HP 27G>? mi CORNELL UNIVERSITY LIBRARY GIFT OF A. A. Young Cornell University Library HD2769.F2 A5 1914 International Harvester Company of New J olin 3 1924 030 065 951 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030065951 IN THE ,, Supreme Court of the United States. ■ -" OCTOBBB TEBM, 1914. *— *. I J No. 757 INTERNATIONAL HARVESTER COMPANY OP NEW JERSEY, and others, Appellants, vs. THE UNITED STATES OF AMERICA, Appellee. APPEAL FROM THE DISTRICT COURT OP THE UNITED STATES ^ FOE THE DISTRICT OF MINNESOTA. BRIEF FOR APPELLANTS. John P. Wilson,/ Edgar A. Bancroft, Solicitors for Appellants. Frank B. J£ellogg, William D. McHugh, Philip S. Post, Of Counsel. BUHTMORP-WARMH PRINTI»-0 COMPANY, CHICAflO. Ho A.Z^^olaJS* SUBJECT INDEX. STATEMENT : History of the case 1-15 The Petition 3 The Answer 10 The Issues of Fact 11 The Opinions of the Circuit Judges 12 Statement of facts 16-40 Domestic harvesting machine business in 1902 16 State of the foreign trade in 1902 17 The need of large capital 20 Negotiations with J. P. Morgan & Co 21 The organization of the International Har- no vester Company *° Capital stock paid in full 24 Development of the International's business. . 25 Growth in foreign trade and "new lines" 25 Business methods and practices of the Interna- tional Company 29 Competitive conditions in the implement trade 30 Price of harvesting machines 32 International has not made excessive profits . . 32 No control through patents 35 Purchases of additional harvester plants 35 No monopoly practices, prices or profits 39 Eeeoes assigned and belied upon by appellants. . 40 11 ARGUMENT : I. The Law Applicable to this Case 42-59 This is a proceeding in equity to protect the public against present and future injuries . . 42 Basis of the District Court's opinion 43 The Sherman Law condemns not size but mo- nopolistic practices and wrongs to the public 45 Standard Oil Co. v. U. S., 221 U. S., 1, 73. . 45 U. S. v. Standard Oil Co., 173 Fed., 183. . . 45 U. S. v. The American Tobacco Co., 221 U. S., 106, 163, 165, 181-3 48 Nash v. United States, 229 U. S., 373, 376. . 50 U. S. v. St. Louis Terminal, 224 U. S., 383, 401 50 U. S. v. Reading Co., 226 U. S., 324, 369, 370 51 IT. S. v. Eeading Co., 183 Fed. Rep., 427, 456 52 IT. S. v. Pacific & Arctic Railway & Navi- gation Co., 228 IT. S., 87, 104 53 Attorney- General Wickersham's Article on the "Enforcement of the Anti-Trust Law" in "The Century," Feb., 1912, p. 618 53 Wm. H. Taft on "The Anti-Trust Act and the Supreme Court," pp. 112, 126-7 54 Consolidations of business corporations not con- trary to public policy 56 The test of monopoly 57 Definition of monopoly given by Senators Edmunds and Hoar, Cong. Rec. 51st Cong., 1st Sess., p. 3151 58 Argument of Attorney-General in Standard Oil Case 58 Mr. Justice Holmes in Northern Securities Case, 193 IT. S., 405 59 m II. The International Harvester Company was ORGANIZED FOR A LEGITIMATE BUSINESS PURPOSE. . . . 59-77 Methods of handling the harvester business in the United States prior to 1902 60 Foreign trade in American harvesting machin- ery ; its condition and possibilities in 1902 . . 62 Situation of McCormick Company in 1902 65 Purpose of formation of International Company 66 The test of time and conduct 68 The development of the foreign trade and "new lines" 70 Purposes proven by results 75 HI. No MONOPOLIZATION OR UNDUE RESTRAINT IS SHOWN ; NO MONOPOLY POWER EXISTS ; TRADE IN HAR- VESTING MACHINES IS FREE AND OPEN 77-151 A. The record of the International's business conduct for ten yeabs prior to 1913 disproves the Government's charge that it has monopo- lized DOMESTIC TRADE IN HARVESTING MACHINES AND OTHER FARM IMPLEMENTS 77 Unproven charges of the Petition 77 The transitional period— 1903 and 1904 78 The Government's 22 dealer witnesses as to coercion 80 823 local implement dealers testified for the defendants 82 No coercion attempted or possible 84 Typical testimony of implement dealers 85-97 W. J. Howard, Shaller, la 85 W. E. English, Huron, Kas 87 J. W. Patterson, Kearney, Neb 89 Fred Bott, Spring-field, Minn 92 C. J. Bach, Hurley, S. D 94 George H. Bingenheimer, Mandan, N. D. . . 95 William Belcher, York, Neb 96 IV B. The International, has no power to monopo^ LIZE OR UNDULY RESTRAIN TRADE IN HARVESTING MACHINES OR OTHER AGRICULTURAL, IMPLEMENTS 97 1. The International's percentage of harvester business has constantly decreased and its competitors ' shares increased 98 2. Expansion in "new lines" not secured by coercion 101 Comparison of harvester and "new lines" sales 102 3. The International's competitors testified that coercion of the dealers is impossible 103 Testimony of competitors 104 Testimony of officers of dealers' associa- tions 106 4. 803 implement dealers testified that the Inter- national had not attempted and had not the power to coerce them 108 5. Testimony of dealers as to the freedom with which competitors secured trade in the har- vester lines 114 6. Competitors testified that they found it no impediment to their business that the dealers who handled their goods often handled the International's harvesting machines 118 Magnitude is not monopoly 124 No monopoly prices, profits or dividends 124 Prices not increased ; machines improved . . . 125 The testimony of the farmers — the consumers 127 Government's objection to farmers' evi- dence as to prices and improvements . . 128 Testimony of 228 farmers 129-134 Frank Zahner, Modale, la 129 I. F. Monroe, Hastings, Neb 129 V John C. Pfeister, Sutton, Neb 130 George Swanson, Crawford, Neb 131 H. H. Bailey, New Hampton, Ta 132 T. T. Johnson, Whalan, Minn 133 William McLaren, McCanna, N. D. . . . 133 No excessive profits 134 C. Neithee in hakvesting machines nor in other AGRICULTURAL. IMPLEMENTS WAS TRADE MONOPO- LIZED OR RESTRAINED, OR THREATENED WITH RE- STRAINT, BY DEFENDANTS WHEN THE PETITION WAS FILED. The FIELD IS OPEN AND COMPETITION IS STRONG AND ACTIVE 136 Government's evidence on competition in har- vesting machines 136 Acme Harvesting Machine Company 136 Deere & Company 137 Walter A. Wood Company 138 Emerson-Brantingham Company 138 Johnston Harvester Company 139 Independent Harvester Company 139 J. I. Case Threshing Machine Company. . . 139 Defendants' testimony of 76 competitors as to competitive conditions 140 Moline Plow Company 140 Deere & Company 143 Massey-Harris Company 143 Johnston Harvester Company 144 Walter A. Wood Company 145 Trade not restrained ; the field is free and open 146 New competitors in the harvester business 147 Free competition present and injuries to the public absent 149 VI IV. The Disteict Coubt eeeed in decbeeing that the business and assets of the international Company should be divided into a numbek of parts op sepaeate and distinct owneeship, and also in pboviding fob the beceiveeship of all the property of the corporate defendants in case the defendants should fail to file a plan for such division within ninety days that would meet the approval of the district couet 151-164 The decree 152 The amended decree 153 Corporate changes since the filing of the peti- tion 156 The decree is not in harmony with the decisions of this court 159 Standard Oil Co. v. United States, 221 U. S., 1, 78 159 IT. S. v. St. Louis Terminal, 224 U. S., 383, 409 159 U. S. v. American Tobacco Co., 221 U. S., 106, 185 159 U. S. v. Great Lakes Towing Company, 208 Fed., 733 160 U. S. v. Hamburg-American S. S. Line, 216 Fed., 971 160 U. S. v. Keystone Watch Co., decided Jan. 2, 1915 160 U. S. v. Prince Line, Ltd., and U. S. v. American Asiatic S. S. Co., decided Feb. 8, 1915 160 The decree involves an unnecessary destruction of property 160 APPENDIX: Opinions of the District Court. Vll LIST OF CASES CITED. Page of Brief Nash v. IT. S., 229 U. S., 373, 376 50 Northern Securities Case, 193 IT. S., 405 59 Standard Oil Co. v. IT. S., 221 U. S., 1, 73, 78 45, 46, 47, 159 U. S. v. American-Asiatic S. S. Co., decided Feb. 8, 1915 160,162 U S. v. American Tobacco Co., 221 U. S., 106, 163, 165, 181-3, 185 48, 49, 50, 159 U. S. v. Great Lakes Towing Co., 208 Fed., 733. .. . 160 U. S. v. Hamburg- American S. S. Line, 216 Fed., 971 160 U. S. v. International Harvester Co., 214 Fed., 987 . . 2 U. S. v. Keystone Watch Co., decided Jan. 2, 1915 . . 160 U. S. Pacific & Arctic Ry. & Navigation Co., 228 U. S., 87, 104 53 U. S. v. Prince Line, Ltd., decided Feb. 8, 1915 .... 160 IT. S. v. Reading Co., 183 Fed., 427, 456 52 U. S. v. Reading Co., 226 U. S., 324, 369, 370 51, 52 U. S. v. Standard Oil Co, 173 Fed., 183 45 IT. S. v. St. Louis Terminal, 224 IT. S., 383, 401, 409 50, 159 "The Enforcement of the Anti-Trust Law," by At- torney-General Wickersham in "The Century" for February, 1912, p. 618 53 "The Anti-Trust Act and the Supreme Court," by Ex-President William H Taft (pp. 112, 126, 127) .54, 55 Cong. Rec, 51st Congress, First Sess., p. 3151 58 IN THE Supreme Court of the United States. Octobeb Teem, 1914. No. 767 INTERNATIONAL HARVESTER COMPANY OF NEW JERSEY, and othees, Appellants, vs. THE UNITED STATES OF AMERICA, Appellee. APPEAL FBOM THE DISTBICT COOBT OP THE UNITED STATES FOB THE DISTBICT OP MINNESOTA. STATEMENT. HISTOKY OF THE CASE. On April 30, 1912, the United States filed its petition in equity in the District Court of the United States for the District of Minnesota against the International Harvester Company, its subsidiary companies, and the members of its board of directors, charging that the International Company was a combination in restraint of interstate trade and commerce, and pray- ing for a dissolution of the company and for other re- lief. The defendants answered denying all charges of un- lawful conduct and that any action of the defendants had operated to restrain interstate commerce or to injure the public. Evidence was taken before a commissioner— the Government calling 83 witnesses and the defendants, 1,146 ; and in November, 1913, the case was heard at St. Paul by Circuit Judges Sanborn, Hook and Smith. On August 12, 1914, three opinions were filed, Judge Smith rendering the opinion of the court, directing the entry of a decree adverse to the company, Judge Hook filing a concurring opinion, and Judge Sanborn a dis- senting opinion. (214 Fed., 987 ; see Appendix hereto.) These opinions substantially agree in their findings of the facts as disclosed by the record, 1 and differ mainly with reference to the application of the law to the facts. The majority opinion bases the adverse decision upon the elimination of competition in 1902 between the five harvesting machine companies whose properties were then acquired by the International Harvester Company and upon its large percentage of the harvester business ; while Judge Sanborn bases his dissent on the fact that there were no monopolization or undue restraint of trade or illegal practices or unfair methods of business existing at the date of the filing of the petition nor for at least seven years prior thereto. 'The printed record in this case is in two volumes : Volume I con- tains the pleadings, and the evidence for the Petitioner, pp. 1-750; Volume II contains the evidence for the Defendants, pp. 751-1452. Certain maps and printed documents are certified therewith as origi- nal exhibits. THE PETITION. The Petition states That the object of this suit is to remove the restraints which the defendants have imposed upon trade and com- merce in agricultural machinery and implements and more particularly upon commerce among the several states in harvesting machinery and binder twine (I, 4) ; That prior to 1902 there were ten or twelve estab- lishments for the manufacture and sale of harvesting im- plements in successful operation in the United States, which sold and distributed their products throughout the United States, in active and open competition; That before 1902 the aggregate annual output of five of said separate concerns amounted to over eighty-five per cent, of all the harvesting machinery and more than fifty per cent, of all the binder twine produced and sold in the United States. These concerns were the McCor- mick, the Deering, the Piano, the Warder, Bushnell & G-lessner and the Milwaukee Companies, all of whose plants were acquired by the International Company. That each of the five had established a successful, profit- able and expanding business, selling and shipping their machines generally throughout the United States ; That in July, 1902, defendants Cyrus H. McCormick, Charles Deering, John J. Glessner, William H. Jones, George W. Perkins and others, believing combination would yield large profits, determined to bring it about, and to destroy the existing competition among the five concerns, and, through combinations and agreements in restraint of trade, to exclude all others, and to secure control of and monopolize interstate trade and commerce in harvesting machines and twine ; That they further determined that when they had ac- complished the purpose just mentioned, they would ex- pand into other classes of agricultural machinery, and finally monopolize interstate trade and commerce in agri- cultural machinery of all kinds, their purpose being to use the power obtained by a monopoly of trade in har- vesting machines in such a way as to acquire a similar monopoly in all other classes of agricultural implements ; That the combination was to take the form of a cor- poration to be created under the law of such state as per- mitted to its corporations the widest powers, to which corporation the five concerns named above were to transfer all their property and business as going con- cerns; the individuals who owned and controlled these concerns were to receive as the consideration for such transfer shares of the capital stock of the new cor- poration and no other consideration. Thereafter this corporation was to carry on as one business the business of the five concerns which had theretofore been com- peting (1,6). That the International Company was incorporated as an instrumentality to effect the said unlawful purposes of defendants; That the total stock issued was $120,000,000, of which $53,400,000 was apportioned among the owners of the McCormick, Deering, Warder, Bushnell & Glessner, and Piano Companies, in consideration of the transfer by each company of all its property and good will, ex- cept bills and accounts receivable; Stock in the amount of $3,148,196.66 was issued to J. P. Morgan & Company, of New York, who had paid that amount in cash to secure the property of the Mil- waukee Harvester Company, which was conveyed to the International Company at the date of its organization; Stock in the amount of $3,451,803.34 was issued to J. P. Morgan & Company for services rendered and for legal expenses; Stock in the amount of $4.0,000,000 was appor- tioned among the owners of the McCormick, Deering, Piano, and Warder, Bushnell & Glessner Companies, in consideration of the assignment by those companies to the purchasing company of that amount of bills and ac- counts receivable, guaranteed by the vendors, or for cash; Stock in the amount of $20,000,000 was issued at par for cash, the subscribers being in large part owners of or persons interested in the four concerns above named; That all the stock of the International Company was held by George W. Perkins, Cyrus H. McCormick and Charles Deering as voting trustees under an agreement dated August 13, 1902, a copy of which is attached to the petition, and the stock was issued to the owners thereof as above stated in the form of stock trust certificates, issued by said voting trustees ; That defendant, Cyrus H. McCormick, former presi- dent and director of the McCormick Company, has been president ; that defendant Charles Deering, former mem- ber of the Deering Company, has been chairman of the Board of Directors; that defendants, James Deering, former member of the Deering Company, Harold F. Mc- Cormick, former vice-president of the McCormick Com- pany, John J. Glessner, former vice-president of the Warder, Bushnell & Glessner Company, and William H. Jones, former president of the Piano Company, have all been vice-presidents ; that defendants, Eichard F. Howe, formerly a member of the Deering Company, and said Harold F. McCormick, have been respectively secretary and treasurer of the International Company since its organization. All the officers above named, and also Stanley McCormick, former director of, and Cyrus Bentley, former attorney for, the McCormick Company, and William Deering, former member of the Deering Company, became directors of the International Com- pany upon its organization ; That the International Company, having acquired the, five old concerns, began and has continued to oper- ate and control all their affairs in concert and agree- ment, and it then became, and with added ac- quisitions has ever since been, itself a combination in restraint of trade and commerce between the states; That thereafter the total output of the five concerns was sold at the same price; that is to say, one organization thereafter sold and distributed at the same prices all binders, mowers, etc., which prices competition had pre- viously controlled, and thereby interstate trade and com- merce in harvesting machinery and twine was hindered and restrained; and that the defendants have ever since the organization of the International Company been en- gaged in maintaining and perpetuating said illegal com- bination and monopoly in harvesting machines, and with expanding purpose to dominate allied industries have been unlawfully attempting to enlarge the monopoly then acquired by them and to monopolize interstate trade and commerce in agricultural machinery, tools and implements of all kinds ; (I, 10) That early in the year 1903 the International Company acquired the plants and business of the following com- panies : D. M. Osborne & Company, of Auburn, New York ; Aultman-Miller Company, of Akron, Ohio ; Minnie Harvester Company, at St. Paul, Minnesota, and the Key- stone Company, of Sterling, Illinois; all of which com- panies were engaged in the manufacture and sale of harvesting machinery in interstate commerce in compe- tition with each other and with the International Com- pany (I, 13-16) ; and that Company after acquiring said plants operated the same for a period of about two years as independent companies to break down competition and secure the benefit of public sentiment against com- bination, after which time the International Company ceased to manufacture binders and mowers at the plants of the Aultman-Miller Company, the Minnie Harvester Company and the Keystone Company, and used said plants for the manufacture of new lines. The Petition further charges that ever since the or- ganization of the International Company the defendants have been carrying out their unlawful purpose, and to that end have : (a) Monopolized local implement dealers during the years 1902 to 1905, inclusive, through exclusive agency contracts and by limiting each dealer to one line of its machines ; (b) Exercised a like control and domination over dealers in 1906 and subsequent years, through contracts terminable at will; (c) Compelled dealers to handle their new lines as a condition of continuing their agencies for harvester lines ; (d) Discredited competitors by statements affecting their machines or their credit; (e) Eeduced the price of machines in special local- ities below cost of production to destroy competitors ; (f) Systematically bought up patents and all new inventions in harvesting machines to perpetuate the monopoly ; (g) Used a subsidiary company, International Har- vester Company of America, with small capital, for the sale and distribution of the entire output of the Interna- tional Company, so as to enable the latter company to do 8 business in states from which it would otherwise be barred by reason of its large capitalization ; (h) Acquired factories for new lines of agricultural implements ; (i) Organized subsidiary companies which own coal lands, iron mines, timber lands and own and operate blast furnaces and steel and rolling mills and saw mills as means to eliminate competition and to aid in carry- ing out their unlawful purposes; (j) Acquired switching railways connecting with their plants to secure unfair division of rates on traffic (I, 10-18) : With the result that at the date of the filing of the pe- tition the defendants' power makes effective competi- tion in the harvester lines impossible, and in the new lines nearly so, and that the defendants through the power acquired by their monopoly in harvesting ma- chinery "have been enabled to advance, and have ad- vanced the prices of harvesting implements," "to the grave injury of the farmer and the general public," "and unless prevented and restrained their complete unchal- lenged dominion of every branch of trade and commerce in agricultural implements of all kinds may be confidently expected at an early date." (I, 22.) That the International Company is now manufacturing and selling all classes of tillage implements, seeding im- plements, harvesting machines, threshing machinery, and wagons, manure spreaders, gasoline engines, cream sep- arators, auto-buggies, automobiles, tractors, cultivators, drills, tedders, seeders, hay loaders, hay presses, sweep rakes, stackers, trucks, etc., all in pursuance of the un- lawful purpose to monopolize trade hereinbefore de- scribed. That at least 90 per cent, of the harvesters or grain binders, and 75 per cent, of the mowers and 9 over 50 per cent, of the binder twine annually produced and sold in the United States are the products of the International Harvester Company, and are all sold through its subsidiary company, the International Har- vester Company of America; that there are only three or four manufacturers of harvesting machinery in the United States other than the International Company and in comparison with it they are small, and as their busi- ness does not embrace the entire United States, in many sections of the country the International has a complete monopoly of harvesting machinery. In other lines of agricultural implements the percentage controlled by it is less, but the varieties and relative quantities of these have increased rapidly, so that, considering agricultural implements of every kind, other than harvesting lines, its output amounts to over 30 per cent, of the whole. (I, 22.) Petitioner prays : I. That the combination hereinbefore described, in and of itself, as well as each and all of the elements composing it, whether corporate or individual, whether considered collectively or separately, be decreed to be in restraint of interstate trade and an attempt to monopo- lize and a monopolization thereof within the first and second sections of the act of Congress of July 2, 1890. II. That the court adjudge the International Company to be a combination in restraint of interstate trade and commerce, and an attempt to monopolize and a monopol- ization of harvesting and agricultural machinery, and that the court direct a dissolution of said combination. III. That the International Company be adjudged an unlawful instrumentality operated and maintained by defendants solely for the purpose of carrying into effect 10 the illegal purposes of said contracts, combinations, etc. ; and that it be decreed to be in restraint of trade and commerce among the states and an attempt to monopolize and a monopolization thereof. IV. That the court by way of injunction restrain the movement of the products of the International Company and of the America Company in the channels of inter- state commerce, or that receivers be appointed to take possession of the property of said combinations, and wind up the same, and otherwise take such course in re- gard thereto as will bring about conditions in trade and commerce among the states in harmony with the law. V. That the holding of stock by the International Company in the other corporation defendants be declared illegal, and that it be enjoined from continuing to hold such stocks. VI. That the defendants be enjoined from continu- ing to carry out the purposes of the above described con- tracts, etc., and be required to desist and withdraw from all connection with the same ; and for other, further and general relief. (I, 22-23.) THE ANSWEB. The Answer avers that the International Harvester Company was organized for the lawful purpose of devel- oping foreign trade in harvesting machinery, and to ex- tend and promote trade in agricultural implements in the United States by enlarging the scope of the business so as to include other lines and thus furnish continuous em- ployment for the manufacturing and selling organiza- tions. It denies specifically all wrongful or oppressive acts or methods charged in the Petition, or that any of the acts 11 done by the defendants were done for the purpose of elim- inating competition or restraining the freedom of trade in harvesting machines or other agricultural implements, or that they have restrained, or attempted to restrain, such trade, or that there exists any restraint upon the freedom of trade or competition in harvesting machines or in other agricultural implements. (I, 37-71.) THE ISSUES OP FACT. The main issues of fact are (a) Whether the International Harvester Com- pany was organized for lawful business purposes ; (b) Whether it has used unlawful and oppressive, methods and practices in the conduct of its business ; and (c) Whether free competitive conditions in the har- vesting machine and agricultural implement trade in the United States existed at the date of the filing of the Peti- tion in this cause. The Government contends that the International Company was organized for the purpose of cre- ating a monopoly in the agricultural implement trade in the United States; that it had used continuously, up to the date of the filing of the petition, the usual monopolis- tic and oppressive methods in the conduct of its business with the result that it possesses to-day a monopoly in harvesting machines in the United States, and has ren- dered effective competition in other lines nearly impos- sible, and has through its monopoly advanced prices to the grave injury of the farmer and of the general public. The defendants contend that the International Company was organized for the purpose of secur- ing the capital and men necessary adequately to de- velop the foreign business in harvesting machines and to 12 place the domestic business upon a sound economic basis by manufacturing new lines of agricultural imple- ments that would give an all-year-round employment; that its business has been conducted in accord- ance with the strictest requirements of the law, free from any monopolistic or oppressive methods or practices, with the result that better harvesting machines have been furnished to the farmers in the United States at the old prices, notwithstanding great advances in the cost of labor and materials, while it has increased the annual foreign business in its lines of agricultural implements from $10,000,000 in 1902 to $50,000,000 in 1912 ; that the farmer and the public at home have been benefited, not injured ; that not a single competitor has been forced to the wall or his trade diminished; that new, strong and vigorous competitors in harvesting machines have en- tered the field, and others are preparing to do so; that the evidence in the record demonstrates that at the date of the filing of the Petition absolute freedom in the trade and in competitive conditions existed in the harvester lines, as well as in all other kinds of agricultural imple- ments. THE OPLNTONS OF THE CIRCUIT JUDGES. None of the judges in his opinion passes upon the issue raised as to the purpose or object for which the International Company was organized. All three judges find the issue as to the methods and practices of the International Company in the conduct of its business, in favor of the company. The majority opinion bases the adverse decision upon its find- ing that the International Company was and is a viola- tion of the anti-trust law, by reason of the elimination in 1902 of the competition between the companies whose plants it then acquired. 13 Judge Sanboen bases his dissenting opinion upon the finding that at the date of the filing of the petition, and for at least seven years prior thereto, free competitive conditions existed in the United States in the trade in harvesting and other agricultural machines. The following quotations from the opinions make clear the question upon which Judge Sanborn dissented, and also the main question now before this Court for decision : Judge Smith in his opinion says : "We think it may be laid down as a general rule that if companies could not make a legal contract as to prices or as to collateral services they could not legally unite, and as the companies named did in effect unite, the sole question (is) as to whether they could have agreed on prices and what collat- eral services they would render when their companies were all prosperous and they jointly controlled eighty to eighty-five per cent, of the business in that line in the United States. We think they could not have made such an agreement" (I, 89). And again: "While the evidence shows some instances of at- tempted oppression of the American trade by the International and the America companies, such cases are sporadic and in general their treatment of their smaller competitors has been fair and just and if the International and America companies were not in themselves unlawful there is nothing in the his- tory of the expanding of the lines of manufacture so as to make an all the year around business that could be condemned. "The real question is whether the combination of the companies was illegal in the beginning or be- came so with the additions subsequently made" (I, 82). And again: "If the parties in controversy have eighty or eighty-five per cent, of the American business, and by the combination of the companies all competition is eliminated between the constituent parts of the 14 combination, then it is in restraint of trade within the meaning of the statute under all of the decisions." (I, 90). Judge Hook in his opinion says : "I concur in the foregoing opinion. The Inter- national Harvester Company is not the result of the normal growth of the fair enterprise of an indi- vidual, a partnership or a corporation. On the con- trary it was created by combining five great com- peting companies which controlled more than eighty per cent, of the trade in necessary farm implements, and it still maintains a substantial dominance. That is the controlling fact; all else is detail." # # # * * "It is but just, however, to say and to make it plain, that in the main the business conduct of the company towards its competitors and the public has been honorable, clean and fair. Some petty dis- honesties were tracked in at the start, mostly by subordinates who had been in the service of the old companies, but they were soon gotten rid of. In this connection it should also be said that specific charges of misconduct were made in the government's peti- tion which found no warrant whatever in the proof. They were of such a character and there was so much of them, apparently without foundation, that the case is exceptional in that particular" (I, 91). Judge Sanborn in his dissenting opinion says: "It is the opinion of the majority of the court that the property and the foreign and interstate busi- ness of the International Company must be divided into at least three substantially equal and independ- ent parts, or placed in the hands of a receiver under a decree of this court because in 1902 five companies theretofore engaged in the manufacture and sale of harvesting machinery, controlling about 85 per cent. of the interstate and foreign trade therein, combined in the International Company, ceased and have not since resumed competition among themselves. "With profound respect for their judgment I find myself forced to dissent from it (1) because it seems to me to give insufficient consideration to the trade 15 conduct of the defendants at the time this suit was commenced in April, 1912, and for seven years be- fore that date, (2) because the crucial issue in this case is not whether or not in 1902 or 1903 the de- fendants or their predecessors by reason of the sup- pression of competition between five or more com- panies made a combination or an attempted monop- oly in restraint of trade, but it is whether or not ten years afterwards, in 1912, when the complaint in this suit was filed, the International Company and the other defendants were then unduly or unrea- sonably restraining or monopolizing interstate or foreign trade or threatening so to do and (3) be- cause the evidence in this case has forced upon my mind the deep and abiding conviction that for at least seven years before the commencement of this suit the defendants had not been and then were not either so doing or threatening so to do" (I, 92). 16 STATEMENT OF FACTS. THE DOMESTIC HARVESTING MACHINE BUSINESS IN 1903. All harvesting machines — the mower, the reaper, the header and the self-binder, — are American inventions, and were first developed and used here. The reaper was developed in 1831, and came into use in the early forties, and the mower prior thereto. Then, in 1864, came the Marsh harvester — a reaper with a platform upon which two men could stand and bind the grain as it was cut. This was followed, in 1875, with the wire binder, which automatically made and tied the bun- dles, and, in 1880, by the automatic twine binder, which used twine instead of wire. (II, 1189; II, 1049.) The great development of the harvesting machinery business in the United States, was coincident with the development of its agricultural resources. As the pio- neers settled upon the western lands, a constantly in- creasing market for harvesting machinery was presented. These pioneers, as a rule, were without means, and it was essential that harvesting machinery be sold to them upon credit and terms of easy payment. The farmers were not skilled mechanics and the manufacturer of har- vesting machinery was compelled to provide available experts to aid the farmers and thus insure the successful operation of the machine. For these reasons the busi- ness of manufacturing and selling harvesting machinery in the United States has required a very large amount of capital in proportion to the volume of business. (II, 1355-6.) The sales of harvesting machinery were, of necessity, made during the few months preceding the harvest of 17 each year ; and the business was a seasonal one. The eco- nomic conduct of the harvesting machine business required such an extension of the manufacturer's business as would include a sufficient variety of agri- cultural implements, used at different seasons of the year, to sustain an all year around selling organization. Such an extension of business involved great demands for ad- ditional capital, and in 1902 all the companies had their capital and credit fully utilized. In 1902 the domestic trade in harvesting machines had reached its maximum. There had been no growth in the number of binders, reapers and mowers sold annually in the United States during the five years immediately preceding 1902, and the number of binders and mowers sold has never been as great in any year subsequent to 1902, as the average annual sales of the five years ending with the year 1902. There could be no expectation of further growth in the sale of harvesting machines for use in the United States by reason of causes permanent in their nature. There remained no new territories to be settled. The area upon which small grains were grown had become practically stationary. All future growth and development in the business must, therefore, be in foreign fields, notably in Canada, Eussia, the Ar- gentine and Australia. Hence the controlling impor- tance of the foreign field to the American manufacturers of harvesting machinery. (II, 1371.) STATE OP FOREIGN TRADE IN 1902. The American manufacturers of harvesting machines, soon after the invention of the reaper, began the ex- portation of the reaper and mower. After the self-binder came into use here, in 1881, its introduction abroad began in a small way. But, generally speaking, the use of ma- 18 chines in harvesting crops was practically unknown in foreign countries. In Europe special efforts had been made to explore the field and obtain reports on the pos- sibilities of developing a trade in harvesting ma- chinery there and in other foreign countries. After much effort and demonstration an interest in American har- vesting machinery was aroused on the part of intelligent and progressive landed proprietors. A marked increase in the foreign trade followed. The sales, however, were through jobbers, who bought the machines for cash on delivery at New York, and sold them almost exclu- sively to the large landed proprietors, who likewise paid cash for them. By 1902 the use of these machines upon large estates in Europe had become general. Upon such estates experienced mechanics were constantly employed, who could understand and operate the machines. (II, 1246.) The Paris Exposition of 1900 brought to its exhibit of American harvesting machines many men inter- ested in the agricultural development of various coun- tries. These men confirmed the reports, made to the manufacturers by their foreign representatives, of the great possibilities of the foreign trade in harvesting machinery if the sales of such machines could be ex- tended to the mass of the farmers. (II, 1266.) It was recognized, however, that to so extend the sale of machines, the manufacturers must abandon the system of sales through jobbers and adopt the method of selling directly to the farmer through an American organization. As the farmers, especially of Eastern Eu- rope and Siberia, were uneducated, entirely unused to harvesting machinery, and wedded to the immemorial customs of gathering the harvest by hand, the task of educating them to appreciate and use American machines 19 necessarily involved great labor and expense. Moreover, as these farmers were poor, sales to them must be upon long credits. (II, 1246, 1265-7.) Again, the machines manufactured in America had to be shipped great distances to foreign distributing points long enough before the harvesting season to permit of their being sold and supplied for the harvest. Branch houses carrying large stocks of machines had to be estab- lished and maintained at these distant distributing points. An organization of experts able to instruct and aid the farmers in the use of the machines, after they were sold, was likewise essential; and so was the carrying of stocks of repair parts at many places so as to be easily deliv- ered to each farmer in case of a breakdown. (II, 1246, 1267.) Another vital factor was the tariff laws of foreign coun- tries. (H, 1249.) Protective tariff laws affecting the agricultural imple- ment trade already existed in Sweden, Canada, France, Germany and Eussia. These tariff laws were based upon the policy of compelling the domestic manufacture of at least a part of the country's supply of agricultural imple- ments. This policy was likely to be progressively enforced as the business increased. No investments in the develop- ment of this foreign trade could or would be safe unless the American manufacturer was prepared, as necessity should arise, to acquire and maintain foreign manufac- turing plants to supplement and protect his export busi- ness. The European policy of protecting and develop- ing home industries in this fundamental branch of busi- ness was too strongly held to be ignored or antagonized. The business in each of these several countries was not sufficient to justify a separate manufacturing plant for 20 each of the American companies, or even for each of the larger ones. The International Company, by reason of this tariff policy, has been obliged to invest large sums of money in foreign plants in Canada, Sweden, France, Germany and Eussia, and the end has not yet been reached. The possibility of European wars was also recognized as a risk incident to the foreign trade. (II, 1252.) These features required an extraordinary investment of capital to develop and carry on the foreign business. For example : In 1912 the proportion of selling invest- ment to gross sales in the United States was 64.9 per cent., but in the foreign trade it was 131.6 per cent. (II, 1250-1.) And yet there is no claim in this case that harvesting machines are sold cheaper abroad than at home, or that the profits of the domestic business were greater than the foreign, or have been used to exploit the latter. THE WEED OF LARGE CAPITAL. The two prime conditions which the America manu- facturer had to face in 1902 were (1) the necessity of ex- tending his lines of manufacture so as to furnish employ- ment to the selling organization during the entire year; and (2) to provide for the adequate development of the foreign business in which alone he could look for future growth. The solution of each of these problems involved a vast increase in the capital invested. All the companies in 1902 had their capital and credit fully utilized. In 1899, 1900 and 1901 the McCormick 21 Company, the strongest of all, had paid no dividends, and during the years 1898 to 1902 its annual borrowings increased from $1,100,000 to $11,000,000, and the limit of its borrowing capacity had been reached. (II, 1270.) It was the situation above outlined that led to the organization of the International Harvester Company. NEGOTIATIONS WITH J. P. MORGAN AND COMPANY. In June, 1902, Cyrus H. McCormick, President of the McCormick Harvesting Machine Company, went to New York to enlist the services of J. P- Morgan & Company to secure the additional capital needed by his company. He presented the situation, domestic and foreign, to Mr. George W. Perkins, one of the active partners of the firm. For many years Mr. Perkins had been thoroughly familiar with the western portion of the United States and its agricultural conditions. As vice president of the New York Life Insurance Company he had also traveled year after year throughout Europe, establishing and organizing the foreign business of that company. He thus was familiar with agricultural conditions in European countries, and had been impressed by the primitive methods which almost universally prevailed there in the harvesting of crops. He advised Mr. Mc- Cormick that the situation could not be adequately met through tbe furnishing of additional capital to the Mc- Cormick Company. He was of opinion that the work of rapidly and thoroughly developing the foreign trade de- manded such vast capital and credit and such a large force of trained men that it was impracticable to accom- plish it through the expansion of any one existing com- pany. Canadian and English manufacturers were already well advanced in the race for the foreign market, and it 22 was essential, in his opinion, that a large, new organiza- tion be at once created if the American machines were to occupy the field, and that the work should he rapidly and vigorously pushed. (II, 1273-1277.) Mr. Perkins therefore determined to organize a new company which should purchase the plants and business of several companies, so that there would be sufficient resources in property, cash, credit and men to enable the new company promptly to accomplish the work. He en- tered upon this plan with vigor. He learned that the Mil- waukee Harvester Company's property could be bought and on behalf of J. P. Morgan & Company immediately paid |100,000 for an option thereon. He opened negotia- tions with the owners of the Deering, McCormick, Warder, Bushnell & Glessner, and Piano companies, all of which were large manufacturers of harvesting machines. The negotiations resulted on July 28, 1902, in the purchase of the plants and properties and business (excepting the bills receivable) of all of these companies under separate but substantially similar contracts. (I, 563-572.) These contracts were made with William C. Lane acting as a mere representative of Mr. Perkins in taking and transferring title. The contracts provided that each vendor was to receive the value of its proper- ties, business and good will as a going concern, as after- ward determined by impartial appraisals, and that the properties in the meanwhile were to be transferred to a corporation with a capital stock of $120,000,000, of which one-half should be cash working capital and the other half should be used to pay for the properties purchased. The McCormick, Deering and Piano vendors agreed to, and did, accept stock of the new company in payment of the purchase price of their properties. The Warder, Bushnell & G-lessner owners were to receive, and did re- 23 ceive, $1,000,000 of their purchase price in cash and the balance,— which proved to be $2,447,185,— in the stock of the new company. Morgan &, Company had already pur- chased the Milwaukee Company for a little over $3,000,- 000 in cash. (II, 1413; 1447.) THE ORGANIZATION OF THE INTERNATIONAL HARVESTER COMPANY. The International Harvester Company was organized August 12, 1902, with a capital of $120,000,000. Under the terms of the contracts of July 28, 1902 with the own- ers of the plants to be taken over, $60,000,000 of the stock was to be paid for in cash for working capital. Of this amount about $40,000,000 were subscribed and paid for at par by certain of the owners of the McCormick and Deering Companies, the receivables of the McCormick and Deering companies being assigned as collateral se- curity for their subscriptions until the cash was paid. The remaining $20,000,000 of stock issued for working capital was taken and paid for in cash at par by persons not before connected with the agricultural implement business.* (11,1413.) The other $60,000,000 of the capital stock was under said contracts to be used in paying for the properties and business of the five vendor companies. The ap- praisals of the properties of the McCormick, Deering, Champion and Piano companies was not completed until the summer of 1903. The seventy-four large volumes of records of such appraisals were produced upon the hear- *In the original subscription the owners of the Piano Company sub- scribed for $4,000,000 of this stock, and of The Warder, Bushnell & Glessner Company for $1,000,000 (II, 1448) ; but the Piano subscriptions were taken over and paid for by outsiders, and the "Champion" by J. P. Morgan & Company, as shown in the original list of the stockholders (II, 1413). 