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the interference with its business by the
construction of a railroad paralleling it. In
discussing the case, Mr. Justice Caton said:
" Who shall anticipate the new methods of
intercommunication which the ingenuity of
this wonderful age may devise, or the im-
provements which may be made in the old?
Who can set bounds to the wants in this
respect which new developments may sug-
gest? And shall we imply and intend, even
with the aid of the most liberal rule of con-
struction, that the legislature designed to sur-
render the right to allow the people to avail
themselves of improved modes of communica-
tion or commerce?"



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FREEDOM FOR FAIR COMPETITION 21

VI

It would seem that the right to cut prices,
whatever damage may result to competitors,
is a fundamental privilege in competition.
In the very important case of the Mogul
Steamship Company v. McGregor (L. R. 23
Q. B. D. 398), one of the matters of which
the tramp steamship owners complained was
that the regular steamship companies sent
additional ships to Hankow and smashed
freights, in order to ruin them or drive them
from the field. In holding that this con-
stituted no legal wrong Lord Justice Bowen
said: "It would impose a novel fetter upon
trade. The defendants, we are told by the
plaintiffs' counsel, might lawfully lower rates,
provided they did not lower them beyond a
' fair freight,' whatever that may mean. But
where is it established that there is any such
restriction upon commerce? And what is to
be the definition of a 'fair freight'? It is
said that it ought to be a normal rate of
freight, such as is reasonably remunerative to
the shipowner. But over what period of time
is the average of this reasonable remunera-
tiveness to be calculated? All commercial
men with capital are acquainted with the



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22 THE CONTROL OF THE MARKET

ordinary expedient of sowing one year a
crop of apparently unfruitful prices, in
order by driving competition away to reap
a fuller harvest of profit in the future; and
until the present argument at the bar it
may be doubted whether shipowners or
merchants were ever deemed to be bound by
law to conform to some imaginary ' normal '
standard of freights or prices, or that law
courts had a right to say to them in respect
of their competitive tariffs, ' Thus far shalt
thou go, and no further/ To attempt to
limit English competition in this way would
probably be as hopeless an endeavor as the
experiment of King Canute."

Undoubtedly the excellent opinion just
quoted represents the law everywhere. All
that there is against it is an interesting
dictum in Averrill v. Southern Railway (75
Fed. Rep. 736), where the receiver of a rail-
way filed a bill asking the aid of the court
in protecting the property against a rate
war inaugurated by the Southern Railway.
A cut of 35 per cent, had been made with
notice that, if this was met, a further cut of
80 per cent, would be made in the rates. It
was alleged that its ultimate object in this
was to annihilate competition by the de-



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M THE CONTROL OF THE MARKET

VII

The attempt in every modern case of this
sort is, therefore, to show something more
than mere competition — ^to show in the par-
ticular case there are special circmnstances
which bring the case outside the ordinary
course of competition. A striking instance
of this is the recent case of Passaic Print
Works V. Ely & Walker Dry Goods Com-
pany (105 Fed. 163). These manufacturers
of various brands of calicoes, which sold
usually at fixed prices, complained of a cir-
cular sent out by these jobbers, wholly ma-
liciously, so it was alleged, offering these
prints at cut prices. This injured the manu-
facturers' trade; for no other jobber could
sell " Central Park Shirtings " at Sj^ cents
per yard, the list price, while these jobbers
were offering the same goods at 2% cents.
The majority of the court — Mr. Justice
Thayer writing the opinion — decided against
the complainants; the gist of his opinion
being this: "The owner of property, real
or personal, has an undoubted right to sell
it and to offer it for sale at whatever price
he deems proper, although the effect of such
offer may be to depreciate the market value



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the social needs of the community which it



