UNITED STATES v. CONTAINER CORP.
Legal provision: Sherman
Argument of Zimmerman
Chief Justice Earl Warren: Number 27, United States versus petitioner or appellate versus Container Corporation of America.
Mr. Zimmerman: Mr. Chief Justice, may it please the Court.
This case is on appeal from the United States District Court to the middle district of North Carolina.
In 1963, the United States filed a civil complaint under Section 1 of the Sherman Act alleging that at least since 1955, the defendant companies engaged in the business of selling corrugated containers in the Southeastern United States unlawfully combined to exchange among themselves information as to prices they charge are quoted “specific customers,” for the purpose and with the effect of restricting price competition.
The case was submitted to the District Court for decision on the basis of proposed findings, many of which were agreed to as well as on the basis of extensive depositions taken by the plaintiff of various offices of the defendant, and of exhibits introduced by both parties.
The United States asserted the evidence as to defendants course of conduct over the eight year period, compelled the conclusion that a combination existed whereby defendants finished to one another upon request information as to the most recent prize or current quotes, any member of the group was offering to a specific customer.
The United States also asserted that under the facts of this case, such combination was unlawful because it had the purpose and necessary effect of restricting prize competition.
The District Court handed down its decision on August 31, 1967.
It dismissed the Government's complaint with prejudice and we accordingly appealed to this Court.
In brief, the District Court concluded that no combination for the furnishing of specific prize information was proven.
It further found that even where there such a combination, it was not unlawful since there was no further agreement among the defendants to use the exchange price information to maintain prices or minimize price reductions.
We believe the District Court was wrong as a matter of law and not finding that a combination existed and that it also applied an erroneous legal standard to the question of legality of the combination.
They agreed upon facts described this market, the corrugated container industry in the southeastern part of the United States does over $100 million worth of business each year.
There are some 10,000 purchasers of corrugated containers in this region.
The group of 18 defendants in this case account for 90% of the shipments.
As defendant's brief points out, the four largest defendants account for 45% of the business.
It is also the fact that the six largest defendants account for almost 60% of the business.
The number of sellers interested in any given purchase was also limited by such considerations as the geographic proximity of the buyer to the seller's plant, the suitability of the seller's equipment, the attractiveness of the order and the particular product mixed than being manufactured.
The business is essentially accustomed order one with each purchaser indicating the particular specifications of its box requirements.
The buyers do not carry inventories and they must buy for immediate needs.
Price is the consideration which determines to whom a buyer gives its business.
Since, there were no quality differences among the products offered by the sellers, a box made to particular specification is identical to any other seller's box.
The industry throughout the period was characterized by chronic overcapacity.
The Court found that as to each defendant, that when it considered it necessary to ascertain from a defendant competitor, the most recent price to a specific customer or when to ascertain the accuracy of a customer's report of another competitor's price, that information was usually requested from the competitor then supplying the customer.
The Court also found as to each defendant, that when such a request for information as to the most recent price to a specific customer was received, that information usually was furnished and it was accurate.
After receipt of the information, each company was free to do with it, what it wished.
Although the findings again show, and is say it finding 28th, that “in the majority of instances, the recipient quoted or charged substantially the same price as the price given by it's competitor in response to its request.”
This interchange was engaged in throughout the eight year period except when for brief periods for defendants went as one witness put it off the air.
In such cases, the defendants would neither give nor request the price information.
Justice John M. Harlan: Does the evidence show Mr. Zimmerman, the uniformity of prices throughout the industry?
Mr. Zimmerman: No, it does not Mr. Justice Harlan, and I think this would enable me to clarify what this case is not about because it's not about that.
For one thing, this case is not about an express agreement, it's about a combination which is revealed by a persistent course of conduct.
Secondly, it's not about the claim of specific price fixing, as for example, the Government charged in the electrical price conspiracy cases where in submitting bids on custom-made equipment as here, manufactures were accused as of conspiring as to who would bid, what price, it's not about that.
We are claiming a combination that meliorates that bigger of price competition, that inhibits it, that breaks it.
To express the distinction as to the conduct, it was as though the electrical equipment manufacturers in submitting competing bids to public utilities on a custom-made machine agreed among themselves in order to alleviate the perils of inadvertent price cuts, that anytime a perspective seller on a piece of business was uncertain as to what a competitor was bidding, that information would usually be accurately supplied by the competitor upon request and the favor would be returned at some future point.
This is not a case that seeks to outlaw the availability of price information.
The trade association and this case supplied its members with monthly price configures and would weekly analyze price trend information computed for each defendant and that is not challenged by the Government.
Published pricing manuals existed and those are not challenged by the Government.
The defendants had available to them their own cost information, and the wrong record of prior pricing and as the findings indicated, prior pricing to a customer tended to be carried forward, unless there were significant cost changes or unless market conditions altered and purchasers could reveal to competing bidders if they thought it improved competition the bids they had received.
Hence, this is a not a case that challenges as illegal, any acquisition of information needed for intelligent marketing initiative decisions.
It's a case which claims the defendants have through the combination become too precise, too detailed, too knowledgeable about the specific plans of each other, and it's this precision that inhibits price competition a conclusion verified in this case by uncontroverted deposition evidence, that the parties to the information exchange regarded it as assurance against unnecessary price cuts.
Finally, Mr. Justice Harlan, we do not claim that the agreement froze prices.
This industry according to the findings has throughout the period in question been characterized by overcapacity.
A condition which ordinarily makes for a vigorous price competition that works to adjust the capacity to demand.
The fact that under the circumstances, prices varied and business shifted is not as significant as the uncontroverted fact that despite the chronic overcapacity, new entrance were attracted to the market, an indication that market competition was not doing its job of balancing capacity and demand.
