denced among other things by the contracts of that date, Exhibits 1 and 2 hereto. 4. That the British-American Tobacco Company be adjudged an unlawful instrumentality created solely for carrying into effect the objects and purposes of said contract, combination and conspiracy entered into on or about September 27, 1902, and thereafter, and that it be enjoined from engaging in interstate or foreign trade and commerce within the jurisdiction of the United States.

5. That the court adjudge the American Tobacco Company, the American Snuff Company, the American Cigar Company, the American Stogie Company, the MacAndrews & Forbes Company and the Conley Foil Company is each a combination in restraint of interstate and foreign trade and commerce, and that each has attempted and is attempting to monopolize, is in combination and conspiracy with other persons and corporations to monopolize and has monopolized part of the trade and commerce among the several states and with foreign nations, and order and decree that each one of them be restrained from engaging in interstate or foreign commerce, or if the court should be of opinion that the public interests will be better subserved thereby, that receivers be appointed to take possession of all the property, assets, business and affairs of said defendants and wind up the same, and otherwise take such course in regard thereto as will bring about conditions in trade and commerce among the states and with foreign nations in harmony with law.

6. That the holding of stock by one of the defendant corporations in another under the circumstances shown be declared illegal and that each of them be enjoined from continuing to hold or own such shares in another, and from exercising any right in connection therewith.

7. That defendants, each and all, be enjoined from continuing to carry out the purposes of the above described contracts, combinations, conspiracies and attempts to monopolize by the means herein described, or by any other, and be required to desist and withdraw from all connection with the same.

8. That each of the defendants be enjoined from purchasing leaf tobacco, or from selling and distributing its manufactured output as a part of interstate and foreign trade and commerce in conjunction or combination with any other defendant, and from taking part or being interested in any agreement or combination intended to destroy competition among them in reference to such purposes or sales.

9. The petitioners have such other, further and general relief as may be proper.

As to the answers, it suffices to say that all the individual and corporate defendants, other than the foreign corporations, denied the charges of wrongdoing and illegal combination, and the corporate defendants in particular in addition averred their right under state charters by virtue of which they existed to own and possess the property which they held and further averred that they were engaged in manufacturing and that any combination among them related only to that subject and therefore was not within the anti-trust act. The two foreign corporations asserted the validity of their corporations and of the assailed agreements and denied any participation in the wrongful combination. After the taking of much testimony before a special examiner, the case was heard before a court consisting of four judges, constituted under the expediting act of February 11, 1903. In deciding the case in favor of the What the Lower government each of the four judges delivered an opinion (164) Courts Decided. Fed., 700). A final decree was entered on December 15, 1908. The petition was dismissed as to the English corporations, three of the subsidiary corporations, the United Cigar Stores Company and all the individual defendants.

It was decreed that the defendants other than those against whom the petition was dismissed had theretofore entered into and were parties to combinations in restraint of trade, etc., in violation of the anti-trust act, and said defendants and each of them, their officers, agents, etc., were restrained and enjoined "from directly or indirectly doing any act or thing whatsoever in furtherance of the objects and purposes of said combinations and from continuing as parties thereto."

It specifically found that each of the defendants, "The American Tobacco Company, American Snuff Company, American Cigar Company, American Stogie Company and MacAndrews & Forbes Company constitutes and is itself a combination in violation of the said act of Congress." The corporations thus named, their officers, etc., were next restrained and enjoined "from further directly or indirectly engaging in interstate or foreign trade and commerce in leaf tobacco or the products manufactured therefrom or articles necessary or useful in connection therewith. But if any of said last named defendants can hereafter affirmatively show the restoration of reasonably competitive conditions, such defendants may apply to this court for a modification, suspension or dissolution of the injunction herein granted against it."

