United States v. U.S. Steel Corp., 251 U.S. 417 (1920)

Congress was moved to pass the Anti-Trust Act by two main considerations: (1) The desire to preserve the competitve system of industry. (2) The conviction that p. 421that system was threatened by the undue concentration of commercial power resulting chiefly from the unrestricted exercise of the right of combination.

What constitutes a preponderant position must be determined in the light of conditions in the particular branch of trade affected. The principal factors to be considered are (1) the portion of the trade engrossed by the combination as compared with the portion possessed by each of its competitors as well as with the whole, and p. 422(2) the extent of the control, if any, acquired by the combination over raw materials or over the agencies of transportation and of distribution or over the reserve supply where the article of trade is one the supply of which is limited by nature.

It has never been doubted that combinations of this type, embracing a dominant proportion of those engaged in a particular industry and formed for the express purpose of suppressing competition between them, are combinations in restraint of trade. Addyston Pipe Co. v. United States, 175 U. S. 211; Swift & Co. v. United States, 196 U. S. 375, 394; Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 273, 408. Nor is it material, their purpose and effect being what they were, that the combinations here assailed were created in corporate form instead of by loose agreement. United States v. American Tobacco Co., 221 U. S. 106, 176, 181. Indeed, where, as here, corporations simply exchange their plants and businesses for stock in a consolidated corporation, the resulting combination is in no respect different in principle from a combination in the form of trust which the statute specifically prohibits. Northern Securities Co. v. United States, 193 U. S. 197, 326, 327; United States v. Reading Co., 226 U. S. 324, 352-363; s. c. 183 Fed. Rep. 427, 470; Patterson v. United States, 222 Fed. Rep. 599, 619, 620; Noyes, Intercorporate p. 423Relations, § 354; Eddy, Combinations, § 622. Wherefore we submit that the illegality of these combinations is not merely debatable, as the defendants themselves admit as to some, but is conclusive as to all. They were still occupying the illegal position thus acquired in various branches of the steel trade when united under the control of the United States Steel Corporation in 1901.

We are dealing here with a combination of competitors in the truest sense and not with the mere purchase by one competitor of the business of another as an incident of normal development. The distinction between a mere purchase of a competing business and a combination of competing businesses clothed in the form of purchases is sharply drawn in Shawnee Compress Co. v. Anderson, 209 p. 425U. S. 423. See Noyes, Intercorporate Relations, § 354. If the vast aggregation of competing businesses here involved occupying an overwhelmingly preponderant position in practically every branch of the iron and steel industry had been combined by executory agreement or in the old form of trust there would be none to dispute the illegality of the transaction. The legal situation is not changed by substituting a holding company as the instrument of combination. The vesting in such a company of the capital stocks of a group of able competitors for the purpose of centralizing control is no more lawful, is no more a normal method of business development, than the similar centralization of control in common trustees under the old form of trust. In such case, indeed, the holding company is but the old trust in corporate form. Northern Securities Co. v. United States, supra; Standard Oil Co. v. United States, 221 U. S. 1; Temple Iron Co. v. United States, 226 U. S. 324; s. c. 183 Fed. Rep. 427. It is literally a case, therefore, of the stockholders of a group of competing corporations transferring the control of each into the hands of a committee of trustees—a form of combination in restraint of trade which has ever been regarded as peculiarly obnoxious. If competitors controlling half the trade not alone in one product or in two but in an entire series of products constituting one of the grand divisions of industry may thus combine through a holding company, to what lengths can the process go without offending the law? If one-half of the steel industry may be thus combined through one holding company, certainly those controlling the other half would have the right to combine through another holding company. And of course if it be lawful to centralize control of the steel industry in two holding companies it would be equally lawful to centralize control of every other industry in two holding companies. Such undue concentration of control over industry was the very evil which the act was in-

The contention that a combination of such size and power was a necessary means to attain efficiency and to p. 427promote foreign trade is irrelevant in law. It is but another way of saying that good intentions can save the combination from illegality. Thomsen v. Cayser, 243 U. S. 66; United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 341 ; Addyston Pipe Co. v. United States, 175 U. S. 211, 234, 243; Swift & Co. v. United States, 196 U. S. 375, 396. The intent to violate the law implied from doing what the law prohibits renders immaterial every other intent, purpose, or motive. Bishop, New Criminal Law, § 343; Holmes, The Common Law, p. 52. Applying this principle, this court from the very beginning has held that a contract or combination by its own “inherent nature or effect,” without more may “restrain trade within the purview of the statute.” Any other construction would require courts to decide not only whether a given combination prevents the existence of effective competition or constitutes a virtual monopoly, but whether in their opinion monopoly would not be, on the whole, a better policy than competition—i. e., would compel them to act on frankly legislative grounds. Park & Sons Co. v. Hartman, 153 Fed. Rep. 24, 46. Congress rightly believed that the advantages of large business units, in so far as they are real and substantial, would inevitably assert themselves by normal growth. It closed the short cut to those advantages—monopolistic combination—because danger lies that way. “If there is evil in this it is accepted as less than that which may result from the unification of interest, and the power such unification gives.” National Cotton Oil Co. v. Texas, 197 U. S. 115, 129. “Competition is worth more to society than it costs.” Vegelahn v. Guntner, 107 Massachusetts, 92, 106. Furthermore, even if it would have been lawful for the many independent businesses combined through this holding company to unite to some extent to develop foreign trade—by joint selling agencies, for example—that can not justify the complete and permanent suppression of p. 428competition between them in domestic trade. United States v. Com Products Refining Co., 234 Fed. Rep. 964, 1016; United States v. Union Pacific R. R. Co., 226 U. S. 61, 93.

The present bill charges a combination to suppress p. 429competition between the parties to the combination themselves. In such a case the only question is whether the combination embraces competitors in sufficient number and of sufficient importance to make the resulting restriction of competition a substantial or undue restriction. Whether such a combination is also attempting to hinder the competition of those outside the combination is of no weight except as a matter of aggravation.

