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Moore v. New York Cotton Exchange

Supreme Court of United States
270 U.S. 593 (1926)
ELI5:

Rule of Law:

A private business that creates proprietary information, such as commodities price quotations, does not violate federal antitrust laws by entering into an exclusive distribution contract and refusing to provide that information to certain parties, as this is an exercise of the right to choose with whom to deal, and any effect on interstate commerce is merely indirect and incidental.


Facts:

  • The New York Cotton Exchange, a private organization, collected price quotations from cotton futures contracts executed on its floor.
  • The New York Cotton Exchange entered into a contract with the Western Union company, granting Western Union the privilege to receive and distribute these quotations for an annual payment of $27,500.
  • The contract stipulated that Western Union could only distribute the quotations to persons approved by the New York Cotton Exchange.
  • Applicants for the service were required to sign an agreement not to use the quotations in connection with a 'bucket shop' (an illegal brokerage).
  • The Odd-Lot Cotton Exchange, a competing exchange, applied to Western Union for the quotation service.
  • The New York Cotton Exchange refused to approve Odd-Lot's application, stating its belief that Odd-Lot was a cover for members of a former exchange that had been convicted of running a bucket shop.

Procedural Posture:

  • The Odd-Lot Cotton Exchange (appellant) filed a bill in U.S. District Court against the New York Cotton Exchange and Western Union (appellees).
  • The appellees filed an answer and a counterclaim seeking to enjoin the Odd-Lot Exchange from purloining the quotations.
  • Both parties moved for interlocutory injunctions in the district court.
  • The U.S. District Court denied Odd-Lot's motion and granted the New York Cotton Exchange's motion for an injunction.
  • Odd-Lot appealed both orders to the U.S. Court of Appeals.
  • The Court of Appeals affirmed the district court's orders.
  • By stipulation of the parties, the Court of Appeals remanded the case to the district court with directions to enter a final decree dismissing Odd-Lot's bill and making the injunction against Odd-Lot permanent.

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Issue:

Does a contract between a private commodities exchange and a telegraph company, which grants the telegraph company the exclusive right to distribute the exchange's price quotations only to approved subscribers, constitute an illegal monopoly or restraint of trade in violation of the Sherman Anti-Trust Act?


Opinions:

Majority - Mr. Justice Sutherland

No, a contract between a private commodities exchange and a telegraph company for exclusive distribution of price quotations to approved parties does not violate the Sherman Anti-Trust Act. The court reasoned that the New York Exchange is engaged in a purely local business, as the contracts made on its floor do not require or contemplate the shipment of cotton between states; any subsequent interstate shipment is incidental and does not convert the local transactions into interstate commerce. The price quotations are the private property of the Exchange, which it creates at its own expense. In furnishing the quotations to some and refusing them to others, the Exchange is exercising the ordinary right of a private trader to choose its business partners. The contract's purpose is to protect its business and the integrity of its information, not to monopolize or restrain trade, making any effect on interstate commerce indirect and permissible under the law.



Analysis:

This decision solidifies the principle that information, such as market quotations, can be treated as proprietary property, and the owner has significant discretion over its distribution. It establishes a high bar for bringing an antitrust claim by distinguishing between activities that are inherently part of interstate commerce and those that are purely local with only incidental effects on interstate commerce. The ruling affirms a private entity's 'right to refuse to deal,' a doctrine that allows businesses to select their customers and partners, limiting antitrust liability absent a direct and unreasonable restraint on trade. This precedent protects information-based businesses but has been narrowed in later cases involving essential facilities or concerted refusals to deal.

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