Full opinion text
LINDLEY, District Judge. The information in this cause charges, in the first count, that defendants unlawfully formed and carried out, in part within the Eastern District of Illinois, a combination . and conspiracy unreasonably to restrain interstate commerce in food products; and, in count two, that they entered into and carried out, in the same manner, a con-spiracy to monopolize a substantial part of such products in interstate commerce, all in violation of the Sherman Act, 15 U.S. •C.A. §§ 1-7, 15 note. The corporate defendants are: The New 'York Great Atlantic & Pacific Tea Company, Inc., a New York corporation, The Great Atlantic & Pacific Tea Company of America, a Maryland corporation, The Great Atlantic & Pacific Tea Company, a New Jersey corporation, The Great Atlantic & Pacific Tea Company, an Arizona corporation, The Great Atlantic & Pacific Tea Company, a Nevada corporation, The Great Atlantic & Pacific Tea Corporation, a Delaware corporation, The Great Atlantic & Pacific Company of Vermont, Inc., a Vermont corporation, The Quaker Maid Company, Inc., White House Milk Company, Inc., Nakat Packing Corporation, and Atlantic Commission Company, Inc., all New York corporations and The American Coffee Corporation, a New Jersey corporation. Certain individuals comprise the so-called headquarters defendants, as follows : George L. Plartford, president of the first above named corporation; chairman of the board of directors of the second; president and director of the Great A & P Tea Co., Ltd., Canada, secretary and director of Atlantic Warehouses, Inc., N. Y., Great American Tea Co., N. Y., and the Arizona corporation; treasurer and director of the New Jersey and’Nevada corporations and director of the Delaware corporation. John A. Hartford, first vice president and director of the first named corporation, president and director of the Maryland, the Arizona, the New Jersey, the Nevada and the Delaware corporations and of The Great American Tea Company, New York; treasurer and director of Atlantic Warehouses, Inc., New York, vice president and director of The Great Atlantic & Pacific Tea Co., Ltd., Canada. R. W. Burger, assistant secretary of the Arizona, the New York and the Nevada corporations, the American Coffee Corporation, Nakat Packing Corporation, the Atlantic Commission Company, the Great American Tea Company, the Atlantic Warehouses, Inc., and The Great Atlantic & Pacific Tea Co., Ltd., secretary of the New Jersey and Maryland corporations, secretary and director of the Delaware corporation, assistant secretary and director of the Quaker Maid Company, secretary-treasurer and director of White House Milk Company, vice president, Stores Publishing Co., Inc., New York. Robert B. Smith (now deceased), vice president and director of the Maryland, New Jersey and Nevada corporations, and of the White House Milk Company; president and director of Nakat Packing Corporation, the Atlantic Commission Company, and the Quaker Maid Company and vice president of Stores Publishing Company. David T. Bofinger, vice president and director of the New Jersey corporation and the Stores Publishing Company. R. G. Ernst, vice president of the Quaker Maid Company. Francis M. Kurtz, vice president, American Coffee Corporation, New Jersey. H. A. Baum, vice president, general manager and director of Atlantic Commission Company, New York. Other defendants are: O. C. Adams, chairman of the board of'the Atlantic division; W. F. Leach, president of the Atlantic division; W. M. Byrnes, president of the Eastern division; J. J. Byrnes, president, New England division; R. M. Smith, president, Southern division; O. I. Black, general superintendent of Dallas unit; T. A. Connors, agent in charge of the national meat department of A & P; A. W. Vogt, agent in charge of the buying office, Milwaukee, Wisconsin; Business Organization, Inc., a New York corporation, and Carl Byoir, chairman of its board. The information sets forth at some length the respective participating activities of the members of A & P group in the food industry of the United States. It avers and the fact is that the New York corporation and the Maryland .corporation are holding companies, the first holding the stock of the other and the latter that of the other corporate defendants except the Vermont corporation which is owned by the New Jersey corporation; that defendants George and John Hartford, as trustees of the George H. Hartford Trust hold" all the authorized and issued voting stock of the New York corporation and, individually and as trustees, 99.97% of the authorized capital stock of that corporation; that besides retailing food through retail stores, the group processes, packs and wholesales food products and engages in brokerage business in such products. It is charged that headquarters control 'the buying; that the purchasing department is located at headquarters where food products to be retailed are purchased; that in various states, there are located other offices, known as buying and brokerage offices, where A & Ps agents and employees, under the direction of the grocery purchasing department, purchase various products, all of which are shipped to A ¡ & P warehouses and from there forwarded in interstate commerce to the retail stores, and that the stores, 6412 in number, in 3436 cities, constitute the conduit through which food products are moved in commerce from producers to consumers. It is charged that headquarters also control the selling and advertising of the entire group, dictate where stores shall be located and suggest profit rates and expense rates for all the stores. All defendants entered pleas of not guilty and both sides waived trial by jury. Voluminous evidence was submitted, both oral and documentary. The Government relies upon the records made by defendants in their corporate and group meeting minutes, their communications with each other and with others, testimony of suppliers from whom A & P bought food products, and that of producers of fruits and vegetables and the officers or agents of cooperatives producing and selling such produce. Defendants produced controverting evidence, both oral and documentary, submitting portions of its records as part of the res gestae. The Government has not offered evidence of any expressed undertaking to restrain interstate trade or to create a monopoly. It insists, however, that the policies and practices of the allied corporations and their officers from the year 1925 until the time the information was filed have remained constant, namely, lower buying prices for A & P than those of its competitors, realized largely through discriminatory preferences to A & P from suppliers, enabling A & P to undersell retail competitors and to off-set losses incurred in selected areas at a profit rate below cost of .operation. It complains, not of the size of the defendants’ enterprise but that, through vertical and horizontal integration reflected by the evidence, defendants have acquired and used tremendous power- in. such manner and employed such means as inherently involve unreasonable restraint of competition. It insists that A & P, in meeting competition in certain sections has so lowered prices as to result in stores in those sections being operated at a loss; that, to reimburse them for losses or lessened profits, stores have received allotments of other earnings which are first received at headquarters and then