indicated, the restrictive covenant would not be enforced, there would be the same reason for refusing to enforce the agreement to sell the rest of the business or property. These cases, therefore, which hold the sale of the property, as well as the restrictive covenant, invalid, where the object of the purchaser is to accomplish control of the market, are consistent at least.

Perhaps the most effective answer to the holding in these cases is, that the validity of each contract of sale must be determined by the character and terms of the particular sale itself, apart from any question as to the situation or intention of the vendee, with which the vendor has nothing to do.1 Unless all sales between competitors are to be held invalid, there is no sound principle upon which one contract for the sale of the whole or a part of an established business can be held valid, while an exactly similar contract of sale is held invalid for the reason merely that the vendee will thereby acquire control of some particular market. And the moment it is conceded that public policy is not opposed to the sale by any one of all of the business which he in fact owns upon the best terms obtainable, then a restrictive covenant which serves merely to assist in making the sale of that business and its good will must also be held valid and enforceable, whether the object of the vendee be to obtain a monopoly or not.2 Such a restrictive covenant is not properly a contract in restraint of trade.3

In the ordinary case of the sale of a business, such as we have been considering, there can be no question of illegal combination as between vendor and vendee. There is no union of their interests; their interests are separate and distinct, if not opposed. But suppose the transaction involves more than a sale, and the relationship of the parties is not that of vendor and vendee merely. Suppose, in other words, that the sale is a part only of the whole transaction between the parties and is carried out in pursuance of some previous understanding or agreement for the combination or consolidation of their interests. What is to be said of the validity

1 Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507, 522; State v. Continental Tobacco Co., 177 Mo. I.

2 Camors-McConnell Co. v. McConnell, 140 Fed. Rep. 412; Davis v. A. Booth & Co., 131 Fed. Rep. 31, 37. But see Comer v. Burton-Lingo Co., 58 S. W. Rep. 969 (Tex.). 3 This would appear to be the view taken by the New Jersey court in the Trenton Potteries Case, 58 N. J. Eq. 519.

In those states, such as Illinois and Ohio, where it is held that a restrictive covenant extending throughout the state is invalid, the result is that where the business does extend throughout the whole state a part of it is unsalable.

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of the contract of sale, and of the resulting union of interests between vendor and vendee, in such a case? There can be no successful attempt to answer these questions without first considering carefully the nature of contracts held invalid because limiting competition.

III.

So far we have considered the question of the validity of sales between competitors. Suppose, now, instead of a purchase by one competitor of the business and competition of his rival, the two parties enter into an agreement by which each is bound not to sell goods below a fixed price. This is the typical case of a contract now generally recognized as invalid because in restraint of trade. Why? It is important to consider the circumstances under which such contracts are made.

In such a case as that supposed, it is clear that if there is still a third competitor who is capable of supplying the particular market, then the parties to the contract would be delivering themselves into his hands by carrying out their agreement. In other words, such a contract would not be profitable for the parties, and could not successfully be carried out, unless all competitors likely to prove dangerous were bound by its terms. To take a simple example: suppose two laborers enter into an agreement by which they bind themselves not to work for less than ten dollars a day. Such a contract would have the effect only of depriving the parties thereto of work, and the public would be affected only on that account and to that extent. It would have no tendency by itself to

1 In Carter-Crume Co. v. Peurrung, 86 Fed. Rep. 439, where it was objected that a contract of sale was invalid for the reason that the purchaser was seeking to obtain control of the market, Judge Lurton said: "Another question might arise if all or a large proportion of all the producers of a particular article should agree to sell their entire product to one buyer, who would thereby be enabled to monopolize the market. But, if each independent producer contract to sell his product, or to sell or lease his plant, without concert with others, or knowledge of or purpose to participate in the plans of the buyer, he cannot be said to have conspired against freedom of commerce, or to have made a contract in illegal restraint of trade. The transaction with Peurrung Bros. & Co. was, on its face, legitimate, and it cannot be impeached simply by evidence that the Carter-Crume Co. understood and intended it as one step in a general illegal scheme for monopolizing the trade in wooden butter dishes, and controlling prices. The principle, if we admit that the purpose of the Carter-Crume Co. was illegitimate, is that which is applied to so-called wagering contracts. The proof must show that the illegal purpose was mutual."

See also Davis v. A. Booth & Co., 131 Fed. Rep. 31, 37, and Clancey v. Onondaga Fine Salt Mfg. Co., 62 Barb. (N. Y.) 395.

raise the level of laborers' wages. Only when laborers enter into such an agreement in such numbers that their services cannot be at once or readily replaced does such a contract tend to raise the level of wages. Consequently the laborers form unions, and do not undertake to regulate their wages by agreements amongst themselves until their numbers are sufficient to warrant such action.

