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STANDARD SANITARY MFG. CO. V. UNITED STATES, 226 U. S. 20 (1912)
U.S. Supreme Court
Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20 (1912)
Standard Sanitary Manufacturing Company v. United States
Argued October 15, 16, 17, 1912
Decided November 18, 1912
226 U.S. 20
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES
FOR THE DISTRICT OF MARYLAND
A trade agreement under which manufacturers, who prior thereto were independent and competitive, combined and subjected themselves to certain rules and regulations, among others, limiting output and sales of their product and quantity, vendees, and price, held in this case to he illegal under the Sherman Anti-Trust Act of July 2, 1890. Montague v. Lowry, 193 U. S. 38.
A trade agreement involving the right of all parties thereto to use a
certain patent, which transcends what is necessary to protect the
use of the patent or the monopoly thereof as conferred by law and controls the output and price of goods manufactured by all those using the patent, is illegal under the Anti-Trust Act of 1890. Bement v. National Harrow Co., 186 U. S. 70, and Henry v. A. B. Dick Co., 224 U. S. 1, distinguished.
While rights conferred by patents are definite and extensive, they do not give a universal license against positive prohibitions any more than any other rights do.
The Sherman Anti-Trust Act is a limitation of rights which may be pushed to evil consequences, and should therefore be restrained.
The character of the Sherman Act is sufficiently comprehensive and thorough to prevent evasions of its policy by disguise or subterfuge.
The Sherman Act is its own measure of right and wrong; courts cannot declare an agreement which is against its policy legal because of the good intentions of the parties making it.
A party to an agreement in restraint of trade is nonetheless a party to the illegal combination created thereby because it is not subject to all the restrictions imposed upon all the other parties thereto.
A corporation having a manufactory in one state and warehouses in several other states held to he engaged in interstate commerce under the circumstances of this case.
Quaere whether one of the individual defendants in an equity case brought by the government to dissolve an illegal combination under the Sherman Act, called as a witness by one of the other defendants in the same suit, obtains immunity from criminal prosecution as to the matters testified to.
There is no rule that civil suits brought under the Sherman Act to dissolve the combination must await the trial of criminal actions against the same defendants, and whether the trial of the civil action shall be delayed because some of the defendants refuse to testify as witnesses for other defendants is a matter in the discretion of the trial court, and in the absence of abuse, not reviewable.
191 F. 172 affirmed.
The facts, which involve the legality under the Sherman Anti-Trust Act of July 2, 1890, 26 Stat. 209, c. 647, of a combination of manufacturers, are stated in the opinion.
MR. JUSTICE McKENNA delivered the opinion of the Court.
Suit by the government against appellants for a violation by them of the Act of July 2, 1890, 26 Stat. 209, commonly known as the Sherman Anti-Trust Act.
A decree was entered in favor of the government, from which appellants (designated herein as defendants) have prosecuted this appeal. 191 F. 172.
There are sixteen corporate and thirty-four individual defendants, the latter, with the exception of Edwin L. Wayman, being the officers, presidents, or secretaries, of the companies.
The corporate defendants were alleged to be the manufacturers of enameled ironware in various places in the United States, manufacturing 85% of such ware and engaged in interstate commerce in such ware throughout the United States and with foreign countries in competition with one another and with certain other manufacturers of such ware, and that in 1909, or early in 1910, they entered into and engaged in a combination and conspiracy to restrain such trade and commerce.
The defendants denied the charges against them, Wayman doing so in a separate answer. The Colwell Lead Company denied that it was engaged in interstate commerce.
A great deal of testimony was taken and the case quite elaborately argued, but, in the view we take of it, it is in comparatively narrow compass, depending upon the application of well settled principles.
The corporate defendants are manufacturers of sanitary enameled ironware, such as bath tubs, wash bowls, drinking fountains, sinks, closets, etc. The enameling consists in applying opaque white glass to iron utensils, first in the condition of a liquid and second in the form of a powder. The process consists in heating the utensils to a red heat and then sifting upon it the enameling powder. The powder is fused by the high temperature, and forms on the utensil a hard, impenetrable, insoluble, smooth, and glossy surface.
