Full opinion text
MACK, Circuit Judge. By petition filed March 30, 1931, the United States seeks a decree under the provisions of the Sherman Act and acts amendatory thereof and supplemental thereto (15 U.S.C.A. § 1 et seq.), dissolving the’ Sugar Institute, a trade association incorporated under the laws of New York, and enjoining certain corporations, firms, and individuals, defendants herein, from engaging further in an alleged conspiracy in restraint of interstate commerce in sugar. In addition to the Institute, the defendants are fifteen sugar refinery companies which either have been or are members thereof and various individuals who either have been or are active in its management and in the direction of the activities alleged to constitute the conspiracy. The testimony is transcribed in over 10,000 typewritten pages; more than 900 exhibits covering many thousands of pages were introduced in evidence. The petition charges a comprehensive conspiracy affecting almost all phases of the sale and distribution in the domestic markets of domestic refined cane sugar,, and incidentally beet and offshore sugar. The complicated and frequently disputed issues of fact and of law involved must be approached with the more important factors of the sugar industry in mind. I. Background. The Institute was organized in December, 1927, and began operation the following month. The scope of its activities may be gathered to some extent from its “Code of Ethics,” reproduced in the Appendix: hereto. The implications of the code were-, worked out in great detail by “interpretations” adopted pursuant thereto. The code,, together with these rulings the nature of.' which is hereinafter more fully described,, reveals much of the purpose and plan ofi. the Institute. The Institute -members refined practicably all of the imported raw sugar processed. in this country. They describe their product as “domestic refined.” In recent years,, the wholesale value thereof has. been as>. much as $500,000,000. Prior to the Institute, they provided in excess of'80; per cent» of the sugar consumed in the United) States. They have since supplied from 70, per cent, to 80 per cent, thereof;, in some states, particularly in the New England: and Middle Atlantic areas, they have-supplied in excess of 90 per cent.; in only a-, few states throughout the country is their, share less than 55 per cent.. Ex. E-15A Manufacturers of beet and. of. domestic.cane sugar and cane refineries located in the insular possessions and foreign countries provide the remainder of the nation’s supply. Domestic refined, beet sugar, and foreign and insular refined known in the trade as “offshore” refined, constitute about 99 per cent, of the nation’s supply. The balance, which consists of domestic cane grown and refined principally in Louisiana, is not, so far as the record shows, an important factor in the national markets. Quantities of various sugars used in the United States in recent years are shown in Ex. D-15. Defendants’ refineries arc located in the vicinity of Boston, New York, Philadelphia, Baltimore, Savannah, New Orleans, Galveston, and San Francisco. Only two defendants operate more than one plant: The National Co., with three refineries near New York: the American Co., with refineries in or near Boston, New York, Philadelphia, Baltimore, and New Orleans. In 1927, American accounted for 25.06 per cent, of all sugar produced by defendants, National, for 22.07 per cent; the others in that year ranged from Henderson’s 1.13 per cent, to California and Hawaiians’ 10.84 per cent. Ex. Y-14. Capital employed ranged from Henderson’s $2,037,975 to American’s $119,854,340. Ex. E-17. .Raw cane sugar used by defendants is imported principally from Cuba and to some extent from the insular possessions. It is obtained by clarifying juice extracted from the cane at mills near the plantations. The raws, which usually contain about 96 per cent, pure sucrose, are further clarified and purified at defendants’ domestic plants to produce sugar 100 per cent, sucrose and ready for consumption. Ample supplies of raw sugar in a steadily declining market have been available since the formation of the Institute. The government does not contest defendants’ claim that the refined sugar produced by them is, as to physical and chemical properties, a thoroughly standardized commodity. It is undisputed that at least since the Institute, the product of the various defendants has generally sold at a uniform price in any given trade area. The government insists, however, as a basis for contentions hereinafter discussed, that because of certain preferences created by advertising and other means, the sugars of the several defendants are economically different products. Beet sugar for many years has been an important factor in the domestic market, and offshore sugar, since the Institute, has increasingly become such. See note 2, supra. Either or both offer some competition to defendants’ product in nearly all trade areas (Ex. E-15), and each has always sold at a differential below domestic refined. The sugar beet is grown and the sugar therefrom produced and sold chiefly in the Middle and Far West, providing in some states well over 75 per cent, of the supply. It competes, too, with other sugars, in a number of Southern and Middle Atlantic States. Ex. E-15. Although for most purposes practically identical with domestic refined, it has ordinarily, for several reasons, sold at a differential of 20 cents per hundred pounds. In the early years of the beet sugar industry, the grade was inferior; thus, a prejudice grew up against it, which to some extent has carried over to the present time. Beet sugar, unlike domestic refined, is not sold in full assortments of grades and packages and is therefore less attractive to the trade. While 20 cents has been -the customary differential, at various times and localities,, it has ranged from 10 cents to 35 cents both before and since the Institute. The relation of the Domestic Sugar Bureau to the beet manufacturers is similar to that of the Institute to the domestic refiners. They were informally organized at about the same time. A few months. later, in the spring of 1928, the Bureau was incorporated, with headquarters in Chicago. Its “Code of Ethics” is substantially identical with that of the Institute and is admittedly .patterned after it. While defendants insist that the two trade associations are entirely independent, they freely admit that the Institute has sought and obtained a high degree of co-operation from the Bureau in practically all of its activities. Joint meetings have been held, questions of policy have been discussed, and action jointly taken. The two associations have continuously communicated by letter, telegram, or personal contact of their officials. The evidence, however, does not support the contention that defendants have effected an agreement with the producers of beet sugar, through the Bureau, to maintain a fixed 20 cents, differential, even though that differential may have prevailed more consistently since the creation of the Institute than theretofore. Offshore sugar, which is practically a new factor in the domestic market, is refined principally in Cuba and to some extent the insular possessions. Its sale in this country is in the hands chiefly of four selling agencies. Its important trade areas have been Middle Atlantic and Southern States, although substantial quantities of it have also