United States v. Standard Oil Co. of New Jersey

SANBORN, Circuit Judge. This is a suit brought by the United States to enjoin the Standard Oil Company of New Jersey, a corporation, about 70 subsidiary corporations, and 7 individual defendants, from continuing an alleged illegal combination in restraint of commerce among the several states, in the District of Columbia, in the territories, and with foreign nations, in violation of the Sherman anti-trust act (Act July 2. 1890, c. 647, 26 Stat. 209 [U. S. Comp. St. 1901, p. 3200]). The provisions of that act pertinent to the issues in this case are: Section 1: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal.” Section 2: ■‘Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of trade or commerce among the several states, or with foreign nations, shall be deemed guilty -of a misdemeanor.’ Section 8: “The word ‘person’ or ‘persons’ wherever used in this act shall be deemed to include corporations and associations.” Repeated discussion and consideration of the purpose and meaning of this act have established, by controlling authority, beyond debate in this tribunal, these pertinent rules for its interpretation and application to the facts of this case. The test of the legality of a contract or combination under this act is its direct and necessary effect upon competition in interstate or international commerce. If the necessary effect of a contract, combination, or conspiracy is to stifle, or directly and substantially to restrict, free competition in commerce among the states or with foreign nations, it is a contract, combination, or conspiracy in restraint of that trade, and it violates this law. The parties to it are presumed to intend the inevitable result of their acts, and neither their actual intent nor the reasonableness of the restraint imposed may withdraw it from the denunciation of the statute. Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 234, 20 Sup. Ct. 96, 44 L. Ed. 136; Northern Securities Company v. United States, 193 U. S. 197, 331, 24 Sup. Ct. 436, 48 L. Ed. 679; United States v. Joint Traffic Association, 171 U. S. 505, 577, 19 Sup. Ct. 25, 43 L. Ed. 259; Hopkins v. United States, 171 U. S. 579, 592, 19 Sup. Ct. 40, 43 L. Ed. 290. The exchange of the stock or shares in the ownership of competitive corporations engaged in interstate or international commerce for stock or shares in the ownership of a single corporation, the necessary effect of which is a direct and substantial restriction of competition in that commerce, constitutes a combination in restraint of commerce among the states or with foreign nations that is declared illegal by this — 180 — law. Northern Securities Company v. United States, 193 U. S. 197, 354, 366, 24 Sup. Ct. 436, 48 L. Ed. 679; United States v. American Tobacco Co. (C. C.) 164 Fed. 700, 718. The business of the defendants is the production and the purchase of petroleum, its storage, its transportation from the producing wells to refineries, the refining of this oil, and the transportation and sale of its products to purchasers in this and other countries. In 1865 John D. Rockefeller owned a refinery in Cleveland, Ohio. He and Samuel Andrews formed the firm of Rockefeller & Andrews, which bought and operated this refinery. In 1870 the successors of this firm, John D. Rockefeller, William Rockefeller, Samuel Andrews, Henry M. Flagler, and Stephen D. Harkness, owned two refineries, and had a domestic trade in oil at Cleveland and a warehousing business and an export trade at the port of New York, which they vested in the Standard Oil Company of Ohio, a corporation with a capital stock of $1,-000,000, which they then organized. Betweeen the organization of that corporation in 1870 and April 8, 1879, Henry H. Rogers, John D. Archbold, Oliver H. Payne, and Charles M. Pratt associated themselves with the Rockefellers and Flagler and became stockholders in this corporation, and these 7 defendants and their associates increased the number of its stockholders to 37, its capital stock to $3,500,000, the value of its property tp a much larger sum, and acquired for the stockholders of that corporation, by the purchase of property .conveyed directly to it, by the exchange of its stock for stock of other corporations and for interests in partnerships, and by placing the title to the business and property obtained in new corporations organized to hold them, and then vesting the title to a majority of all of their stock in various individuals in trust for the stockholders of the Standard Oil Company, more than 40 competitive refineries located, respectively, in Cleveland, Pittsburg, Titusville, Parkersburg, Baltimore, Philadelphia, Bayonne, New York Harbor, Boston, and other places, and the ownership of the entire interest or of a controlling interest in more than 30 companies, some of which were corporations, while others were partnerships, engaged in the same general business. The result was that on April 8, 1879, the stockholders of the Standard Oil Company were, by their holdings of stock and by their position as cestuis que trust, practically the owners of controlling interests in the property and the business of more than 30 companies engaged in the oil business, the title to which was held in trust for them by the Standard Oil Company and other trustees in proportion to their ownership of the stock of that corporation. Thereupon on that day the Standard Oil Company and all the other trustees conveyed their interests in the stock, property, and business of these concerns to George H. Vilas, M. R. Keith, and George F. Chester, in trust, to hold and manage them for, and to divide and distribute them among, the 37 stockholders of the Standard Oil Company in proportion to their respective holdings of the stock of that company. The trustees, however, did not divide or distribute, but operated the refineries and the companies which they held under this deed, and with their earnings purchased other property and the stock of other companies, until in 1882 they held in this-trust property worth more than $55,000,000. * ' — 181 — In January, 