United States of America v. Union Pacific Railroad Company

• Decision Date: 02 December 1912
• Docket Number: No. 446,446
• Citation: 33 S.Ct. 53,57 L.Ed. 124,226 U.S. 61
• Parties: UNITED STATES OF AMERICA, Appt., v. UNION PACIFIC RAILROAD COMPANY et al
• Court: U.S. Supreme Court

226 U.S. 61

33 S.Ct. 53

57 L.Ed. 124

UNITED STATES OF AMERICA, Appt.,

v UNION PACIFIC RAILROAD COMPANY et al.

No. 446.

Argued April 19, 22, and 23, 1912.

Decided December 2, 1912.

[Syllabus from pages 61-64 intentionally omitted] Attorney General Wickersham and Messrs. Cordenio A. Severance and Frank B. Kellogg, Special Assistants to the Attorney General, for appellant.

[Argument of Counsel from pages 64-68 intentionally omitted] Messrs. P. F. Dunne and N. H. Loomis for appellees.

Mr. Paul D. Cravath for appellees Jacob H. Schiff and Otto H. Kahn.

Mr. James M. Beck for appellee James Stillman.

Messrs. H. F. Stambaugh and D. T. Watson for appellee Henry C. Frick.

[Argument of Counsel from pages 68-79 intentionally omitted]

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Mr. Justice Day delivered the opinion of the court:

The case was begun in the United States circuit court for the district of Utah to enforce the provisions of the so-called Sherman anti-trust act of 1890 (26 Stat. at L. 209, chap. 647, U. S. Comp Stat. 1901, p. 3200) against certain alleged conspiracies and combinations in restraint of interstate commerce. The case in its principal aspect grew out of the purchase by the Union Pacific Railroad Company in the month of February, 1901, of certain shares of the capital stock of the Southern Pacific Company from the devisees under the will of the late Collis P. Huntington, who had formerly owned the stock. Other shares of Southern Pacific stock were acquired at the same time, the holding of the Union Pacific amounting to 750,000 shares, or about 37 1/2 per cent (subsequently increased to 46 per cent) of the outstanding stock of the Southern Pacific Company. The stock is held for the Union Pacific Company by one of its proprietary companies, the Oregon Short Line Railroad Company. The government contends that the domination over and control of the Southern Pacific Company given to the Union Pacific Company by this purchase of stock brings the transaction within the terms of the antitrust act. A large amount of testimony was taken and the case heard before four circuit judges of the eighth circuit, resulting in a decree dismissing the bill. 188 Fed. 102.

Prior to the stock purchase in 1901 the Union Pacific

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system may briefly be described as a line of railroad from the Missouri river to the Pacific coast; namely, from Omaha, Nebraska, or perhaps more strictly from Council Bluffs, Iowa; and from Kansas City, Missouri, to Ogden, Utah, and Portland, Oregon, with various branches and connections and a line of steamships from Portland to San Francisco, California, and from Portland to the Orient; and a line of steamships from San Francisco to the Orient (the Occidental & Oriental Steamship Company), in which the Union Pacific and the Southern Pacific each owned a half interest. The main line from Council Bluffs to Ogden, a little over 1,000 miles in length, with the branch from Kansas City, through Denver, Colorado, to Cheyenne, Wyoming, on the main line, was owned and operated by the Union Pacific; the line from Granger, Wyoming, on the main line of the Union Pacific, to Huntington, Oregon, was owned and operated by the Oregon Short Line Railroad Company, the capital stock of which was owned by the Union Pacific; and the line from Huntington to Portland was owned and operated by the Oregon Railroad & Navigation Company, the stock ownership of which was in the Oregon Short Line. The boat line from Portland to San Francisco and to the Orient, the Portland & Asiatic Steamship Company, was organized early in 1901, its stock being owned by the Oregon Railroad & Navigation Company.

The Southern Pacific Company, a holding company of the state of Kentucky, also engaged in operating certain lines of railroad under lease, controlled a line of railroad extending from New Orleans through Louisiana, Texas, New Mexico, Arizona, California, and Oregon to Portland, reaching Los Angeles and San Francisco, with several branch lines and connections extending into tributary territory. A line of boats running between New York and New Orleans was also owned and operated by the Southern Pacific, and later the same ships entered the port of Gal-

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veston, where also the Southern Pacific reached tidewater, and it had branches extending to various points in northern Texas, connecting with other lines of road. The Southern Pacific also operated, under lease, the railroad of the Central Pacific Railway Company, all the stock of which is owned by the Southern Pacific. The lines of the Central Pacific consisted of the road from San Francisco to Ogden, about 800 miles, in length, and connecting at the latter place with the Union Pacific and the Denver & Rio Grande Railroad Company's line. It also had various branches in and about California, aggregating in mileage about 500 miles. The Southern Pacific also owned a majority of the stock of the Pacific Mail Steamship Company, which operated a line of steamships plying to ports in the Orient and running between San Francisco and Panama, which, with the Panama Railroad and its boats, constituted the so-called Panama Route.

