Although the state appellate court may not have referred to the
constitutional questions in its opinion, this Court cannot regard
such silence as a condemnation of the time at, or manner in which,
those questions were raised, and, if the record shows that they
were raised in that court, this Court has jurisdiction.
The Fourteenth Amendment does not preclude the state from
adopting a policy against all combinations of competing
corporations and enforcing it even against combinations which have
been induced by good intentions and from which benefit and not
injury may have resulted.
The power of classification which may be exerted in the
legislation of
Page 234 U. S. 200
states has a very broad range, and a classification is not
invalid under the equal protection provision of the Fourteenth
Amendment because of simple inequality. A state statute prohibiting
combination is not unconstitutional as denying equal protection of
the law because it embraces vendors of commodities and not vendors
of labor and services. There is a reasonable basis for such a
classification, and so
held as to the Missouri antitrust
laws of 1899 and 1909. Questions of policy are for the legislature,
and not for this Court, to determine.
As classification must be accommodated to the problems of
legislation,
it may depend upon degree of evil so long as it is not
unreasonable or arbitrary.
237 Mo. 369 affirmed.
The facts, which involve the constitutionality of the Missouri
Anti-Trust Acts of 1899 and 1909, are stated in the opinion.
Page 234 U. S. 202
MR. JUSTICE McKENNA delivered the opinion of the Court.
Information in the nature of
quo warranto, brought in
the supreme court of the state to exclude plaintiff in error from
the corporate rights, privileges, and franchises exercised
Page 234 U. S. 203
or enjoyed by it under the laws of the state, that they be
forfeited, and all or such portion of its property as the court may
deem proper be confiscated, or, in lieu thereof, a fine be imposed
upon it in "punishment of the perversion, usurpation, abuse, and
misuse of franchises."
The ground of the action is the alleged violation of the
statutes of the state passed respectively in 1899 and 1909, and
entitled "Pools, Trusts, and Conspiracies," and "Pools, Trusts, and
Conspiracies and Discriminations."
The facts alleged in the information are these: plaintiff in
error is a Wisconsin corporation engaged in the manufacture and
sale of agricultural implements, binders, mowers, etc., and was
licensed on the 5th of April, 1892, to do business in Missouri
under the name of the Milwaukee Harvester Company, and on September
18, 1902, became licensed to do and engaged in such business in the
state. In that year, the International Harvester Company of New
Jersey was organized with a capital stock of $120,000,000 for the
purpose of effecting a combination of plaintiff in error and
certain other companies to restrain competition in the manufacture
and sale of such agricultural implements in Missouri, and the New
Jersey company has maintained plaintiff in error as its sole
selling agent in Missouri. Before the combination, the companies
combined were competitors of one another and of other corporations,
individuals, and partnerships engaged in the same business in the
state, and that thereby the people of the state, and particularly
the retail dealers and farmers of the state, received the benefit
of competition in the purchase and sale of farm implements. The
combination was designed and made with a view to lessen, and it
tended to lessen, free competition in such implements, and thereby
the said corporations entered into and became members of a pool,
trust, combination, and agreement. In furtherance thereof, and for
the purpose of giving the International Harvester Company of New
Jersey a
Page 234 U. S. 204
monopoly of the business of manufacturing and selling
agricultural implements in the state, and, for the purpose of
preventing competition in the sale thereof, plaintiff in error has
compelled the retail dealers in each county of the state who desire
to handle and sell or act as agent for it to refrain from selling
implements manufactured or sold by competing companies or persons.
By reason thereof, competition in such implements has been
restrained, prices controlled, the quantity of such implements has
been fixed and limited, and plaintiff in error has been able to
secure, and for several years enjoy, from 85% to 90% of the
business, all to the great damage and loss of the people of the
state, and, by reason of its participation in the pool, trust, and
combination, and by reason of the acts and things done by it,
plaintiff in error has been guilty of an illegal, willful, and
malicious perversion and abuse of its franchises, privileges, and
licenses granted to it by the state.
