Court Opinion

ID: 8017688
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:06:43.867442+00
Date Added: 2024-06-11T16:36:27.742111
License: Public Domain

GRAVES, J.
I. I do not concur in all that has been written by the learned Chief Justice in this case, nor do I concur at all in the manner in which he finally disposes of the ease. I do, however, concur in much that he has said.
The opinion as presented simply ousts the International Harvester Company of America, but fixes no fine as against it. In the judgment of ouster I concur. The above company is the only one before this court, and the only one which can be reached by *403this court, and if a penalty is to be fixed for the violation of our laws, such penalty must go as against the sole respondent in this case. I agree further that we may suspend the ouster upon terms, if we see fit to grant terms. I cannot concur in that portion of the opinion, -which reads:
“And since the International Harvester Company has been doing business in this- State, through the agency of respondent, under license that it had no right to use, it should pay to the State a reasonable sum for the privilege enjoyed, and it should take out a license in its own name under the terms and conditions prescribed in section 3.039, Revised Statutes 1909, and pay therefor the taxes in that section prescribed, estimated on the proportion of its capital stock represented by its property and business in Missouri, and subject itself to all the requirements of foreign corporations doing business in this State prescribed in article 1 of chapter 33 of the Revised Statutes of 1909. The license so to be taken out to stand revoked if at any time hereafter on motion of the Attorney-General it be made to appear to this court that the corporation, either in person or by its agent, has violated any of the conditions above specified. If the International Harvester Company sees fit to comply with the terms above specified, it may carry on its business in this State, either in person or through the agency of the respondent, but not on respondent’s present license.”
The International Harvester Company is not before this court, and we have no right to place restrictions upon it by way of a judgment. If it desires to do business in this State it has the right to make application to the proper State officer for a license so to do, unhampered by a prejudgment in the matter by the opinion of this court in a ease to which it was not a party. To determine the status of the respondent, the International Harvester Company of America, *404we have the right to determine the character of the relations which it bore to the International Harvester Company, the big corporation, and the character of the business done by each. We have also the right to say whether by contractor otherwise the relationship and business of the two are such as to subject the respondent in this ease to the penalty prescribed by the law, but we can go no further in our judgment and say that the International Harvester Company shall take out no license to do business in this State until it pays a fine prescribed by a judgment in a case to which it is not a party. To my mind, our whole judgment should be as against the International Harvester Company of America, the only company subject. to the jurisdiction of this court. That judgment in my opinion should be one of ouster, and in addition thereto a fine of not less than $50,000. Whether the ouster may be stayed upon terms may be a matter for further consideration. My reasons for these conclusions I prefer, as indicated above, to express in my own way.
II. We have now in this State, and so had at the time of the institution of this suit, a statute (Sec. 10301, R. S. 1909) which reads:
“All arrangements, contracts, agreements, combinations or' undertakings made, or entered into between any two or more persons, designed or marie with a view to lessen, or which tend to lessen, lawful trade, or full and free competition in the importation,. transportation, manufacture or sale in this State of any product, commodity or article, or thing bought and sold of any class or kind whatsoever, ineluding the price or premium to be paid for insuring property against loss or damage by fire, hghtrdng or storm, and all arrangements, contracts, agreements, combinations or understandings made or entered into between any two or more persons which are designed or *405made with a view to increase, or which tend to increase the market price of any product, commodity or article or thing, of any class or kind whatsoever bought and sold, including the price or premium to be paid for insuring property against loss or damage by fire, lightning or storm, are hereby declared to be against public policy, unlawful and void; and any person or persons creating, entering into, becoming a member of or participating in such arrangements, contracts, agreements, combinations or understandings shall be deemed and adjudged guilty of a conspiracy in restraint of trade, and punished as provided for in this article.”
The part to which I desire first to apply the facts in this case, stripped of all useless verbiage, would read:
“All arrangements, contracts, agreements, combinations or understandings made, or entered into between any two or more persons, designed or made with a view to lessen, or which tend to lessen . . . full and free competition in the sale ... in this State of any product, commodity or article, or things bought and sold . . . are hereby declared to be against public policy, unlawful and void; and any person or persons creating, entering into, becoming a member of or participating in such arrangements, contracts, agreements, combinations or understandings shall be deemed and adjudged guilty of a conspiracy in restraint of trade, and punished as provided for in this article.”