My task is to persuade you that the course of conduct over the eight-year period, evidence is a combination and that this combination is illegal.
Because I do not read defendant's brief as showing much heart for the proposition that a combination did not exist.
Justice Potter Stewart: Mr. Zimmerman.
Mr. Zimmerman: Yes.
Justice Potter Stewart: Perhaps I missed the point of something you said just awhile ago but that the -- the fact that there were new entries into this --
Mr. Zimmerman: Yes.
Justice Potter Stewart: Into this business, into the production of rubber board boxes, this helps your case you say.
Mr. Zimmerman: Yes, the fact that there was extensive new entry despite the fact of chronic overcapacity indicates that something is wrong in the pricing.
If you had competitive pricing, typically overcapacity would lead to depression of profit and less attractiveness for new entrance into the business and our judgment to the fact that you have no entry despite the chronic overcapacity suggest that something isn't working.
Justice John M. Harlan: The sort of the conspiracy that promotes competition?
Justice Potter Stewart: Yes.
Mr. Zimmerman: I beg your pardon.
Justice John M. Harlan: The sort of a conspiracy that promotes competition.
Mr. Zimmerman: Oh, competition Mr. Justice Harlan is intended to allocate resources most properly.
It's intended to have people make informed decisions about when to leave the industry and when to build new capacity.
That's why we are committed to it, and the fact that you get the distortion here, I suggest the competition has not been working.
Justice Abe Fortas: Well, maybe by this time Mr. Zimmerman it would be a good idea for you to tell us precisely what it is that you're complaining.
I got all of these saying you're not complaining out of it, it makes me feel pretty comfortable.
Now, what is it that you don't --
Mr. Zimmerman: Mr. Justice Fortas as you and I are at the same point in my argument, the District Court stated that if a combination existed, it was not unlawful.
It appear to thank that the critical question was, whether the defendants had a further understanding to use the exchange price information to inhibit competition.
The Court found that each party made an individual decision as to pricing after receiving the information and decided that no further agreement could be inferred.
That therefore refuse to consider the significance of uncontroverted evidence, which the Court itself described as showing that most defendants felt that the price information was needed to maintain prices and minimize price competition that might otherwise exist.
And here is my point Mr. Justice Fortas, as we did not clam that in addition to the information exchange, you needed a further agreement on how to use the information.
The proposition we advanced to the Court, is that when a group of sellers who account for by far the dominant share of the market combined to meet or call one another when there was a substantial doubt as to what some member of the group may be bidding on a particular piece of business, and when they were motivated to such a combination by their concern, that failure to have such complete and precise information could lead to price cutting.
Even though each party walks away from the meeting with the nominal freedom, the charge as he pleases the necessary effect of allaying the doubts and resolving the uncertainties in this context is to mitigate price competition.
Of course, if they had the further agreement as to specific prices, the arrangement would be blatantly and criminally unlawful.
But under the circumstances of further agreement it's not necessary unless this be regarded as noble doctrine, I refer you to this Court's decision and American column, 257 U.S., now 399, the Court again in an information exchange agreement noted that there was the absence of a further agreement as to pricing.
Justice Abe Fortas: I thought I had an understanding was with the case for the -- been wrong, were there meetings here of these people?
Mr. Zimmerman: There was occasional meetings, most of the exchanges where by telephone, or by oral content.
Justice Abe Fortas: I thought so then you --
Mr. Zimmerman: Yes.
There were occasional meetings, but most of the -- it doesn't make any difference whether they meet or whether they meet on the telephone.
Justice Abe Fortas: Well, maybe it doesn't, maybe it does, but there were -- you say mostly it was matter of telephone --
Mr. Zimmerman: Yes.
Justice Abe Fortas: Occasionally, there were meetings.
Mr. Zimmerman: Yes.
Right, there was communication.
Justice Abe Fortas: And were these meetings under the hospices of the trade association or pursuant to agreement or how do they -- what are you --
Mr. Zimmerman: We're talking about a course of conduct here and in terms of the exchange of information, this is simply a course of conduct in terms of the telephone calls and the occasional meetings which I suppose happened after trade association meetings ended.
This was a course of conduct that typify this industry over the eight year period covered by the compliant and apparently, it preceded the complaint.
Justice Abe Fortas: And your complaint is, so that these meetings are in this telephone conversations.
Mr. Zimmerman: In the telephone, yeah.
Justice Abe Fortas: One competitor or one member of the industry would tell another what it had charged --
Mr. Zimmerman: No.
Justice Abe Fortas: A particular customer?
Mr. Zimmerman: It's more complicated than that.
A competitor would ask the other competitor, what is your price to X whom you are now supplying?
Justice Abe Fortas: What does that mean?
What has been your price?
Mr. Zimmerman: No.
It includes your -- there are two types of price information generally that was supplied.
The last quoted price and/or a current quote, it varied from competitor to competitor, but the point is that the information requested was readily understood as indicating the current price.
Certainly, a current quote indicates the current price.
The last sale quote in this industry is a very good indication of a current price because of the finding that there was a persistency of prior prices.
If the company had been supplying a customer at a given price, it typically barring certain changes in the industry would requote that price.
So, that this information when exchanged was meaningful to the parties asking it.
Justice Abe Fortas: Did this go beyond the 1940 consent decree?
Mr. Zimmerman: Well, yes.
The 1940 consent decree was not a permissive decree, but the 1940 consent decree spoke of past prices and in this respect, I think it went beyond the Section 3 of the 1940 consent decree.
Justice Abe Fortas: If that decree didn't permit, or was it seven of the defendant -- no, nine of the defendants here?
Mr. Zimmerman: Eight -- I believe eight defendants that gave only their most recent price rather than the current quote.
But, as I indicate that most recent price is readily translatable and of course that decree didn't permit, it simply indicated its limitations.
