be construed in the light of reason, and hence the Act "prohibits all con-
tracts and combinations which amount to an unreasonable or undue
restraint of trade in interstate commerce," and necessarily limiting and
qualifying the earlier great decisions.

A further consideration of this Act is found in U. S. v. United Shoe
Machinery Co., 247 U. S. 32 (1918).

In 38 Stat. L. 730, Act of October 15, 1914, is found the so-called
Clayton Act, entitled "An Act to supplement existing laws against unlawful
restraints and monopolies, and for other purposes ;" this relates to price
discrimination, one corporation acquiring stock in another corporation,



660 SUITS IN EQUITY.

interlocking directorates, and some other matters, besides prescribing regu-
lations and limitations upon injunctions.

Suit for violation may be brought by the person injured in any district
court of the United States in any district where the defendant resides or
has an agent or is found, and there is no jurisdictional amount, and making
a corporation suable wherever it does business. Frey v. Cudahy Packing
Co., 228 Fed. 209.

The Act provides that compliance therewith may be enforced in the
Interstate Commerce Commission, where common carriers are involved ;
in the Federal Reserve Board, where banks are involved, and in the
Federal Trade Commission where any other character of commerce is
involved.

Under this Act all that is necessary to state a case is "to charge that
the defendants committed the named acts prohibited by the statute and
that the acts tend substantially to lessen competition or create a monopoly
in interstate commerce." U. S. v. United Shoe Machinery Co., 234 Fed.
127, and see page 150, for statement of sufficiency of allegations; and
further, on page 150, the court says that Congress intended that the
construction of the Sherman Act should not control the Clayton Act, inas-
much as the latter Act enumerates specific acts of conduct which are
prohibited while in the Sherman Act the conduct prohibited is stated in
general terms.

The reasoning on this point was satisfactory to the court in Standard
Fashion Co. v. Magrane Houston Co., 254 Fed. 493, at pp. 498 and 499;
but the circuit court of appeals, in affirming the judgment of this case below
expressly declined to express an opinion upon the application of the
Clayton Act therein. Standard Fashion Co. v. Magrane Houston Co., 251
Fed. 559.



No. 465.

To Permit One Competitor to Sell Out to Another, Both

Having Previously Been Found Guilty of Violating

the Sherman Law.

[Caption.]

The plaintiffs, American Press Association, a corporation
organized under the laws of the state of New York; Ameri-
can Press Association, a corporation organized under the
laws of the state of West Virginia; Courtland Smith, Wil-
liam G. Brogan and Maurice F. Germond, by Edgar A. Ban-
croft and Charles A. Brodek, their solicitors, for their bill of
complaint against the defendants, Western Newspaper Union
of Maine, Western Newspaper Union of New York, John F!



BILLS IN SPECIAL CASES. 661

Cramer, H. H. Fish, M. H. McMillan and The United States
of America, allege and show :

1. That American Press Association is a corporation or-
ganized under the laws of the state of New York, with its
principal office in New York City, and a citizen and resident
of the state of New York. That the other plaintiff, American
Press Association, is a corporation organized under the laws
of the state of West Virginia, with its principal office in that
state at Charleston, and a citizen and resident of said state,
and that said company has the same officers as plaintiff,
American Press Association, organized under the laws of the
state of New York. The plant and other properties herein-
after referred to as belonging to American Press Association
are the properties of the former corporation bearing that
name, but the same are leased to and the business is con-
ducted by the latter corporation, and when the American
Press Association is herein mentioned or referred to refer-
ence is had to both of said corporations or the one to which
the allegation is appropriate. That the plaintiffs, Courtland
Smith, William G. Brogan and Maurice F. Germond, are
residents and citizens of the state of New York.

