International Harvester Co. of America v. Commonwealth

• Decision Date: 16 March 1912
• Citation: 147 Ky. 564,144 S.W. 1064
• Parties: INTERNATIONAL HARVESTER CO. OF AMERICA v. COMMONWEALTH. [d]
• Court: Kentucky Court of Appeals

144 S.W. 1064

147 Ky. 564

INTERNATIONAL HARVESTER CO. OF AMERICA v. COMMONWEALTH. ^[d]

Court of Appeals of Kentucky.

March 16, 1912

Appeal from Circuit Court, Bullitt County.

Action by the Commonwealth against the International Harvester Company of America. From a judgment for plaintiff, defendant appeals. Affirmed.

Fairleigh Straus & Fairleigh, Humphrey & Humphrey, and Arthur M Rutledge, for appellant.

J. F Combs, Jas. Breathitt, Carroll & Carroll, T. C. Carroll, and F. E. Daugherty, for the Commonwealth.

SETTLE J.

This action was instituted in the court below against the appellant, international Harvester Company of America, by the appellee, commonwealth of Kentucky to recover of it the penalty prescribed for a violation of the provisions of section 3915, Kentucky Statutes, as amended by section 3941a, Kentucky Statutes; the first being known as the Anti-Trust Act of May 20, 1890, and the last as the Farmers' Pooling Act of March 21, 1906. The prosecution covered the year beginning July 21, 1910, and ending July 21, 1911. The trial resulted in a verdict and judgment inflicting upon appellant a fine of $5,000, and from that judgment it has appealed.

Two grounds of reversal are relied on: (1) that the verdict is flagrantly against the evidence. (2) That the trial court erred in instructing the jury.

Appellant filed a demurrer to the petition which was overruled. It appears from the evidence introduced in appellant's behalf that its affirmative grounds of defense were that the increase in prices of machines sold by it was due (1) to the increased cost of the materials entering into their manufacture, (2) to the increased cost of labor employed in their manufacture, (3) the increased cost of putting the machines on the market, (4) the increase in the efficiency of the machines. The demurrer not only put in issue the general sufficiency of the petition, but also assigned as a ground an alleged conflict between section 3915, Kentucky Statutes as construed by this court in connection with section 3941a, and the fourteenth amendment to the Constitution of the United States. We think the demurrer was properly overruled. The objection raised by it to the sufficiency of the petition was not well taken, as tested by the construction given sections 3915, 3941a, Kentucky Statutes, in international Harvester Company of America v. Commonwealth, 137 Ky. 668, 126 S.W. 352, and on the second appeal of the same case in 144 Ky. 403, 138 S.W. 248, it stated a cause of action.

As to the federal question raised by the demurrer, it is sufficient to say that it was decided adversely to appellant's contention in the case of Commonwealth v. International Harvester Co., 131 Ky. 551, 115 S.W. 703, 133 Am. St. Rep. 256, and we adhere to that ruling. Indeed, by the opinion in that case it was not only held that the sections, supra, were not in conflict with the fourteenth amendment to the federal Constitution, but that by construing section 3941a as an amendment to section 3915, as was evidently intended by the Legislature, they could properly be and were harmonized. In effect the same conclusion had been arrived at by the court in the previous case of Owen County Burley Tobacco Society v. Brumback, 128 Ky. 137, 107 S.W. 710, 32 Ky. Law Rep. 916.

It may be said that, since these two cases were decided, there is no law in this state which forbids the existence of trusts, pools, or combinations, or that prohibits them from fixing and maintaining the price or prices of their products or commodities, so long as they are not sold for more, nor less, than their real or market value. Obviously, the real value of any marketable commodity is its market value under fair competition, and under normal market conditions. It goes without saying, however, that such value would increase or diminish according to the increase or decrease in the market value of the ingredients, or the increase or lowering of the price of the labor which produces it. The court had in mind these conditions when, in international Harvester Company of America v. Commonwealth, 137 Ky. 668, 126 S.W. 352, it said: "When, therefore, the prosecutions show: (1) That there has been a combination among all or any of the producers of a commodity of merchandise, by which its output is restricted, or controlled alone by the confederates in the scheme; (2) that the market price of the article was then materially enhanced; (3) that the conditions affecting commerce in general are normal; (4) that the competition otherwise than for the combination complained of would be fair--there would be established prima facie a case of violation of the statute." In further elaboration of the subject, the following additional excerpt from the opinion will prove instructive: "Therefore it is not enough under a prosecution under our statute to show that there has been a combination among producers of their products or plants; *** nor is it enough to show in addition, and no more, that the price of the commodity was subsequently advanced. *** It is necessary to show that the general conditions affecting the market value of that commodity were normal, and that but for the combination complained of the competition would have been fair; that is, natural and usual." In the opinion on the second appeal of the same case (International Harvester Company of America v. Commonwealth, 144 Ky. 403, 138 S.W. 248) is a statement indicating the various elements to be taken into the account in determining what constitutes a violation of the statute in question: "But the fact that a combination was formed, in connection with the legal presumption that it was formed for the purpose of controlling and fixing prices, is sufficient to show, in the absence of countervailing evidence, that an advance in the price prevailing before the combination was entered into enhanced the price of the article above its real value; if market conditions before and after the advance were substantially the same, and the cost of production has not materially increased, or in proportion to the advance. And so we think, in prosecutions under the statute, when the commonwealth has shown by evidence and legal presumption the combination to fix, control, and regulate prices, with evidence of an advance in prices by the combination under substantially the same market conditions that existed before the advance, it is sufficient to sustain a verdict of guilty, in the absence of evidence that the advance was justified by changed market conditions, or a corresponding increase in the cost of production. The offense under these statutes does not consist merely in forming the combination or trust and in fixing or regulating the price, or in limiting the production, but in addition thereto the price must be enhanced above or depreciated below its real value by the pool, trust or combination. Now, it is manifest from this that it is the sale of the article at a price above or below its real value that constitutes the overt act of guilt, and it would seem to follow from this that each sale at a price in violation of the statute would be a separate offense."

It is now necessary to apply the principles thus stated to the facts of this case in order that we may determine whether the fine imposed by the verdict and judgment upon the appellant was authorized. Our reading of the record convinces us that the following facts were established by the evidence of the commonwealth: (1) That six companies or corporations engaged in the manufacture and sale of harvesting machines and all doing business in this state, viz, Champion Machine Company Deering Machine Company, McCormick Machine Company, Plano Machine Company, Milwaukee Machine Company, and Osborne Machine Company, between which there had been previous competition, entered into a combination to fix and regulate, and did fix and regulate, the prices at which their machines should be sold throughout the United States; this combination being effected by transferring the ownership and control of the companies named and the business of each of them to the appellant corporation, known as the International...