The Kansas City Live Stock Exchange was an unincorporated
volunteer association of men, doing business at its stockyards,
situated partly in Kansas City, Missouri, and partly across the
line separating Kansas City, Missouri, from Kansas City, Kansas.
The business of its members was to receive individually
consignments of cattle, hogs, and other livestock from owners of
the same, not only in the States of Missouri and Kansas, but also
in other states and territories, and to feed such stock, and to
prepare it for the market, to dispose of the same, to receive the
proceeds thereof from the purchasers, and to pay the owners their
proportion of such proceeds, after deducting charges, expenses and
advances. The members were individually in the habit of soliciting
consignments from the owners of such stock, and of making them
advances thereon. The rules of the association forbade members from
buying livestock from a commission merchant in Kansas City not a
member of the exchange. They also fixed the commission for selling
such livestock, prohibited the employment of agents to solicit
consignments except upon a stipulated salary, and forbade the
sending of prepaid telegrams or telephone messages with information
as to the condition of the markets. It was also provided that no
member should transact business with any person violating
Page 171 U. S. 579
the rules and regulations, or with an expelled or suspended
member after notice of such violation.
Held that the
situation of the yards partly in Kansas and partly in Missouri was
a fact without any weight; that such business or occupation of the
several members of the association was not interstate commerce,
within the meaning of the Act of July 2, 1890, c. 647, "to protect
trade and commerce against unlawful restraints and monopolies," and
that that act does not cover, and was not intended to cover, such
kind of agreements.
This suit was commenced by the United States Attorney for the
District of Kansas, acting under the direction and by the authority
of the Attorney General of the United States, against Henry Hopkins
and the other defendants, residents of the State of Kansas, and
members of a voluntary unincorporated association known and
designated as the Kansas City Live-Stock Exchange. The purpose of
the action is to obtain the dissolution of the exchange and to
perpetually enjoin the members from entering into or from
continuing in any combination of a like character.
As a foundation for the relief sought, it was alleged in the
bill that the members of this association known as the Kansas City
Live-Stock Exchange have adopted articles of association, rules,
and bylaws which they have agreed to be bound by; that the business
of the exchange is carried on and conducted by a board of directors
at the Kansas City Stockyards, which are situated partly in Kansas
City in the State of Missouri and partly in Kansas City in the
State of Kansas, the building owned by the stockyards company being
located one-half of it in the State of Missouri, and the other half
in the State of Kansas, and half of the defendants have offices and
transact business in these stockyards, and in that part of the
building which is within the State of Kansas, and the other half in
that part of the building which is in the State of Missouri; that
the Kansas City Stockyards Company is a corporation owning the
stockyards where the business is done by the members of the
exchange; that substantially all the business transacted in the
matter of receiving, buying, selling, and handling their livestock
at Kansas City is carried on by the defendants herein, and by the
other members of the exchange, as commission merchants, and that
large numbers of the livestock, consisting of
Page 171 U. S. 580
cattle and hogs and sheep bought and sold and handled at the
stockyards by the defendants and their fellow members in the
exchange are shipped from the States of Nebraska, Colorado, Texas,
Missouri, Iowa, and Kansas, and the Territories of Oklahoma,
Arizona, and New Mexico; that, when this stock is received at the
stockyards, it is sold by the defendants, members of the exchange,
to the various packing houses situated at Kansas City, Missouri,
and Kansas City, Kansas, and it is also sold for shipment to the
various other markets, particularly Chicago, St. Louis, and New
York; that vast numbers of cattle, hogs, and other livestock are
received annually at the stockyards, and handled by the members of
the exchange.
The bill also alleges that large numbers of the livestock sold
at the stockyards by the defendants are encumbered by mortgages
thereon executed by their owners in the various states and
territories, which mortgages have been given to various defendants
as security for money advanced by them to the different owners to
enable them to feed and prepare the cattle for market, and that,
when the livestock so mortgaged are ready for shipment, they are
sent to the defendants, who have advanced the money and received
the mortgages, and on the sale of the stock the amount of these
advances and interest is deducted from the proceeds of the sale of
the cattle by the commission merchants owning the mortgages; that
ninety percent of the members of the exchange make such advances,
and that the market is largely sustained by means of the money thus
advanced to the cattle raisers by the defendants, and that Kansas
City is the only place for many miles about which constitutes an
available market for the purchase and sale of livestock from the
large territory located in the states and territories already
named; that it is the custom of the owners of the cattle, many of
them living in different states, and who consign their stock to the
Kansas City stockyards for sale, to draw drafts on the commission
merchants to whom the livestock is consigned, which the consignors
attach to the bill of lading issued by the carrier, and the money
on these drafts is advanced by the local banks throughout the
Western states
Page 171 U. S. 581
and territories. These drafts are paid by the consignees, and
the proceeds remitted to the various owners through the banks.
The business thus conducted is alleged to be interstate
commerce, and it is further alleged that if the person to whom the
livestock is consigned at Kansas City is not a member of the
exchange, he is not permitted to, and cannot, sell or dispose of
the stock at the Kansas City market, for the reason that the
defendants, and all the other commission merchants, members of the
exchange, refuse to buy livestock or in any manner negotiate or
deal with or buy from a person or commission merchant who is not a
member of the exchange, and thus the owner of livestock shipped to
the Kansas City market is compelled to reship the same to other
markets, and by reason of the unlawful combination existing among
the defendants and the other members of the exchange, the owner is
prevented from delivering this stock at the Kansas City stockyards,
and the sale of stock is thereby hindered and delayed, entailing
extra expense and loss to the shipper and placing an obstruction
and embargo on the marketing of all livestock shipped from the
states and territories to the Kansas City market which is not
consigned to the stockyards company, or to the defendants, or some
of them, members of the stock exchange.