Mr. Richard V. Lindabury, Mr. David A. Reed and Mr. Cordenio A. Severance, with whom Mr. Raynal C. Bolling was on the brief, for United States Steel Corporation et al., appellees, cited and discussed the following, as revealing what the Anti-Trust Act means by “restraint of trade”: Senator Hoar, Autobiography of Seventy Years, vol. II, p. 364; United States v. Du Pont De Nemours & Co., 188 Fed. Rep. 127, 150; United States v. Trans-Missouri Freight Assn., 166 U. S. 290; Gibbs v. Baltimore Gas Co., 130 U. S. 396, 408; Northern Securities Co. v. United States, 193 U. S. 197, 337, 361; Standard Oil Co. v. United States, 221U. S. 1, 58, 60,61; United States p. 431v. American Tobacco Co., 221 U. S. 106,179; United States v. Terminal Railroad Assn., 224 U. S. 383, 394; Nash v. United States, 229 U. S. 373, 376.

No intent to monopolize or to restrain trade is shown by the circumstances which led up to and surrounded the organization of the Corporation. The organization was but a natural and normal development from existing trade and manufacturing conditions and was only notable because of the largeness of the conception which underlay it and the courage exhibited in undertaking to carry it out. But ability to think large and courage to execute the thought are not condemned by the law. Indeed, the p. 433future prosperity of our country must depend in large measure upon the encouragement given to these attributes of the American business man.

We insist that the acquisition of a preponderant position in a trade or manufacture (whether this means size or power) without unlawful intent and without excluding practices, does not constitute restraint of trade or monopoly either at common law or under the Federal Anti-Trust Act when no actual monopoly or actual restraint of trade results therefrom. How could it? Size in itself is nothing as we have already shown. And power to do wrong cannot be confounded with wrongdoing itself without leading to hopeless confusion. We are dealing with a criminal statute. If the acquisition of power to violate a statute is the equivalent of its violation, then all men are guilty, for all have acquired the power to violate not one but many statutes. In the opinions in some of the railroad cases {United, States v. Trans-Missouri Freight Assn., 166 U. S. 290, 334; Northern Securities Co. v. United States, 193 U. S. 197, 373; United States v. Union Pacific R. R. Co., 226 U. S. 61, 88) are to be found expressions to the effect that it is the scope of combinations of the kind there under consideration and the power to suppress competition and create monopoly which results therefrom that determines the applicability of the Anti-Trust Act. In those cases, however, the corporations combining were under a duty to compete, and any substantial suppression of competition between them was, therefore, illegal—the scope of the combinations (i. e., what they embraced) alone determining their illegality. No such rule has ever been applied to private trading or manufacturing companies, and this for the obvious reason that such companies are under no duty to compete. Meredith v. N. J. Zinc & Iron Co., 55 N. J. Eq. 212, 221. In the Tobacco Case the combination was condemned because the court thought the conclusion of wrongful purposes and illegal combination was overwhelmingly established by the circumstances surrounding the organization and the after-conduct of the company, showing an ever present intent to drive p. 436competitors out of the field and to monopolize the tobacco trade. Nothing, we submit, could be more unreasonable than to condemn every corporation, without regard to its purposes or practices, which happens to exceed in size or trade power any other competitor in the field. A rule which would lead to that result, instead of protecting commerce—which was the object of the Anti-Trust Act—would tend to throttle and destroy it by driving or keeping out of the competitive field all but the incompetents and inefficients.

Special charges of illegality and monopoly are made and special redresses and remedies are prayed, among others, that there be a prohibition of stock ownership and p. 437exercise of rights under such ownership, and that there shall be such orders and distribution of the stock and other properties as shall be in accordance with equity and good conscience and “ shall effectuate the purpose of the Anti-Trust Act.” General relief is also prayed.

The case was heard in the District Court by four judges. They agreed that the bill should be dismissed; they disagreed as to the reasons for it. 223 Fed. Rep. 55. One opinion (written by Judge Buffington and concurred in by Judge McPherson) expressed the view that the Steel Corporation was not formed with the intention or purpose to monopolize or restrain trade, and did not have the motive or effect “to prejudice the public interest by unduly restricting competition or unduly obstructing the course of trade.” The corporation, in the view of the opinion, was an evolution, a natural consummation of the tendencies of the industry on account of changing conditions, practically a compulsion from “the metallurgical method of making steel and the physical method of handling it,” this method, and the conditions consequent upon it, tending to combinations of capital and energies rather than diffusion in independent action. And the p. 438concentration of powers (we are still representing the opinion) was only such as was deemed necessary, and immediately manifested itself in improved methods and products and in an increase of domestic and foreign trade. Indeed an important purpose of the organization of the corporation was the building up of the export trade in steel and iron which at that time was sporadic, the mere dumping of the products upon foreign markets.

The other opinion (by Judge Woolley and concurred in by Judge Hunt, 223 Fed. Rep. 161) was in some particulars, in antithesis to Judge Buffington’s. The view was expressed that neither the Steel Corporation nor the preceding combinations, which were in a sense its antetypes, had the justification of industrial conditions, nor were they or it impelled by the necessity for integration, or compelled to unite in comprehensive enterprise because such had become a condition of success under the new order of things. On the contrary, that the organizers of the corporation and the preceding companies had illegal purpose from the very beginning, and the corporation p. 439became “a combination of combinations, by which, directly or indirectly, approximately 180 independent concerns were brought under one business control,” which, measured by the amount of production, extended to 80% or 90% of the entire output of the country, and that its purpose was to secure great profits which were thought possible in the light of the history of its constituent combinations, and to accomplish permanently what those combinations had demonstrated could be accomplished temporarily, and thereby monopolize and restrain trade.1

The Corporation, it was said, did not at any time abuse the power or ascendency it possessed. It resorted to none of the brutalities or tyrannies that the cases illustrate of p. 441other combinations. It did not secure freight rebates; it did not increase its profits by reducing the wages of its employees—whatever it did was not at the expense of labor; it did not increase its profits by lowering the quality of its products, nor create an artificial scarcity of them; it did not oppress or coerce its competitors—its competition, though vigorous, was fair; it did not undersell its competitors in some localities by reducing its prices there below those maintained elsewhere, or require its customers to enter into contracts limiting their purchases or restricting them in resale prices; it did not obtain customers by secret rebates or departures from its published prices; there was no evidence that it attempted to crush its competitors or drive them out of the market, nor did it take customers from its competitors by unfair means, and in its competition it seemed to make no difference between large and small competitors. Indeed it is said in many ways and illustrated that (‘instead of relying upon its own power to fix and maintain prices, the corporation, at its very beginning sought and obtained the assistance of others.” It combined its power with that of its competitors. It did not have power in and of itself, and the control it exerted was only in and by association with its competitors. Its offense, therefore, such as it was, was not different from theirs and was distinguished from theirs “only in the leadership it assumed in promulgating and perfecting the policy.” This leadership it gave up, and it had ceased to offend against the law before this suit was brought. It was hence concluded that it should be distinguished from its organizers and that their intent and unsuccessful attempt should not be attributed to it, that it “in and of itself is not now and has never been a monopoly or a combination in restraint of trade,” and a decree of dissolution should not be entered against it.

