Under § 4 of the Sherman Act, the Government sued in a Federal
District Court for a declaration that appellant railroad's
"preferential routing" agreements are unlawful as unreasonable
restraints of trade under § 1 of the Act. Such agreements were
incorporated in deeds and leases to several million acres of land
in several Northwestern States, originally granted to the railroad
to facilitate its construction. They compel the grantees and
lessees to ship over the railroad's lines all commodities produced
or manufactured on the land, provided its rates (and in some
instances its service) are equal to those of competing carriers.
Many of the goods produced on such lands are shipped from one State
to another. After various pretrial proceedings, the Government
moved for summary judgment. The district judge made numerous
findings based on pleadings, stipulations, depositions and answers
to interrogatories; granted the Government's motion; and enjoined
the railroad from enforcing such "preferential routing"
clauses.
Held: The judgment is affirmed. Pp.
356 U. S.
2-12.
(a) A tying arrangement, whereby a party agrees to sell one
product only on condition that the buyer also purchases a different
(or tied) product, or at least agrees that he will not purchase
that product from any other supplier, is
per se
unreasonable, and unlawful under the Sherman Act whenever the
seller has sufficient
Page 356 U. S. 2
economic power with respect to the tying product to restrain
appreciably free competition in the market for the tied product,
and a "not insubstantial" amount of interstate commerce is
affected. Pp.
356 U. S. 5-7.
(b) On the record in this case, the undisputed facts established
beyond any genuine question that appellant possessed substantial
economic power by virtue of its extensive landholdings, which it
used as leverage to induce large numbers of purchasers and lessees
to give it preference, to the exclusion of its competitors, in
carrying goods or produce from the land transferred to them, and
that a "not insubstantial" amount of interstate commerce was and is
affected. Pp.
356 U. S. 7-8.
(c) The essential prerequisites for treating appellant's tying
arrangements as unreasonable
per se were conclusively
established in the District Court, and appellant has offered to
prove nothing there or here which would alter this conclusion. P.
356 U. S. 8.
(d) The conclusion here reached is supported by
International Salt Co. v. United States, 332 U.
S. 392, which was not limited by
Times-Picayune
Publishing Co. v. United States, 345 U.
S. 594. Pp.
356 U. S.
8-11.
(e) That appellant's "preferential routing" clauses are subject
to certain exceptions and may have been administered leniently does
not avoid their stifling effect on competition. Pp.
356 U. S.
11-12.
142 F.
Supp. 679, affirmed.
MR. JUSTICE BLACK delivered the opinion of the Court.
In 1864 and 1870, Congress granted the predecessor of the
Northern Pacific Railway Company approximately forty million acres
of land in several Northwestern States and Territories to
facilitate its construction of a railroad
Page 356 U. S. 3
line from Lake Superior to Puget Sound. [
Footnote 1] In general terms, this grant consisted of
every alternate section of land in a belt 20 miles wide on each
side of the track through States and 40 miles wide through
Territories. The granted lands were of various kinds; some
contained great stands of timber, some iron ore or other valuable
mineral deposits, some oil or natural gas, while still other
sections were useful for agriculture, grazing or industrial
purposes. By 1949, the Railroad had sold about 37,000,000 acres of
its holdings, but had reserved mineral rights in 6,500,000 of those
acres. Most of the unsold land was leased for one purpose or
another. In a large number its sales contracts and most of its
lease agreements, the Railroad had inserted "preferential routing"
clauses which compelled the grantee or lessee to ship over its
lines all commodities produced or manufactured on the land,
provided that its rates (and, in some instances, its service) were
equal to those of competing carriers. [
Footnote 2] Since many of the goods produced on the lands
subject to these "preferential routing" provisions are shipped from
one State to another, the actual and potential amount of interstate
commerce affected is substantial. Alternative means of
transportation exist for a large portion of these shipments,
including the facilities of two other major railroad systems.
