RADIANT BURNERS v. PEOPLES GAS CO.

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Argument of Richard F. Levy

Chief Justice Earl Warren: -- Incorporated, Petitioner, versus Peoples Gas Light and Coke Company et al.

Mr. Levy, you may proceed with your argument.

Mr. Richard F. Levy: Mr. Chief Justice, may it please the Court.

This case is here on the pleadings to review dismissal of petitioner's complaint by the District Court for failure to state a cause of action and the affirmance of that dismissal by the United States Court of Appeals for the Seventh Circuit.

Petitioner seeks in this action to recover treble damages and to obtain injunctive relief against respondents from respondents by virtue of their alleged violations of the Sherman Act.

The petitioner is a small manufacturer of ceramic gas burners which are used in the space heating of homes and industrial and commercial facilities.

The complaint charges that petitioner has been prevented from selling its product in interstate commerce by a horizontal and vertical conspiracy consisting of the respondent, American Gas Association or AGA and its members.

Now, the membership of this trade association, the AGA, includes hundreds of petitioner's direct competitors, that is, manufacturers of competing gas burners.

It includes gas pipeline companies and it includes all or practically all of the gas public utilities in the United States.

According to the complaint, petitioner has been excluded from the market by a device called the AGA approval plan and the AGA seal of approval.

It works like this.

A committee of the AGA which includes among its membership petitioner's competitors has established standards for the granting or denial of this AGA seal of approval.

All of the competitors who sit on this Committee make burners of metal.

The standards which they have established require that only metal burners may be approved.

The petitioner's burner has twice been submitted to the AGA, twice, the AGA has rejected it.

Now, the complaint alleges that the standards which this Committee establishes are not objective standards.

And this is, of course, admitted for the purposes of this argument by respondent's motion to dismiss and in any event, the respondent, AGA, argues in its brief before this Court that the standards need not be objective and as a matter of fact, they argue that the standards need not even be valid standards.

This denial of the seal of approval to petitioner's burner is only the horizontal aspect of this conspiracy which we have charged.

After the seal of approval was denied to petitioner, the vertical component was brought into play.

Justice Potter Stewart: Before you proceed, I'm --

Mr. Richard F. Levy: Yes.

Justice Potter Stewart: -- not quite sure I understand what you mean by the -- what the -- what the complaint means by its allegation that the standards are not objective standards.

I understand the words but I don't --

Mr. Richard F. Levy: Well --

Justice Potter Stewart: -- I don't know what the significance is.

Mr. Richard F. Levy: It means that they --

Justice Potter Stewart: The -- the subjective standards?

Mr. Richard F. Levy: I mean that they are subjective.

We mean that these competitors who sit on the Committee can impose and do impose any standards which suit their purpose that their seal is purportedly granted to a product which is fit to be marketed, that in fact, the standards they have established have no relation to this at all.

Justice Potter Stewart: That they're arbitrary standards?

Mr. Richard F. Levy: That they are arbitrary standards, that they are capricious standards.

Justice William J. Brennan: Well, does this mean not only a metal burner (Inaudible)

Mr. Richard F. Levy: Exactly.

Exactly.

Justice William J. Brennan: (Inaudible)

Mr. Richard F. Levy: Our burner is a ceramic burner that is to say the gas instead of coming out of a -- a metal port much like a standard gas stove, comes out of ceramic ports.

It crosses and heats other ceramic bars or radiants as they are called.

And the -- the unique principle involved in this burner is that the ceramic radiant is superheated and instead of the normal rising heat or convected heat, which you get in the AGA burners, you get a radiant heat which goes in every direction and which the complaint alleges is a safer burner and a burner which is twice as efficient in the use of gas.

Justice William J. Brennan: (Inaudible)

Mr. Richard F. Levy: That is what I mean.

Justice William J. Brennan: (Inaudible)

Mr. Richard F. Levy: That is correct.

Justice Charles E. Whittaker: Was the complaint alleged that?

Mr. Richard F. Levy: Yes.

Indeed, it does, Your Honor.

Justice Charles E. Whittaker: And that's (Inaudible) are not metal and that they -- the AGA approved on these matters?

Mr. Richard F. Levy: Yes, it does, Your Honor.

On page 13 of the record in the first indented paragraph reading from the complaint, “All gas burners approved by AGA are metal,” and skipping to the next paragraph, “The Radiant Burner is made of ceramic radiants.”

And I -- I might point out also that the AGA, in their brief, has indicated that their denial of the seal was not improper because their standards are metal and the Radiant Burner is ceramic.

That's at page 14 of the brief submitted by the respondent AGA.

Chief Justice Earl Warren: Do you allege that yours are as durable and safe as the -- as the others?

Mr. Richard F. Levy: We allege, in fact, Your Honor, that ours is a safer burner that because of a unique application of the gas, the way it's introduced, that the Radiant Burner cannot explode that, in fact, burners approved by the AGA do explode.

We allege that it is at least as durable and perhaps more durable than the AGA burners.

And we allege that it uses half as much gas to heat the same space under the same conditions because of this radiant principle.

Now, the public is not given the choice by the respondents of accepting or rejecting this non-approved burner.

They do not stop with simply granting or denying the seal of approval.

They have used -- and this is what I've referred to as the vertical aspect of the conspiracy, they've used the strength of the gas companies' monopolies to make sure that petitioner cannot get to the market with its product.

They've created an image for this seal of approval by using the AGA, which is allegedly a non-profit organization, to state to the public that we think that the AGA products are good and the radiant burners are bad.

In fact, we think they have created here a license to compete.

And without this license, we cannot enter the market.

Now, this is the way that the gas companies have done it.

Justice John M. Harlan: Do you allege or do you claim that the standards were discriminatorily applied?

Mr. Richard F. Levy: We think that the complaint certainly contains that allegation.

Now --

Justice John M. Harlan: Where -- where is that?

I (Voice Overlap) --

Mr. Richard F. Levy: It does not -- it does not state that they were discriminatorily applied in the case of the two tests that were given to the Radiant Burner.

It does state, on the other hand, and I'm now looking at page 6 of the record, at the bottom in subparagraph (a), these tests made by the AGA are not based on valid and bearing objective standards, and AGA can make an arbitrarily, and capriciously does make determinations in respect of whether a given gas burner has passed its tests.

Justice Charles E. Whittaker: But -- but no allegation that they did in your case.

Mr. Richard F. Levy: There is no specific allegation that the two tests applied to our burners were arbitrarily -- were -- were arbitrarily applied.

Justice Charles E. Whittaker: But they could do so and sometimes do.

Mr. Richard F. Levy: That they could do so, that they sometimes do and that it is petitioner's competitors who sit on this Committee which has the final word, not only as to standards which automatically exclude the ceramic burner, but whether, in a particular instance, the seal of approval will be granted or will not be granted.

So these gas companies have discouraged their customers from purchasing the Radiant Burner or in fact any non-approved burner.

They have opened their -- their public showroom space for exhibition of the products of their co-conspirators, the members of the AGA.

They've closed this public showroom space to petitioner's product and to all other non-approved products.

They have coerced dealers not to handle the Radiant Burner.

And when a dealer has done so, he has been disciplined by the gas companies by a threatened or in some cases, an actual withdrawal of the dealer's certificate as competent and trustworthy in the installation of gas equipment.

Justice Charles E. Whittaker: I don't understand that certificate.

Could you explain that and --

Mr. Richard F. Levy: Yes, sir.

Justice Charles E. Whittaker: -- how -- how does that one supplier have authority to license the certificate of prior approval?

Mr. Richard F. Levy: The gas public utilities, Mr. Justice Whittaker, have followed a practice of giving a certificate to those gas burner dealers in their -- in their communities who they think are competent and trustworthy.

The practice is that if a potential customer comes to the gas company and says, “What kind of gas burner do you recommend?”

They say to them, “Here is our list of competent and trustworthy dealers.”

And this listing, as a competent and trustworthy dealer, has been important to dealers because a good deal of business comes to the dealers through the gas company.

Now, this is particularly true in Illinois because in Illinois, there are over, to this date, there are over 200,000 persons waiting for a permit from the gas company to install gas space heating.

So the gas company, which issues a permit to install gas space heating, is in direct contact with the customer at the time that the customer is ready to buy a gas burner.

And he's in direct contact with this certificate.

And so he is able to say, “Buy an AGA approved product.

Don't buy a radiant burner.

Don't buy a non-approved burner.”

Justice William J. Brennan: You don't allege however that if a customer, nevertheless, buys a non-approved burner that any of the utilities refused in supplying gas.

Mr. Richard F. Levy: We do allege that.

Indeed, Your Honor.

Justice William J. Brennan: Where -- where is that?

Mr. Richard F. Levy: That was the next point which I was going to discuss.On page 7 of the record in paragraph d1, “We allege that gas companies refused to provide gas for use in plaintiff's Radiant Burner and other gas heating devices and equipment produced by other manufacturers which are not approved by the AGA."

In other words, if -- if their persuasion doesn't work and if their coercion on the dealers though, it doesn't work, then they have, what I suppose you could only call an absolute weapon.

They have said, “You can't have gas for use in this Radiant Burner.”

And as good a product as we think this -- this burner is and as alleged in the complaint, it's obvious that you can't sell a burner if the gas companies, who were monopolies in the communities they serve, say, “We won't supply gas.”

Justice William J. Brennan: I don't quite understand how some of this can -- can do this.

Mr. Richard F. Levy: Well, Your Honor, the fact is that they have done it.

It is true that utilities are required by local law to serve the public in a non-discriminatory manner.

It is also true that a gas company if it was acting individually, might well say, “We don't think that this gas burner is safe and so we won't install it.”

And I think that would not violate the law.

But -- but the impact of our allegation here is a conspiracy.

That they have not -- gas companies haven't examined the Radiant Burner.

The gas companies haven't said, “This burner is no good.”

What the gas companies have done and said, “You are not AGA approved, you can't have gas.”

And this approval, of course, is made impart by our competitors who are part of the same overall conspiracy.

Justice Hugo L. Black: Who is the American Gas Association?

Mr. Richard F. Levy: The American Gas Association, Mr. Justice Black, is a New York membership corporation.

It is allegedly a non-profit association and it includes, as I discussed, the competitors, the pipeline companies and all or practically all of the gas companies in the United States.

Justice Hugo L. Black: But you make radiant burners?

Your company is --

Mr. Richard F. Levy: Our company makes the Radiant Burner and it is --

Justice Hugo L. Black: Now, who makes the metal burners?

Mr. Richard F. Levy: The metal burners are made the hundreds of AGA members who compete with the petitioner with the Radiant Burner.

Justice Hugo L. Black: Not the utilities -- not the utilities themselves.

Mr. Richard F. Levy: No, sir.

The utilities do not sell burners.

Justice Hugo L. Black: Your charge is then that the utilities have combined and conspired with the makers of metal burners to put your people out of business?

Mr. Richard F. Levy: That is correct, Your Honor.

Justice Hugo L. Black: Do you --

Mr. Richard F. Levy: Or I would actually turn it around and I would say, “That our competitors who horizontally have conspired to deny the seal to us have conspired with the gas companies to make sure that the denial of the seal effectively prevents us from getting to the market.”

