Whether the unification of terminals in a railroad center is a
permissible facility in aid of interstate commerce, or an illegal
combination in restraint thereof, depends upon the intent to be
inferred from the extent of the control secured over the
instrumentalities which such commerce is compelled to use, the
method by which such control has been obtained, and the manner in
which it is exercised.
The unification of substantially every terminal facility by
which the traffic of St. Louis is served is a combination in
restraint of interstate
Page 224 U. S. 384
trade within the meaning and purposes of the Anti-Trust Act of
July 2, 1890, as the same has been construed by this Court in
Standard Oil Co. v. United States, 221 U. S.
1, and
United States v. American Tobacco Co.,
221 U. S. 106.
The history of the unification of the railroad terminal systems
in St. Louis in the Terminal Railroad Association shows an intent
to destroy the independent existence of the terminal systems
previously existing, to close the door to competition, and to
prevent the joint use or control of the terminals by any
nonproprietary company.
A provision in an agreement for joint use of terminals by
nonproprietary companies on equal terms does not render an illegal
combination legal where there is no provision by which the
nonproprietary companies can enforce their right to such use.
Although the proprietary companies of a combination unifying
terminals may not use their full power to impede free competition
by outside companies, the control may so result in methods
inconsistent with freedom of competition as to render it an illegal
restraint under the Sherman Act.
This Court bases its conclusion that the unification of the
terminals in St. Louis is an illegal restraint on interstate
traffic, and not an aid thereto, largely upon the extraordinary
situation at St. Louis and upon the physical and topographical
conditions of the locality.
A combination of terminal facilities, which is an illegal
restraint of trade by reason of the exclusion of nonproprietary
companies, may be modified by the court by permitting such
nonproprietors to avail of the facilities on equal terms.
In this case,
held that the practices of the Terminal
Association in not only absorbing other railroad corporation but in
doing a transportation business other than supplying terminal
facilities operated to the disadvantage of interstate commerce.
One of the fundamental purposes of the Anti-Trust Act is to
protect, and not to destroy, the rights of property, and, in
applying the remedy, injury to the public by the prevention of the
restraint is the foundation of the prohibitions of the statute.
Standard Oil Co. v. United States, 221 U. S.
1,
221 U. S. 78.
Where the illegality of the combination grows out of
administrative conditions which may be eliminated, an inhibition of
the obnoxious practices may vindicate the statute, and where public
advantages of a unified system can be preserved, that method may be
adopted by the Court.
In this case, the objects of the Anti-Trust Act are best
attained by a decree directing the defendants to reorganize the
contracts unifying
Page 224 U. S. 385
the terminal facilities of St. Louis under their control so as
to permit the proper and equal use thereof by nonproprietary
companies, and abolishing the obnoxious practices in regard to
transportation of merchandise. Unless defendants, whose combination
has been declared illegal by reason of administrative abuse,
mollify it to the satisfaction of the Court so as to eliminate such
abuse in the future, the Court will direct a complete disjoinder of
the element of the combination and enjoin the defendants from
exercising any joint control thereover.
The facts, which involve the validity under the Sherman
Anti-Trust Act of the Terminal Railroad Association of St. Louis,
are stated in the opinion.
Page 224 U. S. 390
MR. JUSTICE LURTON delivered the opinion of the Court.
The United States filed this bill to enforce the provisions of
the Sherman Act of July 2, 1890, c. 647, 26 Stat. 209, against
thirty-eight corporate and individual defendants named in the
margin,
* as a combination
in restraint
Page 224 U. S. 391
of interstate commerce and as a monopoly forbidden by that law.
The cause was heard by the four circuit judges, who, being equally
divided in judgment, dismissed the bill without filing an opinion.
From this decree the United States has appealed.
The principal defendant is the Terminal Railroad Association of
St. Louis, hereinafter designated as the terminal company. It is a
corporation of the State of Missouri, and was organized under an
agreement made in 1889 between Mr. Jay Gould and a number of the
defendant railroad companies for the express purpose of acquiring
the properties of several independent terminal companies at St.
Louis with a view to combining and operating them as a unitary
system.
The terminal properties first acquired and combined into one
system by the terminal company comprised the following: The Union
Railway & Transit Company of St. Louis and East St. Louis; the
Terminal Railroad of St. Louis and East St. Louis; the Union Depot
Company of St. Louis; the St. Louis Bridge Company, and the Tunnel
Railroad of St. Louis. These properties included the great union
station, the only existing railroad bridge -- the Eads or St. Louis
bridge -- and every connecting or terminal company by means of
which that bridge could be used by railroads terminating on either
side of the river. For a time, this combination was operated in
competition
Page 224 U. S. 392
with the terminal system of the Wiggins Ferry Company, and upon
the completion of the Merchants' Bridge, in competition with it,
and a system of terminals which were organized in connection with
it. The Wiggins Ferry Company had for many years operated car
transfer boats by means of which cars were transferred between St.
