Timken Roller Bearing Company v. United States/Opinion of the Court

The United States brought this civil action to prevent and restrain violations of the Sherman Act by appellant, Timken Roller Bearing Co., an Ohio corporation. The complaint charged that appellant, in violation of §§ 1 and 3 of the Act, combined, conspired and acted with British Timken, Ltd. (British Timken), and Societe Anonyme Francaise Timken (French Timken) to restrain interstate and foreign commerce by eliminating competition in the manufacture and sale of antifriction bearings in the markets of the world. After a trial of more than a month the District Court made detailed findings of fact which may be summarized as follows:

As early as 1909 appellant and British Timken's predecessor had made comprehensive agreements providing for a territorial division of the world markets for antifriction bearings. These arrangements were somewhat modified and extended in 1920, 1924 and 1925. Again in 1927 the agreements were substantially renewed in connection with a transaction by which appellant and one Dewar, an English businessman, cooperated in purchasing all the stock of British Timken. Later some British Timken stock was sold to the public with the result that appellant now holds about 30% of the outstanding shares while Dewar owns about 24%. In 1928 appellant and Dewar organized French Timken and since that date have together owned all the stock in the French company. Beginning in that year, appellant, British Timken and French Timken have continuously kept operative "business agreements" regulating the manufacture and sale of antifriction bearings by the three companies and providing for the use by the British and French corporations of the trademark "Timken." Under these agreements the contracting parties have (1) allocated trade territories among themselves; (2) fixed prices on products of one sold in the territory of the others; (3) cooperated to protect each other's markets and to eliminate outside competition; and (4) participated in cartels to restrict imports to, and exports from, the United States.

On these findings, the District Court concluded that appellant had violated the Sherman Act as charged, and entered a comprehensive decree designed to bar future violations. 83 F.Supp. 284. The case is before us on appellant's direct appeal under 15 U.S.C. § 29, 15 U.S.C.A. § 29.

Although appellant has indiscriminately challenged the District Court's judgment and decree in over 200 separate assignments of error, the real grounds relied on for reversal are only a few in number. In the first place, appellant contends that most of the District Court's material findings of fact are without evidential support, that they 'ignore or fail properly to evaluate' evidence supporting appellant's position, and that it was error for the court to refuse to make additional findings. For the most part, this shotgun approach is actually only a dispute as to the proper inferences to be drawn from the evidence in the record; in effect, it is an invitation for us to try the case de novo. This Court must decline such an invitation just as it does when the Government makes the same request. United States v. Yellow Cab Co., 338 U.S. 338, 70 S.Ct. 177, 94 L.Ed. 150. In the present case, the trial judge after a patient hearing carefully analyzed the evidence in an opinion prepared with obvious care. Appellant's lengthy brief has failed to establish that there was error in making any crucial, or even important, ultimate or subsidiary finding. Since we cannot say the findings are 'clearly erroneous,' we accept them. Fed.Rules Civ.Proc., 52(a), 28 U.S.C.A.

Appellant next contends that the restraints of trade so clearly revealed by the District Court's findings can be justified as 'reasonable,' and therefore not in violation of the Sherman Act, because they are 'ancillary' to allegedly 'legal main transactions,' namely, (1) a 'joint venture' between appellant and Dewar, and (2) an exercise of appellant's right to license the trademark 'Timken.'

We cannot accept the 'joint venture' contention. That the trade restraints were merely incidental to an otherwise legitimate 'joint venture' is, to say the least, doubtful. The District Court found that the dominant purpose of the restrictive agreements into which appellant, British Timken and French Timken entered was to avoid all competition either among themselves or with others. Regardless of this, however, appellant's argument must be rejected. Our prior decisions plainly establish that agreements providing for an aggregation of trade restraints such as those existing in this case are illegal under the Act. Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 213, 71 S.Ct. 259, 261; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-224 and note 59, 60 S.Ct. 811, 844-845, 84 L.Ed. 1129; United States v. National Lead Co. D.C., 63 F.Supp. 513, affirmed 332 U.S. 319, 67 S.Ct. 1634, 91 L.Ed. 2077; United States v. American Tobacco, 221 U.S. 106, 180-184, 31 S.Ct. 632, 648-650, 55 L.Ed. 663; Associated Press v. United States, 326 U.S. 1, 15, 65 S.Ct. 1416, 1422, 89 L.Ed. 2013. See also United States v. Aluminum Co. of America, 2 Cir., 148 F.2d 416, 439-445. The fact that there is common ownership or control of the contracting corporations does not liberate them from the impact of the antitrust laws. E.g., Kiefer-Stewart Co. v. Seagram & Sons, supra 340 U.S. at page 215, 71 S.Ct. at page 262. Nor do we find any support in reason or authority for the proposition that agreements between legally separate persons and companies to suppress competition among themselves and others can be justified by labeling the project a 'joint venture.' Perhaps every agreement and combination to restrain trade could be so labeled.