Prior to the invention of James W. Arrott, Jr., covered by letters patent issued September 26, 1899, the enameling powder was applied by a sieve attached to a long handle, which was held by the workman with one hand, and the sieve made to vibrate by the workman striking the handle with his other hand, thereby sifting the powder over the surface of the ironware. The implement was an imperfect one, not easily handled, and by its use the workmen were subjected to intense heat and physical strain. The
flow of the powder, beside, was not continuous; it was cast upon the metal in intermittent puffs, causing in many instances an unequal distribution of the powder and producing defective articles which either had to be thrown away or sold as "seconds." With Arrott's invention, these evil results are lessened or disappear. The sieve is mechanically vibrated very rapidly, causing, instead of an intermittent flow of the powder as in the hand process, a practically continuous flow. Both hands of the workman may be used to guide and direct the sieve. The advantages of the instrument over the hand process are decided. It is more efficient and more economical. It makes a better article and in less time. There is no waste in defects or "seconds." The workman is relieved to some extent from "fierce heat conditions," to quote from the answers.
At the time of the contracts which are attacked by the government, the Standard Sanitary Manufacturing Company was the owner of the patent and manufacturer of 50% of the ware, and used in its production the patented device. Some of the other manufacturers were infringing, and controversies existed. Some yielded to its validity, others contested it. It was sustained by the courts in several cases.
We have gone through this detail to exhibit the conditions, as asserted by defendants, which confronted them and induced their contracts. In further display of it, we quote Wayman's answer, as follows:
"For the reasons stated, the art was in a very unsatisfactory condition. No means had been discovered of accomplishing the result produced by the use of the Arrott invention without laying the user of such means open to a suit for infringement by the owner of the Arrott patent. The manufacturers using the process in use prior to Arrott's invention were unable to successfully compete with those using the Arrott invention, and, moreover, produced a
disproportionate number of defective, unsightly and substantially unsalable articles. The consumer was deceived and defrauded, and the use of sanitary enameled ironware lessened and its reputation depreciated by defective articles being palmed off on the consumer as not defective."
On the situation thus asserted to exist, the defendants build their defense, contending that Wayman saw its evils and conceived the way to correct them, and insist that the following facts are established by the evidence: Wayman was familiar, through his connection with another enameling company called the Seamless Steel Bath Tub Company, with the enamel ware trade, and had become convinced of the advantages -- indeed, necessity -- of the use of the Arrott invention. He tried to secure it, but the Standard Company seemed unwilling at that time to confer its utility upon other companies, and, pending the negotiations, the Seamless Company failed and Wayman turned to other plans, one of which resulted in the contracts under review.
As early as 1908, impressed with the importance of the Arrott patent, he endeavored to have the Standard Company grant licenses to other companies in order to improve trade conditions, and to this end he tried to interest other gentlemen in the project. The Standard Company was unwilling to grant, and other manufacturers were equally disinclined to accept, them. He then conceived the idea of a holding company, but this failed also, the Standard still being unyielding, stating by one of its officers that
"his company was unwilling either to sell the Arrott patent or to enter into any arrangement which would lessen the advantage which it had by reason of the ownership of the Arrott patent."
The plan was therefore abandoned.
In August, 1909 (we are still following the version of the testimony given by counsel for defendants), it was suggested to Wayman by a person connected with one
of the manufacturing companies that he (Wayman) apply for the position of secretary of the Association of Sanitary Enameled Ware Manufacturers which was about to be reorganized. The position, it was said, would give Wayman an excellent opportunity to continue his efforts to buy the Arrott patent, and establish such relation with the manufacturers of enameled ware as would enable him to present in the most favorable manner his ideas in regard to the advantages of patent licenses under the Arrott patent. This association was a pure trade organization, and not formed to control or regulate prices. Wayman applied for and obtained the position, and commenced again negotiations for the Arrott patent, and persisted, against the apparent reluctance of the Standard Company to give up the advantages of the patent. Finally he impressed the manager of the Standard factories with the greater advantages which would come to his company by the elimination of "seconds," and removing them as competitors of the better articles of the Standard, confining the competition to such articles, of which the Standard produced 50%. The manager of the Standard and that company yielded to the representation of these advantages.
