Does Price Fixing Destroy Liberty?/The Uncertainty of the Act
The Uncertainty of the Act.
The problem that is now to be dealt with is whether, there being a market price determined through the "higgling of the market," there is the requisite data available to business men upon which, beyond any reasonable doubt, they can, as business men, determine just what deviation from such market price they should make to satisfy any judge and any jury that they had not acted criminally. In other words, to ascertain what any chance twelve men might think a proper variance from the "Market Price"—which is, of course, the recorded judgment of all the rest of the world.
To avoid confusion, it must be borne in mind that the "market price" is an ever-varying one, being determined only be a free market, where each one is entitled, as a freeman, to offer what he pleases or to sell on terms satisfactory to himself. In other words, that it is the price constantly and ever being fixed, and thus meeting every variation and contingency necessary to be faced by men exercising the freedom of a democracy, instead of the bondage of communistic government. Grave error is made in assuming that it is ever a fixed price. It is every varying to meet all influences, and is simply the last price made in a free market. It is in reality, the price of freedom!
Another preliminary consideration must not be lost sight of, and it is that, as every one wants to buy at the lowest prices, and sell at the highest, there is always a perplexing political agitation going on to secure state aid either to boost or reduce prices by governmental action. This always results in agitations most dangerous to our institutions, and in favor of majorities, seeking their ends through unjust and arbitrary power, as by inflating the currency, or penalizing those who use their inalienable right "to pursue their own happiness," obeying the law,—that is, of course, the Constitutional Law,—in an exercise of their own free discretion. The courts have been fond of saying that they will not either make contracts for men, or assume the guardianship of competent adults. The legislative brance of government, unfortunately oft tries to thrust this task upon them.
Further, it is practically impossible to obtain absolutely impartial juries in such cases. Who has ever heard of one charged with profiteering being acquitted where the shield of the Constitution was withdrawn by the Courts from his protection? Of course, a jury might be found, of such higher timber, as to rise above all personal interest and prejudice, but it would be exceptional, for as sellers are alone indicted and as in most instances juries must be composed of buyers (whose attitude of mind is picturesquely described according to the Scriptures as, "It is naught, it is naught, saith the buyer, but when he is gone his way, then he boasteth": Proverbs, Chapter XX, Verse 14), called to pass upon the question whether they are to pay more or less for what they want and who are influenced by a strong public sentiment supporting them in endeavoring to make things cheap for everybody. Such a disposition but really insures higher prices, as has been proven again and again, however little it may be realized for the time being by the masses of men.
But "Nemo sibi esse judex vel suis jus dicere debet." A fundamental principle of justice not departed from by the Roman Law, and long since declared in our own jurisprudence. "Nemo debet esse Judex in propria sua Causa," That the ablest Judges have always realized these difficulties in such cases is abundantly shown, but nowhere better than in the opinion of Mr. Justice Holmes in the Northern Securities case: "Great cases," he says, "like hard cases make bad law." For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment. These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well-settled principles of law will bend. What we have to do in this case is to find the meaning of some not very difficult words. We must try, I have tried, to do it with the same freedom of natural and spontaneous interpretation that one would be sure of if the same question arose upon an indictment or a similar act which excited no public attention, and was of importance only to a prisoner before the Court."
Indeed, when the principle of universal justice, stated in these foregoing maxims, is applied to the "erroneous" interpretation of the Lever Act, the most inconceivable results instantly appear. The Government makes no provision whatever to instruct those engaged in business as to what they are or are not to charge for their commodities. Indeed it, in fact, constitutes the dealers the governmental agents to determine the proper price for commodities both for themselves, and for the public, with its adverse interest, despite the fact that such dealers have not only a continuing interest, but, very often, a trust duty to others, to make the business that they are transacting as successful as possible. The Act intensifies the violation of these maxims by providing that, in turn, such dealers are to be judged in a criminal proceeding by a jury drawn from those having the conflicting interest! In a word, the Act insists upon a satisfactory result from biased minds, to be determined by other minds equally biased to the contrary, and provides, upon the question of prices, no method of test or appeal to a proper judicial tribunal from that which constitutes a legislative determination, except where actual cases for punishment for possible error in price fixing are before the court.
The contention, therefore, must be that men can be convicted of crime by juries in larger part of adverse interest, solely for being compelled to reach conclusions, under the duress of otherwise abandoning their means of livelihood, in cases where, both under divine and civil law, they have heretofore universally been precluded from decision at all because from natural human infirmity they are incapable of satisfactory performance.
For the law positively to declare that "no man can serve two masters," and then not only to force him to do so, but put him in prison because he has not done so satisfactorily, and to pass judgment upon him by the verdict of a body of men also, subject to the disabilities of personal interest,—cannot be a portion of our splendid system of justice, buttressed by the Constitution and always safeguarded by Judges whose highest duty is its preservation.
