United States v. General Electric Co, 113

Citation47 S.Ct. 192,71 L.Ed. 362,272 U.S. 476
Decision Date23 November 1926
Docket NumberNo. 113,113
CourtUnited States Supreme Court

The Attorney General and Mr. James A. Fowler, of Knoxville, Tenn., for the United States.

[Argument of Counsel from page 477 intentionally omitted] Mr. Charles Neave, of New York City, for General Electric Co.

Mr. Fred H. Wood, of New York City, for Westinghouse Electric & Mfg. Co.

Mr. Chief Justice TAFT delivered the opinion of the Court.

This is a bill in equity, brought by the United States in the District Court for the Northern District of Ohio to enjoin the General Electric Company, the Westinghouse Electric & Manufacturing Company, and the Westinghouse Lamp Company from further violation of the Anti-Trust Act of July 2, 1890. 26 Stat. 209, c. 647 (Comp. St. §§ 8820-8823, 8827-8830). The bill made two charges, one that the General Electric Company, in its business of making and selling incandescent electric lights, had devised and was carrying out a plan for their distribution throughout out the United States by a number of socalled agents, exceeding 21,000, to restrain interstate trade in such lamps and to exercise a monopoly of the sale thereof; and, second, that it was achieving the same illegal purpose through a contract of license with the defendants, the Westinghouse Electric & Manufacturing Company and the Westinghouse house Lamp Company. As the Westinghouse Lamp Company is a corporation all of whose stock is owned by the Westinghouse Electric & Manufacturing Company, and is but its selling agent, we may treat the two as one, and reference hereafter will be only to the defendants the General Elec- tric Company, which we shall call the Electric Company, and the Westinghouse Company.

The government alleged that the system of distribution adopted was merely a device to enable the Electric Company to fix the resale prices of lamps in the hands of purchasers, that the so-called agents were in fact wholesale and retail merchants, and the lamps passed through the ordinary channels of commerce in the ordinary way, and that the restraint was the same and just as unlawful as if the so-called agents were avowed purchasers handling the lamps under resale price agreements. The Electric Company answered that its distributors were bona fide agents, that it had the legal right to market its lamps and pass them directly to the consumer by such agents, and at prices and by a system prescribed by it and agreed upon between it and its agents, there being no limitation sought as to resale prices upon those who purchased from such agents.

The second question in the case involves the validity of a license granted March 1, 1912, by the Electric Company to the Westinghouse Company to make, use, and sell lamps under the patents owned by the former. It was charged that the license in effect provided that the Westinghouse Company would follow prices and terms of sale from time to time fixed by the Electric Company and observed by it, and that the Westinghouse Company would, with regard to lamps manufactured by it under the license, adopt and maintain the same conditions of sale as observed by the Electric Company in the distribution of lamps manufactured by it.

The District Court upon a full hearing dismissed the bill for want of equity and this is an appeal under section 2 of the Act of February 11, 1903, known as the Expediting Act (32 Stat. 823, c. 544, § 2 (Comp. St. § 8825)).

There had been a prior litigation between the United States and the three defendants and 32 other cor- porations, in which the government sued to dissolve an illegal combination in restraint of interstate commerce in electric lamps, in violation of the Anti-Trust Act, and to enjoin its further violation. A consent decree was entered in that cause, by which the combination was dissolved, the subsidiary corporations surrendered their charters and their properties were taken over by the General Electric Company. The defendants were all enjoined from fixing resale prices for purchasers, except that the owner of the patents were permitted to fix the prices at which a licensee should sell lamps manufactured by it under the patent. After the decree was entered, a new sales plan, which was the one here complained of, was submitted to the Attorney General. The Attorney General declined to express an opinion as to its legality. The plan was adopted and has been in operation since 1912.