In 1949, the Government filed suit under § 4 of the Sherman Act
seeking a declaration that the defendant's "preferential routing"
agreements were unlawful as
Page 356 U. S. 4
unreasonable restraints of trade under § 1 of that Act.
[
Footnote 3] After various
pretrial proceedings, the Government moved for summary judgment,
contending that, on the undisputed facts, it was entitled, as a
matter of law, to the relief demanded. The district judge made
numerous findings, as set forth in substance in the preceding
paragraph, based on the voluminous pleadings, stipulations,
depositions and answers to interrogatories filed in the case, and
then granted the Government's motion (with an exception not
relevant here).
142 F.
Supp. 679. He issued an order enjoining the defendant from
enforcing the existing "preferential routing" clauses or from
entering into any future agreements containing them. The defendant
took a direct appeal to this Court under § 2 of the Expediting Act
of 1903, 32 Stat. 823, as amended, 15 U.S.C. § 29, and we noted
probable jurisdiction. 352 U.S. 980.
The Sherman Act was designed to be a comprehensive charter of
economic liberty aimed at preserving free and unfettered
competition as the rule of trade. It rests on the premise that the
unrestrained interaction of competitive forces will yield the best
allocation of our economic resources, the lowest prices, the
highest quality, and the greatest material progress, while at the
same time providing an environment conductive to the preservation
of our democratic political and social institutions. But even were
that premise open to question, the policy unequivocally laid down
by the Act is competition. And, to this end, it prohibits "Every
contract, combination . . . or
Page 356 U. S. 5
conspiracy, in restraint of trade or commerce among the several
States." Although this prohibition is literally all-encompassing,
the courts have construed it as precluding only those contracts or
combinations which "unreasonably" restrain competition.
Standard Oil Co. of New Jersey v. United States,
221 U. S. 1;
Chicago Board of Trade v. United States, 246 U.
S. 231.
However, there are certain agreements or practices which,
because of their pernicious effect on competition and lack of any
redeeming virtue, are conclusively presumed to be unreasonable, and
therefore illegal, without elaborate inquiry as to the precise harm
they have caused or the business excuse for their use. This
principle of
per se unreasonableness not only makes the
type of restraints which are proscribed by the Sherman Act more
certain to the benefit of everyone concerned, but it also avoids
the necessity for an incredibly complicated and prolonged economic
investigation into the entire history of the industry involved, as
well as related industries, in an effort to determine at large
whether a particular restraint has been unreasonable -- an inquiry
so often wholly fruitless when undertaken. Among the practices
which the courts have heretofore deemed to be unlawful in and of
themselves are price-fixing,
United States v. Socony-Vacuum Oil
Co., 310 U. S. 150,
310 U. S. 210;
division of markets,
United States v. Addyston Pipe & Steel
Co., 85 F. 271,
affirmed, 175 U.
S. 211; group boycotts,
Fashion Originators' Guild
v. Federal Trade Comm'n, 312 U. S. 457; and
tying arrangements,
International Salt Co. v. United
States, 332 U.S.
332 U. S. 392.
For our purposes, a tying arrangement may be defined as an
agreement by a party to sell one product, but only on the condition
that the buyer also purchases a different (or tied) product, or at
least agrees that he will not
Page 356 U. S. 6
purchase that product from any other supplier. [
Footnote 4] Where such conditions are
successfully exacted, competition on the merits with respect to the
tied product is inevitably curbed. Indeed, "tying agreements serve
hardly any purpose beyond the suppression of competition."
Standard Oil Co. of California v. United States,
337 U. S. 293,
337 U. S.
305-306. [
Footnote
5] They deny competitors free access to the market for the tied
product not because the party imposing the tying requirements has a
better product or a lower price, but because of his power or
leverage in another market. At the same time, buyers are forced to
forego their free choice between competing products. For these
reasons, "tying agreements fare harshly under the laws forbidding
restraints of trade."