been sold in other parts of the country. In some states, it has provided from 25 per cent, to 40 per cent, of the total supply. With the exception of Hershey sugar, represented by H. H. Pike & Co., all of it is sold at a differential from 5 cents to 10 cents below defendants’ sugar. This is due to the fact that it has not been in the fnarket long and also because it is offered in a limited assortment of grades and packages. An agreement with the offshore interests (except Hershey) to sell at a fixed 5-cent differential is charged against defendants. The government relies, in this connection, on a letter written by the executive vice secretary of the Institute, in which the statement is made that, “the Armstrong people [representative of an offshore refinery] * * * had sold' their sugars strictly in accordance with our Code Rulings on a price differential of 5‡.” Ex. 324. While this might be susceptible of the inference, as contended, that the 5-cent differential was the result of an agreement, the explanation offered therefor by defendants, that it was merely expressive of the fact that Armstrong had sold at such a differential, is equally plausible. In view of the lack of other evidence to support the government’s charge and the failure to refute defendants’ evidence of a varying differential, I cannot find that any such agreement was made by them with the offshore interests even though, as defendants freely admit, co-operation has been sought and obtained in many activities. Certain alleged activities, however, are denied by defendants; of course, as to these they likewise denied having sought such co-operation. There is one other important factor in the sugar industry, which the government charges has also been drawn into the conspiracy by defendants. The sugar merchandising firm of W. H. Edgar & Son of Detroit, although not directly engaged in the refining of sugar, offered substantial competition to some of the defendants by reason of its manifold activities. In 1928, it merchandised, according to testimony of' the head of the firm, about 2 per cent, of all the sugar consumed in the United States. It distributed both cane and beet sugar and was sales agent for some beet companies in which the Edgar family was heavily interested. In addition, the Edgar family controlled the Edgar Sugar House,. which engaged widely in the storage of sugar and also acted as sugar brokers. The Edgar interests, moreover, operated a chain of cash and carry sugar stores in Michigan, Indiana, Ohio, New York, West Virginia, and Pennsylvania. The Institute sought and obtained from the Edgar interests a high degree of co-operation. II. Pre-Institute Secret Concessions. Defendants assert that for a number of years prior to the formation of the Institute, the sale and distribution of sugar had become increasingly characterized by grossly unfair and uneconomic practices. This situation, defendants urge, provides a complete legal and economic justification for the steps taken through the Institute to correct it. Defendants assert that the sugar industry has always purported to be one in which the product was sold on open published prices and that this in fact was done up to the year 1924. During the period 1917 to 1919, when the industry was under governmental control, prices were fixed and all forms of concessions and rebates were forbidden by the government. But beginning perhaps as early as 1921 and increasingly thereafter, the practice developed on the part of some but not all refiners of giving secret concessions from their basis prices. Arbuckle, California & Hawaiian, Henderson, Revere, & Western were the exceptions. They have never indulged in the practice of secret concessions. The so-called “unethical” refiners, however, gave secret concessions and rebates in 60 per cent, to 70 per cent, of the sugar sold by them in 1927, as estimated by one of defendants’ principal witnesses. R. 4594. The need of secrecy was urgent, for if and as soon as it became known that a specific concession was grantcd, it would be generally demanded. That concessions and rebates were widely granted was of course generally known in the trade. Each refiner, too, was able to find out in a general way the approximate prices and terms of his competitors. Moreover, many of the contracts carrying concessions revealed that fact on their face. But in the conditions prevailing prior to the Institute, it was impossible for refiners and purchasers to know with any degree of accuracy what prices and terms were granted in the innumerable transactions. The mere fact that many of the larger customers of the “unethical” refiners not infrequently received no concessions indicates that the efforts at secrecy were at least fairly successful. Various causes undoubtedly contributed to the development of these selling methods. Probably chief among them is the substantial overcapacity since the war, stated in defendants’ answer to be about 50 per cent. Among other causes assigned by defendants were: (1) The lack of statistical information as to the amount of production, deliveries, and stocks on hand, causing overproduction; (2) the uncertainties which prevailed in the raw market during this period and which made the refined sugar industry highly speculative; (3) the fact that since 1922, most sugar has been sold through brokers and is thus somewhat outside of the refiners’ control; and (4) the standardization of the several defendants’ sugar, which has made their sale depend almost entirely upon prices and terms offered. The concessions granted were largely, although not entirely, arbitrary in character. While they were given principally to the large buyers of sugar, no system was followed in this respect; they were frequently granted to the smaller purchasers as well. Defendants assert that the refiner was thus largely at the mercy of the purchaser, who, in order to secure a particular concession, would falsely represent that he could get it from a competitor. While there is little direct evidence that such misrepresentations were extensively resorted to, nevertheless the refiners’ fears in this respect appear to have been genuine. Defendants further claim that the discriminatory nature of the concessions which were granted, was leading to the creation of monopolies among the distributors; that the leaders, most successful in obtaining concessions, were thereby potentially enabled to, and in fact to some extent'did, secure monopolies in their respective trade areas. Some smaller distributors, defendants contend, had thus been put into so disadvantageous a position that they were disinclined to push the sale of sugar and as a result, in 1927, per capita consumption fell off about 10 per cent. It may well be that such discriminatory concessions tend to' create territorial monopolies in sugar distribution. The evidence shows that certain smaller distributors did suffer because of the advantages enjoyed by the larger ones, such as W. H. Edgar & Son. But I believe that the advantages enjoyed by them and by several other large distributors were in largest measure attributable to their greater efficiency. Moreover, there is no substantial evidence that these distributors in fact obtained such monopolies. With respect to the falling off of consumption in 1927, it must not be overlooked that, as one of defendants’ principal witnesses indicated, the “slimness campaign” of 1927 had a substantial effect in discouraging the use of