SUPREME COURT OF THE UNITED STATES
APPALACHIAN COALS, INC., ET AL. v. UNITED STATES
288 U.S. 344
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF VIRGINIA.
No. 504. Argued January 9, 10, 1933 -- Decided March 13, 1933
Appeal from a decree of the District Court composed of three circuit judges granting an injunction against a combination of producers of bituminous coal, in a suit by the Government under the Sherman Antitrust Act.
1. Competing producers of bituminous coal formed a corporation to act as their selling agent, with authority to set the prices. The industry was in grave distress, because of overexpansion, relatively diminishing consumption, organized buying, and injurious marketing practices within itself; and the members of the combination sought, through the agent, to escape those practices, promote the sale of their coal in fair competition, and sell as much of it as possible. Although they controlled a large proportion (73%) of the commercial production in the immediate region where they mined, the great bulk of their output was marketed in another and highly competitive region; and in view of the vast volume of other coal actually and potentially available, the conditions of production, and transportation facilities, there was no basis for concluding that competition anywhere could be injuriously affected by the operation of their plan.
Held that there is no present reason for an injunction under the Sherman Act.
2. The purpose of the Sherman Act is to maintain the freedom of interstate commerce in the public interest; its restrictions are not mechanical or artificial but are to be construed by the essential standard of reasonableness. P. 359.
3. The Act does not seek to establish a delusive liberty of interstate commerce by making normal and fair expansion impossible; it does not prevent those engaged in that commerce from adopting reasonable measures to protect it from injurious and destructive practices and to promote competition upon a sound basis. P. 360.
4. The mere fact that the parties to a combination eliminate competition among themselves is not enough to condemn it. The question is one of intent and effect, not to be determined by arbitrary assumptions, but by close and objective scrutiny of the particular conditions and purposes in each case. Pp. 360, 375.
5. Good intentions will not save a plan otherwise objectionable under the Sherman Act; but knowledge of actual intent is an aid in the interpretation of facts and prediction of consequences. P. 372.
6. A cooperative enterprise is not to be condemned as an undue restraint 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 would foster, fair competitive opportunities. P. 373.
7. A cooperative plan of competing producers can not be held illegal merely because they do not integrate their properties in a single corporation but keep their plants independent. In either case the test is the same: Is there an unreasonable restraint of trade or an attempt to monopolize? P. 374.
8. A suit under the Sherman Act to enjoin a combination is governed by the principles of equitable relief; and to warrant an injunction there must be a definite factual showing of illegality. P. 377.
9. Where a trade agreement was attacked and sustained under the Sherman Act before it was put in operation, the case being decided upon the purposes of the participants and the probable consequences of their plan, the decree directed the District Court to dismiss the bill without prejudice, but to retain jurisdiction, to the end that, should results of the plan in actual operation prove contrary to the Act, the case might be reopened by that court for further proceedings by the Government and the voluminous testimony already taken remain available in that event. P. 378.
Reversed and remanded.
1 F.Supp. 339, reversed.
Mr. Chief Justice Hughes delivered the opinion of the Court.
Mr. Justice McReynolds thinks that the court below reached the proper conclusion and that its decree should be affirmed.