United States v. St. Louis Dairy Co.

• Decision Date: 14 May 1948
• Docket Number: Cr. No. 25713.
• Citation: 77 F. Supp. 853
• Parties: UNITED STATES v. ST. LOUIS DAIRY CO. et al.
• Court: U.S. District Court — Eastern District of Missouri

77 F. Supp. 853

UNITED STATES v. ST. LOUIS DAIRY CO. et al.

Cr. No. 25713.

District Court, E. D. Missouri, E. D.

May 14, 1948.

Drake Watson, U. S. Atty., of New London, Mo., George B. Haddock, Sp. Asst. to Atty. Gen., and John R. Niesley, Walter D. Murphy, and Joseph R. Cannon, Sp. Attys., Department of Justice, all of Washington, D. C., for plaintiff.

Jacob M. Lashly, of St. Louis, Mo., for defendants St. Louis Dairy Co., and Basil M. Lide.

James A. Finch of Cape Girardeau, Mo., and E. C. Hartman and William H. Allen, both of St. Louis, Mo., for defendants Pevely Dairy Company, Arthur Kerckhoff, Richard D. Kerckhoff, Elmer M. Kerckhoff, Daniel M. Kerckhoff, and Alexander Kerckhoff.

HULEN, District Judge.

Defendants, being charged by indictment with conspiracy to fix and stabilize prices of fluid milk, in restraint of interstate commerce in violation of the Sherman Act, 15 U.S.C.A., § 1, move to dismiss on grounds that the indictment does not plead facts showing (1) the conspiracy charged was in restraint of interstate commerce, and (2) the restraint described directly and substantially restrains interstate commerce.

The indictment in substance charges the corporate defendants have their principal place of business in St. Louis, Missouri, are engaged in purchasing fluid milk from producers, bottling, selling and distributing such milk to retail and wholesale customers for resale in the City of St. Louis, Missouri, and communities near St. Louis in Missouri. The milk thus sold is produced in the States of Illinois and Missouri. The corporate defendants purchase milk from the producers in Illinois, consisting of over half the fluid milk sold by them. After purchase of the milk in Illinois it is transported by defendants to St. Louis, there it is intermingled in the corporate defendants' plants with milk produced in Missouri. (By local ordinance all milk sold in the City of St. Louis must be Pasteurized.) The indictment recites that fluid milk by its nature is perishable, cannot be stored, must reach consumers within a short time after production, and from day to day there is a continuous flow of fluid milk from the producers in Illinois and Missouri to consumers in St. Louis and vicinity. The corporate defendants sell and distribute 63 per cent of fluid milk consumed in the St. Louis area. Conspiracy of defendants, as alleged, is to fix uniform and non-competitive retail and wholesale prices for fluid milk sold by them in the St. Louis, Missouri, area during the past ten years, by virtue of a continuing agreement and concert of action among defendants that the corporate defendants would charge uniform prices for fluid milk sold by them. Things charged as the purpose of and to effect the conspiracy are the charging of uniform prices and various meetings at which it was agreed to and said defendants did fix a uniform price for fluid milk. The meetings commenced in July 1946 and ended in January 1948. The retail price of fluid milk in July 1946 was fixed at 17¢, wholesale 15¢. The last meeting, according to the indictment, fixed the retail price at 22½¢ and wholesale at 20½¢. The effect of the conspiracy, as intended by defendants, has been to increase and fix the price of milk to consumers sold by the corporate defendants in the St. Louis area and restrain interstate commerce in fluid milk.

I.

The Government asserts that "while it is true that the Sherman Act applies only to unreasonable restraints of trade * * * price fixing agreements are per se unreasonable." Combinations to fix or regulate prices are banned by the Sherman Act. Such was the holding of the Supreme Court in Fashion Originators' Guild v. Trade Commission, 312 U.S. 457, loc. cit. 466, 61 S.Ct. 703, 707, 85 L.Ed. 949:

"Petitioners, however, argue that the combination cannot be contrary to the policy of the Sherman and Clayton Acts 15 U.S.C.A. § 1 et seq., since the Federal Trade Commission did not find that the combination fixed or regulated prices, parcelled out or limited production, or brought about a deterioration in quality. But action falling into these three categories does not exhaust the types of conduct banned by the Sherman and Clayton Acts."

More direct was the pronouncement of the Court in United States v. Socony-Vacuum Oil Co., 310 U.S. 150, loc. cit. 154, 155, 60 S.Ct. 811, 84 L.Ed. 1129.