allocated to the stores; that these include, not only earnings of the wholly owned subsidiaries hut also stock gains, advertising allowances received from suppliers and various other “headquarters” profits, and contribute to an illegal result., i.e., they bar or handicap open competition; and that in certain sections, defendants have agreed with others to fix prices. It insists that there is adequate proof of illegal action by Atlantic Commission Company in that it acts as buying agent for A & P and at the same time as broker for vendors selling to other -distributors and as buying broker for others and eventually turns over all its profits to A & P. It insists that defendants have engaged in false front activities, the nature of which I shall discuss hereafter. In short, it is the Government’s position that it has proved beyond reasonable doubt that all of the actions of defendants disclosed by the evidence in the end amount inevitably to illegal restraint of trade as charged in the first count and to an attempt to create a partial monopoly as charged in the second count, while defendants insist that proper analysis of the evidence can lead only to a conviction that they never at any time intended to violate the law; that their recorded policy over a period of years has been to live within the law, and that they have studiously attempted at all times to meet competition fairly, without threat to its healthy open existence, all in order to achieve their only purpose—to furnish the consuming public with good goods at cheap prices and a low profit. It is obvious, therefore, that determination of which is the correct view, or a reconciliation of one with the other, involves the issue of whether the evidence points inevitably, beyond all reasonable doubt, to guilt, or whether it discloses such facts as are consistent only with innocence. In order to answer satisfactorily to myself the‘J resulting collateral questions, it has been necessary to give careful attention to a vast amount of evidence and, as the question to be solved has frequently been, from the viewpoint of each of the parties, one of determination of inevitable implications of largely undisputed facts, I have found it essential to scrutinize many minutes, resolutions, contracts, letters and other documents. To attempt to summarize the evidence fully and accurately would extend this memorandum to an unreasonable length. I shall attempt only to point out some representative or typical features in the hope that my complete consideration will be reflected by what I say. Historical Development and Present Status of A & P. A & P, as a genus, came into existence some 75 years ago. Defendants John A. and George L. Hartford, sons of one of the original founders, George H. Hartford, connected with the enterprise since early manhood, control the corporations forming the group, through the George H. Hartford trust, of which they are trustees. The group first operated only “economy stores,” run by one man, with no deliveries, no credit, no advertising and no telephones; later it opened various “combination stores,” carrying meats and vegetables as well as groceries, “special development stores,” and still later “supermarkets.” In 1920 there were 4,638 A & P stores in the United States, with sales of $235,303,000 and earnings, before taxes, of $4,806,000. At the end of 1924, there were 11,413 stores, sales of $352,093,000, and earnings of $13,-165,000. In 1925 occurred what the Government terms a reorganization and the defense a decentralization, under which all territory in which A & P operated was divided into divisions, of which, since 1938, there have been seven as charged in the information. On June 1, 1926, sales aggregated some 26.6% of the total U. S. Food business done by all chain stores, which, as a group, were doing 23.6% of the total grocery business of the United States. At that time A & P had 14,220 stores out of a total of all chain stores of 46,800. The controlling stock of the New York c.orporation is owned by the two Hartfords as trustees and that of the Maryland corporation by the New York corporation. The Maryland corporation owns the controlling stock of all other subsidiaries except the Great Atlantic & Pacific Tea Company of Vermont, Inc., which is owned by the New Jersey corporation, a subsidiary of the Maryland corporation. The relative positions of the executive officers is stipulated as hereinbefore set forth. The New York corporation does not handle merchandise. The Maryland corporation helps finance the operating companies—its subsidiaries or subsidiaries of its subsidiaries. The New Jersey corporation operates retail food stores in 24 states, the Arizona in thirteen states, other than those in which New Jersey operates, and Nevada in three states, in, addition to those in which New Jersey and Arizona operate. The Delaware corporation does not buy, manufacture or sell food products, but seems to have been created for the purpose of protecting the company’s name in states where A & P is not yet doing business. The Vermont corporation merely conducts liquor departments in the retail stores operated by the New Jersey corporation in the jtate of Vermont. Quaker Maid Company, Inc., maintains four manufacturing plants and ships its products to A & P warehouses, packed under A & P labels. The American Coffee Corporation buys green coffee in South America from producers and on the spot market which it sells to the New Jersey corporation at the ports of export and which is then imported and turned over to the national coffee department, roasted and distributed under A & P labels. The White House Milk Company, Inc., operates plants in Wisconsin, selling and shipping its products to the warehouses under A & P brands. The Nakat Packing Corporation packs and cans in four canneries in Alaska salmon which is sold and shipped to A & P warehouses. The Atlantic Commission Company, Inc., is qualified to do business in 36 states. It is commonly referred to as Acco and will be so designated here. Organized primarily to purchase fresh fruits and vegetables for A & P, it purchases from growers and shippers in the various producing parts of the country produce which it delivers to A & P warehouses and stores. By 1940 approximately 70 per cent of the merchandise purchased by Acco was shipped to A & P and about 30 per cent sold to competing trade, from which is derived profits in the form of brokerage. The Government claims that its chief purpose was to procure for A & P select quality at special prices and to divert relatively low quality produce to the outside trade at higher prices. Previous to passage of the Robinson Patman Act and the court decision enforcing it against A & P in 1940, Acco enjoyed substantial profits from brokerage collected from suppliers on products purchased for A & P. The mechanical set-up and business methods of all divisions seem to have been substantially the same, with perhaps the exception of the eastern, which operates entirely in metropolitan New York more nearly as a unit than the other divisions, in which diverse units are located, frequently widely separated. Divisions are not incorporated, but each has a president, one or more vice presidents, a treasurer, secretary, director of sales, director of purchases and director of operation. Each has, also, an advisory board of directors, of which the officers are members, and an executive committee, which