The United States filed a bill to enforce the provisions of the
Sherman Anti-Trust Act of July 2, 1890, against an alleged
combination of railroad and coal mining companies formed to
restrain competition in the production, sale, and transportation in
interstate commerce of anthracite coal. The bill alleged a general
combination through an agreement between the carrier defendants to
apportion the coal tonnage between themselves on a scale of
percentages; a combination through the medium of one of the mining
companies to prevent the construction of a new competing coal
carrying road from the anthracite district to tidewater, a
combination by a series of identical contracts with independent
coal operators for sale of their total product, and certain
contributory combinations between some but not all of the
defendants. The bill was filed prior to the enactment
Page 226 U. S. 325
of the Commodities Clause of the Hepburn Act of June 29,
1906.
Held that:
Any relief against a continuance of the transportation of
carrier-owned coal under the Commodities Clause must be sought in a
proceeding based upon that act, and cannot be obtained in this
suit.
On the record in this case, this Court agrees with the court
below that the Government has failed to show any contract or
combination for the distribution of coal tonnage between the
carriers.
The defendants did combine to unreasonably restrain interstate
commerce in violation of the Sherman Anti-Trust Act through the
Temple Iron Company to prevent the construction of the competing
coal-carrying railroad.
Although a combination has succeeded in accomplishing one of the
purposes for which it was formed, if it is still an efficient
agency to prevent competition in other methods, the court may
proceed to judgment and decree its dissolution.
A disclaimer on the part of defendants of power of any one of
them to control business of the others cannot detract from the
significance of documentary evidence bearing on the relations of
the defendants to each other.
Although separate acts of the defendants may be legal under the
state law when considered alone, they may, when taken together,
become parts of an illegal combination under the Anti-Trust Act
which it is the duty of the court to dissolve.
Acts absolutely lawful may be steps in a criminal plot.
Aikens v. Wisconsin, 195 U. S.
206.
While no one of a number of contracts, considered severally, may
be in restraint of trade, each of a series of innocent contracts
may be a step in a concerted criminal plot to restrain interstate
trade, and if so, may thereupon become unlawful under the
Anti-Trust Act.
Swift Co. v. United States, 196 U.
S. 375.
In this case,
held that a series of identical contracts
between interstate carriers with a great majority of the
independent coal operators to market all the coal of the latter for
all time at an agreed percentage of tidewater price were all parts
of a concerted scheme to control the sale of the independent
output, and were unreasonable contracts in restraint of interstate
trade within the prohibition of the Sherman Act.
Where, as in this case, purchase and delivery within a state is
but one step in a plan and purpose to control and dominate trade
and commerce in other states for an illegal purpose, it is an
interference with and restraint of interstate commerce.
Loewe
v. Lawlor, 208 U. S. 274.
While the Sherman Act does not forbid or restrain the power to
make
Page 226 U. S. 326
usual and normal contracts to further trade through normal
methods, whether by agreement or otherwise,
Standard Oil Co. v.
United States, 221 U. S. 1, it does
forbid contracts entered into according to a concerted scheme, as
in this case, to unduly suppress competition and restrain freedom
of commerce among the states.
While the law may not compel competition, it may remove illegal
barriers resulting from illegal agreements, such as those involved
in this case, which make competition impracticable.
Whether a particular act or agreement is reasonable and normal
or unreasonable may in doubtful cases turn upon intent, and the
extent of control obtained over the output of a commodity may
afford evidence of the intent to suppress competition.
Where there is no doubt that the necessary result of an act is
to materially restrain trade between the states, intent is of no
consequence.
In a suit to restrain all defendants from carrying out an
illegal combination under the Sherman Act in which all defendants
participated, the Court will not consider minor combinations
between less than all of the defendants which did not constitute
part of the general combination found to be illegal. To do so would
condemn the bill for misjoinder and multifariousness.
In this case, the Court expresses no opinion on such minor
combinations, and, as to them, the bill should be dismissed without
prejudice.
183 F. 427 affirmed in part and reversed in part.
The facts, which involve the legality under the Sherman
Anti-Trust Act of certain combinations of railroad and coal mining
companies engaged in the production, sale, and transportation in
interstate commerce of anthracite coal, are stated in the
opinion.
Page 226 U. S. 337
MR. JUSTICE LURTON delivered the opinion of the Court.
This is a petition in equity, filed by the United States in the
Circuit Court of the United States for the Eastern District of
Pennsylvania, for the purpose of enforcing the provisions of the
Act of July 2, 1890, known as the Sherman Anti-Trust Act, against
an alleged combination of railroad and coal mining companies formed
and continued for the purpose of restraining competition in the
production, sale, and transportation of anthracite coal in commerce
among the states.
The defendants originally made such, and alone referred to
hereafter as the defendants, were the following:
The Philadelphia & Reading Railway Company; the Philadelphia
& Reading Coal & Iron Company; the Lehigh Valley Railroad
Company; the Lehigh Valley Coal Company; the Delaware, Lackawanna
& Western Railroad Company; the Central Railroad Company of New
Jersey; the Erie Railroad Company; the New York, Susquehanna &
Western Railroad Company; the New York, Susquehanna & Western
Coal Company; the Lehigh & Wilkesbarre Coal Company; the
Pennsylvania Coal Company; the Hillside Coal Company; the Reading
Company, and the Temple Iron Company. By an amendment, certain
other defendants were brought in, consisting of holders of
contracts made by independent operators of coal mines and trustees
holding securities which might be affected by the relief sought
against the carrier and coal mining companies, the original
defendants. A list of these later defendants is set out in the
margin,
* and when they
are referred to herein, they will be specifically mentioned.
Page 226 U. S. 338
The bill alleges that anthracite coal is an article of prime
necessity as a fuel, and finds its market mainly in the New England
and middle Atlantic states. The deposits of the coal, with
unimportant exceptions, lie in the State of Pennsylvania, but do
not occupy a continuous field, though found in certain counties
adjoining in the eastern half of the state, and embrace an area of
484 square miles. This coal region is from 150 to 250 miles from
tidewater. The region itself is broken and mountainous, and the
natural conditions and character of the deposits are such that the
mining and reduction of the coal to suitable sizes for domestic use
require very large amounts of capital. Its value commercially is
dependent, in a large degree, upon quick and cheap transportation
to convenient shipping points at tidewater, from whence it may be
distributed to the great consuming markets of the Atlantic Coast
states.
The whole problem of advantageously developing these deposits
and supplying the eastern demand for fuel was one which presented
enormous difficulties. From an early day, it has been the settled
policy of the State of Pennsylvania
Page 226 U. S. 339
to encourage the development of this coal region by canal and
railroad construction, which would furnish transportation to
convenient shipping points at tidewater. One of the defendant
carriers, the Delaware, Lackawanna & Western Company, was given
the power to acquire coal lands and engage in the business of
mining and selling coal in addition to the business of a common
carrier, and all railroad companies were permitted to aid in the
production of coal by assisting coal mining companies through the
purchase of capital stock and bonds. Thus it has come about that
the defendant carriers not only dominate the transportation of coal
from this anthracite region to the great distributing ports at New
York harbor, but also through their controlled coal-producing
companies, produce and sell about seventy-five percent of the
annual supply of anthracite. As a further direct consequence of the
state authorized between coal-producing and coal-transporting
companies, it has come about that the defendant carrier companies
and the coal mining companies affiliated with the carrier companies
now own or control about ninety percent of the entire unmined area
of anthracite, distributed, according to the averments of the
petition, as follows:
Reading Company . . . . . . . . . . 44. %
Lehigh Valley Company . . . . . . . 16.87 %
Del. L. & Western Company . . . . . 6.55 %
Cent. Railroad of New Jersey. . . . 19. %
Erie Railroad . . . . . . . . . . . 2.59 %
N.Y., Sus. & Western Railroad . . . .54 %
-------
89.55 %
It further appears that, in addition to the great coal mining
companies subsidiary to one or another of the defendant carrier
companies, there are a large number of independent coal operators
whose aggregate production
Page 226 U. S. 340
from coal lands, in part leased from the railroad companies or
the railroad controlled coal-producing companies, amounts to about
twenty percent of the annual anthracite supply. These independent
operators are said to no longer have the power to compete with the
carrier defendants and their subsidiary coal companies because a
large proportion of them have severally entered into contracts with
one or the other of the carrier or coal mining companies defendant
for the sale of the entire product of their mines for the
consideration of sixty-five percent of the average market price at
tidewater.