Justice Abe Fortas: Well, to the extent that it did that you're charging communication of the most recent price.
Mr. Zimmerman: Yes.
Justice Abe Fortas: Then you're charging them with doing something that was expressly permitted by the consent decree, this particular defendant, is that right or not?
Mr. Zimmerman: As the court below points out, the consent decree does not repeal the antitrust laws.
Justice Abe Fortas: I understand if I say.
Mr. Zimmerman: Section 3 simply indicates what the limitations of that decree were.
Justice Abe Fortas: Well, the consent decree does something, doesn't it?
Mr. Zimmerman: Well, it was limited to -- designed to limit the trade association here, to the activities permitted by maple flooring, indeed that's what they did.
They exchanged all the information that Maple flooring permitted them to a association --
Justice Abe Fortas: Well at some point, get a -- here, you're saying that they did something beyond --
Mr. Zimmerman: Yes.
Justice Abe Fortas: Maple Flooring, something beyond the exchange of information.
Mr. Zimmerman: Exchange of information has to pass in close transactions.
Justice Abe Fortas: You're saying that they did something beyond that?
Mr. Zimmerman: Yes.
Justice Abe Fortas: But it did not -- it did accord the fine.
Mr. Zimmerman: It's for the right information.
Justice Abe Fortas: As to what they were going to charge --
Mr. Zimmerman: In this case, some defendants we have explicit evidence that they gave current quotes that they now have to a purchaser.
And the case of the past, the close quotes, the practice in this industry was such that this could be readily assumed to give a very good indication of what the next quote would be.
Now, I think that the court below failed to look at the uncontroverted deposition evidence because it misconceives the teachings of the prior cases.
But, the prior cases don't say that you need an additional agreement, prior cases say that the additional agreement can be the missing link “American Column” the missing link, the absence of the agreement on how to use a price is supplied by the disposition of man to follow their most intelligent competitors.
They hear an disposition to make all the money possible and by the system of reports which makes discovery of price reductions inevitable and immediate, to illustrate what the uncontroverted deposition evidenced indicated, I'd like to refer you to page 32 of our brief where we have the following colloquy.
Question: Were you ever requested for information by the same competitors?
Answer: Yes sir.
Question: What would you do on these occasions?
Answer: We would give them the information, Mr. Bernstein.
If I'm selling a box for a dollar and I don't give you the information, you got to guess at my price, and I don't want you guessing 68 cents of my dollar price.
If you are going to cut it, I would rather you cut a penny to 99, don't make me look like an idiot, that's why Dixie container gives prices.
Other officials testify the exchange of information presented -- prevented destructive price competition, avoided the necessity of pricing as low as he was willing to go.
The District Court erroneously because it insisted on a further agreement ignored this evidence.
But, even if we didn't have this evidence, we think that the necessary effect here where you have information requested at times of uncertainty by members of irrelatively small group of sellers, six of whom did almost 60% of the business.
Under circumstances, where self interest would dictate minimization of the rigors of price competition and where the buyers demand was fixed.
We think that under such a situation, so long as pricing was clearly visible to one another, so long as any uncertainty was avoided, it would not pay anyone substantially to cut prices since the others could know of match the cut, and the share of the business would have to remain the same at a lower profit.
The individual self interest of each participant could be relied upon to mitigate competition.
Once the combination to exchange information was in effect unpredictably and this is very important, the evidence showed in the Court found that in the majority of instances, the recipient of the information in fact quoted substantially the same price it had received.
The District Court discusses the fact that the information exchange was for the purpose of enabling informed marketing decisions.
But, the Court treats informed decision making with an undiscriminating reverence and Linseed Oil and American Column revealed the dangers of over specificity on current prices.
The point is that but for the information exchange, occasions would have a reason when the defendants would have been slightly in the dark as to how low they would have to bid.
These are the occasions when the buyers determine it is not in their self interest to educate the bidders as to the precise state of the competition.
On those occasions, but for the combination, the competitors would have consulted their own cost and the extensive general price information available to them and submitted a price that warranted them a profit.
Defendants argue that without the information they may have bid to high.
But, they had a good idea of the level of prices and if they bid to high the buyer would probably tell them and in fact the Court found that many buyers gave high bidders a second chance to meet the lower price.
It's not in the buyer's interest by being silent to induce high price.
He's interested in doing and inducing low prices, indeed if it want a specific information, the serious risk existed that the uninformed seller would bid too high one wonders why each competitor assisted his colleague to avoid such a mistake.
Justice Abe Fortas: I'm sorry to interrupt you again, but would you tell us just what information if any as to price.
Do you believe that these companies could lawfully exchange and what information they could not and as to the exchange of which you are here complaining?
Mr. Zimmerman: Very simply Mr. Justice Fortas, they could and did exchange through their trade association.
Information as to past pricing behavior --
Justice Abe Fortas: I don't understand that, what does that mean?
Is that the past prices?
Mr. Zimmerman: At the -- every ten days, they would compute what the prices had been previously.
Justice Abe Fortas: In average prices?
Mr. Zimmerman: Average prices with some breakdown according to region, some breakdown according to type of box.
Justice Abe Fortas: Can you distinguish between that and prices to individual customers inside the port?
Mr. Zimmerman: Yes, I distinguish between that and prices to individual customer.
Secondly, they could receive from the buyers information as to what the competitors were selling if the buyer wanted to give it to him.
We have no objection to that.
Thirdly, they could publish to the world their price lists.
We have no objection to that because price list are general and people can discount from price list in specific cases.
It's when they crawl up to one another and agree upon the exchange of information as to the specific price, to the specific customer.
Justice Abe Fortas: I thought you said there was no -- you weren't charging an agreement here.
Mr. Zimmerman: Well, yes!
