Transcript of Record — Ethyl Gasoline Corp. v. United States

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TRANSCRIPT OF RECORD

. Supreme Court of the United States <);

-. ee Beak Sy eors > @

OCTOBER TERM, 19399 .- = *

"RE HO Rien renin Sy. lags Sia hain —

a ae ‘No. 536°

: 5 ie 3

‘ tS

3 °

HTHYL‘GASOLINE CORPORATION, EARLE W.

WEBB AND JOHN COARD TAYLOR, APPEL-

MMM ee" 8 -

US.

JHE UNITED STATES OF AMERICA.

; 4 ie

-@APPEAL FROM THE: DISTRICT COURT OF THE UNITED STATES FOR

’ THE SOUTHERN DISTRICT OF NEW YORK

- Pa 2

FILED NOVEMBER 16, 1939.

” SUPREME COURT OF THE UNI STATES .

: % OCTOBER TERM, ol

aw No.'536

ETHYL GASOLINKQUORPOR ATION. EARLE W.

WEBB AND JOHN COARD TAYLOR, APPEL-

fee ese

cae STATES OF AMERICA : oe

APPEAL FROM THE DISTRICT COURT. OF THE UNITED STATES. yen

THE 50 THERN DISTRICT OF NEW. YORK

& INDEX.

, Original Print ..

: Record from D. C.'U. 8., Soutberfi District of New York.. ae +

| Petition ......cccccscccedegecccscceces bccccccceseces _& 1

Exhibit “A’*—Ketiner’s license and sales agreement, :

regular (same as Exhibit 9a’ to : #4

te ay pee ogee: in printing) . 16

. “B"—Refiner’s: license and sales agreement, |

he ’ Ethyl (same as Exhibit 9B to stipu-

> lation) (omitted in printing)...... 22 P

“C™—Refiner's ‘license, non-manufacturjng

(same as Exhibit 9-C go stipulation)

(omitted in printing)..... 7 $2

“D"—Jobber license, Ethyl (same as Ex-

Sj ERP PERT Eee CTT ee 38 ©

—Jobber license, regular (same as Ex- a

hibit 13-B testipulation) (omitted

4 * CD. ck cncevnsadlteViecsce 44

Sie eo su csascct cavddedakatadcdd tan tpeciascue a... 9

Stipulation of facts ....... Seah s sae heb oN Senos baares 59 7

Gettin, Melle Bic ciccccisccecteccsphsssscees Pepkias * 98 43.

= Findings of fact ang concinsions of 1h. baccgecccccocs | es

Fina}, GEOIOD sana pce cv qtbvcvessccersesénacéontccns eas ee 62

Order staying Ree ecution of GOSEDD. bck eviscceenens skban 133 , 64

—5507 %

Jupp & Derwrater (INc.), Printers, Wasninoron, D. C., JANuARY 5, 1940. ae

ii*. 4 P pe oe alee

Record from D. C. U. S., Southern District ‘of New, York— ~

Continua. & | Original -

Petitiaig: for appeal, assignments of erro Cag prayer far +

Nye cs PI oc pakanaes onesdadaccakevaseeriecs

Order allowing appeal Vineens Scare onmandes iene

Citation and servicé............

Bond on appeal........ et tebets -

———;——-Stiputations as to transcript of record.—.-v........... ; 145

Clerk’s certificate.............. (omitted in ae). 150

Exhibits to stipulation of facts inset teteeeeees eescaveee ee

3-A—Patent: No. Vt eee eee ameuses <> §

3-B—Pitent No. 1,502,064.......20cccssceceee0s - 5

_ 3-C—Patento No. 1,668,922........ Rclatanckeiens AP a

3-D—Patent No. 9 a eee rexne wtkin?. wv

aid 6-A—Photograph of mixing sie (omitted in print- ;

ys : ing) Trrrrere ree PTOePERETELELEEeT eT “+ Ti

‘ | 6-¥—Bluepript of mixing ots (omitted in j eat

ea - Be): bs eeeee PE Aree te. 12

4; 6C—Defendan handling ang,

ae CS Siig GE WV ccencccacecese acm ~ 13--

. 0-A—Refiner’s license—Regular........+.-%... Z Se

9-B—Refiner’s license—Ethyl. . Ce ececseesccee 37 °

9-C—Refiper’s license—non-manufacturiag. seacues be

13-A—Jobber license—Ethyl .:..... nannies ane aus o

_’ 13-B—Jobber. licvense—Regular «2.05... 85

6 14-A—Regulations’ proposed by ‘surgeon-general.... 58

_-” & 14-B—Cha ‘in aforesaid regulations. . OTS eee ee 65

14-C—Lead \ign—first form ...........--eeceeeess 69

4 14-D—-Lead sign “POTM. cece ee ceceseseccees . TO

17-A—Investigatjon re form—first ............ Pe

17-B—Investi mivt form—second.......... GF:

17- C—Instruct ns to representatives.............- a. F

- 17-D—Supplg ental instructions. ....... Gi cad pp od 107 :

