United States v. Trenton Potteries Co

• Decision Date: 21 February 1927
• Docket Number: No. 27,27
• Citation: 47 S.Ct. 377,50 A.L.R. 989,273 U.S. 392,71 L.Ed. 700
• Parties: UNITED STATES v. TRENTON POTTERIES CO. et al
• Court: U.S. Supreme Court

273 U.S. 392

47 S.Ct. 377

71 L.Ed. 700

UNITED STATES

v TRENTON POTTERIES CO. et al.

No. 27.

Argued Nov. 30, Dec. 1, 1926.

Decided Feb. 21, 1927.

Mr. Assistant Attorney General Donovan, for the United States.

Messrs. Charles E. Hughes, of New York City, and John W. Bishop, Jr., of Newark, N. J., for respondents.

Mr. Justice STONE delivered the opinion of the Court.

Respondents, 20 individuals and 23 corporations, were convicted in the District Court for South- ern New York of violating the Sherman Anti-Trust Law. Act July 2, 1890, c. 647 (26 Stat. 209 (Comp. St. § 8820 et seq.)). The indictment was in two counts. The first charged a combination to fix and maintain uniform prices for the sale of sanitary pottery, in restraint of interstate commerce; the second, a combination to restrain interstate commerce by limiting sales of pottery to a special group known to respondents as 'legitimate jobbers.' On appeal, the Circuit Court of Appeals for the Second Court reversed the judgment of conviction on both counts on the ground that there were errors in the conduct of the trial. 300 F. 550. This court granted certiorari. 266 U. S. 597, 45 S. Ct. 96, 69 L. Ed. 460; Judicial Code, § 240 (Comp. St. § 1217).

Respondents, engaged in the manufacture or distribution of 82 per cent. of the vitreous pottery fixtures produced in the United States for use in bathrooms and lavatories, were members of a trade organization known as the Sanitary Potters' Association. Twelve of the corporate respondents had their factories and chief places of business in New Jersey, one was located in California, and the others were situated in Illinois, Michigan, West Virginia, Indiana, Ohio, and Pennsylvania. Many of them sold and delivered their product within the Southern district of New York, and some maintained sales offices and agents there.

There is no contention here that the verdict was not supported by sufficient evidence that respondents, controlling some 82 per cent. of the business of manufacturing and distributing in the United States vitreous pottery of the type described, combined to fix prices and to limit sales in interstate commerce to jobbers.

The issues raised here by the government's specification of errors relate only to the decision of the Circuit Court of Appeals upon its review of certain rulings of the District Court made in the course of the trial. It is urged that the court below erred in holding in effect (1) that the trial court should have submitted to the jury the question whether the price agreement complained of constituted an unreasonable restraint of trade; (2) that the trial court erred in failing to charge the jury correctly on the question of venue; and (3) that it erred also in the admission and exclusion of certain evidence.

Reasonableness of Restraint.

The trial court charged, in submitting the case to the jury that, if it found the agreements or combination complained of, it might return a verdict of guilty without regard to the reasonableness of the prices fixed, or the good intentions of the combining units, whether prices were actually lowered or raised or whether sales were restricted to the special jobbers, since both agreements of themselves were unreasonable restraints. These instructions repeated in various forms applied to both counts of the indictment. The trial court refused various requests to charge that both the agreement to fix prices and the agreement to limit sales to a particular group, if found, did not in themselves constitute violations of law, unless it was also found that they unreasonably restrained interstate commerce. In particular the court refused the request to charge the following:

'The essence of the law is injury to the public. It is not every restraint of competition and not every restraint of trade that works an injury to the public; it is only an undue and unreasonable restraint of trade that has such an effect and is deemed to be unlawful.'

Other requests of similar purport were refused including a quotation from the opinion of this court in Chicago Board of Trade v. United States, 246 U. S. 231, 238, 38 S. Ct. 242, 62 L. Ed. 683.

