Charles Evans Hughes

“ It is a fundamental and earnest contention of defendants that the occasion for the formation of the Institute was the existence of grossly unfair and uneconomical practices in the trade, and that a proper appraisal of the motives and transactions of defendants cannot be made without full appreciation of the sorry condition into which the industry had fallen. ”

“ The fact that, because sugar is a standardized commodity, there is a strong tendency to uniformity of price, makes it the more important that such opportunities as may exist for fair competition should not be impaired.
Defendants point to the abuses which existed before they formed the Institute, and to their remedial efforts. But the controversy that emerges is not as to the abuses which admittedly existed, but whether defendants' agreement and requirements went too far and imposed unreasonable restraints. ”

“ These price announcements must be considered in the light of the trade practice known as 'moves.' The great bulk of sugar, as the court found, 'always was and is purchased on what is known in the trade as 'moves,' although very substantial quantities are sold from time to time apart from moves.' A 'move' takes place when the refiners make public announcements that at a fixed time they will advance their selling price to a named figure, either higher than the presently current selling price or higher than a reduced price which the announcements offer before the advance. ”

“ While their product competes with beet sugar and 'offshore' sugar, the maintenance of fair competition between the defendants themselves in the sale of domestic refined sugar is manifestly of serious public concern. Another outstanding fact is that defendants' product is a thoroughly standarized commodity. In their competition, price, rather than brand, is generally the vital consideration. The question of unreasonable restraint of competition thus relates in the main to competition in prices, terms and conditions of sales. ”

“ On the other hand, such provision for publicity may be helpful in promoting fair competition. If the requirement that there must be adherence to prices and terms openly announced in advance is abrogated and the restraints which followed that requirement are removed, the just interests of competition will be sefeguarded and the trade will still be left with whatever advantage may be incidental to its established practice. ”

“ The trial court found that none of the other statistics supplied to members or offshore refiners were available except through the Institute and none were supplied or available to the trade. What the court considered to be 'vital data' relating to production and deliveries of individual refiners, to deliveries by states, to deliveries by states by all the important differential routes, to consigned and in-transit stocks for the several states, 'which would have illuminated the situation in the several trade areas where the competitive set-ups differed widely,' were withheld from purchasers. ”

“ They explain that the Institute continued to operate 'under the move system' because it is 'a natural growth essential to the economical conduct of the sugar business.' The cost of raw sugar makes up about four-fifths of the cost of the refined sugar. Raw prices fluctuate widely from day to day and substantially control the price of refined. Wholesale and retail distributors sell on a narrow margin of 5 or 10 cents a bag. They cannot afford to stock large supplies because of storage costs, dangers of deterioration, and the hazardous nature of the business. ”

“ And, while the collection and dissemination of trade statistics are in themselves permissible and may be a useful adjunct of fair commerce, a combination to gather and supply information as a part of a plan to impose unwarrantable restrictions, as, for example, to curtail production and raise prices, has been condemned. ”

“ Accordingly we have held that a co-operative enterprise otherwise free from objection, which carries with it no monopolistic menace, is not to be condemned as an undue restraint merely because it may effect a change in market conditions where the change would be in mitigation of recognized evils and would not impair, but rather foster, fair competitive opportunities. ”

“ Transportation.-The custom of the trade was to quote sugar f.o.b. refinery. Since the price was usually the same or varied but slightly, individual refiners sold in areas enjoying lower freight rates from other refineries by paying or absorbing part of the transportation charges. That is, the refiner added to the refinery price the amount of his 'ruling freight basis' or 'freight application,' which was the amount the customer was to pay as distinguished from the actual cost of the transportation. ”

“ And in order to obtain their sugar at the lower price, the trade, unless it was felt that the move occurred at too high a price, would then enter into contracts covering their needs for at least the next thirty days. Defendants point out that in actual practice the initial announcements might be made by any one of the refiners and that the move actually takes place only if all refiners follow a similar course. If any one fails to follow with a like announcement, the others must withdraw their advance, since sugar is a completely standardized commodity. ”

“ The court concluded that there was a definite possibility of lower prices to ultimate consumers as a result of combination of functions, because the increased income thus made possible, even apart from advantages obtained through secret concessions and fraudulent practices, gave opportunity 'to outsell competitors who engage in only one occupation.' The most important purpose of defendants, the court found, in compelling the separation of occupations was to aid in preserving 'the uniformity of price structure,' which would otherwise be threatened. ”