Thus there exists, independently of any agreement, combination,
or contract between the several defendant carrier companies for the
purpose of suppressing competition among them, this condition:
First: excluding two carrier companies not made defendants,
which reach but a limited number of collieries -- the Pennsylvania
Railroad Company and the New York, Ontario & Western Railroad
Company -- the six carrier companies who are defendants are shown
to control the only means of transportation between this great
anthracite deposit and tidewater, from whence the product may be
distributed by rail and water to the great consuming markets of the
Atlantic coast states.
Second: these carriers and their subsidiary coal mining and
selling companies produce and sell about seventy-five percent of
the total annual supply of anthracite coal. Of the remainder, the
independent operators mentioned above produce about twenty
percent
The chief significance of the fact that the six carrier
defendants control substantially the only means for the
transportation of coal from the mines to distributing points at
tidewater is in the fact that they, collectively, also control
nearly three-fourths of the annual supply of anthracite which there
finds a market. The situation is therefore one which invites
concerted action and makes exceedingly
Page 226 U. S. 341
easy the accomplishment of any purpose to dominate the supply
and control the prices at seaboard. The one-fourth of the total
annual supply which comes from independent operators in the same
region has been sold in competition with the larger supply of the
defendants. If, by concert of action, that source of competition be
removed, the monopoly which the defendants, acting together, may
exert over production and sale, will be complete.
This bill avers that the defendants have combined for the
purpose of securing their collective grip upon the anthracite coal
supply by exerting their activities to shut out from the district
any new line of transportation from the mines to tidewater points,
and to shut out from competition at tidewater the coal of
independent operators with their own coal. The steps said to have
been taken having this end in view, we shall now consider:
The community of interest which has resulted from the charter
powers of the carrier companies to directly or indirectly engage in
the business of mining and selling coal has produced the relation
between the carrier and coal mining defendants shown by the several
groups into which we have arranged them, thus:
1. The Reading Company is a Pennsylvania corporation, and
apparently nothing more than a holding company. That company
holds:
a. The entire capital stock of the Philadelphia & Reading
Railway, one of the defendant carriers.
b. The entire capital stock of the Philadelphia & Reading
Coal & Iron Company, a coal mining company.
The three companies have the same president.
2. The Lehigh Valley Railroad Company owns all of the capital
stock of the Lehigh Valley Coal Company, and the two companies have
the same president.
3. The Central Railroad of New Jersey owns ninety percent of the
capital stock of the Lehigh & Wilkes-Barre
Page 226 U. S. 342
Coal Company, and the two companies have the same president, who
is also the president of the Reading Company and its two controlled
companies.
4. The Erie Railroad Company owns all of the capital stock of
the Pennsylvania Coal Company and a large majority of the stock of
the Hillside Coal Company, and the three companies have the same
president.
5. The New York, Susquehanna & Western Railroad Company owns
nearly the entire capital stock of the New York, Susquehanna &
Western Coal Company, and they have the same president, who is also
the president of the Erie Railroad Company and of its two allied
coal companies mentioned above.
6. The Delaware, Lackawanna & Western Railroad Company is
itself an owner and producer of anthracite, and seems to have no
subsidiary coal company.
7. The Temple Iron Company. The relation of this company to the
several carrier companies will be considered separately.
Excluding the Temple Iron Company, the groups as arranged are
independent of each other, and each group, in the absence of any
agreement or combination, possesses the power to compete with every
other in the production, sale, and transportation of coal from the
mines to tidewater. Indeed, the plain averment of the bill is that,
prior to 1896, they were actually competing in the market reached
at New York harbor, and that the competition continued, except as
interrupted by abortive or abandoned efforts to combine, until they
entered into the general combination which it is the purpose of
this proceeding to dissolve.
That the Delaware, Lackawanna & Western Railroad Company was
itself the owner of coal lands, and was engaged in mining,
transporting, and marketing its own coal, and that the other
railway defendants were also engaged, through their subsidiary coal
companies, in mining and
Page 226 U. S. 343
selling coal as well as in transporting the coal so mined is not
determinative of any issue here presented, since this bill was
filed before the commodities clause of the Hepburn Act of June 29,
1906, 34 Stat. 584, c. 3591, became effective, which forbids any
carrier engaged in interstate transportation from transporting coal
for market when the coal at the time of transportation is owner by
the carrier company.
See United States v. D., L. & W. R.
Co., 213 U. S. 366. Any
relief against a continuance of such forbidden transportation must
therefore be sought in another proceeding based upon the Act of
Congress referred to.
The scope and theory of the bill
The theory upon which the bill is framed and upon which the case
has been presented by counsel is that there exists between the
defendants a general combination to control the anthracite coal
industry both in respect of mining and transportation from the
mines to the general consuming markets reached from shipping points
at New York harbor and the production and sale of coal throughout
the United States.
The contention is that this
general combination is
established first by evidence of an agreement between the carrier
defendants to apportion between themselves the total coal tonnage
transported from the mines to tidewater according to a scale of
percentages; second, by a combination between them, through the
instrumentality of the defendant, the Temple Iron Company, to
prevent the construction of a new and competing line of railroad
from the mines to tidewater; third, by a combination between the
defendants by means of a series of identical contracts for the
control of the coal produced by independent coal operators, thereby
preventing competition in the markets of other states between the
coal of such independent operators and that produced by the
defendants; and,
Page 226 U. S. 344
finally, by certain so-called contributary combinations, already
referred to, between some, but not all, of the defendants.
Aside from the particular transactions averred as "steps" or
"acts in furtherance" of a presupposed
general
combination, the charge of such a combination is general and
indefinite.
The case is barren of documentary evidence of solidarity. The
fact of such general combination, if it exists, most be deduced
from specific acts or transactions in which the companies have
united and from which such a general combination may be inferred.
When and how did such a combination come about? We start with the
proposition that, if any such combination exists, it had an origin
not earlier than 1896. Attempts to bring about a suppression of
competition prior to that time, indicated by some of the evidence,
had either proved abortive or had been abandoned. Thus, it is
stated that, in 1890 and 1891, the price of coal of certain sizes
at tidewater was from $3.71 to $3.85 per ton; that, in 1892, the
Philadelphia & Reading Railroad Company, the predecessor in
title of the defendant the Philadelphia & Reading Railway
Company, leased the lines of the Lehigh Valley Railroad Company and
of the Central Railroad Company of New Jersey for nine hundred and
ninety-nine years, and that the three companies together owned or
controlled about eighty percent of the coal deposits of this
anthracite region and transported nearly fifty percent of the
entire tonnage; that, while these leases were in force, the price
of coal was advanced to $4.15 and $4.19 per ton for the same sizes.