The court below held specifically that the trial court erred in refusing to charge as requested and held in effect that the charge as given on this branch of the case was erroneous. This determination was based upon the assumption that the charge and refusals could be attributed only to a mistaken view of the trial judge, expressed in denying a motion at the close of the case to quash and dismiss the indictment, that the 'rule of reason' announced in Standard Oil Co. v. United States, 221 U. S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734, and in American Tobacco Co. v. United States, 221 U. S. 106, 31 S. Ct. 632, 55 L. Ed. 663, which were suits for injunctions, had no application in a criminal prosecution. Compare Nash v. United States, 229 U. S. 373, 33 S. Ct. 780, 57 L. Ed. 1232.

This disposition of the matter ignored the fact that the trial judge plainly and variously charged the jury that the combinations alleged in the indictment, if found, were violations of the statute as a matter of law, saying:

'* * * The law is clear that an agreement on the part of the members of a combination controlling a substantial part of an industry, upon the prices which the members are to charge for their commodity, is in itself an undue and unreasonable restraint of trade and commerce. * * *'

If the charge itself was correctly given and adequately covered the various aspects of the case, the refusal to charge in another correct form or to quote to the jury extracts from opinions of this court was not error, nor should the court below have been concerned with the wrong reasons that may have inspired the charge, if correctly given. The question therefore to be considered here is whether the trial judge correctly withdrew from the jury the consideration of the reasonableness of the particular restraints charged.

That only those restraints upon interstate commerce which are unreasonable are prohibited by the Sherman Law was the rule laid down by the opinions of this court in the Standard Oil and Tobacco Cases. But it does not follow that agreements to fix or maintain prices are reasonable restraints and therefore permitted by the statute, merely because the prices themselves are reasonable. Reasonableness is not a concept of definite and unchanging content. Its meaning necessarily varies in the different fields of the law, because it is used as a convenient summary of the dominant considerations which control in the application of legal doctrines. Our view of what is a reasonable restraint of commerce is controlled by the recognized purpose of the Sherman Law itself. Whether this type of restraint is reasonable or not must be judged in part at least, in the light of its effect on competition, for, whatever difference of opinion there may be among economists as to the social and economic desirability of an unrestrained competitive system, it cannot be doubted that the Sherman Law and the judicial decisions interpreting it are based upon the assumption that the public interest is best protected from the evils of monopoly and price control by the maintenance of competition. See United States v. Trans-Missouri Freight Association, 166 U. S. 290, 17 S. Ct. 540, 41 L. Ed. 1007; Standard Oil Co. v. United States, supra; American Column Co. v. United States, 257 U. S. 377, 400, 42 S. Ct. 114, 66 L. Ed. 284, 21 A. L. R. 1093; United States v. Linseed Oil Co., 262 U. S. 371, 388, 43 S. Ct. 607, 67 L. Ed. 1035; Eastern States Lumber Association v. United States, 234 U. S. 600, 614, 34 S. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788.

The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The reasonable price fixed today may through economic and business changes become the unreasonable price of to-morrow. Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be in themselves unreasonable or unlawful restraints, without the necessity of minute inquiry whether a particular price is reasonable or unreasonable as fixed and without placing on the government in enforcing the Sherman Law the burden of ascertaining from day to day whether it has become unreasonable through the mere variation of economic conditions. Moreover, in the absence of express legislation requiring it, we should hesitate to adopt a construction making the difference between legal and illegal conduct in the field of business relations depend upon so uncertain a test as whether prices are reasonable-a determination which can be satisfactorily made only after a complete survey of our economic organization and a choice between rival philosophies. Compare United States v. Cohen Grocery Co., 255 U. S. 81, 41 S. Ct. 298, 65 L. Ed. 516, 14 A. L. R. 1045; International Harvester Co. v. Kentucky, 234 U. S. 216, 34 S. Ct. 853, 58 L. Ed. 1284; Nash v. United States, supra. Thus viewed the Sherman Law is not only a prohibition against the infliction of a particular type of public injury. It 'is a limitation of rights, * * * which may be pushed to evil consequences and therefore restrained.' Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 49, 33 S. Ct. 9, 15 (57 L. Ed. 107).

That such was the view of this court in deciding the Standard Oil and Tobacco Cases, and that such is the effect of its decisions both before and after those cases, does not seem fairly open to question. Beginning with United States v. Trans-Missouri Freight Association, supra, and United States v. Joint Traffic Association, ...