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is a separate and distinct article of trade. Being manufactured under secret processes and formulæ which the single producer alone has power to use, no other manufacturer can make it. There are of course other preparations used for the same purposes, but the articles controlled are, from their very nature, all the articles of their precise kind in commerce. The attempted restraint is therefore complete. Even though the public might not have much general interest in the trade in the articles in question, when the public has some interest and the restraint is total, the unimportance of the trade does not prevent the restraint from being general.28
An exhaustive classification of permissible restraints of trade is found in the opinion of Judge Taft in United States v. Addyston Pipe & Steel Co.29 If in any of the five classes there enumerated, the right of the seller of chattels to fix prices of re-sale could fall only under the fourth, as an agreement "by the buyer of property not to use the same in competition with the business retained by the seller.” Assuming that a general contract system fixing prices on all sales and re-sales is not illegal as in general restraint of trade, and that the covenants are ancillary to a principal contract of sale, under the foregoing test, the question still remains as to whether they are necessary for the protection of the business retained by the seller. The manufacturer of chattels who does not sell the same to the consumer is not in competition with the dealer to whom he sells for such distribution. Regardless of whether or not his immediate vendees secure a satisfactory price in their sales, the manufacturer, because of his monopoly of production and initial sale, secures such price as he may desire. Consequently such contracts cannot fall within Judge Taft's fourth class of permitted partial restraints.
It is true that the original vendor of chattels may be limited in his sales by the fact that his vendees are subjected to such competition as to prevent them from making a reasonable profit in the re-sale of his goods, but this is a disadvantage incidental to the distribution of chattels through intermediaries to the consumer. The manufacturer has no more right to overcome this disadvantage by identical contracts with all intermediate vendors than such
28 Montague & Co. v. Lowry, 193 U. S. 38 (1904).
vendors would have by agreement with each other. Such agreements between dealers have uniformly been held contrary to the public interest.30
In conclusion it might be suggested that public policy, apart from that involved in the technical questions of restraint of trade, should oppose the enforcement of such systems of fixing prices. The inducement now offered for the disclosure of beneficial discoveries, to the ultimate advantage of the general public, includes a monopoly of manufacture, use, and sale.31 To sanction and establish any part of these as rights of the owners of general chattel property is to reduce the consideration for the disclosure of inventions.
A second consideration adverse to the establishing of such right is the means it would afford to the large producers, or so-called “trusts,” of doing what the public is now using every means to prevent their doing. The ultimate object of all producers is to enlarge the profit which they are to receive for their productions. If a larger profit could be insured to the intermediate dealer he would be willing to pay an enhanced price to the manufacturer. To legalize the system of fixing prices would furnish the “trusts” the most simple and least expensive method of accomplishing this end. The establishment of such right would render nugatory the efforts of a quarter of a century to enforce the public policy declared in all the anti-trust statutes.
William J. Shroder. CINCINNATI, OHIO.
30 People v. Sheldon, 139 N. Y. 251 (1893); People v. Milk Exchange, 145 N. Y. 267 (1895); United States v. Addyston Pipe & Steel Co., 85 Fed. 271 (1898), aff. 175 U. S. 211 (1899); Montague & Co. v. Lowry, 193 U. S. 38 (1904).
31 Bement ». National Harrow Co., 186 U. S. 70 (1902); Heaton, etc. Co. o. Eureka Specialty Co., 77 Fed. 288 (1896); Dickerson o. Tinling, 84 Fed. 192 (1897); Edison Phonograph Co. v. Kaufmann, 105 Fed. 960 (1901); Edison Phonograph Co. v. Pike, 116 Fed. 863 (1902); Victor Talking Machine Co.o. The Fair, 123 Fed. 424 (1903).
HARVARD LAW REVIEW.
Published monthly, during the Academic Year, by Harvard Law Students.
SUBSCRIPTION PRICE, $2.50 PER ANNUM
35 CENTS PER NUMBER,
JOHN R. McLANE, LAWRENCE G. BENNETT,
HARRY O. PALMER, JOHN G. BUCHANAN,
ROBERT W. PERKINS, JR., ROBERT W. BYERLY,“
STUART C. RAND, E. MERRICK DODD, JR.,
EUSTACE J. SELIGMAN, WILLIAM M. EVARTS,
J. ROBERT SZOLD, CHARLES V. GRAHAM,
ROBERT A. TAFT, MAURICE HIRSCH,
WILLIAM S. WARFIELD, III, ALLEN T. Klots,
CORNELIUS C. WEBSTER, ALFRED L. LOOMIS,
CHAUNCEY E. WHEELER,
MR. AUSTIN WAKEMAN SCOTT, Assistant Professor of Law, has accepted the position of Dean of the College of Law of the State University of Iowa. When it is recalled that Professor Beale was similarly absent from this Law School, as Dean of the Law School of the University of Chicago, for two years from 1902 until 1904, the hope may well be entertained that the absence of Assistant Professor Scott will be but temporary.
THE LAW SCHOOL. — Several changes in the curriculum may be noted. Chief among these is the abolition of practically all mid-year examinations. Professor Wambaugh's course in Insurance has been made a fullyear course of two hours a week; the course in Public Service Companies will be given as a whole by Professor Wyman, instead of being divided, as formerly, into Carriers under Professor Beale, and Public Service Companies under Professor Wyman; the courses in Equity III and in Quasi-Contracts have been joined so as to form one full course. Thus the only half-year courses remaining in the regular three-year curriculum are Damages, Bankruptcy, which has been made a third-year subject, Persons, and Municipal Corporations; and of these the two first named are the only ones in which the examinations fall at mid-year.
