Full opinion text
FREED, District Judge. The instant action was brought by the United States under favor of Section 4 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 4, to prevent and restrain the continuing violations of Sections 1 and 3 of the Act, 15 U.S.C.A. §§ 1, 3. Permanent injunction with adequate protection to prohibit the violations is sought. The complaint charges, that the defendant and the co-conspirators entered into contracts, agreements and understandings to eliminate competition between themselves and with others, in the manufacture and sale of anti-friction bearings in all the markets of the world, including the United States. It recites that they allocated the respective territories in the world in which each party might manufacture and sell anti-friction bearings and that they prevented one party from selling or shipping anti-friction bearings into the territory allocated to any other party, except in completed articles of manufacture and for replacement bearings in those articles. It further charges that they fixed and agreed upon prices of bearings shipped . into the territory allocated to any other party and that they fixed and agreed upon prices of anti-friction bearings sold and shipped to Russia. They allocated the use of the trade mark “Timken” to each of the parties in their respective designated territories and required that the co-conspirators not manufacture and sell bearings, except under the mark “Timken.” The agreements required the co-conspirators to surrender to defendant the rights in the name “Timken” upon the termination of the contracts between them. It is claimed, in certain of the designated territories they entered into agreements with other manufacturers to regulate and allocate the sale of anti-friction bearings and they aided and assisted each other in restricting and eliminating in their respective territories competition from others in the manufacture and sale of anti-friction bearings. It is alleged in the complaint that the combination and conspiracy resulted in unreasonable restraint of imports into and exports from the United States. It is further alleged that the current world shortage of anti-friction bearings and decreased European production caused by the war has created large potential export markets for anti-friction bearings of American manufacture. Notwithstanding this, the continuation of the conspiracy and combination will restrain and prevent defendant from seeking and acquiring many world markets with the eventual consequence of reducing its production of bearings and employment of labor. The factual and legal questions to be determined in respect of the charges of the complaint are posed by the Government as follows: Within the purview of the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note, is it illegal for the “defendant and two foreign corporations, which between them manufacture and sell a substantial portion of the world’s production of anti-friction bearings, to regulate interstate and foreign commerce by private arrangements embodying the following restrictive practices? “(a) Allocation, by agreement, of trade territories throughout the entire world, each agreeing with limited exceptions, not to manufacture and sell in the other’s territory; “(b) Imposition by agreement, of price restrictions upon products sold by any party in the territory of another; “(c) Agreement to exclusively exchange present and future know-how and inventions, patented or unpatented; “(d) Use, by agreement, of a common trade mark “Timken” in their respective territories, compulsory use of that mark by the foreign conspirators, prohibition against their dealing in products under any other name, and requiring that they cease using the name upon termination of the agreement; “(e) Mutual co-operation and-assistance to protect each others’ markets and to eliminate the competition of outsiders; “(f) Participation in foreign cartels which restrict exports by United States producers.” The defendant, The Timken Roller Bearing Co., is an Ohio corporation with its principal offices located at Canton, Ohio. It employs upwards of 16500 employees at its various plants located in Ohio and in Colorado, in the United States and St. Thomas, Ontario in Canada. Its foreign sales are handled by two wholly owned corporations: Timken Roller Bearing and Service, Limited, and The Timken Roller Bearing Co., of South America, Canadian and Ohio corporations respectively. Defendant manufactures tapered roller bearings, alloy steel, seamless tubing and removable rock bits. British Timken, Limited, named a co-conspirator (hereinafter referred to as British Timken), is a British Joint Stock Company which maintains its plant and principal offices at Birmingham, England. It employs approximately 2400 • workmen and manufactures tapered roller bearings and axle boxes for railroad cars. Its wholly owned subsidiary, Fischer Bearings Co., Ltd., manufactures straight roller bearings and ball bearings. Societe Anonyme Francaise Timken, also named a co-conspirator (hereinafter referred to as French Timken), is a French corporation with its plant and offices at Asnieres, France. It employs approximately 510 people and manufactures tapered roller bearings. The assertion of the Government that defendant, British Timken and French Timken dominate the tapered roller bearing market of the world and a substantial portion of the total anti-friction bearing market is challenged by defendant. The evidence discloses that defendant is “many times over” the largest manufacturer of tapered roller bearings in the world. Its gross sales in 1947 were $77,-097,756.00. According to the figures complied by the Anti-Friction Bearing Manufacturers Association, defendant’s percentage of the tapered roller bearing industry in the United States was as follows: year 1941 71.0% 1942 77.9% 1943 82.2% 1944 80.3% (7 months) 1945 78.9% Presently defendant’s output of tapered anti-friction bearings constitutes 25% of the total production of anti-friction bearings in the United States. British Timken, during the period from 1927 to date, produced a large volume of all the tapered bearings in England. It manufactured more than 90% in 1927, the percentage decreased to 70%, and later returned to more than 90%. It produces approximately 20% of all the British anti-friction bearings. British Timken’s sales including those made by its subsidiary, Fischer Bearings Co., Ltd., totaled $14,-700,000 in 1947. French Timken manufactures about 80% of the tapered bearings in France, which constitutes 10% of all the anti-friction bearings. Its sales in 1947 totaled $2,274,-723. Command of such volume of business spells out the dominant position of defendant, British Timken and French Timken both in the tapered and anti-friction bearing industry. Oxford Varnish Corporation et al. v. Ault & Wiborg Corporation, 6 Cir., 83 F.2d 764, U. S. v. Columbia Steel Co., 334 U.S. 495, 527, 68 S.Ct. 1107. It was aptly stated during the trial that practically every shaft that turns and every vehicle that rolls is dependent on anti-friction bearings. Their crucial importance to our present industrial economy requires no demonstration. Modern machinery, such as trucks, automobiles, farm machinery, locomotives, áeroplanes, in fact every product which has rotating parts, relies on anti-friction bearings for continued operation. Friction bearings and anti-friction bearings have distinctive characteristics. Friction