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A case which well illustrates the "rule of reason" is that of the National Window Glass Manufacturers v. United States, in which the Supreme Court of the United States passed upon a situation in which all the manufacturers of hand-blown glass and all the labor (union) to be had for this work entered into an arrangement under which it was agreed that certain of the factories only would operate for a specified period during which all the labor would be employed by those factories; then, during another specified period, the remainder of the factories would operate with all the labor, and the other factories would not then operate. In view of all the facts involved, it was held that there was no violation of the law. It is true that the court referred to the fact that the price of glass was virtually determined by those engaged in the manufacture of machineblown glass, but the fact remains that an economic arrangement, involving the complete closing of certain factories during a specified period and the operation of only certain other factories during that period, was upheld.

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In a case o involving an organization of coal producers the Supreme Court in upholding the legality of the organization said:

The mere fact that the parties to an agreement eliminate competition between themselves is not enough to condemn it.

The court further said:

The fact that the correction of abuses may tend to stabilize a business, or to produce fairer price levels, does not mean that the abuses should go uncorrected or that co-operative endeavor to correct them necessarily constitutes an unreasonable restraint of trade.

The Supreme Court has also declared that those engaged in the same line of business may, through their trade associations, freely exchange information regarding goods on hand, the amount of unfilled orders, and the prices at which sales have been made."1

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The court has, however, refused to apply the "rule of reason" in instances in which manufacturers of the same product have agreed upon a schedule of prices.72 In cases of this character the court regards the fixing of prices as in itself a violation of the Sherman Act and will not inquire into the reasonableness of such prices.

National Association of Window Glass Manufacturers v. United States, 263 U. S. 403, 44 S. Ct. 148, 68 L. Ed. 358.

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Appalachian Coals, Inc. v. United States, 288 U. S. 344, 360, 374, 53 S. Ct. 471, 77 L. Ed. 825.

"Maple Flooring Manufacturers' Ass'n v. United States, 268 U. S. 563, 45 S. Ct. 578, 69 L. Ed 1093; Cement Manufacturers' Protective Ass'n v. United States, 268 U. S. 588, 45 S. Ct. 586, 69 L. Ed. 1104.

72 United States v. Trenton Potteries Co., 273 U. S. 392, 47 S. Ct. 377, 71 L. Ed. 700.

The Sherman Act contains a provision authorizing any private person who is injured in his business or property by anything forbidden. or declared to be unlawful by that act, to sue for treble damages.73 The act of Congress 74 approved July 2, 1926, directing the Secretary of Agriculture to establish a division of cooperative marketing in the Department of Agriculture contains a provision reading as follows:

Persons engaged, as original producers of agricultural products, such as farmers, planters, ranchmen, dairymen, nut or fruit growers, acting together in association, corporate or otherwise, in collectively processing, preparing for market, handling, and marketing in interstate and/or foreign commerce such products of persons so engaged, may acquire, exchange, interpret, and disseminate past, present, and prospective crop, market, statistical, economic, and other similar information by direct exchange between such persons, and/or such associations or federations thereof, and/or by and through a common agent created or selected by them.

This provision confers broad authority on producers and their associations to acquire and exchange information pertaining to the production and marketing of crops.

Section 6 of the Clayton Act

Following the passage of the Sherman Act, as larger and larger cooperative marketing and bargaining associations of producers were formed, the question of the application of the Sherman Act to such associations claimed the attention of agricultural leaders. To clarify the situation, when the Clayton Act 75 was enacted in 1914, language was included in section 6 thereof with reference to the status of organizations of farmers. This section reads as follows:

That the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.

It seems to be generally agreed that this section appears to prevent the dissolution of an organization which meets the conditions it prescribes, namely, that it is a "labor, agricultural, or horticultural organization;" that it is "instituted for the purposes of mutual

73 See Louisiana Farmers' Protective Union, Inc., v. Great Atlantic & Pacific Tea Company of America, Inc., 31 F. Supp. 483.

744 Stat. 803, 7 U. S. C. A. 451.

75 38 Stat. 730, 731, 15 U. S. C. A. 12.

help," and does not have "capital stock;" and last, is not "conducted for profit." However, the few decisions of the courts relative to this section indicate that it does not enable such organizations, if they desire, to adopt methods of conducting their operations denied to other lawful business organizations. In a case decided by the Supreme Court involving the legality of a secondary boycott by a labor organization it was said:

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As to [section] 6, it seems to us its principal importance in this discussion is for what it does not authorize, and for the limit it sets to the immunity conferred. The section assumes the normal objects of a labor organization to be legitimate, and declares that nothing in the antitrust laws shall be construed to forbid the existence and operation of such organizations or to forbid their members for lawfully carrying out their legitimate objects; and that such an organization shall not be held in itself-merely because of its existence and operation-to be an illegal combination or conspiracy in restraint of trade. But there is nothing in the section to exempt such an organization or its members from accountability where it or they depart from its normal and legitimate objects and engage in an actual combination or conspiracy in restraint of trade. And by no fair or permissible construction can it be taken as authorizing any activity otherwise unlawful, or enabling a normally lawful organization to become a cloak for an illegal combination or conspiracy in restraint of trade as defined by the antitrust laws.

