Iiecember 2o. 1921 



HARDWOOD RECORD 



21 



eral use were inorcnsed to an unpreoedented extent during tbe year. Thus, 

 the increases in prices of varieties of oak range from 33.3 per cent to 

 296 per cent during the year ; of gum, GO per cent to 343 per cent, and 

 of ash from 5 per cent to ISl per cent. While it is true that 1919 was a 

 year of high and increasing prices generally, and that wet weather may 

 have restricted production to some extent, we can not but agree with the 

 members of the Plan themselves, as we have quoted them, and with the 

 District Court in the conclusion that the united action of this large and 

 influential membership of dealers contributed greatly to this extraordinary 

 price increase. 



Such close co-operation between many persons, firms and corporations, 

 controlling a large volume of Interstate commerce, as is provided for in this 

 Plan is plainly in theory, as it proved to be in fact, inconsistent with 

 that free and unreslricted trade whi<*h the statute contemplates shall be 

 maintained, and that the persons conducting the association fully realized 

 this is apparent from their protesting so often as they did, in many of 

 their confldential communications appearing in this record, that their pur- 

 poses were not unlawful, that they sought only to supplant cut-throat 

 competition, with what in their own judgment would be "fair and rea- 

 sonable competition," and to obtain, not make, fair prices, and by their 

 repeated insistence that the Sherman Law "designed to prevent the 

 restraint of trade is itself one of the greatest restrainers of trade and 

 should be repealed." 



Name of Plan Adjudged Misleading 

 To call the activities of the defendants, as they are proved in this 

 record; an "open competition plan" of action is plainly a misleading mis- 

 nomer. 



Genuine competitors do not make daily, weekly and monthly reports 

 of the minutest details of their business to their rivals, as the defendants 

 did : they do not contract, as was done here, to submit their books to the 

 discretionary audit and their stocks to the discretionary inspection of 

 their rivals for the purpose of successfully competing with them ; and 

 they do not submit the details of their business to the analysis of an 

 expert, jointly employed, and obtain from him a "harmonized estimate 

 of the market" as it is and as, in his specially and confidentially informed 

 judgment, it promises to he. This is not the conduct of competitors, but 

 is so clearly that of men united in an agreement, expressed or implied, 

 to act together and pursue a common purpose under a common guide, 

 that, if it did not stand confessed a combination to restrict production 

 and increase prices in interestate commerce, and as, therefore, a direct 

 restraint upon that commerce, as we have seen that it is, that conclusion 

 must inevitably have been inferred from the facts which were proved. To 

 pronounce such abnormal conduct on the part of 365 natural competitors. 



controlling one-third of the trade of the country in an article of prime 

 necessity, a "new form of competition" and not an old form of combination 

 in restraint of trade, as it so plainly is, would be for this court to confess 

 itself blinded by words and forms to ri'alities which men in general very 

 plainly see and undersland and condemn, as an old evil in a new dress and 

 with a new name. 



Condenuiation of the Flan 



The Plan is, essentially, simply an expansion of the gentlemen's agree- 

 ment of rosier days, skillfully devised to evade the law. To call it open 

 competition because the meetings were nominally open to the public, or 

 because some voluminous reports were transmitted to the Department of 

 Justice, or because no specific agreement to restrict trade or fix prices is 

 proved, cannot conceal the fact that the fundamental purpose of the Plan 

 was to procure "harmonious" individual action among a large number of 

 naturally competing dealers with respect to the volume of production and 

 prices, without having any specific agreement with respect to them, and to 

 rely for maintenance of concerted action in both respects not upon fines 

 and forfeitures, as in earlier days, but upon what experience has shown 

 to be the more potent and dependable restraints, of business honor and 

 social penalties, cautiously reinforced by many and elaborate reports, 

 which would promptly expose to his associates any disposition in any 

 member to deviate from the tacit understanding that all were to act 

 together under the subtle direction of a single interpreter of their common 

 purposes, as evidenced in the minute reports of what they had done and in 

 their expressed purposes as to what they Intended to do. 



In the presence of this record It is futile to argue that the purpose of 

 the Plan was simply to furnish those engaged in this industry, with widely 

 scattered units, the equivalent of such information as is contained in the 

 newspaper and Government publications with respect to the market for 

 commodities sold on boards of trade or stock exchanges. One distinguish- 

 ing and sufficient difi'erence is that the published reports go to both seller 

 and buyer, but those reports go to the seller only : and another is, that 

 there is no skilled interpreter of published reports, such as we have in this 

 case, to insistently recommend harmony of action likely to prove profitable 

 in proportion as it is unitedly pursued. 



