United States v. Addyston Pipe & Steel Co.

• Decision Date: 08 February 1898
• Docket Number: 498.
• Parties: UNITED STATES V. ADDYSTON PIPE & STEEL CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

85 F. 271

UNITED STATES V. ADDYSTON PIPE & STEEL CO. et al.

No. 498.

United States Court of Appeals, Sixth Circuit.

February 8, 1898

This was a proceeding in equity, begun by petition filed by the attorney general, on behalf of the United States, against six corporations engaged in the manufacture of cast-iron pipe charging them with a combination and conspiracy in unlawful restraint of interstate commerce in such pipe, in violation of the so-called 'Anti-Trust Law,' passed by congress July 2, 1890. The defendants were the Addyston Pipe & Steel Company, of Cincinnati, Ohio; Dennis Long & Co., of Louisville, Ky.; the Howard-Harrison Iron Company, of Bessemer, Ala.; the Anniston Pipe & Foundry Company, of Anniston, Ala.; the South Pittsburgh Pipe Works, of South Pittsburg, Tenn.; and the Chattanooga Foundry & Pipe Works of Chattanooga, Tenn. The petition prayed that all pipe sold and transported from one state to another, under the combination and conspiracy described therein, be forfeited to the petitioner, and be seized and confiscated in the manner provided by law, and that a decree be entered dissolving the unlawful conspiracy of defendants, and perpetually enjoining them from operating under the same, and from selling said cast-iron pipe in accordance therewith to be transported from one state into another. The defendants filed a joint and separate demurrer to the petition in so far as it prayed for the confiscation of goods in transit, on the ground that such proceedings, under the anti-trust act, are not to be had in a court of equity but in a court of law. In addition to the demurrer, the defendants filed a joint and separate answer, in which they admitted the existence of an association between them for the purpose of avoiding the great losses they would otherwise sustain, due to ruinous competition between defendants, but denied that their association was in restraint of trade state or interstate, or that it was organized to create a monopoly, and denied it was a violation of the anti-trust act of congress. Testimony in the form of affidavits was submitted by petitioner and defendants, and, by stipulation, it was agreed that the final hearing might be had thereon. Judge Clark, who presided in the circuit court, dismissed the petition on the merits. His opinion is reported in 78 F. 712.

From the minutes of the association, a copy of which was put in evidence by the petitioner, it appeared that prior to December 28, 1894, the Anniston Company, the Howard-Harrison Company, the Chattanooga Company, and the South Pittsburg Company had been associated as the Southern Associated Pipe Works. Upon that date the Addyston Company and Dennis Long & Co. were admitted to membership, and the following plan was then adopted:

'First. The bonuses on the first 90,000 tons of pipe secured in any territory, 16' and smaller, shall be divided equally among six shops. The bonuses on the next 75,000 tons, 30' and smaller sizes, to be divided among five shops, South Pittsburg not participating. Third. The bonuses on the next 40,000 tons, 36' and smaller sizes, to be divided among four shops, Anniston and South Pittsburg not participating. Fourth. The bonuses on the next 15,000 tons, consisting of all sizes of pipe, shall be divided among the three shops, Chattanooga, South Pittsburg, and Anniston not participating. The above division is based on the following tonnage of capacity: South Pittsburg, 15,000 tons; Anniston, 30,000 tons; Chattanooga, 40,000 tons; Bessemer, 45,000 tons; Louisville, 45,000 tons; Cincinnati, 45,000 tons. When the 220, tons have been made and shipped, and the bonuses divided as hereinafter provided, the auditor shall set aside into a reserve fund all bonuses arising from the excess of shipments over 220,000 tons, and shall divide the same at the end of the year among the respective companies according to the percentage of the excess of tonnage they may have shipped (of the sizes made by them) either in pay or free territory. It is also the intention of this proposition that the bonuses on all pipe larger than 36 inches in diameter be divided equally between the Addyston Pipe & Steel Company, Dennis Long & Co., and the Howard-Harrison Company.'

