Grenada Lumber Company v. Mississippi/Opinion of the Court

The agreement and combination which offends against the Mississippi anti-trust statute is one between a large majority of the independent and competitive merchants engaged in the retail lumber trade in the territory covered by their articles of association, whereby they have obligated themselves not to deal with any manufacturer or wholesale dealer in lumber, sash, or doors, etc., who sells to consumers in localities in which they conduct their business and keep a sufficient stock to meet demands, and to inform each other of any sale made by manufacturers or wholesalers who sell to consumers.

That such an agreement and combination was, within the meaning of the Mississippi statute, a conspiracy 'in restraint of trade,' 'intended to hinder competition in the production, importation, manufacture, transportation, sale, or purchase of a commodity,' is the express decision of the supreme court of Mississippi. That the object and purpose of the compact was to suppress competition between the plaintiffs in error and another class of dealers in or producers of the same commodity and the consumer is avowed in the 'Declaration of Purpose,' set out heretofore, in which it is stated that the members of the association, as retailers, 'cannot meet competition from those from whom they buy.' This concession means, if it means anything, that those against whom the plaintiffs in error are acting in concert will undersell them in the competition for the trade of the consuming public, and must therefore be stopped by concerted refusal to deal with them if they should persist in such competition. This constitutes under the interpretation of the Mississippi statute by the Mississippi court, a 'restraint of trade,' and a hindrance to competitors in the sale of a commodity. Accepting, as we must, this interpretation and application of a state statute by the highest court of the state, there is no question for our consideration other than the insistence that the statute is in conflict with the 14th Amendment to the Constitution of the United States. The contention is that this statute abridges unreasonably the freedom of contract, which is as much within the protection of that Amendment as is liberty of person.

That any one of the persons engaged in the retail lumber business might have made a fixed rule of conduct not to buy his stock from a producer or wholesaler tho should sell to consumers in competition with himself is plain. No law which would infringe his freedom of contract in that particular would stand. But when the plaintiffs in error combine and agree that no one of them will trade with any producer or wholesaler who shall sell to a consumer within the trade range of any of them, quite another case is presented. An act harmless when done by one may become a public wrong when done by many, acting in concert, for it then takes on the form of a conspiracy, and may be prohibited or punished, if the result be hurtful to the public, or to the individual against whom the concerted action is directed. Callan v. Wilson, 127 U.S. 555, 556, 32 L. ed. 228, 8 Sup. Ct. Rep. 1301.

But the plaintiffs in error say that the action which they have taken is purely defensive, and that they cannot maintain themselves as independent dealers, supplying the consumer, if the producers or wholesalers from whom they buy may not be prevented from competing with them for the direct trade of the consumer.

For the purpose of suppressing this competition, they have not stopped with an individual obligation to refrain from dealing with one who sells within his own circle, and thereby deprives him of a possible customer, but have agreed not to deal with anyone who makes sales to consumers, which sales might have been made by any one of the seventy-seven independent members of the association. Thus they have stripped themselves of all freedom of contract in order to compel those against whom they have combined to elect between their combined trade and that of consumers. That such an agreement is one in restraint of trade is undeniable, whatever the motive or necessity which has induced the compact. Whether it would be an illegal restraint at common law is not now for our determination. It is an illegal combination and conspiracy under the Mississippi statute. That is enough if the statute does not infringe the 14th Amendment.

The argument that the situation is one which justified the defensive measures taken by the plaintiffs in error is one which we need neither refute nor concede. Neither are we required to consider any mere question of the expediency of such a law. It is a regulation of commerce purely intrastate,-a subject as entirely under the control of the state as is the delegated control over interstate commerce exercised by the United States. The power exercised is the police power reserved to the states. The limitation upon its exercise, contained in the Federal Constitution, is found in the 14th Amendment, whereby no state may pass any law by which a citizen is deprived of life, liberty, or property without due process of law. A like limitation upon the legislative power will be found in the Constitution of each state. That legislation night be so arbitrary or so irrational in depriving a citizen of freedom of contract as to come under the condemnation of the Amendment may be conceded.

In dealing with certain Kansas legislation in regulation of state commerce, which was claimed to be so extreme as to be an unwarranted infringement of liberty of contract, this court, in Smiley v. Kansas, 196 U.S. 447, 457, 49 L. ed. 546, 551, 25 Sup. Ct. Rep. 289, 291, said:

'Undoubtedly there is a certain freedom of contract which cannot be destroyed by legislative enactment. In pursuance of that freedom, parties may seek to further their business interests, and it may not be always easy to draw the line between those contracts which are beyond the reach of the police power, and those which are subject to prohibition or restraint. But a secret arrangement, by which, under penalties, an apparently existing competition among all the dealers in a community in one of the necessaries of life is substantially destroyed, without any merging of interests through partnership or incorporation, is one to which the police power extends. That is as far as we need to go in sustaining the judgment in this case.'

We confine ourselves to so much of the act assailed as was construed and applied in the present case. If there should arise a case in which this legislation is sought to be applied where any interference with freedom of contract would be beyond legislative restraint, it will be time enough for interference by the courts.

As observed in Smiley v. Kansas, where the breadth of the act was criticized, 'Unless appellant can show that he himself has been wrongfully included in the terms of the law, he can have no just ground of complaint.' The same principle has been often announced by this court in may cases, the last instance being in Citizens' Nat. Bank v. Com. an opinion handed down with this. [217 U.S. 443, 54 L. ed. --, 30 Sup. Ct. Rep. 532.]

The excessive penalties provided by the Mississippi statutes have been urged as making the act unconstitutional under Ex parte Young, 209 U.S. 123, 52 L. ed. 714, 13 L.R.A.(N.S.) 932, 28 Sup. Ct. Rep. 441. No penalties were demanded in the present case, the state contenting itself with a bill in equity to dissolve the association. The penalty provisions are plainly separable from the section under which such a combination is declared illegal. The penalty section not being invoked, we are not called upon to give any opinion in respect to it. United States ex rel. Atty. Gen. v. Delaware & H. Co. 213 U.S. 366, 417, 53 L. ed. 836, 852, 29 Sup. Ct. Rep. 527; Southwestern Oil Co. v. Texas, handed down April 4. [217 U.S. 114, 54 L. ed. --, 30 Sup. Ct. Rep. 496.]

It is enough to say that the act, as construed and applied to the facts of this case by the Supreme Court of Mississippi, exhibits no such restraint upon liberty of contract as to violate the Federal Constitution. The decree must therefore be affirmed.