It is alleged that the defendants, as members of the exchange,
have adopted certain rules, among them being rules 9 and 16, which
are particularly alleged to be in restraint of trade and commerce
between the states and intended to create a monopoly in
contravention of the laws of the United States in that behalf.
Rule 9 provides as follows:
"Section 1. Commissions charged by members of this association
for selling livestock shall not be less than the following named
rates."
Sections 2, 3, 4, 5, 6, and 7 relate to the amounts of such
commissions, and it is alleged that in some instances the
commissions are greater than had theretofore been paid.
Section 8 permits the members to handle the business of
Page 171 U. S. 582
nonresident commission firms, when the stock is consigned
directly to or from such firm at half the rates fixed by the rule,
provided the nonresident commission firms are established at the
markets named in the section.
Section 10 prohibits the employment of any agent, solicitor, or
employee except upon a stipulated salary not contingent upon the
commissions earned, and it provides that not more than three
solicitors shall be employed at one time by a commission firm or
corporation, resident or nonresident of Kansas City.
Section 11 forbids any member of the exchange from sending or
causing to be sent a prepaid telegram or telephone message quoting
the markets or giving information as to the condition of the same,
under the penalty of a fine as therein stated. The rule, however,
permits prepaid messages to be sent to shippers quoting actual
sales of their stock on the date made, also to parties desiring to
make purchases on the market.
Rule 16 provides, in section 1,
"that no member of the exchange shall transact business with any
persons violating any of the rules or regulations of the exchange,
or with an expelled or suspended member, after notice of such
violation, suspension, or expulsion shall have been issued by the
secretary or board of directors of the exchange."
It is alleged that the defendants, in adopting these rules and
in forming the exchange and carrying out the same, have violated
and are violating the statute of the United States, approved July
2, 1890, entitled. "An act to protect trade and commerce against
unlawful restraints and monopolies," and it is charged that it was
the purpose of the defendants, in organizing the exchange and in
adopting the rules mentioned, to prevent the shipment or
consignment of any livestock to the Kansas City market unless it
was shipped or consigned to the Kansas City stockyards, and to some
one or other of the defendants, members of the exchange, and to
compel the shippers of livestock from other states and from the
territories to pay to the defendants the commissions and charges
provided for in rule 9, and to prevent such shippers
Page 171 U. S. 583
from placing their property on sale at the Kansas City market
unless these commissions were paid.
The answer of the defendants admitted their forming the exchange
and becoming members thereof and adopting, among others, the rules
specially mentioned in complainants' bill. They denied that the
exchange itself engaged in any business whatever, and alleged that
it existed simply in order to prescribe rules and provide
facilities for the transaction of business by the members thereof,
and to govern them by such rules and regulations as have been
evolved and sanctioned by the developments of commerce, and which
are universally recognized to be just and fair to all
concerned.
It was further set up in the answer that each member of the
organization was in fact left free to compete in every manner, and
by all means recognized to be fair and just, for his share of the
business which comes to the point at which the members of the
organization do business; that, in adopting their rules, they
followed in all substantial respects the provisions which had been
made upon the same subject, respectively, by the exchanges
theretofore established at Chicago and East St. Louis, Illinois,
and which have been since established at St. Louis, Omaha,
Indianapolis, Buffalo, Sioux City, and Fort Worth; that the
exchange at no time refused to admit as a member any reputable
person who was willing to comply with the conditions of membership
and to abide by the rules of the organization.
Various allegations in the bill as to the effect of the
organization in precluding any sales or purchases of cattle other
than by its members are denied.
The defendants also deny that the exercise of their occupation
as commission merchants doing business as members of the exchange
constitutes or amounts to interstate commerce within the meaning of
the Constitution or laws of the United States. They allege that
they have no part in or control over the disposition of the
livestock sold by them to others, nor of livestock purchased by
them as commission merchants acting for others. They allege that
the stockyards company permits any person whatsoever to transact
business at its yards
Page 171 U. S. 584
who will pay the established charges of that company for its
services, and that in point of fact a very large part of the
business done at said yards is transacted by persons who are not
members of the exchange, and without the interposition of such
members. It is also alleged in their answer that they are under no
obligations to extend the privileges of the exchange to a person
who is not a member thereof, who has violated its rules and been
suspended from membership, and who has voluntarily withdrawn
therefrom, and announced his purpose to carry on his business as a
competitor of the members of such exchange, to the destruction of
said organization and its rules, and to the injury of his
competitors.
It is also set up that defendants cannot be compelled to deal
with a nonmember of their organization, or a person violating its
rules, or with one who has been suspended for such violation, or
who has withdrawn therefrom, or who has announced his intention to
destroy said organization and to compete with the members thereof,
and the defendants allege that they cannot be compelled to deal
with any person whatsoever, and that they had a right to establish
said exchange, and now have the right to maintain the same, and to
require the observance of its rules and regulations on the part of
their associates so long as they desire to retain the privileges of
membership in the body. They allege that their rules are in harmony
with the rules and regulations of commercial exchanges which have
existed for more than a hundred years, and which are now to be
found in every state, almost, in the United States and throughout
the world, and that such rules and regulations are in all respects
legal and binding. They deny all general and special allegations of
illegal agreements, combinations, or conspiracies to violate any
law of the United States or of the State of Kansas.