meets frequently to decide-questions of current nature which can not wait for a full board meeting. Each division is subdivided into units, in each of which are located retail stores and, in most instances, warehouses which serve the stores. The units are not incorporated but each of them, too, has officers, including the general superintendent, who is often a vice president of the division, office manager, sales manager, unit buyer and warehouse superintendent, all of whom jointly constitute the unit executive committee-Supervisors, working under the general superintendents, visit, check and report upon the stores in the unit. Each store has a manager. Since 1925 the presidents of the divisions, together with the Hartfords, and Bofinger and others, have constituted the' general policy-making body. They meet quarterly at headquarters in what they term presidents meetings. Usually present have been the two Hartfords, until his death, R. B. Smith, vice president, Burger, secretary, Bofinger, vice president in charge of purchases and chairman of the merchandising committee, the division presidents and representatives of the national accounting and statistical departments and various other employees. All attending vote upon matters presented. Also meeting at headquarters are the merchandising committee, the sales directors, the purchasing directors and the comptrollers. At presidents meetings open discussion prevails, but it is obvious from the many records submitted that the voice of the Hartfords is a valued guide, indeed, the determining factor in deciding what is to be done. Any attendant may express his opinion but, in the end, I think it clear, the wishes of the two joint heads of the group constitute at all times the controlling factor in determination of policies for the entire A & P set-up. By 1942 A & P retails sales had expanded to $1,444,718,000. Tn 1941 principal chain stores figures were: A & P $1,354,018,000; Safeway $475,125,000; Kroger $302,766.-000; American Stores $157,677,000; First National Stores $121,949,000; National Tea $72,182,000. For the year 1930, eleven years earlier, the sales were: A & P $1,-059,099,000; Kroger $257,094,000; American Stores $142,770,000; National Tea $85,-236,000. The number of A & P stores advanced from 4,588 in 1920, to 15,422 in 1930 and then' declined to 5,821 in 1942 and 5,751 in 1943, principally because of replacement of smaller service stores with supermarkets, where volumes handled are much greater. Thus the tons per store increased from 2.73 tons per week in 1925 to 6.40 tons in 1937. The average dollar weekly sales per store rose from $678 per week to $1,175. A & P total tonnage in 1941 had become 7,200,000 tons, an average weekly per store of approximately 19 tons. In 1941 the average weekly sales for all stores was $4,662, for all supermarkets $12,128 and for all special development stores $5,753. The defense introduced a chart disclosing the comparative amounts of national food sales over a period of years compiled from Department of Commerce statistics. This shows that in 1933, of the total sales of stores engaged primarily only in sale of food at retail, independent sales amounted to 61.7% of the total, those of all chain stores to 38.3'% and those of A & P to 11.6% and that in 1943 the sales of the independent stores constituted 70.2% of the total, those of all food chains, 29.8%, those of food chain stores other than A & P 22.7% and those of A & P 7.1%. The Government contends that any persuasive effect of the figures shown is completely negatived upon proper analysis; that nation-wide comparisons do not take into consideration expansion in territories occupied by A & P. It deduces from the record, that in 1925-1926 A & P had some 33 units, that of these, one unit only had more than 15% of the total available business in its territory, eleven units from 10 to 15'%, twelve from 5 to 10% and nine less than 5'%; whereas in 1941 A & P had 39 units with the following percentages of the total available business in the respective communities; eight with from 15 to 20%; eighteen 10 to 15%; ten 5 to 10% and three less than 5%. It insists that A & P’s percentage of total available business in the areas occupied by A & P is shown to be much larger when limited to cities of certain sizes within the divisions. It refers to the board of directors meeting of the central division in May, 1941, when a program of supermarkets and special development stores was outlined aiming at obtaining 20% of the available food business in cities wherg there was an available volume of $20,000 or more per week. That record discloses that at that time A & P had more than 20% of the total available business in approximately three fourths of the cities in the division. There were in the division eight cities where A & P had over 50% of the available business, 15 cities from 40 to 50%, 51 from 30 to 40%, 51 from 20 to 30%, 55 from 10 to 20%, seven with less than 10%. In short the Government contends that the chart is wholly valueless in determining A & P’s true growth in that it does not reflect development in areas actually occupied by A & P but is built upon a national basis, which is misleading, inasmuch as A & P does not participate in business in all communities. The sales of Quaker Maid, White House Milk, Nakat, Fish Department, Tea, etc., expanded from a total of $41,960,000 in 1931 to $88,720,000 in 1941. In 1941 the bakery sales, as compared with the well known national bakers, were as follows: A & P $55,077,000; Continental $69,427,-000; General $42,067,000; Parity $41,414,-000; Ward $36,721,000. A & P increased sales of its own coffee from 60,928,000 pounds in 1925 to 270,503,757 in 1941 and those of outside brands from 1,972,251 pounds in 1925 to 28,817,109 pounds. An increase of 43% in A & P brands of coffee in 1940 over 1930 compares with a national increase in coffee sales of 18%. This latter fact, says the Government,' further proves the undependability of comparisons of A & P statistics with national statistics. The Government’s calculation is that, after taking into consideration the coffee consumed in hotels, restaurants, etc., and the fact that A & P covered only 78% of the population, its coffee sales were equivalent to 20% of the available retail business. Purchases of soap in 1937 were $4,997,355 and in 1941 $9,529,633. The national meat department of A & P purchased 685,770,383 pounds in 1940. This represented an increase of 36.6% over 1939. Acco handled in 1938, 8.41% of the total national movement of fresh fruits and produce; in 1940 11.62%. Total sales of Acco for the fiscal years 1940 and 1941 were $79,294,969 and $103,-503,250. Of this, in 1940, $6,490,146 represented sales to the outside trade. John Hartford testified that the division presidents hold their positions at the will of himself and his brother, and I believe it the only proper inference that this is true as to all officials of the various corporations, resulting, for all substantial purposes, in unification of ownership and of control in the two Hartfords. The board of directors of the New Jersey corporation pass upon and approve the appointment of division presidents and approve or ratify the actions of the presidents meetings. The various officers of the corporations have at all times recognized this unification; so Parr, in charge of field buying said: “it is all the A & P Tea Company to me.” Burger did