Justice Felix Frankfurter: Are you eligible as a member of the AGA?

Mr. Richard F. Levy: The complaint contains no allegation of -- as to whether we are or we are not.

I do not know whether the AGA bylaws would make or would -- would admit us.

Justice Felix Frankfurter: No suggestion that you are excluded from sharing in the setting up of the standards.

Mr. Richard F. Levy: No suggestion in the complaint that we were excluded.

Justice Charles E. Whittaker: On what --

Chief Justice Earl Warren: As a matter of curiosity, would you mind or -- or do you know what the reason is for the fact of all the 200,000 applications in Illinois?

Mr. Richard F. Levy: Yes.

I think, Your Honor, it's simply a lack of pipeline facilities to bring the -- this is all natural gas --

Chief Justice Earl Warren: Yes.

Mr. Richard F. Levy: -- which comes I think largely from Texas --

Chief Justice Earl Warren: Yes.

Mr. Richard F. Levy: -- New Mexico and Southern California.

These gas companies or the gas pipeline companies are in the process of adding pipelines undoubtedly within a few years, this backlog will be gone.

Chief Justice Earl Warren: But it is a short supply of gas.

Mr. Richard F. Levy: But there is a short supply of gas in Illinois.

Chief Justice Earl Warren: I see.

And is that just in Illinois or is that in these other States too?

Mr. Richard F. Levy: It's my impression that this is general throughout the mid-west area.

Chief Justice Earl Warren: Yes.

Mr. Richard F. Levy: Now, it -- it should be noted that there's -- there's no secret conspiracy that ties this horizontal and vertical agreement together.

The -- the AGA itself has characterized their approval plan as their theme song.

And they have published a brochure which they had sent out to their members and which is contained in our complaint at page 8 of the record.

And they say, “Not only must -- not only must we be familiar with the theme song, but we must all sing it in tune if we would be successful.”

And there are additional allegations in the complaint that the AGA has urged, and this at page 9 of the record, has urged all of its members to work as a unit to exclude from sale and use any gas products not approved by the AGA.

Now, the Seventh Circuit --

Justice John M. Harlan: How long is this AGA been in existence?

Mr. Richard F. Levy: We have not established in our complaint the initial date.

Argument of Horace R. Lamb

Mr. Horace R. Lamb: 1919.

Rebuttal of Richard F. Levy

Mr. Richard F. Levy: Mr. Lamb tells me that it -- it came into existence in 1919.

Justice John M. Harlan: Never been sued by the Government under (Inaudible)

Mr. Richard F. Levy: As far as I know it never has.

Justice Charles E. Whittaker: Are there any other ceramic manufacturers who were making (Inaudible) who are members, do you know?

Mr. Richard F. Levy: To my knowledge, there are no other ceramic manufacturers.

Justice Charles E. Whittaker: You're the only one?

Mr. Richard F. Levy: We are the only ceramic manufacturer.

This is a patented product.

The ceramic manufacturer, according to the complaint, could not -- well, he might be a member of the AGA, he could not get AGA approval for the reason that he does make his product of ceramic.

Now, the Seventh Circuit said that --

Chief Justice Earl Warren: And may I ask you?

Is it fairly -- were ad hoc decisions that -- that limited to metal appliances or is it in their constitution or their bylaws or something that it should be limited to metal?

Mr. Richard F. Levy: Well, it's in the standards which are printed --

Chief Justice Earl Warren: (Voice Overlap) --

Mr. Richard F. Levy: -- standards as I would --

Chief Justice Earl Warren: I understand.

Mr. Richard F. Levy: -- as I understand.

Chief Justice Earl Warren: They must be metal.

Mr. Richard F. Levy: That they must be metal, that burners which are not made of metal will not be approved.

But I -- I do want to make clear that this Committee of the AGA which includes our competitors has two functions.

It not only establishes the standards but in a given case, it is this Committee which says that the seal will be given or will be denied as they did twice in our case.

The Seventh Circuit said there was no cause of action stated by these allegations.

Justice Charles E. Whittaker: May I ask you please?

Could you give me the reasons why (Inaudible)

Mr. Richard F. Levy: The -- there is nothing in the record before this Court that would indicate they gave reasons.

Now, as far as I know, the only reasons they have given are contained in the AGA brief and that is that it was ceramic and that it was not metal.

Justice Hugo L. Black: There was no answer filed?

Mr. Richard F. Levy: There was no answer filed, Mr. Justice Black.

This does come here on a motion to dismiss filed by all of the respondents.

Justice Hugo L. Black: Was it dismissed for failure to allege something it could -- should've been alleged in a good pleading or did they dismiss on the ground that you didn't have any good cause of action, you couldn't have it?

Mr. Richard F. Levy: Well, they dismissed -- as a matter of fact, they dismissed three complaints.

The complaint that we're here on today is the second amended complaint.

The District Court said for failure to state a cause of action.

The -- now, I -- I know I'm not being directly responsive to your question and I'm not because I don't know the answer to it, that is, the District Court did not make clear whether they said that no cause of action ever could be alleged or whether they said that we have left something out.

But the Court of Appeals did give us reasons as to why they thought that there was no cause of action stated here.

What they said was this.

They said, “First --

Justice Hugo L. Black: What is it -- what I'm getting at is because it makes some difference to my approach to the case?

Have they acted, either one of them, on the basis that demurrers have said you don't allege so and so and therefore, you don't have a good case or have they just sustained a general demurrer or dismissal, whatever it is, on the grounds that you just don't have a cause of action?

Mr. Richard F. Levy: I think that they have done the first, Mr. Justice Black, that is, they have said, “You do not have a good cause of action because the certain items are missing from your allegations.”

And those items that the Court of Appeals says are missing and that as a matter fact, the District Court too said were missing, were these.

They said that as to a per se violation of the Sherman Act that there was no per se violation here because there was no boycott.

And they took their definition of boycott from their reading of the Klor's case from the Fashion Originators' Guild case.

They read those cases to require as -- and this is from the Court of Appeals opinion, the essential basis for a boycott, a direct refusal to deal between parties in a buyer and a seller relationship.

That direct refusal element being absent here, the Court of Appeals summarily in one paragraph discarded Klor's, discarded Fashion Originators' and said there was no per se violation in this case.

Next, they went through the rule of reason.

And here, they said that petitioner had not stated the cause of action and that as a matter of fact, it was not even open to petitioner under the complaint to prove the unreasonableness under the circumstances because there is no allegation in the complaint that the AGA did not have a good reason for denying the seal of approval, in other words, that there was no allegation in their view that the seal was denied arbitrarily and capriciously.

And this -- this was the extent of their inquiry under the rule of reason.Finally, the Court of Appeals said there was no cause of action here because the complaint failed to allege injury to the public in the form, and I think this important, in the form of an appreciable lessening in the sale of conversion gas burners or that the public has been deprived of a product of overall superiority.

In other words, no public injury because we didn't say that our product was not merely as good as but overall superior to all the other products on the market, and we didn't have a cause of action because there was no appreciable lessening in the sale of gas burners.

Justice Felix Frankfurter: Did I properly understand your answer to Justice Black's question in amount to saying that they found pleading defects which therefore are remediable?

Mr. Richard F. Levy: They are remedial -- remediable, Mr. Justice Frankfurter, in the sense that we could allege such facts.

But we are going to urge today and the United States has joined us as amicus to urge.

It is no necessity.

Justice Felix Frankfurter: I -- I understand that but -- but in view of the alternative that were put to you by Justice Black, you do come down in saying that if this (Inaudible) defects in pleading and not -- no matter if you -- and -- and not really in the -- in the usual sense of power so grave as no matter what, you can't award no -- no pleading to give your cause of action.

That's right, isn't it?

Mr. Richard F. Levy: Well, I think that's right.

In other words, the Court of Appeals did not say that you can never state a cause of action under the Sherman Act.

But they did impose, as requirements for a cause of action under the Sherman Act, requirements that we don't think the decisions of this Court --

Justice Hugo L. Black: Did -- did they give you any time to amend or did they just dismiss?

Mr. Richard F. Levy: The proceedings carried over about two years, Mr. Justice Black.

Justice Hugo L. Black: I'm talking about the last proceeding.

Mr. Richard F. Levy: On the last proceeding, that is the District Court dismissal of the second amended complaint, we did not ask for time to amend.

In other words, we felt that it was now time to go to a higher court and we took an appeal from the dismissal of the second amended complain.

Justice Hugo L. Black: You considered that you had alleged enough, that you didn't have to allege the other.

Mr. Richard F. Levy: That is correct, Your Honor.

That is correct.

Now, we think that the Court of Appeals has overlooked the -- the basic question.

It's not even discussed, the basic question which faces this Court and which faces any court in a Sherman Act case and that is what the effect of this restraint is on competition.

The respondents argue that only petitioner was hurt, that competition was not affected at all.

We think that the impact of this restraint goes far beyond petitioner.

The complaint alleges at the outset that the purpose of the conspiracy is to control the manufacture, sale, use and installation of gas burners, gas heating devices and other gas equipment.

Not just the Radiant Burner but anything which the AGA does not like.

And we submit that this, taken in connection with the factual allegations which I've described are sufficient so that this Court should conclusively presume that if these facts are proven to be true at the trial, competition has been injured, competition has been destroyed in this case.

Justice John M. Harlan: I'm not sure that I understand the Court of Appeals' opinion.

Is it that if you allege what it amounts to a per se violation, you don't need any allegation of public injury, but if you allege what amounts to a non-per se -- or might amount to a non-per se violation, then you need -- do need such an allegation?

Mr. Richard F. Levy: Right.

In other words, Mr. Justice Harlan, the Court of Appeals has taken this position.

Once you get out of the per se area, you must not only prove an unreasonable restraint in the sense of injury to the competitive processes but you must prove something more.

Now, what the Court of Appeals says we have to prove is an appreciable lessening in the sale of gas burners or that the public has been deprived of a product of overall superiority.

Justice John M. Harlan: (Voice Overlap) you'd alleged price-fixing and that's enough?

Mr. Richard F. Levy: If you allege price-fixing, that's enough.

If you allege a direct refusal to deal, that's enough.

But when you allege that the gas companies refuse to deal with your customers, that's not enough.

Justice John M. Harlan: Even though you allege your restraint if the --

Mr. Richard F. Levy: Even though --

Justice John M. Harlan: -- effect of that is a restraint?

Mr. Richard F. Levy: Even though you allege conclusory terms and factual terms that as a result of this restraint, there's no more competition in this industry.

Justice Felix Frankfurter: Well, I suppose, without trying to defend their position, I suppose one could say that when you say even though there's a restraint, you beg the question.

They say, “Unless you make additional allegation," there is no restraint?

Mr. Richard F. Levy: Well --

Justice Felix Frankfurter: Because that's what they -- that's their -- that's their opinion.

Mr. Richard F. Levy: It -- it could be phrased that way and I -- if they phrased it that way, Your Honor, I would then answer it by saying that they are requiring more than the rule of reason requires that has an adverse effect on competition.

Justice Felix Frankfurter: I understand your position, but I -- all I'm suggesting that they were ridiculous.

