Page:The Green Bag (1889–1914), Volume 24.pdf/282

 The Law of Restraint of Trade tween the buyer and seller, and consists of the transaction between these parties. "The market is controlled when all or the larger part of the buying and sell ing is in the hands of one person or a combination. Restraints on trade may operate (1) equally on some one or all of the buyers and sellers, (2) on some one or all of one or the other of them, (3) and as to one or all of any of the elements we have mentioned, and may be volun tary or involuntary, direct or indirect. A direct restraint specifically prohibits an individual from some act of trade or restrains him in the manner of doing some act of trade. An indirect restraint is the restraint imposed on another per son by reason of this direct restraint. The various restraints of trade are as follows2: (1) Monopoly, which is a state of facts and exists when all the buying or selling of a particular commodity is in the hands of one person or a combina tion or persons acting as a unit. A monopoly is objectionable as a restraint on trade of (a) those who may seek to engage in the same trade but cannot do so with any chance of profit because of the monopoly; (&) of the persons buy ing or selling, as the case may be, from or to the monopoly; (c) and when the monopoly has been brought about by a combination or contract it is a restraint on the trade of the parties to the com bination or contract. The only real evil of a monopoly is its aspect as a restraint on the trade of those buying or selling to the monopoly. The amount of the buying or selling controlled by one per son or a combination may be sufficient to confer all the advantages and bring about all the evils of a monopoly, al though no perfect monopoly be in effect achieved. The question is, what size

251

of business is to be treated as a monopoly? This question cannot be answered on the authorities. "Monopolies are of different origin — those arising by grant from the state, by accident and by nature, seem to be lawful. So, also, where the monopoly arises by the exertions of an individual, the law cannot interfere without repu diating the principle favoring freedom of individual action and contract. When the monopoly is brought about by associated action or combination, the law is different. Monopoly, therefore, is probably in itself perfectly lawful, and the law only objects to certain methods of bringing it about. Com petition, regulations by the state, and the action of public service corporations are also restraints on trade; the latter is peculiarly the subject of legislative regulation. A restraint may be imposed on trade by the performance of a cove nant contained in a contract, which per formance may be an act either of omis sion or commission, and may restrain the trade of (1) the covenantor, (2) the covenantee, (3) a third person. Our concern is only with the first, in which case the performance of the covenant may involve (1) total cessation of trade, 2) (restriction on the manner of trading generally as to one or more of the ele ments we have referred to. The first is generally found in contracts relating to (1) a sale usually of a business, (2) dissolution of a partnership, (3) employ ment of a servant; the second in con tracts of (1) formation of a partnership, (2) agreement among competitors, (3) agreements between buyers and sellers. The one eliminates competition, the other modifies it. "The performance of a covenant in restraint of trade is a direct restraint •For Mr. Foulke's table of restraints, see 12 on the trade of the promisor or promisee, and an indirect restraint on the trade Columbia Law Review, Feb. 1912. p. 105, note 21.