On appeal under the Criminal Appeals Act of March 2, 1907, this
Court must accept the lower court's construction of the counts, and
its jurisdiction is limited to considering whether the decision of
the
Page 226 U. S. 526
court below that the acts charged are not criminal is based upon
an erroneous construction of the statute alleged to have been
violated.
In order to decide whether acts charged are within the
condemnation of a statute, the court must first ascertain what the
statute does condemn, and that involves its construction.
On appeal under the Criminal Appeals Act of 1907, this Court
must assume that the counts of the indictment adequately allege
whatever the lower court treated them as alleging, and, where its
decision shows that it assumed that every element necessary to form
a combination was present, this Court has jurisdiction to determine
whether such a combination was illegal under the statute which
defendants are charged with violating.
A conspiracy to run a corner in the available supply of a staple
commodity which is normally a subject of interstate commerce, such
as cotton, and thereby to artificially enhance its price throughout
the country, is within the terms of § 1 of the Anti-Trust Act of
July 2, 1890.
Section 1 of the Anti-Trust Act is not confined to voluntary
restraints, but includes involuntary restraints, as where persons
not engaged in interstate commerce conspire to compel action by
others or create artificial conditions which necessarily affect and
restrain such commerce.
A combination otherwise illegal under the Anti-Trust Act as
suppressing competition is not the less so because, for a time, it
may tend to stimulate competition -- and so held as to a corner in
cotton.
The Anti-Trust Act does not apply to a combination affecting
trade or commerce that is purely intrastate, or where the effect on
interstate commerce is merely incidental and not direct; but,
although carried on wholly within a state, if the necessary
operation of a combination is to directly impede and burden the due
course of interstate commerce, it is within the prohibition of the
statute, and so
held as to a corner in cotton to be run in
New York City.
Persons purposely engaging in a conspiracy which necessarily and
directly produces the result which a prohibitory statute is
designed to prevent are, in legal contemplation, chargeable with
intending to produce that result, and so
held that, if the
details of the conspiracy are alleged in the indictment, an
allegation of specific intent to produce the natural results is not
essential.
The character and effect of a conspiracy is not to be judged by
dismembering it and viewing its separate parts, but only by looking
at it as a whole.
187 F. 664 reversed.
Page 226 U. S. 527
The facts, which involve the jurisdiction of this Court under
the Criminal Appeals Act of March 2, 1907, and whether a corner in
cotton constitutes an illegal combination under the Sherman
Anti-Trust Act, are stated in the opinion.
Page 226 U. S. 534
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
This is a criminal prosecution under the Anti-Trust Act of July
2, 1980, 26 Stat. 209, c. 647, the indictment being in eight
counts. In the circuit court, demurrers to the third, fourth,
seventh, and eighth counts were sustained, and those counts
dismissed, 187 F. 664, whereupon the government sued out this writ
of error under the Criminal Appeals Act of March 2, 1907, 34 Stat.
1246, c. 2564. The case has been twice orally argued. At the second
argument, the government expressly abandoned the third and fourth
counts and challenged only the ruling upon counts seven and eight.
Thus, the
Page 226 U. S. 535
propriety of the ruling upon the first two need not be
considered.
In passing upon the demurrers, the circuit court proceeded first
to construe the counts -- that is, to ascertain with what acts the
defendants are charged -- and next to consider whether those acts
are denounced as criminal by the Anti-Trust Act, the conclusion
being that they are not.
The limitations upon our jurisdiction under the criminal appeals
act [
Footnote 1] are such that
we must accept the circuit court's construction of the counts, and
consider only whether its decision that the acts charged are not
condemned as criminal by the Anti-Trust Act is based upon an
erroneous construction of that statute.
At the outset, we are confronted with the contention that the
decision is not based upon a construction of the statute. But to
this we cannot assent. The court could not have decided, as it did,
that the acts charged are not within the condemnation of the
statute without first ascertaining what it does condemn; which, of
course, involved its construction. Indeed, it seems a solecism to
say that the decision that the acts charged are not within the
statute is not based upon a construction of it.