These advantages are dwelt on and made much of by counsel, and they quote testimony to display their extent. "Seconds," as we have said, were articles of inferior or defective manufacture, and as their inferiority was not apparent, they could be represented and sold as of standard quality. Such deception, it is asserted, was frequently practiced, and the articles turning out defective discredited enamel ware, gave it a bad reputation, and there was a growing difficulty to maintain or extend its sale. With "seconds" out of the way, it may be conceded, as it is contended, that only honest articles were available to plumbers, jobbers, and builders.
The Standard Company fixed a price upon the Arrott patent and gave Wayman an option upon it. He, in the
following December, secured also an option from the J. L. Mott Iron Works upon a patent called the Dithridge, and from the L. Wolff Manufacturing Company an option upon the Lindsay patent. These patents were infringements of the Arrott device. Thus equipped, Wayman proceeded to engage the manufacturers in his proposition.
This summary of the situation counsel have supplemented by a declaration of motives. Counsel say that Wayman and the manufacturers were advised by able and competent lawyers of the legality of their plan. "Wayman's motive," it is asserted,
"was to make money for himself not as a manufacturer, but as the owner of a patent, receiving royalties from those whom he licensed to use his patented invention."
The form of his license, it is further asserted, followed the precedents, and was based on that principle of the patent law which gives to the owner of an invention the power to grant to others its use or to withhold it, or to grant it upon such terms as he may choose to impose. Such being his motive and such being his right, he, it is contended, negotiated with and contracted with the manufacturers of enameled ware. And their motives also are attempted to be justified, though the necessity for doing so is disclaimed.
Wayman's right, it seems to be contended, is all-sufficient, and that the manufacturers only paid the price that he could legally demand. As the demand was legal, it is argued, the payment of the price could not be illegal. But the government asserts subterfuge -- illegal purpose liveried in legal forms to give color of right to illegal practices.
The charge challenges consideration of the relation between that which the manufacturers engaged to do and the protection of the exclusive right attached to the invention. Upon such consideration, how far the licenses transcend such right and violate the Sherman law we can then determine. And we shall keep in mind and apply
"clearly does not refer to that kind of a restraint of interstate commerce which may arise from reasonable and legal conditions imposed upon the assignee or licensee of a patent by the owner thereof, restricting the terms upon which the article may be used and the price to be demanded therefor. Such a construction of the act, no doubt, was never contemplated by its framers."
In our inquiry, we shall accept arguendo the statement of defendants of their inducement and purpose. We say "arguendo" because the asserted inducement and purpose are denied by the government, it contending, as we have seen, that the Arrott patent was but a pretense, and that the agreements were put in the form of licenses of it to at once accomplish and palliate evasions of the law. The fact being in controversy, we place our consideration and decision on other elements. In other words, we will consider the case from the standpoint of defendants' view of the situation, with comments as we proceed as to what they did to meet it and how far what they did accorded with or transgressed the law.
The contention of the defendants, then, is that the Standard Company's position and power as owner of the patent and Wayman's were identical. What it could have done, it is contended, he could do, and its relation to the trade and the relation of other manufacturers to the trade clearly demonstrate, it is further contended, that, as that company could have made the contracts, Wayman could do so.
To support the contention, defendants represent the Standard as the dominant (it produced 50% of the articles) and the only honest manufacturer, pointing out to other manufacturers the worthlessness of their output, they not having the Arrott patent; also the dishonesty of their output, they putting out "seconds," the inferiority
of which was "discernible only by experts," thereby defrauding the public, "discrediting the ware, and demoralizing the market and business." To avert these evil results, it is represented that the Standard was willing to forego the advantages which its ownership of the Arrott patent gave it and confer them upon the other manufacturers. But upon terms. "First and foremost," it was to be agreed that no "seconds" should be marketed. In the second place, a standard price must be agreed to so that henceforth rivalry should be "in the quality of the ware turned out at a uniform price, or in any other collateral inducement to the purchaser" that would not "affect the quality of the ware." Wayman's agency and office, it is represented, was that of "watching all parties and insuring their fidelity to the agreement by the payment of a royalty for the use of the invention." And this, it is said, is
"all there is, in substance or principle, to the case at bar, except that Mr. Wayman, instead of the Standard Company, was the originator of the scheme, and that he persuaded his codefendants to enter into it."