bearings slide over the shaft and depend solely on oil or other similar substance to reduce friction. Anti-friction bearings, on the other hand, consist of a circular group of steel rollers or balls revolving between two circular raceways which reduce friction between moving mechanical parts. There are two general types of anti-friction bearings: roller bearings and ball bearings. Tapered roller bearings are a style of roller bearings. While tapered bearings compete with other types of anti-friction bearings and to a much lesser extent with friction bearings, tapered bearings, because of their design and applicability for particular use, enjoy freedom from competition, just as for certain definite uses, ball bearings are free from competition. They constitute a distinctive type of anti-friction bearing which fulfills a requirement not supplied or satisfied by others. Whatever competition exists between the different types of anti-friction bearings, is present only up to the point of the adoption, in the design of a specific type of bearing in the proposed equipment or machinery. Once that particular type of bearing is incorporated, other types cannot be substituted for replacement. The replacement bearings must be of the same size and character. The original installations constitute approximately 95% of the output of roller bearings and the replacement sales the balance of 5%. In our highly mechanized industries, roller bearings serve as vital links in the chain of their assured existence and sustained progress. Defendant, British Tim-ken and French Timken exercise- a potent force in the making and marketing of these products, essential to the maintenance of the economic welfare of the United States and of the entire world. In order to view the conduct of defendant in the proper perspective during the period of time when it is accused of violating the antitrust laws, it is essential to examine its prior activities which the Government claims culminated in the agreements, contracts and understandings to eliminate competition, assailed in this action. On June 16, 1909, the first of a series of written agreements, licensing the production and distribution of tapered roller bearings was concluded between defendant and Electric & Ordnance Accessories Company Limited (a predecessor of British Timken and a subsidiary of Vickers Ltd., a British trust comprised of many companies and described as manufacturing everything from battleships to baby carriages). Under its provisions defendant granted to E. & O. A. the exclusive license to “make, use, exercise and vend” in the United Kingdom and the Isle of Man roller bearings of all kinds made pursuant to the specifications of British patents which defendant then owned or under patents later to be granted to or acquired by defendant. It contained definite territorial restrictions. Defendant was prohibited from making or selling to others or from licensing others to do it, or from selling its own manufactured bearings for shipment into the territory of E. & O. A. It was, however, permitted to make and sell or license others to make and sell bearings for vehicles manufactured outside and shipped into the territory of E. & O. A. E. & O. A. was prohibited from selling bearings outside of its territory and from selling bearings in its territory, knowing them to be for shipment outside. E. & O. A. was allowed to sell bearings in its own territory for vehicles manufactured there for export elsewhere. The license was so conditioned that E. & O. A. was prevented from manufacturing or selling any anti-friction bearings, except those made under the licensed patents and except those assembled in other articles produced or sold by E. & O. A. E. & O. A. was obliged to use the designation “Timken” exclusively on all the bearings made or sold by it. It was incumbent on E. & O. A. to use all the instructions for manufacture given to it by defendant which defendant agreed to supply. Defendant in turn was privileged to utilize any improvements made by E. & O. A. in its manufacturing process. E. & O. A. had the right to determine the sale price for its bearings, provided that the deficiency between its lowest price and the lowest sale price of defendant would not be in excess of the United States tariff chargeable on the bearings from any part of E. & O. A.’s territory. In another agreement executed on the same day defendant granted to E. & O. A. the full and exclusive right to “license and authority to make use exercise and vend” roller bearings of all kinds under certain French and Russian patents and under a German patent application as soon as the patent or other equivalent grant shall have been obtained in the territories covered by the patents. It provided that so long as the agreement is in force, E. & O. A. shall have “full and exclusive right license and authority until all the said Patents shall have been granted or after all or any of the said Patents shall have ceased to exist (but only so far as the Licensor can then lawfully do so) to make use exercise and vend articles embodying the subject matter of such Patents or Patent and Roller Bearings of every kind whatsoever in that part of the said territory where the Patents or Patent shall not have been granted or shall have ceased to exist.” Defendant also granted to E. & O. A. an exclusive license to manufacture and sell articles, embodying the subject matter of the British patents referred to in the first agreement and roller bearings of every kind whatsoever (whether covered by patents or not) throughout Europe (except the United Kingdom, France and Russia and except Germany after the patent or grant shall be issued or made there) and throughout the whole of the British Colonies, Protectorates and Dependencies except Canada. It contained the identical restrictions set forth in the first agreement in respect of sales in the other party’s territory. The provisions of the first agreement pertaining to price regulations, to the compulsory use of the mark “Timken” by E. & O. A., to the requirement that E. & O. A. use instructions as to method of manufacture, to the furnishing of data by defendant, to the privilege of defendant to utilize improvements made by E. & O. A. were embodied in the second agreement Jn identical language. The agreements of June 16, 1909, were modified on April 6, 1920, by two separate instruments between defendant and Wolse-ley Motors of England (another VickeFs subsidiary). The rights of E. & O. A. were assigned to Wolseley. The territorial divisions remained as they had been designated. The respective areas were redefined as licensor’s area (defendant) and licensee’s area (Wolseley). Defendant was permitted, however, to sell to manufacturers in defendant’s territory who, in turn, were allowed to export bearings to Wolseley’s territory for use in their products. Wolse-ley was granted the same privilege in its territory. The price for replacement sets for use in Ford cars in Wolseley’s territory was fixed. Defendant and Wolseley placed on record their desire and intention, that bearings made in their respective territories “shall not be sold at prices which shall be unreasonable and unfair to the party in whose territory the Roller Bearings are sold” without accepting any legal obligation for it. The modifying agreements further provided, that if the principal agreement (June 16, 1909) should be rescinded, Wolseley should abandon the use of the name “Tim-ken” as