1882, the owners, as cestuis que trust and otherwise, of all this property, and the trustees, George IF Vilas, M. R. Keith, and George F. Chester, entered into a trust agreement to the effect that all the stocks they owned in the Standard Oil Company of Ohio and in all other corporations and limited partnerships engaged in the oil business, 39 of which were mentioned in the contract, were conveyed to 9 trustees during their lives and the life of the survivor of them and for 21 years thereafter, unless the trust was sooner dissolved by vote of the shareholders; that these trustees might organize other corporations to produce, manufacture, refine, and deal in petroleum and its jiroducts; that they might buy with the trust funds bonds or stocks of other companies engaged in similar or collateral business; that as stockholders of the various corporations they should elect the officers of those corporations ; that they should issue and deliver, to each o f the equitable owners of the stocks, bonds, and property held by them, trust certificates, which should show the value and extent of his interest in the trust in shares of the par value of $100 each; and that they should supervise ihe business of all the companies whose stock they held, collect the dividends upon the stock and the interest upon the bonds in their possession, and distribute the income thus derived in dividends upon the trust certificates. Six of the individual defendants were six of the nine trustees, and these trustees issued for the stocks, the title to which was thus conveyed to them, trust certificates of the par value of $‘10,000,000, and between 1882 and March 21, 1892, additional certificates of the par value of $27,250,000, so that on the latter date there were outstanding certificates for 972,500 shares in the trust. In March, 1892, the Supreme Court of Ohio decided that the making and operation of this trust of 1882 were beyond the corporate powers of the Standard Oil Company of Ohio and tended to create a monopoly, and enjoined that corporation from continuing its operation. State v. Standard Oil Company, 49 Ohio St. 137, 30 N. E. 279, 291, 15 L. R. A. 145, 34 Am. St. Rep. 541. A few days later, on March 21, 1892, the holders of the trust certificates met and resolved that the trust agreement was terminated on that day, that the trustees should sell all the trust property except the stocks of companies held by them, and that these stocks should be distributed to the owners of the trust certificates, who then numbered several thousands, in proportion to their respective ownerships of shares in the trust. The trustees then held stocks in 84 companies. They first transferred the stocks they held in 23 of these companies to the Standard Oil Company of New Jersey, the stocks they held in 11 of these companies to the Standard Oil Company of New York, the stocks they held in 3 of these companies to the South Penn Oil Company, the stocks they held in 4 of them to the Forest Oil Company, the stocks they held in 2 of them to the Standard Oil Company of Indiana, the stocks they held in 4 of them to the Standard Oil Company of Kentucky, the stock they held in 1 of-them to the Ohio Oil Company, the stocks they held in 3 of them to the -Buckeye Pipe Fine Company, the stocks they held in 2 of them to the National Transit Company, and the stocks they held in 13 of them to the Anglo-American Oil Company, so that they retained the stocks — 182 — of the 20 principal companies, and these 20 companies held the stocks in the, 64 other companies. There were outstanding trust certificates for 972,500 shares in this trust, and the owners of these certificates were the equitable owners of the stocks in all these companies. The method of division and. distribution of these stocks adopted by the trustees was this: They made to each holder of a trust certificate, upon his.surrender of it, a single assignment of as many 972500ths of all thfe stocks held by them on July 1, 1892; in each and all of these companies as the holder of the trust certificate held 'shares in the trust. If he had one share, he received one assignment of V°T2500 of all the stocks; and if he held 256,854 shares, he received 25035Y972500 of all the shares held in the trust. But the receipt by the assignee of his share of the stock of any one of these companies was conditioned by the terms of the assignment upon his accepting his share of the stock of all of them. This method of distribution appears to have deterred many of the holders of trust certificates from surrendering them and accepting their shares of the stocks. The individual defendants,, however, and their more intimate associates, surrendered their trust certificates and took sufficient shares of the stocks to aggregate a majority of the stock of each of the 20 companies and secured to themselves the control and management of all the companies in that way until the year 1899. In that year the defendant the Standard Oil Company of New Jersey, a corporation, was one of the 20 companies. The par value of its capital stockwas $10,000,000. Its charter was then so amended that it was empowered to do all kinds of mining, manufacturing, trading, and transportation business, to acquire, hold, vote, sell, and assign shares of capital stock, and to carry on its business in all parts of the world. Its capital stock was increased to $100,000,000, and the stock of the other 19-companies was exchanged for the stock of the Standard Oil Company of New Jersey, so that the latter company succeeded to the legal title, to the majority of the stock of the 19 companies, and thereby to the management and control of those companies and of all the companies which they controlled. Henceforth in this discussion the Standard 011 Company of New Jersey will be called the “principal company,” and the companies it then and thereafter controlled the “subsidiary companies.” Between 1899 and the filing of the bill in this case in November,. 