The complainants, in addition to their bill, used several
affidavits, the tendency of which was to show that, by virtue of
the adoption of rules 9 and 16, the members of the exchange refused
to deal with one who had violated a rule and had been suspended by
reason thereof, and that, by reason of this refusal to do business,
the member thus suspended was
Page 171 U. S. 585
substantially incapacitated from carrying on his business as a
commission merchant, and that, by this combination, defendants, in
forming such rule and in adhering to it, have greatly injured the
business of such member.
The defendants read counter-affidavits for the purpose of
sustaining their answer, which were replied to by the complainants
filing affidavits in rebuttal, and upon these affidavits and the
pleadings above described an application for an injunction was made
to the Circuit Court of the United States for the District of
Kansas, First Division. That court, after argument, granted an
injunction restraining the defendants from combining by contract,
express or implied, so as by their acts, conduct, or words to
interfere with, hinder, or impede others in shipping, trading,
selling, or buying livestock that is received from the states and
territories at the stockyards in Kansas City, Missouri and Kansas
City, Kansas; also, enjoining them from acting under the rules of
the exchange known as "Rules 9 and 16," and from attempting to
impose any fines or penalties upon members for trading or offering
to trade with any person respecting the purchase and sale of any
livestock, and also from discriminating in favor of any member of
the exchange because of such membership, and especially from
discriminating against any person trading at the stockyards, and
from refusing, by united or concerted action, or by word,
persuasion, threat, or by other means, to deal or trade with
persons with respect to such livestock who are not members of the
association because they are not members of such association, or in
any manner from interfering with the right and freedom of all and
any persons trading or desiring to trade in such livestock at the
stockyards, the same as if the exchange did not exist. The
defendants were also enjoined from agreeing or attempting to limit
the right of any person in business at the Kansas City stockyards
to employ labor or assistance in soliciting shipments of livestock
from other states or territories, and from enforcing any agreement
not to send prepaid telegrams from the stockyards to any other
state or territory.
The district judge delivered an opinion upon granting the
Page 171 U. S. 586
injunction, which will be found reported in 82 F. 529. From the
order granting it, an appeal was taken by the defendants to the
United States Circuit Court of Appeals for the Eighth Circuit,
which court certified to this Court certain questions under the
provisions of section 6 of the Act of March 3, 1891, and thereupon
a writ of certiorari was issued from this Court, and the whole case
brought here for decision.
MR. JUSTICE PECKHAM, after stating the facts, delivered the
opinion of the court.
The relief sought in this case is based exclusively on the act
of Congress approved July 2, 1890, c. 647, entitled "An act to
protect trade and commerce against unlawful restraints and
monopolies," commonly spoken of as the "Anti-Trust Act." 26 Stat.
209.
The act has reference only to that trade or commerce which
exists or may exist among the several states or with foreign
nations, and has no application whatever to any other trade or
commerce.
The question meeting us at the threshold, therefore, in this
case, is what is the nature of the business of the defendants, and
are the bylaws, or any subdivision of them, above referred to, in
their direct effect in restraint of trade or commerce among the
several states, or with foreign nations, or does the case made by
the bill and answer show that any one of the above defendants has
monopolized, or attempted to monopolize, or combined or conspired
with other persons to monopolize, any part of the trade or commerce
among the several states, or with foreign nations?
Page 171 U. S. 587
That part of the bill which alleges that no one is permitted to
do business at the cattle market at Kansas City unless he is a
member of this exchange does not mean that there is any regulation
at the stockyards by which one who is not a member of the exchange
is prevented from doing business, although ready to pay the
established charges of the stockyards company for its services, but
it simply means that, by reason of the members of the exchange
refusing to do business with those who are not members, the
nonmember cannot obtain the facilities of a market for his cattle
such as the members of the exchange enjoy. It is unnecessary at
present to discuss the question whether there is any illegality in
a combination of businessmen who are members of an exchange not to
do business with those who are not members thereof, even if the
business done were in regard to interstate commerce. The first
inquiry to be made is as to the character of the business in which
defendants are engaged, and if it be not interstate commerce, the
validity of this agreement not to transact their business with
nonmembers does not come before us for decision.
We come, therefore, to the inquiry as to the nature of the
business or occupation that the defendants are engaged in. Is it
interstate commerce, in the sense of that word as it has been used
and understood in the decisions of this Court? Or is it a business
which is an aid or facility to commerce, and which, if it affect
interstate commerce at all, does so only in an indirect and
incidental manner?
As set forth in the record, the main facts are that the
defendants have entered into a voluntary association for the
purpose of thereby the better conducting their business, and that,
after they entered into such association, they still continued
their individual business in full competition with each other, and
that the association itself, as an association, does no business
whatever, but is simply a means by and through which the individual
members who have become thus associated are the better enabled to
transact their business, to maintain and uphold a proper way of
doing it, and to create the means for preserving business integrity
in the transaction
Page 171 U. S. 588
of the business itself. The business of defendants is primarily
and substantially the buying and selling, in their character as
commission merchants at the stockyards in Kansas City, livestock
which has been consigned to some of them for the purpose of sale,
and the rendering of an account of the proceeds arising therefrom.
The sale or purchase of livestock as commission merchants at Kansas
City is the business done, and its character is not altered because
the larger proportion of the purchases and sales may be of
livestock sent into the state from other states or from the
territories. Where the stock came from, or where it may ultimately
go after a sale or purchase procured through the services of one of
the defendants at the Kansas City stockyards, is not the
substantial factor in the case. The character of the business of
defendants must, in this case, be determined by the facts occurring
at that city.
