Full opinion text
STONE, Circuit Judge. Heretofore, the United States brought suit against various individual, associated, and corporate parties for violation -of the Sherman Anti-Trust Act (15 USCA §§ 1-7, 15) through a conspiracy to restrain interstate and foreign commerce in petroleum and its products and to monopolize such commerce in that regard. In that action, this court entered its decree against seven individual and thirty-eight corporate defendants, including the Standard Oil Company of New York and the Vacuum Oil Company. (C. C.) 173 F. 177, 197. With minor modifications, that deeree was affirmed. 221 U. S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734. The only modification affecting the present proceeding was that “the court below to retain jurisdiction to the extent necessary to compel compliance in every respect with its deeree.” 221 U. S. 1, 82, 31 S. Ct. 502, 524, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734. The original deeree was modified, in the respects directed by the Supreme Court, by an entry of record in this court dated July 29, 1911. Thereafter, the deeree, in so far as dissolution of the existing unlawful organization was concerned, was fully executed. The Now Jersey company (the old holding company) distributed the stocks to the subsidiary corporations, and for almost twenty years the Standard Oil Company of New York and the Vacuum Oil Company (two of such subsidiaries) have existed and conducted their businesses entirely independently of each other and of the other parlies to the old combination. Under this retained jurisdiction “to compel compliance,” the United States files this supplemental petition to prevent a contemplated merger of the Standard Oil Company of New York and the Vacuum Oil Company. A certificate of expedition has been filed by the United States and the matter heard by three Circuit Judges under the statute. USCA title 15, § 28. Evidence has been taken by a master, and such evidence, with an excellent summary thereof by the master, has been filed. The defendants will hereafter be designated as Vacuum and as Socony (the trade-name of the Standard Oil Company of New York). Such petition alleges that these two companies are contemplating a merger, and that such merger is in violation of the above decree. The companies admit the contemplated merger, but deny that it is in violation of the decree. Therefore, whether the deeree will be violated by the merger depends upon what the deeree enjoined and whether the merger is shown by the evidence to be within the things and matters enjoined. The parties differ widely as to the meaning of the decree and as to the effect of the evidence. The controversy is over the proper construction of the deeree and the effect of the evidence upon the decree so construed. Naturally, the first matter for determination is the construction of the deeree, I. Construction of the Decree. The decree (sections 1 to 4, inclusive) declared that the Standard Oil Company of New Jersey held a majority of the capital stock of the other companies, and exercised complete control thereover; that this arrangement was in pursuance of a' conspiracy to, and resulted in a combination to, restrain trade in violation of section 1 of the AntiTrust Act; and that such combination was a monopoly in violation of section 2 of the act. Sections 5 to 7, inclusive, set forth the remedy applied by the court. Section 7 (as modified) enjoined the named defendants from engaging in interstate commerce after a six-month period allowed for dissolution of the combination. Section 5 enjoined the New Jersey company from voting the stock of, or exercising any control over, this subsidiaries, and enjoined the subsidiaries from declaring or paying any dividends to the New Jersey company and from permitting it to exercise any control over them, but the defendants were permitted to distribute the shares in the several corporations ratably to the shareholders of the New Jersey company. These two sections (5 and 7) were designed to compel dissolution of the existing combination by distribution to the stockholders of the New Jersey company of the shares in the several companies hold by it, so that such companies would go forward as separate units, freed from the central control and domination of the New Jersey company. Section 6 was designed to meet the situation after the above dissolution and to prevent a re-creation or reformation of another and new combination by any participant in the existing combination — it. was to preserve, as to such participants,- the situation designed to be brought about by section 5, that is, a continued effective dissolution of the unlawful combination. Section 5 has been fully complied with. We are here concerned with section 6. Therefore, the controversy here is over the meaning of section 6. That section is as follows: “Section 6. That the defendants named in section 2 of this decree, their officers, directors, agents, servants, and employees are enjoined and prohibited from continuing or carrying into further effect the combination adjudged illegal hereby, and from entering or performing any like combination or conspiracy, the effect of which is, or will be, t'o restrain commerce in petroleum or its products among the States, or in the Territories, or with foreign nations, or to prolong the unlawful monopoly of such commerce obtained and possessed by defendants as before stated, in violation of the act of July 2, 1890, either (1) by the use of liquidating certificates, or other written evidences, of a stock interest in two or more potentially competitive-parties to the illegal combination, by causing the conveyance of the physical property and business of any of said parties to a potentially competitive party to this combination, by causing the conveyance of the property and business of two or more of the potentially competitive parties to this combination to any party thereto, by placing the control of any of said corporations in a trustee, or group of' trustees, by causing its stock or property to be held by others than its equitable owners, or by any similar device; or (2) by making any express or implied agreement or arrangement together, or one with another, like that adjudged illegal hereby, relative to the control or management of any of said corporations, or the price or terms of purchase, or-of sale, or the rates of transportation of petroleum or its products in interstate or international commerce, or relative to the quantities thereof purchased, sold, transported, or manufactured by any of said corporations which will have a like effect in restraint of commerce among the States in the Territories, and with foreign nations to that of the combination the operation of which is hereby enjoined.” The- pertinency of section 6 is that it forbids, under conditions therein expressed, “the conveyance' of the physical property and i business” of one of these defendants to an- Í other, and that the. contemplated merger con- , fessedly intends the conveyance of the prop- • erty and business of the Vacuum to 'the So- ) cony. The construction contended for by the plaintiff is as follows: . “Section 6 sets out specific acts which the court will consider as tending to recreate the old combination or tending to- create a similar one, and that the court will, therefore, consider such conduct to be a violation of the decree.” Plf. Br., p. 40. The same thought is again expressed as that the