1906, the affairs of the principal.company and of the subsidiary companies have been managed by the former as the business of a single • person. Subsidiary companies have come and gone at its bidding, but it still holds the control of more than 30 of the chief companies whose ■ management was committed to it in 1899. The par value of the capital-stock of these companies in 1899 was about $100,000,000. In 1908 it was more than $150,000,000. Among them are 9 companies, the own- ■ ers of 16 refineries, while the principal company has several, engaged-in manufacturing illuminating oil and other products of petroleum,., 12 transportation companies, the owners in 1899 of 10,749 and in 1908 ■ of 45,227 miles of gathering pipe lines, and in 1899 of 3,904 and in 1908 of- 9,338 miles of trunk pipe lines, capable of gathering from’ the: — 183 — wells and pumping oil from Pennsylvania/In diana, Kansas, and Oklahoma to the Atlantic seaboard and to the refineries, 6 marketing companies, which in 1906 had 3,-111 selling stations scattered throughout the United States, and several producing companies. The crude oil is transported from the oil fields to the refineries by pipe lines, and the products from the refineries and storage tanks to the selling stations by tank cars, and, when exported, by ships. Prom 1899 to 1907 the principal company and the subsidiary companies it has operated under this trust produced more than one-tenth of the crude oil obtained in this country, transported more than four-fifths of the petroleum derived from the Pennsylvania and Indiana oil fields, manufactured more than three-fourths of all the crude oil refined in the United States, owned and operated more than one-half of all the tank cars used to distribute its products, marketed more than four-fifths of all the illuminating oil sold in the United States, exported more than four-fifths of all the illuminating oil sent forth from the United States, sold more than four-fifths of all the naphtha sold in the United States, and sold more than nine-tenths of all the lubricating oil sold to railroad companies in the United States. The principal company, by means of this trust and the commanding volume of the oil business which it acquired thereby, secured, and it has since exercised and is using, the power to prevent competition between the companies it controls, to fix for them the purchase price of the crude oil, the rates for its transportation, and the selling prices of its products. It has prevented, and is preventing, any competition in interstate and international commerce in petroleum and its products between its subsidiary companies and between those companies and itself. The United States,, charged in its bill that between 1869 and 1879 the '7 individual defendants conspired to restrain interstate and international commerce in petroleum and its products, that they combined with each other and with numerous corporations and partnerships named, and by the union of competing companies, by the trust of 1879, by the trust of 1882, and bjf the formation and operation of the stock-holding trust of 1899, they have restrained and are still restraining that commerce. Attention is challenged to the fact 1 hat these defendants constitute only 7 of about 5,000 stockholders of the principal company and only 7 of its 15 directors, and that they own hut little more than one-third of its stock, and it is contended that no adequate proof has been presented that they are, or were in 1906, when the bill was filed, controlling or directing the operations of the principal or subsidiary corporations, or operating- the stockholding trust of 1899. But a third of the stock of a great corporation, when the remainder is scattered among thousands of followers, and 7 out of 15 friendly directors, may control a board of directors and a corporation; and evidence in this case, too voluminous for recitation or review, has convinced that prior to 1879 these 7 defendants combined to secure and obtained the control of companies competing- in interstate commerce in oil and suppressed their competition, that they caused the formation and execution of the trusts of 1879 and 1882, that they directed and followed thát unique method of distributing the stock held in the latter trust by which it was — 184 — not distributed to the majority of the stockholders for many years'after 1892, while they and their associates held the control of it and of the corporations it commanded, that they caused the stockholding trust of 1899, and that by means of that trust'they still hold the actual control and direction of the Standard Company and of its subsidiary corporations, apid that since 1899 they have been and still are engaged in carrying into effect and executing that trust. The acts of these and other defendants prior to July 2, 1890, did not violate the anti-trust act of that year, because it was not then in existence. Whether or not their transactions constituted a violation of the common law is a question much discussed, which' it is unnecessary to determine in this case. However that may be, the acts of the defendants and the effect of their transactions in the conduct of the oil trade prior to July 2,1890, which, if done thereafter, would have constituted a violation of the law of that date, are competent and material evidence of the dominant purpose and the probable effect of their similar transactions in that business since that date, and for that purpose they may be considered. Laying out of view the acts of the defendants prior to July 2, 1890, except as evidence of their purpose, of their continuing conduct, and of its effect, do the stockholding trust of 1899 and its continuing operation constitute an illegal restraint of interstate or international commerce, in violation of the anti-trust act of 1890 ? The purpose of this statute was to keep the rates of transportation and the prices of articles in interstate and international commerce open to free competition. Any contract or combination of two or more parties, whereby the control of such rates or prices is taken from separate competitors in that trade and vested in a person or an association of persons, necessarily restricts competition and restrains that commerce. The formation or