Louis and East St. Louis.
Upon each side of the river, it owned extensive railway terminal
facilities, with which connection was maintained with the many
railroads terminating on the west and east sides of the rivers,
which gave such roads connection with each other, as well as access
to many of the industrial and business districts on each side. In
1890, a third terminal system was opened up by the completion of a
second railroad bridge over the Mississippi River at St. Louis,
known as the Merchants' Bridge. This was a railroad toll bridge,
open to every railroad upon equal terms. That it might forever
maintain the potentiality of competition as a railroad bridge, the
Act of Congress authorizing its construction provided that no
stockholders in any other railway bridge company should become a
stockholder therein. But, as this was a mere bridge company, it was
essential that railroad companies desiring to use it should have
railway connections with it on each side of the river. For this
purpose, two or more railway companies were organized and lines of
railway were constructed connecting each end of the Merchants'
Bridge with various railroad systems terminating on either side of
the river. The Merchants' Bridge and its allied terminals were
thereby able to afford many, if not all, of the railroads coming
into St. Louis access to the business districts on both sides of
the river and connection with each other.
Thus, for a time, there existed three independent methods by
which connection was maintained between railroads terminating on
either side of the river at St. Louis: first, the original Wiggins
Ferry Company, and
Page 224 U. S. 393
its railway terminal connections; second, the Eads Railroad
Bridge and the several terminal companies by means of which
railroads terminating at St. Louis were able to use that bridge and
connect with one another, constituting the system controlled by the
terminal company; and, third, the Merchants' Bridge and terminal
facilities owned and operated by companies in connection
therewith.
This resulted in some cases in an unnecessary duplication of
facilities, but it at least gave to carriers and shippers some
choice, a condition which, if it does not lead to competition in
charges, does insure competition in service. Important as were the
considerations mentioned, their independence of one another served
to keep open the means for the entrance of new lines to the city,
and was an obstacle to united opposition from existing lines. The
importance of this will be more clearly seen when we come to
consider the topographical conditions of the situation.
That the promoters of the terminal company designed to obtain
the control of every feasible means of railroad access to St.
Louis, or means of connecting the lines of railway entering on
opposite sides of the river, is manifested by the declarations of
the original agreement. as well as by the successive steps which
followed. Thus, the proviso in the Act of Congress authorizing the
construction of the Merchants' Bridge, which forbade the ownership
of its stock by any other bridge company or stockholder in any such
company, was eliminated by an act of Congress, and shortly
thereafter the terminal company obtained stock control of the
Merchants' Bridge Company, and of its related terminal companies,
and likewise a lease.
The Wiggins Ferry Company owned the riverfront on the Illinois
shore opposite St. Louis for a distance of several miles. It had on
that side and on its own property switching yards and other
terminal facilities. From these yards extended lines of rails which
connected with its car transfer boats and with the termini of
railroads on the Illinois side.
Page 224 U. S. 394
On the St. Louis side of the river, it had like facilities by
which it was in connection with railway lines terminating on that
side. That company was consequently able to interchange traffic
between the systems on opposite sides of the river, and to serve
many industries. In 1892, the Rock Island Railroad Company
endeavored to obtain an independent entrance to the city. For this
purpose, it sought to acquire the facilities owned by the Wiggins
Ferry Company by securing a control of its capital stock. This was
not deemed desirable by the railroad companies which jointly owned
the terminal company's facilities, and to prevent this acquisition,
effort was made to secure control of the stock. The competition was
fierce, and the market price of the shares pushed to an abnormal
price. The final result being in doubt, an agreement was reached by
which the Rock Island Company was admitted to joint ownership with
the other proprietary companies in all of the terminal properties
which were operated by the terminal company or which should be
acquired by it. The shares in the ferry company bought by the Rock
Island were transferred to the terminal company at cost, and were
paid for by that company. These shares, united with those which had
been acquired by the terminal company, enabled the latter to absorb
the properties of the ferry company, and thus the three independent
terminal systems were combined into a single system.
We come, then, to the question upon which the case must turn:
has the unification of substantially every terminal facility by
which the traffic of St. Louis is served resulted in a combination
which is in restraint of trade within the meaning and purpose of
the Anti-Trust Act?
It is not contended that the unification of the terminal
facilities of a great city where many railroad systems center is,
under all circumstances and conditions, a combination in restraint
of trade or commerce. Whether it is a facility in aid of interstate
commerce or an unreasonable
Page 224 U. S. 395
restraint, forbidden by the Act of Congress, as construed and
applied by this Court in the cases of
Standard Oil Co. v.
United States, 221 U. S. 1, and
United States v. American Tobacco Co., 221 U. S.
106, will depend upon the intent to be inferred from the
extent of the control thereby secured over instrumentalities which
such commerce is under compulsion to use, the method by which such
control has been brought about, and the manner in which that
control has been exerted.