Nor can the restraints of trade be justified as reasonable steps taken to implement a valid trademark licensing system, even if we assume with appellant that it is the owner of the trademark 'Timken' in the trade areas allocated to the British and French corporations. Appellant's premise that the trade restraints are only incidental to the trademark contracts is refuted by the District Court's finding that the 'trade mark provisions (in the agreements) were subsidiary and secondary to the central purpose of allocating trade territories.' Furthermore, while a trademark merely affords protection to a name, the agreements in the present case went far beyond protection of the name 'Timken' and provided for control of the manufacture and sale of antifriction bearings whether carrying the mark or not. A trademark cannot be legally used as a device for Sherman Act violation. Indeed, the Trade Mark Act of 1946 itself penalizes use of a mark 'to violate the antitrust laws of the United States.'

We also reject the suggestion that the Sherman Act should not be enforced in this case because what appellant has done is reasonable in view of current foreign trade conditions. The argument in this regard seems to be that tariffs, quota restrictions and the like are now such that the export and import of antifriction bearings can no longer be expected as a practical matter; that appellant cannot successfully sell its American-made goods abroad; and that the only way it can profit from business in England, France and other countries is through the ownership of stock in companies organized and manufacturing there. This position ignores the fact that the provisions in the Sherman Act against restraints of foreign trade are based on the assumption, and reflect the policy, that export and import trade in commodities is both possible and desirable. Those provisions of the Act are wholly inconsistent with appellant's argument that American business must be left free to participate in international cartels, that free foreign commerce in goods must be sacrificed in order to foster export of American dollars for investment in foreign factories which sell abroad. Acceptance of appellant's view would make the Sherman Act a dead letter insofar as it prohibits contracts and conspiracies in restraint of foreign trade. If such a drastic change is to be made in the statute, Congress is the one to do it.

Finally, appellant attacks the District Court's decree as being too broad in scope. The decree enjoins continuation or repetition of the conduct found illegal. This is clearly correct. Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 461, 60 S.Ct. 618, 627, 84 L.Ed. 852. It also contains certain other restraining provisions which were within the court's discretion because 'relief, to be effective, must go beyond the narrow limits of the proven violation.' United States v. United States Gypsum Co., 340 U.S. 76, 90, 71 S.Ct. 160, 170. The most vigorous objection, however, is made to those portions of the decree relating to divestiture of appellant's stockholdings and other financial interests in British and French Timken.

Mr. Justice DOUGLAS, Mr. Justice MINTON and I believe that the decree properly ordered divestiture. Our views on this point are as follows: Appellant's interests in the British and French companies were obtained as part of a plan to promote the illegal trade restraints. If not severed, the intercompany relationships will provide in the future, as they have in the past, the temptation and means to engage in the prohibited conduct. These considerations alone should be enough to support the divestiture order. United States v. Paramount Pictures, Inc., 334 U.S. 131, 152-153, 68 S.Ct. 915, 926-927, 92 L.Ed. 1260; United States v. National Lead Co., 332 U.S. 319, 363, 67 S.Ct. 1634, 1655, 91 L.Ed. 2077. But there are other considerations as well. The decree should not be overturned unless we can say that the District Court abused its discretion. Absent divestiture, it is difficult to see where other parts of the decree forbidding trade restraints would add much to what the Sherman Act by itself already prohibits. And obviously the most effective way to suppress further Sherman Act violations is to end the inter-corporate relationship which has been the core of the conspiracy. For these reasons, Mr. Justice DOUGLAS, Mr. Justice MINTON and I cannot say that the District Court abused its discretion in ordering divestiture.

Nevertheless, a majority of this Court, for reasons set forth in other opinions filed in this case, believe that divestiture should not have been ordered by the District Court. Therefore, it becomes necessary to strike from the decree §§ VIII, IVB, and the phrase 'or B' in § IVC. As so modified, the judgment of the District Court is affirmed.