2A— FU eum code (February 11, 1929 (omitted

wre. a PD 2. SPE cu aneencépecsseesos dees 116

: 23-B—Yodified code ’ (abet 10, 1981) ¢omitted in

, ‘MD i5 pot waukteksdoedaenees's e800 bod 122

7. 23—Code of Fair Competition for Puindlouss In- -,

dustry ‘(omitted in printing». es fs

23-D—Federal Trade Commission order (Sept. Pes

1937) (omitted in printing) veGtabsessdso-+ ae 595)

25-A—Trade Mark Registration No. 187,410........ a | _

¥ ‘2B Trade Mark Registration<No. 202,275......:. 1 Bi ee

: 2h -C—Trade Mark Registration No. 215,2$2........ BO *

e . 25-D—-Trade Mark- Registration No. 2092,242...... ee 160

Care Not 26-E--New" Jersey registration of “Ethy!”.......... + 16%

25-F—New Jersey registration of “Ethyl” design. . i «

25-i—Advertisements of licensees ........-+.+.+: 4

4 ‘25-H4- Ady ertisements of defendant corporation. . . mm

_ 25-1 —Photographs of- filling stattons reneeeeane es 17

Statement of points to be-relied upon....... eo csegesceccoes - 1%

Stipulation of portions. of record to be printed chsh ndexws ~. 198

2 _ 2 s < ? . ; ° Ey

"foley 4) et = ;

IN: D STATES DISTRICT COURT FOR THE

_ SOUTHERN’ DISTRICT OF NEW YORK

— Q. | Equity No. E. 84.321 ae 3

~Userip Staags OF Anenica, Petitioner, 7

_ Erayn Gxtouine ‘Conrorarioy, EARLE ©. ‘Wess, and Joun

_ Coarp Fay LOR, Defendants

reece _Prritiox—Filed February 19° oi R

“® To the Honorable .the Judges*of the District-Court-of-the

—

organized aid existing under and by virtue of the laws of

: the State of Delaware, and having its principal place of.

- United States on-tis Hominers istrict of New York, in

quity : : : ApoE, tara er

5 peti ;

Dane’ United States of America, by its attorneys, brings

- this suit in equity against Ethyl. ‘Gasoline Corporation, |

. Earle. C. Webb, ard John Coard es defendants, and ©

alleges: :

& Defendant Ethyl Gasoline Sarnoration is a icieaetion

business at 135 East 42nd Street, in the City and State of

New York. » Oge-half of its capital stock is owrled by the ’

is owned by General MotorsCorporation and E. @u Pont

_ Standard Oil Company (New Jersey), and the remainder . ~

[fol. 3] de Nemours Company. Defendants, Earle C. Webb »

and Joh# Coard Taylor, are president and ‘vice-president

cut and resides in the City of Greenwich in that State. De-

-* in charge of sales, respectively, of Ethyl Gasoline Corpora- .

- tion Defendant Webb is'a citizen of tie State ‘of Connecti-

fendant Taylor is a citizen of the State-of New Jersey and ee :

— in the City of Montclair in that State.

oS a The purpose of this suit is to enjoin and réstrain de- .

'. fendants and each of them, from further ‘violations of the

‘Xet of Congress of J uly 2, 1m, known as the Sherman Anti:

trust Act. : ,

3.-The unlawful sibel conspiracy, and EIEN 3

hereinafter described has operated, “and has been carried

on in part within the Southern District of new York, we

. 1—536

7 caeainaisl in:

part within said-district. Seay | SEE

. continuously engaged in the production and sale of a sub-

oma ‘uniaw ful ‘acts pursuant thereto. Sem been er Te 3

efcndantg:and others in said district. The interstate «,

Toline hereinafter described i is carried, on in

4. Deferglant corporation has been for a number of years

stance. (hereinafter referred tovas ‘‘ethyl fluid’’) for use in.

inere&tsing the octane, or anti-knock, rating of motor fuel,

principally gasoline. Said ethyl fluid consists prince ipally |

of tetraethyl Jead, which said substance hasthe effect, When |

oo relatively minute quantity thereof i is mixed with ‘gasoline, a

nianner of sale of the greater part of all gasoline sold

_[fol!4] gasoline in automobile motors of ‘high ¢6 rpression. \

—- ® exclusive rights under certam letters

_ of said ethiyl fluid. No othe? substance of like character i Jis

. treated-with ethyl fluid. Approximatély 70% of all gasoline

control exercised by defendant corporation pe the mani-

of reducing or preventing, the ‘*kriocking”’ which % sometimes

‘takes place in the course of the éombustion ff ordinary

Defendant corporation is the sole aaegeg of efh yt fluid in.

the United States, being or claiming t e owner of .

igient of the United «-

States purporting to cove? the manufacture, use and sale

inqnufactured or sold.’ The use of improved refining proé- ie

esses, such as so-called ‘“‘eracking’”’ processes, to-raise fhe:

octane rating of gasoline sufficiently to, meet prevailing. X

competitive standards inv olves the acquisition of expensive

Pi oreccns apparatus and is so costly that said processes are

“not practically competitive with the use of ethyl fluid.