It is then averred that, in a proceeding in the courts of New
Jersey, these leases of the Central Railroad Company of New Jersey
were held null and void, and that, in 1893, this decree was
followed by a rescission of the lease of the Lehigh Valley Railroad
Company to the Philadelphia & Reading Railroad Company. It is
then averred that,
Page 226 U. S. 345
under the influence of competition thereby restored, the price
of the same grade of coal in 1894 fell to $3.60 per ton and in 1895
to $3.12 per ton. "Whereupon," the petition avers,
"in violation of the provisions of ยงยง 1 and 2, respectively, of
the Act of Congress of July 2, 1890, . . . the defendants the
Reading Company and the defendant carriers and the defendant coal
companies, owning or controlling 90 percent, more or less, of all
the anthracite deposits, and producing 75 percent, more or less, of
the annual supply of anthracite, and controlling all the means of
transportation between the anthracite mines and tidewater, save the
railroads operated by the Pennsylvania Railroad Company and the New
York, Ontario & Western Railroad Company, which, as aforesaid,
reach only a limited number of collieries (not defendants here),
entered into an agreement, scheme, combination, or conspiracy by
virtue whereof they acquired the power to control, regulate,
restrain, and monopolize, and have controlled, regulated,
restrained, and monopolized, not only the production of anthracite
coal, but its transportation from the mines in Pennsylvania to
market points in other states, and its prices and sale throughout
the several states, with the result that competition in the
transportation and sale of anthracite has been wholly suppressed,
and the price thereof greatly enhanced."
1. We come first to the evidence relied upon to show such a
general combination through an agreement between the carriers to
distribute the total tonnage of coal from this region to shipping
points at New York harbor according to a scale of percentages
spoken of as the "presidents' percentages."
There is some evidence tending to show that, early in 1896,
there was an effort made at a conference of the presidents of the
carrier companies to distribute the coal tonnage between the
several carriers based upon the
Page 226 U. S. 346
average percentage of coal carried in prior years by each
carrier. The limited character of the coal field, the control of so
large a proportion of the deposits and of the transportation, was
such as to invite agreements and combinations. A pooling
arrangement would largely prevent competition between the otherwise
independent groups of carriers and producers. That any such pooling
agreement was made is denied most earnestly by all of the
defendants. That there occurred a conference in 1896 looking to
such an arrangement seems probable on the evidence. But the weight
of proof satisfies us that, whatever might have been contemplated
or attempted, the scheme proved abortive, or, if attempted, was
abandoned long before this bill was filed. We do not set out the
circumstances which are pointed out as tending to show such an
illegal agreement, nor do we deem it necessary to discuss the
conflicting direct testimony. We have gone through the record. The
facts are discussed and largely set out in the opinion of the court
below. Though its judges differed in respect to the relief which
might be granted upon other grounds, they agreed in holding that
the government had failed to show any contract or agreement for the
distribution of tonnage. In this we concur.
The Temple Iron Company combination
2. We come, then, to the several acts, agreements, or
transactions set out in the seventh paragraph of the bill, two of
which are said to have been participated in by all of the
defendants, and therefore to constitute evidence of the general
combination charged, and to be, in and of themselves, illegal
combinations between all of the principal defendants which come
under the frame of the bill as in violation of the Act of July 2,
1890.
The transactions referred to are introduced immediately
following the general charge, and are characterized in the
Page 226 U. S. 347
bill as "steps in the development of this illegal combination
and in furtherance of its illegal purposes." It is then averred,
that
"the defendants, or some of them, became parties to the
following additional acts, schemes, and contracts, among others, in
violation of the aforesaid Act of July 2, 1890."
This is followed by five distinct paragraphs, each setting out
some distinct contract, combination, or agreement alleged to have
been the Act of all of the defendants, or of two or some number
less than all. These alleged "steps" and "additional acts, schemes,
and contracts," in violation of the Sherman law and in furtherance
of the alleged illegal general scheme or purpose, are:
a.
the making of the sixty-five percent contracts with the independent
operators;
b. the absorption by the Erie Railroad of the
New York, Susquehanna & Western Railroad Company;
c.
the acquisition by the Reading Company of the majority of the
capital stock of the Central Railroad of New Jersey;
d.
the acquisition of the Temple Iron Company, and through it of a
large number of collieries, for the purpose of defeating a
projected independent line of railway into the coal region, and
e. the acquisition by the Erie Railroad Company, while
controlling the Hillside Coal & Iron Company, of all of the
shares of the Delaware Valley & Kingston Railroad Company, a
projected common carrier, and all of the shares of the Pennsylvania
Coal Company.
As we have already stated, two of these transactions are averred
to be transactions into which all of the defendants entered in
pursuance of a common purpose and general design to suppress
competition and restrain commerce in coal between the states.
The first which we shall consider is the alleged combination
through the Temple Iron Company. Concerning this, the petition in
substance states that, in 1898, many of the independent coal
operators in the Wyoming or Northern field became dissatisfied with
the transportation
Page 226 U. S. 348
and market conditions under which they were obliged to conduct
their collieries. Many contracts for the sale of their coal to the
defendant coal companies had expired or were about to expire, and
they demanded either lower freight rates or better prices from the
coal companies. A competing line of railway from the Northern or
Wyoming zone of the anthracite region to a point on the Delaware
River, where connection would be made with two or more lines
extending to shipping points at New York harbor, was projected as a
means of relieving the situation. The New York, Wyoming &
Western Railroad was accordingly incorporated. Large subscriptions
of stock were taken, the line in part surveyed, parts of the
right-of-way procured, and a large quantity of steel rails
contracted for. As the road was to be mainly a coal-carrying road,
support from coal mining companies was essential. Its chief backing
came from independent coal operators. The most important and
influential of them was the firm of Simpson & Watkins, who
controlled and operated eight collieries in the region, having an
annual output of more than a million tons. The time for such a
competing means of transportation was auspicious. Much of the
output of the district not tied up by contracts of sale or
transportation was pledged to this project, and much more was
promised.
The petition alleges that the construction of the projected
independent railroad would not only have introduced competition
into the transportation of anthracite coal to tidewater, but it
would have enabled independent operators reached by it to sell
their coal at distributing points in free competition with the
defendant coal companies. "Wherefore," avers the pleading,
"the defendants the Reading Company, owning the entire capital
stock of the Philadelphia & Reading Railway Company, and the
other carrier companies defendants herein, controlling collectively
all means of transportation between the mines
Page 226 U. S. 349
and shipping points at New York harbor, combined together for
the purpose of shutting out the proposed railroad, and preventing
competition with them in the transportation of coal from the mines
to other states, and the sale of coal in competition with their own
controlled coal in the markets of other states."
The plan devised was to detach from the enterprise the powerful
support of Simpson & Watkins and the great tonnage which their
cooperation would give to the new road, by acquiring for the
combination the coal properties and collieries controlled by that
great independent firm of operators. This would not only strangle
the project, but secure them forever against new schemes induced by
the large tonnage produced by these eight collieries, and secure
not only that tonnage for their own lines, but keep the coal
forever out of competition with that of their controlled
coal-producing companies.
The scheme was worked out with the result foreseen and intended.
The capital stock of the Temple Iron Company, aggregating only
$240,000, was all secured. That company was then operating a small
iron furnace near Reading. Its assets were small, but its charter
was a special legislative charter which gave it power to engage in
almost any sort of business, and to increase its capital
substantially at will. Control of that company having been secured,
it was used as the instrument for the purpose intended.