This summary of the opinions, given necessarily in paraphrase, does not adequately represent their ability p. 442and strength, but it has value as indicating the contentions of the parties, and the ultimate propositions to which the contentions are addressed. The opinions indicate that the evidence admits of different deductions as to the genesis of the Corporation and the purpose of its organizers, but only of a single deduction as to the power it attained and could exercise. Both opinions were clear and confident that the power of the Corporation never did and does not now reach to monopoly, and their review of the evidence, and our independent examination of it, enable us to elect between their respective estimates of it, and we concur in the main with that of Judges Woolley and Hunt. And we add no comment except, it may be, that they underestimated the influence of the tendency and movement to integration, the appreciation of the necessity or value of the continuity of manufacture from the ore to the finished product. And there was such a tendency; and though it cannot be asserted it had become a necessity, it had certainly become a facility of industrial progress. There was, therefore, much to urge it and give incentive to conduct that could accomplish it. From the nature and properties of the industry, the processes of production were something more than the stage and setting of the human activities. They determined to an extent those activities, furnished their motives, and gave test of their quality—not, of course, that the activities could get any immunity from size, or resources, or energies, whether exerted in integrated plants or diversified ones.

The contentions of the case, therefore, must be judged by the requirements of the law, not by accidental or adventitious circumstances. But what are such circumstances? We have seen that it was the view of the District Court that size was such a circumstance and had no accusing or excusing influence. The contention of the Government is to the contrary. Its assertion is that the size of the Corporation being the result of a u combination p. 443of powerful and able competitors” had become “substantially dominant” in the industry and illegal. And that this was determined. The companies combined, is the further assertion, had already reached a high degree of efficiency, and in their independence were factors in production and competition, but ceased to be such when brought under the regulating control of the Corporation, which by uniting them offended the law; and that the organizers of the Corporation “had in mind the specific purposes of the restraint of trade and the enormous profits resulting from that restraint.”

It is the contention of the Corporation opposing those of the Government and denying the illegal purposes charged against it, that the industry demanded qualities and an enterprise that lesser industries do not demand and must have a corresponding latitude and facility. Indeed, it is insisted that the industry had practically, (to quote the words of Judge Buffington, he quoting those of a witness,) “reached the limit, or very nearly so, at which economies from a metallurgical or mechanical standpoint could be made effective,” and “that instead, as was then the practice, of having one mill to make 10 or 20 or 50 products, the greatest economy would result from having one mill make one product, and make that product continuously.” In other words, that there was a necessity for integration, and rescue from the old conditions—from their improvidence and waste of effort; and that, in redress of the conditions, the Corporation was formed, its purpose and effect being “salvage not monopoly,” to quote the words of counsel. It. was, is the insistence, the conception of ability, “a vision of a great business which should embrace all lines of steel and all processes of manufacture from the ore to the finished product and which by reason of the economies thus to be effected and the diversity of products it would be able to offer, could successfully compete in all the markets of the world.” p. 444It is urged further that to the discernment of that great possibility was added a courage that dared attempt its accomplishment, and the conception and the courage made the formation of the Corporation notable but did not make it illegal.

The alternatives are perplexing—involve conflicting considerations, which, regarded in isolation, have diverse tendencies. We have seen that the judges of the District Court unanimously concurred in the view that the Corporation did not achieve monopoly, and such is our deduction, and it is against monopoly that the statute is directed, not against an expectation of it, but against its realization, and it is certain that it was not realized. The opposing conditions were underestimated. The power attained was much greater than that possessed by any one competitor—it was not greater than that possessed by all of them. Monopoly, therefore, was not achieved, and p. 445competitors had to be persuaded by pools, associations, trade meetings, and through the social form of dinners, all of them, it may be, violations of the law, but transient in their purpose and effect. They were scattered through the years from 1901 (the year of the formation of the Corporation), until 1911, but, after instances of success and failure, were abandoned nine months before this suit was brought. There is no evidence that the abandonment was in prophecy of or dread of suit; and the illegal practices have not been resumed, nor is there any evidence of an intention to resume them, and certainly no “dangerous probability” of their resumption, the test for which Swift & Co. v. United States, 196 U. S. 375, 396, is cited. It is our conclusion, therefore, as it was that of the judges below, that the practices were abandoned from a conviction of their futility, from the operation of forces that were not understood or were underestimated, and the case is not peculiar. And we may say in passing that the Government cannot fear their resumption for it did not avail itself of the offer of the District Court to retain jurisdiction of the cause in order that if illegal acts should be attempted they could be restrained.

It is true there is some testimony tending to show that the Corporation had such power, but there was also testimony and a course of action tending strongly to the contrary. The conflict was by the judges of the District Court unanimously resolved against the existence of that power, and in doing so they but gave effect to the greater weight of the evidence. It is certain that no such power p. 446was exerted. On the contrary, the only attempt at a fixation of prices was, as already said, through an appeal to and confederation with competitors, and the record shows besides that when competition occurred it was not in pretence, and the Corporation declined in productive powers—the competitors growing either against or in consequence of the competition. If against the competition we have an instance of movement against what the Government insists was an irresistible force; if in consequence of competition, we have an illustration of the adage that ‘‘competition is the life of trade” and is not easily repressed. The power of monopoly in the Corporation under either illustration is an untenable accusation.

