the community generally, until it was finally put at rest and the
statute once more planted on the firm ground of common-law rule and
definition by the decisions in the Standard Oil and Tobacco cases.

What, then, is this common-law rule which President Taft found so clear?
No one has discussed it more lucidly than did the youthful Circuit Judge
Taft himself in delivering the opinion of the Circuit Court of Appeals
in the Addyston Pipe & Steel Co. case,[1] an opinion in which his two
associates on the bench, the late Justices Harlan and Lurton, concurred.
The rule may be briefly stated as follows:

Every contract or combination whose primary purpose and effect is to fix
prices, limit production, or otherwise restrain trade is unlawful,
provided the restraint be direct, material, and substantial.

Where, however, the restraint of trade is not direct, but merely
ancillary or collateral to some lawful contract or transaction, it is
not unlawful, provided it is _reasonable_, that is to say, not broader
than is required for the protection of the party in whose favor the
restraint is imposed.

[Footnote 1: _United States v. Addyston Pipe & Steel Co._, 85 Fed. Rep.,
271.]

A familiar illustration is the sale of a business and its goodwill,
accompanied by a covenant on the part of the vendor not to compete. Such
a covenant is collateral to the sale, and if not broader than is
reasonably required for the protection of the vendee it will be upheld,
although a similar agreement, standing alone and not collateral to a
sale or other lawful transaction, would be in direct restraint of trade