The "Call" rule of the Board of Trade of Chicago, prohibiting
members of the Board from purchasing or offering to purchase,
during the period between the session of the Board termed the
"Call" and the opening of the regular session of the next business
day, grain "to arrive," at a price other than the closing bid at
the "Call," does not violate the Anti-Trust Law.
A rule or agreement by which men occupying strong positions in a
branch of trade fix prices at which they will buy or sell during an
important part of the business day is not necessarily an illegal
restraint of trade under the Anti-Trust Law.
Every agreement concerning or regulating trade restrains, and
the true test of legality is whether the restraint is such as
merely regulates, and perhaps thereby promotes, competition, or
whether it is such as may suppress or even destroy competition.
To determine this question, the court must ordinarily consider
the facts peculiar to the business, its condition before and after
the restraint was imposed, the nature of the restraint, and its
effect, actual or probable.
The history of the restraint, the evil believed to exist, the
reason for adopting the particular remedy, the purpose or end
sought to be attained, are all relevant facts, not because a good
intention will save an otherwise objectionable regulation or the
reverse, but because knowledge of intent may help the court to
interpret facts and predict consequences.
It was therefore error for the District Court to strike from the
answer in this case allegations concerning the history and purpose
of the "Call" rule and to exclude evidence on that subject.
The rule of the Board of Trade here involved, by nature, is a
restriction merely upon the period of price-making; in scope, it
applies during a small part only of the business day, to a small
part only of the grain shipped from day to day to Chicago, to an
even smaller part of the day's sales, and not at all to grain
shipped to any of numerous other
Page 246 U. S. 232
available markets; it has had no appreciable effect upon general
market prices, nor has it materially affected the total volume of
grain coming to Chicago, but, within the narrow limits of its
operation, it has helped to improve market conditions in a number
of ways.
Reversed.
The case is stated in the opinion.
Page 246 U. S. 235
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
Chicago is the leading grain market in the world. Its Board of
Trade is the commercial center through which most of the trading in
grain is done. The character of the organization is described in
Board of Trade v. Christie Grain & Stock Co.,
198 U. S. 236. Its
1600 members include brokers, commission merchants, dealers,
millers,
Page 246 U. S. 236
maltsters, manufacturers of corn products and proprietors of
elevators. Grains there dealt in are graded according to kind and
quality, and are sold usually "Chicago weight, inspection and
delivery." The standard forms of trading are: (a) spot sales; that
is, sales of grain already in Chicago in railroad cars or elevators
for immediate delivery by order on carrier or transfer of warehouse
receipt. (b) future sales; that is, agreements for delivery later
in the current or in some future month. (c) sales "to arrive" --
that is, agreements to deliver on arrival grain which is already in
transit to Chicago or is to be shipped there within a time
specified. On every business day, sessions of the Board are held at
which all bids and sales are publicly made. Spot sales and future
sales are made at the regular sessions of the Board from 9:30 A.M.
to 1:15 P.M., except on Saturdays, when the session closes at 12 M.
Special sessions, termed the "call," are held immediately after the
close of the regular session, at which sales "to arrive" are made.
These sessions are not limited as to duration, but last usually
about half an hour. At all these sessions, transactions are between
members only, but they may trade either for themselves or on behalf
of others. Members may also trade privately with one another at any
place, either during the sessions or after, and they may trade with
nonmembers at any time except on the premises occupied by the
Board.
*
Purchases of grain "to arrive" are made largely from country
dealers and farmers throughout the whole territory tributary to
Chicago, which includes, besides Illinois and Iowa, Indiana, Ohio,
Wisconsin, Minnesota, Missouri, Kansas, Nebraska, and even South
and North Dakota. The purchases are sometimes the result of bids to
individual country dealers made by telegraph or telephone either
during the sessions or after, but most purchases
Page 246 U. S. 237
are made by the sending out from Chicago by the afternoon mails
to hundreds of country dealers, offers to buy at the prices named,
any number of carloads, subject to acceptance before 9:30 A.M. on
the next business day.
In 1906, the Board adopted what is known as the "call" rule. By
it, members were prohibited from purchasing or offering to
purchase, during the period between the close of the call and the
opening of the session on the next business day, any wheat, corn,
oats or rye "to arrive" at a price other than the closing bid at
the call. The call was over, with rare exceptions, by 2 o'clock.
The change effected was this: before the adoption of the rule,
members fixed their bids throughout the day at such prices as they
respectively saw fit; after the adoption of the rule, the bids had
to be fixed at the day's closing bid on the call until the opening
of the next session.
In 1913, the United States filed in the District Court for the
Northern District of Illinois, this suit against the Board and its
executive officers and directors, to enjoin the enforcement of the
call rule, alleging it to be in violation of the Anti-Trust Law of
July 2, 1890, c. 647, 26 Stat. 209. The defendants admitted the
adoption and enforcement of the call rule, and averred that its
purpose was not to prevent competition or to control prices, but to
promote the convenience of members by restricting their hours of
business and to break up a monopoly in that branch of the grain
trade acquired by four or five warehousemen in Chicago. On motion
of the government, the allegations concerning the purpose of
establishing the regulation were stricken from the record. The case
was then heard upon evidence; and a decree was entered which
declared that defendants became parties to a combination or
conspiracy to restrain interstate and foreign trade and commerce
"by adopting, acting upon and enforcing" the "call" rule; and
enjoined them from acting
Page 246 U. S. 238
upon the same or from adopting or acting upon any similar
rule.