We may pause here for a moment to notice illustrations of the Government of the purpose of the Corporation, instancing its acquisition after its formation of control over the Shelby Steel Tube Company, the Union Steel Company, and, subsequently, the Tennessee Company. There is dispute over the reasons for these acquisitions which we shall not detail. There is, however, an important circumstance in connection with that of the Tennessee Company which is worthy to be noted. It was submitted to President Roosevelt and he gave it his approval. His approval, of course, did not make it legal, but it gives assurance of its legality, and we know from his earnestness in the public welfare he would have approved of nothing that had even a tendency to its detriment. And he testified he was not deceived and that he believed that “the Tennessee Coal and Iron people had a property which was almost worthless in their hands, nearly worthless to them, nearly worthless to the communities in which it was situated, and entirely worthless to any financial institution that had the securities the minute that any panic came, and that the only way to give value to it was to put it in the hands of people whose possession of it p. 447would be a guarantee that there was value to it.” Such being the emergency it seems like an extreme accusation to say that the Corporation which relieved it, and, perhaps, rescued the company and the communities dependent upon it from disaster, was urged by unworthy motives. Did illegality attach afterwards and how? And what was the Corporation to do with the property? Let it decay in desuetude or develop its capabilities and resources? In the development, of course, there would be profit to the Corporation, but there would be profit as well to the world. For this reason President Roosevelt sanctioned the purchase, and it would seem a distempered view of purchase and result to regard them as violations of law.

From this digression we return to the consideration of the conduct of the Corporation towards its competitors. Besides the circumstances which we have mentioned there are others of probative strength. The company’s officers and, as well, its competitors and customers, testified that its competition was genuine, direct and vigorous, and was reflected in prices and production. No practical witness was produced by the Government in opposition. Its contention is based on the size and asserted dominance of the Corporation—alleged power for evil, not the exertion of the power in evil. Or as counsel put it, “a combination may be illegal because of its purpose; it may be illegal because it acquires a dominating power, not as a result of normal growth and development, but as a result of a combination of competitors.” Such composition and its resulting power constitute, in the view of the Government, the offence against the law, and yet it is admitted “no competitor came forward and said he had to accept the Steel Corporation’s prices.” But this absence of complaint counsel urge against the Corporation. Competitors, it is said, followed the Corporation’s prices because they made money by the imitation. Indeed the imitation is urged as p. 448an evidence of the Corporation’s power. “Universal imitation,” counsel assert, is “an evidence of power.” In this concord of action, the contention is, there is the sinister dominance of the Corporation—“its extensive control of the industry is such that the others [independent companies] follow.” Counsel, however, admit that there was “occasionally” some competition, but reject the suggestion that it extended practically to a war between the Corporation and the independents. Counsel say, “They [the Corporation is made a plural] called a few—they called 200 witnesses out of some forty thousand customers, and they expect with that customer evidence to overcome the whole train of price movement shown since the Corporation was formed.” And “movement of prices” counsel explained “as shown by the published prices . . . they were the ones that the competitors were maintaining all during the interval.”

It would seem that “200 witnesses” would be fairly representative. Besides the balance of the “forty thousand customers” was open to the Government to draw upon. Not having done so, is it not permissible to infer that none would testify to the existence of the influence that the Government asserts? At any rate, not one was called, but instead the opinion of an editor of a trade journal is adduced, and that of an author and teacher of economics whose philosophical deductions had, perhaps, fortification from experience as Deputy Commissioner of Corporations and as an employee in the Bureau of Corporations. His deduction was that when prices are constant through a definite period an artificial influence is indicated; if they vary during such a period it is a consequence of competitive conditions. It has become an aphorism that there is danger of deception in generalities, and in a case of this importance we should have something surer for judgment than speculation, something more than a deduction equivocal of itself even though the p. 449facts it rests gh or asserts were not contradicted. If the phenomena of production and prices were as easily resolved as the witness implied, much discussion and much literature have been wasted, and some of the problems that are now distracting the world would be given composing solution. Of course competition affects prices but it is only one among other influences and does not more than they, register itself in definite and legible effect.

But there are other paradoxes. The Government does not hesitate to present contradictions, though only one can be true, such being we were told in our school books the ‘/principle of contradiction.” In one competitors (the independents) are represented as oppressed by the superior power of the Corporation; in the other they are represented as ascending to opulence by imitating that power’s prices which they could not do if at disadvantage from the other conditions of competition; and yet confederated action is not asserted. If it were this suit would take on another cast. The competitors would cease to be the victims of the Corporation and would become its accomplices. And there is no other alternative. The p. 450suggestion that lurks in the Government’s contention that the acceptance of the Corporation’s prices is the submission of impotence to irresistible power is, in view of the testimony of the competitors, untenable. They, as we have seen, deny restraint in any measure or illegal influence of any kind. The Government, therefore, is reduced to the assertion that the size of the Corporation, the power it may have, not the exertion of the power, is an abhorrence to the law, or as the Government says, “the combination embodied in the Corporation unduly restrains competition by its necessary effect, [the italics are the emphasis of the Government] and therefore is unlawful regardless of purpose.” “A wrongful purpose,” the Government adds, is “matter of aggravation.” The illegality is statical, purpose or movement of any kind only its emphasis. To assent to that, to what extremes should we be led? Competition consists of business activities and ability—they make its life; but there may be fatalities in it. Are the activities to be encouraged when militant, and suppressed or regulated when triumphant because of the dominance attained? To such paternalism the Government’s contention, which regards power rather than its use the determining consideration, seems to conduct. Certainly conducts we may say, for it is the inevitable logic of the Government’s contention that competition must not only be free, but that it must not be pressed to the ascendency of a competitor, for in ascendency there is the menace of monopoly.

We have pointed out that there are several of the Government’s contentions which are difficult to represent or measure, and, the one we are now considering, that is the power is “unlawful regardless of purpose,” is another of them. It seems to us that it has for its ultimate principle and justification that strength in any producer or seller is a menace to the public interest and illegal because there is potency in it for mischief. The regression is extreme, but p. 451short of it the Government cannot stop. The fallacy it conveys is manifest.