24 ing, and their summaries were offered in evidence by the Government. (I, 278-282; 653-684.) They show that the tangible properties of these four companies, including patents and good will, as inde- pendently appraised, amounted to $74,611,518 (I, 281); but, as there was only $60,000,000 of stock to pay for those properties and the Milwaukee plant and the serv- ices and expenses of the organizers, the four vendors finally agreed that Mr. Perkins should be the sole arbiter in scaling down the appraisals. Thereupon, the values of the patents and good will as ascertained under the con- tracts were excluded, and the appraisals were still fur- ther reduced. (II, 1296.) The $60,000,000 set apart for the purchase of proper- ties was then issued as follows: To J. P. Morgan & Company, for the Mil- waukee Harvester Company's property and business $3,148,196.66 To J. P. Morgan & Company for services and expenses in connection with the or- ganization of the company 3,451,803.34 To the McCormick, Deering, Champion and Piano companies, in payment for their properties and businesses, the balance . . 53,400,000.00 This last amount was very much below the appraise- ment of the tangible properties for which it was issued, without any allowance for patents and good will. Thus the capital of the International Harvester Com- pany not only contained no "water," but was issued one- half for cash at par, and the other half for tangible properties, amounting, in value, to much more than the par of the stock received for it, as the court's opinion finds. (I, 79.)* *"The property turned in was of greater value than the stock issued for it. This case therefore involves no question of over-capitalization." (Judge Smith's Opinion, I, 79.) 25 THE DEVELOPMENT OF THE INTERNATIONAL'S BUSINESS. The sales of machines by all the vendor companies in the foreign field in the year 1902 amounted in round numbers to $10,000,000. Since that date the foreign sales of the International Company have been, in round numbers, for the several years as follows (II, 1254) : In 1903, $12,000,000 1908, $25,000,000 1904, $15,000,000 1909, $28,000,000 1905, $17,000,000 1910, $34,000,000 1906, $20,000,000 1911, $42,000,000 1907, $24,000,000 1912, $51,000,000 In 1902 the five vendor companies were making only what are referred to constantly in the record as the "harvester lines," or the "old lines." They consist of grain binders, reapers, headers and header-binders for harvesting grain; mowers, and sulky rakes for harvesting grass ; corn binders, buskers and shredders, and shockers for harvesting corn ; the repair parts for these machines, and binder twine. (I, 612.) The "new lines," which were afterwards added, embrace hay-loaders, presses, stack- ers, side delivery and sweep rakes and tedders under the general term "hay tools"; tillage implements — cultivators, disc and tooth harrows; and planting ma- chines, — seeders and drills; and then, more important, the general farm implements, auto-wagons, cream sepa- rators, gasoline engines, feed grinders, manure spread- ers, tractors and wagons. Nearly all of the new lines were added in the years 1904 to 1908. (I, 612-13.) GROWTH IN FOREIGN TRADE AND NEW LINES. A comparison of the sales of the six vendor companies in 1902 (including the Osborne, purchased in 1903) with the sales of the International Company, for the years 26 1903-6-9 and 12, shows what the company has accom- plished in ten years, and is instructive as to the purpose of its organization (II, 1386) : 1902 1903 1906 1909 1912 New lines in United States *$1,S10,453 *$2,056,057 $10,677,992 $18,550,894 $24,945,293 Steel prod- ucts, fibre sales, etc. 400,000 946,893 5,372,035 8,3S3,008 10,533,392 Total foreign business 10,416,192 tl2,246,012 20,199,313 28,134,375 50,896,963 Total foreign sales and new lines $12,626,645 $15,248,962 $36,249,340 $55,068,277 $86,375,648 Total sales of old lines in TJ. S. t46.142.158 37.763.S58 31,339,714 31.546,270 39,062,455 Total Gross Sales $58,768,803 $53,012,S20 $67,589,054 $86,614,547 $125,438,103 It will be noted that the sales in the United States in the old or "monopolized" lines had diminished be- tween 1902 and 1912 from $46,000,000 to $39,000,000; that the new lines, including fibre and steel sales, had in- creased in round figures from $2,000,000 to $35,000,000; and that the foreign business had increased in round figures from $10,000,000 to $50,000,000. In 1902 the total business of the vendor companies, domestic and foreign, in all lines was $58,768,803. In 1912 the total sales of the International Company were $125,438,103. This increase of over $66,000,000 was entirely in the foreign business and the new lines, to develop which the Inter- national Company was organized. Thus in 1912 the busi- ness of the International in the old or so-called "monop- *This was the output of the Osborne Company in the new lines, the five original vendors having no output in the new lines and the Osborne Company being acquired by the International early in the year 1903, in part for the purpose of aiding to develop new lines of manufacture. tThis amount includes $47S,445 of the so-called new lines manu- factured by the Osborne Company, and exported. +01d lines include all grain binders, reapers, mowers, rakes corn bind- ers, buskers and shredders, with attachments and repairs, and twine. 27 olized" lines amounted to but 31 per cent, of its total business. The International's percentage of the new line busi- ness as compared with the total in the United States is so small and the manner of its development so free from criticism that the court below said: "If the International and America companies were not in themselves unlawful, there is nothing in the history of the expanding of the lines of manufac- ture so as to make an all the year around business that could be condemned." (I, 82.) The fact is that the "new line" business was a natural economic development, and that the International's share of it is comparatively small, — only in one implement does its proportion approximate 40 per cent. In all the others it is very much less. The facts known to the defendants at the date of the organization of the International Company led them to believe at that time that all increase in the business must of necessity be in new lines and in the foreign business. The average number of binders sold annually in the United States by the six vendor companies during the five years 1898-1902, inclusive, was 152,364. The number sold in 1898 was 161,820. The average number of bind- ers sold annually by the International Company during the ten years 1903-1912, inclusive, was 91,465. The num- ber sold by it in 1903 was 104,273. (II, 1371.) The average annual number of mowers sold in the United States by the vendor companies in the five years 1898 to 1902, inclusive, was 218,082. The average annual sales of mowers in the United States by the International Company during the years 1903 to 1912, inclusive, was 169,565. (11,1406.) 28 The average annual amount of sales in the United States in the so-called monopolized harvesting lines for the ten years 1903 to 1912, was $33,290,154, whereas the amount of the vendor companies ' business in the United States in these lines in 1902 was $46,142,158. (II, 1386.) The average annual domestic sales of hinders by the vendors in the years 1898 to 1902 was $19,045,500. The average annual domestic sales of binders by the Inter- national from 1903 to 1912, was $11,890,450. (II, 1371.) During the same period, 1903 to 1912, the per- centage of the International Company in each of the "monopolized" harvester lines in the United States has steadily decreased year by year. Its foreign trade alone in the year 1912 exceeded by $13,000,000 its entire old line business in the United States in the year 1903. (II, 1386.) Moreover, the future growth of business in the har- vester lines is shown to be still confined to the foreign field. Of the small grains grown in the world the United States produces less than one- fifth, and outside of the United States more than one-half of the small grain is still har- vested by hand. There is an undeveloped area of grain producing country in Siberia alone, as great as the heart of the grain growing section of the United States, and as fertile as the plains of Minnesota and Nebraska, while the area devoted to small grains in the United States has remained nearly stationary for more than fifteen years, with no new territory available. (II, 1261.) The record further shows that the Company was pro- vided in its inception with no more resources in the way of property, credit and men than were absolutely essen- tial to the lawful purposes of its organization. Its neces- sities compelled the retention in large part of its net 29 earnings in the earlier years for use in developing the business instead of being used to pay reasonable divi- dends ; and its current borrowings for use in the business increased from $15,000,000 in 1903 to $66,000,000 in 1912. (II, 1402.) BUSINESS METHODS AND PRACTICES OE THE INTERNA- TIONAL COMPANY. During the ten years of its existence the International Company has not attempted to interfere with or restrain freedom of trade or competitive conditions in the agri- cultural implement business in the United States. The testimony of its competitors makes a record full and complete upon this subject. More than seventy of these competitors testified that the course and conduct of the International Company in its competition for the business of the United States throughout the ten years of its activities have been businesslike, honorable and fair. Every line of implements manufactured by the Interna- tional is represented in the list of competitors who testi- fied to its fair dealing, and these competitors, great and small, testify alike to the fairness of the policy which has controlled the course of the company's business in the United States. The testimony shows that not one competitor has been driven out or excluded from the trade since 1902. It also shows that, into this "monopolized" harvesting ma- chine business, there have entered during the past five years, new, strong, active competitors, whose combined resources exceed $100,000,000. These new competitors have proved by their acts, as well as by their evidence, that this trade is not restrained, but is free and open to competition. 30 That the tendency toward the "long line" is a general development in the agricultural implement trade is illus- trated by defendants' Exhibit 196 (II, 1352), which lists the machines and implements distributed by nine of the larger concerns in the trade, as shown by their cata- logues and advertisements. Deere & Company sells 108 implements, the International 59, Moline Plow Company 57, Emerson-Brantingham Company 47, Eock Island Plow Company 34, Parlin & Orendorff Company 28, Eumely Products Company 26, J. I. Case Threshing Machine Company 20, and J. I. Case Plow Company 19. Out of the 59 implements sold by the International it competes with Deere & Company in 49, with Emerson- Brantingham Company in 33, with Moline Plow Company in 31, with Eock Island Plow Company in 21, with Par- lin & Orendorff Company in 17, with Eumely Products Company in 13, with J. I. Case Plow Company in 11, and J. I. Case Threshing Machine Company in 8. Two of these companies, Deere & Company and Moline Plow Company, compete with the International Company in the complete harvester line, while the Emerson-Brantingham Company competes vigorously in mowers and rakes. COMPETITIVE CONDITIONS IN THE IMPLEMENT TRADE. Eight hundred and twenty-three representative imple- ment dealers throughout the various grain-growing sec- tions of the United States testified as to the course and conditions of the agricultural implement trade during the last ten or twelve years. Their testimony establishes that the International Company has never adopted the policy of attempting to coerce local dealers into handling International harvest- ing machines exclusively, or into purchasing its new lines 31 of implements. Their testimony also proves that the In- ternational Company could not, if it would, suppress or destroy competition in the manufacture and sale of har- vesting machines or other agricultural implements in the United States. The steady growth of the business of those who, dur- ing the entire ten years, have been in competition with the International Company in the harvesting machine business is proven by the principal officers and sales managers of such competitors. And the growth of com- petition in the harvester trade by the entry into the business of strong companies, having thoroughly estab- lished efficient selling organizations in every part of the United States, is clearly proven and not controverted. Certified with the record (original Vols. XV to XVIII) is a complete census of the implement dealers of the grain growing sections of the United States, showing the brands of harvesting machines and the principal lines of other agricultural implements which they severally handle. Based upon this census there were introduced in evi- dence maps of the grain growing states, upon which is marked with a black dot every town or city at which In- ternational harvesting machines are sold, and with a red dot every town or city at which competing harvesting machines are sold. (Original Defts.' Exhibit 197, filed with Eecord.) These maps (of which reduced copies will be filed for convenient reference), make visible the fact that every purchaser of International harvesting ma- chines in the United States has an opportunity to buy like machines made by one or more of its competitors. 32 T TTT PRICE OF HARVESTING MACHINES. Two hundred and twenty-eight representative farmers testified as witnesses for the defendants. The Govern- ment did not call a single farmer as a witness. This testimony, in connection with that of dealers and competing manufacturers, puts beyond question the fact that harvesting machinery today is sold in the United States as cheaply as it was fifteen years ago. This level of prices has been maintained with the single exception that in 1908 there was an advance of about five per cent, in the price of harvesting machinery, which advance con- tinued for the seasons of 1909, 1910, 1911. In the fall of 1911 prices again went to their former level. This increase in price was because of the increase in the cost of raw material and labor, and did not nearly equal such increase. The record shows an average increase in the cost of all materials purchased in the ten-year period, 1902-1912, of 13.7 per cent., and a steady increase in labor, amount- ing in 1912 to 32.52 per cent. Farmers and dealers alike testified to the fact that of all the agricultural implements sold, none in the past ten years has advanced as little in price and im- proved so much in quality as International harvesting machines. PROFITS. The average annual net earnings of the International Harvester Company from its entire business, including new lines, for the first six years (1903 to 1908) were $7,181,998.26. The average annual net earnings of the McCormick and Deering companies alone from 33 the sale of harvesting machines only, during the three years prior to the organization of the International Harvester Company, was $8,972,830.21. (II, 1404; I, 279.) By the end of 1908 the company had added $16,000,000 out of its earnings to its capital invested in the business, and had greatly increased its foreign business, and thereafter its earnings were materially larger; but its average annual earnings during the whole period from 1903 to 1912 were only $10,598,654, and the percent- age of its annual net earnings on its average capital and surplus actually invested and used in the business was only 7.83 per cent. (II, 1404.) The average percentage of profit of the International Company on its gross sales from 1903 to 1912 was only 13 per cent., as shown by the Aggregate sales, $803,494,295 Aggregate profits, $105,986,540. The amount of sales and of profits of the McCormick and Deering Companies for the years 1900, 1901 and 1902 were as follows (I, 665-7; 655-7): McCormick: Amount of Sales. Net Profits. 1900 $16,733,920.80 $4,829,229.72 1901 20,753,364.59 5,185,191.71 1902 23,074,806.19 5,401,270.61 $60,562,091.58 $15,415,692.04 Average profits on amount of sales 25%. Deering: Amount of Sales. Net Profits. 1900 $13,471,945.98 $3,970,951.34 1901 16,349,610.67 3,130,269.22 1902 19,671,654.21 4,401,578.03 $49,493,210.86 $11,502,798.59 Average percentage of profits on sales 23%. 34 The International's highest earnings in any year on its capital and surplus invested in the business was 10.91 per cent. (II, 1404.) The average total assets of the McCormick Company- invested in its business, 1900 to 1902, was $45,000,000; and its average annual net profits were $5,138,540, or over 12 per cent., which is greater than the highest per- centage of earnings of the International on its assets in- vested in its business in any year of its existence. The total assets of the Deering Company in its busi- ness are not shown by the record, but its profits on its sales were practically the same as those of the McCor- mick Company, and undoubtedly the percentage of its earnings on its capital invested were equally large. The record thus shows that the owners of the McCor- mick and Deering companies have, by the change to the International Company, diminished the earnings on their capital invested, measured by the maximum profits in any year of the International's existence, while the per- centage of profit on sales has been cut in two. The record discloses an adequate explanation. The price of machines has remained practically stationary, while labor and material have largely increased in cost, and the machines have been improved in quality ; also in its earlier years the International's profits were dimin- ished by the large initial expenses of developing new business, both in new lines and in foreign countries ; but even after the new lines were developed and the for- eign business expanded, in the best year of its business the percentage of earnings of the International Company on its capital and surplus invested in its business has not equaled the average earnings of the McCormick and 35 Deering Companies on the capital invested in their sep- arate businesses for the three years preceding 1903. The object in organizing the International Company- is demonstrated by these figures not to have been the increase of profits through the establishment of a mo- nopoly, as charged in the Petition. PATENTS. It is shown by proof that the International Harvester Company has no control over the supply of harvesting machinery. There is no basic patent upon any of the machines in use. All patents had expired prior to its organization. Other companies may, and do duplicate at pleasure the general form and every essential part of the harvesting machines made by the International Company. (II, 1052, 1190.) PURCHASES OE ADDITIONAL HARVESTER PLANTS BY IN- TERNATIONAL COMPANY. The Petition charges that early in 1903 four competing harvester companies were purchased by the Interna- tional for the purpose of eliminating competition and es- tablishing a monopoly. In fact there were acquired, D. M. Osborne & Co., January 15, 1903 ; Aultman-Miller Co., July, 1903 ; Minnie Harvester Co., September, 1903 ; and Keystone Co., October, 1904, and they were not bought to secure a monopoly but for valid business reasons. The course of the harvester business for a long term of years prior to 1902 had been such as gradually to eliminate the smaller and weaker concerns and to concen- trate the profits of the business largely in the McCormick and Deering Companies. Several companies by reason of deaths were controlled by executors of estates or by 36 women neither fitted nor desiring further to continue a highly hazardous and complicated business, with its at- tendant risks in the matter of extended credits. Other companies had practically suspended business or had gone into the hands of receivers or creditors. The organization of the International Company, with its large capitalization, attracted the attention of all such companies, and many plants were quickly offered to it for sale. The Company, desiring to increase its lines of manufacture and to develop its foreign business, purchased the four plants in question. Of these plants only one, the Osborne, is of sufficient importance to jus- tify a detailed statement of the facts. Of the other three, the Minnie, at St. Paul, had been bought at receiver's sale in 1901 to promote the sale of a grass binder twine, which proved a failure, and it was not a factor in the harvester trade. (II, 1236, 1400.) Its plant was ac- quired and used by the International for the develop- ment of binder twine made from American grown flax straw. The Akron plant — Aultman-Miller Co. — employed on an average only twenty men during the year 1902, and was in the hands of a receiver. It was purchased and used for the development of new lines. The Keystone employed on an average 200 men during the year 1902, and was engaged in the manufacture of a line of hay tools. (II, 1400.) The Osborne plant,* situated at Auburn, New York, employed during the year 1902 on an average 1,400 men, and its purchase was relied upon as specially flagrant. It had a well organized export trade in the harvester line ♦The facts regarding the Osborne purchase were stated by the fol- lowing witnesses called by the Government : Thomas M. Osborne (I, 250-2; James J. Storrow (I, 253) ; Edwin D. Metcalf (I, 253-60). 37 and in twine, which in proportion to its total business was larger than that of any other American manufac- turer. Its plant at Auburn, New York, was well located for the export trade. It also had an established line of tillage tools, including various lines of harrows, into the manufacture of which the International Com- pany desired to enter. (II, 1362.) Its plant was, therefore, specially fitted to assist in accomplish- ing the purposes for which the International Company "was organized, viz., the building up of foreign trade and the establishment of the manufacture of new lines of agricultural implements. The majority of the stock of the Osborne Com- pany was owned by three women, the widow and daughters of the founder of the company, whose entire fortunes were invested in the business. Two of them no longer resided in Auburn. In the conduct of the business they were forced indorsers of its notes for current bank borrowings amounting to several millions of dollars each year. Owing to this situ- ation these women had long been anxious to sell out the business, and soon after the organization of the Interna- tional Company endeavored to make a sale to it. The first three attempts to make such sale were futile, but in January, 1903, such a reduction ($1,800,000) from the first price named was made that the negotiations resulted in the purchase of the Os- borne plant and business on January 15, 1903. (I, 250-260.) The purchase did not include the receivables, which the International Company re- fused to buy. The purchase price,— $4,500,000,— was paid $1,000,000 cash and $3,500,000 in the International Company's notes, secured only by the pledge of the pur- chased certificates of stock of the Osborne Company as collateral. 38 The receivables not purchased, but retained by the vendors, amounted to over $3,000,000, in small amounts, widely scattered in various parts of the world, and the vendors deemed it essential to the collection of these scat- tered receivables that they should control the business of the company, and also that its business should be kept distinct and going, to the end that the stock of the com- pany held as collateral might be available in case of need. The vendors, therefore, demanded, and their demand was granted, that they should remain in control of the com- pany and of its business as an independent concern until their receivables were collected and the purchase money paid or other collateral substituted for the stock, and that in the meanwhile the sale should not be disclosed. The business of the company was in fact, as well as in appearance, managed independently by its old officers the same as before the sale, who continued to advertise it as an independent company. Neither its sales organization nor that of the International knew of this purchase until it was publicly announced. In the fall of 1904, when the purpose of leaving the con- trol of the company in the vendors had been accom- plished, the sale was at once publicly announced and all its properties transferred to the International Company, which has ever since operated and controlled it. The concealment was made a condition of the sale by the ven- dors, for their own use and benefit, and ceased at once when the control of the company and its plant passed to the International Company. The concealment was not at the desire nor for the benefit of the International Company. 39 NO MONOPOLY PRACTICES, PRICES, OR PROFITS. The proof in the record in this case establishes the fol- lowing facts in regard to the business and conduct of the International Company since its organization, viz. : No unreasonable prices. No excessive profits. No discrimination in prices to destroy competitors. No fixing of prices by contract with competitors. No deterioration, but an improvement, in the product. No dismantling of plants acquired. No limitation of output. No exclusive or price-controlling sales contracts. No monopolization of local dealers. No unfair treatment of competitors. No unfair business policy used. No unfair treatment of employes. No monopolization of raw or other materials. No controlling patents owned or acquired. No exclusive privilege or advantage. No system of rebates. No unfair use of transportation facilities. No attempt to exclude competitors. No injury to the public. Foreign trade increased fivefold. Domestic business placed upon a sounder economic basis by the manufacture of new lines in connection with harvesting machines. Percentage of International 'Company in harvester business continuously diminished; percentage of com- petitors in harvester business continuously increased. No competitor in the harvester trade has been stifled or restrained. New and strong competitors have entered the harvester trade in the United States — notably the Deere, the Moline Plow and the Massey-Harris Companies. 40 The great salient fact established in this case is that the door of opportunity is wide open in the United States for the conduct and development of interstate business in all agricultural implements, to all who are engaged therein and to all who may desire to enter there- in, and that the International Company has neither the inclination nor the power to close this door, nor has it at any time attempted so to do. ERRORS ASSIGNED AND RELIED UPON BY APPELLANTS. 1. The Court erred in finding that defendant, Inter- national Harvester Company, as originally organized was a combination in restraint of interstate trade and commerce in agricultural implements. 2. The Court erred in finding that said defendant is now a combination in restraint of interstate trade and commerce in agricultural implements. 3. The Court erred in finding that said defendant did from its inception monopolize or attempt to monopolize a part of the trade and commerce among the several states in agricultural implements. 4. The Court erred in finding that the corporate de- fendants, other than the International Harvester Com- pany, are confederated with the International Harvester Company in the unlawful purposes of combining in re- straint of trade and commerce among the several states in agricultural implements and in monopolizing and at- tempting to monopolize a part of the trade and com- merce among the several states in agricultural imple- ments. 41 5. The Court erred in finding that the individual de- fendants are aiding and assisting in any unlawful busi- ness of the International Harvester Company. 6. The Court erred in finding that the Petitioner was entitled to any relief in equity under its Petition. 7. The Court erred in decreeing that the International Harvester Company should be dissolved and its business assets be divided, as specified in its decree. 8. The Court erred in not dismissing the suit for want of equity. 42 ARGUMENT. The Law Applicable to This Case. The Anti-Trust Act provides two forms of proceedings to secure its enforcement — the one criminal, to punish violations of the act for past offenses ; the other in equity to protect the public against present and future injuries. This proceeding is in equity and has to do with the present and future conditions of the trade in agricultural implements. The Petition charges that the defendants have estab- lished a monopoly in the manufacture and sale of har- vesting machinery by unfair methods of trade and ex- clusion of competitors, with the resulting injury to the public characteristic of monopolies, an increase in prices. The relief sought is against such monopoly, exclusion of competition and injury to the public. In his brief filed in this case in the District Court the Attorney General said: "The question in any case must be whether the direct effect of the acts involved has brought about the evils which it is the purpose of the statute to prevent, namely, undue suppression of competition and monopoly. ' ' In his oral argument in this cause in the same Court counsel for the Government said: "It is incumbent upon the Government to show that at the present time the extent of control held by these defendants amounts to an undue suppression of competition and a monopoly." 43 BASIS OF THE DISTRICT COURT'S DECISIOJST. The majority of the Judges in the District Court held that the charge of monopoly in 1912 was established by two facts which are not in dispute, viz.: the elimination in 1902 of the competition then existing between the com- panies whose plants were acquired by the International Company, and its large percentage of the harvester busi- ness; and they entirely disregarded the question as to whether the International Company was organized and its plants acquired for a lawful purpose, and whether any of the evils or methods of business characteristic of mo- nopolies existed. The elimination of competition necessarily resulting from a single ownership of plants theretofore separately owned, and the size of the International Company, were treated by the majority opinion as raising a conclusive presumption of monopoly — not to be overcome by proof of the freedom of the trade, the existence of competition and competitive conditions, and the entire absence of oppressive methods of business and other evils character- istic of monopolies. The majority of the Judges wholly disregarded the proof as to the actual conditions of the trade at the date of the suit — the voluminous and conclu- sive evidence is not even referred to in the opinion — and rested its adverse decree upon its inference of the ex- istence of a monopoly from the two facts above stated. The basis of the Court's decision is stated in the ma- jority opinion as follows : "There is no limit under the American law to which a business may not independently grow, and even a combination of two or more businesses, if it does not unreasonably restrain trade, is not illegal ; but it is the combination which unreasonably re- strains trade that is illegal, and if the parties in 44 controversy have eighty or eighty-five per cent, of the American business, and by the combination of the companies all competition is eliminated between the constituent parts of the combination, then it is in restraint of trade within the meaning of the stat- ute, under all of the decisions." ***** "It would not be lawful to restrain the interstate trade in order to build up the foreign trade. The International, by suppressing all competition between the five original companies, was in restraint of trade as prohibited in the first section of the Sherman Law, and it tended to monopolize within the meaning of the second section of the same law, and this restraint and this monopoly were the direct and immediate effect of the consolidation, and were not incidental and uncertain in their effect." (I, 89, 90.) We are confident that a consideration of the evidence in the record will make clear that the decree appealed from can only be sustained, if at all, upon this interpreta- tion of the Sherman Law. The decisive question, therefore, is whether the elim- ination of competition necessarily resulting from uniting the plants of the vendor companies in a single corpo- ration in 1902, and the large percentage of the harvester business transacted by that corporation, raises a conclu- sive presumption that a monoply existed in 1912, — re- gardless of the proof to the contrary. If the Government had brought its suit in 1902 to enjoin the International Company from carry- ing out its plan of acquiring the plants of the vendor companies, of necessity the Court would have acted upon the inferences which it might then have drawn as to the effect of the proposed trans- action, as to whether it would or would not result in the methods of business and other evils characteristic of monopoly. But in a suit brought ten years after the or- 45 ganization of the International Company the question as to whether or not a monopoly exists is to be deter- mined not by inference or presumption based on the acts done in 1902, but by the record that the company has made, and by the actual condition of the trade in 1912 as shown by the evidence. THE LAW CONDEMNS NOT SIZE BUT MONOPOLISTIC PRAC- TICES AND WKONGS TO THE PUBLIC. In no case has this Court held the mere acquisition of a large percentage of any business a violation of the Anti-Trust statute. In the case of industrial corporations the emphasis in every case has been placed upon acts in restraint of trade, monopolistic methods of business and wrongs done to the public. In the Standard Oil case it appeared that at the date of the filing of the petition the Standard Oil Company and its subsidiaries "transported more than four-fifths of the petroleum derived from the Pennsylvania and In- diana oil fields, manufactured more than three-fourths of all the crude oil refined in the United States, owned and operated more than one-half of all the tank cars used to distribute its products, marketed more than four- fifths of all the illuminating oil sold in the United States, exported more than four-fifths of all the illuminating oil sent forth from the United States, sold more than four- fifths of all the naphtha sold in the United States, and sold more than nine-tenths of all the lubricating oil sold to railroad companies in the United States."* Notwithstanding this showing, this Court (221 U. S., 1, 73) did not base its decision adverse to that company *V. S. v. Standard Oil Company, 173 Fed., 1S3. 46 upon the elimination of the competition between the con- stituent companies, the control of which had been ac- quired by the Standard Oil Company, nor upon its large percentage of the oil business, but upon its destruction of the "potentiality of competition," and upon its meth- ods of business adopted for "the purpose of excluding others from the trade," and upon its acts and dealings done with "the intent to drive others from the field and to exclude them from their right to trade. ' ' We quote from the opinion of the Court as follows (p. 73): ' ' The court below held that the acts and dealings established by the proof operated to destroy the 'po- tentiality of competition' which otherwise would have existed to such an extent as to cause the tranfers of stock which were made to the New Jersey corpora- tion and the control which resulted over the many and various subsidiary corporations to be a combina- tion or conspiracy in restraint of trade in violation of the first section of the act, but also to be an at- tempt to monopolize and a monopolization bringing about a perennial violation of the second section. "We see no cause to doubt the correctness of these conclusions, considering the subject from every as- pect, that is, both in view of the facts established by the record and the necessary operation and effect of the law as we have construed it upon the inferences deducible from the facts, for the following reasons: (a) Because the unification of power and control over petroleum and its products which was the in- evitable result of the combining in the New Jersey corporation by the increase of its stock and the trans- fer to it of the stocks of so many other corporations, aggregating so vast a capital, gives rise, in and of itself, in the absence of countervailing circumstances, to say the least, to the prima facie presumption of intent and purpose to maintain the dominancy over the oil industry, not as a result of normal methods of industrial development, but by new means of com- bination which were resorted to in order that greater power might be added than would otherwise have 47 arisen had normal methods been followed, the whole with the purpose of excluding others from the trade and thus centralizing in the combination a perpetual control of the movements of petroleum and its products in the channels of interstate commerce. (b) Because the prima facie presumption of in- tent to restrain trade, to monopolize and to bring about monopolization resulting from the act of ex- panding the stock of the New Jersey corporation and vesting it with such vast control of the oil industry, is made conclusive by considering, 1, the conduct of the persons or corporations who were mainly instru- mental in bringing about the extension of power in the New Jersey corporation before the consummation of that result and prior to the formation of the trust agreements of 1879 and 1882; 2, by considering the proof as to what was done under those agreements and the acts which immediately preceded the vesting of power in the New Jersey corporation as well as by weighing the modes in which the power vested in that corporation has been exerted and the results which have arisen from it. "Recurring to the acts done by the individuals or corporations who were mainly instrumental in bring- ing about the expansion of the New Jersey corpora- tion during the period prior to the formation of the trust agreements of 1879 and 1882, including those agreements, not for the purpose of weighing the sub- stantial merit of the numerous charges of wrongdo- ing made during such period, but solely as an aid for discovering intent and purpose, we think no dis- interested mind can survey the period in question without being irresistibly driven to the conclusion that the very genius for commercial development and organization which it would seem was manifested from the beginning soon begot an intent and purpose to exclude others which was frequently manifested by acts and dealings wholly inconsistent with the theory that they were made with the single concep- tion of advancing the development of business power by usual methods, but which on the contrary neces- sarily involved the intent to drive others from the field and to exclude them from their right to trade and thus accomplish the mastery which was the end 48 In United States v. The American Tobacco Company, 221 U. S., 106, it appeared that the company produced from 70 to 96 per cent, of the various kinds of tobacco products (164 Fed., 719) ; but this Court based its de- cision adverse to the Tobacco Company upon the busi- ness methods used by it to drive competitors out of busi- ness, and the total destruction of competitive conditions at the date of the commencement of the suit, and the exist- ence at that time of injuries to the public which were prohibited by the statute. We quote from the opinion as follows (p. 163) : "In the year 1899 and thereafter either the Amer- ican or the Continental Company, for cash or stock, at an aggregate cost of fifty millions of dollars ($50,- 000,000), bought and closed up some thirty compet- ing corporations and partnerships theretofore en- gaged in interstate and foreign commerce as manu- facturers, sellers, and distributers of tobacco and re- lated commodities, the interested parties covenant- ing not to engage in the business. Likewise the two corporations acquired for cash, by issuing stock, and otherwise, control of many competing corporations, now going concerns, with plants in various states, Cuba and Porto Eico, which manufactured, bought, sold and distributed tobacco products or related arti- cles throughout the United States and foreign coun- tries, and took from the parties in interest covenants not to engage in the tobacco business." (p. 165) : "It is of the utmost importance to observe that the acquisitions made by the subsidiary corporations in some cases likewise show the remarkable fact stated above, that is, the disbursement of enormous amounts of money to acquire plants, which on being purchased were not utilized but were immediately closed. ' ' (pp. 181-3) : "Indeed, the history of the combination is so re- plete with the doing of acts which it was the obvious purpose of the statute to forbid, so demonstrative of 49 the existence from the beginning of a purpose to acquire dominion and control of the tobacco trade, not by the mere exertion of the ordinary right to con- tract and to trade, but by methods devised in order to monopolize the trade by driving competitors out of business, which were ruthlessly carried out upon the assumption that to work upon the fears or play upon the cupidity of competitors would make success possi- ble. We say these conclusions are inevitable, not be- cause of the vast amount of property aggregated by the combination, not because alone of the many cor- porations which the proof shows were united by re- sort to one device or another. Again, not alone be- cause of the dominion and control over the tobacco trade which actually exists, but because we think the conclusion of wrongful purpose and illegal combina- tion is overwhelmingly established by the following considerations : a. By the fact that the very first organization or combination was impelled by a pre- viously existing fierce trade war, evidently inspired by one or more of the minds which brought about and became parties to that combination, b. Be- cause, immediately after that combination and the in- crease of capital which followed, the acts which en- sued justify the inference that the intention existed to use the power of the combination as a vantage ground to further monopolize the trade in tobacco by means of trade conflicts designed to injure others, either by driving competitors out of the business or compelling them to become parties to a combina- tion — a purpose whose execution was illustrated by the plug war which ensued and its results, by the snuff war which followed and its results, and by the conflict which immediately followed the entry of the combination in England and the division of the world's business by the two foreign contracts which ensued, c. By the ever present manifestation Avhich is exhibited of a conscious wrongdoing by the form in which the various transactions were embodied from the beginning, ever changing but ever in sub- stance the same. Now the organization of a new company, now the control exerted by the taking of stock in one or another or in several, so as to obscure the result actually attained, nevertheless uniform, in their manifestations of the purpose to restrain others 50 and to monopolize and retain power in the hands of the few, who, it would seem, from the beginning con- templated the mastery of the trade which practically followed, d. By the gradual absorption of control over all the elements essential to the successful manu- facture of tobacco products, and placing such control in the hands of seemingly independent corporations serving as perpetual barriers to the entry of others into the tobacco trade, e. By persistent expenditure of millions upon millions of dollars in buying out plants, not for the purpose of utilizing them, but in order to close them up and render them useless for the purposes of trade, f. By the constantly recur- ring stipulations, whose legality, isolatedly viewed, we are not considering, by which numbers of persons, whether manufacturers, stockholders or employes, were required to bind themselves, generally for long periods, not to compete in the future. Indeed, when the results of the undisputed proof which we have stated are fully apprehended, and the wrongful acts which they exhibit are considered, there comes in- evitably to the mind the conviction that it was the danger which it was deemed would arise to individual liberty and the public well being from acts like those which this record exhibits, which led the legisla- tive mind to conceive and to enact the Anti-Trust Act, considerations which also serve to clearly demonstrate that the combination here assailed is within the law as to leave no doubt that it is our plain duty to apply its prohibitions." In Nash v. United States, 229 U. S., 373, this Court, speaking of the Standard Oil and Tobacco decisions, said (p. 376) : "Those cases may be taken to have established that only such contracts and combinations are with- in the act as, by reason of intent or the inherent na- ture of the contemplated acts, prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade." *s> In United States v. St. Louis Terminal, 224 U. S., 383, the decision of the court was based not on the union of 51 all existing terminal facilities, nor even simply on the absolute control by the defendant of all possible means of entrance to the City of St. Louis, but, in part, upon the adoption of discriminatory terms and methods. The Court said (p. 401) : "Aside from their power under all of the condi- tions to exclude independent entrance to the city by any outside company, their control has resulted in certain methods which are not consistent with free- dom of competition. ' ' In United States v. Reading Co., 226 U. S., 324, the Court bases its decision upon the existence of con- tracts which rendered competition in the anthracite coal trade impossible, and not upon the large percentage of that trade controlled directly by the defendants. The Court said (p. 369) : "The defendants insist that these contracts were but the outgrowth of conditions peculiar to the an- thracite coal region and are not unreasonably in re- straint of competition but mutually advantageous to buyer and seller. "That the act of Congress 'does not forbid or re- strain the power to make normal and usual con- tracts to further trade by resorting to all normal methods, whether by agreement or otherwise, to ac- complish such purpose,' was pointed out in the Standard Oil Case, 221 U. S., 1. In that case it was also said that 'the words "restraint of trade," should be given a meaning which would not destroy the individual right of contract, and render difficult, if not impossible, any movement of trade in the character of interstate commerce, the free move- ment of which it was the purpose of the statute to protect.' We reaffirm this view of the plain mean- ing of the statute, and in so doing limit ourselves to the inquiry as to whether this plan or system of contracts entered into according to a concerted scheme does not operate to unduly suppress competi- tion and restrain freedom of commerce anions;- the states. 