The consequences to interstate commerce of this combination
cannot be appreciated without a consideration of natural conditions
greatly affecting the railroad situation at St. Louis. Though
twenty-four lines of railway converge at St. Louis, not one of them
passes through. About one-half of these lines have their termini on
the Illinois side of the river. The others, coming from the west
and north, have their termini either in the city or on its northern
edge. To the river the city owes its origin, and, for a century and
more, its river commerce was predominant. It is now the great
obstacle to connection between the termini of lines on opposite
sides of the river and any entry into the city by eastern lines.
The cost of construction and maintenance of railroad bridges over
so great a river makes it impracticable for every road desiring to
enter or pass through the city to have its own bridge. The obvious
solution is the maintenance of toll bridges open to the use of any
and all lines, upon identical terms. And so the commercial
interests of St. Louis sought to solve the question, the system of
car-ferry transfer being inadequate to the growing demands of an
ever-increasing population. The first bridge, called the Eads
Bridge, was, and is, a toll bridge. Any carrier may use it on equal
terms. But, to use it, there must be access over rails connecting
the bridge and the railway. On the St. Louis side, the bridge
terminates at the foot of the great hills upon which the city is
built; on the Illinois side, it
Page 224 U. S. 396
ends in the low and wide valley of the Mississippi. This
condition resulted in the organization of independent companies
which undertook to connect the bridge on each side with the various
railroad termini. On the Missouri side, it was necessary to tunnel
the hills, that the valley of Mill Creek might be reached, where
the roads from the west had their termini. Thus, though the bridge
might be used by all upon equal terms, it was accessible only by
means of the several terminal companies operating lines connecting
it with the railroad termini.
This brought about a condition which led to the construction of
the second bridge, the Merchants' Bridge. This, too, was and is a
toll bridge, and may be used by all upon equal terms. To prevent
its control by the Eads Bridge Company, it was carefully provided
that no stockholder in any other bridge company should own its
shares. But this Merchants' Bridge, like the Eads Bridge, had not
rail connections with any of the existing railroad systems, and
these facilities, as in the case of the Eads Bridge, were supplied
by a number of independent railway companies who undertook to fill
in the gaps between the bridge ends and the termini of railroads on
both sides of the river. It must be also observed that these
terminal companies were in many instances so supplied with switch
connections as not only to connect with the bridge, but also served
to connect such roads with each other and with the industries along
their lines. Now it is evident that these lines connecting railroad
termini with the railroad bridges dominated the situation. They
stood, as it were, just outside the gateway, and none could enter,
though the gate stood open, who did not comply with their terms.
The topographical situation making access to the city difficult
does not end with the river. The city lies upon a group of great
hills which hug the river closely and rapidly recede to the west.
These hills are penetrated on the west by the narrow valley of Mill
creek, which crosses the city about
Page 224 U. S. 397
its center. Railways coming from the west use this valley, but
its facilities are very restricted and now quite occupied. North of
the city, the hills drop back from the river gradually, and there
exists a valley formed by the Mississippi and Missouri rivers.
Railroads coming from the north on the west side of the river come
by this valley. As we have stated before, the valley of the
Mississippi at St. Louis is on the Illinois side of the river.
Railroads coming from the east, northeast, and southeast have their
termini in that valley. As a consequence, there have grown up
numerous cities and towns of some consequence as manufacturing
places, the chief of which is East St. Louis.
The result of the geographical and topographical situation is
that it is, as a practical matter, impossible for any railroad
company to pass through, or even enter St. Louis, so as to be
within reach of its industries or commerce, without using the
facilities entirely controlled by the terminal company. The
averment of the bill that the railroad companies, here defendants,
being the sole stockholders of the terminal company, as we shall
later see, compel all other railroad companies converging at St.
Louis to use the facilities owned and operated by the terminal
company, is therefore borne out by the facts of the situation. Nor
is this effect denied, for the learned counsel representing the
proprietary companies, as well as the terminal company, say in
their filed brief:
"There indeed is compulsion, but it is inherent in the
situation. The other companies use the terminal properties because
it is not possible to acquire adequate facilities for themselves.
The cost to any one company is prohibitive."
Obviously this was not true before the consolidation of the
systems of the Wiggins Ferry Company and the Merchants' Bridge
Company with the system theretofore controlled by the terminal
company. That the nonproprietary companies might have been
compelled to use the instrumentalities of one or the other of the
three systems then available, and
Page 224 U. S. 398
that the advantages secured might not have been so great as
those offered by the unified system now operated by the terminal
company, must be admitted. But that there existed before the three
terminal systems were combined a considerable measure of
competition for the business of the other companies, and a larger
power of competition, is undeniable. That the fourteen proprietary
companies did not then have the power they now have to exclude
either existing roads not in the combination, or new companies,
from acquiring an independent entrance into the city is also
indisputable. The independent existence of these three terminal
systems was therefore a menace to complete domination, as keeping
open the way for greater competition. Only by their absorption or
some equivalent arrangement was it possible to exclude from
independent entrance the Rock Island Company, or any other company
which might desire its own terminals. To close the door to
competition, large sums were expended to acquire stock control. For
this purpose, the obligations of the absorbed companies were
assumed and new funds obtained by mortgages upon the unified
system.