The decree then enumerated the various corporations which it found held or claimed to own some or all of the capital stock of other corporations and particularly specified such other corporations, and then made the following restraining provisions:

"Wherefore, each and all of defendants, the American Tobacco Company, the American Snuff Company, the American Cigar Company, P. Lorillard Company, R. J. Reynolds Tobacco Company, Blackwell's Durham Tobacco Company and Conley Foil Company, their officers, directors, agents, servants and employes are hereby restrained and enjoined from acquiring by conveyance or otherwise the plant or business of any such corporation wherein any one of them now holds or owns stock; and each and all of said defendant corporations so holding stock in

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332,246,

other corporations as above specified, their officers, directors, agents, servants and employes are further enjoined from voting or attempting to vote said stock at any meeting of the stockholders of the corporation issuing the same, and from exercising or attempting to exercise any control, direction, supervision or influence whatsoever over the acts and doings of such corporation. And, it is further ordered and decreed that each and every one of the defendant corporations, the stock of which is held by any other defendant corporation as hereinbefore shown, their officers, directors, servants and agents, be and they are hereby respectively and collectively restrained and enjoined from permitting the stock so held to be voted by any other defendant holding or claiming to own the same, or by its attorneys or agents, at any corporate election for directors or officers, and from permitting or suffering any other defendant corporation claiming to own hold stock therein, or its officers or agents, to exercise any control whatsoever over its corporate acts."

or

Judgment for costs was given in favor of the petitioner and against the defendants as to whom the petition had not been dismissed, except R. P. Richardson, Jr., & Co., a corporation which had consented to the decree. The decree also contained a provision that the defendants or any of them should not be prevented "from the institution, prosecution or defence of any suit, action or proceeding to prevent or restrain the infringment of a trade mark used in interstate commerce or otherwise assert or defend a claim to any property or rights." In the event of a taking of an appeal to this court, the decree provided that the injunction which it directed "shall be suspended during the pendency of such appeal."

The United States appealed as did also the various defendants against whom the decree was entered. For the government it is contended: 1. That the petition should not have been dismissed as to the individual defendants.

Charges and Defence on Appeal. 2. That it should not have been dismissed as to the two foreign corporations-the Imperial Tobacco Company and the British-American Tobacco Company-and the domestic corporations controlled by the latter, and that, on the contrary, the decree should have commanded the observance of the anti-trust act by the foreign corporations so far as their dealings in the United States were concerned, and should have restrained those companies from doing any act in the United States in violation of the anti-trust act, whether or not the right to do said acts was asserted to have arisen pursuant to the contracts made outside of or within the United States.

3. The petition should not have been dismissed as to the United Cigar Stores Company.

4. The final decree should have adjudged defendants parties to unlawful contracts and conspiracies.

5. The final decree should have adjudged that defendants were attempting to monopolize and had monopolized parts of commerce. More particularly, it is urged, it should have adjudged that the American Tobacco Company, American Snuff Company, American Cigar Company, American Stogie Company, MacAndrews & Forbes Company, the Conley Foil Company and the British-American Tobacco Company were severally attempting to monopolize and had monopolized parts of commerce, and that appropriate remedies should have been applied.

6. The decree was not sufficiently specific, since it should have described with more particularity the methods which the defendants had followed in forming and carrying out their unlawful purpose, and should have prohibited the resort to similar methods.

7. The decree should have specified the shares in corporations disclosed by the evidence to be owned by the parties to the conspiracy, and should have enjoined those parties from exercising any control over the corporations in which such stock was held, and the latter, if made defendant, from permitting such control, and should have also enjoined the collecting of any dividends upon the stock.

8. The decree improperly provided that nothing therein should prevent defendants from prosecuting or defending suits; also improperly suspended the injunction pending appeal.

The defendants, by their assignments of error, complain because the petition was not dismissed as to all, and more specifically:

(a) Because they were adjudged parties to a combination in restraint of interstate and foreign commerce, and enjoined accordingly. (b) Because certain defendant corporations holding shares in others were enjoined from voting or exercising control over the issuing company, and the latter from permitting this; and

(c) Because the American Tobacco Company, American Snuff Company, American Cigar Company, American Stogie Company and the MacAndrews & Forbes Company were adjudged unlawful combinations and restrained from engaging in interstate and foreign commerce.

After summarizing at length what it held to be the undisputed facts in the case the court thus applied the law to them: If the anti-trust law is applicable to the entire situation here presented and is adequate to afford complete relief for the evils which the United States insists that situation presents it can only be because that law will be given a more comprehensive application than has been affixed to it in any previous decision. This will be the case because the undisputed facts as we have stated them involve questions as to the operation of the anti-trust law not hitherto presented in any case. Thus even if the ownership of stock by the American Tobacco Company in the accessory and subsidiary companies and the ownership of stock in any of those

Application of the
Anti-Trust Act.

The second largest city in Australia is Melbourne, Victoria, whose population in 1908 was 549,200.

