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not by the legitimate means of persuasion, but
by the illegitimate means of physical intimida-
tion and fear."



The issue is, then, whether what is per-
mitted individuals should be permitted a com-
bination. The minority say that, as one per-
son in competition is permitted to refuse to
deal with those who will not deal with them
exclusively, even though the ruin of a rival
follows, so a union ought to be allowed the



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86 THE CONTROL OF THE MARKET

same course of action. But is it fair to say
that concerted action is of the same nature as
separate action? Certainly, it is the usual
fact that individual competition may be met,
while combined action is overwhelming. The
truth is with the majority of the courts, that
the combination gives to concerted action
higher potentiality than separate action by
individuals can ever have. Both boycotting
and unionizing are conspicuous examples of
the resistless force of numbers, and this un-
derlying basis of fact is explanation enough
of the substantial similarity of the way in
which both are treated by the courts. Until
individualism shall cease to be the predomi-
nant theory, the courts will continue to hold
unionizing wrong. Unionizing will not be-
come legal unless the arguments for collec-
tivism, shall ever command the adherence
of the great majority of men. If that time
comes, the law, it seems, must regulate the
admission to the unions to which it would
thus concede the control of the labor market.
For regulation, as we shall see throughout
this discussion, is the only basis upon which
monopoly can be permitted. If, finally, the
law should concede the closed shop, it very:
probably will require an open union.



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NOTE

The position taken in this chapter that the non-union
man is protected against the union is the law of the
following jurisdictions at least: Maine — Perkins v,
Pendleton, 90 Me. 166 (1897); Maryland— Lucke v.
Clothing Cutters' Assembly, 77 Md. S96 (1893) ; Massa-
chusetts — Plant V. Woods, 176 Mass. 492 (1900); Mich-
igan — Beck V, Railway Teamsters' Protective Union, 118
Mich. 497 (1898) ; Minnesota — Gray v. Building Trades'
Council, 91 Minn. 171 (1903); Pennsylvania — Erdman
V, Mitchell, 207 Pa. (1903).

In the following jurisdictions the issue is in
doubt: England— Allen v. Flood (1898), A. C. 1 and
Perrault v, Gauthier, 28 Can. Sup. 241 (1897), are for
the. union, but Quinn v, Leathem (1901), A. C. 495 and
Giblan v. National Amalgamated Union (1903) 2 K.
B. 600, are distinctly for the non-union man; New York
— Curran v. Galen, 152 N. Y. 33 (1897) and Davis
Machine Company v, Robinson, 41 Misc. 329 (1903)
are for the non-union man, but National Protective As-
sociation V. Cumming, 170 N. Y. 315 (1902) and
Davis V, United Hoisting Engineers, 28 App. Div. S96
(1898), hold for the union.

In the following jurisdictions at least the law permits
the union to force the non-union man out: California —
Pierce v. Stablemen's Union, 156 Cal. 70 (1909); Indi-
ana — Clemmit v. Watson, 14 Ind. App. 38 (1895);
Montana— -Lindsay v. Montana Federation, 37 Mont.
264 (1908); New Jersey — Mayer v. Journeymen Stone-
cutters' Association, 47 N. J. Eq. 519 (1890).



87



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CHAPTER V

PEESSUEE BY TRADE COMBINATIONS



Even to the most superficial observers of
current events, it is clear that the competitive
system is much threatened from many quar- •
ters. Undoubtedly the industrial order in
the first half of the twentieth century is going
to be a different thing from the business or-
ganization of the first half of the nineteenth
century; but whether this change is to be
one in kind, or one merely in degree, remains
to be seen. At the present moment, despite
adverse movements, the substance of competi-
tion is still to be found in the general course
of most of industrial activities for the greater^^
part of the time. This condition can be
maintained if all the conservative forces of
society are exerted; and among these one
of the most potent is the law. The courts
are manifesting the greatest activity at the
present time at various points where the dis-
turbing force of the predatory combination



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PRESSURE BY TRADE COMBINATIONS 89

is making itself felt. The principal issue
is whether there is a difference between the
methods in competition which may be em-
ployed by an individual in competition, and
the course of action that may be taken by a
combination. For example, may a combina-
tion engaged in competition refuse to have
any business dealings with those who continue
to have commercial relations with its rivals?
It is obvious that if the combination be
permitted to compete in this way (as in-
dividuals may), the ruin of the rival, thus
cut off from his sources of supply, will very
often result.