_ 5. Defendants do not manufacture, refine or sell any gaso-

Tos or mix. ethyl fluid with gasoline, and do not own any

“part of, or interest in, any of the gasoline which i is treated

with ethyl fluid. ; ae

6. More than 85% of all gasoline sold in the United States

which is processed’ so as fo obtain a high ocfane rating is -—

manufactured and sold in the, United States. is treated with

ethyl! fluid. ‘By reason of these facts, and by reason of the

facture and sale of ethyl fluid, said defendant possesses the

power, unless the activities hereinafter described are re-

strained, in effect, to control and.regulate the price and the

—— the United States.

-[fol. 5] 7. Gasoliné is manufactured from crude petroleunt

at folliertés located in various states“of the United States,

- priticipally the States of eine “Oktshobie, California,

Dk nois, Indiana, Missouri, New Jersey, Pénnsylvania, and

. NAW York. The greater part of all gasoline manufactured -

=> at such refineries; “ind the. greater ¢ art of- all gasoline,

rented with ethyl fluid, as afor esaid; i s sold and transported (ts

‘interstaté commerce from the® States in which such re-

‘ida are located into. each of the other States of the

United’ States, including the State 8f:New York and the

_ Southern District thereof, @herein such gasoline is’ sold

for + consign, Said gagfline is sold by the refining com- -

panies in*part through golesale and retail outlets owned .

-or controlled by them, afid i in ‘part to so-called jobbers for |

- resale.to retail dealers and consumers. :

8. Jobbers usually own and operate bulk storage plants . .

s peep ning a ‘ted so as -to serve such gasoline, by their

@ trucks or Lauk wagons, to retail service stations, either.

= ay OP ‘rated ‘by them, or independently owned or oper-

a ail dealers, in the various marketing territories

pens. f $ them... There are approximately 12,000 jobbers

. of gagsdline doing: business insthe several: States of the —

Unitéd States, who distribute a great part of all gasoline

sold and distributed in the United States. The greater part

of all gasoline, and of the gasoline treated with ‘ethyl fluid, -

as aforesaid, purchased by said jobbers is purchased by _

[fol. 6] them in tank car quantities, and is delivered to them —

from the States in which said gasoline is refined to the

— States i in which said*jobbers are engaged in business, anda

large part of such gasoline sold byjobbers is sold and dis-

tributed by them in intetstate commerce from the States in

' which their®said bulk storage plants are Tocated to service |

stations located in other States.

oe Defendants, each well knowing all the matters of fact ©

— hereinbefore alleged, have been’ engaged in an unlawful -

combination, conspiracy, monopoly, and attempt to monopo- ’

- lize, in. violation of.the Sherman Antitrust Act, whereby

said defendants have adopted and put intd effect. certain

licensing policies and practices hereinafter referred to, and

‘have attempted to control and. regulate, have in fact ¢on- :

- trolled and regulated, and have unlawfully restrained, the

manner of sale and the prices of the greater part of all

gasoline sold in interstate. commerce in the United States.

Defendants have, as “part of said unlawful activities go the

purposes and objectives thereof, conspired and comsbivied

with numerous rdfiners of gasoline throughout the United —

States as hereinafter more fully alleged. Said violations |

of law ure more fully’ described as follows : :

10." Defendant: corporation, antes, with and hivngh its

officers named as defendants herein and others of its officers

‘ind employees, ha# entered intn numeroyis agreements with |

-> refiners of gasoline pursuant to which ethyl fluid is seld ‘

_{fol. 7] outright by defendant compgration to said refiners

oy 3

ap.

ethyl fluid per gallon, or gne part of ethyl fluid to 4400 parts .

from time to time, ‘and said refiners are licensed té use said

ethyl fil: and to sell the same wheb mixed with gasoline.

Said license —— authorize said refiners —

to treat-the gasoline actured by them with sufficient

ethyt fluid (not-exceeding-3 cubic centimeters per gallon of

gasoline) ‘ ‘to produce a grade of gasoline having an octane |

rating of ‘not less than 76 (such gasoline being known as

premium or ‘‘ethyl’’ grade of gasoline), or # grade of gaso-

line having anoctane rating pot in excess of 70 (such gaso-

line being known as regular gasoline and sometimes reférred

to -by defendants As **Q”’ gasoline). Said license agree-

ments impose re a ietons ‘upon the refiner licensees with

respect to the pt

finer’ s best non- -premium gasoline,

11. An-average of approximately 85 enbis centimeters of.

of gasoline, is required fo produce regular gasoline. Usu-

ally the quantity of ethy] fluid requived to produce premium

gasoline i is approximately 2.25 cubi¢ centimeters per gallon.

me, gasoline, or one part of ethyl fluid fo.1700 parts of gaso- : |

[fol:8] line. Nea#ly all (more than 96%) of the asdline

treated with ethyl | flnid § is regular gasoline.

a UL The names of refiners who have meted ae said . -

: livense agreements are too numerous to set out herein, there

being approximately. 123 such refiner licensees, who.together

refine, sell and control more than 85% of all gasoline sold in -

"* the United States. Copies of typical forms of such refiner

license agreements employed by defendant corporation are

—— hereto and marked Exhibits.A, B, and @, respec-

ces at which the premium or Ethyl grade,

of —s may be sold. by them to jobbers, dealers and con--

“su * Saids license agreeménts impose the further re- f

: strittton as to regular gasoline that said regular gasoline es

shall be sold by the refirer as the next highest priced motor

‘fuel below the refiner’s Ethy) gasoline, and shall be the re-

> 4 . 2

i. 4 .

oes 2 PSNI Ha eae

, .

