The opinion of the court was delivered by: KAUFMAN
This is an equitable proceeding brought by the United States under Section 4 of the Sherman Anti-Trust Act, 26 Stat. 209, 15 U.S.C.A. 4, to restrain certain practices alleged to be in violation of Section 1 of the same Act, 15 U.S.C.A. 1. The complaint was filed in March, 1944, and named as defendants to domestic export associations organized under the Export Trade Act of 1918, Webb-Pomerene Law, 40 Stat. 516, 517, Public Law 126, 65th Cong., 2nd Sess., 15 U.S.C.A. 61-65, thirteen corporate members of one or the other of said associations, and a corporation of the United Kingdom together with its New York subsidiary.
Defendants, all of which either manufacture, distribute, or export alkalis, are charged with entering into a series of agreements and engaging in concerted practices whereby the export of alkalis from the United States to many markets of the world has been restricted; the import of alkalis into the United States from abroad has been prohibited; the production of alkalis within the United States has been curtailed and limited; competition between defendants and others has been eliminated; the trade of domestic competitors of the defendants engaged in exporting alkalis has been restrained; and prices of caustic soda in the United States have been fixed.
Before the trial, all defendants moved to dismiss the complaint on the ground that under Sections 1, 2 and 5 of the Export Trade Act of 1918, 15 U.S.C.A. 61, 62, 65 (hereinafter referred to as the Webb Act), the Attorney General was without authority to institute this suit until investigations and recommendations had first been made by the Federal Trade Commission. Both the District Court, United States v. United States Alkali Export Ass'n, D.C. 58 F.Supp. 785, and the Supreme Court, United States Alkali Ass'n v. United States, 325 U.S. 196, 65 S. Ct. 1120, 89 L. Ed. 1554, rejected this contention and the case proceeded to trial before the late Judge Bright. Evidence was taken, testimony completed, and argument and briefs of counsel were considered, but Judge Bright's untimely death prevented him from rendering a decision in the case. Subsequently, the entire proceeding was referred to me with the understanding that decision of the matter would be made upon the case that had been presented before Judge Bright, after reargument before me on the record as made.
The principal defendant, the United States Alkali Export Association (hereinafter referred to as 'Alkasso'), was organized as a Delaware corporation in 1919, and, pursuant to the Webb Act, filed in that year with the Federal Trade Commission a verified written statement containing the location of its offices, names and addresses of its officers and stockholders, and a copy of its certificate of incorporation and by-laws.
Each of Alkasso's members holds stock in Alkasso, has a representative on its board of directors, and has executed a membership agreement. The purpose of the Association is to handle all sales of its members in foreign markets and, to that end, it has its own sales agents abroad, ships and sells as an independent corporation, and determines distribution of material, prices, terms, and other conditions of sale. Originally starting with five members, Alkasso's present membership numbers eleven of the most important alkali producing companies in the United States, all of which are defendants in this suit. (See chart of individual corporate defendants, infra, p. 86 F.Supp. 64.)
The California Alkali Export Association, otherwise known as 'Calkex', is the second domestic export association named in the complaint. Calkex, a California corporation organized in 1936, was originally composed of three corporate members, West End Chemical Co., Inc., Pacific Alkali Co., Ltd., and American Potash & Chemical Corporation. Of these corporations, however, West End is the sole remaining member of Calkex and the only defendant in this case. American Potash withdrew from Calkex in April, 1944 at the behest of the Alien Property Custodian, who had obtained control of substantially all its capital stock; while Pacific Alkali, a defendant named in the complaint when filed, subsequently withdrew from Calkex, and the action against it was voluntarily dismissed.
Also joined as parties defendant are Imperial Chemical Industries, Ltd. (hereinafter termed 'I.C.I.'), a British corporation which manufactures and exports alkalis, and its wholly owned New York subsidiary, Imperial Chemical Industries (New York) Ltd. (later referred to as 'I.C.I., New York').