maintenance by competing corporations of an association to determine their rates of transportation (United States v. Trans-Missouri Freight Association, 166 U. S. 290, 17 Sup. Ct. 540, 41 L. Ed. 1007; United States v. Joint Traffic Association, 171 U. S. 505, 19 Sup. Ct. 25, 43 L. Ed. 259), agreements of competitive manufacturers and. traders not to compete in the purchase or sale of articles in interstate commerce, or to buy or to sell them at prices fixed by a mutual agent or association (Continental Wall Paper Co. v. Voight & Sons Company, 212 U. S. 227, 29 Sup. Ct. 280, 53 L. Ed. 486; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 217, 20 Sup. Ct. 96, 44 L. Ed. 136; Id., 85 Fed. 271, 285-294, 29 C. C. A. 141, 155-164, 46 L. R. A. 122; Swift & Company v. United States, 196 U. S. 375, 395, 25 Sup. Ct. 276, 49 L. Ed. 518; Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U. S. 390, 396, 27 Sup. Ct. 65, 51 L. Ed. 241; Montague & Company v. Lowry, 193 U. S. 38, 41, 24 Sup. Ct. 307, 48 L. Ed. 608), the conveyance of the stock or property of competitors to a trustee or trustees to hold and operate as a single interest (Distilling & Cattle Feeding Co. v. People, 156 Ill. 448, 488, 41 N. E. 188, 201, 47 Am. St. Rep. 200), the exchange of the stocks or the property of competitive corporations for the stock or for interests in a single corporation, which thereby acquires the power to control the rates of transportation or the prices of articles in interstate com — 185 — merce in which the corporations were dealing (Northern Securities Company v. United States, 193 U. S. 197, 24 Sup. Ct. 436, 48 L. Ed. 679; United States v. American Tobacco Company [C. C.] 164 Fed. 700, 710; Continental Securities Company v. Interborough Rapid Transit Company [C. C.] 165 Fed. 945, 953; Richardson v. Buhl, 77 Mich. 632, 636, 43 N. W. 1102, 1103, 6 L. R. A. 457; Harding v. American Glucose Company, 182 Ill. 551, 615, 55 N. E. 577, 598, 64 L. R. A. 738, 74 Am. St. Rep. 189; Dunbar v. American Telephone & Telegraph Co., 224 Ill. 9, 23, 24, 79 N. E. 423, 427, 115 Am. St. Rep. 132), are alike declared to be illegal by this law. In the construction and enforcement of this statute, corporations are persons, they are legal entities distinct from their stockholders, and the combination of two or more of them in restraint of trade is as unlawful as the combination of individuals. By the trust of 1899 more than 30 corporations were combined with the principal company, and that corporation was given the power to fix the rates of transportation and the purchase and selling, prices which all these companies should pay and receive for petroleum and its products throughout the republic and in the traffic with foreign nations. The principal company and many of the subsidiary corporations were then and still are engaged in interstate and international commerce, many of them were capable of competing with each other in that trade, and would have been actively competitive if they had been owned by different individuals or different groups of individuals. Thus the principal company in 1899 owned and operated several refineries in New jersey, West Virginia, and Maryland, which in the year 1906 had a capacity of 19,854,900 barrels of crude oil yearly. The Standard Oil Company of New York, one of the subsidiary companies, owned and operated several refineries in the state of New York, which in the year 1906 had a capacity of 6,732,060 barrels yearly. These companies drew much of the crude oil which they refined from, and marketed much of their products, beyond the limits of the states in which their refineries were located. The majority of the stock of the New York Company and of 18 other corporations engaged in different branches of the production, manufacture, and sale of petroleum and its products was conveyed to the New Jersey Company in exchange for its stock, and the latter has ever since controlled and operated all these corporations and those which they controlled, and has prevented them from competing with it or with each other. In Northern Securities Company v. United States, 193 U. S. 197, 321, 322, 21 Sup. Ct. 436, 48 L. Ed. 679, Mr. Hill, Mr. Morgan, and their associates acquired the control of a majority of the voting stock of two competitive railway companies, and by means of that ownership the power to prevent them from actually competing. This group of stockholders subsequently transferred their controlling interest-in the stock of each of these companies to the Northern Securities Company in exchange for its stock, and the Supreme Court decided that this transaction constituted a combination in restraint of commerce among the states, and affirmed a decree of this court which enjoined the continuance of its operation. The defendants and their associates ac — 186 — quired the control of a majority of the stock of more than. 30 corporations, many of which were potentially and naturally competitive, prevented their competition by means of this ownership, and then by the transfer of the stock of 19 of them to the principal company in exchange for its stock placed in that .company the control and management of all of them. If it was a violation of the anti-trust act to combine the control of competitive corporations in a third in the case of the Northern Securities Cpnipany, why was it not as much a violation of it to combine the control of 10 or 20 or 30 of these corporations in one of their number in the case in hand? The defendants answer: (1) Because these corporations were not competitors, and had not been such since 1879; (2) because the stockholders of the principal company were the joint owners of the stock of the subsidiary companies, and had the right to convey their stock in the latter to the former in- trust for themselves, and Congress was without power to restrict their acquisition, their method of holding, or their disposition of their title to their property, or their use of it; (3) because the corporations whose stock was vested in a holding company in the Northern Securities Company’s Case were railway companies, which were charged with the discharge of public duties, then-performance of which was peculiarly subject to regulation by the nation and the state, while the corporations -whose stock was vested in the Standard Oil Company in this case were private corporations; and (4) because, if any restraint of trade resulted from the trust of 1899, it was neither direct, immediate, nor substantial. 