Lorillard
The United States of America, Appellant, V. The American Tobacco Company and Others. The American Tobacco Company and Others, Appellants, V. The United States of America. Oral Argument of Delancey Nicoll (P. 1), John G. Johnson ( P. 87), Junius Parker (P. 105), for the American Tobacco Company and Others, and of Sol M. Stroock (P. 131), for United Cigar Stores Company. No. 118 (Formerly 316). No. 119 (Formerly 317).
Fields
- Author
- Coxe
- Harlan
- Hillman
- Hoar
- Holmes
- Hughes
- Johnson, J.G.
- Lamar
- Lurton
- Mckenna
- Nicoll, D.
- Parker
- Parker, J.
- Stroock, S.M.
- Vandevanter
- Whelan, G.J.
- Wickersham
- Harlan
- Type
- PLEA, PLEADING
- Area
- LEGAL DEPT FILES/BASEMENT GMP
- Recipient (Organization)
- US Supreme Court
- Named Person
- Bendheim
- Bloch
- Brewster
- Butler, G.P.
- Carnegie
- Choate
- Clark
- Condon
- Conley, J.
- Coxe
- Craft
- Deiches
- Devoe
- Duke
- Dula
- Dunkerson
- Eckstein, N.
- Edmunds
- Fowler, A.
- Friedlander
- Furst
- Harrington
- Helme
- Hill
- Hillman
- Hoar
- Holmes
- Hornblower
- Hughes
- Jenkins
- Johnson
- Johnson, J.G.
- Jungbluth
- Knight
- Lacombe
- Lane
- Larus
- Lee
- Letts
- Mahn, G.
- Mathews
- Mckenna
- Mcreynolds
- Moore
- Nicoll, D.
- Noyes
- Parker, J.
- Pearson
- Peckham
- Peper
- Puryear
- Ray
- Richardson
- Rockefeller
- Savage
- Schulte
- Scotten, D.
- Shawnee
- Sheppey
- Sherman
- Stewart
- Stone, H.M.
- Strater
- Stroock, S.M.
- Swift
- Taft
- Ward
- Wetmore, M.C.
- Whelan, G.J.
- Wilson
- Young
- Bloch
- Named Organization
- Addyston Pipe + Foundry
- Allen Ginter
- Amer, American Tobacco
- American Cigar
- American Snuff
- American Stogie
- Anargyros
- Atlantic Snuff
- Bat, British American Tobacco
- Blackwells Durham
- Bloch Brothers
- Board of Directors
- Brown
- Bureau of Corporations
- Burley Tobacco Assn
- Burley Tobacco Society
- Butler Butler
- Byfield Snuff
- Columbia
- Congress
- Conley
- Consolidated Cigarette
- Continental Tobacco
- Continental Wall Paper
- Craft Tobacco
- Danbury Hat
- Daniel Scotten
- Dept of Commerce + Labor
- Drummond
- Errors + Appeals Court
- Gail + Ax
- Globe Tobacco
- Golden Belt Mfg
- Goodwin
- Hall
- Herman Ellis
- Hernsheim
- Imperial Tobacco
- J Wright
- Johnson Tinfoil
- Joint Traffic
- Kinney Tobacco
- Larus
- Lehmaier Schwartz
- Lewis
- Licorice
- Lm, Liggett & Myers
- Mcandrews Forbes
- Meller Rittenhouse
- Mengel Box
- Metropolitan Tobacco
- Nall Williams
- Nashville Tobacco Works
- Natl Tobacco Works
- Northern Securities
- Ogdens
- Peoples Tobacco
- Pharmaceutical Works
- Pinkerton
- Pinkerton Tobacco
- Powell Smith
- Ray + Hughes
- Regie
- Rp Richardson
- Schinasi Brothers
- Scotten Dillon Tobacco
- Spaulding Merrick
- Standard Snuff
- Trans Mo
- United Cigar Stores
- Universal Tobacco
- US Circuit Court Sd Ny
- US Supreme Court
- US Tobacco
- Usda, U.S. Dept of Agriculture
- W Duke + Sons
- Weaver Sterry
- Wetmore Tobacco
- Weymans
- Whitlocks
- Ws Kimball
- Young
- Allen Ginter
- Document File
- 88684790/88685554/American Tobacco Company
- Date Loaded
- 14 Sep 2001
- Litigation
- Feda/Produced
- Author (Organization)
- Amer, American Tobacco
- United Cigar Stores
- Characteristic
- MARG, MARGINALIA
- Request
- R1-270
- Site
- G29
- Brand
- Anargyros
- UCSF Legacy ID
- ozj64a00
Document Images
3
ness and that their great success is a natural
growth resulting from industry, intelligence
and economy."