part of its name (if so used) and in all other respects, and secure to defendant the exclusive use of the name “Timken.” In 1924 and 1925 after all the basic patents pertaining to the tapered roller bearing had expired, two agreements were executed between defendant and British Timken. They merely modified the prior agreements and continued them for a term of five years to January 1, 1929. In the meantime British Timken succeeded to the rights of Wolseley Motors (its parent company). Royalties payable by British Timken were reduced from fifteen per cent to five per cent. They recited that the name “Tim-ken” should belong exclusively to defendant and that during the continuance of the principal agreements as modified from time to time British Timken should be deemed to be using it as a part of its exclusive license and upon the expiration of the agreements British Timken should change its name and do everything necessary to secure for defendant the exclusive right to the name “Timken.” These various agreements constituted the basis of relations between defendant and British Timken, including its predecessors E. & O. A. and Wolseley Motors; subsidiaries of Vickers. Against the backdrop of these prior relations we must view the conduct of defendant to resolve the questions raised by the charges of antitrust violations beginning in 1928. As to the existence of these license contracts, which contained restrictions of territories, fixing of prices, covenants of defendant and British Timken not to compete with each other there is no dispute. The only comment of defendant in that regard is that, “Vickers in its zeal to protect itself may have exacted too broad a license.” The Government points out that in 1927, prior to the time defendant and British Timken associated in their challenged conduct in the .bearing industry they were prosperous and growing concerns. This is amply supported by the evidence. Since it was founded, defendant has held a commanding position in its field of manufacture. By 1928 it became the Titan of the roller bearing industry. It had purchased the assets of its principal competitors in the United States. Conflicting claims were made, during the trial, as to the exact percentage of the total tapered roller bearing market controlled by defendant. It is of no moment what the precise figures were. 'Defendant’s assertions that it was “many times over the largest manufacturer of tapered roller bearings in the world” and that “Timken Tapered Roller Bearings are standard equipment in a majority of all makes of automobiles, trucks and busses. Railroad cars and locomotives, steel mill roll necks, machine tool spindles, oil field machinery, compressor crankshafts, paper making machines — these are but a few of Industry’s tough jobs in which Timken Bearings have become dominant” are sufficient indication of the position of defendant in the industry. Although defendant in its advertising characterized itself and its product in this fashion in 1941, its relative position was the same in 1928. British Timken’s potent leadership in the industry compared favorably with that of defendant. It showed a substantial growth from the time the principal contracts were made and increased its productive capacity, experience in manufacture and sales output to an extent, that it became a potential formidable competitor in the field of roller bearings. It experienced a relatively greater 'growth in the business than did defendant. It had but one competitor in Great Britain and sold approximately 90% of all the tapered roller bearings there. So the accused agreements between 1928 and 1938 were made between two manufacturers,! who, on the basis of the evidence, were properly characterized as the largest manufacturer in the world and the largest manufacturer in Great Britain, respectively. Around 1926, Michael B. U. Dewar, an English businessman, became vice chairman of Wolseley Motors. British Timken was then a subsidiary of Wolseley Motors. As a member of a British commission, while on a visit to the United States to make an economic study, he spent some time at defendant’s plant, in 1927, shortly after his return to England, he became interested in personally acquiring British Timken. As an officer of Wolseley Motors, he knew of the existing agreements between defendant and British Timken, of their provisions pertaining to territory, royalty and trade mark. He also knew that the contracts were to expire on January 1, 1929. On March 10, 1927, Dewar wrote to defendant’s president, advising that he had become chairman of British Timken and raising the question of the continuation of the existing agreements between British Timken and defendant. In this letter mention was made that he contemplated making an offer to Vickers for the purchase of British Timken and expressed the thought that it would require about £300,000. He commented, “I do not know whether your Company would care to be interested if I were to make such an offer either permanently or on the basis of the money loaned being repaid out of profits.” On March 28, Dewar cabled defendant, inquiring whether it would be prepared to extend its agreements with British Timken for ten years, if he were to take it over and stating that he had to make up his mind within the next ten days and should like to do it, but did “not think it wise without a ten year’s arrangement with” defendant. Defendant cabled Dewar in reply, that it was willing to consider an additional ten year license and reduction of royalty, that with its co-operation costs could be reduced 25 per cent or more and further saying that it would be more interested in joining with him in purchasing the British company from Vickers. Additional cables and personal negotiations between an executive of defendant and Dewar followed, which eventuated in a written instrument named, “Heads of Agreement” dated May 16, 1927, signed by defendant and Dewar. It was in effect a memorandum of the concurrence of the parties on the basic subject matters of the negotiations to be later “embodied in morev formal documents as soon as practicable.” Inter alia, it provided that defendant would contribute £52,500 and Dewar £47,500, for the purchase of the stock of British Timken; that upon the issuance of two classes of shares Dewar would hold the majority of the class which controlled the company; that such control would cease in the event a stipulated minimum net profit was not earned and a specified dividend was not paid periodically; that Dewar was to be the managing director while the shares he owned controlled the company. The contract likewise provided that a new agreement would be -entered into between defendant and British Timken “extending for ten years the terms of the existing Agreements between them subject to modifications and generally upon such terms and conditions to be mutually agreed” including among others, “Any practicable steps to be taken for the protection of the name Timken and securing the exclusive reversion of the name in all countries to the American Company at the termination of the Agreement.” The control of British Timken accordingly passed from Vickers to defendant and Dewar. Each owned about 50 per cent of the stock, but Dewar was the managing director and conducted its affairs. Under these recited circumstances and following these preceding events, British Timken, defendant and French Timken made a series of agreements and engaged in a course of conduct