II

As has been seen in an earlier chapter, the
general legal theory of the most accurate ob-
servers of these current industrial phenomena
is that every person engaged in business has
a legal right to his trade; consequently those
who interpose themselves between a trader and
the persons who would deal with him commit
what is prima facte a wrong by this very
interference. One who intermeddles with the
business relations of another is thus put to
his justification; and among the initiated.



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90 THE CONTROL OF THE MARKET

therefore, the problem of legality has be-
come a question of justification. As to the
grounds upon which such justification may
rest, there are many of these, as has already
been indicated. For the present purpose it
is enough that fair competition is an accepted
excuse. But if the motive or the method
be bad, it is not fair competition; and the
justification consequently fails. A striking
case of unfair action under this rule is the
blacklist. In the case of Hundley v. Louis-
ville & Nashville Railroad (45 S. W. Ky.
439), it appeared that many railroads had
agreed among themselves to refuse employ-
ment to any man who was reported to their
blacklist office (jointly maintained) as having
ever been party to a strike. The court held
that although any railroad might separately
have adopted this policy, their combination to
stand by this blacklist was another matter.
It was thought to be plainly the policy of the
law that a man should be free from molesta-
tion in his business relations. The only
thing lacking was a showing that he had
actually been refused employment by reason
of this combination against him. For, how-
ever evil their intentions may have been, this
complainant must show damage to him of



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PRESSURE BY TRADE COMBINATIONS 91

some sort in order to have a standing in
court.

This law is shown again in Doremus v.
Hennessy (176 111. 608). It was set forth
in this complaint that the members of an
organization known as the Chicago Laundry-
men's Association had fixed a scale of prices
for laundry work, and had conspired to injure
the complainant in her good name and credit
and to destroy her business because she would
not charge prices in accordance with such
scale. The court decided in her favor, Mr.
Justice Phillips saying: "A combination by
them to induce others not to deal with ap-
pellee or enter into contracts with her, or
to do any further work for her, was an action-
able wrong. Every man has a right, under
the law, as between himself and others, to
full and free disposition of his own labor and
capital according to his own free will, and
anyone who invades that right without lawful
cause or justification commits a legal wrong,
and, if followed by an injury caused in con-
sequence thereof, the one whose right is thus
invaded has a legal ground of action for such
wrong." Whenever, therefore, the operations
of a combination in the course of competition
are proved to be detrimental to the best in-



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92 THE CONTROL OF THE MARKET

terest of society, its members may be held
to be wrongdoers by reason of what they
have done. For what is to be held fair in
competition, and what is unfair, is by this
analysis all a question of public policy, which
may well be different in the case of concerted
action than in the case of individual action.



Ill

It must be remembered that we have
always to reckon with the established law
for freedom in competition, and the
undoubted desire for its maintenance.
Competition is firmly believed, by the mass
of men, to be worth more to society than ii^
costs; and, therefore, so long as competition
by a combination has no different effect upon
the course of trade than competition by an
individual has, it must be allowed to go on,
however ruinous it may be to rivals in busi-
ness. Not until we have a plain case where
combined effort can be shown to be quite
different in its operation from individual
action, can the competition of a combination
be held unfair, if similar methods are held
fair enough for an individual. When this is
so it will usually be seen that, in order to



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PRESSURE BY TRADE COMBINATIONS 93

preserve the freedom of the individual in
trade, the freedom of a combination must be
curbed.