The punishment is fixed by section 10304, which follows in the article.
It will be noticed that our statute is exceedingly broad. It includes not only contracts, agreements and understandings, but also all arrangements and coyvbinations. It includes not only all those things which tend to lessen full and free competition, 'but likewise all those things which were done with the view of less*406ening full and free competition. In other words, this statute punctuated and worded as it is, covers two classes of “arrangements, contracts, agreements, combinations and understandings”; i. e., (1) those that were made “with the view to lessen . . . full and free competition”, but which may have never been so operated as to reach the result had in view or in mind; and (2) those made “which tend to lessen . . . full and free • competition” and which in fact did lessen competition.
I repeat that this statute when fairly analyzed thus resolves itself, so far as the question under discussion is concerned. The several clauses purposely placed therein by the lawmaking power do not mean one and the same thing, but were put there purposely to be far reaching in effect. It was intended to reach all conceivable methods which might be designed by shrewd “captains of finance.” The purpose of the statute was to thwart action in the very ineipiency as well as all down the fine. It was designed to reach all arrangements, etc., which were designed and made with the view of lessening competition, as well as those which in fact did that thing. Either class falls equally under the ban of the statute — one no more nor less than the other. To my mind the respondent in this ease is guilty under either portion of the statute, as thus analyzed. We should perhaps add that section 8966 of the Revised Statutes of 1899 condemned the same “arrangements, contracts, agreements or combinations.”
In that statute we have the same two classes as in the present statute. We apply the facts to the first class only in the succeeding paragraph.
. III. That there was an arrangement between the respondent and four other leading manufacturers of binders and reapers in 1902 is beyond question. That respondent, through J. P. Morgan & Co., en*407tered fully into that arrangement there is no question. Now, was such arrangement made with the “design and view of lessening full and free competition”? If so, then such arrangement violated our laws, and if respondent was a party thereto it was at the time and is now guilty. This arrangement must be stamped and branded as of the date of its making. The question is, what was its “design and view” at the time made? If unlawful then, it remains unlawful. Let us now revert to the facts. In 1902, and for some years prior thereto, there were six concerns licensed to do business in this State, i. e., (1) the respondent, then known as the Milwaukee Company; (2) the McCormick Company; (3) the Deering Company, a copartnership; (4) the Warder-Bushnell & Glessner Company; (5) the Plano Company, and (6) the, Osborne Company. These companies at that time did eighty to ninety per cent of the binder, reaper and mower business in this State. They were then in actual and unrestricted competition in the sale of binders, reapers and mowers in this State. To make sales they would cut prices. Every syllable of evidence in this record shows that there was then actual competition. The same evidence likewise shows that after 1902 there was no real competition. The International Harvester Company, acting through its agent, the respondent herein, fixed the prices of each machine to the retailer and permitted no deviation therefrom. The only possible chance for competition was by the agent cutting off a part of his commission. The machines were listed to the agent at a fixed sum and that sum had to be accounted for at the settlement. That there was reap competition prior to 1902 and no competition since is best shown by a few excerpts from the testimony.
Mr. McCormick, one of the leading spirits in the International Harvester Company, in part, said:
*408“Q. Was a part of the unstable condition incident to this unsettled condition prior to the formation of the International Harvester Company, a- variation from the list- price and the selling of the machines— did that constitute a part of the unbusinesslike methods that you mention? A. The unbusinesslike methods were a multitude of things.
“Q. Was that a part of it? A. Yes, sir.
“Q. That is, the Deering people would have a machine listed at $90 and let the dealer have it at $80? A. Yes, sir.
“Q. Was that a common practice in giving rebates? A. All kinds of subterfuges for modifying prices, taking old machines at large values, throwing in other property, wasteful expenditure of money and time, and salary of men.
“Q. I was not asking you of what you complained in detailed statements — I asked you if the selling below list prices was one — was that true? A. Yes, sir.
