cause the contracts fail to accomplish their purpose. It is evident that there is a wide difference between such contracts and those the purpose of which is to so regulate competition so that it may be fair, open and healthy, and whose restriction upon it is slight, and only that which is necessary to accomplish this purpose. It does not necessarily follow that contracts of the latter class constitute illegal restraints of trade, because those of the former class do." This makes the authorities generally rest on the uncertain test of intent, as to which see $ 2. This decision was reversed in 166 U. S. 290, 373; s. c., 17 Supm. Ct. Rep. 540 (1897), without necessarily affect ing the soundness of the conclusions of the court below on this point, though the difficulties in the way of a judicial determination of what is a reasonable rate for railroad transportation, are forcibly pointed out.

But, although the decisions in this country, as a rule, apply the test of extent, yet, as we have already stated (§ 19, p. 101, above), the English decisions, so far as they recognize the doctrine condemning restrictions upon competition, seem to apply the test of reasonableness, rather than that of extent. In Collins v. Locke, 4 L. R. App. Cas. 674 (1879), an agreement among four individuals and firms carrying on the business of stevedores in the port of Melbourne, for parceling out the stevedoring busi

ness, and preventing competition, at least among themselves, “and it may be to keep up the price," was held not unlawful as in restraint of trade, if carried into effect by proper means. The question then was as to the means. However, the test of reasonableness or "propriety " was not applied to the restriction itself, the validity of which seems assumed, but to the means, the validity of which was determined by the rules applicable to contracts in restraint of trade. The decision strikingly shows how little foothold what we must regard as the American doctrine condemning restrictions upon competition arising from the acts of mere individuals, has obtained in England. It is pointed out in United States v. Addyston Pipe & Steel Co., 54 U. S. App. 723, 751; s. C., S5 Fed. Rep. 271, 285 (6th Cir., 1898), that it is at variance with many decisions in this country. The test of reasonableness seems to have been applied in Chicago, Milwaukee & St. Paul Ry. Co. v. Wabash, St. Louis & Pacific Ry. Co., 27 U. S. App. 1; s. c., 61 Fed. Rep. 993 (8th Cir., 1894), where an agreement among seven railroad companies, the Union Pacific, the Chicago, Rock Island & Pacific, the Chicago, Milwaukee & St. Paul, the Wabash, St. Louis & Pacific, the Chicago & Northwestern, the Chicago, St. Paul, Minneapolis & Omaha, and the Missouri Pacific, for a pooling and division of through traffic, was

held void as designed to establish rates without reference to their reasonableness. There was no evidence of the rates fixed for the traffic involved. This test might perhaps have been applied in Central Trust Co. v. Ohio Central Ry. Co., 23 Fed. Rep. 306 (Cir. Ct. Ohio, 1885), where a pooling contract among three railroad companies, having reference to their coal business, in respect to which they were competitors, and providing for division of business and earnings in certain fixed proportions, and for fixing the rates of transportation, was sustained as against a receiver of one of the companies. The decision was "without regard to the questions made as to the original validity of the contract." It appears, however, that the contract "afforded to shippers of coal along the lines of the railroads, rates of transportation as low, if not lower, than was charged by any other railroad companies in the State, quantities and distances being equal. The facilities afforded to shippers and the rates for transportation, were uniform and fixed for a definite period. They were not higher than had been charged the public under the sharpest competition existing before the contract was made."

The test was applied in United States v. Joint Traffic Assoc., 76 Fed. Rep. 895 (Cir. Ct. N. Y., 1896), sustaining an agreement among thirty-two railroad companies immensely engaged in competitive

interstate commerce, fixing rates, fares and charges, providing for the division of competitive traffic and for the control of soliciting agents. The court say: "These provisions of the contract do not provide for lessening the number of carriers, nor their facilities; nor for raising their rates, except expressly by its terms not contrary to law, and therefore not beyond what are reasonable." So held notwithstanding the provisions of the Federal antitrust act. But this seems opposed to United States v. Trans-Missouri Freight Assoc., above, and it may be said here generally, in view of that decision, that, so far at least as decisions in the Federal courts are concerned, the test of reasonableness is probably, even on commonlaw grounds, inapplicable to restrictions upon competition among railroad corporations. See § 25. This test was also applied in San Diego Water Co. v. San Diego Flume Co., 108 Cal. 549; s. C., 41 Pac. Rep. 495 (1895), sustaining an agreement between a "water company" that owned a complete distributing plant for furnishing water to the city of San Diego, and a "flume company" owning no distributing plant in the city, but water rights, reservoirs and a supply of water outside the city, connected with the distributing plant of the other. The agreement provided that the flume company should appoint the water company its sole agent for the exclusive sale of its water within the city, all

such sales to be subject to the approval of the flume company, two trustees, one selected from each of the companies, being invested with control of the properties within the city, and a distribution of profits being provided for. The city authorities had constitutional power to fix reasonable rates for water supplied to it. The court say (p. 559): "A monopoly is usually, though not necessarily, harmful or injurious to public interests, though, as that term is generally used, injury to the public is implied, and competition is therefore regarded as favorable to the public interest. But there is a competition which tends to monopoly, by driving out all but the stronger competitor, when prices are again increased so as not only to yield a profit upon the original investment, but to recoup the losses incurrred in breaking down competitors; or, where the competitors are

1 See, for instance, Kellogg v. Larkin, 3 Pinney (Wis.), 123, 147 (1851), where an agreement to secure to certain parties the " control of the Milwaukee wheat market" was held not illegal as tending to "reduce the price of wheat below its actual market value," and the court say: "Wheat, being an article of almost universal consumption, has a market everywhere and a value in every market. And that value in any particular place is determined less by the number of purchasers in that place, than by its distance from and means of

of equal strength and tenacity of purpose, it may result in the destruction of the public service by the collapse of all of them." And again (p. 561): "Public policy does not condemn nor prohibit an arrangement intended to prevent a competition between these corporations, which would inevitably result in the financial ruin of one or both of them, and which could not, in any event, benefit the city or its inhabitants."

