International Harvester Co. of America v. Missouri

delivered the opinion of the court.

Information in the nature of quo warranto brought in the Supreme Court of the State to exclude plaintiff in error from the corporate rights, privileges and franchises exer

The ground of the action is the alleged violation of the statutes of the State passed respectively in 1899 and 1909 and entitled “Pools, Trusts and Conspiracies” and “Pools, Trusts and Conspiracies and Discriminations.”

The facts alleged in the information are these: Plaintiff in error is a Wisconsin corporation engaged in the manufacture and sale of agricultural implements, binders, mowers, etc., and was licensed on. the fifth of April, 1892, to do business in Missouri under the name of the Milwaukee Harvester Company, and on September 18, 1902, became licensed to do and engaged in such business in the State. In that year the International Harvester Company of New Jersey was organized with a capital stock of $120,000,000 for the purpose of effecting a combination of plaintiff in error and certain other companies to restrain competition in the manufacture and sale of such agricultural implements in Missouri, and the New Jersey company has maintained plaintiff in error as its sole selling agent in Missouri. Before the combination the companies combined were competitors of one another and of other corporations, individuals and partnerships engaged in the same business in the State and that thereby the people of the State, and particularly the retail dealers and farmers of the State, received the benefit of competition in the purchase and sale of farm implements. The combination was designed and made with a view to lessen, and it tended to lessen, free competition in such implements, and thereby the said corporations entered into and became members of a pool, trust, combination and agreement. In furtherance thereof and for the purpose of giving the International Harvester Company of New Jersey a

The answer of plaintiff in error denied that it had become a party to any combination or that in its transactions there was any purpose to restrain or'lessen competition, or that trade had been or was restrained.

The case was referred to a special commissioner to take the evidence and report his conclusions. He found, as alleged in the information, that the International Harvester Company of New Jersey was a combination of the properties and businesses of formerly competing harvester companies, and plaintiff in error being one of such companies and, thereafter by selling the New Jersey company’s products in Missouri, had violated the Missouri statutes against pools, trusts and conspiracies.

In exceptions to the report of the special commissioner plaintiff in error urged that the statute of Missouri violated the equality clause and due process clause of the Fourteenth Amendment to the Constitution of the United States, “(1) Because said statute arbitrarily discrim

These exceptions were urged and argued in the Supreme Court upon the filing of the commissioner’s report. Judgment was entered upon the report, in which it was adjudged that by reason of the violation of the statutes of the State as charged in the information, plaintiff in error had forfeited the license theretofore granted to it to do business in the State, and it was adjudged that the license be forfeited and canceled and the company ousted from its rights and franchises granted by the State to do business in the State, and a fine of $50,000 was imposed upon it. It was, however, provided that upon payment of the fine on or before the first of January, 1912, and immediately ceasing all connection with the International Harvester Company of New Jersey and the corporations and co-partnerships with which it had combined, and not continuing and maintaining the unlawful agreement and com

A motion is made to dismiss on the ground that plaintiff in error in its answer simply denied that it had violated the anti-trust laws of the State, and, it is contended, that by not alleging in its answer that those laws violated the Constitution of the United States it waived such defense. It is further contended that because the Federal right was not assertéd in the answer the Supreme Court of the State could not have considered, and did not consider or decide it. Decisions of the Supreme Court of Missouri are cited to sustain the contentions. The decisions declare • the proposition that constitutional questions must be raised at the first opportunity or, as it is expressed in'one of the cases (Brown v. Railway Co., 175 Missouri, 185, 188), “the protection of the Constitution must be timely and properly invoked in the trial court.”