But the scheme has other features and effects which counsel overlook or ignore. It is immediately open to the criticism that its parts have no natural or necessary relation. What relation has the fixing of a price of the ware to the production of "seconds"? If the articles were made perfect, their price in compensation of them and by unfettered competition would adjust itself. To say otherwise would be in defiance of the examples of the trading and industrial world. Nor was a combination of manufacturers necessary to the perfection of manufacture and to rivalry in its quality. And it may be asked, if such perfection and its protecting influence against deception and the ruinous depression of prices were so desirable and potent as it is contended that they were, why were they not extended to "baths," the most important of the articles in the trade? It is not an adequate answer to say that
there was a time guaranty of them, even though it was given to all of them, as it was not. The justification of defendants is based not on the responsibility of manufacturers, but on the integrity of the articles assured by the use of the Arrott device.
It is the foundation of defendants' argument that to make the use of that device universal was the prompting of Wayman's energies to unite the manufacturers and to remove the evils which beset the trade and which were "discrediting the ware and demoralizing the market and business." It was the representation of the advantage, we are told, of such results that broke down the resolution of the Standard Company not to share the use of the device with other manufacturers. But, granting that there was provision or security against the production of "seconds" in all of the articles, it seems from what we have said above that all of the substantial good which is asserted to have been the object of the agreements could have been attained by a simple sale of the right to use the Arrott patent, conceding to it the dominant effect which is attributed to it. Nor is the justification of defendants made more adequate by the representation that
"Wayman's motive was to make money for himself not as a manufacturer, but as the owner of the patent, receiving royalties from those whom he licensed to use his patented invention."
Wayman testified to another motive. By fixing prices, "he hoped," he said, "as one of the features of the license agreements, to enable the companies to abolish ruinous competition," and to get a "revenue for each of the companies to enable them to make a reasonable profit."
But motives and inducements may not be easily estimated, and we will pass to a consideration of the agreements. On March 30, 1910, the Manufacturers' Association passed a resolution, and a committee of five was constituted, to be known as the price and schedule committee,
to which the license agreements and resale agreements should be referred. This committee was to interview the various manufacturers and obtain their consent to the agreements which were to become effective "when the consent of 83% of the production" was had. The signatory manufacturers agreed to "give their prompt cooperation to the matter in question."
At the same time, the following resolution was passed:
"Whereas, a proposition is pending for a license agreement and a resale price for the benefit of the jobbing trade, and"
"Whereas, long-term contracts are a menace to said proposition,"
"We, the undersigned, manufacturers of enameled ware, hereby agree to take no orders for delivery beyond May 31, 1910."
"This agreement is not binding upon the signers unless all members of the Enameled Ware Manufacturers' Association are parties thereto and append their signatures."
"The within is agreed to."
At the same meeting, a memorandum of agreement was proposed which was to be executed with Wayman as licensor of various patents covering pneumatic dredgers. The agreement covered selling schedules of the ware and provided for the royalties to be paid, the selling price to the jobbers to be established by the licensor through a committee appointed by the various manufacturers. It provided penalties for the violation of the price regulations and preferential discounts (discounts allowed to certain manufacturers) form the selling prices. Such discounts were to be allowed on sales to jobbers only.
Such details as might "be necessary for the perfection of the arrangement" were reserved for the next meeting of manufacturers. After this meeting, a circular letter was sent by Wayman to all manufacturers apprising them of what had transpired, the attention that had been
given the subject, and informing them that "the final license agreement papers" would be executed at the next meeting, to be held in May.