“ Brokers and warehousemen.-Most of defendants' sales are negotiated through brokers who receive their commissions from the refiners. The court found that prior to the Institute, a broker and a warehouseman 'were frequently one,' and might also be 'a merchant or other sugar user'; that concerns which thus combined distribution functions frequently performed a valuable service to the industry ”

“ The 'basic agreement' cannot be divorced from the steps taken to make it effective, and the requirements of the Institute must be viewed in the light of the particular opportunities which they cut off or curtailed. The crucial question-whether, in the ostensible effort to prevent unfair competition, the resources of fair competition have been impaired-is presented not abstractly but in connection with various concrete restrictions to which the decree below was addressed. ”

“ Questions of reasonableness are necessarily questions of relation and degree. In the instant case, a fact of outstanding importance is the relative position of defendants in the sugar industry. We have noted that the fifteen refiners, represented in the Institute, refine practically all the imported raw sugar processed in this country. They supply from 70¢to 80 per cent. ”

“ The freedom of concerted action to improve conditions has an obvious limitation. The end does not justify illegal means. The endeavor to put a stop to illicit practices must not itself become illicit. As the statute draws the line at unreasonable restraints, a co-operative endeavor which transgresses that line cannot justify itself by pointing to evils afflicting the industry or to a laudable purpose to remove them. The decisions on which defendants rely emphasize this limitation. ”

“ In that case, we decided that trade associations which openly and fairly gather and disseminate information as to the cost of their product, the volume of production, the actual price which the product has brought in past transactions, stocks of merchandise on hand, approximate costs of transportation, without reaching or attempting to reach an agreement or concerted action with respect to prices or production or restraining competition, do not fall under the interdiction of the Act. ”

“ Off-shore sugar is refined principally in Cuba and to some extent in the insular possessions. Its important trade areas have been the Middle, Atlantic, and Southern States; in some states it constitutes from 25 to 40 per cent. of the total supply. Both beet sugar and off-shore sugar are sold at a small differential below defendants' sugar. The trial court found that there was no agreement between defendants and the beet sugar manufacturers, or with the off-shore interests, to maintain any differential. ”

“ To require, under the penalties of disobedience of the injunction, the dissemination of everything that the Institute may learn might well prejudice rather than serve the interests of fair competition and obstruct the useful and entirely lawful activities of the refiners.
In this view we think that the clause in paragraph 7 'or any other statistical information of a similar character' should be eliminated. The preceding specifications as to melt, sales, deliveries, stocks on hand, on consignment, or in transit, and as to transportation and new business, appear to be adequate. ”

“ Defendants urge that the broker is the refiner's agent to sell to customers and the warehouseman is the refiner's agent for storage and delivery; that these agents act as a check on each other; that the refiners' concerted adoption of the principle against storing in customers' and brokers' warehouses was essential both to prevent discrimination among customers and to avoid impositions and frauds upon the refiners ”

“ Designed to frustrate unreasonable restraints, they do not prevent the adoption of reasonable means to protect interstate commerce from destructive or injurious practices and to promote competition upon a sound basis. Voluntary action to end abuses and to foster fair competitive opportunities in the public interest may be more effective than legal processes. ”

“ The finding of purpose and of the adequacy of alternative measures is sharply contested. But, while the parties present their respective views as to the details of evidence, there is no room for doubt as to the nature and effect of the restrictions actually imposed through the Institute. The findings of the court as to agreement and practice are fully supported. ”

“ Defendants urge that the abolition of the vicious and discriminatory system of secret concessions, thr ugh the adoption of the principle of open prices publicly announced, without discrimination, was their dominant purpose in forming the Institute, and that other purposes were the supplying of accurate trade statistics, the elimination of wasteful practices, the creation of a credit bureau, and the institution of an advertising campaign. ”

“ These statistics were widely distributed through news¢agencies, banks and brokers. The total refined stocks on hand could be computed by subtracting from the total melt of each week the total deliveries. During recent years when refined stocks were greatly increasing, defendants continued to supply to the trade weekly statistics on melt and deliveries from which the trade could readily calculate the increase. Data as to the capacity of the several refiners were available to the public in substantially similar form to that obtained by the Institute. ”

“ Contending that the trial court fell into 'fundamental error,' defendants assert that the Institute made no change in the historic marketing system of the sugar industry. They say, first, that the code and its interpretations did not in terms call for price announcements in advance of sales. ”

“ Supplementary restrictions.-The requirements and practices designed to support the basic agreement, and which the trial court condemned, relate to the employment of brokers and warehousemen, transportation, consignment points, longterm contracts, quantity discounts, and other contract terms and conditions, and to the withholding of statistical information. ”