Mr. Richard F. Levy: Well --

Justice Felix Frankfurter: You didn't beg the question as broadly as all that.

Mr. Richard F. Levy: Well, they did say -- they did use the word “also” when they got through with the rule of reason.

They said, “Also we think that the complaint fails to state a cause of action because,” and then they went in to the public injury discussion.

Now, we think that as a matter of economics, as a matter of economic principles, it must be recognized that you cannot have effective competition unless you have free access to the market for new products.

And we suggest that this requirement of the AGA that we obtained a license from our competitors is tantamount to a denial of access to the market.

As far as the public injury question is concerned, we certainly joined with the United States and Parmelee transportation as amicus in this case in urging that this Court's rule that there's no requirement that a plaintiff prove anything except an unreasonable restraint of the competition.

Justice Potter Stewart: Mr. Levy, before you sit down, you haven't mentioned the Lanham Act at all or its effect, and I have presumed that your position would be that that would be a matter of defense to be filed and any answer is filed in the event that this coerced --

Mr. Richard F. Levy: Well --

Justice Potter Stewart: -- appeals that is not now here, is that it?

Mr. Richard F. Levy: I -- I think that it's not now here because there's nothing in the record before this case.

Justice Potter Stewart: Nothing in the allegations that is important?

Mr. Richard F. Levy: Nothing in the allegations to indicate that the AGA has registered its trademark under the Lanham Act but --

Justice Potter Stewart: I see, that would be -- that's a matter for the answer and the permit.

Mr. Richard F. Levy: Yes, and going to the -- going to the basic question, I -- I would certainly suggest that this Court has held and that it's clear that the Lanham Act is never a defense to an antitrust violation.

And the Lanham Act certainly was not intended by converse as a device to impose an unreasonable restraint of trade.

And I am speaking of attempt in (Inaudible) case where this Court said that.

Thank you.

Chief Justice Earl Warren: Mr. Weston.

Argument of Charles H. Weston

Mr. Charles H. Weston: Mr. Chief Justice, may it please the Court.

The interest of the Government in this case is with the holding that the complaint did not state a cause of action because it did not show injury to the general public.

On the particular facts here, this means that a powerful group can combine to keep a product off the market and yet have no violation of the Sherman Act.

And they said they've shown that the total volume of sales the public has been induced or that the excluded product is a superior product.

I believe that this is not the law.

At the 1956 term in Radovich, the Court held there could be error to dismiss a complaint for failure to allege public injury.

And of course, at the 1958 term, it held that whether there was a conspiracy to keep a retail store from obtaining goods of certain leading manufactures, this was a restraint of such monopolistic tendency that it came within the prohibitions of the Act, and that it was immaterial that was no charge or proof that it was in effect on the quantity, or quality, or price of goods sold to the public.

In the Fashion Originators' Guild case in 312 U.S., an agreement to keep from out of trade, garments which embody pirated original designs was held to violate the Act, not withstanding, no showing that this conspiracy regulated prices or that it allocated or limited production have brought about a deterioration in the quality of goods.

The Court said that these categories did not exhaust the types of conduct then by the Sherman Act.

The court below said that this -- that Klor's and Fashion Originators' Guild involve per se -- restraints per se illegal.

And that they eliminated the necessity of showing public injury only as to such restraints.

In these cases, the Court did not attach the label per se to the restraints which it held unlawful.

My view of the decisions is that the Court regarded them as involving restraints of -- restraints on competition of a degree in character that made them unreasonable irrespective of whether they fell within the classification of per se restraints.

And that, if this is true, these are holdings that public injury does not -- is not an essential element in a complaint or in the proof of a restraint which is not per se unreasonable but whether this maybe debatable whether the decision below is in conflict with the actual holdings in Fashion Originators' and Klor's.

But the conflict with Radovich seems to me certain.

There, the Court held that it was not necessary to allege public injury and it treated the restraint as being not per se illegal.

It said that it need be treated only under the general prohibition -- under the Sherman Act's general prohibition on unreasonable restraints of trade.

It cited for this general prohibition the Times-Picayune case where the restraint was not per se illegal, it was in fact held legal.

The Court in Radovich said, “Congress has by legislative fiat determined that such prohibited activities are injurious to the public.”

In other words, that any restraint that comes within the Act's prohibitions does involve detriment to the public.

The very fact the prohibition establishes the view that Congress regarded that as against public interest.

It is not necessary to prove in addition to violation that the defendant's particular violation has defeated the ultimate public objectives of the statute, ultimate ends that the statute was designed to serve.

Justice Felix Frankfurter: When you say that, that differ -- differentiates the Sherman Act from the Clayton Act.

Mr. Charles H. Weston: Yes, of course, there is the -- certain specific, very precise prohibitions in the Clayton Act and --

Justice Felix Frankfurter: I mean as to this --

Mr. Charles H. Weston: And --

Justice Felix Frankfurter: -- requirement of specifically involving the public interest.

Mr. Charles H. Weston: Well, there is a specific element there, yes.

Now, the decision below in this case, a decision by United States District Court for the Southern District of New York, of Ritz (ph) case which our brief cites.

And I think the decision of the Court of Appeals in the Klor's case show that lower federal courts still believe that public injury must be shown in every Section 1, Sherman Act proceeding not involving restraint per se illegal.

I believe the lower courts will continue to enforce this requirement because it provides an easy doctrine of a basis for disposing of Sherman Act cases which otherwise might require careful analysis of the facts in relation to -- to decide the cases.

And only a decision by this Court which explicitly holds that public injury does not have to be shown, whether the restraint is per se illegal or not by putting in to dismissal of Sherman Act cases from the basis of lack of showing of public injury.

Grant of certiorari in this case would seem to indicate that it was regarded as presenting a question of federal law of general importance.

There would be no such question decided if this Court merely holds that the allocations in fact show a restraint per se illegal or that they sufficiently allege public injury or that in a Sherman Act proceeding, it's enough merely to allege that the restraint is unreasonable or to the injury of the public.

The necessity of showing public injury is presented here as a pleading question.

But the much more important and underlying question is one of substantive law, that is, the elements which is essential to show to establish that restraint not per se illegal is in violation of the Act.

This is so because whatever it is necessary to allege, it is necessary to prove.

The brief of Parmelee Transportation Company illustrates this.

The complaint which it filed charged a conspiracy to exclude it from performing certain transportation service.

The District Court on the authority of the Radiant Burners decision in the court below required, ordered preliminary separate trial of the question whether this conspiracy injured the general public.

And it put the plaintiff to prove by a preponderance of proof that because of the conspiracy, the service to the public had been appreciably lessened or it had been deprived as superior service.

Under the concept of substantive law of the court below, present petitioner if it ever -- if the case -- when the case came to trial, would have an impossible burden of proof.

Assume that this conspiracy to keep off the market every burner that does not have the association seal of approval is a 100% successful.

Public has been able to buy all the burners if it wished to buy.

How can it be shown that the conspiracy has lessened, appreciably lessened the sale of burners?

How can it be shown that it has been deprived of a product of overall superiority?

Perhaps superiority means superiority regardless of price.

Perhaps it means superior value per dollar of purchase price or perhaps it means that the plaintiff would have to show that his burner is superior to each and every one of the burners available to the public.

In any event, it has to be court and jury determination of technical, mechanical engineering questions probably presented on conflicting expert opinion testimony.

There'll be an injection of another issue in antitrust proceedings which -- as the Court knows unfortunately, frequently are very long and protracted as well as expensive.

Now, except for the Ritz (ph) case which was decided last year, this doctrine of -- required a showing that public injury has been applied only in private actions.

If this is requisite in private actions, it is requisite in -- probably in Sherman Act proceedings.

Violation of the statute is the basis of suit in either type of proceeding.

And the elements necessary to show violation have to be the same.

Yet, there have been a great number of Government cases involving restraints which the Court did not treat as per se illegal, which have been held unlawful without any discussion of the question whether it has been a showing of the kind of public injury referred to by the court below, without any discussion of whether such a showing is necessary.

This is the body of law which at least sub silentio, indicates that this is not a required element in --

Justice Felix Frankfurter: Since when?

Mr. Charles H. Weston: -- showing a violation of the Act.

Justice Felix Frankfurter: Since when, did you say?

Mr. Charles H. Weston: Excuse me?

Justice Felix Frankfurter: You said, since something, which I didn't hear.

You said this is not -- this is a body of law which at least since something.

Mr. Charles H. Weston: Oh, sub silentio.

At least sub silentio.

Justice John M. Harlan: Am I right in thinking that in a government and civil antitrust complaint, you don't include any such allegation?

Mr. Charles H. Weston: Not -- not --

Justice John M. Harlan: I remember -- I cannot remember a thing.

Mr. Charles H. Weston: -- not in those terms.

That is -- that certainly is true.

It might be that --

Justice John M. Harlan: You think the rulings --

Mr. Charles H. Weston: -- it might be that there would be allegations from that in some -- in many instances from which perhaps -- because --

Justice John M. Harlan: Well, I can't remember any case that I ever saw where there was an allegation of that kind included.

Mr. Charles H. Weston: I think -- well a --

Justice John M. Harlan: And I just want to --

Mr. Charles H. Weston: Yes.

Well, as far as I know, that is true.

I just want to be cautious since and say that there might be allegations from which you would --

Justice John M. Harlan: You can infer, isn't it?

Mr. Charles H. Weston: -- in some instances to be impossible to infer.

Now, this requirement of public injury has -- gets no support from the words of the statute.

That contention isn't even made.

Respondent's argument went something like this, as I understand it.

Under the so called rule of reason which the Court first adopted in Standard Oil case in 221 U.S., the Act makes unlawful on the restraints which are unduly or unreasonably restrictive of competition or tending to monopoly.

And some types of restraints are so destructive of competition and conducive to monopoly but their very nature in character, that they are deemed unreasonable under any -- all circumstances.

Justice Felix Frankfurter: Mr. Weston, may I ask you this.

This opinion isn't the most exclusive opinion I ever read in my life, if I'm not quite clear, but does the opinion -- is it fair to say that the opinion makes the requirement of alleging injury to the public as a phrase of art?

That you must use that phrase the way you use warranted zone in the 17th century?

Mr. Charles H. Weston: Well --

Justice Felix Frankfurter: Or does it -- does it go to the issuing of controversies in which you have questioned to yourself that the allegation do not make out an injury to the public, not that the words weren't used.

Mr. Charles H. Weston: I think it goes to the latter.

Justice Felix Frankfurter: That the words weren't used.

Mr. Charles H. Weston: No, no, that it -- that the --

Justice Felix Frankfurter: The subject matter.

Mr. Charles H. Weston: Yes, yes.

I --

Justice Felix Frankfurter: So that's --

Mr. Charles H. Weston: That's my reading of it, certainly.

Justice Felix Frankfurter: So that it's the question of finding some (Voice Overlap) --

Mr. Charles H. Weston: That's right.

It -- if it's merely a pleading question, I suppose plaintiffs can per se pleadings --

Justice Felix Frankfurter: Yes.

Mr. Charles H. Weston: -- meet the requirements.

Justice Hugo L. Black: Mr. Weston, there hadn't been any explanation yet of precisely of what a burner is.