Perhaps the most noteworthy case in this
connection is Mogul Steamship Company v.
McGregor (L. R. 23 Q. B. D. 598), because
of the great opinion of Lord Justice Bowen.
The facts of that case make it a crucial one.
The defendants were a number of ship-own-
ers who formed themselves into a league or
" conference " for the purpose of ultimately
keeping in their own hands the control of the
tea carriage from certain Chinese ports, and
for the purpose of driving the plaintiffs and
other competitors from the field. In order to
succeed in this object, and to discourage the
plaintiffs' vessels from resorting to those
ports, the defendants, during the " tea har-
vest " of 1885, combined to offer to the local
shippers very low freights, with a view of
generally reducing or " smashing " rates, and
thus rendering it unprofitable for the plain-
tiffs to send their ships thither. Moreover,
they offered a rebate of five per cent, to all
local shippers and agents who would deal
exclusively with vessels belonging to the con-
ference — a rebate which would be forfeited
if, at any time, outside ships were used. It



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94 THE CONTROL OF THE MARKET

is impossible to give a fair impression of Lord
Bowen's opinion by extracts from it; but his
points may be shown. Considered as mere
competition he found, as we have seen al-
ready, no cause of action. On the point
of combination as an element in the case, he
could not see that this made any difference.
It was perfectly legitimate, he thought, to
combine capital for all mere purposes of trade
for which capital might, apart from com-
bination, be legitimately used in trade. As
to his first point, it would seem that the same
policy which permits an individual trader. to
cut prices to any extent, although his rival-
is thereby ruined, would allow a combination
to lower rates in competition against its
rivals. Indeed, looked at from one point of
view, the public is benefited more when many
lower prices than it is when a single man
does; and a rival must meet the low price
made by his combined rivals as he must the
reduced rate of a single opponent, or else go
out of business. But as to the second point
— query. Shall a combination be permitted
to take the attitude that they will charge a
higher price to those who deal with a rival —
may a rival who is thus driven out of business
say that this is unfair competition? This



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PRESSURE BY TRADE COMBINATIONS 96

issue must again be decided upon the balance
of social advantage, and requires, therefore,
the fuller discussion which it receives in this
and later chapters.

A rather similar case is John D. Park &
Sons Company v. National Wholesale Drug-
gists' Association et. all. (175 N. Y. 1). The
facts in that case in brief were these: The
manufacturers of certain proprietary medi-
cines and an association of wholesale dealers
therein entered, into an agreement to sell
the goods at a uniform jobbing price for fixed
quantities only to such dealers as would con-
form to the manufacturers' price list in mak-
ing sales of goods. All wholesale dealers had
the right to purchase the goods from the
manufacturers upon the same terms as mem-
bers of the association, on agreeing to main-
tain the prices established by the manufac-
turers. The complainants were unwilling to
maintain the trade prices upori the medicines
they purchased; and they brought this com-
plaint for being charged the " long " price,
alleging that it was by reason of the conspir-
acy of the defendants that they were unable
to get the discount rate. The case was
finally dismissed in the Court of Appeals,
upon a course of reasoning which may be



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96 THE CONTROL OF THE MARKET

seen in the following extracts from the
opinion of Mr. Justice Haight: "Is
this plan against public policy? An active
competition and rivalry in business is
undoubtedly conducive to the public wel-
fare; but we must not shut our eyes to the
fact that competition may be carried to such
an extent as to accomplish the financial ruin
of those engaged therein, and thus result in
a derangement of the business, an incon-
venience to consumers, and in public harm."
The argument for the validity of special
favors by a combination is stated most at-
tractively when it is said that there is no real
pressure exerted by the combination upon
anyone; simply those outside the combination
get an advantage if they accept the terms,
while they do not get the benefit of the con-
cession unless they conform to the rules.



IV

Cases now engage our attention where the
disturbance of the industrial peace by the
coercion exerted by a combination in its com-
petition is much more serious. What, un-
fortunately, is a typical case is seen in Jack-
son V. Stanfeld (157 Ind. 592). Jackson was



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PRESSURE BY TRADE COMBINATIONS 97

a broker engaged in buying and selling lum-
ber; Stanfeld was a member of a retail lum-
ber dealers' association. The rules of this
association provided that, if a wholesale
dealer should sell lumber direct instead of
through retailers who owned lumber yards,
all the members of the association of the re-
tailers would, upon notice, refuse to have
further dealings with such a wholesaler. In
holding this a conspiracy, Mr. Justice Dailey
said: "The great weight of authority sup-
ports the doctrine, that where the policy
pursued against a trade or business is cal-
culated to destroy or injure the business of
the person so engaged either by threats or
by intimidation, it becomes unlawful, and the
person inflicting the wrong is amenable to
the injured party in a civil suit for damages
therefor. It is not a mere passive, let-alone
policy, a withdrawal of all business relations,
intercourse, and fellowship, that creates the
liability, but the threats and intimidation in-
volved in it."