The physical conditions which compel the use of the combined
system by every road which desires to cross the river, either to
server the commerce of the city or to connect with lines separated
by the river, is the factor which gives greatest color to the
unlawfulness of the combination as now controlled and operated. If
the terminal company was in law and fact the agent of all, the mere
unification which has occurred would take on quite a different
aspect. It becomes, therefore, of the utmost importance to know the
character and purpose of the corporation which has combined all of
the terminal instrumentalities upon which the commerce of a great
city and gateway between the East and West must depend. The fact
that the terminal company is not an independent corporation at all
is of the utmost significance. There
Page 224 U. S. 399
are twenty-four railroads converging at St. Louis. The relation
of the terminal company is not one of impartiality to each of them.
It was organized in 1889 at the instance of six of these railroad
companies for the purpose of acquiring all existing terminal
instrumentalities for the benefit of the combination, and such
other companies as they might thereafter admit to joint ownership
by unanimous consent, and upon a consideration to be agreed upon.
From time to time, other companies came to an agreement with the
original proprietors until, at the time this bill was filed, the
properties unified were held for the joint use of the fourteen
companies made defendants. In the contract of 1889, above referred
to, the purpose of acquiring the first terminals combined is
declared to be,
"that said properties may be held in perpetuity as a unit, and
developed and improved in the interest of the proprietary
companies, for the purpose of furnishing adequate terminal
facilities in St. Louis and East St. Louis."
This purpose was carried out by the conveyance to
"each of the proprietary companies . . . forever, a right of
joint use with each other and such other companies as may be
admitted as proprietary lines to joint use thereof, of all said
terminal properties . . . now held or that may be hereafter
acquired in St. Louis and East St. Louis, . . . it being understood
that the right herein granted to each proprietary company is not
transferable to any extent whatever, but is to remain as an
appurtenant to the railroad now owned by each proprietary
company."
That these facilities were not to be acquired for the benefit of
any railroad company which might desire a joint use thereof was
made plain by a provision in the contract referred to which
stipulated that other railroad companies not named therein as
proprietary companies might only be admitted
"to joint use of said terminal system on unanimous consent, but
not otherwise, of the
Page 224 U. S. 400
directors of the first party, and on payment of such a
consideration as they may determine, and on signing this
agreement,"
etc. Inasmuch as the directors of the terminal company consisted
of one representative of each of the proprietary companies,
selected by itself, it is plain that each of said companies had and
still has a veto upon any joint use or control of terminals by any
nonproprietary company.
By that and the supplemental agreement of December, 1902, the
ferry company and the Merchants' Bridge Company having then been
absorbed, the proprietary companies prescribe that the charges of
the company shall be so adjusted as to produce no more revenue than
shall equal the fixed charges, operating and maintenance expenses.
Deficiencies for those purposes the proprietary companies guarantee
to make good, though such payments are to be reimbursed by an
increase in charges, if necessary.
We fail to find in either of the contracts referred to any
provision abrogating the requirement of unanimous consent to the
admission of other companies to the ownership of the terminal
company, though counsel say that no such company will now find
itself excluded from joint use or ownership upon application. That
other companies are permitted to use the facilities of the terminal
company upon paying the same charges paid by the proprietary
companies seems to be conceded. But there is no provision by which
any such privilege is accorded.
By still another clause in the agreement, the proprietary
companies obligate themselves to forever use the facilities of the
terminal company for all business destined to cross the river. This
would seem to guarantee against any competitive system, since the
companies to the agreement now control about one third of the
railroad mileage of the United States.
In acquiring these properties, the terminal company has assumed
mortgage and stock dividend obligations of
Page 224 U. S. 401
the constituent companies aggregating about twenty-five million
dollars. It has executed its own mortgage upon all of its property
to secure an issue of fifty million dollars of bonds, of which
twenty million dollars worth have been sold, and the proceeds used
in construction or in paying for the properties acquired. It has
thus about forty-five million dollars of mortgage or fixed charges
or liabilities. The company has an authorized capital stock of
fifty million dollars. Of this, about twenty-eight million dollars
have been issued in equal proportions to the several owning
railroad companies. No dividends have ever been paid, and the
company disclaims any purpose to pay dividends. We fail to find any
obligation by which they may be prevented from paying dividends
upon the stock held by the proprietary companies, or that in its
treasury, if ever issued. Undoubtedly, the major part of this
revenue arises from the business done by the proprietary companies
through the terminal company, but that coming from other companies
is, however, a large contribution. That no direct profit is derived
by the owning companies from the operation of the terminals may be
true. But it is not clear that the proprietary companies do not
make an indirect profit through ownership of obligations of the
absorbed companies.