We're charging a combination to exchange information, an agreement to exchange information.
Justice Abe Fortas: I thought you said deduce from a course of conduct rather than --
Mr. Zimmerman: Yes.
Well, one can deduce an agreement or a combination --
Justice Abe Fortas: I understand that, but are you charging an agreement or course of conduct?
Mr. Zimmerman: We are charging a combination, language of the compliant is a combination with -- by agreement to exchange prices.
That's the language of the -- or understanding.
Justice Abe Fortas: And the -- and the -- and what you object to is that these prices were prices to individual customers and individualized transaction.
Mr. Zimmerman: And were current.
Justice Abe Fortas: And were current instead of say ten days old?
Mr. Zimmerman: Right.
Current either because they were current quotes or current because they were last sale transactions which in the context of this particular industry was a very good indication of what the seller who gave that information would next charge.
Now, we argue that the buyer would not ordinarily act against the self interest and by remaining silent co-sellers to bid too high, and we think that as this Court has recognized extensive and specific information on current prices available to a relatively small group of sellers buying for the same market, will resolve in mitigation of competition.
The agreement here, the combination of the understanding evidence by the course of conduct over eight years and before can be understood by a sellers desire to avoid the possibility that his opponent had kept in the dark, may comment at a lower price and again, I note the explicit testimony which reveal this, which I referred to earlier, and the Court's finding that in most cases in fact, upon receiving information, the recipient quoted the same price as the price furnished.
I'd like to turn for a moment to the question whether there was a combination.
The court below seem to think that this could be regarded as unilateral conduct as in Theater Enterprises, but we're not dealing with unilateral conduct such as refusal to deal.
There were two parties to each request and each answer.
Furthermore, the District Court itself referred to an implied understanding that by giving the information, one gets the right to request the information and indeed I read appellee's brief of page 13 to concede that.
Hence, the conduct is not only bilateral joint, it's interdependent.
One simply doesn't do it without reliance in what the others are doing.
This is evidence by the fact that when a company went off the air, it went off the air both ways.
It didn't continue furnishing information, it not had furnished nor requested information.
The District Court was also mislead by the fact of request varied in frequency that information was supplied in different forms and that the defendants retain the freedom to stop furnishing information.
The variations and frequency merely met that the agreement worked when it had to, namely in those occasions where there was uncertainty.
Where the buyer wasn't talking or wasn't being accurate.
The different forms of the information as I try to explain to you Mr. Justice Fortas did not make very much difference because with the manuals that existed here and with the practices of the trade, the information was readily translatable and we can't assume that the parties here were engaged in a useless exchange of stale information.
Finally, the fact that each company maintain its freedom to furnish information is another way of stating that it pertain that the right to depart and go off the air.
The fact that they usually furnish information, rather than always furnish information does not mean that there was not a course of conduct here, such usual conduct over an eight year period is evidenced enough of a combination even the most explicitly conceived conspiracy does not operate to perfection.
Justice Potter Stewart: Mr. Zirmann.
Mr. Zimmerman: Yes.
Justice Potter Stewart: As I understood you earlier in the argument, you took position that the history of over production in this industry and the history of new entries into a somehow help to establish your case in restraint of trade.
Mr. Zimmerman: Were not relying Mr. Justice Stewart, but --
Justice Potter Stewart: Why don't you were?
Mr. Zimmerman: No, I was saying that it confirms -- we're arguing that the necessary effect here is to inhibit --
Justice Potter Stewart: Is the restraints rate, the new entry and the over production.
Mr. Zimmerman: Right.
Justice Potter Stewart: Now, how about the history of constantly lowered prices?
Mr. Zimmerman: To be expected when you have overcapacity.
To be expected when you have overcapacity, but the point is that the adjustment isn't being made properly.
Justice Potter Stewart: I don't quite understand how that -- maybe too bad, but it's -- how does it establish a restraint of trade?
Mr. Zimmerman: You establish a restraint of trade in this type of case when you assume that the necessary effect -- look, the purpose of this if you accept the Government's view, was to avoid unnecessary price cutting.
Inadvertent price cutting due to ignorance of what the buyer is getting.
They therefore enter the combination, if you accept our view.
The combination provides the precise information which avoids that uncertainty.
We argue under those circumstances, the necessary effect is to ameliorate, not to end price competition.
There are many cases here in which the buyer would reveal the price and there would be competition.
There was ample price information to the parties, so that the economic forces that worked would be working, but the point is, it was not working as it should have and this is evidenced, we think though, I'm not relying on it, by the fact that you have chronic overcapacity and entry.
Justice Potter Stewart: Well, what's the difference economically if buyer reveals the price or if another seller reveals the price?
Mr. Zimmerman: Because you're deprived by having the sellers agree with another that they will get the price if the buyer doesn't -- deprive the buyer in a situation where he probably needs it of a bargaining to namely silence.
That's the difference.
Chief Justice Earl Warren: Mr. Seymour.
Argument of Whitney North Seymour
Mr. Whitney North Seymour: May it please the Court.
Let me in the few minutes, just try to summarize the situation as I see it as a result of Mr. Zimmerman's argument.
This case were filing -- all the respondents who filed the common brief in this case because the question was common to all of them, the common denominator was that all of the defendants from time to time, when they couldn't get the information from their own records and they didn't trust the information when they got it from the buyer, would call up another manufacturer and ask him for his last price, and this was done by telephone, and this is the universal practice which is challenged in this case and the Government says on that fact alone and the speculation that people would not cut their prices anymore and they had to, we will establish the combination of violation of the law.
Now it -- the meetings that counsel has talked about as Your Honors will find are few smaller trait gossip meetings involving three or four of the defendants not challenged as illegal and not a part of this practice at all.
They were just thrown in for color and the practice was this telephoning practice which I referred to.