Times-Picayune Publishing Co. v. United
States, 345 U. S. 594,
345 U. S. 606.
They are unreasonable in and of themselves whenever a party has
sufficient economic power with respect to the tying product to
appreciably restrain free competition in the market for the tied
product and a "not insubstantial" amount of interstate commerce is
affected.
International Salt Co. v. United States,
332 U. S. 392.
Cf. United States v. Paramount Pictures, 334 U.
S. 131,
334 U. S.
156-159;
United States v. Griffith,
334 U. S. 100. Of
course, where the seller has no control or dominance over the tying
product, so that it does not represent an effectual weapon to
pressure buyers into taking the tied item, any restraint of trade
attributable to such tying arrangements would obviously be
insignificant, at most. As
Page 356 U. S. 7
a simple example, if one of a dozen food stores in a community
were to refuse to sell flour unless the buyer also took sugar, it
would hardly tend to restrain competition in sugar if its
competitors were ready and able to sell flour by itself.
In this case, we believe the district judge was clearly correct
in entering summary judgment declaring the defendant's
"preferential routing" clauses unlawful restraints of trade. We
wholly agree that the undisputed facts established beyond any
genuine question that the defendant possessed substantial economic
power by virtue of its extensive landholdings, which it used as
leverage to induce large numbers of purchasers and lessees to give
it preference, to the exclusion of its competitors, in carrying
goods or produce from the land transferred to them. Nor can there
be any real doubt that a "not insubstantial" amount of interstate
commerce was and is affected by these restrictive provisions.
As pointed out before, the defendant was initially granted large
acreages by Congress in the several Northwestern States through
which its lines now run. This land was strategically located in
checkerboard fashion amid private holdings and within economic
distance of transportation facilities. Not only the testimony of
various witnesses, but common sense, makes it evident that this
particular land was often prized by those who purchased or leased
it, and was frequently essential to their business activities. In
disposing of its holdings, the defendant entered into contracts of
sale or lease covering at least several million acres of land which
included "preferential routing" clauses. [
Footnote 6] The very existence of
Page 356 U. S. 8
this host of tying arrangements is itself compelling evidence of
the defendant's great power, at least where, as here, no other
explanation has been offered for the existence of these restraints.
The "preferential routing" clauses conferred no benefit on the
purchasers or lessees. While they got the land they wanted by
yielding their freedom to deal with competing carriers, the
defendant makes no claim that it came any cheaper than if the
restrictive clauses had been omitted. In fact, any such price
reduction in return for rail shipments would have quite plainly
constituted an unlawful rebate to the shipper. [
Footnote 7] So far as the Railroad was concerned,
its purpose obviously was to fence out competitors, to stifle
competition. While this may have been exceedingly beneficial to its
business, it is the very type of thing the Sherman Act condemns. In
short, we are convinced that the essential prerequisites for
treating the defendant's tying arrangements as unreasonable
"
per se" were conclusively established below, and that the
defendant has offered to prove nothing there or here which would
alter this conclusion.
In our view,
International Salt Co. v. United States,
332 U. S. 392,
which has been unqualifiedly approved by subsequent decisions, is
ample authority for affirming the judgment below. In that case, the
defendant refused
Page 356 U. S. 9
to lease its salt-dispensing machines unless the lessee also
agreed to purchase all the salt it used in the machines from the
defendant. It was established that the defendant had made about 900
leases under such conditions, and that, in the year in question, it
had sold about $500,000 worth of salt for use in the leased
machines. On that basis we affirmed unanimously a summary judgment
finding the defendant guilty of violating § 1 of the Sherman Act.
The Court ruled that it was "unreasonable,
per se, to
foreclose competitors from any substantial market" by tying
arrangements. As we later analyzed the decision,
"it was not established that equivalent machines were
unobtainable, it was not indicated what proportion of the business
of supplying such machines was controlled by defendant, and it was
deemed irrelevant that there was no evidence as to the actual
effect of the tying clauses upon competition."
Standard Oil Co. of California v. United States,
337 U. S. 293,
337 U. S.
305.