The plan by which the defendant carriers were enabled to carry
out this scheme and apportion among themselves proportionate
interests in the property acquired and the burden to be assumed was
not simple, but elaborate. The financial arrangements seem to have
been made through Mr. Baer, who was the president of and a large
stockholder in the Temple Company, and Mr. R. J. Bacon, of the firm
of J. P. Morgan & Company. Shortly stated, it was this: the
Temple Company increased its
Page 226 U. S. 350
capital stock to $2,500,000 and issued mortgage bonds
aggregating $3,500,000. Simpson & Watkins agreed to sell to the
Temple Company their properties for something near $5,000,000. They
accordingly transferred to the Temple Company the capital shares in
the several coal companies, holding the title to their eight
collieries, and received in exchange $2,260,000 in the shares of
the Temple Company, and $3,500,000 of its mortgage bonds. By
contemporaneous instruments, Simpson & Watkins transferred to
the defendant the Guaranty Trust Company of New York, as trustee,
this capital stock and $2,100,000 of the bonds of the Temple
Company, and received from the Guaranty Company, $3,238,396.66 in
money and $1,000,000 in certificates of beneficial interest in the
stock of the Temple Company. The Guaranty Company seems to have
been but a medium, and was accordingly protected by a
contemporaneous contract with the Reading Company and the other
carrier defendants by which they severally contracted with the
Guaranty Company to purchase the Temple Company's capital stock in
a certain agreed proportion or percentage of the total capital
stock, and to guarantee the bonded debt of the Temple Company in
the same proportion. A large proportion of the bonds and of the
beneficial certificates of interest in stock of the Temple Company
was later guaranteed, or underwritten, as the stock phrase goes, by
a syndicate including J. P. Morgan, William Rockefeller, the
Guaranty Company, and others.
Thus it came about that, when this bill was filed, the stock of
the Temple Company, which, as seen, is a mere holding company for
the several defendant carrier companies, was owned by the
defendants, and the obligations of that company were guaranteed by
them in proportions based on the percentage of the total anthracite
tonnage carried annually by each of the defendant carriers, namely:
the Reading Company and the Reading Railway
Page 226 U. S. 351
Company, being treated as one and the same in this matter,
29.96%; the Lehigh Valley Railroad Company, 22.88%; the Central
Railroad of New Jersey, 17.12%; the Delaware, Lackawanna &
Western Railroad Company, 19.52%; the Erie Railroad Company, 5.84%;
the New York, Susquehanna & Western Railroad Company, 4.86%. At
the time this proof was taken, the average annual output of the
collieries thus acquired was about 1,600,000 tons, and in the last
year the output had risen to 1,950,000 tons. This combination of
the defendants through the Temple Iron Company was effective in
bringing about the desired result. The New York, Wyoming &
Western Railroad Company was successfully strangled, and the
monopoly of transportation collectively held by the six defendant
carrier companies was maintained.
The projected competing railroad was undoubtedly a good faith
proposition, and held out promise to independent coal operators not
only of the prospect of competition in transportation from the
mines to tidewater, but the possibility of selling their coal
either to the controlled coal companies defendant at better prices,
or to the consuming public at tidewater in competition with that of
the controlled coal companies. But if we assume that its
construction was doubtful, the result must be the same as
characterizing the purpose and design of the concerted action of
the defendants. They were so far convinced of the threatening
character of the enterprise that they were moved at great cost to
thwart it and at the same time remove the temptation for like
competition by securing to themselves forever the product of the
collieries named.
That the collieries to be reached by the new road were not all
reached by each of the defendants is true. The great bulk of
tonnage from them seems to have been carried by the Erie, the
Lehigh, and the Lackawanna. But the preservation of the monopoly of
transportation
Page 226 U. S. 352
from the mines to tidewater held by the six lines which were
serving the region was plainly a common interest,-a collective
monopoly by which the profits in coal could be secured and the
monopoly maintained by shutting out any new line to tidewater. The
extent of the interest of each in the desired result seems to have
been estimated by themselves as fairly measured by the percentage
of the total tonnage theretofore carried annually by each. Thus, it
was that they became owners of the shares in the Temple Company,
and guarantors of its obligations in the same proportions.
It has been suggested that, since the New York, Wyoming &
Western Railroad has been effectively strangled, it will be idle to
enjoin the doing of an act already accomplished. But that is a
narrow view of the relief which may be granted under the statute
and the frame of this bill.
The combination by means of the Temple Company still exists. It
has been and still is an efficient agency for the collective
activities of the defendant carriers for the purpose of preventing
competition in the transportation and sale of coal in other
states.
That under the law of Pennsylvania each of the defendant carrier
companies has the power to acquire and hold the stock of
coal-producing companies may be true. That the Temple Company may,
under the same law, have the power to acquire and hold the capital
stock of the Simpson & Watkins collieries may also be conceded.
But if the defendant carriers did, as we have found to be the fact,
combine to restrain the freedom of interstate commerce either in
the transportation or in the sale of anthracite coal in the markets
of other states, and adopted as a means for that purpose the Temple
Company, and, through it, the control of the great Simpson &
Watkins collieries, the parts of the general scheme, however
lawful, considered alone, become parts of an illegal
combination
Page 226 U. S. 353
under the federal statute which it is the duty of the court to
dissolve, irrespective of how the legal title to the shares is
held.
Harriman v. Northern Securities Co., 197 U.
S. 244,
197 U. S. 291.
So long as the defendants are able to exercise the power thus
illegally acquired, it may be most efficiently exerted for the
continued and further suppression of competition. Through it, the
defendants, in combination, may absorb the remaining output of
independent producers. The evil is in the combination. Without it,
the several groups of coal-carrying and coal-producing companies
have the power and motive to compete. That each may for itself
advance the price of coal or cut down the production is true. But
in the power which each other group would have to compete would be
found a corrective. The statute forbids the concerted action which
has already brought about the strangling of a projected competing
railroad and the complete control of the sale of an immense tonnage
of independent coal which had prior thereto not only been a menace
to their collective control of the means of transportation to New
York harbor points, but a large competing factor in sales at these
points. The Temple Company therefore affords a powerful agency by
means of which the unlawful purpose which induced its acquisition
may be continued beyond the mere operation of the Simpson &
Watkins collieries.
Its board of directors includes the presidents of the defendant
carriers, who also are the presidents of the defendant coal
companies, and these defendant companies absolutely dominate its
affairs. The Temple Company also owns and dominates the great
collieries obtained from Simpson & Watkins. Its board of
directors, composed as it is of men representing the defendants,
supplies time, place, and occasion for the expression of plans or
combinations requiring or inviting concert of action. Though as a
board it may not dictate the activities of
Page 226 U. S. 354
the owning corporations, still, in view of the relation of the
Temple Company to the defendant carriers and their respective
coal-mining companies, and of the constitution of its directors,
the attitude of its board, as indicated by the proceedings spread
upon the corporate minutes, is of significance upon the question of
the existence of any concerted purpose to unite the activities of
its corporate owners to suppress competition. There are to be found
on the minutes of the Temple Company a number of entries which
point strongly to combinations between the defendants. Thus, on
June 27, 1899, a committee was appointed to consider the
establishment of a statistical bureau, "to keep a record of all
matters of interest to the anthracite companies." What resulted
does not appear from any further minutes. On July 2, 1901, a
resolution in these words was adopted:
"
Resolved, That Mr. Cumming, Mr. Sayre, Mr. Henderson,
Mr. Caldwell, and Mr. Warren be appointed a committee to consider
the advisability and expediency of making a 40 percent rate to
outside shippers, or a flat rate, and, if so, what rate."