which are labeled by the Government, “a broad combination ■and conspiracy to suppress all competition between the parties * * What were these agreements and what did these companies do to warrant the charge leveled against them? On January 1, 1928, a “business agreement” consisting of three written instruments of the same date was made between defendant and British Timken, to be in effect for a period of ten years. Simultaneously all existing contracts between them were cancelled. The agreement of 1928 followed generally the pattern of those which preceded it. The world was divided into respective territories for the manufacture and sale of bearings in this language: “For the purpose of this Agreement the United Kingdom of Great Britain and Northern Ireland and all other countries of Europe and all colonies or dependencies of said United Kingdom and European countries except in or adjacent to North or South America shall be deemed to be the territory of the British Company and the rest of the world shall be deemed to be the territory of the American Company.” Exclusive license was granted to British Timken under existing or future patents of defendant for the duration of the agreement. In turn British Timken was to assign absolutely and for all time its existing and future patent rights in defendant’s territory. They agreed to inform each other in respect of all inventions and improvements regardless whether they were patented or not patented. . Advice as to methods of manufacture was to be furnished by defendant, and British Timken was obliged to follow it. Each party agreed not to sell bearings directly, or to others for shipment into the other party’s territory, except as assembled component parts of completed articles manufactured in its own territory and for bearing replacement purposes in such completed articles. In the event such sales in or into the other party’s territory were made, they were obliged to advise each other of the details of the sales and pay an amount of ten per cent of the net sales price. They agreed to endeavor to maintain the distinctive character of the trade mark “Timken.” British Timken agreed not to manufacture or sell bearings except under the trade mark and only in accordance with the provisions of the agreement, and to eliminate the name “Timken” from its corporate name and to refrain from its use as a trade mark upon the termination of the contract. Prior to 1924, British Timken or its predecessor exclusively licensed a French company La Societe de Mecanique de Gene-villiers (hereinafter referred to as S. M. G.) to manufacture Timken roller bearings in France and its colonies. S. M. G. registered the trade mark “Timken” in France and her colonies, where it was the only manufacturer of tapered roller bearings until 1928, when its license agreement was terminated. Early that year steps were taken by Dewar, with the consent and co-operation of defendant, to organize Societe Francaise Timken (French Timken), which accordingly came into existence in July of 1928. The ownership of its stock was divided between defendant and British Timken. Dewar, however, during the entire time under consideration, controlled its operations and supervised its business activities. French Timken purchased from S. M. G. the trade mark rights in the name “Timken” for 12,000 francs. A “business agreement” was entered into between British Timken and French Tim-ken, on the model of the one between defendant and British Timken, allocating to French Timken France and her colonies, dependencies and mandates (except those in North and South America) as its exclusive territory for the manufacture and sale of anti-friction bearings. French Timken rented a plant, purchased machinery from defendant and British Timken and commenced operations by first importing semi-finished products from defendant and British Timken. By T933 it was engaged in the manufacture of all the component parts of roller bearings. In Germany, one Prausnitzer, the owner of a company called Deutsche Timken Ges-selschaft, had registered the trade mark “Timken.” Defendant and British Timken organized a new German company with the same name, gave Prausnitzer a 20-25 per cent interest in it and named him manager in order to acquire the trade mark and Prausnitzer’s assignment of his company. An agreement similar to the one made with French Timken was consummated between British Timken and Deutsche Tim-ken Gesselschaft, which allocated Germany as the German company’s exclusive territory for the distribution of anti-friction bearings. In 1934 the German company’s business was discontinued and British Timken again took over the territory. Before the expiration of the 1928 contract, -another agreement between defendant and British Timken became effective (on January 1, 1935) for sixteen years, which was substantially the same as the 1928 contract. In it were found, however, the following provisions: “The American Company [Tim-ken] in its territory may accept and execute orders for bearings for ultimate destination in the British Company’s [British Timken’s] territory for use for bearing replacement purposes in such completed articles of manufacture but such right shall not authorize sales to or known to be destined for manufacturers in the British Company’s territory or sales at prices in conflict with the wishes of the British Company and the American Company from time to time will notify the British Company of the details of the sales authorized under this paragraph and will pay to the British Company an amount equal to five per cent (5%) of the net sale price thereof.” Conversely the same provision is made as to prices and payments to defendant for sales of replacement bearings by British Timken in defendant’s territory. Russia became the joint territory of defendant and British Timken. Business transacted there was conditioned as follows : “The prices and terms at or upon which offers are made and orders are accepted shall so far as practicable be mutually agreed from time to time but nevertheless either of the parties hereto shall be at liberty to quote and accept orders at low prices and extended times for payment without the consent of the other party after having first submitted the prices and other terms to the other party for its consideration and remarks provided that any such quotation or acceptance shall not involve under cutting some quotation already made by the other party.” The agreement of June, 1928, between French and British Timken was modified in a new contract on July 15, 1935. It too provided that bearing replacement sales might be made by defendant, French Tim-ken and British Timken in and into their respective territories. The prices had to be satisfactory to the company into whose territory bearings were sold. French Tim-ken was obliged to sell no bearings other than under the trade mark “Timken.” The present operations of defendant, British and French Timken in the world market of anti-friction bearings are carried on under the provisions of and subject to the restrictions of two contracts both dated November 28, 1938. They are, the “Tripartite Contract” between defendant, British and French Timken and the agreement between defendant, British Timken and Dewar, which is supplemental to the Tripartite Agreement. These are the final understandings which superseded -all the numerous others and are to govern the conduct of the parties until the end of 1965. >" The lengthy recital