The defendant attempts to evade the force of
International
Salt on the ground that the tying product there was patented,
while here it is not. But we do not believe this distinction has,
or should have, any significance. In arriving at its decision in
International Salt, the Court placed no reliance on the
fact that a patent was involved, nor did it give the slightest
intimation that the outcome would have been any different if that
had not been the case. If anything, the Court held the challenged
tying arrangements unlawful
despite the fact that the
tying item was patented, not because of it.
"By contracting to close this market for salt against
competition, International has engaged in a restraint of trade for
which its patents afford no immunity from the antitrust laws."
332 U.S. at
332 U. S. 396.
Nor have subsequent cases confined the rule of
per se
unreasonableness laid down in
International Salt to
situations involving patents.
Cf. United States v.
Griffith, 334 U. S. 100;
United
Page 356 U. S. 10
States v Paramount Pictures, Inc., 334 U.
S. 131,
334 U. S. 156;
Times-Picayune Publishing Co. v. United States,
345 U. S. 594.
[
Footnote 8]
The defendant argues that the holding in
International
Salt was limited by the decision in
Times-Picayune
Publishing Co. v. United States, 345 U.
S. 594. There, the Court held that a unit system of
advertising in two local newspapers did not violate § 1 of the
Sherman Act. On the facts before it, the majority found there was
no tying problem at all, since only one product was involved, and
that, in any event, the defendant did not possess sufficient
economic power in the advertising market to bring its unit rule
within the principle of
per se unreasonableness. But the
Court was extremely careful to confine its decision to the narrow
record before it.
Id. at
345 U. S.
627-628. And, far from repudiating any of the principles
set forth in
International Salt, it vigorously reasserted
them by broadly condemning tying arrangements as wholly
inconsistent with the fundamental principles of the antitrust laws.
In the Court's forceful terms,
"Tying arrangements . . . flout the Sherman Act's policy that
competition rule the marts of trade. . . . By conditioning his sale
of one commodity on the purchase of another, a seller coerces the
abdication of buyers' independent judgment as to the 'tied'
product's merits and insulates it from the competitive stresses of
the open market. But any intrinsic superiority of the 'tied'
product would convince
Page 356 U. S. 11
freely choosing buyers to select it over others, anyway."
Id. at
345 U. S.
605.
While there is some language in the
Times-Picayune
opinion which speaks of "monopoly power" or "dominance" over the
tying product as a necessary precondition for application of the
rule of
per se unreasonableness to tying arrangements, we
do not construe this general language as requiring anything more
than sufficient economic power to impose an appreciable restraint
on free competition in the tied product (assuming all the time, of
course, that a "not insubstantial" amount of interstate commerce is
affected). To give it any other construction would be wholly out of
accord with the opinion's cogent analysis of the nature and baneful
effects of tying arrangements and their incompatibility with the
policies underlying the Sherman Act.
Times-Picayune, of
course, must be viewed in context with
International Salt
and our other decisions concerning tying agreements. There is no
warrant for treating it as a departure from those cases. Nor did it
purport to be any such thing; rather, it simply made an effort to
restate the governing considerations in this area as set forth in
the prior cases. And, in so doing, it makes clear, as do those
cases, that the vice of tying arrangements lies in the use of
economic power in one market to restrict competition on the merits
in another, regardless of the source from which the power is
derived and whether the power takes the form of a monopoly or
not.
The defendant contends that its "preferential routing" clauses
are subject to so many exceptions and have been administered so
leniently that they do not significantly restrain competition. It
points out that these clauses permit the vendee or lessee to ship
by competing carrier if its rates are lower (or, in some instances,
if its service is better) than the defendant's. [
Footnote 9] Of course, if these
restrictive
Page 356 U. S. 12
provisions are merely harmless sieves with no tendency to
restrain competition, as the defendant's argument seems to imply,
it is hard to understand why it has expended so much effort in
obtaining them in vast numbers and upholding their validity, or how
they are of any benefit to anyone, even the defendant. But however
that may be, the essential fact remains that these agreements are
binding obligations held over the heads of vendees which deny
defendant's competitors access to the fenced-off market on the same
terms as the defendant. In
International Salt, the
defendants similarly argued that their tying arrangements were
inoffensive restraints because they allowed lessees to buy salt
from other suppliers when they offered a lower price than
International. The Court's answer there is equally apt here.
