from hand labor to that of machinery, and from operating machinery by hand to the application of steam for such purpose, leave behind them for the time, a number of men who must seek other avenues of livelihood. These are misfortunes which seem to be the necessary accompaniment of all great industrial changes. It takes time to effect a readjustment of industrial life, so that those who are thrown out of their old employment by reason of such changes as we have spoken of may find opportunities for labor in other departments than those to which they have been accustomed. It is a misfortune, but yet in such cases it seems to be the inevitable accompaniment of change and improvement.

"It is wholly different, however, when such changes are effected by combinations of capital, whose purpose in combining is to control the production or manufacture of any particular article in the market, and by such control dictate the price at which the article shall be sold, the effect being to drive out of business all the small dealers in the commodity and to render the public subject to the decision of the combination as to what price shall be paid for the article. In this light it is not material that the price of an article may be lowered. It is in the power of the combination to raise it, and the result in any event is unfortunate for the country by depriving it of the services of a large number of small but independent dealers who were familiar with the business and who had spent their lives in it, and who supported themselves and their families from the small profits realized therein. Whether they be able to find other avenues to earn their livelihood is not so material, because it is not for the real prosperity of any country that such changes should occur which result in transferring an independent business man, the head of his establishment, small though it may be, into a mere servant or agent of a corporation for selling the commodities which he once manufactured or dealt in, having no voice in shaping the business policy

of the company and bound to obey orders issued by others."

§ 113. Different phases of the application of antitrust statutes Factor's system Control of patentsCombinations against dishonest debtors Agreements to sell only to regular dealers Combinations of employers to resist combinations of employees Department stores. One of the most interesting attempts to regulate and control the price of products is what is known in trade as the factor's system. The manufacturer, who controls a large part of the country's output of the commodity, enters into an agreement with the jobbers throughout the country, under which each jobber becomes a factor or agent of the manufacturer for the sale of the goods in question, the goods remaining after shipment the property of the manufacturer, and subject to recall by him, while the jobber assumes all risks in regard to the safe custody of the goods. The jobber agrees to sell the goods at the prices fixed by the manufacturer from time to time, and not to sell similar goods manufactured by any other competing concern. If he fulfills his agreement in every particular, he receives a rebate on the price of the goods, which assures him a fair profit for handling the goods, and protects him against the under-cutting of prices by competing jobbers. The sugar and tobacco trusts inaugu rated the system at the urgent request of the jobbers, throughout the country. This brief statement of the factor's contract, apart from the motive of its general execution between the manufacturer and the jobbers, discloses the ordinary legal relation of principal and factor, having no element which was unknown to such contracts at common law and prior to the enactment of the anti-trust laws. The motive was undoubtedly the maintenance of uniform prices throughout the country, and the protection of the jobber from ruinous competition. No proof has ever been made that

the trusts intended to, or did charge extortionate prices; but they did certainly intend by that system to control the trade throughout the country, and drive the small manufacturer out of business.

In principle, this combination differs in nothing from the railway freight associations, and the associations of coal and milk dealers, which have been declared to come within the prohibitive provisions of the anti-trust laws.1 And this was the conclusion of the New York courts in regard to the tobacco trust's factor's contract.2 But a contrary conclusion has been reached by the Texas Supreme Court in a case, in which a manufacturer of windmills had granted one firm the exclusive right within a certain territory to sell his windmills, on a factor's contract, in which it was stipulated that the mills were to remain until sold the property of the manufacturer, and the factor was not to sell mills manufactured by any one else. The contract was held to be lawful, and not to fall within the provisions of the anti-trust law of Texas; for the reason, inter alia, that the statute did not apply to contracts between principal and agent. In a still more recent case, the Texas courts have sustained the contract of a carriage manufacturer, which granted to a Texas dealer the exclusive right to sell these carriages upon condition that he sold no others.*

Somewhat similar to these factor's contracts, in restricting competition, is the agreement of railroads and express

1 See ante, § 112.

2 People v. Duke, 44 N. Y. S. 336; 11 N. Y. Cr. R. 472; 19 Misc. Rep. 292. In a recent case, it has been held in New York, that the contract of a manufacturer to give his customers a rebate, if they do not sell his goods below the price which the manufacturer has fixed from time to time, did not violate any provision of the New York anti-trust law. Walsh v. Dwight, 40 App. Div. N. Y. 513; 58 N. Y. S. 91.