2. That the Western Newspaper Union of Maine is a cor-
poration organized under the laws of the state of Maine, with
its principal office in that state at Augusta, and is a citizen
and resident of said state. Upon information and belief that
the defendant, John F. Cramer, is a resident and citizen of
the state of Wisconsin; that the defendant, H. H. Fish, is a
resident and citizen of the state of Nebraska, and that the
defendant, M. H. McMillen, is a resident and citizen of the
state of Illinois.

2a. That the amount involved in this controversy in this
suit, exclusive of costs and interests, exceeds the sum of five
thousand dollars ($5,000).

3. That on the 3rd day of August, 1912, the United States
of America, by James H. Wilkerson, its attorney for the
northern district of Illinois, acting under the direction of its
attorney general, filed in the United States district court for



662 SUITS IN EQUITY.

the northern district of Illinois, a petition in equity under the
act of July 2, 1890, known as the Sherman law, against the
plaintiffs, the defendants, Western Newspaper Union, a cor-
poration of Illinois, which has since been dissolved; Western
Newspaper Union of New York, which has since transferred
all of its assets to said Western Newspaper Union of Maine,
and is no longer engaged in business; John F. Cramer, H. II .
Fish and M. H. McMillen, and against Central- West Publish-
ing Company, whose name has since been changed to West-
ern Newspaper Union, a corporation of Maine, and which is
made a party defendant hereto under said last-mentioned name,
and one George A. Joslyn, who has died since the filing of
said petition; that a copy of said petition in equity is hereto
annexed as part hereof, and marked "Exhibit A." That on
the day said petition in equity was filed answers were filed by
the several defendants in said cause, and that immediately
thereafter said cause came on for hearing before the Hon.
K. M. Landis, district judge of the said court, and the United
States, petitioners, appeared by its district attorney, James H.
Wilkerson, and by William T. Chantland, special assistant to
the attorney general, and moved the court for an injunction
in accordance with the prayer of its petition. That by agree-
ment between the government and the counsel representing
the several defendants, a decree was rendered and entered in
said cause on the 3rd day of August, 1912. That a copy of
the said decree is hereto annexed as part hereof, and marked
"Exhibit B." That since the filing of said petition said
Western Newspaper Union of New York has transferred its
assets to said Western Newspaper Union of Maine and is no
longer engaged in business.

4. That at the time of the rendition of the aforesaid decree
of August 3, 1912, the American Press Association and the
Western Newspaper Union were engaged in the business of
furnishing matter in plate form and in ready-print form to a
large number of the smaller or so-called "country newspapers"
of the United States. That such services were known in the
newspaper world respectively as (1) plate service and (2)



BILLS IN SPECIAL CASES. 663

ready-print service. That plate service consists in furnishing
matter in the form of metal type plates cast in newspaper
column lengths and shipped from the various distributing
points of the plate concern to the issuing offices of the news-
papers using it. That ready-print is the furnishing of news-
papers partly printed and for home or local printing partly
blank. That the ready-print service must be put out in full
pages upon the back of which, and upon additional pages the
newspapers print additional matter, while plate service is put
out in columns which may be used as sent out or may be
sawed up and rearranged in the newspaper offices. That the
ready-prints furnished by the Western Newspaper Union con-
tain advertisements, but the ready-prints furnished by the
American Press Association contain no advertisements and
were consequently known as adless ready-prints.

5. That the industry of furnishing matter to the country
press in plate form and in ready-print form was organized
and developed because the very limited circulation of each
separate country newspaper makes it impossible for any one
of them to go to the large expense of gathering the matter
for its particular use, whereas one concern gathering the
matter can distribute it to a number of newspapers at a price
which the individual country newspaper can afford to pay.

6. That at the time of the rendition of the said decree of
August 3, 1912, the Western Newspaper Union supplied more
than eighty per cent, of the ready-print service in the United
States, and the American Press Association supplied a small
fraction with adless ready-prints ; but at that time the plate
business of the American Press Association was substantially
greater than that of the Western Newspaper Union. That
shortly after the entry of said decree, and in or about Octo-
ber. 1912, the American Press Association ceased its efforts
to expand its ready-print service because it reached the con-
clusion that an adless ready-print service was unprofitable, but
ic continued to serve a constantly diminishing number of cus-
tomers with adless ready-prints until at the present time there
are only about fifty papers receiving its service, and that



664 SUITS IN EQUITY.

service now is negligible, being not more than one per cent,
of the total ready-print business in the United States.

