Court Opinion

ID: 8799331
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:25:15.609274+00
Date Added: 2024-06-11T17:03:48.958804
License: Public Domain

ALSCHULER, Circuit Judge.
I cannot concur in the conclusion of the majority of the court, nor, of course, in some of the reasoning whereby that conclusion was reached. It was, and I think properly, deemed wise to expedite this case by announcing the decision as soon as it was reached, without waiting for the ordinarily longer process of preparing written opinions.
At the time of making the contract of purchase of which the government complains, of the total rolled oats output in and for the United States, the Quaker Oats Company had, roughly speaking, 55 per cent, the Western Cereal Company between 15 and 20 per cent., and the remainder, divided in various proportions between something over a dozen others, who were in the same business, the largest of them quite small in comparison with the Western. About half the Quaker output was of package goods under the advertised brand of “Quaker Oats,” and a much larger proportion of the Western product was put out under the advertised brand of “Mother’s Oats.”
Competition in the market between these two bránds was keen. Quaker had lost some ground in 1910 and 1911, and Mother’s had rapidly gained in volume. The Quaker Company showed large profits, while the Western was running behind financially. There was much evidence as to the cause for the losses of the latter, the government claiming it was improper conduct of its officers; but to my mind this is quite immaterial to the issue here involved, particularly as it is not charged that the Quaker interests were instrumental in bringing about such conduct, if any there was.
The two companies themselves were composed of various units which had theretofore been brought together, the manner whereof could not be related in small compass; but suffice to say that even if, as claimed by the government, this was in some respect obnoxious to the law, these long-existing associations and combinations,. culminating in these two major companies here involved, are not attacked by the bill, but it is sought only to affect thereby the contract of June 21, 1911, under which the Quaker acquired certain properties of the Western.
Without reviewing the voluminous details of conditions and negotiations leading to> the contract, it seems clear to me that both parties to it contemplated that the Great Western should permanently with*505draw from participation in the rolled oats business. This is strenuously denied by the defendants, but it seems to me that the circumstances, to which I will refer very briefly, could lead to no other conclusion than that this was the purpose and intent of the transaction.
The directors’ and stockholders’ resolution adopted by the Western authorizing the transaction distinctly set out its purpose, in reciting that in the judgment of the board of directors it was for the best interests of the company to discontinue the manufacture of oatmeal, rolled oats, and crushed oats. The defendants contended that this was but a form that was adopted to assure the trustee of the mortgage or trust deed covering the real estate contracted to be conveyed that it would have the power under clauses of the trust deed to make a conveyance of property that was no longer of use to the company. But the contract itself seems to dispel all doubt on the subject. It provides primarily for the conveyance of two plants of the Western, one at Joliet and one at Ft. Dodge, but not of several other plants which it possessed. After providing for the conveyance of these two plants, and for all of the property contained therein, the fifth section conveys:
“All and singular the business, good will, contracts for sales, formulas, processes, trade secrets, copyrights, trade rights, trade-marks, trade-names, trade insignia, both registered and unregistered, and all registrations and certificates of registration, at home and abroad of any such trade-marks, trade-names, and trade insignia, etc., relating to or in any way connected or associated with the manufacturing, putting up-, packaging, and sale of oatmeal, rolled oats, crushed oats, and commercial mixed feed, possessed or controlled or claimed by the party of the first part” (which is the Western).
It includes all, whether of the two mills specifically conveyed, or any other of the various mills in which it was theretofore manufacturing oat products. And in clause 7 the first party, the Western, covenants and agrees at once to turn over and deliver to the Quaker Company complete enjoyment of all such business and good will and trade-marks and the like, and that will not directly or indirectly interfere with the use and enjoyment thereof by the Quaker Company, nor use or authorize others to use the same. All labels, advertising materials, and premiums, boxes, and cartons are included, and the eleventh section provides that for the same consideration (which is stated in the instrument to be $10 and other good and valuable consideration, but which in fact was a little over $1,000,000) for which the plants at Joliet and Ft. Dodge are conveyed, the. enumerated intangible things are also conveyed. Section 14 provides that the first party shall turn over all contracts for the oat products of the business of which the good will and trade-marks are sold, and a list of all the customers which the first party has in the oat product business.
Included in the sale there was also, for another consideration, being the appraised price thereof, all of the product on hand and all of the materials for the manufacturing of these products, in all of the mills and plants of the Western, not alone those at Joliet and Ft. Dodge. The appraised price paid for all of such products and materials was upwards of $400,000. This parting with its business, *506good will, contracts, customers, marks, brands, advertising matter, stock, and materials, and stripping itself of the very essentials for building up and holding its immense trade, manifests an intention on the part of the seller permanently to retire, and upon the part of the purchaser that the seller shall so retire, from the oat product business in any-form. The retention by the Western of its other plants, so far as indicating, as claimed, an intention to continue in this business, must have reference to the products of grains other than oats, in the manufacture of which other products both of the companies were then and theretofore heavily engaged.