150

SUPREME COURT DECISIONS, 1911.

companies among themselves were held, as was decided in the Standard Oil Company case to be a violation of the act and all relations resulting from such stock ownership were therefore set aside, the question would yet remain whether the principal defendant, the American Tobacco Company, and the five accessory defendants, even when divested of their stock ownership in other corporations by virtue of the power which they would continue to possess, even although thus stripped, would amount to a violation of both the first and second sections of the act.

was

Again, if it were held that the corporations, the existence whereof due to a combination between such companies and other companies was a violation of the act, the question would remain whether such of the companies as did not owe their existence and power to combinations, but whose power alone arose from the exercise of the right to acquire and own property, would be amenable to the prohibitions of the act.

Yet, further: If even this proposition was held in the affirmative, the question would remain whether the principal defendant, the American Tobacco Company, when stripped of its stock ownership, would be in and of itself within the prohibitions of the act, although that company was organized and took being before the anti-trust act was passed. Still further, the question would yet remain whether particular corporations which, when bereft of the power which they possessed as resulting from stock ownership, although they were not inherently possessed of a sufficient residuum of power to cause them to be in and of themselves either a restraint of trade or a monopolization of any attempt to monopolize, should nevertheless be restrained because of their intimate connection and association with other corporations found to be within the prohibitions of the act.

The necessity of relief as to all these aspects, we think, seemed to the government so essential and the difficulty of giving to the act such a comprehensive and coherent construction as would be adequate to enable it to Conflict of meet the entire situation, led to what appears to us to be in their Theories, essence a resort to methods of construction not compatible one with the other. And the same apparent conflict is presented by the views of the act taken by the defendants when their contentions are accurately tested. Thus the government, for the purpose of fixing the illegal character of the original combination which organized the old American Tobacco Company, asserts that the illegal character of the combination is plainly shown because the combination was brought about to stay the progress of a flagrant and ruinous trade war. In other words, the contention is that as the act forbids every contract and combination, it hence prohibits a reasonable and just agreement made for the purpose of ending a trade war.

But as thus construing the act by the rule of the letter which kills would necessarily operate to take out of the reach of the act some of the accessory and many subsidiary corporations, the existence of which depend not at all upon combination or agreement or contract, but upon mere purchases of property, it is insisted in many forms of argument that the rule of the construction to be applied must be the spirit and intent of the act, and therefore its prohibitions must be held to extend to acts, even if not within the literal terms of the statute, if they are within its spirit, because done with an intent to bring about the harmful results which it was the purpose of the statute to prohibit.

So as to the defendants, while it is argued on the one hand that the forms by which various properties were acquired, in view of the letter of the act, exclude many of the assailed transactions from condemnation, it is yet urged that giving to the act the broad construction which it should rightfully receive, whatever may be the form, no condemnation should follow, because, looking at the case as a whole, every act assailed is shown to have been but a legitimate and lawful result of the exertion of honest business methods brought into play for the purpose of advancing trade, instead of with the object of obstructing and restraining the same.

But the difficulties which arise from the complexity of the particular dealings which are here involved, and the situation they produce, we think, grows out of a plain misconception of both the letter and spirit of the anti-trust act. We say of the letter because, while seeking by a narrow rule of the letter to include things which it is deemed would otherwise be excluded, the contention really destroys the great purpose of the act, since it renders it impossible to apply the law to a multitude of wrongful acts which would come within the scope of its remedial purposes by resort to a reasonable construction, although they would not be within its reach by a too narrow and unreasonable adherence to the strict letter.

This must be the case unless it is possible in reason to say that for the purpose of including one class of acts which would not otherwise be embraced a literal construction, although in conflict with reason, must be applied, and for the purpose of including other acts which would not otherwise be embraced a reasonable construction must be resorted to. That is to say, two conflicting rules of construction must at one and the same time be applied and adhered to. The obscurity and resulting uncertainty, however, is now but an abstraction because it has been removed by the consideration which we have given quite recently to the construction of the anti-trust act in the Standard The Rule Oil case. In that case it was held, without departing from any of Reason. previous decision of the court, that as the statute had not defined the word restraint of trade, it became necessary to construe those words, a duty which could only be discharged by a resort to reason. We say the doctrine thus stated was in accord with all the previous decisions of this court, despite

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the fact that the contrary view was sometimes erroneously attributed to some of the expressions used in two prior decisions (the Trans-Missouri Freight Association and Joint Traffic cases, 166 U. S., 290, and 171 U. S., 505). That such view was a mistaken one was fully pointed out in the Standard Oil case, and is additionally shown by a passage in the opinion in the joint traffic case, as follows (171 U. S., 568): "The act of Congress must have a reasonable construction or else there would scarcely be an agreement or contract among business men that would not be said to have, indirectly or remotely, some bearing on interstate commerce and possibly to restrain it."

