United States v. Trans-Missouri Freight Ass’n
166 U.S. 290 (1897)
*This was a railroad price-fixing case in which the Supreme Court first considered the meaning of “restraint of trade.”
Facts: Railroad
companies agreed to set rates for freight traffic. Government sued to
have agreement voided and the association dissolved.
Issue: Does the Sherman Act proscribe only contracts in unreasonable restraint of trade?
Holding: No. Court held that the “plain and ordinary meaning” of the statute prohibited ALL contracts in restraint of trade.
Reasoning: Justice
Peckham rejected proposed reasonable-price standard because it
contained an inherent lack of certitude and subjected market forces to
the caprices of the judiciary. Peckham’s argument required dissent to
specify what criteria were available for deciding how far above the
competitive level a price might be raised before it becomes
unreasonable.
Bork: Bork lauded Peckham’s opinion in this case. Bork found that Peckham chose consumer welfare as the Sherman Act’s guiding policy, creating a category of agreements illegal per se, and began to work toward a formula for excepting efficiency-creating integrations from the statute’s interdiction.
US v. Trans-Missouri Freight Ass’n
ReplyDelete· Railroard companies agree to set rates for freight traffic, but rates were to be reasonable. Any violation of the agreement was subject to fines. Purpose was to end freight war caused by overproduction of railroad service and fierce competition. Main goal was to put a floor on rates so they wouldn’t drop below cost. Government sues on Restraint of Trade claim. Does the restraint of trade only apply to unreasonable restraints?
· Court rules that restraint of trade applies to all contracts of that nature, not just unreasonable ones. The price-fixing’s direct, immediate, and necessary effect is to put a restraint on trade, so court will not care about intent.
o Argument that if natural competition allowed then prices would drop below cost which would destroy industry. Court says that there are evils of competitions, but right now, the public should not be deprive of the benefits of competition. Self-Regulation not permitted by railroads. Rivalries = Choice = Welfare
o Reasonableness is also a very difficult standard to apply because very fact sensitive. Reasonableness should not be left up to the companies. Judges would have too much power.
o Dissent argues that the decision is too broad and would apply to all contracts that have an impact on competition. Per se illegality would have serious effects.