The license agreement was subsequently executed. It granted to the licensee the right to use in the manufacture of enameled ware the Arrott patent, also a patent to E. Dithridge for a pneumatic sieve and a patent to William Lindsay for an "enameling powder distributor." It released the claims for past infringement so long as the licensees operated under the license. It fixed royalties of $5.00 per day for each furnace, subject to a diminution of like amount for furnaces shut down for more than six consecutive working days. It fixed preferential discounts from the regular selling prices, confining them only to sales by the manufacturers to jobbers. And it was provided that no goods manufactured under the license should be sold unless they bore a registered label (except where otherwise specified) owned by the licensee, and in addition thereto a license tag or label approved by the licensor, placed in a visible position thereon.
The provision for prices was as follows:
"The licensor agrees that he will employ a commission of six persons, of which he is to be one, and to act as chairman thereof, five of whom shall be designated by a majority of the parties holding licenses similar to this license, which commission shall have supervision of all the relation and transactions between the parties hereto under this agreement; but it is understood that, where a member of said commission, or his company, shall be directly interested in any question of a violation of the license to be decided by the said commission, said member shall be disqualified and a temporary member shall be appointed in his place by the remaining members of the commission."
"All terms and conditions relative to prices and discounts now established by the licensor and set forth in
the annexed schedules and made a part hereof shall remain in force and effect until other terms, conditions, and preferential discounts are substituted therefor by the licensor, which substitution can only be made by him with the approval of a majority of the members of the commission, hereinbefore prescribed. Notice of such changes and substitutions shall be given from time to time in writing by the licensor to the licensees. The licensee covenants to adhere to and maintain such terms, conditions, regulations, prices, and preferential discounts as may be established by the licensor from time to time, and the licensee further agrees to sell no 'seconds' or 'B's' covered by schedules 4, 4 1/2, 5, and 6."
The restrictions as to prices at which the goods were to be sold did not apply to those sold and exported to foreign countries. Such sales were required, however, to be proved to the licensor.
There was a provision for the return of 80% of the royalties paid if the agreement should be complied with. These royalties, called in the agreement "royalty rebates," were forfeited if the provisions of the agreement should be violated in any particular.
The foregoing constitute the essential provisions of the manufacturer's agreements, and it will be observed what little space is given to "seconds," though it is asserted in the argument, as we have seen, that to get rid of the evils of their production and sale was the chief impulse to the agreements. The covenant as to "seconds" was expressed by the words which we have italicized in the provision relating to prices and discounts, quoted above. The schedules referred to are found in the paragraph providing for preferential discounts, and cover all articles but baths, these being described in schedules 1, 2, and 3.
There was also a jobber's license agreement that bore at the top the note that it "must be executed by the purchaser in order to purchase licensed sanitary enameled
ware." It conveyed to the jobber the right to buy and sell such ware, provided for certain discounts and details as to shipments and deliveries, and that the sales were to be made
"by the purchasers at prices to be established and prevailing in the various zones into which the goods were shipped, regardless of the point of purchase."
There was a provision for the payment of the purchase price at certain rebate periods if the agreement should be complied with. The resale prices as established from time to time were required to be maintained by all jobbers and dealers, and sales could not be made from one jobber to another for any better prices than "established by the sheets," and the purchaser agreed to
"observe and strictly maintain . . . the selling prices as they are set forth in the schedules, and observe and adhere to the rules and regulations as embodied in the price sheets,"
or embodied in price sheets which might be issued by or under the authority of the licensor. Articles might be added to or removed from the schedules at any time. The purchaser also agreed during the life of the contract not to purchase, sell, advertise, or solicit orders for, or in any way handle or deal in, sanitary enameled ironware of any manufacturer not licensed under the letters patent enumerated in the agreement, except with the express written permission of the licensor. A breach of any of the conditions subjected the contract and all unfilled orders to cancellation, the forfeiture of rebates, and the power to obtain the ware manufactured under the letters patent from any of the licensed manufacturers. The purchaser further agreed not to sell any goods on hand manufactured in accordance with the patents, irrespective of by whom manufactured, except in accordance with the prices, conditions, and regulations of sale established by the licensor.