Considering the relations of these companies toward each other, and toward tire trade and the public, and attaching to the contract that probative value which common observation and. ordinary experience will give it, I cannot escape the conclusion that the contract is violative of the statute. The controlling fact seems to me to be that the Quaker Oats Company, already through its domination of the major part of the entire output, in this advantageous position, took over the property of its largest competitor, whereupon the latter with its remaining mills ceased longer to be a factor in the oatmeal trade. That as the result of this acquisition the Quaker Oats Company did or could materially control or affect the raw product, the oats, is not reasonable to suppose; that the competition in the bulk rolled oats has not been appreciably affected since the contract may be said to be fairly established by the^ evidence. That by the added power of the Quaker Company, through its absorption of this its most potent competitor, it is in greatly improved position to seriously affect the trade through price manipulation of such goods, or other action easily possible with such power, is to me self-evident.
Although, as it was testified, $50,000, might build á fair-sized mill, the existence of this single powerful unit would be a strong deterrent to such an undertaking. But that the transaction in question did remove the strong competition theretofore existing between the Quaker Oats and Mother’s Oats brands, in each of which the respective companies had theretofore built up a vast trade totaling far more than that of all others combined, is but another way of stating that-the contract in question was consummated, for this was its necessary as well as its intended effect.
It is not tenable to say that in this transfer of the trade-marks, brands, and good will, rather than of tangible property, there was manifested no, intent or tendency to monopolize trade in the product. The trade-marks and brands' constitute the effective instrumentalities whereby a great trade was built up, and that there was real competition in -these advertised goods would appear, not alone in the very nature of things, but in the fact that, as a probable result, the Quaker Oats brand output had somewhat declined, while the Mother’s Oats was rapidly on the increase. True, the price of Quaker Oats package goods has not been increased, but this is not essential to the establishment of the existence of monopoly or of undue restraint of trade. If the Quaker concern has thereby better intrenched and secured itself against successful competitive attack, the tendency to trade restraint *507and monopoly is apparent, and the law may be thereby, and in my judgment, under the circumstances shown, has been, transgressed. If the competition in package goods had been maintained, the Quaker might have lowered its prices, or done something else disadvantageous to itself and of advantage to the buying public, in order to maintain its commercial status. To say that people may buy the unadvertised or bulk product, which is equally good, at much lower prices, seems to me to be beside the question.’ It is not for the courts to tell the people what they may or shall buy.
If these companies have exploited their respective brands so successfully that the public by the hundreds of thousands have been induced to believe that they possess superior merit, and thereby the companies respectively have established this vast package trade in these goods, if then in some way they combine, or one sells to the other, for the advantage thereby accruing, and in such manner they unduly restrict trade and promote monopoly in these products, they ought not, in defense of such transaction, be heard to say that, if the public do not like it, they may get goods of other brands or go without any brand at all. That the great trade has been established in these particular goods through advertising does not in my judgment affect the proposition. The fact that through judicious and successful advertising two concerns each secure a vast trade, equal or greater than the other combined similar trade of the country, does not of itself authorize the two to unite to eliminate the competition between them. It is to the credit of the Quaker Company that it does not appear to have resorted to those coercive and terrorizing tactics for increasing or maintaining its trade, so often found to be the case where a business establishment has obtained the comparative ascendency and power of this one; but in my judgment this does not obviate the apparent undue restraint or attempted undue restraint of trade, which the entering into this contract seems to me to manifest.
There was for the defendants evidence to the effect that the real thing which was the subject of the purchase was the brands, trademarks and good will of the Western in the oatmeal trade, and that the tangible property was taken only as an incident, because deemed essential to secure title to the intangibles, such as brands, trade-marks, and good will. If for this $1,000,000 or so of consideration, the Quaker Oats had obtained oats and machinery and real estate and other facilities for maintaining and enlarging its business and plant, things which might be purchased elsewhere, it might with better grace maintain that there was nothing in the transaction that tended to destroy competition and create monopoly. What did it buy for its $1,000,-€00 of investment? It is clear to me that it purchased the business extinction in the oat product trade, and the commercial status therein, of its greatest and most powerful rival, thus strengthening the purchaser’s already strong grasp upon the entire industry, through the added force of this very considerable unit, thenceforth joined with its own. To my mind, this of itself, quite regardless of the manner in which this enlarged power has been exercised in the interim between the making of the contract and the filing of the bill, manifests in the *508contract such an undue restraint of the interstate trade and commerce thereby affected, and such a purpose and tendency to monopolize, as comes fairly within the condemnation of the statute, a statute which denounces, not commercial growth, nor strength, nor power, nor proportion, but only combination or device, by whatever form they may appear, calculated and tending unduly to restrain interstate trade and commerce, or to eliminate competition, and, in the words of - the statute, “to monopolize any part of the trade or commerce among the several states.” < 1
Entertaining these views, I believe there should be a decree for the government, the precise scope of which, under the circumstances, it is hardly necessary for me to discuss.