United States v. American Linseed Oil Co, 307

• Decision Date: 04 June 1923
• Docket Number: No. 307,307
• Citation: 43 S.Ct. 607,67 L.Ed. 1035,262 U.S. 371
• Parties: UNITED STATES v. AMERICAN LINSEED OIL CO. et al
• Court: U.S. Supreme Court

262 U.S. 371

43 S.Ct. 607

67 L.Ed. 1035

UNITED STATES

v AMERICAN LINSEED OIL CO. et al.

No. 307.

Argued April 25, 26, 1923.

Decided June 4, 1923.

Mr. James A. Fowler, of Knoxville, Tenn., for the United states.

[Argument of Counsel from pages 371-375 intentionally omitted] Messrs. John Walsh, of Washington, D. C., and Thomas M. Debevoise, of New York City, for appellees.

[Argument of Counsel from pages 375-379 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

By an original bill filed June 30, 1920, the United States charged that appellees—defendants below—were parties to a combination in restraint of interstate trade and commerce forbidden by the Sherman Act, and asked that they be enjoined from continuing therein. The court below held the combination lawful and dismissed the bill. 275 Fed. 939.

The defendants are 12 corporations, commonly referred to as 'crushers,' with principal places of business in six different states, which manufacture, sell, and distribute linseed oil, cake, and meal, and Julian Armstrong, who operates at Chicago under the name 'Armstrong Bureau of Related Industries.' This bureau conducts a so-called 'exchange,' through which one subscribing manufacturer may obtain detailed information concerning the affairs of others doing like business. The defendant 'crushers' constitute one of the groups who contract for this service. They manufacture and distribute throughout the Union a very large part of the linseed products consumed therein, and prior to the challenged combination were active, unrestrained competitors. Some time in September or October, 1918, each of them entered into an identical written 'subscription agreement' with the Armstrong bureau, and a year thereafter signed another, not essentially different. The latter is summarized and quoted from below.

After stating that 'the matter contained herein is for the exclusive and confidential use of the subscriber,' the agreement recites that it and other 'crushers' of flaxseed desire promptly and economically to secure from and through the bureau the following things, 'which will promote better and more safe, sane, and stable conditions in the linseed oil, cake, and meal industry and increase its service to the commonwealth': Comprehensive data as to market, trade, and manufacturing conditions in the linseed oil industry; economies in manufacture and sale, by frank exchange of accurate information; the latest authentic information concerning the credit of buyers; a broader market for cake and meal; establishment of uniform cost accounting systems; fair and just freight tariffs and classifications; definite standardization of the products of the industry; economies in the development of foreign markets and increase of sales therein; stabilization of the flaxseed market so far as lawful; shipment of cake and meal to the consumer from the nearest point of production.

The contracting 'crusher' agrees:

To subscribe for the bureau's service for 12 months, and thereafter from year to year, subject to cancellation by either party upon 30 days' notice, and pay therefor a sum reckoned upon the amount of flaxseed milled by it, but not less than $1,100 annually.

That all information reported or received shall be purely statistical and relevant to past operations, and no part of the bureau's machinery will be used to fix prices, divide territory, limit sales, production, or manufacture, or control competition.

That it will 'promptly make, have made, forward, and have sent in and to said bureau, as and in the form required y this agreement, full, accurate, complete, signed, and certified reports of all said sales, quotations, and offerings or other information required by the bureau, and full, correct replies or answers to any and all inquires concerning the same or seeking any information in regard thereto.'

That upon request it will 'at once turn and have turned over to the bureau's auditor for examination all vouchers, books of account, correspondence, and such other evidence or documents as he may request, or, in lieu of the same, or any part thereof, such abstracts therefrom as he may designate, verified under oath and certified by a certified public accountant in good standing.'

That, 'if any subscriber considers that it has good cause to question the report made by any other subscriber, then it may request an investigation or audit to be made by the bureau, and, if considered proper by the bureau, it will be so made,' the incident expense to be paid by the party found in error.

That it will deposit with the bureau not less than $1,000 nor more than $10,000 of Liberty Bonds, according to its milling capacity.

That, 'should the undersigned subscriber fail, in any manner whatsoever, to comply with any of the terms of this agreement, or with any and all reasonable requirements of said bureau, then it shall and does hereby forfeit to said bureau, at its election, all money paid for services and all further benefits and rights under this agreement, which forfeiture, for just cause, may be declared by said bureau, evidenced by written notice thereof mailed to said offender by United States registered mail, and such subscriber shall thereby forfeit all further right, title, or interest in and to said bonds [so on deposit] in whole or in part,' subject to the right of appeal to a council, of three subscribers, which shall have power to review the entire matter, reinstate the offender, or take such other final action as seems proper. No fine shall exceed the deposit with the bureau.

That it will (a) 'immediately, and when and as hereafter issued, deposit with the bureau all public price lists of the undersigned covering raw and boiled linseed oil, cake, and meal; (b) also to report to the bureau by prepaid telegraph, and further confirm by mail, duplicate of all quotations made at variance with above price lists, giving better terms to the contemplated purchaser than those quoted; (c) with all reports made in compliance with the above paragraph 'b' of quotations which amount to one carload or more of oil, cake, or meal there shall also be reported at the same time and in the same manner the prospective buyer's name, address, and f. o. b. point of shipment; (d) in so far as the above reports 'a,' 'b,' and 'c' do not disclose the following, the undersigned 'subscriber' agrees to give the following information in connection therewith, that is: The exact prices, terms, and discounts, and whether made to the jobber, dealer, or consumer, and in what quantities, carload or less than carload, and warehouse or mill prices; (e) also to promptly report all changes in and alterations or withdrawals of the above, of every kind whatsoever, that may be made; (f) also to promptly report by prepaid telegraph, and further confirm by mail, all orders received by the undersigned subscriber in response to special quotations made as above provided in paragraph 'c,' designating the quotation which is the basis of such order and any variance therefrom.'

That 'directly at the close of each day's business each subscriber shall mail by special delivery to the bureau a complete report of all its carload sales for that day of oil, cake, or meal, not covered by its previous daily sales reports, which report shall disclose the quantity and kind, price, and terms, and whether for immediate or future delivery, and, if no sale has been so made, this fact shall be likewise reported.'

That for the purpose of compiling a weekly sales report 'a map of the United States shall be divided int zones as agreed upon by all of the subscribers to this service, and each subscriber at the conclusion of the week shall send to the bureau by special delivery, not later than the following Monday night, a compiled report of all its sales of oil, cake, or meal into each zone made during the period covered by such report, and not previously so reported, specifically setting forth the following: (a-a) Total gallons of oil sold into each zone, also showing the total gallons and price per gallon received for such oil sold; (b-b) total tonnage of cake and meal sold into each zone, also showing total weight and price received per ton for such cake or meal sold; (c-c) sales reports on both oil, cake, and meal shall differentiate spot and future delivery, giving period of such futures.'

That before the 10th day of each calendar month it will report to the bureau the number of gallons of oil and the total tons of meal or cake on hand not covered by sale or contract.

That all information received from the bureau or any meeting of subscribers will be treated as confidential.

The bureau...