and
we will assume (not decide) with them that it is not determinative
of their contention.
The acts of 1889 and 1895 are set out at length in the
Waters-Pierce Oil Company case. The act of 1899, so far as
the present question is concerned, is substantially the same as
they. All of the acts are directed to the prohibition of
combinations to restrict trade, or in any way limit competition in
the production
Page 197 U. S. 128
or sale of articles, or to increase or reduce their price in
order to preclude a free and unrestricted competition in them. The
various ways in which these purposes can be accomplished are
enumerated and forbidden. Penalties are affixed to the violation of
the acts, offending domestic corporations forfeit their charters,
and offending foreign corporations forfeit their privileges to do
business in the state.
There was also an act passed in 1903 which repealed all laws or
parts of laws in conflict with it, and expressly repealed certain
provisions of the Penal Code of the state, and the acts of 1895 and
1899. The right to recover penalties or to forfeit charters of
domestic, or the permits of foreign, corporations for acts
committed before the going into effect of the statute was
reserved.
The argument which is directed against the validity of the
statutes is drawn from extremes. It is difficult to present its
elements in a concise way. Its ultimate foundation is the right of
individuals and corporations as well, under the Constitution of the
United States, to make contracts and combine in business
enterprises, and, it is argued, to prohibit them from so doing
"in the ordinary way through the making of purchases and sales
and the fixing of prices, is clearly to work a deprivation of
property without due process of law, and to impair the well
recognized liberty of contract, involved in the acquiring, using,
and dealing with property,"
assured by the federal Constitution.
To support the argument, the usages and necessity of business
are adduced, and partnerships and their effect are brought forward
as illustrations. There are some things which counsel easily
demonstrate. They easily demonstrate that some combination of
"capital, skill, or acts" is necessary to any business development,
and that the result must inevitably be a cessation of competition.
But this does not prove that all combinations are inviolable, or
that no restriction upon competition can be forbidden. To contend
for these extremes is to overlook the difference in the effect of
actions, and to limit too
Page 197 U. S. 129
much the function and power of government. By arguing from
extremes, almost every exercise of government can be shown to be a
deprivation of individual liberty. It is commonplace to say that it
is the purpose and indeed duty of government, to get all it can of
good out of the activities of men, and limit or forbid them when
they become or tend to evil. Of course, what is evil may not be
always clear, but to be able to dispute the policy of a law is not
to establish its invalidity. It is certainly the conception of a
large body of public opinion that the control of prices through
combinations tends to restraint of trade and to monopoly, and is
evil. The foundations of the belief we are not called upon to
discuss, nor does our purpose require us to distinguish between the
kinds of combinations or the degrees of monopoly. It is enough to
say that the idea of monopoly is not now confined to a grant of
privileges. It is understood to include a "condition produced by
the acts of mere individuals." Its dominant thought now is, to
quote another, "the notion of exclusiveness or unity" -- in other
words, the suppression of competition by the unification of
interest or management, or it may be through agreement and concert
of action. And the purpose is so definitely the control of prices
that monopoly has been defined to be "unified tactics with regard
to prices." It is the power to control prices which makes the
inducement of combinations and their profit. It is such power that
makes it the concern of the law to prohibit or limit them. And this
concern and the policy based upon it has not only expression in the
Texas statutes; it has expression in the statutes of other states
and in a well known national enactment. According to them,
competition, not combination, should be the law of trade. If there
is evil in this, it is accepted as less than that which may result
from the unification of interests, and the power such unification
gives. And that legislatures may so ordain this Court has decided.
United States v. E. C. Knight Co., 156 U. S.
1;
United States v. Trans-Missouri Freight
Association, 166 U. S. 290;
United States v. Joint
Traffic Association, 171
Page 197 U. S. 130
U.S. 505;
Northern Securities Co. v. United States,
193 U. S. 197;
Swift & Co. v. United States, 196 U.
S. 375.
In
Smiley v.
Kansas, decided at this term,
196 U.
S. 447, a statute of Kansas is passed on which is
identical in effect, and even in words, in all that concerns the
present controversy, with the Texas statutes. The statute was
assailed as "an unwarranted attempt upon the part of the
legislature to limit the rights of the individual in the matter of
contracting and dealing with his fellowmen." The right which Smiley
claimed was to combine with certain grain dealers, persons,
companies, and corporations, who were competitors, to pool and fix
the price of grain in the Town of Bison, and to prevent competition
in the purchase and sale of grain at that place. We followed the
ruling of the supreme court of the state in holding that the
combination was within the prohibition of the statute; we concurred
with that court in deciding that the prohibition was a valid
exercise of the police power of the state.
It follows that the statutes of Texas do not deprive the oil
company of its property without due process of law.
Next, as to the effect of the statutes.
The Act of May 25, 1899, omits the discriminatory provisions of
the prior acts, but, it is contended that, as the latter act is
declared to be cumulative of the prior acts, their discriminations
are preserved and continued, and that, under the Code provisions,
the company may be criminally prosecuted, and that the excepted
classes of the acts of 1889 and 1895 are exempt from prosecution.
It is further urged, whether such discrimination results from the
statutes is for us to determine independently of what views the
courts of the state may entertain of them and their relations.
Upon the last contention depends the mode of approaching the
other, and we will dispose of it first. We cannot assent to it.