sugar. R. 4598. There is, however, some evidence that distributors of sugar did refrain from' pushing it because they could not sell it profitably. Defendants’ contention that “the refiners who ’did not indulge in concessions were well on their way to becoming martyrs,” and that “their problem was how long they could survive” (Fact Brief, pp. 9, 10), is without substantial support in the evidence. While the “ethical” refiners may have been inconvenienced through the sales methods of some of their competitors and probably believed its effect on them to be harmful, they had no part in the first steps taken to form the Institute and were in no danger of being eliminated from the industry. Three of the five refiners who suffered losses in the year 1927, when the profits for the industry as a whole showed a substantial decline, were “ethical” companies. But the 'deficit shown in the statement of one of them, California & Hawaiian, is without much significance because of the special arrangement subsisting between C. & H. and its parent corporation, -the owner of sugar plantations in Hawaii. Moreover, despite the “fair competition” inaugurated by the Institute, two of the “ethical” companies showed substantially less profits for the post-institute period, 1928 to 1931, than for the pre-institute years of 1925 to 1927, while the profits of several of the “unethical” companies increased substantially in the post-institute period. The conditions which defendants allege confronted them just prior to the Institute are thus summarized in their brief: “The refiners had had ample experience with the regime of secret concessions. They had witnessed a falling off in their sales due to the reluctance of wholesalers and retailers to sell sugar, because they could not compete. Their customers in large numbers were complaining that the system was wrecking their business. Sugar distribu-' tion was being concentrated in a few hands, and some of the refiners themselves were facing ruin.” Fact Brief, p. 15. As the foregoing discussion reveals, this picture is greatly exaggerated. The declining profits for the year 1927 must be attributed, at least in large part, to causes other than the secret concessions system. Defendants themselves have complained of the enormous overproduction and the ruinous dumping that took place during that year. The “slimness campaign,” too, had its effect. Nevertheless, although the picture is by no means as black as painted and the serious consequences foreseen, the loss of business, and the ruin of refiners and distributors are to a large extent speculative, ■ the industry was characterized by highly unfair and otherwise uneconomic competitive conditions; arbitrary, secret rebates and concessions were the rule, and the widespread knowledge of market conditions which the courts and economists have recognized as necessary for intelligent fair competition were lacking. I believe the refiners’ testimony that they were disturbed economically and morally over the then prevailing conditions. There is evidence, too, that at least American was concerned at the possibility of liability under the Clayton Act because of the discriminations resulting from the various concessions. I believe, too, that among the purposes for which the Institute was formed were, as defendants insist: (1) The elimination of secret concessions and selling of sugar on open, publicly announced terms; (2) the gathering and the dissemination of statistics not previously available, as to refined stocks, consumption, location of stocks throughout the country, production, and current deliveries; (3) the elimination, of practices which they deemed wasteful; and (4) the institution of an advertising campaign to increase consumption. But it will be apparent, from a discussion of the actual activities of the Institute and of its members, that these were by no means the dominant purposes. III. The Sugar Institute. The agitation which finally resulted in the formation of the Institute began in the summer of 1927, Representatives of American, National, McCahan, Federal (reorganized in 1929, as Spreckels), and Lowry, the then operator of Pennsylvania, met with W. L. Cummings, later general counsel of the Institute, to discuss the situation. A series of meetings were held, the condition of the industry; with particular reference to undesirable practices and secret concessions, was discussed, and in September, Cummings submitted to representatives of the Attorney General’s office a proposed certificate of incorporation and by-laws for a trade association, together with a number of suggestions respecting tra.de practices. In September, the other refiners were invited to attend a joint meeting. Representatives of each refiner met frequently in December; a Code of Ethics was worked out. It was submitted to and discussed with officials in the Attorney General’s office and, as a result, some changes were made. According to Cummings’ testimony, the code, finally adopted on January 7, 1928, was substantially identical with that worked out when the discussions with the Department of Justice officials were held. With the exception of the two changes noted in the appended copy, it has retained its original form. Members of the Institute meet annually as well as iti occasional special meetings. The board of directors meets generally monthly, and the executive committee, composed of certain members of the board, weekly. Various other committees have met from time to time. In February, 1928, Judge Sydney Ballou, until then general counsel of California & Hawaiian, joined the Institute staff as executive secretary at a salary of $75,000 annually. Upon his death in October, 1929, his duties were assumed by the vice secretary, whose anuual salary was $25,000. Other executive salaries amounted yearly to about $15,-000. According to the testimony of the office manager of the Institute, other annual expenses were: Salaries of a staff of stenographers, statisticians, etc., about $45,-000, and overhead about $85,000; advertising averaged $450,000 annually. The Institute statement for 1930 shows, too, that in that year some $29,000 were spent for investigations. It is interesting to note that the total expenses for that year were set at some $838,000, of which, some $641,-000 were for “advertising and publicity.” Expenses were defrayed by levy on the members proportionate to their production. Although the defendants have emphasized the reporting and statistical services of the Institute, the minutes and other records of the meetings of members, directors, executive committee, and other committees, abundantly demonstrate that the Institute and its members were to a very high degree occupied in their meetings with the various problems and practices relating to sales and distribution. Defendants have insisted throughout that their activities have been characterized by the utmost good faith. In this connection, they cite their open dealings with the Attorney General’s office both immediately prior to and after the formation of the Institute. As far as the evidence shows, the Department of Justice, in its three investigations of the Institute in 1928, 1929, and 1930, was given complete access to the Institute files. The record likewise shows that from time to time, as new issues of the Code and Code Interpretations were printed, copies thereof were forwarded to the Attorney General’s office. But the Department of Justice was not notified