Northern Pacific Railway Co. v. United States

*13 Mr. Justice Harlan,

whom

Mr. Justice Frankfurter and Mr. Justice Whittaker join, dissenting.

The Court affirms summary judgment for the Government by concluding that “the essential prerequisites for treating the defendant's tying arrangements as unreasonable ‘per se’ were conclusively established below . . . In my view, these prerequisites were not established, and this case should be remanded to the District Court for a trial on the issue whether appellants’ landholdings gave them that amount of control over the relevant market for land necessary under this Court’s past decisions to make the challenged tying clauses violative per se of the Sherman Act. Further, in light of the Court’s disposition of the case and the nature of the findings made below, I think that the Court’s discussion of International Salt Co. v. United States, 332 U. S. 392 , is apt to produce confusion as to what proof is necessary to show per se illegality of tying clauses in future Sherman Act cases.

Because the Government necessarily based its complaint on § 1 of the Sherman Act, 26 Stat. 209 , as amended, 15 U. S. C. i 1, rather than on § 3 of the Clayton Act, 1 it was required to show that the challenged tying clauses constituted unreasonable restraints of trade, see Standard Oil Co. of New Jersey v. United States, 221 U. S. 1 . As a result, these tying clauses raise legal issues different from those presented by the legislatively defined tying clauses invalidated under the more pointed prohibitions of the Clayton Act. Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , has made it clear beyond dispute that both proof of dominance in the market for the tying product and a showing that an appreciable volume of business in the tied product is restrained are *14 essential conditions to judicial condemnation of a tying clause as a per se violation of the Sherman Act. 2 345 U. S., at 608-611 . These firm requirements derive from an awareness that the vice apt to exist in tying agreements “is the wielding of monopolistic leverage; a seller exploits his dominant position in one market to expand his empire into the next.” 345 U. S., at 611 . It is not, as the Court intimates at one point in its opinion, that under the Sherman Act the tying clause is illegal per se; the per se illegality results from its use by virtue of a vendor’s dominance over the tying interest to foreclose competitors from a substantial market in the tied interest.

My primary difficulty with the Court’s affirmance of the judgment below is that the District Court made no finding that the appellants had a “dominant position” or, as this Court now puts it, “sufficient economic power,” in the relevant land market. Such a finding would indicate that those requiring land of the character owned by the appellants would be driven to them for it, thereby putting appellants in a position to foreclose competing carriers, through the medium of tying clauses, from shipping the produce from the lands sold or leased. The District Court seems to have conceived that no more need be shown on this score than that the appellants owned the particular tracts of land sold or leased subject to a tying clause. Thus it said:

“Defendants argue that the first tying element, i. e., market domination over the tying product, is not established because the record does not show the proportion of N. P. [Northern Pacific] lands of various types to the total of the lands of the same types sold and leased in the area of defendants’ operations. *15 This contention ignores the plain language of the cited decisions [“tying clause” cases in this Court], providing that market dominance of 'the tying commodity’ is required. The tying commodity need only be the particular property or product to which jorced purchase of the second commodity is tied; certainly it does not necessarily include all of the similar and competing commodities which may be in the market. . . .

“The tying commodity in the present case is the land presently or formerly owned by N. P. Unrestricted fee-simple title to land vests in the owner absolute domination of the market in such land. By the ownership of the lands and resulting dominance in the market therefor defendants were able to impose the traffic clauses in question on the grantees and lessees of the land.” (Italics added.) 142 F. Supp. 679, 684 .

In conformity with these views the ultimate findings of the District Court on the issue of “control” were only these:

“37. Defendants, as sellers and as lessors, by reason of title in fee simple, have dominance in the lands now owned by them and had dominance in the lands formerly owned at the time of sale of such lands. [Italics added.]

“38. Defendants have used their dominance in the lands sold and leased to require purchasers and lessees to purchase and use Northern Pacific’s transportation service, under the conditions stated in finding 10.” (Finding 10 relates to the terms of the tying clauses.)

I do not think that these findings as to appellants’ ad hoc “dominance” over the particular land sold or leased suffice to meet the showing of market control which Times-Picayune established as one of the essential pre *16 requisites to holding tying clauses illegal per se under the Sherman Act. In effect the District Court’s view bypassed that requirement and made the validity of these tying clauses depend entirely on the commercial restraint accomplished by them. The District Court should have taken evidence of the relative strength of appellants’ landholdings vis-á-vis that of others in the appropriate market for land of the types now or formerly possessed by appellants, 3 of the “uniqueness” of appellants’ landholdings in terms of quality or use to which they may have been put, and of the extent to which the location of the lands on or near the Northern Pacific’s railroad line, or any other circumstances, put the appellants in a strategic position as against other sellers and lessors of land. Short of such an inquiry I do not see how it can be determined whether the appellants occupied such a dominant position in the relevant land market, cf. United States v. E. I. du Pont de Nemours & Co., 351 U. S. 377 , as to make these tying clauses illegal per se under the Sherman Act.