"A combination formed for the purpose of controlling the market price of a commodity and possessing the power to make its control effective raises such danger of evil consequences which the Sherman Act was intended to prevent, that it falls within the direct condemnation of the statute and can not be removed by collateral considerations urged in justification of the restraint. United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989.

"While the Act has been interpreted as forbidding only unreasonable restraints of trade and while this concept is of value in many situations where the nature of the restraint is such that the application of the statute is doubtful, the concept does not compel the conclusion that there are no restraints which ipso facto come within the condemnation of the Act."

The consequences of such combinations, at which the law is leveled, is stated in Ethyl Gasoline Corp. v. United States, 309 U.S. 436, loc. cit. 458, 60 S.Ct. 618, 626, 84 L.Ed. 852:

"Agreements for price maintenance of articles moving in interstate commerce are, without more, unreasonable restraints within the meaning of the Sherman Act because they eliminate competition, United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989, and agreements which create potential power for such price maintenance exhibited by its actual exertion for that purpose are in themselves unlawful restraints within the meaning of the Sherman Act, which is not only a prohibition against the infliction of a particular type of public injury but `a limitation of rights * * * which may be pushed to evil consequences, and therefore restrained.'" (Emphasis added.)

We pause to observe in the last ruling the words "potential power" for price maintenance. The agreement need not in fact accomplish that result. Note this language: "a limitation of rights * * * which may be pushed to evil consequences." On the same subject the Court said in Local 167 of International Brotherhood of Teamsters v. United States, 291 U.S. 293, loc. cit. 297, 54 S.Ct. 396, 398, 78 L.Ed. 804:

"The control of the handling, the sales and the prices at the place of origin before the interstate journey begins or in the State of destination where the interstate movement ends may operate directly to restrain and monopolize interstate commerce."

In line with the latest authorities, cited above, which it is claimed by some give the Sherman Act a more liberal interpretation than older cases, will be found Coronado Coal Co. v. U. M. Workers, 268 U.S. 295, loc. cit. 310, 45 S.Ct. 551, 556, 69 L.Ed. 963, where the Court said:

"The mere reduction in the supply of an article to be shipped in interstate commerce by the illegal or tortious prevention of its manufacture or production is ordinarily an indirect and remote obstruction to that commerce. But when the intent of those unlawfully preventing the manufacture or production is shown to be to restrain or control the supply entering and moving in interstate commerce, or the price of it in interstate markets, their action is a direct violation of the Anti-Trust Act."

The authorities on this proposition are reviewed in United States v. Food and Grocery Bureau of So. Cal., D.C. 43 F. Supp. 974, loc. cit. 977, 978, and there will be found a summary of the law in an opinion by Judge Yankwich:

"In assaying price-fixing agreements, the test is not so much whether the effect is felt after the movement of the goods has reached the end of the interstate journey. The inquiry seeks the effect upon prices in the market. And if this effect be shown, it matters not that the movement has come to a halt within the state. The teaching of the most recent cases, to which I have just referred, and which I also discussed in the opinion on the motions to dismiss and to strike, is too clear to absolve price-fixing agreements solely becauses their effect may not be felt until local sales are made, in retail trade, at the end of the journey. To interpret them in this manner is not to destroy whatever distinction may exist between interstate and local activities. It is merely to recognize that the Supreme Court, realizing the inter-relation between local and interstate commerce, has declined to recognize a break in the continuity of movement of articles originating in interstate commerce, and has asserted the controlling power of the anti-trust law over the entire process. And so, when the court said specifically that control of prices `in the state of destination where the interstate movement ends' (Local 167 of International Brotherhood of Teamsters v. United States, 1934, 291 U.S. 293, 297, 54 S.Ct. 396, 398, 78 L.Ed. 804) may come under the interdict of the anti-trust laws, we cannot assume that it was not aware of the full implication of the words.

"The optative mood in the language of the court does not mean that in price-fixing other elements of restraint must be shown. If the language had that meaning, the teaching of the later case — that price-fixing alone is a violation — gives the contrary answer."

The indictment in this case states the defendants engaged in the conspiracy "to fix uniform and non-competitive retail and wholesale prices for fluid milk sold"; "corporate defendants * * * sell and distribute approximately 63 per cent of the fluid milk consumed in the St. Louis area"; "the * * * conspiracy has consisted of a continuing agreement and concert of action * * * the * * * terms of which have been that * * * corporate defendants would charge uniform and non-competitive retail and wholesale...