United States v. Appalachian Coals, 1.
| Citation | 1 F. Supp. 339 |
| Decision Date | 03 October 1932 |
| Docket Number | No. 1.,1. |
| Parties | UNITED STATES v. APPALACHIAN COALS, Inc., et al. |
| Court | U.S. District Court — Western District of Virginia |
John Lord O'Brian, Asst. to Atty. Gen., Charles H. Weston, Russell Hardy, W. B. Watson Snyder, and Hammond E. Chaffetz, Sp. Assts. to Atty. Gen., for the United States.
William J. Donovan, of Washington, D. C., Edgar L. Greever, of Tazewell, Va., Horace R. Lamb, and Ralstone R. Irvine, both of Washington, D. C., and Otto C. Doering, Jr., of New York City, for defendants.
Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.
This is a petition for an injunction under section 4 of the Sherman Anti-Trust Act of July 2, 1890 (15 USCA § 4), heard before a special court of the three Circuit Judges of the circuit as provided by 15 USCA § 28. The complainant is the United States and the defendants are 137 producers of bituminous coal operating in the states of Virginia, West Virginia, Kentucky, and Tennessee and a coal selling agency which they have organized. It is alleged that the plan by which this agency is given the exclusive right to sell the coal produced by the defendants and to fix the prices at which same shall be sold is in violation of sections 1 and 2 of the Sherman Anti-Trust Act (15 USCA §§ 1, 2). Much testimony has been taken which is covered by a detailed finding of facts which we are filing herewith. In this opinion we shall state only such of the facts as are necessary to an understanding of the application which we make of the controlling principles of law.
The defendant producers, 137 in number, are engaged in the mining of bituminous coal in eight coal-producing districts of Virginia, West Virginia, Tennessee, and Kentucky, extending over twenty-four counties of these states. This territory embraces a large part of the Southern Appalachian coal field; and, as it is the territory from which the coal to be sold by Appalachian Coals, Inc., the selling agency, is produced, we shall for convenience refer to it hereafter as the Appalachian territory. Defendant producers mine the greater part of the coal mined in this territory and a very substantial part of all the high volatile coal mined in the United States. In 1929, the last year for which complete figures are available, the total production of bituminous coal east of the Mississippi river was 484,786,000 tons. In the Appalachian and immediately surrounding territory, the production was 107,008,209 tons. Of this amount 58,011,367 tons were produced by the 137 defendants, 20,541,841 tons by nondefendant producers in the same territory, 16,455,001 by captive mines, that is, mines operated to produce coal chiefly for the consumption of the owners, and 12,000,000 tons by mines in the immediately surrounding territory. It will thus be seen that the production controlled by the defendants was 11.96 per cent. of the production east of the Mississippi, 54.21 per cent. of the total production of the Appalachian and immediately surrounding territory, including that of captive mines, 64 per cent. of the production of the Appalachian and immediately surrounding territory, not including captive mines, and 74.4 per cent. of that part of the product of the Appalachian territory proper which is sold commercially.
The cost of transportation narrows the market in which coal can be sold profitably; and the market of coal produced in the Appalachian territory is not the entire United States, but the sections of the country which are accessible under existing costs of transportation. A study of the figures for rail shipments in the year 1929 shows that the coal produced in the Appalachian and immediately surrounding territory was an important factor in the markets mentioned in the following table, which covers all of the important markets in which Appalachian coal is sold.1 Its relative importance in these markets may be seen at a glance by comparing the shipments from Appalachian and surrounding territory, set forth in the second column, with the total rail shipments into the markets, set forth in the first. The percentage is shown in the third.