A more recent phase of the same problem is
seen in the late case of Brown & Allen v.
Jacobs Pharmacy Company (115 Ga. 429).
Jacobs, the plaintiff, had formerly been a
member of the local branch of the Retailers'



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98 THE CONTROL OF THE MARKET

Association in Atlanta; but he had withdrawn
from it upon charges being preferred against
him for violation of its rules. The Atlanta
Retailers' Association thereupon sent a letter
to the Wholesalers' Association, representing
that no retailer in the local association would
buy of any wholesaler who sold to the rate
cutter. Mr. Justice Fish promptly granted
an injunction against such concerted action.
" The individual right is radically different
from the combined action. The combination
has hurtful powers and influences not pos-
sessed by the individual. It threatens and
impairs rivalry in trade, covets control in
prices, seeks and obtains its own advancement
at the expense and in the oppression of the
public. The difference, in legal contemplation,
between individual right and combined action
in trade, is seen in numerous cases. To pro-
tect the individual against encroachments
upon his rights by a greater power is one of
the most sacred duties of the courts."

We have seen, then, that the law, as de-
clared by the majority of courts, is to the
effect that when a combination exerts its
force upon outside dealers to prevent them
from having any relations with rivals of the
combination, the rivals have an action for the



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PRESSURE BY TRADE COMBINATIONS 99

damages caused by the interference. This
law is applied, by the majority of courts, as
it seems, consistently, when the power of the
combination is brought to bear upon its own
members to prevent them from having any
dealings with those outside the combination.
The same elements of wrong exist whether
the attack of the conspirators upon their vie- *
tim is indirect or direct. And the key to the
general problem under discussion seems to
be this, that coercion of the sort discussed
here is wrong in itself, like fraud, and there-
fore, like fraud, an unfair method to use
in competition. And conspiracy will always
be considered to be a continuing wrong of
which the law will take notice so long as it is
true that an organized force has the power to
overwhelm unorganized individuals. This
principle of law that we have under discussion
has therefore this foundation of fact, that a
concerted refusal to deal disturbs the indus-
trial order in a way which an individual
refusal never can.



To be quite fair, it must be admitted that
there is conflict of authority upon these mat-
ters. There are courts which hold that a



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100 THE CONTROL OF THE MARKET

combination can use its force to drive the
customers of a rival away; and these should
be given a hearing if this investigation is to
be conducted impartially. One of the stron-
gest of these cases is MacCauley Bros. v.
Tiemey (19 R. I. 255). The complainants
were master plumbers, engaged in business
in Providence; the respondents were oflScers
of the Providence Master Plumbers' Asso-
ciation, a body affiliated with a national asso-
ciation. This general association had adopted
resolutions that they would withdraw their
patronage from any firm manufacturing or
dealing in plumbing material, which sold to
others than members of the affiliated associa-
tion. The enforcement of this resolution by
the oflScers was so strict that complainants
were almost driven out of business after they
had refused to join the local association and
be bound by its rules. Chief Justice Matte-
son refused to grant an injunction. He said
in part: " The cause and excuse for the send-
ing of the notices, it is evident, was a selfish
desire on the part of the members of the
association to rid themselves of the competi-
tion of those not members, with a view to in-
creasing the profits of their own business.
The question, then, resolves itself into this:



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PRESSURE BY TRADE C&MBiNA^i6Ng - l6l - '*

Was the desire to free themselves from com-
petition a sufficient excuse in legal contem-
plation for the sending of the notices? We
think the question must receive an affirmative
answer. Competition, it has been said, is
the life of trade. Every act done by a
trader for the purpose of diverting trade
from a rival and attracting it to himself is
an act intentionally done and, in so far as it
is successful, to the injury of the rival in his
business, since to that extent it lessens his
gains and profits. To hold such an act
wrongful and illegal would be to stifle com-
petition."

