Addyston Pipe and Steel Co. v. United States
| Addyston Pipe and Steel Co. v. U.S. | |
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| Argued April 26–27, 1899 Decided December 4, 1899 |
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| Full case name | Addyston Pipe and Steel Company et al., Appts., v. United States |
| Citations | 175 U.S. 211 (more)
20 S. Ct. 96; 44 L. Ed. 136; 1899 U.S. LEXIS 1559
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| Holding | |
| Upheld the rule of reason doctrine regarding U.S. antitrust laws. | |
| Court membership | |
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| Case opinions | |
| Majority | Peckham, joined by Fuller, Harlan, Gray, Brewer, Brown, Shiras, White, McKenna |
| Laws applied | |
| First, Fourteenth amendment, Commerce Clause | |
Addyston Pipe and Steel Co. v. United States, 175 U.S. 211 (1899), was a United States Supreme Court case in which the Court held that for a restraint of trade to be lawful, it must be ancillary to the main purpose of a lawful contract. A naked restraint on trade is unlawful; it is not a defense that the restraint is reasonable.
The defendants were pipemakers who were operating in agreement. When municipalities offered projects available to the lowest bidder, all companies but the one designated would overbid, guaranteeing the success of the designated low bidder if no bidder outside the group submitted a bid.
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 it was a reasonable restraint of trade and that the Sherman Act could not have meant to prevent such restraints.
The United States Court of Appeals for the Sixth Circuit noted that it would be impossible for the Sherman Act to prohibit every restraint of trade for that would even encompass employment contracts, which, by their nature, restrain the employee from working elsewhere while they are being paid to work for the employer. Therefore, reasonable restraints were permitted, but this would only apply if the restraint was ancillary to the main purpose of the agreement. No conventional restraint of trade can be enforced unless it is both ancillary to the main purpose of the lawful contract and necessary to protect the enjoyment of legitimate fruits of the contract or protect from the danger of unjust use of those fruits by the other party.
If the primary purpose is to restrain trade, then the agreement is invalid, and in this case, the restraint was direct and therefore invalid.
The opinion was written by Chief Judge William Howard Taft (who later became President of the United States and then Chief Justice of the United States Supreme Court). Taft's reasoning was subsequently adopted by the Supreme Court as the proper interpretation of the Sherman Act.
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