226 U.S. 324 (1912), 198, United States v. Reading Company

Docket Nº:No.198, 206, 217
Citation:226 U.S. 324, 33 S.Ct. 90, 57 L.Ed. 243
Party Name:United States v. Reading Company
Case Date:December 16, 1912
Court:United States Supreme Court
 
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Page 324

226 U.S. 324 (1912)

33 S.Ct. 90, 57 L.Ed. 243

United States

v.

Reading Company

No.198, 206, 217

United States Supreme Court

December 16, 1912

Argued October 10, 11, 1911

APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Syllabus

The United States filed a bill to enforce the provisions of the Sherman Anti-Trust Act of July 2, 1890, against an alleged combination of railroad and coal mining companies formed to restrain competition in the production, sale, and transportation in interstate commerce of anthracite coal. The bill alleged a general combination through an agreement between the carrier defendants to apportion the coal tonnage between themselves on a scale of percentages; a combination through the medium of one of the mining companies to prevent the construction of a new competing coal carrying road from the anthracite district to tidewater, a combination by a series of identical contracts with independent coal operators for sale of their total product, and certain contributory combinations between some but not all of the defendants. The bill was filed prior to the enactment

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of the Commodities Clause of the Hepburn Act of June 29, 1906.

Held that:

Any relief against a continuance of the transportation of carrier-owned coal under the Commodities Clause must be sought in a proceeding based upon that act, and cannot be obtained in this suit.

On the record in this case, this Court agrees with the court below that the Government has failed to show any contract or combination for the distribution of coal tonnage between the carriers.

The defendants did combine to unreasonably restrain interstate commerce in violation of the Sherman Anti-Trust Act through the Temple Iron Company to prevent the construction of the competing coal-carrying railroad.

Although a combination has succeeded in accomplishing one of the purposes for which it was formed, if it is still an efficient agency to prevent competition in other methods, the court may proceed to judgment and decree its dissolution.

A disclaimer on the part of defendants of power of any one of them to control business of the others cannot detract from the significance of documentary evidence bearing on the relations of the defendants to each other.

Although separate acts of the defendants may be legal under the state law when considered alone, they may, when taken together, become parts of an illegal combination under the Anti-Trust Act which it is the duty of the court to dissolve.

Acts absolutely lawful may be steps in a criminal plot. Aikens v. Wisconsin, 195 U.S. 206.

While no one of a number of contracts, considered severally, may be in restraint of trade, each of a series of innocent contracts may be a step in a concerted criminal plot to restrain interstate trade, and if so, may thereupon become unlawful under the Anti-Trust Act. Swift Co. v. United States, 196 U.S. 375.

In this case, held that a series of identical contracts between interstate carriers with a great majority of the independent coal operators to market all the coal of the latter for all time at an agreed percentage of tidewater price were all parts of a concerted scheme to control the sale of the independent output, and were unreasonable contracts in restraint of interstate trade within the prohibition of the Sherman Act.

Where, as in this case, purchase and delivery within a state is but one step in a plan and purpose to control and dominate trade and commerce in other states for an illegal purpose, it is an interference with and restraint of interstate commerce. Loewe v. Lawlor, 208 U.S. 274.

While the Sherman Act does not forbid or restrain the power to make

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usual and normal contracts to further trade through normal methods, whether by agreement or otherwise, Standard Oil Co. v. United States, 221 U.S. 1, it does forbid contracts entered into according to a concerted scheme, as in this case, to unduly suppress competition and restrain freedom of commerce among the states.

While the law may not compel competition, it may remove illegal barriers resulting from illegal agreements, such as those involved in this case, which make competition impracticable.

Whether a particular act or agreement is reasonable and normal or unreasonable may in doubtful cases turn upon intent, and the extent of control obtained over the output of a commodity may afford evidence of the intent to suppress competition.

Where there is no doubt that the necessary result of an act is to materially restrain trade between the states, intent is of no consequence.