We come before this Court, therefore, acquitted
of the very charges which the Assistant Attorney-
General now repeats. We stand before your
Honors with clean hands.
Another extraordinary fact about this Record
which differentiates it from many cases is that
these defendants have no control whatever over
the. supply of the. raw material. They own no
tobacco lands in the United States. There are un-
limited lands upon which tobacco may be grown in
addition to the land upon which it is grown at pres-
ent. In fact, tobacco grows all over the world, and
the United States does not produce much more than
a third of the annual crop. This circumstance puts
these defendants in a very different position from
those'indnstries which include in their assets such
natural resources as coal or iron or oil or lumber or
copper or other minerala
Not only that; but the defendants have never
purchased, in any one year, half of the tobacco crop
of the United States. Exhibit No. 76 of the Record
shows the total production of tobacco leaf and the
amount used by the defendants, as compared with
the total production in the years 1903, 1904 and
1905.
The Chief Justice: Mr. Nicoll, may I interrupt
you just a moment? Your argument is following
the line of your brief, is it not?
Mr. Nicoll: Somewhat; not here, however-not
on this point.
The Chief Justice: I wanted to take some memo-
randa if it was not. That is why I asked.
Mr. Nicoll: Not here; but of course a great many
of these facts are to be found in the brief.
The Chief Justice: Yes.
.r
rr
Mr. Nicoll: These facts that I am stating now
will be found in the briefs, your Honor.
The Chief Justice: I beg pardon. Go on.
Mr. Nicoll: Also a discussion of some difference
which has arisen between the Attorney-General
and ourselves as to these facts. I am quoting them
from the record, and I am quoting them from
Exhibit No. 76.
This exhibit shows that in 1903 the total crop was
998,000,000 pounds. The total purchased by the
defendants was 391,000,000 pounds. In 1904 the
total crop was 842,000,000 pounds. The total pur-
chased by the defendants was 329,000,000 pounds.
In 1905 the total crop was 921,000,000 pounds. The
total purchased by the defendants was 418,000,000
pounds. And we agreed that the crop of 1906 would
show substantially the same proportions.
There is still another great fact: The defendants
have never produced half of the manufactured out-
put of tobacco. Measured in dollars and cents, the
annual output of manufactured tobacco is f565;
000,000. The defendants produce $212,000,000, or
something less than thirty-eight per cent. of the
annual crop. Of course in making this statement
I am treating the tobacco business as a whole, in-
cluding cigars.
There is another extraordinary fact about this
record which differentiates it from many other
cases: There is no charge here of rebating, or that
the defendants owe their growth or prosperity to
any advantage over their competitors in transporta-
tion. This fact is generally relied upon in Govern-
ment prosecutions as an evidence of an intention to
monopolize; and the charge is often made that many,
of the great industrial corporations of the IInited,,
States have flourished by it, if, indeed; their pros- :
perity has not actually been built up upon it. <8ut
however that may be in other instances, I take some
satisfaction in saying to your Honors that the de-
v
Oral Argument of De Lancey Nioo11,
Esq., Jannary 9, 1911.
Mr. Nicoll: If your Honors please:
Before I proceed to discuss the evidence from the
viewpoint of the defendants, I will call your atten-
tion to certain paramount considerations in this
Record which I believe will go far to dispel any un-
favorable impressions which may have been made
by the argument of the learned Assistant Attorney-
General.
Paramount Considerations.
The petition in this case gives a history of the
life of the defendants from the beginning, and al-
most their every act is brought into question. It
was prepared upon the theory that the existence
of the American Tobacco Company, and the other
defendants, is prejudicial to the producers of to-
bacco, to the manufacturers of tobacco, and to the
consumers of tobacco.
The case below was tried at great length. The
Court listened to argument for four whole days.
For two whole days the learned Assistant Attor-
ney-General, with that eloquence and ingenuity
which characterize all his addresses, endeavored to
persuade the Court that many, if not all, of our acts
were oppressive, coercive and generally injurious.
What was the result of that discussion? It has
not appeared thus far in the argument; but the
fact is that the Court below acquitted us of all the
methods of which the Attorney-General now ac-
cnses us.
Judge Lacombe eaid:
"The record in this case does not indic~
that there has been any increase in the prfce
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hinder, restrain and monopolize interstate and
foreign trade and commerce in leaf tobacco and
articles fabricated therefrom or necessary therein.