The government insists that these circumstances tend to support the government's view that the new plan was a mere evasion of the restrictions of the decree and was intended to carry out the same evil result that had been condemned in the prior litigation. There is really no conflict of testimony in the sense of a variation as to the facts but only a difference as to the inference to be drawn therefrom. The evidence is all included in a stipulation as to certain facts, as to what certain witnesses for the defendants would testify, and as to the written contracts of license and agency made by the General Electric Company and the Westinghouse Company.

The General Electric Company is the owner of three patents-one of 1912 to Just & Hanaman, the basic patent for the use of tungsten filaments in the manufacture of electric lamps; the Coolidge patent of 1913, covering a process of manufacturing tungsten filaments by which their tensile strength and endurance is greatly increased; and, third, the Langmuir patent of 1916, which is for the use of gas in the bulb, by which the intensity of the light is substantially heightened. These three patents cover completely the making of the modern electric lights with the tungsten filaments, and secure to the General Electric Company the monopoly of their making, using, and vending.

The total business in electric lights for the year 1921 was $68,300,000, and the relative percentages of business done by the companies were: General Electric, 69 per cent.; Westinghouse, 16 per cent.; other licensees, 8 per cent.; and manufacturers not licensed, 7 per cent. The plan of distribution by the Electric Company divides the trade into three classes. The first class is that of sales to large consumers readily reached by the General Electric Company, negotiated by its own salaried employees, and the deliveries made from its own factories and warehouses. The second class is of sales to large consumers under contracts with the General Electric Company, negotiated by agents, the deliveries being made from stock in the custody of the agents; and the third is of the sales to general consumers by agents under similar contracts. The agents under the second class are called B agents, and the agents under the third class are called A agents. Each B agent is appointed by the General Electric Company by the execution and delivery of a contract for the appointment, which lasts a year from a stated date, unless sooner terminated. It provides that the company is to maintain on consignment in the custody of the agent a stock of lamps, the sizes, types, classes, and quantity of which and the length of time which they are to remain in stock to be determined by the company. The lamps consigned to the agents are to be kept in their respective places of business, where they may be readily inspected and identified by the company. The consigned stock, or any part of it, is to be returned to the company as it may direct. The agent is to keep account books and records giving the complete information as to his dealings for the inspec- tion of the company. All of the lamps in such consigned stock are to be and remain the property of the company until the lamps are sold, and the proceeds of all lamps are to be held in trust for the benefit and for the account of the company until fully accounted for. The B agent is authorized to deal with the lamps on consignment with him in three ways-first to distribute the lamps to the company's A agents as authorized by the company; second, to sell lamps from the stock to any consumer to the extent of his requirements for immediate delivery at prices specified by the company; third, to deliver lamps from the stock to any purchaser under written contract with the company to whom the B agent may be authorized by the company to deliver lamps at the prices and on the terms stated in the contract. The B agent has no authority to dispose of any of the lamps, except as above provided, and is not to control or attempt to control prices at which any purchaser shall sell any of such lamps. The agent is to pay all expenses in the storage, cartage, transportation, handling, sale, and distribution of lamps, and all expenses incident thereto and to the accounting therefor, and to the collection of accounts created. This transportation does not include the freight for the lamps in the consignment from the company to the agent. The agent guarantees the return to the company of all unsold lamps in the custody of the agent within a certain time after the termination of his agency. The agent is to pay over to the company not later than the 15th of each month an amount equal to the total sales value, less the agent's compensation, of all of the company's lamps sold by him-that is, first, of the collections that have been made; second, of those customers' accounts which are past due. This is to comply with the guaranty of the agent of due and prompt payment for all lamps sold by him from his stock. Third, the agent is to pay to the company the value of all of the company's lamps lost or missing from or damaged in the stock in his custody.

There is a basic rate of commission payable to the agent, and there are certain special supplemental and additional compensations for prompt and efficient service. If the agent becomes insolvent, or fails to make reports and remittances, or fails in any of his obligations, the appointment may be terminated, and, when terminated, either at the end of the year or otherwise, the...

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