of various important steps taken by the Institute which are now charged to be illegal and of course not as to those activities in which the Institute denies having engaged. Defendants’ good faith must be largely a matter of inference to be drawn from their admitted or proven actions with respect to such and other matters. For convenience and clarity, the various activities of the defendants upon which plaintiff bases its charges of illegality will be classified and separately considered, although most of them are more or less vitally related to one another. Defendants assert that the fundamental principle underlying practically all of these activities is expressed in Code 1: “All discriminations between customers should be abolished. To that end, sugar should be sold only' upon open prices and terms publicly announced.” To attain these results, defendants insist, was their primary purpose in creating and maintaining the Institute. Necessarily and admittedly implied in the agreement to sell only on open publicly announced prices and terms is the further obligation to adhere thereto until public announcement shall have been made of any change. IV. Price Reporting. With respect to the reporting system adopted by the Institute, the government alleges: “Defendants have concertedly adopted and maintained a comprehensive system for the exchange of detailed and complete information relating to .the prices, terms and conditions of current and future sales; they have agreed that the prices, terms and conditions of sale shall be reported to the Institute by the Members as a condition precedent to any sale of sugar; and they have agreed that no Member shall deviate from, or change, such prices, terms, or conditions until such Member shall have given at least 18 hours notice of such deviation or change. The Institute has immediately relayed all such reports by wire to all members. Defendants have sold and are now selling all sugar under a binding mutual agreement to adhere strictly and without deviation, to the prices, terms and conditions reported to the Institute, and to maintain such prices, terms and conditions until they shall have given at least 18 hours notice of proposed changes and deviations as aforesaid.” The reporting activities of the defendants concern not only changes in the basis price, but all changes in the sales conditions and terms. The present discussion, which is concerned only with price reporting, sufficiently indicates the nature of defendants’ system. 1. The price reporting system was worked out in its final form only about a year after the formation of the Institute. Certain- points with respect to the earlier practices must be clarified before considering it in its final form. (a) In February, 1928, the following provision was adopted by the directors; it appeared first in the code issue of February 17, 1928, as an interpretation: “Three O’Clock Notice. “Except to meet a competitive price already announced, the Institute recommends to its Members that they announce changes in price not later than three o’clock of the day before' the changed price becomes effective. The first announcement of a change in price should he sent by telegram to the Executive Secretary, he to notify the other Members.” (Italics mine.) The government contends that the italicized provision required that all changes in price be first announced to the Institute. The language is not clear. The Institute’s office manager testified (R. 5120) that it meant merely that only the announcement of the refiner first to announce a change in price was to be relayed to the other members by the Institute; this appears to have been the early practice. In support of its contention, however, the government refers to the following memorandum found in American’s files: “Announcement of change in price, either an advance or decline, must be made before 3 P. M., to become effective at the opening of the market the following morning. “When change in price has been decided upon, and before making announcement to our brokers and the trade, copy of the change must be furnished Judge Ballou.” Ex. 385-K. However, unlike other memoranda in this series admittedly prepared by American’s sales manager, the one quoted did not carry his signature. With respect thereto he testified: “I do not know who prepared it and with respect to the second paragraph which states * * * [that when a] change in price * * * has been decided upon and before making announcement to our brokers and the trade, copy * * * must be furnished Judge Ballou; that has never been done.” R. 5259, 5260. He, as well as several other refiners, testified emphatically that the actual practice has always been first to notify the trade through the various channels used prior to the Institute and then, the Institute. The evidence, in my judgment, establishes that there was never any obligation to give the Institute the first notice of a change in price. The important requirement imposed upon the refiners was to make an open announcement to the trade. In fact, California & Hawaiian, with the possible exception of a brief period in the early days of the Institute, never exchanged any price information with the Institute. I am inclined to accept defendants’ explanation in this matter. In any event, in the next printing of the code, November 26, 1928, it was expressly provided that the trade should be notified, by the individual refiners before the Institute, of a change, in price and that the Institute should relay to all members not only the first announcement of a change, but all subsequent announcements. The latter practice had been adopted by the executive secretary on March 14, 1928. As defendants explain, this was done because the price change of that date was a complicated one, and it was then found advisable to continue the practice in the interests of accuracy. (b) It is charged, too, that defendants were under an obligation to notify the Institute not only when they changed their prices, but also when, after a change had been announced by another member, they chose not to follow it. In support, the following minute from the executive committee meeting of March 6, 1928, is quoted : “Executive Secretary expects all members of the Institute to give him immediate notice of what they do or decide not to do.” Ex. 21-26, pp. 29 -30. Nothing in the record, however, indicates that this procedure was followed. The Institute office manager testified that in its entire history, notification to the Institute of what a refiner decided not to do had occurred only one or two times. R. 5122, 5123. (c) Complaint is made of the activities during its first six months in prohibiting what is known in the trade as “repricing”; that is, giving the benefit of a price decline retroactively to contracts taken at a higher price. Usually this occurred when a decline was announced late in the day and was applied to all of that day's business. Defendants admit that during the first few months of the Institute, an attempt was made to prevent repricing as a violation of the code requirement of openly announced prices and they assert that their “Three O’clock Rule” was drafted to prevent the practice. However, the practice was customary in the trade. The Institute rule encouraged buyers to hold q& until, after 3 o’clock awaiting a possible decline and thus caused a bunching of orders after 3 o’clock. In addition, the announcement of a decline to be effective the following