That through their ownership and exclusive control they are in
possession of advantages in respect to the enormous traffic which
must use the St. Louis gateway is undeniable. That the proprietary
companies have not availed themselves of the full measure of their
power to impede free competition of outside companies may be true.
Aside from their power under all of the conditions to exclude
independent entrance to the city by any outside company, their
control has resulted in certain methods which are not consistent
with freedom of competition. To these acts we shall refer
later.
We are not unmindful of the essential difference
Page 224 U. S. 402
between terminal systems properly so described and railroad
transportation companies. The first are but instrumentalities which
assist the latter in the transfer of traffic between different
lines, and in the collection and distribution of traffic. They are
a modern evolution in the doing of railroad business, and are of
the greatest public utility. They, under proper conditions, do not
restrain, but promote, commerce.
The argument that the combination of the instrumentalities
operated by the terminal company with those of the Merchants'
Bridge Company was a combination of two competing lines of
railroad, such as was condemned in
Northern Securities Co. v.
United States, 193 U. S. 197, is
not well founded. This combination, if properly regarded as of
parallel and competing lines, would have been obnoxious to the
seventeenth section of the Constitution of Missouri. For the
purpose of enforcing this Missouri prohibition, the state
instituted a proceeding to dissolve the combination of the
properties of the Merchants' Bridge Terminal Railroad Company with
the Terminal Railroad Association of St. Louis upon the ground that
the railroads operated by those companies were parallel and
competing lines of railroad. Relief was denied. The Missouri court
held that the merger of mere railway terminals used to facilitate
the public convenience by the transfer of cars from one line of
railway to another, and instrumentalities for the distribution or
gathering of traffic, freight or passenger, among scattered
industries, or to different business centers of a great city were
not properly railroad companies within the reasonable meaning of
the statutes forbidding combinations between competing or parallel
lines of railroad. Referring to the legitimate use of terminal
companies, the Missouri court said:
"A more effectual means of keeping competition up to the highest
point between parallel or competing lines could not be devised. The
destruction of the system would result
Page 224 U. S. 403
in compelling the shipper to employ the railroad with which he
has switch connection, or else cart his product to a distant part
of the city at a cost possibly as great as the railroad
tariff."
"St. Louis is a city of great magnitude in the extent of its
area, its population, and its manufacturing and other business. A
very large number of trunk-line railroads converge in this city. In
the brief of one of the well informed counsel in this case it is
said that St. Louis is one of the largest railroad centers in the
world. Suppose it were required of every railroad company to effect
its entrance to the city as best it could and establish its own
terminal facilities, we would have a large number of passenger
stations, freight depots and switch yards scattered all over the
vast area, and innumerable vehicles employed in hauling passengers
and freight to and from those stations and depots. Or suppose it
became necessary in the exigency of commerce that all incoming
trains should reach a common focus, but every railroad company
provide its own track; then not only would the expense of obtaining
the necessary rights of way be so enormous as to amount to the
exclusion of all but a few of the strongest roads, but, if it could
be accomplished, the city would be cut to pieces with the many
lines of railroad intersecting it in every direction, and thus the
greatest agency of commerce would become the greatest burden."
182 Mo. 284, 299.
Among the cases in which the public utility of such companies
has been recognized are
Bridwell v. Gate City Terminal
Co., 127 Ga. 520;
Indianapolis Union Railroad Company v.
Cooper, 6 Ind.App. 202;
State ex Rel. v. Martin, 51
Kan. 462;
Worcester v. Norwich E.W. Railroad Co., 109
Mass. 103;
Union Depot Company v. Morton, 83 Mich. 265;
State v. St. Paul Union Depot Co., 42 Minn. 142;
Ryan
v. Terminal Co., 102 Tenn. 124.
Page 224 U. S. 404
While, therefore, the mere combining of several independent
terminal systems into one may not operate as a restraint upon the
interstate commerce which must use them, yet there may be
conditions which will bring such a combination under the
prohibition of the Sherman Act. The one in question, counsel say,
is not antagonistic to, but in harmony with, the Anti-Trust
Act,
"because it expands competition by extending equal conveniences
and advantages to all shippers located upon each of the three
systems for all traffic to and from St. Louis; expedites and
economizes the service."
It is justified, they argue, by
"(1) the physical or topographical conditions peculiar to the
locality, by (2) its commercial, industrial, and railroad
development and history, by (3) public opinion expressed
legislatively and judicially, and (4) by the judgment of
experienced railroad engineers and managers."