52 "Before these contracts there existed not only the power to compete but actual competition between the coal of the independents and that produced by the buying defendants. Such competition was after the contracts impracticable. It is, of course, obvious that the law may not compel competition between these independent coal operators and the defendants, but it may at least remove illegal barriers resulting from illegal agreements which will make such competition impracticable." The decision condemned only the joint ownership and control of the Temple Iron Company, — to deprive com- petitors of transportation facilities, — and the "65 per cent, contracts," which controlled the sale of substan- tially the entire independent output at tide-water (p. 370). It was this control of the independent output of a naturally limited supply of anthracite coal, in addition to the 75 per cent, owned by the defendants, to which the language above quoted refers. The Court further said: "In the instant case the extent of the control over the limited supply of anthracite coal by means of the great proportion theretofore owned or controlled by the defendant companies, and the extent of the con- trol acquired over the independent output which con- stituted the only competing supply, affords evidence of an intent to suppress that competition and of a purpose to unduly restrain the freedom of produc- tion, transportation and sale of the article at tide- water markets" (p. 370). In the same case in the Circuit Court Judge Gray, rendering the opinion, said, in 183 Fed. Rep., 427 (p. 456): "There must, however, be a clear, legal concept of the words 'monopolize' and 'monopoly,' in order to properly consider the charge in this respect, as set forth in the petition. The word is hard to define, and no attempt at exhaustive definition need be made. It will suffice to say that the mere extent of acquisition of business or property achieved by fair or lawful means cannot be the criterion of monopoly. 53 In addition to acquisition and acquirement, there must be an intent by unlawful means to exclude oth- ers from the same traffic or business, or from acquir- ing by the same means property and material things." In United States v. Pacific & Arctic Railway & Naviga- tion Company, 228 U. S., 87, the decree was based upon agreements, the object of which was the prevention or destruction of competition in transportation. The Court in its opinion said (p. 104) : "We do not pause to justify this conclusion, either by the general purpose of the act or by its adjudged applications. Its general purpose has been elabo- rately set forth in very recent cases ; and particular instances of its application, pertinent to the case at bar and illustrative of it, are exhibited by Swift & Co. v. United States, supra, and Standard Sanitary Mfg. Co. v. United States, 226 U. S., 20. In those cases, as here, rights were brought forward to jus- tify a purpose which transcended the limits put upon their exercise by the Anti-Trust Act. In those cases, as here, the purpose (the means being differ- ent) was the prevention or destruction of competi- tion, and the agreements here are exactly adapted to the purpose." Shortly before this suit was begun, the Attorney Gen- eral published an article on "The Enforcement of the Anti-Trust Law"* containing the following: "There is, however, a third class whicb, I admit, is probably confronted by genuine uncertainty. I doubt if this class is so great as is thought; but it exists, and its members are actual and honest. They are the owners of, say, two or more concerns en- gaged in the same or similar lines of business who desire to consolidate or combine their efforts, and the investors whom they invite to contribute to the combined enterprise. In making such a consolida- tion there is necessarily eliminated such competi- *Mr. Geo. W. Wickersham in "The Centuby," for February, 1012, at p. 61S. 54 tion as existed between them in the past. If the object of that combination is not the mere destruc- tion of an existing competition, but the carrying on of the business under improved conditions, with economies of production and management, the com- bination cannot be said to be illegal. Nevertheless, there is an uncertainty in ascertaining the actual purpose. At the outset, this purpose is locked in the breast of the participants in the combinations. * * * It may be difficult for an outsider to decide truly and accurately whether or not the combination has for its ohject a restraint of trade or an expansion of trade. Subsequent acts, however, reveal the pur- pose, because men are presumed to intend to per- form the acts which they do perform, and they are presumed also to intend the natural consequence of their acts * * *." Ex-President Taft in his recent book on "The Anti- Trust Act and the Supreme Court," after a careful re- view of the decisions of this court in cases arising under the Anti-Trust Act, states their effect as follows : "The effect of the cases is that a mere union of capital in the same branch of industry for the pur- pose of promoting economy and efficiency, though it uses interstate commerce, and though to the ex- tent of the business of the two firms or companies it suppresses the competition of each against the other, is not within the statute unless what is done necessarily has the effect to control all the busi- ness or can be shown by the character of the acts to be intended to effect that purpose or to be a step in the plot to bring it about. Mere bigness is not an evidence of violating the act. It is the purpose and necessary effect of controlling prices and putting the industry under the domination of one manage- ment that is within the statute." (p. 112.) "Where, as in this case, a period of ten years has elapsed, the test is not what might be inferred would re- sult from the elimination of the competition between the constituent companies, or was the intention of the par- 55 ties, but what have been the actual results as shown by the evidence. On the question of big business or big percentage, as affected by the statute and the decisions of this court, Ex-President Taft states his conclusions as follows : "What, then, is the result as to the lawful busi- ness, and especially the big business, of our coun- try under the statute and these decisions'? It is this: It is possible for the owners of a business of manufacturing and selling useful articles of mer- chandise so to conduct their business as not to vio- late the inhibitions of the anti-trust law and yet to secure to themselves the benefit of the economies of management and of production due to the concen- tration under one control of large capital and many plants. If they use no other inducement than the constant low price of their product and its good quality to attract custom, and their business is a profitable one, they violate no law. But if they attempt, by a use of their preponder- ating capital and by a sale of their goods tempo- rarily at unduly low prices, to drive out of busi- ness their competitors, or if they attempt, by price- controlling contracts with their patrons and threats of non-dealing except upon such contracts, or by other methods of a similar character, to use the large- ness of their resources and the extent of their out- put compared with the country's total output as a means of compelling custom and frightening off com- petition, then they disclose a purpose to restrain trade and to establish a monopoly and violate the act. The object of the anti-trust law was to suppress the abuses of business of the kind described. It was not to interfere with a great volume of capital which, concentrated under one organization, reduced the cost of production and made its profits thereby and took no advantage of its size by methods akin to duress to stifle competition with it. I wish to make this distinction as emphatic as pos- sible, because I conceive that nothing could happen 56 more destructive to the prosperity of this country than the loss of that great economy in production which has been and will be effected in all manufactur- ing lines by the employment of large capital under one management." (pp. 126-7.) In the case of the International Company, its organiza- tion and subsequent acts have benefited the public by fur- nishing to American farmers better harvesting machines without increasing the cost, notwithstanding the increase in the cost of the material and labor used in their manufacture. It has not made excessive profits or at- tempted to stifle competition, or injured its competitors. CONSOLIDATIONS OF BUSINESS CORPORATIONS NOT CON- TRARY TO PUBLIC POLICY. The formation of partnerships and the consolidation of business corporations usually eliminate competition between the individuals or corporations affected. Such elimination of competition has never been held in and of itself to be in conflict with public policy or the pub- lic interest or been prohibited by statute, except in case of public service corporations. Statutes had been enacted in many of the states long prior to the passage of the Anti-Trust Act, authorizing business corporations to consolidate. Such authority was frequently limited to corporations doing the same kind of business, in the same locality, i. e., competing cor- porations. For example, Chapter 32 of the Revised Statutes of Illinois authorizing business corporations to consolidate, contains the proviso, "That the provisions of this act in reference to the consolidation of corporations shall only apply to corporations of the same kind and en- gaged in the same general business and carrying on their business in the same vicinity." 57 The following states have statutes authorizing the con- solidation of business corporations with substantially such a limitation : Connecticut, Illinois, Indiana, Mary- land, Missouri, New Jersey, New York, Ohio, Pennsyl- vania and West Virginia. In many of the other states statutes have long been in force authorizing the consoli- dation of business corporations without excepting com- peting companies. The elimination of competition between persons or corporations by their uniting in business for legitimate business purposes was not unlawful under the laws in force in the United States at the date of the enactment of the Anti-Trust Act. If such elimination was a part of a plot or plan to monopolize, then, of course, it was within the condemnation of the Anti-Trust Act, otherwise not. THE TEST OF MONOPOLY. The charge in this case is of a completed monopoliza- tion, — an established monopoly. It therefore becomes important to define as clearly as may be what constitutes a monopoly within the prohibition of the statute. Size or percentage of business alone does not constitute a monopoly within the meaning of the statute. The crucial test as to whether a monopoly exists within the meaning of the statute is whether competitors have been excluded from the business by methods of business which were adopted for that purpose. When the Anti-Trust bill was reported to the senate by the Judiciary Committee, Senator Kenna questioned Senator Edmunds, chairman of the committee, as to the meaning of the word "monopolize" as used in the bill, who replied that the word monopolize had a technical meaning, which limits its scope to conduct impeding 58 competitors and preventing them from having equal op- portunity to engage in the business monopolized. Sen- ator Hoar expressed Ms agreement with the opinion of Senator Edmunds on this point, saying : "I put in the committee * * * the precise question which has been put by the Senator from West Virginia (Senator Kenna) * * * but I was answered, and I think all the other members of the committee agreed in the answer, that 'monopoly' is a technical term known to the com- mon law, and that it signifies — I do not mean to say that they stated what the signification was, but I became satisfied that they were right and that the word 'monopoly' is a merely technical term which has a clear and legal signification, and it is this : It is the sole engrossing to a man's self, by means which prevent other men from engaging in fair com- petition with him." Cong. Eec. 51st Cong., 1st Sess., p. 3151. Upon the first hearing in the Standard Oil case the Attorney General in his oral argument before this court read from the senate debates on the bill as to the mean- ing of the word monopolize, the quotations above closing with the statement "That it" (monopoly) "involved something like the use of means which made it impossible for other persons to engage in fair competition, like the en- grossing, the buying up of all other persons engaged in the same business," and then said: "I have never contended, and the Government does not contend here, that the mere ownership of all of an existing commodity, where the avenue is open to anybody else to go in and produce the same commodity, and the possessor does not interfere in the slightest degree with the exercise of that right by that person, constitutes in and of itself an illegal monopoly. That is the position I have always taken ; it is the position I conceive to be the sound one, and it is the position taken by these very eminent law- yers in debating this proposed bill." 59 This is directly in line with the view expressed by Mr. Justice Holmes in his dissenting opinion in the Northern Securities case (concurred in by the present Chief Jus- tice), 193 IT. S., 405: "The prohibition was suggested by the trusts, the objection to which, as every one knows, was not the union of former competitors, but the sinister power exercised or supposed to be exercised by the com- bination in keeping rivals out of the business and ruining those who already were in. It was the ferocious extreme of competition with others, not the cessation of competition among the partners, that was the evil feared." II. The International Harvester Company Was Organized for a Legitimate Business Purpose. The Petition charges that: ' ' The International Harvester Company was incor- porated as an instrumentality to effect the unlawful purposes of defendants, as a means of destroying competition, of unlawfully combining and confed- erating a number of independent manufacturers, dealers in and distributors of harvesting machinery, tools and implements, and binder twine, and of creating a monopoly in interstate commerce there- in." (1,10.) The defendants deny this charge and aver that the ob- jects of the formation of the International Company were the expansion of foreign trade in harvesting machinery and the placing of the domestic trade upon a better economic basis. (I, 46.) The issue thus joined must be determined by a con- sideration of the evidence in the record. This evidence shows that the condition which brought about the organization of the company was the lack of 60 sufficient capital by the then existing companies ade- quately to meet the situation and seize the opportunities in the agricultural implement business. In the home field the requirement of additional capital grew out of the tendency toward, and advantages of, enlarging the lines of implements manufactured so as to provide an all year employment for the selling organization, and the importance of providing their own raw material, espe- cially iron and steel, involving the ownership of iron and steel mills, and also the ownership of ore mines, coal mines and timber lands. METHODS OF HANDLING THE HARVESTER BUSINESS IN THE UNITED STATES PRIOR TO 1902. Plows and small tools were sold outright to the dealer, whereas, from the beginning, the larger and more expen- sive machines, such as threshers, reapers, binders and mowers, were handled by local dealers on commission agency contracts. (II, 1335-6.) The largest sales of har- vesting machines were also made in the Western or newer parts of the country, where the farmers were in most cases without sufficient money to pay cash for their machinery. This necessitated long time credits. The harvester business has this peculiarity: The manufacturer's responsibility does not end with the sale to the farmer; the machine must be set up in the field and expert help must be kept constantly available in case of breakdown. Particu- larly important is the prompt furnishing of repairs. De- lay in replacing a broken part may mean the loss of the harvest. Hence large stocks of repairs and machines must be kept at convenient points ready for immediate delivery. All this required capital, and the record shows that the implement business absorbs an extraordinary 61 amount of capital in proportion to the annual turn-over — nearly $2 of capital to every dollar of sales. Thus, the International's total assets as compared with its total sales from 1903 to 1911 were as follows (I, 205, 208) : Total Assets. Total Sales. 1903 $130,710,469.99 $ 53,012,823.07 1904 132,370,000.87 51,314,752.27 1905 139,168,296.16 59,576,393.62 1906 147,904,064.14 67,589,056.27 1907 156,282,454.16 78,206,890.36 1908 157,608,632.51 72,541,771.16 1909 172,795,542.61 86,614,549.55 1910 195,306,083.53 101,166,358.88 1911 223,724,555.54 108,033,595.61 The delivery of harvesting machinery in any given ter- ritory had always to be made within a very short period of the year. The sales organization was employed dur- ing only a few months each year and then disbanded. This resulted in a tendency on the part of the harvester companies to manufacture other implements, so that the selling organization would be steadily employed. The object of course was ultimately to acquire a line which would justify an "all-year-round" selling organization, whereby a maximum of economy and efficiency could be realized. The advantages of the long line were early sought by such companies as the Massey-Harris Co. of Canada, the John Deere Plow Company and the Moline Plow Company, which, beginning with plows, had already, by 1902, established a large trade in a long line of tillage implements and vehicles. In 1891 the Mc- Cormick Company sold only binders and mowers. Dur- ing the following eight or nine years it extended its lines by adding sulky hay rakes, headers, push binders, corn binders, corn shredders, knife grinders and twine ; and in 1901 and 1902 the heads of the various departments of 62 the McCormiek Company were constantly advising the adding of still other lines of implements. These recom- mendations were not adopted because of the Company's insufficient resources. (II, 1357.) The McCormiek was the oldest and strongest of the harvester companies, and its financial situation in 1902 will illustrate the general situation. In the years 1898 to 1902, inclusive, the amount of the capi- tal and surplus combined and invested in the business of this company increased from about $25,000,000 to over $40,000,000. Its net earnings in the five years aggre- gated over $20,000,000. Out of these total earnings only $2,100,000 were paid out in dividends. Ninety per cent, of the earnings were left in the business and were insuf- ficient to supply its needs. Its borrowings increased as follows (II, 1270) : In 1898 $1,100,000 In 1899 3,000,000 In 1900 7,000,000 In 1901 8,000,000 In 1902 11,000,000 These figures indicate how completely in 1902 its busi- ness absorbed all its available resources and credit. THE FOREIGN TRADE IN AMERICAN HARVESTING MACHIN- ERY; ITS CONDITION AND POSSIBILITIES IN 1902. While at various times long prior to 1890 samples of American harvesting machinery were exhibited in foreign countries, and an export trade established, its volume was very small. Shortly afterward, however, American manufac- turers of harvesting machinery, notably the Mc- Cormicks and Deerings, began to explore and develop the foreign trade. In 1892, the Deering Harvester Com- 63 pany sent Mr. Charles H. Haney abroad thoroughly to in- vestigate the field. He made personal investigations in the different countries of Europe, South America, Aus- tralia, New Zealand, South and North Africa and in Asiatic Eussia, and remained abroad from 1892 until 1902, in charge of the foreign business of the Deering Company. Since 1903 he has been in charge of the for- eign business of the International Harvester Company. In his testimony the history of the foreign trade in har- vesting machinery, the conditions attending its develop- ment, its position and possibilities in 1902, and its subsequent development by the International Harvester Company, are fully detailed. (II, 1245-65.) Mr. William V. Couchman was sent abroad by the Mc- Cormick Company in 1899, and was in charge of the for- eign business of that company until 1902, and has been identified with the European trade of the International Harvester Company since its organization, and his testi- mony describes the opportunities for foreign trade in American harvesting machinery in 1902, and what was required to embrace them. (II, 1265-69.) The foreign business in harvesting machinery prior to 1902 had practically all been conducted through for- eign jobbers. These merchants bought the machines de- livered in New York City usually for cash. Credits ex- tended to the jobbers were few and for short periods. These jobbers bought only such machines as they felt sure they could sell, and sold them in the easiest market. When the jobber had sold his machine, deliv- ered it to the farmer and set it up, his work was finished. He had no interest in the use or mainte- nance of the machine by the farmer. His only purchas- ers were those who had available mechanical skill to understand and operate the machines. Therefore, out- 64 side of England and portions of France and Germany, practically the only persons buying machines were the proprietors of large estates who could employ skilled mechanics. These proprietors were able to pay for their purchases either in cash or upon short time, and the business with them was within the capital of the foreign jobbers. By 1902 there had been developed a considerable for- eign business transacted through jobbers, by the Deering and McCormick companies. From 1898 to 1902, the for- eign sales of the Deering Company increased from $1,400,000 to $3,488,000. (II, 1264.) The foreign sales of the McCormick Company increased from $1,864,000 in 1898, to $4,336,000 in 1902. (II, 1269.) These sales, how- ever, were merely skimming the cream of the foreign business. The millions of small farm- ers in foreign countries were still cutting their grain by hand, ignorant of the value of the har- vesting machine, and without enough mechanical skill to understand its construction and operate it. These millions of farmers in foreign lands offered a possible market for harvesting machinery, the magnitude and extent of which could scarcely be computed. This vast and unoccupied field was in striking con- trast to the home field, where there had been no increase in the sales of harvesting machines for five years, and no prospect of any future increase. (II, 1371.) The development of the business in the for- eign field among the small farmers involved the abandonment of the system of selling through jobbers, and the establishment of an organiza- tion in each country through which the company itself would sell direct to the farmer upon credit. It was therefore clearly understood in 1902 that the 65 realization of the tremendous opportunities of the for- eign trade involved a foreign organization of skilled men, and also great resources both in cash and in credit. All of these facts are fully shown with detail and il- lustration by the testimony of Haney and Couehman, who, as already stated, represented the Deering and Mc- Cormick Companies abroad prior to 1902. (II, 1245-65; 1265-69.) SITUATION OF McCORMICK COMPANY IN 1902. In 1902 the owners of the McCormick Com- pany, alive to this situation, centered their thought upon the acquisition of the capital and resources essential to work out the problem suc- cessfully. It was pointed out to them by the head of their purchasing department that the possession of plants by which raw material, principally iron and steel, could be manufactured, would be required, to the end that a constant and steady supply at fairly stable costs might be assured. Plans were drawn up for a steel plant and blast furnaces for producing pig iron and steel, that would have required, on any reasonable basis, an outlay of $5,000,000, with no provision for working capital, which would have taken $2,000,000 in addition. That these estimates were conservative now appears from the balance sheet of the Wisconsin Steel Company, the Interna- tional's subsidiary which handles its ore mines and steel mills, which showed in 1912 $18,500,000 employed in its iron and steel operations. (II, 1318-20; II, 1357.) The Deering Company, realizing the same necessity, had already taken steps to acquire steel and iron mills, ore mines, coal and timber lands, and had also taken up 66 the question of constructing a plant in Canada to over- come the handicap of the Canadian tariff. But only a beginning had been made. (II, 1321.) No enlargement of the domestic market for harvesting machines could be expected. There had been no growth in this business in five years (and there was none in the subsequent ten years). The success of the harvester business in the future depended upon expansion into the manufacture of new lines of agricultural implements for the home market, so as to keep its selling organization intact during the entire year, and the de- velopment of the foreign market. PURPOSE OF FORMATION OP INTERNATIONAL COMPANY. Faced by this situation, it is easy to see and understand that the owners of the McCormick Company were anxious as to their future, and the prime question with them was one of finance. How it could add to its resources suffi- ciently to meet the situation adequately was the problem. This problem was submitted to Mr. Perkins of the firm of J. P. Morgan & Company. Mr. Perkins advised that the McCormick Company did not furnish a suffi- cient basis for the efficient and quick development of the foreign field. His testimony in that regard is as fol- lows: "I thought McCormick 's way of getting at it, that is to enlarge his one particular company, was not the right way. It did not appeal to me as being quite big enough or broad enough to cover what I considered the opportunities * * * there were two very important channels to develop in the agri- cultural implement business: one was to establish an all-year-round selling organization which did not then exist. They would sell for two or three months, and then the organization would be idle. It was very expensive. The other was the colossal oppor- 67 tunities for the export trade. I did not see how any one company, with only the credit and the men of one company, could be developed promptly and vig- orously enough and in the most satisfactory way to accomplish those objects. It meant large men. * * * I set about to talk to men of other companies with a feeling that the only way to accomplish what I had in mind was to get a number of the best equipped and most experienced harvester men together in one company, with sufficient capital behind them to make a drive for the export trade, and for an organization that could do business all the year round." (II, 1277.) Mr. John J. Glessner, one of the owners of The Warder, Bushnell & Glessner Company, whose business was ac- quired by the International Company, was called by the Government as a witness, and testified as follows : "I thought that, as Mr. Perkins had told me, we were to have a strong company, a company that was amply capitalized so that the business could be in- creased in the place where it would make money; so that we could enter largely in the foreign trade which was a virgin field for all the harvester com- panies. None of the original companies that were in existence at that time, had sufficient capital to properly enter that trade." (I, 271.) When Mr. Perkins decided that the organization of a new and stronger company was the only proper and feasi- ble way by which an all the year round business could be secured and the foreign trade in harvesting machinery could be created and supplied, he took up the work of car- rying out his plan with vigor. His efforts resulted in the organization of the International Harvester Com- pany and its acquiring the plants of the McCormick, Deer- ing and other vendor companies. The testimony of Mr. Perkins, who was the organizer of the International Harvester Company, is clear that the main purpose of organizing the International Company 68 was the adequate development of the foreign field, that being the only field which promised any further growth in the demand for harvesting machines. "I selected the name 'International Harvester Company' because it was the natural outcome of the conception of the plan that I was trying to work out, that we should have a company large enough to be very potential in the export trade; and my experi- ence with the New York Life in developing business in Europe had to do directly with selecting that name." (II, 1278.) By representatives of the Deering, ' ' Champion, ' ' Piano and Milwaukee companies, the Government proved that Mr. Perkins initiated and carried through the negotia- tions ending in the acquisition of the five harvester prop- erties under the contracts of July 28, 1902 ; that he had charge of the organization of the company, and selected its first board of directors. The plan and purposes, as well as the name of the new company, originated with him as the representative of J. P. Morgan & Company, who with their associates put $20,000,000 of new capital into this enterprise. Mr. Perkins' testimony states in detail what those plans and policies were. The record of the ten succeeding years in the foreign and domestic busi- ness of the company furnishes the conclusive proof that its purposes were those stated in his testimony. THE TEST OE TIME AND CONDUCT. What the International did in the ten years following, its organization shows that it was formed to develop foreign trade and put the domestic business upon a bet- ter economic basis by the manufacture of "new lines," and disproves the charge that it tvas organized to create a monopoly. The delay of ten years in the institution of this suit has resulted in a demonstration of the actual purposes 69 and objects of the organization of the International Com- pany. It has always been a canon of construction, applied by courts, that the conduct of parties under an agreement is the best evidence of the meaning of an agreement. ' ' Tell me," said Lord Chancellor Sugden, "what you have done under a deed, and I will tell you what that deed means." This statement of the Lord Chancellor is a maxim in the construction of contracts. Therefore to test the truth of the claim of the defend- ants as to the purposes for which the company was or- ganized, we properly turn to its record in its ten years of business to see what it did do. If the real object of the organization of the Interna- tional Company was the development of the foreign field and the manufacture of new lines in the United States, its growth in foreign business and in new lines of manu- facture should be the main features of its history. If the real object of its organization was the establishment of a monopoly in harvester machines and other agricultural implements, its history should show the exclusion of com- petitors by unfair methods of business, unreasonable prices, excessive profits and resulting injury to the pub- lic. Which claim, that of the Government or the de- fendants, is confirmed by the record made by the com- pany during its existence of ten years prior to this suit? 70 THE DEVELOPMENT OF THE FOREIGN TRADE AND "NEW DINES." Eussia furnishes perhaps the best illustration of the work of the International Company in developing the foreign trade. Siberia is a vast country, largely unsettled, having an area of between three and four million square miles, a large percentage of which is fertile and well adapted to the raising of small grains. Its population in 1902 was poor, ignorant and unused to machinery. Very few of the peasant farmers could read or write. American agricultural implements were practically unknown. (II, 1247.) The project of introducing American machinery in Siberia involved the education of the ignorant peasantry so that they might know the value and have the skill to use the American machinery. This required men skilled in the use of the machines, and who could speak the language of the country wherever the machines were of- fered for sale. The peasants being poor, sales had to be made upon long credit and it was necessary to estab- lish agencies or stores for the sale of the machines, there being few local merchants available for that purpose. In the ten years ' operations of the International Com- pany it had so developed its business in Siberia from practically nothing, that in 1912 the branch of the Inter- national Harvester Company which did the largest busi- ness of any of its branches in the world was situated at Omsk, in Central Siberia, its sales for the single year amounting to the sum of $3,184,325.63. The business done at Vladivostok, Siberia, in 1912 amounted to the sum of $569,278.09. (II, 1264.) 71 The company in 1912 carried stocks for wholesale distribution outside of the United States and Canada, at 183 points, distributed as follows: Africa, 17 ; South and Central America, 14 ; Australasia, 12 ; Austria, 6 ; Belgium, 3 ; Bulgaria, 5 ; Denmark, 1 ; Fin- land, 3; France, 9; Germany, 9; Great Britain, 5; Greece, 2 ; Holland, 4 ; Hungary, 4 ; India, 1 ; Italy, 7 ; Mexico, 8 ; Norway, 3 ; Portugal, 1 ; Roumania, 5 ; Russia, 42 ; Servia, 1; Siam, 1; Spain, 6; Sweden, 5; Switzerland, 3; Tur- key, 6. (II, 1256.) In the year 1912 there were 30,888 local dealers han- dling the machines of the International Company in countries other than the United States. (II, 1256.) The number of local dealers of the International Com- pany in the United States in 1913 handling the old lines (binders, mowers and reapers) was less than 30,000. (II, 1364.) The following tables show the amount of the Interna- tional's sales for the years 1903-12 as compared with the sales of the six vendor companies (including the Osborne) for the year 1902, separating foreign and domestic trade and old lines and new lines. (II, 1386-7.) 72 United States Sales. Old Lines New Lines Amount Amount 1902 $46,142,158.64 $ 1,810,453.59 1903 37,763,858.45 2,056,057.92 1904 32,337,917.32 2,029,737.93 1905 30,999,632.59 5,193,369.29 1906 31,339,714.18 10,677,992.55 1907 32,726,330.36 13,676,254.69 1908 28,213,111.53 13,610,886.45 1909 31,546,270.82 18,550,894.87 1910 34,510,273.20 21,992,709.76 1911 34,401,981.89 22,465,927.35 1912 39,062,455.36 24,945,293.52 Foreign Sal es. 1902 $ 9,937,746.50 $ 478,445.90 1903 11,879,797.59 366,215.14 1904 14,294,289.79 1,055,074.69 1905 14,578,011.88 2,336,901.89 1906 17,095,540.51 3,103,773.20 1907 20,291,018.58 4,187,525.59 1908 20,073,892.80 4,730,900.58 1909 21,301,495.76 6,832,879.90 1910 23,360,535.07 10,835,520.53 1911 26,864,992.08 15,449,686.59 1912 33,740,663.65 17,156,299.59 These tables graphically show: (a) The absence of growth — a shrinkage, in fact, — in the domestic sales of the "old lines"; (b) A constant and, beginning in 1906, a rapid growth in the domestic sales of the "new lines"; and, still more marked, (c) The rapid expansion of the foreign trade, both in the "old" and the "new lines." The significant figures are: in 1908, the fifth year of its operations, the International's domestic sales of "old 73 lines" were $18,000,000 less than the vendors' aggregate sales of those lines in 1902, while its domestic sales of the "new lines" had increased from $2,000,000 to $14,000,000; and, in 1912, the International's domestic sales of the "old lines" were still $7,000,000 less than the sales of 1902, while in the ' ' new lines ' ' there had been a further increase of $11,000,000, or, for the ten years, an increase from $2,000,000 to $25,000,000 in the "new lines." In the foreign field the increase, in both the "old" and the "new lines," has been constant — from $10,400,000 in 1902 to $50,896,000 in 1912. The following table shows the cash remitted to the United States by the company from its foreign trade in each of the years from 1903 to 1912 (II, 1388) : Year Cash Received. 1903 $ 5,500,000 1904 9,154,000 1905 11,640,000 1906 14,123,000 1907 16,520,000 1908 17,138,000 1909 20,644,000 1910 20,016,000 1911 18,778,000 1912 25,894,000 Total $159,407,000 The number of binders and reapers exported to foreign countries in the year 1913, was 131,977, which is lar- ger than the number of binders and reapers sold by the International Company in the United States the same year, or in any year since its formation. (II, 1249.) The selling investment in the foreign business of the International Company at the close of 1912 was $66,965,- 725.33, which was 131.6 per cent, of the gross foreign 74 sales for that year. At the close of the same year the selling investment in the domestic business was $41,- 557,146.89 on gross sales of $64,007,748.88, or 64.9 per cent. (II, 1250-1.) This disproportion in the selling investment for the same year in the foreign business as compared with the domestic arises largely out of the greater distance of ship- ment, requiring earlier manufacture, and the greater credit involved in foreign sales. In the year 1912 the percentage of cash collected to sales was in the domestic business 68.8 per cent., and in foreign sales 35.2 per cent. (II, 1252.) The result of this great increase in the foreign sales and the greater amount of capital required for the same amount of busi- ness, caused the capital of the International Company to be inadequate to its requirements. To meet this diffi- culty it paid very small dividends, adding a great part of its net earnings to its capital invested, and also in- creased very largely its borrowings. In the year 1903 the total borrowed money of the company was $14,974,- 000, which continuously increased year by year until in the year 1912 its borrowings were $65,920,000, of which $19,264,000 were borrowed in Europe. (II, 1402.) During the same period it had added out of its net earn- ings to its working capital the sum of $31,586,543. (II, 1403-4.) It is clear from the foregoing tables that the entire growth of the business of the International Harvester Company has been in the new lines and in the foreign business, and that its great capital and the combined organizations of the companies whose plants it took over were all fully required to carry out the business plans of the International Company. 75 The testimony in the record as to the difficulties of developing the foreign trade, especially in countries like Eussia and Siberia, together with the vast capital re- quired to carry on such trade, demonstrate that it could not have been accomplished by any plans less compre- hensive than were adopted, or by any company with less resources in men, capital and credit than those possessed by the International Company. For any of the American companies existing in 1902 to have undertaken to estab- lish a world wide organization for the development of its foreign business and to construct additional plants in the several countries required by their tariff laws would have been utterly impracticable. The foreign business could not have been developed in any large way through sales for cash to jobbers. It was accomplished, and could only have been accomplished, through the commis- sion agency plan, with sales on credit direct to the farm- ers, the same as in the United States. THE PURPOSES PROVEN" BY THE RESULTS. The history of the company's business and its achieve- ments shows that its energies and its resources have been devoted to accomplishing the results which the defend- ants claim its organizers had in view in its organization. The proposition that the International Company ivas organized for the purpose of monopolizing trade in the United States in harvesting machines finds no support in the record of its achievements. The evidence touching the question of monopoly will be discussed under the next point. We will therefore here only summarize the facts established: The crucial test of monopoly is coercive exclusion of others from the business. Since the organization of the 76 International Company no competitor lias been elimi- nated or his business interfered with. New and strong competitors have entered and are still in the field. The International's percentage of the trade has steadily diminished; the percentage of its competitors steadily increased. Profits have been less since the organization of the company than before. Prices have not been in- creased to correspond with the increased cost of ma- terial and labor. Prices have not been fixed by contract with competitors. The quality of its machines has been improved. Competitive conditions have been and are free and open to all alike. If it had been the purpose or intention of the organ- izers of the International Company to monopolize trade abundant evidence of such purpose and intention would have been found in the record of its business. The question of the intentions or purposes of the or- ganizers of the International Company in 1902 is of no substantial importance in view of the evidence m this case. The question at issue is whether a monopoly existed at the date of the suit. If it did, then laudable inten- tions and purposes on the part of the organizers of the company would be no defense. If a monopoly did not exist at the date of the suit and the trade was free from undue restraint, then improper motives or purposes on the part of the organizers of the company in 1902 would form no basis for an adverse decree. In a criminal ac- tion to punish the organizers of the company for viola- tions of the statute the intent or purpose for which they organized the company would be of vital importance. In a suit in equity in 1912 brought to secure relief against the injuries of an established monopoly then ex- 77 isting the intent or purposes of the organizers of the company in 1902 can be of but little, if any, importance. The question at issue is whether in 1912 a monopoly, with its characteristic evils, existed. If it did the fact is susceptible of direct proof. Speculations and infer- ences as to what was in the minds of the organizers of the company in 1902 do not materially help to determine the question as to whether a monopoly existed in fact in 1912, which is the issue to be decided. The purposes of the Company may properly be inferred from what the Company has done, but the conditions of the trade in 1912 cannot be ascertained or determined from the intentions or purpose of the organizers of the Company in 1902. III. No Monopolization or Undue Restraint Is Shown; No Monopoly Power Exists; the Field Is Open and Trade Is Free. A. The record of the International's business conduct for ten years prior to 1912 disproves the Government's charge that the Company has monopolized the domestic trade in harvesting machines and other farm implements; and proves that the International has not used or at- tempted any monopolizing methods. The Petition's charges of monopolization were specific and severe — (a) excessive prices, (b) local price-cutting to destroy competitors, (c) purchases and organization of other companies to monopolize new lines, (d) use of switching railways to secure rebates, (e) the policy of maintaining a patent monopoly in harvesting ma- chines, and (f) the monopolization of local dealers by means of exclusive contracts and coercive methods. On not one of these except the last did the Government offer any proof. 