Mr. Charles H. Weston: Well, I'm afraid I --

Justice Hugo L. Black: Well, do you know?

Mr. Charles H. Weston: No, I can't.

Justice Hugo L. Black: But maybe we can get back to that.

Mr. Charles H. Weston: I can't tell.

Justice Hugo L. Black: I'd like to know just how much of the gas requirement is involved?

Justice Felix Frankfurter: And I suppose nobody have a physical --

Justice Hugo L. Black: Which -- which part has to be metal?

Justice Felix Frankfurter: Nobody has a physical object here.

They -- you know, lawyers should -- perhaps those appreciate the -- the depths of the -- of ignorance on this mechanical phase of each by one member of this Court.

Mr. Charles H. Weston: Now --

Justice Hugo L. Black: Is there anything in the case that indicates that any law as against the burners, whatever they are, are being used anywhere in the country?

Mr. Charles H. Weston: Well, I have to imagine -- the respondent's counsel would perhaps be able to answer that question, I cannot.

Justice Potter Stewart: There is something in the complaint there are laws, ordinances against these things.

That's part of the complaint.

Mr. Charles H. Weston: Oh, yes.

That they have -- that -- that they have advocated and brought about -- brought from the --

Justice Potter Stewart: Brought about the --

Mr. Charles H. Weston: (Inaudible) intentions.

Justice Potter Stewart: -- it has to be local (Inaudible)

Mr. Charles H. Weston: That's right.

Justice Charles E. Whittaker: Well, is that part of the conspiracy?

That these ordinances result form conspiracy?

Mr. Charles H. Weston: That is with one of numerous elements charged.

Justice Charles E. Whittaker: (Inaudible) here, is that what you mean?

Mr. Charles H. Weston: Excuse me?

Justice Charles E. Whittaker: That means that the city councils are parties to it?

Mr. Charles H. Weston: There have been cases.

For instance, the Borden case in this Court where a -- a Government case where the United States charged, that is a part of a conspiracy to fix prices, city officials had -- were participants in the conspiracy.

Justice Felix Frankfurter: That's a very different thing from suggesting that we can lay it to the foundation for a violation of the Sherman law that people persuaded the legislative body to rule out as unsafe for certain commodities.

Mr. Charles H. Weston: Well, I don't think that I should undertake to --

Justice Potter Stewart: (Voice Overlap) their column next week, I think.

Mr. Charles H. Weston: -- to [Laughs] deal with this question because I think counsel for the petitioner is more confident that I am and -- certainly in that area.

Now, the respondents urge that where a restraint is not per se illegal, then in order to show that it comes within the statute, you have to show that it has certain adverse effects on the public.

And they mentioned statements made by this Court from time to time that the purpose of the Act or one of the purposes was to protect the public against -- and has been of prices curtailing production, deterioration of quality goods.

They say that this requirement of showing of public injury is a verbalization or a reformulation of rule of reason.

I submit that this contention is an error because it dissimilates the benefits to the public thought to -- and so by and large in the long run by prohibiting anti-competitive and monopolistic combinations that the prohibitions themselves attest the application and scope of these prohibitions as the effect on competition of the acts which is charged.

This is the very meaning of the words “restraint of trade”.

Test is not whether the act's directly and immediately and demonstrably produce these effects on the public which the statute have the general purpose of preventing.

This Court has consistently held that the touchstone to the unreasonableness of a restraint of trade to the extent to which -- in the manner in which it affected competition.

The Chicago Board of Trade case in 246 U.S. is referred to press more frequently than any other by antitrust defendants who assert that the restraints of which they are charged are reasonable.

The Court in that case as in other cases made the effect on competition, the key to the scope of what was prohibited.

Court said at page 238, “The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.”

In the recent Northern Pacific case, the Court said that the Sherman Act was designed, reserved, free and unfettered competition as the law of trade.”

It said that the Act rests on the premise that the free-play of competitive forces would yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress.

Plainly, an antitrust plaintiff does not have to prove what is incapable of proof that the defendants' acts have interfered with or prevented the best allocation of the nation's economic resources or the greatest material progress.

All that need be shown is that the restraint significantly interferes with the free interaction of competitive forces.

I'll mention just one other consideration.

Price enhancement is a public evil most commonly and most directly considered to be the -- to result from anti-competitive and monos -- monopolistic combinations.

And price-fixing agreements are unlawful per se, but regardless of whether they enhance price.

The prohibited agreements include those to fix price ceilings and it is irrelevant in the case of these agreements.

What the actual effect on price was, that was the holding first in Trenton Potteries and in great number of following cases.

The agreements are outlawed per se because they strike at the very core of commercial competition, that is price competition.

The determining consideration is not effect on the public but the effect on competition.

Thank you.

Chief Justice Earl Warren: Mr Lamb.

Rebuttal of Horace R. Lamb

Mr. Horace R. Lamb: Mr. Chief Justice and may it please the Court.

I appear for the respondent, the American Gas Association Incorporated.

It's alleged to be a membership corporation organized on the laws of New York.

It follows I think that you can safely assume, as a matter of law, it's not engaged in commerce.

The alleged illegal conspiracy in combination that is attempted to be stated in this complaint is said in paragraph (4) to be revolving around membership in the American Gas Association.

And I think that we can take it that there isn't a thing that alleged constituting an illegal conspiracy, combination, agreement, combination in the form of trust or otherwise except the membership in the American Gas Association and the acts of the American Gas Association that are involved in this complaint.

And I think the only useful function that I can serve to this Court is to go through this complain briefly and show you that this is the case, Your Honors, where the plaintiff has pleaded so much when it comes to the precise particular facts, he's pleaded himself out of court.

And the decisions below, three times in the District Court and in the Court of Appeals came to that conclusion.

Now, the only business so called that the American Gas Association is alleged to do is to send its inspectors systematically into the Northern District of Illinois to inspect the products of manufactures of gas equipments whose products have been approved and listed by AGA.

That's in paragraph (2).

The plaintiff here is a corporation organized under the laws of Illinois.

There is no allegation it's a small corporation or a large corporation.

It's a corporation, and there is no fact, no basis for saying what its size is or is not.

There were also named as defendants here, gas utilities, manufacturers, pipe line companies.

And there are references to the statistics that are published, I refer on R6 for example, that have been published from time to time by the American Gas Association.

And there, the standard is reliably estimated by the defendant AGA between the years 1960 and 1974, were 42 million space heaters, 17 million floor and wall furnaces and 19 million central heating units, including replacements, will be installed in the United States.

We're talking therefore on the basis of what AGA has compiled and what AGA has done as a public service.

To inform the public regarding this industry and I think I can safely say its acts are devoted to promoting the gas industry in this great country of ours.

Chief Justice Earl Warren: Are you going to discuss any further the membership of the -- of the organization as alleged in full?

Mr. Horace R. Lamb: I -- I think I will do so, Your Honor.

Chief Justice Earl Warren: I -- I thought that you passed --

Mr. Horace R. Lamb: (Inaudible)

Chief Justice Earl Warren: -- you passed over.

But it's all right, take your time.

Mr. Horace R. Lamb: Yes, the members.

I -- I crossed over that so generally but I think I want to take my time to come to the significant claims.

But I want to go right to that, if I may, in just a moment.

Now, there is an allegation in -- in very conclusory terms of controlling the manufacture, sale and use and installation of gas burners.

General language concededly is in this complaint.

But I submit there are also specific allegations to which I'll refer in a moment.

Now, one of the first factual allegations regarding American Gas Association is on page 6, at the bottom of the page.

The defendant AGA has laboratories in Cleveland, Ohio and Los Angeles, California.

Each of which, he uses the words “purport” in speaking of the facts, concede the facts, to test the utility, durability and safety of gas burners and gas equipment.

And I'd like to pause right there and turn, if may, to page 9 and say that the plaintiff has also alleged in paragraph (8) in his purported injury to the public allegation, saying that AGA purports to approve only products which are safe, substantial.

And I express the word here "substantial, durable, and efficient", and I'll come to the remainder of that in a moment, if I may, in good order.

But I do think it -- it should be mentioned here because we are dealing, I think, in large part with this characteristic of the substantiality of the Radiant Burner, as I shall endeavor to develop in a moment.

Now, the next paragraph on page 7 merely alleges that defendant gas burner and equipment manufacturers, some of which are in competition with the plaintiff along with the utilities and the Peoples Gas are -- or have been represented on the Committee of AGA.

It is not true, as my adversary endeavored to point out to you, that the competitors control the acts of AGA in these tests.

There isn't any allegation of that fact.

The most that can be said and the fact that we concede is that they are represented on the Committee and that's perfectly proper thing to have the representatives of people who manufacture these products participate as manufacturers on the AGA Committee which decides whether or not gas burners and equipment wore an AGA approval.

But there isn't any allegation anywhere in this complaint that they control each and every test, in each or every decision and each and every approval or failure to give approval by these two gas laboratories.

Now, there, it's alleged there the power to influence on the part of utilities.

But again, let's keep in mind that this is a combination involving membership in AGA and what AGA does.

But I think paragraph (d) on page 7 has some significance.

There, it is alleged by this petitioner, it is not possible to successfully sell, market and distribute gas equipment including radiant burners, manufactured by plaintiff, which are not approved by AGA.

Well, I think we can take it as a reasonable inference that the petitioner is in commerce that it does sell what it would like to sell more.

It would like to sell it so that it can regard itself as successfully selling and marketing its product.

Then it continues because we effectuate the plan and the purpose of this unlawful combination, which I have already referred to.

Now, the refusal to provide gas is, of course, something which no one here can absolutely control.

The utilities are as I think has been indicated by the questioning from the bench subject to the Public Utility Commission to their various States.

And if the costumers denied service, his grievance, of course, is to go to his commission, state the facts and the Commission will deal with the matter.

Justice Charles E. Whittaker: (Inaudible)

Mr. Horace R. Lamb: Well, I -- I think it's a fact that you must take a judicial notice officer there that the Public Utilities by law -- by general account of practice are subject to jurisdiction of the regulatory body from their States and it isn't up to utility to override the Commission.

In fact, they are regulated by the Commission that it's the common practice.

Justice Charles E. Whittaker: Even though -- even though that's true, what the judge would do, ignoring that (Inaudible) an allegation like this.

Mr. Horace R. Lamb: Well --

Justice Charles E. Whittaker: And do you say this is not an allegation well treated?

Mr. Horace R. Lamb: Well, Your Honor --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Horace R. Lamb: -- let's take it as in -- in --

Justice Charles E. Whittaker: (Inaudible)

Mr. Horace R. Lamb: Pardon me, sir.

Let's take its entirety, by refusing to provide gas for use in plaintiff Radiant Burner and other gas heating devices and equipment produced by other manufacturers, which are not approved by AGA.

There is the -- that's the whole paragraph.

Now, we're going to come to in a little moment about this approval by AGA.

It is alleged further along that we have endeavored the AGA and utilities on the next page to use municipalities and other government agencies to pass ordinances.

There was a question about that from the bench and require that no equipment shall be used within its limits unless that gas burner equipment bears the seal of approval of AGA.

And there's a further specific illustration given later in the complaint about the experience up in Milwaukee where the -- that's on page 15, sirs.