Explanation for the Court’s failure to remand with instructions to pursue such an inquiry apparently lies in part in its statement that the “very existence of this host of tying arrangements is itself compelling evidence of the defendant’s great power” over the land market. I do not deny that there may be instances where economic coercion by a vendor may be inferred, without any direct showing of market dominance, from the mere existence of the tying arrangements themselves, as where the vendee *17 is apt to suffer economic detriment from the tying clause because precluded from purchasing a tied product at better terms or of a better quality elsewhere. But the tying clauses here are not cast in such absolute terms. The record indicates that a large majority of appellants’ lands were close to the Northern Pacific lines and thus vendees or lessees of these lands might be expected to utilize Northern Pacific as a matter of course. Further, substantially all the tying clauses, as found by the District Court, contained provisos leaving the vendee or lessee free to ship by other railroads when offered either lower rates or lower rates or superior service. In these circumstances it would appear that the inclusion of the tying clauses in contracts or leases might have been largely a matter of indifference to at least many of the purchasers or lessees of appellants’ land, and hence that more is needed than the tying clauses themselves to warrant the inference that acceptance of the tying clauses resulted from coercion exercised by appellants through their position in the land market.

Particularly in view of the Court’s affirmance of a judgment based on so inadequate a record, I have further difficulty with the opinion in its treatment of International Salt, the decision on which the Court principally relies. The Court regards that case as making irrelevant proof of market dominance in the tying interest, but it seems to me that Times-Picayune has laid to rest all doubt as to the need for clear proof on this issue. In fact that case considered that in International Salt the required element of proof was supplied by the patents themselves which “conferred monopolistic, albeit lawful, market control” over the tying product, 345 U. S., at 608 , as indeed the Court in International Salt itself suggested by prefacing its holding with the statement that “[defendant’s] patents confer a limited monopoly of the invention they *18 reward.” 332 U. S., at 395 . Still the Court today states that the tying clauses were there struck down despite the fact that the tying product was patented. In short, insofar as the Sherman Act is concerned, it appears that International Salt simply treated a patent as the equivalent of proof of market control — a view further supported by what was said about International Salt in Standard Oil Co. of California v. United States, 337 U. S. 293, at 304, 307 .

The reliance on International Salt with the new scope the Court now gives it is puzzling in light of the Court’s express recognition that a finding of sufficient economic power over land to restrict competition in freight services is an essential element here. The Court heightens this paradox by its effort to satisfy this requirement with the assertion that “undisputed facts” conclusively established the existence of this power. But in so concluding, it could hardly rely on the market-dominance findings below which, as I have tried to show, rested upon the District Court’s evident misconception of Times-Picayune.

I do not understand the Court to excuse findings as to control by adopting the Government’s argument that this case should be brought within International Salt by analogy of the ownership of land to that of a patent, so that the particular tract of land involved in each purchase or lease itself constitutes the relevant market. The record in any event is without support for such a theory. No findings were made below as to the uniqueness of any of appellants’ lands either because of their location 4 or *19 because of their peculiar qualities enabling production of superior mineral, timber, or agricultural products. Without such an inquiry, I do not see how appellants’ supposed dominance of the land market can be based on the theory that their lands were “unique.”

Finally, the Court leaves in unsettling doubt the future effect of its statement that the use of the word “dominance” in Times-Picayune implies no more of a showing of market dominance than “sufficient economic power to impose an appreciable restraint on free competition in the tied product.” As an abstraction one can hardly quarrel with this piece of surgery, for I do not claim that a monopoly in the sense of § 2 of the Sherman Act must be shown over a tying product. As already indicated, I should think that a showing of “sufficient economic power” in cases of this kind could be based upon a variety of factors, such as significant percentage control of the relevant market, desirability of the product to the purchaser, use of tying clauses which would be likely to result in economic detriment to vendees or lessees, and such uniqueness of the tying product as to suggest comparison with a monopoly by patent. But I venture to predict that the language of the Court, taken in conjunction with its approval of the summary disposition of this case, will leave courts and lawyers in confusion as to what the proper standards now are for judging tying clauses under the Sherman Act.

The Court’s action in affirming the judgment below sanctions what I deem to be a serious abuse of the summary judgment procedures. Cf. Sartor v. Arkansas Natural Gas Corp., 321 U. S. 620 . A record barren of facts adequate to support either a finding of economic *20 power over a relevant land market or a finding that the land involved is so unique as to constitute in itself the relevant market is remedied by this Court’s reliance upon “common sense” and judicial notice of appellants’ commanding position. But these are poor substitutes for the proof to which the Government should be put. I would remand to the District Court for a trial and findings on the issue of “dominance.”

The tying arrangements proscribed by § 3 of the Clayton Act relate only to “goods, wares, merchandise, machinery, supplies or other commodities . . . .” 38 Stat. 731 , 15 U. S. C. § 14 .

The Court there stated that the presence of either factor is sufficient for invalidation of a tying clause under the Clayton Act. 345 U. S., at 608-609 .

The findings entered by the District Court make no reference to appellants’ percentage ownership of a proper market for land, and indeed the record contains in only one instance statistics bearing on this problem. In the period between 1935 and 1942, it appears that appellants’ holdings of merchantable timber in Montana, Idaho, and Washington constituted approximately 5% of the total merchantable timber in those States.

Affidavits before the District Court did indicate that certain landholdings of appellants, particularly grazing lands, were in a checkerboard pattern among private holdings, thereby giving appellants a strategic position with respect to these lands since the private landholders often found it necessary to acquire appellants’ lands to fill *19 gaps in existing ranges. The amount of such land does not appear, and I do not think that these affidavits justify short-circuiting an inquiry into the broad issue of market dominance.