The price list contained a notice to the jobbers' salesmen that the agreements executed by their companies
required them to resell the various licensed products at no better prices, terms, or other regulations than therein established. And further, as changes, additions, and eliminations occurred, new sheets would be issued promptly.
These are the main outlines of the agreements, and, as emphasizing them, Wayman directed the manufacturers at the time they sent out the jobbers' agreements to also send with them a letter containing the following: "It is necessary for you [the jobbers] to execute these contracts before we [the manufacturers] can sell you licensed sanitary enameled ware." This provision was enforced, as indicated by letters in the record. It was also the condition expressed by Wayman in his correspondence with other manufacturers whom he tried to induce to accept licenses and become parties to the agreements. In a letter to a jobber, Wayman expressed the hope that the jobber could see his way clear to execute the agreement, as it covered "a matter entirely for the jobbers' benefit." He further stated:
"The Cedar Rapids Pump Company, of your city, has executed the agreement, and I hope you will cooperate immediately with your local competitors, which will be much more advantageous than a continuous cut market."
In this statement certain things are prominent. Before the agreements, the manufacturers of enameled ware were independent and competitive. By the agreements, they were combined, subjected themselves to certain rules and regulations -- among others, not to sell their product to the jobbers except at a price fixed not by trade and competitive conditions, but by the decision of the committee of six of their number -- and zones of sales were created. And the jobbers were brought into the combination and made its subjection complete and its purpose successful. Unless they entered the combination, they could obtain no enameled ware from any manufacturer who was in the combination, and the condition of entry
was not to resell to plumbers except at the prices determined by the manufacturers. The trade was therefore practically controlled from producer to consumer, and the potency of the scheme was established by the cooperation of 85% of the manufacturers, and their fidelity to it was secured not only by trade advantages, but by what was practically a pecuniary penalty, not inaptly termed in the argument, "cash bail." The royalty for each furnace was $5.00, 80% of which was to be returned if the agreement was faithfully observed; it was to be "forfeited as a penalty" if the agreement was violated. And, for faithful observance of their engagements, the jobbers, too, were entitled to rebates from their purchases. It is testified that 90% of the jobbers in number and more than 90% in purchasing power joined the combination.
The agreements clearly therefore transcended what was necessary to protect the use of the patent or the monopoly which the law conferred upon it. They passed to the purpose and accomplished a restraint of trade condemned by the Sherman law. It had therefore a purpose and accomplished a result not shown in the Bement case. There was a contention in that case that the contract of the National Harrow Company with Bement & Sons was part of a contract and combination with many other companies and constituted a violation of the Sherman law, but the fact was not established, and the case was treated as one between the particular parties, the one granting and the other receiving a right to use a patented article with conditions suitable to protect such use and secure its benefits. And there is nothing in Henry v. A. B. Dick Co., 224 U. S. 1, which contravenes the views herein expressed.
The agreements in the case at bar combined the manufacturers and jobbers of enameled ware very much to the same purpose and results as the association of manufacturers
and dealers in tiles combined them in Montague & Co. v. Lowry, 193 U. S. 38, which combination was condemned by this Court as offending the Sherman law. The added element of the patent in the case at bar cannot confer immunity from a like condemnation, for the reasons we have stated. And this we say without entering into the consideration of the distinction of rights for which the government contends between a patented article and a patented tool used in the manufacture of an unpatented article. Rights conferred by patents are indeed very definite and extensive, but they do not give any more than other rights a universal license against positive prohibitions. 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. The others it is not necessary to review or to quote from except to say that, in the very latest of them, the comprehensive and thorough character of the law is demonstrated and its sufficiency to prevent evasions of its policy "by resort 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, 221 U. S. 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 cannot 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 [argument of counsel -- omitted].
The Colwell Lead Company asserts the legality of the license agreements as the other defendants do, and, besides, urges that it was not engaged in interstate commerce, but that it only sold to plumbers, and that none of the price restrictions was applicable so it, nor was it
at any time in any relations whatsoever with the other defendants. It asserts that it was itself a jobber, and therefore had no occasion to deal with jobbers, and that it was not present nor represented at any of the meetings preceding the license agreements.