7. That following the rendition of the said decree, and up
to 1914, the most important business of the American Press
Association was its plate department. That in 1910 the
American Press Association started an advertising depart-
ment to represent country newspapers in placing and advising
with respect to foreign (/. c., non-local) advertising with
them. That it was not until 1914 that any substantial prog-
ress was made with publishers, advertisers or advertising
agents, but since that time progress has been steady. That in
1912 the advertising department of the American Press As-
sociation represented about two thousand newspapers, but the
volume of foreign advertising business placed with such pa-
pers was nominal. That at the present time the advertising
department of the American Press Association represents
5,230 papers and the foreign advertising business placed with
them by it is the most important part of their foreign adver-
tising revenue. That as yet the country newspapers have no
other agency or influence working for them to develop for-
eign advertising, which is the country publishers' one un-
limited field for profitable income. That the only other
sources of income open to country publishers are income from
circulation, which is always a loss, and income from local
advertising and from job-work, both of which are limited by
the size and business of each publisher's town and immediate
vicinity.

8. That since the rendition of the said decree conditions
that obtained among the country newspapers of the United
States have undergone a marked change, in that foreign (i. e.,
non-local) advertising in 1912 was of little, if any, importance
in the revenue producing sense to publishers of country news-
papers, whereas to-day it is the subject that engrosses their
attention to the exclusion of every other question, except, for
the time being, the scarcity of print paper, for the reason
that it is the only growing and unlimited field of revenue
open to the country publishers, so that if five years ago the



BILLS IN SPECIAL CASES. 665

American Press Association had gone out of the plate busi-
ness it could not, in all probability, have continued its adver-
tising department, for the reason that the publishers of coun-
try newspapers did not know or appreciate the American
Press Association as their advertising representative. That
at the present time, notwithstanding the fact that it has dealt
with the publishers of country newspapers for thirty-five
years in the plate business, the American Press Association is
better known and more thoroughly appreciated by the pub-
lishers of country newspapers as their advertising representa-
tive than as a manufacturer of plates. That the American
Press Association did not have, and has not now, the capital
necessary to a rapid development and expansion of its adver-
tising department, inasmuch as practically all of its available
capital has been and is invested in its original and now non-
profitable business, to-wit : its plate service.

9. That the practical disappearance of the ready-print de-
partment of the American Press Association had the effect
of concentrating all the important items of overhead on the
plate department, so that plate service became a sole and di-
rect product of the American Press Association. That, as
stated in the case of the Western Newspaper Union, its ready-
print service is, and for many years has been, its more im-
portant and profitable service, and inasmuch as the mainte-
nance and development of both ready-print and plate services
require practically the same organization, the overhead of the
Western Newspaper Union is distributed over both plate and
ready-print services, and the plate service is treated by it as
the by-product of the more important and profitable ready-
print service.

10. That since the rendition of the said decree the cost of
labor and of materials, and of many items of overhead of
plate service, has greatly increased, but the American Press
Association has not increased the price of its plate service to
the newspapers because the Western Newspaper Union ad-
heres to the old price, so that any increase in price by the
American Press Association would have resulted inevitably



666 SUITS IN EQUITY.

in a serious, if not complete, loss of business. That the net
result to the American Press Association of the enforced con-
tinuance of the old prices has been that the plate service of
the American Press Association, notwithstanding the most
rigid economy and the efforts to increase business, has estab-
lished an impossibility to increase the volume of sales, and has
resulted in a loss from the time of the entry of the said decree
until the present time, a period of almost five years.