The answer of plaintiff in error denied that it had become a
party to any combination, or that, in its transactions, there was
any purpose to restrain or lessen competition, or that trade had
been or was restrained.
The case was referred to a special commissioner to take the
evidence and report his conclusions. He found, as alleged in the
information, that the International Harvester Company of New Jersey
was a combination of the properties and businesses of formerly
competing harvester companies, and plaintiff in error, being one of
such companies, and thereafter, by selling the New Jersey company's
products in Missouri, had violated the Missouri statutes against
pools, trusts, and conspiracies.
In exceptions to the report of the special commissioner,
plaintiff in error urged that the statute of Missouri violated the
equality clause and due process clause of the Fourteenth Amendment
to the Constitution of the United States
"(1) because said statute arbitrarily discriminates
Page 234 U. S. 205
between persons making or selling products and commodities and
persons selling labor and service of all kinds, in that each
section of said statute applies only to articles of merchandise,
and not to labor or services and the like, the prices of which are
equally and similarly determined by competition, and may be equally
and similarly the subject of combination and conspiracy to the
detriment of the public; (2) because said statute arbitrarily
discriminates between the makers and sellers of products and
commodities and the purchasers thereof; it prohibits manufacturers
and sellers from making contracts or arrangements intended or
tending to increase the market price of the articles they make or
sell, but does not prohibit purchasers from combining to fix or
reduce the market price of the commodities or articles to be
purchased by them; (3) because said statute, as construed by the
Commissioner, unreasonably and arbitrarily interferes with
plaintiff in error's right to make proper and reasonable business
contracts, and deprives it of property rights in respect
thereto."
These exceptions were urged and argued in the supreme court upon
the filing of the commissioner's report. Judgment was entered upon
the report in which it was adjudged that, by reason of the
violation of the statutes of the state, as charged in the
information, plaintiff in error had forfeited the license
theretofore granted to it to do business in the state, and it was
adjudged that the license be forfeited and cancelled and the
company ousted from its rights and franchises granted by the state
to do business in the state, and a fine of $50,000 was imposed upon
it. It was, however, provided that, upon payment of the fine on or
before the first of January, 1912, and immediately ceasing all
connection with the International Harvester Company of New Jersey
and the corporations and copartnerships with which it had combined,
and not continuing and maintaining the unlawful agreement and
combination
Page 234 U. S. 206
with them to lessen and destroy competition in the sale of the
enumerated farm implements, and giving satisfactory evidence
thereof to the court, the judgment of ouster should be suspended.
The company was given until March 1, 1912, "to file its proof of
willingness" to comply with the judgment. It was also adjudged
that, upon a subsequent violation of the statute "the suspension of
the writ of ouster shall be removed" by the court "and absolute
ouster be enforced," and, to that end, the court retained "its full
and complete jurisdiction over the cause." 237 Mo. 369.
A motion is made to dismiss on the ground that plaintiff in
error, in its answer, simply denied that it had violated the
antitrust laws of the state, and it is contended that, by not
alleging in its answer that those laws violated the Constitution of
the United States, it waived such defense. It is further contended
that, because the federal right was not asserted in the answer, the
supreme court of the state could not have considered, and did not
consider or decide it. Decisions of the Supreme Court of Missouri
are cited to sustain the contentions. The decisions declare the
proposition that constitutional questions must be raised at the
first opportunity, or, as it is expressed in one of the cases
(
Brown v. Railway, 175 Mo. 185), "the protection of the
Constitution must be timely and properly invoked in the trial
court."
In
Milling Co. v. Blake, 242 Mo. 31, it is said:
"The rule of this court is that so grave a question
[constitutional question] must be lodged at the first opportunity,
or it will be deemed to have been waived. If it can be
appropriately and naturally raised in the pleadings, and thereby be
a question lodged in the record proper, such is the time and place
to raise it,"
and that it is too late to raise the question after judgment in
a motion for new trial. In
Hertzler v. Railway Co., 218
Mo. 562, it was held:
"The motion for a new trial was not
Page 234 U. S. 207
the first door for the question to enter, and in our later
decisions we have ruled that a question of such gravity must be
raised as soon as orderly procedure will allow. This in order that
the trial court may be treated fairly, and the question get into
the case under correct safeguards, and earmarked as of substance,
and not mere color."