. ee

tively. All except one of-the major (i. e. large, integrated) -

* pefiners of_gasoiine in the United States have entered into

such Neense agreements: with.defendant corporation, and

. ull exeépt one of said major company licetisees treat with °.

ethyl fluid their regular or so-called house brands of gasv-

line, which constitute moré than 90% of all gasoline manu-

factured ‘and sold by each of said major ‘gotipany - license PS,

13. Each of said refiner license agreements contains the |

express prqvision, and defendant corporation and each of |

‘ the refiner licensees have agreed with cach other, Yhat the

latter will-seli gasoline treated with ethyl fluid only to thosé

jobbers who shall -have been licensed by defendant corpora-

‘tion to handle .such gasoline. Jobbers have been licensed

by defendant. corporation, acting with and through: its of-_ 8

ficers namedas defendants herein, and others of its officer’ ~

‘an: ~smployees, wider two forms of Ticenses, ene purporting

to ‘-ense the handling of premium or Ethyl and the other

of Report gasoline. ‘Copies of each. of -said forms of

[fol. 9]. licenses are attached -hereto and. marked: Exhibits .”

D and E, respeetively, Jobbers desiring to apply for. such

licenses are. required. to apply Wrough their. respective re-.

finers* suppliers, who, in turn, s ubmif such jobber applica-

tions to defendants. Very often the same jobbers have been Se

licensed under both -forms_ of . licenses. : ‘Approximately:

10,000 jobbers have. been granted. such licenses by defend-.

ants. Numerous applications for jobber licenses havé been |

_ dénied.” Apart from the issuance of such Jicénses to said

jobbers’ (through their respectiv e refiner suppliers, as afore-

_said) and the "investigation thereof hereinafter. described,

defendant corporation dees not have any business relations :

™ any of said jobbers. *° Se

° 14, “Said jobber: licensés- purport: to be aimed-atthe pro-

--teetion of health and the maintenance of quality of gasoline

treated with ethyl fluid. The additioygof ethyl fluid to gaso-. ©

line, however, does*not cause or proguce any dangers or

., hazards, to health, thé Ethyl and regular gasoline. being i in g

no respect more dangerous to health than ordinary. un-

» treated gasoline. No authentic cases of lead: ,0isoning, OT ,

: other.injury to health from sych lead.treated gasoline, have ©

-£ ever been discovered. . Also, d&endants have not employ ed

ee ° or requiréd ‘the use of any trade name or trade-mark in con-

_ nection with regular: gasoline; and have established no frade

' reputation in. conne¢tion with such ganoline, No mil imum.

, 6

a '

octane requirement is specified. by the defendants with re-

[fol. 10] spect. to such gasoline and ‘the maintenance’ of |.

. quality thereof is not, actually or in practices a factor in

defgndante’ licensing policy.

15. Defendants have eniploy ed said jobber licensés, and -

their power to grant or withhold the. same, so as to require

*- and compel jobbers purchasing outright any gasoline treated

_ with ethyl fluid.to maintain. so-ca}led‘*business. ethies’’,

a term employ ed by defendants to denote compliance with

approved marketing policies of of the major oil. companies,

- or the inarket leaders ‘among such major oil compunies, .

and particularly the maintenance by jobbers, arid retail

dealers who in turn purchase such gasoline outright from

, jobbers, of the retail prices for gasoline posted by. said .

~ major oil companies or market leaders. Defendants have -

reftised to grant licenses to a large number of jobbers who

do not ‘abide by said- approved. marketing policies -or do

not maintain said major oil company -prices, and they have

required and compelled. jobber licensees, under: threat, or’

apparent threat of revocation of said licenses or refusal

_ to renew said licenses, to maintain, and to see to it that

their retail dealer oufléts maintain, said approved market-

ing methods’ and practices and prices: of. ‘said major oil

* eompanies or market leaders. Each, jobber license contains —

a provision whereby defendant corporation is authorized |,

to cancel said: license, without stating-any reasons therefor,

at any time upon thirty days’ notice.

16. In order to effectuate ‘said clidien and said céutrol

and restrictions upon-jobbers and their retail dealers, de- *

fol. 11] fendants have organized and maintained an @X-

tensive system of invéstigation.of the practices and prices:

maintained by jobbers in, their retail outlets‘or those main-

tained. by the retail dealers to whom they sell. Ostensibly

such investigations, whether of Jobber licenses or Of ap-.

plicants for jobber licenses, have been made for. the purpose _

of protecting the quality of gasoline treated with ethyl

fluid or of discov ering possible health hazards. in the sale’ -

of.such gasoline, but in fact the primary prrpose. of said

investigations, and -the only substantial purpose theredf,

has been as aforesaid, to effectuate the unlawfui control. Ce

and restrictions upon, said jobbers and their retail dealers -

above described.’ ‘By reason thereof, regular investigators,

or field representatives, in the’employ of defendant .eqrpo-

. .

acs . rer py

a a i Oe ls

Sas a Peay

ne ee, a ee ae ee ee wed

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‘ .

