The unincorporated 'American Hardwood Manufacturers' Association' was formed in December, 1918, by the consolidation of two similar associations, from one of which it took over a department of activity designated the 'Open Competition Plan,' and hereinafter referred to as the 'Plan.'
Participation in the Plan was optional with the members of the Association, but, at the time this suit was commenced, of its 400 members, 365, operating 465 mills, were members of the Plan. The importance and strength of the Association is shown by the admission in the joint answer that, while the defendants operated only 5 per cent. of the number of mills engaged in hardwood manufacture in the country, they produced one-third of the total production of the United States. The places of business of the corporations and partnerships members of the Plan were located in many states from New York to Texas, but chiefly in the hardwood producing territory of the Soughwest. The defendants are the members of the Plan, their personal representatives, and F. R. Gadd, its 'Manager of Statistics.'
The bill alleged, in substance, that the Plan constituted a combination and conspiracy to restrain interstate commerce in hardwood lumber by restricting competition and maintaining and increasing prices, in violation of the Anti-Trust Act of 1890 (26 Stat. 209 [Comp. St. §§ 8820-8823, 8827-8830]).
The answer denied that the Plan had any such purpose and effect as charged, and averred that it promoted competition, especially among its own members.
A temporary injunction, granted by the District Court, restricting the activities of the Plan in specified respects, by consent of the parties, was made permanent, and a direct appeal brings the case here for review.
The activities which we shall see were comprehended within the 'Open Competition Plan' (which is sometimes called the 'New Competition') have come to be widely adopted in our country, and, as this is the first time their legality has been before this court for decision, some detail of statement with respect to them is necessary.
There is very little dispute as to the facts. The testimony of the government consists of various documents and excerpts from others, obtained from the files of the Plan, and the testimony of the defendants consists of like documents and excerpts from other documents, also from the same files, supplemented by affidavits of a number of persons, members and nonmembers, chiefly to the point that the confessedly great increases of prices during 1919 were dut to natural trade and weather conditions and not to the influence of the Plan.
The record shows that the Plan was evolved by a committee, which, in recommending its adoption, said:
'The purpose of the plan is to disseminate among members accurate knowledge of production and market conditions so that each member may gauge the market intelligently instead of guessing at it; to make competition open and above board instead of secret and concealed; to substitute, in estimating market conditions, frank and full statements of out competitors for the frequently misleading and colored statements of the buyer.'
After stating that the purpose was not to restrict competition or to control prices but to 'furnish information to enable each member to intelligently make prices and to intelligently govern his production,' the committee continues:
'The chief concern of the buyer, as we all know, is to see that the price he pays is no higher than that of his competitors, against whom he must sell his product in the market. The chief concern of the seller is to get as much as anybody else for his lumber; in other words to get what is termed the top of the market for the quality he offers. By making prices known to each other they will gradually tend toward a standard in harmony with market conditions, a situation advantageous to both buyer and seller.'
Not long after the consolidation, a further explanation of the objects and purposes of the Plan was made in an appeal to members to join it, in which it is said:
'The theoretical proposition at the basis of the Open Competition Plan is that
Knowledge regarding prices actually made is all that is necessary to keep prices at reasonably stable and normal levels.
'The Open Competition Plan is a central clearing house for information on prices, trade statistics and practices. By keeping all members fully and quickly informed of what the others have done, the work of the Plan results in a certain uniformity of trade practice. There is no agreement to follow the practice of others, although members do follow their most intelligent competitors, if they know what these competitors have been actually doing.