1. The first two answers were overruled by the Supreme Court in the case of the Northern Securities Company, and the questions they present are not debatable here. It is true, with negligible exceptions, that the stockholders of the defendant corporations were the joint equitable owners of them, from 1879, or from their subsequent organizations, respectively, until July 1, 1899; but the great majority of these stockholders never held the legal title to their stock, except • during-a few months between 1896 and 1900- In 1899 the stockholders of the principal company were the stockholders of the subsidiary companies, and feach stockholder held the same share or interest in each of the corporations. By means of this joint ownership and the trusts of 1879 and 1882, the natural competition between these corporations had .been prevented for a much longer time in 1899 than had the competition between the two railway companies when their stocks were vested in the holding company in 1901 in the Northern Securities Company’s Case. But this fact cannot constitute a material difference, and in all other respects the facts of the two cases regarding competition are practically identical. Hill, Morgan, and their associates acquired control of the two railway corporations long before they placed their stock in the Securities Company in 1901. Pearsall v. Great Northern R. Co., 161 U. S. 646, 16 Sup. Ct. 705, 40 L. Ed. 838. Those companies were natural and potential competitors; but this group of stockholders held the power to prevent them from actively competing-, and it is as incredible that they were actually doing so after they came under the control of that group as it is that the defendant corpora187 lions were engaged in actual competition during the nineties. It was the granting of the power to prevent competition to the holding company, not the subsequent exercise of that power, that in the opinion of the Supreme Court brought the combination under the ban of the law (Harriman v. Northern Securities Company, 197 U. S. 241, 297, 25 Sup. Ct. 493, 49 L. Ed. 739); and a similar, but greater, power was vested in the principal company in this case by the trust of 1899. For some time, therefore, before the transfer in each of these cases, a group of stockholders controlled a majority of the stock of potentially competitive corporations which they vested in the holding company, so that the latter had the power to operate them together without competition, and the rule which governs one must control the other. 2. The contention that Congress has no power to restrict the acquisition. the method of holding the title, and the disposition and the use of property, was forcibly urged upon the attention of the courts in many forms in the case of the Northern Securities Company, 193 U. S. 272, 273, 24 Sup. Ct. 436, 48 L. Ed. 679; but the answer to it was, as il must be here, that no question of the mere acquisition, or method of holding or of disposition, of the title to property, was there or is here in issue; that the question there was, as it is here, whether a certain method of holding the stocks which control several corporations may be used to prevent competition between them in interstate and international trade. And Congress has plenary and indisputable power under the commercial clause of the Constitution to restrict and regulate the use of every instrumentality .employed in interstate or international commerce, so far as it may be necessary to do so in order to prevent the restraint thereof denounced by the anti-trust act of 1890. Northern Securities Company v. United States, 193 U. S. 197, 334, 338, 346, 350, 24 Sup. Ct. 436, 48 L. Ed. 679; United States v. Northern Securities Companv (C. C.) 120 Fed. 721, 729; Addyston Pipe & Steel Company v. United States, 175 U. S. 211, 228, 229, 20 Sup. Ct. 96, 44 L. Ed. 136; United States v. Addyston Pipe & Steel Co., 85 Fed. 284, 29 C. C. A. 141, 46 L. R. A. 122; Smiley v. Kansas, 196 U. S. 447, 456, 25 Sup. Ct. 289, 49 L. Ed. 546; New Haven R. R. Co. v. Interstate Commerce Commission, 200 U. S. 361, 398, 26 Sup. Ct. 272, 50 L. Ed. 515; Texas Pacific Ry. Co. v. Mugg, 202 U. S. 242, 245, 26 Sup. Ct. 628, 50 L. Ed. 1011 ; Armour Packing Co. v. United States, 209 U. S. 56, 82, 28 Sup. Ct. 428, 52 L. Ed. 681; Shawnee Compress Company v. Anderson, 209 U. S. 423, 433, 28 Sup. Ct. 572, 52 L. Ed. 865; United States v. American Tobacco Company (C. C.) 164 Fed. 700, 718. 3. It is true that railway corporations owe duties to the public which do not rest upon trading, manufacturing, and private transportation companies, such as the duty to operate continually their railroads and the duty to carry persons and property presented for transportation at reasonable rates; but the power of Congress to regulate interstate and foreign commerce and the exertion of that power manifested in the anti-trust act embrace all persons and corporations engaged in such commerce, as is amply illustrated in the various applications of the act which have been made in the several decisions here cited. The mis — 188 — chief against which that law was leveled is hot less threatening from a vast combination of private corporations owning and using in interstate and foreign commerce property worth hundreds of millions of dollars than from a combination of two railway companies. The act makes no distinction between them, it excepts neither class, and where Congress has made no exception it is not the province of the courts to do so. No countervailing reason overcomes these considerations, and the vesting of the majority of the stock of many potentially competitive private corporations engaged in interstate commerce in a holding company, which would be violative of the anti-trust