day of course ended all business on the day of the announcement. Consequently, in August, 1928, the attempt to eliminate all repricing was abandoned; partial approval thereof as an “exception to open prices publicly announced” was given in the next printing of Code Interpretations, November, 1928, in the following terms: “The custom of the trade permits giving the customer the benéfit of the refiner’s lowest price during the day, that is, a contract entered into or stigar delivered in the morning may be repriced at any lower price announced during the day.” Repricing has been practiced at least since August, 1928. Although expressly sanctioned only as to business of the day of the decline, refiners occasionally have repriced beyond that period. But the above-quoted “interpretation” was evidently intended to prevent this and must have had some effect in discouraging it. 2. Present practice. Price reporting through the Institute was developed in its present form at least by the beginning of the second year. It is, of course, an integral part of defendants’ plan that “sugar should be sold only upon open prices and terms publicly announced.” (a) The present form of the Three O’clock Notice Rule is as follows: “Except to meet a competitive price already ‘ announced, the Institute recommends to its members that they announce changes in prices not later than 3:00 o’clock. Such timely announcement will enable a price change to receive wide publication through the evening and morning papers. It is, furthermore, in the interests of uniformity which will be appreciated by the trade.” As to declines in price, its effect was to compel announcement thereof before 3 o’clock in the afternoon. Defendants insist that its sole purpose was to enable the price change to receive wide publication through evening as well as morning papers and the ticker service which stopped at 3 P. M. With respect to announcing price advances, the practice under the Institute pursuant to the “rule” differed from that which had theretofore prevailed. The great bulk of sugar always was and is purchased on what is known in the trade as “moves,” although very substantial quantities are, of course, sold from time to time apart from moves. A move occurs when a price advance is announced. Some times, prior to the Institute, .an advance was announced to go into effect immediately, usually, however, to become effective at some future time. But regardless of the form of the announcement, some period of grace was always allowed during which sugar could be bought at the price prevailing before the advance. In order to obtain their sugar at the lower price, the trade, unless of course they felt that the move occurred at too high a price, would then enter into contracts covering their needs for at least the next 30 days. But prior to the Institute, this period of grace allowed for purchasing at the old price was uncertain in duration. Sometimes it was very short, a matter of hours; some times sugar buyers who did not learn of the move in time, sent their orders in too late to buy at the old price. Until the Three O’clock Rule was cast in its final form, it compelled a period of grace from 3 p. m. to the opening of business on the next day because its express language provided that changes in price should be made “not later than 3:00 o’clock of the day before the changed price becomes effective.” Until the opening of business the day after the announcement, buyers had been enabled to get the lower price. Early in 1929, the quoted language was deleted from the pro,vision. Why this was done is not apparent. Thereafter the price advance could have been made effective at once. But at this time the definite period of grace had doubtless become well established; in any event, refiners have not availed themselves of the Code privilege to effectuate an immediate advance. Price advances continued to be announced to become effective the following day or even later. There is no evidence that the refiners consulted with one another after an advance had been announced by one of them or that the grace period was in fact used by them, to persuade a reluctant member to follow the example set; and this, too, despite the business necessity of withdrawing an advance unless it were followed by all. The effect, so far as the record reveals, of the Three O’Clock “Rule,” in and of itself, seems to have been advantageous to the trade in case of a price advance in that the uncertain period of grace has been replaced by a definite one. (b) Other material code interpretations covering price reporting at the time of suit, follow: “Posting. Refiners’ basis price of sugar should be kept posted, in accordance with the long established custom of the trade, upon their bulletin boards available to access by the trade. In addition, they should notify the trade of price changes in the manner customary previous to the for-, mation of the Institute.” “Notification to the Institute. (a) Price Changes. The Institute requests members before notifying the Institute of price changes to post or otherwise announce them in their customary manner and then to notify the Institute of action which has been taken.” “Notification by Institute. Upon receipt of a price, change notification the Executive Secretary will give the same to the news agencies in New York which operate commercial tickers. He will also advise by telegram members of the Institute, the Domestic Sugar Bureau, and other distributors of refined sugar.” Defendants contend that these Code interpretations, except in so far as they make the Institute the clearing house for price changes, provide substantially for continuing the pre-institute practice. The testimony of American’s sales manager and of Revere’s, Arbuckle’s, and California & Hawaiian’s representatives is that price changes before the Institute were listed on the refiners’ bulletin boards, brokers, customers, and news agencies were notified, and frequently, as a courtesy, competitors would be telephoned, and -that except for notifying the Institute, price changes, during the post-institute period have been similarly announced. They testified, too, that both before and since the Institute they have received information of the price changes of their competitors from their customers and brokers and from various news services. It appears to be unquestioned that before the Institute, general price changes were disseminated and became known to the entire trade very quickly- Defendants insist that the use of the Institute as a clearing house for price change information had for its purpose, and resulted only in, a wider and more accurate dissemination of the information. The Institute notified not only the members, but also numerous news agencies and the ticker services. It is unquestioned that the price change data was circulated by the Institute without any comment. But it is clear that the Institute price reporting system did effect important changes in the methods of announcing and quoting prices. The witnesses as to preinstitute practice, except American’s sales manager, represented the ethical refiners and testified to their practice. But in the case of the other refiners, a somewhat different situation appears to have prevailed. Gardiner, editor of the Willett and Gray sugar trade journal, a government witness, testified that the list prices which many of the refiners announced and which, as such, were published in the trade journal, were merely nominal quotations and bore no relation to the actual “selling bases” at which their sugar was sold. This is confirmed by the testimony of American’s vice chairman and McCahan’s vice president. No witness has explained the reason for it. The published list prices and the “selling bases” of some of the unethical refiners differed widely. The selling basis was the price at which they purported to sell; the secret concessions were from this basis. In the case of American, the selling basis was given widespread publicity through brokers and customers. In this connection, McCahan’s vice president testified: “If we have a soft market, and we sold yesterday to five customers at $5.