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Grenada Lumber Co. v. Mississippi, 217 U.S. 433 (1910)

Grenada Lumber Company v. Mississippi

No. 493

Submitted January 10, 1910

Decided May 2, 1910

217 U.S. 433


This Court accepts the construction of the state court, and where that court has held that an agreement between retailers not to purchase from wholesale dealers who sell direct to consumers within prescribed localities amounts to a restraint of trade within the meaning of the antitrust statute of the state, the only question for this Court is whether such statute so unreasonably abridges freedom of contract

Page 217 U. S. 434

as to amount to deprivation of property without due process of law within the meaning of the Fourteenth Amendment.

An act harmless when done by one may become a public wrong when done by many acting in concert, and when it becomes the object of a conspiracy and operates in restraint of trade, the police power of the state may prohibit it without impairing the liberty of contract protected by the Fourteenth Amendment, and so held that, while an individual may not be interfered with in regard to a fixed trade rule not to purchase from competitors, a state may prohibit more than one from entering into an agreement not to purchase from certain described persons even though such persons be competitors and the agreement be made to enable the parties thereto to continue their business as independents.

Whether a combination is or is not illegal at common law is immaterial if it is illegal under a state statute which does not infringe the Fourteenth Amendment.

A combination that is actually in restraint of trade under a statute which is constitutional is illegal whatever may be the motive or necessity inducing it.

In determining the validity of a state statute, this Court is concerned only with its constitutionality; it does not consider any question of its expediency.

In determining the constitutionality of a slate statute, this Court considers only so much thereof as is assailed, construed, and applied in the particular case.

One not within a class affected by a statute cannot attack its constitutionality.

Where the penalty provisions of a statute are clearly separable, as in this case, and are not invoked, this Court is not called upon to determine whether the penalties are so excessive as to amount to deprivation of property without due process of law, and thus render the statute unconstitutional in that respect.

In this case, in an action by the state in equity, and not to enforce penalties, held that the antitrust statute of Mississippi, § 5002, Code, is not unconstitutional as abridging the liberty of contract as against retail lumber dealers uniting in an agreement, which the state court decided was within the prohibition of the statute, not to purchase any materials from wholesale dealers selling direct to consumers in certain localities.

This is a writ of error to the Supreme Court of the State

Page 217 U. S. 435

of Mississippi to review a decree dissolving a voluntary association of retail lumber dealers as a combination in restraint of trade, under a statute of the state.

So such of the Mississippi act as is here involved is set out in the margin, being part of § 5002, Mississippi Code. [Footnote 1]

The proceeding under this statute was by a bill filed in a chancery court of the state, by the state, upon relation of its Attorney General. The bill averred that the defendants, some seventy-seven individuals and corporations, were retail dealers in lumber, sash, doors, etc., doing business, some of them, in the State of Mississippi, and others in the State of Louisiana, and were competitors in business, each engaged in buying and selling again for profit, and in competition with each other for the business of consumers; that the defendants had entered into an agreement, compact, or combination for the purpose and with the intent to destroy, prevent, or suppress

Page 217 U. S. 436

all competition between themselves, as retail dealers in the materials mentioned, and manufacturers, wholesale dealers, brokers or commission men, keeping no stock, from selling the like articles or commodities directly to consumers in competition with retailers. To accomplish this suppression of competition for the trade of consumers, it was in substance averred that they had organized an association, and had obligated themselves not to purchase any of their stock or commodities from any wholesale dealer or manufacturer who sold such products direct to the consumers in competition with the members of their combination, and to carry out this end had adopted articles of agreement, called a constitution, and appointed a secretary to ascertain such sales and to see that the obligation of the members was respected. The material parts of the agreement under which the defendants combined consist of a preamble, called "Declaration of Purpose," the relevant part of which, together with articles 2, 3, and 7, are set out in the margin. [Footnote 2]

It was then averred that the necessary effect of such agreement among the defendants, who, it was said, composed a majority of all the retail lumber dealers in the states covered by their compact, was to limit or destroy competition between

Page 217 U. S. 437

the retailers and the wholesalers or manufacturers for the trade or business of the consumer, and that they constituted a combination or conspiracy in restraint of trade, etc.

Page 217 U. S. 438

The answer admitted the substantial facts, but denied that the object or purpose was to restrain trade or to suppress competition, or that such a result has ensued or would or

Page 217 U. S. 439

could follow, or that the agreement had any other object than to "conserve and advance their business interests as retailers." That their agreement is defensive of, and not injurious to, public interests, is asserted by many paragraphs of the answer, upon economic considerations.

The chancery court, upon the pleadings and exhibits, held that the association and agreement among the members was

"a combination in restraint of trade, and intended to hinder competition in the sale and purchase of a commodity, and was inimical to the public welfare, and unlawful."

The dissolution of the association was adjudged, and an injunction against further operations granted. This decree was affirmed upon appeal to the supreme court of the state.

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