Each of the counts in question charges the defendants and others
with engaging in a conspiracy "in restraint of, and to restrain,"
by the method therein described, "trade and commerce among the
several states" in the supply of cotton available during the year
ending September 1, 1910, such supply consisting of all the cotton
grown in the
Page 226 U. S. 536
Southern states in that year and the cotton left over from prior
years. The counts are long, and the acts which the circuit court
treated as charged in them are indicated by the following excerpt
from its opinion, the footnotes being ours:
"These counts are alike, with the exception of the statement of
overt acts, [
Footnote 2] and
each may be, broadly speaking, divided into three parts, which may
be thus summarized:"
"(1) The charging part contains a general charge of conspiracy
in restraint of interstate commerce, with the usual formal and
jurisdictional averments."
"(2) The second part contains a 'description of the trade and
commerce to be restrained.' Under this head, it is stated, in
substance, that cotton is an article of necessity raised in the
Southern states, which moves in a large volume in interstate and
foreign commerce, and that it is bought and sold upon the New York
Cotton Exchange to such an extent as to practically regulate prices
elsewhere in the country, so that future sales by speculators upon
such exchange of more than the amount of cotton available at the
time of delivery would create an abnormal demand and resultant
excessive prices in all cotton markets. [
Footnote 3] "
Page 226 U. S. 537
"(3) The third part contains a 'description of the method
devised and adopted by the conspirators for restraining
Page 226 U. S. 538
the trade and commerce.' It is alleged at the outset that the
conspirators were to restrain trade and commerce by doing 'what is
commonly called running a corner in cotton.' Averments then follow
showing how the corner was to be brought about and its effect,
which may be thus analyzed:"
"(1) The conspirators were to make purchases from speculators
upon the New York Cotton Exchange of quantities of cotton for
future delivery greatly in excess of the amount available for
delivery when deliveries should become due. [
Footnote 4] "
Page 226 U. S. 539
"(2) By these means an abnormal demand was to be created on the
part of such sellers, who would pay excessive prices to obtain
cotton for delivery upon their contracts."
"(3) The excessive prices prevailing upon the New York Exchange
would cause similar prices to exist upon other cotton markets."
"(4) 'As a necessary and unavoidable result of their acts, said
conspirators were to compel' cotton manufacturers throughout out
the country to pay said excessive prices to obtain cotton for their
needs, or else curtail their operations."
"(5) And also, as 'a necessary and unavoidable result' of said
acts, an unlawful obstruction would be put upon interstate trade
and commerce. [
Footnote 5]"
"The offense charged, then, is a conspiracy in restraint of
trade through the operation of a 'corner.'"
Although ruling that there was no allegation of a specific
intent to obstruct interstate trade or commerce, and that the
raising of prices in markets other than the Cotton Exchange in New
York was "in itself no part of the scheme," the court assumed that
the conspirators intended "the necessary and unavoidable
consequences of their acts," and observed that
"prices of cotton are so correlated that it may be said that the
direct result of the acts of the conspirators was to be the raising
of the price of cotton throughout the country."
Upon the second argument the defendants contended, and counsel
for the government expressly conceded, that "running a corner"
consists, broadly speaking, in acquiring control of all or the
dominant portion of a commodity, with the purpose of artificially
enhancing the price; "one of the important features of which," to
use the
Page 226 U. S. 540
language of the government's brief, "is the purchase for future
delivery, coupled with a withholding from sale for a limited time;"
and as this definition is in substantial accord with that given by
lexicographers and juridical writers, we accept it for present
purposes, although observing that not improbably in actual usage
the expression includes modified modes of attaining substantially
the same end.
Whilst thus agreeing upon what constitutes running a corner, the
parties widely differ as to whether what is so styled in this
instance contained the elements necessary to make it operative. The
point of difference is the presence or absence of an adequate
allegation that the purchasing for future delivery was to be
coupled with a withholding from sale, without which, it is conceded
by both parties, the market could not be cornered. But the solution
of the point turns upon the right construction of the counts, and
that, as has been indicated, is not within our province on this
writ of error. We must assume that the counts adequately allege
whatever the circuit court treated them as alleging. Its opinion,
given at the time, although not containing any express ruling upon
the point of difference, shows that the counts were treated as
alleging an operative scheme -- one by which the market could be
cornered. The court spoke of it as "contrary to public policy," as
"arbitrarily controlling the price of a commodity," and as
"positively unlawful in any state having a statute against
corners." Evidently, it was assumed that every element of running a
corner was present. We accordingly indulge that assumption, but
leave the parties free to present the question to the district
court for its decision in the course of such further proceedings as
may be had in that court.