It does appear, however, that the company was a member of the association of manufacturers -- an association which, we have seen, passed the first resolution in regard to the license agreement -- and the president of the company, when addressed on the subject of the agreement, expressed an appreciation of it provided all manufacturers should "sign up." He, however, reserved final judgment until he could go over the matter in detail with Wayman, who had addressed him, and declared that he would "be greatly influenced by what other manufacturers do."
There is a letter in the record, about which, however, there is some dispute, purporting to have been written by the president of the company to Wayman, in which the latter's interpretation of a previous letter was said to be "entirely correct," and which contained the following: "We will not require any preferentials below the lowest price made by the Standard Sanitary Manufacturing Company." There can be little doubt of the genuineness of the letter, and it is certain that the company assented on the 25th of May, 1910. Its license, however, was modified in order that it might meet local competition in New York, its business being, it is contended, mostly local.
It appears from the testimony that the company was a manufacturer and a jobber, manufacturing about one-half of what it sold. As a jobber, it bought goods from other manufacturers, but it denies there was an agreement as to prices with such manufacturers.
The testimony as to the state or interstate character of its business is that it manufactures at Elizabeth, N.J.,
and buys also from other manufacturers and jobbers. It ships from there to its warehouses in New York, Worcester, Massachusetts, and Brooklyn. The trade of its Worcester branch covers about 200 miles around Worcester, its efforts being to localize its business. It is doubtful, it is testified, if the trade goes beyond Massachusetts, the trade there being circumscribed. Sales in Connecticut are made through the New York office from the ware-rooms.
It is manifest that the Colwell Company was a party to the combination and was also engaged in interstate commerce. The fact that its trade was less general than that of the other manufacturers and jobbers does not take from it the character of an interstate trader. The fact that it was restricted in less degree than the other jobbers, given a certain freedom of competition to meet local conditions in New York, diminishes only the degree of culpability, but does not entirely remove it. Indeed, it may be said that such freedom does not even diminish culpability. It is a concession which may be made a means of crushing competition where it is most formidable.
Error is assigned on the action of the circuit court in not granting a motion made by defendants for an enlargement of time to take testimony on the ground that they had been prevented, by the action of the government in instituting criminal proceedings, from properly presenting their defense.
The question arose upon the action of witnesses who were subpoenaed and called by the Colwell Lead Company, they being officers of some of the other manufacturers. The government apprehending, and as it now contends, that the witnesses were called to give them immunity from a criminal prosecution which was then pending in Michigan, notified them that, if they testified, they would do so at their peril, as immunity could only be claimed by
witnesses for the government. The witnesses thereupon, upon the advice of counsel, refused to testify, leaving, as it is contended, the Colwell Company particularly, and the other defendants as well, without the evidence such witnesses could have given and which, it is said, they did give subsequently in the criminal trial.
Whether the testimony, if given, would have conferred immunity we are not called upon to determine. The only question is as to the extent of the court's discretion in such circumstances. The Sherman Act provides for a criminal proceeding to punish violations, and suits in equity to restrain such violations, and the suits may be brought simultaneously or successively. The order of their bringing must depend upon the government; the dependence of their trials cannot be fixed by a hard and fast rule, or made imperatively to turn upon the character of the suit. Circumstances may determine, and are for the consideration of the court. An imperative rule that the civil suit must await the trial of the criminal action might result in injustice or take from the statute a great deal of its power. Besides a suit by the government, there may be an action for damages by a "person injured by reason of anything forbidden by the act." Must it also wait? Indeed, the reasons urged for the rule, if logically extended, would compel the postponement of the enforcement of the civil remedies until the exhaustion of criminal prosecutions or their expiration by lapse of time. Until either event occurs, the danger of incrimination cannot be said to have passed. It is manifest, therefor, that the most favorable view which can be taken of the rights of defendants in such situation is that they depend upon the discretion of the court in the particular case. We find no abuse of such discretion in the case at bar.
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