the sale of their coal. The Court said that it was not surprised that the railroads were willing to offer unusually favorable terms, as the perpetual contracts would remove forever the inducement to the entry of competing lines of anthracite carriers, and would remove, also, the coal of the independents from competition with the coal of the defendants. To suppress competition through the percentage contracts would require, however, concerted action, as the attempt of a few to secure the independent coal would have been resisted by the others. The Court held that the defendants had thus acted in concert, and that the contracts were therefore unlawful, even though singly they might not have been in restraint of trade.

The final charge was that the purchase of the New York, Susquehanna and Western and the Pennsylvania Coal Company by the Erie, and of the Central of New Jersey by the Reading Company, were illegal. This charge was dismissed by the Court. It held that it did not appear from the record that any one of these three transactions was the result of any general combination between all of the defendants, and if they did not constitute any part of a general plan or combination entered into by all the carrier companies, their separate consideration as independent violations of the law was not admissible under the general frame of the bill. As to the legality of these three minor combinations the Court expressed no opinion, but directed that the bill, in so far as it sought relief against them, be dismissed, without prejudice to the bringing of a new action.

This was a criminal prosecution brought against Mr. James A. Patten, charging violation of the Sherman Act through the establishment of a corner in cotton. It presented the question, to use the Court's language, 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 artificially its price throughout the country, was within the terms of section one of the Anti-trust 1 226 U. S. 525-544 (January 6, 1913).

Act. The Circuit Court had held that it was not, and for three reasons: first, that the conspiracy did not belong to the class in which the members, engaged in interstate trade, agreed to suppress competition among themselves. But the Supreme Court held that section one, on which the counts were founded, related not solely to voluntary restraints, such as resulted when persons engaged in interstate trade agreed to suppress competition among themselves, but related as well to involuntary restraints, such as resulted when persons not so engaged conspired to compel action by others, or to create artificial conditions, which necessarily impeded or burdened the due course of such trade or restricted the common liberty to engage therein.

The Circuit Court had held, second, that running a corner, instead of restraining competition, tended, temporarily at least, to stimulate it. With respect to this point the Supreme Court said, "It may well 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."

Third, the Circuit Court had held that the obstruction of interstate trade resulting from the operation of the conspiracy, even although a necessary result, would be so indirect as not to be a restraint in the sense of the statute. The Supreme Court in analyzing this claim outlined the salient features of the conspiracy. It was, it said, a conspiracy to run a corner in the market. The commodity to be cornered was cotton, a product of the southern states, mainly used in the northern states, and therefore necessarily the subject of interstate commerce. The corner was to be conducted on the Cotton Exchange in New York City, but by means that 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. Upon the corner 1188 Fed. Rep. 664-673.

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. The conspiracy was thus to bring within its dominating influence the entire cotton trade of the country. Such being the nature, object, and scope of the conspiracy it was plain that by its necessary operation it would directly and materially impede the due course of commerce among the states, and therefore inflict upon the public the injuries which the Anti-trust Act was designed to prevent.1

This was a criminal proceeding brought against the president of the United Shoe Machinery Company and others, charging them with forming a combination in restraint of trade and with forming a conspiracy. The alleged facts were substantially as follows: Practically all the shoes worn in the United States are made with the aid of lasting machines, welt-sewing machines, outsole-stitching machines, heeling machines, and metallicfastening machines. Up to February 7, 1899, the Consolidated and McKay Lasting Machine Company made 60 per cent of the lasting machines; the Goodyear Shoe Machinery Company made 80 per cent of the welt-sewing and outsole-stitching machines, and 10 per cent of the lasting machines; and the McKay Shoe Machinery Company made 70 per cent of the heeling machines, and 80 per cent of the metallic-fastening machines. On February 7, 1899, these three companies organized the United Shoe Machinery Company to unite the businesses formerly separately controlled. The organization of the United Shoe Machinery Company and its acquisition of the stocks and business of these companies was alleged to constitute a breach of the Sherman Act.

The opinion of the Court was unanimous and brief, being embraced in less than four pages. It is to be observed, said the Court, that the conditions now inserted in the leases of shoe

1 From this opinion Chief Justice White and Justices Lurton and Holmes dissented.

2227 U. S. 202-218 (February 3, 1913).

machinery to shoe manufacturers are not alleged to have been contemporaneous with the combination, or to have been contemplated when it was made. The District Court construed the indictment as confined to the combination of February 7 without regard to the leases subsequently made, and we have no jurisdiction to review this interpretation of the indictment. The validity of the leases or of a combination contemplating them is therefore not before us.

The question to be decided, said the Court, is whether the combination taken by itself was within the penalties of the Sherman Act. Thus limited the question did not require much discussion. On the face of it the combination was merely an attempt to secure greater efficiency. The business of the several companies that combined, as it existed prior to the combination, is assumed to have been legal. The machines are patented, making them a monopoly in any event; and it may be assumed that the success of the several companies was due to their patents having been the best. As, by the interpretation of the lower court and by the admission in argument before us, these companies did not compete with one another, it is difficult to see why the collective business should be any worse than its component parts. We can see no greater objection to one corporation manufacturing seventy per cent of three noncompeting groups of patented machines collectively used for making a single product than to three corporations making the same proportion of one group each. The disintegration aimed at by the statute does not extend to reducing all manufacture to isolated units of the lowest degree. The case was therefore dismissed.

UNITED STATES v. UNITED SHOE MACHINERY COMPANY

1

The government instituted suit against the United Shoe Machinery Company on December 12, 1911. It charged a combination of manufacturers of shoe machinery, and it specifically attacked certain leases of the company which were asserted to be the means whereby competition in the manufacture

1 247 U. S. 32-91 (May 20, 1918).

of shoe machinery was restrained.1 The defendant claimed that it had merely combined noncompeting businesses; and that the leases were but the exercise of undoubted patent rights. The District Court dismissed the bill, whereupon the government appealed to the Supreme Court.2 This body in an opinion rendered on May 20, 1918, upheld. the decision of the lower court by a vote of four to three (Justices McReynolds and Brandeis, having been connected with suits against the company, being debarred by professional ethics from participation in the case).

The charge of the government was two-fold: first, that the United Company had effected a combination of competing concerns engaged in the manufacture of shoe machinery in violation of sections one and two of the Sherman Act; and, second, that it had entered into leases with shoe manufacturers which extended the control achieved by the act of combination. With respect to the first contention the Supreme Court held that the companies that united to form the United Shoe Machinery Company were complementary, not competitive. It admitted that the testimony was conflicting, and might lead to a different conclusion; but it accepted the verdict of the lower court that there was no practical competition among these companies. It decided likewise as to the companies acquired after the organization of the combination in 1899. These acquisitions, it held, did not remove competition "in any practical or large sense."

Under this interpretation there was obviously no occasion to dissolve the United Shoe Machinery Company. It was undoubtedly a trust, since it represented the union of a group of concerns monopolizing various branches of the shoe machinery business. But it was not an illegal trust, since the constituent companies were patent monopolies, protected by law; and since, not being competitive with each other, there was no bar to their combination.

With respect to the leases and their tying clauses the Court held that they were simply the exercise of the company's right as a patentee. The leases perhaps restrained the trade of com

1 For an account of the United Shoe Machinery Company, see ch. 8. 2 222 Fed. Rep. 349-415.