“Q. Now, since that time you make one price on paper and get another price from, the dealer? A. We do not.
“Q. You maintain the prices listed? A. Yes, sir.
“Q. And before that consolidation that was not done by any of the companies? A. Was not done so generally.
“Q. Well, the truth of the matter is that a very large proportion, if not the larger proportion, of the sales were made below the list price? A. I could not say about the larger proportion.
“Q. But a large proportion was? A. Yes, sir.”
Mr. Glessner,' of the Warder-Bushnell & Glessner Company, said:
“Q. You were all competitors of each other? A. Yes, sir.
“Q. Was there no understanding or agreement between you prior to 1902? A. No, sir.
*409“Q. There was actual competition between you? A. Yes, sir.
“Q, The fact is, the competition was pretty fierce? A. Yes, sir; we tried to make it so.
“Q. The competition in the harvester business had been more pronounced in their early part? A. No, sir; it grew in bitterness and extent right along.
“Q. You think it increased? A. Yes, sir.
“Q. You think there was more competition in the harvester business in 1902 than any time before? A. It depends on what you call competition; it was a bitter, fight between everybody to get business and to get the better of your competitior.”
Mr. Funk, the general manager of ■ the International Harvester Company, said:
“Q. Then you did cut prices on your machines, when you were with the Champion people, to get business? A. Yes, sir.
“Q. Was there a uniform price to the dealers at that time, before the International Harvester Company of New Jersey was organized? A. No, sir.
“Q. You sold the machines for what you could get? A. We had a list price but it was varied from in certain conditions.” .
Mr. Yancey, former general agent for the Deering Company, said:
“Q. Did you at any time prior to 1902 reduce the price to the dealer because of competition? A. Yes, sir.
“Q. To what, extent would you reduce the price in instances of that character? A. Well, my previous answer covers ■ that case. During the war of the competition we were pretty hard run for business, and if it looked as if we were going to carry machines over, and to protect ourselves we had to cut the prices.
“Q. How much? A. Ordinarily five dollars, sometimes ten, in extreme cases maybe a little bit more than that.
*410“Q. In fact you frequently cut the prices in any way to sell? A. Not frequently.
“Q. So that the old instructions — or was not that the rules prior to 1902? A. It could not be said to be the rule.
“Q. It was rather frequently done, was it not, Mr. Yancy? A. ' It varied in different sections, sometimes the demand was greater, and the necessity did not exist in some years as in others.
“Q. Did you find that the necessity came up because other companies were also doing that? A. Yes, sir.
“Q. The McCormicks were doing that? A. Yes, sir.
“Q. And the Plano? A. Yes, sir.
“Q. The Milwaukee, The Osborne, and the Champion — they were all doing that? A. Yes, sir; more or less.”
We shall not go further. There was actual competition between the six leading manufacturers in 1902 prior to the organization of what in plain language should be called the harvester trust.
In 1902, as stated by Judge Valliant, Mr. McCormick went east to get money to enlarge his business. The evidence indicated that these large concerns were not losing money, but as said by one of the parties, they were not making money on the trade in the United States, but were making money on their foreign business. Judge Valliant has detailed more than I shall as to how the arrangement was made. I want to note briefly, however, this arrangement or combination to lessen competition, for in plain English it was that and nothing else.
