Morton Salt Company v. United States

• Decision Date: 05 July 1956
• Docket Number: No. 5318-5321.,5318-5321.
• Citation: 235 F.2d 573
• Parties: MORTON SALT COMPANY, Royal Crystal Salt Company, Deseret Livestock Company and Deseret Salt Company, Appellants, v. UNITED STATES of America, Respondent.
• Court: U.S. Court of Appeals — Tenth Circuit

235 F.2d 573 (1956)

MORTON SALT COMPANY, Royal Crystal Salt Company, Deseret Livestock Company and Deseret Salt Company, Appellants, v. UNITED STATES of America, Respondent.

Nos. 5318-5321.

United States Court of Appeals Tenth Circuit.

July 5, 1956.

Paul H. Ray, Salt Lake City, Utah (L. M. McBride, Chicago, Ill., S. J. Quinney, Salt Lake City, Utah, and C. Preston Allen, Murray, Utah, were with him on the brief), for Morton Salt Co. and Royal Crystal Salt Co.; Nathan J. Fullmer, Salt Lake City, Utah (Louis H. Callister and David A. Robinson, Salt Lake City, Utah, were with him on the brief), for Deseret Salt Company.

Lyle L. Jones and Don H. Banks, Attys., Dept. of Justice, San Francisco, Cal. (John H. Burgess, Atty., Dept. of Justice, San Francisco, Cal., Stanley N. Barnes, Asst. Atty. Gen., and A. Pratt Kesler, U. S. Atty., Salt Lake City, Utah, were with them on the brief), for respondent.

Before HUXMAN, MURRAH and PICKETT, Circuit Judges.

HUXMAN, Circuit Judge.

These consolidated appeals are from a judgment of the United States District Court for the District of Utah finding appellants guilty of violating Section 1 of the Sherman Anti-Trust Act, 15 U.S. C.A. § 1. The grand jury indictment charged that appellants Morton Salt Company, Royal Crystal Salt Company, Deseret Livestock Company and Deseret Salt Company, together with the Stansbury Salt Company and Council M. McDaniel, not named defendants, were members of a conspiracy in restraint of trade: (a) to stabilize and control the prices and terms for the sale of salt; (b) to adopt and maintain uniform and non-competitive prices and terms for the sale of salt; (c) to restrict and eliminate price competition between themselves and with others in the sale and distribution of salt; (d) to adopt and use uniform price scales and price keys; and (e) to eliminate distributors who sell at less than agreed upon prices.

The right to a jury was waived and the case was tried to the court. After a trial that consumed 10 days and in which more than 1,000 exhibits were introduced, the court found all appellants guilty as charged. At the time of rendering decision the trial judge explained the considerations and reasons for his judgment in concise, summary comments, which he later adopted as the special and general findings of fact. The only question presented on appeal is whether the evidence justified the guilty verdicts.

The essential facts on the market area and the competitive background here involved are not controverted. All these companies obtain, or obtained, their salt from the Great Salt Lake and have their processing plants in Utah. The salt is sold in the intermountain area between Colorado on the east and Nevada, Oregon and Washington on the west, comprising several states. Prior to 1952 Morton Salt Company and its wholly owned subsidiary Royal Crystal Salt Company, maintaining separate sales offices and operating under different brand names, enjoyed a virtual monopoly of the sale of salt in this area. No other company was selling more than a negligible quantity of salt from the Great Salt Lake and these two appellants' only competition was on the western and eastern fringes of the intermountain area where freight costs enabled the California and Kansas salt producers to compete.

In 1949 the Deseret Livestock Company began the preparation of facilities for the production of salt from the Great Salt Lake. In 1951 it harvested its first crop and made a few small sales, and by 1952 it was in a position to begin substantial competition with Morton and Royal Crystal. Late that year or in early 1953 the ownership of the Deseret Livestock Company came into the hands of David Freed and David Robinson. Knowing little about the salt business these two went to Freed's long time friend, I. A. Clayton, Vice President and Manager of Royal Crystal, to see if that part of Deseret Livestock's business could be sold to Morton. Clayton stated that Morton was not interested because of the possibility, if this potentially important competitor was bought out, of monopoly charges under the Sherman Act.

Deseret Livestock kept its salt facilities and sold salt in the area market through the year 1954. Its sales steadily increased, and in 1954 it sold 26,900 tons of salt as compared to 120,657 tons sold by Morton and its subsidiary Royal Crystal. The tonnage sold by Morton and Royal Crystal in 1954 was almost exactly the same as in 1952 120,657 tons v. 120,028 tons, prior to substantial competition from Deseret Livestock.