By "outside shippers," the witness says was meant "independent
operators" who shipped their own coal. The witness by whom this
action was proved says that he never saw the report and does not
know that any was made by the committee. It is true that Mr. Baer,
the president of the Temple Company, denied that the Temple Company
had or undertook to exercise any power in respect of carrier rates,
or in fixing prices of coal. He says that the minute entries
referred to above are matters "interjected by somebody" under a
misconception of the powers and duties of the directors of that
company, and came to nothing. That he shortly took the presidency
himself, and that the Temple Company "has been run as the most
harmless mining company in the State of Pennsylvania," and has had
nothing to do with the
Page 226 U. S. 355
price of coal or with rates for transportation. But this
disclaimer of power does not detract from the significance of the
minutes of the board referred to as evidence bearing upon the
question of the relation of the several defendants to each
other.
We are in entire accord with the view of the court below in
holding that the transaction involved a concerted scheme and
combination for the purpose of restraining commerce among the
states, in plain violation of the Act of Congress of July 2,
1890.
3. We come now to the sixty-five percent contracts.
The charge of the petition in respect of these contracts is
substantially this:
a. That the defendant carriers possessed a substantial monopoly
of all of the means of transportation between the coal region and
tidewater.
b. That they directly or indirectly, through their controlled
coal companies, produced about seventy-five percent of the annual
supply of anthracite coal.
c. That twenty percent or more of the annual supply was produced
by independent operators, whose collieries were located contiguous
to the carrier lines of the defendant companies.
d. This being the situation, it is charged that, for the purpose
of preventing the output of these independent producers
"from being sold throughout the several states in competition
with the output from their own mines, or of the mines of their
subsidiary coal companies, the said defendant carriers, having
almost a complete monopoly of the means of transportation between
the anthracite mines and tidewater, entered into and now maintain
an agreement, combination, or conspiracy to use their power as said
carriers to obtain control of the sale and disposition of the
aforesaid output of the independent mines in the markets of the
several states, particularly
Page 226 U. S. 356
of the great distributing market at New York harbor, in
violation of the aforesaid Act of July 2, 1890."
It is further averred:
e. That, prior to 1900, the defendants "severally made" a large
number of short-term contracts for the purchase of the coal of
independent operators "along their respective lines," prices
ranging from fifty-five to sixty percent of the average price at
tidewater.
That, upon the termination of these contracts, the
defendants,
"in pursuance of a previous agreement between themselves,
severally offered to make and did make and conclude with nearly all
of the independent operators along their lines new contracts
containing substantially uniform provisions agreed upon beforehand
by the defendant carriers in concert, some of the operators
contracting with one of the defendants and some with another,"
by which such operators "severally agreed" to deliver on cars at
breakers
"to one or the other of the defendant carriers, or its
subsidiary coal company, all the anthracite coal thereafter mined
from any of their mines now opened and operated, or which they
might thereafter open and operate, deliveries to be made from time
to time as called for,"
etc. In consideration, the sellers were to receive for prepared
sizes sixty-five percent of the general average price prevailing at
tidewater points at or near New York, as computed from month to
month, this average price to be settled by an expert agreed upon by
the parties.
It is further averred that this price was such as to enable the
independent operator entering into one of these contracts to
realize upon his coal from fifteen to fifty cents more than he
could when shipping on his own account after paying the established
rates of transportation, waste, and cost of selling in competition
with the coal of the defendants. That the difference was the price
paid for the privilege of controlling the sale of the
independent
Page 226 U. S. 357
output, "so as to prevent it from selling in competition with
the output of their own mines."
It is then further alleged that the result of this plan,
"as was intended, was to draw, if not to force, the great body
of independent operators into making the aforesaid contracts,
thereby enabling the defendants to control absolutely, and until
the mines are exhausted, the output of most of the independent
anthracite mines, and to prevent it, as aforesaid, from being sold
in competition with the output of their own mines in the markets of
the several states, particularly in the great tidewater
markets."
It is obvious that the averments do not touch upon the legality
of the contracts considered severally, and ask no relief upon the
theory that each was a contract in restraint of trade. The theory
and charge of the bill is that, by concerted action between the
defendants, the independent operators were to be induced to enter
singly into uniform agreements for the sale of the entire output of
their several mines and any other they might thereafter acquire,
excluding a negligible amount of unmarketable coal and coal for
local consumption. And the further theory of the pleading is that,
by such concerted action and through the higher price offered, the
defendants would obtain such control of independent coal as to
prevent competition in the markets of other states.
It is not essential that these contracts, considered singly, be
unlawful as in restraint of trade. So considered, they may be
wholly innocent. Even acts absolutely lawful may be steps in a
criminal plot.
Aikens v. Wisconsin, 195 U.
S. 194,
195 U. S. 206.
But a series of such contracts, if the result of a concerted plan
or plot between the defendants to thereby secure control of the
sale of the independent coal in the markets of other states, and
thereby suppress competition in prices between their own output and
that of the independent operators, would come plainly within the
terms of the statute, and, as parts of the scheme or plot,
Page 226 U. S. 358
would be unlawful. Thus, in
Swift & Co. v. United
States, 196 U. S. 375,
196 U. S. 396,
where a plan or scheme consisting in many parts or elements was
averred to constitute a combination forbidden by the Act of July 2,
1890, it was said:
"The scheme as a whole seems to us to be within reach of the
law. The constituent elements, as we have stated them, are enough
to give to the scheme a body, and, for all that we can say, to
accomplish it. Moreover, whatever we may think of them separately
when we take them up as distinct charges, they are alleged
sufficiently as elements of the scheme. It is suggested that the
several acts charged are lawful, and that intent can make no
difference. But they are bound together as the parts of a single
plan. The plan may make the parts unlawful."
That the plan was calculated to accomplish the design averred in
the present case seems plain enough. The anthracite field was very
limited. The means for transportation from the mines to seaboard
shipping points were in the hands of the defendant carriers. They,
together with their subsidiary companies, controlled about ninety
percent of the coal deposit and about seventy-five percent of the
annual output. If the remaining output, that of the independent
operators along their several lines, could be controlled as to
production and sale at tidewater points, there would inevitably
result such a dominating control of a necessity of life as to bring
the scheme or combination within the condemnation of the
statute.
That these sixty-five percent contracts were the result of an
agreement through protracted conferences between the independent
operators, acting through an authorized committee, and officials of
the carrier defendants, who were likewise officials of the coal
companies subsidiary to the railroad companies, is plainly
established. That they were designed by the defendants
Page 226 U. S. 359
as a means of controlling the sale of the independent output in
the market at tidewater points, thereby preventing competition with
their own coal, and as a plan for removing the great tonnage
controlled by the independents from being used as an inducement for
the entry of competing carriers into the district, is a plain
deduction.
Some of the facts which lead to this conclusion will be referred
to as briefly as the great importance of the case will permit:
That for a long time many of the independent operators had been
selling their output to their great rivals, the defendant carriers
and their several coal companies, is true. By means of such sales
and deliveries at their own breakers, the sellers avoided freight,
waste, and expense of sales through agents, etc. The price they
would thereby realize was fixed, and they were not dependent upon a
fluctuating market. So long, therefore, as they could sell to their
rivals at their breakers to better advantage than they could ship
and sell on their own account, the method appealed to them. But
obviously buyer and seller were not upon an equal plane. The former
had control of freight rates and car service. The seller must pay
the rate exacted and accept the car service supplied him by the
buyer or appeal to the remedies afforded by the law. If the rate of
freight to tidewater was onerous, and was imposed upon the coal
produced by the defendants and their allied coal producers without
discrimination against the coal of the independent shipper, it
would nevertheless bear upon the latter oppressively, since the
rate paid would find its way into the pocket of the defendants.
