U.S. v. Trans-Missouri Freight Ass’n. case brief summary
Peckham, Justice, 1897 (rejection of Rule of Reason)
Parties, Statement of Case: The Sherman Act did more than simply codify the common law; it prohibited all contracts, etc. in restraint of trade. Since the Act did not include a Rule of Reason, it should not have been applied by the courts below.
Facts: Defendant association was formed by eighteen carriers that transport goods west of the Mississippi. It fixes freight rates and establishes rules and regulations for the goods carried - rates are set by committee and must be observed by members. Deviation was only permitted when absolutely necessary to meet competitive pricing from non-member carriers.
Procedural History & Outcome: The government sued in equity for dissolution of the association. The district court dismissed the claim, and the Court of Appeals affirmed. The government appealed to the Supreme Court of the United States.
Issue: Were the association's articles of agreement a violation of the Sherman Act?
Holding: The Court held that the association violated the Act even if it would have been legal under the common law; the judgment of the lower courts was reversed and the case remanded for trial.
Reasoning: The Court said that while great periods of economic change cause displacement of workers and businesses, those changes cannot be permitted to occur as a result of “combinations of capital” formed for that purpose. It said that Congress had prohibited all contracts and combinations with the purpose of restraint of trade. The Court rejected the argument that the Act only criminalized those contracts and combinations that were already prohibited by the common law; rather, it stated that the statute's plain language should be used to determine what is prohibited. The Act did not include a Rule of Reason in its wording, and the Court said that it was not possible to accept the Rule of Reason exception that the lower courts had been applying (based on the common law) without reading something in to the statute that was not there. Therefore, the agreement at issue is unlawful based on the wording of the Act.
The defendants in this case had formed a classic cartel in order to control prices of shipping.
The defendants claimed that since Congress was merely enacting the common law, and since their cartel agreement would have been permissible under the common law, it was therefore not in violation of the Sherman Act. The Court rejected this argument, relying instead on the text of the Act itself.