"[This exception] does, of course, afford a measure of
protection to the lessee, but it does not avoid the stifling effect
of the agreement on competition. The appellant had at all times a
priority on the business at equal prices. A competitor would have
to undercut appellant's price to have any hope of capturing the
market, while appellant could hold that market by merely meeting
competition. We do not think this concession relieves the contract
of being a restraint of trade, albeit a less harsh one than would
result in the absence of such a provision."
332 U.S. at
332 U. S.
397.
All of this is only aggravated, of course, here in the regulated
transportation industry, where there is frequently no real rate
competition at all, and such effective competition as actually
thrives takes other forms.
Affirmed.
MR. JUSTICE CLARK took no part in the consideration or decision
of this case.
Page 356 U. S. 13
[
Footnote 1]
13 Stat. 365, 16 Stat. 378. The details of these statutory
grants are extensively set forth and discussed in
United States
v. Northern Pacific R. Co., 256 U. S. 51, and
United States v. Northern Pacific R. Co., 311 U.
S. 317.
[
Footnote 2]
The volume and nature of these restrictive provisions are set
forth in more detail hereafter.
See note 6 infra.
[
Footnote 3]
26 Stat. 209, as amended, 15 U.S.C. §§ 1, 4. Actually there are
two defendants here, the Northern Pacific Railway Company and its
wholly owned subsidiary Northwestern Improvement Company, which
sells, leases and manages the Railroad's lands. For convenience,
and since Northwestern is completely controlled by the Railroad, we
shall speak of the two of them as a single "defendant," or as the
"Railroad."
[
Footnote 4]
Of course, where the buyer is free to take either product by
itself, there is no tying problem even though the seller may also
offer the two items as a unit at a single price.
[
Footnote 5]
As this Court has previously pointed out, such
non-anticompetitive purposes as these arrangements have been
asserted to possess can be adequately accomplished by other means
much less inimical to competition.
See, e.g., International
Business Machines Corp. v. United States, 298 U.
S. 131;
International Salt Co. v. United
States, 332 U. S. 392.
[
Footnote 6]
The district judge found (and his findings are not challenged
here) that, as of 1949, there were (1) over 1,000 grazing leases
covering more than 1,000,000 acres of land, (2) at least 72
contracts for the sale of timberland covering 1,244,137 acres, (3)
at least 31 timber sale contracts covering 100,585 acres, (4) at
least 19 oil and gas leases covering 135,000 acres, (5) at least 16
iron ore leases covering 5,261 acres, (6) 12 coal leases (acreage
not specified), and (7) at least 17 other mineral leases covering
6,810 acres which contained "preferential routing" clauses.
The grazing leases, timber sales contracts, timberland sales
contracts, and, in some instances, the mineral land leases
obligated the vendee or lessee to ship its products by way of the
defendant's lines unless rates of competitors were lower; the oil
and gas leases, coal leases and the remainder of the mineral land
leases, unless the rates were lower or the service better; the iron
ore leases, unless the defendant's rates, service and facilities
were equal to those of any competing line.
[
Footnote 7]
49 U.S.C. §§ 2, 6(7), 41(3).
[
Footnote 8]
Of course, it is common knowledge that a patent does not always
confer a monopoly over a particular commodity. Often, the patent is
limited to a unique form or improvement of the product, and the
economic power resulting from the patent privileges is slight. As a
matter of fact, the defendant in
International Salt
offered to prove that competitive salt machines were readily
available which were satisfactory substitutes for its machines (a
fact the Government did not controvert), but the Court regarded
such proof as irrelevant.