But there are countervailing considerations. We have seen whatever there was of wrong intent could not be executed, whatever there was of evil effect, was discontinued before this suit was brought; and this, we think, determines the decree. We say this in full realization of the requirements of the law. It is clear in its denunciation of monopolies and equally clear in its direction that the courts of the Nation shall prevent and restrain them (its language is “to prevent and restrain violations of” the act), but the command is necessarily submissive to the conditions which may exist and the usual powers of a court of equity to adapt its remedies to those conditions. In other words, it is not expected to enforce abstractions and do injury thereby, it may be, to the purpose of the law. It is this flexibility of discretion—indeed essential function—that makes its value in our jurisprudence—value in this case as in others. We do not mean to say that the law is not its own measure and that it can be disregarded, but only that the appropriate relief in each instance is remitted to a court of equity to determine, not, and let us be explicit in this, to advance a policy contrary to that of the law, but in submission to the law and its policy, and in execution of both. And it is certainly a p. 453matter for consideration that there was no legal attack on the Corporation until 1911, ten years after its formation and the commencement of its career. We do not, however speak of the delay simply as to its time—that there is estoppel in it because of its time—but on account of what was done during that time—the many millions of dollars spent, the development made, and the enterprises undertaken, the investments by the public that have been invited and are not to be ignored. And what of the foreign trade that has been developed and exists? The Government, with some inconsistency, it seems to us, would remove this from the decree of dissolution. Indeed, it is pointed out that under congressional legislation in the Webb Act the foreign trade of the Corporation is reserved to it. And further, it is said, that the Corporation has constructed a company called the Products Company which can be “very easily preserved as a medium through which the steel business might reach the balance of the world,” and that in the decree of “dissolution that could be provided.” This is supplemented by the suggestion that not only the Steel Corporation, “but other steel makers of the country, could function through an instrumentality created under the Webb Act.” [C. 50, § 2, 40 Stat. 516.]

The propositions and suggestions do not commend themselves. We do not see how the Steel Corporation can be such a beneficial instrumentality in the trade of the world and its beneficence be preserved, and yet be such an evil instrumentality in the trade of the United States that it must be destroyed. And by whom and how shall all the adjustments of preservation or destruction be made? How can the Corporation be sustained and its power of control over its subsidiary companies be retained and exercised in the foreign trade and given up in the domestic trade? The Government presents no solution of the problem. Counsel realize the difficulty and seem to think that its solution or its evasion is in the suggestion p. 454that the Steel Corporation and “other steel makers could function through an instrumentality created under the Webb Act.” But we are confronted with the necessity of immediate judicial action under existing laws, not action under conceptions which may never be capable of legal execution. We must now decide and we see no guide to decision in the propositions of the Government.

But let us see what guide to a procedure of dissolution of the Corporation and the dispersion as well of its subsidiary companies, for they are asserted to be illegal combinations, is prayed. And the fact must not be overlooked or underestimated. The prayer of the Government calls for not only a disruption of present conditions but the restoration of the conditions of twenty years ago, if p. 455not literally, substantially. Is there guidance to this in the Standard Oil Case and the Tobacco Case [221 U. S. 1,106]? As an element in determining the answer we shall have to compare the cases with that at bar, but this can only be done in a general way. And the law necessarily must be kept in mind. No other comment of it is necessary. It has received so much exposition that it and all it prescribes and proscribes should be considered as a consciously directing presence.

The Standard Oil Company had its origin in 1882 and through successive forms of combinations and agencies it progressed in illegal power to the day of the decree, even attempting to circumvent by one of its forms the decision of a court against it. And its methods in using its power was of the kind that Judge Woolley described as “brutal,” and of which practices, he said, the Steel Corporation was absolutely guiltless. We have enumerated them and this reference to them is enough. And of the practices this court said no disinterested mind could doubt that the purpose was “to drive others from the field and to exclude them from their right to trade and thus accomplish the mastery which was the end in view.” It was further said that what was done and the final culmination “in the plan of the New Jersey corporation” made “manifest the continued existence of the intent . . . and . . . impelled the expansion of the New Jersey corporation.” It was to this corporation, which represented the power and purpose of all that preceded, that the suit was addressed and the decree of the court was to apply. What we have quoted contrasts that case with this. The contrast is further emphasized by pointing out how in the case of the New Jersey corporation the original wrong was reflected in and manifested by the acts which followed the organization, as described by the court. It said: “The exercise of the power which resulted from that organization fortifies the foregoing conclusions [as to monopoly, etc.], since the p. 456development which came, the acquisition here and there which ensued of every efficient means by which competition could have been asserted, the slow but resistless methods which followed by which means of transportation were absorbed and brought under control, the system of marketing which was adopted by which the country was divided into districts and the trade in each district in oil was turned over to a designated corporation within the combination and all others were excluded, all lead the mind up to a conviction of a purpose and intent which we think is so certain as practically to cause the subject not to be within the domain of reasonable contention.”

The Tobacco Case has the same bad distinctions as the Standard Oil Case. The illegality in which it was formed (there were two American Tobacco Companies, but we use the name as designating the new company as representing the combinations of the suit) continued, indeed progressed in intensity and defiance to the moment of decree. And it is the intimation of the opinion if not its direct assertion that the formation of the company (the word “ combination” is used) was preceded by the intimidation of a trade war “ inspired by one or more of the minds which brought about and became parties to that combination.” In other words the purpose of the combination was signalled to competitors and the choice presented to them was submission or ruin, to become parties to the illegal enterprise or be driven “out of the business.” This was the purpose and the achievement, and the processes by which achieved this court enumerated to be the formation of new companies, taking stock in others to obscure the result actually attained, but always to monopolize and retain power in the hands of the few and mastery of the trade; putting control in the hands of seemingly independent corporations as barriers to the entry of others into the trade; the expenditure of millions upon millions in buying out plants not to utilize them but to close them; by p. 457constantly recurring stipulations by which numbers of persons, whether manufacturers, stockholders or employees, were required to bind themselves, generally for long periods, not to compete in the future. In the Tobacco Case, therefore, as in the Standard Oil Case, the court had to deal with a persistent and systematic lawbreaker masquerading under legal forms, and which not only had to be stripped of its disguises but arrested in its illegality. A decree of dissolution was the manifest instrumentality and inevitable. We think it would be a work of sheer supererogation to point out that a decree in that case or in the Standard Oil Case furnishes no example for a decree in this.