The reference was, "It violated a city ordinance which provided that no gas burner could be used other than those approved by AGA or equal."

In other words, it could have been some other laboratory or some other standard provided it was equal to those established by AGA.

I want to continue on the various matters that are the manner of -- of carrying out this unlawful combination.

I've referred to one that I think is the significant act so far as to fix my client the laboratories.

And it is said there that the tests made by AGA are not based on valid.

Well, what is valid?

Maybe difference of opinion on varying -- this whole industry is changing all the while, objectives standard.

I'll show you in a moment, Your Honor, that by the affirmance of this complaint certainly, one objective standard is alleged in this complaint, namely, that the appliances that are approved by AGA are metal.

And the plaintiff's burner is of ceramic material.

Now, I think I could pause here to say that ceramic is defined in the dictionary as pertaining to pottery, the art of molding, modeling and baking in clay.

So, you have here a very definite specific factual allegation of an objective standard.

And that is shown -- I'll jump around to fit in this complaint, and I'm doing it to save time, but to come to what I think is the heart of the matter.

The alleged injury to the public is that AGA purports to approve only products which are safe, substantially durable and efficient.

And then it's alleged, plaintiff has tendered the radiant burners to AGA for approval on two occasions.

And AGA has not approved such radiant burner.

For now, I think it's reasonable to assume that something must have been said in the first -- as a result of the first test that induced the Radiant to try a second test which he did.

But the complaint doesn't tell you one word, not a sound is uttered in this complaint about what was said in these reports of the test made in these laboratories.

They were left completely in the dark about that.

Now, I say that if he was induced to make a second try, there isn't any reason why he should make a third try or other tries.

AGA -- there isn't anything in fact showed here that it denied its laboratory to anyone.

Thus, the plaintiff voluntarily came to its doors and asked for its test, and it was not refused.

There's no allegation that anyone has ever been refused the tests by AGA and its laboratories.

Chief Justice Earl Warren: Well, under your -- under your standards, could they -- could they ever qualify with the ceramic thing?

Mr. Horace R. Lamb: I would -- you answered me the question, sir.

Chief Justice Earl Warren: I beg your pardon?

Mr. Horace R. Lamb: I -- I would say that there is an interesting note in the footnote of the reply brief which gives some recent references to --

Chief Justice Earl Warren: Whose the --

Mr. Horace R. Lamb: -- scientific --

Chief Justice Earl Warren: -- whose reply brief --

Mr. Horace R. Lamb: The petitioner's reply brief, sir.

Chief Justice Earl Warren: Well, I thought maybe you would have --

Mr. Horace R. Lamb: Where he -- he pointed out that in those --

Chief Justice Earl Warren: I thought you would --

Mr. Horace R. Lamb: (Voice Overlap) sir.

Chief Justice Earl Warren: -- maybe you would have the answer because you represent the AGA.

Could you -- could you ask -- answer that question?

Mr. Horace R. Lamb: Well, I think the best answer to give is that we have tested the ceramic material, sir, and the particular details of what is the standard are nowhere in this complaint.

But there isn't any reason to believe that if a ceramic is properly connected to a metal gas pipe, in its common knowledge, I think, I may say that gas must be led into a consumer's place of consumption by a metal pipe.

And the important thing, of course, is to find someway to connect a ceramic material to the metal so that it is safe and it is substantial and it is durable and there isn't any risks, at least so that it will stand up when subjected to these test and there isn't --

Chief Justice Earl Warren: Well, is your answer then that it could be a -- a ceramic could be approved by your organization without violating your standards?

Mr. Horace R. Lamb: Yes, sir.

Chief Justice Earl Warren: If you have said that --

Mr. Horace R. Lamb: I -- I would say it could.

It could be.

Chief Justice Earl Warren: I -- the reason I asked you this because I understood counsel to say that the standards that you have set up limit your approval to metal contrivances.

Mr. Horace R. Lamb: Well, now, all he says in that regard, Your Honor.

It makes one statement, and that's over on page 13 and I'm going to come to that.

He says, “All gas burners by approved by AGA are metal,” speaking as of the date of this complaint.

And he says that metal is subject to corrosion due to dampness and ashes produced by the combustion of gas.

And the very next sentence says, “Radiant Burner is made of ceramic radiant.”

It goes on to term, “pervious to moisture and ashes, it cannot corrode.”

Well, there maybe of any other qualifications and characteristics that are necessary to a plan on determination of safety substantiality and durability.

They're not all set out in this complaint.

Chief Justice Earl Warren: No.

But that isn't exactly what I asked.

I asked if -- if it is true, as counsel has stated, that your standards limited -- limit appliances such as this to metal appliances.

Mr. Horace R. Lamb: No, sir.

There's no allegation that they are limited to metal.

My answer to you has no allegation to this complaint that they are limited to metal.

All it says is that those that have been approved so far as to the date of this complaint, Your Honor.

Chief Justice Earl Warren: I see.

Mr. Horace R. Lamb: But the standards, Your Honor, I had to have an engineer to help me out on this, of course, but --

Chief Justice Earl Warren: I beg your pardon.

Mr. Horace R. Lamb: I had to have an engineer to tell you in detail that they -- the degrees of heat to which a burner is subjected, the number of hours that it must burn, the pressures and all that.

Chief Justice Earl Warren: No, I wasn't interested in that.

I'm just interested if your --

Mr. Horace R. Lamb: No.

Chief Justice Earl Warren: -- the standards you had set up limited your approval to metal contrivances.

Mr. Horace R. Lamb: No, sir.

Chief Justice Earl Warren: I thought --

Mr. Horace R. Lamb: And there's no allegation to that affect.

Chief Justice Earl Warren: Oh, I thought so.

Mr. Horace R. Lamb: My answer is to your interest that way.

They are not, they are not, and I know of no reason why they couldn't continue with improvements based on the suggestions that maybe made to them by AGA to meet AGA standards.

Justice Hugo L. Black: May I ask you if that is crucial in the case of this kind.

As I understand, what they're complaining of is that a group of businessmen have gotten together to regulate the types of burners that can be used.

And that they are doing that so as to interfere with the right of these people to trade free from regulation by private business groups.

And I -- it seems to me like they've charged something as though you are operating under the old NLRA.What's the difference?

Mr. Horace R. Lamb: Oh, might just -- Mr. Justice Black, we are certainly not operating under NLRA.

We're operating under a plan to give the public, by our AGA seal of approval, an indication that based on our tests in our -- in our laboratory, this particular plan that bears our seal of approval is -- as result of such tests to be regarded as safe, substantive, durable and a good piece of equipment.

Justice Hugo L. Black: That's all the charge.

It could be one thing but as I understand it, their charge do not only do that but you do it in combination and agreement and conspiracy with a group of people who sell the metals, do not mark the other sellers.

Mr. Horace R. Lamb: Well, Your Honor, I think that is a very quite erroneous construction of this complaint as a whole, if I may say so.

The combination in conspiracy involves only the membership in this AGA and what this AGA does.

Justice Hugo L. Black: Yes, but -- but the fact is that AGA doesn't excuse it from the -- the Sherman Act if --

Mr. Horace R. Lamb: Well, AGA doesn't --

Justice Hugo L. Black: -- if your numbers do what they say they've done here.

Does it?

Mr. Horace R. Lamb: I say that everything that these members have done related to AGA activities including the issuance of the seal of approval, shows a course of conduct in this respect, and I'd like to answer Mr. Justice Stewart's question at the same time, shows the course of conduct regarding the testing, the granting of the certification, the right of a seal of approval which is the course of conduct, sir, that is in all respects in accord with what is provided in the Lanham Act.

We do not claim that the Lanham Act is referred to specifically in this complaint, but we do say that since they refer to a seal of approval, if that's about the same as the mark.

And that the acts done are completely in harmony with what is permitted to be done under the Lanham Act.

And we say, therefore, that the giving of a seal of approval or a mark, if I may use that term here, is just like any other trademarks.

And whatever interference may be due a product that doesn't bear that mark, that is an entirely reasonable interference.

In other words, the place to determine whether or not there shall be public acceptance by the Radiant Burner or by our burner with our mark is not a -- a question to the Court, it's a question to the market place.

If it's the public that really believe everything that they say about their burner, they don't have to have AGA approval.

Justice Hugo L. Black: But how could they operate if their -- their complaint is -- is stating the facts?

How is it possible for them to sell any of their burners?

Mr. Horace R. Lamb: Well, they are selling them to their -- today, sir, that's one answer.

Justice Hugo L. Black: Well, their complaint indicates that they can't sell it.

Those that --

Mr. Horace R. Lamb: Well, they -- they overstated if I may say so.

Justice Hugo L. Black: Well, then they overstated it but that's --

Mr. Horace R. Lamb: When they --

Justice Hugo L. Black: -- the question for the Court, isn't it, on the determination of facts?

Mr. Horace R. Lamb: I don't think it is, sir -- are not under the antitrust laws.

They haven't stated anything that constitutes an unreasonable restraint of trade.

And I think they must allege that to bring themselves in --

Justice Hugo L. Black: Well, I -- I thought we held in Klor's and following numerous other cases that the combination of business can get together to regulate, has something to be sold even though they only affect one trader that that charges a violation of the Act.

Mr. Horace R. Lamb: That, sir, was certainly a per se where they precluded one --

Justice Hugo L. Black: Can we -- can we use the words per se?

Mr. Horace R. Lamb: Yes.

I think you used the word per se there that that act of preventing the Klor's store from having a particular appliance was regarded as an inherent wrong and a per se violation.

And that was the -- the -- as I read the Klor case.

Now, this doesn't come within the Klor case then come close to it.

They are selling.

They're selling to, I'm sure, lots of dealers all over the country.

They think they could sell more if they could get our seal of approval.

Chief Justice Earl Warren: Well, isn't that what that merchant wanted to do in the Klor case?

He wasn't out of business.

He was still transacting in business.

Mr. Horace R. Lamb: He could not, sir.

He could not get the particular appliance from the supplier who refused him sales and deliveries of that appliance.

Absolutely precluded him from selling that particular appliance, so that was --

Justice Felix Frankfurter: I heard it said -- I heard it said by petitioner's counsel that in order to have gas, you need a certificate from the gas company, and they will give you a certificate if you use one of their burners.

Is that right?

Mr. Horace R. Lamb: I -- I know of no such facts, sir.

No, it's not -- not in the fact.

Justice Felix Frankfurter: Isn't it -- isn't it --

Justice Potter Stewart: Well, somewhere along -- excuse me.

Somewhere along that line has alleged though, isn't it?

Justice Felix Frankfurter: Isn't it alleged that there was some kind of associated, cooperated, elected action as between AGA seal and the gas companies' necessary clearance whereby consumers in Chicago get gas.

Mr. Horace R. Lamb: Not in this complaint, sir.

I don't read it in this complaint.

Justice Potter Stewart: How about paragraph (d) (1) on page 7?

Mr. Horace R. Lamb: (d) (1) on page 7, it says “It is not possible successfully -- to successfully sell market and distribute gas equipment --

Justice Potter Stewart: No.

Then by the following conducts and actions, one.

That's what I'm talking about.

By refusing to supply gas.