They have already driven out most opponents, and
have attained such power in combination that the
few established competitors must conduct. their
business in the well-grounded fear of swift destruc-
tion."
What proof was there to.sustain this charge?
This proceeding certainly offered an opportunity
to alI men in the United States who had been
coerced or dragooned to come forward and tell the
story of their wrongs. If, indeed, these defendants
had coerced others to sell, here was the opportunity
at last to tell the tale. Yet but one witness (Mr.
Puryear, of the. Nashville Tobacco Works) made
any such complaint I will explain that transaction
as I proceed. And no manufacturer was called to
prove that.he conducted his business in fear of swift .
destruction, or in any fear at all on the account of
the defendants.
There is still another paramount fact about this
Record. Notwithstanding the.claim that these de
fendants have restrained trade in tobacco leaf and
in the products manufactured therefrom, from their
organization in 1890 down to the year 1907, it
appears that in that period there has been a great
increase in the number of tobacco factories and in
the number of cigar and cigarette factories. In
1890 the number.of tobacco manufactories in the
United States (by which I mean smoking and plug
tobacco) was 1,021. In 1907 it was 3,600. In other
words, during the period of the birth and growth of
the American Tobacco Company, the tobacco plants
in the United States more than trebled. During the
same period the cigar and cigarette manufacturerY
have increased from 23,000 to 26,000. I am speak-
ing now of the growth of the independents, not the
7
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2
of tobacco products to the consumer. There
is an absence of persuasive evidence: that by
unfair competition or improper practices in-
dependent dealers have been dragooned Into
giving up their individual enterprises and
selling out to the principal defendant . .
"During the existence of the Ameriean
Tobacco Company new enterprises have been
started-some with small capital in competi-
tion with it and have thriven. The price of
leaf tobacco-the raw material-except for
one brief period of abnormal conditions, has
steadily increased until it has nearly doubled,
while at the same time 150,000 additional
acres have been devoted to tobacco crops and
the consumption of the leaf has greatly in-
creased."
Judge Noyes agreed with Judge Lacombe that
this Record is "remarkably free from instances of
coercion and oppression"; and he added:
"It may be that now, in applying the sec-
ond section of the statute, performance, as
well ae power of performance, should be con-
sidered-that the elements of oppression and
coercion should be shown to erist-to estab-
llah an unlawful monopoly. And if these
elements are.to be considered, they are not
suSiciently presented upon this record. It is
not shown that the defendants have reduced
prices to growers, nor that they have raised
prices to consumers. The instances of co-
ercion which are shown appear rather as in-
cidental to the development of a.great busi
ness than as indicative of a policy of oppres-
sion."
Judge Ward, who wrote the dissenting opinion
in the Court below, agreed with his brethren upon
this subject, and said:
"A perusal of the record satisfied me that
their purposes and conduct were not illegal
or oppressive, but that they strove, as every
business man strives, to increase their busi
fendants in this case have never enjoyed any such
advantage over their competitors.
There ie still another fact of peculiar importance.
The charge in this petition is that these defendants
have combined and conspired to injure the pro-
ducers of tobacco. And yet the fact is that not a
single producer of tobacco in the United States is
here to complain. There are at least half a million
men in the United States engaged in growing
tobacco, and yet there is not one of them who is a
complainant before this Court.
Another charge is that these defendants have com-
bined and conspired to injure the manufacturers
of tobacco. But not a single independent manu-
facturer was called by the Government to sustain
that charge. The only independent manufacturers
in this case who were called were called by the de
fendanta They were called by us to prove the fair
ness and justice of our methoda We calledd the
largeatindependent manufacturer of plug tobacco,
the largest independent manufacturer of scrap
tobacco, the largest independent cigarette manu-
facturer; and all of them agreed that the methods
of the defendants bad been fair and just, and the
avenues of distribution kept free and open.
The charge is also made in the petition that these
defendants have combined and conspired to injure
the consumers of tobacco in the United States. Yet
out of the millions and millions of men who use
tobacco products in the United Btates, no one came
to complain.
But that is not all. The dsstatant Attorney-
General has told yon 'of the freqnent purchases
made of plants and brands from competitora And
he made to-day the very general charge that these
vendors had been coerced to eell. The charge in
the petition is this:
'^Phe defendants have driven out opponenta, de-
terred others from entering, and now unreaeonably
N
growth of any factories controlled by the American
Tobacco Company. And in this connection I ought
to call your Honors' attention to another fact which
appears in the Record; and that Is that in certain
branches of the tobacco business our percentage
haa constantly decreased instead of increasing. If
the theory of the Government is true that we
possess such enormous power over the trade, why
should not our percentage have increased from year
to year?
