December 25, 19'21 



HARDWOOD RECORD 



19 



the members, and from the replies received, supplementing the other 

 reports, the statistician compiled an estimate of the condition of the 

 market, actual and prospective, which was distributed to the members at- 

 tending each meeting, and was mailed to these not present. There were 

 eleven questions on this list of which the most important were : 



"Fourth. What was your total production ot hardwood during the last 

 month? What do you estimate your production will probably be for the 

 next two months? 



"Tenth. Do you expect to shut down within the next few months on ac- 

 count of shortage of logs or for any other reason? If so, please state 

 how long you will be idle. 



"Eleven. What is you view of market conditions for the ne.xt few 

 months and what is the general outlook for business? State the reasons 

 for your conclusion." 



The Plan on paper provided only for reports of past transactions and 

 much is made of this in the record and in argument — that reporting 

 to one another past transactions cannot fix prices for the future. But 

 each of these three questions plainly invited an estimate and discussion 

 of future market conditions by each member, and a co-ordination of them 

 by an expert anal.vst could readil.v evolve an attractive basis for co-op- 

 erative, even if unexpressed, "harmony" with respect to future prices. 



Third. The Plan provided for a monthly "market report letter" to 

 go to, all members of the association. In practice this market report 

 letter was prepared by F. R. Gadd, Manager of Statistics, to cause, or 

 which in fact does cause, direct and undue restraint of competition in 

 such commerce as falls within the condemnation of the act and is unlawful. 



have charge of the gathering and dissemination of the data, which were 

 to be contained in the various reports, and that the defendant, F. R. Gadd. 

 was selected for this purpose, with the title of "Manager of Statistics." 

 Mr. Gadd was a man of large experience in the lumber business, competent 

 and aggressive, and the record makes it clear that he was in complete and 

 responsible charge of all the activities of this "Open Competition Plan." 

 He compiled the summaries of daily, weekly and monthly reports, and 

 wrote the monthly market letter and the market comment in the weekly 

 sales reports, which were distributed to the members. Some disposition 

 appears in the argument, but not in the evidence, to suggest that Gadd 

 exceeded his authority at times, but no objection appears to have been 

 taken to any of his conduct, and the "Secretary Manager" says in his 

 affidavit that his office adjoins that of Gadd and that "he (Gadd) and 

 affiant have frequent conferences and discussions relating to their work, 

 and that affiant is familiar with the activities and methods of the Open 

 Competition Plan." 



Gadd Was the "Clearing House" of the Plan 



It is plain that as the IMan was the "clearing house" of the members 

 "for information on prices, trade statistics and practices," so Gadd was 

 the "clearing house" of the Plan, and that what he said and did, acquiesced 

 in by the members, as it was, must be accepted as the authoritative 

 expression of the combination. 



The record shows that the lumber market was inactive in the months 

 of January and February and the first part of March of 1919. It grew 

 better late in March and progressively stronger in July, when it 



Statement by Lumbermen's Chief Counsel 



It is uiy unhappy duty to advise that the Supreme Court of tlie 

 United States by divided opinion of six to three aflSrmed Judge 

 McCall's decision in what is known as the Hardwood Case. At 

 this writing I liave not had opportunity to study the opinion, but 

 from the verbal expression of Justice Clark who stated the court's 

 opinion, it seems that the judgment of the court is grounded in 

 the position that competitors wlio exchange information as to past 

 transactions touching prices or production are doing that which is 

 prohibited by the Sherman Law. In other words, as I gather 

 from Justice Clark 's opinion, as rendered from the bench, the so- 

 called Gadd letters were not the controlUug influence. Tlie plan 

 whereby statistics were exchanged as to past transactions was 

 condemned as such. Just as soon as I am able to get a copy oi 

 the opinion and have time to study same will write a careful 

 review for the press. 