It is manifest, we think, that the court only intended to
express the condition of appellate review to be that, in the trial
court, constitutional questions should not be reserved until the
case had gone to judgment on other issues, and then used to secure
a new trial. The principle of the rulings is satisfied in the case
at bar. It is, as we have seen, an original proceeding in the
supreme court, and upon the report of the commissioner which
brought the case to the court for decision of the issues and
questions involved in it, the federal questions were made "under
correct safeguards and earmarked as of substance, and not mere
color." It is true the court has not referred to them in its
opinion, but we cannot regard its silence as a condemnation of the
time or manner at or in which they were raised. The motion to
dismiss is therefore denied.
The assignments of error necessarily involve a consideration of
the statutes. The relevant provisions are contained in § 10,301 of
the Revised Statutes of the State of 1909, and § 8,966 of the
Revised Statutes of 1899.
Section 10301 provides that
"all arrangements, contracts, agreements, combinations, or
understandings made or entered into between two or more persons,
designed or made with a view to lessen, or which tend to lessen,
lawful trade, or full and free competition in the importation,
transportation, manufacture, or sale"
in the state "of any product, commodity, or article, or thing
bought and sold," and all such arrangements, etc.,
"which are designed or made with a view to increase, or which
tend to increase, the market price of any product, commodity, or
article, or thing, of any class or kind whatsoever,
Page 234 U. S. 208
bought and sold,"
are declared to be against public policy, unlawful and void, and
those offending "shall be deemed and adjudged guilty of a
conspiracy in restraint of trade, and punished" as provided.
Section 8966 provides that arrangements, etc., such as described
in § 10301, having like purpose, and all such arrangements,
etc.,
"whereby or under the terms of which it is proposed, stipulated,
provided, agreed, or understood that any person, association of
persons, or corporations doing business in"
the state, "shall deal in, sell, or offer for sale" in the
state
"any particular or specific article, product, or commodity, and
shall not, during the continuance or existence of any such
arrangement, . . . deal in, sell, or offer for sale"
in the state "any competing article, product, or commodity" are
declared to be against public policy, unlawful and void, and any
person offending "shall be deemed and adjudged guilty of a
conspiracy to defraud, and be subject to the penalties"
provided.
By § 10304 of the Revised Statutes of 1909, it is provided that
domestic offending corporations shall forfeit their charters and
all or any part of their property as shall be adjudged by a court
of competent jurisdiction, or be fined in lieu of the forfeiture of
charters or of property.
Foreign offending corporations shall forfeit their right to do
business in the state, with forfeiture also of property, or, in
lieu thereof, the payment of a fine.
In
State v. Standard Oil Co., 218 Mo. 1, 370, 372, the
supreme court held that the antitrust statutes of the state
"are limited in their scope and operation to persons and
corporations dealing in commodities, and do not include
combinations of persons engaged in labor pursuits."
And, justifying the statutes against a charge of illegal
discrimination, the court further said that
"it must be borne in mind that the differentiation between labor
and property is so great that they do not belong to the same
Page 234 U. S. 209
general or natural classification of rights or things, and have
never been so recognized by the common law or by legislative
enactments."
Accepting the construction put upon the statute, but contesting
its legality as thus construed, plaintiff in error makes three
contentions: (1) the statutes, as so construed, unreasonably and
arbitrarily limit the right of contract; (2) discriminate between
the vendors of commodities and the vendors of labor and services,
and (3) between vendors and purchasers of commodities.