Therefore it was that the higher the freight rate, the greater the
inducement to sell to the carrier companies. That the conditions
were not accepted by the independent producers as satisfactory is
evident. The majority at all times stood out, and those making such
agreements as well as those refusing to do so maintained
Page 226 U. S. 360
an agitation for better freight rates and better prices for
those who preferred to sell at their breakers. For many years
before this proceeding, they maintained an organization called "The
Anthracite Coal Operators' Association," and through that body
endeavored to improve their situation.
The series of contracts here involved were all made since 1900,
and are therefore subsequent to the combination through the Temple
Iron Company, already considered. The charge is that, since that
combination, the defendants further combined through these
contracts. Prior to 1900, we find no evidence of any combination or
agreement for the procurement of contracts of sale with independent
operators. Upon the contrary, there is much to indicate that there
was more or less competition for coal accessible to more than one
of the buying defendants. The effect of competition is shown by the
gradual rise in the price the great companies were willing to pay.
In the earliest stages of the business, the buying price seems to
have been fixed with some relation to the varying wage scale of
miners. This gave way to an agreed percentage of the current price
at tidewater. Thus, the earlier contracts allowed the selling
operator only forty percent of the tidewater price for prepared
sizes. Through competition between the existing companies and
through that which resulted from the entry of new carrier lines
with their subsidiary coal companies, the price was forced
gradually up from forty to sixty percent of the tidewater price,
and at this latter figure the price stood when the combination here
averred came into existence.
We have mentioned the influence of the coming into the region of
new coal-carrying railroads upon the percent of the tidewater price
which the independent operators were able to obtain from the buying
coal companies. This influence, as we shall see, was a large factor
in bringing about the contracts now in question. The carriers
Page 226 U. S. 361
here defendant did not all obtain their footing in this
anthracite field at the same time. Thus, when the New York,
Susquehanna & Western was projected, it, through its coal
company, offered to buy coal on fifty percent contracts. The price
before that had been forty to forty-five percent. The result was
that the other companies came gradually up to the same price. This
was late in the eighties, the exact date not being at hand. Again,
it is said in the brief for the defendants, that:
"In the early 90's, the New York, Ontario & Western Railroad
built a branch into the Wyoming region and sought tonnage. Mr.
Sturgis was commissioned beforehand by the coal company of that
railroad to offer 60% contracts on the understanding that, if he
could secure a half million tons annually, the branch would be
built. The branch railroad was built, and by its help large new
acreages of coal lands were developed, tributary to the Ontario
& Western Railroad."
As a consequence, says the same brief, "the other coal companies
began to raise their rates to 60%," and, by 1892, that had become
the settled price.
The influence of competition, actual or threatened, was also
illustrated in 1898, when the New York, Wyoming & Western was
projected. A large number of coal contracts had expired or were
about to expire, thus creating a great tonnage open to competition.
Many of the operators in the Wyoming region of the coal field
united their influence to procure the building of a competing line
between the mines and New York harbor points. To this end, a large
tonnage was pledged to its coal-selling company, which offered to
pay sixty-five percent of the tidewater price to such operators.
How and why that project failed we have already shown in the
section of this opinion devoted to the Temple Iron Company
combination.
When that effort failed, there arose a movement for a
Page 226 U. S. 362
new road from the mines to tidewater through the Pennsylvania
Coal Company. That was one of the greatest of the independent
companies, producing in 1899 about 2,000,000 tons. It controlled a
coal-gathering railroad called the Erie & Wyoming Valley
Railroad, and proposed its extension to Lackawaxen, and to cause
the construction from that point of a railroad line to the Hudson
River. To this end, it caused to be organized the Delaware Valley
& Kingston Railroad. Of this project, Mr. Thomas, the president
of the Erie Railroad Company, said: "They were threatening and had
started to build a competing road to the Hudson River." The
independent operators, in an association maintained by them for
their mutual protection, hailed this scheme with joy. At a meeting
of the association on November 22, 1899, the following minute was
made:
"Mr. E. L. Fuller, chairman of the executive committee, on being
called upon, told of the efforts which have been made to induce the
various anthracite railroads to offer more satisfactory terms for
the purchase of the operators' coal, and of the absolute failure of
these efforts to bring about any definite result. He then reported
the organization of the Delaware Valley & Kingston Railroad,
backed by the Pennsylvania Coal Company, and the proffer of this
latter company to purchase coal from operators in the Wyoming and
Lehigh region, paying 65 percent of the tidewater price for
chestnut and larger; 50 percent for pea coal, and a flat 85 percent
freight rate on buckwheat and smaller sizes. These contracts were
to be for all of the coal in the ground, thus settling permanently
the price which the operator would receive."
"After extended discussion as to the details of these contracts
and a comparison with the results obtained under the old contracts,
the following resolution was offered and passed unanimously:"
"Whereas the Erie & Wyoming Valley Railroad Company
Page 226 U. S. 363
has arranged to build a branch line from Hawley, Pennsylvania,
to a point on the boundary line between New York and Pennsylvania
at Lackawaxen, forming a connection with a railroad proposed to be
constructed by the Delaware Valley & Kingston Railroad Company
to tidewater at Kingston, on the Hudson river;"
"And whereas the construction of the said railroads is approved
and promoted by the Pennsylvania Coal Company, which has large
interests in the anthracite coal region;"
"And whereas the independent operators and the general public
are now largely at the mercy of the existing railroad companies,
which charge unreasonable rates for their services, owing in part
to the large amounts for which the said companies have been
capitalized;"
"And whereas it would be highly advantageous to all the
independent owners of coal properties throughout the entire
anthracite region of Pennsylvania to have the railroad connection,
now proposed, completed as speedily as possible;"
"And whereas it is equally desirable, in the interests of the
people of the State of New York and the public in general, that
such railroad connection shall be made (since it will necessarily
result in a material reduction of the price paid for anthracite
coal by consumers), now, therefore it is."
"
Resolved, I. That this association hereby expresses
its hearty and unqualified approval of the proposed plan for the
construction of the said railroads, and hereby pledges its constant
support and active assistance in promoting the speedy construction
and completion of the said railroads."
"II. That a committee of three be appointed by the president, of
which the president shall be a member, to take such steps as may be
deemed advisable toward furthering the said plans and cooperating
with the said companies
Page 226 U. S. 364
for the completion of the said railroads, and that a report of
their proceedings be submitted to the next meeting of this
association."
"In the discussion which followed, it was the opinion of those
present that, in view of the hearty assistance which had been
accorded the operators by the Pennsylvania Coal Company, it was the
duty of the members to give to this company all of the tonnage
which they could deliver, and not to permit any more advantageous
offers which the older companies might make, to divert freight from
a road which was constructed to give the operators a fair share in
the selling price. A vote of thanks was accorded Mr. Fuller for his
labor and great success in accomplishing a work which was for the
advantage of every individual operator in the anthracite
regions."
It is enough to say of this project that it was abandoned when,
in 1901, the Erie Railroad acquired, without any concert of action
between it and the other carrier defendants, the capital stock of
the Pennsylvania Coal Company, which carried with it the capital
stock of the Erie & Wyoming Valley Railroad and the Delaware
& Kingston Railroad.