A more recent case, with more complication
in the facts, is Scottish Cooperative Whole-
sale Society v. Glasgow Fleshers' Trade De-
fense Association (35 Scottish Law Reporter,
645). Certain butchers of Glasgow were
the members of the defendant association;
a system of cooperative stores formed the
constituency of the plaintiff association.
The fleshers set about it to drive the stores
out of the meat business. It appeared that
the imported meat market was carried on at
only one place in Scotland, at the Yorkhill
Wharf in Glasgow, where the meats were
sold by the importers at auction. The asso-



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It^l'HlE^ CONTROL OF THE MARKET

ciation considered that they would attain their
object if they could induce the cattle sales-
men who were used to sell the cattle at
Yorkhill, to refuse to sell to the cooperative
stores. The cattle salesmen yielded to the
pressure, and the defendants thereby forced
the plaintiffs out of that line of business.
Lord Kincaimey, who heard the case, did not
see anything that could be done about it.
" After all, the name does not signify. A
conspiracy, combination, or association, is,
after all, nothing but a kind of contract.
But, assuming conspiracy, it is not easy
to see what the first defenders did which
could subject them in damages. They were
entitled to resolve to abstain from bidding
at sales at which cooperative bids were re-
ceived. It was entirely at their option to
do that or not. It appears to me that the
fleshers acted within their legal rights. It
may be regrettable that they happened to
have so much in their power. That is the
accident of their position, and of the peculiar
character of the foreign cattle market."

The reasoning of these cases, and of the
others that are like them, is obvious — ^too
simple in view of the complexity of the prob-
lem. It is said that A has a right to refuse



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PRESSURE BY TRADE COMBINATIONS 103

to deal with B, unless he will deal with him
exclusively; therefore A and others with him
have a right to refuse to deal with B, unless
he will deal with them exclusively. So it is
said, however outrageous the result, the logic
of the law must not be set aside. Under-
neath affirmation of this sort lurks doubt;
for if the result is wrong the course of reason-
ing must be. There is the intermediate as-
sumption that the individual refusal by a
single man is of the same character as a
concerted refusal by many men. This may
well be challenged as law, since it is con-
trary to fact. Even if it were in the face of
the logic of the law, most men would call
this competition unfair. For most men
firmly believe in the perpetuation of the open
market; and they realize that if a combina-
tion may work its will in this way, the end of
industrial liberty is at hand.



VI

The true method of approaching this prob-
lem, it should be reiterated, is by way of
justification; we are not examining absolute
rights, but relative rights. This is well put
in Delz u. Winfree (80 Tex. 400), where



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104 THE CONTROL OF THE MARKET

the cause of action stated in the petition was
that several persons had induced others not
to sell to the petitioner live animals for cash,
whereby he was greatly injured in his busi-
ness as butcher. As to the legality of this.
Associate Justice Henry said, in part: " The
appellee also asserts the following proposi-
tion, which may be conceded to be correct:
* A person has an absolute right to refuse to
have business relations with any person
whomsoever, whether the refusal is based
upon reason or is the result of whim, caprice,
prejudice, or malice, and there is no law
that forces a man to part with his title to his
property/ The privilege here asserted must
be limited, however, to the individual action
of the party who asserts the right. It is not
equally true that one person may, from such
motives, influence another person to do the
same thing."

Granted that we have under discussion a
case of pure business motive, not of personal
spite, it becomes a question, therefore, what
course of action shall be justified, and what
methods shall be held to be opposed to public
policy. An excellent recent case attacks the
problem upon that basis — Bailey v. Master
Plumbers* Association (103 Tenn. 99). This



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PRESSURE BY TRADE COMBINATIONS 106

was one of the typical eases — ^the defendants,
members of an association with by-laws for-
bidding its members to purchase from deal-
ers who sold to outsiders, the plaintiff, one
forced out of business by this sort of com-
petition. And whether this is fair or unfair
competition was again the question. The


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