8 Welch v. Phelps & Bigelow Windmill Co., 89 Tex. 653. And see, to same effect, In re Green, 52 Fed. 104; In re Corning, 51 F. 205; United States v. Greenhut, 51 F. 205; Dueber Watch Case Mfg. Co. v. E. Howard Watch and Clock Co., 14 C. C. A. 14; 66 F. 637.

* Columbia Carriage Co. v. Hatch (Tex. Civ. App.), 47 S. W. 288.

companies, forming connecting lines of more extensive systems, to pro-rate with each other, to the exclusion of other competing companies. The Federal Circuit Court has held, that a contract between two connecting railroads - providing for an interchange of passengers and freight between them, to the exclusion of other competing railroads, by the issue of through tickets and bills of lading only over each other's roads- was not in violation of the Federal anti-trust law.1

A combination of manufacturers of drugs and of wholesale druggists, formed for the purpose of maintaining the prices of proprietary drugs, violates the anti-trust law by refusing to sell goods to a retailer who cuts prices.2

3

Considerable litigation has arisen out of the combinations of manufacturers of articles, the exclusive manufacture of which is secured by letters-patent. The decisions, however, seem to have settled the points of contention as follows: The owner of a patent is, of course, entitled to a monopoly during the life of the patent, and the antitrust laws do not in any way control or limit that right, either by declaring the monopoly void, in general, or by denying to the patentee or his assignee the right to sue for infringements of his patent rights, because he has entered into a combination to acquire and control all valuable patents, covering machines which relate to the same art or industry, even though that combination may be unlawful.* But the mere fact, that the subject-matter of the monopolistic combination may be patent rights, covering

1 Prescott & A. C. Ry. Co. v. Atchison, T. & S. F. Ry. Co., 73 Fed. 438.

2 John D. Park & Sons Co. v. Nat. Wholesale Druggists Association, 50 N. Y. S. 1064.

3 See post, § 129.

Edison Electric Light Co. v. Sawyer Man. Electric Co., 53 F. 592; 3 C. C. A. 605; Strait v. National Harrow Co., 51 F. 819; Soda Fountain Co. v. Green, 69 F. 333; Columbia Wire Co. v. Freeman Wire Co., 71 F. 302; disapproving of National Harrow Co. v. Quick, 67 F. 130, contra.

machines employed in the same art or industry, will not protect the combination from the penal provisions of the antitrust laws. If a corporation or association is formed among manufacturers and patentees of certain articles of kindred character, in order to control the trade and prices of such articles, the combination is nevertheless illegal, although the exclusive manufacture of the goods is guaranteed by letters-patent from the United States government.' In the Harrow Company cases, cited in the note below, the manufacturers of spring-tooth harrows formed a combination, for the purpose of providing for the transfer to a central corporation of all the patents under which they were severally operating, each manufacturer receiving in the place of his patents an exclusive license to manufacture the particular kind of harrow which was covered by his patent. All agreed that the harrow should be sold at an uniform price, to be fixed by the combination. The Federal courts united with the New York courts in declaring this combination to be violative of the anti-trust laws.

Combinations of wholesale dealers, for the purpose of compelling retail dealers to pay their bills, by the agreement that the members of the combination will refuse to sell to a retailer who has failed to pay his bills due to one of the combination,-are held to be lawful and not to come within the provisions of the anti-trust laws.'

So, also, has it been held to be lawful for retail dealers to enter into an agreement, not to deal with manufacturers who sell to consumers or other than regular dealers, at points where there is a regular retail dealer.3

1 National Harrow Co. v. Hench, 66 Fed. 667; 83 Fed. 36; 27 C. C. A. 349; United States v. Patterson, 59 Fed. 280; National Harrow Co. v. E. Bement & Sons, 47 N. Y. S. 462; 21 App. Div. (N. Y.) 290. But see Columbia Wire Co. v. Freeman Wire Co., 71 F. 302.

* Schulten v. Bavarian Brewing Co. (Ky.), 28 S. W. 504; Delz v. Winfree, 6 Tex. Civ. App. 11.

3 Jackson v. Stanfield, 137 Ind. 592; Bohn Mfg. Co. v. Hollis, 54 Minn. 223.