We come, then, to the question whether a conspiracy to run a
corner in the available supply of a staple commodity, such as
cotton, normally a subject of trade and commerce among the states,
and thereby to enhance
Page 226 U. S. 541
artificially its price throughout the country, and to compel all
who have occasion to obtain it to pay the enhanced price or else to
leave their needs unsatisfied, is within the terms of § 1 of the
Anti-Trust Act, which makes it a criminal offense to "engage in" a
"conspiracy in restraint of trade or commerce among the several
states." The circuit court, as we have seen, answered the question
in the negative, and this although accepting as an allegation of
fact, rather than as a mere economic theory of the pleader, the
statement in the counts that interstate trade and commerce would
necessarily be obstructed by the operation of the conspiracy. The
reasons assigned for the ruling, and now pressed upon our
attention, are (1) that the conspiracy does not belong to the class
in which the members are engaged in interstate trade or commerce,
and agree to suppress competition among themselves, (2) that
running a corner, instead of restraining competition, tends,
temporarily at least, to stimulate it, and (3) that the obstruction
of interstate trade and commerce resulting from the operation of
the conspiracy, even although a necessary result, would be so
indirect as not be to a restraint in the sense of the statute.
Upon careful reflection, we are constrained to hold that the
reasons given do not sustain the ruling, and that the answer to the
question must be in the affirmative.
Section 1 of the act, upon which the counts are founded, is not
confined to voluntary restraints, as where persons engaged in
interstate trade or commerce agree to suppress competition among
themselves, but includes as well involuntary restraints, as where
persons not so engaged conspire to compel action by others, or to
create artificial conditions, which necessarily impede or burden
the due course of such trade or commerce or restrict the common
liberty to engage therein.
Loewe v.Lawlor, 208 U.
S. 274,
208 U. S. 293.
As was said of this section in
Standard Oil Co. v. United
States, 221 U. S. 1,
221 U. S. 59:
Page 226 U. S. 542
"The context manifests that the statute was drawn in the light
of the existing practical conception of the law of restraint of
trade because it groups as within that class not only contracts
which were in restraint of trade in the subjective sense, but all
contracts or acts which theoretically were attempts to monopolize,
yet which in practice have come to be considered as in restraint of
trade in a broad sense."
It well may be that running a corner tends for a time to
stimulate competition; but this does not prevent it from being a
forbidden restraint, for it also operates to thwart the usual
operation of the laws of supply and demand, to withdraw the
commodity from the normal current of trade, to enhance the price
artificially, to hamper users and consumers in satisfying their
needs, and to produce practically the same evils as does the
suppression of competition.
Of course, the statute does not apply where the trade or
commerce affected is purely intrastate. Neither does it apply, as
this Court often has held, where the trade or commerce affected is
interstate, unless the effect thereon is direct, not merely
indirect. But no difficulty is encountered in applying these tests
in the present case when its salient features are kept in view.
It was a conspiracy to run a corner in the market. The commodity
to be cornered was cotton -- a product of the Southern states
largely used and consumed in the Northern states. It was a subject
of interstate trade and commerce, and through that channel it was
obtained from time to time by the many manufacturers of cotton
fabrics in the Northern states. The corner was to be conducted on
the Cotton Exchange in New York City, but by means which would
enable the conspirators to obtain control of the available supply
and to enhance the price to all buyers in every market of the
country. This control and the enhancement of the price were
features of the conspiracy
Page 226 U. S. 543
upon the attainment of which it is conceded its success
depended. Upon the corner's becoming effective, there could be no
trading in the commodity save at the will of the conspirators and
at such price as their interests might prompt them to exact. And
so, the conspiracy was to reach and to bring within its dominating
influence the entire cotton trade of the country.