Mr. Horace R. Lamb: On page 7, sir?

Justice Felix Frankfurter: Yes.

Justice Potter Stewart: Yes.

Just the sub -- subparagraph under what you started reading.

Mr. Horace R. Lamb: Oh, “By refusing to provide gas for use in the plaintiff's Radiant Burner and other gas heating devices and equipment produced by other manufacturers which are not approved by AGA.”

Well, I say again that any gas supplier, any utility who rejects any consumers' application for gas service has a real grievance which will be heard by the Public Service Commission.

Justice Hugo L. Black: But suppose it's by agreement, do you think that the Sherman Act could destroy if people who engage in the subject of Public Utility regulation if they then engage with others on a conspiracy or agreement?

Mr. Horace R. Lamb: The only agreements --

Justice Hugo L. Black: Handicapped trade?

Mr. Horace R. Lamb: There is no agreement --

Justice Hugo L. Black: But it's charged.

Mr. Horace R. Lamb: I -- I think that those are all results that they claim, flow from the use of the AGA practice in testing equipment and granting it seal of approval.

Justice Hugo L. Black: That's the means by which the -- one of the means by which they say purpose is accomplished to make it impossible for them to sell this type of burner.

Mr. Horace R. Lamb: Well, Mr. -- that's impossible, sir.

Justice Hugo L. Black: Well, let's suppose that -- that they can sell not a -- it only destroys 99% of their market, not only 50%.

Would that make any difference?

Mr. Horace R. Lamb: Well --

Justice Hugo L. Black: Would you think that made any difference as to the validity of the charge?

Mr. Horace R. Lamb: Perhaps not.

Perhaps not, if that were charged.

I do not read this complaint as so charging.

Justice Felix Frankfurter: Are you saying that it isn't charged that the utility and AGA were in cahoots meaning (Inaudible) but what the consumer -- what the utility did, it did on its own and not as a result of any agreement with your client.

Mr. Horace R. Lamb: It must have been, sir, because my plan does nothing but constitute itself as a membership corporation and the activities that it carries on are the operational laboratories made into the tests, those that passed the test given the seal of approval.

Justice William J. Brennan: But, Mr. Lamb --

Mr. Horace R. Lamb: Yes.

Justice William J. Brennan: -- that -- this maybe the fact if it (Voice Overlap) --

Mr. Horace R. Lamb: And that's -- it's on here.

Justice William J. Brennan: No.

Is it -- I'm looking -- you cannot --

Mr. Horace R. Lamb: I can give you that, sir.

Justice William J. Brennan: -- Mr. Justice Stewart referred to because AGA and its utility members effectuate the plan and purpose of the unlawful combination and conspiracy alleged herein by the following conduct and action.

Then it goes on by refusing to provide gas and so forth.

Those --

Mr. Horace R. Lamb: Well --

Justice William J. Brennan: -- may not be the fact but that is the charge, isn't it?

Mr. Horace R. Lamb: Well, there isn't anything showing that AGA itself, of course, has any relations whatever with gas service.

Justice Felix Frankfurter: Well, but suppose -- suppose that it were unequivocally charged that by agreement with whether they love the AGA or whether they have advantages coming to them from it, suppose it were unequivocally charged that there was, in fact, an agreement between the utility and the AGA whereby no consumer service will be given to anybody who hasn't got an AGA burner.What would you say to that?

Mr. Horace R. Lamb: Well, I think that would be bad.

Justice Felix Frankfurter: Would be bad.

Justice William J. Brennan: Well, that's been exactly what you said.

Mr. Horace R. Lamb: But -- but this is tied up if -- you mean by an AGA approved burner?

Justice Felix Frankfurter: Yes.

Mr. Horace R. Lamb: Well, I think that the essence of that is that the approval act.

Now, our approvals are on the allegations here, granted where the material is of metal.

They are not granted where it is a ceramic.

Now, those are the facts.

And on -- in the basis of those facts, if they have -- or met with refusal from the utility company, that is a matter which I think is not actionable under the Sherman Act.

Justice Felix Frankfurter: You mean -- you mean -- if I may interrupt.

If utility wholly of its own volition.

Mr. Horace R. Lamb: Well, that's what the utilities themselves --

Justice Felix Frankfurter: Yes.

Mr. Horace R. Lamb: -- say sir.

Justice Felix Frankfurter: If you mean if -- you -- if it's of its own volition, you say you cannot be charged with what they do even though they think your seal or your approval is as protected value for themselves in the ground of stating your whatnot.

You say unless there's an agreement, you can't be charged of what they do.

Mr. Horace R. Lamb: That's right, sir.

Justice Felix Frankfurter: If there is an agreement, I understood you to say that would be within the Sherman Law.

Mr. Horace R. Lamb: I think that probably would be, sir.

Justice Felix Frankfurter: Until we get down here to a question of what being these words telling a susceptible of meaning.

Is that it?

Mr. Horace R. Lamb: That may well be.

It may well be but it's a -- a conclusion, it's an argument that all tied in with because they're not approved by AGA.

That now -- that can't be overlooked in this complaint.

And I say that our approval by AGA is not based on any discriminatory practice.

It's not based on any charges that the standards are not honestly arrived at.

I think that the remainder on some of those questions, Your Honor, could perhaps be more effective (Inaudible) my colleague who will take on from here, sir.

Chief Justice Earl Warren: You didn't tell us a little about the membership of this organization which you have done.

Mr. Horace R. Lamb: Well, all I can tell you, Your Honor, of course, is that the -- I can only bound by the -- the allegations of the complaint and it says in paragraph (4) on page 4, "Members of the combination conspiracy," saying first we're a -- our membership corporation, it is the defendant AGA around which the illegal conspiracy in combination herein alleged revolves.

It consists of a combination of members as follows, practically all if not all of the public utility corporations or companies including defendants, Peoples Gas and other utilities mentioned therein, hundreds of manufacturers, pipeline companies, thousands of individuals who carry out the purposes of AGA.

It is a large organization.

Justice William O. Douglas: Are those (Inaudible)

Mr. Horace R. Lamb: Yes, we concede that there are large categories -- many categories having large membership.

That's true.

That's quite true, sir.

Therefore, if there's --

Justice Hugo L. Black: People who sell the gas burners.

Mr. Horace R. Lamb: Well, the exact number isn't given but --

Justice Hugo L. Black: Well, I'm --

Mr. Horace R. Lamb: -- but manufacturers.

Yes, sir.

Manufacturers --

Justice Hugo L. Black: (Voice Overlap) --

Mr. Horace R. Lamb: -- are members of AGA, and they are represented on the Committee, as I've pointed out from the (Voice Overlap) --

Justice Hugo L. Black: They sell metal burners.

Mr. Horace R. Lamb: They manufacture and sell metal burners.

That's right, sir.

Chief Justice Earl Warren: Mr. Ross.

Argument of Clarence H. Ross

Mr. Clarence H. Ross: May it please the Court.

The petitioner and the merits amicae below have characterized the opinion of the Court of Appeals as imposing a novel, an unjustifiable burden on the antitrust plaintiffs, the burden of demonstrating that the public has been injured by the act complained of.

May I point out that the necessity of such an allegation was expressly conceded in the petitioner's brief in the Court of Appeals which is on file with this Court.

And at the Court, petitioner did not, as it does here, argue that the public injury is not an element of the offense prescribed by the Sherman Act.

In its brief, it conceded these words, page 12, “Since the courts have repeatedly held that public injury sometimes must be shown where the action is brought by a private litigant, we bow to those decisions.”

I'm explaining some of the reasons why the Court of Appeals held as it did, that is the petitioners here.

In their brief, admit the necessity of showing public injury where the action is brought by a private litigant.

Justice Potter Stewart: That is in their brief in the Court of Appeals.

Mr. Clarence H. Ross: Yes, sir.

Justice John M. Harlan: Do you think there's no doubt that the Court of Appeals did hold that rather than that its language should be read that the plaintiff alleged unreasonable restraints.

Mr. Clarence H. Ross: Well, I -- I think that the -- I think the Court of Appeals did not really hold that.

I think the Court of Appeals held --

Justice John M. Harlan: Well, I thought you --

Mr. Clarence H. Ross: Well, they said so but I don't think that's the real holding.

Justice Hugo L. Black: What do you -- [Laughter] what do you think the real --

Mr. Clarence H. Ross: Well --

Justice Hugo L. Black: -- holding was?

Mr. Clarence H. Ross: Well, all right.

In the Court of Appeals, the petitioner urged in its brief a showing that the public is being deprived of a public -- of a product of superiority is enough to show injury to the public.

That is to say the petitioner itself defined this injury to the public.

It is the -- the petitioner said the reason here is that there is injury to the public is that the public is being deprived of a product of superior quality that they say that's injury to the public, that's what they said, petitioner.

And the Court of Appeals responded this issue as framed by the petitioner and denied relief because it found that the allegations of the petitioner's complaint failed to establish the public had been deprived of a product of overall superiority.

That is to say the petitioner framed the issue in the court below, Court of Appeals, and the Court of Appeals responded to that issue and said, “You haven't even prove this issue that you have -- that the public has been deprived of the access to a burner of superior quality.”

And this does not -- I do not believe represents the Court's views of the requirements of the public injury doctrine but only rejection of the petitioner's own framing of the issue.

And I can -- would like to cite the fact that the court below states, page 32, “In the absence of per se violation, the Sherman Act protects the individual, injured competitor and affords him relief but only under circumstances where there is such general injury to the competitive process that the public at large suffers economic harm.”

Justice Hugo L. Black: How would you say that it kept -- charged that of proving if they -- if they charged that a large group of businessmen and the commodity that's dealt with all over the nation, block certain types of that business from entering into the channels of interstate commerce.

How -- what would you say it's necessary for them to show an addition to that to show that the public is injured?

Mr. Clarence H. Ross: I think that it have to show injury to the competitive process as such.

And I do not think that only the showing that one person -- this company made one burner, a radiant burner.

It's the only burner that they allege has been shut out of competition --

Justice Hugo L. Black: And that's --

Mr. Clarence H. Ross: -- and nobody else makes a radiant burner.

Justice Hugo L. Black: That's precisely the argument that was made in the Klor case.

And the court below held that the acquired public injury was missing because there was no charge or proof.

That by any act of defendants, the price, quality or quality -- quantity offered to public was affected, nor that there was any intent or purpose to affect to change in or an influence on prices, quantity or quality.

And we held that they didn't have to show it --

Mr. Clarence H. Ross: Well --

Justice Hugo L. Black: -- or charge it.

Mr. Clarence H. Ross: I distinguish the Klor's case on the theory that that is, even though it's not to called a per se case in that it is a per se case.

Justice Hugo L. Black: I -- I didn't think it was.

Mr. Clarence H. Ross: I beg your pardon?

Justice Hugo L. Black: I didn't think it was.

Mr. Clarence H. Ross: No, well, it is this kind of a case though, I distinguish the Klor's case from our case on this basis, taking examination of all the cases where public injury isn't required which we call a non-per se -- per se cases.

That's the general term we -- we use at a per se case, public injury is not required and in the non-per se case it is.

Examine the practices in the per se case.

Examine the practice in the Klor's case.