From which consideration the same counsel say that the issue
presented by this record is
"whether the common control or ownership of all the terminal
facilities (mechanical devices for the exchange, receipt, and
distribution of traffic) of a large commercial and manufacturing
center by all of the railroad companies, and for the benefit of all
upon equal terms and facilities, without discrimination, is
condemned by the Sherman Act."
Let us analyze the proposition included in the issue, as stated
by counsel, quoted above: counsel assume that the combined
terminals have come under a "common control or ownership." But this
is not the case. That the instrumentalities so combined are not
jointly owned or managed by all of the companies compelled to use
them is a significant fact which must be taken into account for the
purpose of determining whether there has been a violation of the
Anti-Trust Act. The control and ownership is that of the fourteen
roads which are defendants. The railroad systems and the coal roads
converging at St. Louis, which are not associated with the
proprietary companies, are
Page 224 U. S. 405
under compulsion to use the terminal system, and yet have no
voice in its control.
It cannot be controverted that, in ordinary circumstances, a
number of independent companies might combine for the purpose of
controlling or acquiring terminals for their common but exclusive
use. In such cases, other companies might be admitted upon terms or
excluded altogether. If such terms were too onerous, there would
ordinarily remain the right and power to construct their own
terminals. But the situation at St. Louis is most extraordinary,
and we base our conclusion in this case, in a large measure, upon
that fact. The "physical or topographical condition peculiar to the
locality," which is advanced as a prime justification for a unified
system of terminals, constitutes a most obvious reason why such a
unified system is an obstacle, a hindrance, and a restriction upon
interstate commerce, unless it is the impartial agent of all who,
owing to conditions, are under such compulsion, as here exists, to
use its facilities. The witness upon whom the defendants chiefly
rely to uphold the advantages of the unified system which has been
constructed, Mr. Albert L. Perkins, gives this as his unqualified
judgment. He was and is an experienced railroad engineer and
manager, and is the railway expert of the Municipal Bridge and
Terminal Board, a commission appointed under a city ordinance,
headed by the Mayor, to study and report legislation needed to
relieve the terminal conditions of St. Louis. From his study of the
local situation, he expresses the opinion that the terminals of
railway lines in any large city should be unified as far as
possible, and that such unification may be of the greatest public
utility and of immeasurable advantage to commerce, state and
interstate. Neither does he find in the conditions at St. Louis any
insurmountable objection to such unification. The witness, however,
points out that such a terminal company should be the agent of
every
Page 224 U. S. 406
company, and furthermore that its service should not be for
profit or gain. In short, that every railroad using the service
should be a joint owner and equally interested in the control and
management. This, he thinks, will serve the greatest possible
economy and will give the most efficient service without
discrimination. When thus jointly owned and controlled, whether
through the medium of a mere holding or operating company, such as
the terminal company is, or by other means, the facilities would
belong to each relatively to its own business, and delivery would
be made by each company over its own tracks to connecting lines or
places of destination in the city. The charge for the haul thus
lengthened would then be properly absorbed by the through rate,
leaving nothing to be added to that to be charged the shipper or
consignee but switching and storage charges proper.
The terminal properties in question are not so controlled and
managed, in view of the inherent local conditions, as to escape
condemnation as a restraint upon commerce. They are not under a
common control and ownership. Nor can this be brought about unless
the prohibition against the admission of other companies to such
control is stricken out, and provision made for the admission of
any company to an equal control and management upon an equal basis
with the present proprietary companies.
There are certain practices of this terminal company which
operate to the disadvantage of the commerce which must cross the
river at St. Louis, and of nonproprietary railroad lines compelled
to use its facilities. One of them grows out of the fact that the
terminal company is a terminal company and something more. It does
not confine itself to supplying and operating mere facilities for
the interchange of traffic between railroads, and to assistance in
the collecting and distributing of traffic for the carrier
companies. It, as well as several of the absorbed
Page 224 U. S. 407
terminal companies, was organized under ordinary railroad
charters. If the combination which has occurred is to escape
condemnation as a combination of parallel and competing railroad
companies, it is because of the essential difference between
railroad and terminal companies proper -- differences pointed out
by the Missouri Supreme Court in the case heretofore referred to.
Indeed, the defense to this proceeding is based upon the insistence
that the terminal company is solely engaged in operating terminal
facilities, defined in the briefs "as mechanical devices for the
exchange, receipt, and distribution of traffic." This terminal
company, in addition to its schedule for terminal charges proper,
such as switching, warehousing, etc., files its rate-sheets for the
transportation of every class of merchandise from the termini of
the railroads on the Illinois side of the river to destinations
across the river, over its lines. These rates are applied to all
traffic destined to cross the river, with certain exceptions to
which we shall later refer, which originates within an irregular
area of which St. Louis is the center, and having a diameter of
from 1 to 200 miles. This arbitrary operates to cast a burden upon
short hauls which has led to much complaint as being both
discriminatory and extortionate. An exception is made as to traffic
originating within so much of this area as constitutes what is
called "Green Line territory," or which is destined to points
within "Green Line territory." This seems to be based upon
competitive conditions caused by the great toll railway bridge at
Memphis, Tennessee, the bridge toll being treated by lines using
the bridge as a part of the through rate.
