Mogul Steamship Co Ltd v McGregor, Gow & Co [1892] AC 25 concerned a shipping association’s attempts to win trade from a rival through reduced freight rates, rebates and exclusive agency arrangements. The House of Lords dismissed Mogul’s appeal. On the facts, the defendants had pursued their own commercial advantage by lawful means, so the loss caused to Mogul did not give it a right to damages.
Facts
The defendants operated ships in the trade between China and Europe. They formed a conference to regulate shipping capacity, cargo allocation and freight rates, seeking to retain the tea-carrying trade and keep it profitable.
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Mogul was excluded from the 1885 agreement and sent vessels to Hankow to obtain cargo during the tea season. The conference responded by sending additional ships and reducing its rates. Mogul obtained cargo, but at rates which were not profitable.
The conference also offered a five per cent rebate to customers who shipped exclusively with its members during the relevant period. Shipments through outside vessels could disqualify a customer from that rebate. The defendants required their agents to choose between acting for them and assisting competing shipowners.
Mogul sought damages and an injunction, alleging a conspiracy to injure its trade. Lord Coleridge CJ found for the defendants. The Court of Appeal upheld that decision by a majority, with Lord Esher MR dissenting. Mogul then appealed to the House of Lords.
The legal questions
The case required the House to distinguish commercial loss caused by competition from an actionable interference with trade. Mogul argued that the defendants’ combination, intended to drive it out of the market, was unlawful and that the methods used went beyond permissible competition.
It also argued that the agreement was in restraint of trade and therefore supported a claim based on conspiracy. Although criminal conspiracy was discussed in those arguments, the proceedings before the House were Mogul’s civil claim, not a criminal prosecution.
Why the claim failed
The House treated protecting and increasing the defendants’ own business as a lawful commercial objective. The intended disadvantage to Mogul arose from the defendants’ pursuit of that business, rather than an independent purpose of harming Mogul out of personal malice.
Lord Halsbury rejected the suggestion that deliberately offering lower prices to draw customers away from a competitor necessarily made the conduct unlawful. The court was not to impose an assumed normal freight rate below which competitors could not go.
The means used also mattered. The evidence did not establish violence, fraud, unlawful coercion or the procurement of breaches of Mogul’s existing contracts. The rebate encouraged customers to choose conference ships; it did not physically prevent them from using Mogul. Requiring agents to choose between competing principals was also accepted in the circumstances.
Acting together did not make this otherwise lawful commercial competition actionable. The speeches nevertheless recognised that some combinations could be unlawful even where an individual’s act would not be: the decision did not give every collective action immunity from liability.
Restraint of trade and enforceability
The House distinguished an agreement which the courts would not enforce from an agreement whose making or performance constituted an actionable wrong or criminal offence. Even if the conference agreement was unenforceable as a restraint of trade, that did not itself establish the conspiracy alleged by Mogul.
The judges did not all express the same view about whether this particular agreement was an unenforceable restraint. They agreed that the objection did not give Mogul a cause of action on the facts proved.
Decision
The appeal was dismissed with costs on 18 December 1891. The orders in favour of the defendants were affirmed. The distinction was between loss from lawful competition and loss caused by unlawful objects or means; the fact that the defendants intended to secure trade at Mogul’s expense was insufficient by itself.
Earlier appeal: (1889) 23 QBD 598 was the Court of Appeal decision. The House of Lords judgment is reported at [1892] AC 25.