not know which corporation handled the' merchandising. The officials and employees quite generally do not distinguish one corporation from another. They recognize John Hartford as presir dent, George Hartford as chairman of the board and treasurer and Burger as assistant to John Hartford. Everyone seems to have considered the total operation of the A & P group as the operation of one com-, pany; all net earnings eventually reached the two Hartfords. Mr. Hartford stated to the presidents in 1937 that responsibility for determining programs rests in headquarters; that the presidents meetings control the conduct of the business, although carrying out details is left to division key man and the headquarters buying committee. He cautioned the conference to make sure that company policies were carried down to the employees of the system. Minutes of meetings are sent to unit heads and thereafter the boards of directors of the divisions attempt to carry out the enunciated policies. One president testified that occasionally decisions were made at the presidents meetings not in accord with the views of the two Hartfords but, upon cross-examination, he failed to recall any instance of such action. Operation of manufacturing plants and expansion programs are likewise controlled by decisions of the presidents meetings. Compliance by the operating organization with company policy is checked by reports of the auditing department. Any violation of policies must be reported to headquarters. Employees of subsidiaries receive stenciled copies from. the New York office which serve as statements of policies approved by headquarters. The merchandising committee at headquarters coordinates the general advertising for and merchandising of retail operations, including subsidiary manufactured products and their competing nationally and sectionally known brands. Bofinger, in charge of buying operations, was chairman of the committee, which included the general manager of Acco, public relations counsel, representatives of Quaker Maid and American Coffee, advertising counsel, Connors, in charge of the meat department, Gundry, assistant to Bofinger, Gilb, head of the national bakeries division and Kling of White House Milk and Nakat Packing corporations. This committee does not fix policies but interprets and carries out those prescribed at the presidents meetings. It helps guide the retail organizations in handling A & P’s own products and those purchased from outside manufacturers, supervises the advertising activities, acts as headquarters sales department and recommends policies to the presidents meetings. In addition, there are meetings of the directors of purchases of the divisions and the divisional directors of sales, under, apparently, the directing hand of Bofinger, who is also head of the grocery department at headquarters, which, in turn, directs the activities of the purchasing directors. These meetings, too, are attended, at least at times, by the two Hartfords, Bofinger and the headquarters buyers and by assistants to Bofinger. The division sales directors meetings are attended by sales directors of the divisions and headquarters representatives and concern themselves with national sales programs. The complete buying organization consists of the headquarters purchasing department, field buying offices, purchasing directors for each division and unit buyers for the respective units. Bofinger, head of the first of these, has some ten or twelve assistants, each of whom has to do with one particular group of products. Purchases are also executed by field buyers and division purchasing directors. The latter are accountable to headquarters and the unit buyers to the divisional purchasing directors. The purchasing director for each division purchases goods produced within the division and goods produced outside the division but sold by the manufacturer only within the division. The same rule is applicable to unit buyers. If a manufacturer desires to sell more than one division, he must deal with headquarters or one of the field buying offices. ' Some 75% of the fruits and vegetables purchased for A & P are purchased by Acco. The remainder consists of small purchases made by store managers from local producers and other purchases made by the units to fill in or supplement other purchases. National purchases are made by the egg and poultry department at headquarters. The purchasing department buys produce not only for the retail stores but also for the manufacturing system. New commodities are not stocked generally without permission of division headquarters. If they are competitive with products manufactured by A & P subsidiaries, the retail stores must first make an effort to have the A & P products take care of the demand. The Government presents an analysis of profits. There is some controversy as to the correctness of the figures presented, but I deem them sufficiently truly illustrative of the facts. The total profits of A & P in 1939 were $21,312,000, in 1940 $23,409,000, in 1941 $26,025,000. Of these the net retail profit in 1939 was 6.31% of the total, in 1940 9.37% and in 1941, 10.98%. In the same years the manufacturing subsidiaries’ profits were, in 1939 $5,009,067 or 23.50% of the total; in 1940 $5,310,890 or 22.69% of the total and in 1941 $6,359,012 or 24.43%. The earnings in coffee were, in 1939, $3,092,760 or 14.51% of the total, in 1940 almost $4,000,000 or 16.80%, in 1941 $3,274,348 or 12.59%. Thus it is evident that the profits from coffee alone in each of the three years was in excess of those from retail earnings of all of the several thousand retail stores. The headquarters’ allocation of profits exceeded the net profit of the retail stores in 1939, being more than three times as much as retail earnings, and in 1940 and 1941 more than two times as much. The manufacturing companies’ earnings in 1939 were more than three times net retail earnings and in 1940 and 1941 more than two times. The earnings of Acco alone very closely approached the total retail earnings of all the stores. In 1939 its profits were $1,082,336 or 5.08% as compared to 6.31% for net retail profits; in 1940 $1,-316,374 or 5.62% of all profits as compared with 9.37% for the net profit of the retail stores and in 1941 profits of Acco were $1,863,697 or 7.16% of the total profits as compared with 10.98% for net retail profits from the stores. It thus appears that if the retail stores of the A & P system had operated without any profit, the net earnings from all other sources would have equaled in 1939, 93.69% of what was realized including retail profits, in 1940, 90.-63% and in 1941, 89.02%. Before discussing further details of evidence, I shall refer briefly to certain pertinent decisions. The purpose of the Sherman Act is to prevent restraints of interstate commerce, to maintain its appropriate freedom in the public interest, to afford protection from the subversive or coercive influence of monopolistic endeavor. As a charter of freedom, the Act has a generality and adaptability comparable to that found to be desirable in constitutional provisions. It does not go into detailed definitions which might either work injury to legitimate enterprise or through particularization defeat its purposes by providing loopholes for escape. “Combination which unreasonably limits competition which would otherwise exist between persons in similar businesses -is illegal. A suppression of competition necessarily restrains commerce. Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683, Ann.Cas.l918D, 1207. * * * In Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 45, 75 L.Ed. 145, it was said: ‘In order to establish violation of the Sherman Anti-Trust Act, it is not necessary to show that the challenged arrangement suppresses all competition between the parties * * *. The interest of the public in the preservation of competition is the primary consideration.’ The restraint of trade contemplated by the statute means restraint of competition.. United States v. Eastern States Retail L. D. Ass’n, 234 U.S. 600, 34 S.Ct. 951, 58 L.Ed. 1490, L.R.A.1915A, 788.” William Goldman Theatres, Inc. v. Loew’s, Inc., 3 Cir., 150 F.2d 738, 743. The court said further: “The statutory prohibition is against any course of conduct which monopolizes ‘any part’ of interstate trade. We know of no authority which sanctions what would otherwise be an illegal monopoly simply because it operates in a single city or a particular part of a city and affects only a part of an industry involved. There is no such limitation on the effect of the antitrust laws. Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136; Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734; Indiana Farmer's Guide Pub. Co., ,v. Prairie F. P. Co., 293 U.S. 268, 55 S.Ct. 182, 79 L.Ed. 356; Oxford Varnish Corp. v. Ault & Wiborg Corp., 6 Cir., 83 F.2d 764; Peto v. Howell, 7 Cir., 101 F.2d 353; Truck Drivers’ Local No. 421 v. United States, 8 Cir., 128 F.2d 227; White Bear Theatre Corp. v. State Theatre Corp., 8 Cir., 129 F. 2d 600; Louisiana Farmers’ Protective Union v. Great A & P Tea Co., 8 Cir., 131 F.2d 419; Bigelow v. Calumet & Iiecla Mining Co., C.C.Mich., 167 F. 704.” Combination that leads directly to lower prices to the consumer may, even as against the consumer, be restraint of trade; and combination that leads directly to higher prices may, as against the producer, be restraint of trade. The statute, thus interpreted, has no concern with prices, but looks solely to competition, and to the giving of competition full play, by making illegal any effort at restriction upon competition. Whatever combination has the direct and necessary effect of restricting competition is, within the meaning of the act as now interpreted, restraint of trade. United States v. Swift & Co., C.C.Ill., 122 F. 529. In United States v. American Linseed Oil Co., 262 U.S. 371, 43 S.Ct. 607, 67 L.Ed. 1035, the court said (page 388 of 262 U.S., 43 S.Ct. 611, 67 L.Ed. 1035): “The Sherman Act was intended to secure equality of opportunity, and to protect the public against evils commonly incident to monopolies, and those abnormal contracts and combinations which tend directly to suppress the conflict for advantage called competition—the play of the contending forces ordinarily engendered by an honest desire for gain.” “Nor is it determinative in considering the policy of the Sherman Act that petitioners may not yet have achieved a complete monopoly. For ‘it is sufficient if it really tends to that end, and-to deprive the public of the advantages- which flow from free competition.’ ” Fashion Guild v. Trade Commission, 312 U.S. 457, 61 S.Ct. 703, 707, 85 L.Ed. 949; United States v. E. C. Knight Co., 156 U.S. 1, 16, 15 S.Ct. 249, 39 L.Ed. 325; Addyson Pipe & Steel Co. v. United States, 175 U.S. 211, 237, 20 S.Ct. 96, 44 L„ Ed. 136. In American Tobacco Company v. United States, 66 S.Ct. 1125, 1139, the court said: “It is not the form of the combination or the particular means used but the result to be achieved that the statute condemns. It is not of importance whether the means used to accomplish the unlawful objective are in themselves lawful or unlawful. Acts done to give effect to the conspiracy may be in themselves wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition. * * * The essential combination or conspiracy in violation of the Sherman Act may be found in a course of dealings or other circumstances as well as in any exchange of words. * * * Neither proof of exertion of the power to exclude nor proof of actual exclusion of existing or potential competitors is essential to sustain a charge of monopolization under the Sherman Act. * * * A combination may be one in restraint of interstate trade or commerce or to monopolize a part of such trade or commerce in violation of the Sherman Act, although such restraint or monopoly may not have been actually attempted to any harmful extent. See United States v. International Harvester Co., D. C., 214 F. 987; Id., 274 U.S. 693, 47 S.Ct. 748, 71 L.Ed. 1302. * * * the material consideration in determining whether a monopoly exists is not that prices are raised and that competition actually is excluded but that power exists to raise prices or to exclude competition. * * * It is not necessary that the power thus obtained should be exercised. Its existence is sufficient.” “With respect to defendant’s purposes, we find no warrant for determining that they were other than those they declared. Good intentions will not save a plan otherwise objectionable, but knowledge of actual intent is an aid in the interpretation of facts and prediction of consequences.” Appalachian Coals Inc. v. United States, 288 U.S. 344 at 372, 53 S.Ct. 471, 478, 77 L.Ed. 825. The inquiry must be whether, despite the objective of good intentions, the inherent nature of the plan was such as to create an undue restraint upon interstate commerce. Appalachian Coals Inc. v. United States, 288 U.S. 344 at 372, 53 S.Ct. 471, 77 L.Ed. 825. In Wardell v. Union Pacific R. Co., 103 U.S. 651, 26 L.Ed. 509, discussing fiduciary relationship, the court said: “the same person cannot act for himself and at the same time, with respect to the same matter, as the agent for another, whose interests are conflicting. Thus a person cannot be a purchaser of property and at the same time the agent of the vendor. The two positions impose different obligations, and their union would at once raise a conflict between interest and duty; and, ‘Constituted as humanity is, in the majority of cases duty would be overborne in the struggle.’ Marsh v. Whitmore, 21 Wall. 178, 22 L.Ed. 482. The law, therefore, will always condemn the transactions of a party on his own behalf when, in respect to the matter concerned, he is the agent of others, and will relieve against them whenever their enforcement is seasonably resisted. * * * all persons who stand in a fiduciary relation to other parties and are clothed with power to act for them are subject to this rule; they are not permitted to occupy a position which will conflict with the interest of parties they represent and are bound to protect. They cannot, as agents or trustees, enter into or authorize contracts on behalf of those for whom they are appointed to act, and then personally participate in the benefits.” All who participate in a Sherman Act violation, or who aid or abet in its commission are indictable as principals. United States v. MacAndrews & Forbes Co., C. C. N.Y., 149 F. 823. Individual defendants who have cognizance of and participate in carrying out policies and practices inherently involving unreasonable restraint of trade or monopoly are criminally liable for the acts and practices of their superiors or their employees although they may not have specific knowledge of each act done or know all the details of the carrying into effect of such