The persistent effort of the independents to bring into the
field competing carrier and coal-producing companies was a menace
to the monopoly of transportation from that field to tidewater
which the defendants collectively possessed. The independent output
was one-fourth of the annual supply. It was mainly sold at
tidewater, where it came into active competition with the larger
production of the defendants; but, as we have already seen, this
enormous tonnage offered a great inducement to the organization of
new carrier lines from the mines to the seaboard. The contracts
theretofore made for the purchase of this output had been for short
terms. The expiration of a considerable number had more than once
been the occasion for new carrier projects backed by the
Page 226 U. S. 365
independent operators. To renew the contracts for short terms
would not postpone the day of competition. The control in
perpetuity of such a large proportion of the output as would
prevent in the future effective competition in the selling markets
of the coast, and at the same time remove inducement to the entry
of other lines of carriers, was the obvious solution of the
situation. The necessary control could only come about through
concerted action. If one of the several independent groups of
defendants, or two, or any less number than all, had sought to
obtain control, it would have been resisted by those not included.
Therefore it is plain that, if the coal of these operators was to
be placed in such situation as that it could not affect the price
of their own coal, nor longer constitute a mass of tonnage
sufficient to invite the construction of new lines from the mines
to the sea, it must be brought about through the concerted action
of the defendants.
In 1900, there occurred the great strike of the coal miners.
Settled by arbitration in the fall of that year, the miners
obtained a ten percent increase in wages. Of course, this affected
the railroad coal-producing companies and the independent coal
companies alike. The great companies took the lead in the
arbitration and accepted the result. The independent companies were
compelled to follow this lead. The latter, as we have seen, had
before the strike been particularly urgent in their efforts to
secure better conditions from the railroads and their allied coal
companies. The rebellious attitude is partially shown by the
resolution of the Anthracite Coal Operators' Association of
November 22, 1899, heretofore set out. When the strike settlement
was made, there was some hesitation among the independent operators
about posting notice of the advance in wages, and through
committees they urged upon the defendants that such advance in
wages justified a reduction in freight rates and a price of not
less
Page 226 U. S. 366
than sixty-five percent for coal sold to the defendant
companies. The committees reported back that they could not obtain
"any definite promise," but there has been "an intimation" that
something would be done to improve the present conditions. It was
thereupon resolved that the advance scale should be posted, and
that a committee should be appointed "to confer with the various
carrier companies relative to a new contract." At the same meeting,
a number of the operators present signed an agreement empowering
the committee named "to adjust all differences with certain
transportation companies," and agree upon a basis of contract which
should definitely and for a period of years fix the commercial
relations between the said operators and the transportation
companies, "each of the parties agreeing to make a particular
contract for himself with the proper transportation company." This
agreement, after being signed by those present, was placed in the
hands of Mr. McNulty to secure further signatures. These matters
appear on the minutes of the individual operators of October 5th.
There ensued a number of conferences between the representatives of
the sellers and buyers. The result was that a form of contract and
a price was mutually agreed upon, being the form of the sixty-five
percent contracts, which were thereafter entered into as the short
term agreements theretofore made expired. Thus the independents put
in force the advance wage scale imposed by the strike arbitrators
before any agreement whatever was made or promised by the
defendants. This increased scale which the arbitration imposed,
having been accepted by the large companies, could not be
successfully resisted by the independents. It only operated to make
them more persistent in their demand for some improvement in the
methods and prices theretofore prevailing.
That the defendant companies should offer such terms is not
surprising. The contracts to be made would be not
Page 226 U. S. 367
only for the life of the mines being operated at the date of the
sale, but was to extend to any other mines thereafter opened by the
seller. The menace of the independent output as an invitation to
competing carriers and as a competing coal at tidewater would be
removed forever.
Upon this aspect of the case, we find ourselves in agreement
with Judge Buffington, who concluded a discussion of the evidence
by saying:
"By such perpetual contracts . . . , these defendant railroads,
through their subsidiary coal companies, severally made with other
collieries, these combiners withdrew and still continue to withdraw
such product for all time from competition either in interstate
transportation or sale. To my mind, there is no more subtle and
effective agency for the gradual, unnoted absorption by interstate
carriers of the remaining interstate product than these perpetual
contracts. Holding, then, that they are, in the words of the
statute, 'contracts . . . in restraint of trade or commerce among
the state,' I record my dissent to the action of the court in
refusing to enjoin them."
The coal contracts acquired when this proceeding was begun
aggregated nearly one half the tonnage of the independent
operators. Much of the coal so bought was sold in Pennsylvania, and
all of the contracts were made in that state, and the coal was also
there delivered to the buying defendants. That the defendants were
free to sell again within Pennsylvania, or transport and sell
beyond the state, is true. That some of the coal was intended for
local consumption may also be true. But the general market
contemplated was the market at tidewater, and the sales were made
upon the basis of the average price at tidewater. The mere fact
that the sales and deliveries took place in Pennsylvania is not
controlling when, as here, the expectation was that the coal would,
for the most part, fall into and become a part of the well known
current of commerce between the mines and the
Page 226 U. S. 368
general consuming markets of other states. "Commerce among the
states is not a technical legal conception, but a practical one,
drawn from the course of business."
Swift & Co. v. United
States, 196 U. S. 396,
196 U. S. 398;
Loewe v.Lawlor, 208 U. S. 274. The
purchase and delivery within the state was but one step in a plan
and purpose to control and dominate trade and commerce in other
states for an illegal purpose. As was said by the Chief Justice in
Loewe v.Lawlor (p.
208 U. S.
301), cited above:
"Although some of the means whereby the interstate traffic was
to be destroyed were acts within a state, and some of them were in
themselves, as a part of their obvious purpose and effect, beyond
the scope of federal authority, still, as we have seen, the acts
must be considered as a whole, and the plan is open to condemnation
notwithstanding a negligible amount of intrastate business might be
affected in carrying it out. If the purposes of the combination
were, as alleged, to prevent any interstate transportation at all,
the fact that the means operated at one end before physical
transportation commenced, and at the other end after the physical
transportation ended, was immaterial."
The general view which this Court took of the effect of these
contracts upon interstate traffic in the coal of this region is
indicated in
Interstate Commerce Commission v. Baird,
194 U. S. 25,
194 U. S. 42.
The concerted plan concerned the relations of these railroads to
their interstate commerce, and directly affected the transportation
and sale and price of the coal in other states. The prime object in
engaging in this scheme was not so much the control and sale of
coal in Pennsylvania, but the control of sales at New York
harbor.
That percent of the average price at tidewater retained by the
buyer was assumed to cover the freight, waste, and cost of sale.
There is evidence tending strongly to show that an independent
accepting one of these contracts
Page 226 U. S. 369
realized slightly more than he could realize if he had shipped
and sold on his own account. This advanced price, therefore, as
charged in the bill, constituted a great inducement to draw the
independents within the control of the defendants, and makes it
highly probable that, if not enjoined, they will absorb the entire
independent output.
The defendants insist that these contracts were but the
outgrowth of conditions peculiar to the anthracite coal region, and
are not unreasonably in restraint of competition, but mutually
advantageous to buyer and seller.
That the act of Congress does not forbid or restrain the power
to make normal and usual contracts to further trade by resorting to
all normal methods, whether by agreement or otherwise, to
accomplish such purpose was pointed out in the
Standard
Oil case,
221 U. S. 1. In that
case, it was also said that the words "restraint of trade" should
be given a meaning which would not destroy the individual right of
contract and render difficult, if not impossible, any movement of
trade in the character of interstate commerce the free movement of
which it was the purpose of the statute to protect. We reaffirm
this view of the plain meaning of the statute, and, in so doing,
limit ourselves to the inquiry as to whether this plan or system of
contracts entered into according to a concerted scheme does not
operate to unduly suppress competition and restrain freedom of
commerce among the states.