Bearing in mind that such was the nature, object, and scope of
the conspiracy, we regard it as altogether plain that, by its
necessary operation, it would directly and materially impede and
burden the due course of trade and commerce among the states, and
therefore inflict upon the public the injuries which the Anti-Trust
Act is designed to prevent.
See Swift & Co. v. United
States, 196 U. S. 375,
196 U. S.
396-400;
Loewe v.Lawlor, 208 U.
S. 274,
Standard Oil Co. v. United States,
221 U. S. 1;
United States v. American Tobacco Co., 212
U. S. 106. And that there is no allegation of a specific
intent to restrain such trade or commerce does not make against
this conclusion, for, as is shown by prior decisions of this Court,
the conspirators must be held to have intended the necessary and
direct consequences of their acts, and cannot be heard to say the
contrary. In other words, by purposely engaging in a conspiracy
which necessarily and directly produces the result which the
statute is designed to prevent, they are, in legal contemplation,
chargeable with intending that result.
Addyston Pipe &
Steel Co. v. United States, 175 U. S. 211,
175 U. S. 243;
United States v. Reading Co., 226 U.
S. 324,
226 U. S.
370.
The defendants place some reliance upon
Ware v. Mobile
County, 209 U. S. 405, as
showing that the operation of the conspiracy did not involve
interstate trade or commerce, but we think the case does not go so
far, and is not in point. It presented only the question of the
effect upon interstate trade or commerce of the taxing by a state
of the business of a broker who was dealing
Page 226 U. S. 544
in contracts for the future delivery of cotton, where there was
no obligation to ship from one state to another, while here we are
concerned with a conspiracy which was to reach and bring within its
dominating influence the entire cotton trade of the country, and
which was to be executed, in part only, through contracts for
future delivery. It hardly needs statement that the character and
effect of a conspiracy are not to be judged by dismembering it and
viewing its separate parts, but only by looking at it as a whole.
Montague & Co. v. Lowry, 193 U. S.
38,
193 U. S. 45-46;
Swift & Co. v. United States, 196 U.
S. 375, 386-387 [argument of counsel -- omitted].
As we are of opinion that the statute does embrace the
conspiracy which the circuit court treated as charged in counts
seven and eight, as construed by it, its judgment upon those counts
is reversed, and the case is remanded for further proceedings in
conformity with this opinion.
Reversed in part.
[
Footnote 1]
The act is set forth in full in 211 U.S. at
211 U. S. 398,
and rulings thereunder are found in
United States v.
Bitty, 208 U. S. 393,
208 U. S. 399;
United States v. Keitel, 211 U. S. 370,
211 U. S. 398;
United States v. Biggs, 211 U. S. 507,
211 U. S. 518;
United States v. Mason, 213 U. S. 115,
213 U. S. 122;
United States v. Mescal, 215 U. S. 26,
215 U. S. 31;
United States v. Stevenson, 215 U.
S. 190,
215 U. S. 195;
United States v. Heinze, 218 U. S. 532,
218 U. S. 540;
United States v. Heinze, 218 U. S. 547,
218 U. S. 550;
United States v. Kissel, 218 U. S. 601,
218 U. S. 606;
United States v. Miller, 223 U. S. 599,
223 U. S.
602.
[
Footnote 2]
One count contained a statement of overt acts, while the other
contained no such statement,-a difference not here material.