'It was thereupon resolved: First. That this agreement shall last for two years from the date of the signing of same, until December 31, 1896. Second. On any question coming before the association requiring a vote, it shall take five affirmative votes thereon to carry said question, each member of this association being entitled to but one vote. Third. The Addyston Pipe & Steel Company shall handle the business of the gas and water companies of Cincinnati, Ohio, Covington, and Newport, Ky., and pay the bonuses hereafter mentioned, and the balance of the parties to this agreement shall bid on such work such reasonable prices as they shall dictate. Fourth. Dennis Long & Company, of Louisville, Ky., shall handle Louisville, Ky., Jefferson, Ind., and New Albany, Ind., furnishing all the pipe for gas and water works cities. Fifth. The Anniston Pipe & Foundry Company shall handle Anniston, Ala., and Atlanta, Ga., furnishing all pipe for gas and water companies in above-named cities. The Chattanooga Foundry & Pipe Works shall handle Chattanooga, Tenn., and New Orleans, La., furnishing all gas and water pipe in the above-named cities. The Howard-Harrison Iron Company shall handle Bessemer and Birmingham, Ala., and St. Louis, Mo., furnishing all pipe for gas and water companies in the above-named cities; extra bonus to be put on East St. Louis and Madison, Ill., so as to protect the prices named for St. Louis, Mo. Eighth. South Pittsburg Pipe Works shall handle Omaha, Neb., on all sizes required by that city during the year 1895, conferring with the other companies and co-operating with them. Thereafter they shall handle the gas and water companies of Omaha, Neb., on such sizes as they make.

'Note: It is understood that all the shops who are members of this association shall handle the business of the gas and water companies of the cities set apart for them, including all sizes of pipe made by them.

'The following bonuses were adopted for the different states as named below: All railroad or culvert pipe for any drainage or sewerage purposes on 12 ' and larger sizes shipped into bonus territory shall pay a bonus of $1.00 per ton. On all sizes below 12' and shipped into 'bonus territory' for the purposes above named, there shall be a bonus of $2.00 per ton.

List of Bonuses.

Alabama ................ $3 00 Wyoming ........... $4 00 Michigan ..... $1 50

B'gham, Ala.............. 2 00 Oregon ............. 1 00 West Va ....... 1 00

Anniston, Ala ........... 2 00 Ohio ............... 1 50 Kansas ........ 2 00

Mobile, Ala ............. 1 00 N. D................ 2 00 Ky ............ 2 00

Arizona Ter ............. 3 00 S. D................ 2 00 La ............ 3 00

California .............. 1 00 Florida ............ 1 00 Miss .......... 4 00

Colorado ................ 2 00 Georgia ............ 2 00 Mo ............ 2 00

Ind. Ter ................ 3 00 Atlanta, Ga ........ 2 00 Montana ....... 3 00

North C ................. 1 00 Ga. Coast Pts ...... 1 00 Nebraska ...... 3 00

Tenn., East of C'land ... 2 00 Idaho .............. 2 00 N. Mex ........ 3 00

Tenn., Middle and ............. Nev ................ 3 00 S. C........... 1 00

West .................. 3 00 Oklahoma ........... 3 00 Minn .......... 2 00

Illinois, except .............. Wis ................ 2 00 Utah .......... 4 00

Madison and East

St........................... Texas,

Interior ......... 3 00 Indiana ....... 2 00

Louis, as

previously .................. Texas Coast ........ 1 00 Iowa .......... 2 00

provided .............. 2 00 Wash'ton Ter ....... 1 00

"All other territory free.

"On motion of Mr. Llewellyn, the bonuses on all city work as specially

reserved shall be $2.00 per ton."

'On motion of Mr. Llewellyn, the bonuses on all city work as specially reserved shall be $2.00 per ton.'

The states, for sales in which, bonuses had to be paid into the association were called 'pay' territory, as distinguished from 'free' territory, in which defendants were at liberty to make sales without restriction and without paying any bonus. The by-laws provided for an auditor of the association, whose duty it was to keep account of the business done by each shop both in pay and free territory. On the 1st and 16th of each month, he was required to send to each shop 'a statement of all shipments reported in the previous half month, with a balance sheet showing the total amount of the premiums on shipments, the division of the same, and debit, credit, balance of each company. ' The system of bonuses, as a means of restricting competition and maintaining prices, was not successful. A change was therefore made by which prices were to be fixed for each contract by the association, and, except in reserved cities, the bidder was determined by competitive bidding of the members, the one agreeing to give the highest bonus for division among the others getting the contract. The plan was embodied in a resolution passed May 27, 1895, in the words following: 'Whereas, the system now in operation in this association of having a fixed bonus on the several states has not, in its operation, resulted in the advancement in the prices of pipe, as was anticipated, except in reserved cities, and some further action is imperatively necessary in order to accomplish the ends for which this association was formed: Therefore, be it resolved, that from and after the first day of June, that all competition on the pipe lettings shall take place among the various pipe shops prior to the said letting. To accomplish this...