78 The Government's own evidence showed that no coer- cion or trade warfare had been used to induce the sales of properties to the International. The purchases were made for proper business reasons, no purchased plant was dismantled or abandoned, but each was developed and enlarged. THE TRANSITIONAL PERIOD — 1903 AND 1904. Upon the organization of the International Company it was confronted with the problem of marketing its prod- ucts. Because some states excluded corporations with a capital as large as the International's and others im- posed license fees based upon the entire capital stock, it was found necessary to organize a selling company. Ac- cordingly, in September, 1902, the name of the old Mil- waukee Company was changed to "International Harves- ter Company of America" and this company undertook the sale and distribution of International machines. As the appraisals of the McCormick, Deering, Champion and Piano properties were not completed until the fall of 1903, and as this and the other steps necessary to the final determination of the amounts each vendor was to receive for his properties took much of the time of the management, the unifying and perfecting of the selling organization was delayed until October, 1904. Mean- while, the sales organizations as taken over from the old companies with their branch houses or general agencies, were temporarily continued under the name of "divisions," each handling its separate line of har- vesting machines. Thus the ' ' McCormick Division ' ' han- dled McCormick machines, the "Deering Division" di- rected the sales of the Deering line, and so on ; so that until the fall of 1904 the International Harvester Com- 79 pany of America conducted its selling operations through the five divisions. Each division was largely in charge of the men who in 1902 and prior years had directed the sales of that particular line of harvesting machines. There- fore, the seasons of 1903 and 1904 were a period of tran- sition and reorganization and the first task of the new management was to harmonize five separate sales organ- izations that had recently been in constant and some- times bitter antagonism, and to find a way to unify those forces, select the more efficient, and thus establish the business policy of the International. These division sales organizations, which were tem- porarily continued, naturally represented various busi- ness policies and practices. As a sort of a clearing house, a sales committee was formed, composed of the heads of the five sales divisions. This committee met frequently to prevent and to harmonize conflicts, to make reports to the executive officers, and, by circular letters to the general agents of the five divisions, give instructions to the field force. A hundred or more of the sales commit- tee's reports, 1942 circular letters, and more than 2,000 pages of other records were produced at the Govern- ment's request. They present a clear and frank record of the confusion and difficulties attending the organiza- tion of the Sales Department upon an efficient, econom- ical and business-like basis. From these documents the Government selected every word and fragment which tended to sustain the various opprobrious charges of the Petition. They constitute a considerable part of the Government's evidence. Taken as a whole, they reflect rather the conditions of the har- vester trade when the International was formed, than 80 the policies of the new company. For example : several of the divisions, notably the Piano and Champion, were very insistent on securing exclusive representatives for their respective harvesting machines. It had been cus- tomary in the harvesting machine trade almost from the beginning to sell the goods on commission under exclusive agency contracts providing a penalty for handling any competing machines. Such a contract was adopted by the International during the early years, but was en- tirely discontinued after 1905, though thereafter con- tinued by some of its competitors. The record further discloses a very natural desire on the part of the men in charge of these separate divi- sions to develop and show great energy in increasing the sales of that particular division, and of the sales committee unitedly to make a sales record for the new organization, in the hope that in the perfected organiza- tion in which necessarily the divisions would be abolished, they might secure a prominent place. It is to the abuses that under these conditions occasionally appeared in the earlier years, that Judge Hook referred when he said that some "petty dishonesties were tracked in at the start, mostly by subordinates who had been in the serv- ice of the old companies, but they were soon gotten rid of." (1,92.) THE GOVERNMENT'S 22 DEALER WITNESSES AS TO COERCION. The Government called twenty-two local dealers from nine western states to prove twenty-two instances, dur- ing ten years, of subordinate employes of the Interna- tional trying to use "coercion" instead of salesmanship to promote their employer's business. 81 The particular charges sought to be substantiated were (a) that the International enforced exclusive agency con- tracts, thus preventing its agents from handling com- peting goods, and (b) that the company coerced dealers into handling its "new lines" by threatening to take from them the handling of the old lines. These twenty-two witnesses each told of a single instance of some Inter- national representative insisting upon an exclusive agency, or of larger purchases of the "new lines"; and letters of one general agent urging a blockman to insist upon larger purchases of new lines, were introduced. The results of those attempts furnish conspicuous proof that the International had not the power to coerce the local dealers or monopolize their trade: Out of the twenty-two attempts the International secured four ex- clusive agents and lost the trade and good-will of the other eighteen dealers to its competitors : the Acme gained 12* exclusive agents, and the Johnston gained 3f . That was the Government's total showing of coercive methods gleaned from the vast fruitful field for misun- derstandings and complaints furnished by ten years' business transactions — embracing 400,000 settlements, with more than 40,000 local implement dealers for nearly 1,000,000 grain binders, 1,500,000 rakes and 2,000,000 mowers sold to 2,000,000 farmers in the United States. And the International's representatives in this business have consisted of 100 general agents, and 2,000 blockmen and canvassers, with a total field force of 4,000 men. Such a showing by the Government, even if there were no other evidence, would prove (as the lower court found) *Bohnen (I, 460), Borgman (I, 445), Brown (I, 458), Dale (I, 453), Goldammer (I, 458), Green (I, 427), Hagen (I, 455), Hull (I, 457), Jones (I, 456) sold 100 Acmes in 1912, McDougall (I, 465), Sal- laska (I, 433), Schwope (I, 417). fLee (I, 460), Simmons (I, 411), Weyland (I, 401). 82 that the instances were "sporadic" and exceptional, and did not represent the policy of the International.* 823 LOCAL IMPLEMENT DEALERS TESTIFIED FOR THE INTERNATIONAL. But the Company did not rest its defense upon the weakness of the Government's showing. It called 823 local implement dealers from 24 leading agricultural states to demonstrate beyond question that the Interna- tional had not, by exclusive contracts or otherwise, coerced the local dealers, or monopolized the trade in harvesting machines or in any other farm implements, — as the Petition charged. These 823 implement dealers were typical of the men engaged in the agricultural machinery trade. They were representative merchants of their communities. The list includes present and former presidents of the Na- tional, the "Western, the Illinois, the Iowa, and the Wis- consin retail implement dealers' associations, as well as bankers, mayors, county officials, members of state leg- islatures and other prominent citizens. They came from all sections of their states and spoke with a knowledge, not only of their individual business, but of the general conditions in the implement trade. If the International had adopted a policy of monopo- lizing the local implement dealers or coercing them, or of attempting so to do, or if it had monopolized or had attempted to monopolize the agricultural implement trade, these local dealers would have known of that policy * Judge Smith's opinion states : "While the evidence shows some instances of attempted oppression of the American trade by the International and the America com- panies, such cases are sporadic and in general their treatment of their smaller competitors has oeen fair and just." (I, 82.) 83 and of those facts. They were the necessary agencies and channels of such a policy. If the International had attempted by unfair or oppressive methods to monopo- lize that trade, these dealers would have known it. They denied all such charges of the petition, and their testi- mony is a complete and convincing refutation of them. The testimony of these dealers was printed in extenso in the record in the District Court and occupied about 4000 pages. In condensing the record in compliance with the equity rules, the testimony of 63 out of the 823 deal- ers (chosen arbitrarily by taking the first names on the entire list when arranged alphabetically by states) is given in full. (II, 752-835.) Then follows the testimony of 10 dealers who handled no International harvesting machines. (II, 835-842.) Then follows the testimony of other dealers who had special knowledge or experience on particular points or were selected by the respective counsel. (II, 842-880.) Opposite page 880 of the record is a summary of the testimony of all these 823 dealers, followed by a complete list arranged alphabetically by states, with an analysis of the testimony of each upon pertinent points. From this it appears : (a) That the total volume of business of 748 deal- ers (all who testified on this point) was $41,382,715, or an average annual business of about $55,000 each, and in farm implements, vehicles and twine of about ),000 each; (b) That of their total business in farm imple- ments, vehicles and twine, only about one-fourth was in International goods of all kinds ; (c) That 73 of these dealers handled competing binders or mowers or rakes while handling the Inter- national harvesting line between 1903 and 1905, in- clusive; and 84 (d) That 498 of these dealers handled competing binders or mowers or rakes or twine, while handling the International line, between 3906 and 1913 inclu- sive; (e) That 425 witnesses — all who testified on this point — stated that the dealer fixes his retail prices. All the dealers except ten handled International harvesting machines or twine; and all of them handled implements made by the International's competitors. Obviously these were of the class of dealers, therefore, upon whom coercive measures would have been used, if such had been the International's policy. NO COERCION ATTEMPTED OB POSSIBLE. These dealers testified that no attempt at coer- cion had been made with respect to the goods they should handle or buy, and that the International could not have succeeded in any such attempt if it had been made; that the result of any such attempt would have been that the International goods would no longer have been handled by them — that it would have lessened, not increased the International's sales. Among these 823 dealer witnesses, over 500 had at various times during the past 10 years handled without objection competing binders, mowers, rakes or twine, while handling similar International goods. They thus demonstrated by the facts of their business, as well as by their statements on the specific point, that the Interna- tional did not and could not exercise any coercive influ- ence against the business of competitors. 85 TYPICAL TESTIMONY OF IMPLEMENT DEALEBS. As illustrating the tenor of all, the testimony of a few of these dealer witnesses from different States is here given at length : W. J. Howard, Shaller, la. (first witness for the de- fendants, March 5, 1913, at Omaha) (II, 842) : I am a member of the Iowa State Retail Implement Dealers' Association; have been presi- dent two years, vice president two years and direc- tor three years. I handle * * * the Deering and McCormick binders and mowers, the Standard mow- ers, made by the Emerson-Brantingham Co., and have handled those mowers 25 years; * * * I handle hay rakes, hay loaders, manure spreaders, gasoline engines, corn shellers, threshing machines, disc harrows, seeders, drills, corn planters and wagons that are manufactured by competitors of the I. H. Co. * * * My aggregate sales of agricultural implements per year run from $35,000 to $50,000. They vary ac- cording to the crop. About 20 to 25% of my aggre- gate sales of implements consists of implements manufactured by I. H. Co. ; about 7 to 8% consists of binders and mowers. No one representing the I. H. Co. ever said to me that I must abandon the selling of this competing mower or I could not handle the harvesting ma- chinery of the I. H. Co. ; * * * that unless I quit handling these implements that are manufactured by competitors * * * I could not handle harvest- ing machinery of the I. H. Co. If they did, I be- lieve I would tell them that they could not run my business and they could take their line of goods. I have an extensive acquaintance with retail im- plement dealers of Iowa. If the I. H. Co. said to the retail implement dealers of Iowa, "You will have to quit selling any goods of our competitors or you cannot handle our goods," I think 90% of the deal- 86 Testimony of implement dealers (Cont'd). ers would tell them to take their goods, tell the In- ternational to get out, that they could get some other lines. There are several other lines made. The course of prices in the farm implement busi- ness in the last ten years — binders have advanced a little, about 5%. Mr. Grosvenor: I tvant to note my objection on the record; that all testimony of this character is clearly irrelevant, incompetent and without bearing upon the issues; if of any value at all, it is only of economic value. (II, 843.) Mr. Howard: The hay and plow goods — small goods as we call them — have advanced from 10 to 15%. Buggies and wagons have advanced more, buggies about 22% and wagons about 30% in the last 10 years. The prices of cultivators have advanced 10 to 12%. The binder has advanced in price less in proportion than any other agricultural implements. In the last 10 years all harvesting machinery has been improved, made lighter and more convenient; more malleable iron instead of gray iron. * * * It makes it much more durable and reliable so that the farmer does not have to have repairs. * * * That is particularly true as to binders and mowers. The condition of the farm implement business to- day, as compared with the condition of the farm implement business 10 years ago, so far as it af- fects the farmer, is much better for the farmer. He gets so much better service; his machines are more durable, he can get repairs quicker and the machines are more convenient and easier to operate. From the I. H. Co. we do not have any expert as- sistance except on gasoline engines ; we do not need any. * * * "When there is trouble the farmer com- plains. * * * w e (j no t receive one complaint 87 in ten now that we did ten years ago. The quality of the machines is improved so much. Eetail dealers fix the prices at which harvesting machinery is sold to the farmers. * * * I am a farmer as well as a retail implement dealer. I was on the farm seven weeks last summer, my own farm. We farm about 1180 acres * * * in Lyon County, Minn. * * * I have been familiar with farming practically all my life. I was raised on a farm. * * * I have a farm in Iowa, a half section. I rent that for cash. * * * * * Competing harvesting machinery is sold by dealers near Shaller, la., so as to come in com- petition with me on the west six miles and a half at Galva. There is one dealer over there who handles the Deering mower and binder and the other handles the McCormick mower and binder and the Dain mower. On the east of me at Early, Iowa, there is a dealer that handles the Deering binder and mower and the Dain mower ; and there is also another firm there that handles the line of the Independent Har- vester Co. made at Piano, 111. At Storm Lake they handle the Acme and the Deering and McCormick. Re-cross Examination. * * * There are five dealers at Storm Lake. The place is about 2200 or 2300, I think. One han- dles the Deering lines, one the McCormick lines and another the Osborne lines, one handles the Acme and the other the Independent. * * * They sold quite a number of Acme. * * * The Acme has been doing business there about eight or ten years. ' ' W. E. English (II, 865) : I have been engaged in the hardware and imple- ment business at Huron, Kan. 17 years. My aver- age total business runs about $12,000, of which $6,000 or $7,000 is in implements. In the last 4 years my business with the International has been about $2,500 a year. My annual business in binders, mow- ers and sulky rakes is about $3,000 to $3,500. I han- 88 Testimony of implement dealers (Cont'd). die International, Acme and John Deere binders, mowers and sulky rakes — no, not the John Deere binder — the Dain mower. I handle the Deere wagons and manure spreaders, the Deere and Inter- national cream separators, Deere and LaCrosse plows, Deere and Roderick Lean cultivators, Deere listers, Deere and I. H. Co. gas engines, Acme and International sulky rakes, the Dain Deere sweep rakes, Eoderick Lean and Deere drag harrows, Deere and International disc harrows, Deere plant- ers and drills, Rumely tractors, Deere feed grinders and stalk cutters. The International has never objected to my han- dling the Acme binders and mowers, or the Dain mowers. I have handled the Dain mower since 1908, the Acme since 1910. Before 1898, I had the Mc- Cormick contract, * * * but before 1908 did not handle the Deere or Acme. I fix the price at which I shall sell my goods. The International has never attempted to do it. If it objected to my han- dling the Deere and Acme lines and stated to me that if I continued I could not handle International binders, mowers and rakes, I would cancel my con- tract with the International. The International has never stated that if I con- tinued to handle their binders, mowers and sulky rakes I would have to buy other goods of them. If they did I would cancel my business with them. Cross-Examination. I am the only dealer at Huron. I sold 5 Acme binders last year and 11 Milwaukees in the Interna- tional. Sold no others of International make. * * * In 1911 sold 5 Acmes and 5 Internationals; 4 were Milwaukees and 1 McCormick. In 1912 I paid $105.50 for a 7-ft. Milwaukee ma- chine; $3 for transport trucks and $12 for tongue trucks. I paid the same price for the Acme. The price on the Milwaukee was not lower than the reg- ular price. It was the contract price of 1912. In the 89 territory around Huron where I sell binders all were of International make up to 1908. In 1910 the bind- ers were all International. Since that time it has been an even break until last year. Then it was about 50% of the Acmes. The dealer at a town close hy had handled the Acme. Through some mis- understanding with the company he gave it up. That left several machines bordering on my territory without repair facilities. I was solicited by the farm- ers that had them to take on the line, and I took it up with the Acme people who granted me the con- tract. In 1912 I sold 5 Dain mowers, 1 McCormick and 1 Acme. In sulky rakes it is about an even break; there have been very few sweep rakes. It is hard to state what per cent, of twine has been In- ternational. We have competition with Penitentiary twine. There has not been a corn binder sold there for 7 years. The sweep rakes that have been sold there in the last few years are Dain, principally. I have sold 1 or 2 Acmes. The Dain and Acmes had 100%' of the business in siveep rakes there in the last years. J. W. Patterson (II, 853) : I am mayor of Kearney, Neb. Business, farm im- plements and field seeds for 10 years there. My ag- gregate business per year fluctuates from $110,000 to $140,000. It is probably $75,000.00 a year in farm implements. Handle the Deering line of harvesting machinery made by the I. H. Co. Of farm implements made by competitors of the International, I handle John Deere 's line almost ex- clusively. That applies to ground tools, stackers, sweeps and to the general line such as cultivators, listers, planters, drills, plows of all kinds, vehicles, buggies, wagons, though we handle some Interna- tional wagons, the Weber. We stick closely to the John Deere on tillage implements and on their gen- eral line outside of harvesting machinery. In the cream separator line we have quite a trade from the Empire people and the DeLaval, both of them com- petitors of the International. 90 Testimony of implement dealers (Cont'd). Of the $75,000.00 of annual business, probably $30,000.00 to $35,000.00 is represented by goods of the I. H. Co. I judge the harvesting line, binders and mowers and hay rakes, would be $10,000.00 to $12,000.00— possibly running a little higher at times. We sell the International engine line ; that is quite an item. We sell them almost exclusively, but not en- tirely so. Nobody on behalf of the International ever inti- mated to me that I could not handle their harvesting line, unless I refused to handle the goods of com- petitors. There has not been any attempt to coerce our choice in the purchasing of goods. We are just as free to buy or refuse to buy of the International as of John Deere. If the attempt were made by the International to coerce our choice in purchasing, if we were told that we could not handle their harvesting line unless we took their full line exclusively, I should be very much surprised at such a proposition and should certain- ly decline to consider it for a moment. I should let the International harvester goods go. The trend of prices during the past 10 years has been generally upward. The advance in binders, I think, has been less than other lines, unless it would be the plow line, — and as little as in that line. There has been in the past 12 years a constant im- provement in harvesting machinery. The machines have been made more dependable, durable, of lighter draft and are handled with more ease by the users, and materially improved. That applies particularly to the Deering line with which I am acquainted and to the mowers, the hay rakes and the corn binders, which have been very much improved in the last 8 or 10 years. I think the farmer is better cared for today than at any time in the machine line because the machin- ery is more dependable. He is provided with more adequate and quick service. We do a certain amount of transfer work and we carry ample stock 91 for the surrounding country. We cover a consid- erable territory in our vicinity. Last season when a twine shortage menaced the farmer, he was cared for every moment. The binder, the mower, and the hay rake today — and this applies to machines in general — require lit- tle experting. They are made of such material that their dependability has been greatly increased. I get an expert, of course, very quickly by telephone or wire call. "We have not had an expert for the har- vesting line in our place of business for 7 or 8 years. The improvement in the machines has eliminated the necessity. I think we really do not appear in the field in the capacity of experts on one binder in 25. The farmer has a machine now that he can handle himself. I fix the retail price at which I sell machinery to the farmer myself. I am in a measure guided by the conditions surrounding us by competition and by what is a fair compensatory profit. The I. H. Co. does not attempt to fix for me the price at which I sell. They have never attempted to do anything of that sort. Cross-Examination. Kearney has between 6,000 and 7,000 people. There are three dealers there. I handle the Deering lines. The Gilchrist Lumber Company handle the McCormick lines. The other handles the Champion and I think he has a Piano contract, or had last year. He has the Emerson mowers and the Acme line. I don't know but he has sold a Johnston corn har- vester or two this season. I do not think there are any Acme corn binders sold. The Johnston was sold by this man Fredericks — two or three of them. The Johnston was sold in territory that touches us at Pleasanton, something like 30 sold there; probably twice as many as sold of the McCormick and Deering at that point. Not in our town but reaching my territory. I do business in 3 towns,— Kearney and 2 adjacent 92 Testimony of implement dealers (Cont'd). points. I sold about 60 corn binders. I presume the McCormick man sold 25 in like territory. I have been handling the Deering lines 10 years. I have handled, during those years, Crown mowers and Acme headers. * * * I sold about 15 Crown mowers in 1903 and '04. Except for those, I have only sold harvesting implements made by the I. H. Co. The price of standard plows has advanced very little and there has been a great deal of competition in that character of plows in the last 10 or 12 years. The John Deere Plow 'Co., the Parlin & Orendorff and the Oliver Plow Co., the Moline Plow Co. and numerous others manufacture that type of plow. Re-direct Examination. The plow costs something between 6 and 7 cents per pound and some of them, as high as 10 cents a pound. A 6-foot binder would weigh about 1,600 pounds, the tongue truck 200 and the transport probably 90 to 100, an aggregate of 1900. The price of that binder to the dealer with the transport and these features would be approximately 6 cents per pound, so that I think the binder is sold at less per pound than the plow. There are infinitely a greater number of parts to this binder than there is to the plow. The binder is a complicated and intricate piece of machinery with a great many parts. It is in the thousands. This binder made of more than 1,000 parts, this complicated machine is sold to the dealer at less per pound than some plows ; in fact I think as cheap per pound as any plow and cheaper than most. Fred Bott (II, 867) : Have been in the implement business at Spring- field, Minn., since 1887, not for myself until 1901. That has been my business practically all my life. I worked 2 years for the Deering Harvester Co., as salesman, then went into the retail business in the fall of 1901. 93 My annual business is about $35,000 or $40,000, of which from $8,000 to $10,000 is with the I. H. Co., or about a fourth of my business. I handle the Deering and _ Minnesota Prison binders; Deering, Dain and Prison sulky rakes; Deering, Champion, Dain and Prison mowers ; Deering and Johnston corn binders and Deering and Plymouth twine. I handle a general line of farm implements, includ- ing^ those made by other companies and sold in com- petition with like implements of the International. I have been handling the Deere, LaCrosse, Moline, Emerson, some Rock Island and some P. & 0. The I. H. Co. has never intimated to me that I could not handle their harvesting lines unless I re- fused to handle the Minnesota harvesting machin- ery, the Dain mower and rake, or unless I bought more goods from the I. H. Co. in these other lines. Should they attempt such a thing, it would be their move and I reckon they would move. I handle and sell Minnesota Prison harvesting machinery. I am their authorized agent. I get a commission on the sale of these implements. Anybody can order them and they will be shipped directly to the farmer. The State fixes the retail price. They fixed the price last year — a stipulated price. The I. H. Co. does not fix the retail price at which I sell their goods. The binder has improved in the last 10 years. The price is not higher to amount to anything, if it is any, than it was 10 years ago, that is if you get the same thing. Of course, if you have the tongue truck and the transport truck it is higher today than it was then, because in those days it was not sold with the machine. Taking the binder by itself, the same size, the price is practically the same. As a matter of fact, the price has been about the same since about 1892. It has been about level; before that it was higher, and it came down to the present level in the early nineties. In the general line of farm implements I judge there has been a raise of from 15 to 20% in the last 10 years, varying in different articles. I think that a fair estimate, es- pecially on plows, wagons and buggies. 94 Testimony of implement dealers {Cont'd). I know of no staple farm implements which in the past 10 years have maintained their price on a level and advanced in quality as much as the binder. (II, 868) There are three dealers in Springfield, Minn., one other handles the McCormick lines, and the third the Acme. The sale of the Acme is pushed by this man * * * and beats me out too * * * at least that is what he claims. Am not in a position to claim the con- trary. C. J. Bach (II, 821) : I am in the implement, hanking and farming busi- ness at Hurley, S. D. My average business in farm implements amounts to about $20,000, of which, in 1912, $2,000 to $2,500 was with the I. H. Co. I han- dle the McCormick binder, mower and hay rake and the Thomas mower. I handle a general line of farm implements outside of harvesting machinery, includ- ing those made by other companies and sold in com- petition with like implements of the International. Last year we bought Mitchell-Lewis wagons, Stoughton wagons and a car of wagons from the In- ternational which came in for next fall's use. We have sold the Moline Plow Co., manure spreaders. Are not selling them this year. We buy the most manure spreaders in the fall. Last year we sold the Fuller & Johnson and Waterloo gas engines, the Eock Island and Moline disc harrows, and the Mo- line drag harrows. The I. H. Co. has never intimated to me that I could not handle their harvesting machinery if I did not refuse to handle this other mower or increase my purchases from that company of its other lines. The International has never attempted to coerce my action as a dealer in purchasing either from that company or from any other company. Should they attempt that, I would cut them out absolutely. The 95 man who would make such a proposition to me I would throw out of the office if I was able. Last year the Acme and Deering lines were han- dled at Hurley. I come in competition with towns around Hurley. The Independent line is handled at Viborg, eight miles from Hurley, and the Acme is handled at Parker, ten miles north of us, and the dealer there handled the Acme binder last year, and I think the Dain mower and the Johnston corn binder. I think the Acme was handled at Viborg, and I think there were some John Deere binders there last year but I am not sure. I was informed twelve were sold. These dealers solicited farm- ers to buy harvesting implements. There is ac- tive competition in the harvesting trade there. Have been in business twenty-nine years. "Was a member of the Legislature the first two sessions and a member of the House of Representatives from my county. I was Commissioner of Schools and Public Lands of this State in 1902 and 1904. Served four years at Pierre. G-EOBGE H. BlNGENHEIMER (II, 803) : I am in the lumber, farm machinery and grain business at Mandan, N. D., and my average business in the three places I have is about $270,000. I have a branch at Sweet Briar, and another at Judson. I handle agricultural implements at all three places. The annual volume of my agricultural implement business at the three places is between $50,000 and $60,000, of which 30 per cent, is done with the I. H. Co. I handle the McCormick binder at Mandan and Sweet Briar, and the Deering at Judson. I handle the McCormick and Dain sulky hay rakes at all three places. I handle the McCormick, Deering, Dain and Thomas mowers. I handle a general line of farm implements, sold in competition with I. H. Co. goods— including the John Deere, Minnesota Moline Plow Co., Grand De- Tour and Kingman lines. The I. H. Co. has never intimated to me that I 96 Testimony of implement dealers (Cont'd). could not handle their harvesting machinery unless I quit handling the Dain mower and rake or the Thomas mower, or bought more goods of them in these other lines. Should they attempt to impose that condition on my handling their harvesting ma- chinery, I would get some other line. The Acme har- vesting line is handled at Mandan by the Mandan Mercantile Co. It is actively pushed, and the com- petition is strong. The farmers are solicited to buy. Cross-Examination. The business in binders and mowers in our terri- tory is about equally divided between the Deering, McCormick and Acme. Their line is very strong there. The Mandan Mercantile Co. handles the Acme there, and at some 20 odd places. William Belcher (II, 797) : I have been in the implement business since 1884 and at York, Neb. since 1897. My annual sales of implements average from $15,000 to $20,000. I han- dle the Deering binder and mower and twine, and some Osborne disc harrows. I handle the Rock Island, Janesville, the Mon- mouth, Studebaker and Hercules goods, and what we call the Old Hickory. About 25 per cent, of my total sales are International goods. The John Deere binders and mowers are handled in our town and the Acme has been, and the Johnston. I certainly fix the retail price on all goods I han- dle. The International Company never dictated to me, never said to me that if I did not handle lines other than binders and mowers that I could not han- dle their binders and mowers. If they tried to influ- ence or control the management of my business I would not buy from them. I would go into the mar- ket and buy other goods. The Deering binder is a great deal cheaper today than it was when the Deering people sold it. They 97 have tried to improve tlie binder and mowers and have improved them wonderfully and they give a great deal better satisfaction to the farmer and the trade is a great deal better satisfied. The reel is a particular improvement. Cross-Examination. There are three dealers in York, besides myself. The peering, McCormick, Johnston, Acme (I am not certain about this year now) and the John Deere harvesting implements are handled. In the last few years, fifty per cent, more binders and mowers of the International were sold than of the others. This last year there were not that many sold by the International. * * * John Deere came into the trade last year and cut a large figure. Be sold about 33 as I hear it. * * * The foregoing testimony is typical of the evidence given by all the 823 local implement dealers : — Complete freedom in their business with respect to the goods they handle and the prices at which they sell, and no attempt or power by the International to use coercive methods. B. The International has no power to monopolize or unduly restrain trade in harvesting machines or other agricultural implements. The abstract question as to whether the International Company has the power to monopolize or unduly re- strain trade in agricultural implements is not an issue in this case. The Company had been in existence and car- ried on business for ten years before the Petition was filed. The Petition is not based upon any unexercised power of the International Company, nor upon antici- pated wrongs or injuries, but upon distinct charges of wrongful business methods, accomplished monopoly and the resulting evils, to prevent which the anti-trust stat- 98 ute was passed. But although this question of the power to monopolize is not an issue in the case the record is not silent in regard to it, but furnishes full, complete and convincing evidence that the International Company does not possess the power to monopolize or unduly re- strain trade in any branch of the agricultural implement trade. Judge Hook in his concurring opinion uses the word "dominance" as applied to the International Company's position in the harvester trade, but no reference is made in this opinion to any acts done or results accomplished which are characteristic of the dominance which the law condemns as undue restraint of trade or an attempt to monopolize trade. Judge Hook in his opinion clears the company of all the monopolistic and unlawful business methods and policies charged in the Petition. It is evi- dent that by the word ' ' dominance ' ' in his opinion he only refers to the International's large percentage of the har- vester trade. 1. THE INTERNATIONAL'S PERCENTAGE OF THE HAR- VESTER BUSINESS HAS CONSTANTLY DECREASED AND ITS COMPETITORS' SHARES INCREASED. In 1912 the International's proportion was about 85 per cent, of the trade in binders ; 73 per cent, in mowers, and 67 per cent, in rakes 1 — or an average of 75 per cent. But the International's per cent., instead of in- creasing during the past ten years, has year by year decreased, from an average of about 88 or 89 per cent, in 1903, 2 — while, at the same time in each line, the share of its competitors has, in like measure, increased. •The complete figures for 1912 are lacking. The figures for 1911 are 67.79. 2 The actual figures for 1903 show the per cent. 91.6; but the Acme's binder sales are lacking for 1903, and its mower and rake sales for 1903 and 1904. 99 For 1913 the sales of the Acme, Adriance-Platt, Deere and Minnesota Prison exceeded their sales for 1912 by 6,676 machines, or a 33^ per cent, increase. Assuming that the other companies' sales were the same as in 1912, the International's share of binders in 1913 was only 81 per cent. In mowers the figures of only four competitors are given for 1913, but they show an increase in sales over 1912 of over 12 per cent. The sales of all the competitors in 1912 had largely increased over 1911. Therefore the Interna- tional's share of mowers in 1913 may be safely estimated at about 70 per cent. Similarly its share of the rake trade in 1913 was certainly not over 65 per cent. So that, in 1913, its share in the harvesting machine trade had declined to an average, on the three lines, of approx- imately 71.6 per cent. And its business in all harvester lines in the U. S. was only 31 per cent, of its total -busi- ness in 1912. The International's large share of the trade in har- vesting machines has been well known to the Government and the public ever since 1902, and has never been denied by it, though its precise percentages were unknown until the evidence was taken in this case. The Government, in its Petition, recognizes that the International's large share of the trade in the har- vester lines does not, of itself, constitute a restraint or monopolization of trade, for it does not rest its case on that ground. The Petition charges that, through exclu- sive contracts and the oppressive use of the Interna- tional's popular brands of machines, the local dealers have been coerced into refusing to handle competing har- vesting machines, and competing "new lines;" and that, by wrongful and oppressive trade practices and a patent 100 monopoly, competitors and competition have been elim- inated, and a monopoly lias been created and maintained. The Answer admits that the companies whose properties the International acquired were making and selling about "80 to 85 per cent, of such harvesting machinery" (1, 40) ; and that it now has about 70 per cent, of the trade in grain binders and 60 per cent, of the trade in mowers (I, 63). Instead of seeking to take judgment upon de- fendants' Answer, the Government made an exhaustive investigation of all the corporate records, circulars, cor- respondence and business dealings of ten years through- out the western country, to find, if possible, some sup- port for its opprobrious charges of monopolization, — some acts of unfairness or wrongdoing by subordinates. Discharged and discredited employes were given oppor- tunity to vent their hostility; and the whole field of the International's competitors in the "new lines," as well as in the harvesting machine lines, was searched for evi- dence of the wrongful and oppressive practices which the Petition charged. The Petition charged — and the Government undertook to prove — a continuing and systematic policy on the part of the International to increase its trade in the harvest- ing machine lines by unfair and oppressive means. The attempt to establish wrongful practices completely failed. But there is no question upon the record of the Interna- tional's constant activity and enterprise fairly to extend its trade in all the goods it makes. Therefore, on the question of its power, the first and significant fact is that its share in the trade in the har- vesting machine lines has constantly decreased — not in- creased — while there has been no substantial increase in prices. 101 2. EXPANSION IN "NEW LINES" NOT SECURED BY COERCION. The second fact is that its growth in the "new lines" is shown to be attributable to its enterprise and energy in developing trade, and not to its alleged mo- nopoly of harvesting machines. Consider the specific facts concerning the charge that the strong harvester lines were used to force the dealers to buy the International's new lines. In 1908 the America Company had 31,758 dealers han- dling International harvesting machines. The largest number of dealers handling any new line was 6,417 on manure spreaders, or 20% of the number of dealers han- dling its harvesting machines. That was the third sea- son in that line. On May 31, 1913, with five years of active "monopolizing," the total number of dealers han- dling International manure spreaders was 5,214, or 1,203 less than five years before. So in cream separators. In 1908, which was only the third season in selling this new line, the International had 3,495 local dealers selling separators, as compared with the 31,758 dealers handling its harvesting machines. Five years later the number of dealers handling sep- arators had increased only 518. And in the harvester lines themselves in those five years of "monopolization" the number of dealers handling them had decreased over 2,000— from 31,758 in 1908 to 29,500 in 1913. Using the latter figure as a basis, there were only 7.6% of those dealers handling side delivery rakes, only 7.5% handling hay loaders, only 5.5% handling sweep rakes, 9.1% handling corn shellers, 17.7% handling manure spreaders, 15.3% handling 102 wagons, 13.6% cream separators, 19.5% handling engines and tractors and 36.8% handling disc harrows. Only in harrows is the per cent, of dealers handling the new lines above 19.5%. (II, 1364.) Bemember that these new lines are sold against com- petitors just as strong as the International, — like the John Deere, Moline Plow, Emerson-Brantingham and Massey-Harris Companies. COMPARISON OF HARVESTER AND NEW LINES SALES. In the eastern territory the total sale of harvesting machines in 1912 was $5,000,000. In the northwest ter- ritory, it was two and one-half times as much — $12,800,000. In the "new lines," the sales in the East were $4,916,000 and in the Northwest the sales of new lines were only $5,273,000. Thus, while the binder sales in the Northwest are two and a half times the binder sales in the eastern territory, the new line sales- in the Northwest are only 7 per cent, larger than the new line sales in the East (II, 1366). The General Agency which sold the largest number of binders in 1912 was Minot, N. D.— 3,281 binders. Al- most the smallest sale was at Birmingham, Ala., where only 150 binders were sold. Compare with these the sales of engines and wagons at those two agencies. At Minot only 100 engines were sold; at Birmingham 272 engines were sold — or nearly twice the number of binders sold there. In wagons Minot sold only 961 against its 3281 binders ; while Birmingham, with a sale of only 150 binders, sold 3134 wagons — or 20 wagons to each binder! (II, 1405.) Furthermore, the share of the trade in the "new lines" which the International has secured is not large. The 103 precise figures were not shown by the Government, but estimates were given by competitors. Its largest share is in manure spreaders. In this machine it bought out an established business and at once, by a campaign of education among the farmers, introduced it to more gen- eral use, not only to its own benefit, but to the benefit — as they testified — of its competitors. Its share in that trade is about 40 per cent. (II, 1167, 1368.) So, in wag- ons, a well established business was purchased in the fall of 1905, and has been largely improved and developed; but the International's share of that trade is only about 15 per cent. (II, 1128.) In cream separators, gas engines and tractors, it came into the trade as a new competitor, and its share is still comparatively small : in tractors 12 to 15 per cent., gas engines 15 to 20 per cent., cream sep- arators 16f per cent. (I, 347.) 3. THE INTERNATIONAL'S COMPETITIORS TESTIFIED THAT COERCION OE THE DEALERS IS IMPOSSIBLE. The defendants called seventy-six of its com- petitors that are making and selling in the United States every line of agricultural implements man- ufactured by the International. If there were any monopolization or attempts at monopolization, the trade was taken from these competitors. They were its first victims. It could not exist or be attempted without their knowledge, or without loss to them as well as to the con- sumers. If local dealers were coerced to handle Inter- national goods to the exclusion of others, the competitors were directly and injuriously affected. They would nec- essarily know the facts and be interested in having the facts known. These competitors testified not only that the International had used no unfair or oppressive trade methods— that its competition had been clean, honorable 104 and businesslike— but, also, tbat it could not coerce the local dealers, and that any attempted coercion of them would injure the International and not its competitors. The reason is made plain by the testimony : the imple- ment dealer is a local merchant, and handles agricultural implements as every merchant handles the goods he sells, — independently, according to his own wishes, ideas and interests. He is the customer of the manufacturer, and not the agent. "While he handles some implements on commission, he fixes their retail prices and deals with their sales exactly as with the other goods which he purchases outright. The following are samples of the testimony upon this point of competitors, large and small, in all the principal International lines: Sales Manager Albekt C. Baebeb of the Moline Plow Company, who had been competing in several lines of agricultural implements with the International, said of such a policy: "There is no question but what the International would lose their good dealers." (II, 1058.) E. J. Fairfield, of Lindsay Bros., Minneapolis, North- western agents for the Johnston Harvester Company and jobbers of agricultural implements through the North- west, said: "I think they (I. H. Co.) would soon get out of the territory if they tried that." (II, 1092.) James Vietch, general agent at Sioux Falls, S. D., for the Thomas Company's line of Crown mowers and rakes, seeding machines, drills and disc harrows, said : "I would like to see them do that * * * It would be easier for us to sell our goods." (II, 1171.) 