The Inter Ocean Publishing Company owned a daily newspaper in Chicago, called the Inter Ocean Daily. The company had for several years been receiving its foreign news from the Associated Press, a company organized to distribute this news to many newspapers. At the expiration of its contract with the Inter Ocean company, the Associated Press refused to make another, since it had already contracted with other papers in Chicago to give them its exclusive service. Because of this refusal to furnish it with news, the Inter Ocean company brought an action in court to compel the Associated Press to render the service. The suit was brought, on the ground that the defendant was engaged in a public service calling, and, therefore, must serve all the public alike. The Associated Press maintained that it was engaged in a private business, and could serve whom it pleased, or refuse service where it pleased, and that no reason need be given for this preference. The case turns on the point whether or not the Associated Press is a public service corporation.
The legislature of the State of Illinois passed a law, fixing the maximum rate of storage in grain elevators in the city of Chicago, and other cities having over one hundred thousand inhabitants. The elevator and warehouse owners considered their business a private business, and maintained that the state had no power to regulate it, or fix charges for their service. They maintained that the fixing of storage charges was such an interference with private property as to amount to a taking of property without due process of law, and, therefore, invalid under the Fourteenth Amendment of the Constitution of the United States. The case was carried to the Supreme Court of the United States.
Chief Justice Waite rendered the opinion of the court, and held, in substance, that the business conducted by grain elevators and warehousemen had in recent years become affected with a public interest, because those who controlled the business wielded a tremendous power over the public welfare. The nature of the business tended to make it a natural monopoly whose control was centered in a few individuals. Therefore, these individuals exercised a sort of public office or public trusteeship, and were subject to governmental control. The criterion for determining whether a given business has become public service is its consequence and influence upon public welfare. In this case, the business, because of its inherent nature, became affected with a public interest, and is properly subject to state control. Judgment was given for the State of Illinois.
It is a principle of fundamental law that a man may, in his own business, deal with whom he pleases, and in the manner he chooses, so long as he does not commit any wrong, either to the individual or the state. For instance, the shoemaker may today fix any price he pleases upon his own commodity and service; he may sell to one, and refuse to sell to another without offering or having any reason for his conduct. This fundamental rule of the Common Law is further safeguarded by the Constitution of the United States, which denies the right to the state to curb liberty of contract, to take property, without due process of law. This principle of law is applicable to all private business conducted either by an individual, partnership, or corporation.
When a business or property becomes affected with a public interest, and by this is meant when its control gives power to those in charge to jeopardize public happiness, or impress burdens upon the community at large, the law recognizes the public as having an interest in that business, with a resulting power in the public through its government to regulate that business. The number of such businesses becoming clothed with a public interest, tends to increase, as our economic development tends to become more complex. This is illustrated by the Ruling Court Case, where a business formerly purely private is now recognized as a public service employment. It has been predicted by one eminent writer, that all business which supplies the public with the necessities of life, will in the course of time become public service functions, and subject to the control of the state. Various and divergent organizations have been declared by the courts to be public service companies. In Connecticut, a cemetery association was declared a public employment, because the burial of the dead affected public health. In Maine, a log driving company was given the exclusive right to drive logs upon a certain river and, therefore, held to be a public service. Companies engaged in grinding grains have been declared public service organizations in those communities where the business seriously affected public welfare, in that the people were dependent upon those particular mills for their food stuffs. Obviously, this is not true of grain mills in modern times in most communities. Railroads, street railways, irrigation, telegraphy, telephone, lighting plants, are the usual public employments.
The Story Case is based upon Inter Ocean Publishing Company vs. Associated Press, where the court held that the latter was a public service corporation. The court said, that, since its business became of vast importance to the public, and the operations of such a business required the expenditures of vast sums of money, it was a public service company, required to do business with all newspapers. The court further explained that scarcely any newspaper could organize and continue the means of gathering such necessary information as was gathered by the association, and no newspaper could be regarded as a newspaper of the day unless it had access to this news.
There are several tests for determining whether or not a given occupation is a public calling.
(1) Everywhere, hotel and innkeepers remain public servants, because of the long established precedent of Common Law. In former times, before the days of modern conveniences in travel, the wayfarer was absolutely dependent upon the inn of the town in which he arrived, at night. The necessity of the people, therefore, fixed the innkeeper as a public servant, who must take, as guests, all who come to his door. That necessity does not exist today, yet the law with reference to innkeepers remains.
(2) If an organization is granted a legal monopoly or franchise, clearly it is a public service company, in that the public itself has granted to it one of its own functions, such as the right to run a street railway, pipe lines, telephone lines, ferry, or canal boats.
(3) The complexity of modern civilization creates natural monopolies, such as the one outlined in the Story Case and Ruling Court Case. A natural monopoly is a business that has practically eliminated competition by its own growth and size, without the aid of legal franchises. Should it seriously affect public welfare, it becomes a public service organization.