85 F. 271 (6th Cir. 1898)
Facts
The defendants were pipemakers 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 (although it was still possible for a company outside the group to win).
Issue
The defendants asserted that this was a reasonable restraint of trade, and that the Sherman Act could not have meant to prevent such restraints.
Opinion of the court
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 during the time that 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:
1.it is ancillary to the main purpose of the lawful contract; and
2.it is necessary to protect enjoyment of legit fruits or to protect from dangers.
3.If the primary purpose is to restrain trade, then the agreement is invalid, and in this case, the restraint was direct, and therefore invalid.
Later developments
This case was appealed to the Supreme Court as Addyston Pipe and Steel Company v. United States, 175 U.S. 211 (1899)
, but in that case the defendants did not attack the reasoning of the Sixth Circuit. Instead, they argued that there had been no interstate commerce (to which the Sherman Act was restricted). The Supreme Court disagreed, noting that there was interstate shipping of the pipes being sold.