(1) The specification under this head is that the supreme court
found, it is contended, benefit -- not injury -- to the public had
resulted from the alleged combination. Granting that this is not an
overstatement of the opinion, the answer is immediate. It is too
late in the day to assert against statutes which forbid
combinations of competing companies that a particular combination
was induced by good intentions and has had some good effect.
Armour Packing Co. v. United States, 209 U. S.
56, 62 [argument of counsel -- omitted];
Standard
Sanitary Mfg. Co. v. United States, 226 U. S.
20,
226 U. S. 49.
The purpose of such statutes is to secure competition and preclude
combinations which tend to defeat it. And such is explicitly the
purpose and policy of the Missouri statutes, and they have been
sustained by the Supreme Court. There is nothing in the
Constitution of the United States which precludes a state from
adopting and enforcing such policy. To so decide would be stepping
backwards.
Carroll v. Greenwich Ins. Co., 199 U.
S. 401;
Central Lumber Co. v. South Dakota,
226 U. S. 157.
It is true that the supreme court did not find a definite abuse
of its powers by plaintiff in error, but it did find that there was
an offending against the statute, a union of able competitors, and
a cessation of their competition, and the court said: "Some of the
smaller concerns that were competitors in the market have ceased
their struggle for existence and retired from the field." This is
one
Page 234 U. S. 210
of the results which the statute was intended to prevent -- the
unequal struggle of individual effort against the power of
combination. The preventing of the engrossment of trade is as
definitely the object of the law as is price regulation of
commodities, its prohibition being against combinations
"made with a view to lessen, or which tend to lessen, lawful
trade or full and free competition in the importation,
transportation, manufacture, or sale of any commodity, or article,
or thing bought or sold."
See Standard Oil Co. v. United States, 221 U. S.
1;
United States v. American Tobacco Co.,
221 U. S. 106;
United States v. Patten, 226 U. S. 525.
(2) and (3). These contentions may be considered together, both
involving a charge of discrimination -- the one because the law
does not embrace vendors of labor, the other because it does not
cover purchasers of commodities as well as vendors of them. Both,
therefore, invoke a consideration of the power of classification
which may be exerted in the legislation of the state. And we shall
presently see that power has very broad range. A classification is
not invalid because of simple inequality. We said in
Atchison,
Topeka & Santa Fe R. Co. v. Matthews, 174 U. S.
96,
174 U. S. 106,
by Mr. Justice Brewer:
"The very idea of classification is that of inequality, so that
it goes without saying that the fact of inequality in no manner
determines the matter of constitutionality."
Therefore it may be there is restraint of competition in a
combination of laborers and in a combination of purchasers, but
that does not demonstrate that legislation which does not include
either combination is illegal. Whether it would have been better
policy to have made such comprehensive classification it is not our
province to decide. In other words, whether a combination of wage
earners or purchasers of commodities called for repression by law
under the conditions in the state was for the legislature of the
state to determine.
Page 234 U. S. 211
In
Carroll v. Greenwich Ins. Co. supra, a statute of
Iowa was considered which made it unlawful for two or more fire
insurance companies doing business in the state, or their officers
or agents, to make or enter into combinations or agreements in
relation to the rates to be charged for insurance, and certain
other matters. The provision was held invalid by the Circuit Court
of the United States for the District of Iowa on the ground of
depriving of liberty of contract secured by the Fourteenth
Amendment and of the equal protection of the laws. This Court
reversed the decision, saying, after stating that there was a
general statute of Iowa which prohibited combinations to fix the
price of any article of merchandise or commodity, or to limit the
quantity of the same produced or sold in the state: "Therefore, the
act in question does little, if anything, more than apply and work
out the policy of the general law in a particular case." Again,
"If an evil is specially experienced in a particular branch of
business, the Constitution embodies no prohibition of laws confined
to the evil, or doctrinaire requirement that they should be couched
in all-embracing terms."