In the first place, J. P. Morgan & Company procured an option on the present respondent, then the Milwaukee Company. This covered the whole concern, lock, stock and barrell. Then Morgan & Company, as practical owners of respondent, were in a situation *411to arrange and combine with, others* in the harvesting machine business. They did so arrange, but to give evidence of individual sales they had each party to the arrangement or combination sell by written contract to one Lane. This is step number one. Lane later conveyed to the International Harvester Company. This is step number two. The International Harvester Company then proceeded to put its stock in the hands of voting trustees under a written agreement, forming a voting trust, which was to be in force for ten years, but which might be terminated in five years. This is step three. Then followed the sales agent’s contract with the respondent in this case. The stock held by these trustees was held in proportion to the amount put in by these several component corporations, save and except certain amounts fully discussed in the principal opinion. Was this an arrangement or combination with the view of lessening competition? . It was not a bona-fide sale, because the sellers had to create their own buyer. It was a device to combine all their property into one huge concern and for what purpose? In view of the facts and upon conscience can we say it was not done with a view to lessen free and full competition? We think not. The parties themselves say that it was done to stop the fierce competition between these large manufacturers. They further say that it did stop that competition, as is evident from the very arrangement itself. The statute does not say that the arrangement must stop competition to bring it within the ban of the law. If it was made with the view of lessening competition the arrangement and combination must be condemned. Can it be said that when you have taken eighty or ninety per cent of a given trade, formerly in the hands of six corporations in open and fierce competition, and place it in the hands of three voting trustees with practically absolute power, you haven’t by the very act itself lessened free and full competition in general trade? We think .not. The *412thing speaks for‘itself. The purpose .is apparent. It would be years before the small concerns left, which did own ten to. twenty per cent of the business, could gain strength and capacity to. have any real competition.
The situation of the so-called competition which was left after this unlawful combination, is well described by Mr. Funk, the general manager of the International Harvester Company. He says:
“Q. Would not that guerilla warfare and competition, would it not be just as hable to occur with the Johnston, the Acme or Walter A. Wood as it did happen with the companies you spoke of awhile ago (referring to the six companies just mentioned)? No, sir.
“Q. Why? Á. Because the companies who are active and aggressive always draw the fire of the others. The Wood and the Johnston and those other concerns were not as active, and they picked their territories, while these five companies were everywhere. It was a matter of pride and policy with us to be represented everywhere. The Johnston and the Wood and the few you spoke of had considerable trade in the East where competition was not quite as fierce, and they could pick out localities where conditions were favorable to them. They operated more where conditions were more favorable.”
This refers to the condition just before the merger of interests. From this it appears that these little fellows doing from ten to twenty per cent of the business, were not doing business in all localities. The six companies were doing business everywhere. The little fellows picked their places. Under this testimony the merger in 1902 in many places not only lessened competition, but actually cut it off entirely. Imagine a place where the six big corporations each had agents and therefore active competition and where the little fellows in. their caution had not located an agent. *413They had to pick their places as stated by the witness. Look at our imaginary place a month before, and then again a month after the merger. Or if you please, a day before and a day after the merger. With this pen picture in mind can you say that the competition in the harvester trade was not in fact lessened by the arrangement and combination attacked in this suit? We think not. In the shades of a single night the six great warriors upon the held of active trade are gathered together into one fold and when morning comes competition has fled. Not only does the thing speak for itself, but the conspirators have spoken for it. They say, first, that prior to the creation of this good trust the manufacturers to meet competition often had to cut the prices from $5 to $15 per machine, and sometimes more.
These cuts were made by the manufacturer and not by the poor agent out of his commission. It was actual competition between the manufacturers themselves. But how the day after? A fixed price was established by the one giant owner of all. No cut is ever made. No competition between these six large manufacturers. General competition is lessened and in many plaees all competition destroyed.
The parties say what they did was done for the very purpose of stopping all competition between these large concerns. That it had that effect is evident.
We can judge the meaning of a contract by the construction the parties place upon it themselves. So also we can judge an act by the construction the parties place upon it themselves. The purpose of one act can be gathered by subsequent acts immediately following, which subsequent acts show that they were done in the course of carrying out the first. With this in view let us see what was done by the parties in 1903, 1904 and 1905. During these years their agency contracts contained this-clause:
*414“5th.. To sell all machines or property received under this contract at such prices and on such terms as may' be fixed in writing by said company or its general agent in the territory herein mentioned.”
The purpose there expressed is to fix the price to the consumer. It is true that this was dropped from the agency contracts of 1906, and thereafter, but it is yet potential as declaratory of the intent' of the parties when they entered into this arrangement and combination. Public history discloses that about that time the State of Kansas was proceeding against the International, and this perhaps induced the change. By the same contract the agent’s territory was limited so that he could not compete with other agents selling the same line, and further he was obligated not to sell the goods of any other manufacturer. Everything was done that could be done to destroy competition. Even the little competition between agents where they made cuts out of their commissions was provided against. These things from the parties themselves bespeak their construction of the arrangement and combination made in 1902. These are things that cannot be rubbed out of this record by the smooth talk of the head men or their sub-agents. They show that the whole transaction was done with the view of stifling competition. Not only so, but they show that it did in fact impede competition.