Total rail Rail shipments Percentage
shipments from of Appalachian
Market into Appalachian to
Market territory total
Virginia 4,880,098 1,628,500 33.4
West Virginia 4,428,463 978,769 22.1
Kentucky 4,191,675 2,782,026 66.4
Tennessee 5,582,419 3,228,952 57.8
North Carolina 3,215,337 2,197,545 68.3
South Carolina 2,400,025 2,295,476 96
Georgia 3,024,614 2,541,533 84
Ohio 45,847,286 15,941,414 34.8
Indiana other
than Chicago
District 14,632,580 6,484,157 44.3
Illinois other
than Chicago
District 19,230,660 1,850,215 9.6
Chicago District 32,254,255 7,429,543 23
Southern Michigan
Peninsula 19,947,446 14,522,291 72.8
Lake Cargo 39,204,835 17,172,446 43.8
Tidewater between
N. Y
and Hampton
Roads 7,202,877 717,900 10
Tidewater to
N. Y. 14,407,000 1,317,000 9.
Tidewater to
New England 14,445,000 2,540,000 17.6
We need not go into the figures as to what part of the shipments from Appalachian territory shown above represents coal sold by the defendants. The fact that they mine 54 per cent. of the coal produced in the Appalachian and surrounding territory is sufficient proof of the important part which their coal plays in these markets. It is apparent, without further elaboration, that they control, not only a substantial part of the production in the field in which they operate, but also a substantial part of the coal sold in the markets in which they compete.
Appalachian Coals, Inc., is a coal-selling agency organized by the 137 producing defendants to sell the coal which they produce. They own the agency's entire capital stock, which is apportioned among them in proportion to their productive capacity. By contracts which they have executed with the agency, the latter is given the exclusive right, not only to sell all the coal which they produce, but also to fix the prices at which same shall be sold. Orders for coal obtained by the agency are to be apportioned among them in the event that it is not possible to sell their entire production. The agency is to receive a commission of 10 per cent. for making sales and is to guarantee accounts. Subagents are to be appointed by the agency, and are to receive 8 per cent. on sales from the commission allowed the agency. Any stockholding producer may direct the appointment of subagents to sell the product of his mines for the agency and any stockholder not exercising this privilege is required to subscribe to a larger percentage of the preferred stock of the agency. Subagents are to sell the coal of the producer at whose instance they are appointed; and, notwithstanding the agreement as to prorating orders, it is understood that coal sold to be delivered by a certain producer is to be delivered by him. It does not appear with certainty how this is to be reconciled with the agreement for prorating; but it is certain that no producer is to sell except through the agency, and that the agency is to fix the prices at which all sales are to be made.
The prices at which coal is to be sold are to be fixed by a board composed of the president and the vice presidents of the agency. This board is to stay at the central office of the agency and is to fix prices from time to time at which the coal of defendants is to be offered; and it is contemplated that prices are to be fixed with reference to the market price of coal so as to sell as nearly as possible all the coal that defendants can produce and to secure for same the highest prices obtainable. No contract for delivery exceeding sixty days in the future is to be binding upon any producer unless he agrees to it; but, with this exception, the agency is to have the power to close contracts at whatever price it may fix.
This selling agency has not yet begun to operate. It was organized early in the year 1932, and contracts were entered into with the producing defendants continuing until April 1, 1935, and thereafter from year to year. Before defendants began operating through the agency, however, they called the attention of the Department of Justice to what they were proposing to do. Although, for the reasons hereafter stated, we think the plan violative of the Sherman Act, it is but due to defendants to say that the evidence in the case clearly shows that they have been acting fairly and openly, in an attempt to organize the coal industry and to relieve the deplorable conditions resulting from overexpansion, destructive competition, wasteful trade practices, and the inroads of competing industries.
The evidence before us discloses that the condition of the coal industry for many years has been indeed deplorable. During the World War, and for a short while thereafter, conditions led to an overdevelopment of mine capacity, with the result that, to meet a demand of less than 500,000,000 tons, the bituminous mines of the country have a developed capacity exceeding 700,000,000 tons. In addition to this, the demand, which formerly doubled every decade, has been seriously affected as the result of more efficient methods in the burning of coal and the increasing use of hydroelectric current and of substitute fuels, such as petroleum and natural gas. Competition within the industry has become very fierce, being based in many instances, not upon...
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Appalachian Coals v. United States
...The District Court, composed of three Circuit Judges, made detailed findings of fact and entered final decree granting the injunction. 1 F.Supp. 339. The case comes here on appeal. 28 U.S.C. § 380 (28 USCA § Defendants, other than Appalachian Coals, Inc., are 137 producers of bituminous coa......
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