105 John L. Jones, Branch Manager, John Deere Plow Co., Des Moines, Iowa : "The majority of the dealers would tell the I. H. Co. to take their goods out of the house. The best dealers would say that, I believe." (II, 1122.) E. G. Blanton, Oklahoma Manager of B. F. Avery & Sons Plow Company, who for 7 years had been selling implements in competition with the International, said: "I think the field * * * has been open to com- petition to every one who will go after it and get it on the merits of their goods." (II, 1068.) As to attempts at coercion, he said: "I do not think it would be a successful policy for anyone. My judgment would be that they would lose business by a policy of that kind. ' ' (II, 1068.) W. C. Bbkgman, former President Maytag Co., New- ton, Iowa: "It would be very disastrous to the business inter- ests of the I. H. Co. Dealers would refuse to do business with them." (II, 1065.) W. B. Brinton, President Grand De Tour Plow Com- pany, Dixon, Illinois: "If the I. H. Co. should adopt the policy of saying to them that they could not handle harvesting ma- chinery at all unless they took on the full fine of the I. H. Co., and handled them exclusively, outside of court would say that if he was a decent respectable dealer he would tell them to go to hell. * * * In court would use more diplomatic language to the same effect." (II, 1071.) J. A. Ceaig, General Manager, Janesville Machine Co., Janesville, Wis. : "In my opinion they would lose the majority of their best customers." (II, 1079.) 106 J. E. Duncan, Branch Manager, Parlin & Orendorff Plow Co., Oklahoma City, Okla.: "In my judgment I do not think they (dealers) would stand for it. I think it would ruin the busi- ness of the International." (II, 1086.) Henry L. Pierce, Branch Manager, Emerson-Branting- ham Co., Minneapolis, Minn. : "In the great majority of cases they would tell them to take the whole stuff,— all the goods." (II. 1137.) George A. Stephens, President Moline Plow Co., Mo- line, Illinois: "The effect would be that we would get more of the International trade. It would be a losing propo- sition for the I. H. Co. They could not successfully enforce such a policy." (II, 1160.) Lewis T. Yount, Local Manager, Oliver Chilled Plow Works, Kansas City, Mo. : ' ' The dealers would tell them they could get along without them. That is true of all the strong dealers and the men who really do the business. ' ' (II, 1176.) TESTIMONY OF OFFICERS OF DEALERS' ASSOCIATIONS. In addition to the competitors, the defendants called several dealers whose experience with the retail trade in agricultural implements was quite similar to that of the competitors. They were or had been prominent offi- cers of the Eetail Implement Dealers' Associations of their state or section, or of the National Association. They therefore had special knowledge as to the effects of a policy of attempted coercion. The testimony of three on this point is given here. 107 Howard, W. J. (II, 842-3) : "I have been engaged at Shaller, la., in the im- plement business, farming some, and banking some for 30 years. I am a member of the Iowa State Re- tail Implement Dealers ' Association ; have been pres- ident two years, vice-president two years and di- rector three years. * * * I have an extensive acquaintance with retail imple- ment dealers of Iowa. If the I. H. Co. said to the retail implement dealers of Iowa, 'You will have to quit selling any goods of our competitors or you can- not handle our goods,' I think 90 per cent, of the dealers would tell them to take their goods, tell the International to get out, that they could get some other lines. There are several other lines made." Gossard, 0. (II, 848) : "I live at Oswego, Kan. * * * I am a mem- ber of the Western Retail Implement Dealers' Asso- ciation. I have been director and president of the association and have attended the meetings. I have been, and am now, president of the National Asso- ciation. By virtue of my membership in these asso- ciations, my activities in the work of the associations, and my presence at the meetings, I am well ac- quainted with a large and representative number of the implement dealers of the territory comprised in the Western Association. In the meetings of the National Association I have become acquainted with a large number of implement dealers throughout the country. In my judgment, based upon the way I feel in regard to it, and expressions from other deal- ers, if the International should adopt and try to en- force a policy of coercing implement dealers, they would discontinue the sale of the International line." Wiles, T. G. (II, 851-2) : "I reside at Cherokee, Kan. * * * I know quite a good many of the implement dealers of Kan- sas. We have an association called the Western Re- tail Implement and Vehicle Dealers' Association. The membership of that association is included in the states of Missouri, Kansas, and Oklahoma; we have members, too, scattered in other states : Illinois, Nebraska, Colorado, Texas and Arkansas. I am a 108 member of that association and served several years on the Board of Directors, and one year as presi- dent, and one year as vice-president. This associ- ation meets once a year in annual convention and there is a large attendance. There is also a National Association called the National Federation of Eetail Hardware and Imple- ment Dealers. That is made up of representatives of the various local associations throughout the coun- try. These local associations send delegates to the National Association which meets once a year. A number of years I was on the Official Board of the National Association, one year as vice-president and one year as president; and then I was put back on the Official Board and am a member at this time. From my participation in the meetings and my offi- cial position, I have met and become acquainted with a large number of implement dealers throughout the country. In my judgment, if the I. H. Co. should attempt to coerce their actions as dealers, the majority of the dealers would simply cut out the International line, just the same as I would do. I know the class of men who are sent as delegates to the Federation are not men who would submit to dictation, and have no reason to think that the members of their asso- ciations would look upon the matter any differently. They simply wonld not submit to it." 4. EIGHT HUNDRED AND THREE IMPLEMENT DEALERS TESTIFIED THAT THE INTERNATIONAL HAD NOT AT- TEMPTED, AND HAD NOT THE POWER, TO COERCE THEM. The Petition charges that the International has mo- noplized the harvester trade through its monopolization of the implement dealers. The testimony in the record clearly establishes, not only that it has not monopolized the dealers and has not attempted to do so, but also that it has no power so to do. Eight hundred and three local dealers from twenty- four Central Western states testified directly that the In- 109 ternational had not attempted to prevent them from han- dling competing harvesting machines or to coerce them into increasing their purchases from the International or to exclude or restrict their purchases from com- petitors ; and that, if any such attempt should be made, it would result in the dealers' ceasing to handle the International's goods. The following are examples of their testimony upon this point : W. E. Aldebson, Virden, 111. (II, 754) : "If they made such a condition to my handling their harvesting machinery I would have to say, 'Boys, I am very sorry, but I will have to tell you good-by. ' " T. A. Bass, Canton, 111. (II, 756) : "If they should make that a condition to my han- dling their harvesting machinery, I would not handle them, that is all. I would handle some other lines." Peed H. Haems, Momence, 111. (II, 926) : "I would tell them the same as I did the McCor- mick people in '94 — to take their stuff and take it." Cable Betzneb, Peru, Ind. (II, 758) : "If it should make that a condition to handling their harvesting machinery I would discontinue their line." J. B. Leonabd, Wakarusa, Ind. (II, 929) : "Would not permit the International to force me to buy something I did not want. ' ' Geoege W. Aemfield, Bedfield, Iowa (II, 760) : "They have never tried to coerce me as a dealer. If they did try it, it would not go. ' ' E. P. Aemknecht, Donnellson, Iowa (II, 761) : "The I. H. Co. have never said that I could not handle their harvesting machinery unless I quit han- 110 Testimony of dealers as to power to coerce (Cont'd). dling the Dain mower, or unless I bought more goods of the I. H. Co. If the I. H. Co. should attempt to impose such a condition I would quit them." Geoege C. Buckley, Menlo, Iowa (II, 764) : "If they ever did try to coerce me I would not buy. I would 'get my Dutch up.' " A. E. Achterberg, Lincoln, Kan. (II, 766) : "Should they attempt that I would tell them to take their goods out of my place of business. Would not stand for it. ' ' W. C. Allison, Muscotah, Kan. (II, 767) : "They have never attempted to coerce my action as a dealer in purchasing from them or anybody else ; They could not do that if they tried. I would not handle them, that would be all. ' ' Eoy E. Anderson, Garnett, Kan. (II, 769) : "They have not attempted to coerce my action as a dealer as to whom I should buy from or sell to. Should they attempt to do that I would quit them." J. G. Bachelor, Cuba, Kan. (II, 771) : ' ' They could not do it if they tried. ' ' S. H. Franklin, Glasgow, Ky. (II, 772) : ' ' I think our company would cut them out entirely if they attempted to force it on us. They have never intimated anything of that kind." M. A. Doyle, Westminster, Maryland (II, 774) : "The I. n. Co. could not force me by threat or intimidation to purchase additional goods from them or diminish my purchases from competitors." Walter D. Boss, Worcester, Mass. (II, 775) : "If they should attempt such a thing I would re- fuse to handle their line." Ill Jay Baldwin, New Haven, Mich. (II, 777) : "If the I. H. Co. should put that as a condition to my handling their goods it would be moving day for the International. " J. F. Follmer, Vicksburg, Mich. (II, 932) : "I would ask them to check me out, and cease handling any of their lines. ' ' A. B. Anderson, Osakis, Minn. (II, 779) : "Should they attempt to impose such conditions on me I would tell them to take out their goods and quit business with me. ' ' Jens Anderson, Windham, Minn. (II, 782) : "If they should make that a condition to the han- dling of their harvesting machinery I would tell them I would handle some other binder." E. P. Babcock, Elk Biver, Minn. (II, 785) : "If the I. H. Co. should say that as a condition to my handling harvesting machinery I would have to buy this, that or the other of their implements, the result would be I should do just what I did with one man that tried it — I quit. ' ' John Alley, Mercer, Mo. (II, 787) : "They could not do that if they tried. I would not handle their goods." B. C. Barton, Coffey, Mo. (II, 864) : "Nor has the company ever attempted to coerce my action as a dealer in purchasing from them or from anybody else, nor could they if they tried. If they tried that I would just tell them to take their goods, I don't want them." George H. Ulmer, Miles City, Mont. (II, 792) : "I would have to try and get some other line to take its place. You bet I could do that. We have propositions from other lines every year." 112 Testimony of dealers as to power to coerce (Cont'd). A. P. Andebson, St. Paul, Neb. (II, 793) : "We would have to quit doing business with the International. They have no power to coerce me. I buy from my own standpoint and conserve my own interests, just as I buy any other article that I handle. ' ' Edwabd A. Ayees, Fairbury, Neb. (II, 795) : "They have never tried in any way to coerce the conduct of my business. If they did so attempt to coerce me, I would handle the other goods." William Belcheb, York, Neb. (II, 797) : "If they tried to influence or control the manage- ment of my business I would not buy from them. I would go into the market and buy other goods. ' ' John Bbennan, Burr, Neb. (II, 863) : "The I. H. Co. never objected to my handling these Acmes or the Standard mower. It wouldn't do them any good if they did object. * * * It wouldn't do them any good, for I wouldn't pay any attention to them." Chables E. Banfield, Olean, N. T (II, 798) : "If they make such an attempt we would have to discontinue buying from the I. H. Co. We would buy the other lines." E. L. Bennett, Inkster, N. D. (II, 801) : ' ' Should the I. H. Co. adopt such policy, we would not do any more business at all with them. We would do business with somebody else." G. D. Lovell, Beach, N. D. (II, 943) : ' ' If they should make that a condition to handling their lines, would get another binder." C. L. Babb, Xenia, Ohio (II, 804) : "We are just as free to buy or to refuse to buy International goods as we are any other goods. The 113 I. H. Co. could not control or coerce me in respect to those matters at all, and never has tried to do so." James Brown, Edmond, Okla. (II, 810) : "If they should say to me that I could not handle their goods unless I quit handling goods of com- petitors, I would under no circumstances yield to their demand." Francis Baker, Everett, Pa. (II, 816) : "The I. H. Co. has never tried to control my action in either respect, and I think it could not do it if it tried." Samuel Book, Quarryville, Pa. (II, 818) : ' ' If they atempted it they would get turned down. ' ' H. 0. Anderson, Sturgis, S. D. (II, 820) : "If they did object to our carrying other lines of goods I would not carry their line at all." H. M. Bleeker, Emery, S. D. (II, 823) : "If they should say that I could not handle their harvesting machinery unless I bought this, that or the other as a condition thereof I would tell them to go down to the creek ; no matter how polite they were that is what they would get. ' ' B. T. Boylan, Armour, S. D. (II, 826) : "Should they make such a proposition I would tell them to go straight up or down with their har- vester." Jacob Hieb, Marion Junction, S. D. (II, 945) : "They could not succeed in that if they tried. I am my own boss in that line." J. M. Barnes, Elizabeth, Tenn. (II, 827) : "If they should make that a condition to my han- dling their binders and mowers, I would tell them to take their goods and go with them." 114 Testimony of dealers as to power to coerce (Cont'd). George W. Case, Purcellville, Va. (II, 830) : "We would close our account with them at once." James A. Blanchaed, Blanckardville, Wis. (II, 833) : "I would tell them to take their goods out." H. Bliesnee, Baldwin, Wis. (II, 833) : "I would cease handling their line." Joseph Mills, Waukesha, Wis. (II, 950) : "By such means they could not force me to do so or diminish my purchases from their competi- tors." James B. Watson, Fond du Lac, Wis. (II, 951) : "They could not force me to buy any of their goods, if I did not want them, by such methods. If they attempted that there would be a dissolution of business between me and the International." 5. SIGNIFICANT TESTIMONY OF DEALERS AS TO THE FREE- DOM WITH WHICH COMPETITORS SECURE TRADE IN THE HARVESTER LINES. If the harvesting machine trade is monopolized, then the International has made competition in harvesting machinery impossible, as the Petition charges. (I, 12.) But the testimony of witnesses for the Government, as well as for defendants, clearly shows that the shares of competitors in the harvester trade, as in other agricul- tural implements, changes freely according to the enter- prise, energy and salesmanship of their representatives and of the local dealers who handle their lines. We quote from the record examples of this testimony: A. H. Jones, Hastings, Nebraska (I, 456) (witness for Government) : "In 1905 we had the McCormick; we had handled it since 1901 or 1902. * * * In 1906 we took on 115 the Acme. * * * "We have been doing a growing business with the Acme since then ; sold between 15 and 35 in 1906; this year about 100." Henry Bierkamp, Durant, la. (II, 763) : " * * * I sold 11 Acme binders last year and 13 or 14 McCormicks. Sold 3 Acme mowers and 5 Mc- Cormicks last year. * * * I took the Acme and hustled and sold a lot of them, and any man who takes it and hustles can do the same. ' ' W B. Burt, Gait, la. (II, 766) : "Before the Acme was handled there all the binders were International. The Acme has gotten 25 per cent, of the binder and mower business in 2 years' time." Boy B. Anderson, Garnett, Kas. (II, 769) : "I sold 6 or 7 Johnston grain binders last year and 12 McCormick. * * * I took up the Johnston line 5 years ago. I introduced it there and found the field open for its introduction." George J. Gensman, Enid, Okla. (II, 814) : "* * * We had 3 John Deere binders and sold them and that was all we could get. It was a new binder and an experiment." H. A. Boyer, Faribault, Minn. (II, 837) : ' ' I sold 14 John Deere binders last year. The first year I handled them I just got 2. It was a brand new binder, first put on the market at that time. Have found it as easy to sell the John Deere binder as any other." George H. Carter, Windsor, Mo. (II, 838) : "There were more Acme binders sold out of our town last year than any other. Years ago the Mc- Cormick had the lead; think they were practically the only people there at that time." "Last year I sold 20 Acme binders. There are C. D. Chapman, Giltner, Neb. (II, 838) : other dealers at Giltner, exclusive implement deal- 116 Dealers testifying as to freedom with which competitors secure trade in harvester lines (Cont'd). ers. One handles the McCormick and the other the Deering. * * * I think I sold just as many bind- ers as both of the others, to my knowledge. 16 Mc- Cormicks and 4 Deerings were sold there. ' ' Heney Geosshans, Sutton, Neb. (II, 839) : "* * * I sold 15 Deere binders the last year and 21 Acme binders." John Beennan, Burr, Neb. (II, 864) : ' ' The first 5 years I suppose that I. H. Co. sold the most binders, then they sold them all. In the last 5 years the Acme has sold the most binders. 7 ' E. C. Barton, Coffey, Mo. (II, 864) : " * * * I sold 4 Standard mowers last year, the first time I had the agency for the Standard. I sold 2 Deering mowers. * * * These agents of the Acme are active, wide-awake competitors, and the International harvesting machinery in the territory I sell has about one-half the business, the Acme prac- tically the other half." W. E. English, Huron, Kas. (II, 866) : "In 1910 the binders were all International. Since that time it has been an even break until last year. Then it was about 50 per cent, of the Acmes. * * * The Dain and Acmes had 100 per cent, of the busi- ness in sweep rakes there in the last years." J. Q. CuBEiEB, Nicollet, Minn. (II, 935) : "The man who has the saloon there who took on the Acme has sold about as many as the Deering and McCormick both." G. D. Lovell, Beach, N. D. (II, 943) : "I think the Acme sold 90 binders in 1910. They have done a very successful business and demon- strated that the field is absolutely open to competi- tion." 117 T. J. Smith, Grand Forks, N. D. (II, 945) : "East Grand Forks is just across the river, and the Independent people were over there last year. They had the bulk of the business last year in the binder line in my territory. They claim they sold 90 binders to stockholders and others; principally to stockholders. * * * The John Deere binder was put on the market only a couple of years ago at Grand Forks. It is finding a market there, and com- petition is indeed active out in my territory. The proportion of the business done by the I. H. Co. has been growing less in the past 2 years." F. L. Walkek, Ellendale, S. D. (II, 949) : "The Acme people sold more goods than the In- ternational some years during the last 10 years. * * * The Acme people have sold a great many more headers than McCormick and Deering." Joseph Mills, Waukesha, Wis. (II, 950) : "There are 3 dealers in Waukesha. One carries the Deering, the other the Acme and Johnston lines. It is getting so the Acme is the principal one in my territory. * * * The Acme has been handled there, and I think last year it has 50 per cent, of the binders and mowers sold in our town together with the Johnston machinery. Acme was not represented there until 3 years ago." Representatives of competitors testified as follows : John L. Jones, Branch Manager, John Deere Plow Co., Des Moines, Iowa (II, 1122) -. "Deere binders were allotted to the different branches, in 1912, by the house. Twelve were al- lotted to me and I sold them. One hundred were al- lotted this year and I expect to sell them." R. E. Mason, General Agent, Acme Co., Omaha, Neb. (I, 462) : "As general agent of the Acme Co. from 1909 I covered southwestern Iowa, practically all of Ne- braska, a little of Kansas and some of Colorado and Wyoming. In that territory we sell headers, bind- 118 Dealers testifying as to freedom with which competitors secure trade in harvester lines (Cont'd). ers, mowers and hay tools; very few headers are sold ; there is a large sale of grain binders. * * * I have heard that its binder sales have increased from 1908 to 1912 from 2,500 to 11,000. In the South Platte territory we do about fifty per cent, of the business in binders. That is the big grain territory in Nebraska. The McCormick, Deering, Piano, Cham- pion and Milwaukee companies in 1901 and 1902 did about all the business in that territory." Christopher Dunkle, Manager Nebraska Moline Plow Company, Omaha, Nebraska (II, 1088) : "The binder has been the easiest new tool to sell that we have taken on." 6. COMPETITORS TESTIFIED THAT THEY FOUND IT NO IM- PEDIMENT TO THEIR BUSINESS THAT THE DEALERS WHO HANDLED THEIB, GOODS OFTEN HANDLED THE INTER- NATIONAL'S HARVESTING MACHINES. We quote the testimony of some of these competitors on this point : S. D. Porter, Peoria, 111. — General Manager, Acme Har- vesting Machine Co (II, 1138) : "We sold the output of our plant in competition with the I. H. Co. in 1904, 1905 and 1906 to local im- plement dealers; in a number of instances through dealers who were handling and selling International harvesting machinery. We did not find that the ex- clusive clause which was in the I. H. Co. contract in 1904 operated to prevent the dealers from taking our line in connection with I. H. Co. lines, for we mar- keted through the same men. ' ' Egbert H. Procter, Minneapolis, Minn. — Manager of Eock Island Plow Co. (II, 1140) : "A great proportion of our sales were made to dealers who handled the harvesting lines of the I. H. 119 Co. It was no impediment to our selling to the dealer that he handled the International harvesting lines. I know the dealers pretty well throughout the terri- tory and their method of doing business. They are merchants handling agricultural implements. ' ' William H. Taylor, Minneapolis, Minn. — Manager, Min- nesota Moline Plow Co. (II, 1164) : "In the sale of implements for the Moline Co., since I have been manager, my sales have been to the retail implement dealers throughout the section. These dealers in the main handle and sell the I. H. Co. harvesting machinery. We have not found that fact an impediment to the sale of these tillage tools and wagons we sell in competition with the I. H. Co. The field is open to us and the I. H. Co. in perfectly fair competition." John L. Jones, Des Moines, la. — Branch Manager for John Deere Plow Co. (II, 1122) : "Prior to that sold other implements, without hav- ing a line of harvesting machinery, to retail dealers throughout the territory named and to dealers who handled I. H. Co. harvesting machinery. Did not find the fact that dealers were handling I. H. Co. harvest- ing machinery an impediment to the sale by us to them of our competing implements." James B. Vietch, Sioux Falls, S. D. — General Agent, Thomas Manufacturing Co. (II, 1170) : "We sell our goods to the implement dealers, a large proportion of whom handle I. H. Co. harvesting machinery. Have not found that fact an impediment to our selling to them our implements. ' ' Lewis T. Tount, Kansas City, Mo.— Manager, Oliver Chilled Plow Works (II, 1176) : "We have in the main sold our implements to deal- ers who handle the binders, mowers and rakes of the International and frequently ship all in the same car with the International; in other words, the dealer 120 Competitors' testimony as to freedom of dealers (Cont'd) makes up what we call carloads. I have not found the fact that the dealer bought harvesters, mowers and rakes from the International an impediment to sell- ing our goods to the same dealer." H. M. Wallis, Racine, Wis. — President and Treasurer of J. I. Case Plow Works (II, 1174) : "We sell product of our factories through local dealers throughout the country, many of whom han- dle I. H. Co. harvesting lines. I do not think we find that fact an obstacle to the sale of our implements to those dealers — in the main." Dr. Edward A. Rtjmely, La Porte, Ind. — M. Rumely Co. (II, 1143) : "We sell our implements to local retail dealers throughout the country. The dealer is an important factor in our business. Between 25 and 35 per cent, of our dealers I should think, are also agents of the I. H. Co. We have found the dealers free. We found dealers measured up the price and terms upon which we could sell a tractor and the terms and the price upon which the I. H. Co. could sell them and the ease with which ours could be sold ; we had to match what we had to offer against the I. H. Co. in the same line." l a l William Schreiber, Chariton, la. — Wagon Manufacturer (II, 1147) : "I estimate that about 70 per cent, of the wagons sold in my county are of my manufacture. I sell some of them to dealers in farm implements, who handle I. H. Co. harvesting machinery. I have not found the fact that the dealer was handling I. H. Co. binders and mowers any obstacle to selling him my wagons." Henry L. Pierce, Minneapolis, Minn. — Manager for Em- erson-Brantingham Co. (II, 1137) : "I sold in competition with the I. H. Co. to agri- cultural implement dealers, who, in most cases, han- 121 died I. H. Co. harvesting machinery. I did not find that fact an impediment in selling my implements to them." G. M. Matson, New Holstein, Wis.— Vice-President and Sales Manager for John Lauson Manufacturing Co. (II, 1131) : "To a considerable extent we sell to dealers who handle the harvesting line of the I. H. Co. We have never found that fact an impediment in marketing our goods through them." H. M. Kinney, Winona, Minn. — Secretary and General Manager of Winona Wagon Co. (II, 1127) : "We sell our wagons to local dealers, who handle I. H. Co. hinders and mowers, and the fact that they handle those International goods is no obstacle to our business." E. J. Fairfield, Minneapolis, Minn. — Manager of Lind- say Bros. (II, 1091) : "We do business in our various lines by selling to dealers in farm implements, a great many of whom handle I. H. Co. harvesting machinery. We have not found the latter fact an impediment to our doing business with them in the sale of our implements, where we could interest them in our line. ' ' B. F. Hamet, Minneapolis, Minn. — Manager for Parlin & Orendorff Plow Co. (II, 1107) : "We sold our goods to local implement dealers throughout the territory; a very large per cent, of whom handled I. H. Co. machinery. I have not found that fact an impediment to the sale to them of lines we handle, only the same as any other competitors ; it proved no obstacle to selling our goods to them." 122 Competitors' testimony as to freedom of dealers (Cont'd) Edward Heidrich, Je. — Vice President and Assistant Manager of the Peoria Cordage Co. (II, 1114) : "We manufacture binding twine and rope. It is sold throughout the central west through local im- plement dealers, including dealers handling Interna- tional harvesting machinery. As to whether that is an obstacle to selling our twine, — we find that just the same as we do any customer, it is competition, that is all. Don't know how else to put it." A. R. Dempster, Sioux Falls, S. D. — In water supply job- bing business and farm implements, and connected with the Dempster Mill Manufacturing Co. (II, 1082) : "We sell our implements to the retail dealers in farm implements throughout the territory and in a very large per cent, to dealers who are handling the I. H. Co.'s harvesting lines. I do not find and have never found that to be an obstacle to the sale of these implements to those dealers." W. H. Day, Milwaukee, Wis. — Sales Manager for the In- ternational Gas Engine Co. (II, 1081) : "We market through retail hardware and imple- ment dealers principally, and to those who handle I. H. Co. harvester lines. The fact that they handle such lines has not in the least interfered with the sale of our engines to such dealers." J. A. Craig, Janesville, Wis. — General Manager of Janes- ville Machine Co. (II, 1078) : "We sell our implements mostly to retail dealers and some to jobbers — in some cases to dealers who handle I. H. Co. harvesting lines. I know of no case where that fact has been an impediment to selling our implements to them. We meet I. H. Co. in free com- petition selling to those dealers." 123 C. A. Cadwell, Sioux Falls, S. D.— Manager of the Da- kota Moline Plow Co. (II, 1074) : "Have sold our goods almost altogether to retail implement dealers handling I. H. Co.'s harvesting machinery. Can't say that I have found fact that dealers handle I. H. Co. harvesting machinery an im- pediment to the sale to them of the goods I handle." V. E. Bush, La Porte, Ind.— Eastern and Southern Sales Manager for the Eumely Products Co. (II, 1073) : "We consigned them to the retail dealers on a commission contract basis, and to dealers who han- dled I. H. Co. harvesting machinery. The fact that such dealers handled International harvesting ma- chinery did not operate in any way to the detriment of our sales, to my knowledge. ' ' Habky W. Bolens, Port Washington, Wis.— President of the Gilson Manufacturing Co. (II, 1070) : "We sell our gas engines to dealers who handle In- ternational lines. That fact has not interfered in any way with the sale of our gas engines." Feed H. Bateman, Grrenloch, N. J. — Vice-President and General Manager of Bateman Manufacturing Co. (II, 1064) : "We sell these implements to local dealers who handle like goods or other goods of the I. H. Co. We find it no obstacle or objection that the local dealers to whom we sell also sell I. H. Co.'s goods." &^ J. B. Bartholomew, Peoria, 111. — President of the Avery Co. (II, 1063) : "In many instances our goods are handled by local dealers in the United States who handle the goods made by the I. H. Co. We find it no detriment or obstacle to placing our product with them, on account of their handling the harvesters. That is not an ele- ment in the problem at all." 124 MAGNITUDE IS NOT MONOPOLY. Magnitude of business is not monopoly, nor suc- cess in business, monopolization. If the true significance of the International's possession of a large share of the trade is not a matter of general economic knowledge, it is established by the evidence here : that where there is no patent monopoly, no exclusive control of a necessary raw material, no exclusive advantage or privilege in freight rates or otherwise, the per cent, of trade depends on merit and service and salesmanship. This record con- clusively shows that the International has not, by virtue of its large share in the harvester trade, the power to monopolize trade in any agricultural implement. Its share of the trade depends entirely upon the energy and efficiency of its selling organization, the merits of its machines, the reasonableness of the prices and the fair- ness of its business methods, and the good-tvill and prefer- ence of the farmers. No monopoly prices, profits or dividends. The Government charges that the defendants, through the power of "their monopolization of the manufacture and sale of harvesting machinery, have been enabled to advance and have advanced the prices of harvesting im- plements, to the grave injury of the farmer and the gen- eral public." (I, 22.) As the object of all business is profit, the object of monopoly is excessive profit; and this object can be at- tained only through excessive prices paid by the con- sumers. The Government recognizes this in the above charge. To the general public the chief evil of monopoly is excessive prices; and absence of excessive prices ar- gues the absence of monopoly power. 125 PRICES NOT INCREASED AND MACHINES IMPROVED. From the organization of the International until 1908, the prices of binders and mowers remained at the low level reached about 1897. The course of prices of binders and mowers, the prin- cipal harvesting machines, for the entire period since 1892, was established by a complete set of original con- tracts with a retail implement firm at Fergus Falls, Minnesota. (II, 1436.) The net prices to the dealer for each year are there tabulated, and show that, since 1892, they have not varied over 6 per cent., and that the aver- age price for the 6-ft. binder (which is the standard), for the ten years since 1902, is less than the average for the ten preceding years by $1.35. Since 1896 the net price to the dealer of a 6-ft. binder has been $95, with the excep- tion of the years 1900, 1901 and 1908-11, when it was $100. In 1908 there was an increase of about 6 per cent, which continued through that and the three following seasons, until the summer of 1911, when prices returned to sub- stantially the former level. But in the period between 1902 and 1908 the costs of the raw materials and labor used had increased fully 21 per cent. During the whole ten-year period the rate of wages paid at the Works in- creased 32.52 per cent. ; and the average increase in the cost of all raw materials was 13.7 per cent. (II, 1392-3.) The increases of labor and material costs since 1902 are graphically shown on Defts.' Ex. 205. (Ibid.) The total increase of returns on the old lines during 1908-11 was about $5,250,000, while the increased cost of the materials entering into the man- ufacture of those old lines during that period above their cost on the basis of the 1902 prices was a little over $9,000,000. (II, 1404.) 126 While the farmers were paying the same prices for their harvesting machines, the value of the crops which the binder and mower harvested increased, from 1902 to 1912, wheat, 41 per cent. ; oats, 10 per cent. ; hay 63 per cent., or an average increase for wheat, oats and hay of 38 per cent. ; and the value of all farm products had increased 31 per cent. (II, 1390.) The average increase in the prices of raw commodities had increased 22 per cent. ; of manufactured commodities, 17 per cent., and of all commodities, 18.3 per cent. (II, 1412.) Although the grain binder contains about 2,500 separate pieces, and is a complicated machine with its binding at- tachment and knotting device, it has been sold to the dealer, for the last fifteen years, at a price which amounts to only 6 cents per pound, and to the farmer at less than 7 cents per pound, which is considerably less per pound than the price paid for the standard plow. (II, 856.) The evidence further showed without dispute that while the price of harvesting machines has remained substan- tially unchanged for the past twenty years, the prices of all other agricultural implements, including wagons, have increased from 10 to 25 per cent, since 1902. (II, 843.) Although the prices remained stationary, the Interna- tional machines have been greatly improved. The Com- pany, soon after its organization, spent $600,000 to re- build and improve in efficiency its principal binders and mowers, and it has maintained an experimental depart- ment of 756 men to devise improvements and inspect ma- terials and products, at an average annual cost of over $400,000. (II, 1194, 1201.) John F. Appleby, the inventor of the twine binder, testified to the extent and importance of the improve- ments made by the International in its harvesting ma- 127 chines. (II, 1049.) Many dealers and farmers also testi- fied to the practical importance of these improvements. Hugh McCabgeb, an implement dealer at Crete, Neb., said: "I think the binder that is put out to-day is worth two of what was put out 12 years ago." (II, 873.) The evidence shows conclusively that there is no farm implement that has been improved as much and has in- creased in price as little in the last 10 years as the Inter- national 's binders and mowers. THE TESTIMONY OF THE FARMERS, THE CONSUMERS. The Petition singles out the farmer as the particular victim of the International's "monopolization" and "monopoly." The Government's specific charge is that defendants used their monopoly power to advance prices "to the grave injury of the farmer." But the Government did not call a single witness — did not find a single farmer — to sustain the charge. To disprove these charges of the Petition the defendants called hundreds of representative im- plement dealers and 228 farmers from the states of the Central West. Their testimony showed there was actual and active competition in the harvester lines, and that the farmers were canvassed to buy machines of competitors as well as those of the International, and that their pur- chases were the result of their free choice. 128 THE GOVERNMENT'S OBJECTION TO FARMERS ' EVIDENCE AS TO PRICES AND IMPROVEMENTS. When the defendants presented the testimony of the farmers themselves, — that the prices had not been in- creased, but that the machines and the service had been improved, — the Government objected that it was "clearly- irrelevant, incompetent, and without bearing upon the issues. If of any value at all, it is only of economic value." (II, 843.) When Frank Zahner, an Iowa farmer, was asked as to the course of prices in the binder trade, the Government counsel objected : "The witness has not shown any information as to the price. He is not in the business ; he is merely a farmer. Defts.' Counsel: The farmer pays for the binder. Gov't's Counsel: Well, I object to it; it is abso- lutely incompetent." (II, 964.) At the next hearing — at Wichita, Kansas, — the Gov- ernment's counsel formally presented objections to: (1) All evidence m relation to prices of agricul- tural implements, whether prior to or since the for- mation of the International; (2) All evidence in regard to improvements since August, 1902, or as to comparison of implements now and as they were before 1902 ; (3) All evidence relating to repairs, that is, the testimony of farmers and dealers relating to the fa- cilities now and jDreviously afforded. (II, 752.) If the consumers' interests and knowledge of the ef- fects of the alleged monopolization of the harvester trade are to be disregarded, in whose behalf did the Govern- ment bring this suit? 129 THE TESTIMONY OF THE FARMERS. Two hundred twenty-eight representative farmers from the Central West testified for the defendants. The tes- timony of only 49 is given fully in the record (beginning at p. 952, Vol. II) ; but this is followed (pp. 1024-35) by a complete list, arranged alphabetically by states, with a summary of their testimony as to the proportion, in cost, of their harvesting machines to their total farm equip- ment. This proportion, instead of being one-half (as the Government claimed, I, 286), is only 15.2 per cent., as shown by their testimony. This is followed with the names of the farmers who testified that harvesting machines were offered for sale in their neighborhoods (II, 1035), and that the International had made important improve- ments in its harvesting machines. (II, 1044.) The testimony of a few farmers is here given as rep- resenting them all: Frank Zahner, of Modale, la., already referred to, was in the implement business for 5 or 6 years prior to 1903 and has since then been farming a 530-aore farm of which 220 acres are in cultivation: """""" ' ' I have observed the binders from year to year as they have been used in the country. I used to handle a good many. They are now made lighter in some respects and they work more scientifically than they used to. They have put on trucks, and in various ways they have been improved. I do not see that there is much difference in the price of binders now than when I used to be selling them along in 1896 to 1900." I. F. Monroe, Hastings Neb. (II, 1017) : Owns 240 acres, farming 22 years : "I have been familiar with the prevailing prices of binders in our country since 1897 or 1898. Q. On the same size of machine what can you say 130 Testimony of farmers {Cont'd). of the prices now and ten years back and along there?" Government's counsel: "I object to this. * * * You are asking about the prices of retailers to these farmers. * * * It is absolutely immaterial. How does he know about the prices of the International to the dealer? It is just cumbering the record with a lot of immaterial stuff." Defendants ' counsel : ' ' Our theory is that it is proper for the bearing it has on the service to the farmer — the price of the machine. ' ' The Witness : "I paid $125 for my Champion in 1897 and in 1906 I paid $145 for the 8-ft. McCormick with trucks and out-end reel support. The 8-ft. cuts about a fourth more acres of grain in a day's work than a 6-ft. bind- er. We claim to cut from 20 to 25 acres a day with the 8-ft. and from 15 to 17 acres with the 6-ft." John C. Pfeister, Sutton, Neb. (II, 1018) : Farming 375 acres, farmer for 25 years, 280 acres under cultiva- tion: "Q. Has the price remained about the same for the past 12 or 15 years?" Government's counsel: "How many has he bought? What does he know about it. I object to this testimony as to prices." The Witness : "I know the price that machines have retailed for in our neighborhood for the last 12 or 15 years. We pay $150 now for a 7-ft. * * * A 6-ft. 10 or 12 years ago was $10 less than we now pay for the 7-ft. with a truck under it and it runs no heavier than the 6-ft. used to." 131 George Swanson (II, 983) : * * * Crawford, Neb. Have been farming and ranching there about 20 years. * * * I have about 7,000 acres in my farm and ranch, of which about 600 acres is cultivated ground. I have personal manage- ment of my farm. I am not an agriculturist but a farmer. During the 20 years I have been a farmer I have bought and used various kinds of farming im- plements that have been and are used on a farm. There has been quite an improvement in the agri- cultural implement business in the last 12 years in all implements. The improvements make the situa- tion better for the farmer both in the machines and the way the trade is handled as compared with 12 years ago. Taking binders — it is a lighter draft ma- chine, easier to handle it and easier on the horses. It lasts better ; of course they last longer than they used to. We use less repairs. * * * It is a good deal easier to get repairs to-day than it used to be because we used to have to send away east for the repairs and now you can get right to your dealer or the I. H. Co. and get the repairs right there. It is of great importance to the farmer to have repairs quickly and promptly because when a man breaks down with his machine he don't want to lay idle very long; he wants to get it as soon as he can and it never breaks except when it is in use and that is when the harvest is on, so it is very important and that has been greatly improved. I have used the McCormick binders on my farm for about 20 years. The machines cost me altogether $3212. The har- vesting machinery, grain binders, mowers, rakes and corn binders cost me $733. * I purchased a binder about 2 years ago, and about 10 or 12 years ago. A binder is a little cheaper to- day than 10 or 12 years ago. * * * Wagons have gone up more than the binders. * * * Cultivators, I think, are pretty close the same. I think plows went up a little but not as much as wagons. The price the last 12 years has gone up very much in everything the farmer uses. * * * The farmer can buy a 132 Testimony of farmers (Cont'd). better binder for half the amount of grain, for in- stance, than he could buy it 12 years ago. I buy whatever implements I want to. * * * Whatever kind of a binder I want I can get. * * * I buy the McCormick binder because it is the best lasting binder and the simplest to run, calls for less repairs. Cross-Examination. About a couple of hundred acres is a good sized farm in Nebraska. I presume there are 3 or 4 dealers in Crawford. They handle the John Deere binders and mowers. The John Deere is a new binder, just come out. I never saw a John Deere binder. I have seen the Acme binder up there. The McCormick and Deer- ing, I suppose, are the most common binders. There is an agent at Crawford representing the Deering and one the McCormick. There is one handles tbe Acme binder and mower. I have got a neighbor alongside of me that has got one. * * * H. H. Bailey (II, 960) : * * * New Hampton, Iowa. Have farmed all my life. Am 75 years old. I control about 500 acres. There are 410 acres in the farm that I operate at home, of which 300 acres are under cultivation. The other 110 acres are used for pasture, etc. I raise corn, oats, barley, rye and buckwheat occasionally. * * * I began with the cradle and scythe. Have used present Deering binder about six years. Pre- vious to that used the Champion, and the Marsh ahead of that, and at first the Old Manny. I wore the Champion out before I used the Deering. * * * Have been familiar with binders for a long time. The changes have been marvelous since 1902, like going from the wagon to the automobile, the general work of the machine. It works better than it did ten years ago ; runs lighter ; three horses run it now, and we used to put on four and six. The repair and expert service for the International machinery is al- most perfection itself. I live 7 miles from town, and 133 in an hour can have an expert or repairs on the farm and ready to work. It is entirely satisfactory to me. I know of no period when the farmer has been as fully taken care of in his harvesting machinery as m the past ten years. The following list correctly states the machinery that I own and use in oper- ating my farm, including the cost price of the same : Total $1510 Harvesting machinery 290 I have been solicited to buy other makes of grain binders than the International. Can get nearly every make of machine we want in our country. I think the Deering lines of extras are more easily reached ; there is less delay. T. T. Johnson (II, 976) : Whalan, Minn. My farm is of 1000 acres, of which about 800 acres are under cultivation. We raise bar- ley, oats, timothy and corn ; 150 to 200 acres of corn and the balance of the cultivated land in small grain and pasture. I use the Deering binder and mower. Have had different makes ; the first harvester we had was the Marsh. As soon as Deering came out we got that. After that had different makes — now have the Deer- ing again. Have been familiar with the Deering grain binder ever since I have been farming. The Deering binder has been improved in the last 10 years. The first one was a 6-ft. ; now we have an 8-ft., and they have the tongue truck, and the new ones now you can lower and raise easier than you could before ; the reel is better. They are easier all the way round than they were the first time. Have no side draft on the new machines such as was on the old, which makes it easier on the team. There is no neck weight on the horses. I can buy makes of binders and mowers other than the International around our country there if I want them. We can buy the Acme and what they call the Minnesota, which is the State Prison binder. Wiiuliam McLaeen (II, 992) : McCanna, N. D. Have been a farmer since 1882. There are 800 acres in my farm, improved and un- 134 Testimony of farmers {Cont'd). improved. I raise, chiefly, wheat, oats, barley and flax ; some corn. There are quite a few farms of 800 acres around there, half sections ; some of them have 2,000 and 3,000 acres of land. I use McCormick binder and mower on my farm. Have been accustomed to its use since 1895. I think the McCormick binder is a much better machine since 1902 ; they do better work than they did 10 years ago and it is a stronger machine; runs lighter, has a tongue truck. The repair and expert service to the farmer in the last 10 years has been good ; all right. Am satis- fied with the treatment I receive and the work done by the machine. The following list is a correct statement of the farm machinery owned and used by me in operating my farm, with the cost of same, excepting the one item, the 9 wagons. There are more wagons there than I really need. Total farm machinery $2712 Harvesting machines, 464 * * * 750 acres of my farm are improved. My farm is not of unusual size for that part of the state. * * # NO EXCESSIVE PROFITS. It is one of the unfailing indicia of monopoly that it gains and uses its powers in order to obtain excessive profits. In this case it is admitted — for the petition states the figures down to 1910 (I, 18-20) — that the total earnings of the International upon its capital invested in the busi- ness averaged during the entire ten years only 7.83 per cent, per annum, and that there was distributed to the stockholders in dividends only 4.3 per cent, per annum. The balance of the earnings have been required and used in the busi- ness. In 1910 a dividend in stock representing this sur- 135 plus was issued which of course only gave more shares representing the same amount of property. But even counting this as a dividend the average dividend on the full-paid capital stock has been only 5.9 per cent, per annum. (II, 1404.) If the International's prices had been excessive, if the quality of its machines or its service had deteriorated, or if improvement in them had stopped, the International could not have retained the custom and good-will of the farmers. It has con- stantly improved its machines and the facilities for dis- tribution, and has charged reasonable prices and made moderate profits, not simply because de- fendants thought that this course was good pol- icy but because' they knew that it was necessary. Farm- ers and dealers alike, testified that the Interna- tional's share in the trade has depended, and de- pends, upon these facts. If the International Company had a monopoly of the harvesting machine trade is it conceivable that the prices of these machines should not have increased, and that harvesting machines should be to-day, relatively and actu- ally, the cheapest agricultural implements sold in the United States; that independents should have invested large capital in the manufacture of these machines and their business should be growing faster than that of the International? 