Every one of those cases involved an agreement by competitors not to compete in some area.

That is to say competitors' agreement not to compete in the area of price or agreement not to compete in areas of division of territory.

Some -- some agreement not to compete.

Justice Hugo L. Black: Do you think that's any different to charging an agreement among the people that they will keep somebody from competing in the -- in the area?

Mr. Clarence H. Ross: I think it's -- I think that the -- there is no agreement among competitors in the AGA case, nor our case here, not to compete.

All of the other per se cases, there is an agreement in the nature, that nature where they agree not to compete in some kind of an area.

I think that's the real distinction here.

And I think that the Court goes past that -- that distinction here.

It has --

Justice Hugo L. Black: I don't quite understand that distinction.

Mr. Clarence H. Ross: Well --

Justice Hugo L. Black: I understand you to say that if a group of people agreed that they will not compete, that's a violation of the Act.

Mr. Clarence H. Ross: Yes.

Justice Hugo L. Black: But if the same people agreed that they're going to block somebody else from competing, that's not a violation of the Act.

Mr. Clarence H. Ross: Well, this -- that's not exactly our situation here but I think they do not agree to compete but they -- they do not agree not to compete in our case.

There's no -- there's not that angle in our case, and we think --

Justice Hugo L. Black: Well, the charge --

Mr. Clarence H. Ross: -- that that's not per se.

Justice Hugo L. Black: -- the charge is that, as I read it, if there's an agreement to keep people to manufacture this kind of burner from being able to compete in the market, do you -- do you think that's not enough to charge a violation of the Sherman Act?

Mr. Clarence H. Ross: I think that's not enough to charge a violation of the Sherman Act.

It must show public injury under those circumstances unless there's actually an agreement among competitors of some not to -- not to compete in some area.

I think that is really the per se area and the proper per se area.

When you get outside that area, then I think you should show injury to the competitive process, which is what the court below --

Justice Hugo L. Black: Do you think in other words that the agreement of a group of people where they leave themselves free to compete with one another but agree to knock other people out from competing with them does not violate the Act.

Mr. Clarence H. Ross: Not per se.

I think you have to show public injury.

Now, I'd like to deal with the complaint.

In my view, the petitioner here has not alleged public injury in the sense that he has not alleged injury to the public but only that he has alleged that my particular burner, my Radiant Burner, only one burner has been shut out of the market.

He hasn't alleged generally that the public has been harmed, that the competitive process has been harmed but only that one burner, the burner made by him, may not be admitted into competition.

Justice Hugo L. Black: Well, I -- I'm interested in that because we had to meet the argument that only one man, Klor, was knocked out of the market, only one man, and I thought we answered that in the opinion saying that it didn't make any difference if it was just one man.

Mr. Clarence H. Ross: I think it doesn't make any difference where you have the type of agreement to compete but you had in that case.I think we have a different situation, different factual situation.

This is not a division of markets.

Justice Hugo L. Black: So then you are not to arguing on the basis that this has effect on one man.

You're arguing it on your division.

Mr. Clarence H. Ross: Well, I'm on the basis -- well, I'm -- I'm arguing that where you do not have what we define or consider a per se case, then you must find public injury.

And keeping one man out of the market is not public injury, it takes more than that.

It takes -- it takes -- varies to the competitive process to create or to constitute public injury.

And that therefore, you have two categories, first, our basis is here that this not been a per se case.

You first must find public injury.

If it is -- if public injury is not found here and the petitioner, we don't think, has true public injury, then he has to establish a per se case and that's what he has attempted to do.

And we say that he has not proved public injury and therefore, he can't establish a violation unless it is per se, and we also say he has not established a per se case because he has not come within the essential requirement of establishing a per se case which is that you have to have an agreement among competitors in our view not to compete and that that is not our situation.

Some areas, let's take your -- take your case, we think -- as the per se cases.

Your Klor's case, they agreed not to compete for this man's business.

Your price fixing cases, they agree not to compete with respect to price.

Justice Hugo L. Black: Well, taking your argument in -- in effect if this complaint alleges, they've agreed not to compete with ceramic burners by agreeing among themselves that they are people off the market.

Mr. Clarence H. Ross: Well, they're not buying ceramic burners.

Well, they're not -- they're not agreeing not to compete with ceramic burners at all.

I think they're agreeing among themselves that -- that the ceramic burner does not meet their requirements and that therefore, they want to prove it.

Chief Justice Earl Warren: Well, then according to that argument, it wouldn't make any difference how many manufacturers situated this as petitioner is -- who is shutout of the market by your organization.

Mr. Clarence H. Ross: Well, this complaint alleges only one.

Chief Justice Earl Warren: Well, I know but you -- you've been arguing it to a greater extent, you're just broadening that out.

Now, suppose that all ceramic manufacturers and suppose there are a number of them who were shut out by the kind of activity such that are charged here, would that, in your opinion, be a violation of the Act?

Mr. Clarence H. Ross: I think that'd be a very different case.

Let's suppose that we had --

Chief Justice Earl Warren: Well, I know but would it -- would it be a violation?

I just -- I'd like to test your reasoning a little.

Mr. Clarence H. Ross: In spite -- let me state the case.

I think if there were a large group of ceramic burner manufacturers and a group of metal burner manufacturers got together with the AGA and with the distribution companies and somehow worked out a plan whereby they could put that group of ceramic burner manufacturers out of business, I think it would be, yes.

Chief Justice Earl Warren: But not if it was just one.

Mr. Clarence H. Ross: Not -- not if it's just one because the just one doesn't show the necessary public injury that the cases require, the Standard Oil case going back 50 years that the cases require where you have -- do not have a non-per se injury.

Chief Justice Earl Warren: In other words --

Mr. Clarence H. Ross: None.

Chief Justice Earl Warren: -- if your conspiracy starts early enough when the first ceramic manufacturer comes into business, you can keep them up forever.

But if they -- if you don't start so early and if you haven't get in to the business, then you're in trouble.

Mr. Clarence H. Ross: Well, I don't think that's the real distinction.

That is the distinction as whether --

Chief Justice Earl Warren: But why -- why doesn't it follow?

Mr. Clarence H. Ross: Well, the question is -- the question is, how much has the competitive process been restricted, and we say that one man who has a -- a special burner, a burner with special characteristics that they -- they're keeping the one man out of business without a showing of public injury is not sufficient under the law and under the laws --

Justice Hugo L. Black: Suppose all the gasoline --

Mr. Clarence H. Ross: -- here by this Court.

Justice Hugo L. Black: -- suppose all the gasoline companies on the contrary will get together to the people who sold automobiles all but one automobile and agreed that they would not supply gas to anybody except the people who ride an approved car, then they refused to approve one car, would that be a violation of the Antitrust Act?

Mr. Clarence H. Ross: Well, I suppose it would depend on why the car -- well, I can't --

Justice Hugo L. Black: Well, that --

Mr. Clarence H. Ross: -- I don't know.

Justice Hugo L. Black: -- that's just that.

Just that, they just agree among themselves, they're going to approve cars that use their -- all gas and they approve all of them but one.

Mr. Clarence H. Ross: Well, they are keeping that other car off the market --

Justice Hugo L. Black: And then they won't sell any gas to that car.

Mr. Clarence H. Ross: They're keeping the other car off the market by selling no gas that is the gasoline company --

Justice Hugo L. Black: Except that they are keeping the ceramic off the market here.

Mr. Clarence H. Ross: It's like the gasoline companies say, "We won't -- we -- we make -- we make a deal with the automobile companies that we won't sell gas --

Justice Hugo L. Black: Oh, no, just what you charge here that they've gotten together and by a system of -- that makes testing an approval.

They've decided that they will not sell gasoline to any cars if they don't approve.

Mr. Clarence H. Ross: All right.

Yours -- your --

Justice Hugo L. Black: And there's just one car there.

Mr. Clarence H. Ross: All right.

You're citing the case within our definition of per se where they agree not to compete --

Justice Hugo L. Black: No.

Mr. Clarence H. Ross: -- for the market, for the gas --

Justice Hugo L. Black: Oh, no.

I'm stating --

Mr. Clarence H. Ross: -- of just one car.

Justice Hugo L. Black: -- stating precisely the case you have except I'm using gasoline -- oil -- gasoline company instead of --

Mr. Clarence H. Ross: Well, who has refused to sell the gasoline?

Justice Hugo L. Black: There's an agreement among all of them that there will not be any gasoline -- cannot be any gasoline sold.

Mr. Clarence H. Ross: That involves the seller of the gasoline.

Justice Hugo L. Black: That's right.

And they conspire among themselves in such a way that they can keep, they can keep as they can here into sales being made of those automobiles because they can't get -- get it approved.

Mr. Clarence H. Ross: Well, that's the Klor's case because the -- the competitors get together and say, “We will not compete for this --

Justice Hugo L. Black: You say -- you say --

Mr. Clarence H. Ross: -- for this man's business.”

Justice Hugo L. Black: -- if the gasoline companies had been the Klor's case.

Mr. Clarence H. Ross: Yes.

Justice Hugo L. Black: But it's not the Klor's case if it's the -- if it's the gas company.

Mr. Clarence H. Ross: Well, I -- I don't -- and may perhaps -- you're saying that the automobile companies will not -- how -- I don't see -- I don't understand how the man -- how come the man can't get the gasoline.

Somebody has refused to sell it to him.

Justice Hugo L. Black: Well, the same setup -- the same state of facts that you have here with reference to the reason the man can't dispose of his ceramic burners.

He can't buy one because he can't get any gas for it.

That's the charge of the complaint.

Mr. Clarence H. Ross: Well, supposing that the automobile industry sets up a -- a standard and they say that -- I -- I hate to try to imagine a case here entirely made out of ceramics or ceramic wheels or something like that.

And they say that we don't approve this kind of a car.

I -- I don't -- that's not our case so I -- I don't know.

Justice Hugo L. Black: No, not unless you agreed with them and conspired with them to see that they didn't do it and helped them work it out so as they didn't have to.

Mr. Clarence H. Ross: Well, I don't --

Justice Hugo L. Black: There's no doubt about that.

Mr. Clarence H. Ross: I just don't believe that -- that the Court has ever decided in the absence of some -- some agreement not to compete.

But you didn't have to show some public injury.

And that's our -- that's our thesis here and we think that's the distinction between the Klor's case and between the Radovich case.

Now, on the Radovich case, for example, which the petitioner cites and the Government cites and Parmelee cites.

You have there an admitted monopolization.

There can't be any -- I don't say that the Radovich is a per se case but it's certainly a Section 2 case.

And when you have a Section 2 case, a monopoly, you certainly have a case which does not require a showing of public injury.

And therefore, for the reasons I have stated, we do not believe that either the Klor's case because it is really a per se case where competitors do agree not to compete.

And that the Radovich case being the case where monopolists maintain their monopoly.

But neither of those require public injury.But our case, we feel, is one which does require public injury.

I'd like to refer to the Standard Oil case where the Court pointed out 50 years ago that the classes of acts defined in Section 1 are broad enough to embrace every conceivable contract or combination which could be made concerning trade or commerce or the subject to such commerce, and thus calls any act done by any of the enumerated methods anywhere in the whole field of human activity to be illegal within the restraint of trade.