Now, Mr. Zimmerman said that after they telephoned, the fellow got the information was nominally free to go about his business.
It's stipulated and it's found that every one of the prices fixed was priced -- was fixed in the individual judgment of the seller in his business judgment alone.
He was nominally free, he was free and he exercised that freedom and there's not a word of proof in this case that he was under any restraint or under any coercion.
Now, come after recess to the precise manner of competition.
And the fact that there was wholesale price cutting in this industry.
The prices went down and the prices vary, people were taking away customers all the time from other people and they were not nominally free, they were free, that's the heart of it.
Now, what is the Government really challenging here?
The Government is really challenging the maple flooring decision under the guys of not challenging it by saying, that when there's an exchange of price information or when there's price information furnished and the word exchange is not an accurate one, because there wasn't an exchange here, each companies sometimes go to another company and gather information, it's only in that sense that there was an exchange.
What they're really saying is that such a practice, one not disapproved, not specifically disapproved in a consent decree which has been on the books for 28 years and which everybody has relied upon, that such a practice is now per se unlawful, and that the Court are to so declare because this case was tried on a stipulation, the findings were largely agreed too, where the findings weren't agreed to, they were based upon documents or other stipulation.
And so, the Government is coming in and asking the Court somehow to review not this ordinary findings of the District Court, but are to renegotiate the stipulation, and though I submit that when Your Honors look at the stipulation and the findings, you'll find that the conclusion of the District Court reach was inescapable on this record.
Now, if there is a case, some other case, in which there is supplying of price information and some kind of an agreement as to the prices, some kind of a stabilizing of the prices, some kind of a uniform of the prices, none of which were present here.
Let them bring such a case and give this Court and the trial court the economic pieces which this Court has insisted in White Motors and others is essential if it's to expand the group of per se violations.
This is not a proper case for expansion.
So, that that's the summary of our position and I will -- just say this in addition before the lunch recess.
This was a practice followed by the 18 defendants in this case.
Those in existence said that the time of the consent decree by them and by their successors, large and small and it was regarded as vital to their operation to know what the price alternatives of buyers are, and that's stipulated, and that's agreed and they agreed findings.
This is vital information and it's stipulated as to each company that the company needed the information in order to compete.
This was a highly competitive business as Your Honors will when you see the charge.
Justice Abe Fortas: That would apply to everything, that apply to all over our economy wouldn't it Mr. Seymour, that they need that price information about the competitors --
Mr. Whitney North Seymour: Of course, otherwise you're asked to fire a cannon without knowing where the target is.
And I submit that the idea that our great economy has been built by balancing demand and supply into a position where it can't grow or shouldn't grow is a kind of a fantastic approach to the problem.
May it please the Court, perhaps just a little more on the nature of this industry, as I think I've said this case challenges the trade practice which goes back to at least 1940 when the consent decree which did not enjoined the dissemination of information on best transactions was entered.
There are 18 of the 51 companies in the Southeastern part of the United States involved in the case.
The number of companies and the number of plants has grown because the business of the customers have grown has been an enormous increase in the furniture business in the southeast and that's one to the main purposes of the use of these containers.
The containers are used to ship furniture, fruit, cigarettes and other things while they're made to specifications anyone of the companies can make them.
There's no published market.
There is no -- there are few published price list and therefore in order to get information to enable a company to compete, it has to get it somewhere, and the Court found that -- and it was stipulated that it was vital to have information about buyers alternatives here as elsewhere and the usual method of getting information was to -- if the seller had to sell the purchaser before to look at his own records and if not to ask the potential customer what he was buying for and usually the customer supplied that information, obviously it was to their advantage to do so.
And if not that then occasionally and usually according to the findings where they had some doubt about information which was supplied by the customers, did the practice of telephoning and getting information from the competitors.
But, when the information was obtained from competitors while the findings indicate that in a majority of cases, the new potential supplier would bid the same amount that he understood was being bid by his competitors, if he couldn't get the business that way, he cut the price and if he cut the price, the old supplier would cut the price and it happened all the time.
And the findings indicate that price competition was rife, that it was highly competitive business and that this practice of price cutting went all the time and I'm going to show you some affirmative evidence or I'll tell you about some affirmative evidence before I get through.
As I said --
Justice Hugo L. Black: Mr. Seymour.
Mr. Whitney North Seymour: Yes sir.
Justice Hugo L. Black: You're making --
Mr. Whitney North Seymour: Yes.
Justice Hugo L. Black: Those that are in the lawsuit -- understand?
Mr. Whitney North Seymour: Yes.
Justice Hugo L. Black: (Inaudible)
Mr. Whitney North Seymour: Yes.
Justice Hugo L. Black: Now, is the same arrangement open to the (Inaudible)
Mr. Whitney North Seymour: I can't answer that.
Justice Hugo L. Black: But you participate in the --
Mr. Whitney North Seymour: I can't answer that but I have no reason to doubt that it is.
I don't know whether or not the case was brought charging only these 18, nobody ever inquired about the others but I can assume that an industry practice of this character is probably followed by everybody.
The consent decree was relied on by everybody and probably the practice was followed by anybody but I can't answer Your Honors specifically.
I said before recess that this case was submitted largely on stipulated facts and I think its important to realized that because its upon the stipulations and the agreed findings that the court below largely based its judgment and Mr. Louis Bronstein who was here handled the case for the Government in the lower court and handled it in a various statesmen's like fashion.
He is a very able and tough adversary.