If an owner of cattle in Nebraska accompanied them to Kansas
City, and there personally employed one of these defendants to sell
the cattle at the stockyards for him on commission, could it be
properly said that such defendant in conducting the sale for his
principal was engaged in interstate commerce? or that an agreement
between himself and others not to render such services for less
than a certain sum was a contract in restraint of interstate trade
or commerce? We think not. On the contrary, we regard the services
as collateral to such commerce, and in the nature of a local aid or
facility provided for the cattle owner towards the accomplishment
of his purpose to sell them, and an agreement among those who
render the services, relating to the terms upon which they will
render them, is not a contract in restraint of interstate trade or
commerce.
Is the true character of the transaction altered when the owner,
instead of coming from Nebraska with his cattle, sends them by a
common carrier consigned to one of the defendants at Kansas City,
with directions to sell the cattle and render him an account of the
proceeds? The services rendered are the same in both instances,
only in one case they are rendered under a verbal contract made at
Kansas
Page 171 U. S. 589
City personally, while in the other they are rendered under
written instructions from the owner given in another state. This
difference in the manner of making the contract for the services
cannot alter the nature of the services themselves. If the person,
under the circumstances stated, who makes a sale of the cattle for
the owner by virtue of a personal employment at Kansas City is not
engaged in interstate commerce when he makes such sale, we regard
it as clear that he is not so engaged although he has been employed
by means of a written communication from the owner of the cattle in
another state.
The bylaws of the exchange relate to the business of its members
who are commission merchants at Kansas City, and some of these
bylaws, it is claimed by the government, are in violation of the
act of Congress because they are in restraint of that business
which is in truth interstate commerce. That one of the bylaws which
relates to the commissions to be charged for selling the various
kinds of stock is particularly cited as a violation of the act. In
connection with that, bylaw, it will be well to examine with some
detail the nature of defendants' business.
It is urged that they are active promoters of the business of
selling cattle upon consignment from their owners in other states,
and that in order to secure the business, the defendants send their
agents into other states to the owners of the cattle to solicit the
business from them; that the defendants also lend money to the
cattle owners, and take back mortgages upon the cattle as security
for the loan; that they make advances of a portion of the purchase
price of the cattle to be sold by means of the payment of drafts
drawn upon them by the shippers of the cattle in another state at
the time of the shipment. All these things, it is said, constitute
intercourse and traffic between the citizens of different states,
and hence the bylaw in question operates upon and affects commerce
between the states.
The facts stated do not, in our judgment, in any degree alter
the nature of the services performed by the defendants, nor do they
render that particular bylaw void as in restraint
Page 171 U. S. 590
of interstate trade or commerce because it provides for a
minimum amount of commissions for the sale of the cattle.
Objections are taken to other parts of the bylaws which we will
notice hereafter.
Notwithstanding these various matters undertaken by defendants,
we must keep our attention upon the real business transacted by
them, and in regard to which the section of the bylaw complained of
is made. The section amounts to an agreement, and it relates to
charges made for services performed in selling cattle upon
commission at Kansas City. The charges relate to that business
alone. In order to obtain it, the defendants advance money to the
cattle owner, they pay his drafts, and they aid him to keep his
cattle and make them fit for the market. All this is done as a
means towards an end -- as an inducement to the cattle owner to
give one of the defendants the business of selling the cattle for
him when the owner shall finally determine to sell them. That
business is not altered in character because of the various things
done by defendants for the cattle owner in order to secure it. The
competition among the defendants and others who may be engaged in
it to obtain the business results in their sending outside the
city, to cattle owners, to urge them, by distinct and various
inducements, to send their cattle to one of the defendants to sell
for them. In this view, it is immaterial over how many states the
defendants may themselves, or by their agents, travel in order to
thereby secure the business. They do not purchase the cattle
themselves. They do not transport them. They receive them at Kansas
City, and the complaint made is in regard to the agreements for
charges for the services at that point in selling the cattle for
the owner. Thus, everything at last centers at the market at Kansas
City, and the charges are for services there, and there only,
performed.
The selling of an article at its destination, which has been
sent from another state, while it may be regarded as an interstate
sale, and one which the importer was entitled to make, yet the
services of the individual employed at the place where the article
is sold are not so connected with the subject sold as to make them
a portion of interstate commerce, and a
Page 171 U. S. 591
combination in regard to the amount to be charged for such
service is not, therefore, a combination in restraint of that trade
or commerce. Granting that the cattle themselves, because coming
from another state, are articles of interstate commerce, yet it
does not therefore follow that before their sale, all persons
performing services in any way connected with them are themselves
engaged in that commerce, or that their agreements among each other
relative to the compensation to be charged for their services are
void as agreements made in restraint of interstate trade. The
commission agent, in selling the cattle for their owner, simply
aids him in finding a market, but the facilities thus afforded the
owner by the agent are not of such nature as to thereby make that
agent an individual engaged in interstate commerce, nor is his
agreement with others engaged in the same business, as to the terms
upon which they would provide these facilities, rendered void as a
contract in restraint of that commerce. Even all agreements among
buyers of cattle from other states are not necessarily a violation
of the act, although such agreements may undoubtedly affect that
commerce.
The charges of the agent on account of his services are nothing
more than charges for aids or facilities furnished the owner
whereby his object may be the more easily and readily accomplished.