But men cannot be punished for their ordinary human limitations. That the Harvester case fully determines. But, beyond this, nothing is better settled than that they cannot be punished where confiscatory interference with property is concerned, except when they have a clearly expressed method of judicial determination plainly provided for their protection. This has been so often expressed that but a short reference to the authorities is adequate. It is a right that cannot be lost by uncertainty or obscurity. Men cannot lose it by a statute that makes them guess at a possibility of its exercise, or where the opportunity consists only as a defense to any application or proceeding for their punishment. This is well covered in the very recent cases of Ohio, etc., Water Co. vs. Ben Avon Borough, and Oklahoma vs. Love. In the latter case the defendant was, by a State Commission, acting under a statute, prohibited from establishing rates higher than those prevailing in 1913, for laundry work in Oklahoma City. Proceedings were taken for the violation of the orders of the State Commission. It was provided that for disobedience of such orders there was to be a fine imposed, as for a contempt, of not exceeding five hundred dollars a day. Mr. Justice Brandeis, speaking for the whole court, says: "So it appears that the only judicial review of an order fixing rates possible under the laws of the State was that arising in proceedings to punish for contempt. * * * By boldly violating an order a party against whom it was directed may provoke a complaint; and if the complaint results in a citation to show cause why he should not be punished for contempt, he may justify before the Commission by showing that the order violated was invalid, or unjust or unreasonable. If he fails to satisfy the Commission that it erred in this respect, a judicial review is open to him by way of appeal on the whole record to the Supreme Court. But the penalties, which may possibly be imposed, if he pursues this course without success, are such as might well deter even the boldest and most confident. The penalty for refusal to obey an order may be five hundred dollars. * * * Obviously a judicial review beset by such deterrents does not satisfy the constitutional requirements, even if otherwise adequate, and therefore the provisions of the Acts relating to the enforcement of the rates by penalties are unconstitutional, without regard to the question of the insufficiency of those rates."
Of course, under the Lever Act, a man with a large business might, for errors of judgment resulting from being forced to decide matters that the law has always insisted he cannot be expected to decide properly, suffer endless imprisonment and fines impossible of payment.
In the Ohio case, Mr. Justice McReynolds again says: "We are unable to say that Section 31 offered an opportunity to test the order so clear and definite that plaintiff in error was obliged to proceed thereunder or suffer loss of rights guaranteed by the Federal Constitution. * * * Without doubt the duties of the Courts upon appeals under the Act are judicial in character—not legislative. * * * This is not disputed; but their jurisdiction * * * stopped short of what must be plainly intrusted to some Court, in order that there may be due process of law."
In commodity cases, where prices, of necessity, vary from minute to minute, the decision of one day must be totally inadequate for the next day's prices; and, as there is nothing in the Act by which anyone can obtain relief until after he has acted, at his peril, it is impossible to see how one can have proper constitutional protection under its provisions. Indeed, upon general principles of jurisprudence, has it not always been the law that men, forced to reach conclusions, must be kept free from even the possibility of civil, much less criminal liability, for error in the conclusions that they may reach?
And, if this be so, is it not inconceivable that the Legislature could have intended, or that it would constitute due process of law, even did it so intend, to enact that men were to be criminally punished, under circumstances and for acts of which, the law has always declared, they could not properly judge or expect to attain correct results; and in a class of cases, where the matters involved were of the most speculative and difficult character? Indeed, even of a much more difficult (if not an impossible) nature than those utility cases of which the Court treated. "In determining what is due process of law, regard must be had to substance not to form. * * * 'Can a State make anything due process of law which, by its own legislation, it chooses to declare such? To affirm this is to hold that the prohibition to the States is of no avail, or has no application where the invasion of private rights is effected under the forms of State legislation.'"
It cannot be believed that the Courts will ever permit that those, upon whose success and prosperity the revenues and welfare of the nation must depend, should be subjected to treatment that no court of justice would for a moment, permit to be inflicted upon itself under like circumstances,—the vital principle, of course, governing all such cases is that the State cannot force the duty of judgment upon those whose minds it shackles with the fears of danger and with threats of harm. It is no answer in such cases to say that the matter so constantly varies that the State cannot give a fixed rule, for if this be the case, as it is, that simply proves that the attempt is unlawful and oppressive. "Lex non cogit ad impossibilia."
This subject well illustrates the point that many business men may rightly feel they are being unjustly treated under the threatening provisions of the Act, and yet have difficulty in formulating exactly of what the injustice consists. The crux of the matter lies largely in that very principle upon which the writer has sought to lay the greatest emphasis, and it is that the law should not require of a man the performance of a duty which by reason of the uncertainties of its conditions, the infallibility of human understanding, and the ever present elements of bias and self-interest, it is not possible for him to discharge with absolute precision, and then to punish him for errors which unwittingly he might make. It would be as extreme to maintain that a jury, a judge, or any extra-judicial body should be held to the strict accountability of absolute accuracy in all of their conclusions. It is not proper for the Act to make the dealer the judge as to when prices are reasonable, fair and not excessive, and then to punish him for error in the judgments at which he arrives. For instance, the Interstate Commerce Commission, necessarily upon the most unsatisfactory and speculative data, has had to pass its judgment in rate cases on so difficult a basis that it has resulted in errors of millions of dollars, so it has been asserted. What could be said of a law that would contemplate that the conclusions of the Commission should be above and beyond all error, or otherwise its members held to a ruinous responsibility?