The test was also applied in Manchester & Lawrence R. R. v. Concord R. R., 66 N. H. 100, 127; s. c., 20 Atl. Rep. 383 (1890), where an agreement between two rival and competing railroad companies, having the purpose and effect of destroying and preventing competition, was sustained as valid, it not appearing that the purpose or ef fect was to raise the prices of transportation above a reasonable standard, or that the public were prejucommunication with the great central markets of the country and of the world." In United States v. Addyston Pipe & Steel Co., 54 U. S. App. 723, 750; s. c., 85 Fed. Rep. 271, 284 (6th Cir., 1898), it is intimated that the illegality of even a local monopoly is not removed by the circumstance that by reason of outside competition it is purely temporary. The court say: “The public interest may suffer severely while new competition is slowly developing." See comments therein on Wickens v. Evans, 3 Younge & J. 318 (1829).

diced by their operation in any manner. The court say: "The naked question presented then is, whether all contracts between rival railway corporations which prevent competition, are necessarily contrary to public policy, and therefore mala prohibita and illegal in themselves. To state this question is to answer it in the negative, because it is obvious that the answer depends upon circumstances. While without doubt contracts which have a direct tend ency to prevent a healthy competition, are detrimental to the public, and consequently against public policy, it is equally free from doubt that when such contracts prevent an unhealthy competition, and yet furnish the public with adequate facilities, at fixed and reasonable rates, they are beneficial and in accord with sound principles of public policy. For the lessons of experience, as well as the deductions of reason, amply demonstrate that the public interest is not subserved by competition which reduces the rate of transportation below the standard of fair compensation; and the theory which formerly obtained, that the public is benefited by unrestricted competition between railroads, has been so emphatically disproved by the results which have generally followed its adoption in practice, that the hope of any permanent relief from excessive rates, through the competition of a parallel or

rival road, may, as a rule, be justly characterized as illusory and fallacious." Of the case at bar it is said (p. 129): "The geographical location and relative resources of the two roads were such as to render it obvious that the plaintiffs could not reasonably hope successfully to compete with their more powerful rival. The alternatives presented, it may be safely assumed, were combination or ruinous competition." Of cases cited as showing the illegality of such a combination, it is said: "They are cases of contracts in restraint of mercantile business; or cases of contracts which attempt to derogate from the right of eminent domain inherent in the State; or cases where contracts between railroad companies were held contrary to public policy, because one of the parties attempted to bind itself not to perform duties incident to the legal character of common carriers or public servants; or cases where contracts between railroad companies were held contrary to public policy, because one of the parties agreed not to build, or to cease to operate, a road which they were chartered to build or operate; or cases where contracts between railroad companies have been held illegal merely on the ground that they were ultra vires.”

The test was also applied in Ives v. Smith, 3 N. Y. Suppl. 645, 654; affirmed in 8 Id. 46 (Supm. Ct., Gen. T., 1889), where was sustained an

agreement thus characterized: "The Oregon Railway & Navigation Company and the Northern Pacific Company have each the right to build branches in a great and widely-extended territory, unsettled, remote and undeveloped. The main lines of each company penetrate territory naturally tributary to them. From each of these main lines, branches or extensions from time to time become necessary, as the progress and development of the country may require. Instead of engaging in a strife which may cripple both corporations and obstruct the development of all the country through which the lines are to pass, they agree that each shall open up for the public certain parts of the country through which their lines are authorized to be built; that each shall pursue a plan, harmonious and consistent with its own system, affording to the public means of communication and travel, the one north and the other south of a certain line; that each may go on developing its enterprise and providing for the public, within certain prescribed territory, without the constant necessity of anticipating or avoiding the effects of the action of the other. How does this course infringe a sound dictate of public policy? It rather tends to promote than to defeat the opening of new districts to travel and commerce. It does not deprive the public of an advantage,

but tends to secure it by leaving each company to the work of development in a certain district, without the necessity of confining itself to counteracting or countervailing the efforts of one to occupy a certain locality to the exclusion of the other." See also as to the validity of traffic agreements among competing railroad corporations, 2 Morawetz on Corporations (2d ed.), §§ 1130, 1131; Cleveland, Columbus, Cincinnati, etc. Ry. Co. v. Closser, 126 Ind. 348, 360; s. c., 26 N. E. Rep. 159 (1890).

In the following decisions, where, on the whole, the test applied has been that of extent, with the result of condemning the restrictions under consideration, there is observable an inclination to apply the test of reasonableness, though under the erroneous impression that the doctrine against restrictions upon competition is based on that against contracts in restraint of trade. Morris Run Coal Co. v. Barclay, 68 Pa. St. 173, 185 (1871); Craft v. McConoughy, 79 Ill. 346 (1875); Texas Standard Oil Co. v. Adoue, 83 Tex. 650; s. C., 19 S. W. Rep. 274 (1892); Milwaukee Masons & Builders' Assoc. v. Niezerowski, 95 Wis. 129; s. c., 70 N. W. Rep. 166 (1897); Pacific Factor Co. v. Adler, 90 Cal. 110, 117; s. C., 27 Pac. Rep. 36 (1891). In Hoffman v. Brooks, 23 Am. Law Reg. (N. S.) 648 (Super. Ct. Cinn., 1884), however, the court, while applying the test