That's now the position taken by the petitioner.

All you have to show is a restraint.

You don't have to show if it's reasonable or anything else.

This is -- position is that if it falls in the letter of the law, within the letter of Section 1, that's the end of it.

You don't have to show public injury, you don't have to show any effect on competition whatever.

Chief Justice Earl Warren: Well, assuming his facts are correct, as stated in his complaint, is that a reasonable restraint as to him?

Mr. Clarence H. Ross: We think that it is a reasonable restraint.

And we think that it is not public injury.

Chief Justice Earl Warren: So every time a ceramics manufacturer comes into the industry, you knock him out?

Mr. Clarence H. Ross: We don't know.

Well --

Chief Justice Earl Warren: And because it's -- it's reasonable to --

Mr. Clarence H. Ross: I don't know.

No, I'd --

Chief Justice Earl Warren: -- then you're free to compete?

Mr. Clarence H. Ross: I have no -- I can't assume that they'll knock out the next --

Chief Justice Earl Warren: Well, he -- he --

Mr. Clarence H. Ross: -- ceramic burner.

Chief Justice Earl Warren: -- alleges that you do.

He alleges that you'll knock him out.

Mr. Clarence H. Ross: He alleges we did.

Chief Justice Earl Warren: I beg your pardon?

Mr. Clarence H. Ross: He alleges we did -- he -- we did so far as he's concerned refuse --

Chief Justice Earl Warren: Yes.

Mr. Clarence H. Ross: -- him the seal.

That doesn't mean the next man who comes in with a ceramic burner may not get the seal.

I don't know.

I don't know how you can say that.Just this one man is eliminated.

Chief Justice Earl Warren: Well, I don't -- I don't know how they can prove it either but he says in his (Voice Overlap) --

Mr. Clarence H. Ross: He said no and he didn't.

He said, “We were eliminated.”

He didn't say there's a course of conduct designed here to eliminate all manufacturers of ceramic burners.

He didn't say that.

He said -- he said the reason that we have public injury here is that I have a superior burner.

I've got the best burner.

And the public is injured by not having access to buy my burner, my -- my superior burner.

And the court below said --

Justice Hugo L. Black: Well, let's suppose that's --

Mr. Clarence H. Ross: -- that's not public injury.

Justice Hugo L. Black: -- let's suppose that's true but it may not be.

I --

Mr. Clarence H. Ross: I don't know.

Justice Hugo L. Black: Suppose that's the best of that kind of burner.

Well, let's suppose it is superior, it's a much better burner than the others.

Sell to the public and save them a lot of money if they could buy and that there is such an agreement as is claimed here to keep them from selling.

Would you say that that would be an unreasonable restraint of trade to engage in such an agreement to stop such a superior burner from entering into the market?

Mr. Clarence H. Ross: I think that you -- in the absence -- as I say, I don't use dirty -- the word per se is sort of a short cut.

In the absence of a per se violation, then I think you got to look into the question of the reasonability of the denial.

Justice Potter Stewart: Wasn't that a matter for the trial?

Certainly, on the allegations that the Chief Justice has just suggested, it seems to me, on the top of page 13, the complaint, perhaps inartistically but I should say if the complaint alleges that not only this manufacturer of ceramic burners, but everyone is going to be knocked out because there's an allegation that the only ones approved are metal, this man's are ceramic.

Mr. Clarence H. Ross: It says the only ones which --

Justice Potter Stewart: And it's in the present test.

Mr. Clarence H. Ross: It's the only that have been approved.

Justice Potter Stewart: It's what happened in the past.

Mr. Clarence H. Ross: One says, the only ones which have been approved are metal, that's right.

Justice Potter Stewart: Well, now, it -- that's the way I read it.

“All gas burners approved by AGA are metal.”

Mr. Clarence H. Ross: Well, that's as of the time of the complaint.

Justice Potter Stewart: Yes.

Mr. Clarence H. Ross: Well, I think that's right.

That doesn't mean that that necessarily follow --

Justice Potter Stewart: Well, the -- the reasonableness of all this in the Lanham Act and all those things backs us to the safety and durability and the -- all the other items bearing on the reasonableness of all these.

That's a matter for the trial, isn't it?

Rather than for --

Mr. Clarence H. Ross: Well --

Justice Potter Stewart: -- consideration to this date.

Mr. Clarence H. Ross: Well, the Chief Justice asked me whether I thought they would approve a -- a second manufacturer of -- of ceramic burners.

And I say, I think, there's nothing in here that says they won't.

I don't know if it were --

Justice Hugo L. Black: Unlikely to be one if what they allege is true, isn't it?

Mr. Clarence H. Ross: I don't know.

[Laughter]

No, I -- I think if the ceramic burner is 50% more efficient than the other burner, there's very likely to be a lot of them.

Justice Hugo L. Black: How could there be?

What good would it do if they were 75% (Voice Overlap) --

Mr. Clarence H. Ross: Well, the gas companies -- the gas distribution companies, if we could find a burner that's 50% more efficient than the burners we got now, we'll certainly like to have it.

Justice Hugo L. Black: But that depends, under your argument, that depends on the decision of all these aggregation of companies instead of only traders who want to buy it for themselves.

Mr. Clarence H. Ross: Speaking for the People's Gas Company, if somebody had a burner that is 50 -- 50% more efficient than any other burner, we wouldn't give a hoot what the AGA said.

We'd go ahead and sell it.

If we wouldn't sell it, we would go ahead and approve it if we thought (Voice Overlap) --

Justice Potter Stewart: You can sell less gas per burner or more (Inaudible).

Mr. Clarence H. Ross: Well, it's all right.

We -- we can sell -- we can sell less gas.But we could sell more gas.

Justice Potter Stewart: Less gas per burner.

Mr. Clarence H. Ross: Less gas per burners.

We could sell lot more -- more gas and we could compete much more effectively with the oil burner.

If we had a more efficient burner, we would love to have a burner that's 50% more efficient.

Justice Hugo L. Black: I think you did pretty well.

I'm speaking personally for you.

[Laughter]

Chief Justice Earl Warren: But -- but he alleges -- he alleges, sir, in -- in his complaint that these utility members are in the conspiracy by refusing to provide gas for use in plaintiff's Radiant Burner and other gas heating devices and equipment produced by other manufacturers which are not approved by AGA.

You say that you would do it whether you wouldn't care a hoot what AGA said, but isn't that a matter of defense?

Mr. Clarence H. Ross: Oh, I agree --

Chief Justice Earl Warren: He alleges --

Mr. Clarence H. Ross: I agree --

Chief Justice Earl Warren: -- he alleges that --

Mr. Clarence H. Ross: I agree with that.

I agree that -- I agree with what the --

Chief Justice Earl Warren: Well --

Mr. Clarence H. Ross: -- what the record said.

I don't deny that.

Chief Justice Earl Warren: Well, the complaint --

Mr. Clarence H. Ross: Well, the complaint says -- I -- I --

Chief Justice Earl Warren: -- states it.

Mr. Clarence H. Ross: I agree.

Chief Justice Earl Warren: Yes.

Mr. Clarence H. Ross: I agree with that.

Chief Justice Earl Warren: Well, that I didn't understand.

Mr. Clarence H. Ross: No, I -- I don't -- I wasn't saying the complaint says something else.

I was just responding to a question of whether -- whether or not the Radiant Burner -- whether we had ever approved a radiant burner.

Well, that was the question, “Would you ever approve a radiant burner?”

And I said that so far as we're concerned, if it were a good burner and 50% more efficient, as a gas company, we'd love to have it.

And that's, I know is outside the record.

Chief Justice Earl Warren: We -- we'll recess now.

Print this transcript Transcript: 

Argument of Clarence H. Ross

Chief Justice Earl Warren: (Inaudible)

Mr. Clarence H. Ross: I just have one statement I wish to make and that is I wish to point out that in the complaint, there is no allegation of any plan of successive or other proposed denials of anyone else.

All it says in the complaint is that our device was denied to seal.

Nothing there just spell out that this is like in the result in being an A, B, C, D.

They don't say that.

They don't allege it.

They don't even allege that the denial and the particular case was arbitrary.

Thank you.

Argument of Attorney General

Mr. Attorney General: Mr --

Justice Felix Frankfurter: (Inaudible)

Mr. Attorney General: Yes, Your Honor.

Justice Felix Frankfurter: (Inaudible) distinguish your case from the arrangement between International Garment Workers and the New York Garment Trade whereby they put on the products of the people within -- the manufactures of the union or white label and they constitute advertise both through all the medias especially over the radios telling people not to buy this that haven't got that white label.

Mr. Attorney General: Your Honor, asked me to put something aside at the beginning of your question.

Justice Felix Frankfurter: Putting aside the question whether in fact there was a combination between the AGA and the Gas Company, the utility of Chicago whereby the utility agreed not to service customers, consumers who haven't got the AGA burners.

Mr. Attorney General: Well, Mr. Justice Frankfurter, I'm not sure that I have to distinguish it and I will come to answer your question because --

Justice Felix Frankfurter: Well, that you -- you may not be able to distinguish that (Voice Overlap) with it.

Mr. Attorney General: Because our case is dependent upon a conspiracy here.

Now, there is a possible distinction along this line.

If we approach the Sherman Act question from the point of view of what has this done to competition?

We might well say that the International Garment Workers' case is a situation of waging competition, that the improvement of the conditions of labor is important to competition because its labor who buys the products.

This is an entirely different case than a case which is not waging competition but was -- which is waging anti-competition because our competitors are part of this conspiracy.

Justice Felix Frankfurter: I'm not thinking of the manufacturers.

They are going to shop, give these high wages or higher, one way of keeping union gather is to meet the wage advantage as union (Inaudible)

Our wages are higher, our health conditions are better, etcetera, etcetera but we have a principle, you know there are (Inaudible) there are principles (Inaudible).

Mr. Attorney General: Yes.

Justice Felix Frankfurter: And therefore by this campaign as between the manufacturers and the (Inaudible) union, we're really driven or at least restricted in our market because of the big departments was in New York or want to carry those that haven't got the white label.

Mr. Attorney General: I -- I have no answer other than that which I've stated and that is that it possibly improves competition.

I'd like to make only two brief remarks.

Mr. Ross's closing remark was that the complaint does not allege and effect on anyone but the petitioner.

The complaint does allege that this conspiracy has prevented everyone who does not get the AGA seal of approval from competing in this market.

Now, what I think he has overlooked is the potential effect of a power similar to the power that the AGA has.

In other words, they don't have to say, “We won't approve it.”

No one is going to come into the market.

No one is going to invest the capital and time.

If they know that their competitors can say after their product is ready to be marketed, sorry you can't market -- market it.

Now, the second point was this.

In response to a question by the Chief Justice, Mr. Lamb said, “I believe that the present standards of the AGA do not restrict gas burners to metal that it was possible for a ceramic burner to be approved.”

Chief Justice Earl Warren: I so understood it.

Mr. Attorney General: That's how I understood him, Mr. Chief Justice in his brief.

On page 5, Mr. Lamb says, “AGA standards require that metal be used.”

In his brief on page 14, he says, “All gas burners approved by AGA are metal.”

Thank you.