Conspiracies are seldom capable of proof by direct testimony,
and a conspiracy to accomplish that which is their natural
consequence may be inferred from the things actually done.
The Sherman Law, as construed by this Court in the
Standard
Oil case, while not reaching normal and usual contracts
incident to lawful purposes and in furtherance of legitimate trade,
does broadly condemn all combinations and conspiracies which
restrain the free and natural flow of trade in the channels of
interstate commerce.
Held in this case that the circulation of a so-called
official report among members of an association of retail dealers
calling attention to actions
Page 234 U. S. 601
of listed wholesale dealer in selling direct to consumers tended
to prevent member of the association from dealing with the listed
dealers referred to in the report, and to directly and unreasonably
restrain trade by preventing it with such listed dealer, and was
within the prohibitions of the Sherman Law.
While a retail dealer may unquestionably stop dealing with a
wholesaler for any reason sufficient to himself, he and other
dealer may not combine and agree that none of them will deal with
such wholesaler without, in case interstate commerce is involved,
violating the Sherman Law.
An act, harmless when done by one person, may become a public
wrong when done by many acting in concert in pursuance of a
conspiracy.
Grenada Lumber Co. v. Mississippi,
217 U. S. 433.
201 F. 581 affirmed.
The facts, which involve the determination of whether an
arrangement between certain retail lumbermen's associations in
regard to their relations with wholesale dealers amounted to a
combination and conspiracy in restraint of trade within the
prohibitions of the Sherman Act, are stated in the opinion.
Page 234 U. S. 604
MR. JUSTICE DAY delivered the opinion of the Court.
These are appeals from a decree of the District Court of the
United States for the Southern District of New York
Page 234 U. S. 605
in an action brought by the United States under the Sherman
Anti-Trust Act (July 2, 1890, 26 Stat. 209, c. 647), having for its
object an injunction against certain alleged combinations of retail
lumber dealers which, it was averred, had entered into a conspiracy
to prevent wholesale dealers from selling directly to consumers of
lumber. The defendants are various lumber associations composed
largely of retail lumber dealers in New York, New Jersey,
Pennsylvania, Connecticut, Massachusetts, Rhode Island, Maryland,
and the District of Columbia, and the officers and directors of the
associations. The record is very voluminous, but the facts
essential to a consideration of the decree of the district court
are in comparatively narrow compass. While the record also concerns
practices which are said to have been abandoned, the decree
entered, declaring the defendants named to be in a combination or
conspiracy to restrict and restrain competition, depends solely
upon the method adopted and being used by the defendants in the
distribution of the information contained in a certain document
known as the "Official Report," the form of which, set forth in the
decree, is as follows:
"
OFFICIAL REPORT"
"
(Name of the Particular Association Circulating
it.)"
"
STATEMENT TO MEMBERS (WITH THE DATE)"
"You are reminded that it is because you are members of our
Association and have an interest in common with your fellow members
in the information contained in this statement that they
communicate it to you, and that they communicate to you in
strictest confidence, and with the understanding that you are to
receive it and treat it in the same way."
"The following are reported as having solicited, quoted, or as
having sold direct to the consumers:"
"[Here follows a list of the names and addresses of various
wholesale dealers.] "
Page 234 U. S. 606
"Members, upon learning of any instance of persons soliciting,
quoting, or selling direct to consumers, should at once report
same, and in so doing should, if possible, supply the following
information:"
"The number and initials of car."
"The name of consumer to whom the car is consigned."
"The initials or name of shipper."
"The date of arrival of car."
"The place of delivery."
"The point of origin;"
and the defendants were enjoined from combining, conspiring, or
agreeing together to distribute, and from distributing, to members
of the associations named or any other person or persons, any
information showing soliciting, quotations, or sales and shipments
of lumber and lumber products from manufacturers and wholesalers to
consumers of or dealers in lumber, and from the preparation and
distribution of the lists above described as the "Official Report,"
or the use of a similar device.
The record discloses that the defendant associations are
constituted largely of retail lumber dealers, each of whom has the
natural desire to control his local trade, which the retailers
contend have been unduly interfered with by the wholesalers in
selling to consumers within the local territory in such wise as to
conflict with what they regard as a strictly local trade, and it
appears that the defendant associations have for their object,
among other things, the adoption of ways and means to protect such
trade and to prevent the wholesale dealers from intruding therein.