In Milling Company v. Blake, 242 Missouri, 23, 31, it is said: “The rule of this court is that so grave a question [constitutional question] must be lodged at the first opportunity, or it will be deemed to have been waived. If it can be appropriately and naturally raised in the pleadings, and thereby be a question lodged in the record proper, such is the time and place to raise it,” and that it is too late to raise the question after judgment in a motion for new trial. In Hertzler v. Railway Co., 218 Missouri, 562, 564, it was held: “The motion for a new trial was not

It is manifest, we think, that the court only intended to express the condition of appellate review to be that in the trial court constitutional questions should not be reserved until the case had gone to judgment on other issues, and then „ used to secure a new trial. The principle of the rulings is satisfied in the case at bar. It is, as we have seen, an original proceeding in the Supreme Court and upon the report of the commissioner which brought the case to the court for decision of the issues and questions involved in it the Federal questions were made “under correct safeguards and earmarked as of substance and not mere color.” It is true the court has not referred to them in its opinion, but we cannot regard its silence as a condemnation of the time or manner at or in which they were raised. The motion to dismiss is, therefore, denied.

The assignments of error necessarily involve a consideration of the statutes. The relevant provisions are contained in § 10301 of the Revised Statutes of the State of 1909, and § 8966 of the Revised Statutes of 1899.

Section 10301 provides, “that all arrangements, contracts, agreements, combinations or understandings made, or entered into between any two or more persons, designed or made with a view to lessen, or which tend to lessen, lawful trade, or full and free competition in the importation, transportation, manufacture or sale” in the State “of any product, commodity or article, or thing bought and sold,” and all such arrangements, etc., “which are designed or made with a view to increase, or which tend to increase the market price of any product, commodity or article or thing, of any class or kind whatsoever

Section 8966 provides that arrangements, etc., such as described in § 10301, having like purpose, and all such arrangements, etc., “whereby, or under the terms of which, it is proposed, stipulated, provided, agreed or understood that any person, association of persons or corporations doing business in” the State, “shall deal in, sell or offer for sale” in the State “any particular or specified article, product or commodity, and shall not during the continuance or existence of any such arrangement, . . . deal in, sell or offer for sale,” in the State, “any competing article, product or commodity,” are declared to be against public policy, unlawful and void; and any person offending “shall, be deemed and adjudged guilty of a conspiracy to defraud, and be subject to the penalties” provided.

By § 10304 of the Revised Statutes of 1909 it is provided that domestic offending corporations shall forfeit their charters and all or any part of their property as shall be adjudged by a court of competent jurisdiction, or be fined in lieu of the forfeiture of charters or of property.

Foreign offending corporations shall forfeit their right to do business in the State, with forfeiture also of property or, in lieu thereof, the payment of a fine.

In State v. Standard Oil Co., 218 Missouri, 1, 370, 372, the Supreme Court held that the anti-trust statutes of the State “are limited in their scope and operations to persons and corporations dealing in commodities, and do not include combinations of persons engaged in labor pursuits.” And, justifying the statutes against a charge of illegal discrimination, thé court further said that “it must be borne in mind that the differentiation between labor and property is so great that they do not belong to the same

Accepting the construction put upon the statute, but contesting its legality as thus construed, plaintiff in error makes three contentions, (1) The statutes as so construed unreasonably and arbitrarily limit the right of contract; (2) discriminate between the vendors of commodities and the vendors of. labor and services, and (3) between vendors and purchasers of commodities.

(1). The specification under this head is that the Supreme Court found, it is contended, benefit — not injury — to the public had resulted from the alleged combination. Granting that this is. not an overstatement of the opinion the answer is immediate. It is too late in the day to assert against statutes which forbid combinations of competing companies that a particular combination was induced by good intentions and has had some good effect. Armour Packing Co. v. United States, 209 U. S. 56 , 62; Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20 , 49. The purpose of such statutes is to secure competition and preclude combinations which tend to defeat it. And such is explicitly the purpose and policy of the Missouri statutes; and they have been sustained by the Supreme Court. There is nothing in the Constitution of the United States which precludes a State from adopting and enforcing such policy. To so decide would be stepping backwards. Carroll v. Greenwich Ins. Co., 199 U. S. 401 ; Central Lumber Co. v. South Dakota, 226 U. S. 157 .