Before these contracts, there existed not only the power to
compete, but actual competition, between the coal of the
independents and that produced by the buying defendants. Such
competition was, after the contracts, impracticable. It is, of
course, obvious that the law may not compel competition between
these independent coal operators and the defendants, but it may at
least
Page 226 U. S. 370
remove illegal barriers resulting from illegal agreements which
will make such competition impracticable.
Whether a particular act, contract, or agreement was a
reasonable and normal method in furtherance of trade and commerce
may, in doubtful cases, turn upon the intent to be inferred from
the extent of the control thereby secured over the commerce
affected, as well as by the method which was used. Of course, if
the necessary result is materially to restrain trade between the
states, the intent with which the thing was done is of no
consequence. But when there is only a probability, the intent to
produce the consequences may become important.
United States v.
Terminal R. Association, 224 U. S. 383,
224 U. S. 394;
Swift & Co. v. United States, 196 U.
S. 375.
In the instant case, the extent of the control over the limited
supply of anthracite coal by means of the great proportion
theretofore owned or controlled by the defendant companies, and the
extent of the control acquired over the independent output which
constituted the only competing supply, affords evidence of an
intent to suppress that competition and of a purpose to unduly
restrain the freedom of production, transportation, and sale of the
article at tidewater markets.
The case falls well within not only the
Standard
Oil and
Tobacco
cases,
221 U. S. 1,
221 U. S. 106, but
is of such an unreasonable character as to be within the authority
of a long line of cases decided by this Court. Among them we may
cite
Northern Securities Company v. United States,
193 U. S. 197;
Swift & Co. v. United States, 196 U.
S. 375;
National Cotton Oil Company v. Texas,
197 U. S. 115;
United States v. St. Louis Terminal Association,
224 U. S. 383, and
the recent case of
United States v. Union Pacific Railway,
ante, p.
226 U. S. 61.
We are thus led to the conclusion that the defendants did
combine for two distinct purposes -- first, by and through the
instrumentality of the Temple Iron Company,
Page 226 U. S. 371
with the object of preventing the construction of an independent
and competing line of railway into the anthracite region; and,
second, by and through the instrumentality of the sixty-five
percent contracts, with the purpose and design of controlling the
sale of the independent output at tidewater.
The acts and transactions which the bill avers to have been
committed by some of the defendants in furtherance of the illegal
plan and scheme of a general combination are these:
a. The absorption in January, 1898, of the New York, Susquehanna
& Western Railroad, through the purchase by the Erie Railroad
of a large majority of its shares, whereby two lines of competing
railroad came under one control and management.
b. The acquisition in 1901 of a controlling majority of the
capital stock of the Central Railroad of New Jersey by the Reading
Company, which then owned the entire capital stock of the
Philadelphia & Reading Railway Company and the Philadelphia
& Reading Coal & Iron Company, "thereby uniting and
bringing together under a common head and source of control the
said Philadelphia & Reading Railway Company and Central
Railroad Company of New Jersey, operating parallel and competitive
lines of railroad, and the said Philadelphia & Reading Coal
& Iron Company and Lehigh & Wilkesbarre Coal Company,"
theretofore owned and controlled by the Central Railroad of New
Jersey, thereby destroying competition between former competing
carriers and coal-producing companies.
c. The absorption in 1899 by the Erie Railroad Company of the
Pennsylvania Coal Company, thereby acquiring the stock control of
the Erie & Wyoming Railroad Company and of the Delaware Valley
& Kingston Railroad, thus defeating a projected construction of
the last-named railroad.
Page 226 U. S. 372
These were all minor combinations in which only some of the
defendants participated. The accomplishment of these several
subordinate transactions only completed one or another of the
several groups of carriers and coal-producing companies, which
several groups thereafter not only possessed of the power to
compete with every other group, but, as we have already seen, were
actually engaged in competing, one with another, prior to the
general combination through the Temple Iron Company and the
sixty-five percent contract scheme.
So far as this record shows, not one of these transactions was
the result of any general combination between all of the
defendants, and constituted no part of any such general
combination. None of the defendants had any part or lot in bringing
them about except the particular combining companies.
It is true that the bill asks injunctions against the
continuance of each of these minor combinations. But if, as we
conclude, they did not constitute any part of any general plan or
combination entered into by all of the carrier companies, their
separate consideration as independent violations of the Act of
Congress is not admissible under the general frame of this bill. To
treat the bill as one seeking to apply the prohibition of the Act
of Congress to each one of these independent combinations would
condemn the pleading as a plain misjoinder of parties and of causes
of suit, and a plain confession of multifariousness. All of the
defendants had a common interest in the defense of the Temple Iron
Company combination, and that of the sixty-five percent contracts,
because it was alleged that all had joined therein. But all of the
defendants did not have a common interest in the defense of these
three minor combinations unless it appear that they were, as
charged, "steps," or acts and agreements in furtherance of the
general combination to which they were all parties. This we find
not to be the fact. If, therefore, we shall
Page 226 U. S. 373
treat the bill as broad enough to involve combinations which
were not steps or acts in furtherance of any general combination,
we shall overrule the objection of multifariousness, made below and
here, for we shall then maintain a bill setting up three separate
and distinct causes of action against the distinct groups of
defendants, one having no interest in or connection with the other.
The grounds of each suit would be different, and the parties
defending different.
See the discussion and cases cited in
Simkins, Federal Equity Suit, pp. 290
et seq.
Having failed to show that these minor combinations were acts in
furtherance of the general scheme, or the Acts of the combiners in
the two combinations condemned, we are asked to deal with them as
separate illegal combinations by such of the defendants as
participated. This the court below declined to do, and we in this
find no error.
As to the legality of the minor combinations, we therefore
express no opinion. We affirm the action of the court below in
declining to enjoin them, because to construe the bill as directed
against them as independent combinations between some, but not all,
of the principal defendants would make the pleading objectionably
multifarious. We therefore direct that the bill be dismissed
without prejudice insofar as it seeks relief against the three
alleged minor combinations.
The decree of the court below is affirmed as to the Temple
Iron Company combination. It is reversed as to the sixty-five
percent contracts, and the case will be remanded with direction to
enter a decree cancelling each of these contracts and perpetually
enjoining their further execution, and for such proceedings as are
in conformity with this opinion.
MR. JUSTICE DAY, MR. JUSTICE HUGHES, and MR. JUSTICE PITNEY did
not participate in the consideration or decision of this case.
* The Delaware & Hudson Company; Elk Hill Coal & Iron
Company; St. Clair Coal Company; Enterprise Coal Company; Buck Run
Coal Company; Llewellyn Mining Company; Clear Spring Coal Company;
Pancoast Coal Company; Price-Pancoast Coal Company; Mount Lookout
Coal Company; People's Coal Company; George F. Lee Coal Company;
North End Coal Company; Melville Coal Company; Parrish Coal
Company; Red Ash Coal Company; Raub Coal Company; Mid Valley Coal
Company; Austin Coal Company; Clarence Coal Company; Nay Aug Coal
Company; Green Ridge Coal Company; Excelsior Coal Company;
Lackawanna Coal Company; Dolph Coal Company, Limited; Mary F. W.
Howe, Frank Pardee, and Sarah Drexel Van Rensellaer, constituting
A. Pardee & Company; Lafayette Lentz, William O. Lentz, and
Lewis A. Riley, constituting Lentz & Company; William Law and
John M. Robertson, constituting Robertson & Law; Richard White,
W. R. McTurk, and Robert White, constituting E. White Company;
Joseph J. Jermyn, George B. Jermyn, Emma J. Jermyn, constituting
John Jermyn Estate; Joseph J. Jermyn, Michael F. Dolphin; the
Pennsylvania Company for Insurance on Lives and Granting Annuities,
and the Mercantile Trust Company.