Charges for the transportation of cattle between different states
are charges for doing something which is one of the forms of, and
which itself constitutes, interstate trade or commerce, while
charges or commissions based upon services performed for the owner
in effecting the sale of the cattle are not directly connected
with, as forming part of, interstate commerce, although the cattle
may have come from another state. Charges for services of this
nature do not immediately touch or act upon, nor do they directly
affect, the subject of the transportation. Indirectly, and as an
incident, they may enhance the cost to the owner of the cattle in
finding a market, or they may add to the price paid by a purchaser,
but they are not charges which are directly laid upon the article
in the course of transportation and which are charges upon the
commerce itself. They are charges for the
Page 171 U. S. 592
facilities given or provided the owner in the course of the
movement from the home situs of the article to the place and point
where it is sold.
The contract condemned by the statute is one whose direct and
immediate effect is a restraint upon that kind of trade or commerce
which is interstate. Charges for such facilities as we have already
mentioned are not a restraint upon that trade, although the total
cost of marketing a subject thereof may be thereby increased.
Charges for facilities furnished have been held not a regulation of
commerce even when made for services rendered or as compensation
for benefits conferred.
Sands v. Manistee River Improvement
Co., 123 U. S. 288;
Monongahela Navigation Co. v. United States, 148 U.
S. 312,
148 U. S.
329-330;
Kentucky & Indiana Bridge Company v.
Louisville &c. Railroad, 37 F. 567.
To treat as condemned by the act all agreements under which, as
a result, the cost of conducting an interstate commercial business
may be increased would enlarge the application of the act far
beyond the fair meaning of the language used. There must be some
direct and immediate effect upon interstate commerce in order to
come within the act. The state may levy a tax upon the earnings of
a commission merchant which were realized out of the sales of
property belonging to nonresidents, and such a tax is not one upon
interstate commerce, because it affects it only incidentally and
remotely, although certainly.
Ficklen v. Shelby County Taxing
District, 145 U. S. 1. Many
agreements suggest themselves which relate only to facilities
furnished commerce or else touch it only in an indirect way, while
possibly enhancing the cost of transacting the business, and which
at the same time we would not think of as agreements in restraint
of interstate trade or commerce. They are agreements which in their
effect operate in furtherance and in aid of commerce by providing
for it facilities, conveniences, privileges, or services, but which
do not directly relate to charges for its transportation, nor to
any other form of interstate commerce. To hold all such agreements
void would, in our judgment, improperly extend the act to matters
which are not of an interstate commercial nature.
Page 171 U. S. 593
It is not difficult to imagine agreements of the character above
indicated. For example, cattle, when transported long distances by
rail, require rest, food, and water. To give them these
accommodations, it is necessary to take them from the car and put
them in pens or other places for their safe reception. Would an
agreement among the landowners along the line not to lease their
lands for less than a certain sum be a contract within the statute
as being in restraint of interstate trade or commerce? Would it be
such a contract even if the lands, or some of them, were necessary
for use in furnishing the cattle with suitable accommodations?
Would an agreement between the dealers in corn at some station
along the line of the road not to sell it below a certain price be
covered by the act because the cattle must have corn for food? Or
would an agreement among the men not to perform the service of
watering the cattle for less than a certain compensation come
within the restriction of the statute? Suppose the railroad company
which transports the cattle itself furnishes the facilities, and
that its charges for transportation are enhanced because of an
agreement among the landowners along the line not to lease their
lands to the company for such purposes for less than a named sum;
could it be successfully contended that the agreement of the
landowners among themselves would be a violation of the act as
being in restraint of interstate trade or commerce? Would an
agreement between builders of cattle cars not to build them under a
certain price be void because the effect might be to increase the
price of transportation of cattle between the states? Would an
agreement among dealers in horse blankets not to sell them for less
than a certain price be open to the charge of a violation of the
act because horse blankets are necessary to put on horses to be
sent long journeys by rail, and by reason of the agreement the
expense of sending the horses from one state to another for a
market might be thereby enhanced? Would an agreement among cattle
drivers not to drive the cattle after their arrival at the railroad
depot at their place of destination to the cattle yards where sold
for less than a minimum sum come within the statute? Would an
agreement among themselves
Page 171 U. S. 594
by locomotive engineers, firemen, or trainmen engaged in the
service of an interstate railroad not to work for less than a
certain named compensation be illegal because the cost of
transporting interstate freight would be thereby enhanced?
Agreements similar to these might be indefinitely suggested.
In our opinion, all these queries should be answered in the
negative. The indirect effect of the agreements mentioned might be
to enhance the cost of marketing the cattle, but the agreements
themselves would not necessarily for that reason be in restraint of
interstate trade or commerce. As their effect is either indirect or
else they relate to charges for the use of facilities furnished,
the agreements instanced would be valid, provided the charges
agreed upon were reasonable. The effect upon the commerce spoken of
must be direct and proximate.
New York, Lake Erie & Western
Railroad v. Pennsylvania, 158 U. S. 431,
158 U. S.
439.
An agreement may in a variety of ways affect interstate
commerce, just as state legislation may, and yet, like it, be
entirely valid because the interference produced by the agreement
or by the legislation is not direct.
Sherlock v. Alling,
93 U. S. 99,
93 U. S. 103;
United States v. E. C. Knight Company, 156 U. S.
1,
156 U. S. 16;
Pittsburg & Southern Coal Co. v. Louisiana,
156 U. S. 590,
156 U. S. 597;
Transportation Company v. Parkersburg, 107 U.
S. 691;
Ficklen v. Shelby County, supra.
