Admitting, however, that the essential characteristic, both of contracts limiting competition and of illegal combinations, is effective control of the market by the parties that both contract and in some cases merger are bad because by means of them the parties accomplish that result- then is such control of the market in itself not merely a test in particular cases, but a sign in all cases of the existence of an illegal combination or monopoly, and must all partnerships and corporations be held illegal combinations which can be proved at any time to possess such power of control over the situation in the particular market in which they operate? Or is control of the market in itself of no consequence, and does it become of consequence only when accomplished in a particular way by means of contract between existing competitors or a union of such competing interests?

It was objected at the time of the decision in the Northern Securities case that in such a case of merger the original illegal agreement between competitors, if there was one, was terminated by the time the scheme for the consolidation of competitive interests was perfected, the new corporation created and placed in control of the former competitors, and that thereafter there was nothing to be objected to but the fact that one large corporation did in reality control interests formerly existing in two independent corporations. The new corporation, it was said, could not be an illegal combination because its members were once competitors, particularly where not all of the members of the new corporation were formerly competitors and parties to the original agreement or arrangement. Mr. Morawetz, to avoid that difficulty, has suggested1 that the only view on which the new corporation, as in the Northern Securities case, can be considered an illegal combination is by regarding the members of that corporation, whether all or any of them were competitors before or not, as becoming an illegal combination by reason of the acquisition of a controlling interest in the two competing companies. This would be an entirely new combination, wholly apart from the earlier one, and the new corporation, legal when formed, would become illegal only upon the acquisition of, and by reason of acquiring, control of the two competing companies.

It may be open to question if Mr. Morawetz's theory really avoids the particular difficulty which suggested it, inasmuch as the

1 The Anti-Trust Act and the Merger Case, 17 HARV. L. REV. 533.

new corporation would continue to be an illegal combination, subject to attack on account of the original purchase, in spite of subsequent changes in its membership and in the operation or extent of its business. But, in any event, if it is true that a corporation which acquires the control of two competing companies thereby becomes an illegal combination, then why does that result not follow from any purchase by one corporation of the business of another? In such a case the stockholders of the purchasing corporation have combined to remove a competitor from the field and leave only one in the business to control the two properties, and if that constitutes the purchasing corporation an illegal combination, then all sales of business by one competitor to a competing partnership or corporation would involve that result, and no sale to such a purchaser could be valid. The sale itself must be against public policy, if that alone is to make the purchaser an illegal combination. It cannot be legal for the seller to sell, and at the same time illegal for the buyer to buy. But we have already seen that not all sales between competitors are invalid, and that the better view, and the tendency of the most recent cases, is to hold such sales not invalid even when the purchaser may thereby acquire control of the market. Not the sale, therefore, in any event, could constitute the purchaser an illegal combination, but such a result must follow, if at all, from the fact of the purchaser's actual control of the market; and the sale would be looked to only for the purpose of establishing that fact.

Does control of the market, then, by itself, constitute the corporation shown to possess such control an illegal combination? In Whitwell v. Continental Tobacco Company, the Circuit Court of Appeals for the Eighth Circuit held, in a case arising under the Sherman Act, that a corporation, which was admitted to control almost the entire market of the country in certain particular lines of goods, might legally refuse to sell customers upon profitable terms unless they would contract for all their requirements and agree not to buy competing goods of competitors. That an action for damages under the Sherman Act could be maintained on account of such a refusal to sell by a combination of competitors is shown by a still more recent decision by the Circuit Court of Appeals for the Ninth Circuit,2 and the court in the Tobacco case

1 125 Fed. Rep. 454.

2 Ellis v. Inman, Poulsen & Co., 131 Fed. Rep. 182. See also City of Atlanta v. Chattanooga Foundry & Pipe Works, 127 Fed. Rep. 23.

admits that if a combination of competitors had been shown to exist in that case the result would have been different. The decision, therefore, of the same court which first decided the Northern Securities case is that substantial control of the market does not of itself constitute a corporation an illegal combination.

But if not all partnerships and corporations which have control of some market are illegal combinations, and if the sale of a business by one competitor to another is not illegal and does not of itself constitute a purchasing corporation an illegal combination, even though the purchaser may thereby acquire control of the market, how is it to be determined what combinations are and what combinations are not illegal? That must depend, apparently, upon the facts and circumstances surrounding and determining the origin of the particular combination. There appears to be no escape from that conclusion. To be illegal, the combination must rest upon an understanding or agreement between actual competitors who, by removing competition between their established independent enterprises, are able at the time to control the market or industry in which they are engaged. A sale by one rival to another is one thing; but an agreement between competitors to surrender control over their properties and transfer them to one and the same corporation or organization, where each transfer is conditional upon a similar transfer by each of the other competitors and parties to the arrangement, and where the consideration for each transfer is the acquirement of an interest by the seller in the new organization which will have control of all the former competitors, is a different thing. This arrangement may be effectuated by means of a sale (a sale of stock, as in the Northern Securities case), but there is something more than a series of independent sales.