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26 THE CONTROL OF THE MARKET

governs. It is the resultant of conflicting
social forces, and those forces which are for
the time dominant leave their impress upon
the law. For generations there has been a
practical agreement upon the proposition that
competition in trade and business is desirable ;
and this idea has found expression in the
decisions of the courts, as well as in statutes.
But it has led to grievous and manifold
wrongs to individuals; and many courts have
manifested an earnest desire to protect the
individual from the evils which result from
unrestrained business competition. The prob-
lem has been to so adjust matters as to pre-
serve the principle of competition and yet
guard against its abuse to the unnecessary
injury to the individual. To divert to
one's self the customers of a business
rival by the offer of goods at lower
prices is in general a legitimate mode of
serving one's own interest, and justifiable
as fair competition. But when a man starts
an opposition place of business, not for the
sake of profit to himself, but regardless of
loss to himself, and for the sole purpose of
driving his competitor out of business, and
with the intention of himself retiring upon
the accomplishment of his malevolent pur-



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FREEDOM FOR FAIR COMPETITION 27

pose, he is guilty of a wanton wrong and
an actionable tort."

VIII

According to the better opinion at the
present time, as expressed in the writings
of the many authorities who have turned their
attention of late to the problem of the place
of competition in the law, fair competition is
considered as a matter of justification upon
grounds of policy. The accepted theory is
that every man engaged in business has a
right prima facie to have his custom undis-
turbed; in this view a person who diverts
trade from him commits a legal wrong prima
facie. But if this trade is invaded in the
course of fair competition there is a recog-
nized justification; while there is no valid
excuse in the case of unfair competition.
The comparison of two cases may bring this
out more clearly.

In Graham v. St. Charles Street Railway
(47 La. Ann. 214) a foreman posted a
notice to the effect that he would discharge
employees who should continue to deal with
Graham, a grocer. The court held that
such unjustifiable interference with the
grocer's business constituted an actionable



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28 THE CONTROL OF THE MARKET

wrong. Chief Justice Nichols saying: " In
so doing the defendants would not only con-
trol their own will, action, and conduct,
but forcibly control and change, from pure
motives of malice the choice and will of
others, through fear of non-employment or
discharge. This will and power of choice,
both the plaintiff and the parties themselves
are entitled to have left free, and not coerced
in order to simply work the former damage
and injury."

On the other hand, in Robinson v. Texas
Pine Land Association (40 S. W- Rep. 843),
where the Land Company gave notice that
it would discharge employees who did not
trade at its store, but bought supplies of
Robinson, the com*t held that there was no
actionable wrong. As Chief Justice James
said: "If the defendant could so control its
employees as to prevent their dealing with
plaintiff, or so control their wages as to
divert them from the channels of the plain-
tiff's business in favor of his own, we know
no rule making it actionable. Had the
defendant no proper interest of his own to
subserve in so doing, but had acted wantonly
in causing loss to plaintiff, the rule would
have been different. The fact that defend-



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FREEDOM FOR FAIR COMPETITION 29

ant's purpose by the act was to break plain-
tiff up in business would not give the cause
of action, for that is the natural result of
successful competition."

It is submitted that both of these cases
are good law, but it would be impossible
to reconcile them without the theory here
defended; however, this general theory is
now so well accepted that it no longer re-
quires an elaborate defense. The right of
every man in any business to adequate pro-
tection of his probable expectancy is now well
established; but equally well recognized is
the necessary justification of any damage
caused a business rival in the regular course
of fair competition.

IX

What is not justifiable under these rules
is seen in London Guaranty and Accident
Company v. Horn (206 111. 493) . One Horn,
while in the employ of Arnold, Schwinn &
Co., suffered the loss of two fingers on his
right hand while attempting to operate a
milling machine. At the time of this injury
Arnold, Schwinn & Co., carried an indemnity
policy in the London Guaranty and Accident



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30 THE CONTROL OF THE MARKET

Company, which provided that the Guaranty
Company could cancel the policy at any
time upon giving five days' notice. Horn
brought suit against Arnold, Schwinn & Co.,
in which a verdict was subsequently rendered
for $3500, from which judgment an appeal
was taken, which was pending at the time of
the trial of this case. Pending that suit, one
Robinett, representing the Guaranty Com-
pany, called at the factory of Arnold,
Schwinn & Co., where Horn had been em-
ployed, and offered Horn $100 in settlement
of his claim, telling him that unless he
accepted that amount he would have him dis-
charged by Arnold, Schwinn & Co. Robinett
then said to O' Council, in the presence of
Horn, that O'Connell would have to dis-
charge Horn, as he refused to give the
company a release. O'Connell at first was
much disinclined to discharge Horn; but
finally did so upon the threat being made that
otherwise the Guaranty Company would
cancel the policy. The Illinois Court held
that Horn could recover from the Guaranty
Company the damages caused him by losing
his job. Mr. Justice Scott thus concluded
his opinion: " It follows therefore that the
act of the defendant complained of was