-00, and sold today to one at 4.90 and the market remained soft, and tomorrow we sell to two or three customers at 4.90, I would call that a change in the selling basis.” R. 10413. And the evidence indicates that changes in “selling bases” were made from time to time without formal public announcement in advance of sale. Changes therein did, however, become known very quickly to the trade and to competitors; but frequently that knowledge would be obtained not through news agencies or published announcement; customers of a certain refiner would refuse to buy at his then price and would tell him that another refiner was quoting a lower price. All this, of course, is entirely apart from sales carrying secret concessions. It is thus clear that the practice of public announcement since the Institute differs considerably from the prior practice, at least with the unethical and as will hereinafter appear, in some important respects with the ethical refiners. Of course, the actual adherence to the open price announcements, which has very generally prevailed since the Institute, is vastly different from the prior departure therefrom through a very substantial number of arbitrary secret concession transactions, and other special arrangements. V. Statistics. Government’s charge denied by defendants, with respect to the statistical services of the Institute, is that, while defendants exchanged the most intimate details of their business operations, they failed to supply essential information to the trade. A distinguished economist, testifying for defendants, subscribed to the view that: “Perfect competition requires a perfect knowledge of the state of the market,” and, “A perfect market is a district, small or large, in which there are many buyers and many sellers all so keenly on the alert and so well acquainted with one another’s affairs that the price of a commodity is always practically the same for the whole ol the district.” (Italics mine.) R. 10209, 10210. On cross-examination, he was asked and he answered as follows: “O. Does your truly competitive situation contemplate that the purchasing trade as well as the sellers shall have full information as to capacities and production, deliveries and stocks of the finished product on hand, and the like? A. The more such information they would have the closer you would approach to the conditions of a free competitive market. “Q. In other words, you do not really have a freely and truly competitive market unless the purchasing trade as well as the selling trade have all of that information. “A. You have not perfect competition. You may have a good deal of approximation to it, but not perfect competition.” R. 10332. Defendants’ assertion that they supplied the purchasing trade with all those items of information “necessary to place it on an equal footing with the refiners” is not supported by the evidence. 1 shall consider separately statistical matters relating to data (1) collected by the Institute, (2) that as to which the Institute did not concern itself. 1. Most important among the Institute’s statistical services exclusive of price and terms reports are the following {all reports were compiled chiefly from data supplied by defendant refiners) : (a) Each week the Institute sent out an individual report to each refiner showing'the total weekly melt (i. e., production), deliveries and stock on hand of all members, and the.percentage thereof of the refiner so notified. (b) The Institute reported weekly the melt and deliveries for the week of each member as well as his cumulative total melts and deliveries from the beginning of the year to the end of such week. Key letters were used to designate the several refiners; each refiner had a code of all designations. {c) -At the end of the contract period on each price move, a report or reports were sent out showing for each refiner the total undelivered and unspecified sugar on the contracts. Reports were also sent out showing by states the total amount of undelivered sugar for each refiner; here, too, the key letters were used instead of names. (d) Reports of capacities of the several refiners were circulated several times during the Institute period. (e) An annual compilation of statistics collected by the Institute with analyses thereof was sent out. The foregoing reports were furnished to each of the Institute members, but to them alone. (f) A quarterly statistical report was sent to Institute members and a few others, chiefly representatives of off shore refiners. (g) A weekly report showing total deliveries in- each state for such week by all refiners, but not by each of them, was sent to the Institute members, Hershey, and its sales representative. (h) Each month a report showing total deliveries by states of all refiners for the month, together with a comparison with the same in each of the four years immediately preceding and the same data for the year to the end of such month, was sent to the same parties. (i) A weekly report, showing by states with some subdivisions thereof total sugars on consignment at consignment points for all refiners but not for each of them, was sent to the same parties. (j) A similar report showing in-transit stocks was sent weekly to the same parties. (k) Reports showing the amount of sugars moved into each state during the week by all the important differential routes for refiners own account and separately, at customers’ request, together with some analyses thereof, were sent to the same parties; some such reports were also sent to L. W. & P. Armstrong, representatives of an offshore refiner. (l) A monthly report showing the total cane and beet sugar deliveries separately by states was sent, to Institute members, the Domestic Sugar Bureau and several representatives of off shore refiners. The only data disseminated to the trade generally were: (a) Weekly statistics as to the total melt and total deliveries. These statistics were widely distributed through news agencies, banks, brokers, etc. (b) Monthly statistics of the total deliveries of all sugar, divided so as to show the amount of domestic cane, imported cane, and beet sugar, delivered during the period. These statistics were widely distributed through news agencies, banks, brokers, etc. See Ex. 1-2. Data as to capacity of the several refiners were available to the public in substantially similar form to that obtained by the Institute, in an annual trade publication “Sugar Reference Book and Directory” and in less complete form in the annual Report of the American Sugar Refining Company. Defendants point out, too, that the total refined stocks on hand could be computed by the simple method of subtracting from the total melt of each week the total deliveries during each week and as evidence of their good faith