[
Footnote 9]
See note 6
supra.
MR. JUSTICE HARLAN, whom MR. JUSTICE FRANKFURTER and MR. JUSTICE
WHITTAKER join, dissenting.
The Court affirms summary judgment for the Government by
concluding that
"the essential prerequisites for treating the defendant's tying
arrangements as unreasonable 'per se' were conclusively established
below. . . ."
In my view, these prerequisites were not established, and this
case should be remanded to the District Court for a trial on the
issue whether appellants' landholdings gave them that amount of
control over the relevant market for land necessary under this
Court's past decisions to make the challenged tying clauses
violative
per se of the Sherman Act. Further, in light of
the Court's disposition of the case and the nature of the findings
made below, I think that the Court's discussion of
International Salt Co. v. United States, 332 U.
S. 392, is apt to produce confusion as to what proof is
necessary to show
per se illegality of tying clauses in
future Sherman Act cases.
Because the Government necessarily based its complaint on § 1 of
the Sherman Act, 26 State. 209, as amended, 15 U.S.C. § 1, rather
than on § 3 of the Clayton Act, [
Footnote 2/1] it was required to show that the
challenged tying clauses constituted unreasonable restraints of
trade,
see Standard Oil Co. of New Jersey v. United
States, 221 U. S. 1. As a
result, these tying clauses raise legal issues different from those
presented by the legislatively defined tying clauses invalidated
under the more pointed prohibitions of the Clayton Act.
Times-Picayune Publishing Co. v. United States,
345 U. S. 594, has
made it clear beyond dispute that both proof of dominance in the
market for the tying product and a showing that an appreciable
volume of business in the tied product is restrained are
Page 356 U. S. 14
essential conditions to judicial condemnation of a tying clause
as a
per se violation of the Sherman Act. [
Footnote 2/2] 345 U.S. at
345 U. S.
608-611. These firm requirements derive from an
awareness that the vice apt to exist in tying agreements "is the
wielding of monopolistic leverage; a seller exploits his dominant
position in one market to expand his empire into the next." 345
U.S. at
345 U. S. 611.
It is not, as the Court intimates at one point in its opinion,
that, under the Sherman Act, the tying clause is illegal
per
se; the
per se illegality results from its use by
virtue of a vendor's dominance over the tying interest to foreclose
competitors from a substantial market in the tied interest.
My primary difficulty with the Court's affirmance of the
judgment below is that the District Court made no finding that the
appellants had a "dominant position" or, as this Court now puts it,
"sufficient economic power," in the relevant land market. Such a
finding would indicate that those requiring land of the character
owned by the appellants would be driven to them for it, thereby
putting appellants in a position to foreclose competing carriers,
through the medium of tying clauses, from shipping the produce from
the lands sold or leased. The District Court seems to have
conceived that no more need be shown on this score than that the
appellants owned the
particular tracts of land sold or
leased subject to a tying clause. Thus, it said:
"Defendants argue that the first tying element,
i.e.,
market domination over the tying product, is not established
because the record does not show the proportion of N.P. [Northern
Pacific] lands of various types to the total of the lands of the
same types sold and leased in the area of defendants'
operations.
Page 356 U. S. 15
This contention ignores the plain language of the cited
decisions ['tying clause' cases in this Court], providing that
market dominance of 'the tying commodity' is required.
The
tying commodity need only be the particular property or product to
which forced purchase of the second commodity is tied; certainly it
does not necessarily include all of the similar and competing
commodities which may be in the market. . . ."
"The tying commodity in the present case is the land presently
or formerly owned by N.P.
Unrestricted fee-simple title to land
vests in the owner absolute domination of the market in such
land. By the ownership of the lands and resulting dominance in
the market therefor, defendants were able to impose the traffic
clauses in question on the grantees and lessees of the land."