act if made by the stockholders of railway companies of that character, must be subject to the condemnation of that statute. The purpose of the act of July 2, 189.0, was to prevent the stifling and the substantial restriction of competition in interstate and international commerce. The test under that act of the legality of a combination or conspiracy is its direct and necessary effect upon such competition. If its necessary effect is but incidentally or indirectly to restrict competition, while its chief result is to foster the trade and increase the business of those who make and operate it, it is not violative of this law. Hopkins v. United States, 171 U. S. 578, 592, 19 Sup. Ct. 40, 43 L. Ed. 290; Anderson v. United States, 171 U. S. 604, 606, 19 Sup. Ct. 50, 43 L. Ed. 300; United States v. Joint Traffic Association, 171 U. S. 505, 568, 19 Sup. Ct. 25, 43 L. Ed. 259; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 245, 20 Sup. Ct. 96, 44 L. Ed. 136. But if its necessary effect is to stifle, or directly and substantially to restrict, free competition in commerce among the states or with foreign nations, it is a combination or conspiracy in restraint of that trade, and it falls under the ban of the act. United States v. Trans-Missouri Freight Association, 166 U. S. 290, 339, 340, 342, 17 Sup. Ct. 540, 41 L. Ed. 1007; Addyston Pipe & Steel Company v. United States, 175 U. S. 211, 234, 20 Sup. Ct. 96, 44 L. Ed. 136; United States v. Joint Traffic Association, 171 U. S. 505, 576, 577, 19 Sup. Ct. 25, 43 L. Ed. 259; United States v. Northern Securities Company (C. C.) 120 Fed. 721, 722. And the power to restrict competition in interstate and international commerce, vested in a person or an association of persons by a contract or combination, is indicative of its character; for it is to the interest of the parties that such a power should be exercised, and the presumption is that it will be. In the case under consideration it has been exercised, and thereby the principal company has prevented competition between the corporations it controls since 1899. In Harriman v. Northern Securities Company, 197 U. S., at page 291, 25 Sup. Ct. 503, 49 L. Ed. 739, Chief Justice Fuller, speaking of the decision in the case of the Northern Securities Company, said: “For the purposes of that suit it was enough that in any capacity the Securities Company had the power to vote the railway shares and to receive the dividends thereon. The objection was that the exercise of its powers, whether those of owner or of trustee, would tend to prevent competition, and thus to restrain commerce. Some of our number thought that, as the Securities Company owned the stock, the relief sought could not be granted; hut the conclusion was that the possession of the power, which, if exercised, would prevent — 189 — competition, brought the case within the statute, no matter what the tenure of title was.” 4. Counsel argue with persuasive force that the transfer of the stock of the 19 corporations to the principal company wrought no substantial restriction of competition, because the owners of that stock had and exercised the same power of restraint before that transfer that was vested in the Standard Oil Company of New Jersey thereafter. But the power of the principal company after the transfer of 1899 to fix the prices at which the 30 corporations should buy and sell the articles in which they dealt, the terms of their purchases and sales, their rates for the transportation of oil and its products, and all the infinite details of their vast operations in which they might compete, and thereby to prevent their competition, was greater, more easily and quickly exercised, and hence more effective, than it could have been in the hands of 3,000 scattered stockholders. The trust deed of 1879, the trust agreement of 1882, the withholding of the separate certificates of shares of stock in each corporation from the holders of the trust certificates in the dissolution of that trust until they took their shares in all of the corporations, bear convincing testimony to the soundness of this proposition. The combination formed by that transfer and its power to restrict competition were less liable to be destroyed, more reliable and permanent, than those springing from the joint ownership by 3,000 stockholders of each corporation. There is much more probability that corporations potentially competitive will separate and compete, when each of their stockholders has a separate certificate of his shares of stock in each corporation, -which he is free to sell, than when a majority of the stock of each of the corporations is held by a single corporation, which has the power to vote the stock and to operate them. And although the group of stockholders led by Mr. Mill and Mr. Morgan had the same power to prevent competition between the two railway companies that the stockholders of these corporations had to prevent competition between them, the Supreme Court held in the case of the Northern Securities Company that their transfer of their stock to the holding company granted to that corporation a power so much greater and more effective than that held by the stockholders of the railway companies that the necessary effect of it was a restriction of competition so direct and substantial that it made it an illegal combination in restraint of interstate commerce. Because the power to restrict competition in interstate commerce granted to the Standard Oil Company of New Jersey by the transfer to it of the stock of the 19 companies and of the authority to manage and operate them and the other corporations which they controlled was the absolute power to prevent competition among any of these corporations, because this power was greater, more easily exercised,- more effective, and more durable than that which the 3,000 stockholders of these corporations previously had, because many of these corporations were potentially competitive and were engaged in interstate commerce, and tile necessary effect of the transfer of the stock of the 19 companies to the holding company was, under the decision