United States v. General Electric Co.
| Decision Date | 03 April 1925 |
| Docket Number | No. 1051.,1051. |
| Parties | UNITED STATES v. GENERAL ELECTRIC CO. et al. |
| Court | U.S. District Court — Northern District of Ohio |
A. E. Bernsteen, U. S. Atty., of Cleveland, Ohio.
Squire, Sanders & Dempsey, of Cleveland, Ohio (Frederick P. Fish and Charles Neave, both of New York City, of counsel), for General Electric Co.
Tolles, Hogsett, Ginn & Morley, of Cleveland, Ohio (Paul D. Cravath and F. Harold Smith, both of New York City, of counsel), for Westinghouse Electric & Mfg. Co. and Westinghouse Lamp Co.
This suit is in equity to dissolve an alleged combination and conspiracy organized and maintained by defendants in violation of Act July 2, 1890, and amendments thereto, known as the Sherman Anti-Trust Act (Comp. St. ß 8820 et seq.). It has been heard and submitted on an agreed statement of facts, chiefly documentary. Careful study has been given to the respective contentions of counsel, but I deem it unnecessary to prepare an extended opinion. Obviously the case is destined to go higher; hence I shall content myself with a statement only of my conclusions.
The alleged conspiracy began in 1912. It is embodied in written documents, which have been modified since only in immaterial respects. It has to do with the manufacture and sale of incandescent electric lamps having a tungsten filament. The manufacture and sale of these lamps during the entire period has been dominated by underlying patents owned by the General Electric Company. The validity of these patents has been sustained against all infringers, and no one may make or sell this type of lamp except with its permission. It has licensed the Westinghouse Company, the terms of which license is the basis of one of the major grounds relied on to support the charge of an illegal combination. It has also licensed some 13 other manufacturers, whose combined output constitutes less than 10 per cent. of the total product made and sold in the United States; but as to these 13 no complaint is made, and their activities, as well as their relations to the General Electric Company, are not involved in this controversy. Of the incandescent electric lamps made and sold in the United States, approximately 97 per cent. have a tungsten filament, covered by the patents above referred to. In 1923 the General Electric Company had 61 per cent. and the Westinghouse Company 16 per cent. of the total trade in these patented lamps. In prior years the General Electric Company did more; at the beginning of the alleged conspiracy, as much as 80 per cent. of the total.
The General Electric Company adopted in 1912, and has ever since followed, as it contends, the policy of selling its lamps direct to the ultimate consumer. Its selling system was at the same time adopted and has since been followed by the Westinghouse Company. The complaints made of this selling system will be first considered.
Of the General Electric Company's business, what are known as the large lamps constitute 80 per cent. Of its large lamps, 22 per cent. is sold direct to the ultimate consumer by its own salaried employÈs and delivered direct from its own warehouses; 37 per cent. is sold direct to large consumers on contracts likewise made by its own salaried employÈs; but deliveries upon these contracts are made from consigned stock in the custody of its agents and under the terms of certain agency contracts of which complaint is made. The remaining 41 per cent. of its large lamps is sold by agents under these agency contracts. Its remaining 20 per cent. of incandescent electric lamp output consists of what are called small lamps, and are marketed by the same methods; but the larger percentage of small lamps is sold and delivered through agents under the agency contracts in question.
The main point of contention relates to these agency contracts and method of distribution. The facts as they appear in the stipulated documents are too long even to summarize. Counsel agree that the test inquiries are whether the agents or distributors are in fact bona fide agents, whether the consignments of lamps to them are genuine consignments of the manufacturers' product or conditional sales, or whether the title remains in the consignor until sale and delivery is made to the ultimate consumer. All these inquiries must be answered in the affirmative. All the rights and burdens of ownership until sale and delivery are with the consignor. Since 1915, insurance and local taxes have been borne by it. The only noteworthy incident of the relation is that the agent is required to guarantee the collectibility of his customers' accounts and to remit when due, whether collection has been made or not; but these are only the usual and long-familiar incidents of a del credere factor or agent. This conclusion is not only supported, but compelled, by the following authorities: General Electric Co. v. Brower (9 C. C. A.) 221 F. 597, 137 C. C. A. 321; General Elec. Co. v. Commercial Elec. Supply Co. (Mo. App.) 191 S. W. 1106; In re Taft (6 C. C. A.) 133 F. 511, 514, 66 C. C. A. 385; Ludvigh v. Am. Woolen Co., 231 U. S. 522, 34 S. Ct. 161, 58 L. Ed. 345; Sturm v. Boker, 150 U. S. 312, 330, 14 S. Ct. 99, 37 L. Ed. 1093.
The government's counsel, while conceding the soundness and applicability of the foregoing principles as applied to one or a limited number of agency contracts, contends that the combined system of selling direct and through agents under these contracts is a subterfuge and a sham, whereby the Anti-Trust Law is nullified if not violated. It seems to me that this contention is based merely upon the size and the effectiveness of defendants' system. It must be conceded that a manufacturer may market his product direct to the ultimate consumer. It must also be conceded that he may do this through genuine agents. It must also be conceded that he may fix the price at which he will sell, and may select the agents whom he wishes to represent him, and may fix the price at which these agents may sell the principal's goods. See Federal Trade Commission v. Curtis Publishing Co., 260 U. S. 568, 581, 43 S. Ct. 210, 67 L. Ed. 408; Federal Trade Commission v. Raymond Co., 263 U. S. 565, 573, 44 S. Ct. 162, 68 L. Ed. 448, 30 A. L. R. 1114. These principles being conceded or established, the building up of a system adequate in size to market the product becomes the only ground of criticism, and, in my opinion, is without merit.
The argument that this may not be done is sustained by invoking the principle that a manufacturer may not, after selling or parting with his product, tie up his jobber purchasers and their retail dealers with resale price-fixing agreements. See Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502. But this is quite beside the mark. Counsel's argument is too nebulous to be grasped, but it seems to be this: If the manufacturer, after selling his product, attempts to tie up jobbers and retailers with price-fixing agreements, it is illegal; if he does not sell his product to jobbers and dealers, but undertakes to market it himself, through his salaried employÈs or bona fide agents, then, while this may not be per se illegal, it may become so, if his motive is to realize the advantages which he may not lawfully realize by restricting resale prices after he has parted with title. Stated in other words, the argument comes to this: A man wants to get rich; he may not get rich by stealing; ergo, he may not get rich by honest toil, if his motive is to accomplish that which he is forbidden to do by stealing. In law, the motive which moves a man to adopt and follow a course of conduct strictly legal is immaterial,...
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