257 U.S. 377 (1921), 71, American Column & Lumber Co. v. United States

Docket Nº:No. 71
Citation:257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284
Party Name:American Column & Lumber Co. v. United States
Case Date:December 19, 1921
Court:United States Supreme Court

Page 377

257 U.S. 377 (1921)

42 S.Ct. 114, 66 L.Ed. 284

American Column & Lumber Co.


United States

No. 71

United States Supreme Court

Dec. 19, 1921

Argued October 20, 21, 1920

Restored to docket for reargument February 28, 1921

Reargued October 12, 13, 1921




An " Open Competition Plan" under which manufacturers of one-third of the hardwood output of the country exchanged full and minute disclosures of the details of their business, including stocks on hand, production, shipments, prices, names of purchasers, etc., and their views on future market conditions, by means of reports and letters from the several members to a central office and distribution to them therefrom of analytical digests of the matters thus furnished, with significant suggestions as to future production and prices, by an expert agent, these means being supplemented by frequent meetings and discussions by the members -- is found from the evidence to have been actuated by the purpose and to have had the effect of restricting competition in interstate commerce by curtailing production and increasing prices, and is held a combination and conspiracy violating the Anti-Trust Act. P. 399.

263 F. 147 affirmed.

Direct appeal from a decree of the district court granting a permanent injunction under the Anti-Trust Act.

Page 391

CLARKE, J., lead opinion

MR. JUSTICE CLARKE delivered the opinion of the Court.

The unincorporated "American Hardwood Manufacturers' Association" was formed in December, 1918, by the consolidation of two similar associations, from one of which it took over a department of activity designated the "Open Competition Plan," and hereinafter referred to as the "Plan."

Participation in the Plan was optional with the members of the Association, but, at the time this suit was commenced, of its 400 members, 365, operating 465 mills, were members of the Plan. The importance and strength of the Association is shown by the admission in the joint answer that, while the defendants operated only 5 percent of the number of mills engaged in hardwood manufacture in the country, they produced one-third of the total production of the United States. The places of business of the corporations and partnerships members of the Plan were located in many states, from New York to Texas, but chiefly in the hardwood producing territory of the Southwest. The defendants are the members of the Plan, their personal representatives, and F. R. Gadd, its "Manager of Statistics."

The bill alleged, in substance, that the Plan constituted a combination and conspiracy to restrain interstate commerce in hardwood lumber by restricting competition and maintaining and increasing prices, in violation of the Anti-Trust Act of 1890, 26 Stat. 209.

Page 392

The answer denied that the Plan had any such purpose and effect as charged, and averred that it promoted competition, especially among its own members.

A temporary injunction, granted by the district court, restricting the activities of the Plan in specified respects, by consent of the parties, was made permanent, and a direct appeal brings the case here for review.

The activities which we shall see were comprehended within the "Open Competition Plan" (which is sometimes called the "New Competition") have come to be widely adopted in our country, and, as this is the first time their legality has been before this Court for decision, some detail of statement with respect to them is necessary.

There is very little dispute as to the facts. The testimony of the government consists of various documents and excerpts from others, obtained from the files of the Plan, and the testimony of the defendants consists of like documents and excerpts from other documents, also from the same files, supplemented by affidavits of a number of persons, members and nonmembers, chiefly to the point that the confessedly great increases of prices during 1919 were due to natural trade and weather conditions, and not to the influence of the Plan.

The record shows that the Plan was evolved by a committee, which, in recommending its adoption, said:

The purpose of the plan is to disseminate among members accurate knowledge of production and market conditions so that each member may gauge the market intelligently, instead of guessing at it; to make competition open and above board instead of secret and concealed; to substitute, in estimating market conditions, frank and full statements of out competitors for the frequently misleading and colored statements of the buyer.

[42 S.Ct. 115] After stating that the purpose was not to restrict competition or to control prices, but to "furnish information to enable each member to intelligently make prices and to

Page 393

intelligently govern his production," the committee continues:

The chief concern of the buyer, as we all know, is to see that the price he pays is no higher than that of his competitors, against whom he must sell his product in the market. The chief concern of the seller is to get as much as anybody else for his lumber -- in other words to get what is termed the top of the market for the quality he offers. By making prices known to each other, they will gradually tend toward a standard in harmony with market conditions, a situation advantageous to both buyer and seller.

Not long after the consolidation, a further explanation of the objects and purposes of the Plan was made in an appeal to members to join it, in which it is said:

The theoretical proposition at the basis of the Open Competition Plan is that

Knowledge regarding prices actually made is all that is necessary to keep prices at reasonably stable and normal levels.

The Open Competition Plan is a central clearing house for information on prices, trade statistics and practices. By keeping all members fully and quickly informed of what the others have done, the work of the Plan results in a certain uniformity of trade practice. There is no agreement to follow the practice of others, although members do follow their most intelligent competitors, if they know what these competitors have been actually doing.

The monthly meetings held in various sections of the country each month have improved the human relations existing between the members before the organization of this Plan.

And, in another later and somewhat similar appeal sent to all the members, this is found:

Competition, blind, vicious, unreasoning, may stimulate trade to abnormal activity, but such condition is no

Page 394

more sound than that medieval spirit some still cling to of taking a club and going out and knocking the other fellow and taking away his bone.

The keynote to modern business success is mutual confidence and cooperation. Cooperative competition, not cutthroat competition. Cooperation is a matter of business, because it pays, because it enables you to get the best price for your product, because you come into closer personal contact with the market.

Cooperation will only replace undesirable competition as you develop a cooperative spirit. For the first time in the history of the industry, the hardwood manufacturers are organized into one compact, comprehensive body, equipped to serve the whole trade in a thorough and efficient manner. . . . More members mean more power to do more good for the industry. With cooperation of this kind, we will very soon have enlisted in our efforts practically every producing interest, and you know what that means.

Thus, the Plan proposed a system of cooperation among the members, consisting of the interchange of reports of sales, prices, production, and practices, and in meetings of the members for discussion, for the avowed purpose of substituting "cooperative competition" for "cutthroat competition," of keeping "prices at reasonably stable and normal levels," and of improving the "human relations" among the members. But the purpose to agree upon prices or production was always disclaimed.

Coming, now, to the fully worked out paper plan as adopted:

It required each member to make six reports to the secretary, viz.:

1. A daily report of all sales actually made, with the name and address of the purchaser, the kind, grade and quality of lumber sold and all special agreements of every

Page 395

kind, verbal or written with respect thereto. "The reports to be exact copies of orders taken."

2. A daily shipping report, with exact copies of the invoices, all special agreements as to terms, grade, etc. The classification shall be the same as with sales.

3. A monthly production report, showing the production of the member reporting during the previous month, with the grades and thickness classified as prescribed in the Plan.

4. A monthly stock report by each member, showing the stock on hand on the first day of the month, sold and unsold, green and dry, with the total of each, kind, grade and thickness.

5. Price lists. Members must file at the beginning of each month price lists showing prices f.o.b. shipping point, which shall be stated. New prices must be filed with the association as soon as made.

6. Inspection reports. These reports are to be made to the association by a service of its own, established for the purpose of checking up grades of the various members and the Plan provides for a chief inspector and sufficient assistants to inspect the stocks of all members from time to time.

The declared purpose of the inspection service is not to change any member's grading except with his consent, but to furnish each member a basis on which he can compare his prices with those of other members, thereby making all...

To continue reading