6. MONOPOLIES 24 (2)-NATURE OF RELIEF RESTS WITH COURT.

Though the Sherman Anti-Trust Act (Comp. St. §§ 8820-8823, 8827-8830) requires the courts to prevent and restrain violations of the act, the command is necessarily submissive to the conditions which may exist, and the usual powers of a court of equity to adapt its remedies to those conditions, and the appropriate relief in each instance is for the determination of the court.

Mr. Justice Day, Mr. Justice Pitney, and Mr. Justice Clarke dissenting.

Appeal from the District Court of the United States for the District of New Jersey. Suit by the United States of America against the United States Steel Corporation and others. From a decree dismissing the bill (223 Fed. 55), the United States appeals. Affirmed.

Messrs. C. B. Ames, Asst. Atty. Gen., and Henry E. Colton, of Nashville, Tenn., for the United States.

Messrs. R. V. Lindabury, of Newark, N. J., David A. Reed, of Pittsburg, Pa., C. A. Severance, of St. Paul, Minn., and Geo. Welwood Murray, Kenneth B. Halstead, W. J. Curtis and Raynal C. Bolling, all of New York City, for appellees.

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*Mr. Justice McKENNA delivered the opin

ion of the Court.

Suit against the Steel Corporation and certain other companies which it directs and controls by reason of the ownership of their stock, it and they being separately and collectively charged as violators of the Sherman Anti-Trust Act (Comp. St. §§ 8820-8823, 8827-8830).

It is prayed that it and they be dissolved because engaged in illegal restraint of trade and the exercise of monopoly.

Special charges of illegality and monopoly are made and special redresses and remedies are prayed, among others, that there be a

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prohibition of stock ownership and exer*cise of rights under such ownership, and that there shall be such orders and distribution of the stock and other properties as shall be in accordance with equity and good conscience and "shall effectuate the purpose of the AntiTrust Act." General relief is also prayed.

The Steel Corporation is a holding company only; the other companies are the operating ones, manufacturers in the iron and steel industry, 12 in number. There are, besides, other corporations and individuals more or less connected in the activities of the other defendants, that are alleged to be instruments or accomplices in their activities and offendings, and that these activities and offendings (speaking in general terms) extend from 1901 to 1911, when the bill

was filed, and have illustrative periods of significant and demonstrated illegality.

Issue is taken upon all these charges, and we see at a glance what detail of circumstances may be demanded, and we may find ourselves puzzled to compress them into an opinion that will not be of fatiguing prolixity.

The case was heard in the District Court by four judges. They agreed that the bill should be dismissed; they disagreed as to the reasons for it. (D. C.) 223 Fed. 55. One opinion (written by Judge Buffington and concurred in by Judge McPherson) expressed the view that the Steel Corporation was not formed with the intention or purpose to mothe motive or effect "to prejudice the pubnopolize or restrain trade, and did not have lic interest by unduly restricting competi tion or unduly obstructing the course of trade." The corporation, in the view of the opinion, was an evolution, a natural consummation of the tendencies of the industry on account of changing conditions, practically a compulsion from "the metallurgical method of making steel and the physical method of handling it," this method, and the conditions consequent upon it, tending to combinations of capital and energies rather than diffusion

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in independent action. And the *concentration of powers (we are still representing the opinion) was only such as was deemed necessary, and immediately manifested itself in improved methods and products and in an increase of domestic and foreign trade. Indeed an important purpose of the organization was the building up of the export trade in steel and iron which at that time was sporadic, the mere dumping of the products upon foreign markets.

Not monopoly, therefore, was the purpose of the organization of the corporation, but concentration of efforts, with resultant economies and benefits.

The tendency of the industry and the purpose of the corporation in yielding to it was expressed in comprehensive condensation by the word "integration," which signifies continuity in the processes of the industry from ore mines to the finished product.

All considerations deemed pertinent were expressed and their influence was attempted to be assigned and, while conceding that the Steel Corporation after its formation in times of financial disturbance, entered into informal agreements or understandings with its competitors to maintain prices, they terminated with their occasions, and, as they had ceased to exist, the court was not justified in dissolving the corporation.