11. That the distribution of plate matter by the Western
Newspaper Union as a by-product enabled that company not
only to refrain from raising its prices, but in January, 1917,
apparently enabled it to reduce the price of miscellaneous
plate matter of various kinds from $1 to 75 cents a page, and
of serials from $1.50 to $1 a page; that immediately after
knowledge of such reduction came into possession of the
American Press Association, it appeared with its counsel be-
fore the department of justice to protest against such reduc-
tion as a violation of the provisions of said decree of August
3, 1912, and more particularly the provisions of III(c) there-
of, whereby the Western Newspaper Union and its affiliated
defendants were enjoined "from selling any of their product
or services at less than a fair and reasonable profit, or at cost
or less than cost, with the purpose or intent of injuring or
destroying the interstate trade and commerce of the Ameri-
can Press Association, or any other competitor," and the
American Press Association asked that proceedings be taken
forthwith to punish the Western Newspaper Union and its
affiliated defendants for a violation of said decree and to
restrain the continuance of such violation. That an investi-
gation by the department of justice resulted in a finding by
it of the fact that the reduced prices of the Western News-
paper Union, as aforesaid, were not in violation of the decree
of August 3, 1912, and more particularly paragraph III(c)
thereof, hereinbefore quoted.

12. That the scarcity and consequent high price of print
paper has had a serious effect in diminishing the aggregate
demand for plate service, in that very few, if any, newspapers



BILLS IN SPECIAL CASES. 667

are being started, more are discontinuing, and those that re-
main in business are using every effort to minimize the quan-
tity of print paper used. That this substantial diminution of
the field for plate service, combined with the aforesaid reduc-
tion in the price of plates, has resulted in a serious shrinkage
in the volume of plate sales by the American Press Association,
and in transforming its non-profitable plate business into a
business inolving serious financial losses. That the total plate
sales of the American Press Association in the year 1916
amounted to $731,000, while its sales from January 1, 1917,
to April 1, 1917, were at the rate of $600,000 for the year
a loss in sales of $131,000, without taking into consideration
the naturally progressive rate of loss. That the sale of plate
matter by the American Press Association during the first
three months of 1917 involved a loss of approximately
$9,500, or at the rate of about $40,000 a year, without mak-
ing any allowance for depreciation or for loss of metal.

13. That with the print-paper market in normal condition
the plate business of the United States is necessarily limited,
inasmuch as no additional newspapers can be caused to be
started merely to obtain plate service, nor can any effort ex-
pand to any material extent the amount of space which the
editors devote to plate matter, while at the present time the
field is shrinking through the efforts of the publishers to
economize in the use of print paper. That even if capital
were available and the print-paper market normal, it would
be futile for the American Press Association to attempt to
obtain a larger percentage of the plate business against the
competition of a by-product of the Western Newspaper
Union. That the only commercially sound manner of putting
the plate business of the American Press Association on an
economically equal basis with the plate business of the. West-
ern Newspaper Union, would be to transform it likewise into
a by-product by engaging on a vast scale, as does the Western
Newspaper Union, in the ready-print business. That such a
plan is utterly impossible, not merely because no capital is
available or procurable for the purpose, but because the situ-



668 SUITS IN EQUITY.

ation in the print-paper industry is such that the paper for a
ready-print service is not obtainable.