The Court urged the parties to try to get together on stipulations instead of taking the Court's time with a lot of miscellaneous testimony and exhibits and after Mr. Bronstein had deposed 34 representatives of the defendants, they proceeded to the stipulation table and after some months there, the stipulations which are in this record were arrived at and I submit that its not an occasion for looking in to little fragments of the deposition as Mr. Zimmerman did in one reference this morning in saying “well, look at this, here the Government has stipulated the facts, the basic facts, the broad sweep of facts and I submit there's no occasion for the Court to have to revert to these depositions but if you do, you find as in most other depositions or testimony of 34 witnesses that some say one thing and some say another and its out of the total of this that this stipulation was arrived at.”
And you can find a little fragment here, a little fragment there that will support almost anything but you can't find any that will show that there was any agreement on price or that anybody was constrained as to what price he should charge, he didn't have full freedom of action and that I submit is the key to it.
Justice Abe Fortas: Mr. Seymour, I suppose that if there were price uniformity or price stability in this industry, that the effect of the exchange of price information would be some evidence of a combination, conventional antitrust --
Mr. Whitney North Seymour: Well, I have no doubt it would be pointed to as some evidence of that but you barely need to --
Justice Abe Fortas: And it could be -- and could be relied on to some evidence of that.
Now, the Government admits that there's no as I understand it that there's no indication of price stability here.
What they say as I get it is that there would have been more vigorous competition than if there had not been this exchange of information, is that your understanding of the theory?
Mr. Whitney North Seymour: Mr. Zimmerman if I understood him said, if you assume the effects, you can establish the restraint and that's the Government's case.
They assume without any proof that it has have this effect upon competition and upon that assumption they say there was a combination and restraint of trade.
The trouble with that is there's no such proof and so it's only a matter of assumption.
Now, just on the fact -- factor stipulation, one other thing which I think is significant.
The stipulations were arrived at after the Government had a grand jury investigation which did not result in an indictment when they called many witnesses, when they gotten thousands of documents and we supply, the defendants supplied the list of 10,000 costumers and they apparently found no costumer who complained about this practice because no costumer was ever called and there's no testimony or stipulation showing what a costumer would testify on this subject and I submit that the case is not a proper one for the Court to go behind the stipulations and as if the parties had made different stipulations.
Justice Byron R. White: Mr. Seymour, did I understand Mr. Zimmerman to say that in addition to the stipulation, in other words, an agreement upon many other findings of fact?
Mr. Whitney North Seymour: Yes, and if Your Honor will look in volume one --
Justice Byron R. White: Well, I notice here at page 183, there are some 326 findings of fact.
Mr. Whitney North Seymour: Well, that the agreed findings begin at page 55 and run on for 150 pages and those --
Justice Byron R. White: Agreed finding, was that it?
Mr. Whitney North Seymour: Those are the findings --
Justice Byron R. White: I see.
Mr. Whitney North Seymour: Where the indication in the margin as to whether they were agreed or not agreed and those, the agreed findings are the basis for the trial court's findings and those agreed findings in turn were based upon the underlying stipulation which is also in this record, the several stipulations.
Justice Byron R. White: But the District Court, did the District Court makes some independent findings?
Mr. Whitney North Seymour: Yes.
Where there were -- if Your Honor will look at that agreed set of findings, you will see some matters which are underlined.
Where the parties did not agree and there in some cases, the Court basing his conclusion on the stipulation or documents of record made independent findings but the critical findings, the dispositive findings here stem from the stipulation and the agreement I think.
Now, -- if Your Honors will look at the sweep of those agreed findings and the sweep of the practice of price competition and the need for this information and how it was used, you'll see one other thing which I ought to mention at this stage.
If a supplier had supplied the costumer before he could find out the price of course by looking at his own records, the price he charged.
Now, one did not always adhere to the same price and he couldn't rely on the fact that another supplier would adhere to the same price because it's also stipulated that if there were changes in cost or changes in supply or changes in specifications, those prices would not be adhered to.
So you cannot take it just because the price was charged once that it will still be the charge -- the same charge.
After the costumer or after the records of the supplier as a source, the supplier would then ask the costumer and the costumer would supply information, sometimes information which the supplier doubted but usually supplied information.
Now, the important part of this is that it didn't make the slightest difference where the information was obtained as to how the seller who got the information behaved.
He behaved in exactly the same way in seeking further business, whether he got the information from his records or from a costumer or from a competitor and therefore to say that any of the alleged defects stem from this exchange of price information seems to me to be without foundation.
Now, I'm going to push on here and say only that as we've said in our brief, it -- I think the Government's statement of the questions really rather elides the fact that so much of this record was stipulated and basis it rather on some fragments here and there.
I said before recess that it really were there was a common denominator here of the practice which was challenged, which was the practice of getting information by a telephone and then supplying it in due course when it was asked for on a wholly different transaction.
Mr. Zimmerman said this morning that in some cases, people gave not only past transaction information but current code information.
Now, its clear from the findings that only a part of all the defendants ever supplied the code information but the case was tried on the assumption that it was the common denominator information that was the thing that bound all these defendants together and therefore I submit that there's no occasion to explore separately the few cases where there was quotation information supplied.
If that made a difference, the Court would have to dispose of the case by dismissing as to some and not as to others and what the Government was trying to do as it just trying to do here is to hold all the defendants together on the exchange of information about past transactions.
The fact that some defendants might have interpreted that phrase differently, I think does not affect the basic legal position.
Now, on the question of combination, I won't take any real time on that.
I must say that the cases don't clarify entirely what is a combination and what is a conspiracy or an agreement.
Here, what happened was that a supplier would call up another supplier and ask for some information.
Knowing that in due course that supplier might expect to have the courtesy reciprocated not in connection with that transaction but in connection with the wholly different transaction and that's all there is in the way of consensual basis for whatever this -- whatever you want to call this.
Each supplier had sometime asked and then as a matter of reciprocal courtesy at some other time supplied some information.
Sometimes a few request, sometimes more request and so you have a sort of a situation of reciprocal commercial courtesy at work.