of the contents of the prior agreements was felt desirable for the purpose of showing the evolution of exclusive licenses under patents into agreements which are not based on the prerogatives enjoyed by the limited patent monopoly. Defendant and Dewar have to date maintained controlling stock interests in British Timken. In 1935 stock was sold to the general public, which resulted in defendant owning 30.25 per cent and Dewar 25 per cent of the shares. Defendant and British Timken own all the stock of French Tim-ken. Considerable testimony was offered to explain the reasons for the making of the large number of contracts, why they were modified and extended from time to time and various covenants were inserted in them and why the present contracts have such long duration. In the basic questions involved, the reasons advanced are of no significance. The controlling facts are that they were made and that they contained certain provisions which may bring them under the condemnation of the Sherman Act. The 1938 contracts are each entitled “Business Agreements” and contain substantially the same provisions present in the 1935 agreements. To summarize their salient features, the contracts provided for exclusive marketing areas which prevented the parties from selling in each other’s territories, fixed prices on all replacement bearings sold in each other’s territories,- fixed prices on bearings sold in Russia and compelled British Timken and French Timken to manufacture and sell bearings only under the terms of the agreements and under the trade mark “Timken.” The evidence is overwhelming and un-contradicted that defendant, British Tim-ken and French Timken religiously adhered to their contractual obligations to make the territorial divisions inviolate. Indeed, in some instances they refused to disturb the allocated territories even where exceptions were made in the agreements. For example, although the contracts permitted sales of replacement bearings outside of the allocated territory D. P. Hess (assistant to the president of the defendant company) confirmed the arrangements he made with British Timken in a memorandum on February 16, 1932 as follows: "Prices on Service Bearings Into Ow T erritory “Arrangements completed to effect that British Timken will not quote on any inquiry coming in and state product should be obtained from us. There are two exceptions to this: “(1) When customer demands British product. “(2) When S. K. F. or F. S. are in competition. “Both the latter are quoting 70 off on the Continent and we are having our trouble. “Hong Kong will be American territory starting at once.” Each of the parties refused orders for shipment outside of its territory, referring them to the company in whose territory they were to be used. During the period from July 1, 1945, to February 20, 1947, alone, defendant transmitted 402 inquiries or orders to British Timken and French Timken. In each instance the customer who placed the order was advised that either British or French Timken had the exclusive right to supply the bearings. The steady and persistent effort to assure the exclusive right of each party to manufacture and sell in its own domain is emphatically illustrated in the various letters and memoranda of the officers of the contracting parties and particularly of the officers of defendant. They bear out the Government’s contention that -the respective trade provinces were to be preserved regardless of the unsatisfied demand for bearings in the various parts of the world. Over the entire span of years during which the restrictions existed, -the parties did not deviate from their course of conduct. Even when the world gradually became engulfed in armed conflict, provisions were made to supply customers by specific arrangements so as to retain the trade division. In 1929, the Ford Motor Company attempted to purchase a quantity of tractor bearings from defendant for use in its Cork, Ireland plant, which was in British Timken territory. Defendant, instead of filling the order, made -the bearings, and shipped them to British Timken for resale to Ford. In that connection Hess wrote: “This is causing us, frankly, a great deal of changing in our plan of operations, as it meant putting all of this type of machinery to making these large bearings, on double shift and operating them seven days per week; but we feel that you need this help very badly at the present time, and our joint efforts must be made to keep competition out. of this Ford situation. “You may be interested to know that the Ford Motor Company, Detroit, upon receiving advices that your deliveries were not satisfactory, from their English and Cork representatives, immediately placed an order with us for approximately 5,000 sets of bearings, and of course they would have to pay our prices for them. We felt this would be a very serious handicap to your future sales, as they would constantly hold up the fact to you and possibly to us, that you could not handle their production after we had used our efforts, as you know, successfully, to have them turn over this entire production to you. ****** “We are shipping these bearings to Ford, Cork, Ireland, freight prepaid, and are going to bill you your selling prices to Ford. * * * “As you understand, these prices for the differential bearings in particular, are very materially below the prices that we sell Ford, and these quotations to you must be held in strictest confidence, as we certainly would be asked to explain the difference in prices we bill to Ford and the prices to you'; and our explanation of this would be that we are billing you such prices on account of the close relationship between the ■two corporations, and that the British Tim-ken Company is standing whatever losses may be incurred.” On December 5, 1939, L. M. Klinedinst (vice president of defendant) wrote to all interested employees of defendant as follows: “Since the turmoil in Europe certain situations are arising that make it necessary for each and every one of our key men to thoroughly understand the setup between British Timken Limited, Birmingham, England, and The Timken Roller Bearing Company, Canton, Ohio. ****** “The contract provides that we shall not ship or knowingly permit our customers to ship bearings into their territory for use in the manufacture of any equipment whatsoever. Where customers wish us to make shipments into their territory for manufacturing purposes, we are to advise them of our arrangement with British Timken Limited and you are to immediately advise us of such conversations, negotiations, etc., so that we can in turn contact the British Timken Company. “Undoubtedly many of our manufacturing customers buy bearings from us for service purposes and occasionally for manufacturing purposes and in turn re-ship them into British Timken’s territory. That, of course, we have no knowledge of and we cannot stop. ****** “There are a number of American manufacturers using Timken bearings who operate plants in British Timken’s territory. Some of these plants have used both SKF tapered roller bearings and Timken bearings. Inasmuch as it is becoming more and more difficult to secure anti-friction bearings from the Swedish companies, these American manufacturers who own these foreign plants will probably call on us to make deliveries of bearings from here. Please note that such deliveries are in direct violation of the British Timken contract, and where such requests are made refer