“Without referring to the great mass of figures which bears upon this aspect of the case, it is clear to me that combinations were created by acquiring competing producing concerns at figures not based upon their physical or their business values, as independent and separate producers, but upon their values in combination; that is, upon their values as manufacturing plants and business p. 459concerns with competition eliminated. In many instances, capital stock was issued for amounts vastly in excess of the values of the properties purchased, thereby capitalizing the anticipated fruits of combination. The control acquired over the branches of the industry to which the combinations particularly related, measured by the amount of production, extended in some instances from 80 per cent, to 95 per cent, of the entire output of the country, resulting in the immediate increase in prices, in some cases double and in others treble what they were before, yielding large dividends upon greatly inflated capital.

In the American Tobacco Company Case the nature of the relief to be granted was again given consideration, and it was there concluded that the only effectual remedy was to dissolve the combination and the companies comprising it, and for that purpose the cause was remanded to the District Court to hear the parties and determine a method of dissolution and of recreating from the elements composing it “a new condition which shall be honestly in harmony with and not repugnant to the law.” In that p. 463case the corporations dissolved had long been in existence, and the offending companies were organized years before the suit‘was brought and before the decree of dissolution was finally made. Such facts were considered no valid objection to the dissolution of these powerful organizations as the only effective means of enforcing the purposes of the Sherman Anti-Trust Act. These cases have been frequently followed in this court, and in the lower federal courts, in determining the nature of the relief to be granted, and I see no occasion to depart from them now.

Nor can I yield assent to the proposition that this combination has not acquired a dominant position in the trade which enables it to control prices and production when it sees fit to exert its power. Its total assets on December 31, 1913, were in excess of $1,800,000,000; its outstanding capital stock was $868,583,600; its surplus $151,798,428. Its cash on hand ordinarily was $75,000,000; this sum alone exceeded the total capitalization of any of its competitors, and with a single exception, the total capitalization and surplus of any one of them. That such an organization thus fortified and equipped could if it saw fit dominate the trade and control competition would seem to be a business proposition too plain to require extended argument to support it. Its resources, strength and comprehensive ownership of the means of production enable it to adopt measures to do again as it has done in the past, that is, to effectually dominate and control the steel business of the country. From the earliest decisions of this court it has been declared that it was the effective power of such organizations to control and restrain competition and the freedom of trade that Congress intended to limit and control. That the exercise of the power may be withheld, or exerted with forbearing benevolence, does not place such combinations beyond the authority of the statute which was intended to prohibit their formation, p. 465and when formed to deprive them of the power unlawfully attained.

Count nine charges a conspiracy entered into by defendants to be executed through the agency of the two p. 469newspapers for the purpose (a) to make false reports and statements with intent to interfere with the military and naval operations and success of the United States and to promote the success of its enemies; (b) to cause insubordination, disloyalty and mutiny in the military and naval forces of the United States; (c) to obstruct the recruiting and enlistment service of the United States. And there were specifications in support of the charges.

Other grounds for severance were urged but the court denied the motion and to the ruling each of the defendants excepted. In fortification of the motion for severance, at the selection of the jury, counsel, in succession for each defendant, challenged particular jurors peremptorily, expressing at the same time the acceptance by the other defendants of the challenged jurors. After ten such challenges had been made counsel interposed a peremptory challenge to other jurors in behalf of all of the defendants, stating as reasons that they “collectively” were not “bound by what their co-defendants may have done with respect to any particular juror, and that, therefore, they are still within their rights.” The court denied the challenge, ruling that under the provisions of the act of Congress “all the defendants will be deemed a single party, p. 470and ten challenges having been exercised in the aggregate, the right of challenge is exhausted.”

Assignments one and three may be considered together. They both depend upon an appreciation of the evidence p. 471although assignment one is more particular as to the offense charged. But neither can be discussed without a review of the evidence and a detailed estimation of its strength, direct and inferential. That, however, is impossible as the evidence occupies over three hundred pages of the record and counsel have not given us an analysis or compendium of it, but have thrust upon us a transcript of the stenographer’s notes of the trial which, counsel for the Government aptly says “presents” of the case “a picture of a certain sort, but it is a picture which is constantly out of focus, being either larger than the reality or smaller.” However, we have accepted the labor it imposed and have considered the parts of the evidence in their proper proportions and relation and brought them to an intelligible focus, and are of opinion that the court rightfully refused the requested instructions except as to the defendants Schaefer and Vogel. As to them we do not think that there was substantial evidence to sustain the conviction. They were acquitted, we have seen, of all the individual and active offenses, and found guilty only on the ninth count—the charge of conspiracy.

The second assignment of error is somewhat confusedly expressed. It, however, presents an exception to the charge of the court as to what the jurors were entitled to consider as matters of public knowledge and general information. Counsel apparently urge against the charge that it submitted all the accusations of the indictment to the proof of the public knowledge and general information that the jurors possessed. The charge is not open to the contention, and, as discussion is precluded except through a consideration of the instructions in their entirety, we answer the contention by a simple declaration of dissent from it based, however, we may say, on a consideration of the instructions as a whole not in fragments detached and isolated from their explanations and qualifications. Counsel at the trial attempted p. 472to assign to the charge the generality they now assert and it was rejected.

Such being the situation and the defendants having testified in their own behalf, and having opportunity of explanation of the changes they made of the articles which they copied, the court instructed the jury as follows: “In passing upon this question of falsity and in passing upon this question of intent and in passing upon, of course, the question of whether or not we are at war, you are permitted to use your general knowledge. I will withdraw the reference to ‘intent,’ but in passing upon the question of the falsity of these publications, in passing upon the p. 473question whether we are at war, and in passing upon any other questions which are in like manner a matter of public knowledge and of general information, you have the right to call upon the fund of general information which is in your keeping.”