decree forbids “certain types of transactions which were considered unlawful because tending to defeat the purpose of the decree. The .types of agreement which' the court does not consider normal and lawful under the circumstances are set out in Section 6 of the decree, and • among such unlawful agreements are combinations of competitors, because such combination's do tend to recreate the illegal combination dissolved.” Plf. Br., p. 51. The construction urged by the defendants is as follows: . ~~..... At *' * * ln Section 6, it [the trial court] directed the language of injunction against the continuing of the old and the ‘entering or performing of any like conspiracy or combination the effect of which is, or will be, to restrain commerce * * * in violation of the Act of July 2, 1890,’ by various enumerated acts instead of as in Section 5 specifically enjoining the doing of particular acts without ány reference to whether or not they constituted the entering or performing any combination or conspiracy. The court thus clearly recognized that the particular acts referred to in Section 6 might or might not be an ‘entering or performing of any like combination or conspiracy,’ and that these or any similar devices only come within the purview of the decree when by doing them the defendants are in fact entering or performing such combination or conspiracy. The court did not attempt to forbid absolutely under all future circumstances particular transactions which would normally be lawful and which would only be unlawful if in fact done as a part of or in effecting that ‘like combination or conspiracy’ which this decree in terms enjoins the defendants from ‘entering or performing.’ ” Def. Br., p. 96. . Therefore, the controversy concerning the proper construction of section 6 is whether it enjoined the doing of the enumerated acts absolutely and irrespective of their effect, or whether it enjoined such acts only if they had the effect of entering into or performing a like conspiracy to restrain or monopolize interstate commerce. When this decree was on appeal in the original suit, section 6 was the subject of specific attack by the then appellants. In response to such attack, the Supreme Court placed a construction upon the section. That construction entirely covers the line of cleavage now presented. Therefore, our duty is to state the construction made by that court rather than to attempt any independent eon-struction of our own. Such construction is to be found on pages 77 to 81 of 221 U. S., with particular attention to pages 80 and 81 thereof (31 S. Ct. 523, 524). In dealing with the various controversies presented to it, the Supreme Court divided its opinion into four main headings, of which the fourth was stated as “The Remedy to Be Administered.” Page 77 of 221 U. S., 31 S, Ct. 523. The meaning and effect of section 6 is one of the matters examined and disposed of under this heading. In opening its discussion under the above heading, the court announces that ordinarily sufficient relief would he afforded by restraining the acts found to he unlawful, but where, as here, there is “not only a continued attempt to monopolize, hut also a monopolization, the duty to enforce the statute requires the application of broader and more controlling remedies,” and, as the act does not authorize penalties, “it follows that to meet the situation with which we are confronted the application of remedies two-fold in character becomes essential: 1st, to forbid the doing in the future of acts like those which we have found to have been done in the past which would be violative of the statute,” and, second, to effectually dissolve the existing unlawful combination. In applying those remedies, the court states that “tho fact must not be overlooked that injury to the public by the prevention of an undue restraint on, or the monopolization of, trade or commerce, is the foundation upon which the prohibitions of the statute rest, and moreover that one of the fundamental purposes of the statute is to protect, not to destroy, rights of property.” Page 78 of 221 U. S., 31 S. Ct. 502, 523. The court then proceeds to an examination of the decree “in order to fix how far it is necessary to take from or add to that relief, to the end that tho prohibitions of the statute may have complete and operative force.” Page 78 of 221 U. S., 31 S. Ct. 502, 523. The court then summarizes the decree, and afterwards states its determination as to the propriety of various features thereof. In its summary of the decree, as to section 6, the court says: “So far as the owners of the stock of the subsidiary corporations and the corporations themselves were concerned after the stock had been transferred [by the holding New Jersey Company to the subsidiary companies according to the permission in section 5 of the decree], ,§ 6 of the decree enjoined them from in any way conspiring or combining to violate the act, or to monopolize or attempt to monopolize in virtue of their ownership of the stock transferred to them, and prohibited all agreements between the subsidiary corporations or other stockholders in the future, tending to produce or bring about further violations of the act.” Page 79 of 221 U. S., 31 S. Ct. 502, 523. Its determination as to the propriety of section 6 is thus stated (page 80 of 221 U. S., 31 S. Ct. 502, 524) : “But the contention is that, in so far as the relief by way of injunction which was awarded by § 6 against the stockholders of the subsidiary corporations or the subsidiary corporations themselves after'the transfer of stock by the New Jersey corporation was completed in conformity to the decree, that the relief awarded was too broad: a. Because it was not sufficiently specific, and tended to cause those who were within the embrace of the order to cease to be under the protection of the law of the land and required them to thereafter conduct their business under the jeopardy of punishments for contempt for violating a general injunction. New Haven R. R. v. Interstate Commerce Commission, 200 U. S. 404, 26 S. Ct. 272, 50 L. Ed. 526. [b] Besides it is'said that the restraint imposed by § 6 — even putting out of view the consideration just stated — was, moreover, calculated to do injury to the public, and it may be in and of itself to produce the very restraint on the due course of trade which it was intended to prevent. We say f this since it does not necessarily follow be- ! cause an illegal restraint of trade or an at-1 tempt to monopolize or a monopolization re-j suited from the combination and the transfer I of the stocks of the subsidiary corporations ¡to the New Jersey corporation that a like restraint or attempt to monopolize or monopojlization would necessarily arise from agree¡ments between one or more of the subsidiary corporations after the transfer of the stock ;by the New Jersey corporation. For illus-' tration, take the pipe lines. By the effect of the transfer of the stock, the pipe lines would come under the control of various corporations instead of being subjected to a uniform ¡ control. If various corporations owning the ; lines determined in the public interests to so í combine as to make a continuous line, such agreement or combination would not be repugnant to the act, and yet it might be restrained by the decree. As another example, take the Union Tank Line Company, one of the subsidiary corporations, the owner practically of all the tank ears in use by the