they call attention to their» practice in recent years, of continuing to supply statistics on melt and deliveries at a time when the trade could readily calculate therefrom how greatly refined stocks were increasing. None of the other statistics, as defendants themselves state, were available to the trade from any source except the Institute. In May, 1931, after the bill in this suit was filed, the executive vice secretary reported to an executive committee meeting that a representative of “Facts About Sugar,” a trade publication, had suggested “that it would be of benefit to the trade in general if the Institute would release to the trade more statistics than at present.” A directors’ meeting thereafter voted to release combined statistics on the total consumption of cane, beet, foreign, and insular refined sugar by states, together with figures showing the per capita consumption of each state, for the years 1928, 1929, and 1930. Ex. 21-26, pp. 649, 659. Defendants explain their failure to give additional statistics to the trade only by the suggestion in their brief, but without support in the evidence, that the information relating to the consignment and the in-transit stocks was “of little or no interest to the trade generally.” No explanation whatsoever is given for not making the other data available to the trade. The refiners by thus circulating only among themselves certain collected information were thereby placed in an advantageous position with respect to purchasers. The purchaser’s relative handicap is graphically revealed by reference to certain of defendants’ exhibits. They show that data relating to total production and deliveries given to the trade and the calculable stocks could have had only a limited significance for the individual purchaser and were even likely to mislead him. For such data reflect only the general situation for the country as a whole and for all the refiners. But the competitive set-tips in the several tráde areas throughout the country differ widely. In no state do all of the refiners, and in many of them only a few, offer substantial competition ; the business done by those competing in any trade area is not proportionate to their total sugar production (Ex. F-15). In the light of such facts, the vital character of the statistics which defendants did not reveal to the trade becomes apparent. The names of refiners competing in various areas would of course be generally known. Data relating to production and deliveries of individual refiners, to deliveries by states, to consigned and in-transit stocks for the several states, obviously would illuminate the situation in the several trade areas; but this was withheld from purchasers. While the refiner was thus informed with respect to the several areas in which he was interested, the customer knew the situation only with respect to the country as a whole. Defendants also obtained an advantage over the trade by keeping to themselves the data concerning the customers’ unspecified and undelivered balances at the end of the 30-day contract period. Under the Institute regime, the refiners professed to compel customers to adhere to the contract terms of giving specifications for delivery and withdrawing sugar not later than 30 days after the contract was made. In fact, however, if it appeared after a “move” that it would be impracticable to enforce these terms, and the determination of that question depended in part at least upon what the statistics revealed, the Institute committee in charge of such matters sometimes recommended a later dead line. The more detailed facts concerning the enforcement of contracts and the question of the legality of concerted action in respect thereto are hereinafter discussed. It is unnecessary to consider whether the Institute’s collection of such data, and its circulation only to members, would have involved unfair dealing with the trade, if each member had been expected to and had in fact ' used the information independently and not concertedly with the other members. 2. Complaint is made, too, of defendants’ failure to collect and publish certain statistics. The contention is that if there is to be open competition, data from which demand for refined sugar might be calculated and that relating to defendants’ stocks of raws on hand and to the prices paid therefor ought to be collected and disseminated. During the early days of the Institute, efforts made to obtain from the members information as to new business entered each week was unsuccessful because three of the refiners, National, American, and Arbuckle, who together did well over 50 per cent, of the business of all defendants, refused to report thereon. Such figures, as the Institute’s statistical expert testified, were necessary to estimate “the demand.” He further stated: “I always considered that the most valuable statistical information we could get.” R. 8651, 8652. The reason given for not collecting data as to the stocks of raws was that, had such information become known generally, raw sugar sellers would have been placed in a position to “squeeze”, on “spot sales” any refiner whose stock of raws happened to be low; further, that this information would be of little value in any event and that the only important information with respect to supplies of raws would be that of the world market situation which was readily available from many sources. Justification for the failure to collect and disseminate information as to the raw sugar 'transactions of the several refiners is sought on the ground that this had always been kept entirely secret; the refiners did not reveal it even to one another. The evidence shows that about 50 per cent, of all raw sugar purchased was bought in secret transactions rather than in open market. The refiners did not want their competitors to know the “trades” and concessions that they were getting. Moreover, as Place of McCahan testified, if a refiner is' buying sugar, “he does not want to bull the market on himself * * * so he tried to hold the transaction confidential until he has bought all the sugar that he wants.” R. 8174. The witness Gardiner, editor of Willett & Gray, testified, too, that if it were known among the buyers of refined that the refiners were buying raw below its then open market quotation, it might to some extent cause them to stop buying because of their belief that a weak raw market indicated an early decline in refined. R. 401. It thus appears that various factors entered into the Institute’s failure to collect data relating to these matters, but chiefly the unexplained hostility of individual refiners and the possibility of jeopardizing the refiners’ position with respect to sellers of raw sugar. But the evidence indicates that none of the information except that relating to demand was really important; in any event, defendants’ failure to concern themselves is no indication of bad faith or unfair dealing with the trade. In failing to collect such data, defendants have neither sought nor obtained any advantage, if it may be deemed an advantage, over purchasers, which they did not in fact possess individually prior to the Institute. VI. Boycott of Brokers and Ware-housemen. Most of defendants’ sales are negotiated through brokers; they receive their commission from the refiners. Some are exclusively sugar, others general food brokers. During the period January, 1928 to December, 1931, members of the Institute used 1,360 brokers. Much of