Convinced, as we are, that the purpose and effect of the activities of the 

 "open competitive plan" here under discussion, were to restrict competition 

 and thereby restrain interstate commerce in the manufacture and sale of 

 hardwood lumber by concerted action in curtailing production and in 

 increasing prices, we agree with the District Court that it constituted a 

 combination and conspiracy in restraint of interstate commerce within the 

 meaning of the Anti-Trust Act of 1S90 (20 Stat. 209), and the decree of 

 thpt court must be affirmed. 



Text of Dissenting Opinion 



The dissenting opinion in the case which was concurred in by 

 Justice Brandeis, Justice McKenna and Justice Holmes and vrhich 

 was read by Justice Brandeis, in full, is as follows: 



There are more than 9.000 hardwood lumber mills in that part of the 

 United States which lies east of the line extending from Minnesota to 

 Texas. Three hundred and sixty-five concerns, each separate and inde- 

 pendent, are members of an association by means of which they co-operate 

 under the so-called "Open competition plan." Their mills — about 470 in 

 number — are located in eighteen states. Their aggregate production is 

 about 30 per cent of the total production of hardwood in the United States. 

 The question presented for our decision is whether the open competition 

 plan, either Inherently or as practiced by those concerns, violates the Sher- 

 man Law. The plan provided for co-operation in collecting and distribut- 

 ing information concerning the business of members and generally in 

 regard to the trade. That in adopting the plan the members formed a 

 combination in trade is clear. Co-operation implies combination. And 

 this combination confessedly relates to interstate trade. It is also clear 

 that a plan for co-operation, although itself Innocent, may be made an 

 instrument by which illegal restraint is practiced. But the decree below 

 should, in my opinion, be reversed, because the plan is not inherently a 

 restraint of trade, and the record is barren of evidence to support a finding 

 that it has been used, or was intended to be used, as an instrument to 

 restrain trade. 



Restraint of trade may be exerted upon rivals : upon buyers or upon 

 sellers : upon employers or upon employed. Restraint may be exerted 

 through force, fraud or agreement. It may be exerted through moral or 

 through local legal obligations; through fear or through hope. It may exist 

 although it is not manifested in any overt act and even though there is no 

 intent to restrain. Words of advice seemingly innocent and perhaps 

 benevolent, may restrain, when uttered under circumstances that make 

 advice equivalent Jo command. For the essence of restraint is power ; and 

 power may arise merely out of position. Wherever a dominant position 

 has been attained, restraint necessarily arises. And when dominance is 

 iittained, or is sought, tBrough combination, however good the motives or 

 the manners of those participating, the Sherman Law is violated ; provided. 

 •Of course, that the restraint be what is called unreasonable. 



There Was No Coercion 



In the case before us there was clearly no coercion. There is no claim 

 that a monopoly was sought or createil. There is no claim that uniform 

 prices were established or desired. There is no claim that by agreement, 

 force, or fraud, any producer, dealer or consumer was to be or has. in fact, 

 been controlled or coerced. The plan is a voluntary system for collecting 

 from those independent concerns detailed information concerning the busi- 

 ness operations of each, and its opinions as to trade conditions, prospects 

 and policy : and of collecting, interpreting, and distributing the data so 

 received among the members of the Association and others. No informa- 

 tion gathered under the plan was kept secret from any producer, any 

 buyer or the public. Ever since its inception in 1917, a copy of every 

 report made and of every market letter published has been filed with the 

 Department of Justice and with the Federal Trade Commission. The Dis- 

 trict meetings were open to the public. Dealers and consumers were invited 

 to participate in the discussions and to some extent have done so. 



It is claimed that the purpose of the "Open Competition Plank" was to 

 lessen competition. Competition among members was contemplated and 

 was in vigorous operation. The Sherman Law does not prohibit every 

 lessening of competition ; and it certainly does not command that competi- 

 tion shall be pursued bllndl.v. that business rivals shall remain Ignorant 

 of trade facts or be denied aid in weighing their significance. It is lawful 

 to regulate competition in some degree. (Chicago Board of Trade vs. United 

 States, 246 U. S. 231.) But it was neither the aim of the plan, nor the 

 practice under it, to regulate competition in any way. Its purpose was to 

 make rational competition possible by supplying data not otherwise avail- 

 able and without which most of those engaged in the trade would be un- 

 able to trade intelligently. 



Show Need for Hardwood Statistics 



The hardwood lumber mills are widely scattered. The principal area of 

 production is in the Southern states. But there are mills in Minnesota, 

 New York, Xew England and the Middle states. Most plants are located 

 near the sources of supply : isolated, remote from the larger cities and from 

 the principal markets. Xo official, or other public means have been estab- 

 lished for collecting from these mills and from dealers data as to current 

 production, stocks on hand and market prices. Concerning grain, cotton. 