policies and practices. An individual is criminally liable if he actually participates in an unlawful act, or if he authorizes another to participate in an unlawful act, or if he ratifies the unlawful act of another after knowledge of it. United States v. Winslow, D. C., 195 F. 578, affirmed 227 U.S. 202, 33 S.Ct. 253, 57 L.Ed. 481; United States v. Lancaster, C. C. Ga., 44 F. 896, 10 L.R.A. 333; McGrath v. Mathues, D. C., 6 F.2d 149; Lawlor v. Loewe, 2 Cir., 209 F. 721, affirmed 235 U.S. 522, 35 S.Ct. 170, 59 L.Ed. 341. ■ The acts of a corporation’s governing officials, when they act on behalf of the corporation and within the scope of the generals powers delegated to them, including acts which such officials assume to do while performing duties actually delegated, are properly attributable to the corporation for criminal purposes. New York Central R. R. Co. v. United States, 212 U.S. 481, 29 S. Ct. 304, 53 L.Ed. 613. Defendants' Buying Practices. The Government finds nothing inherently •wrong in defendants’ intercorporate integration but contends that by means of horizontal integration, that is, combination under one management of a number of similar industries on the same level, and vertical integration, that is, combination under one management of different business functions at more than one level, both of which have existed since 1925, defendants have so acted as, inherently, by their misuse of such integrated power, unreasonably to restrain interstate trade. For example, says the Government, in 1925 A & P received $624,560.97 in profits from the American Coffee Corporation and exhibited an intent to dominate the coffee business in these words: “Desire to see A & P gain and retain a supremacy in coffee * * * with a holeproof organization from tree to cup, we shall have nothing to fear from future competition.” The Government also refers to the fact that in 1934, profits of the central division were reducéd from $1,300,000 for the first quarter of 1933 to $700,000 for the first quarter of 1934, in order to permit the division, and particularly the two Pittsburgh units, to pursue an aggressive sales policy. The earnings referred to include profits from source outside of retail sales, such as advertising allowances and income of ' subsidiary companies. It was said: “this unique advantage of the company over competitors should be explored to the limit.” This is one of many-such instances which, the Government claims, illustrate abuse of vertical and horizontal integration with ruinous effects on competition. The Government claims that defendants have forced preferences unavailable to competitors by threats to withhold or withdraw purchases and to engage in manufacture of competing products on their own account, thereby creating unreasonable restraint of food processing and distribution; that crediting profits realized from manufacture and other nonretail sources to A & P’s income so operates as to subsidize wrongfully its retail operations and that Acco’s inconsistent roles bring to A & P profits which in turn work an illegal advantage in it over competitors. Whether defendants would manufacture products in any instance was quite naturally based upon whether A & P could obtain such prices from suppliers as would make it imprudent, as a business proposition, to engage in manufacturing itself. As early as 1927, at the request of John Hartford for an expression on pushing A & P’s own brands, the minutes recite that the time has arrived for making a “demonstration in order to safeguard the arrangements which we now have with national manufacturers. * * * national manufacturers * * * will be anxious to keep their arrangements with us attractive so that we would not consider it necessary to go into their lines. * * * coffee would be the best commodity to start out with and White House Milk next.” The Government submitted evidence of certain events in this respect, some of them occurring many years ago, including defendants’ action in New Orleans in rice, shrimp and canned oysters, their dealings with Campbell as to beans and spaghetti in 1925, when Hartford suggested that A & P could afford to cease to make those products, inasmuch as it could resume its own manufacture, if Campbell’s terms should prove unsatisfactory, and A & Ps decision to continue to manufacture gelatin products until it could consummate a satisfactory arrangement with the Jello Company. In March, 1927, Canada Dry had withdrawn from sales to A & P because of the latter’s alleged price cuts in Indianapolis. John Hartford said that an organization with 15,000 stores was too big to be dictated to, and A & P decided to select one of its own competing products, advertise it extensively and price it attractively, to demonstrate that it could establish a competing product. Canada Dry returned to the A & P fold and it was announced in 1928 that A & P’s emphasis on its private brand had achieved its purpose. In 1939 A & P sought to secure from large soap companies allowances on Crisco atid Spry shortening so that A & P could profit by ordering in straight carload lots. The manufacturers rejected the suggestion and A & P advised its buyer that when A & P got ready to go into the shortening business the retail price would be made very attractive as compared with that of Spry or Crisco and that thereby A & P would be able to secure greater concessions than it then could and that, consequently, the soap manufacturers should not, at that time, be pushed. In February, 1926 it was decided that more favorable relationship with the great millers could be established by purchasing A & P’s entire requirement of flour on an allowance basis through one source, “thereby taking advantage of our buying power.” The national meat department, in Chicago, under the management of Conners, made carload purchases from western packers for the entire system. Headquarters advised that it was to A & P’s interest to “exercise our buying power” through the Chicago purchasing office. In 1910 Conners was given complete authority over all meat purchases. The effect of correspondence with Ralston Purina Company was that A & P would have to have a lower price for corn flakes or it would enter into manufacture of cereal itself. A & P had considered opening a plant in the corn belt, obtained cost quotations and had made a survey, all of which indicated that it could manufacture flakes with a saving of 21$ per case on the price it was then paying Ralston. Ralston finally offered an additional allowance of 10$ per case or a total of 17%$ and A & P did not build its plant. Defendants explain this alleged duress of Ralston Purina Company as in no wise coercive, but as merely a definite statement on the part of A & P that it was “paying too high a price to Ralston and that, if it could not obtain a better rate, it would go into business,” all with the intent to secure a fair sales price, rather than to force the supplier to sell goods at A & P’s dictated price. Defendants point to the comparatively small portion of Ralston’s business which went to A & P, as “proof in support of our contention.” The Government suggests that concentration of purchases of salmon resulted in price preference to A & P of from 5 to 10$ per case. Other instances of the alleged misuse of A & P’s buying power are cited but the ones discussed are illustrative. Defendants admit that they have been aggressive in carrying out their merchandising