136 C. Neither in harvesting machines nor in other agri- cultural implements was trade monopolized or restrained, or threatened with restraint, by defendants when the peti- tion was filed. The field in harvesting machines, as in other agricul- tural implements, is absolutely free and open, and compe- tition is strong and active. The Petition charges: "The power in combination of defendants in in- terstate commerce in harvesting machinery and twine deters and prevents others from becoming com- petitors therein, and has made effective competition with defendants in harvesting machinery impossible, and in other lines of agricultural machinery well nigh impossible." (1,12.) "The opportunities for any new competitors are constantly being closed by defendants in all lines of agricultural implements; the agencies for distribu- tion, the retail implement dealers, and others are rapidly coming under their undisputed control, and unless prevented and restrained, their complete un- challenged dominion of every branch of trade and commerce in agricultural implements of all kinds may be confidently expected at an early date." (I, 22.) government's evidence on competition in harvesting machines. In support of the above charges the Government called a number of witnesses, from whose testimony we quote as follows : Acme Harvesting Machine Company. P. D. Middlekacff, President of the Acme Harvesting Machine Company, a competing harvester company, testified : In 1907-8 I thought there was a field for success- 137 ful business in the harvesting machine lines in active competition with the I. H. Co. in the U. S. and in that belief I invested money in the Acme Co. We make only harvesting machines and we have been doing a growing and successful business in active competition with the I. H. Co. In 1908 the Acme Co. had four general agents; now it has 14, and the number of local agents has increased two and a half times. The volume of business increased from $779,672 in 1908 to $2,100,000 in 1912, and the total number of harvesting machines sold increased from 11,400 in 1908 to 31,000 in 1912. (I, 188.) E. E. Mason, General Agent of the Acme Company at Omaha, Neb., testified: As Acme general agent I covered S. W. Iowa, all of Nebraska, a little of Kansas, Colorado, and Wyo- ming. Its business in my territory has increased. North of the Platte the International does about 80 per cent, of the business in grain binders; south of the Platte I think we do 50 per cent, of the business in binders; that is the big grain territory in Nebraska. (I, 462.) Deeke & Company. WniLiAM Btjtterworth, President of Deere & Co., testi- fied: Deere & Co. was organized in 1868; in business since 1837; began with plows. Its capitalization is now $65,000,000 of which about $40,000,000 preferred is issued. This is not exact. (Later evidence shows that in June, 1913, the issued capital was $58,007,100, II, 1382). It has added to the lines until now it makes, besides plows; corn planters, discs, wagons, manure spreaders, mowers, hay loaders, corn shel- lers, buskers and shredders, etc. About 15,000 deal- ers sell our lines. We have between 20 and 30 branch houses. We went into the mower business about five years ago, by buying the Dain plant, and into the binder business in 1911. We regarded it as a proper business field for the enterprise of our com- pany, and went into it as a business proposition. We 138 expect that it will develop into much larger propor- tions than it now has. In mowers the sales in the U. S. have increased from 490 in 1906 to 7,314 in 1911; in binders we sold 27 in 1911 and 933 in 1912. The Deere & Co. binder and mower are very similar to the International type. I do not know of any ob- stacles encountered on account of patents outstand- ing on either of these machines. (I, 336.) Walter A. Wood Company. Danforth Geer, President of the Wood Mowing & Eeap- ing Machine Co., testified: Our business began in 1852; incorporated 1865, and done chiefly in the eastern territory; in the mid- dle west only through jobbers. We do business in active competition with the I. H. Co. and competi- tion is normal and our business has been fairly pros- perous. When we need a new agent in a place we have no more trouble in getting an agent against the International than against anybody else. The op- portunities for the development of our business are normal and businesslike. (I, 515.) Emerson-Brantingham Company. J. D. White, Sales Manager of Emerson-Brantingham Company, Eockford, Illinois, testified : The company has eleven different plants manufacturing agricultural implements which in- clude beside steam plows and threshing ma- chinery, steam tractors, corn shellers, hay presses, gas tractors, harrows, planters, culti- vators, mowers, rakes, drills, wagons, gas engines, hay loaders, stackers, tedders and manure spreaders. The company advertises itself as hav- ing the largest line of farm machines of any company in the world. It has 12,000 retail implement dealers handling its goods and has had an increasing busi- ness during the past ten years, during a large part of which time it has been selling most of its line in activa competition with the International. (I, 352.) 139 Johnston Harvester Company'. A. C. Atwater, Secretary of the Johnston Harvester Company, produced a list of its sales from 1902 to 1911, showing that its binder sales had increased from 1,002 in 1903, to 3,027 in 1911 ; its mowers from 2,527 in 1903, to 7,026 in 1911 ; corn binders from 528 in 1903, to 3,150 in 1911, and rakes from 1,855 in 1903, to 5,200 in 1911. (I, 350.) Independent Harvester Company. A. H. Bayston, of the Independent Harvester Company, Piano, 111., testified: Company reorganized in 1907 ; paid up capital is nearly $5,000,000. Beside harvesting machines it makes plows, cultivators, harrows, listers and port- able elevators. We have about twenty-three thou- sand farmer stockholders, and branch houses in a dozen or more states. The last three years the out- put has been doubled each year over the preceding one. (I, 350.) J. I. Case Threshing Machine Company. Frederick Bobinson, Vice-President of J. I. Case Thresh- ing Machine Company of Bacine, Wis. : The companv has an authorized capitalization of $40,000,000 of which $20,000,000 is issued. We have completed an experimental binder and it has been in the field and we are constructing a large plant for its manufacture. Our experimental binder is perfected, is practical and has been tested in the field. We have not got ready to place it on the market. The Case Company does a very large business throughout the United States. We have a very efficient force — about 10,000 of what we term local agents, the number of which has grown very largely and continuously dur- ing the past ten years, and when we decide to mar- ket our binder we believe we can do it efficiently and successfully. (I, 340-1.) 140 The above witnesses were all called by the Government to establish its charges in the Petition. This was the substance of the Government 's testimony as to present competitive conditions in the harvester trade. Instead of showing the trade monopolized and competitors suppressed, it showed active, strong and growing competition in that field. DEFENDANTS EVIDENCE AS TO COMPETITIVE CONDITIONS. The defendants called as witnesses seventy-sis officials of all the principal competing agricultural implement companies, of whom thirty were in the harvester trade. We quote the following as samples of this testimony : Moline Plow Company. Albebt C. Babber, Sales Manager Moline Plow Company for six years : The business of Moline Plow Co. is manufactur- ing farm implements. Its business has had a steady and constant growth. Its capital in 1892 was $800,- 000. In 1902 it was $2,400,000. In 1902 we increased our capital stock from that to $3,200,000; in 1904 we again increased it to $4,000,000; in 1906 we increased to $6,000,000; in 1909 we increased from $6,000,000 to $7,000,000; in 1910 we increased from $7,000,000 to $9,000,000, and in 1913 we increased from $9,000,- 000 to $18,000,000. Outside of the increase in 1913, the increases of the capital stock were effected from the profits of the business and represented those profits. We sell our implements throughout the United States to retail implement dealers in the country. That includes implements which we sell in competi- tion with the I. H. Co. We have sold them in quite a large proportion to retail dealers who handle I. H. Co. harvesting machinery. We did not find that fact an obstacle to selling them our machinery. We found no attempt on the part of the I. H. Co. to pre- 141 vent dealers from buying our implements. Without the figures at hand, should say we sell our goods to from 25,000 to 30,000 dealers in the United States. From my knowledge of the implement business and the trade conditions during the past ten years, my judgment is, and has been for a considerable time, that the field was open to a successful business in harvesting machines in opposition to the I. H. Co. in the United States, and that is the reason we are now engaged in the harvesting machinery business. The Moline Plow Co. has just entered upon that line through the purchase of the Adriance-Platt Com- pany's plant at Poughkeepsie, New York, where we make a full line of harvesting machinery. I have been a stockholder and director of the Moline Plow Company for some years. I was consulted and took part in the deliberations which resulted in the deci- sion to purchase the Adriance-Platt plant. The purchase of that plant was simply an expan- sion of our business into a field of opportunity. We had arranged for quite an increase in our capital, and felt the harvester line was open as a field for ex- pansion. The business of the Moline Plow Co. has not been hampered in any manner by the fact that it did not have a harvesting machinery line. There has never been a year I have been with the Moline Plow Company when we have not done all the busi- ness our capital would warrant. Made arrangement for harvester plant the latter part of November, 1912; took over plant January, 1913. We had increased sales of Adriance-Platt Co. in the United States some 10,000 harvesting machines up to May 1st. In deciding to go into the manufac- ture and sale of harvesting machinery and purchase of Adriance-Platt Co., we were not influenced in any way by this suit of the United States against I. H. Co. We never thought of such a thing. (II, 1057-9.) George A. Stephens, President Moline Plow Company: We have only commenced the manufacture and sale of harvesting machinery this year. In January, 1913, we bought the business of the Adriance-Platt Company of Poughkeepsie. From my own knowl- edge of the implement business and the conditions 142 under which it is carried on in the United States, we felt that the field was open to successful business in the manufacture and sale of harvesting machin- ery in competition with the I. H. Co. and other com- panies that are engaged in it. We certainly felt that the field was open or we would not have bought the plant. As to the United States, we felt that we were very late in coming into manufacturing of this line and there would not be a possibility of our doing very much with the goods this year outside of the eastern territory, which had been served by this firm. We found that there was going to be demand for the middle states and west. Our travelers began to sell and we found we could sell more goods than we could make, and we are in that position of embarrass- ment to-day. Found the field absolutely open to a successful business and the only obstacle we have found up to date is our inability to make as many goods as we can sell. (II, 1160-1.) Christopher Dtjnkle, Manager Nebraska Moline Plow Co. of Omaha : The Nebraska Moline Plow Co. sells farm im- plements throughout the territory mentioned in ac- tive competition with the I. H. Co.; implements so sold are wagons, spreaders and hay stackers, hay loaders, side delivery rakes, sweep rakes, stackers, disc harrows, lever harrows, grain drills, corn plant- ers, cultivators, stalk cutters, alfalfa renovators, binders, mowers, rakes and corn binders. Until 1913 our company did not sell binders, mowers, rakes or corn binders. During the years that I have been as- sistant manager of this company, have been selling all these machines named, except binders, mowers, rakes and corn binders in the territory named. The I. H. Co. competition was normal, healthy and business- like. During last three years that have been with this company I thought the field was open for intro- duction and sale of a new harvesting line. In my judgment based on my knowledge and famil- iarity of territory and conditions of business, the field for competition was not only open in the lines we handled, but in addition the field of harvesting ma- 143 chinery was open. Our company has taken on a line of binders, mowers, rakes and corn binders; it bought the Adriance-Platt Co. in January this year. Have entered upon the sale of these new implements this season (1913) in our territory. * * # # # The binder has been the easiest new tool to sell that we have taken on. (II, 1087-8.) Deere & Company. Floyd R. Todd, of Executive Committee of Deere & Co. ; Produced further figures showing the growth of Deere & Co. 's business in all the lines sold in compe- tition with the International, with the precise figures as to binders, mowers, rakes, wagons and spreaders. In mowers the increase in five years was 348 per cent., the actual number sold continuously increas- ing from 490 in 1906 to 9,560 in 1912. In binders the sale in the United States had increased from 10 in 1911 to 4,000 in 1913, and the number of binder agents had increased from five to 376. The total sales of Deere & Co. in 1912 were $27,000,000 and they expect to increase this volume in 1913, and other competitors have made a like increase. (II, 1165-9.) John L. Jones, Manager of Deere Co. at Des Moines, Iowa: Before 1912 I sold the Deere line of implements (without harvesters), through retail dealers, who handled International harvesting machinery, and did not find that fact an impediment to the sale of the competing Deere implements. I have found the field open to competition in my territory and have al- ways found the International's competition fair. (II, 1122.) Massey-Hakris Company, Ltd. Thomas Findley, Vice-President and Assistant G-eneral Manager of the Massey-Harris Company, Ltd., of To- ronto, Canada : The Massey-Harris Co. has an issued capital 144 stock of $15,000,000 and our resources are about $30,- 000,000. I think we are the largest manufacturers of harvesting implements in the world next to the International. We bought control of the Johnston Harvester Co. in January, 1910. (II, 1100-2.) Johnston Harvester Company. Geobge W. Baker, Assistant Sales Manager Johnston Harvester Co. since 1900: That company until January, 1913, made only harvesting machinery and handled them through local dealers in the territory from Indiana east. During the past 10 years we had no difficulty in get- ting local dealers ; the limited number sold was deter- mined by the managers of the business; more agents could have been obtained and more machines sold if the company had been willing to expand in that di- rection; the competition of the International has been fair and businesslike; from my knowledge of the trade it would he impossible for the International to coerce the dealer through its harvesting lines ; and it would be detrimental to any company that tried it. The Massey-Harris Co. of Canada is now a large holder of the stock of my company. It became a prominent factor in the conduct of the Johnston Oo.'s business nearly two years ago. Since then the capacity of the plant of the Johnston Co. at Batavia has doubled. Our business has expanded into the Central West since the International was organized. (II, 1053-5.) L. D. Collins, Treasurer and Assistant General Manager of the Johnston Harvester Company, Secretary from 1902 until 1910 : The sales of the Johnston Harvester Co. during the last 10 years in the United States were primar- ily governed by our resources and facilities, meas- ured by our policy as to foreign trade. Our domestic sales would have been much larger during the last 10 years, if our financial resources and our manuf actur- 145 ing capacity had enabled us to increase them. (II, 1078.) Walter A. Wood Company. William I. Shaw, Sales Manager Walter A. Wood Co. ""from 1907 until 1913: I succeeded Given Moore and extended the trade in territory east of the Mississippi, and sold our goods in competition with the I. H. Co. We consid- ered that competition along business lines and fair. Our business grew. We did all our capital would permit; that was the only limitation. (II, 1150-1.) John F. Appleby, inventor of the knotter and many es- sential parts of the self -binding harvesting machine; interested in harvesting machines for 54 years; con- nected with Western Implement & Motor Co., Daven- port, la., and engaged in finishing a new binder for that company to be made and sold in competition with the International's: "From my experience and knowledge of the bar- vesting machine business I feel that tbe field for making and selling harvesting machinery is free and open." (II, 1052.) The testimony of each of the seventy-six witnesses rep- resenting competitors, called by the defendants, is of like tenor as to the freedom of the trade and the growth of the competitors' business. These competitors, represent- ing the manufacture and sale of every implement made by the International, and carrying on their business in con- stant and direct competition with tbe International, testi- fied that its competitive methods were fair, clean, busi- nesslike and honorable. Not one competitor testified to the contrary, not one has been suppressed or driven to the wall. 146 TRADE NOT RESTRAINED; THE FIELD IS FREE AND OPEN. This testimony, both of the Government's witnesses and of the defendants', clearly disproves the charge in the petition that the "defendants have made effective competition in harvesting machinery impossible," or that the opportunities for any new competitors are constantly being closed by defendants in all lines of agricultural im- plements. In this testimony we have not merely the opinions of the Avitnesses, but actions based upon such opinions and the facts and figures given with regard to the increasing success of competitors and the entry of new competitors into the field. As to the possibility of effective competition, take the case of the Acme Company, whose officers were called by the Government. This company, with small capital and manufacturing no implements except harvesting machines, and with few agents, re-entered the field of competition in 1908, and in four years it increased its business nearly three hundred per cent., both in the number of machines sold and the aggregate amount of its sales. South of the Platte, in the big grain territory of Nebraska, where, previous to its entry, the International Company had been selling about 100 per cent, of the binders, the Acme secured in four years 50 per cent, of that business. (I, 462-3.) Its president testified that in 1907 and 1908 he thought there was a field for successful business in harvesting machines in active competition with the International Company, he put his money into the Acme Company, and the results achieved proved that his opinion was correct. The treasurer of the Johnston Harvester Com- pany testified that their sales of harvesting machines 147 were limited only by their resources and facilities. (II, 1078.) NEW COMPETITORS IN THE HARVESTER BUSINESS. The evidence as to the new competitors who have en- tered the harvesting machine business since 1903 is espe- cially convincing. The Moline Plow Company, starting in 1892, with a cap- ital of $800,000, which increased out of profits to $2,400,- 000 In 1902, and which again increased wholly out of earnings to $9,000,000 in 1910, and again in 1913 in- creased to $18,000,000, in part by the sale of preferred stock, and which had been engaged for years in active competition with the International Harvester Company in the new lines, decided to enter upon the manufacture and sale of harvesting machines. To that end it pur- chased the Adriance-Platt Company's plant, at Pough- keepsie, New York, where it now makes a full line of har- vesting machines. This purchase was made in 1912. The plant was taken over in January, 1913, and up to the first of May, 1913, it had increased the sales of Adriance-Platt & Company in the United States by more than 10,000 harvesting machines. The Moline Plow Company sold their long and well-established line of farm implements to 25,000 or 30,000 dealers in the United States, and the testimony is that they found the binder the easiest new tool to sell that the company had ever taken on. Deere & Company, organized in 1868, with a capital of nearly $60,000,000 in 1913, doing business in a long line of agricultural implements in competition with the Interna- tional Harvester Company, and making its sales through 148 15,000 dealers, went into the mower business in 1905, and into the binder business in 1911, and increased the num- ber of Dain mowers sold from 39 in 1905 to 9,560 in 1912, and increased the number of Deere binders sold from 10 in 1911 to 4,000 in 1913. The Massey-Harris Company, an old established com- pany in Canada, with a capital stock of $15,000,000, and resources of $30,000,000, and next to the Harvester Com- pany the largest manufacturer of harvesting implements in the world, not satisfied with the privilege of selling in the United States without duty its machines manufac- tured in Canada, purchased the Johnston Harvester Company's plant, doubled its capacity, and entered upon the manufacture and sale of harvesting machines in the United States in 1910. What stronger competition could possibly exist than that furnished by the entry of the Moline Plow Company, the Deere Company and the Massey-Harris Company into the harvesting machine trade in the United States, a field where the trade has reached its maximum of growth, and where no possibility of an increased demand for binders and mowers exists. The record shows that there has been no increase in the number of binders or mowers sold in the United States for more than eighteen years. There is no stronger competition in any line of agricultural implements. As President Stephens, of the Moline Plow Company, testified, no new competitor has entered upon the manufacture of plows in the last ten years. "The field is absolutely open to competition in harvesting machinery and in plows alike in this country." (II, 1162.) Defendants presented a tabulation of the corporations engaged in the agricultural implement business since the 149 International was organized, with their total authorized and issued capital stock, by years, from 1902 to 1913. (II, 1382.) It includes the facts relating to authorized and issued capital stock, but not as to the investments, bor- rowings, or surplus in the business. Since the Interna- tional was organized, 107 other such corporations have been formed and their capital, with the increases in the other companies, amount in the aggregate to $283,000,000. Of this authorized capital and increase there were cor- porations engaged in the agricultural implement busi- ness in June, 1913, other than the International, with an aggregate issued capital of $228,270,000, of which $181,441,371 has been invested in this business since the International was formed. FREE COMPETITION PRESENT, AND INJURIES TO THE PUB- LIC ABSENT. The hearing of this case in the District Court occu- pied three days, which were chiefly devoted to the dis- cussion of the evidence in the record upon the question now under consideration. Each of the three judges in the opinion filed by him found the charges of the Gov- ernment, in regard to unfair or monopolistic methods of business, to be unfounded. We have .quoted the language of Judges Smith and Hook on pages 13-15 of this brief. Judge Sanborn in his opinion said: "(3) The particular facts proved in this individual case not only fail to show that the defend- ants were unduly or unreasonably restraining or at- tempting to monopolize interstate or foreign trade, or threatening so to do at the time this suit was com- menced and for seven years before that time, but they establish the converse." (I, 94.) # # * * * "The conduct of the business of the de- 150 fendants for years in all parts of the land were searched and proved. Among the innumerable acts of the defendants and their agents in conducting their vast business for a decade the government found some that were unfair to competitors, but they were either unauthorized acts of subordinate agents or sporadic and exceptional instances. The weight of the evidence of the officers and agents of their competitors who came in large numbers to testify, and of all the witnesses upon the subject, is so over- whelming that the general conduct and the almost universal practice of the defendants and their agents was and is free from all methods and acts either unlawful, unfair or oppressive towards their com- petitors, that it has left no doubt that the consistent and persistent purpose, policy, rule of action and practice of the defendants has been and is to avoid and prevent all acts and methods unfair, unjust or oppressive towards their competitors, to leave com- petition with them free, to give to them full and fair opportunities to secure shares of the trade and busi- ness in which they are all engaged and to carry on their own trade honestly, justly and fairly." (I, 97-8.) W ^ tF * * "The evidence in this suit seems to me to present a new case under the anti-trust law. No case has been found in the books and none has come under my observation in which the absence of all the evils against which that law was directed at the time the suit was brought and for seven years before was so conclusively proved as in this suit, — the absence of unfair or oppressive treatment of competitors, of unjust or oppressive methods of competition, the absence of the drawing of an undue share of the business away from competitors and to the defend- ants, the absence of the raising of prices of the ar- ticles affected to their consumers, the absence of the limiting of the product, the absence of the deteriora- tion of the quality, the absence of the decrease of the wages of the laborers and of the prices of the ma- terials, — the absence, in short, of all the elements of undue injury to the public and undue restraint of trade, together with the presence of free competition which increased the share of the competitors in the interstate trade and decreased the share of the de- fendants." (I, 100.) 151 In view of this finding of all of the judges of the Dis- trict Court, on the issue of fact as to the conduct of the International Company in the transaction of its business, and the fullness of the evidence in its support, the Attor- ney General may not press these charges in this Court. We do not feel justified in further quoting from or dis- cussing the testimony of the more than twelve hundred witnesses, until the Government has defined its position. If necessary the matter will be more fully gone into in a reply brief. IV. The District Court erred in decreeing that the business and assets of the International Company should be di- vided into a number of parts of separate and distinct ownership, and also in providing for the receivership of all the property of the corporate defendants in case the defendants should fail to file a plan for such division within ninety days that would meet the approval of the District Court. The fundamental objections to the decree are: (1) If affirmed it leaves within the discretion of the District Court, without right of review, the entire ques- tion of the manner and extent of the destruction of the property interests of the defendants; and (2) It provides upon the happening of a probable contingency, for the appointment of a receiver of the entire assets, foreign and domestic, old lines and new, the only purpose of which receivership must be the sale of such assets and the destruction of the International Company. To understand the importance of these questions it is necessary to consider the situation as disclosed by the record with reference to the entry of this decree. 152 THE DECREE. On the 12th clay of August, 1914, the opinion of the District Court was filed, containing the following direc- tions with reference to the decree : "We conclude that the International Harvester Company was from the beginning in violation of the first and second sections of the Sherman Law, and that this condition was accentuated by the reorgan- ization of the America Company and by the subse- quent acquisitions of competing plants, and that all the defendant subsidiary companies became from time to time parties to the illegal combination, and the defendant companies are combined to monopolize a part of the interstate and foreign trade. It will therefore be ordered that the entire combination and monopoly be dissolved, that the defendants have 90 days in which to report to the court a plan for the dissolution of the entire unlawful business into at least three substantially equal, separate, distinct, and independent corporations, with wholly separate owners and stockholders, or in the event this case is appealed and this decree superseded, then within 90 days from the filing of the procedendo or man- date from the Supreme Court the defendants shall file such plan, and in case the defendants fail to file such plan within the time limit the court will entertain an application for the appointment of a receiver for all the properties of the corporate de- fendants, and jurisdiction is retained to make such additional decrees as may become necessary to se- cure the final winding up and dissolution of the com- bination and monopoly complained of, and as to costs." (I, 91.) Three days later the Court entered its decree as fol- lows: "On this 15th day of August, 1914, this cause came on for decree upon the submission hereto- fore had, and the court being well advised in the premises finds that the defendant, the International Harvester Company, was as originally organized and now is a combination in restraint of trade and com- merce among the several states and with foreign 153 nations in agricultural implements, and did from its inception monopolize and attempt to monopolize a part of the trade and commerce among the several states and with foreign nations in agricultural im- plements. ###**■ It is adjudged and decreed that said combination and monopoly be forever dissolved and to the end that the business and assets of the International Harvester Company be separated and divided among at least three substantially equal, separate, distinct and independent corporations with wholly separate owners and stockholders and that the defendants file with the clerk within ninety days a plan for such separation and division for the consideration of this court. In the event this case is appealed and decree superseded then the time in which the defendant shall file said plan is hereby extended to ninety days from the filing of the procedendo or mandate of the Supreme Court with the clerk of this court. In case the defendants fail to file such plan in the time limited this court will entertain an applica- tion for the appointment of a receiver for all the property of the corporate defendants. Jurisdiction is retained by the court to make such additional decrees as may be deemed necessary to secure the final winding up and dissolution of the combination and monopoly complained of and as to costs." (I, 102-3.) THE AMENDED DECREE. The defendants thereupon filed their motion for a modification of the opinion and the decree in two particu- lars: (1) By eliminating all provisions relating to foreign business ; (2) By eliminating all specifications and limita- tions as to the plan to be proposed or decided upon for the carrying out of the decree. (I, 104.) Affidavits were filed in support of the motion. 154 On October 3, 1914, on the hearing of the motion, the Court entered the following order: "It is hereby ordered, that said decree be, and the same is, hereby amended by striking out the words 'and with foreign nations' wherever they ap- pear in the decree, but the power and duty of the court in dealing with all the property and business of every character of the defendant corporations, at the commencement of this suit or since, so far as lawful and necessary to effect a dissolution of the combination, are not renounced but expressly re- served, and by striking out, pursuant to an agree- ment between the attorney general and counsel for the defendants evidenced by the written consent of the attorney general signed by the United States attorney for Minnesota, presented to the court this day, the first sentence in the second paragraph of said decree reading as follows: 'It is adjudged and decreed that said combination and monopoly be forever dissolved and to the end that the business and assets of the International Harvester Company be separated and divided among at least three substantially equal, separate, distinct and independent corporations with wholly separate owners and stockholders and that the de- fendants file with the clerk within ninety days a plan for such separation and division for the con- sideration of this court,' and substituting in place thereof the following: 'It is adjudged and decreed that said combina- tion and monopoly be forever dissolved, and to that end that the business and assets of the International Harvester Company be divided in such manner and into such number of parts of separate and distinct ownership as may be necessary to restore competi- tive conditions and bring about a new situation in harmony with law ; and that the defendants file with the clerk within ninety (90) days a plan for such separation and division for the consideration of this court.'" (1,119-120.) The plan required to be presented to the District Court is one which in the opinion of that court will produce the results specified in the decree, viz, "restore competitive 155 conditions and bring about a new situation in harmony with law." The opinion filed defines certain specifications of such division, viz : "The dissolution of the entire unlawful business into at least three substantially equal, separate, dis- tinct and independent corporations, with wholly separate owners and stockholders." (I, 91.) The provision that in the event of the failure of the defendants to present such a plan "the court will entertain an application for the appointment of a re- ceiver for all the properties of the corporate defendants," can only be construed as adjudging that such receiver will be appointed in the event of the specified default. The motion filed by the defendants asked for a modifi- cation of the opinion as well as of the decree. Only the decree was modified ; and the modification with respect to the division of the entire business and assets among at least three substantially equal separate corporations was made upon the consent and agreement of the At- torney General, its purpose being to leave the Govern- ment free with reference to the measure of relief which it may ask in this case. The elimination from the decree of the foreign business was made by the Court (without the consent of the Attorney General) because no reference to the foreign business was made by the Government either in its petition, evidence or argu- ment. The question of monopoly or restraint of trade with reference to the foreign business was not in litiga- tion in this suit. The original decree was drafted and entered by the court without any hearing of any kind after the opinion was filed. No opportunity was given to the parties to offer evidence or make suggestions in re- 156 gard to the form or substance of the decree. They had not been discussed by defendants' counsel because they supposed that they would have an opportunity to present facts and suggestions after they were advised by the court as to what evils, if any, it found to exist and as to which relief was to be given. CORPORATE CHANGES SINCE THE FILING OE THE PETITION. All the facts necessary to an intelligent decision as to what manner of relief is practicable under an adverse decision in this case are not even now in the record, but there are certain important facts bearing upon this ques- tion shown by the affidavits filed in support of the motion to modify the decree. From these affidavits it appears that the pendency of this suit, with the Government 'a many gross and untrue charges against the company, car- ried such weight in foreign lands as seriously to affect the credit and business of the International abroad. This situation was discussed in a conference with the Attorney General and a plan was submitted to him by which the foreign business and the new line plants should be taken over by a new corporation. After the conference a letter was written to the At- torney General, from which we quote the following: "We also propose to organize a new corporation to take over all the business both of manufacturing and selling International Harvester products outside of the United States — taking the stock of the foreign subsidiary manufacturing and selling companies where they exist and the actual properties in for- eign countries now owned by the America Com- pany; also to become the owner of the plants in the United States at which only new lines are manu- factured, namely, the engine, tractor, spreader and wagon works. Such properties to be paid for with the stock of the new corporation which would be 157 held by the International Harvester Company in lieu of such properties until distributed to its stock- holders. Our proposed action is, as we understand it, along the line of the Government's wishes, but is not of- fered to the Government as a solution of the situa- tion." To which the Attorney General of the United States answered, under date of July 10, 1912, as follows : "While such action does not meet my views with reference to a division of the properties of the In- ternational Harvester Company and dissolution of its subsidiary companies, yet I am unable to see how the contemplated action can increase such mo- nopoly and restraint upon interstate commerce as may exist under the present organization. Appar- ently its effect will be rather to the contrary. How- ever, I reserve any expression of opinion which might operate as a waiver of any of the rights of the United States in the premises, and only call your attention to the fact that transactions, trans- fers and distributions made pendente lite cannot af- fect such rights as the Government may otherwise establish in the pending suit." In January and February, 1913, this plan was carried into effect. The Attorney General was fully advised of the proceedings carrying out this plan, a copy of the notice to the stockholders setting forth in full what was proposed to be done being then delivered to him. In carrying out this plan five plants in the United States, exclusively used to manufacture the new lines and employing nearly ten thousand men, three plants in Canada, employing 1,750 men, and four plants in Eu- rope, viz., in France, Russia, Germany and Sweden, em- ploying 3,500 men, were conveyed to a new cor- poration— the "International Harvester Corporation." It acquired one-half of the assets of the original company, but no interest in the plants in the United States manufacturing harvesting machines and no inter- 158 est in the business of selling harvesting machines in the United States. Its capitalization of $70,000,000— $30,- 000,000 preferred and $40,000,000 common — was distrib- uted pro rata to the stockholders of the original com- pany upon their surrender of a like amount of the stock of the original company. This stock of the In- ternational Harvester Corporation was listed on the New York Stock Exchange and has been bought and sold freely ever since the organization of the company, so that its stockholders are no longer the same as those of the original company. No objection to or comment on this transaction was made by the Government at any stage of the proceedings other than the letter from the at- torney general above quoted from. The new corporation is not engaged either in the manufacture or sale of harvesting machines in the United States. Its business in the United States is lim- ited exclusively to the new lines. In regard to this busi- ness the majority opinion said: "If the International and America Companies" (i. e., the manufacturing and selling companies) "were not in themselves unlawful there is nothing in the history of the expanding of the lines of manu- facture so as to make an all the year around busi- ness that could be condemned." (I, 82.) In regard to the new lines, there has been no elimina- tion of competition and no large percentage in any new line was controlled by the International Company. Its foreign business is not the subject of complaint or charges in this suit. 159 THE DECREE IS NOT IN HABMONY WITH THE DECISIONS OE THIS COURT. The relief ordered by the decree entered is not in har- mony with the principles laid down by this court in the anti-trust cases. In Standard Oil Company v. United States, 221 U. S., 1, this Court said (p. 