(Italics added.) In conformity with these views, the ultimate
findings of the District Court on the issue of "control" were only
these:
"37. Defendants, as sellers and as lessors,
by reason of
title in fee simple, have dominance in the lands now owned by
them and had dominance in the lands formerly owned at the time of
sale of such lands. [Italics added.]"
"38. Defendants have used their dominance in the lands sold and
leased to require purchasers and lessees to purchase and use
Northern Pacific's transportation service, under the conditions
stated in finding 10."
(Finding 10 relates to the terms of the tying clauses.)
I do not think that these findings as to appellants'
ad
hoc "dominance" over the particular land sold or leased
suffice to meet the showing of market control which
Times-Picayune established as one of the essential
prerequisites
Page 356 U. S. 16
to holding tying clauses illegal
per se under the
Sherman Act. In effect, the District Court's view bypassed that
requirement, and made the validity of these tying clauses depend
entirely on the commercial restraint accomplished by them. The
District Court should have taken evidence of the relative strength
of appellants' landholdings
vis-a-vis that of others in
the appropriate market for land of the types now or formerly
possessed by appellants, [
Footnote
2/3] of the "uniqueness" of appellants' landholdings in terms
of quality or use to which they may have been put, and of the
extent to which the location of the lands on or near the Northern
Pacific's railroad line, or any other circumstances, put the
appellants in a strategic position as against other sellers and
lessors of land. Short of such an inquiry, I do not see how it can
be determined whether the appellants occupied such a dominant
position in the relevant land market,
cf. United States v. E.
I. du Pont de Nemours & Co., 351 U.
S. 377, as to make these tying clauses illegal
per
se under the Sherman Act.
Explanation for the Court's failure to remand with instructions
to pursue such an inquiry apparently lies in part in its statement
that the "very existence of this host of tying arrangements is
itself compelling evidence of the defendant's great power" over the
land market. I do not deny that there may be instances where
economic coercion by a vendor may be inferred, without any direct
showing of market dominance, from the mere existence of the tying
arrangements themselves, as where the vendee
Page 356 U. S. 17
is apt to suffer economic detriment from the tying clause
because precluded from purchasing a tied product at better terms or
of a better quality elsewhere. But the tying clauses here are not
cast in such absolute terms. The record indicates that a large
majority of appellants' lands were close to the Northern Pacific
lines, and thus vendees or lessees of these lands might be expected
to utilize Northern Pacific as a matter of course. Further,
substantially all the tying clauses, as found by the District
Court, contained provisos leaving the vendee or lessee free to ship
by other railroads when offered either lower rates or lower rates
or superior service. In these circumstances, it would appear that
the inclusion of the tying clauses in contracts or leases might
have been largely a matter of indifference to at least many of the
purchasers or lessees of appellants' land, and hence that more is
needed than the tying clauses themselves to warrant the inference
that acceptance of the tying clauses resulted from coercion
exercised by appellants through their position in the land
market.
Particularly in view of the Court's affirmance of a judgment
based on so inadequate a record, I have further difficulty with the
opinion in its treatment of
International Salt, the
decision on which the Court principally relies. The Court regards
that case as making irrelevant proof of market dominance in the
tying interest, but it seems to me that
Times-Picayune has
laid to rest all doubt as to the need for clear proof on this
issue. In fact, that case considered that, in
International
Salt, the required element of proof was supplied by the
patents themselves, which "conferred monopolistic, albeit lawful,
market control" over the tying product, 345 U.S. at
345 U. S. 608,
as indeed the Court in
International Salt itself suggested
by prefacing its holding with the statement that "[defendant's]
patents confer a limited monopoly of the invention they
Page 356 U. S. 18
reward." 332 U.S. at 395. Still, the Court today states that the
tying clauses were there struck down
despite the fact that
the tying product was patented. In short, insofar as the Sherman
Act is concerned, it appears that
International Salt
simply treated a patent as the equivalent of proof of market
control -- a view further supported by what was said about
International Salt in
Standard Oil Co. of California
v. United States, 337 U. S. 293, at
337 U. S. 304,
337 U. S.
307.
