American Column & Lumber Co. v. United States , 42 S. Ct. 114 ( 1921 )

Mr. Justice Brandéis

dissenting, with whom

Mr. Justice McKenna concurs.

There are more than 9,000 hardwood lumber mills in that part of the United States which lies east of a line extending from Minnesota to Texas. Three hundred and sixty-five concerns — each separate and independent — are members of an association by means of which they cooperate under the so-called “ Open Competition Plan.” Their mills — about 470 in number — are located in eighteen States. Their aggregáte production is about thirty 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 these concerns violates the Sherman Law. The Plan provides for cooperation in collecting and distributing 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. Cooperation implies combination. And this combination confessedly relates to interstate trade; It is also clear that a plan for cooperation, 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 or fraud or agreement. It may be exerted through moral or through 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 /sdvice equivalent to 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 attained, or is sought, through 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.

In the case before us there was clearly no coercion. There is no claim that a monopoly was sought or created. There is no claim that a division of territory was planned or secured. 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 these independent .concerns detailed information concerning the business operations of each, and its opinions as to trade conditions, prospects and policy; and of collating, inter-' preting, and distributing the data so received among the members of the association and others. No information 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 district meetings were open td' 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 Plan ” 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 competition shall be pursued blindly, 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 v. 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 available and without which most of those engaged in the trade would be unable to trade intelligently.

The hardwood lumber mills are widely scattered. The principal area of production is the Southern States. But there are mills in Minnesota, New York, New 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. No official, or other public, means have been established for collecting from these mills and from dealers data as to current production, stocks on hand and market prices. Concerning grain, cotton, coal and oil, the Government collects and publishes regularly, at frequent intervals, current information on production, consumption and stocks on hand; and boards of trade furnish freely to the public details of current market prices of those commodities, the volume of sales, and even individual sales, as recorded in daily transactions. Persons interested in such commodities are enabled through this information to deal with one another on an equal footing. The absence of such information in the hardwood lumber trade enables dealers in the large centres more readily to secure advantage over the isolated producer.. And the large concerns, which are able to establish their own bureaus of statistics, secure an advantage over smaller concerns. Surely it is not ■against the public interest to distribute knowledge of trade facts, however detailed. Nor are the other features of the Plan — the market letters and the regional conferences, an unreasonable interference with freedom in trade. Intelligent conduct of business implies not only knowledge of trade facts, but an understanding of them. To this understanding editorial comment and free discussion by those engaged in the business and by others interested are aids. Opinions expressed may be unsound; predictions may be unfounded; but there is nothing in the Sherman Law which should limit freedom of discussion, even among traders.

It is insisted that there was a purpose to curtail production.' No evidence of any such purpose was introduced. There was at no time uniformity in the percentage of production to capacity. On the contrary the evidence is uncontradicted that the high prices induced strenuous efforts to increase production. Weather and labor conditions had made production difficult. Tractors were purchased at great cost to get the logs out of the forests which excessive rains had rendered inaccessible to the usual methods of transport. ' The current sales of new machinery to hardwood lumber mills were on an unprecedented scale. Where equipment and supply of logs permitted, mills were run at night to overcome the restrictions upon production which the bad weather had imposed. There were, it is true, from time to time, warnings, in the “Market Letters” and otherwise, against overproduction — warnings which seem not to have been heeded. But surely Congress did not intend by the Sherman Act to prohibit self-restraint — and it was for self-restraint that the only appeal was made. Thé purpose of the warnings was to induce mill owners to curb their greed — lest both they and others suffer from the crushing evils of overproduction. Such warning or advice whether given by individuals or the representatives of an association presents no element of illegality.

It is urged that this' was a concerted effort to enhance. prices. There was át no time uniformity in prices. So far as appears every mill charged for its product as much as it could get. There is evidence that the hardwood mills expected, by adopting the Plan, to earn more in profits; and to do so, at least in part, by getting higher prices for their product. It may be that the distribution of the trade data, the editorial comment and the conferences enabled the producers to obtain, on the average, higher prices than would otherwise have been possible. But there is nothing in the Sherman Law to indicate that Congress intended to condemn cooperative action in the exchange of information, merely because prophecy resulting from comment on the data collected may lead, for a period, to higher market prices. Congress assumed that the desire to acquire and to enjoy property is the safest and most promising basis for society. And to that end it sought, among other things, to protect the pursuit of business for private profit. Its purpose, obviously, was not to prevent the making of profits or to counteract the operation of the law of supply and demand. Its purpose was merely to prevent restraint. The illegality of a combination under the Sherman Law lies not in its effect upon the price level, but in the coercion thereby effected;. It is the limitation of freedom, by agreements which narrow a market, as in Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, and Montague & Co. v. Lowry, 193 U. S. 38, or by organized boycott, as in Loewe v. Lawlor, 208 U. S. 274, and Eastern States Retail Lumber Dealers’ Association v. United States, 234 U. S. 600, or by the coercive power of rebates, as in Thomsen v. Cayser, 243 U. S. 66, which constitutes the unlawful restraint.

The cooperation which is incident to this Plan does not suppress competition. On the contrary it tends to promote all in competition which is desirable. ’ By substituting knowledge for ignorance, rumor,, guess and suspicion, it tends also to substitute research and reasoning for gambling and piracy, without closing the door to adventure or lessening the value of prophetic wisdom. In making such knowledge available to the smallest concern it creates among producers equality of opportunity. In making it available also to purchasers and the general public, it does all that can actually be done to protect the community from extortion. If, as is alleged, the Plan tends to substitute stability in prices for violent fluctuations, its influence,' in this respect, is not against the public interest. The evidence in this case, far from establishing an illegal restraint of trade, presents, in my opinion, an instance of commendable effort by concerns engaged in a chaotic industry to make possible its intelligent conduct under competitive conditions.

The refusal to permit a multitude of small rivals to cooperate, as they have done here, in order to protect themselves and the public from the chaos and havoc wrought in their trade by ignorance, may result in suppressing com-. petition in the hardwood industry. These keen business rivals, who sought through cooperative exchange of trade information to create conditions under which alone rational competition is possible, produce in the aggregate about one-third of the hardwood, lumber of the country. This court held in United States v. United States Steel Corporation, 251 U. S. 417, that it was not unlawful to vest in a single corporation control of 50 per cent, of the steel industry of the country; and in United States v. United Shoe Machinery Co., 247 U. S. 32, the court held that it was not unlawful to vest in a single corporation control of practically the whole shoe machinery industry. May not these hardwood lumber concerns, frustrated in their efforts to rationalize competition, be led to enter the inviting field of consolidation? And if they do, may not another huge trust with highly centralized control over vast resources, natural, manufacturing and financial, become so powerful as to dominate competitors, wholesalers, retailers, consumers, employees and, in large measure, the community?