78) : "5 1 applying remedies for this purpose, however, the fact must not be overlooked that injury to the public by the prevention of an undue restraint on, or the monopolization of trade or commerce is the foundation upon which the prohibitions of the stat- ute rest, and moreover that one of the fundamental purposes of the statute is to protect, not to de- stroy, rights of property." The foregoing statement was quoted and reaffirmed in United States v. St. Louis Terminal, 224 U. S., 383, 409. In United States v. American Tobacco Company, 221 IT. S., 106, this Court said (p. 185) : "In considering the subject from both of these aspects three dominant influences must guide our action: 1. The duty of giving complete and effi- cacious effect to the prohibitions of the statute; 2, the accomplishing of this result with as little in- jury as possible to the interest of the general pub- lic; and, 3, a proper regard for the vast interests of private property which may have become vested in many persons as a result of the acquisition either by way of stock ownership or otherwise of interests in the stock or securities of the combination without any guilty knowledge or intent in any way to become actors or participants in the wrongs which we find to have inspired and dominated the combination from the beginning. ' ' Following the principles laid down in the above cases the United States District Courts have confined the re- 160 lief granted to injunctions in the following recent cases arising under the Anti-Trust Act : United States v. Great Lakes Towing Company, 208 Fed., 733. United States v. Hamburg-American Steamship Line, decision by Circuit Judges Lacombe, Cose, Ward and Rogers, 216 Fed., 971. U. S. v. Prince Line, Ltd., and U. S. v. Amer- ican-Asiatic S. S. Co. Decision by Circuit Judges Lacombe, Coxe, Ward and Rogers, Feb. 8, 1915 ; and the United States v. Keystone Watch Case Com- pany, decision January 2, 1915, by Circuit Judges Btjffington, Hunt and Macphebson. In the case last cited the opinion contains a very com- prehensive discussion of the District Court's decision in this case, all the judges concurring in the views ex- pressed in the dissenting opinion of Judge Sanborn. THE DECREE INVOLVES AW UNNECESSARY DESTRUCTION OF PROPERTY. The District Court erred in entering a decree which involved an unnecessary destruction of property inter- ests. The sole evil found by the District Court to exist at the date of the decree was the large percentage of the harvester business in the United States possessed by the International Company. For this evil the remedy should have been restricted to the reduction of such per- centage which would only have affected the business of the company in the harvester lines in the United States. To remedy this evil the decree need not have touched the foreign business or the new lines in which there had been neither elimination of com- petition nor any large percentage. The measure of 161 relief required by the opinion of the District Court which stands unmodified is the division of the entire business and assets, domestic and foreign, of the Inter- national Company into three substantially equal parts, to be owned by separate corporations having entirely different stockholders. In view of the evil sought to be remedied this implies the division of the company's har- vester business in the United States into three separate and distinct parts separately owned. The capitalization of the International Company, at the date of the filing of the suit, was $140,000,000, with a surplus of approximately $20,000,000, to which additions have since been made. A division of these assets be- tween three substantially equal parts owned by separate corporations would require an investment on the part of each of three companies in excess of $50,000,000. As- suming it was contemplated that one of these corpora- tions should be the existing International Company two other corporations are required to carry out the scheme of the District Court, each of which shall acquire from the International Company property of a value in excess of $50,000,000. Where are such corporations to be found? How are they to be created ! Where is the capi- tal to make the required investments? The end apparently sought by the District Court is the re-establishment of the competition which existed in 1902. This is not limiting the remedy to the removal of evils existing in 1912. It is to attempt the impossible. As the courts have well said, they cannot compel competition; they can only compel the existence of opportunity for competition. The existing situation precludes the possibility of a voluntary partition of the assets and business of the In- ternational Company between its stockholders so as to carry out the decree in that way. 162 If the decree in this case should be affirmed there is no possibility of the defendants being able to present a plan to the District Court which will conform to its views as expressed in the majority opinion, which stands unmodified. Upon their failure so to do the entire as- sets of all the corporate defendants would under the decree pass into the hands of a receiver. A receivership solves none of the difficulties of carrying out the plan of the District Court. Its only possible result would be a sale by the court of all the property and assets of the International Company, and the de- struction of many millions of dollars in the value of its business and assets. The difficulty of finding pur- chasers to conform to the views of the court would still remain. With no prospective growth in the harvester business in the United States; with the Massey-Harris, the Deere, the Moline Plow, the Acme and other competitors in the field with their own lines of harvesting and other machines, there could be, in the nature of the case, no adequate inducement to new capital or new companies to enter the field to such an extent as to provide purchasers at forced sale of the busi- ness and assets of the International Company. The only result would be the greatest destruction of values, amounting to from $20,000,000 to $50,000,000, fall- ing in large part upon stockholders who had no part in the organization of the International Company. It could only result in injury to the public in destroying the economies which have prevented an in- crease in the price of harvesting machines, proportionate to the increase in the cost of labor and material and of the prices of all other agricultural implements. In U. S. v. American- Asiatic S. S. Co., supra, the four Circuit Judges, by Lacombe, C. J., said: "Some actual unreasonable interference with the natural course of trade must be shown by proof. In most, if not all, cases of this character many of 163 the witnesses called by the Government necessarily come from the officers of the defendants. From them only can it be established what agreements were made and what action under such agreements was taken by the parties thereto. In all cases to which attention has been called, however, this testi- mony is supplemented by other evidence given by witnesses who complain of some injury; some one asserts that the rates charged him are excessive or that his business has been in some way interfered with or harassed or hampered by defendant's con- duct. No such witness has appeared in this case; no ship-owner, no shipper or consignee, no manufac- turer, merchant or trader, large or small, in the United States or in the Far East is here with any complaint. Persons engaged in the trade which, it is alleged, is restrained sit mute; every one seems to be reasonably well satisfied with existing condi- tions except the Government, which contends that the agreements themselves, carried out according to their terms, constitute a violation of the Act, i. e. (as it is now construed), that they evidence an 'un- reasonable restraint of trade.' * * * When from carriers and former carriers and pros- pective carriers of merchandise between the speci- fied ports, and from persons interested in the manu- facture, transportation, sale and purchase of such merchandise there comes no complaint, it seems a fair inference that whatever restraints may have re- sulted from defendants ' combination and conduct are merely the usual, normal and reasonable restraints against which it has been held the Sherman Act is not directed." So, in this case the record is barren of any existing in- jury to any interest, public or private, by reason of the International Company. Its competitors, the dealers and the farmers are all without a grievance, — they are, in fact, its defenders. The Government waited in silence ten years after the organization of the Interna- tional Company before commencing this suit. All the acts of the International Company now complained of were public and well known; nothing was concealed. 164 During the ten years new enterprises have been under- taken, large investments have been made, great numbers of new stockholders have become interested — over 6,000 new stockholders since 1903 of whom 3,000 are employes of the Company — and great organizations at home and abroad for the transaction of business have been formed; and now a court of equity is asked to disrupt these organizations, to disintegrate the proper- ties, and to destroy in large part the enterprises undertaken and the investments made, while the Govern- ment stood quietly by without criticism and without ob- jection. And all to what end? For whose benefit? In this case, so strongly in contrast with other trust cases, in the absence of injured or complaining parties, a decree was entered far more drastic than any decree' that has been entered in any other trust case. There is no urgency for relief which could possibly justify placing the whole measure of relief and resulting destruction of property interests within the uncontrolled discretion of the District Court under penalty of a receivership of all the property of the Company. If there is any apprehen- sion anywhere that evil may hereafter be done and the Anti-Trust Act may hereafter be violated by the Interna- tional Company, the public will be fully protected by a dismissal of the petition without prejudice, leaving the Government free to intervene at once should any occa- sion for such action hereafter arise. February 26, 1915. Respectfully submitted, John P. Wilson, Edgar A. Bancroft, Frank B. Kellogg, Solicitors for Appellants. William D. McHugh, Philip S. Post, Of Counsel. APPENDIX. U. S. v. International Harvester Co., 214 Fed., 987. (Record I, 76.) OPINIONS OF THE DISTRICT COURT. Before SANBORN, HOOK and SMITH, Circuit Judges. Smith, Circuit Judge, delivered the opinion of the court : The petition in this case was filed April 30th, 1912, under Section 4 of "An Act to Protect Trade and Commerce Against Unlawful Restraints and Monopolies," generally known as the "Sherman Law," 26 Stat., 209. Under that section the Circuit Court was vested with juris- diction of such suits, hut the Circuit Court was abolished by Judicial Code, Section 289, and by Section 291 the jurisdic- tion under Section 4 of the Sherman Law passed to the Dis- trict Court. The Attorney General having under 32 Stat. 823 filed with the Clerk of the District Court a certificate that this case is of general public importance the same came on for hearing before the Circuit Judges named: Notwithstanding the abolishment of the Circuit Court. Ex Parte United States, 226 U. S., 420. The petition makes defendants the International Harvester Company ; the International Harvester Company of America ; the International Flax Twine Company ; the Wisconsin Steel Company; the Wisconsin Lumber Company; the Illinois Northern Railway Company; the Chicago West Pullman & Southern Railroad Company; Cyrus H. McCormick; Charles Deering; James Deering; John J. Glessner; William H. Jones; Harold F. McCormick; Richard F. Howe; Edgar A. Bancroft; George F. Baker; William J. Louderback; Nor- man B. Ream; Charles Steele; John A. Chapman; Elbert H. Gary ; Thomas D. Jones ; John P. Wilson ; William L. Saun- ders and George W. Perkins. All of these defendants made answer. The case was tried and has been submitted to the court for a decree. As the pleadings are elaborate, covering more than one hundred and thirty pages of printed matter, and as no questions have been raised as to the sufficiency of any of them we will state the facts as shown, contenting ourselves with saying that all 2 Opinion of Judge Smith. of the facts found by the court are either expressly covered by the allegations of the pleadings or are within the neces- sary implications thereof. In their argument defendants' counsel say: "This case is one of fact, not of controverted questions of law." It will be necessary therefore to review the facts fairly fully, but not elaborately, as there are eighteen volumes and nearly ten thousand five hundred printed pages in the rec- ord. Agricultural implements may be divided into five classes : — 1. Tillage implements, such as plows, harrows and other instruments used in keeping the soil in good con- dition. 2. Seeding implements, such as corn-planters, drills and seeders. 3. Harvesting implements, such as harvesters, mow- ers, reapers, rakes and the like. 4. Threshing machines. 5. Implements for general agricultural use, such as wagons, manure spreaders, gas engines, cream separa- tors, tractors and certain similar tools and instrumentali- ties. The defendant, the International Harvester Company, hereafter called the International Company, was organized on August 12, 1902, under the laws of New Jersey. The ob- jects for which it was organized as stated in the articles of incorporation were: "To manufacture, sell and deal in harvesting ma- chines, tools and implements of all kinds, including har- vesters, binders, reapers, mowers, rakes, headers, shred- ders, machinery, engines, wagons, motor vehicles, and vehicles of all kinds; agricultural machinery, tools and implements of all kinds; binder twine; and all devices, materials and articles used, or intended for use, in con- nection therewith; and all repair parts and other de- vices, materials and articles used, or intended for use in connection with any kind of harvesting or agricultural machines, tools or implements, or any gasoline, electric or other vehicles. "To engage in the manufacture or production of, and to deal in, any materials or products which may be used in, or in connection with, the manufacture of harvesting or agricultural machines, tools and implements." Opinion of Judge Smith. 3 Prior to that time the principal manufacturers of harvest- ing implements in the United States had been : First : The McCormick Harvesting Machine Company, a corporation of Chicago, Illinois, founded about 1849. Second : D. M. Osborne & Company, a New York cor- poration, with a plant or plants at Auburn, N. Y., founded about 1860. Third: The Warder, Bushnell & Glessner Company, an Ohio corporation, with its manufacturing plant at Springfield, Ohio, and its offices at Chicago, Illinois, which manufactured under the name of the Champion, founded about 1869. Fourth: The Deering Harvester Company, a copart- nership of Chicago, Illinois, founded about 1875. Fifth: The Milwaukee Harvester Company, of Mil- waukee, Wisconsin, and Sixth: The Piano Manufacturing Company, of West Pullman, Illinois. While these were the leading manufacturers of harvest- ing machines, they had other, but not general, lines of manu- facture of agricultural implements. On June 24, 1902, P. D. Middlekauff secured in his own name, an option on the stock and plant of the Milwaukee Har- vester Company, for $3,123,691.90. He did this in fact as agent, though it does not clearly and certainly appear who his principal was, whether J. P. Morgan & Co., George W. Perkins or the McCormick Harvesting Machine Co. He did it, however, at the direct instance of the McCormick Harvest- ing Machine Company, but whether it was acting as principal or agent is left in some slight doubt. On June 25, 1902, Mr. Middlekauff went to New York with a letter from an officer of the McCormick Company, author- izing him to assign this option to J. P. Morgan & Co., of which George W. Perkins was a member, or to anyone they might designate, and reciting that the option had been obtained "for us." Mr. Middlekauff remained in New York until July 30, 1902, aside from being absent a small portion of the time in Philadelphia and Washington on business for Mr. Per- kins. On August 11, 1902, a new contract was made for the pur- chase of the Milwaukee Harvester plant, by Mr. Middlekauff, and on the same day lie nssismod his contract to Mr. William C. Lane, a New York banker, and then President of the Standard Trust Company. 4 Opinion of Judge Smith. In July, 1902, the representatives of the McCormick, Peer- ing, Warder, Bushnell & Glessner, and the Piano were all in New York, hut stopping at different hotels and not seeing one another. They were all seeing, however, Mr. George W. Per- kins. On July 28, 1902, they met and gave separate contracts to William C. Lane, heretofore referred to, and his assigns to sell all their tangible property and specified portions of their bills receivable. These agreements all contained a recital that the purchaser upon his acquisition of the property intended to transfer the same to a corporation to be organized under the laws of Illinois or some other state, called the "purchas- ing company. ' ' It was in each case, except that of the Warder, Bushnell & Glessner Co., stipulated that the entire purchase price should be paid in fully paid non-assessable stock of the purchasing company. On August 11, 1902, the companies all signed an agreement for the immediate delivery of their plants and property, with- out waiting for any appraisement theretofore stipulated for in each instance. On August 12, 1902, the very day of the organization of the International Harvester Company, with a total capital of one hundred and twenty millions of dollars, Mr. Lane appeared before the Board of Directors and offered to sell the Milwau- kee Harvester Company plant as a going concern, including its bills receivable, and the plants of the McCormick Harvest- ing Machine Company; the Deering Harvester Company; the Piano Manufacturing Company; and the Warder, Bushnell & Glessner Company, and to furnish sixty millions of dollars of working capital to be represented by accounts and bills re- ceivable of the McCormick Harvesting Machine Company, the Deering Harvester Company, and the Piano Manufacturing Company, or in cash, for the one hundred and twenty millions of dollars of the capital stock of the company, and on August 13, 1902, this proposition was accepted. The property turned in was of greater value than the stock issued for it. This case therefore involves no question of overcapitalization. In pursuance of this agreement there was turned over to the company forty million dollars of the bills receivable of the McCormick Harvesting Machine Company, the Deering Harvester Company, and the Piano Manufacturing Company, guaranteed by them respectively. In all Mr. Lane did in this matter he was acting upon the suggestion of his counsel, Messrs. Guthrie, Cravath & Henderson. He was compensated Opinion of Judge Smith. 5 but there was never any idea upon Ms part that he owned any of the properties. He was a mere conduit or instrumentality in the transaction. The International Company shortly acquired all the stock of the Milwaukee Harvester Company as it had already ac- quired the plant, it reduced the capital of the Milwaukee Har- vester Company to a million dollars, and changed the name to the International Harvester Company of America, here- after called the American Company. It was for a considerable time officered by the same men who held the offices in the In- ternational Company. A contract was entered into between the International Company and the America Company by which the former contracted to sell to the latter its entire out- put and the latter undertook the responsibilities of re-selling the same. The America Company in addition to buying the manufactured products of the International bought from out- side parties some threshers, wagons, plows, and so forth, and resold them; but the dealing in all property not the product of the International Company only amounts to about 2-1/2% of its business. All the stock of the American Company is still the property of the International Company. The two defendant railroads are switching roads to the factories of the International Company, one acquired in the consolidation mentioned and one constructed by the new com- pany. The International Flax Twine Company, the Wiscon- sin Steel Company and the Wisconsin Lumber Company are auxiliary companies of the International Company, and the personal defendants are officers and directors of the last named company. It is alleged in the petition that these five companies pro- duced over eighty-five per cent, of all harvesting machinery sold in the United States, and it is admitted in the answer that said companies produced approximately eighty to eighty- five per cent, of the binders, moivers, reapers and rakes. In January following the consolidation of the five compa- nies the International Company acquired the D. M. Osborne & Company stock and the companies thus combined manufactured a still greater percentage of the harvest- ing machinery used in the United States and nearly the whole of that exported from the United States. The five companies except the Milwaukee Company all took stock in the new com- pany and with the exception of the Warder, Bushnell & Gless- ner Company took stock for the entire amount of property turned over by them and this amounted to $93,400,000 of the 6 Opinion of Judge Smith. $120,000,000 capital of the new company. $6,600,000 of the capital of the new company was paid -to J. P. Morgan & Com- pany, of which $3,148,196.66 was for the Milwaukee Harvester Company's property and business and $3,451,803.34 was for services and expenses in connection with the organization of the International Company. Thus $100,000,000 of the capital of the new company was clearly covered without any new or additional working capital. By agreement among all the par- ties who were to receive shares of stock in the International all the stock except enough to qualify directors was vested in voting trustees, namely: George W. Perkins, Cyrus H. Mc- Cormick, President of the McCormick Harvesting Machine Company, and Charles Deering, of the Deering Harvester Company. These voting trustees were maintained for ten years. The day of the transfer to the International Harvester Company of the five plants Cyrus H. McCormick, Harold F. McCormick, Stanley McCormick, all of the McCormick Har- vesting Machine Company and Cyrus Bentley, the Chicago Attorney of the Company ; Charles Deering, William Deering, James Deering and Eichard F. Howe, all of the Deering Har- vester Company, John J. Glessner of the Warder, Bushnell & Glessner Company; and William H. Jones of the Piano Manufacturing Company, were all chosen directors of the In- ternational Harvester Company and constituted the majority of the board. When the D. M. Osborne & Company purchase was made while the International bought all the stock it permitted the Osborne Company to continue to appear to be independent. It is claimed that this was done to enable the Osborne to col- lect its bills receivable which were not acquired by the Interna- tional. There was commercial advantage in claiming not to be associated with the International. Many persons were opposed to buying from it and for two years the Osborne Company persistently advertised that it was independent. While under the old time law of warranty it might be justi- fiable for the Osborne Company to conceal its relations with the International, there can be no excuse for the affirmation on its part that it was independent after it had been acquired by the International. "The seller may let the buyer cheat himself ad libitum but must not actively assist him in cheating himself." Parsons on Contracts, 9th Ed., Vol. 1, page 615. The International had bought all the stock of the Osborne Opinion of Judge Smith. 7 Company and it had been transferred to a trustee for it and there was in the fact that the Osborne Company might better collect its bills receivable no basis to justify the International in making a contract under which the Osborne Company could continue to advertise falsely that it was an independent con- cern when it had in fact been merged with the International. It is safe to say that from January, 1903, the competition of the Osborne Company was in name only and did not exist in fact. "What has been said of the Osborne purchase is true in prin- ciple of purchases made by the International of the Keystone Company, the Minnie Harvester Company, and the Aultman- Miller plant. Prior to the consolidation the first five companies were in fierce competition for trade and especially was this true of the McCormick and the Deering Companies and this competi- tion extended not only to price but to the granting of expert assistance and numerous free items with machines. The re- sult of the combination was that all this competition at once wholly ceased, except within the limitation of agents commis- sions. The defendants claim that the objects of the organization were: First : to build up the foreign trade ; Second: by the combination to secure more capital to enable them to continue the battle in the foreign mar- ket; Third: by enlarging the scope of the business so as to include other lines of agricultural implements to make an all the year around business ; and that it was not the intention to oppress the domestic mar- ket and that they have not done so. It does appear that since the combination the foreign trade has been greatly increased. This trade of all the combining companies was $10,400,000 in 1902 and has grown under the defendants' management to $50,000,000 in 1912. This vast growth is to the credit of the energy and enterprise of the defendants. But the growth of the trade of the companies who formed the combination was at the time of the consolida- tion very recent and the trade was rapidly increasing just prior to the combination. "With the knowledge that the for- eign trade was making such a remarkable growth at the time of the consolidation whether the separate companies would have increased their business as much as the defendants have 8 Opinion of Judge Smith. done is a mere matter of speculation on which we can ven- ture no opinion. It is claimed that the consolidation brought $60,000,000 of available cash to the new company with which to expand the foreign trade. This is not true. The Government claims that not more than $10,000,000 of new cash was furnished, but in no event did it exceed $20,000,000. Forty million dollars of this so called working capital was furnished in bills receiv- able of the old companies, just as available to the old compa- nies as to the new. And $60,000,000 was issued for the tangible property of the old companies and the expenses of J. P. Morgan & Company in connection with the organization of the new company, and for the Milwaukee Company. Soon the International began buying and constructing plants to extend its business from the prior one of the manu- facture of harvesting machinery to the manufacture of all of the five classes of agricultural implements heretofore re- ferred to. Consequently a distinction is drawn in argument between what are called the old lines and the new. It is contended by the Government that the International used its prior monopoly of the old lines to impose its new lines upon dealers and it includes this among numerous charges of oppression upon purchasers. While the evidence shows some instances of attempted op- pression of the American trade by the International and the America companies, such cases are sporadic and in general their treatment of their smaller competitors has been fair and just and if the International and America companies were not in themselves unlawful there is nothing in the history of the expanding of the lines of manufacture so as to make an all the year around business that could be condemned. The real question is whether the combination of the com- panies was illegal in the beginning or became so with the additions subsequently made. This court is clearly of the opinion that the process by which it was made to appear that the properties were sold to Lane was merely colorable. Parts of sections 1 and 2 of the Sherman Law are as fol- lows: "Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign na- tions, is hereby declared to be illegal. Opinion of Judge Smith. 9 ' ' Sec. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor." The question is whether the combination was illegal under this statute. This statute must be construed in the light of reason. Standard Oil Company v. United States, 221 U. S., 1. United States v. American Tobacco Co., 221 U. S., 106. In the latter case the Supreme Court said (p. 180) : "Coming then to apply to the case before ns the act as interpreted in the Standard Oil and previous cases, all the difficulties suggested by the mere form in which the assailed transactions are clothed become of no mo- ment. This follows because although it was held in the Standard Oil case that, giving to the statute a reasonable construction, the words 'restraint of trade' did not em- brace all those normal and usual contracts essential to individual freedom and the right to make which were nec- essary in order that the course of trade might be free, yet, as a result of the reasonable construction which was af- fixed to the statute, it was pointed out that the generic designation of the first and second sections of the law, when taken together, embraced every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed. That is to say, it was held that in view of the general language of the statute and the public policy which it manifested, there was no possibility of frustrating that policy by resorting to any disguise or subterfuge of form, since resort to reason rendered it impossible to escape by any indirection the prohibitions of the statute." No weight is attached therefore to the means by which the combination was formed if a combination within the purview of the statute was created. That it was a combination of five companies is clear. The fact that this combination took the form of a new corporation is immaterial. United States v. American Tobacco Company, 221 U. S., 106. United States v. E. I. Du Pont Be Nemours & Co., 188 Fed., 127. 10 Opinion of Judge Smith. Was this combination in restraint of trade? It substantially suppressed all competition between the five companies, and the restraint of competition between combining companies is as illegal as destruction of competition between them with- out combining. In United States v. E. I. Du Pont Be Nemours & Co., 188 Fed., 127, in an able opinion by Lanning, Circuit Judge, in behalf of Circuit Judges Gray, Buffington and himself, it is said (p. 150) : "A number of bills were introduced in the Fiftieth Congress (in August and September, 1888), designed to make unlawful every combination 'to prevent competition' and 'to prevent full and free competition' in the sales of, articles transported from one State to another. None of them was enacted into law. On December 4, 1889, Mr. Sherman introduced into the Senate of the Fifty-first Congress a bill which declared unlawful every combina- tion 'to prevent full and free competition' in such sales. After much debate the bill was, on March 27, 1890, re- ferred to the committee on judiciary, and on April 2, 1890, that committee reported it back to the Senate with an amendment drawn by the late Senator Hoar, striking out all after its enacting clause and substituting therefor the act as we now have it. As enacted, it does not con- demn every combination 'to prevent competition.' What it condemns is every combination in restraint of trade or commerce among the several states, etc. When the bill went from the Senate to the House the latter body amended it by inserting a provision extending the scope of the act to all agreements entered into for the purpose of 'preventing competition' either in the purchase or sale of commodities; but the amendment was disagreed to. While there is a ' general acquiescence in the doctrine that debates in Congress are not appropriate sources of in- formation from which to discover the meaning of the language of a statute passed by that body' (United States v. Freight Association, 166 U. S., 318, 17 Sup. Ct., 540, 41 L. Ed., 1007), that rule 'in the nature of things is not vio- lated by resorting to debates as a means of ascertaining the environment at the time of the enactment of a par- ticular law; that is, the history of the period when it was adopted.' [Standard Oil Co. v. United, States, 221 U. S., 50, 31 Sup. Ct., 512, 55 L. Ed., 619, decided May 15, 1911.) There is a distinction between restraint of competition Opinion of Judge Smith. 11 and restraint of trade. The latter expression had, when the anti-trust act was passed, a definite legal signification. Not every combination in restraint of competition was, in a legal sense, in restraint of trade. Two men in the same town engaged in the same business as competitors may unite in a copartnership, and thereafter, as be- tween themselves, substitute co-operation for competition. Their combination restrains competition, and if their town is located near the line between two states, and each has been trading in both states, their combination restrains competition in interstate trade. But it does not necessar- ily follow that such restraint of competition is a restraint of interstate trade and commerce. The determination of whether it be so must depend upon the facts and circum- stances of each individual case. It is undoubtedly the policy of the statute that competitive conditions in inter- state trade should be maintained wherever their aboli- tion would tend to suppress or diminish such trade. But this being true does not read into the statute a denuncia- tion of all agreements that may restrain competition with- out regard to their purpose or direct effect to restrain 'trade or commerce among the several states.' To what extent the anti-trust act condemns combinations that re- strain full and free competition in interstate trade is a question that has been much debated. For a dozen years, at least, it has been settled that it does not condemn com- binations which only indirectly, remotely, or incidentally restrain interstate trade. The recent decisions of the Supreme Court in Standard Oil Co. v. United States, and American Tobacco Co. v. United States, 221 IT. S., 106, 31 Sup. Ct., 632, 55 L. Ed., 663, make it quite clear that the language of the anti-trust act is not to receive that literal construction which will impair rather than enhance freedom of interstate com- merce. As we read those decisions, restraint of interstate trade and restraint of competition in interstate trade are not interchangeable expressions. There may be, under the anti-trust act, restraint of competition that does not amount to restraint of interstate trade, just as before the passage of the act there might have been restraint of competition that did not amount to a common-law re- straint of trade. This fact was plainly recognized in United States v. Joint Traffic Association, 111 U. S., 505, 12 Opinion of Judge Smith. 567 ; 19 Sup. Ct. 25, 31 ; 43 L. Ed., 259, where Mr. Justice Peckham said : 'We might say that the formation of corporations for business or manufacturing purposes has never, to our knoAvledge, been regarded in the nature of a contract in restraint of trade or commerce. The same may be said of the contract of partnership. It might also be difficult to show that the appointment by two, or more producers of the same person to sell their goods on commission was a matter in any degree in restraint of trade. We are not aware that it has ever been claimed that a lease or purchase by a farmer, a manufacturer, or merchant of an additional farm, manufactory, or shop, or the withdrawal from busi- ness of any farmer, merchant or manufacturer, re- strained commerce or trade within the legal defini- tion of that term.' While all this is true, the recent decisions of the Su- preme Court make it equally clear that a combination cannot escape the condemnation of the anti-trust act mere- ly by the form it assumes or by the dress it wears. It matters not whether the combination be 'in the form of a trust or otherwise,' whether it be in the form of a trade association or a corporation, if it arbitrarily uses its power to force weaker competitors out of business, or to coerce them into a sale to or union with the combination, it puts a restraint upon interstate commerce, and monop- olizes or attempts to monopolize a part of that co mm erce in a sense that violates the anti-trust act." In United States v. E. C. Knight Co., 156 IT. S., 1 (16), Chief Justice Fuller said: "Again, all the authorities agree that in order to vitiate a contract or combination, it is not essential that its results should be a complete monopoly; it is sufficient if it really tends to that end and to deprive the public of the advantages which flow from free competition." And this was reiterated in Addyston Pipe Co. v. United States, 175 U. S., 211 (237). In Northern Securities Co. v. United States, 193 U. S., 197 (331) it is said: "We will not incumber this opinion by extended ex- tracts from the former opinions of this court. It is suffi- cient to say that from the decisions in the above cases cer- Opinion of Judge Smith. 13 tain propositions are plainly deducible and embrace the present case. Those propositions are: * * * That railroad carriers engaged in interstate or inter- national trade or commerce are embraced by the act; That combinations even among private manufacturers or dealers whereby interstate or international commerce is restrained are equally embraced by the act; That Congress has the power to establish rules by which interstate and international commerce shall be governed, and by the anti-trust act, has prescribed the rule of free competition among those engaged in such commerce. ' ' In United States v. Reading Co., 226 U. S., 324 (370), it is said : "Whether a particular act, contract or agreement was a reasonable and normal method in furtherance of trade and commerce, may, in doubtful cases, turn upon the in- tent to be inferred from the extent of the control thereby secured over the commerce affected, as well as by the method which was used. Of course if the necessary re- sult is materially to restrain trade between the states, the intent with which the thing was done is of no consequence. But when there is only a probability, the intent to pro- duce the consequences may become important. United States v. St. Louis Terminal Association, 224 U. S., 383, 394; Swift & Co. v. U. S., 196 U. S., 375. In the instant case the extent of the control over the limited supply of anthracite coal by means of the great proportion theretofore owned or controlled by the defend- ant companies, and the extent of the control acquired over the independent output which constituted the only compet- ing supply, affords evidence of an intent to suppress that competition and of a purpose to unduly restrain the free- dom of production, transportation and sale of the ar- ticle at tidewater markets. The case falls well within not only the Standard Oil and Tobacco Cases, 221 U. S., 1, 106, but is of such an unreasonable character as to be within the authority of a long line of cases decided by this court. Among them we may cite : Northern Securities Co. v. U. S., 193 U. S., 197 ; Swift £ Co. v. United States, 196 IT. S., 375; National Cotton Oil Co. v. Texas, 197 U. S., 115; United States v. St. Louis Terminal Association, 224 U. S., 383 ; and the recent case of United States v. Union Pacific Railway, ante, p. 61. >> 14 Opinion of Judge Smith. In United States v. American Tobacco Co., 221 U. S., 106, (179), it is said: "Applying the rule of reason to the construction of the statute, it was held in the Standard Oil case that as the words 'restraint of trade' at common law and in the law of this country at the time of the adoption of the anti-trust act only embraced acts or contracts or agree- ments or combinations which operated to the prejudice of the public interests by unduly restricting competition, or unduly obstructing the due course of trade or which, either because of their inherent nature or effect or be- cause of the evident purpose of the acts, etc., injuriously restrain trade, that the words as used in the statute were designed to have and did have but a like significance. It was therefore pointed out that the statute did not forbid or restrain the power to make normal and usual con- tracts to further trade by resorting to all normal methods, whether by agreement or otherwise, to accomplish such purpose. In other words it was held, not that acts which the statute prohibited could be removed from the control of its prohibitions by a finding that they were rea- sonable, but that the duty to interpret which inevitably arose from the general character of the term ' restraint of trade' required that the words 'restraint of trade' should be given a meaning which would not destroy the individual right to contract and render difficult if not impossible any movement of trade in the channels of interstate commerce — the free movement of which it was the purpose of the statute to protect. The soundness of the rule that the statute should receive a reasonable construction, after further mature deliberation we see no reason to doubt. Indeed, the necessity for not departing in this case from the standard of the rule of reason which is universal in its application is so plainly required in order to give effect to the remedial purposes which the act under consideration contemplates and to prevent that act from destroying all liberty of contract and all substantial right to trade, and thus causing the act to be at war with itself by annihilat- ing the fundamental right of freedom to trade which, on the very face of the act, it was enacted to preserve is illustrated by the record before us. In truth, the plain demonstration which this rec- ord gives of the injury which would arise from and the promotion of the wrongs which the statute was Opinion of Judge Smith. 15 intended to guard against, which would result in giving to the statute a narrow, unreasoning and unheard-of con- struction, as illustrated by the record before us, if pos- sible serves to strengthen our conviction as to the cor- rectness of the rule of construction, the rule of reason, which was applied in the Standard Oil case, the applica- tion of which rule to the statute we now in the most un- equivocal terms, re-express and re-affirm." In Nash v. United States, 229 U. S., 373, referring to the Standard Oil and American Tobacco cases, it is said (p. 376) : "Those cases may be taken to have established that only such contracts and combinations are within the act as, by reason of intent or the inherent nature of the contem- plated acts prejudiced the public interests by unduly re- stricting competition or unduly obstructing the course of trade." In United States v. Freight Association, 166 U. S., 290 (339), the court said: "The claim that the company has the right to charge reasonable rates and that therefore it has the right to enter into a combination with competing roads to main- tain such rates cannot be admitted. The conclusion does not follow from an admission of the premise. What one company may do in the way of charging reasonable rates is radically different from entering into an agreement with other and competing roads to keep up the rates to that point. If there be any competition the extent of the charge for the service will be seriously affected by that fact. Competition will itself bring charges down to what may be reasonable while in the case of an agreement to keep prices up competition is allowed no play ; it is shut out, and the rate is practically fixed by the companies themselves by virtue of the agreement, so long as they In Shawnee Compress Company v. Anderson, 209 U. S., 423, the Supreme Court held a certain lease valid so far as the mere power to execute it was concerned; but that it became invalid when it tended directly and in a substantial manner to suppress competition under the common law, the Sherman Anti-Trust law, and the laws of Oklahoma. The decision was upon the sole ground of the undue suppression of competi- Suppression of competition where the parties to a combina- tion control a large portion of the interstate or foreign com- 16 Opinion of Judge Smith. merce in the article, and where there is no obligation to form the combination arising out of the fact that the parties to the same are losing money or the like has been held an undue re- straint of trade. See: Continental Wall Paper Co. v. Voight & Sons Co., 212 U S 227 Same v.' Same, 148 Fed., 939. Swift & Co. v. United States, 196 U. S., 375. Addyston Pipe Co. v. United States, 175 U. S., 211. United States v. Addyston Pipe Co., 85 Fed., 271; 29 C. C. A., 141. Chattanooga Foundry v. Atlanta, 203 U. S., 390. City of Atlanta v. Chattanooga Foundry, 127 Fed., 23. Montague & Co. v. Lowrey, 193 U. S., 38. In United States v. Standard Oil Co., 173 Federal 177 (184), Sanborn, Circuit Judge, in behalf of himself, Van Devanter, then Circuit Judge, now a Judge of the Supreme Court, and Adams, Circuit Judge, said: "The purpose of this statute was to keep the rates of transportation and the prices of articles in interstate and international commerce open to free competition. Any contract or combination of two or more parties, where- by the control of such rates or prices is taken from sep- arate competitors in that trade and vested in a person or an association of persons, necessarily restricts competi- tion and restrains that commerce * * * Agreements of competitive manufacturers and traders not to compete in the purchase or sale of articles in interstate com- merce, or to buy or to sell them at prices fixed by a mutual agent or association * * * are alike declared to be illegal by this law. In the construction and enforcement of this statute, corporations are persons, they are legal entities distinct from their stockholders, and the combination of two or more of them in restraint of trade is as unlawful as the combination of individuals." In United States v. Addyston Pipe Co., 85 Federal 271 (282), Taft, Circuit Judge, speaking for Circuit Justice Har- lan, the writer of the opinion, and Lurton, Circuit Judge, late a Justice of the Supreme Court, in an opinion exhaustive in its review of foreign and state decisions, quotes with approval Opinion of Judge Smith. 