There are cases in which we determine for ourselves the meaning of
a state law, but this is not one of them. The contention of the
company is that the statutes of the state discriminate against it
-- in other words, deny it the equal protection
Page 197 U. S. 131
of the law, by forbidding it from doing what they permit others
to do in similar circumstances -- punish its acts and exempt from
punishment the same acts when done by others. But the courts of the
state are the tribunals appointed to administer the statutes and
impose their penalties, and to do so, they must necessarily
interpret them. In other words, they are the tribunals to declare
the meaning of the statutes, and if in declaring it they make the
statutes discriminatory, then may the statutes become
unconstitutional.
Olsen v. Smith, 195 U.
S. 332.
What has the Supreme Court of Texas said of the statutes?
The court of civil appeals in the case at bar expressed the
following view:
"The trial court did not err in overruling appellant's
demurrers. While it has been correctly held that certain provisions
of the antitrust statutes are unconstitutional, the supreme court,
in the case of
State v. Shippers' Compress & Warehouse
Co., 95 Tex. 603, relying upon the case of
Waters-Pierce
Oil Co. v. Texas, 177 U. S. 28, holds that so much
of these statutes that authorize the cancelling and forfeiture of a
charter or permit to do business within the State of Texas are
valid, and are not in violation of the Constitution."
The supreme court refused a writ of error, and thereby, as we
understand the local rule to be, approved the views of the court of
civil appeals. Subsequently the supreme court expressed itself
explicitly in
State v. Shippers' Compress & Warehouse
Co., 95 Tex. 603, and
State v. Laredo Ice Co., 96
Tex. 461.
The object in
State v. Shippers' Compress & Warehouse
Co. was to forfeit the charter of the compress company for
violating the antitrust law of 1895, in that the incorporators
combined "to restrict aids to commerce." The law was attacked as
unconstitutional. To the contention, the court said:
"The defendant insists that the law is unconstitutional,
Page 197 U. S. 132
therefore void in whole, and will not support the action to
forfeit the charter. Upon the same objection, we held the antitrust
law of 1889 to be constitutional, and there is no such difference
between the two laws as would affect the decision of this question.
We believe that our decision is correct; that the law is not in
contravention of the constitution of the state, nor of the United
States.
Honck v. Brewing Assn., 88 Tex. 189."
The court then referred to
Connolly v. Union Sewer Pipe
Co., 184 U. S. 540, and
in submission to its authority held the law of 1895, so far as it
came within the terms of that case, invalid, and would not support
an action by the state to recover a penalty for a violation of the
law; nor would it, in suits between corporations and individuals,
support a defense based upon the fact that the right of action
originated in violation of the antitrust law. "But," the court
remarked,
"to the extent that the statute of this state is not embraced in
the decision of the Supreme Court of the United States, we shall
adhere to our former decision that it is constitutional and valid,
and therefore enforceable by the state."
That is, the court decided the act of 1895 was valid to the
extent that it authorized the state to revoke the license of a
foreign corporation, and to forfeit the charter of a domestic
corporation. The other provisions of the act were held invalid, and
the right to make this distinction was based on
Waters-Pierce
Oil Co. v. Texas.
State v. Laredo Ice Co. was instituted to recover
penalties for the violation of the antitrust law of 1899. The ice
company was a domestic corporation, and it was proceeded against
for having formed a combination to regulate and fix prices. In
defense, the company asserted the unconstitutionality of the
act.
It is provided in section 14 of the act of 1899 that the
provisions of preceding sections and the fines and penalties
provided for violations of the act shall be held and construed to
be cumulative of all laws now in force in the state. It was
Page 197 U. S. 133
contended, as it is contended here, that this provision made one
law of the act and the act of 1895, and that the exemptions of the
latter became part of the former and made it unconstitutional. In
other words, the effect was (we quote from the opinion of the
court) "thereby to give exemption from prosecution under the law of
1899 to those persons who are exempted by the provisions of the law
of 1895." The Supreme Court of Texas rejected the contention. Its
reasoning was not very direct or circumstantial, but it in effect
held that the act of 1899 did not continue the provisions of the
prior acts, whether constitutional or unconstitutional, merely
because it was declared to be cumulative. And the court decided the
law of 1899 to be constitutional because it did not contain the
discriminating features of the prior laws. Under the laws of Texas,
therefore, combinations of the kind described in the various
antitrust laws, whether by agriculturalists or organized laborers
or others, are forbidden and penalized, and the oil company is not
discriminated against.
But it may be said that, if the inequalities of prior antitrust
acts have been removed by the act of 1899, they still remain in the
Revised Statutes of the state and in the Penal Code, and by those
statutes and that code, the excepted classes are exempted from
indictment and punishment, while the oil company is subject to
both. We need not consider the statutes referred to or consider how
far this discrimination can exist, in view of the decision of the
supreme court of the state in
State v. Laredo Ice Co.
Granting it can exist, the case at bar is not a criminal
prosecution. It involves only the antitrust laws and their
prohibitions and penalties. And in them, we have seen, by the
effect of the act of 1899, there is no inequality of operation. It
is the effect of that decision also that the laws of the state
against combinations and trusts are formed into a harmonious
system, of which the criminal provisions in other statutes and the
Code are a part, and that their provisions can be adjusted and
reconciled so as to have constitutional operation.
Judgment affirmed.