Another exception to the rule imposing this arbitrary is that it
does not apply to traffic which originates in East St. Louis,
whether it is destined to cross the river or not. The reason for
this exemption, where such traffic does cross the river, is not
apparent. Possibly it may be said
Page 224 U. S. 408
that it is because the traffic of St. Louis and East St. Louis
should be treated as arising in the same commercial area. But this
reason does not seem to apply to the traffic originating in St.
Louis, which is bound east, though that of East St. Louis is
altogether free from this arbitrary charge. The effect of this
arbitrary discrimination is obviously injurious to the commerce and
manufacturers of St. Louis, and is among the chief causes of
complaint against the terminal company. Mr. Perkins, to whom we
have before referred as a capable and impartial expert, says of the
consequence of this curious exception out of the 100-mile area rule
that
"the effect of these charges was, of course, to put the man
doing business in St. Louis at a disadvantage to that extent with
the man doing business at East St. Louis on his eastern
business."
Again, he says that the practical operation was to give East St.
Louis a distinct advantage in the manufacturing lines. Another
practice which marks this terminal company as a transportation
company which interposed itself between railroads having their
termini on opposite sides of the river, and between the city itself
and the roads terminating on the east side of the river, is that
all traffic destined to cross the river at St. Louis, whether bound
east or west, or destined for the city if coming from the east, is
billed only to East St. Louis, and there rebilled to
destination.
The practice of rebilling and of making a distinct hauling
charge is an evident survival of the methods which existed when the
eastern lines had no termini in St. Louis. They then billed to East
St. Louis, and there turned the traffic over to one of the existing
terminal companies, who made their own specific charges for the
haul to places of delivery within the city. The practice has been
continued after the reason for it has disappeared. The effect of
this practice of rebilling at East St. Louis and of imposing this
arbitrary upon traffic originating within
Page 224 U. S. 409
one hundred miles of the city, destined to cross the river,
seems to have been also applied to the large coal traffic between
the Illinois coal mines, upon which the city is largely
dependent.
We come now to the remedy. In determining what this should be,
we, as said by this Court in
Standard Oil Co. v. United
States, 221 U. S. 1,
221 U. S. 78,
must not overlook the fact that, in applying a remedy,
"that injury to the public by the prevention of an undue
restraint on, or the monopolization of, trade or commerce is the
foundation upon which the prohibitions of the statute rest; and,
moreover, that one of the fundamental purposes of the statute is to
protect, not to destroy, rights of property."
If, as we have already said, the combination of two or more mere
terminal companies into a single system does not violate the
prohibition of the statute against contracts and combinations in
restraint of interstate commerce, it is because such a combination
may be of the greatest public utility. But when, as here, the
inherent conditions are such as to prohibit any other reasonable
means of entering the city, the combination of every such facility
under the exclusive ownership and control of less than all of the
companies under compulsion to use them violates both the first and
second sections of the act, in that it constitutes a contract or
combination in restraint of commerce among the states and an
attempt to monopolize commerce among the states which must pass
through the gateway at St. Louis.
The government has urged a dissolution of the combination
between the terminal company, the Merchants' Bridge Terminal
Company, and the Wiggins Ferry Company. That remedy may be
necessary unless one equally adequate can be applied.
But the illegal restraint upon commerce among the states which
we here find to exist consists in the possession acquired by the
proprietary companies through the
Page 224 U. S. 410
means and with the object we have stated, of dominating commerce
among the states, carried on by other railroads entering or seeking
to enter the City of St. Louis, and by which such railroads are
compelled either to desist from carrying on interstate commerce or
to do so upon the terms imposed by the proprietary companies. This
control and possession constitute such a grip upon the commerce of
St. Louis and commerce which must cross the river there, whether
coming from the east or west, as to be both an illegal restraint
and an attempt to monopolize.
The power resulting from the combination, even before completed
by the acquisition of the Wiggins Ferry Company and its related
terminals, was exhibited when the Rock Island sought an independent
entrance.
Some of its abuses are shown by the imposition of the arbitrary
hauling charge imposed upon the artificially limited trade
districts described. It is shown also by the maintenance of the
system of billing traffic destined to cross the river at St. Louis,
either east or west, or to St. Louis, if from points on the east
side of the river -- a practice so galling and universal as to
practically "eliminate St. Louis from the railroad map," to quote
the graphic, if extravagant, language of counsel for the United
States as respects the great traffic subject to the regulation.