17 from the opinion of Chief Justice Tindal in Horner v. Graves, 7th Bing., 735, the following: "We do not see how a better test can be applied to the question whether this is or not a reasonable restraint of trade than by considering whether the restraint is sucb only as to afford a fair protection to the interests of the party in favor of whom it is given and not so large as to interfere with the interests of the public. Whatever re- straint is larger than the necessary protection of the party requires can be of no benefit to either. It can only be oppressive. It is in the eye of the law, unreasonable. Whatever is injurious to the interests of the public is void on the ground of public policy." In the United States v. American Tobacco Co., 164 Federal, 700 (702, 703), in an opinion by LaCombe, Circuit Judge, on behalf of himself and Coxe and Noyes, Circuit Judges, it is said : "What benefits may have come from this combination or from the others complained of, it is not material to in- quire, nor need subsequent business methods be consid- ered, nor the effects on production or prices. The rec- ord in this case does not indicate that there has been any increase in the price of tobacco products to the consumer. There is an absence of persuasive evidence that by un- fair competition or improper practices independent deal- ers have been dragooned into giving up their individual enterprises and selling out to the principal defendant. * # # During the existence of the American Tobacco Com- pany new enterprises have been started, some with small capital, in competition with it, and have thriven. The price of leaf tobacco — the raw material — except for one brief period of abnormal conditions, has steadily in- creased, until it has nearly doubled, while at the same time 150,000 additional acres have been devoted to to- bacco crops and the consumption of the leaf has greatly increased. Through the enterprise of defendant and at large expense new markets for American tobacco have been opened or developed in India, China and elsewhere. But all this is immaterial. Each one of these purchases of existing concerns, complained of in the petition was a con- tract and combination in restraint of a competition exist- ing when it was entered into, and that is sufficient to bring it within the ban of this drastic statute." 18 Opinion of Judge Smith. In State v. International Harvester Co. of A., 237 Mo., 369, 141 Southwestern, 672 (677), the court said: "In the case at bar we are to take the acts of the par- ties and judge their purpose by the consequence that would naturally result. When men deliberately and intel- ligently go to work and acquire power that will enable them to control the market, if they choose to exercise it, there is no use for them to say that they did not intend to control the trade or limit competition, nor, when the legal- ity of their act of acquisition is in question is it any use for them to say, 'We have not used the power to oppress any one.' " We think it may be laid down as a general rule that if companies could not make a legal contract as to prices or as to collateral services they could not legally unite, and as the companies named did in effect unite, the sole question is as to whether they would have agreed on prices and what collateral services they could render when their companies were all prosperous and they jointly controlled eighty to eighty-five per cent, of the business in that line in the United States. We think they could not have made such an agreement. Continental Wall Paper Co. v. Louis Voight Sons Co., 212 U. S., 227. Same v. Same, 148 Federal, 939. Addyston Pipe Co. v. United States, 175 U. S., 211. Swift & Co. v. United States, 196 U. S., 375. If the five companies which formed the International had been small and their combination had been essential to enable them to compete with large corporations in the same line, then their uniting would, in the light of reason, not have been in re- straint of trade, but in the furtherance of it; but when they constituted the largest manufacturers of their articles in America, if not in the world, and held jointly about eighty to eighty-five per cent, of the trade, and two at least of the com- panies forming the combination were prosperous, their com- bining was when similarly viewed an unreasonable restraint of trade. If the business of the separate companies combin- ing was unsuccessful it could be claimed that their combina- tion was reasonable in view of the rule of reason as proclaimed by the Supreme Court but it is conceded that the McCormick and the Deering companies "had established reasonably suc- cessful and prosperous businesses," so that question is elim- inated. There is no limit under the American law to which a busi- Opinion of Judge Smith. 19 ness may not independently grow, and even a combination of two or more businesses if it does not unreasonably restrain trade is not illegal, but it is the combination which unreason- ably restrains trade that is illegal, and if the parties in con- troversy have eighty or eighty-five per cent, of the American business and by the combination of the companies all compe- tition is eliminated between the constituent parts of the com- bination then it is in restraint of trade within the meaning of the statute under all of the decisions. The International is not only a great manufacturing com- pany but by the America Company is a great dealer in agricul- tural implements in interstate and foreign commerce, and so the case comes more nearly within the ruling in Addyston Pipe Co. v. United States, 175 U. S., 211, than United States v. Knight, 156 U. S., 1. It seems proper to call attention to the fact that all com- merce is classified as intrastate, interstate or foreign; both the first and second sections of the Sherman Law treat inter- state and foreign commerce as separate and distinct entities. Foreign commerce is as distinct from interstate commerce as interstate commerce is distinct from intrastate commerce. Each is a unit. While intrastate commerce is within the con- trol of the states, interstate and foreign commerce are both within the control of the United States, but as separate entities or units. The Congress has condemned any combination in re- straint of either the foreign or the interstate trade, and if the International Harvester Company was in restraint of either the interstate or foreign trade it was unlawful. It would not be lawful to restrain the interstate trade in order to build up the foreign trade. The International by suppressing all competition between the five original companies was in re- straint of trade as prohibited in the first section of the Sher- man Law, and it tended to monopolize within the meaning of the second section of the same law, and this restraint and this monopoly were the direct and immediate effect of the consolidation and were not incidental and uncertain in their effect. In Standard Sanitary Manufacturing Company v. United States of America, 226 TJ. S., 20 (49), the court said : "The Sherman Law is a limitation of rights, rights which may be pushed to evil consequences and therefore restrained. This court has had occasion in a number of cases to declare its principle. Two of those cases we have cited. 20 Opinion of Judge Smith. The others it is not necessary to review or to quote from except to say that in the very latest of them the compre- hensive and thorough character of the law is demonstrated and its sufficiency to prevent evasions of its policy 'by re- sort to any disguise or subterfuge of form' or the escape of its prohibitions 'by any indirection.' United States v. American Tobacco Co., 221 U. S., 106, 181. Nor can they be evaded by good motives. The law is its own measure of right and wrong, of what it permits, or forbids, and the judgment of the courts can- not be set up against it in a supposed accommodation of its policy with the good intention of parties, and it may be, of some good results. United States v. Trans- Missouri Freight Asso., 166 U. S., 290; Armour Packing Co. v. United States, 209 U. S., 56, 62." "We conclude that the International Harvester Company was from the beginning in violation of the first and second sections of the Sherman Law, and that this condition was accentuated by the reorganization of the America Company and by the subsequent acquisitions of competing plants, and that all the defendant subsidiary companies became from time to time parties to the illegal combination, and the defendant com- panies are combined to monopolize a part of the interstate and foreign trade. It will, therefore, be ordered that the entire combination and monopoly be dissolved, that the defendants have ninety days in which to report to the court a plan for the dissolution of the entire unlawful business into at least three substantially equal, separate, distinct and independent corporations with wholly separate owners and stockholders, or in the event this case is appealed and this decree super- seded then within ninety days from the filing of the procedendo or mandate from the Supreme Court the defendants shall file such plan, and in case the defendants fail to file such plan within the time limit the court will entertain an application for the appointment of a receiver for all the properties of the corporate defendants, and jurisdiction is retained to make such additional decrees as may become necessary to secure the final winding up and dissolution of the combination and monopoly complained of and as to costs. 21 OONCTJBRING OPINION OF JUDGE HOOK. Hook, Circuit Judge, concurring (I, 91) : I concur in the foregoing opinion. The International Har- vester Company is not the result of the normal growth of the fair enterprise of an individual, a partnership or a corporation. On the contrary it was created by combining five great competing companies which _ controlled more than eighty per cent, of the trade in necessary farm implements, and it still main- tains a substantial dominance. That is the controlling fact; all else is detail. No one who has studied with an open mind the history of the Sherman act and the atmosphere in which it was framed can reasonably doubt that it was not born of a mere concern over prices in dollars and cents but that it was also directed at the creation of artificial barriers across the avenues of industry deemed destructive of the opportu- nity, initiative and independence of those who come after, and therefore against the common good. And the remedy prescribed was prohibition. It may be, as is said, that there is a growing recognition of the need of great concentrated resources for trade and commerce, even though secured by combination of independent, competing concerns. But that is not the Sherman act. And a statute must be taken by the courts as a true estimate of that preponderance of public opin- ion which calls for legislative expression. It is not for them to question whether that opinion was rightly weighed or inter- preted, whether it is wise or unwise or whether it has since changed. The intent of a statute at its passage must con- tinue. It does not automatically adjust itself to the variations of the public pulse and a judicial adjustment would be an usurpation. In our national government such things are for Congress alone. It is but just, however, to say and to make it plain that in the main the business conduct of the company towards its competitors and the public has been honorable, clean and fair. Some petty dishonesties were tracked in at the start, mostly by subordinates who had been in the service of the old com- panies, but they were soon gotten rid of. In this connection it should also be said that specific charges of misconduct were made in the government's petition which found no warrant whatever in the proof. They were of such a character and there was so much of them, apparently without foundation, that the case is exceptional in that particular. 22 DISSENTING OPINION OF JUDGE SANBORN. Sanborn, Circuit Judge, dissenting (I, 92) : It is the opinion of the majority of the court that the prop- erty and the foreign and interstate business of the Inter- national Company must be divided into at least three substan- tially equal and independent parts, or placed in the hands of a receiver under a decree of this court because in 1902 five companies theretofore engaged in the manufacture and sale of harvesting machinery, controlling about 85 per cent, of the interstate and foreign trade therein, combined in the Inter- national Company, ceased and have not since resumed com- petition among themselves. With profound respect for their judgment I find myself forced to dissent from it (1) because it seems to me to give insufficient consideration to the trade conduct of the defend- ants at the time this suit was commenced in April, 1912, and for seven years before that date, (2) because the crucial issue in this case is not whether or not in 1902 or 1903 the defend- ants or their predecessors by reason of the suppression of competition between five or more companies made a combina- tion or an attempted monopoly in restraint of trade, but it is whether or not ten years afterwards, in 1912, when the com- plaint in this suit was filed, the International Company and the other defendants were then unduly or unreasonably re- straining or monopolizing interstate or foreign trade, or threatening so to do and (3) because the evidence in this case has forced upon my mind the deep and abiding conviction that for at least seven years before the commencement of this suit the defendants had not been and then were not either so doing or threatening so to do. (1) Conceding, but not admitting, that if the combination of 1902 and 1903 had been challenged in 1903 or 1904 before the actual effect of the conduct of its business by the defend- ants upon interstate and foreign trade had been demonstrated by the actual trial of it from 1905 to 1912, a court might have presumed that the defendants were violating the anti-trust law and have so found on the theory that those who have power to violate a law are presumed to do so, yet the demon- stration by actual trial which the evidence seems to me to present that at the time this suit was commenced the defend- ants were, and for at least seven years before that time had Dissenting Opinion of Judge Sanborn. 23 been, conducting the business of the International Company and their business without unduly restraining or monopolizing interstate or foreign trade, ought to, and in my opinion must, far outweigh that questionable presumption. I say question- able presumption because while it was invoked to sustain the view of the majority of the Supreme Court in that case in which they declared that the prohibition of the anti-trust law was not limited to restraints of and attempts to monopolize interstate and foreign trade that were deleterious to the public and unreasonable, but embraced every direct restraint whether beneficial or injurious to the public and whether reasonable or unreasonable (Northern Securities Co. v. United States, 193 U. S. 197, 331 ; Harriman v. Northern Securities Co., 197 U. S. 244, 291), and while it has been since cited in some cases, doubtless in deference to its citation in that case, it flies in the face of the basic principle of civil government and the in- dispensable and indisputable rule of law and of action that all persons are presumed to obey the laws and to discharge their legal and moral duties until the contrary is proved (Cole v. German Savings & Loan Society, 124 Fed. 113, 119 ; Amer- ican Bridge Co. v. Seeds, 144 Fed. 605, 609), and it is con- trary to the universal experience of mankind, for persons who acquire the power to violate laws, whether against murder, or arson, or larceny, or undue restraints of trade, or unrea- sonable monopolies, or other forbidden acts generally obey those laws and fail to exercise their power to violate them. This alleged presumption never seemed well founded or rea- sonable to me and now that the rule of reason must be ap- plied to the interpretation of the anti-trust law and to its application to the facts of each particular case, as well as to other laws and to the facts of other cases (Standard Oil Co. v. United States, 221 U. S. 1, 64, 67, 68; United States v. Amer- ican Tobacco Co., 221 U. S. 106, 179), I think this alleged pre- sumption should be deemed functus officio. (2) The controlling issue in this case is not what combina- tion or monopoly was made in 1902, 1903 or 1904, nor whether or not that combination was violative of the anti-trust law. It is, were the defendants in 1912 doing or threatening to do acts which so unreasonably restrained or monopolized inter- state or foreign trade that it is the duty of this court of equity to enjoin and prevent their future performance? Sec- tions 1 and 2 of the anti-trust law forbid combinations and monopolies in undue restraint of interstate or foreign trade and prescribe punishment by fine or imprisonment, or both, 24 Dissenting Opinion of Judge Sanborn. for any violation thereof, and Section 725 of the Revised Stat- utes bars any prosecution under these acts for such violations three years after they are committed. 26 Stat. 209, Chap. 647, Sections 1, 2 and 4; Revised Statutes, Section 1044; 3 Comp. Stat. 3200 and 3201; 1 Comp. Stat. 725, Sec. 1044. If, there- fore, a combination or monopoly in unreasonable restraint of trade was made in 1902, 1903 or 1904 the proceedings to pun- ish for the making thereof were barred many years before this suit was commenced. Section 4 of the Act gives jurisdiction to this court "to prevent and restrain violations of this act," but it grants this court no power to punish past violations thereof. This suit is not a proceeding to punish the defendants for deeds done in the past. It is a suit in equity under Section 4 to prevent and restrain future violations of the anti-trust law. It looks to the future, not to the past, and this court is not only with- out jurisdiction to punish defendants for past violations of this law but persons who at some past time combined to un- reasonably restrain or monopolize interstate or international trade were not thereby deprived of their right thereafter and now to conduct such trade in obedience to the law. New York, New Haven <& Hartford R. R. Co. v. Interstate Com- merce Comm., 200 U. S. 361, 404; United States v. Standard Oil Co., 173 Fed. 177, 190, 191. This suit, therefore, is nothing more than an appeal to the consciences of the members of this court of equity to prevent and enjoin future violations of this law by the defendants and under familiar principles of equity jurisprudence no such restraint, injunction, or other relief, may be lawfully granted here unless the particular facts proved in this individual case clearly show that the defend- ants were violating or threatening to violate this anti-trust act when this suit was commenced. (3) The particular facts proved in this individual case not only fail to show that the defendants were unduly or unrea- sonably restraining or attempting to monopolize interstate or foreign trade, or threatening so to do at the time this suit was commenced and for seven years before that time, but they establish the converse. That the anti-trust law is but the embodiment and appli- cation to interstate and foreign trade of the ancient English rule_ of public policy against undue and unreasonable re- straints of trade and unreasonable monopolies, that it does not forbid all restraints upon such trade or all attempts to monop- olize it, nor all restrictions of competition therein, but those Dissenting Opinion of Judge Sanborn. 25 only which are unreasonably injurious to the public, that the reason for and the purpose of the anti-trust act are the same as the reason for and the purpose of that English rule of public policy, that the test and standard by which to deter- mine whether or not the defendants in any case are unrea- sonably restraining or monopolizing interstate or foreign trade is the same which had been applied under the English rule of public policy for years before this anti-trust act was enacted, and that, as Chief Justice White said : ' ' The statute under this view evidenced the intent not to restrain the right to make and enforce contracts, whether resulting from com- bination or otherwise, which did not unduly restrain inter- state or foreign commerce, but to protect that co mm erce from being restrained by methods, whether old or new, which would constitute an interference that is an undue restraint," are now rules of interpretation and application of this law con- clusively established by the repeated decisions of the highest judicial tribunal in the land. Standard Oil Co. v. United States, 221 U. S. 1, 60; United States v. American Tobacco Co., 221 U. S. 106, 179. Trade is the making and enforcing of contracts. And it necessarily follows from the rule laid down in the excerpt just quoted from the opinion of the Chief Jus- tice that the anti-trust act evidenced the intent not to re-» strain, and that it does not restrain, the trade or business of the defendants "whether resulting from combination or other- wise" unless that trade or business is conducted by methods which constitute an interference which is an undue restraint of interstate or foreign commerce. It is equally well established that the reason for the pro- hibition by the English rule of public policy and by the statute under consideration of unreasonable restraints of and at- tempts to monopolize trade was and is that by unduly re- stricting competition they are injurious to the public in that (1) they raise the prices to the consumers of the articles they affect, (2) limit their production, (3) deteriorate their quality and (4) decrease the wages of the labor and the prices of the materials required to produce them. Standard Oil Co. v. United States, 221 U. S. 1, 52. Undue injury in the ways just stated to the public, that is to say, to the consumers and mak- ers of the articles produced or sold is the basis and reason for the prohibition and the test of undue or unreasonable re- straint or attempt to monopolize. And if in any individual case the weight of the evidence fails to prove that the def end- ants ' conduct of their business is so restricting or threatening 26 Dissenting Opinion of Judge Sanborn. to restrict competition in the articles they make or sell as to unduly injure the public by (1) raising the prices of the arti- cles to the consumers, or (2) limiting their production, or (3) deteriorating their quality, or (4) decreasing the prices paid for the labor or materials required to produce them, or (5) by unfair and oppressive treatment of competitors, neither undue nor unreasonable restraint of competition, nor of trade, nor undue attempt to monopolize is established. The reason for the rule and for the prohibition in the law does not exist and the law is inapplicable. Cessante ratione, cessat ipsa lex. Green v. Liter, 8 Cranch 229, 249. Such a case the evidence in this case seems to me to present. Counsel for the government recognize the fact that it was essential to the grant of the relief they sought that they should plead and prove that at the commencement of this suit the defendants were committing and threatening to commit the acts constituting undue restriction of competition, undue re- straint of trade and undue attempt to monopolize trade which have been recited, and they alleged that they were committing them in their complaint. The main charge in their pleading was that the defendants between 1903 and April 30, 1912, had, by means of the International Company, unduly restricted competition in the manufacture and sale of harvesting ma- chinery, drawn to itself the business therein, excluded other manufacturers and dealers therefrom and that they threatened to continue so to do. The evidence, however seems to me to have established the following facts which in my judgment prove the contrary. The amount of the domestic sales of the old lines claimed to have been monopolized, that is to say, of the harvesting ma- chinery, by the five companies whose business was acquired by the International Company in 1902, was $46,142,158.64 in that year. The amount of the domestic sales of like machin- ery by the International Company in 1903 was $37,763,858.55, a decrease of 18.16 per cent. ; in 1904 it was $32,337,917.32, a decrease in the two years of 29.92 per cent. ; in 1905 it was $30,999,632.59, a decrease in the three years of 32.82 per cent, and in 1912 it was only $39,062,455.36 which was 15.34 per cent, less than the amount of the domestic sales of the com- bining companies in 1902. The average yearly acreage and production of small grain in the United States during the ten years prior to 1913 was greater than during the nine years prior to 1903. But the yearly average domestic sales of the International Company Dissenting Opinion of Judge Sanborn. 27 of all agricultural machinery including both the old lines charged to have been monopolized and the new lines, such as harrows and cultivators, during the ten years prior to 1913, was $46,810,067 which was more than a million dollars less than the domestic sales of the vendor companies in 1902. In 1903 the International Company sold 98.15 per cent, of the binders sold in the United States ; in 1912 only 85.04 per cent, thereof. In 1903 the International Company sold 92.05 per cent, of all the mowers sold in the United States ; in 1912 only 72.98 per cent, thereof. In 1903 the International Com- pany sold 84.91 per cent, of the rakes sold in the United States ; in 1911 it sold 67.79 per cent, thereof. The average number of binders sold in the United States yearly by the five combining companies during the five years prior to 1902 was 152,364; the average number sold yearly by the International Company during the first ten years of its existence was 91,465. In 1903 the International Company had five competitors who in that year sold in the United States 1960 binders, while in 1912 these competitors sold 15,631 binders and three new competitors sold 3979. In 1903 eight competitors of the In- ternational Company sold in the United States 17,985 mowers and in 1912 these and six other competitors sold 60,816. In 1903 ten competitors of the International Company sold in the United States 27,753 rakes and in 1911 these and five other competitors sold 42,723, while the International Company sold 157,160 in 1903 and only 89,912 in 1912. In 1901 and 1902 in the section of Nebraska south of the Platte River the com- bining companies sold substantially all the binders, but in 1912, the evidence tends to show, that their competitors sold about one-half the binders sold in that country. During all of the ten years prior to 1913 the International Company has had active and successful competitors in the manufacture and sale of harvesting machines and during those years new competitors have established themselves in the busi- ness and become successful. Among its competitors in the manufacture and sale of harvesting machinery are the Acme Company which entered the field in 1907 or 1908, which makes harvesting machinery only, which conducts a growing and suc- cessful business and which sold in the United States 11,400 harvesting machines in 1908 for $779,672.00 and 31,000 har- vesting machines in 1912 for $2,100,000.00; Deere & Company with an issued capital stock of over $50,000,000.00 which sold 490 mowers in 1906 and 7314 in 1911 ; the Johnston Harvester 28 Dissenting Opinion of Judge Sanborn. Company with an issued capital stock of $1,800,000.00 whose sales of binders increased from 1002 in 1903 to 3027 in 1911, whose sales of mowers increased from 2527 in 1903 to 7026 in 1911, whose sales of corn binders increased from 528 in 1903 to 3150 in 1911 and whose sales of rakes increased from 1855 in 1903 to 5200 in 1911; the Independent Harvester Company which entered the field with the manufacture of 954 mowers and 135 binders in 1910 and increased its output to about 2700 mowers and about 1900 binders in 1912 ; the Wood Mowing and Eeaping Company and several others, while the J. I. Case Threshing Machine Company with an issued capital stock of $20,000,000.00 was constructing when this suit was commenced a large plant to manufacture a binder to be sold in competition with those of the International Company. The foregoing facts portray the course of the business in the old lines. In the new lines scores of companies and tens of mil- lions of dollars of capital were and are engaged in active and successful competition with the International Harvester Com- pany. The facts which have been recited and other facts and circumstances to the same effect seem to me to establish the conclusion that during the ten years of the operation of the International Harvester Company neither it nor the defend- ants were, nor are they, drawing to it, its competitors' share of the interstate trade in harvesting machinery, or excluding them therefrom, and that, on the other hand, the Interna- tional Company's proportion of this trade has been decreas- ing and that of its competitors increasing. Counsel for the government charged that the defendants bought factories and failed to operate them in order to re- strain and monopolize the trade but the proof was that they operated every factory they purchased. And the purchase of factories and the organization and operation of subsidiary companies to produce or prepare the raw materials needed for the manufacture of their machines, or to manufacture new lines of implements, was a just and lawful method of conduct- ing their business and tended not to restrain but to promote trade and competition. If competition is desirable the entry of a new competitor into any line of manufacture or trade is ordinarily lawful and must be generally beneficial. The government charged that the defendants systematically bought up patents on and inventions of harvesting machinery in order to make or perpetuate a monopoly in the trade in it. But the proof was that the defendants have no patents upon any parts of any of their harvesting machines and that Dissenting Opinion of Judge Sanborn. 29 any manufacturer is free to make and sell any or all parts of them in competition with them. Counsel for the government alleged that the defendants reduced the prices of its machines in certain localities in order to drive competitors out of the trade and increased their prices in other localities to make up the loss, and that it committed many oppressive and unjust acts to restrict competition and monopolize trade. Volumes of evidence were taken regarding these averments. The conduct of the business of the defend- ants for years in all parts of the land Were searched and proved. Among the innumerable acts of the defendants and their agents in conducting their vast business for a decade the government found some that were unfair to competitors, but they were either unauthorized acts of subordinate agents or sporadic and exceptional instances. The weight of the evi- dence of the officers and agents of their competitors who came in large numbers to testify, and of all the witnesses upon the subject, is so overwhelming that the general conduct and the almost universal practice of the defendants and their agents was and is free from all methods and acts either unlawful, unfair or oppressive towards their competitors, that it has left no doubt that the consistent and persistent purpose, pol- icy, rule of action and practice of the defendants has been and is to avoid and prevent all acts and methods unfair, unjust or oppressive towards their competitors, to leave competition with them free, to give to them full and fair opportunities to secure shares of the trade and business in which they are all engaged and to carry on their own trade honestly, justly and fairly. During the ten years from 1902 to 1912 there was a gen- eral and substantial rise in the prices of machinery and com- modities of nearly all kinds in the United States. Harvesting machines were improved and made more durable and effi- cient. But their prices to the consumers remained nearly sta- tionary and increased far less than the prices of other agri- cultural machinery the trade in which was not claimed to have been restrained or monopolized. The chief harvesting ma- chine was the binder. Its price advanced about five per cent, during some of the intermediate years but was substantially the same in 1912 for a better machine that it was for a poorer machine in 1902, while the prices of cultivators, wagons and plow goods, which were certainly not monopolized, advanced from 10 to 30 per cent. The government charged that the defendants monopolized 30 Dissenting Opinion of Judge Sanborn. the trade in binder twine and increased its price to the con- sumers, but the proof was that in 1912 the inmates of two states' prisons and fourteen other competitors were selling binder twine, that one of them, the Plymouth Cordage Com- pany, sold one hundred million pounds of it in that year, while the International Company sold only one hundred and twelve million pounds in the United States and twenty-two million pounds in Canada, and that the price of binder twine decreased from eleven cents a pound in 1902 to 7| cents a pound in 1912. Meanwhile the cost of the raw material re- quired to make harvesting machines advanced and the wages of the labor required to construct them increased from 20 to 30 per cent. So it is that the evidence has convinced me that at least for seven years before this suit was commenced and at that time the defendants were neither unduly restricting competi- tion in the manufacture or sale of the machinery and articles in which they were dealing or drawing to themselves an un- due share of the business therein, or excluding other manu- facturers and dealers therefrom or practicing acts unjust or unfair to or oppressive of their competitors or threatening so to do, that they were not injuring the public by raising the prices to the consumers of the articles in which they dealt, or limiting the production thereof, or deteriorating their qual- ity, or decreasing the wages of the laborers employed to make them, or the prices paid for the materials required to con- struct them, or threatening so to do, but that they were doing the opposite of these things. And the acts of the defendants and the proved effect of their acts during at least seven years before this suit was commenced to my mind demonstrate the fact that they were neither unduly or unreasonably restrain- ing or attempting to monopolize interstate or foreign trade in the articles they made and sold and that they and their case fall far without the prohibition of the anti-trust law and the reason for it. (4) The only reason for the prevention or restraint of acts of defendants in a suit under the fourth section of the statute is, as we have seen, that they are or threaten to be unduly injurious to the public. If they are not thus injurious or if they are beneficial and such restraint or prevention of their acts would be injurious to the public they should not be re- strained or prevented. The defendants claim that the main purpose of the combination of 1902 and 1903 was to develop the foreign trade in American harvesting machines, that that Dissenting Opinion of Judge Sanborn. 31 development could not be successfully made without a much larger capital than any of the combining companies possessed and that the cessation of competition among the combining companies was merely incidental to the acquisition of the capi- tal requisite to accomplish that purpose. The facts in this case are so clear that the purpose and intent of the defend- ants are not material. The prevention or restriction of their acts by the decree of a court of equity is always a matter within the sound judicial discretion of the chancellor or chan- cellors composing the court, and while in exercising this dis- cretion the rules of law and the facts already stated seem to me to be decisive the following are not altogether unworthy of consideration. The proof is that during the ten years preceding 1913 the International Company at great expense taught the people of foreign countries the use of the American harvesting machin- ery and developed the foreign trade therein in such a way that while in 1902 the sales in foreign trade of machines, re- pairs and twine by the companies whose business was ac- quired by the International Company amounted to about $10,400,000 the sales of the International Company in the for- eign trade gradually increased until in 1912 they amounted to $50,896,000, and so that while in 1903 the domestic sales of that company were 76.5 per cent, and its sales in the foreign trade were 23.5 per cent, of its total sales, in 1912 its do- mestic sales were 55.7 per cent, and its sales in the foreign trade 44.3 per cent, of its total sales.. The employment of the necessary American laborers and salesmen at the increasing wages the defendants have paid and are paying to make and to sell in other lands these machines and the purchase at the increasing prices paid of the materials to construct this vast volume of machinery unavoidably tends to increase the wages of the laborers and the prices of the materials and hence to benefit the public, and any receivership or subdivision of the property and the business of these defendants cannot fail to tend to cripple and diminish this business, to restrain the advance or to decrease the wages of the laborers and the prices of the materials required to carry it on and thereby to inflict injury upon the public. Again, the combination denounced and the International Company, in which it was embodied, have been in existence, and that Company and the other defendants had been conduct- ing their business for almost ten years before this suit was commenced. If the making of that combination was originally 32 Dissenting Opinion of Judge Scmborn. a violation of the anti-trust act the prosecution of the defend- ants at law under Sections 1 and 2 of the anti-trust act for that violation was barred many years before this suit was commenced. It is a general rule of equity jurisprudence that the courts of chancery will apply the doctrine of laches in analogy to the limitation of like actions at law. Conceding that this rule does not control this suit because mere delay does not bar a sovereignty from sustaining a suit in equity to maintain and enforce its equitable rights, nevertheless, when a sovereignty submits itself to a court of equity and prays its aid its claims and rights are and ought to be judi- cable by the general principles and rules of equity applicable to the claims and rights of private parties under like circum- stances. State of Iowa v. Carr, 191 Fed., 257, 266, and cases there cited. It is a maxim of equity jurisprudence that, as Lord Camden said in Smith v. Clay, 3 Brown's Chancery 639, "Nothing can call forth this court into activity but con- science, good faith, and reasonable diligence." The business of the International Company gradually increased during nearly ten years after the formation of the combination as- sailed until that business reached the vast volume indicated at the time this suit was commenced. Its business was con- ducted openly without legal challenge or attack, so far as this record shows, during all these years and it is not im- probable that many parties hold stock of the International Company which they purchased during these ten years in reliance upon these facts the value of which a decree against the defendants will greatly depreciate. So it is that in any event this suit does not appeal to the conscience of a chan- cellor with the force it might have had in 1903 or 1904 before the actual conduct of the business of the defendants had demonstrated its innocuous effect and no parties had been induced to act in reliance upon its freedom from attack. (5) The evidence in this suit seems to me to present a new case under the anti-trust law. No case has been found in the books and none has come under my observation in which the absence of all the evils against which that law was directed at the time the suit was brought and for seven years before was so conclusively proved as in this suit, — the absence of unfair or oppressive treatment of competitors, of unjust or oppressive methods of competition, the absence of the draw- ing of an undue share of the business away from competitors and to the defendants, the absence of the raising of prices of the articles affected to their consumers, the absence of the Dissenting Opinion of Judge Sanborn. 33 limiting of the product, the absence of the deterioration of the quality, the absence of the decrease of the wages of the laborers and of the prices of the materials, — the absence, in short, of all the elements of undue injury to the public and undue restraint of trade, together with the presence of free competition which increased the share of the competitors in the interstate trade and decreased the share of the defend- ants. Neither the Standard Oil Company's case, 221 U. S., 1, nor the American Tobacco Company's case, 221 U. S., 106, 108, nor any other authority cited, seems to me to rule this case, because in none of them was there such affirmative and to my mind conclusive evidence that for years before the suits were commenced the defendants had practiced no acts and pursued no methods which constituted an undue restraint of trade or an unreasonable attempt to monopolize it. And because in this suit this court is without power to pun- ish past violations of the anti-trust law and the limit of its jurisdiction is to prevent and enjoin future acts violative thereof, because the making of the combination of 1902 and 1903, whether violative of the anti-trust law or not, did not deprive the defendants of their right thereafter and now to conduct their business in obedience to that law, because the question in this case is not whether or not the combination of 1902 and 1903 was violative of that law, but it is whether or not in April, 1912, when this suit was commenced, the defend- ants were unduly or unreasonably restraining or attempting to monopolize interstate or foreign trade, because it was not the effect of the anti-trust law, nor was it the intent of the Congress which passed it, to prohibit all restriction of com- petition or all restraints of interstate or foreign trade, or all attempts to monopolize parts of it, but only those restraints and attempts to monopolize which are unduly injurious to the public by (1) raising the prices to the consumers of the ar- ticles they affect, (2) limiting their production, (3) deterio- rating their quality, (4) decreasing the wages of the laborers and the prices of the materials required to produce them, or (5) practicing unfair and oppressive treatment of competitors, because the evidence has convinced me that for at least seven years before this suit was commenced, and at that time, the defendants were not injuring the public by unduly or unrea- sonably restricting competition in the manufacture or sale of the machinery or articles which they were making and selling or by drawing to themselves an undue share of the business therein, or by excluding other manufacturers or deal- 34 Dissenting Opinion of Judge Sanborn. ers therefrom, or by practicing acts unjust or unfair to or oppressive of their competitors, that they were not injuring the public by raising the prices to the consumers of the ar- ticles they made or sold, or limiting their production, or de- teriorating their quality, or decreasing the wages of the la- borers employed to make them, or the prices paid for the materials required to construct them, that they were not threatening to do these things but they were doing the oppo- site of these things to the substantial benefit of their com- petitors, of the consumers of their products, of the laborers who make them, the men who furnish the material for them and the public in general, because the acts of the defendants during these seven years do not constitute that undue or un- reasonable restraint of or attempt to monopolize interstate or foreign trade forbidden by the anti-trust act, and because in my opinion the prevention or restraint of these acts or this business of the defendants, or the splitting of their business and property into three or more independent parts, or the seizure of it by a receiver, by virtue of a decree of a court of equity, would not tend to prevent undue restraint of or undue attempts to monopolize interstate or foreign trade, but on the other hand would tend to produce or foster the very evils at which the anti-trust act was levelled, to- wit: the re- striction or lessening of competition, the increase of the prices of the machinery and articles affected, the deterioration of their quality, the limitation or reduction of the product and the diminution of the wages of the laborers making them and of the prices of the materials required to produce them to the substantial injury of the public, I am unable to concur in the opinion or the decree against the defendants in this case. In my opinion a decree should be rendered that the complaint in this suit be dismissed without prejudice to the right of the United States to bring another suit of like character against any of the defendants whenever any of them is found to be engaged in the commission of any acts in violation of the anti-trust statute.