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“ration eine been instructed not to report ‘their findings in

wri tiie, and the purposes and results of ‘said investigations

reserved disclosing the aforesaid true réasons, er any

reasons, why’ licenses to jobbers have been refused. « Said’ -

invéstigators or field representatives are many in-n goer,

- are located throughout the United States, and exereis¢ , fide.

discretion and anthority in determining the granting sor:

refusal of jobber licenses ; usually the mere decision’ of Ahe -—

field investigator as to the applicant’ s ‘*businéss éthies”’,

without. supporting data, has determined. whether a Tied ese

would be granted. "

e 4

[fol. 12] 17: “‘Rediiers. iment. as : well as jobbers, know

’ and understand that jobber licensees, and their dealers, are

required to maintain prices as aforesaid and to abide by-

the marketing practices and- methods of the major oil com-

panies as’ aforesaid, and. jobber licensees generally have

_ accordingly conformed to these requirements.

18. As part ‘of said unlawful policies, “@efendauta have

from time to time required that each jobber licensee con-. .

tract to purchase all his requirements of .gasoline from

one refiner supplier. Similarly defendants have employgd

_ the power inherent in:said’ jobber. licensing system to en-

‘force supply contracts of jobbers with refiners, and they

have refused to license jobbers who desired to change their

. sources of supply, upon the ground that said jobbers were

-under contract to purchase from.their existing refiner stip-

contracts had been

- pliers, even where pe a jobbers have’ contended that such ‘

ogated,. or for other reasons: were

~ not. eriforceable against them.

19. Defendants’. policies and practices with reaps to

jobbers -have abused, and gone beyond, the scope of, any

patent rights defchdants may own or control, and have con-

+ stituted an unlawful exercise of futureeontrol, over what %

irchasers may wish to do with gasoline which they have

chased outright for full sconsideration. Acting in eon,

noe “and in combination - with sa ul refiner licensees, as

aforesaid, .defendants have emplo said jobber licenses

almost exchisively for the employes ‘ and. with the effect,

- [fol. 13] of-:controlling and reguiafing the marketing :

of gasoline throughout the United States, and theyi lave

* been concealed. ~ Usually no records’ have been made |

attempted to eontrol, and.have, in fact, controlled and regu- sid

« | i

ei yi t NE sty S ; .

«i

‘@his Court. © | pairs

the marketing policies of, and prices charged for gaso-—

line t retail bys jobbers and their dealers. The aforemen- .

. those iting. and selecting thexjobbers ‘to whom said . re-

finers my. sell gasoline treated with ethyl fluid, have not

been no#mally and reasonably adapted,to secure. pecuniary .

reward“to which defendants may be justly entitled by

reason of any patent rights. Defendants have thereby sub-_

stantially monopolized ane restrained trade among refiners, *

jobbers and dealers in the sale of gasoline in interstate com-

merce as aforesaid, all in xdolation ¢ of the Act ef Congress

' of July 2, 1890. >

20. Defendants are now engaged in said Tntawful acts

and practices and threaten to and -will ¢éntinue to engage

in said unlawéul acts and practices unless enjoined by

W herefore petitioner prays:

1. That.writs of subpoena issue ‘directed to ‘acti of énid

defendants, commanding them to appear herein and answer.

. the. allegations contained in this petition, and to abide by

and. ‘perform such decrees as the Court may make in the

__ premises ; 2 gy Nee

That the ‘monapaty, ‘combination and. conspiracy de-

sicthed: herein be declared illegal and in violation of the

Sherman Antitrust. Act;

3. Tit defendants and each of them, and cach and all

[fol. 14] of their respective ‘officers, agents: and employees,

, and all persons acting or claiming to act.on behalf of them,

or any of them, be perpetually. enjoined from continuing

‘the unlawful practices hereinabove described and, particu-

larly, from requiring jobbers to procure Jicenses for han-

dling ¢ gasoline treated with ethyl fluid; and from agreeing

with refiners,. ‘carrying out existing agreements, or other-

wise requiring, “that the latter shall sell gasoline treated

with ethyl fluid to such jobbers only as defer@lants, shall

license or otherwise designate; and from i in any otner way,

“directly or indirectly, cBntinuing to engage ‘in che afore- °

svid monopoly, combination and conspiracy for any other

monopoly, combination and conspiracy of like’ character

os effect; -

yore sei anh eal >

ae 48] \ Unirep Seades District Coury,

mf Petition herein say:

oath ht My

te ee

4. That petitioner have such other and further relief

as the case may require and’ the Court may deem proper

in- the premises ;

8. That. petitioner recovel its costs. »

: John Henry Lewin, Hammond FE. Chaffetz, W. Bz

- . Watson Sny der, Grant W. Kelleher, Special Assist-

ants to the Attorney General. Stanley Reed, Act- 7

ing Attorney Generdl, Feb’y 16,1937. Robert. H.