And,
"If the Legislature of the State of Iowa deems it desirable
artificially to prevent, so far as it can, the substitution of
combination for competition, this Court cannot say that fire
insurance may not present so conspicuous an example of what that
legislature thinks an evil as to justify special treatment. The
imposition of a more specific liability upon life and health
insurance companies was held valid in
Fidelity Mutual Life
Insurance Company v. Mettler, 185 U. S.
308."
Other cases were also cited in illustration.
Carroll v. Greenwich Ins. Co. supra, is especially
apposite. It contains the elements of the case at bar and a
decision upon them. It will be observed that the statute, which it
was said declared the general policy of Iowa, was a prohibition
against a combination of producers and sellers. There was the same
distinction, therefore, between
Page 234 U. S. 212
vendors and purchasers of commodities as in the Missouri
statute, and the same omission of prohibition of combinations of
vendors of labor and services as in the Missouri law. The
distinction and omission were continued when the policy of the
state was extended to insurance companies. The law was not
condemned because it went no farther, because it did not prohibit
the combination of all trades, businesses, and persons. We held
that the omission was not for judicial cognizance, and that a court
could not say that fire insurance might not present so conspicuous
an example of what the legislature might think an evil "as to
justify special treatment."
We might leave the discussion with that and the other cases.
They decide that we are helped little in determining the legality
of a legislative classification by making broad generalizations,
and it is for a broad generalization that plaintiff in error
contends -- indeed, a generalization which includes all the
activities and occupations of life, and there is an enumeration of
wage earners in emphasis of the discrimination in which
manufacturers and sellers are singled out from all others. The
contention is deceptive, and yet it is earnestly urged in various
ways which it would extend this opinion too much to detail. "In
dealing with restraints of trade," it is said, "the proper basis of
classification is obviously neither in commodities nor services,
nor in persons, but in restraints." A law, to be valid, therefore,
is the inflexible deduction, cannot distinguish between
"
restraints," but must apply to all restraints, whatever
their degree or effect or purpose, and that, because the Missouri
statute has not this universal operation, it offends against the
equality required by the Fourteenth Amendment. This Court has
decided many times that a legislative classification does not have
to possess such comprehensive extent. Classification must be
accommodated to the problems of legislation, and we decided in
Ozan Lumber Co. v. Union
County Bank, 207 U.S.
Page 234 U. S. 213
251, that it may depend upon degrees of evil without being
arbitrary or unreasonable. We repeated the ruling in
Heath
& Milligan Mfg. Co. v. Worst, 207 U.
S. 338, in
Engel v. O'Malley, 219 U.
S. 128, in
Mutual Loan Co. v. Martell,
222 U. S. 225, and
again in
German Alliance Insurance Company v. Lewis,
233 U. S. 389,
233 U. S. 418.
In the latter case, a distinction was sustained against a charge of
discrimination between stock fire insurance companies and farmers'
mutual insurance companies insuring farm property. If this power of
classification did not exist, to what straits legislation would be
brought. We may illustrate by the examples furnished by plaintiff
in error. In the enumeration of those who, it is contended, by
combination are able to restrain trade are included, among others,
"persons engaged in domestic service" and "nurses;" and because
these are not embraced in the law, plaintiff in error, it is
contended, although a combination of companies uniting the power of
$120,000,000, and able thereby to engross 85% or 90% of the trade
in agricultural implements, is nevertheless beyond the competency
of the legislature to prohibit. As great as the contrast is, a
greater one may be made. Under the principle applied, a combination
of all the great industrial enterprises (and why not railroads as
well?) could not be condemned unless the law applied as well to a
combination of maid servants or to infants' nurses, whose humble
functions preclude effective combination. Such contrasts and the
considerations they suggest must be pushed aside by government, and
a rigid and universal classification applied, is the contention of
plaintiff in error, and to this the contention must come. Admit
exceptions, and you admit the power of the legislature to select
them. But it may be said the comparison of extremes is forensic,
and, it may be, fallacious; that there may be powerful labor
combinations as well as powerful industrial combinations, and weak
ones of both, and that the law, to be valid, cannot distinguish
Page 234 U. S. 214
between strong and weak offenders. This may be granted
(
Engel v. O'Malley, 219 U. S. 128),
but the comparisons are not without value in estimating the
contentions of plaintiff in error. The foundation of our decision
is, of course, the power of classification which a legislature may
exercise, and the cases we have cited, as well as others which may
be cited, demonstrate that some latitude must be allowed to the
legislative judgment in selecting the "basis of community." We have
said that it must be palpably arbitrary to authorize a judicial
review of it, and that it cannot be disturbed by the courts
"unless they can see clearly that there is no fair reason for
the law that would not require with equal force its extension to
others whom it leaves untouched."