Now, the Government says that's enough to make it a combination.
It seems to me not to fit any of the existing authorities on that subject but it isn't vital because if it was a combination, it was not a combination to restrain trade because it did not result in restraining in any degree the price which any supplier would get for his product.
It did neither coerce nor restrained and so however you break it down.
If you say it was a combination, it was not a combination in restraint of trade.
My own view is that the District Court was quite right on this record in concluding that this was sort of like the mutual courtesies which we all do each other and which cannot be regarded as a combination just because we expect when we give him.
Justice Thurgood Marshall: Mr. Seymour --
Mr. Whitney North Seymour: Yes.
Justice Thurgood Marshall: Is there anything pro con in the record as to the small suppliers that are not in this group?
Mr. Whitney North Seymour: I think not, but there are small suppliers in the group.
Justice Thurgood Marshall: No, I mean is there any -- that they were denied this information or anything?
Mr. Whitney North Seymour: No, nothing of a kind.
Justice Thurgood Marshall: One way or the other?
Mr. Whitney North Seymour: It's absolutely neutral on that subject.
Justice Abe Fortas: Mr. Seymour, is there anything in the record on the price history in the industry?
Is there a tendency for prices to be uniform or the cluster?
Mr. Whitney North Seymour: Well, may I at this time ask those of Your Honors who want to look at Charter two, look at volume three which contains significant information.
The Government put in no proof about the course of price history and the defendant's confronted with this kind of a record did their best and these charts in volume three show it.
Now, the first chart in volume three shows how prices of everything else was going up while the prices of containers were coming down, a practice which result which one would not expect if there was any kind of a price conspiracy or price fixing arrangement however tenuous.
The next group of charts shows how the prices varied between the defendant's plants and shows that there was absolutely no uniformity of price as between the defendants or within plants.
The next group of charts which is a very significant group which begins about the middle or begins on page 21, shows the business gained and lost by these defendants and it shows on page 22 for example, in those columns that each of this companies in every year gain some business and lost some business to competitors.
And for example in this chart on page 22, the Container Corporation which is my plant in the year 1960 did business with about a third of -- about of third of its costumers were people with whom it had not done any business the year before and about a third where people with whom it didn't do any business the year following.
Now, it's found and stipulated that generally speaking, costumers change suppliers only when they got a cut in price and therefore it's reasonable to infer that all this changes were results of the price competition in the industry and the fact that there was widespread price cutting.
Now beyond that, the next group of charts shows how the price went in almost -- almost like a seismograph during a convulsion and the prices went like this as between companies and as between plants and because of the difficulty of getting more than five lines on a single chart, that these are rather grouped geographically as plants of various competitors but Your Honors will see as you look through this that the price was all over the place and was all over the places between plants and as between defendants.
And then going on, there's another series of charts stored at the back of the volume which shows that there was a great variation from so-called manuals.
Now, each company had a manual which views to compute price although they were rarely if ever published and their manual was departed from as shown here both up and down, usually down for manual.
So, nobody who knew what anybody else's manual is could surely compute the price.
And then finally, there's another group of charts in that same part of the volume which show departure from board prices which is another possible way of computing the price.
Justice Abe Fortas: I'm beginning to think that perhaps what the Government is seeking is a perceived rule with respect not to price fixing but with respect to a “combination” to exchange current prices information.
Mr. Whitney North Seymour: I think that's -- I think that's perfectly evident.
What they're saying is, were entitled to bar this access to knowledge among competitors who must there after compete in ignorance because we say the effect might be to somehow chill price competition.
When there's no proof of that, the proof is of the most active kind of price competition, the most destructive kind because it takes costumers away in large numbers year to year, and that in my view is exactly what the --
Justice Byron R. White: Mr. Seymour, on page 567 on the opinion of the District Court it says, the plaintiff conceives, I think that that's the United States conceives that if it had only part on the complaint that the defendants had agreed to obtain price information it would have no case?
Mr. Whitney North Seymour: Yes sir.
That concession was --
Justice Byron R. White: I take it that what you're saying is the Government is just taking an entirely different position here?
Mr. Whitney North Seymour: Well, the -- I think the Governments position in the lower court was if they just charge exchange “a price information” they would have no case.
They went beyond that and charge the effective price information but they didn't prove any such effect.
They relied as to its effect on what they said was the natural effect of the exchange.
Justice Byron R. White: Well, the Court says, goes on and says that the District Court says that the plaintiff therefore has the additional burden of showing that from such inferred agreement, namely, the exchange price information, the Court should further infer that there was an agreement to use such exchange price information.
Mr. Whitney North Seymour: I think what the Court is saying really is that you have to have a combination which restraints trade and if there was a combination, it didn't show any restraint of trade.
And what do you say its one agreement or two agreements doesn't make much difference.
The fact is that they did not prove any such restraint, the record shows the contrary and now, let me push on very rapidly just to touch on the couple of other points.
The Government relies here on the cases decided before Maple Flooring, American Column and Linseed Oil and the Sugar institute case decided after Maple Flooring and says these, this arrangement was or this combination was invalid under those cases.
Now, I won't take Your Honors time to try to describe those cases but Your Honors will recall that they were very tight and explicit arrangements by which in every case, information about prices was supplied, there was per leasing of the price structure.
In the Column case, the prices went up over a 300% as a result of the arrangement.
In the other case, they were stabilized.
There were fines and forfeitures in the Linseed Oil case for any departure and there's nothing of that kind here and Maple Flooring I submit lays down the principle that knowledge which invokes the self interest of sellers and lets the sellers use the knowledge to compete in any way that suits there situation which is the situation here clearly permits.
The kind of information that was supplied here and that was recognized when the consent decree was made and largely in reliance on the Maple Flooring case but my friend says, “well, in Maple Flooring, they didn't have any information about particular costumers.”