In a suit to restrain all defendants from carrying out an illegal combination under the Sherman Act in which all defendants participated, the Court will not consider minor combinations between less than all of the defendants which did not constitute part of the general combination found to be illegal. To do so would condemn the bill for misjoinder and multifariousness.

In this case, the Court expresses no opinion on such minor combinations, and, as to them, the bill should be dismissed without prejudice.

183 F. 427 affirmed in part and reversed in part.

The facts, which involve the legality under the Sherman Anti-Trust Act of certain combinations of railroad and coal mining companies engaged in the production, sale, and transportation in interstate commerce of anthracite coal, are stated in the opinion.

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LURTON, J., lead opinion

MR. JUSTICE LURTON delivered the opinion of the Court.

This is a petition in equity, filed by the United States in the Circuit Court of the United States for the Eastern District of Pennsylvania, for the purpose of enforcing the provisions of the Act of July 2, 1890, known as the Sherman Anti-Trust Act, against an alleged combination of railroad and coal mining companies formed and continued for the purpose of restraining competition in the production, sale, and transportation of anthracite coal in commerce among the states.

The defendants originally made such, and alone referred to hereafter as the defendants, were the following:

The Philadelphia & Reading Railway Company; the Philadelphia & Reading Coal & Iron Company; the Lehigh Valley Railroad Company; the Lehigh Valley Coal Company; the Delaware, Lackawanna & Western Railroad Company; the Central Railroad Company of New Jersey; the Erie Railroad Company; the New York, Susquehanna & Western Railroad Company; the New York, Susquehanna & Western Coal Company; the Lehigh & Wilkesbarre Coal Company; the Pennsylvania Coal Company; the Hillside Coal Company; the Reading Company, and the Temple Iron Company. By an amendment, certain other defendants were brought in, consisting of holders of contracts made by independent operators of coal mines and trustees holding securities which might be affected by the relief sought against the carrier and coal mining companies, the original defendants. A list of these later defendants is set out in the margin, * and when they are referred to herein, they will be specifically mentioned.

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The bill alleges that anthracite coal is an article of prime necessity as a fuel, and finds its market mainly in the New England and middle Atlantic states. The deposits of the coal, with unimportant exceptions, lie in the State of Pennsylvania, but do not occupy a continuous field, though found in certain counties adjoining in the eastern half of the state, and embrace an area of 484 square miles. This coal region is from 150 to 250 miles from tidewater. The region itself is broken and mountainous, and the natural conditions and character of the deposits are such that the mining and reduction of the coal to suitable sizes for domestic use require very large amounts of capital. Its value commercially is dependent, in a large degree, upon quick and cheap transportation to convenient shipping points at tidewater, from whence it may be distributed to the great consuming markets of the Atlantic Coast states.

The whole problem of advantageously developing these deposits and supplying the [33 S.Ct. 92] eastern demand for fuel was one which presented enormous difficulties. From an early day, it has been the settled policy of the State of Pennsylvania

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to encourage the development of this coal region by canal and railroad construction, which would furnish transportation to convenient shipping points at tidewater. One of the defendant carriers, the Delaware, Lackawanna & Western Company, was given the power to acquire coal lands and engage in the business of mining and selling coal in addition to the business of a common carrier, and all railroad companies were permitted to aid in the production of coal by assisting coal mining companies through the purchase of capital stock and bonds. Thus it has come about that the defendant carriers not only dominate the transportation of coal from this anthracite region to the great distributing ports at New York harbor, but also through their controlled coal-producing companies, produce and sell about seventy-five percent of the annual supply of anthracite. As a further direct consequence of the state authorized between coal-producing and coal-transporting companies, it has come about that the defendant carrier companies and the coal mining companies affiliated with the carrier companies now own or control about ninety percent of the entire unmined area of anthracite, distributed, according to the averments of the petition, as follows:

Reading Company . . . . . . . . . . 44. %

Lehigh Valley Company . . . . . . . 16.87 %

Del. L. & Western Company . . . . . 6.55 %

Cent. Railroad of New Jersey. . . . 19. %

Erie...

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