In a certain case," the Aroostook Potato Shippers' Association, acting through a committee, blacklisted certain buyers of potatoes. Members of the association were forbidden, under penalty, to deal with such buyers. Persons outside the association who dealt with persons so blacklisted were also blacklisted and boycotted. The defendants, members of the association, were indicted for a conspiracy in restraint of trade and were fined. The court said with reference to the contention that section 6 relieved the defendants:

* I do not think that the coercion of outsiders by a secondary boycott, which was discussed in my opinion on the former indictment, can be held to be a lawful carrying out of the legitimate objects of such an association. That act means, as I understand it, that organizations such as it describes are not to be dissolved and broken up as illegal, nor held to be combinations or conspiracies in restraint of trade; but they are not privileged to adopt methods of carrying on their business which are not permitted to other lawful associations. Section 6 of the Clayton Act is still in effect and is not repealed by the Capper-Volstead Act.

76 Duplex Printing Press Co. v. Deering, 254 U. S. 443, 469, 41 S. Ct. 172, 65 L. Ed. 349. See also Buyer v. Guillan, 271 F. 65; United States v. Borden Company, 308 U. S. 188, 60 S. Ct. 182, 84 L. Ed. 181, reversing 28 F. Supp. 177; Apex Hosiery Company v. Leader, 310 U. S. 469, 60 S. Ct. 982, 84 L. Ed. 1311. 77 United States v. King, 229 F. 275, 250. F. 908, 910.

Capper-Volstead Act

The Capper-Volstead Act became a law on February 18, 1922. It is entitled "An act to authorize association of producers of agricultural products," and reads as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, That such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein, or,

Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

And in any case to the following:

Third. That the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members.

SEC. 2. That if the Secretary of Agriculture shall have reason to believe that any such association monopolizes or restrains trade in interstate or foreign commerce to such an extent that the price of any agricultural product is unduly enhanced by reason thereof, he shall serve upon such association a complaint stating his charge in that respect, to which complaint shall be attached or contained therein, a notice of hearing, specifying a day and place not less than thirty days after the service thereof, requiring the association to show cause why an order should not be made directing it to cease and desist from monopolization or restraint of trade. An association so complained of may at the time and place so fixed show cause why such order should not be entered. The evidence given on such a hearing shall be taken under such rules and regulations as the Secretary of Agriculture may prescribe, reduced to writing, and made a part of the record therein. If upon such hearing the Secretary of Agriculture shall be of the opinion that such association monopolizes or restrains trade in interstate or foreign commerce to such an extent that the price of any agricultural product is unduly enhanced thereby, he shall issue and cause to be served upon the association an order reciting the facts found by him, directing such association to cease and desist from monopolization or restraint of trade." On the

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Mr. Lenroot, during the debate on this bill in Congress said: "If the Secretary of Agriculture finds that there is a monopolization or restraint of trade, and also an undue enhancement of price, then under the bill as it would read if amended he is directed to issue an order, not against the undue enhancement of price, but against the monopolization or restraint of trade. In other words, when these facts exist the order goes against the monopoly, against the restraint of trade, and the command will be that they must desist from such monopolization or

request of such association or if such association fails or neglects for thirty days to obey such order, the Secretary of Agriculture shall file in the district court in the judicial district in which such association has its principal place of business a certified copy of the order and of all the records in the proceeding, together with a petition asking that the order be enforced, and shall give notice to the Attorney General and to said association of such filing. Such district court shall thereupon have jurisdiction to enter a decree affirming, modifying, or setting aside said order, or enter such other decree as the court may deem equitable, and may make rules as to pleadings and proceedings to be had in considering such order. The place of trial may, for cause or by consent of parties, be changed as in other causes.

The facts found by the Secretary of Agriculture and recited or set forth in said order shall be prima facie evidence of such facts, but either party may adduce additional evidence. The Department of Justice shall have charge of the enforcement of such order. After the order is so filed in such district court and while pending for review therein the court may issue a temporary writ of injunction forbidding such association from violating such order or any part thereof. The court may, upon conclusion of its hearing, enforce its decree by a permanent injunction or other appropriate remedy. Service of such complaint and of all notices may be made upon such association by service upon any officer or agent thereof engaged in carrying on its business, or on any attorney authorized to appear in such proceeding for such association, and such service shall be binding upon such association, the officers, and members thereof."

Section 6 of the Clayton Act refers only to nonstock organizations, so that an association of producers formed with capital stock would not be entitled to the benefits thereof. Owing to this fact and for the further purpose of making the status of the associations of producers under the Federal antitrust laws more clear than was done by section 6 of the Clayton Act, the Capper-Volstead Act was passed. Mr. Volstead, in discussing the bill said:

The objection made to these organizations at present is that they violate the Sherman Antitrust Act, and that is upon the theory that each farmer is a separate business entity. When he combines with his neighbor for the purpose of securing better treatment in the disposal of his crops, he is charged with a conspiracy or combination contrary to the Sherman Antitrust Act. Businessmen can combine by putting their money into corporations, but it is impractical for farmers to combine their farms into similar corporate form. The object of this bill is to modify the laws under which business organizations are now formed, so that farmers may take advantage of the form of organization that is used by business concerns. It is objected in some quarters that this repeals the Sherman Antitrust Act as to farmers. That is not true any more than it is true that a combination of two or three corporations violates the act. Such combinations may or may not monopolize or restrain trade. Corporations today

restraint of trade; and a mere abandonment of the undue enhancement of price will not be a defense." Congressional Record, 67th Cong., second sess., p. 2269.

"42 Stat. at Large 388; 7 U. S. C. 291 and 292.

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