One thing more on the question as to what was the intent of these parties when they entered into this arrangement. In the voting trust agreement, the trustees were empowered to increase the capital stock to $180,000,000, without further consulting the parties interested. The evident purpose of that was to enable them to do just what they afterwards did. The D. M. Osborne Company and the Buckeye Company were not yet in the trust. The former was a strong competitor. In 1903 these two and other manufacturing companies were bought and taken in under the protecting wing *415of the International. At the beginning, as above indicated, the way was prepared. Those things point unerringly to the conclusion that the action of the respondent and the other corporations joining it in the first instance made their deal and arrangement with the view to lessen competition. Not only did they purchase the corporations above indicated, but for two years thereafter they ran them in their former names, without disclosing their ownership. If this was not to deceive the officers of the law and leave some appearance of competition for awhile, why not?
Viewing this case from any standpoint, it is clear that the merger of all these interests in one giant concern was made for the purpose, to use the language of the law, “with the view to lessen . . . full and free competition,” all in violation of our statutes as they exist now and as they have existed since 1897. Nor is there any doubt that the respondent is and ever has been a party to such unlawful arrangement.
IV. Nor do I fully concur in the statement that there has been no violation of the other portion of the statute which denounces arrangements and combinations to increase the market price. I think this arrangement and combination under the facts of this ease was made for that purpose. The principal opinion states the facts as to the amount of raise made by respondent in prices, and also'states that there was a raise-in the cost of material and labor. Grant the latter to be true, which we must, for the evidence so shows, yet there are other facts in the record which show this raise was not demanded for that reason. The new scheme, cut off an army of employees and great amount of expenses. Respondent’s answer, among other things, alleges:
“That the real and only purpose of said purchase of the plants and property by the International Harvester Company of New Jersey was to enable said company to avoid the large waste that had heretofore re-*416suited from the unbusinesslike and extravagant methods -which prevailed in the sale of farm implements, tools and machinery, and particularly in the harvester trade, and it required many unnecessary canvassers, experts and selling agents, and entailed- other large and useless expenditures.”
I have no doubt that these matters which were cut off rendered it unnecessary, even with the increase of raw material and labor, to make this raise in price. In my view of the case, it was made because it could be made owing to lack of real and substantial competition, and I have no doubt in my own mind that had it not been for the activity of Missouri and other States’ officials there would have been other raises ere this, and all in conformity with the intent had and entertained at the very incipieney of this unlawful arrangement and combination. Aggregations of large properties by bona-fide purchasers in the usual business way do not fall under the ban of the statute, but when the would-be sellers have to erect a straw man for the purchaser, the credulity of the court is strained, when we are asked to brand it as a bona-fide transaction.
The respondent in this case was a part and parcel of this gigantic and nefarious scheme. For some years it has been the mere sales agent of the International Harvester Company, the New.. Jersey company. It was licensed in this State to sell its .own goods, but it is now selling the goods of another. " As such party to an unlawful arrangement and combination it' should suffer the penalties prescribed by our laws. I have indicated that we can temper justice with mercy. We have the right to absolutely oust it from the State, and in addition, to fine it. We can conditionally oust it from the State and fine it. I think a conditional ouster should go, and respondent be fined in the sum of fifty thousand dollars for its long and continued infraction of our laws.
*417By conditional ouster I mean that absolute ouster should go, but such judgment of ouster be suspended upon the payment of the fine aforesaid within a reasonable time to be fixed by the court. As further conditions to the suspension of judgment of ouster, I would suggest that said respondent be required to make full and true statement to the proper State officer of the amount of its capital used by it in the transaction of its business in this State, to the end that it may be rightfully and legally taxed in this State. That it sever its unlawful connection with the International Harvester Company of New Jersey, and present satisfactory evidence of that fact to this court within such time as may be fixed by the judgment of the court. That, hereafter, it shall do and commit no act which will lessen or tend to lessen competition in the sale of such articles of commodity as it sells in this State. That, hereafter, it shall do and commit no act which will unnecessarily increase or tend to increase the price of commodities of the character sold by it. That it shall do no act in further violation of our statutes relating to pools, trusts, conspiracies, and discriminations. Our judgment should further provide that if our decree of ouster be suspended upon the conditions mentioned, yet we shall continue control of the case to the end that if upon the motion of the Attorney-General it is made to appear that the conditions imposed have been violated, then we can make such ouster absolute.
