Public Policy in Respect to Monopole I 1

§ 6.

Competition sometimes favored regardless of re sults. In another respect the courts have wavered in their attitude toward competition, the general doctrine being that competition, particularly the cutting of prices, is absolutely justifiable, regardless of circumstances. In the leading Eng lish case the facts were that the larger steamship companies sent to Hankow additional ships, now called, figuratively, "fighting-ships," to "smash" freights in order to ruin tramp steamship owners and drive them out of the field. The court held that this constituted no legal wrong to the tramp steam ship owners, and scouted the idea of the court's looking at the motives in price-cutting, or taking into consideration in any way what the court called "some imaginary normal stand ard of freights and prices." And of this case the lawyer is forced to say : "Undoubtedly the excellent opinion just quoted represents the law everywhere," even though there are other cases difficult to harmonize with it.° To the economist, not bound in like manner by legal prece dent, such a verdict seems short-sighted and mistaken. The court appears to have considered only the rights of the private litigants, the tramp steamship owners, not the a 115 Ga., 429.

Mogul Steamship Company v. McGregor I L. R. 23 Q. B. D. 5981.

s Bruce Wyman, "Control of the Market," p. 22. But see next

II.

rights and interests of the shipping public; it considered the immediate and not the ultimate effects of the "smashing" of rates; it allowed itself to be deceived by the appearance of acts that in outer form were competition, but that had as their purpose the strengthening and maintenance of monop oly-. These acts are forms of the "unfair" practices that will be mentioned later..

§ 7. Increasing regard for results of competition. De spite the binding precedents, the courts in some later deci sions have refused to look upon competition as good regard less of its motives and of its consequences. In a federal case 10 the judge, in a brief and acute dictum, recognized the evil of a rate war that would result from threats of definite cuts. They impair "the usefulness of the railroads them selves, and cause great public and private loss." The court's opinion was no doubt largely influenced by the fact road rates were already subject to regulation: "Every pre caution has been taken by state legislatures and by the Con gress to keep them just and reasonable,—just and reasonable for the public and for the carriers." In a state case 11 the facts were that a man of wealth started a barber-shop and employed a barber to injure the plaintiff and drive him out of business. The court recognized that

while, as a general proposition, "competition in trade and business is desirable," it may in certain cases result in "grievous and manifold wrongs to individuals"; and in this ease the "malevolent" man of wealth was declared to be "guilty of a wanton wrong and an actionable tort." The economist can but pronounce this judgment admirable as far as it goes, but it is remarkably confined to a consideration of the private legal rights of the injured competitor, and gives hardly a hint of a higher criterion for judging competitive acts, that of the general welfare.

9 See below, I 15.

la Averrill v. Southern Railway (75 Fed. Rep. 736). 11 107 Minn. 145.

The further enlightenment of judicial opinion upon the subject of cutthroat competition used as a tool to create monopoly was shown in the granting of an injunction by a federal court, in restraining the use of "fighting ships" by a combination, and by the indication in 1915 23 of the willingness to grant a similar injunction if necessary. Similarly "fighting brands" of goods have been recently pro hibited.

§ 8. Common-law remedy for monopoly ineffective. The common law contained prohibitions enough, both broad and specific, against contracts and acts in restraint of trade. The common law contained likewise a closely related body of doc trine by which the railroads, as common carriers, ought to have given equitable and undiscriminating rates to all ship pers. There was a strong body of influential opinion that long maintained that the common law was sufficient to prevent monopoly, that the only thing needed was to enforce it. Even now, after all that has elapsed, there are some in railroad and business circles who still appear to hold that opinion. But the evils of railroad discrimination and of other monopolistic practices continued, and for some cause the common law was not enforced, excepting occasionally, disconnectedly, and without important results.

Why? The answer may be ventured that in the common law the whole question of restraint of trade was treated pri marily as one of private rights and only incidentally as one involving general public policy. Cases came before the courts only on complaint of some individual who felt injured. Now the injury of higher pfices due to eontracts in restraint of trade is usually diffused among many customers, and the loss of any one is less than the expense of bringing suit. Consequently, it rarely happened that eases were brought be fore the courts except by one of the two equally guilty parties to a contract in restraint of trade, when the other party had 12 216 Fed. 971.