.- Jackson, Assistan iecraar “General. _ Lamar

(3 0 Hardy, United Ste tes Attorney. ,

—

[igls. 15-47] ‘Duly sworn to by John Henry Le win. -Jurat—

omitted in printing. .

obey

-: [Title omitted] “

ANSWER

e W. Webb (incogr ectly designated herein as Earle C.

ebb), ‘and: John Coard Taylor, and for answer. to the

a They -admit the allegations of paragraph 1 of the

Petition. *

2. For answer to the allegations of paragraph 2 of the

Petition, they admit that the purpose of this,suit is for

rélief under the Met of Congress of July 2, 1890, known —

as the Sherman ‘Anti-Trust Agt, but deny thatsthey or any .

of them: have in any way violated said Act.

3. They deny the allegations of paragraph 3 of the ae |

tion except. that they admit that the ‘interstate commerce

in gasoline described in the Petition is carried on in part

within the, Southern District of New York.

; ‘4. For eye the iateitions of parniraph 4.of the:

Petition, they admit that, for a ntmber of years the. de-

fendant corporation: has Keen continuously ergaged in the

production of an anti-knock compound (ar fluid): known by

_ its licensees as Ethyl fluid when used in’ making a pre- ,

mium gasoline, and ‘as ‘‘Q’’ fluid when used in. making a |

asad gasolines f and they admit the allegations. of said

“s

. *

‘ . ¥

, ‘

‘

Jow come - the defendants, Ethy] Gasoline Corporation,

> Ethyl and «Q"" finids have been added, and that the gaso-

te ee ae

paragraph: 4 with respect to the nature of said fluids. They

.{fol. 49] admit that deféndant corporation.is the sole pro-

ducer of said Ethyl] and “‘Q” fluids within the United States

and that it is the owner of exclusive rights/under Letters

Patent of the U nited States. covering’ the manufacture, use .

and sale of said fluids and allege that it is also the owner

of exclusive rights under Letters Patent of the United States: -

covering the manufacture, use and sale of motor fuels con-

taining tetraethy] lead and cov ering the use ‘of tefraethy]

lead*as an anti-knock in‘an internal combustion engine.

Defendants are without information sufficient to constitute

a belief as to whether or-not other substances of like char-

acter are manufactured or. sold and therefore defendants

deny that no other substane ‘e of Hike character is manufae-

fured-er sold but they admit that no other substance of

like character is sold in commercial volume. Def fendants

admit that“speaking generally Ethyl and ‘*Q’’ fluids’ haye

heen. found to be the. cheapest way of getting certain high

auti-knock values, but they deity the allegations 0! para-

graph 4 of said Petition with respect to the practicability

of improved refining processes, such as sovcalled ‘‘eracking’’

processes, and allege that there are many instances where.

by reason of the quality of the eurde petroleum to be re-

fined and the-nature of the distribution ef petroleum prod-

uckesby a refiner, ‘‘eracking’’, re-forming, and other re-.-

fining processes have been and jre now being employed

to produce a high octane rating gasoline competitive with

the addition ef Ethyl ‘ind “<Q” fluids-to gasoline, and they

further allege that a Very substantial amount of gasoline. -

to which no- Ethyl or Byer fluids have been added is sold—

in the United States in competition with gasoline to which

“Jine so‘sold is produced by either cracking, reforming, or

“@

other refining processes; or by the addition of, other com-_

pounds. : _

As tozparagraph 5 of the Petition, defendants admit

the. allegations of said paragraph as to the defendants Earle

W..Webb and John Coard Taylor, and admit that the de-

fendant corporation does‘ ‘not manufacture, refine or sell

any gascline, and that ofily in exceptional circumstances

does It “mix Ethyl or “*Q’’ fluids with gasoline, but upon

(fol. 50] information and belief defendarfts deny each and

every other allegation of said paragraph.

- o wT

‘ . Qs

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“et

. s

. .

° . * et , .

6. For answer to the allegations of paragraph 6 of the

Petition, they admit that more than 85% of ali gasoline sold

. inthe United States which is processed so as to obtain a

high octane rating is treated with Ethyl and ‘‘Q’’ fluids,

and that approximately 70% of all gasoline manufactured

and sold in the United States is treated with the Same fluids.

Defendants ‘are without information sufficient to form a-

belief as to. each and every. other allegation of said para- :

graph 6,/and therefore deny the’same.

cH “. “eee

7. They admit the allegations of paragraph 7 of th. Peti-

tion except they they Allege that gasoline is also sold. by. -

refining: companies to independent retail dealers and to

consumers. . eee ei 7.

8. They admit the aHegations of paragraph 8 of the Peti-

tian except that they deny that a large part of the gasoline

sold by jobbers is sold and distributed by such jobbers in

interstate commerce, and allege the fact to be that, only a

comparatively small number of jobbers sell any gasoline in

_ interstate commerce and that only a compagatively small

portion of the sales: of gasoline by jobbers is in interstate

commerce. Br Oe as

9. They deny each and every-allegation of paragraph 9

of the Petition. « .

