LEGAL POSITION. When a Trust or combina tion is organized, its rights and powers are de termined by the ordinary rules of common and statute law applicable to the particular form of organization adopted. That is, if the com bination is a Trust, its rights and powers are determined by the ordinary rules of law gov erning Trusts; or if the combination is effected by one of the methods of corporate combination, its rights and powers are determined by the general law of corporations. Aside from these questions of the methods of organizing combina tions, the Trusts raise no peculiar legal issues except that as to their legality when organized.
In ascertaining whether a combination is un lawful at common law, it should be remembered that the mere combination or corporation of sev eral individuals is not in itself unlawful, and in the ease of partnerships and corporations com bination of individuals is encouraged by the law. Combination by corporations, however, as has already been indicated, when not authorized by statute, may be such an or mis use of their corporate franchises as to be illegal under the general law of corporations. hi gen eral it may be said that combinations are un lawful per se only when the purpose of the com bination is unlawful or against public policy, or when the means adopted by the combination for effecting its purposes are unlawful or against public policy.
The grounds upon which combinations have been held to be unlawful at common law may be somewhat roughly classified as follows: (1) That the contract (when the combination has been effected by contract) is illegal and void at common law because in restraint of trade. (2) That the combination is all unlawful conspiracy, either civil or criminal. (See CoxsrinAcv.) Technically the second class includes the first, since there eau be no combination without two or more parties to it who are technically guilty of conspiracy where the purpose is to enter into an illegal contract. Since, however, each is recognized as a distinct ground for declaring combinations illegal, the classification may be adopted as both convenient and practical. For a full discussion of the legal doctrines relating to restraint of trade and conspiracy, reference should be made to those topics. (See also MONOPOLY, ENGROSSING, FORESTALLING, BEGRAT ING.) With reference to conspiracy, it may be said that combinations are conspiracies, and therefore unlawful, when the purpose of the agreement or combination is either to do some thing unlawful or to do something lawful hi an unlawful manner. In general, combinations are held to be illegal because of their purposes and methods when they restrain fair competition or create oppressive monopolies. Owing to the difficulty of applying this test to any particular case, it may be extremely difficult to draw a clear line of distinction between those combina tions which are lawful and those which are unlawful.
At common law the remedies of individuals against acts of illegal combination are limited to the recovery of any damage suffered because of the unlawful conspiracy involved in the com bination or to the securing of an injunction re straining those joined in the combination from doing some threatened injury to the In either ease it is necessary for the plaintiff to show actual damage suffered by him or that the defendant threatened to do some act caus ing such damage. When the combination is in the corporate form and is acting outside its corporate powers, or its constituent corporations have ceased to act as separate corporations so as to amount to an abandonment of their char ters, the State may proceed against the cor porate combination or any of the constituent corporations to compel a forfeiture of its char ter by quo warrunto. There is, however, no other method at common law by which either the State or a private individual could proceed against a combination on the ground that it is illegal and is working a public injury. As a result of agitation upon the subject of Trusts, almost all of the United States have adopted statutes or clauses in their State constitutions restraining or prohibiting all contracts, agreements. under takings, or combinations in restraint of trade or tending to create monopolies, whether such restraint would have been unlawful at common law or not. In general the courts have held that these statutes are constitutional under both State and Federal constitutions, and not in violation of the eonstitutinnal provisions against abridging the freedom of contract, depriving citizens of liberty or property without due pro cess of law, or denying them equal protection of the laws. In the interpretation of these statutes, however, the courts have justly regarded them as an innovation upon the common law to be interpreted with strictness and caution. More over, the difficulty of giving such legislation its proper effect without making it subversive of established rights of property has to some extent prevented all these restraining acts from having the effect intended. It may be said that the prin cipal test to be applied in determining whether statutes of this class are violated is whether the act or agreement complained of was done with intent to control prices or whether such would be a natural result of the act or agreement. They usually provide that contracts made in con nection with such an act or agreement shall be void, and attach criminal or quasi-criminal pen alties for their violation. In some States parties injured by such violations of anti-monopoly statutes are given rights of action to recover damages for the injury suffered.