It is true that the Supreme Court did not find a definite abuse of its powers by plaintiff in error, but it did find that there was an offending against the statute, a union of able competitors and a cessation of their competition, and the court said, p. 395: “Some of the smaller concerns that were competitors in the market have ceased their struggle for existence and retired from the field.” This is one

(2) and (3). These contentions may be considered together, both involving a charge of discrimination — the one because the law does not embrace vendors of labor, the other because it does not cover purchasers of commodities as well as vendors of them. Both, therefore, invoke a consideration of the power of classification which may be exerted in the legislation of the State. And we shall presently see that power has very broad range. A classification is not' invalid because of simple inequality. We said in Atchison, Topeka & Santa Fe R. R. Co. v. Matthews, 174 U. S. 96 , 106, by Mr. Justice Brewer, “The very idea of classification is that of inequality, so that it goes without saying that the fact of inequality in no manner determines the matter of constitutionality.” Therefore, it may be there is restraint of competition in a combination of laborers ana in a combination of purchasers, but that does not demonstrate that legislation which does not include either combination is illegal. Whether it would have been better policy to have made such comprehensive classification it is not our province to decide. In other words, whether a combination of wagé earners or purchasers of commodities called for repression by law under the conditions in the State was for the legislature of the State to determine.

Carroll v. Greenwich Ins. Co., supra, is especially apposite. It contains the elements of the case at bar and a decision upon them. It will be observed that the statute, which it was said declared the general policy of Iowa, was a prohibition against a combination of producers and sellers. There was the same distinction,. therefore, be

We might leave the discussion with that and the other cases. They decide that we are helped little in determining the legality of a legislative classification by making broad generalizations, and it is for a broad generalization that plaintiff in error contends — indeed, a generalization which includes all the activities and occupations of life, and there is an enumeration of wage earners in emphasis of the discrimination in which manufacturers and sellers are singled out from all others. The contention is deceptive, and yet it is earnestly urged in various ways which it would' extend this opinion too much to detail. “In dealing with'restraints of trade,” it is said, “the proper basis of classification is obviously neither in commodities nor services, nor in persons, but in restraints.” A law, to be valid, therefore, is the inflexible deduction, cannot distinguish between “restraints,” but must apply to all restraints, whatever their degree or effect or purpose, and that because the Missouri statute has not this universal operation it offends against the equality required by the Fourteenth Amendment. This court has decided many times that a legislative classification does not have to possess such comprehensive extent. Classification must be accommodated to the problems of legislation, and we decided in Ozan Lumber Co. v. Union County, Bank, 207 U. S.

. The instances of these cases are instructive. In the first there was a difference made between land owners as to liability for permitting certain noxious grasses to go to seed on the lands. In the second, the statute passed on made a difference bétween businesses in the solicitation of patronage on railroad trains and at depots. In the third a difference based on the evidence of qualification of physicians was declared valid.

In Western Union Telegraph Co. v. Milling Co., 218 U. S. 406 , a distinction was made between common carriers in the power to limit liability for negligence. In Engd v. O’Malley, supra, a distinction between, bankers was sustained; and in Provident Savings Institution v. Malone, 221 U. S. 660 , deposits in savings banks were distinguished from deposits in other banks in the application of the statute of limitations.

Other cases might be. cited whose instances illustrate the same principle and in which this court has refused to accept the higher generalizations urged as necessary to the fulfilment of the- constitutional guaranty of the equal pro

And so in the case at bar. Whether the Missouri statute. should have set its condemnation on restraints generally, prohibiting combined action for any purpose and to everybody, or confined it as the statute does to manufacturers and vendors of articles and permitting it to purchasers of such articles; prohibiting it to sellers of commodities and permitting it to sellers of services, was a matter of legislative judgment and we cannot say that the distinctions made, are palpably arbitrary, which we have seen is the condition of judicial review. It is to be remembered that the question presented is of the power of the legislature, not the policy of the exercise of the power. To be able to find fault, therefore, with such policy-is not to establish the invalidity of the law based upon it.

It is said that the statute as construed by the Supreme Court of the State comes within our ruling in Connolly v. Union Sewer Pipe Co., 184 U. S. 540 , but we do not think so. If it did we should, of course, apply that ruling here.

Judgment affirmed.