In the fourth year, half courses are still the rule. In that year, Professor Pound will give new courses in the Law of Mining and Irrigation and in the Theory of Law and Legislation. The course in Admiralty has been transferred to the fourth year.
Owing to the absence of Assistant Professor Scott, some redistribution of courses has been necessary. Trusts will be given by Professor Pound, while Equity III, given by him last year, will be taught by Mr. Dutch. The course on Pleading will be given by Mr. Warren Abner Seavey, A.B., LL.B., 1904, newly appointed Lecturer on Pleading, and the course on Massachusetts Practice by Mr. John Gorham Palfrey, A.B., LL.B., 1899, a former editor of this Review, who has been appointed Lecturer on Massachusetts Practice.
There has been a considerable increase in the requirements of the Law School. The required number of hours a week for first year men has been raised from twelve to thirteen, the courses in Criminal Law and in Pleading having each been made full courses of two hours a week throughout the year. Twelve hours a week, instead of ten, is now the requirement in the second year. In addition, it is required that the general average grade of second year students be five per cent higher than the passing mark in the individual courses.
THE AMES COMPETITION. — The year marks the establishment, out of the fund given by Mrs. James Barr Ames, at the request of her husband, of two prizes of $200 and $100, to be given to the winners of a competition between the law clubs in the argument of moot cases. The competition will be in the form of an elimination tournament, and will be open to all second-year clubs of eight members which meet certain requirements. In the competitions in any given round, each club will be represented by two counsel. No representative of any club may argue more than once until at least six men of that club have argued; but after six men have argued no further restriction is imposed.
THE BOARD OF STUDENT ADVISERS. The scope of the work of the Board of Student Advisers, appointed by the Faculty, has been somewhat extended. The Board is to have supervision of the Ames Competition, and, in addition, each adviser will be assigned a certain number of the law clubs over the work of which he will have general supervision; he will also sit on several of the cases argued in these clubs. The members of the Board will be in the reading room of Langdell Hall during certain hours of the day to assist all members of the Law School in the intelligent use of the law library. The members of the Board for the coming year are James B. Grant, Jr., Chairman, Lawrence G. Bennett, John G. Buchanan, William M. Evarts, Charles V. Graham, Max Lowenthal, Stuart C. Rand, and J. Robert Szold.
THE STANDARD OIL AND TOBACCO CASES AND PRIOR DECISIONS THE SUPREME COURT UNDER THE SHERMAN Act.
Seven years ago, only a five to four majority of the judges of the Supreme Court prevented a holding that the Sherman Anti-Trust Act is powerless to deal with restraint of trade in the form of a corporation. The two great recent cases under the Act dispel all former doubts on that subject. In dissolving the Standard Oil Company and the American Tobacco Company, the court held that restraint of trade as a condition is illegal, irrespective of the form which it assumes, or the nature of the transactions which produce it. Standard Oil Co. v. United States, 221 U. S. 1; United States v. American Tobacco Co., 221 U. S. 106.
1 See Northern Securities Co. v. United States, 193 U. S. 197.
But these decisions also mark an epoch in anti-trust law in construing the words “restraint of trade” in the Act in their common-law significance, and so as embracing only “undue” restraints. The court for the first time lays down an intelligible test of illegality. In so doing the court departs in no wise from its prior decisions, and makes no change in the law. It is true that it was often stated, as a result of generalization from some of the language used in certain cases, that the Supreme Court had construed the Act to embrace every restriction of competition, whether or not reasonable, and whether or not affecting the right of strangers to the transaction to compete. But this statement of the law was justified by no decision of the court and was by no means universally accepted. The propositions of law bearing on this question which are embodied in the decisions of the court prior to the principal cases are comparatively few. One class of cases held combinations between railroads to fix rates illegal. Another class of cases held combinations of manufacturers or dealers to control prices by securing a monopoly illegal. But the facts of the cases in the second class showed a very apparent attempt on the part of the defendants to suppress competition by outsiders to the agreement, and hence they furnish no basis for the supposed “rule.” No more do those cases which deal with combinations the primary purpose and effect of which was to restrain the commerce of the public. Indeed the only cases which are seriously regarded as giving color to the statement that all restriction of competition was illegal are the railroad cases. But railroads are public service companies, which, on account of their natural monopoly and their public nature, are governed by rules inapplicable to ordinary men. Even at common law, they were subject to a visitatorial power of regulation in the state enforceable through the courts of chancery. And language, distinguishing public service companies from ordinary corporations, is not lacking in cases in the Supreme Court.8 Combinations of railroads to fix prices were considered so dangerous as to be per se unlawful, and the decision in these cases was simply that the fact that the rates fixed were reasonable would not render them lawful.9
2 See United States v. Trans-Missouri Freight Association, 166 U. S. 290, 327; United States v. Joint Traffic Association, 171 U. S. 505, 577; Northern Securities Co. v. United States, 193 U. S. 197, 328, 331.
3 See, for example, an article by Victor Morawetz in 22 Harv. L. REV. 492.
• United States v. Trans-Missouri Freight Association, supra; United States v. Joint Traffic Association, supra; Northern Securities Co. v. United States, supra.
5 Addyston Pipe & Steel Co. o. United States, 175 U. S. 211; Montague & Co. o. Lowry, 193 U. S. 38; Swift & Co. v. United States, 196 U. S. 375; Continental Wall Paper Co. v. Voight, 212 U. S. 227.
6 Such a case is Loewe v. Lawlor, 208 U. S. 274.
9 See United States v. Trans-Missouri Freight Association, 166 U. S. 290 331; United States v. Joint Traffic Association, 171 U. S. 505, 576. It may well be doubted