combination. If no possibility existed of agreements for the distribution of these cars among the subsidiary corporations, the most serious detriment to the public interest might result. Conceding the merit, abstractly considered, of these contentions, they are irrelevant. We j so think, since we construe the sixth paragraph of the decree, not as depriving the :) stockholders or the corporations, after the ■{ dissolution of the combination, of the power . j to make normal and lawful contracts or agree- j j ments, but as restraining them from, by any! j device whatever, recreating, directly or in-jj directly, the illegal combination which thel> decree dissolved. In other words, we construe the sixth paragraph of the decree, not as depriving the stockholders or corporations of the right to live under the law of the land, but as compelling obedience to that law. As therefore the sixth paragraph as thus construed is not amenable to the criticism directed against it and cannot produce the harmful results which the arguments suggest, it was obviously right.” From the above statement and accompanying quotations from' the report of the case in the Supreme Court, it is clear that section 6 of the decree was directly challenged as having the effect of preventing the defendants from dealing with each other in the particulars specified in that section — one of which was “the conveyance of the physical property and business”; this apprehended effect was illustrated, in argument, by the pipe line properties which were originally owned by eleven companies. Also, it is clear that the court met this presented situation squarely by stating and disposing of it. It said: “ * * * It does not necessarily follow because an illegal restraint of trade or an attempt to monopolize or a monopolization resulted from the combination and the transfer of the stocks of the subsidiary corporations to the New Jersey corporation that a like restraint or attempt to monopolize or monopolization would necessarily arise from agreements between one or more of the subsidiary corporations after the transfer of the stock by the New Jersey corporation.” Page 80 of 221 U. S., 31 S. Ct. 502, 524. Then the court cites two illustrations of such situations which, from the evidence, might arise. The first of these illustrations involved a combination of business facilities and the other the transfer of possibly the entire property of one of the subsidiaries to other subsidiaries. The court said: “For illustration, take the pipe lines. By the effect of the transfer of the stock [from the- New Jersey company], the pipe lines would come under the control of various corporations instead of being' subjected to a uniform control. If various corporations owning the lines determined in the public interests to so combine as to make a continuous line, such agreement or combination would not be repugnant to the act, and yet it might be restrained by the decree. As another example, take the Union Tank Line Company, one of the subsidiary corporations, the owner practically of all the tank ears in use by the combination. If no possibility existed of agreements for the distribution of these cars among the subsidiary corporations, the most serious detriment to the public interest might result.” Pages 80, 81 of 221 U. S., 31 S. Ct. 502, 524. Then the court disposes of these contentions by saying: “Conceding the merit, abstractly considered, of these contentions, they are irrelevant.” Page 81 of 221 U. S., 31 S. Ct. 502, 524. Then the court states that the reason they are irrelevant is because section 6, when properly construed, is not subject to such meaning or as having such effects. It says: “We so think [that these contentions are irrelevant], since we construe the sixth paragraph of the decree, not as depriving the stockholders or the corporations, after the dissolution of the combination, of the power to make normal and lawful contracts or agreements, but as restraining them from, by any device whatever, recreating, directly or indirectly, the illegal combination which the decree dissolved. In other words, we construe the sixth paragraph of the decree, not as depriving the stockholders or corporations of the right to live under the law of the land, but as compelling obedience to that law. As therefore the sixth paragraph as thus construed is not amenable to the criticism directed against it and cannot produce the harmful results which the arguments suggest, it was obviously right.” Page 81 of 221 U. S., 31 S. Ct. 502, 524. Among the “harmful results” suggested in the arguments were that section 6 would prevent mergering of business and transfers of property from one subsidiary to another; the court had so stated its understanding of the arguments; and, in answer, had declared that such contentions were irrelevant and such criticism of the section not justified and such harmful results not produced thereby because that section forbade only such contracts or agreements as directly or indirectly would continue or re-create “the illegal combination which the decree dissolved.” This but stated as to section 6 what the court had stated generally as to the “Remedy to be Administered” ; that it was essential “to forbid the doing in the future of acts like those which we have found to have been done in the past which would be violative of the statute.” Page 78 of 221 U. S., 31 S. Ct. 502, 523. Through all of these statements by the court runs the thought and expression that only such future acts are prohibited as would violate, or tend to violate, the act. Nor is this all. Mr. Justice Harlan concurred in the “general affirmance of the decree” (page 106 of 221 U. S., 31 S. Ct. 502, 534), but dissented from the construction of the Anti-Trust Act and from the modification of the .decree. As to the latter he says: “In my judgment, the decree below should have been affirmed without qualification. But the court, while affirming the decree, directs some modifications in respect of what it characterizes as ‘minor matters.’ It is to be apprehended that those modifications may prove to be mischievous. In saying this, I have particularly in view the statement in the opinion that ‘it does not necessarily follow because an illegal restraint of trade or an attempt to monopolize or a monopolization resulted from the combination and the transfer of the stocks of the subsidiary corporations to the New Jersey corporati m, that a like restraint of trade or attempt ta monopolize or monopolization would necessarily arise from agreements between one or more of the subsidiary corporations after the transfer of the stock by the New Jersey corporation.’ Taking this language, in connection with other parts of the opinion, the subsidiary companies are thus, in effect, informed — unwisely, I think — that although the New Jersey corporation, being an illegal combination, must go out of existence, they may join in an agreement to restrain commerce among the states if such restraint be not ‘undue.’ ” Pages 82, 83 of 221 U. S., 31 S. Ct. 502, 525. There is much present significance in “the subsidiary companies are thus, in effect, informed * * * that * * * they may join in an agreement to restrain commerce among the states if such restraint be not ‘undue.’ ” It cannot be doubted that Mr. Justice Harlan took part in conferences of the Court in determining this very important appeal — one of the issues of which was the meaning and effect of section 6. It cannot be doubted that an issue so serious as the meaning and effeet of section 6 was fully discussed in those conferences. Certainly the opinion expressed the result of such consultations. It is hardly possible that Mr. Justice Harlan could have misunderstood the effect intended. Also, this dissenting opinion must have been known to the members of the Court before the majority opinion was filed, and it cannot be supposed that the majority opinion would have been thereafter-filed in its present form if the construction placed by Mr. Justice Harlan on this portion as to section 6 had been a misconception of its meaning. We cannot believe the Justice would have used such language if the majority opinion had meant that the acts designated in section 6 were forbidden absolutely and without reference to the effect of them. Indeed, if'such had been the meaning, he would have .had no reason to dissent therefrom. When we have the clear language of the opinion concerning section 6 and the construction of that language in the dissenting opinion, it leaves no doubt in our minds that such construction was as follows: That the subsidiary companies were enjoined from entering into the character of contracts named in that section only if such contracts constituted “an entering or performing any like combination or conspiracy, the effect of which is, or will be, to restrain commerce in petroleum or its products among the States, or in the Territories, or with foreign nations” or the effect of prolonging the then existing unlawful conspiracy and combination. The plaintiff argues that all of this language of the Supreme Court must be regarded as recognizing that the acts specifically set forth in sectioh 6 would in and of themselves tend to re-create the combination or create a similar one,- and that the two illustrations used by the court (pipe lines and tank cars) were of noncompetitive subsidiaries. The difficulty with this position is as follows: The Supreme Court nowhere in its opinion states or intimates that any of these specific acts in and of themselves, ordinarily or viewed in the light of the evidence in the record before it, has any such effect. To the contrary, it declares the remedy should be such as “to forbid the doing in the future of acts like those which we have found to have been done in the past which would be viola-tive of the statute” (italics ours), page 78 of 221 U. S., 31 S. Ct. 502, 523, and finds the remedy provided in section 6 does do that by prohibiting “all agreements between the subsidiary corporations or other stockholders in the future, tending to produce or bring about further violations of the act” (italics ours), page 79 of 221 U. S., 31 S. Ct. 502, 523. And, as to the illustrations, it is more than strange, if they were selected because of their noncompetitive character, that the court should make no mention of that cardinal distinguishing characteristic governing the selection of them. Plaintiff argues that, in disposing of section 6, “the court was considering the argument that section 6 was too obscure, too indefinite; that it tended to cause defendants to exist under the peril of a citation in contempt for violating the law; that it was a mei*e injunction to obey the law”; and that its language construing section 6 was used in connection with, or answer to, such argument. Unquestionably, the court was answering that argument, but it was doing more. It was, also, answering the argument directed more specifically to the claimed inhibition upon all combination or property transfer between the subsidiaries — which was illustrated by the pipe line and tank car situations. The force of this position of the plaintiff disappears, unless the court was answering only the general argument as to obscurity, indefiniteness, et cetera. We think the language of the court was not so confined. Plaintiff advances various arguments as to what the construction of this section of the decree should be. Were this court free to construe the section, such arguments would be entirely pertinent. However, when the Supreme Court has, as here, definitely and clearly construed that section in all particulars material to the present suit, the matter of what should be the construction has, as to this court, passed into what is the construction so declared. There is, and could be, no contention here 1 that the present contemplated merger is a continuance, carrying into further effect, or j a prolongation of the conspiracy and monopoly found to exist in the main suit. The con- j tention is, and must be, that it is an entirely j new undertaking. Therefore, as applied to the situation now before us, our conclusion is that the Supreme Court has construed section 6 as enjoining a merger or a transfer of property between the subsidiary corporations which are potentially competitive only if and when such merger or transfer, at the time it may occur, constitutes an “entering or performing any like combination or conspiracy, the effect of which is, or will be, to restrain commerce in petroleum or its products among! the States, or in the Territories, or with for-' eign nations” — “like” not referring to form! but to effect, that is, violative of the act. II. As to Violation of the Decree. 1. Applicable Rule of Law. It is obvious tliat such a merger would be an “entering” of a “combination” by the acting subsidiaries. Whether such merger would be a “conspiracy” would depend upon the actuating intent. Whether, absent such intent, the “eombination” would be a “like” combination and come within the decree would depend upon whether it would have “the effect * * ’* to restrain commerce in petroleum or its products among the States, or-ín the Territories, or with foreign nations” in violation of the act. Therefore, whether the decree is violated by this merger involves (a) existence of an intent to so restrain commerce or (b) tbe effect of resulting in such, restraint. (a) Intent. There is no direct evidence in this record of any such intent to restrain commerce. The only direct evidence is to the contrary (as will appear hereinafter in connection with the situation showing the real reasons for this merger). That evidence, introduced by the defendants, is to the effect, that the intent and purpose of this merger is solely to meet the normal and natural business necessities of the two companies brought about by the development of, and the changed competitive and business conditions in, the industry. The plaintiff does not contend that an intent to monopolize or to so restrain commerce is a moving purpose of the merger. If such intent exists, it must rest upon the rule that an intent to accomplish a result may be inferred from the natural consequences of an act, as shown by the evidence. Whether that rule is here apjlieable need not be determined because, if the effect — the result— of the merger is to so restrain commerce, it is unnecessary to concern ourselves with any intent so to do, since the decree itself enjoins mergers which have that effect. (b) Effect as Restraining Commerce. Before examining the evidence to ascertain whether such “restraint” is here shown to- result from the merger, it is necessary to define, as nearly as may be, the character and extent of restraint required to constitute a violation of the decree. As said above in connection with construction of the decree, the restraint intended therein is such restraint as 'would violate, or tend to violate, the act. Not every restraint