As was also said in the Sparf case: "I do consider that this power and corresponding duty of the Court, authoritatively to declare the law, is one of the highest safeguards of the citizen. The sole end of courts of justice is to enforce the laws uniformly and impartially, without respect of persons or times or the opinions of men. To enforce popular laws is easy. But when an unpopular cause is a just cause; when a law, unpopular in some locality, is to be enforced, there then comes the strain upon the administration of justice; and few unprejudiced men would hesitate as to where that strain would be most firmly borne." A statement of fact and of law well applicable to the matters under discussion.
The first cases arising under the Act which have been reported,—United States vs. Spokane Co., United States vs. Cohen, United States vs. Myatt, and Weed & Co. vs. Lockwood,—show that the Courts have perceived the difficulties of the situation, although they have reached diametrically opposed conclusions. A careful reading of these cases, however, shows that Mr. Justice Holmes' direction as expressed in the Harvester case to give due consideration to the political economy of the circumstances was not given equal attention. This, it is submitted, caused the varying results reached in their opinions.
All judges again express their indignation at the so-called "profiteers." Judge Faris, in the Cohen case, however, rising above it, whilst Judge Rudkin in United States vs. Spokane Co. feels the evil so great that he must aid in the supposed remedy, thinking there was no other cure than by way of government interference. The latter observes: "I will only add in conclusion, that the situation confronting Congress was a difficult one at best. To fix profits definitely and arbitrarily, without reference to place or circumstance, would prove unjust and oppressive in the extreme, for it is matter of common knowledge that what would be deemed a just and reasonable profit in one place or as to one commodity would be unjust and unreasonable in another place or as to a different commodity. Congress was, therefore, compelled to choose between the course pursued and some other course equally difficult." He then points out facts which simply prove nothing, if the economics of the subject be fully understood, that is,—that there was a difference of over one hundred per cent. between the selling price and the cost price. Judge Rudkin then continues: "That such prices or profits are extortionate no one will deny. Of course, if confined to the three stores in question, or to only a few stores, the people have a remedy in their own hands by withholding their patronage, and, if they fail to make use of that remedy, to the fullest extent, they, alone, are to blame. On the other hand, if these conditions are general, and to continue indefinitely, the people are without remedy, except through governmental action." This finding, of course, is error, as the people not only always have a remedy, but in fact the sole, effective and beneficial remedy.
Indeed, it is an astounding fact that whilst there is marked disagreement, a most clearly expressed doubt, a reference to mere "War power" as the most relied upon support of the Act, there is a universal failure in these decisions to regard Mr. Justice Holmes' admonition as to the necessity of examining these questions from the viewpoint of political economists as well as of lawyers. There is not a line to be found in these cases under the Act to show the slightest recognition of the definitely established truth, that high prices always have been, and always will be, the forerunner of low prices; that freemen in a free market, with its inducements to gain the higher rewards, strive, invent and compete, so that every temporary rise in price insures not merely a return to the old price, but to a lower one, and finally to the fair and equitable exchange of all commodities, measured by the labor relatively involved. No Court even notices the different burden of proof in quasi-monopolistic enterprises, and where the free exchange of commodities is involved; not a single one notices the established truth that continuing trade is but composed of repeated cycles of barter, of repeated exchanges of goods for goods, in which money but aids the revolution, and is in no case the substance of either step; no one considers that money itself is often more widely fluctuating than goods, and that in such universal advance of commodities we have only a demonstration of the enormous fall of money resulting from the methods of financing the war; all of the lower Courts seem to have the greatest difficulty in distinguishing the Nash and Harvester cases, and no one has attempted to show, as not only is the case but as is so clearly shown by the Supreme Court itself, how absolutely right these cases are, and how necessary for the preservation not only of the Constitution and the administration of justice, but even for the protection of Liberty herself! No decision follows the rules adopted by the Supreme Court relative to the construction and implied repeals of statutory and common law. All of them simply assume that it was the purpose of these three words, to undo not merely all the work of the Supreme Court since its beginning, but even that of the Common Law for nearly a thousand years. Not one seeks to know why sugar is now selling at sixteen to twenty cents a pound in this time of great scarcity, when in times passed, its normal price always exceeded one dollar. None seeks what Liberty has done for us, nor what we must do for Liberty, if she is to continue to heap her blessings upon us, a measure of blessings that she can alone insure.
Though some of them mention proofs that may be offered juries; there is nowhere taken into consideration the controlling factors of "insurance," "business risk" and "replacement"; nor how these are affected by our greatly depreciated money and our enormous and fluctuating burdens of taxation. None has observed that under some of the indictments, what is really being attempted, is to force merchants to exchange, perhaps, two pounds of their stock for one pound, under a threat of ruin and jail, for failing to assume the risks of doing so.