them to us as we may want to effect some arrangement with British Timken to fill such requirements rather than have the American company buy one of the competing makes of tapered roller bearings and have them shipped into British Timkin’s territory. In such an event, both companies would lose.” Again on December 6, 1939, in another communication he wrote: “It is our interpretation of these arrangements that we are not permitted to sell or ship bearings into or known to be destined to British Timken’s territory without paying them a 5% commission, and even under such circumstances our prices must be acceptable to them. We have a mutual understanding with British Timken that on unsolicited inquiries for bearings going into each other’s territory that we are at liberty at all times to quote prices representing a 50% discount from American list on standard bearings and pay a 5% commission on the net sale thereof. We insist that all of our men respect our agreement with British Timken and on any unusual cases to consult the Home Office for further instructions.” On January 29, 1940, in “Inter-Organization Correspondence,” W. R. Timken (vice president of defendant), referring to Klinedinst’s letters, reiterated their contents in this manner: “In view of the confused conditions of international trade and the increased demands of the British and French governments for bearings for war purposes, it is probable that we will receive more and larger inquiries for bearings destined for the territories of our British and French associates. We have also had reports that companies using SKF bearings are having difficulties in getting deliveries, and this, too, may be a factor in our receiving inquiries for delivery in the territories of our associates. “Our agreement provides that we are not to sell bearings into Europe or possessions of European countries, excluding Russia and North and South America, except for service, and in the case of service, only under certain price conditions. Our agreement does not permit us to sell original equipment bearings directly or to domestic manufacturers knowing them to be destined for shipment into British or French Timken territories. Howevex*, this does not include bearings assembled into completed articles of manufacture or component parts of completed articles of manufacture subsequently shipped into their territory. “When inquiries are made for bearings which may be shipped into our associates’ territories, please report the matter immediately to Canton giving full information as to number, size, quantity, specification, and the exact' use of the bearings. In addition, you should use your best efforts to persuade the customer that our British and French associates are both able and eager to supply their foreign requirements and that they manufacture a product comparable in every way to our own. “When emergency shipment of small orders is demanded, we have the permission of our associates to fill such orders. We do not, however, wish to take advantage of this permission except where it is unavoidable. These cases must be taken up with Canton as outlined above for it is necessary that complete information be given to the associate involved. Should the Canton office see fit to fill any such orders that does not mean we will continue to accept them, and the customer should be urged to place all future orders with British or French Timken as the case may be.” A report from R. E. Forsythe (assistant to the pi’esident of defendant) to Klinedinst on December 3, 1940, entitled “Sales Into British Timken’s Territory,” described the temporary arrangement precipitated by the war. He said: “ * * * It had not been our practice in the past when we shipped bearings for British Timken directly to their export customers to give them a discount from our standard established prices such as we gave them when the bearings went to Birmingham, but they asked that we now do so due to prevailing circumstances. In other words, when we made shipments to their customers direct, they would advise us the prices at which the material should be charged and then we were to credit British Timken’s account with the difference between the amount received from the customer and the price we would ordinarily have charged British Timken had the bearings gone to Birmingham. “We agreed to do the above on a temporary basis, reserving the right to rescind the price concession at our discretion, and in this connection British Timken was to guarantee the credit of their agents so long as we followed their instructions regarding terms of shipment. “Since the time that hostilities broke out in earnest in Europe we have continuously received inquiries emanating from British Timken’s sales territory requesting catalogs and prices on our bearings. In many cases we were advised that they had formerly been supplied their Timken bearings from Birmingham, but they now desired to establish an American source of supply in case they could no longer secure bearings from England, and in some cases these inquiries came from British Timken distributors and French Timken agents. We have either referred the inquiries to Birmingham, or if it were a specific inquiry covering a definite lot of bearings we quoted our protective discount of 50% off American list. We have received definite orders from their sales territories which upon being referred to British Timken were turned down at their instructions. $ % $ “Mr. Winspur [of the British Purchasing Commission] advised me more or less confidentially that he had learned that all orders from Bearing Service Company in Australia had to be placed through Birmingham due to contractual relations and stated that he felt it would be necessary for the Australian Government to probably take over these orders and place them through the British Purchasing Commission. In discussing this with Mr. Harrison a few days before he left Canton, he asked if we would cover them in the amount of 5'% on such sales inasmuch as they had the defense contract, but we made him absolutely no promises of any kind. % s{; if: % sfc sfc “We have picked up from several sources in the United States the story that The Bower Roller Bearing Company is making every effort to take advantage of present conditions in order to establish themselves in world markets, and such conditions as .described above only serve to give them an entree into these fields. We have also heard that SKF is buying Bower bearings and are either re-packaging them or having their name stamped on the bearings and selling them to their regular customers in export markets. Naturally, we feel that present conditions did not add to the prestige of the Timken name and also that Bower who is a dangerous competitor is now being given an opportunity to secure a foothold from which it may be very hard to dislodge them after the war is over.” The strict adherence to the territorial restrictions applicable to Australia became a matter of grave concern to British Tim-ken’s distributors and eventually to the British Purchasing Commission. There was a serious interference in Australian war production due to British Timken’s inability to supply bearings. The threat of sales by competitors to supplant the meager amount of available bearings and the clam- or of Australian distributors eventuated in the relaxation of the theretofore inflexible provisions of the contracts. For the period of the war emergency, defendant was permitted at