Court Opinion

ID: 8827817
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:52:43.278897+00
Date Added: 2024-06-11T17:04:50.060060
License: Public Domain

BUFFINGTON, Circuit Judge
(dissenting). This case involves the construction of the first clause of section 7 of the Act of October 15, 1914, and its application to the facts disclosed by the proofs. That act, being “An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,” was supplementary to existing laws against unlawful restraints and monopolies. The paragraph in question is:
“No corporation engaged in commerce shall acquire directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may he to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.”
These plainly expressed provisions contemplate the existence of two corporations which are competitors in the same line of business, and one of them, with the view to substantially lessening competition, or creating a monopoly, buying the whole or a part of the stock of its competitor. That two existing competing corporations were the subjects of the clause, is shown plainly by its terms. The offending buying corporation is aptly described -as being in business, by the words “no corporation engaged in commerce,” and the other corporation is described as being in like manner engaged in commerce by the words “another corporation engaged also in commerce,” and that the two corporations thus described were each actually engaged in competition of a substantial character, is evidenced by the fact that the stated object of the law was to prevent the two corporations engaged in commerce from doing a thing “the effect of which was to substantially lessen competition,” or which tended ■ “to create a monopoly of any line of commerce.” Moreover, the word “acquire” is an apt one to describe the buying by one corporation of the stock of another competing corporation, as will be seen by reference to the proviso in the third paragraph that “this section shall not apply to corporations purchasing such stock solely for investment and not-using the same by voting or otherwise to bring about, or any attempt to bring about, the substantial lessening of competition,n and also by reference to section 11 of .the act (Comp. St § 8835j), where the remedy against the stock-acquiring corporation is “to cease and desist from such violations and divest itself of the stock held.” Such divesting would restore the competitive corporation to its former competing status.
Clearly, such was'the situation to which this section was directed, but lest the stock of two of more corporations thus engaged in competition, should be bought up not by one another, but by a holding company which was not engaged in commerce, the next paragraph was added, which provided:
“No corporation shall acquire, directly or indirectly, title whole or any part of the stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition between such corporations, or any of them, whose stock or other *410share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.”
A study of this latter paragraph clearly shows it contemplated two sorts of corporations, viz. one class engaged in competitive commerce with each other, viz. “two or more corporations engaged in commerce,” the acquisition of whose shares “may be to substantially lessen competition ‘between such corporations,” or “to restrain such commerce in any section or community,” or “tend to create a monopoly of any line of commerce.” The other or stock-acquiring class of corporation %vas not described as engaged in commerce, but was described without any limitation by the inclusive words “no corporation shall acquire,” etc., thus clearly referring to a mere holding corporation.
In my judgment, the first-quoted clause of section 7 was a case unlike the present, where there was not only no competing corporation buying a competing company’s stock, but where there were no elements or purpose of oppression, bad faith, increase of product price,' diminution of output, or any other of the vicious earmarks of monopoly or lessening of competition, and where, indeed, the uncontradicted evidence is that the whole transaction was influenced by a patriotic war purpose to increase the supply of aluminum, which the government was then largely absorbing for war requirements at its own fixed price. The business problem which confronted those concerned in the transaction was simply this: The Cleveland Foundry Company, whose major business was making stamped steel and enameled vitreous utensils, built in 1915 a mill to roll aluminum sheets for its own use. When the abnormal war demand for aluminum stopped, the mill began to lose $500 a day. This necessitated either mill abandonment or mill enlargement. At this point, I remark that if the Aluminum Company of America, which furnished the Cleveland Company with aluminum ingots, desired to lessen competition or to broaden the monopoly of rolling aluminum sheets, all it had to do was to do nothing and allow the losing mill to drop out of business. On the other hand, if it desired to continue the mill as an ingot consumer and to increase the production of aluminum sheets, its only course was to enlarge the mill and increase its product. Such enlargement the Cleveland Company, after its disastrous venture, was unwilling to make itself, but was willing to contribute a minor part if the Aluminum Company would contribute the major part of the funds to enlarge.
What was really done was that the Aluminum Company formed a new company, and by taking the major stock thereof made the new company a subsidiary company of its own; the Cleveland Company becoming a minority stockholder, its mill being taken in part payment for such minority stock. Such was the simple business proposition; a losing plant, enlargement, and increased product; the Aluminum Company forming a subsidiary to take over and enlarge the business, and the Cleveland Company contributing the mill and the minority of the money needed to effect enlargement. In point of fact, the situation was in no respect different than it would have been had the Aluminum Company bought the losing mill from the Cleveland Company and itself furnished the entire funds to capitalize the new subsidiary com*411pany. In my judgment, the present situation did not fall within the terms of either of the quoted paragraphs, was not an acquisition of stock such as the Act contemplated, or one over which jurisdiction was conferred on the Trade Commission by the act. Nor does the construction which is thus given the act, create a remediless situation, for manifestly, if wrong was done, if this transaction was a subterfuge to lessen competition or to create monopoly, the existing trust laws would have applied. And, indeed, the District Court of the United States for the Western District of Pennsylvania having theretofore taken jurisdiction of a bill filed by the United States against the Aluminum Company of America, the-Attorney General, by proper proceeding in that case, could have and can now prevent that company taking this step, if it tended to lessen competition or create a monopoly. And this prior, general, and effective jurisdiction of courts over such matters, Congress recognized when it created a Trade Commission of defined and limited power, by providing in the act:
“This section shall not apply to corporations purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen competition,” and at the same time making it clear “That nothing in this section shall be held or construed to authorize or make lawful anything heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided.” Comp. St. § 8835g.
Being of opinion the case was one to which the limited jurisdiction of the Trade Commission was not extended by the act of Congress, I respectfully record this my dissent.