But as the character of the labor increases in skill and the number of competitors decreases, the opportunity by agreement to control prices becomes greater. In More v. Bennett,1 for example, the members of an association of stenographers engaged in court reporting, undertook, by agreement amongst themselves, to regulate the prices to be charged for such work, and the agreement was held invalid and unenforceable, although not all such stenographers were members of the association. Those who were, and who entered into the agreement, possessed, acting together, a control over prices which no one member had alone. As their number increased and the number outside of the association diminished, the greater became their power to regulate prices and the higher could they be made.

The situation as regards employers or manufacturers is the same. Contracts limiting competition are made between competitors who together are in a position to make their agreement to raise prices or limit output effectual and advantageous for themselves without regard to outside competition. A contract between two competitors who could not successfully maintain the prices agreed upon. in the face of the competition of other rivals, would be a menace only to the business of the parties themselves.

It is clear, therefore, that a contract between rival manufacturers or traders, which has for its object the regulation or limitation of competition between them,2 must be based upon such a present power to control the market as will make their agreement effectual. The purpose of the agreement can only be to make effective the control of the market which the parties already possess, provided the competition existing between themselves is eliminated. The parties enter into the agreements because they are in a position to regulate and control prices, make their agreements effectual, and

1 140 Ill. 69.

2 Contracts between competitors relating to matters not the subject of rivalry between them would stand upon a different footing. See Gladish v. Kansas City Live Stock Exchange, 113 Mo. App. 726.

the courts hold the agreements invalid for that reason, because that is their only object. The question of the reasonableness of the agreements as between the parties, or the reasonableness of the prices agreed upon, has no place in determining the result. The principle is laid down generally that all such contracts are invalid as in restraint of trade, and obviously, unless the courts are prepared to determine the reasonableness of prices and charges of all kinds for all competitors, and hold uniform prices reasonable regardless of differences in the circumstances of competitors, there is no room for discrimination between them. There is no question here which a court can properly investigate and determine, such as is presented in the case of a restrictive covenant which assists in the sale of a business, where the court is concerned only with the character and extent of the particular business sold, and not with the reasonableness of any power to control prices which the vendee may thereby accomplish. An agreement limiting competition could be held reasonable only in case it were fruitless, and did not in fact accomplish that control over prices which was sought.

It should not be forgotten, also, that public policy demands, not merely present reasonable prices, but the continuous working of competitive conditions, and it therefore objects to the suppression of those conditions by an agreement between parties who have it in their power to determine prices in that way. Even public service corporations, which are entitled to charge only reasonable rates and are subject to governmental regulation in that respect, are nevertheless within the general prohibition of contracts in restraint of trade. They may not by agreement substitute monopoly control in the place of competitive conditions which actually exist.

Where competitors, instead of agreeing not to sell below certain fixed prices, undertake to sell only at prices to be fixed by a committee of their representatives,2 or form a pool, the agreement is still based upon the fact that the removal of competition between the contracting parties will enable them to maintain and control

1 U. S. v. Freight Association, 166 U. S. 290; U. S. v. Joint Traffic Association, 171 U. S. 505.

2 Hooker v. Vandewater, 4 Den. (N. Y.) 349; Stanton v. Allen, 5 Den. (N. Y.) 434; Craft v. McConoughy, 79 Ill. 346; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 173; Nester v. Continental Brewing Co., 161 Pa. St. 473; U. S. v. Freight Association, 166 U. S. 290; U. S. v. Joint Traffic Association, 171 U. S. 505.

prices, in spite of such other competition as there may be, as no one of the competitors could have done alone. Unless the parties possess that power of control their agreement is a useless one. But by means of such a contract between parties who already dominate the particular trade or industry, the usual course of competition is arrested in the supposed interests of all, and their control of the market made effectual.

It is clear that in these cases there is no sale of business by one competitor to another. There is no agreement on the part of one party to discontinue his competition so that the business. of another may be increased, and no one of the parties, by means of the agreement limiting competition, acquires any business of any one of the other competitors. That is not the object of the contract. On the contrary, the object is to preserve the business of each party by eliminating certain risks of competition. The business of each is continued as before subject to a uniform restriction upon the freedom of competition. There is an abandonment of competition by all, but no abandonment of existing business by any. The purpose of the agreement is simply and solely to eliminate competition between parties who already dominate the particular trade or industry, and substitute in its place an effectual control of the market by those parties, relieved, for the time being at least, from the danger of other serious competition.

A recent case in Alabama1 illustrates strikingly the object of contracts limiting competition, and indicates the distinction between such contracts and agreements for the sale of the whole or a part of a business. In that case two ice manufacturing companies, who were at the time the only parties engaged in the ice business in the city of Tuscaloosa, entered into an agreement which provided that one of them, in consideration of certain payments to be made from time to time by the other, should close its manufacturing plant for five years, or until sold to a third party. But it was provided that after a certain amount was paid the agreement should be cancelled in case another competitor opened an ice factory in the city.

The contract, it will be seen, did not involve an absolute purchase, or even lease for a definite term, of the business of one of the parties. On the contrary, it was a contract between two

1 Tuscaloosa Ice Mfg. Co. v. Williams, 127 Ala. 110.