In these cases there is next met the "official war" argument. And see its results! In the only decision under the Act in a Circuit Court of Appeals, as able a Circuit Judge as sits frankly says: "If we were in a state of 'official' peace, this statute would, in my judgment, be unconstitutional under International Harvester Co. vs. Kentucky, 234 United States 216; the condemnation there express espacially page 223, is applicable here word for word. * * * But the statute is begotten by war."
But how can even a real war, much less a mere "official" war, repeal the Constitution, turn to ashes the decisions of the Supreme Court, itself, as to what is unconstitutional? That is nowhere explained.
Has not the Supreme Court gloriously laid down a never-questioned doctrine: * * * "the principles of constitutional liberty would be in peril, unless established, by irrepealable law? * * * The Constitution of the United States is a law for rulers and people, equally in war and in peace, and covers with the shield of its protection all classes of men, at all times, and under all circumstances. No doctrine involving more pernicious consequences, was ever invented by the art of man than that any of its provisions can be suspended during any of the great exigencies of government. Such a doctrine leads directly to anarchy or despotism."
It is also said, in the recent "war-time prohibition" case of Hamilton vs. Kentucky Distilleries Co.: "The war power of the United States like its other powers and like the police power of the State is subject to applicable constitutional limitations."
But the learned Justice holds that, beyond doubt, two "applicable constitutional limitations" having been determined by the Supreme Court itself, a violation of them is "justified" by a power, which, the Supreme Court has distinctly and repeatedly said, was subject to such limitations. That cannot be!
Now let us examine just what this would mean, if the hereinbefore stated be correct.
By this mysterious power, three words "unjust," "unreasonable" and "excessive" would repeal by mere implication all rules of interpretation, the whole policy of the Common Law, and the work of the Supreme Court for years upon this subject; it would justify admitted invasions of the Constitution; it would nullify the economic truth that the only cures for scarcity are decreased consumption and increased production, and the only thing that assures both, is free competition, in an open market. It has established the doctrine that the way to obtain large home supplies is to prevent the workings of sound economic law to further enlarging home production, and thus secure independence, and an average of low prices; whilst, at the same time, our foreign competitors, under the law of freedom, are gaining the power to still further control our markets. It has established that a power existing only for self-protection, can contrary to the Constitution, be turned into a power for the destruction of industries. And the most astonishing contention as to this power, is that it can be used to ruin men for not having mental powers, beyond the capacity of mortal men. For, hereafter, they must know in advance, even in periods of extraordinary governmental extravagance just what are to be governmental exactions; in times of exaggerated uncertainty they must measure even beyond any reasonable doubt the fluctuations and future inflation of the currency, the future result of future years,—how much and when inflated prices will collapse, to what degree "replacement" must and will take place, the varying efficiency of labor, all changes in costs, in interest, in freight rates, and every other item involved in doing business; how will occur all contingencies such as wars, strikes, disorders, droughts, floods, embargoes and transportation difficulties; they must, in a word, do what men in larger measure, ever have been striving and ever failing to do.
As this can never be done in the case of commodities, beyond a reasonable doubt, this "war power" must, in times of stress, make legal the absurdity of attempting to aid the nation, by punishing its business men for what always must be mere guessing; and seek to impair their efficiency and patriotism by keeping them in constant anxiety lest what they have to "guess at" may seem to be wrong to others, also guessing, but having less knowledge. Such guesses, business men know, are, in a great majority of cases, sure to be wrong even to the point of their ruin!
As the Nash and Harvester cases show, such is not the law. That which can be measured by reasonable men, with ordinary daily experience, and upon proper evidence, can be and must be so measured "in many instances," as Mr. Justice Holmes terms it in the Nash case; that which all men know can, in vital particulars, at best be the subject only of surmise, speculation, or guess, cannot be made the basis of any juridicial decision; much less could it be the basis of a verdict at the time of decision known beyond all or "any reasonable doubt." If men can be "guessed" out of Life, Liberty and Property, they will but live under a tyrannical despotism,—certainly not under the constitutional protections of a free country. Should the contrary of the Harvester decision ever be established in our land, it could not be for long, for economic reasons would make it impossible; nevertheless, it would be a first and dangerous step toward the final destruction of the Republic. This is proven by all history.
As will be shown later, political economists agree that where the rise of commodities is general, it but indicates a depreciation in the value of money,—I mean its real value,—that is, the amount of other commodities into which it can be converted. Judge Rudkin, in the Spokane case, notwithstanding his indignation at profiteering, observes that it is the people's own fault if they go to high-price stores, where there is not a general rise—that in such cases there is no occasion for relief. Of course, his greatest economic mistake is in thinking it possible that there is no relief except by a liberty-destroying governmental interference. Every Political Economist knows that—except under monopolistic conditions—Freedom herself not only brings relief, meting out a proper punishment, if any punishment be deserved, but brings the only relief that, throughout the centuries, has ever proved effective. Chains and penalties but enhance prices to give the necessary inducement to face ignominy and danger.