The particular thing which this case concerns in the retailers'
efforts to promote the end in view is the attempt in the manner
shown, by the circulation of the reports in question, to keep the
wholesalers from selling directly to the local trade. The trade of
the wholesalers involved covers a number of states, and there is no
question but that the supplying of lumber to the large numbers
Page 234 U. S. 607
of retailers in these associations in different states is
interstate trade, and that, if the practices are illegal within the
Sherman Act, they may be reached by this proceeding.
Swift
& Co. v. United States, 196 U. S. 375;
Loewe v.Lawlor, 208 U. S. 274,
208 U. S.
300.
The record discloses a systematic circulation among the members
of the defendant associations of the official report above quoted.
The method of operation as stated by the learned counsel for the
appellants is thus summarized in his brief:
"The names on this list are obtained and placed thereon as the
result of complaints made by individual retailers. When an
individual member of a retail association learns of a sale by a
wholesaler to one of the customers of the retailer he may complain
in writing to the secretary of his association, whose duty it is
thereupon to ascertain the facts by correspondence with the
wholesaler in question and such other means as may seem proper.
Should the report or complaint be without proper foundation, or
should the secretary become satisfied that the matter is a trifling
one, or the result of inadvertence, the incident usually terminates
at this point; but should the complaint appear to be serious and
well founded, the case is submitted to the board of directors of
the retail association at its next meeting, and, should the board
be satisfied that the wholesaler is generally making a practice of
selling to consumers or customers of the retail trade, the
secretary is directed to report the name of such wholesaler for the
official list. Thereupon the secretary sends the name to Mr. Crary
of New York, who adds it upon the next report to the names of those
already thereupon. Each report contains the names of all
wholesalers who have been reported from the very beginning as
selling to consumers, and whose names have not been removed for
cause. The reports or lists, after being printed in New York, are
distributed amongst the secretaries of the defendant
associations,
Page 234 U. S. 608
those for each association being marked with its name, and in
that way only being distinguished from those sent to the other
associations. The secretary of each association then distributes
the lists to his members. Should any wholesaler desire to have his
name removed from the list, he can have it done upon satisfactory
assurance to the local secretary that he is no longer selling in
competition with the retailers. In practice, the greatest care is
taken to make the list accurate, and, as a matter of fact, it only
contains the names of such wholesalers as are absolutely committed
to the practice of competing with retailers for the custom of
builders and contractors."
The reading of the official report shows that it is intended to
give confidential information to the members of the associations of
the names of wholesalers reported as soliciting or selling directly
to consumers, members upon learning of any such instances being
called upon to promptly report the same, supplying detailed
information as to the particulars of the transaction. When viewed
in the light of the history of these associations and the conflict
in which they were engaged to keep the retail trade to themselves
and to prevent wholesalers from interfering with what they regarded
as their rights in such trade, there can be but one purpose in
giving the information in this form to the members of the retail
associations of the names of all wholesalers who, by their attempt
to invade the exclusive territory of the retailers, as they regard
it, have been guilty of unfair competitive trade. These lists were
quite commonly spoken of as blacklists, and when the attention of a
retailer was brought to the name of a wholesaler who had acted in
this wise, it was with the evident purpose that he should know of
such conduct, and act accordingly. True it is that there is no
agreement among the retailers to refrain from dealing with listed
wholesalers, nor is there any penalty annexed for the failure so to
do; but he is blind indeed who does not see the
Page 234 U. S. 609
purpose in the predetermined and periodical circulation of this
report to put the ban upon wholesale dealers whose names appear in
the list of unfair dealers trying by methods obnoxious to the
retail dealers to supply the trade which they regard as their own.
Indeed, this purpose is practically conceded in the brief of the
learned counsel for the appellants:
"It was and is conceded by defendants, and the court below
found, that the circulation of this information would have a
natural tendency to cause retailers receiving these reports to
withhold patronage from listed concerns. That was, of course, the
very object of the defendants in circulating them."
In other words, the circulation of such information among the
hundreds of retailers as to the alleged delinquency of a wholesaler
with one of their number had, and was intended to have, the natural
effect of causing such retailers to withhold their patronage from
the concern listed.