The other opinion, by Judge Woolley and concurred in by Judge Hunt (223 Fed. 161), was in some particulars, in antithesis to Judge Buffington's. The view was expressed that neither the Steel Corporation nor the preceding combinations, which were in a

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(40 Sup.Ct.)

sense its antetypes, had the justification of resenting the opinion) underestimated the opindustrial conditions, nor were they or it posing conditions and at the very beginning impelled by the necessity for integration, or the corporation instead of relying upon its compelled to unite in comprehensive enter-own power sought and obtained the assist prise because such had become a condition of success under the new order of things. On the contrary, that the organizers of the corporation and the preceding companies had illegal purpose from the very beginning, and

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the corporation *became "a combination of

combinations by which, directly or indirectly, approximately 180 independent concerns were brought under one business control," which, measured by the amount of production, extended to 80 per cent. or 90 per cent. of the entire output of the country, and that its purpose was to secure great profits which were thought possible in the light of the history of its constituent combinations, and to accomplish permanently what those combinations had demonstrated could be accomplished temporarily, and thereby monopolize and

restrain trade. 1

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ance and the cooperation of its competitors' (the independent companies). In other words the view was expressed that the testimony did "not show that the corporation in and of itself ever possessed or exerted sufficient power when acting alone to control

prices of the products of the industry." Its

power was efficient only when in co-operacerted with them in the expedients of pools, tion with its competitors, and hence it conassociations, trade meetings, and finally in a system of dinners inaugurated in 1907 by the president of the company, E. H. Gary, and called "the Gary Dinners." The dinners were congregations of producers and "were nothing but trade meetings," successors of the other means of associated action and control through such action. They were instituted first in "stress of panic," but their potency being demonstrated they were after

*The organizers, however, (we are still rep-wards called to control prices "in periods of

As bearing upon the power obtained and what the corporation did we give other citations from

Judge Woolley's opinion as follows:

industrial calm." "They were pools without penalties" and more efficient in stabilizing prices. But it was the further declaration that "when joint action was either refused or withdrawn the corporation's prices were

"The ore reserves acquired by the corporation at and subsequent to its organization, the relation which such reserves bear to ore bodies then exist-controlled by competition. ing and subsequently discovered, and their bearing upon the question of monopoly of raw materials, are matters which have been discussed in the preceding opinion, and with the reasoning as well as with the conclusion that the corporation has not a monopoly of the raw materials of the steel industry, I am in entire accord."

"Further inquiring whether the corporation inherently possesses monopolistic power attention is next given to its proportion of the manufacture and sale

The corporation, it was said, did not at any time abuse the power or ascendency it possessed. It resorted to none of the brutalities 441

or tyrannies that the cases illustrate of *other combinations. It did not secure freight rebates; it did not increase its profits by re

of finished iron and steel products of the industry.ducing the wages of its employés-whatever Upon this subject there is a great volume of tes- it did was not at the expense of labor; it did timony, a detailed consideration of which in an opinion would be quite inexcusable. As a last analysis of this testimony, it is sufficient to say it shows that, large as was the corporation, and substantial as was its proportion of the business of the industry, the corporation was not able in the first ten years of its history to maintain its position in the increase of trade. During that period, its proportion of the domestic business decreased from 50.1 per cent. to 40.9 per cent. and its increase of business during that period was but 40.6 per cent. of its original volume. Its increase of business, measured by percentage, was exceeded by eight of its competitors, whose increase of business, likewise measured by percentage, ranged from 63 to 3779. This disparity in the increase of production indicates that the power of the corporation is not commensurate with its size, and that the size and the consequent power of the corporation are not sufficient to retard prosperous growth of efficient competitors."

"From the vast amount of testimony, it is conclusively shown that the Steel Corporation did not attempt to exert a power, if such it posssessed, to

oppress and destroy its competitors, and it is likewise disclosed by the history of the industry subsequent to the organization of the corporation that if it had made such an attempt it would have failed. It is also shown by the testimony that, acting independently and relying alone upon its power and wealth, great as they were, the corporation has never been able to dominate the steel industry by controlling the supply of raw materials, restraining production of finished products, or enhancing and maintaining the prices of either."

not increase its profits by lowering the quality of its products, nor create an artificial scarcity of them; it did not oppress or coerce its competitors-its competition, though vigorous, was fair; it did not undersell its competitors in some localities by reducing its prices there below these maintained elsewhere, or require its customers to enter into contracts limiting their purchases or restricting them in resale prices; it did not obtain customers by secret rebates or departures from its published prices; there was no evidence that it attempted to crush its competitors or drive them out of the market, nor did it take customers from its competitors by unfair means, and in its competition it seemed to make no difference between large and small competitors. Indeed it is said in many Ways and illustrated that "instead of relying upon its own power to fix and maintain prices, the corporation, at its very beginning sought and obtained the assistance of others." It combined its power with that of its competitors. It did not have power in and of itself, and the control it exerted was only in and by association with its competitors. Its offense, therefore, such as it was, was not

different from theirs and was distinguished | is the further assertion, had already reached from "theirs only in the leadership it assum- a high degree of efficiency, and in their indeed in promulgating and perfecting the poli-pendence were factors in production and comcy." This leadership it gave up and it had petition, ceased to be such when brought unceased to offend against the law before this der the regulating control of the corporation, suit was brought. It was hence concluded which by uniting them offended the law, and that it should be distinguished from its or- that the organizers of the corporation “had ganizers and that their intent and unsuccess- in mind the specific purposes of the restraint ful attempt should not be attributed to it, of trade and the enormous profits resulting that it "in and of itself is not now and has from that restraint." never been a monopoly or a combination in restraint of trade," and a decree of dissolution should not be entered against it.