The contention of the government is that, prior to the stock purchase, the Union Pacific and Southern Pacific were competing systems of railroad engaged in interstate commerce, and acted independently as to a large amount of such carrying trade, and that since the acquisition of the stock in question the dominating power of the Union Pacific has eliminated competition between these two systems, and that such domination makes the combination one in restraint of trade, within the meaning of the 1st section of the act of Congress of July 2, 1890, and the transaction an attempt to monopolize interstate trade within the provisions of the 2d section of the act.

In view of the recent consideration of the history and meaning of the act (Standard Oil and Tobacco Cases, 221 U. S. 1, 55 L. ed. 619, 34 L.R.A.(N.S.) 834, 31 Sup. Ct. Rep. 502, and 221 U. S. 106, 55 L. ed. 663, 31 Sup. Ct. Rep. 632, respectively), it would be superfluous to enter upon any general consideration of its origin and scope. Ct. Rep. 548; United States v. Joint Traffic considered and its construction authoritatively settled, and in determining the present controversy we need but

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briefly restate some of the conclusions reached. The act applies to interstate railroads as carriers conducting interstate commerce, and one of the principal instrumentalities thereof. United States v. Tranx-Missouri Freight Asso. 166 U. S. 290, 41 L. ed. 1007, 17 Sup. Ct. Per. 548; United States, v. Joint Traffic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct. Rep. 25. The act is intended to reach combinations and conspiracies which restrain freedom of action in interstate trade and commerce, and unduly suppress or restrict the play of competition in the conduct thereof. United States v. Joint Traffic Asso. supra. In that case an agreement between competing interstate railroads for the purpose of fixing and maintaining rates was condemned.

'It is,' said the court (p. 571), 'the combination of these large and powerful corporations, covering vast sections of territory, and influencing trade throughout the whole extent thereof, and acting as one body in all matters over which the combination extends, that constitutes the alleged evil, and in regard to which, so far as the combination operates upon and restrains interstate commerce, Congress has power to legislate and to prohibit.'

In the Northern Securities Co. v. United States, 193 U. S. 197, 48 L. ed. 679, 24 Sup. Ct. Rep 436, this court dealt with a combination differing in character from that considered in the Trans-Missouri and Joint Traffic Cases, and it was there held that the transfer to a holding company of the stock of two competing interstate railroads, thereby effectually destroying the power which had theretofore existed to compete in interstate commerce, was a restraint upon such commerce, and Mr. Justice Harlan, announcing the affirmance of the decree of the circuit court, said (p. 337):

'In all the prior cases in this court the anti-trust act has been construed as forbidding any combination which, by its necessary operation, destroys or restricts free competition among those engaged in interstate commerce; in

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other words, that to destroy or restrict free competition in interstate commerce was to restrain such commerce. Nor, can this court say that such a rule is prohibited by the Constitution, or is not one that Congress could appropriately prescribe when exerting its power under the commerce clause of the Constitution? Whether the free operation of the normal laws of competition is a wise and wholesome rule for trade and commerce is an economic question which this court need not consider or determine.'

Mr. Justice Brewer, who delivered a concurring opinion, while expressing the view that the former cases were rightly decided, said that they went too far in giving the reasons for the judgments, and declared his view that Congress only intended to reach and destroy those contracts which were in direct restraint of trade, unreasonable, and against public policy. He was nevertheless emphatic in condemning the combination effected by the Northern Securities Company and the transfer of stocks to it, which policy, he declared, might be extended until a single corporation with stocks owned by three or four parties would be in practical control of both roads; or, viewing the possibilities of combination, the control of the whole transportation system of the country; and, in concluding his concurring opinion, said (p. 363):

'It must also be remembered that under present conditions a single railroad is, if not a legal, largely a practical, monopoly, and the arrangement by which the control of these two competing roads was merged in a single corporation broadens and extends such monopoly. I cannot look upon it as other than an unreasonable combination in restraint...