The Spokane Company case affords another illustration of the impossibility of enforcing such a law except through injustice and short cuts. No adequate investigation of unjust, unreasonable and excessive prices can really be had; that a man bought at one price and sold at another, proves nothing in reference to prices. So far as observation goes, it has been the method universally adopted to establish in the cases before the court alleged profiteering.
Judge Rudkin seems as well to have misunderstood Mr. Justice Holmes' very valuable and clear opinion in the Nash case, as that in the Harvester case—two cases perfectly in accord, and both stating principles without which the law could not be administered. On the other hand Judge Faris, reaching, no doubt, a correct conclusion, by not being so misled, had he also considered the economic side of the matter, would not have required so much fortitude in arriving at the conclusion he did.
The sole distinction between the Nash and Harvester cases is the very simple distinction between the possible and the impossible,—between those things which can best be determined by juries and those which cannot be certainly defined by anybody—matters covering so broad a ground as to require the judgment of all men acting with a free and untrammeled use of their judgments,—and which, even with this great aid, constantly leads to grave error. In many things, men must act upon standards of the reasonable conduct of the average man under the same, or nearly like circumstances; and the average jury is, of course, the tribunal best adapted to ascertain such standards. But even in such cases, there must be evidence adequate to justify a jury's passing upon such matters. Nothing is to be left to mere surmise. Even in civil cases the jury will not be permitted to make a finding, where any essential fact is left to guess work. If it be proven that a man drove a car through a crowded street at one hundred miles an hour, it is perfectly reasonable for a jury to find that a reasonable man would not so act,—that there was a violation of ordinary care and public duty. But if it were proven only that some person had so done, without proper evidence that it was the defendant, or if any of the essential facts necessary to establish the offense were lacking, no jury would be allowed by the Court to guess it out. Justice Holmes undoubtedly had this thought in mind when he said, in the Nash case: "The law is full of instances where a man's fate depends on his estimating rightly that is, as the jury subsequently estimates it, some matter of degree. * * * 'An act causing death may be murder, manslaughter, or misadventure, according to the degree of danger attending it.' " But this is, of course, to be reached "by common experience in the circumstances known to the actor."
To argue that these words of Justice Holmes meant anything except what he said,—that where men knew only part of the essential facts that would in the future surround the performance of the second half of the cycle called "trade," they could be punished under ex post facto laws and upon guesses; and where these unknown or unknowable facts were to be measured by a common experience that, for centuries, has had no existence, except that which was directly the opposite. It is beyond sound reason.
The common experience as to ordinary commodities has been through competition in a fair market, for all other methods have not merely been tried but have always failed. It needs no argument beyond the mere statement, therefore, that Justice Holmes, in saying that "the law is full of instances" meant either by "full" that there were no exceptions, or that he expressly confined these cases to those where the circumstances, without limitation, were known and could be judged by past instances forming a common experience. It certainly did not mean, as has been said, that where a man was indicted for manslaughter for driving recklessly through a crowded street, he could be convicted upon guesses by the jury as to whether he was even there. It cannot possibly be argued that because matters are left to juries in cases where from experience they are the best judges,—where all essential facts to be placed before them are known,—that necessarily it follows they are to be permitted for the first time to guess men into jail in cases where the facts are not known or cannot be ascertained. To argue that because, in many instances "common experience" enables men to make reasonable findings, men should be permitted to find where "common experience" has demonstrated their inability to do so, needs no reply.
In the Harvester case the indictment was for the enhancement above real value and at a price in excess of real value; and, to give this some color of reasonableness, the real value was declared to be "its market value under fair competition and under normal market conditions"; but, as Mr. Justice Holmes ably says: "We have to consider whether in application this is more than an illusory form of words, when, nine years after it was incorporated, a combination invited by the law is required to guess at its peril what its product would have sold for, if the combination had not existed, and nothing else violently affecting values had occurred. * * * Value is the effect in exchange of the relative social desires for compared objects expressed in terms of a common denominator. It is a fact and generally is more or less easy to ascertain. But what it would be with such increase of a never extinguished competition as it might be guessed would have existed * * * with exclusion of the actual effect of other abnormal influences, * * * is a problem that no human ingenuity could solve. The reason is not the general uncertainties of a jury trial, but that the elements necessary to determine the imaginary ideal are uncertain both in nature and degree of effect to the acutest commercial mind. The very community, the intensity of whose wish relatively to its other competing desires determines the price that it would give, has to be supposed differently organized and subject to other influences than those under which it acts." Turning to the Nash case, the learned Justice continues: "That deals with the actual, not with an imaginary condition other than the fact. * * * But if business is to go on, men must unite to do it and must sell their wares. To compel them to guess on peril of indictment what the community would have given for them if the continually changing conditions were other than they are, to an uncertain extent; to divine prophetically what the reaction of only partially determinate facts would be upon the imaginations and desires of purchasers, is to exact gifts that mankind does not possess."