in the case of the Northern Securities Company, a direct and substantial resfrie — 190 — tion of that commerce, that transfer and the operation of the companies under it constituted a combination or conspiracy in restraint of interstate and international commerce in. violation of the anti-trust act of July 2, 1890. This court is not authorized to punish past violations of this law in this suit. Its power is “to prevent and'restrain violations of this act,” and the defendants insist that the United States is entitled to no relief, because it has failed to prove that they are now violating, or that when the bill was filed they were violating, this law. But the power to vote the stock, to elect the officers of the subsidiary corporations, to control and operate them, and thereby to restrict their competition in interstate and international commerce, was illegally granted to the Standard Oil Company of New Jersey in 1899, and that company ever since has exercised unlawfully and is still so using that authority, the seven individual defendants are dominating and directing its exercise of this power, the subsidiary corporations are knowingly submitting to and assisting that exercise, and all of them are participating in the fruits of it. These • are menacing and continuing violations of the act which Congress has imposed the duty upon the courts to restrain and prevent. The second section of the anti-trust act declares that: “Every person wbo shall monopolize, or attempt to monopolize, or combine, or conspire, with any other person or persons to monopolize any part of trade or commerce among the several states or with foreign nations shall be guilty of a misdemeanor.” The United States alleges in its bill that the object and effect of the illegal combination and conspiracy, which has been found to exist, were to monopolize, and that the defendants combined and conspired to monopolize, a substantial part of interstate and international commerce in petroleum and its products, in violation of this section of the law. It also avers that at various times between 1870 and the date of the filing of the bill the defendants (1) secured from common carriers preferential rates and rebates; (2) made contracts with some of their competitors which limited the production, output, and markets of the latter; (3) operated companies represented to be independent, when they were not so; (4) procured from employés of railroads information of the trade of competitors, and used it to destroy the latters’ business and to secure the commerce for themselves; and (5) sold their products at times and places where there was competition below remunerative prices, and recouped their losses by selling such products at high prices at other times and places. The gist of the violation of the second section of the act charged in the bill, however, is not the monopolization of interstate or international commerce by a single person or corporation. It is the combination and conspiracy of the numerous defendants, many of them formerly competitors, to restrain trade and to monopolize that commerce, and the burden of its prayer is that the continuance of this combination and conspiracy may be enj'oined. The proof is conclusive that the defendants have secured and now enjoy a very substantial part of the interstate and international commerce in petroleum and its products. But counsel for the defendants in — 191 — sist that this does not constitute an unlawful monopoly, that such a monopoly does not result from the magnitude or proportion of the commerce obtained by one or more individuals or corporations, unless unlawful means are used to obtain it, and .that the power of the court to enjoin under the second section is limited to the prohibition of the use of continuing or threatened unlawful means and their like which have a direct and substantial effect to continue the illegal monopoly. Undoubtedly every person engaged in interstate commerce necessarily attempts to draw to himself, to the exclusion of others, and thereby to monopolize, a part of that trade. Every sale and every transportation of an article which is the subject of interstate commerce evidences a successful attempt to monopolize that trade or commerce which concerns that sale or transportation. If the second section of the act prohibits every attempt to monopolize any part of interstate commerce, it forbids all competition therein, and defeats tlic only purpose of the law; lor there can be no competition, unless each competitor is permitted to attempt to draw to himself, and thereby to monopolize, some part of the commerce. This is not, it cannot be, the proper interpretation of this section. It must he so construed as to abate the mischief it was passed to destroy and to promote the remedy it provided. It was enacted, not to stifle, but to foster, competition, and its true construction is that, while unlawful means to monopolize and to continué an unlawful monopoly of interstate and international commerce are misdemeanors and enjoinable under it, monopolies of part of interstate and international commerce by legitimate competition, however successful, are not denounced by the law, and may not be forbidden by the courts. Whitwell v. Continental Tobacco Co., 60 C. C. A. 290, 298, 125 Fed. 454. 