The complaint charges as 'co-conspirators', though not defendants, the American Potash & Chemical Corporation, mentioned above, Solvey Process Company, an important domestic producer of alkalis and a member of Alkasso from 1919 until 1941, Solvay et Cie- hereinafter termed 'Belgian Solvay'- a corporation of the Kingdom of Belgium and a principal manufacturer of alkalis in Europe, and I. G. Farben-industrie Aktiengesellschaft, more widely known as 'I. G. Farben', one of the largest chemical companies in the world at the time the acts and agreements alleged by the Government occurred.
II. Products of Defendants.
It is important both for a general understanding of the entire case and to determine certain specific issues regarding the legality of defendants' conduct to summarize briefly the nature and characteristics of the products which were subject to the agreements and practices charged in the complaint.
What has so far been phrased in general terms as the production of 'alkalis' in reality embraces the manufacture of three separate but closely related chemical substances: (1) Sodium Bicarbonate; (2) Soda Ash; and (3) Caustic Soda. Sodium Bicarbonate, well known as a household remedy for gastronomical disturbances, is also useful in cooking, and serves important industrial needs. Soda ash is a basic ingredient in the manufacture of glass, textiles, and other chemicals, while caustic soda is used in the making of soap, textiles, rayon, paper, and the refining of petroleum products.
These alkalis are produced by three common methods. The oldest and perhaps the one which yields the most satisfactory product goes under the name of the Solvay process or ammonia-soda process. Here, salt brine is mixed with ammonia and carbon dioxide to produce bicarbonate of soda. The latter is heated and in turn becomes soda ash, while soda ash, causticized with lime, reacts chemically to produce caustic soda. Thus all three alkali products are produced in the various stages of a series of consecutive chemical reactions.
While the Solvay process is a deliberate and controlled method of manufacturing all three alkali products, bicarbonate of soda, soda ash, and caustic soda, the latter substance, caustic soda, also results as a by-product in the production of an increasingly important chemical, chlorine, by the electrolysis of purified brine. Formerly, caustic soda produced indirectly through the manufacture of chlorine, hereafter denominated electrolytic caustic, composed only a small proportion of the total amount of caustic made in this country, but the increased demand for chlorine in recent years has necessarily led to greater manufacture of electrolytic caustic
; so that by 1943, approximately 60% of total caustic produced in the United States was made by the electrolytic process.
Two of the alkalis, soda ash and bicarbonate of soda, can also be manufactured through the evaporation and purification of natural brine, the final method by which alkalis are produced.
below lists the domestic corporate defendants, the products they manufacture, and the method employed in production.
III. The International Cartel.
No issue of facts is presented with regard to the agreements, as later set forth, which the Government maintains are violations of its anti-trust laws. The answers of Alkasso and of I.C.I. admit the execution of agreements relating to the division of world markets, the assignment of international quotas, and the fixing of prices in territories other than the United States, and the individual corporate members of Alkasso admitted knowledge of these cartel arrangements. Solely for determination, therefore, is their legality under the provisions of the Sherman Act and whether or not, if illegal under the Sherman Act, they are exempted from condemnation by virtue of the provisions of the Webb Act.
Insofar as the application of the Webb Act is concerned, the case is res nova, since the Webb Act has not heretofore been construed by the courts.
The conspiracy charged initiated as early as 1924 is evidenced by an agreement between Alkasso and Brunner Mond & Co., Ltd., the corporate predecessor of I.C.I. Under this international contract, the British company agreed to refrain from exporting soda ash and caustic to Cuba; maximum quotas were established for Brunner Mond and Alkasso in Mexico, the British having rights to supply forty per cent. and Alkasso sixty per cent. of the total tonnage; annual maximum tonnages of alkalis to be exported to South America were established; prices were to be raised in the South American market, and both parties agreed to sell at uniform prices thereafter.
The understanding of 1924 was enlarged in 1929 when I.C.I. and Alkasso entered into a three year agreement. Under the new arrangement, Alkasso was given an annually increasing share in the total combined export trade in alkalis from the United Kingdom and the United States. It was agreed that in 1930 Alkasso was to participate to the extent of twenty-two and one-half per cent. of joint total exports, while this percentage was to increase to twenty-five per cent. by 1932.