Reasonable charges for the use of a facility for the transportation
of interstate commerce have heretofore been regarded as valid in
this Court even though such charges might necessarily enhance the
cost of doing the business.
Packet Company v. St. Louis,
100 U. S. 423;
Packet Company v. Catlettsburg, 105 U.
S. 559;
Transportation Company v. Parkersburg,
107 U. S. 691;
Huse v. Glover, 119 U. S. 543;
Ouachita Packet Company v. Aiken, 121 U.
S. 444;
St. Louis v. Western Union Telegraph
Company, 148 U. S. 92. An
agreement among the owners of such facilities to charge not less
than a minimum rate for their use cannot be condemned as illegal
under the act of Congress.
The fact that the above-cited cases relate to tangible property
the use of which was charged for does not alter the
Page 171 U. S. 595
reasoning upon which the decisions were placed. The charges were
held valid because they related to facilities furnished in aid of
the commerce, and which did not constitute a regulation thereof.
Facilities may consist in privileges or conveniences provided and
made use of or in services rendered in aid of commerce, as well as
in the use of tangible property, and so long as they are
facilities, and the charges not unreasonable, an agreement relating
to their amount is not invalid. The cattle owner has no
constitutional right to the services of the commission agent to aid
him in the sale of his cattle, and the agent has the right to say
upon what terms he will render them, and he has the equal right, so
far as the act of Congress is concerned, to agree with others in
his business not to render those services unless for a certain
charge. The services are no part of the commerce in the cattle.
In
Brown v.
Maryland, 12 Wheat. 419, Chief Justice Marshall,
while maintaining the right of an importer to sell his article in
the original package, free from any tax, recognized the distinction
between the importer selling the article himself and employing an
auctioneer to do it for him, and he said that in the latter case,
the importer could not object to paying for such services as for
any other, and that the right to sell might very well be annexed to
importation without annexing to it also the privilege of using
auctioneers, and thus to make the sale in a peculiar way. In such
case, a tax upon the auctioneer's license would be valid.
The same view is enforced in
Ement v. Missouri,
156 U. S. 296.
The right of the cattle owners themselves to sell their own
cattle is not affected or touched by the agreement in question,
while the privilege of having their cattle sold for them at the
market place frequented by defendants, and with the aid of one of
them, is a privilege which they are charged for, and which is not
annexed to their right to sell their own cattle.
It is possible that exorbitant charges for the use of these
facilities might have similar effect as a burden on commerce that a
charge upon commerce itself might have. In a case
Page 171 U. S. 596
like that, the remedy would probably be forthcoming.
Transportation Co. v. Parkersburg, 107 U.
S. 691. As was said by Mr. Justice Field in
Sands v.
Manistee River Improvement Co., supra, "should there be any
gross injustice in the rate of tolls fixed, it would not, in our
system of government, remain long uncorrected."
But whether the charges are or are not exorbitant is a question
primarily of local law, at least in the absence of any superior or
paramount law providing for reasonable charges.
Transportation
Co. v. Parkersburg, 107 U. S. 691.
This case does not involve that question.
If charges of the nature described do not amount to a regulation
of interstate trade or commerce because they touch it only in an
indirect and remote way or else because they are in the nature of
compensation for the use of property or privileges as a mere
facility for that commerce, it would for a like reason seem clear
that agreements relating to the amounts of such charges among those
who furnish the privileges or facilities are not in restraint of
that kind of trade. While the indirect effect of the agreements may
be to enhance the expense to those engaged in the business, yet, as
the agreements are in regard to compensation for privileges
accorded for services rendered as a facility to commerce or trade,
they are not illegal as a restraint thereon.
The facilities or privileges offered by the defendants are
apparent and valuable. The cattle owner has the use of a place for
his cattle furnished by the defendants, and all the facilities
arising from a market where the sales and purchases are conducted
under the auspices of the association of which the defendants are
members, and in a manner the least troublesome to the owners, and
at the same time the most expeditious and effective. Each of these
defendants has the right to have the cattle which are consigned to
him taken to the cattle yards, where, by virtue of the arrangements
made by defendants with the owners of the yards, the cattle are
placed in pens, watered and fed, if necessary, and a sale effected
at the earliest moment. It is these facilities and services which
are paid for by a commission on the sales effected by the
commission men.
Page 171 U. S. 597
If, as is claimed, the commission men sometimes own the cattle
they sell, then the rules do not apply, for they relate to charges
made for selling cattle upon commission, and not at all to sales of
cattle by their owners.
Definitions as to what constitutes interstate commerce are not
easily given so that they shall clearly define the full meaning of
the term. We know from the cases decided in this Court that it is a
term of very large significance. It comprehends, as it is said,
intercourse for the purposes of trade in any and all its forms,
including transportation, purchase, sale, and exchange of
commodities between the citizens of different states, and the power
to regulate it embraces all the instruments by which such commerce
may be conducted.
Welton v. Missouri, 91 U. S.
275;
Mobile County v. Kimball, 102 U.
S. 691;
Gloucester Ferry Company v.
Pennsylvania, 114 U. S. 196;
Hooper v. California, 155 U. S. 648,
155 U. S. 653;
United States v. E. C. Knight Company, 156 U. S.
1.
But in all the cases which have come to this Court, there is not
one which has denied the distinction between a regulation which
directly affects and embarrasses interstate trade or commerce and
one which is nothing more than a charge for a local facility
provided for the transaction of such commerce. On the contrary, the
cases already cited show the existence of the distinction and the
validity of a charge for the use of the facility.
