United States v. American Column & Lumber Co.

• Decision Date: 16 March 1920
• Docket Number: 751.
• Citation: 263 F. 147
• Parties: UNITED STATES v. AMERICAN COLUMN & LUMBER CO. and 332 other defendants.
• Court: U.S. District Court — Western District of Tennessee

263 F. 147

UNITED STATES v. AMERICAN COLUMN & LUMBER CO. and 332 other defendants.

No. 751.

United States District Court, W.D. Tennessee, Western Division.

March 16, 1920

Charles B. Ames, Asst. Atty. Gen., Henry S. Mitchell and Blackburn Esterline, Sp. Asst. Attys. Gen., William D. Kyser, U.S Atty., and Thomas J. Walsh, Asst. U.S. Atty., both of Memphis, Tenn., for application.

L. C Boyle and G. Carroll Todd, both of Washington, D.C., W. H Fitzhugh and Harry B. Anderson, both of Memphis, Tenn., and L. C. Bell, of Columbus, Ohio, opposed.

McCALL District Judge.

This is an application for preliminary injunction. The bill of complaint is brought under section 4 of an Act of Congress (26 Stat. 209 (Comp. St. Sec. 8823)), by the United States of America against the American Column & Lumber Company and 332 other manufacturers of hardwood lumber, residents and citizens of some 16 different states, charging the defendants with combining and conspiring together to suppress competition amongst themselves, and to enhance their selling prices for such lumber, in restraint of interstate commerce in violation of section 1 of said act of Congress (section 8820), which is as follows:

'Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal.'

It is alleged that the defendant companies comprise the most important manufacturers of hardwood lumber in the United States, and have been so engaged for a long time, in the states and at the places indicated in the bill of complaint, in cutting down trees of the hardwood varieties and converting them into logs, in moving such logs to sawmills and lumber factories, in manufacturing them into lumber, and in the selling and shipping of such lumber, in interstate commerce, to manufacturers of sashes, doors, flooring, mill work, etc., and to other manufacturers and to wholesale and retail dealers for the purposes of resale, and that at the beginning of the year 1919 the defendant companies were still demanding for their lumber approximately the same prices that had prevailed before the signing of the armistice in the war with Germany, and that manufacturers and wholesale and retail dealers were buying from the defendants only in small quantities, for the purposes of immediate necessities, in the belief that the prices demanded were too high, and they were intending to largely increase their purchases of such lumber from the defendants, in interstate commerce, as soon as the prices should be reduced by competition among the defendants to more reasonable levels.

Under these circumstances, in January, 1919, and continuously thereafter to the present time, it is further alleged that the defendant companies and individual defendants unlawfully combined and conspired together, in restraint of interstate commerce in hardwood lumber manufactured by them, to maintain the prices demanded in said month of January, 1919, for their lumber and to double and treble the prices, in violation of the said act of Congress and against the public policy of the United States, by suppressing competition in prices amongst the defendants, by substituting therefor co-operation and agreements among themselves having the purpose and effect of maintaining and increasing prices.

The bill then proceeds to state the means resorted to by defendants to accomplish the purpose of the alleged combination and conspiracy, which are in substance as follows (hereinafter referred to as overt acts): By joining together as members of a so-called 'open competition plan' under the slogan 'Co-operation, not Competition, is the Life of Trade,' and by providing and financially supporting at Memphis, Tenn., a suite of offices, clerical force, and the defendant F. R. Gadd as manager of statistics, for the successful operation of said plan; by dividing the members of the plan into four geographical groups, and holding meetings of each group each month; by printing and causing to be distributed amongst the defendants recommendations to make oral agreements at such meetings to eliminate competition amongst these defendants who had been competing, and by this means to suppress 'evil practices,' meaning thereby the practice of competing in prices so as to secure business, by requiring each member of the plan to make monthly 'stock reports' to the manager of statistics, showing the normal stock, the entire actual stock, the unsold stock, of each defendant company, and also to make to said manager 'production reports,' showing the normal monthly production, the actual monthly production, and the estimated future production of each defendant company, and also 'sales reports' showing separately each actual sale of hardwood lumber made by each defendant company, giving the name of the buyer, the kind of lumber sold, the destination, and the selling price; by having these reports tabulated by the manager of statistics and distributed amongst the members of the plan; by distributing amongst the defendants printed recommendations to discuss prices at their monthly meetings, and orally discussing at such monthly meetings said stock reports, production reports, and sales reports, so as to produce at each of such meetings a mutual exchange of oral statements of approval of high prices reported in the sales reports, as assurances that the defendants would further sustain such prices by maintaining prices as high as or higher than such prices; by mutually exchanging each month through the manager of statistics, in connection with the production reports, written predictions by the several defendants that high prices reported in the sales reports would continue to be maintained and enhanced, so as to thus furnish further assurance that the action of each defendant in maintaining and enhancing such price would be supported by like action on the part of other members of the plan; by having distributed by the manager of statistics amongst the defendants printed expositions of the theory of each defendant, to be observed as a guide to prices reported as received by other defendants, to the effect that knowledge regarding prices actually received is all that is necessary to keep prices at reasonably stable and normal levels, there being no agreement to follow the practices of others, although members do naturally follow their most intelligent competitors, if they know what their competitors have been actually doing, this being the theoretical proposition at the basis of the open competition plan; by having questionnaires sent out by the manager of statistics to each member of the plan, asking for information showing how the theory of the open competition plan worked in practice, and that the manager of statistics edited these answers and caused to be distributed amongst the members such parts of them as tended to show that it was successful in producing a steady advance in the prices of their products; by printing and causing to be distributed among the defendants arguments against low prices, on the ground of shortage of lumber disclosed by the stock reports, and explaining how the disclosure of such shortage in the stock reports prevented prices from being lowered, followed by arguments for still higher prices on the ground of the shortage disclosed; the continued co-operation to secure higher prices on the ground of shortage in stocks, and the elimination of competition; by causing to be reprinted with approval, and distributed amongst themselves, statements emphasizing the advance of prices following the shortage of lumber, and urging the defendants against increasing production by night work, which would in effect 'kill the goose that laid the golden eggs' and would be criminal folly, coupled with the suggestion made in the sales report that their combination or association, called the 'open competition plan,' to maintain and enhance prices would not be prosecuted, that prices would continue to advance so long as the shortage of lumber was maintained, and that the Sherman Law, designed to prevent the restraint of trade, should be repealed.

It is further alleged that similar means are still being employed and are about to be further employed by the defendants, at Memphis and elsewhere, in consummation of their alleged unlawful combination and conspiracy to maintain the prices of hardwood lumber at, and enhance it beyond, the present high levels, in restraint of interstate commerce in such lumber. It is the doing of these things by the defendants, characterized as overt acts, that the court is asked to enjoin.

The defendants file a sworn answer, in which they substantially admit doing the things charged in the bill, characterized as overt»acts. They deny that they were wrongful acts, and assert that the defendants were clearly within their rights under the law in the course which has been pursued, and especially do they deny every charge or intimation in the bill of any unlawful combination or conspiracy, and that the doing of those things did not and does not restrain trade in interstate commerce; but, on the other hand, it is asserted that the open competition plan promotes competition in interstate commerce, and especially among the members of the plan, in that it furnishes them with information by which they can more intelligently and effectively conduct the management of their business as manufacturers of hardwood lumber. They deny that the defendants, by their course of conduct as charged in the bill, curtailed production or suppressed competition in, or maintained and increased prices of, manufactured hardwood lumber.

Much documentary evidence and many affidavits were introduced in support of the contention of...