Upon its expiration, the 1929 agreement was renewed by the parties in 1933 with slight modifications and additions. Alkasso again was given a one-quarter share in total exports of alkalis from the United Kingdom and the United States. It was agreed that Alkasso and I.C.I. would sell at agreed prices in markets not specifically enumerated; and percentage shares of the export market were allotted in the markets of Mexico, China, and India. This new undertaking was to last for three years.
Finch, President of Alkasso since 1929, testified at the trial that an oral understanding was also reached between I.C.I. and Alkasso in 1933 whereby the latter agreed to forego all shipments of alkali to the continent of Europe and to the British Empire including Australia and New Zealand.
In 1936, Belgian Solvay became a formal party to the cartel arrangement of I.C.I. and Alkasso, although the Government introduced evidence to show that Belgian Solvay and I.C.I. had bargained with respect to export markets as early as 1928 (Gov. ex. 1). Under the tripartite arrangement, by its terms to run until 1941, exclusive territories were granted to each of the participants. Solvay was to hold sway with regard to alkali sales in Europe, and I.C.I. was granted sole rights to the sale of alkali throughout the British Empire (excluding Canada), Egypt, the Levant, Iraq and Iran; Alkasso was granted the territories of Canada, Mexico, Cuba, Haiti, San Domingo, and the Dutch East Indies; and I.C.I. and Alkasso agreed that certain other markets should be considered as joint territories, principally China, Japan, River Plate, Brazil, along with other markets in South America, and percentage quotas for these areas were established.
In 1941, apparently the war made it impossible for Belgian Solvay to continue to participate in international shipments of alkalis. Alkasso and I.C.I., however, again entered into economic negotiations. The result was an agreement which, while recognizing that the war had made it impracticable any longer to subject certain markets to cartel arrangements, made detailed quota arrangements in important joint markets. The language of the agreement stated specifically that there would be 'no change affecting exclusive markets'.
Evidence was also introduced at the trial showing that during the period covered by the cartel agreements outlined above, certain collateral arrangements regarding the shipment and sale of alkalis existed between I.C.I., Belgian Solvay, and I. G. Farben dividing world markets (Def. ex. G), and allotting Scandinavia as exclusive territory to I. G. Farben (Gov. ex. 28, 36, 42).
Defendants make no attempt to conceal the substance of their arrangements to allocate the world markets in alkalis. Indeed, the broad outlines of the successive agreements were openly communicated to the Federal Trade Commission (Def. ex B, C, S). Defendants rest their claim of justification entirely upon the provisions of the Webb Act, claiming that, by virtue of that statute, the anti-trust laws have no applicability to world wide apportionment of territory, establishment of exclusive markets, and the fixing and maintenance of prices between foreign competitors and export associations organized in the United States under the terms of the Act.
Section 2 of the Webb Act, 40 Stat. 517, 15 U.S.C.A. 62,s/b
provides that the Sherman Anti-Trust Act shall not, except in certain enumerated instances, apply to the formation of an export association engaged solely in the export trade or to 'an agreement made or act done in the course of export trade by such association * * * '. The question for determination, therefore, is whether or not this language authorizes export associations organized under the Webb Act to enter into such arrangements as those above set forth.
The decisions under the Sherman Act leave no doubt that all contracts, combinations, and conspiracies aimed at obstructing the foreign commerce of the United States come within the broad prohibitions of the anti-trust laws. United States v. American Tobacco Co., 221 U.S. 106, 31 S. Ct. 632, 55 L. Ed. 663; United States v. Pacific & Arctic Co., 228 U.S. 87, 33 S. Ct. 443, 57 L. Ed. 742; Thomsen v. Cayser, 243 U.S. 66, 37 S. Ct. 353, 61 L. Ed. 597, Ann. Cas. 1917D, 322; United States v. Sisal Sales Corp., 274 U.S. 268, 47 S. Ct. 592 71 L. Ed. 1042; United States v. Aluminum Co. of America., 2 Cir., 148 F.2d 416; 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. The rule of competition, basic in American economic philosophy and approved by express legislative fiat in the Sherman Anti-Trust Act, is equally applicable to our export trade as it is to trade among the several states. United States v. Aluminum Co. of America, D.C., supra, 148 F.2d at page 444. The ...