This case has been again and again followed by the Supreme Court, as is seen in the Collins case, in the Malone case, and in United States vs. Pennsylvania Railroad Co. As Mr. Justice Hughes pointed out in the Collins case, a man is not bound to determine his conduct apart from the actualities of life, or by reference to unknowable criteria, or by speculating upon imaginary conditions, or by conjecture;—that statement seems so absolutely to dispose of the matter as clearly as well-expressed words can do it. To those who understand that continuing trade consists of a never-ending succession of half steps, that must always be largely worked out through future and unknowable conditions, there should be no difficulty.
If this need further fortification, exactly the same result was reached in the law of England by the Court of Appeals and the House of Lords in the celebrated and highly commended decision of Mogul Steamship Co. vs. McGregor. The exact distinction is made in this case that our own Supreme Court enforced in the Harvester and Nash cases. It will be remembered how strongly this case has been commended by the Supreme Court of the United States in the Standard Oil case. "After all," as Chief Justice White says, "this was but an instinctive recognition of the truisms that the course of trade could not be made free by obstructing it, and that an individual's right to trade could not be protected by destroying such right. * * * The scope and effect of this freedom to trade and contract is clearly shown by the decision in Mogul Steamship Co. vs. McGregor."
The ever memorable opinion of Lord Bowen, in the Mogul case, has exactly the reasoning of Mr. Justice Holmes in the Nash and Harvester cases, with the distinction between the two cases contrasted and considered within the one case. Lord Bowen says: "This seems to assume that, apart from fraud, intimidation, molestation, or obstruction * * *, there is some natural standard of 'fairness' or 'reasonableness' (to be determined by the internal consciousness of judges and juries) beyond which competition ought not in law to go. There seems to be no authority, and I think, with submission, that there is no sufficient reason for such a proposition. It would impose a novel fetter upon trade. * * * 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. * * * To attempt to limit English competition in this way it would probably be as hopeless an endeavor as the experiment of King Canute. But on ordinary principles of law, no such fetter on freedom of trade can, in my opinion, be warranted. A man is bound not to use his property so as to infringe upon another's right. Sic utere tuo ut alienum non laedas. If engaged in actions which may involve danger to others, he ought, speaking generally, to take reasonable care to avoid endangering them. But there is surely no doctrine of law which compels him to use his property in a way that judges and juries may consider reasonable: See Chasemore vs. Richards. If there is no such fetter upon the use of property known to the English Law, why should there be any such a fetter upon trade?"
Lord Bowen, of course, distinguishes the Common Law rules as to monopolies and wrongful acts, and closes by saying: "I myself should deem it to be a misfortune if we were to attempt to prescribe to the business world how honest and peaceable trade was to be carried on in a case where no such illegal elements as I have mentioned exist, or were to adopt some standard of judicial 'reasonableness' or of 'normal' prices or 'fair freights,' to which commercial adventurers, otherwise innocent, were bound to conform." And Lord Justice Fry adds: "To draw a line between fair and unfair competition, between what is reasonable and unreasonable, passes the power of the courts." He then refers to the repeal of the same English Statutes treated by Chief Justice White in the Standard Oil Opinion, because it had been found that such restraints substituted for freedom and competition "had a tendency," as he says, "to discourage the growth and to enhance the price of the same (i.e., of commodities). This statement is very noteworthy. It contains a confession of failure in the past; the indication of a new policy for the future."
In the House of Lords, continual enforcement of this doctrine is reiterated. Lord Chancellor Halsbury quotes with approval Lord Bowen's opinion in the Court below. Lord Watson says: "I cannot for a moment suppose that it is the proper function of English Courts of Law to fix the lowest prices at which traders can sell or hire. * * * In the first place, it was impossible that any honest man could impartially discharge his duty of finding freights to parties who occupied the hostile position of the appellants and respondents." Lord Bramwell observes: "What is the definition of fair competition? What is unfair that is neither forcible nor fraudulent? It does seem strange that to enforce freedom of trade, of action, the law should punish those who make a perfectly honest agreement with a belief that it is fairly required for their protection"; and ends by quoting Lord Justice Fry: "To draw a line between fair and unfair competition, between what is reasonable and unreasonable, passes the power of the Courts." Lord MacNaghten concurred in the decision, and finally Lord Morris says: "I cannot see why judges should be considered specially gifted with prescience of what may hamper or what may increase trade, or of what is to be the test of adequate renumeration. In these days of instant communication with almost all parts of the world, competition is the life of the trade, and I am not aware of any stage of competition called 'fair' intermediate between lawful and unlawful. The question of 'fairness' would be relegated to the idiosyncrasies of individual judges." And Lord Field concurred upon the grounds stated by Lord Justices Bowen and Fry, Lord Hannen also concurring.
For the Supreme Court, therefore, to abandon the position so clearly taken by it, that trade cannot be made free by tying up traders by a requirement that they should conduct their business under the threat of a criminal punishment if they did not successfully do what all these Judges, both American and English, have determined was beyond their power, would be a violation of both the Fifth and Sixth Amendments of the Constitution of the United States, and would, by destroying the one sure remedy for high prices—that is free competition—effectively tend to make them permanent.