The reliance on
International Salt, with the new scope
the Court now gives it, is puzzling in light of the Court's express
recognition that a finding of sufficient economic power over land
to restrict competition in freight services is an essential element
here. The Court heightens this paradox by its effort to satisfy
this requirement with the assertion that "undisputed facts"
conclusively established the existence of this power. But, in so
concluding, it could hardly rely on the market dominance findings
below, which, as I have tried to show, rested upon the District
Court's evidence misconception of
Times-Picayune.
I do not understand the Court to excuse findings as to control
by adopting the Government's argument that this case should be
brought within
International Salt by analogy of the
ownership of land to that of a patent, so that the particular tract
of land involved in each purchase or lease itself constitutes the
relevant market. The record in any event is without support for
such a theory. No findings were made below as to the uniqueness of
any of appellants' lands, either because of their location
[
Footnote 2/4] or
Page 356 U. S. 19
because of their peculiar qualities enabling production of
superior mineral, timber, or agricultural products. Without such an
inquiry, I do not see how appellants' supposed dominance of the
land market can be based on the theory that their lands were
"unique."
Finally, the Court leaves in unsettling doubt the future effect
of its statement that the use of the word "dominance" in
Times-Picayune implies no more of a showing of market
dominance than "sufficient economic power to impose an appreciable
restraint on free competition in the tied product." As an
abstraction, one can hardly quarrel with this piece of surgery, for
I do not claim that a monopoly in the sense of § 2 of the Sherman
Act must be shown over a tying product. As already indicated, I
should think that a shoring of "sufficient economic power" in cases
of this kind could be based upon a variety of factors, such as
significant percentage control of the relevant market, desirability
of the product to the purchaser, use of tying clauses which would
be likely to result in economic detriment to vendees or lessees,
and such uniqueness of the tying product as to suggest comparison
with a monopoly by patent. But I venture to predict that the
language of the Court, taken in conjunction with its approval of
the summary disposition of this case, will leave courts and lawyers
in confusion as to what the proper standards now are for judging
tying clauses under the Sherman Act.
The Court's action in affirming the judgment below sanctions
what I deem to be a serious abuse of the summary judgment
procedures.
Cf. Sartor v. Arkansas Natural Gas Corp.,
321 U. S. 620. A
record barren of facts adequate to support either a finding of
economic
Page 356 U. S. 20
power over a relevant land market or a finding that the land
involved is so unique as to constitute in itself the relevant
market is remedied by this Court's reliance upon "common sense" and
judicial notice of appellants' commanding position. But these are
poor substitutes for the proof to which the Government should be
put. I would remand to the District Court for a trial and findings
on the issue of "dominance."
[
Footnote 2/1]
The tying arrangements proscribed by § 3 of the Clayton Act
relate only to "goods, wares, merchandise, machinery, supplies or
other commodities. . . ." 38 Stat. 731, 15 U.S.C. § 14.
[
Footnote 2/2]
The Court there stated that the presence of either factor is
sufficient for invalidation of a tying clause under the Clayton
Act. 345 U.S. at
345 U. S.
608-609.
[
Footnote 2/3]
The findings entered by the District Court make no reference to
appellants' percentage ownership of a proper market for land, and
indeed the record contains in only one instance statistics bearing
on this problem. In the period between 1935 and 1942, it appears
that appellants' holdings of merchantable timber in Montana, Idaho,
and Washington constituted approximately 5% of the total
merchantable timber in those States.
[
Footnote 2/4]
Affidavits before the District Court did indicate that certain
landholdings of appellants, particularly grazing lands, were in a
checkerboard pattern among private holdings, thereby giving
appellants a strategic position with respect to these lands, since
the private landholders often found it necessary to acquire
appellants' lands to fill gaps in existing ranges. The amount of
such land does not appear, and I do not think that these affidavits
justify short-circuiting an inquiry into the broad issue of market
dominance.