of commerce is within the act. Hence the necessity of stating and approaching the evidence with a conception of the standard or measuring stick of what is to be regarded as restraint forbidden by the act. Tbe evils sought to be averted by the act are those which spring from monopoly. Competition is the antithesis of monopoly. In a sense, any elimination of competition is a movement in the general direction of monopoly. But competition is, in its very essence, a contest for trade, and any progress or victory in such contest must lessen competition. Competition must" always bear in itself the seed of its own alteration or even destruction. Success in business is ordinarily success in competition, and such success is a usual incentive to business effort, and is, of itself, commendable. It is only when this lessening is with an unlawful purpose or by unlawful means, or when it proceeds to the point where it is or is threatening to become a menace to the public, that it is declared unlawful. At that point the public protects itself. Tbe point of danger is reached when monopoly is threatened. This threat or mo- \ nopoly exists, irrespective of intent, when- ,' ever competition is lessened to the danger point. The Supreme Court has construed the purpose of the act to he to prevent monopoly by preserving that character and degree of competition which will prevent monopoly — to be accomplished by preventing the destruction or menacing of such competition. This has been variously expressed as “undue” restraint or “unreasonable” restraint of trade or of commerce. When a restraint is “undue” or “unreasonable” is, of course, dependent upon the facts of each particular case, and requires the application of sound judicial common sense as to existing conditions and as to evident or probable results, and cannot he defined except generally. However, that court has said that restraints are “undue” or “unreasonable” when they have “a monopolistic tendency” (Standard Oil Co. v. U. S., 221 U. S. 1, 62, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. [N. S.] 834, Ann. Cas. 1912D, 734), or “prejudice the public interests” (Nash v. U. S., 229 U. S. 373, 376, 33 S. Ct. 780, 57 L. Ed. 1232), or “injuriously affect the public” (International Shoe Co. v. Federal Trade Comm., 280 ,U. S. 291, 298, 50 S. Ct. 89, 74 L. Ed. 431), or carry power to “suppress competition” (U. S. v. Amer. Linseed Oil Co., 262 U. S. 371, 389, 390, 43 S. Ct. 607, 67 L. Ed. 1035; Eastern States Lumber Ass’n v. U. S., 234 U. S. 600, 610, 34 S. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788; U. S. v. Amer. Tobacco Co., 221 U. S. 106, 179, 31 S. Ct. 632, 55 L. Ed. 663; U. S. v. Union Pac. R. R. Co., 226 U. S. 61, 85, 88, 33 S. Ct. 53, 57 L. Ed. 124), or to keep others from entering the business (U. S. v. Terminal Railroad Ass’n of St. Louis, 224 U. S. 383, 393, 32 S. Ct. 507, 56 L. Ed. 810). When these various expressions are considered, as they should be, along with repeated expressions that normal business development and growth is not impeded by the statute, even though it be by eombi- . nation, it is clear that “undue” or “unreasonable” restraints are such as have a direct, / natural, and evident tendency to create monopoly — that is, monopoly (or the power to 'monopolize) may be expected to result there|from. This idea has been succinctly expressed by Mr. Justice Holmes as, “a combination in unreasonable restraint of trade imports an attempt to override normal market conditions.” American Column Co. v. U. S., 257 U. S. 377, 412, 42 S. Ct. 114, 121, 66 L. Ed. 284, 21 A. L. R. 1093. When this main ease was in the Supreme Court, the Chief Justice defined. undue restraint of trade as being synonymous with “the acts which produce the same result as monopoly.” 221 U. S. 1, 61, 31 S. Ct. 502, 516, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734. Therefore, the legal standard or measuring stick which we are to apply to the facts is whether this merger will tend to ! create monopoly or the harmful results thereof because of its effect upon existingjnd probable competitive conditions in the industry. 2. The Facts. It is conceded and is obvious that what- ? ever competition now exists or would proba-, bly arise between these two companies will b.e entirely eliminated by this merger. There-1 fore, our examination of the evidence is (a) to ascertain the character and extent of such ! competition, and, therefrom, (b) to determine the effect upon the industry of the elimination thereof by the merger. (a) Character and Extent of Intercompany Competition. Broadly speaking, both companies are engaged in the manufacture and sale of petroleum products. However, there are numerous products of petroleum. The basis of all such products is crude oil taken from wells. From this many different things are made in the course of the refinement and treatment of the crude oil. The evidence justified the classification of these products (made by the parties) into (1) gasoline, (2) kerosene, (3) ] lubricants, (4) fuel, diesel, gas, and furnace I oils, and (5) miscellaneous products. It is important to observe this classification since it will be repeatedly referred to hereinafter. The chemical constituents of the crude oil, the methods of refinement, the quantity of production (crude and resulting refined), and the public demand seem the factors determining the production and marketing problems which have developed the character of the industry. Our immediate concern is with the situation now — the time of the contemplated merger — yet that situation is hardly understandable without a knowledge of certain progressive developments in the petroleum industry which have brought about the present situation therein nor without a brief his-' tory of these two companies. The value of petroleum is in the products manufactured from it. In the earlier stages of the industry, the most valuable product was kerosene, which was used for illuminating purposes. Another important line of products was lubricants. The range of lubricants became increasingly wide to meet the varied requirements of machinery lubrication — ranging from the coarse heavy axle greases to the fine oils required for delicate mechanisms. In those earlier days, there was little or no integration in the industry, and those who entered it devoted their attention to some particular line of products — the main divisions being kerosene and lubricants. The Vacuum appeared about this time. It entered the lubricant field, and therein did not attempt to cover the entire field of lubrication, but confined itself to the production of the higher grades of greases and oils. It sold its products direct to the dealer or to the user (usually factories). The refining o£ crude (whatever the product mainly sought by the particular refiner) resulted in various substances, and investigation progressively developed numerous byproducts of value. A natural business need' was to develop markets for the various products and by-products. Among these byproducts was" gasoline (then called naphtha). Ifses for gasoline were developed in household stoves and stationary engines, and it became, therefrom, important, though still less so than kerosene or lubricants. Then came the automobile. This machine depended upon gasoline for its motive force, and required much lubrication of various moving parts. The introduction of electricity as a light medium affected the use of kerosene. These two forces