462, 64 L. R. A. 689; Phillips v. Iola Portland Cement Company, 61 C. C. A. 19, 20, 125 Fed. 593, 594. But in the case under consideration the combination and conspiracy in restraint of trade and its continued execution, which have been found to exist, constitute illegal means by which the conspiring defendants combined, and still combine and conspire, to monopolize a part of interstate and international commerce, and by which they have secured an unlawful monopoly of a substantial part of 'it, and this conspiracy constitutes as clear and complete a violation of the second as of the first section of the act. Upon the ground that the defendants have thus violated, and are violating, the second section of the act, as fully as upon the ground that they have violated its first section, the decree in favor of the government must be, and is, based. The combination and conspiracy, including in those terms the illegal devices by which they were created and are continued, were the source, and they are the support, of the unlawful monopoly. Without them it wottld not have existed and cannot continue, and the continued use of these and like means, including the distribution of the stock of the various defendants ratably among the shareholders of the Standard Oil Company, and the conveyance of the physical property and business of the defendants to one of their number to perpetuate the unlawful monopoly, must be, and it is, prohibited by the decree herein. As illegal means whereby the unlawful monopoly was created and is maintained have been proved and found in the combination and con — 192 — spiracy, and as their use to prolong the unlawful monopoly must be enjoined, the questions whether or not the charges in the bill that other unlawful means were or are employed are true, and whether or not the power of the court to prevent the existence or continuance of a monopoly is limited to the prohibition of the use of illegal means and their like have become moot, and it is unnecessary to express any opinion upon them. It is a grave, and delicate task to determine the exact limits of the relief to which the government is entitled. The prohibition of the court must forbid the performance of the continuing and threatened illegal acts which have had, and are having, a direct and substantial effect to restrain commerce among the states and with foreign nations, and to continue the unlawful monopoly and all like acts which have the same effect. But it may not prohibit all possible .violations of the law, and thus put the whole conduct of the defendant’s business at the peril of a summons for contempt. Past unlawful competition does not deprive parties of their right to conduct lawful competition. New York, N. H. & H. R. R. v. Interstate Commerce Commission, 200 U. S. 361, 404, 26 Sup. Ct. 272, 282, 50 L. Ed. 515. The court must steer as best it may (Swift & Company v. United States, 196 U. S. 375, 396, 25 Sup. Ct. 276, 279, 49 L. Ed. 518) between its duty “to prevent and restrain violations of” this act of Congress and its duty not to deprive the defendants of their right to engage in lawful competition for interstate and international commerce. In our opinion this duty will be discharged, the rights of the defendants to engage in lawful competition for interstate and international commerce will not be infringed, and the .full relief to which the United States is entitled under the law and the evidence will be granted by a decree in its favor to the following effect: That the Standard Oil Company of New Jersey, the seven individual defendants, and all of the subsidiary defendant companies engaged in commerce in petroleum or its products among the states or with foreign nations controlled by the principal company, have entered into and are operating a combination or conspiracy in restraint of trade and commerce among the several states, such as is denounced as illegal by section 1 of the anti-trust act of July 2, 1890, and have combined and conspired to- monopolize, have secured thereby an unlawful monopoly of, and are combining and conspiring to1 continue to monopolize, a substantial part of interstate and international commerce in violation of section 2 of that act; that the Standard Oil Company of New Jersey be enjoined from voting the stock in any of these defendant companies which it acquired by virtue of that combination, and from exercising or attempting to exercise any control, direction, supervision, or influence over the acts of any of these companies by virtue of its holding of the stock and power secured through that combination; that the other defendant companies which are parties to the combination be enjoined from declaring or paying any dividends to the Standard Oil Company on account of any stock acquired by it through that combination, from permitting that company to vote such stock or to direct the policy of any of said companies, or to exercise any control whatsoever over their corporate acts by virtue of the stock or power — 193 — which it secured by means of that combination; that the seven individual defendants and the corporations and partnerships that became parties to this combination be enjoined from continuing it or carrying it out, and from entering into or performing any like combination the effect of which is, or will be, to restrain or monopolize, or to continue-their unlawful monopoly of interstate commerce in petroleum and its products, in violation of the anti-trust act, either (1) by placing the control of any of said corporations in a trustee, or in a group of trustees, by means of the holding of its stock or property by others than its equitable 'owners, by causing the conveyance of the physical property and business of two or more potentially competitive parties to the combination to any party thereto, or by any other such act, or (2) by making any express or implied agreement or arrangement together, or one with another, like that adjudged illegal hereby, relative to the control or management of any of said corporations, or the price or terms of purchase or of sale, or the rates of transportatioh of petroleum or its products in interstate or international commerce, or relative to the quantities thereof purchased, sold, transported, or manufactured by any of said corporations, which will have a like effect in restraint of commerce among the states, in the territories, and with foreign nations to that of the combination the operation of which is hereby enjoined; that the defendants who are parties to the combination be enjoined from engaging or continuing in interstate commerce in petroleum and its products during the continuance of the illegal combination; that the United States recover its costs of the defendants who are parties 'to the combination, and that the other defendants be dismissed. VAN DEVANTER, HOOK, and ADAMS, Circuit Judges, concur. Footnotes [*] For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes