297 U.S. 553 (1936), 268, Sugar Institute, Inc. v. United States

Docket Nº:No. 268
Citation:297 U.S. 553, 56 S.Ct. 629, 80 L.Ed. 859
Party Name:Sugar Institute, Inc. v. United States
Case Date:March 30, 1936
Court:United States Supreme Court
 
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Page 553

297 U.S. 553 (1936)

56 S.Ct. 629, 80 L.Ed. 859

Sugar Institute, Inc.

v.

United States

No. 268

United States Supreme Court

March 30, 1936

Argued February 3, 4, 1936

[56 S.Ct. 630] APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

1. The restrictions of the Sherman Anti-Trust Act are aimed against such restraints of interstate commerce as are unreasonable. P. 597.

2. The Act does not forbid cooperative adoption by competitors of reasonable means to protect their trade from injurious practices and to promote competition on a sound basis, and such legitimate cooperation is not limited to the removal of evils which are in themselves infractions of positive law. P. 598.

3. The mere fact that correction of abuses in a business by cooperative action of those competing in it may tend to stabilize the business, or to produce fairer price levels, does not stamp their action as unreasonable restraint of trade. P. 598.

4. But concerted action which produces unreasonable restraint cannot be justified by pointing to evils affecting the industry or to a laudable purpose to remove them. P. 599.

5. While the collection and dissemination of trade statistics are in themselves permissible, and may be a useful adjunct of fair commerce, a combination to gather and supply information as part of a plan to impose unwarrantable restrictions on competition, as, for example, to curtail production and raise prices, is unlawful. P. 599.

6. In applying the Sherman Act, each case demands a close scrutiny of its own facts, and questions of reasonableness are necessarily questions of relation and degree. P. 600.

7. Fifteen companies, which refined nearly all of the imported raw cane sugar processed in this country and supplied from 70 to 80% of the refined sugar consumed in it, formed a trade association, called The Sugar Institute, ostensibly for the purpose of doing away with unfair merchandizing practices, especially the granting of secret concessions and rebates to customers, which had grown up in the trade. They agreed that all discriminations between customers should be abolished, and, to that end, that each company should publicly announce in advance its prices, terms, and conditions of sale and adhere to them strictly until it publicly changed them. They also agreed upon a number of supplementary restrictions (which are considered in detail in this opinion), among which were

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(a) restrictions on the employment of brokers and warehousemen (infra, 587); (b) restrictions concerning transportation, absorption of freight charges, etc. (infra, 589); (e) limitation of the number of consignment points at which sugar was placed for distribution to surrounding areas and limitation of ports of entry to be used (infra, 591); (d) prohibition of long-term contracts and restriction of quantity discounts on sales to customers (infra, 593); (e) withholding from the purchasing trade of part of the statistical information collected by the Institute for its members and not otherwise available (infra, 596). Owing to the position of these refiners in the sugar industry, maintenance of competition between them was a matter of serious public concern, and, since refined sugar is a highly standardized product, that competition must relate mainly to prices, terms, and conditions of sales. The strong tendency toward uniformity of price resulting from the uniformity of the commodity made it the more important that such opportunities as existed for fair competition should not be impaired.

Held:

(1) The agreement and supporting requirements went beyond the removal of admitted abuses and imposed unreasonable restraints. P. 601.

(2) The vice of the agreement was not in the mere open announcement in advance of prices and terms -- a custom previously existing which had grown out of the special character of the industry and did not restrain competition -- nor in the relaying of such announcements, but in the steps taken to secure undeviating adherence to the prices and terms announced, whereby opportunities for variation in the course of competition, however fair and appropriate, were cut off. P. 601.

(3) In ending the restraint, the beneficial and curative agency of publicity should not be unnecessarily hampered; publicity of prices and terms should not be confined to closed transactions; if the requirement that there must be adherence to prices and terms openly announced in advance be abrogated and the restraints which followed that requirement be removed, the just interests of competition will be safeguarded, and the trade will still be left with whatever advantage may be incidental to its established practice. P. 601.

(4) The refiners should be enjoined from gathering and disseminating among themselves exclusively statistical information which is not readily, fully, and fairly available to the purchasing and distributing trade, and in which that trade has a legitimate interest,

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but the command should not be so broad as to include information in relation to the affairs of refiners which may rightly be treated as having a confidential character and in which distributors and purchasers have no proper interest. P.___.

15 F.Supp. 817 modified and affirmed.

Appeal from a decree of injunction in a suit by the Government under the Anti-Trust Act. The bill named as defendants an incorporated trade association called The Sugar Institute, the fifteen sugar refining corporations composing it, and various individuals. The decree below did not dissolve the Institute, as was prayed, but permanently enjoined the defendants from engaging in forty-five stated activities found to be in restraint of competition in the sugar trade.

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HUGHES, J., lead opinion

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

This suit was brought to dissolve the Sugar Institute, Inc., a trade association, and to restrain the sugar refining companies which composed it, and the individual defendants, from engaging in an alleged conspiracy in restraint

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of interstate and foreign commerce in violation of the Sherman Anti-Trust Act, 15 U.S.C. § 1. Final decree was entered which, while it did not dissolve the Institute, permanently enjoined the defendants from engaging directly or indirectly in forty-five stated activities. Defendants bring a direct appeal to this Court under the Act of February 11, 1903, 15 U.S.C. § 29.

The record is unusually voluminous.1 The court rendered an exhaustive opinion and made detailed findings of fact (218 in number), with conclusions of law, describing and characterizing the transactions involved. Numerous assignments of error broadly challenge its rulings, and the case has been presented here in extended oral arguments and elaborate briefs. We shall attempt to deal only with the salient and controlling points of the controversy. These involve (1) the special characteristics of the sugar industry and the practices which obtained before the organization of the Sugar Institute, (2) the purposes for which the Institute was founded, (3) the agreement and practices of the members of the Institute, and (4) the application of the Anti-Trust And and the provisions of the decree.

First. The sugar industry and practices prior to the formation of the Sugar Institute. [56 S.Ct. 631] Domestic refined sugar, beet sugar, and foreign and insular refined sugar, known in the trade as "off-shore" refined, constitute about 99 percent of the nation's supply. The remainder, consisting of domestic cane sugar, refined particularly in Louisiana, does not appear to be an important factor in the national markets. The fifteen defendant companies, members of the Institute, refine practically all the imported

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raw sugar processed in this country. Their product is known as "domestic refined." Prior to the organization of the Institute in 1927, they provided more than 80 percent of the sugar consumed in the United States, and they have since supplied from 70 to 80 percent. Their proportion of the supply is even greater in the New England and Middle Atlantic States, being more than 90 percent, while, in all but a few states, their share is more than 55 percent. Each of the refiners is engaged extensively in interstate commerce. Their refineries are in the vicinity of Boston, New York, Philadelphia, Baltimore, Savannah, New Orleans, Galveston, and San Francisco. The raw cane sugar which they use is imported principally from Cuba, and, to some extent, from the insular possessions.

Beet sugar for many years has been an important factor in the domestic market. It is produced and sold chiefly in the middle and far West, providing in some states over 75 percent of the supply, and it competes with other sugars in a number of Southern and Middle Atlantic States. Off-shore sugar is refined principally in Cuba and to some extent in the insular possessions. Its important trade areas have been the Middle, Atlantic, and Southern States; in some states, it constitutes from 25 to 40 percent of the total supply. Both beet sugar and off-shore sugar are sold at a small differential below defendants' sugar. The trial court found that there was no agreement between defendants and the beet sugar manufacturers, or with the off-shore interests, to maintain any differential.

The court found that the defendants' refined can sugar "is a thoroughly standardized commodity in physical and chemical properties." In exceptional cases and localities, certain of the defendants had built up a preference for brand names

sufficient before and after the Institute was organized to enable such brands to command a higher

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price than the sugar of the other defendants in sales...

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