10. For answer to the allegations of paragraph 10 of the ©

Petition, they-admit that the defendant corporation has-en-

tered into numerous aggreements with refiners of gasoline

pursuant to which Ethyl and ‘‘Q’’ fluids are delivered by

the defendant corporation to said refiners from time to time -

and:said refiners are licensed to manufacture Ethyl gaso-

line and: gasoline containing:.‘‘Q’* Brand of Anti-Knock |||

Compound, and to sell .and deliver same, and that .said li-

cense agreements purport to authorize said refiners to treat

gasoline manufactured by them with at least sufficient Ethyl!

fluid (not exceeding 3 cubic centimeters.of tetraethyl lead

‘per gallon of gasoline) to make the gasoline equal in anti-

knock value to the*standard Ethyl gasoline as fixed by the

[fol. 51] defendant corporation, which standard now consti-.

tutes an octane rating of not less than 76 (the gasoline so .

treated being known as Ethy!] gasoline), or with an amaunt

of *‘Q’’ fluid to make the resultant product manufactured

under the agreement have‘at the time of sale to the con-:

° ‘~~

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P ewe Ore,

fo .

a ae é

‘ sumeér,an ‘Anti-knock value. of not more than seventy £70)

octane number (such gasoline being ‘known as regular gas-

oline and sometimes referred to by defendants, refiners and

jobbers as *Q& vx: asoline). The. defendants admit that the

said license agreements impose restrictions upon the refiner

licensees with respect to the comparative price at which .

Ethyl gasoline may be sold by.them to jobbers, dealers and

consumers, and the restriction that said ‘‘Q’’-treated gas-

otine shall be sold by the refiner as the next. highest priced

motor fuel below refiner’s Ethyl gasoline and shall be the

refinet’s best’ non-premium gasoline referred to in the

—agreement between refiner and defendant corporation in re-

spect to the manufacture and sale of Ethyl gasoline. How-

ever, defendants allege that. the. agreements which the de- .

‘fendant corporativa has entered into with refiners as, afore-

said with respeet to price at which the fesultant product

may be sold are license agreements of the genera] character

annexed te the Petition as Exhibits A, B and Cand. that:

the authority and restriction of. such Vicelise agreements are

a Sy expressed, and the defendants allege that all de-

liveries of Ethyl and ‘Q” fluids to refiners are subsequent

to the making of such a license agreement and in conformity

with the provisions thereof. Defendants deny , each. and

- every other allegation of said paragraph 10 of the Petition. a”

. For answer to the allegations of paragraph 1 of the

puntitie defendants aver that there is-an average of ap-

_' proximately 0.85 cubic centimeters of tetraethyl lead in

““(*" duid (not-fluid itself) per gallon of gasoline treated

to produce regular or ‘*Q’’-treated gasoline, and that there

Js an average’ of approximately 2.25° cubic centimeters of

tetraethy] lead in Ethyl fluid (not fluid itself) per gallon

ofsgasoline treated to produce premium or Ethyl gasoline,

and that approximately 94% of the gasoline treated with

tetreethyl lead is regular: or “Q”’-treated gasoline ; “and

[fol. 52] except as herein expressly admitted or averred,

defendants deny each and every allegation of said para-

graph 11. <i -

—42—Fhev admit the allegations of paragraph 12 of the °

Petition, exe ept that they deny upon information and belief,

that all but one of said major company licensees treat with.

Ethy! fluid their-regular or so-called house brands of gas-

oline, and that such gasoline constitutes more than 90% of 4

> ms é j

‘ ° Was" i

- all gasoline manufactured: and ‘sold by each of said major

cémpany licensees; and they allege that the fluid so tsed |

is ~— fluid and that such gasoline constitutes between

80% and 90% of all gasoline manufactured and sold by each

of said | major company licensees, . ,

" 13. They deny ‘each and .every allegation of paragraph ——-—

13_ex¢ept ‘that_they- admiit-that tach of said refiner license .

agreements contains the provision as te sales to jobbers, - |

that the refiner licensee will sell gasoline when tre ted with

Ethyl or ‘*Q’* fluids to only those jobbers. who.hold a license |

from the defendant cor poration to sell such gasoline, and

‘they admit the making of. jobber agreements in the form

of Exhibits D and E attached to the Petition.. Defendants,

further admit that jobbers: desiring to apply for -such- li-

censes are generally réquired to.apply through their pres-

pective refiner suppliers who in turn submit such jobber

applications. to defendant corporation, and th&t often the -

- same jobbers have been licensed under both forms of li-

cense. Defendants further admit that approximately ten

thousand (10,000) jobbers have been granted such licenses

by the defendant corporation and that numerous applica-

- tions for jobber licenses.have been denied. Defendants aver

that the principal business relation of the defendant corpo-

ration with jobbers is in the promotion of sales: of Ethyl] .