Applying the rule of reason to the construction of the statute, it was held in the Standard Oil case that as the words restraint of trade at common law and in the law of this country at the time of the adoption of the anti-trust act only embraced acts or contracts or agreements or combinations which operated to the prejudice of the public interests by unduly restraining competition or unduly obstructing the due course of trade, or which, either because of their inherent nature or effect or because of the evident purpose of the acts, etc., injuriously restrained trade, the words as used in the statute were designed to have, and did have, a like significance. It was therefore pointed out that the statute did not forbid or restrain the power to make normal and usual contracts to further trade by restoring to all normal methods, whether by agreement or otherwise, to accomplish such purpose. In other words, it was held not that acts which the statute prohibited could be removed from the control of its prohibition by a finding that they were reasonable, but that the duty to interpret, which inevitably arose from the general character of the term restraint of trade, required that the words restraint of trade should be given a meaning which would not destroy the individual right to contract and render difficult, if not impossible, any movement of trade in the channels of interstate commerce-the free movement of which it was the purpose of the statute to protect.

The soundness of the rule that the statute should receive a reasonable construction, after further mature deliberation, we see no reason to doubt. Indeed, the necessity for not departing in this case from the standard of Reaffirms the rule of reason, which is universal in its application, is so Previous Ruling. plainly required in order to give effect to the remedial purposes which the act under consideration contemplates, and to prevent that act from destroying all liberty of contract and all substantial right to trade, and thus causing the act to be at war with itself by annihilating the fundamental right of freedom to trade which, on the very face of the act it was enacted to preserve, is illustrated by the record before.

In truth, the plain demonstration which this record gives of the injury which would arise from and the promotion of the wrongs which the statute was intended to guard against which would result from giving to the statute a narrow, unreasoning and unheard of construction, as illustrated by the record before us, if possible serves to strengthen our conviction as to the correctness of the rule of construction, the rule of reason, which was applied in the Standard Oil case, the application of which rule to the statute we now, in the most unequivocal terms, re-express and reaffirm.

Coming, then, to apply to the case before us the act as interpreted in the Standard Oil and previous cases, all the difficulties suggested by the mere form in which the assailed transactions are clothed become of no moment. This follows because, although it was held in the Standard Oil case, that giving to the statute a reasonable construction, the words restraint of trade did not embrace all those normal and usual contracts essential to individual freedom and the right to make which were necessary in order that the course of trade might be free, yet, as a result of the reasonable construction which was affixed to the statute, it was pointed out that the generic designation of the first and second sections of the law, when taken together, embraced every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed. That is to say, it was held that, In view of the general language of the statute and the public policy which it manifested, there was no possibility of frustrating that policy by resorting to any disguise or subterfuge of form, since resort to reason rendered it impossible to escape by any indirection the prohibitions of the statute.

Considering, then, the undisputed facts which we have previously stated, it remains only to determine whether they establish that the acts, contracts, agree

Finds the Company Guilty.

ments, combination, etc., which were assailed were of such an unusual and wrongful character as to bring them within the prohibitions of the law. They were, in our opinion, so overwhelmingly shown from the undisputed facts that it seems only necessary to refer to the facts as we have stated them to demonstrate the correctness of this conclusion. Indeed, the history of the combination is so replete with the doing of acts which it was the obvious purpose of the statute to forbid, so demonstrative of the existence from the beginning of a purpose to acquire dominion and control of the tobacco trade, not by the mere exertion of the ordinary right to contract and to trade, but by methods devised in order to monopolize the trade by driving competitors out of business, which were ruthlessly carried out upon the assumption that to work upon the fears or play upon the cupidity of competitors would make success possible. We say these conclusions are inevitable, not because of the vast amount of property aggregated by the combination, not because alone of the many corporations which the proof shows were united by resort to one device or another; again, not alone because of the dominion and control over the tobacco trade which actually exists, but because

