COMPETITION ACT, 2002

Nemil ShahRoll No.53, 5TH Year,BSLS, Faculty of Law,The M.S.University of Baroda.

ADDYSTON PIPE & STEEL CO. V.

UNITED STATES

INTRODUCTION Addyston Pipe and Steel Co. v. United States,

[175 U.S. 211 (1899)], was a United States Supreme Court Case in which Court determined that United States Antitrust Laws as stated in the Sherman Antitrust Act will be governed by a Rule of Reason.

This Case was decided on 4th December, 1899 by Chief Justice Melville Fuller.

- There are six defendants who entered into a combination and conspiracy among themselves by which they agreed that there should be no competition between them in any of the states or territories mentioned in the agreement (comprising some thirty-six in all) in regard to the manufacture and sale of cast-iron pipe:

IMPORTANT FACTS OF CASE

- Addyston Pipe & Steel Company, of Cincinnati, Ohio;- Dennis Long & Company, of Louisville, Kentucky;- Howard-Harrison Iron Company, of Bessemer,

Alabama;- Anniston Pipe & Foundry Company, of Anniston,

Alabama, - South Pittsburg Pipe Works, of South Pittsburg,

Tennessee,- Chattanooga Foundry & Pipe Works, of Chattanooga,

Tennessee.

- The defendants were pipe makers who were operating in agreement, so that when municipalities offered projects available to the lowest bidder, all companies but the one designated would overbid, thus guaranteeing the success of the designated low bidder.

- The Government argued that some antitrust violations, such as bid rigging, were such egregious anti-competitive acts that they were always illegal (the so-called "per se" rule). The defendants asserted that this was a reasonable restraint of trade, and that the Sherman Act could not have meant to prevent such restraints.

JUDGMENT- The Trial Court has dismissed the petition.- Thereafter, an Appeal was made to the Court of

Appeals :- Finding of the Court :

- The United States Court of Appeals for the Sixth Circuit noted that it would impossible for the Sherman Act to prohibit every restraint of Trade. Therefore reasonable restraints were permitted only if the restraint was ancillary to the main purpose of the Agreement.

- If the primary purpose is to restrain trade, then the agreement is invalid, and in this case, the restraint was direct, and therefore invalid.

- This case was appealed to the Supreme Court as Addyston

Pipe and Steel Company v. United States, 175 U.S. 211 (1899). However, on appeal, the defendants did not attack the reasoning of the Sixth Circuit. 

- Instead they argued on the following three points :- Commerce Clause of the Constitution did not empower

Congress to regulate private agreements.- Even if Congress possessed the authority to regulate

purely private agreements, banning defendants' cartel would infringe liberty of contract because the defendants' cartel purportedly set reasonable prices

- their cartel did not directly restrain trade

- The Court, in an opinion by Justice Peckham, rejected all

three arguments and affirmed the decision below.

- Peckham conceded that the framers of the Constitution likely

anticipated that the Commerce Clause would mainly

authorize Congressional interdiction of state-created barriers

to interstate commerce.

- At the same time, Peckham observed that, in some cases,

purely private agreements can have the same economic

impact, that is directly restrain commerce among the several

states. - Finally, Peckham held that the defendants' cartel did in fact

directly restrain trade.

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