The criticism counsel make of the charge is that “without any proof whatsoever, he [the judge] permitted them [the jury] to apply their general knowledge in determining whether the despatches published by the defendants contained false statements.” Indeed counsel go further, and insist that the charge “gave to the jury an unlimited right to use any general information at their disposal in reaching their verdict.” The charge itself refutes such sweeping characterization. Nor is it justified. The court said, “The real offense with which these defendants are charged is in putting out these false statements. They received them from a source. That source purported to be the report of a despatch, and the evidence in this case would seem to direct your minds in at least some of these instances, perhaps in many of them, to just where the report of the despatch appeared. They took that report as it came to them, and the charge is, in plain words, that they garbled it, sometimes by adding something to it and sometimes by leaving things out and sometimes by a change of the words. But the substantial thing which you are to pass upon is, was the report or statement that they put out false? Was it wilfully and knowingly false? Was it put out thus falsified with the intent to promote the success of the enemies of the United States.” In other words the minds of the jurors were directed to the gist of the case which was despatches received and then changed to express falsehood to the detriment of the success of the United States, and the fact and effect of change the jurors might judge of from the testimony as presented and “from the fund of general information which” was in their “keeping.” That is, from the fact of the source p. 474from which the despatches were received, from the fact of war and what was necessary for its spirited and effective conduct and how far a false cast to the despatches received was depressing or detrimental to patriotic ardor. See Stilson v. United States, supra.

It is not very susceptible of measurement. It is difficult to separate in view of the contentions that are made a judgment of the law from a judgment of conviction under the law and keep free from confusing considerations. Free speech is not an absolute right and when it or any right becomes wrong by excess is somewhat elusive of definition. However, some admissions may be made. That freedom of speech and of the press are elements of liberty all will acclaim. Indeed they are so intimate to liberty in every one’s convictions—we may say feelings—that there is an instinctive and instant revolt from any limitation of them either by law or a charge under the law, and judgment must be summoned against the impulse that might p. 475condemn a limitation without consideration of its propriety. But notwithstanding this instant jealousy of any limitation of speech or of the press there is adduced an instance of oppression by the Government, and, it is said, to hold that publications such as those in this case “can be suppressed as false reports, subjects to new perils the constitutional liberty of the press, already seriously curtailed in practice under powers assumed to have been conferred upon the Postal Authorities.”

Again, and we quote the words of the court, “No people is fit to be self-governed whose juries, chosen from among the great body of the people, cannot give due consideration to cases of this kind, and who cannot give to any defendant a fair and impartial trial, and render a just verdict. I know of no greater service an American citizen can perform for his country than to manifest by his attitude in cases of this kind that we are a people who p. 476are governed by law, and who follow unswervingly that sense of justice which we should follow. Calling up just that spirit of justice, and breathing its very atmosphere, let us go to a consideration of the real merits of this case.”

The indictment is based on the Espionage Act and that was addressed to the condition of war and its restraints are not excessive nor ambiguous.1 We need not enumerate p. 477them. They were directed against conduct—speech or writings—that was designed to obstruct the recruitment or enlistment service or to weaken or debase the spirit of our armies causing them, it might be, to operate to defeat and the immeasurable horror and calamity of it.

But simple as the law is, perilous to the country as disobedience to it was, offenders developed and when it was exerted against them challenged it to decision as a violation of the right of free speech assured by the Constitution of the United States. A curious spectacle was presented: that great ordinance of government and orderly liberty was invoked to justify the activities of anarchy or of the enemies of the United States, and by a strange perversion of its precepts it was adduced against itself. In other words and explicitly, though it empowered Congress to declare war and war is waged with armies, their formation (recruiting or enlisting) could be prevented or impeded, and the morale of the armies when formed could be weakened or debased by question or calumny of the motives of authority, and this could not be made a crime—that it was an impregnable attribute of free speech upon which no curb’ could be put. Verdicts and judgments of conviction were the reply to the challenge and when they were brought here our response to it was unhesitating and direct. We did more than reject the contention; we forestalled all shades of repetition of it including that in the case at bar. Schenck v. United States, 249 U. S. 47; Frohwerk v. United States, 249 U. S. 204; Debs v. United States, 249 U. S. 211; Abrams v. United States, 250 U. S. p. 478is a pertinent introduction to the facts of the pending case.

The following, with some other comments, was in the body of the article: “The army of ten million and the hundred thousand airships which were to annihilate Germany, have proved to be American boasts, which will not stand washing. It is worthy of note how much the Yankees can yell their throats out without spraining their mouths. This is in accord with their spiritual quality. They enjoy a capacity for lying, which is able to conceal to a remarkable degree a lack of thought behind a superfluity of words.” Coarse indeed, this was, and vulgar to us, but it was expected to produce, and, it may be, did produce a different effect upon its readers. To them its derisive contempt may have been truly descriptive of American feebleness and inability to combat Germany’s prowess, and thereby chill and check the ardency of patriotism and make it despair of success and in hopelessness relax energy both in preparation and action. If it and the other articles, which we shall presently refer to, p. 479had not that purpose what purpose had they? Were they the mere expression of peevish discontent, aimless, vapid and innocuous? We cannot so conclude. We must take them at their word, as the jury did, and ascribe to them a more active and sinister purpose. They were the publications of a newspaper, deliberately prepared, systematic, always of the same trend, more specific in some instances, it may be, than in others. Their effect or the persons affected could not be shown, nor was it necessary. The tendency of the articles and their efficacy were enough for offense—their “intent” and “attempt,” for those are the words of the law, and to have required more would have made the law useless. It was passed in precaution. The incidence of its violation might not be immediately seen, evil appearing only in disaster, the result of the disloyalty engendered and the spirit of mutiny.

The aid so asserted to have been rendered to England by President Wilson was represented to have been in p. 480opposition to the wishes of the people expressed, “by the unwillingness of their [the United States’] young men to offer themselves as volunteers for the war. But it will not rest there. The call for peace will come from the masses and will demand to be heard. And the sooner the better. No blood has been shed yet, no hate or bitterness has yet arisen against Germany, who has never done this country any harm, but has sent millions of her sons for its upbuilding. The sooner the American people come to their senses and demand peace, the better and more honorable it will be for this country.”

The purpose is manifest, however the statements of the article may be estimated, whether as criminal means—violations of law, or the exercise of free speech and of the p. 481press. And its statements were deliberate and wilfully false, the purpose being to represent that the war was not demanded by the people but was the result of the machinations of executive power, and thus to arouse resentment to it and what it would demand of ardor and effort. In final comment we may say that the article in effect justified the German aggressions.