policies but deny that A & P ever attempted to manipulate its power in order to realize an unwarranted discrimination or preference. They refer to Parr’s language to the effect that “there should be no tactics employed which would even hint of being coercive,” and to that of Hensley in 1940, stating that no pressure was to be brought to bear other than a mere statement of A & P’s policy and to counsel’s letter of October 28, 1936. Retail Operations. The Government contends that A & P used its wide-flung horizontal integration to maintain leadership in retail business by supplementing unduly reduced retail prices in competition by subsidies or profits from sources other than retails, and offset losses incurred in selected areas, because of fixed low prices or low gross profit rates in order to force volume, by profits from other localities, or by diversion of headquarters profits to retail stores; that retail price leadership was sought and maintained for the purpose of injuring retail competitors and that the methods employed were such as inherently to injure nonintegrated retail competitors. It contends that A & P insisted, in all situations, that its prices be kept as low as, or lower than, prices of its competitors and that,' inasmuch as increased sales of subsidiary products meant more money to A & P with which to reduce gross profits, on products which were available to competitors, it thus made it, as defendants said, “very hard for the average supermarket to compete with us.” It claims that in A & P’s desire to attain a position which would make it possible for it to sell food more cheaply than any competitor, it undersold others but refused to be undersold and that competitors suffered, citing instances in various divisions. This program the Government says, by 1941 had placed A & P in a position to fix its operation at a gross profit rate impregnable to competition. An A & P sales director did say that competition as it was known in the old days “does not exist today” ; that “there is no one in the industry selling food at a markup as low as ours.” John Hartford said that profit rates should be held at a level whereby the business would be in .an “impregnable position against competitive supermarket invasion.” Defendants used this language: “when it comes right down to brass tacks we have no competition from a price point of view.” Sales of meat were frequently “at substantial loss.” John Hartford said early in 1942 that headquarters desired a .0022 retail operating profit; that subsidiary profits and headquarters’ allowances would take care of the rest; that this was excellent for the company and that every one should be interested in seeing “that this situation be perpetuated.” • Selling Practices, profit Rates. The Government presents a prolonged discussion of defendants’ suggested profit rates. It is perfectly obvious, as defendants point out, that these were merely programs, but equally obvious that they were goals which defendants expected divisions to strive to attain. The Government construes expansion under low gross profit rates as intentionally building up volume at the expense of competition, relying upon evidence that below average low gross profit rates were fixed in certain territories where competition was severe until competition had been overcome. From 1929 to 1936, A & P programs for net profit rates ranged from .0271 in the middle western division to .0382 in the eastern division. Central western division was directed to operate on a net profit basis of 1% to 2%, including nonretail profits. If results were satisfactory, Hartford believed, the plan should apply to all divisions. The division was authorized to “plough back into Cincinnati whatever is necessary in the way of a drastic sales campaign” in order to bring the unit up to .par with the rest of the division. A & P's percentage of available business in Cincinnati was 5% while that in the entire division was 9%, including Grand Rapids with 14% and Detroit with 10%. Appropriations of $52,000 for Louisville and $14,950 for Cincinnati were approved in order to help them continue low gross profit rates. At the same time, the southern division was earning 34'%% of the company’s retail profits with only 23%% of the company’s investment. Pittsburgh placed more than 100 stores in a special BB zone in which special low prices prevailed and some stores operated at a loss. In opening supermarkets, the gross profit rate, Mr. Hartford directed, should not exceed 10%, though the company’s average supermarket expense rate then was 11.97%. He said “establish them on a low gross profit and maintain them on this basis until we feel that their security has been definitely fixed.” In this program to gain additional volume, some supermarkets lost money. In the central division, the organization was advised not to be concerned about losses and that supermarkets should contin- ' ue to work on a low rate and brought to a higher volume. The middle western division, in November 1938, was informed that it should reduce gross profit rates where-ever volume had not materialized, regardless of expense rate. The New England and Atlantic divisions were in an unfavorable position, the losses being $15,000 per week in New England, and $11,000 per week in/ Atlantic. New England division lost $252,665 on sales in 1939 and Atlantic $288,752. .It was A & P’s plan to earn $7 per share on its stock out of all operations including retail sales, headquarters’ and subsidiaries’ earnings. In order to do this, it was suggested that the five divisions other than New England and Atlantic should earn $5,750,000. In 1940 over 75% of the system’s profits came from subsidiaries and advertising allowances. Oklahoma City had deficits for three years, Kansas City for four years and Cincinnati, Seattle and Los Angeles for varying periods. It is the Government’s contention that the evidence discloses a plan to obtain, in the communities in which A & P operated, 25% of the available business. I shall content myself with saying that I think it clear that the amount of available business in any given area was the starting point on which A & P’s activity in that territory was planned and that, in many instances, it was A & P’s definite program that its supermarket merchandising should eventually enjoy 25% of the available business. I think it clear, too, that, attempting to reach this goal, reduction of gross profit rates was continuously made in various places and subsidiary profit consistently used to supplement the earnings; that the system’s overall annual programs under each goal set by headquarters inherently contemplated subsidization of retail operations generally and of retail operations in areas with unsatisfactory volume in particular by profit from other sources. Inevitably reduction in gross rates lowered the profits from retail sales while nonretail profits increased by virtue of the large volume of A & P’s products, resulting in A & P being able to sell merchandise cheaper than competitors. Retail profits became a minor matter. Mr. Hartford said “when we open * * * a new territory, * * * generally the new unit operates at a loss.” Periodically comparisons were made of A & P’s volume in any area with that of its chief competitor, for the purpose, as the Government says, to determine the extent of aggressiveness which A & P should exercise in achieving or maintaining supremacy in the