[
Footnote 3]
In order that the brief summary and analysis of the third part
may be better understood, the second part is here reproduced:
"
DESCRIPTION OF TRADE AND COMMERCE TO BE
RESTRAINED"
"And the grand jurors aforesaid, upon their oath aforesaid, do
further present that, for many years past, cotton has been grown,
one crop a year, in divers of the states of the United States,
among others, Virginia, North Carolina, South Carolina, Georgia,
Florida, Alabama, Tennessee, Mississippi, Kentucky, Louisiana,
Oklahoma, Texas, Arkansas, Missouri, and New Mexico; that such
cotton has been and is an article of prime necessity to the people
of the United States, and the growing and the spinning and
manufacturing of the same into yarns and fabrics have necessitated
the cultivation of many millions of acres of land in the states
last aforesaid, and the employment of many thousands of persons, in
those states and in other states of the United States, in
connection with the planting, cultivating, picking, ginning,
compressing, storing, selling, shipping, and transporting of such
cotton; that about sixty percent of the cotton so grown has been
shipped to and consumed in foreign countries in each crop year;
that of the remaining forty percent of such cotton, about one-half
has been spun into yarns and manufactured into cotton fabrics by
spinners and manufacturers in said Southern states for the use of
the people of the United States and foreign countries, and the
other half has been shipped to Northern states of the United
States, among others, Massachusetts, Rhode Island, New York,
Pennsylvania, New Hampshire, Maine, Connecticut, Maryland, New
Jersey, and Delaware, in pursuance of sales of the same to spinners
and manufacturers in the last-mentioned states, and there spun into
yarns and manufactured into fabrics for the use of the people of
the United States and foreign countries; that the demand for such
cotton in foreign countries and in said Northern and Southern
states has been steady and continuous throughout all portions of
each crop year; that, in the ordinary course of business, said
spinners and manufacturers have bought little or no cotton beyond
that required by them for their immediate needs; that such cotton
has been extensively bought and sold upon the Cotton Exchange in
said City of New York for future delivery in the United States
during current crop years, so much so that cotton bought and sold
elsewhere in the United States than on that exchange has
customarily been bought and sold at prices corresponding to the
prices prevailing upon said exchange; that, although, as the grand
jurors aforesaid, upon their oath aforesaid charge the fact to be,
the rules of said Cotton Exchange at New York City have required
that all sellers and purchasers of cotton upon that exchange for
future delivery should contemplate the actual delivery and receipt
of cotton sold and purchased by them there, it has been possible
for more cotton to be sold at a given time or at given times upon
said exchange for future delivery at a given time or given times
during a current crop year by speculators -- that is to say,
persons not having any cotton in their possession -- than would be
in existence at such future time or times and available to such
speculators for acquisition and delivery to the purchasers thereof;
that, under such circumstances, it has been necessary for such
sellers of cotton upon said exchange for such future delivery to
make settlements with purchasers in cash or its equivalent at the
prices prevailing upon said exchange at the time or times such
settlements have been made, as to whatever cotton such sellers were
unable to acquire and deliver to such purchasers when such delivery
was due; that the artificial condition produced by such excessive
purchases, when made, has invariably created such an abnormal
demand for cotton on the part of such sellers that very excessive
prices therefor have prevailed upon said exchange, and upon all
other exchanges and in all cotton markets, until after such
settlements have been made, so that
bona fide purchasers
of cotton for consumption in spinning and manufacturing have been
compelled for a time to pay the same excessive prices in order to
obtain cotton for their needs; that the cotton crop for the crop
year beginning September 1, 1909, and ending September 1, 1910,
approximated 10,500,000 bales; that about 265,000 bales of cotton
were left over and available at the beginning of said crop year of
the crops of prior crop years; that the foregoing allegations of
this paragraph of this count of this indictment apply to the cotton
of said crop year and to that of prior crop years, and that each of
said conspirators, when so conspiring, as in this count of this
indictment set forth, well knew all the premises in this count
aforesaid."
[
Footnote 4]
The language of the charge is:
"They were to make purchases from day to day upon said Cotton
Exchange at New York city, from speculators, of quantities of
cotton for future delivery at different times during said crop
year, greatly in excess of the amount of cotton which would be in
existence and available for delivery to them by the sellers thereof
when such deliveries were due, reference being had to the usages
and requirements of said trade and commerce, which are in this
count above set forth."
[
Footnote 5]
Of these allegations, the court said in its opinion:
"We must also assume that the allegations of the results to
follow the conspiracy are more than the conclusions or economic
theories of the pleader, and amount to allegations of fact."
MR. JUSTICE LURTON, dissenting:
The majority seem to base a judgment of reversal upon the
assumption that the court below interpreted the counts in question
as charging all the elements essential to a technical "corner." To
this view of the opinion of the court below I do not assent. As I
interpret that opinion, the court held the count bad because it did
not charge a "corner." Thus, interpreted there was no error in
quashing the count. I am authorized to say that the Chief Justice
concurs in this dissent.
MR. JUSTICE HOLMES also dissents.