The nature and possible effect of a writing cannot be properly determined by culling here and there a sentence and presenting it separated from the context. In making such determination, it should be read as a whole; at least if it is short like these news items and editorials* p. 484Sometimes it is necessary to consider, in connection with it, other evidence which may enlarge or otherwise control its meaning or which may show that it was circulated under circumstances which gave it a peculiar significance or effect. But no such evidence was introduced by the Government. The writings here in question must speak for themselves. Fifteen pubheations were set forth in the indictment; and others were introduced in evidence. To reproduce all of them would unduly prolong this opinion. Four are selected which will illustrate the several contentions of the Government. That at least three of these four were deemed by it of special importance is shown by the fact that each of the three was made the subject of a separate count.

“Berlin, Aug. 5.—In the ‘Taglishe Rundschau,’ Professor Jenny writes under the title ‘Americanism’ as p. 485466. Bra nd ei s and Hol mes , JJ., dissenting.

Second: There were convictions on three counts of wilfully conveying false reports and statements with intent to promote the success of the enemies of the United States. The Tageblatt, like many of the smaller newspapers, was without a foreign or a national news service of any kind and did not purport to have any. It took such news usually from items appearing in some other paper theretofore published in the German or the English language. It did not in any way indicate the source of its news. The item, if taken from the English press, was of course translated. Sometimes it was copied in full; sometimes in part only; and sometimes it was rewritten; or editorial comment was added. The Government did not attempt to prove that any statement made in any of the news items published in the Tageblatt was false in fact. Its evidence, p. 487466. Bra nd ei s and Hol mes , JJ., dissenting.

“‘The great mass of the people bear the costs of war, although they may not be directly taxed one dollar. The great mass of the people pay in higher prices and p. 492prolonged hours of labor. They pay in service, not alone on the battle field, but wherever men and women work hard all day long. But more than all this, they pay the cost of war with their blood, and their lives, and what is the greatest sacrifice of all, with the blood and lives of their loved ones.

The act punishes the wilful making and conveying of “false reports or false statements with intent to interfere with the operation or success of the military or naval forces of the United States or to promote the success of its enemies.” Congress sought thereby to protect the American people from being wilfully misled to the detriment of their cause by one actuated by the intention to further the cause of the enemy. Wilfully untrue statements which might mislead the people as to the financial condition of the Government and thereby embarrass it; as to the adequacy of the preparations for war or the support of the forces; as to the sufficiency of the food supply; or wilfully untrue statements or reports of military operations p. 493466. Bra nde is and Hol mes , JJ., dissenting.

“These acts which are prohibited are treasonable in the sense in which that word is used, in the common speech of the people. Indeed, they may constitute legal treason as defined in some jurisdictions, but they are not treason against the United States, for the simple reason that there is a provision in our Constitution, (which, of course, the Acts of Congress follow), that treason against the United States,—you will observe that it does not say ‘treason generally,’ but treason against the United States shall consist only in making war upon them, or in adhering to their enemies, giving them aid and comfort, and there is another provision to the effect that no person can be convicted of the crime of treason unless there are two witnesses to the same overt act, making, as you will see, it perfectly clear that mere words, whether published or not, as long as they are mere words, do not constitute the crime of treason, but they must be words uttered and published under such circumstances as to become deeds or acts in themselves, as ‘words’ may be. So that words, unless there is something to which they may attach and unless the direct, natural, and reasonably to be expected consequences of them would be to give aid and comfort to the enemy, do not constitute the crime of treason. Every man will observe, however, that even mere words may be fraught with consequences which, although too remote to constitute the crime of treason, may nevertheless be words which are fraught with most awful consequences . . . and, therefore, it is properly within the province of the law to prohibit . . . and make it a crime even to utter them. In substance, that is what this law does. Congress could not call some mere words treason, because the Constitution prohibits it, but there is no constitutional limitation on the power of Congress to declare those things a crime against the law which Congress has done in this act. . . .” p. 495466. Clar ke , J., dissenting.

Lemke was given the sounding title of “business manager,” but, as a matter of fact, he was a mere bookkeeper, p. 496of a small business, with very limited authority. The newspaper led a precarious financial existence and Lemke’s duties were restricted to making out and collecting bills for advertising and circulation, to paying some bills and to turning over the remainder of the money, if any remained, to the treasurer, Vogel. Lemke himself and two or three other witnesses testified that he had nothing whatever to do with deciding what should be published in the newspaper, and that he never wrote for it excepting that when a reporter was ill he occasionally reported a concert. There was no evidence to the contrary.

I cannot doubt that this was gravely erroneous, for the real purpose of the statute is to punish, published, not suppressed, reports and statements, whether original or p. 498copies, made with the intent to promote the success, and which were of a nature reasonably likely to promote the success, of the enemy of the United States—by discouraging our own people or encouraging the enemy.

Obviously there is nothing in this, as published, which could either discourage Americans or encourage the German enemy, and the indictment does not claim that there is. That which the indictment charges makes the publication criminally false is that there was omitted from it “a p. 499466. Cla rk e , J., dissenting.

The ninth count consists of a charge of conspiracy on the part of the entire five defendants to wilfully make and convey false reports and false statements with intent to interfere with the operation and success of the military and naval forces of the United States; with wilfully causing and attempting to cause insubordination, disloyalty and mutiny in the military and naval forces of the United States, and with wilfully obstructing the recruiting and enlisting service of the United States by the publication of various articles referred to, but not quoted, in the indictment. With a single exception these articles are the same as those incorporated in the first count and this exception purported to be a despatch from the Hague, giving the p. 500reasons for the unrest in Germany, from which it is charged there was omitted a statement that one of the reasons for such unrest was the failure of the submarine campaign carried on by the German Government. Even in this ninth count it is not charged that the publications as actually made were harmful but it proceeds, as does the first count, upon the implication that they might have been more discouraging than they were to the German enemy if the omitted statements had been incorporated into them, and that for this reason they violated the statute. In other words, it comes to this, that the ninth count charges as criminal, not a conspiracy to publish the articles complained of, which were innocent, but a conspiracy to suppress certain statements which were published in other newspapers in connection with or as a part of the published articles and which it is argued might have been harmful to the German cause if they had been published. It is impossible for me to think that the statute could be violated in any such manner.