But they did in the Cement Institute case and the Cement Institute case, information was supplied about particular costumers because of the fact that in that case, it was the practice to order cement from a lot of different suppliers in order to get a lower price even if you weren't going to use it and that was kind of a commercial fraud and the information about that could be exchanged.
I don't say --
Justice John M. Harlan: Mr. Seymour.
Mr. Whitney North Seymour: Yes, sir.
Justice John M. Harlan: What was the essence of the charge in the case that led to the consent decree?
Mr. Whitney North Seymour: Well, it was a broad -- it was broad price fixing charge which included references to an earlier trade association, one not involved here and the one involved here is not charged at all and the injunction provisions and the consent decree bar the kind of trade association activity which were involved in the earlier case.
But they exempt the exchange or dissemination of information about past transactions and it stipulated and found that every defendant relied upon the provisions of that consent decree and doing the business this way.
And I submit that of course the consent decree is not binding on Your Honors but at some precedent for the fact that the Government has recognized for a long, long time that this practice does not have the pernicious effects alleged now and if this practice elsewhere does have such pernicious effects so that Your Honors can be asked to extend again the area of first day violation, it ought to be approved and ought not to be assumed just on the basis of speculation.
Chief Justice Earl Warren: Mr. Zimmerman, before we go to the next case, I would like to ask you the same question I have asked Mr. Seymour.
Do you take this people who were charged as the only ones who engaged in practices or is the practice open to all alternate to building the (Inaudible)?
Rebuttal of Zimmerman
Mr. Zimmerman: I'm -- again, I have to give the same answer that Mr. Seymour gave Mr. Chief Justice, I do not know.
The only information that I have is that the president of the Dixie Company testified that he exchanged information only with people that he could trust.
Some suggestion that the exchange may not have included everyone in the industry but beyond that I cannot say and I don't think the record were disclosed.
Chief Justice Earl Warren: I understood Mr. Seymour exactly rely on and have to do some exploring, don't they?
Practically a thousand and some small (Inaudible), I'm not talking about this lawsuit.
Mr. Zimmerman: Well, we picked out all the substantial companies, there were a number of new entrance, I don't know how many of the other companies would have been relatively new entrants and I assume that we chose those on as to whom we had evidence.
The grand jury which began this was inspired by a complaint of a costumer and I suppose we tract the grand jury to see who was involved in this.
Justice Abe Fortas: Well, Mr. Zimmerman, may I take advantage of this to ask you whether you agree that the Government is seeking a per se rule here?
That is to say that it's per se violation of antitrust laws once you have proved that there is a combination among the defendants to exchange current price information as to individual costumers.
Mr. Zimmerman: No, I think the rule we are advancing here Mr. Justice Fortas is that when you have an industry which is dominated by a relatively, relatively small number of sellers, then the precise exchange of current price information with respect to particular costumers necessarily as an inhibiting effect on pricing because --
Justice Abe Fortas: Well, is that so.
Mr. Zimmerman: Of the ability of that small group to visualize the necessary consequence.
Justice Abe Fortas: Without any proof as to --
Mr. Zimmerman: As to effect.
Justice Abe Fortas: The effect.
Mr. Zimmerman: As to effect.
Now, in this case, we have explicit proof that this was their purpose but the Court ignored it because it seem to think we had to prove a subsequent agreement and we don't, an American Column makes it clear that we don't.
Justice Abe Fortas: Alright, but no proof -- you don't claim that you got any proof in this record as to specific effect on price in the market?
Mr. Zimmerman: Well, yes we have specific findings which indicate that when the information was supplied, the recipient quoted the same price, we have that but we did not even attempt to go into the question of what was happening to prices that it seem to us is not necessary after the Socony-Vacuum case.
Justice Hugo L. Black: This is (Inaudible) --
Mr. Zimmerman: The 18, Mr. Justice Black control 90%, six of the 18 controls 60%.
Seven of the 18 controls 70% and the 18 as a whole control 90%.
Justice Hugo L. Black: Do you submit that (Inaudible) --
Mr. Zimmerman: Well, I would assume that one can infer that if they didn't -- perhaps they weren't interested in helping competition and indeed we don't think they were.
Justice Hugo L. Black: except that the rule (Inaudible).
Mr. Zimmerman: Maple Flooring Mr. Justice Black is a very interesting case.
Actually, there were 365 sellers representing but 33% of the industry who were, I'm sorry, I'm speaking of American Column.
American Column is a case in which the Court found illegally exchange of information with 365 sellers representing but 33% of the industry.
Maple Flooring was a case in which the information exchange was only as to past transactions without identity of particular costumers, neither of which --
Justice Hugo L. Black: (Inaudible)
Mr. Zimmerman: I think there were about 22.
Justice Hugo L. Black: (Inaudile)
Mr. Zimmerman: I believe so.
Justice Hugo L. Black: (Inaudible)
Mr. Zimmerman: I think they had most of the business but there was no exchange of current or specific price information and the Maple Flooring exchange indeed went on here and we didn't challenge it, that's what the trade association was doing.
Justice Hugo L. Black: Yeah, alright.
Do you have the (Inaudible), you mean day to day?
Mr. Zimmerman: Yes.
Justice Hugo L. Black: (Inaudible)
Mr. Zimmerman: Oh, we do not claim any evidence that the price went up.
We are not -- we are not --
Justice Hugo L. Black: You said something -- (Inaudible)
Mr. Zimmerman: I stated that the purpose of the exchange as to explicit information was to avoid unnecessary in terms price cutting.
That in order to eliminate doubt as to what the price was so that there wouldn't be price cutting.
They exchanged specific information as to prices a seller was quoting to a specific costumer and this was the arrangement and this was the combination.