In this opinion I have not made the facts as full as I would otherwise have done, owing to the statement of facts in the principal opinion. These, however, express my views of the ease in my own way and from my viewpoint of the record.
Woodson, J., concurs, in toto; Lamm, and Brown, JJ., concur in the judgment in the case as made in this-opinion; Ferriss, J., concurs in the judgment in the case as made herein, except as to *418the fine. As to the fine he does not agree to this disposition and is opposed to a fine.
SEPARATE OPINION.
FERRISS, J.
In this case the court is required by the statute to pronounce a judgment of condemnation upon a combination which is proved by the facts as they appear in this record to have been so far beneficial to the community. The record shows the facts to be as indicated in the opinion of the chief justice, namely, that the price of mowers and reapers has not been raised in proportion to the increased cost of materials and labor, and that otherwise incidental benefits have accrued to the consumers, and furthermore, that independent manufacturers have not suffered by reason of the combination. Yet, it must be concluded from the facts in evidence that this combination was created in order to prevent the competition which had up to that time existed between the various corporations which were finally merged in the New Jersey company, and that the combination did prevent such competition. It appears further that the competition which existed between the various members of this present combination was extreme and ruinous in character, and, if continued, might have resulted in the demoralization of the trade, to the injury of the consumers. The statute, however, is plain in its terms, and indicates very clearly that it was the purpose of the Legislature to forbid a license in this State to any foreign corporation which should prove to be a member of any combination organized to lessen competition, and this without regard to the question whether the consumer would be injuriously affected. Such drastic law was regarded, no doubt, as necessary in order to prevent evils which might flow from a combination intended to prevent competition.
*419It cannot be doubted that combinations may be formed to create a monopoly to the injury of consumers, and yet it must be conceded that the industrial development of the country has indicated to the minds of practical men that its successful continuation requires the aggregation of capital in order to cheapen the cost of production and fully develop the possibilities of the particular industry involved. Economically, it should be to the advantage of the consumer to have the cost of production reduced to the lowest point practicable. The problem confronting the Legislature is how to secure the benefit of a lower cost of production to the consumer without permitting combinations of capital which shall result in oppression. Of necessity, when different manufacturers in the same fine of business combine their capital to create one organization where several existed before, competition between the members of such organization must cease, but such combination should benefit the consumer by allowing him to participate in the profit resulting from the lower cost of production. If such result is obtained, obviously there can be no objection to the combination itself.
The objection is against unjust exactions from the consumers in the shape of profits on fictitious values, watered stocks, and enormous commissions to promoters. In this ease the promoter received more than two millions. There would be little danger to the country from combinations if they were organized and operated along the lines of plain A B C honesty.
The right of capital to employ itself in the way most advantageous to its possessor is a natural and legal right, provided it is not exercised to the injury of the people. In ,my judgment, the present law against pools, trusts and combinations is ineffective to protect the people against combinations of capital. The courts may dismember an organization, but they *420will hardly attempt to confiscate its property; so that, after dismemberment, the ownership and control will continue substantially as before. To permit combinations to exist and at the same time secure to the people the natural and legitimate benefits of such combination is a problem not yet solved. To forbid, as the law in question does, the existence of all combinations that lessen conpetition compels a halt in the natural march of industrial development, and deprives the people of the benefits which should result from improved business methods. However, it is the duty of the court to construe and enforce the law. In obedience to this duty I concur in the opinion in this case, and in the judgment so far as it ousts the defendant from the right to do business in this State so long as it is a member of the combination. I do not, however, agree that the company should be fined, because in my judgment such' penalty is not required by the statute.