## Facts

- The United States sued six cast-iron pipe manufacturers that competed for municipal water and sewer contracts across multiple states.
- The defendants formed an agreement to suppress competition for contracts involving pipe shipped across state lines.
- The conspirators divided a large territory into “reserved” cities and “pay territory.”
- In “reserved” cities, specific firms were allocated projects, while the others submitted prearranged higher “pretended bids.”
- In “pay territory,” bids were controlled by a committee that set the bid level and awarded the contract to the firm offering the largest “bonus” to be shared among the others.
- The government sought equitable relief, including dissolution of the combination and a permanent injunction against continued operation under the agreement.
- The trial court dismissed the government’s bill; the United States appealed.

## Issues

1. Whether the defendants’ agreement was an unlawful restraint of trade at common law, as opposed to a permissible restraint ancillary to a legitimate transaction.
2. Whether the agreement constituted a “contract, combination, or conspiracy in restraint of trade or commerce among the several States” under the Sherman Act.
3. Whether the agreement’s operation on bidding, sales, and delivery of pipe across state lines was sufficiently direct to fall within federal authority over interstate commerce.

## Decision

- The Sixth Circuit reversed the trial court’s dismissal.
- The court held the agreement was a “naked” restraint whose sole object was to suppress competition and maintain prices, not a restraint ancillary to any legitimate and separate transaction.
- The court concluded the agreement directly restrained interstate commerce because it controlled the solicitation of orders and the sale of goods in one state for delivery from another.
- The court directed entry of injunctive relief barring continuation of the combination as it affected interstate trade.

## Legal Principles

- A restraint of trade is valid at common law only if it is ancillary to a lawful contract or relationship and no broader than necessary to protect a legitimate interest created by that transaction.
- Agreements whose sole purpose is to restrain competition and raise or maintain prices are void at common law as naked restraints.
- Under the Sherman Act, contracts and combinations that directly restrain interstate sales and deliveries are unlawful and subject to equitable relief, including injunctions against continued enforcement or operation of the restraint.
- The Sherman Act reaches restraints directed at interstate selling and contracting for delivery across state lines, even if the restrained product is manufactured locally.

## Conclusion

The Sixth Circuit held that the defendants’ coordinated bid-rigging, market allocation, and price-fixing arrangement was a naked restraint of trade that directly controlled interstate sales of cast-iron pipe and therefore violated the Sherman Act, warranting injunctive relief.


United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898)