Justice Brandeis and Justice Holmes delivered carefully written 

 dissenting opinions. These opinions were very forceful and de- 



veloped the situation as contended for by the industry. Justice 

 Brandeis' opinion was very exhaustive. Justice McKenna .ioined 

 Justice Brandeis and Holmes in the dissent. As soon as I have 

 time to read the opinion I will file in all probability a motion for 

 a rehearing. These motions are very rarely granted, but there is 

 a chance. I, of course, feel that the majority opinion is in error 

 and that the court has failed to recognize the conclusions of the 

 Supreme Court in other decisions. In the event the decision as 

 it now reads stands as the law of the land, the only alternative is 

 relief througli Congressional action. The decision makes it abso- 

 lutely impossible for industrial groups to study their economic 

 problems. It is a strangle hold upon progress. It wiU take time, 

 of course, to determine just what is the right course, because we 

 can only determine that after having carefully analyzed the opinion 

 itself. 



(Signed) L. C. Boyle. 



In Northern Securities Company v. United States, 139 U. S. 197, 3.37, 

 It is declared that : 



"In all the prior cases in this court the anti-trust act has been con- 

 strued as forbidding any combination which by its necessary operation de- 

 stroys or restricts free competition among those engaged in interstate 

 -commerce ; in other words, that to destroy or restrict free competition 

 in interstate commerce was to restrain such commerce." In United 

 States v. Union Pacific Railroad Company, 226 U. S. 61, 87, decided in 

 1912, long prior to the forming of their combination by the defendants, 

 the law was condensed into this expression ; 



"To preserve from undue restraint the free action of competition in 

 interstate commerce was the purpose which controlled congress in enacting 

 this statute, and the courts should construe the law with a view to ef- 

 fecting the object of its enactment." 



And in Eastern States Retail Lumber Dealers Association v. The United 

 States, 234 U. S. 600, 609, it was said : 



"It (the Sherman Act) broadly condemns all combinations and con- 

 spiracies which restrain the free and natural flow of trade in the channels 

 -of interstate commerce." And again, on p. 613 : 



Kestraint of Competition Claimed 



"The argument that the course pursued is necessary to the protection 

 of the retail trade and promotive of the public welfare in providing retail 

 facilities is answered by the fact that Congress, with the right to control 

 the field of interstate commerce, has so legislated as to prevent resort to 

 practices which unduly restrain competition or unduly obstruct the free 

 flow of such commerce, and private choice of means must yield to the 

 national authority thus exerte<l." 



With this rule or law and the details of the Plan in mind, we come to 

 -consider what the record shows as to the purpose of this combination and 

 as to its effect upon interstate commerce. 



We have seen that the Plan provided for the selection of a man to 



became very active, with prices high, and so continued until the end of 

 the year we are considering. 



In the first quarter of the year the problem was to maintain the war 

 prices then prevailing rather than to advance them, and although the 

 minutes of the various meetings were kept in barest outline, we find that 

 beginning within a month of the consideration of the two associations, the 

 members of the Plan began actively to co-operate, through the meetings, 

 to suppress competition by restricting production. This is very clearly 

 shown by the excerpts following from the minutes of meetings and from 

 the market letters and sales reports distributed at them. 



Alleged Proof of Cut Restraint 



Thus, at the meeting held at Cincinnati, Jan. 21. 1919. in the discus- 

 sion of business conditions, the chairman said: "If there is no increase 

 in production, particularly in oak, there is going to, be good business." 

 "To man is safe in increasinfj production. If he does he will be in bad 

 shape, as the demand won't come." Again, at the meeting held on May 9, 

 at Memphis, in the discussion of market conditions, appears this para- 

 graph : 



"Reference was made to members who contemplate running day and 

 night, and was stated that the lumber industry had seen these unusual 

 market conditions before and that we ought to be very sure that the mar- 

 ket is capable of taking care of night and day lumber." 



This warning of May 9 against producing too much lumber was fol- 

 lowed on May 17 by a sales report sent out by the Manager of Statistics 

 to all members, which was headed, "Stop, Look and Listen." After saying 

 that the hardwood market had assumed a decidedly better tone, with a 

 tendency in quotations upward, with the demand on the increase and 

 with stocks below normal, the writer continues : 



"The lumbermen have gone through several lean years, but we are con- 

 fronted with the possibility of killing the goose that laid the golden egg. 

 Overproduction iciU Kpell disaster, as it should always be home in mind 