- The maxims that "no man ought to be his own judge, or to administer justice in cases where his relations are concerned," and "No one should be judge in his own cause" are repeatedly found in the decisions of all our courts.
- Northern Securities Co. vs. United States, 193 U. S. 197 (see page 400). 1904.
- Ohio, etc., Water Co., vs. Ben Avon Borough. Decided by the Supreme Court June 1, 1920. Not yet reported.
- The Oklahoma Operating Co. vs. Love. Decided by the Supreme Court, March 22, 1920. Not yet reported.
- In Oklahoma Operating Co. vs. Love. Id.
- Ohio, etc., Water Co., vs. Ben Avon Borough, United States Supreme Court, June, 1920. Not yet reported.
- Referring to a section of the Public Service Company Law of Pennsylvania which provides that no injunction shall issue to modify or suspend an order of the Commission, except upon compliance with a certain procedure for judicial review of the Order. The Court held that the section in question did not make adequate provision for testing judicially an order of the Commission alleged to be confiscatory.
- Chicago R. R. Co., etc., vs. Chicago, 166 U. S. 226 (see page 235). 1897.
- Coke on Litt., 231 b.
- Sparf vs. United States, 156 U. S. 51 (see page 107). 1895.
- In United States vs. Spokane Dry Goods Company, 264 Fed. Rep. 209, 1920, the defendant was indicted for making an unjust and unreasonable charge in dealing in wearing apparel in the City of Spokane. It was contended by the government that the defendant had sold such apparel at an average profit of 118% based on the cost price. The defendant demurred to the indictment on the ground that the Act was invalid, as being too uncertain a definition of crime. District Judge Rudkin overruled the demurrer, upon the ground principally that the Act was not void for uncertainty and the War power of Congress was sufficient to sustain the constitutionality of the Act.
- In United States vs. Cohen Company, 264 Fed. Rep. 218, 1920, which arose in the District Court of Missouri, the defendant was indicted for making an unreasonable charge in dealing in sugar. A demurrer was interposed to the indictment and sustained by the Court in an opinion by District Judge Faris, upon the ground that the Lever Act, though within the War power of Congress, did not define the offenses which it covered, with sufficient certainty that the accused would be informed of the nature and cause of the accusation, and was in consequence, void under Amendment Six of the Constitution.
- The case of United States vs. Myatt, 264 Fed. Rep. 442, 1920, arose in the District Court of North Carolina and was a prosecution brought against the defendant as a retail grocer for selling sugar at an unreasonable profit. The defendant bought it for ten cents per pound and sold for fourteen cents per pound. On motion to quash the indictment the Court in an opinion by District Judge Conner ruled that the motion should be denied and the defendant plead to the bill and stand trial upon the issue of the reasonableness of the charges made by him.
- In Weed & Company vs. Lockwood, 264 Fed. Rep. 453, 1920, indictments against the defendants, who were engaged in the clothing business, were returned in the District Court for the Western District of New York, for selling wearing apparel at unreasonable and unjust prices. The defendants instituted suits in equity against Lockwood, the United States District Attorney, to enjoin him from proceeding in the criminal actions until the constitutionality of the Lever Act could be determined. The bills set up that the Act was unconstitutional upon the ground that it violated the Fifth Amendment in confiscating property rights of individuals, and that it also was void for uncertainty. The District Court in an opinion by Judge Hazel, refused the injunction, holding that the indictments were not valid as the Lever Act was constitutional. On appeal to the United States Circuit Court of Appeals for the Second Circuit, the decree of the District Court was affirmed in an opinion (not yet reported) by Judge Manton, concurred in by Judges Ward and Hough. The opinion, on appeal, sustained the Act principally on the ground that it was a war measure and further that it was not void for uncertainty, or arbitrary in its exemptions.
- Judge Rudkin in United States vs. Spokane Company, 264 Fed. Rep. 209 (see page 217). 1920.
- United States vs. Spokane Co., 264 Fed. Rep. 209 (see page 217). 1920.
- The words in the Act—"unjust," "unreasonable" and "excessive."
- Weed & Co. vs. Lockwood (United States Circuit Court of Appeals, for Second Circuit. Not yet reported.)
- Judge Hough of Second Circuit.
- Ex parte Milligan, 4 Wall. 2 (see page 120). 1866.
- Hamilton vs. Kentucky Distilleries & Warehouse Co., 251 U. S. 146. December 15, 1919.
- Justice Brandeis in Hamilton vs. Distilleries Co., Id.
- The Supreme Court decided in the Hamilton case that under the expressed and implied war powers of Congress, the use and disposition of private property could be restricted without making compensation and without due process of law, as guaranteed by the Fifth Amendment to the Constitution, contrary to the long-established decisions of the same Court that the war power was subject to the limitations of the Fifth Amendment.
- Nash vs. United States, 229 U. S. 373. 1913.