The Sherman Act has been so frequently and recently before this
Court as to require no extended discussion now.
Standard Oil
Co. v. United States, 221 U. S. 1;
United States v. American Tobacco Co., 221 U. S.
106;
United States v. St. Louis Terminal,
224 U. S. 383;
Standard Sanitary Mfg. Co. v. United States, 226 U. S.
20;
United States v. Union Pacific R. Co.,
226 U. S. 61;
United States v. Reading Co., 226 U.
S. 324;
United States v. Patten, 226 U.
S. 525;
Nash v. United States, 229 U.
S. 373;
Straus v. American Publishers' Ass'n,
231 U. S. 222. It
broadly condemns all combinations and conspiracies which restrain
the free and natural flow of trade in the channels of interstate
commerce. It is true that this Court held in the
Standard
Oil and
Tobacco cases,
supra, and in the
subsequent cases following them, that, in its proper construction,
the act was not intended to reach normal and usual contracts
incident to lawful purposes and intended to
Page 234 U. S. 610
further legitimate trade, and summarizing the meaning of the act
in the
Tobacco case, this Court said (221 U.S.
221 U. S.
179):
"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 antitrust act only embraced acts
or contracts or agreements 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
because of the evident purpose of the acts, etc., injuriously
restrained trade, that the words as used in the statute were
designed to have and did have but a like significance."
The same principle was affirmed in
Nash v. United States,
supra. The Court in the Standard Oil case construed the act as
intended to reach only combinations unduly restrictive of the flow
of commerce, or unduly restrictive of competition, and,
illustrating what were such undue or unreasonable combinations, it
classed as illegal (p.
221 U. S. 58)
"all contracts or acts which were unreasonably restrictive of
competitive conditions, either from the nature or character of the
contract or act, or where the surrounding circumstances were such
as to justify the conclusion that they had not been entered into or
performed with the legitimate purpose of reasonably forwarding
personal interest and developing trade but, on the contrary, were
of such a character as to give rise to the inference or presumption
that they had been entered into or done with the intent to do wrong
to the general public and to limit the right of individuals, thus
restraining the free flow of commerce and tending to bring about
the evils, such as enhancement of prices, which were considered to
be against public policy."
And in
Loewe v.Lawlor, supra, this Court held that a
combination to boycott
Page 234 U. S. 611
the hats of a manufacturer and deter dealers from buying them in
order to coerce the manufacturer to a particular course of action
with reference to labor organizations, the effect of the
combination being to compel third parties and strangers not to
engage in a course of trade except upon conditions which the
combination imposed, was within the Sherman Act. In
Gompers v.
Buck's Stove & Range Co., 221 U.
S. 418, after citing
Loewe v.Lawlor, supra,
this Court said (p.
221 U. S.
438):
"But the principle announced by the Court was general. It [the
Sherman Act] covered any illegal means by which interstate commerce
is restrained, whether by unlawful combinations of capital, or
unlawful combinations of labor, and we think also whether the
restraint be occasioned by unlawful contracts, trusts, pooling
arrangements, blacklists, boycotts, coercion, threats,
intimidation, and whether these be made effective, in whole or in
part, by acts, words, or printed matter."
And see Montague & Co. v. Lowry, 193 U. S.
38.
These principles are applicable to this situation. Here are
wholesale dealers in large number engaged in interstate trade upon
whom it is proposed to impose as a condition of carrying on that
trade that they shall not sell in such manner that a local retail
dealer may regard such sale as an infringement of his exclusive
right to trade, upon pain of being reported as an unfair dealer to
a large number of other retail dealers associated with the offended
dealer, the purpose being to keep the wholesaler from dealing not
only with the particular dealer who reports him, but with all
others of the class who may be informed of his delinquency.
"Section 1 of the act . . . is not confined to voluntary
restraints, as where persons engaged in interstate trade or
commerce agree to suppress competition among themselves, but
includes as well involuntary restraints, as where persons not so
engaged conspire to compel action by others, or to create
artificial
Page 234 U. S. 612
conditions, which necessarily impede or burden the due course of
such trade or commerce, or restrict the common liberty to engage
therein."
United States v. Patten, 226
U. S. 541. This record abounds in instances where the
offending dealer was thus reported, the hoped-for effect, unless he
discontinued the offending practice, realized, and his trade
directly and appreciably impaired.