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82 THE CONTROL OF THE MARKET

consideration of the purchasers agreeing not
to sell the goods at a less price than that
named, and not to sell the goods of other
manufacturers at a less price than that at
which they agreed to sell the defendants'
goods. It is difficult to see upon what ground
it can be claimed that such a contract is ille-
gal."



It is because of the underljring public
policy that lawful competition justifies in-
terference with the business of another. The
theory is that free competition is for the
best interests of society; for it is believed
that the law does its best for all when it gives
to every man an equal chance. Enough has
been quoted to show how inveterate the be-
lief has become that free competition is for
the best interests of society. The State acting
through the courts is permitting the despe-
rate struggle for individual advancement to
go on with the fewest possible rules, because
the most of us believe that this is for the
best for all of us. It is not a perfect way
of ordering our world — far from it. No
economist can fail to see that the competi-
tive system has not only its costly mistakes.



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NOTE

One is quite justified by the latest authorities in
basing everything upon this fundamental theory, that
intentional interference with business rights is prima
facie a clear tort, and that, unless plain justification
be sufficiently shown, action lies. See, among many
others, the following cases: Chipley v. Atkinson, 23 Fla.
206; Hollenbeck v. Ristine, 114 Iowa, 858; London
Guaranty Co. v. Horn, 206 111. 493; Tuttle v. Buck,
107 Minn. 145; Klengel v. Sharp, 104 Md. 218; Kirk-
wood V. Finnegan, 95 Mich. 543. These principles are
most elaborately worked out in the long series of able
opinions in Massachusetts, the most informing of which
is perhaps Pickett v. Walsh, 192 Mass. 572. And it
is stated with the utmost accuracy in the New Jersey
decisions, particularly in Jersey City Co. v, Cassidy,
63 N. J. Eq. 769.

This general theory is strongly opposed in recent
times by the majority opinions in Allen v. Flood, 1898
A. C. 1, and in National Assn. v, Cummings, 170 N. Y.
315. But in view of later cases these opinions can
hardly be said to represent the law even in their re-
spective jurisdictions. Payne v. Railroad, 3 Lea. 507,
and Raycroft v. Taynter, 68 Vt. 219> seem to be based
upon this opposite theory. But Guethler v, Altman,
23 Ind. App. 587 and Heywood v. Tillson, 75 Me. 225,
usually cited to the same effect, are plainly distinguish-
able, as there was certainly sufficient justification for
the interference shown in the facts of those cases.



35



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CHAPTER III

TYPES OF UNFAIR COMPETITION



Mere competition, however, is not a suffi-
cient justification for taking away business
from a rival; it must be fair competition as
well. Generally speaking, a customer may
be taken away from a rival by any fair in-
ducement, but not by any unfair methods.
Advertisement and solicitation, for example,
are fair; fraud and intimidation, equally
plainly, are unfair. That is held fair which
the community regards as consistent with its
safety; that is held unfair which the State
considers dangerous to its peace. What is
fair and what is unfair can hardly be more
exactly defined without hampering us too
much in dealing with new conditions. The
predatory tactics of the modem trusts have
shown us that there are new wrongs which
our law must be prepared to meet. It is
not enough to maintain an effective police
against the old wrongs. There are new sins

86



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TYPES OF UNFAIR COMPETITION 37

against industrial society which the law must
be capable of reaching. In dealing with the
traditional law, however, one may generalize
enough to cover the present situation. A
narrow conception of the older cases would
not give the law scope enough to meet these
new conditions. But considered in a broad
way the older cases will give us authority
enough to deal with the present situation.
For thus our common law, as a system of
justice, proves itself, from age to age, cap-
able of dealing with the wrongs of which that
age complains.

