## Facts

- Approximately thirty-one competing railroad companies operating between Chicago and Atlantic coast termini formed the Joint Traffic Association by written agreement.
- The agreement gave the association authority over “competitive traffic” and empowered managers to fix, maintain, and change uniform rates, fares, and charges for that traffic.
- Member railroads were prohibited from deviating from association-approved rates, except that a member’s unilateral action could affect only its own share of the joint rate arrangement over its own line.
- The managers were directed to construe their powers to avoid violating the Interstate Commerce Act and to cooperate with the Interstate Commerce Commission to secure stability and uniformity in rates.
- The managers could decide and enforce policies toward connecting carriers not in the agreement that failed to follow the established rates; member assessments funded the association’s expenses.
- The United States sought equitable relief, alleging the agreement was a horizontal combination to eliminate competition in interstate rates in violation of the Sherman Antitrust Act.

## Issues

1. Whether a rate-setting and rate-maintenance agreement among competing interstate railroads constitutes a “contract, combination … or conspiracy in restraint of trade or commerce among the several States” under the Sherman Act.
2. Whether the Sherman Act applies to interstate railroad rate agreements notwithstanding the Interstate Commerce Act and arguments that only “unreasonable” restraints are unlawful.
3. Whether applying the Sherman Act to such agreements exceeds Congress’s Commerce Clause power or violates the Fifth Amendment.

## Decision

- The Supreme Court reversed the lower courts and held the agreement unlawful under the Sherman Act.
- The Court treated prior precedent invalidating a materially similar railroad rate-fixing association as controlling and found no substantial difference in the rate-setting features of the two arrangements.
- The Court rejected the contention that “reasonable” or publicly beneficial rate stabilization agreements fall outside the Sherman Act’s prohibition.
- The Court held the Interstate Commerce Act did not displace the Sherman Act or legalize cooperative rate-fixing by competitors.
- The case was remanded with directions to enter a decree for the United States declaring the agreement illegal and enjoining its further execution.

## Legal Principles

- A horizontal agreement among competing interstate carriers to fix and maintain rates and to prevent independent deviations is a restraint of trade prohibited by the Sherman Act, even if the agreed rates are claimed to be reasonable.
- The legality of a combination turns on its practical operation in suppressing competition, not on contractual recitals asserting compliance with regulatory statutes.
- The Sherman Act applies to interstate railroad rate agreements alongside federal rate regulation; the existence of the Interstate Commerce Act does not provide immunity for competitor rate-fixing.
- Congress may regulate interstate commerce by forbidding contracts or combinations that restrain trade by excluding the operation of competition; this is within the commerce power and is not invalidated by Fifth Amendment objections to limits on contracting freedom.

## Conclusion

The Court held that competing railroads may not lawfully combine to set and enforce uniform interstate rates, and it ordered injunctive relief because such agreements restrain trade under the Sherman Act notwithstanding regulatory rate statutes or claims of reasonableness.


United States v. Joint Traffic Ass'n, 171 U.S. 505 (1898)