But it is said that, in order to show a combination or
conspiracy within the Sherman Act, some agreement must be shown
under which the concerted action is taken. It is elementary,
however, that conspiracies are seldom capable of proof by direct
testimony, and may be inferred from the things actually done, and
when, in this case, by concerted action, the names of wholesalers
who were reported as having made sales to consumers were
periodically reported to the other members of the associations, the
conspiracy to accomplish that which was the natural consequence of
such action may be readily inferred.
The circulation of these reports not only tends to directly
restrain the freedom of commerce by preventing the listed dealers
from entering into competition with retailers, as was held by the
district court, but it directly tends to prevent other retailers
who have no personal grievance against him, and with whom he might
trade, from so doing, they being deterred solely because of the
influence of the report circulated among the members of the
associations. In other words, the trade of the wholesaler with
strangers was directly affected not because of any supposed wrong
which he had done to them, but because of the grievance of a member
of one of the associations, who had reported a wrong to himself,
which grievance, when brought to the attention of others, it was
hoped would deter them from dealing with the offending party. This
practice takes the case out of those normal and usual agreements in
aid of trade and commerce which may be found not to be within the
act, and puts it within the prohibited
Page 234 U. S. 613
class of undue and unreasonable restraints such as was the
particular subject of condemnation in
Loewe v. Lawlor,
supra.
The argument that the course pursued is necessary to the
protection of the retail trade and promotive of the public welfare
in providing retail facilities is answered by the fact that
Congress, with the right to control the field of interstate
commerce, has so legislated as to prevent resort to practices which
unduly restrain competition or unduly obstruct the free flow of
such commerce, and private choice of means must yield to the
national authority thus exerted.
Addyston Pipe & Steel Co.
v. United States, 175 U. S. 211,
175 U. S.
241-242.
Anderson v. United States, 171 U.
S. 604, is cited and relied upon by the appellants. In
that case, this Court sustained, as against an attack under the
Sherman law, the legality of an association called the Traders'
Live Stock Exchange in Kansas City. An agreement among purchasers
of cattle for the purpose of regulating and controlling the local
business among themselves had been entered into, and one of the
rules provided that the members of the exchange should not deal
with any other yard trader unless he was a member of such exchange.
It was said (p.
171 U. S.
613):
"There is no evidence that these defendants have in any manner
other than by the rules above mentioned hindered or impeded others
in shipping, trading, or selling their stock, or that they have in
any way interfered with the freedom of access to the stock yards of
any and all other traders and purchasers, or hindered their
obtaining the same facilities which were therein afforded by the
stock yards company to the defendants as members of the exchange,
and we think the evidence does not tend to show that the above
results have flowed from the adoption and enforcement of the rules
and regulations referred to. "
Page 234 U. S. 614
As distinguished from this situation, the present case shows
that the trade of the listed wholesalers is hindered or impeded;
that competition is suppressed and the natural flow of commerce
interfered with as the direct result of the circulation of the
official reports in the manner stated. The case is quite different
from the
Anderson case.
And see Montague & Co. v.
Lowry, supra.
A retail dealer has the unquestioned right to stop dealing with
a wholesaler for reasons sufficient to himself, and may do so
because he thinks such dealer is acting unfairly in trying to
undermine his trade. "But," as was said by Mr. Justice Lurton,
speaking for the Court in
Grenada Lumber Co. v.
Mississippi, 217 U. S. 433,
"when the plaintiffs in error combine and agree that no one of
them will trade with any producer or wholesaler who shall sell to a
consumer within the trade range of any of them, quite another case
is presented. An act harmless when done by one may become a public
wrong when done by many acting in concert, for it then takes on the
form of a conspiracy, and may be prohibited or punished if the
result be hurtful to the public or to the individual against whom
the concerted action is directed."
When the retailer goes beyond his personal right, and,
conspiring and combining with others of like purpose, seeks to
obstruct the free course of interstate trade and commerce and to
unduly suppress competition by placing obnoxious wholesale dealers
under the coercive influence of a condemnatory report circulated
among others, actual or possible customers of the offenders, he
exceeds his lawful rights, and such action brings him and those
acting with him within the condemnation of the act of Congress and
the district court was right in so holding. It follows that its
decree must be
Affirmed.