The contentions of the case, therefore, must be judged by the requirements of the law, not by accidental or adventitious circumstances. But what are such circumstances? We have seen that it was the view of the District Court that size was such a circumstance and had no accusing or excusing influence. The contention of the government is to the contrary. Its assertion is that they size of the corporation being the result of a

estimated to judge of what they persuade. Our present purpose is, not retrospect for itself, however instructive, but practical deci"combination *of powerful and able competi- sion upon existing conditions that we may not tors" had become "substantially dominant" by their disturbance, produce, or even risk, in the industry and illegal. And that this consequences of a concern that cannot now was determined. The companies combined, be computed. In other words, our considera

(10 Sup.Ct.)

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'was exerted. On the contrary, the only attempt at a fixation of prices was, as already said, through an appeal to and confederation with competitors, and the record shows besides that when competition occurred it was not in pretense, and the corporation, declined in productive powers-the competitors growing either against or in consequence of the competition. If against the competition we have an instance of movement against what the government insists was an irresistible force; if in consequence of competition, we have an illustration of the adage that "com

tion should be of, not what the corporation but gave effect to the greater weight of the had power to do or did, but what it has now evidence. It is certain that no such power power to do and is doing, and what judgment shall be now pronounced-whether its dissolution, as the government prays, or the dismissal of the suit, as the corporation insists. [1, 2] The alternatives are perplexing, involve conflicting considerations, which, regarded in isolation, have diverse tendencies. We have seen, that the judges of the District Court unanimously concurred in the view that the corporation did not achieve monopoly, and such is our deduction, and it is against monopoly that the statute is directed; not against an expectation of it, but against its realization, and it is certain that it was not realized. The opposing conditions were un-petition is the life of trade" and is not easily derestimated. The power attained was much greater than that possessed by any one competitor-it was not greater than that possessed by all of them. Monopoly, therefore, was

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repressed. The power of monopoly in the corporation under either illustration is an un

tenable accusation.

[3] We may pause here for a moment to notice illustrations of the government of the purpose of the corporation, instancing its acquisition after its formation of control over the Shelby Steel Tube Company, the Union Steel Company, and, subsequently, the Tennessee Company. There is dispute over the reasons for these acquisitions which we shall not detail. There is, however, an important circumstance in connection with that of the Tennessee Company which is worthy to be noted. It was submitted to President Roosevelt and he gave it his approval. His approval, of course, did not make it legal; but it gives assurance of its legality, and we know from his earnestness in the public welfare he would have approved of nothing that had even a tendency to its detriment, and he testified he was not deceived and that he believed that "the Tennessee Coal & Iron People had a property which was almost worthless in their hands, nearly worthless to them, nearly worthless to the communities in which it was situated, and entirely worthless to any financial institution that had the securities the minute that any panic came, and that the only way to give value to it was to put it in the hands of people whose possession of it

not achieved, and *competitors had to be persuaded by pools, associations, trade meetings, and through the social form of dinners, all of them, it may be, violations of the law, but transient in their purpose and effect. They were scattered through the years from 1901 (the year of the formation of the corporation) until 1911, but, after instances of success and failure, were abandoned nine months before this suit was brought. There is no evidence that the abandonment was in prophecy of or dread of suit; and the illegal prac tices have not been resumed, nor is there any evidence of an intention to resume them, and certainly no "dangerous probability" of their resumption, the test for which Swift & Co. v. United States, 196 U. S. 396, 25 Sup. Ct. 276, 49 L. Ed. 518, is cited. It is our conclusion, therefore, as it was that of the judges below, that the practices were abandoned from a conviction of their futility, from the operation of forces that were not understood, or were underestimated, and the case is not peculiar. And we may say in passing that the government cannot fear their resumption, for it did not avail itself of the offer of the District Court to retain jurisdiction of the cause in order that, if illegal acts should be attempt-*would be a guaranty that there was value to ed, they could be restrained.

What, then, can now be urged against the corporation? Can comparisons in other regards be made with its competitors and by such comparisons guilty or innocent existence be assigned it? It is greater in size and productive power than any of its competitors, equal or nearly equal to them all, but its power over prices was not and is not commensurate with its power to produce.