territory. Growth by a competitor at a more rapid rate than A & P was considered “a direct challenge to our (A & P’s) ability, and something must he done to change” that trend. John Hartford testified “we had a pattern * * * if we could get a certain volume * * * we should have a certain expense rate, that would allow us to make a certain gross. If we did not get that, we were just out of luck.” And he added “we would not change our prices to bring a store into black ink.” The Government contends that the evidence rebuts any favorable inference from Mr. Hartford’s statement that the company did not anticipate a loss in selected areas. It argues that the express recorded assignment of definite operating losses in the programs for selected areas could not have been effective without anticipating losses and that A & P’s aim of ultimate profit did not justify the means used to achieve that end. Defendants insist that the evidence reflects no concerted plan to select areas for special treatment for the purpose of injuring competition, i. e., for the purpose of injuring or destroying competitors by cutting prices in one area lower than those elsewhere until control of the retail business in that area has been obtained and offsetting the losses or reduction in profit from such price lowering by the use of income from other areas and from nonretail operations. They offered evidence to show that the primary reason why stores lost money was not low prices but poor management, lack of volume and other factors having nothing to do with prices and that, although there were some losing supermarkets, the majority of losing stores were the small regular stores, and that the prices in these were higher than in the supermarkets. They argue that the fact that every unit always had a number of red stores makes it unrealistic to conclude that “selected areas” were thrown into the red systematically for the purpose of “destroying competition” ; and insist that the record shows that there was strong competition wherever A & P operated and that there is no evidence that A & P unreasonably interfered with competition or obtained a monopoly anywhere. At Springfield, Missouri, defendants insist, A & P failed to succeed and closed its store because of the competition of Safeway. They point to other instances where A & P failed to succeed and closed stores. Since 1933 A & P has withdrawn from over 1,000 towns and has opened in only 140 new towns. They argue that there is no instance where A & P drove any competitor out of business and that the evidence of competitors’ store openings and closings proves nothing. They admit that, in determining the overall profit of A & P, the profit and loss account was made up by placing in it all income and deducting from it all expenses, including income and expense of losing as well as successful stores. To this extent, they agree income from profitable stores offset the losses from unsuccessful stores. But, they aver, this is one of the incidents of any business operating more than one unit. The Government concedes that A & P may lawfully employ subsidiary manufacturing operations. Defendants insist that if that is true, it forecloses any objection to A & P’s manner of distributing its manufacturing profits. They assert that since 1934 the produce manufactured by defendants has been billed at market prices which has usually resulted in manufacturing profit ; that manufacturing profits or losses are paid as dividends to the parent corporation, which makes no accounting distribution of them to divisions or units. A statistical allocation is made to the several units, but, defendants insist that “according to the testimony in this case, it does not in any way favor an unsuccessful or unprofitable store or a store whose prices may be lower than ‘elsewhere’ and no violation of the Sherman Act can be spelled out of the allocation of A & P’s subsidiary profits or losses.” Integration, whether vertical or horizontal or both, is not per se unlawful. So the Government here must show that the size of A & P, its integration, both vertical and horizontal, its resulting power in the industry, were so employed as to bring about inevitably unreasonable advantages over competitors not similarly integrated. The charge is that defendants have so utilized their power and integration as unreasonably to restrain commerce. This means more than meeting competition, more than price cutting, more than coming to prices on even terms with competitors. It means that in their integrated industrial effort, defendants must have overstepped the line by injecting into their competitive methods and into their integrated competitive power, illegal factors of such importance as to taint the entire operation. I am not concerned with any question as to the wisdom or lack of wisdom of the policy of A & P or any other chain store organization but am confronted with the question whether A & P’s methods, even though they look to a legitimate end, have, in them an inherent factor of such legal malevolence as to taint the operation. Dealers have the right to sell freely without restraint. Have defendants unreasonably crippled that right? Such is our real question. Defendants have the right to set prices at such figures as to meet competition. It is only when price cutting extends to destruction or unreasonable restraint of competition or taking losses in order to attain an ultimate monopoly or partial monopoly that the law is violated. If the methods employed are such as necessarily to employ a factor which reflects inevitably an intent to injure or destroy competition, we have something illegal. The Government must prove either that there was a specific wrongful intent to effect restraint of trade or that the acts of defendants had the inherent tendency necessarily unreasonably to restrain trade. As Mr. Justice Lurton said (United States v. Reading Co., 226 U.S. 324, 33 S.Ct. 90, 103, 57 L. Ed. 243): “Whether a particular act, contract, or agreement was a reasonable and normal method in furtherance of trade and commerce may, in doubtful cases, turn upon the intent to be inferred from the extent of the control thereby secured over the commerce affected, as well as by the method which was used. Of course, if the necessary result is materially to restrain trade between the states, the intent with which the thing was done is of no consequence.” See also Industrial Assn, of San Francisco v. United States, 268 U.S. 64, 45 S.Ct. 403, 69 L.Ed. 849; Hopkins v. United States, 171 U.S. 578, 19 S.Ct. 40, 43 L.Ed. 290; Anderson v. United States, 171 U.S. 604, 19 S. Ct. 50, 43 L.Ed. 300. The Anti-Trust Act was not intended to prevent normal expansion of business. It offers no objection to the mere size of a corporation, or to the continued exertion of its lawful power, when that size and power have been obtained by lawful means- and developed by natural growth, although its resources, capital and strength may give to such corporation a dominating place in the business and industry with which it is concerned. It is entitled to maintain its size and the power that legitimately goes with it, provided no law has been transgressed in obtaining it. United States v. U. S. Steel Corp., 251 U. S. 417, 40 S.Ct. 293, 64 L.Ed. 343, 8 A.L. R. 1121; United States v. International Harvester Co., 274 U.S. 693, 708, 47 S.Ct. 748, 71 L.Ed. 1302; Appalachian Coals v. United States, 288 U.S. 344, 53 S.Ct.