No opinion was delivered by the District Judge. The government
proved the existence of the rule and described its application and
the change in business practice involved. It made no attempt to
show that the rule was designed to or that it had the effect of
limiting the amount of grain shipped to Chicago, or of retarding or
accelerating shipment, or if raising or depressing prices, or of
discriminating against any part of the public, or that it resulted
in hardship to anyone. The case was rested upon the bald
proposition that a rule or agreement by which men occupying
positions of strength in any branch of trade fixed prices at which
they would buy or sell during an important part of the business day
is an illegal restraint of trade under the Anti-Trust Law. But the
legality of an agreement or regulation cannot be determined by so
simple a test, as whether it restrains competition. Every agreement
concerning trade, every regulation of trade, restrains. To bind, to
restrain, is of their very essence. The true test of legality is
whether the restraint imposed is such as merely regulates, and
perhaps thereby promotes competition, or whether it is such as may
suppress or even destroy competition. To determine that question,
the court must ordinarily consider the facts peculiar to the
business to which the restraint is applied, its condition before
and after the restraint was imposed, the nature of the restraint,
and its effect, actual or probable. The history of the restraint,
the evil believed to exist, the reason for adopting the particular
remedy, the purpose or end sought to be attained, are all relevant
facts. This is not because a good intention will save an otherwise
objectionable regulation, or the reverse, but because knowledge of
intent may help the court to interpret facts and to predict
consequences. The District Court erred, therefore, in striking from
the answer
Page 246 U. S. 239
allegations concerning the history and purpose of the call rule
and in later excluding evidence on that subject. But the evidence
admitted makes it clear that the rule was a reasonable regulation
of business consistent with the provisions of the Anti-Trust
Law.
First. The nature of the rule: the restriction was upon
the period of price-making. It required members to desist from
further price-making after the close of the call until 9:30 A.M.
the next business day; but there was no restriction upon the
sending out of bids after close of the call. Thus, it required
members who desired to buy grain "to arrive" to make up their minds
before the close of the call how much they were willing to pay
during the interval before the next session of the Board. The rule
made it to their interest to attend the call, and if they did not
fill their wants by purchases there, to make the final bid high
enough to enable them to purchase from country dealers.
Second. The scope of the rule: it is restricted in
operation to grain "to arrive." It applies only to a small part of
the grain shipped from day to day to Chicago, and to an even
smaller part of the day's sales; members were left free to purchase
grain already in Chicago from anyone at any price throughout the
day. It applies only during a small part of the business day;
members were left free to purchase during the sessions of the Board
grain "to arrive," at any price, from members anywhere and from
nonmembers anywhere except on the premises of the Board. It applied
only to grain shipped to Chicago; members were left free to
purchase at any price throughout the day from either members or
non-members, grain "to arrive" at any other market. Country dealers
and farmers had available in practically every part of the
territory called tributary to Chicago some other market for grain
"to arrive." Thus, Missouri, Kansas, Nebraska,
Page 246 U. S. 240
and parts of Illinois are also tributary to St. Louis; Nebraska
and Iowa, to Omaha; Minnesota, Iowa, South and North Dakota, to
Minneapolis or Duluth; Wisconsin and parts of Iowa and of Illinois,
to Milwaukee; Ohio, Indiana and parts of Illinois, to Cincinnati;
Indiana and parts of Illinois, to Louisville.
Third. The effects of the rule: as it applies to only a
small part of the grain shipped to Chicago, and to that only during
a part of the business day, and does not apply at all to grain
shipped to other markets, the rule had no appreciable effect on
general market prices; nor did it materially affect the total
volume of grain coming to Chicago. But, within the narrow limits of
its operation, the rule helped to improve market conditions
thus:
(a) It created a public market for grain "to arrive." Before its
adoption, bids were made privately. Men had to buy and sell without
adequate knowledge of actual market conditions. This was
disadvantageous to all concerned, but particularly so to country
dealers and farmers.
(b) It brought into the regular market hours of the Board
sessions, more of the trading in grain "to arrive."
(c) It brought buyers and sellers into more direct relations
because, on the call, they gathered together for a free and open
interchange of bids and offers.
(d) It distributed the business in grain "to arrive" among a far
larger number of Chicago receivers and commission merchants than
had been the case there before.
(e) It increased the number of country dealers engaging in this
branch of the business, supplied them more regularly with bids from
Chicago, and also increased the number of bids received by them
from competing markets.
(f) It eliminated risks necessarily incident to a private
market, and thus enabled country dealers to do business on a
smaller margin. In that way, the rule made it possible for them to
pay more to farmers without raising the price to consumers.
Page 246 U. S. 241
(g) It enabled country dealers to sell some grain to arrive
which they would otherwise have been obliged either to ship to
Chicago commission merchants or to sell for "future delivery."
(h) It enabled those grain merchants of Chicago who sell to
millers and exporters to trade on a smaller margin and, by paying
more for grain or selling it for less, to make the Chicago market
more attractive for both shippers and buyers of grain.
(i) Incidentally, it facilitated trading "to arrive" by enabling
those engaged in these transactions to fulfill their contracts by
tendering grain arriving at Chicago on any railroad, whereas
formerly shipments had to be made over the particular railroad
designated by the buyer.
The restraint imposed by the rule is less severe than that
sustained in
Anderson v. United States, 171 U.
S. 604. Every Board of Trade and nearly every trade
organization imposes some restraint upon the conduct of business by
its members. Those relating to the hours in which business may be
done are common; and they make a special appeal where, as here,
they tend to shorten the working day or, at least, limit the period
of most exacting activity. The decree of the District Court is
reversed, with directions to dismiss the bill.
Reversed.
MR. JUSTICE McREYNOLDS took no part in the consideration or
decision of this case.
* There is an exception as to future sales not here
material.