It is true there is some testimony tending to show that the corporation had such power, but there was also testimony and a course of action tending strongly to the contrary. The conflict was by the judges of the District Court unanimously resolved against the existence of that power, and in doing so they

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it." Such being the emergency, it seems like an extreme accusation to say that the corporation which relieved it, and, perhaps, rescued the company and the communities dependent upon it from disaster, was urged by unworthy motives. Did illegality attach afterwards and how? And what was the corporation to do with the property? Let it decay in desuetude, or develop its capabilities and resources? In the development, of course, there would be profit to the corporation; but there would be profit as well to the world. For this reason President Roosevelt sanctioned the purchase, and it would seem a distempered view of purchase and result to regard them as violations of law.

[4] From this digression we return to the

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equivocal of itself, even though the facts it rests on or asserts were not contradicted. If the phenomena of production and prices were much discussion and much literature have as easily resolved as the witness implied,

are now distracting the world would be given affects prices; but it is only one among other composing solution. Of course, competition influences, and does not, more than they, register itself in definite and legible effect.

tion. Against it competitors, dealers, and We magnify the testimony by its consideracustomers of the corporation testify in multi

consideration of the conduct of the corpora- | period, it is a consequence of competitive contion to its competitors. Besides the circum- ditions. It has become an aphorism that stances which we have mentioned there are there is danger of deception in generalities, others of probative strength. The company's and in a case of this importance we should officers, and, as well, its competitors and cus- have something surer for judgment than spectomers, testified that its competition was gen- ulation, something more than a deduction, uine, direct, and vigorous and was reflected in prices and production. No practical witness was produced by the government in opposition. Its contention is based on the size and asserted dominance of the corporation-alleged power for evil, not the exertion of the pow-been wasted, and some of the problems that er in evil. Or, as counsel put it, "a combination may be illegal because of its purpose; it may be illegal because it acquires a dominating power, not as a result of normal growth and development, but as a result of a combination of competitors." Such composition and its resulting power constitute, in the view of the government, the offense against the law, and yet it is admitted "no competitude that no adventitious interference was tor came forward and said he had to accept the Steel Corporation's prices." But this absence of complaint counsel urge against the corporation. Competitors, it is said, followed the corporation's prices, because they made money by the imitation. Indeed, the imitation is urged as *an evidence of the corpora- | suppress competition, but to compel testition's power. "Universal imitation," counsel mony, is the necessary inference, shading into assert, is "an evidence of power." In this perjury, to deny its exertion? The situation concord of action, the contention is, there is is indeed singular, and we may wonder at it, the sinister dominance of the corporation-wonder that the despotism of the corporation. "its extensive control of the industry is such that the others [independent companies] follow." Counsel, however, admit that there was "occasionally" some competition, but reject the suggestion that it extended practically to a war between the corporation and the independents. Counsel say:

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employed to either fix or maintain prices, and that they were constant or varied according to natural conditions. Can this testimony be minimized or dismissed by inferring that, as intimated, it is an evidence of power, not of weakness, and power exerted, not only to

so baneful to the world in the representation of the government, did not produce protesting victims.

The

[5] But there are other paradoxes. government does not hesitate to present consuch being, we were told in our schoolbooks, tradictions, though only one can be true; the "principle of contradiction." In one, com"They [the corporation is made a plural] petitors (the independents) are represented called a few-they called 200 witnesses out of as oppressed by the superior power of the some 40,000 customers-and they expect with that customer evidence to overcome the whole corporation; in the other, they are representtrain of price movement shown since the corpo-power's prices, which they could not do, if at ed as ascending to opulence by imitating that

ration was formed."

And by "movement of prices," counsel explained, "as shown by the published prices, they were the ones that the competitors were maintaining all during the interval."

disadvantage from the other conditions of competition, and yet confederated action is not asserted. If it were, this suit would take on another cast. The competitors would cease to be the victims of the corporation, and would become its accomplices. And

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It would seem that "200 witnesses" would be fairly representative. Besides the balance there is no other alternative. The suggestion of the "40,000 customers" was open to the that lurks in the government's contention that government to draw upon. Not having done the acceptance of the corporation's prices is so, is it not permissible to infer that none the submission of impotence to irresistible would testify to the existence of the influence power is, in view of the testimony of the comthat the government asserts? At any rate, petitors, untenable. They, as we have seen, not one was called, but instead the opinion deny restraint in any measure or illegal inof an editor of a trade journal is adduced, fluence of any kind. The government, thereand that of an author and teacher of econom fore, is reduced to the assertion that the size ics, whose philosophical deductions had, per- of the corporation, the power it may have, haps, fortification from experience as Deputy not the exertion of the power, is an abhorCommissioner of Corporations and as an em- rence to the law, or, as the government says, ployé in the Bureau of Corporations. His "the combination embodied in the corporation deduction was that, when prices are constant unduly restrains competition by its necessary through a definite period, an artificial influ- effect [the italics are the emphasis of the gov ence is indicated; if they vary during such a 'ernment], and therefore is unlawful regard.