Mo., Kan, & Tex. Ry. Co. v. May, 194 U.
S. 267,
194 U. S. 269;
Williams v. Arkansas, 217 U. S. 79,
217 U. S. 90;
Watson v. Maryland, 218 U. S. 173,
218 U. S.
179.
The instances of these cases are instructive. In the first,
there was a difference made between landowners as to liability for
permitting certain noxious grasses to go to seed on the lands. In
the second, the statute passed on made a difference between
businesses in the solicitation of patronage on railroad trains and
at depots. In the third, a difference based on the evidence of
qualification of physicians was declared valid.
In
Western Union Telegraph Co. v. Milling Co.,
218 U. S. 406, a
distinction was made between common carriers in the power to limit
liability for negligence. In
Engel v. O'Malley, supra, a
distinction between bankers was sustained, and in
Provident
Savings Institution v. Malone, 221 U.
S. 660, deposits in savings banks were distinguished
from deposits in other banks in the application of the statute of
limitations.
Other cases might be cited whose instances illustrate the same
principle, in which this Court has refused to accept the higher
generalizations urged as necessary to the fulfillment of the
constitutional guaranty of the equal protection
Page 234 U. S. 215
of the law and in which we, in effect, held that it is competent
for a legislature to determine upon what differences a distinction
may be made for the purpose of statutory classification between
objects otherwise having resemblances. Such power, of course,
cannot be arbitrarily exercised. The distinction made must have
reasonable basis.
Magoun v. Illinois Trust &c. Bank,
170 U. S. 283;
Clark v. Kansas City, 176 U. S. 114;
Gundling v. Chicago, 177 U. S. 183;
Petit v. Minnesota, 177 U. S. 164;
Williams v. Fears, 179 U. S. 270;
American Sugar Refining Co. v. Louisiana, 179 U. S.
89;
Griffith v. Connecticut, 218 U.
S. 563;
Chicago, R.I. & Pac. Ry. Co. v.
Arkansas, 219 U. S. 453,
219 U. S. 466;
Lindsley v. Natural Carbonic Gas Co., 220 U. S.
61,
220 U. S. 79;
Fifth Avenue Coach Co. v. New York, 221 U.
S. 467;
Murphy v. California, 225 U.
S. 623;
Rosenthal v. New York, 226
U. S. 269,
226 U. S. 270;
Mo., Kan. & Tex. Ry. v. Cade, 233 U.
S. 642.
And so in the case at bar. Whether the Missouri statute should
have set its condemnation on restraints generally, prohibiting
combined action for any purpose and to everybody, or confined it as
the statute does to manufacturers and vendors of articles, and
permitting it to purchasers of such articles; prohibiting it to
sellers of commodities and permitting it to sellers of services,
was a matter of legislative judgment, and we cannot say that the
distinctions made are palpably arbitrary, which we have seen is the
condition of judicial review. It is to be remembered that the
question presented is of the power of the legislature, not the
policy of the exercise of the power. To be able to find fault,
therefore, with such policy, is not to establish the invalidity of
the law based upon it.
It is said that the statute, as construed by the supreme court
of the state, comes within our ruling in
Connolly v. Union
Sewer Pipe Co., 184 U. S. 540, but
we do not think so. If it did, we should, of course, apply that
ruling here.
Judgment affirmed.