The result is that where competitors enter into an illegal agreement or undertaking to eliminate competition between themselves, and give to their united interests an effectual control of the market in which they operate, the whole transaction by means of which that object is accomplished is illegal. It may be enjoined at the outset, and if carried out, the combination which results is an illegal monopoly. The explanation of this result of the cases appears to be that public policy, as expressed in the statutes, aims to se

1 Harding v. American Glucose Co., 182 Ill. 551, 599.

2 Distilling & Cattle Feeding Co. v. People, 156 Ill. 448; Bishop v. American Preservers' Co., 157 Ill. 284; National Lead Co. v. Grote Paint Store Co., 80 Mo. App. 247; Northern Securities Co. v. U. S., 193 U. S. 197.

cure the preservation of the competitive system, and increased size sufficient to give control of the market which is the result of success in the competitive struggle, the constant and continued aim of each competitor, cannot, at a certain point, be held illegal without depriving competition itself of its incentive. But, on the other hand, to allow size which gives control of the market to be accomplished, not through successful individual competition, but through the method of agreement or union between competitors, is to destroy at one stroke competition as it then exists and substitute a present monopoly in its place.

V.

Such seems to be the conclusion of the matter in regard to illegal combinations from the cases as they now stand. Necessarily, the only remedy which will terminate an illegal combination in the form of a corporation is some order, such as was entered in the Northern Securities case, aiming at the destruction of the power of control which the combination of competitors has established. Any attempt to restore the exact situation existing before the combination was formed would in most cases be impossible, and the parties themselves cannot claim such restoration as a matter of right. Nor would it be possible in most cases to resolve the combination into its original competing elements. The two railroads in the Northern Securities case retained their identity as railroad properties, and the original corporations continued in existence; 2 but in the case of many consolidations the old corporations go out

1 Harriman v. Northern Securities Co., 197 U. S. 244. For a case suggesting that the state might compel a reconveyance of the properties sold, see State v. Chemical Co., 71 S. C. 544.

2 The Northern Securities decision does not rest, however, on the ground merely that the new company acquired and held the stock of the Great Northern and Northern Pacific Railroad Companies, and that only in the case of such a holding company (the identity of the original competitors continuing to be distinct) would the transaction be declared illegal. On the contrary, Mr. Justice Harlan emphasizes the fact that the new corporation had complete control of the situation for all purposes, and that the transaction was illegal because the union of interests was as effectual as if both lines of railroad were "held in one ownership," and because "the constituent companies ceased, under such a combination, to be in active competition for trade and commerce along their respective lines, and have become, practically, one powerful consolidated corporation," etc.

In other words, the holding company is an illegal combination because it has as complete control of the competing interests as a single corporation which should take the place of both of the others upon their dissolution. It is not illegal merely because it

of existence, and the original competing properties may be completely modified and some entirely abandoned. In any event, the court could not compel the parties to resume a competition which had been abandoned. Obviously, under such circumstances, all that the court could do would be to attempt to destroy the power of control over prices or rates which the union of competitive interests had accomplished by enjoining the continuation of the particular combination. If the corporation could show when attacked that it did not possess any greater power to control prices than was possessed by some one of the original competitors, apparently no relief could be had against it. Evidently the merger did not have greater control over prices for its object, or that object was not accomplished, or the power had since been lost, and no evil requiring a remedy remained.

And in the case of most consolidations, particularly of industrial corporations, where the conditions of business are more or less. unstable, subject constantly to the uncertainties of new and improved methods and other unexpected developments, the exact situation as it existed at the time of the combination is quickly left behind. Monopoly, or control of the market in the view here considered, is necessarily an entirely relative matter. A particular combination may obtain greater power of control over the market than was possessed by any one of the united competitors before the union, but just so may a single successful business advance from time to time its situation in the market and increase its power to determine prices. It is a matter of more or less from time to time, and conditions as they existed before a union of competing interests cannot long serve, in many lines of business, as a standard of comparison by which to determine the degree of control over prices possessed at a subsequent time by the particular combination. A union of competing interests in the form of a corporation may acquire the power to fix prices in the same way that they could have been determined by contract between the competing parties, but, just as in the case of an absolute sale by one competitor to another, the consolidation accomplishes more than that. The contract limiting competition or fixing prices has only that for its object, and its termination carries nothing else with it. But the corporation has a right to exist unless illegality has been its essential characteristic

is a holding company. Some holding companies, as well as some other corporations, may not be illegal combinations. If two corporations may lawfully unite their interests, there can be no objection to their doing so by means of a holding company.