The services of members of the different stock and produce
exchanges throughout the country in effecting sales of the articles
they deal in are of a similar nature. Members of the New York Stock
Exchange buy and sell shares of stock of railroads and other
corporations, and the property represented by such shares of stock
is situated all over the country. Is a broker whose principal lives
outside of New York state, and who sends him the shares of stock or
the bonds of a corporation created and doing business in another
state for sale engaged in interstate commerce? If he is employed to
purchase stock or bonds in a like corporation under the same
circumstances, is he then engaged in the business of interstate
commerce? It may perhaps be answered that stocks or
Page 171 U. S. 598
bonds are not commodities, and that dealers therein are not
engaged in commerce. Whether it is an answer to the question need
not be considered, for we will take the case of the New York
Produce Exchange. Is a member of that body to whom a cargo of grain
is consigned from a Western state to be sold engaged in interstate
commerce when he performs the service of selling the article upon
its arrival in New York and transmitting the proceeds of the sale
less his commissions? Is a New Orleans cotton broker, who is a
member of the cotton exchange of that city and who receives
consignments of cotton from different states and sells them on
'change in New Orleans, and accounts to his consignors for the
proceeds of such sales, less his commission, engaged in interstate
commerce? Is the character of the business altered in either case
by the fact that the broker has advanced moneys to the owner of the
article, and taken a mortgage thereon as his security? We
understand we are, in these queries, assuming substantially the
same facts as those which are contained in the case before us, and
if these defendants are engaged in interstate commerce because of
their services in the sale of cattle which may come from other
states, then the same must be said in regard to the members of the
other exchanges above referred to. We think it would be an entirely
novel view of the situation if all of the members of these
different exchanges throughout the country were to be regarded as
engaged in interstate commerce because they sell things for their
principals which come from states different from the one in which
the exchange is situated and the sale made.
The theory upon which we think the bylaw or agreement regarding
commissions is not a violation of the statute operates also in the
case of the other provisions of the bylaws. The answer in regard to
all objections is the defendants are not engaged in interstate
commerce.
But special weight is attached to the objection raised to
section 11 of rule 9 of the bylaws, which provides against sending
prepaid telegrams as set forth in the statement of facts herein. It
is urged that the purpose of this section is to prevent the sending
of prepaid telegrams by the defendants
Page 171 U. S. 599
to their various customers in the different states tributary to
the Kansas City market, and that the section is a part of the
contract between the members of the exchange, and is clearly an
attempt to regulate and restrict the sending of messages by
telegraph and telephone between citizens of the various states and
territories, and operates upon and directly affects the interstate
business of communicating between points in different states by
telegraph or telephone.
An agreement among the defendants to abstain from telegraphing
in certain circumstances and for certain purposes is so clearly not
an attempt to regulate or restrain the general sending of telegrams
that it would seem unnecessary to argue the question. An agreement
among businessmen not to send telegrams in regard to their business
in certain contingencies, when the agreement is entered into only
for the purpose of regulating the business of the individuals, is
not a direct attempt to affect the business of the telegraph
company, and has no direct effect thereon. Although communication
by telegraph may be commerce, and, if carried on between different
states may be commerce among the several states, yet an agreement
or bylaw of the nature of the one under consideration is not a
burden or a regulation of, or a duty laid upon, the telegraph
company, and was clearly not entered into for the purpose of
affecting in the slightest degree the company itself or its
transaction of interstate commerce.
The argument of counsel in behalf of the United States that
because none of the states or territories could enact any law
interfering with or abridging the right of persons in Kansas or
Missouri to send prepaid telegrams of the nature in question,
therefore an agreement to that effect entered into between
businessmen as a means towards the proper transaction of their
legitimate business would be void is, as we think, entirely
unsound. The conclusion does not follow from the facts stated. The
statute might be illegal as an improper attempt to interfere with
the liberty of transacting legitimate business enjoyed by the
citizen, while the agreement among businessmen for the better
conduct of their own
Page 171 U. S. 600
business, as they think, to refrain from using the telegraph for
certain purposes, is a matter purely for their own consideration.
There is no similarity between the two cases, and the principle
existing in the one is wholly absent in the other. The private
agreement does not, as we have said, regulate commerce or impose
any impediment upon it or tax it. Communication by telegraph is
free from any burden so far as this agreement is concerned, and no
restrictions are placed on the commerce itself.
The act of Congress must have a reasonable construction, or else
there would scarcely be an agreement or contract among businessmen
that could not be said to have, indirectly or remotely, some
bearing upon interstate commerce, and possibly to restrain it. We
have no idea that the act covers, or was intended to cover, such
kinds of agreements.
The next bylaw which complainants object to is section 10 of the
same rule 9, which prohibits the hiring of a solicitor except upon
a stipulated salary, not contingent upon commissions earned, and
which provides that no more than three solicitors shall be employed
at one time by a commission firm or corporation.
The claim is that these solicitors are engaged in interstate
commerce, and that such commerce must be free from any state
legislation and free from control or restraint by any person or
combination of persons. They also object that the rule is an
unlawful inhibition upon the privilege possessed by each person
under the Constitution to make lawful contracts in the furtherance
of his business, and they allege that in this respect these members
have surrendered their dominion over their own business, and
permitted the exchange to establish a species of regency, and that
the bylaw in regard to the employment of solicitors is one which
directly affects interstate commerce.