It is so ordered.

Judgment modified and affirmed.

Mr. Justice BURTON and Mr. Justice CLARK took no part in the consideration or decision of this case.

Mr. Justice REED, with whom The CHIEF JUSTICE joins, concurring.

It seems to me there can be no valid objection to that part of the opinion which approves the finding of the District Court that the Timken Roller Bearing Company has violated §§ 1 and 3 of the Sherman Act. It may seem strange to have a conspiracy for the division of territory for marketing between one corporation and another in which it has a large or even a major interest, but any other conclusion would open wide the doors for violation of the Sherman Act at home and in foreign fields. My disagreement with the opinion is based on the suggested requirement that American Timken divest itself of all interest in British Timken and French Timken as required by paragraph VIII of the decree set out below. My reasons for this disagreement follow.

There are no specific statutory provisions authorizing courts to employ the harsh remedy of divestiture in civil proceedings to restrain violations of the Sherman Act. Fines and imprisonment may follow criminal convictions, 15 U.S.C. § 1, 15 U.S.C.A. § 1, and divestiture of property has been used in decrees, not as punishment, but to assure effective enforcement of the laws against restraint of trade.

Since divestiture is a remedy to restore competition and not to punish those who restrain trade, it is not to be used indiscriminately, without regard to the type of violation or whether other effective methods, less harsh, are available. That judicial restraint should follow such lines is exemplified by our recent rulings in United States v. National Lead Co., 332 U.S. 319, pages 348-353, 67 S.Ct. 1634, pages 1647-1650, 91 L.Ed. 2077, where we approved divestiture of some properties belonging to the conspirators and denied it as to others. While the decree here does not call for confiscation, it does call for divestiture. I think that requirement is unnecessary.

In this case the prohibited plan grew out of the effort to implement a patent monopoly. The difficulties of cultivating a foreign market for our manufactured goods obviously entered into creation of the British and French companies so as to enjoy a right of distribution into areas where otherwise restrictions, because of tariffs, quotas and exchange, might be expected. We fail to see such propensity toward restraint of trade as is evidenced in the Crescent case.

What we have is an American corporation, dominant in the field of tapered roller bearings, producing between 70 and 80 percent of the American output. In 1947 its gross sales were over $77,000,000. This is a distinctive type of bearing, competing successfully for adoption by industry with other antifriction bearings. Timken produces about 25% of all United States antifriction bearings. As there were no findings of facts tending to show violation of the Sherman Act otherwise than through formal agreements for partition of territory, we assume appellant's conduct was otherwise lawful.

In such circumstances, there was, of course, no occasion for the lower court to order any splitting up of a consolidated entity. Cf. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619; United States v. American Tobacco Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663. There has been no effort to create numerous smaller companies out of Timken so that there will be no dominant individual in the tapered roller bearing field. The American company had had a normal growth and development. Its relations with English and French Timken were close and American Timken had stock and contracts for furthur stock in both foreign companies of value in the development of its foreign business. Such business arrangements should not be destroyed unless necessary to do away with the prohibited evil.

An injunction was entered by the District Court to prohibit the continuation of the objectionable contracts. Violation of that injunction would threaten the appellant and its officers with civil and criminal contempt. United States v. Goldman, 277 U.S. 229, 48 S.Ct. 486, 72 L.Ed. 862, and Hill v. U.S. ex rel. Weiner, 300 U.S. 105, 57 S.Ct. 347, 81 L.Ed. 537. The paucity of cases dealing with contempt of Sherman Act injunctions is, I think, an indication of how carefully the decrees are obeyed. The injunction is a far stronger sanction against further violation than the Sherman Act alone. Once in possession of facts showing violation, the Government would obtain a quick and summary punishment of the violator. Furthermore this case remains on the docket for the purpose of 'enforcement of compliance' and 'punishment of violations.' This provision should leave power in the court to enforce divestiture, if the injunction alone fails. Prompt and full compliance with the decree should be anticipated.

This Court is hesitant, always, to interfere with the scope of the trial court's decree. However, in this case it seems appropriate to indicate my disapproval of the requirement of divestiture and to suggest a direction to the District Court that provisions leading to that result be eliminated from the decree. Such remand would also give opportunity for reconsideration of the changes necessary in the decree because of the remand and the death of Mr. Dewar.

In my view such an order should be entered.

Mr. Justice FRANKFURTER, dissenting.