first to fill only Australian orders and later orders emanating from any place in British Timken’s territory, but only through British Timken’s distributors and only at prices designated by it. The voluminous correspondence on the subject matter bears out the critical situation which existed and which required the reluctant alteration of established policy. For example, on September 20, 1940, C. S. Gibson (technical representative of British Timken at Melbourne), in a letter advised Forsythe of the proposed visit of an official of Roller Bearing Service Company of Australia to Canton and further said: “ * * * It seems impossible to rely on Birmingham to efficiently handle orders, and of course, neither I nor our Distributors are officially allowed to correspond with you direct, Mr. Harrison will, I expect, give you details of lots of other matters which' have been held up unduly, but I pointed out to him that possibly you may not be able to help him much, as this territory is controlled by British Timken Ltd., “On the other hand, you will appreciate the rather absurd position existing at the present moment, inasmuch that we are getting practically all our supplies from you, and yet it is almost impossible to get any information from Birmingham. Why not take over Australia and New Zealand for the duration of the war? I hope that you have been asked by Birmingham to quote for the complete equipment of 20 alternatively 35 locomotives and tenders for the New Zealand Railways. This is a case where the customer is extremely anxious to place the order with us, but for some extraordinary reason, we do not seem to be able to produce a price.” R. R. Thomas of Bearing Service in writing to Forsythe commented: “Our cable to Mr. Harrison may have been a little difficult for you to understand but we are engaged at the moment in replying to a cable from Mr. Pascoe and we are very concerned to make sure that Mr. Harrision does not ask you specially to request that our orders go direct to Canton and then for us, in our enclosed letter, to ask Timken to do the opposite. In other words, we do not want you to think for one moment that we would ever let you down in the slightest particular. $ s}c % ^ }|< “I am asking Mr. Harrison to try and meet Mr. Dewar and casually give him a copy as per our enclosure stating to him that he might wish to make some enquiries while he is in America.” The cable to which he made reference was sent by Pascoe (chief executive director of British Timken and director of French Timken) to Bearing Service reading: “Canton report confusion caused by receiving requests for deliveries and prices direct from Australia presumably Bearing Service Company Stop This is directly opposite to our instructions Stop How does it occur? Stop Please take immediate steps to rectify.” Subsequently Thomas wrote to Gibson: “Not only was that opportunity missed but after more than twelve months of war, after large quantities of ball bearings have become available in this country, we still await our first considerable shipment from Canton and we still, in some unfortunate cases convert Timken users back to ball bearings. ****** “In some urgent cases we have been reminded by the Ministry of Munitions that we were retarding the Defence program by not supplying information promptly and we were asked whether we were prepared to do something about it or whether they would communicate direct with the British Purchasing Commission. Í-Í $1 S-Í * * * “With all respect we request Mr. Pascoe to accept this following recommendation which we make in the light of many years experience of this market. “(a) That all our orders be forwarded to British Timken, Ltd. “(b) That in all other matters connected with shipments of goods, we be encouraged to communicate freely with Canton, at the same time sending a copy to Birmingham.” On December 4, 1940, Klinedinst wrote Dewar, who was then in the United States: “We were advised by the British Purchasing Commission that they will very likely take over all of the purchases of anti-friction bearings for Australia. This will present a problem, the solving of which we must ask your help. “Undoubtedly as these inquiries come to the British Purchasing Commission they will ask all tapered roller bearing manufacturers in this country to quote prices, and following the same assumption further, they will give the business to the lowest bidder. That is one phase of it. On the other hand, should your Australian distributors specify on their orders that they must definitely be supplied Timken bearings, then, we presume, they would come to only Timken for quotations, or would they take it upon themselves to buy from the cheapest source? “Regardless of how this works out, we have the problem of what prices to quote and how to distinguish between bearings that are to be used essentially for service and those to be used in production. There is another angle that may enter into this— the Purchasing Commission may go, for instance, to the General Motors Export Corporation for prices on bearings for General Motors equipment and, naturally, there should be uniformity in prices. Surely we feel it is necessary to have two distinct prices if this is possible — one covering bearings for service and the other for production. “We have in mind a number of American manufacturers who have assembly plants in Australia, and if the British Purchasing Commission takes over that phase of the business those bearing purchases would come through them rather than through the International Harvester Company, or General Motors, or who ever may have plants in Australia. “We have in mind a situation that developed several months ago. When we quoted th^ British Purchasing Commission on a large quantity of bearings at the established government buying agency price —#30—our competitor, The Bower Roller Bearing Company, quoted on this same inquiry at about a # 17 price and The Bower Company got the business. “We do not want to see The Bower Company or any other American manufacturer of tapered roller bearings find a foothold in Australia or in any other territories covered by you, but we feel this will happen on a straight competitive bidding proposition because it is not possible to definitely control the price at which other tapered roller bearing people will sell their products for foreign consumption. “The simplest way out of this, as we see it, is for British Timken to instruct all of their foreign service connections to very definitely and positively specify Timken tapered roller bearings. That will give the British Purchasing Commission no leeway. If that can be done, the problem is virtually solved. ****** - “We feel, Mr. Dewar, that the awkward situation now presenting itself might have been avoided had British Timken permitted us to handle their outside orders direct. “Mr. Harrison of The Bearing Service Company of Melbourr^ spent quite some time with us recently and was very bitter in his criticism of our deliveries. We found in many cases we had never received an order from British Timken for the sizes so badly needed. “The policy followed by your Australian people was to send the order to British Timken, they would fill such parts of it as they could, and the balance of it was transferred to us. That meant a very great delay and that was why we suggested sometime ago that you have such parts ordered and shipped direct from Canton.” On December 18, 1940, Gibson addressed a personal note to