revolutionized the petroleum industry. Rather rapidly, gasoline passed from an important by-product and became the most desired product; kerosene sank in relative use and importance, and a new, widespread, and increasing use for certain kinds of lubricants occurred. Another important development was the use of oil as fuel — at first this use was of such crude as did not profitably yield to known refining methods; later, when refining methods improved, it was of a refinery residuum product. The development in the industry was not confined to changes in consumers’ use of products and in methods of production. Problems of refinery supply and of transportation gave rise to pipe lines, tank cars, and vast storage facilities. The lessening or exhaustion of production in old crude fields and the discovery of new fields in other parts of the country presented difficulties to he overcome. These and various other considerations suggested the business advisability-— if not necessity — of integration in the industry. The old Standard Oil combination was such an integrated business. It brought together, under one management, refineries (of all manner of petroleum products — kerosene, lubricants, and all kinds of by-products), pipe lines, tank cars, and tank ships. Among the companies so absorbed was Vacuum, which continued (as a unit in the combination instead of as an independent concern) to manufacture high-grade lubricants. The Standard went into the production of crude oil (although it remained a larger buyer thereof). Also it created an extensive and far-flung marketing organization for its various products. A feature of its marketing plan was to use marketing companies which confined their activities to certain designated territories. Soeony was created as such a marketing agency for the territory of New York and New England. At the time of the dissolution (1911), Vacuum had never (except as to domestic markets outlets) changed its character of business, and Soeony was a marketing company subsidiary with small' refining facilities and no pipe lines, tank cars, or crude production. The dissolution resulted in each becoming an independent entity which must do its own business. Vacuum continued much the same as before, except that it built up its own domestic market organization, until about 1926. Soeony developed a rounded petroleum products business. This development of Soeony was toward an integrated company, producing crude from which it made gasoline, kerosene, lubricants, etc. Such development was not complete in the sense of making all of the petroleum products which were derived from the crude, but it did cover the general range, and included the most important ones. Up to 1911, as the marketing agency of the old combination in New York and New England, it had established marketing facilities in that territory, and that naturally continued to be its principal field, although it established an important foreign trade in several lines — principally kerosene and gasoline. Then there came certain influences which changed the conditions in the entire industry. The three predominating influences, were continued, and enormous productions of crude, the rapid increase in automobiles, and the method of marketing gasoline and lubricants to automobile users. The great increase in crude production served to greatly build up several companies which had been independent when the old Standard Oil combination was dissolved and to bring into the business many entirely new companies, some of which grew to considerable size. Many of these old and new companies were thoroughly integrated all the way from production of crude to the marketing of the va- ' rious refined products. The inevitable tendency, jn the search for markets, was to expand territorially, so that for some years past the more important of these companies have been selling in several states, some of them have developed a nation-wide business, and some have, in addition, an important foreign trade. For some years the crude production has kept ahead of the refining capacity and also of the existing consumption need, so that this search for markets has been rather intense on the part of all companies. This overproduction of crude was both stimulated and relieved by the enormous increase in automobiles — particularly in this country. Such increase furnished by far the principal consumption of gasoline and a very important consumption of those classes of lubricants suited to automobiles. Automobile owners became the principal users of these important petroleum products. That was a trade most desirable to secure. Growing out of this situation, and to meet the needs and desires of the automobile trade, a new method of marketing developed. Before the advent of the automobile, the method of marketing petroleum products varied somewhat with the character of the product and the character of the usage. As to many products, the sale was to the retailer. As to kerosene and gasoline, the old Standard Oil combination had partially developed a tank wagon trade direct with household consumers.- In lubricants there was direct sale to large consumers, such as factories and railroads. This was about as far as direct contact with the consumer had developed. Also there was little consumption of more than one product by any important class of consumers. However, the automobile presented a very important class of consumers who used both gasoline and lubricants — the individual purchases being in relatively small quantities. In the initial stages, both of these products were furnished almost entirely by independent retailers, and such dealer might have either or both to offer the automobile customer. It was not unusual for such customer to get gasoline at one place and oil at another. The struggle for this trade made the pleasure of that customer worthwhile, and such pleasure and convenience soon directed that he be able to procure oil at the same place and time that he bought gasoline, and that distances be not too great between the places where he could procure them. A factor which aided this development was that, for the most part, the companies which made gasoline also made automobile lubricants, and the natural thing was to press the entire automobile line upon the retailer. The final step in this matter is that j the refining companies have widely, rapidly, j and increasingly established their own retail j stations (“filling stations”), at which they j handle only gasoline and oils of their own ¡ manufacture. At present, this retail distri- I bution is in the hands of independent retail- j* ers (such as garages and filling stations) and of company owned or controlled stations,, with a pronounced tendency to carry a uni- i , fled line by the independents, and with a de- * cided tendency toward expansion of the com- i pany owned or controlled stations where only ■ the products of the particular company are offered. Aside from automobiles, there is the ■same tendency to sell all lines of products to the consumer — such, for example, as fuel oil and lubricants to railroads and to steamship lines. . Another influence is that the companies have almost universally adopted trade-names for their products — particularly those for automobile use. Extensive, nation-wide ad-ver rising has taken place, with the design and result of creating a demand in the individual automobilist for a particular brand of gasoline or oil or both. As the range and use