Stansbury Salt Company started selling salt in about December, 1950, and its sales progressed much less rapidly than Deseret Livestock. In 1954 it sold about 7,000 tons. Its position as a potential competitor by the end of 1954 was much stronger than its sales show, however, as evidenced by the fact that in 1954 it added some 10,500 tons to its inventories. Also it acquired a block press in that year and thus was able to remedy its deficiency in block salt which had theretofore hampered its attempts to gain a substantial market.

Council M. McDaniel entered the picture here in the summer of 1954. He was a former executive in a west coast salt company, and sought to purchase an interest for himself in a salt business in the Salt Lake area. He negotiated with Stansbury Salt Company with a view to acquiring shares of that company. It was his introduction of Richards, the manager of Stansbury, to Clayton of Royal Crystal which allegedly precipitated Stansbury's entry into the conspiracy. McDaniel finally purchased the salt properties of Deseret Livestock, and from and after January 1, 1955, operated the business as the Deseret Salt Company.

The price fixing conspiracy was alleged to have begun between Royal Crystal, Morton and Deseret Livestock some time in 1953, with Stansbury and McDaniel, as an individual, joining it in the middle of 1954. After the sale of Deseret Livestock's salt properties to McDaniel as of January 1, 1955, the new Deseret Salt Company, under McDaniel's direction, allegedly joined the conspiracy in Deseret Livestock's former role.

I. A. Clayton, manager of Royal Crystal, apparently established the prices, or initiated price changes, for both Royal Crystal and Morton in the Salt Lake area. Morton and Royal Crystal did not compete pricewise, and the two used identical pricing data. Upon entering competition Deseret Livestock in 1952 hired as sales manager Frank Jensen, who until 1947 had been a salesman in the area for Morton. When he left Morton's employ Jensen had taken a complete list of Morton prices, and in a subsequent position buying salt for a water softener company he had kept up with most changes in prices. He established the first price scales and keys for Deseret Livestock based upon this information, and such prices were apparently nearly identical to those charged by Royal Crystal and Morton. But there is abundant evidence that during 1952 and 1953 he often varied and undercut Morton and Royal Crystal to obtain business. Freed, who became his superior at Deseret Livestock, complained several times in his testimony that Jensen was always "cutting prices and chiseling wherever he could."

It is also clear, and not denied by appellants, that beginning in late 1953 and continuing through the prosecution period the price scales and keys used by Deseret Livestock, Morton, and Royal Crystal were practically identical. The only price variation occurred apparently when Jensen disobeyed the instructions of Freed and "chiseled" on the price. It was testified that in April or May 1954 Deseret Livestock took the price scales and keys sent them by Royal Crystal, removed the covers and merely stapled on new cover sheets which bore the name of Deseret instead of Royal Crystal.

It is admitted that beginning in 1953 there was a completely free exchange of pricing information between Deseret, Royal Crystal and Morton, and that after the summer of 1954 this exchange included Stansbury. Pricing information, keys and scales were sent to one another and any changes which were of interest to the other salt producers were communicated immediately. Whenever a variance from the "usual" or "correct" price was revealed there would be telephone calls, apparently nearly always initiated by Clayton, to ascertain if such variance was an error or a new price.

Freed testified that when he first approached Clayton to attempt a sale of Deseret Livestock's salt properties, he was informed that Morton and Royal Crystal would follow any price changes initiated by Deseret. His statement of this conversation with Clayton, in part, is as follows:

"Well there was some discussion regarding prices — in a general way we talked about that — and we were told, at the time, that we were free to set our own prices anywhere that we wanted, that we could compete on a high level or a low level; that they had their own prices which they had arrived at after a long period of time, and if we changed those prices, they would change with us, but, so far as they were concerned, those prices were right, and they were hopeful we would stay with them, but it was our own business to do as we saw fit regarding the prices."

From this he understood that if Deseret Livestock cut prices Morton and Royal Crystal intended to follow, and that if Deseret put its price back up Morton and Royal Crystal would also raise their prices. Clayton stated that the purpose of his calls to Freed on price variations was to ascertain whether such were real price changes which he would have to meet or whether they were merely errors in computation. There is no question but that Morton and Royal Crystal met every price cut instituted by Deseret Livestock, and also followed every increase. During the dates of their alleged participation in the conspiracy most price changes were instituted simultaneously by all the companies. There was testimony that Clayton informed Freed of a proposed increase in the...