# United States v. Addyston Pipe (1898–1899) **Sixth Circuit:** February 8, 1898 · Circuit Judge [[William Howard Taft]] · 85 F. 271 **Supreme Court:** decided December 4, 1899 · unanimous, Justice Rufus Peckham · 175 U.S. 211 The first real government win under the [[Sherman Antitrust Act]], and the source of the doctrine that still separates a lawful contract term from an illegal cartel. ## The conspiracy Six cast-iron pipe manufacturers ran a bid-rigging association. For each municipal contract the association designated a low bidder and the others submitted cover bids. The record showed pipe selling at about **$24.25 a ton** that could be delivered profitably at $17–18. ## Taft's ancillary restraints doctrine Taft — later President, later Chief Justice — was writing four years after [[United States v. E. C. Knight Co]] had gutted the statute for manufacturing. Rather than argue about the Commerce Clause, he built a test that has outlived nearly every other holding of the era: > "no conventional restraint of trade can be enforced unless the covenant embodying it is merely ancillary to the main purpose of a lawful contract, and necessary to protect the covenantee in the enjoyment of the legitimate fruits of the contract, or to protect him from the dangers of an unjust use of those fruits by the other party." He then listed five classes of legitimate ancillary covenants — the seller of a business promising not to compete with the buyer, a retiring partner, an employee bound after service, and so on. Everything else is a **naked restraint**, unlawful without further inquiry. ## What the Supreme Court added Peckham affirmed unanimously, modifying the decree only because it swept in intrastate as well as interstate commerce, and supplied the reach that *Knight* had denied: > "When the direct, immediate and intended effect of a contract or combination among dealers in a commodity is the enhancement of its price, it amounts to a restraint of trade in the commodity." ## Why it matters Two things descend from this case. First, the **per se rule against naked price fixing and bid rigging** — the one category of antitrust liability that survived the entire [[Consumer Welfare Standard]] era intact, and the basis of every criminal cartel prosecution the [[Antitrust Division]] brings today. Second, and more ambiguously: Taft's ancillary/naked distinction is the ancestor of the [[Rule of Reason]]. By conceding that *some* restraints are lawful because they serve a legitimate main purpose, he opened the analytical door that Chief Justice White walked through in 1911. Taft himself thought he was narrowing the inquiry. See [[US Antitrust and Monopoly Timeline]].