Plainly the combination which has occurred would not be an
illegal restraint under the terms of the statute if it were what is
claimed for it -- a proper terminal association acting as the
impartial agent of every line which is under compulsion to use its
instrumentalities. If, as we have pointed out, the violation of the
statute, in view of the inherent physical conditions, grows out of
administrative conditions which may be eliminated and the obvious
advantages of unification preserved, such a modification of the
agreement between the terminal company and the proprietary
companies as shall constitute the former the
bona fide
agent and servant of every railroad line which
Page 224 U. S. 411
shall use its facilities, and an inhibition of certain methods
of administration to which we have referred, will amply vindicate
the wise purpose of the statute, and will preserve to the public a
system of great public advantage.
These considerations lead to a reversal of the decree dismissing
the bill. This is accordingly adjudged, and the case is remanded to
the district court, with directions that a decree be there entered
directing the parties to submit to the court, within ninety days
after receipt of mandate, a plan for the reorganization of the
contract between the fourteen defendant railroad companies and the
terminal company, which we have pointed out as bringing the
combination within the inhibition of the statute.
First. By providing for the admission of any existing or future
railroad to joint ownership and control of the combined terminal
properties, upon such just and reasonable terms as shall place such
applying company upon a plane of equality in respect of benefits
and burdens with the present proprietary companies.
Second. Such plan of reorganization must also provide definitely
for the use of the terminal facilities by any other railroad not
electing to become a joint owner, upon such just and reasonable
terms and regulations as will, in respect of use, character, and
cost of service, place every such company upon as nearly an equal
plane as may be with respect to expenses and charges as that
occupied by the proprietary companies.
Third. By eliminating from the present agreement between the
terminal company and the proprietary companies any provision which
restricts any such company to the use of the facilities of the
terminal company.
Fourth. By providing for the complete abolition of the existing
practice of billing to East St. Louis, or other junction points,
and then rebilling traffic destined to St. Louis, or to points
beyond.
Fifth. By providing for the abolition of any special or
Page 224 U. S. 412
so-called arbitrary charge for the use of the terminal
facilities in respect of traffic originating within the so-called
100-mile area that is not equally and in like manner applied in
respect of all other traffic of a like character originating
outside of that area.
Sixth. By providing that any disagreement between any company
applying to become a joint owner or user, as herein provided for,
and the terminal or proprietary companies, which shall arise after
a final decree in this cause, may be submitted to the district
court, upon a petition filed in this cause, subject to review by
appeal in the usual manner.
Seventh. To avoid any possible misapprehension, the decree
should also contain a provision that nothing therein shall be taken
to affect in any wise or at any time the power of the Interstate
Commerce Commission over the rates to be charged by the terminal
company, or the mode of billing traffic passing over its lines, or
the establishing of joint through rates or routes over its lines,
or any other power conferred by law upon such Commission.
Upon failure of the parties to come to an agreement which is in
substantial accord with this opinion and decree, the court will,
after hearing the parties upon a plan for the dissolution of the
combination between the terminal company, the Wiggins Ferry
Company, the Merchants' Bridge Company, and the several terminal
companies related to the Ferry and Merchants' Bridge Company, make
such order and decree for the complete disjoinder of the three
systems, and their future operation as independent systems as may
be necessary, enjoining the defendants, singly and collectively,
from any exercise of control or dominion over either of the said
terminal systems or their related constituent companies through
lease, purchase, or stock control, and enjoining the defendants
from voting any share in any of said companies or receiving
dividends, directly or indirectly, or from any future
Page 224 U. S. 413
combination of the said systems in evasion of such decree or any
part thereof.
MR. JUSTICE HOLMES took no part in the hearing or determination
of this case.
* The Terminal Railroad Association of St. Louis; the St. Louis
Merchants' Bridge Terminal Railway Company; the Wiggins Ferry
Company; the St. Louis Bridge Company; the St. Louis Merchants'
Bridge Company; the Missouri, Kansas & Texas Railway Company;
the St. Louis & San Francisco Railway Company; the Chicago
& Alton Railway Company; the Baltimore & Ohio Southwestern
Railroad Company; the Illinois Central Railroad Company; the St.
Louis, Iron Mountain & Southern Railway Company; the Chicago,
Burlington & Quincy Railway Company; the St. Louis, Vandalia
& Terre Haute Railroad Company; the Wabash Railroad Company;
the Cleveland Cincinnati, Chicago & St. Louis Railway Company;
the Louisville & Nashville Railroad Company; the Southern
Railway Company; the Chicago, Rock Island & Pacific Railway
Company; the Missouri Pacific Railway Company; the Central Trust
Company of New York; A. A. Allen, S. M. Felton, A. J. Davidson, W.
M. Green, J. T. Harahan, C. S. Clarke, H. Miller, Benjamin McKean,
Joseph Ramsey, George E. Evans, C. E. Schaff, T.C. Powell, J. F.
Stevens, A.G. Cochran, W. S. McChesney, Julius Walsh v. W. Fisher
and S.D. Webster.