defendants’ sugar is delivered in interior points from consignment; that is, from sugar stored by the refiner in an interior warehouse owned by parties other than a defendant, and thence shipped against contracts with customers in the area tributary to such warehouse. Until, withdrawn from consignment, the sugar belongs to the refiner. For the storage service, the warehouseman receives compensation from the refiner. Some warehouses store only sugar, others a great variety of foodstuffs and at times other goods. During the period January, 1928 to December, 1931, Institute members used 1,483 warehouses. Prior to the Institute, a broker and a warehouseman were frequently one, and/or also a merchant or other sugar user. So'on after the creation of the Institute, defendants adopted against such combination of occupations by a broker, a warehouseman, or a merchandiser or other purchaser of sugar, a definite policy expressed generally in Code 3 (d), 3 (e), and 5. Defendants virtually admit concerted action in requiring an election of only one of these business activities with a complete cessation of each of the others, and in refusing to deal with those who disobeyed. The reasons for adopting this policy in the light of the general factual background of the situation, the means taken to effectuate it, and the effects of and necessity, if any, therefor, will now be considered. 1. A combination of distribution functions in a single concern facilitated the grant by a refiner of secret concessions, difficult of detection. Thus a customer whom a refiner wished to favor might be paid what was called brokerage commia-. sions, although in fact no brokerage service was performed; or a refiner might place sugar with and pay so-called warehouse fees to a wholesale sugar merchant, although in fact the customer performed no real storage service but held the sugar on his own premises solely for his own use. A dummy warehouse corporation might even be set up in order the better to conceal the concession. . This so-called storage as well as bona fide storage with a customer also enabled him to sell the sugar to his own trade or otherwise to use it, without reporting to the refiner the time of withdrawal from consignment for the customer’s own account; the customer might then await a drop in the market and report the with.drawal as of such later time, thus obtaining the benefit of the lower price. By delaying reports, lie might also obtain an extension of credit terms. Brokers who stored sugar might by a similar manipulation of reports, use fluctuations in the market to favor their own customers; they might also divert sugar directly to customers’ premises and charge refiners for unearned storage. The evidence indicates that such action by broker-warehouse and jobber-warehouse concerns was at times authorized or acquiesced in by the “unethical” refiners as a means of conferring valuable secret concessions. That defendants appreciated their own paitial blame for such abuses is plain. Thus, the sales manager of Ar-buckle writing to Edgar in explanation of defendants’ policy against combination of brokerage, warehousing, and jobbing, said: “Were the Resolution [which embodied the policy] to require any justification, a cursory examination into rqcent trade practices (for which even some refiners are blamable), would quickly discover the reason for the rule.” Ex. 185. (Italics mine.) It is in my judgment clear (defendants do not say it in so many words but intimate as much in briefs and argument) that one very real motive for adopting the code rules was to assure the refiners, distrustful of one another, that, no one of them could successfully use any of these or similar devices. A like motive actuated defendants in other matters. Thus in arguing against long term contracts, they virtually admit that they disapproved of them because of a fear that some refiners would use them as a means of granting arbitrary concessions. Fact Brief, p. 343. Other “evils” which the code rules sought to eliminate were the fraudulent practices of delaying withdrawal reports and charging unearned storage without refiners’ consent. Such practices were made possible largely by such a combination of activities, and, in fact, were often indulged in by those who combined two or more of the several businesses. In all of these matters it is difficult to determine which of the secret concessions were obtained with refiners’ consent and which by the dishonest acts. While, because of this and other obvious difficulties of proof, it is impossible precisely to measure the extent of such fraudulent practices, the evidence indicates that it was substantial. In another respect, too, defendants insist that combination of functions necessarily led to unfair practices. Thus they assert that while the broker’s duty is to sell his principal’s sugar to as many customers as possible, his adverse interest, if he was also a dealer, would lead him to violate this obligation. Where distribution functions are combined, there dearly is opportunity for such double dealing,- which some brokers and warehousemen may at times seize. Brokers and warehousemen do have special duties toward the refiners; the latter depend upon them to obtain customers, to check consigned stocks, etc. The value to the refiner of one engaged in two or more- of the activities may frequently be impaired. But, on the other hand, a principal may permit his agent to have an adverse interest and such a business arrangement may well be advantageous to both. Ordinarily the only requirements for its legality are the principal’s consent to and the agent’s disclosure of his adverse interest. In the sale and distribution of sugar prior to the Institute; such arrangements were common. Despite the known adverse interest, such brokers and ware-housemen were employed. The evidence affirmatively shows, moreover, that such arrangements, from the refiners’ viewpoint, were not infrequently entirely successful; that concerns in substantial numbers, which combined distribution functions, maintained entire honesty and good faith in their dealings with the refiners. Such concerns were not averse to seeking and accepting special favors from the refiners, but this, of itself, of course cannot be deemed unfair or dishonest: toward those refiners who granted them. I deem it unnecessary to review in detail the evidence in this respect. Defendants’ brief virtually admits and the correspondence with one another and with brokers, warehousemen, and jobbers shows that honest dealing by such distribution agencies was not uncommon; indeed, that it was perhaps about, as usual as dishonesty. Another alleged evil in the combination of functions was that one who dealt with refiners in more than one capacity might obtain an advantage over a competitor who did not or could not do this. For example, to quote from defendants’ brief: “The result of a broker merchandising sugar is that through the brokerage which he receives he is placed in a preferred position over the ordinary sugar merchant” (Fact Brief, p. 106), and “The payment of storage charges to certain customers necessarily gives them an advantage over customers who are not paid storage and makes the net price of sugar to such customers lower than to the other customers.” Fact Brief, p. 109. The increased income received from two or more activities might enable the recipient to outsell a competitor. To what extent this in fact occurred does not ap