McCall v. California, 136 U. S. 104, is
cited for the proposition that the solicitors employed by these
defendants are engaged in interstate commerce. In that case, the
railroad company was itself engaged in such commerce, and its agent
in California was taxed by reason of his business in soliciting
Page 171 U. S. 601
for his company that which was interstate commerce. The fact
that he did not sell tickets or receive or pay out money on account
of it was not regarded as material. His principal was a common
carrier, engaged in interstate commerce, and he was engaged in that
commerce because he was soliciting for the transportation of
passengers by that company through the different states in which
the railroad ran from the State of California. In the case before
us, the defendants are not employed in interstate commerce, but are
simply engaged in the performance of duties or services relating to
stock upon its arrival at Kansas City. We do not think it can be
properly said that the agents of the defendants whom they send out
to solicit the various owners of stock to consign the cattle to one
of the defendants for sale are thereby themselves engaged in
interstate commerce. They are simply soliciting the various stock
owners to consign the stock owned by them to particular defendants
at Kansas City, and until the arrival of the stock at that point,
and the delivery by the transportation company, no duties of an
interstate commerce nature arise to be performed by the defendants.
As the business they do is not interstate commerce, the business of
their agents in soliciting others to give them such business is not
itself interstate commerce. Not being engaged in interstate
commerce, the agreement of the defendants, through the bylaw in
question, restricting the number of solicitors to three, does not
restrain that commerce, and does not therefore violate the act of
Congress under discussion.
The position of the solicitors is entirely different from that
of drummers who are traveling through the several states for the
purpose of getting orders for the purchase of property. It was said
in
Robbins v. Shelby County Taxing District, 120 U.
S. 489, that the negotiation of sales of goods which are
in another state, for the purpose of introducing them into the
state in which the negotiation is made, is interstate commerce.
But the solicitors for these defendants have no property or
goods for sale, and their only duty is to ask or induce those who
own the property to agree that, when they send it to
Page 171 U. S. 602
market for sale, they will consign it to the solicitor's
principal, so that he may perform such services as may be necessary
to sell the stock for them, and account to them for the proceeds
thereof. Unlike the drummer, who contracts in one state for the
sale of goods which are in another and which are to be thereafter
delivered in the state in which the contract is made, the solicitor
in this case has no goods or samples of goods, and negotiates no
sales, and merely seeks to exact a promise from the owner of
property that, when he does wish to sell, he will consign to and
sell the property through the solicitor's principal. There is no
interstate commerce in that business.
Hooper v. California, 155 U. S. 648, is
another illustration of the meaning of the term "commerce," as used
in the Constitution of the United States. In that case, contracts
of marine insurance are stated not to appertain to interstate
commerce, and cases are cited upon the nature of the contract of
insurance generally at page
155 U. S. 653
of the opinion.
It is also to be remarked that the effect of the agreement as to
the number of solicitors to be employed by defendants can only be
remote and indirect upon interstate commerce. The number of
solicitors employed has no direct effect upon the number of cattle
transported from state to state. The solicitors do not solicit
transportation of the cattle. They are not in the interest of the
transportation company, and the transportation is an incident only.
They solicit a consignment of cattle to their principals, so that
the latter may sell them on commission, and thus transact their
local business. The transportation would take place anyway, and the
cattle be consigned for sale by some one of the defendants, or by
others engaged in the business. It is not a matter of
transportation, but one of agreement as to who shall render the
services of selling the cattle for their owner at the place of
destination.
We say nothing against the constitutional right of each one of
the defendants and each person doing business at the Kansas City
stockyards to send into distant states and territories as many
solicitors as the business of each will warrant. This
Page 171 U. S. 603
original right is not denied or questioned. But cannot the
citizen, for what he thinks good reason, contract to curtail that
right? To say that a state would not have the right to prohibit a
defendant from employing as many solicitors as he might choose
proves nothing in regard to the right of individuals to agree upon
that subject in a way which they may think the most conducive to
their own interests. What a state may do is one thing, and what
parties may contract voluntarily to do among themselves is quite
another thing.
The liberty of contract, as referred to in
Allgeyer v.
Louisiana, 165 U. S. 578, is
the liberty of the individual to be free, under certain
circumstances, from the restraint of legislative control with
regard to all his contracts, but the case has no reference to the
right of individuals to sometimes enter into those voluntary
contracts by which their rights and duties may properly be measured
and defined, and in many cases greatly restrained and limited.
We agree with the court below in thinking there is not the
slightest materiality in the fact that the state line runs through
the stockyards in question, resulting in some of the pens in which
the stock may be confined being partly in the State of Kansas and
partly in the State of Missouri, and that sales may be made of a
lot of stock which may be at the time partly in one state and
partly in the other. The erection of the building and the putting
up of the stock pens upon the ground through which the state line
ran were matters of no moment so far as any question of interstate
commerce is concerned. The character of the business done is not in
the least altered by these immaterial and incidental facts.
It follows from what has been said that the complainants have
failed to show the defendants guilty of any violations of the act
of Congress, because it does not appear that the defendants are
engaged in interstate commerce, or that any agreements or contracts
made by them, and relating to the conduct of their business, are in
restraint of any such commerce.
Whether they refused to transact business which is not
interstate commerce except with those who are members of the
exchange and whether such refusal is justifiable or not
Page 171 U. S. 604
are questions not open for discussion here. As defendants'
actions or agreements are not a violation of the act of Congress,
the complainants have failed in their case, and the order for the
injunction must be reversed, and the case remitted to the Circuit
Court of the United States for the District of Kansas, First
Division, with directions to dismiss the bill with costs.
MR. JUSTICE McKENNA took no part in the decision of this
case.