u

The most obvious case of unfair competi-
tion would seem to arise where a customer
who is under contract with one dealer is in-
duced by another to break that contract.
The first case in which this was held to be
unfair competition was, however, the com-
paratively recent case of Limiley i;. Gye
(2 E. & B. 216). A Miss Wagner being
under contract to sing for one Lumley,
another manager, Gye, induced Miss Wagner
to break her contract and sing for him. The
court held that this inducement constituted a
legal wrong, in analogy to the ancient action



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38 THE CONTROL OF THE MARKET

for the enticement of a servant. Mr. Justice
Earle indicated the wider ground upon which
the case was decided. " He who maliciously
procures a damage to another by violation of
his right ought to be made to indemnify, and
that whether he procures an actionable wrong
or a breach of contract. He who procures the
non-delivery of goods according to contract
may inflict an injury, the same as he who
procures the abstraction of goods after de-
livery; and both ought, on the same ground,
to be made responsible."

The most recent case in England reaffirms
this doctrine, upon a state of facts so ex-
traordinary that it is worth the consideration
of every student of present conditions. In
Glamorgan Coal Company v. South Wales
Miners' Federation (1903 2 K. B. 545), an
action was brought by various owners of
collieries against a miners' federation, claim-
ing damages for wrongfully inducing work-
men employed in the collieries to break their
contracts of service. By an elaborate agree-
ment between masters and men, the wages
paid were upon a sliding scale — ^higher when
the market for coal was up, lower when it
was down; by another clause neither party
to the contract could terminate it except by



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TYPES OF UNFAIR COMPETITION 39

notice given on the first of the month. In
this state of facts, the executive committee
of the Miners' Federation, believing that a
restriction of production would raise the
price of coal in the market, issued a manifesto
that the workmen " should observe Fridays
and Saturdays as general holidays." Counsel
defended the Federation upon the ground
that what was done was solely with the
motive of advancing the interests of the
men. But the Court of Appeal finally dis-
posed of this contention. Lord Justice Ster-
ling saying on that point: " The justification
set up seems to me to amount to no more than
this — ^that the course which they took, al-
though it might be to the detriment of the
masters, was for the pecuniary interest of
the men; and I think it wholly insufficient.
The defendants took active steps to carry
this policy into effect, and, as I have said,
interfered to bring about the violation of
legal rights."

Ill

Upon the whole this English doctrine may
be said to prevail in America, although there
are several jurisdictions which hold that in the
course of competition one may go so far as to



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40 THE CONTROL OF THE MARKET

induce the breaking of contracts. In a recent
Kentucky case, Chambers & Marshall v. Bald-
win (91 Ky. 121), for example, the substance
of the cause of action was that the plaintiffs
had made a contract with one Wise for his
crop of tobacco at five cents per pound, and
that thereafter the defendants, with full
knowledge of this contract, induced Wise to
sell his crop to them at a higher price. But
Judge Lewis said: "Competition in every
branch of business being not only lawful,
but necessary and proper, no person should,
or can, upon principle, be made liable in
damages for buying what may be freely
offered for sale by a person having the right
to sell, if done without fraud, merely because
there may be a preexisting contract between
the seller and a rival in business, for a breach
of which each party may have his legal rem-
edy against the other. Nor, the right to buy
existing, should it make any difference, in a
legal aspect, what motive influenced the pur-
chaser."

It should be noted, however, that it is uni-
versally agreed that " to induce a servant to
leave his master's service at the expiration
of the time for which the servant had hired
himself, although the servant had no intention



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TYPES OF UNFAIR COMPETITION 41

at the time of quitting his master's service,"
is not actionable, to use the example put by
Lord Kenyon in a leading case, Nichol i;.
Martyn (2 Esp. 782), to illustrate the prin-
ciple that " everyone has a right, if he can,
to better his situation in the world; and if he
does it by means not contrary to law it is
damnum sine injuria/^