of the automobile is nation-wide, the fullest value from such advertising is secured by the widest territorial distribution of such brands. To summarize. The present state of the, industry is that of integrated companies having an ownership of crude, refining capacity (producing gasoline, lubricants, and other petroleum products), selling to each retailer or to the consumer as near a complete line of products as the consumer uses. The unquestionable tendency is, as to a very important class of customers (owners of automobiles), to sell direct to the consumer and to sell .both gasoline and oil at the same time and place. We have not attempted to state the many influences which have shaped nor to trace — - except in veriest outline — the course of development of the industry. It has seemed necessary to do no more than sketch the framework of a general situation of which these two companies are part, and by which they must inevitably be influenced, if not indeed governed. It is not of their making, and-is beyond their control. It is a business, current which they cannot successfully op-| pose. It cannot be ignored in judging their actions and the results therefrom. In approaching a description of the present business of these two companies, it is necessary to determine a controversy affecting one phase of it. The plaintiff object- ' ed to all evidence as to foreign business of either on the ground that it was immaterial as, it is said, the act does not govern foreign trade, and is not for the protection of outside peoples. We cannot agree. While, of course, the act is not designed to have”an extraterritorial effect, yet that does not render this evidence immaterial. We do not judge violation of the decree by the effect of the merger upon foreign trade, but the business of each of these companies is a nnit, and each has an important foreign trade as an integral part of that business. It is difficult to fully and properly understand the true present place of each of these companies as respects each other or in the industry or the” effect of the merger upon domestic monopolistic tendency or the real motive inducing the merger, if we eliminate entirely this foreign trade. This is so because the industry is not a local nor even a national matter, but is world-wide; because there are various companies engaged in it, the trade of which is world-wide; because the tendency in the industry is to aspire to and to acquire world-wide trade; because the entire business and commercial power of these companies has a direct bearing upon the effect within this country to be expected from the merger, and because the reciprocal conditions of the foreign trade of these two companies are an important part of the reason advanced by them as showing that the merger is a natural, normal, and lawful business step. There is ample judicial precedent for considering such foreign trade in eases of this character. U. S. v. Sisal Sales Corp., 274 U. S. 268, 47 S. Ct. 592, 71 L. Ed. 1042; Geddes v. Anaconda Min. Co., 254 U. S. 590, 594, 595, 41 S. Ct. 209, 65 L. Ed. 425; U. S. v. U. S. Steel Corporation, 251 U. S. 417, 453, 457, 40 S. Ct. 293, 64 L. Ed. 343, 8 A. L. R. 1121. Since the ultimate question of fact involved in this merger is its effect at this time and its probable future effect upon the industry, iu its relation to the public, we think that the real effect of a merger of these businesses will be best understood by considering, first, the intercompany competition of the two companies, and, after the nature and extent of that competition is stated, to examine the effect, upon the general competitive conditions, of the elimination thereof by the 'merger. The first matter is as to (a 1) the resources and character of business of the two companies; next we shall consider (a 2) the ehar- aeter and extent of the actual and of the potential intercompany competition of these companies. (a 1) Resources and Character of Business. At the end of 1929, using round figures, Vacuum had a capitalization of $128,499,-000; a capital surplus of $4,769,000; anda surplus of $52,471,000. It had assets of $205,724,000, included therein being stock in foreign Vacuum companies ($57,100,000), real estate — plant—equipment ($36,241,-000), merchandise — material ($53,732,000) and cash — securities ($18,431,000). Its net profits for that year were $36,767,000. So-cony had a capitalization of $434,489,000; a surplus of $111,770,000; and an “insurance reserve” of $8,258,000. It had assets of $708,406,000, included therein being real estate — plant—equipment ($468,826,000), merchandise — materials ($226,910,000) and cash — securities ($8,003,000). Since its beginning (more than sixty years ago), the business of Vacuum has been and is the manufacture of high-grade lubricants (lubrication specialties) from crude petroleum for all manner of industrial, marine, and automobile uses. Its prime purpose has been and is to make lubricants particularly suitable to various actual lubricating needs. Its general method is, through its organization of lubrication experts, to study the actual working conditions surrounding particular classes of machines, and therefrom to determine the character and composition of lubricant best suited thereto; then to ascertain the kind of crude oil most suitable, and to design a process whereby a lubricant with the desired qualities can be produced. While this is the main purpose of the Vacuum br^iness, the conditions present in refining crude petroleum to make such lubricants and the necessities of situations surrounding the marketing of such lubricants cause it to sell petroleum products other than these high-grade lubricants. The refining conditions are that the crude cannot be entirely converted into 'such or any lubricants, but, in the process of refining for lubricants, various other' valuable products are necessarily or easily produced which are in the nature of by-products to its'main purpose— such are‘gasoline, kerosene, fuel, diesel, and furnace oils, and a great variety of miscellaneous things (as wax, candles, paraffin, asphalt, road oils, etc.). These by-products, so resulting from the manufacture of its lubricants, are commercially valuable, and therefore form a subsidiary feature of Vacuum business. The business situation is illustrated by the advisability of furnishing the full line of lubricants to a customer where part of- his needs are of lower grade lubricants than those made by Vacuum. Until the advent of the automobile) these high-grade lubricants made by Vacuum were mainly for industrial, ¿carine, and other machinery. Since high-grade lubricants were peculiarly fitted to situations where the lubricant was confined and used for repeated lubrication, and since the automobile presented this situation, Vacuum early entered into that field. While its other lubricants still form the larger part of its business, yet automobile lubricants have become a very important feature —particularly in the United States, where there is general and wide use of the automobile. The above character of business determined the relation of Vacuum to the different steps, in the manufacture and sale of petroleum products. As a feature of its method was the use of selected crudes for its own-manufacture, it purchased from various producers those crudes best suited to its .immediate purposes. This policy was pursued until 1923, when it produced (in conjunction with, another company) a small amount of