Yet what are the facts? We started, it is true,
in 1890 in the cigarette business with ninety-eeven
per cent. The very next year it fell to eighty-nine
per cent It has been constantly falling ever since,
until in the year 1907 it reached seventy-three per
cent., or twenty-four per cent. less than when we
started.
Mr. Justice Hnghee: What was the difference in
the total consumption of cigarettes during that
time?
Mr. Nicoll : Say about a billion more a year, Mr.
Parker telle me. Now, as to cigara: We startsd the
cigar business in 1902 with a percentage of a3zteen
per cent. That fell by 1907 to fourteen per cent.
I have brought forward these various considera-
tions in advance of a more detailed diacnesion of
the evidence, in order to show your Honors that
after all the Record in this case has not the daak
and eomber colors in which the learned Aasiatant
Attorney-Qeneral has endeavored to paint it.
I will now proceed with an account of the birth
and growth of the American Tobacco Company.
Here our contention with the Government begina.
Goaexnment cbasges.
The Government charges that the main purpose
and Intention of the defendants from the beginning
was to restrain trade by suppressing competition;
en-
11
able and successful to-day may not be profitable
and saccessfal to-morrow. They had issued seenri-
ties of ;23,000,000--410,000,000 of preferred and
$15,000,000 of common stock; and in order
to broaden the basis upon which the securities
were issued, and to give permanent value to
them, they proceeded to purchase some plants in
other lines of business. The Government here sees
our next offense after our iniquitous organization.
Yet it seems to me to have been the most eminently
conservative and reasonable thing that they could
have dpne. Indeed, it wae more than conservative;
it was necessary if the American Tobacco Company
was to continue in business; for just what they ea-
pected to happen did happen. Popular taste did
change, and In a very short time the business of
matzng Virginia cigarettes became comparatively
ineignificant compared with its size when the
American Tobacco Company was organized.
Let us see what they did. They bought a plug
concern, the National Tobacco Works, at Lonis-
ville; the smoking business of Marburg in Balti-
more; the smoking and snuff business of Gail & Ax,
in Baltimore; Wldtiock's bnsiness in cheroots; from
Hernaheim, of New Orleans, a machine for mamng
cigarettes without paste; and on account of the
prejudice which had arisen against paper cigar-
ettes, they bought three concerns in Baltimore
which were making all-tobacco cigarettes, viz.: Her
man Ellis, Hall, and the Consolidated Cigarette
Company.
Mr. Justice Holmes: Is that what is meant by
"Little Cigars?"
Mr. Nicoll: Yes, that is what is meant by "Little
Clgam
None of these concerns was In competition with
the American Tobacco Company at a1L The,y were
In different lines of business. Each was bought for
cash, although In two instances they gave cash and
sumer; and no increaste in price wae made. There
was no purpose to diminish the price of tobacco leaf
to the farmer. That increased on account of the
expansion of the busineee. The sole purpose was
to increase the business by having a more complete
organization for managing it and to effect econo-
mfes in conducting it; because the expenses of ad-
vertising had increased to an enormous extent,
amounting in the case of W. Duke & Sons to as
much as 4800,000 a year, or nearly twenty per cent.
of the whole business. The advertising expenses
of the others were equally large. These concerns
were wound up, and their plants and businesses
taken over by the American Tobacco Company; and
the business was carried on by the new organization
in the same factories, except where it was found
more economical or convenient to manufacture at
some other point. Then the factories were sold,
but the manufacture of the brand was continued.
The New Jersey corporation received the actual
properties, with their live assets and good will, and
paid for them in its stock.
The Assistant Attorney-General in the course of
his remarks commented upon the fact that, accord-
Ing to an estimate made by the Bureau of Corpo-
rations of the Department of Commerce and IAbor
in the year 1908, two years after the trial of this
case was over (see Reply Brief, p. 10), the
value of the.tangible assets of the factories and
the plants and the stock on hand and bills receiv-
able that went over to the New Jersey corpora-
tion was only #3,500,000. And he makes the
charge that here was an instance of gross over-
capitalization. But, of course, he ignores in that
statement what is the only thing of real value in
the tobacco business, and that Is the brands. The
brand of 'Bull Darham,°f of which your Honors
will bear as I proceed, was one sold at auction for
#4,000,000-one brand of tobacco alone.