IV

Of course, if fraud is used in competition,
it is illegal. Unfair competition of this sort
has become all too common in modern trade;
but the courts bid fair to curb it. One of the
earlier cases which put the law on this point
beyond all doubt went so far as to decide
that inen might not use their own names in
trade so as to work fraud upon the public.
In this case of Croft v. Day (7 Beav. 84) it
appeared that a blacking manufactory had
long been carried on under the firm name
of Day & Martin at 97 High Holborn, Lon-
don. A person by the name of Day, with
one Martin, set up the same trade at 90J^
Holborn Hill. The new concern marked
their product as Day & Martin's blacking,
using labels of a style similar to that used
by the old concern. The Master of the Rolls



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42 THE CONTROL OF THE MARKET

had no doubt of his right to issue an injunc-
tion under these circumstances: " It has been
very correctly said that the principle in these
cases is this, — ^that no man has a right to
sell his own goods as the goods of another.
You may express the same principle in a dif-
ferent form, and say that no man has a right
to dress himself in colors or adopt and bear
symbols, to which he has no peculiar or ex-
clusive right, and thereby personate another
person, for the purpose of inducing the public
to suppose, either that he is that other per-
son, or that he is connected with and selling
the manufacture of such other person, while
he is really selling his own."

We have innumerable modern instances
to show how far the law will go to protect
one manufacturer from fraudulent competi-
tion by his rival. One of the best reasoned
of these is Waltham Watch Co. i;. United
States Watch Co. (173 Mass. 85). The
plaintiff was the first manufacturer of watches
in Waltham, and its watches had acquired a
high reputation in the markets of the world
as " Waltham watches " before the defendant
began to do business there. It was found
at the hearing that the public associated the
goods of the plaintiff with the n^^ui^ " WaJ-



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TYPES OF UNFAIR COMPETITION 43

tham watch " ; and the injunction granted
upon this showing restrained the defendants
from calling its watches " Waltham watches,"
although it manufactured them in Waltham,
Mr. Justice Holmes, in sustaining the injunc-
tion, gave the modern theory with character-
istic exactness: " In cases of this sort, as in
so many others, what ultimately is to be
worked out is a point or line between con-
flicting claims, each of which has meritorious
grounds and would be extended further were
it not for the other. It is desirable that the
plaintiff should not lose custom by reason
of the public mistaking another manufacturer
for it. It is desirable that the defendant
should be free to manufacture watches at
Waltham, and to tell the world that it does
so. The two desiderata cannot both be had
to their full extent, and we have to fix the
boundaries as best we can. On the one hand,
the defendant must be allowed to accomplish
its desideratum in some way, whatever the loss
to the plaintiff. On the other, we think the
cases show that the defendant fairly may be
required to avoid deceiving the public to the
plaintiff's harm, so far as is practicable in a
commercial sense."



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44 THE CONTROL OF THE MARKET



Libelous statements must not be used to
turn customers from a rival. Indeed the
law has always been unusually considerate of
the reputation of tradesmen; and when one
publishes of a tradesman or merchant any
matter in relation to his calling which, if true,
would render him unworthy of patronage,
one is liable to an action, even without damage
being shown. This was pointed out in the
recent case of Davey v. Davey (50 N. Y.
Supp. 161), and thus applied to the facts.
" The litigants are brothers. The defendant
carried on the grocery and tea business at
No. 2295 First Avenue, and the plaintiff
thereafter opened a similar business at No.
2881 First Avenue. The defendant threat-
ened that, if the plaintiff opened a rival
establishment near the defendant's store, he
would break up the business of the plaintiff;
and after the latter opened the store the de-
fendant caused to be printed, and distributed
broadcast, 5000 circulars, in which, after
eulogistically describing the superiority of his
wares and the advantage the public would
derive by patronizing him, h^ said, of and
concerning the plaintiff and his business



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TYPES OF UNFAIR COMPETITION 45

methods, that an unscrupulous grocer of the
same name in the immediate vicinity or
neighborhood advertises ' Davey's teas and
coffees ' with a view to deceive the public, and
may sell an inferior article. The words,
though cunningly devised and put together,
taken in their plain and popular sense, that in
which the readers were sure to understand
them, bear the construction that the plaintiff
was an unprincipled grocer, that he was dis-
honest in his business, for he advertised
Davey's teas and coffees with a view to de-
ceive the public; and that he sold inferior


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