14. That the officers and controlling stockholders of the
American Press Association concluded, therefore, that noth-
ing remained but to wind up the business of the American
Press Association, sell its assets for the benefit of its credit-
ors, and divide the excess, if any, among its stockholders.
That the discontinuance of its plate business necessarily in-
volves the liquidation of the entire affairs of the American
Press Association, for the reason that on such a sale the plant,
metal and other tangible assets would have to be sacrificed.
That the machinery is special and worth little as second-hand
machinery. That part of the metal outstanding would not
be returned by publishers, and the part returned would come
in slowly and be an expense to the American Press Asso-
ciation to collect. That the large quantity of metal outstand-
ing in the form of metal bases, though absolutely necessary
in the plate business, could only be sold as metal junk. That
in addition the accounts receivable, consisting of small
amounts due from numerous country publishers, would take a
year or more to collect in so far as they proved collectible.
That such a disposition of the tangible assets would not real-
ize enough money to enable or justify continuing the adver-
tising department, so that the officers and controlling stock-
holders of the American Press Association have concluded,
after careful consideration, that to attempt to continue the
advertising department on a scale that would render the
necessary service to the country newspapers of the United
States, would require a sum materially in excess of what
could be obtained on a sale in liquidation of the assets of the
American Press Association. That such needed additional
capital could not be procured by way of investment, nor could
the company borrow the necessary funds because it would
have divested itself of its tangible assets to realize thereon to
best advantage and would consequently be without borrowing
capacity. That therefore the stockholders of the American
Press Association, having had no return on tlieir investment



BILLS IN SPECIAL CASES. 669

since 1912, would prefer to take a small dividend and wind
up the business than to hazard the last dollar of their invest-
ment in the continuance of the advertising department under
unfavorable conditions.

15. That the conditions hereinbefore set forth, which com-
pel the retirement of the American Press Association from
the plate business, and in consequence from all business, are
not attributed or attributable to any unlawful acts by the
Western Newspaper Union, but, as hereinbefore set forth,
solely to economic conditions which are outside the statute
law. That in discontinuing its place service the American
Press Association, unless it can sell that business complete,
must sacrifice its assets with very great loss to its stockhold-
ers and with no gain whatever to the public, but a distinct
loss in the interruption of a plate service to country news-
papers throughout the United States.

16. That the purpose of this suit is to place the American
Press Association in a position to avail itself of an alter-
native which will avoid the sacrifice of its assets and will
permit it to continue in business as the advertising represen-
tative of country newspapers. That such alternative is based
upon a suggestion by the plaintiff, Courtland Smith, president
and general manager of the American Press Association, that
in view of the desperate condition of the plate business of the
American Press Association, the assets and business of its
plate service be transferred to the Western Newspaper Union,
provided legal permission be obtained. That the Western
Newspaper Union subsequently signified its willingness, like-
wise subject to legal permission, to take over the assets and
business of the plate service of the American Press Associa-
tion on the basis of annual payments covering a period of
twenty years; that the plaintiff, Courtland Smith, on behalf
of the American Press Association, frankly disclosed to the
Western Newspaper Union the condition of the American
Press Association, and the other facts set forth in this bill of
complaint, and that the aforesaid conditional expression of



670 SUITS IN EQUITY.

willingness to purchase on the part of the Western News-
paper Union was made by it with such knowledge.

17. That in the opinion of the plaintiffs it would be advan-
tageous to the Western Newspaper Union to acquire the
plate department of the American Press Association as a go-
ing concern, if the transfer shall be permitted, for these rea-
sons : that while the tangible assets of the American Press
Association are in such shape that they have comparatively
little value when disposed of as second-hand material, they
have real value to a going concern ; that upon the discon-
tinuance of the plate business by the American Press Asso-
ciation the Western Newspaper Union would be in position of
having this business forced upon it, for the newspapers must
secure plate matter and practically their only source of supply
would be the Western Newspaper Union ; that this would im-
mediately create a demand for Western Newspaper Union
plate far in excess of its ability to supply with its present
stock of metal; that to buy that metal at the present prices,
when it can be bought at all, would be highly unprofitable;
that the plates of the American Press Association and of the
Western Newspaper Union are used with a metal base, the
bases being retained by the newspaper publishers for continu-
ous use; that the plates of the said two companies require
special bases so that Western Newspaper Union plates can
not be used on American Press Association bases, and con-
sequently the Western Newspaper Union would be required
at once to furnish a large number of metal bases to papers
not now using their plates; that by reason of the material
difference in the bases used by the said two companies respec-