- International Harvester Co. vs. Kentucky, 234 U. S. 216. 1914.
- United States vs. Spokane Co., 264 Fed. Rep. 209. 1920.
- Nash vs. United States, 229 U. S. 373, 1913, was a proceeding under the criminal sections of the Sherman Act. Nash, the president of the American Naval Stores Company, was indicted, together with other officials of the company, for alleged acts in restraint of trade dealing in turpentine and rosin. It was charged that the defendants bid down the price of the products so that competitors would be forced to sell at ruinous prices only, circulated false statements as to production and stocks on hand, established "closed ports" for purchasing, made tentative offers of large stores of the products to depress the market, fixed the price below the cost of production to drive competitors out of business, issued false warehouse receipts for turpentine and rosin, and were guilty of other acts to accomplish the purpose stated. The defense was that the statute was so vague as to be inoperative on its criminal side, that the acts and things would not have constituted an offense if they had been done, and that such acts were too vaguely charged in the indictment. The Court, against the contentions of Nash, held that there was no constitutional difficulty in the way of enforcing the criminal part of the act, that the acts alleged if done by intent would convert what on their face might be no more than ordinary acts of competition or the small dishonesties of trade into a conspiracy of the wider scope, and that the counts in the indictment were not bad for uncertainty. But the judgment on the conviction of Nash and others was reversed by the Supreme Court because of errors in the instructions of the trial Court to the jury.
- International Harvester Co. vs. Kentucky. See statement of the facts of the case, supra. Note 11, page 18.
- Nash vs. United States, 229 U. S. 373 (see page 373). 1913.
- International Harvester Co. vs. Kentucky, 234 U. S. 216 (see page 222). 1914.
- International Harvester Co. vs. Kentucky, 234 U. S. 216 (see page 222). 1914.
- Collins vs. Kentucky, 234 U. S. 634 (see page 638). 1914.
- Malone vs. Kentucky, 234 U. S. 639. 1914.
- United States vs. Penna. R. R. Co., 242 U. S. 208 (see page 237). 1916.
- Collins vs. Kentucky, 234 U. S. 634 (see page 638). 1914.
- Mogul Steamship Co. vs. McGregor, 23 Q. B. D. 598. Decided in the Queen's Bench Division in 1889. On appeal to the House of Lords. 1892 A. C. 25.
- Standard Oil Co. vs. United States, 221 U. S. 1 (see pages 55 and 56). 1911.
- Mogul Steamship Co. vs. McGregor, Id. (see page 615). The facts of this case are noteworthy. The Mogul Steamship Company were the owners of certain steamships employed in commerce between England, China and Australia. McGregor, Gow & Company, the defendants, were shipowners who organized an association for the purpose of maintaining the rate of freights in the tea trade between China and Europe, and of securing that trade to themselves by allowing a rebate of five per cent. upon all freights paid by shippers who used only the vessels of the defendants. It was alleged that the defendants had conspired to prevent the Mogul Company from obtaining cargoes for its steamers by bribing, coercing and threatening shippers from using them, to the end that the company would be driven out of the carrying trade from China to England and thereafter freight rates could be maintained at a point which free competition would inevitably lower. In their defence, McGregor, et al., set up that the large profits derived from the tea freights alone enabled them to keep up a regular line of communication between China and England all the year round, and that without a practical monopoly of the tea trade such uninterrupted communication must cease. It was held that the association, being formed by the defendants for the purpose of keeping the trade in their own hands, and not with the intention of ruining the trade of the plaintiffs, or through any personal malice or ill-will towards them, was not unlawful, and no action for conspiracy was maintainable. This decision was subsequently affirmed on appeal to the House of Lords. (See Reports 1892 A. C., page 25.)
- See Mogul Steamship Co. vs. McGregor, 23 Q. B. D., page 620.
- Mogul Steamship Co. vs. McGregor, id. (at page 625).
- See opinion of Lord Fry in Mogul Steamship Co. vs. McGregor, 23 Q. B. D. (at page 629). These English Statutes, known generally as the acts punishing "badgering, forestalling, regrating and engrossing," were repealed as to their criminal provisions in the reign of George III (12 Geo. 3.C.71), because the restraints laid by the statutes upon dealing in corn, meal, flour, cattle and other victuals were found to increase the price of the same to the public. Further and more general removal of all such restraints were made by the statutes passed in the reign of Victoria (7 and 8 Vict. C 24; 34 and 35 Vict. C 31, and 39 and 40 Vict. C 22), and thereafter such matters were left to the common law unaided. These statutes, as stated in the text, were discussed in some detail by Chief Justice White in his opinion in the Standard Oil case, because of their analogy and important bearing upon restraint of trade legislation in this country.
- Mogul Steamship Co. vs. McGregor, on appeal to the House of Lords. Reported 1892 A. C., page 25.
- Id., 1892 A. C., page 37.
- Id., 1892 A. C., page 43.
- Id., 1892 A. C., page 47.
- Id., 1892 A. C., page 50.