Forsythe, saying among other things: “On the 11th December, the following cablegram was received by Bearing Service Co. of Aust. Pty. Ltd. Melbourne from Mr. Harrison. This was sent from Los Angeles on the 10th December: “ ‘Canton advise Dewar agreed yesterday their handling Australia direct he cabled Pascoe this effect now awaiting confirmation Birmingham’ “As you can imagine this is some of the best news I have had in years. So far I have not received any advice from Birmingham about it. I feel that Birmingham will do their best to avoid this arrangement, although if Mr. Dewar has agreed to it, half ■ the battle is won. I can think of quite a number of reasons as to why Mr. Dewar would agree, and no doubt I will hear this story from you in due course. ****** “I do not know if you will be taking over this part of the business, and am- of the opinion that it is quite possible that Birmingham will want to retain it. Should you be taking it over, it will of course, be necessary for you to compete with prices of ex Ford factories in Canada, and you will know what the position is with them. You may prefer to retain the business in this way, but as you can imagine, I am naturally anxious to have it direct.” The Australian government representatives called on defendant in February 1941 to build a plant in Australia. Wm. E. Umstattd (president of defendant) reported to his associates in a memorandum: “Mr. Gutteridge, an engineer who has been sent to this country by the Australian Government to negotiate for the establishment of manufacturing plants in Australia, visited us at 3 P.M. with Mr. Chamberlain who is at present Technical Engineer with the British Minister of Munitions in Washington. “Gutteridge and Chamberlain called on us to see if we would be interested in establishing a bearing plant in Australia to manufacture all types of anti-friction bearings. They said that the anti-friction bearing business in Australia has amounted to about $1,000,000 per year for the past several years, but within the past twelve months this figure has increased approximately 100%. Mr. Gutteridge said that the Australian Government was insisting that a plant be built in Australia and that adequate tariff protection would be given to such an industry. “I explained to Gutteridge and Chamberlain that Australia was controlled by British Timken and that under no circumstances would we consider building a plant in Australia. I pointed out to them that it would be almost impossible to get delivery on any machine tools suitable for the manufacture of anti-friction bearings and that no bearing manufacturer in this country had excess machinery which could be shipped to Australia. Mr. Gutteridge wanted to know if we would be interested in establishing a plant in Australia if he could secure priorities for the necessary-equipment. I told him that I did not think he could secure such priorities, but if he did we would not be interested as I had previously pointed out that British Timken controlled the sale of Timken bearings in Australia.” The inquiry of the British Purchasing Commission was answered in the same vein by Umstattd: “Your letter of February 26th has been received. “When Messrs. Chamberlain and Guthe-ridge visited us about ten days ago we told them that under no circumstances would The Timken Roller Bearing Company establish a plant for the manufacture of bearings in Australia. We have a contract with British Timken Limited which precludes our establishment of a manufacturing plant in Australia. Such a plant would have to be built by British Timken Limited.” These communications demonstrate that the parties not only sought the preservation of their respective sales fields, but that they supported the agreements by the maintenance of a price fixing arrangements. The protective discount policy insured the parties against competition from each other in replacement bearings. Defendant sold at a 70% discount for export in its „ own territory, but quoted prices representing a 50% discount from the American list on standard bearings in response to unsolicited inquiries from British Timken’s territory. Other steps were taken to prevent outsiders from disturbing the agreements as the particular situation required. In January of 1928 D. E. Hobley (sales manager of British Timken) wrote to Hess: “In Budapest, Hungary, Timken bearings are serviced by Mr. Michael Pal, and he has been doing remarkably good business for us during the last year. In the same city there is a house called Messrs Denes & Friedmann, who are the representatives of the Timken-Detroit • Axle Company through their British connection. As you know, we^ have established service prices for bearings identical with your own and operate with the same discounts, but we are much alarmed to find that Messrs. Denes & Friedmann can sell Timken Axle sizes considerably cheaper than our own distributor. * * * “It seems to us that the Timken-Detroit Axle Co. are taking advantage of their position inasmuch as they buy from you at low prices and ship them over to our territory on a small margin of profit, and this does interfere with our service prices.” In February 1928 Hess replied to Hob-ley : “We have finally concluded arrangements with Timken-Detroit Axle Company with reference to the sale of our bearings through their distributors in Europe, and particularly in Budapest, Hungary. “Mr. Emmett, of the Automotive Products Company, London, is in touch with this situation, and I believe it would be wise for you to call upon him. He will receive instructions from Timken-Detroit to the effect that he should not undersell us or you on service bearings.” They deviated from adherence to protective prices only in cases where competition of outsiders required that it be done. In June, 1944, E. H. Austin (defendant’s manager of Service Sales) wrote: “Joe Cornell handed me your letter of June 2 which resulted in my discussing this with Mr. Klinedinst. I think before we definitely commit ourselves to quoting 70% on general sizes and 60% on Ford on the orders to which you refer, we better find out just exactly what is involved— bearing sizes, quantities, etc. Perhaps you could tell us a little bit more about Cymot, Ltd., for it is well that we are given what information is available on any of these companies that we give consideration to quoting our export prices in British Timken markets. “You brought up an age-old subject, namely, the policy that we should employ in quoting on inquiries emanating from British Timken territory. I pointed out to Mr. Klinedinst the weakness in our pricing policy in the British Timken market, emphasizing the fact that buyers for the B-T market are becoming familiar with the fact that we are protecting British Timken and by so doing, do not have a price that is anywhere near competitive to Bower. As a result, it now develops that we don’t even get inquiries for a lot of requirements. They are automatically referred to our competitors. Naturally it cannot be expected that Bower will establish an export policy comparable to ours in territories that we cover and another pricing policy to be in line with us in British Timken territories.” In the joint territory of Russia, the pricing provisions spelled out in the written contracts were carried out to the letter. The contractual obligations for the interchange of information relating to the manufacture of bearings and of all inventions and discoveries, whether they were pate