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we think the conclusion of wrongful purposes and illegal combination is overwhelmingly established by the following considerations:

(a) By the fact that the very first organization or combination was compelled by a previous existing fierce trade war, evidently inspired by one or more of the minds which brought about and became parties to that combination,

(b) Because, immediately after that combination and the increase of capital which followed, the acts which ensued justify the inference that the intention existed to use the power of the combination as a vantage ground to further monopolize the trade in tobacco by means of trade conflicts designed to injure others, either by driving competitors out of the business or compelling them to become parties to a combination-a purpose whose execution was illustrated by the plug war which ensued and its results; by the snuff war which followed and its results and by the conflict which immediately followed the entry of the combination into England and the division of the world's business by the two foreign contracts which ensued; by the ever present manifestation which is exhibited of a conscious wrongdoing; by the form in which the various transactions were embodied from the beginning, ever changing but ever in substance the same, now the organization of a new company, now the control exerted by the taking of stock in one or another or in several, so as to obscure the result actually attained, nevertheless uniform, in their manifestations of the purpose to restrain others and to monopolize and retain power in the hands of the few who, it would seem, from the beginning contemplated the mastery of the trade which practically followed; by the gradual absorption of control over all the elements essential to the successful manufacture of tobacco products, and placing such control in the hands of seemingly independent corporations, serving as perpetual barriers to the entry of others into the tobacco trade; by persistent expenditure of mililons upon millions of dollars in buying out plants, not for the purpose of utilizing them, but in order to close them up and render them useless for the purposes of trade; by the constantly recurring stipulations, whose legality, isolatedly viewed, we are now considering, by which numbers of persons, whether manufacturers, stockholders or employes, were required to bind themselves, generally for long periods, not to compete in the future.

Indeed, when the results of the undisputed proof which we have stated are fully apprehended, and the wrongful acts which they exhibit are considered, there comes inevitably to the mind the conviction that it was the danger which it was deemed would arise to individual liberty and the public wellbeing from acts like those which this record exhibits which led the legislative mind to conceive and to enact the anti-trust act, considerations which also serve to so clearly demonstrate that the combination here assailed is within the law as to leave no doubt that it is our plain duty to apply its prohibitions.

In stating summarily, as we have done, the conclusions which in our opinion are plainly deducible from the undisputed facts, we have not paused to give the reasons why we consider, after giving them great consideration, that Defence of the elaborate arguments advanced to give a different complexion to No Merit. the case are wholly devoid of merit. We do not for the sake of brevity, moreover, stop to examine and discuss the various propositions urged in the argument at bar for the purpose of demonstrating that the subject matter of the combination which we find to exist and the combination itself are not within the scope of the anti-trust law, because when rightly considered they are merely matters of intrastate commerce, and therefore subject alone to state control. We have done this because the want of merit in all the argu ments advanced on such subjects is so completely established by the prior decisions of this court, as pointed out in the Standard Oil case, as not to require restatement.

Leading as this does to the conclusion that the assailed combination in all its aspects that is to say, whether it be looked at from the point of view of stock ownership or from the standpoint of the principal corporation and the accessory or subsidiary corporations viewed independently, including the foreign corporations in so far as by the contracts made by them they became co-operators in the combinations-comes within the prohibitions of the first and second sections of the anti-trust act, it remains only finally to consider the remedy which it is our duty to apply to the situation thus found to exist.

Our conclusion being that the combination as a whole, involving all its cooperating or associated parts, in whatever form clothed, constitutes a restraint Seeking a Remedy.

of trade within the first section, and an attempt to monopolize or a monopolization within the second section in the anti-trust act, it follows that the reduction which we are to afford must be wider than that awarded by the lower courts, since that court merely decided that certain of the corporate defendants constituted combinations in violation of the first section of the act, because of the fact that they were formed by the union of previously competing concerns and that the other defendants, not dismissed from the action, were parties to such combinations or promoted their purposes.

We hence, in determining the relief proper to be given, may not model our action upon that granted by the court below, but in order to enable us to award relief coterminous with the ultimate redress of the wrongs which we find to

exist, we must approach the subject of relief from an original point of view.

Such subject necessarily takes a twofold aspect-the character of the permanent relief required and the nature of the temporary relief in the event that it be found that it is impossible under the situation as it now exists to at once rectify such existing wrongful condition. In considering the subject from both of these aspects three dominant influences must guide our action:

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