crude. Since that time its production has grown to-about 10 per cent, of the amount used by it. in its refining. To manufacture its lubricants, Vacuum-has three refineries and one “skimming-plant” in the United States and five refineries and one “topping plant” in Europe, with a total daily capacity of 35,100 barrels (42. gallons). In addition to the products manufactured by it, Vacuum buys various petroleum products for resale (principally abroad). Thus-its sales consist of its own and of its purchased products. It markets its lubricants in every state in this country and in every important country in the world except Russia. Of its total business, 66.7 per cent, is in foreign countries,, where it sells 64.3 per cent, of the gasoline-distributed by it, 96.4 per cent, of the kerosene, 62.5 per cent, of the lubricants, 26.7 percent. of the fuel, diesel, and furnace oils, and. 57.2 per cent, of the miscellaneous products. In conjunction with its foreign trade in lubricants, it makes considerable sales of gasoline and kerosene in many European countries, Australasia, and the principal markets-of Asia and Africa. Of its total profits (in 1929) of $36,767,627.75, all except about $4,-200,000 came from its foreign business. In the United States the situation is as follows: It sells lubricants in every state; its sales of kerosene, fuel, diesel, and furnace oils and miscellaneous products have been local (to the refineries), usually sporadic and relatively trivial — merely the disposition of accumulations at the refineries without any sustained selling or distribution facilities; its sales of gasoline were, until 1926, whole,¡sale to other companies (of which Socony 'was one). Its marketing methods and organization have been shaped to meet the various conditions surrounding the selling of its high-grade lubricants. While it was a part of the old Standard Oil combination, it had its own foreign selling organization, and, in the United States, its products were distributed through the various Standard Oil selling agencies (including Socony). After the dissolution in 1911, it built up its own selling plans and organization in this country. As it accentuated its ability to furnish lubrication “service” as superior to merely furnishing lubricants, it made surveys -of the lubrication needs of industrial plants, railroads, ot sim, and sold to such industrial consumers direct. Also, it sold wholesale to dealers in lubricants. Until 1926, the latter method was employed in selling automobile lubricants — it placed such lubricants with garage and filling station owners and other dealers, and had no direct touch with the automobile owner. By that year the tendency of integrated companies to market their brands both of gasoline and of automobile lubricants to the same retail dealer or through their own filling stations, the expansion of such marketing methods by the absorption of existing independent retail agencies or by extended installation of stations owned or controlled by such companies — -at both of which usually only their own lubricants were sold — and the habit of the automobile owner to purchase such lubricants at the same time and place as he bought gasoline, began to be seriously felt, by Vacuum. To meet this change in mar- i keting conditions of its automobile lubricants in the United States, Vacuum began, in 1926, to acquire control or ownership of filling stations and other outlets where such lubricants ; could be offered in connection with its own brand of gasoline, and, instead of selling its gasoline wholesale to other companies as theretofore, to dispose of it through these acquired retail stations and outlets. Since that time it has expended about $36,000,000 in the purchase of such, and has obligated itself for other agencies having about 62 stations and 54 dealers. Such acquisitions are in Western New York, Pennsylvania, Ohio, Eastern Missouri (in and near St. Louis, with a few stations near the Mississippi river north of St. Louis), and relatively small areas in Michigan, Wisconsin, Indiana, Illinois, Iowa, Minnesota. For the most part, these marketing acquisitions are in territories contiguous to its refineries. Those now acquired agencies about exhaust the gasoline produced at the Vacuum refineries in the United States. The preceding is a general outline of the present character and extent of the business of Vacuum. A feature of the old Standard Oil combination. was the division of. the United States into selling territories and” the placing of each territory in the exclusive control of an agency. Soeony was organized as such an agency fo'r New York and the New Englard States. At the dissolution in 1911, that v as its character. At that time it had an extensive selling and distribution organization and facilities in that territory. It had no crude production and only a small refining capacity (about 20,000 barrels daily). Since then it has developed along the line of an integrated company. Now. it has a large actual and potential crude production in California, Oklahoma, Texas, and (to a less extent)' Louisiana, and it'has prospective production in Mesopotamia. Excluding Mesopotamia, the proven aereage is 208,000 acres, and the undeveloped is 3,673,000 acres. In 1929, Soeony production from its owned or leased aereage was about 45,700,000 barrels (of 50 gallons each). It has sixteen refineries in the United States, with a total daily capacity of 227,500 barrels (42 gallons each) located in Caliomia, . Kansas, New York, Texas, Wyoming, and Rhode Island. At these refineries, in 1929, it ran 52,500,000 barrels in the manufacture of all manner of petroleum products. It refines about 75 per cent, of the products it distributes in the United States and abroad. It purchases crude and also various refined products which latter it resells. In 1929 it sold 69,343,494 barrels of all kinds of petroleum products, of which 57,379,507 barrels were sold in the United States and 11,963,987 barrels in foreign countries. Soeony markets its products in the United States and abroad. Abroad, its business is mainly confined to Asiatic and Asia Minor countries and places. In Europe it has no business except in Jugo-Slavia, Bulgaria, Greece, and Turkey. In Africa, it has small sales of lubricants in South Africa and substantial sales of fuel, diesel, and gas oils in Egypt and the Sudan. In South American countries it sells only a small amount of fuel, diesel, and gas oils (1,954 barrels). It has practically no business in other foreign countries. Although it sells all classes of its products in China, Japan, Dutch East Indies, Straits Settlements, Bulgaria, Syria (including Cyprus and Cilieia), Greece, Turkey, and Jugo-Slavia and practically all in Indochina, Siam, Philippines; India, and Ceylon, there is a wide variance in quantities of various classes of sueh products sold in these different countries. In the United States, it sells gasoline in thirty-one states, but sueh sales are trivial in four of sueh states (Nevada, Utah, Pennsylvania, and Ohio), and are less than 100,-000 barrels in six others (Arizona, Iowa, Missouri, Montana, Wisconsin, and Wyoming). It sells kerosene in thirty-one states, but sueh sales are trivial in eighteen of sueh states (being less than. 1,000 barrels in six, less than 5,000 barrels in six, and less than 20,000 barrels in six), and’ more than 100,000 barrels in only five states (New York, Connecticut, Massachusetts, Texas, and Kansas). It sells f