and ‘*Q’’-treated gasoline ‘and the protection of the gyuality

thereof and the food will of the defendant corporation

therein, and the maintenance of health regulations herein-

after mentioned. mn a 3

14. For answer to the allegations of paragraph 14 bof Neate

Petition, they admit that said jobber licenses are aimed at

(fol? 53] the protection of ‘health: and the maintenance. of

quality of gasoline treated with Ethyl and ‘‘Q”’ fluids, and

that to the knowledge of these defendants, no authentic

_ , cases of lead poisoning-“er.other injury to health from such.

lef treatpd’ gasoline, havé ever aor discovered, and that

i ovtane number is required by defendants in

respect to,regular gasoline containing ‘£Q’’ fluid, ‘and they

', allege that the United States Public Health Service has pre-

scribed certain regulations covering the blenditig of Ethy!

and ‘*Q’’ fluids with gasoline and the sale and use of gas-

” oline treated” with such fluids and that, the defendant cor-

' poration has endeavored by its jobber licenses’ to comply .

‘with such reg@lations and takes steps to see that its jobber

_ eee . | Pecos

licensees observe such regulations and that in so doing

defendéats are conforming to the wishes of the United

States Public Health Service and that.suchk performance on

the part of the defefdants is essential. to the maintenance

_—of tke good will of the defendant corporation with the

United’ States Public Health Service, with the licenseés of

defendant - corporation, and with. the public. ’ Defendarts

admit that in the opinion 6f executives. of the defendant cor-

“4 poration, the addition of Ethyl fluid or *‘Q’’ fluid.to gas-

“dline does not. cause or produce any dangérs or hazards to

_ health and is no more dangerous to health than ordinary

“ untreated gasoline provided that -said gasoline is used for

* the purpose for which it is deSigned to be used, ‘amely, as

a motor fuel only, and that it does not contain a, m amount

‘of tetraethyl lead which is in excess of that prescribed by

“the regulations of. the United States Public Health Service,

ana the aforesaid licenses. Defendants allege that the anti-

ck compound intended for use in the production of said

regular gasoline referred to in paragraph 14 of the Petition

is delivered by the defendant corporation to refiners as “Q”’ |

fluid and as-such is well Known iat the oil business, and that

gasoline produced by the addition of ‘‘Q”* fluid is sold by

refiners to their jobbers and other customers and upon in-

‘formation and belief is known and referred: to by a large

-number of refiners, jobber rs and retailers as ‘‘Q”’ gasoline.’

Defendants allege that in the sale of said regular or ‘*Q”’

" treated gasoline the defendant corporation has. required the

[fol 54] jobber to.specify the trade name said jobber will”

use in connection With the sale of ‘‘Q’’ treated gasoline as:

appears from paragraph 4 of the form of jobber license

agreement attached to the Petition as Exhibit FE. -Defend-

ats further allege that by reason of said regulations of the

United States Public Health Service said regular or ‘*Q”’ |

treated gasoline i is required to be dispensed at pumps bear-

ing lead wa rning signs of the prescribed form substantially

as set forth in Exhibit. E of said Petition ; that ‘upon in

formation and belief said- warning signs have acqyired a.

meaning with a large number of the public purchasin

motor fuels as indicating a grade of gasoline of good quate

‘ity. and such ‘‘Q’’ treated gasoline .is understood in the

mind of a substantial percentage of the purchasing public —

to be related e" ithyl Gasoline and to be sponsored by the

defendant corpération. Defendants allege that substan-

tially all of such ‘‘Q”’ treated gasoline is between 68 and”

- a : 5

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‘ A, aeskally _—

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pee 15

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70 octane and that the defendant corporation has specified |

in its .refiner’s license-contracts for the production of so-

called *Q” gasoling certain requirements as to the distilla-

tion, sulphur, corrosion and gum qualities of said gasoline

as more fully appears in paragraph 5 of Exhibit A attached

to said Petition, and that the jobber license contracts sath

as Exhibit E of the Petition provide that jobbers Shall not

-adulterage-or modify ‘‘Q’? treated. gasoline as sold by the

refiner; all for the purpose of maintaining the reputation:

and good will of the defendant corporation. Except as

mete expressly admitted, defendants deny each and every

al ation in said paragraph 44 of the Petition.

paragrap

15. Defendants deay each and. every allegation of para-

graph 15 of the Petition except that they admit.they have |

_refused to grant licenses to a number of. jobbers who were .

not abiding by the marketing policies of the major oil com-

. panies or the market leaders’ among-snch major oil com-

panies or who were: not: maintaining: the: retail prices for

gasoline posted by “said major oil companies-or market:

leaders. Defendants are informed and believe that. if there

are or have ‘been any instances’ of threats or apparent

threats as described in paragraph 15° of the Petition, they

(fol. 55] are isolated instances and unauthorized by defend-

ants. They allege.on information and belief that there are

innumerable instances where jobber: licensegs have not: fol-

“lowed the marketing policies of the major oil companies or

the market leaders among such major oil companies and

innumerable-instances of jobber licensees who do not main-

ain and have not maintained the retail prices for gasoline

posted by said major oil companies or market leaders, con-

cerning ‘Which instances no action of any character has ever

‘been taken by the defendants. Defendants admit-that: each

jobber license contains a provision whereby defendant cor-

pordtion is author ized to cancel said lieense without stating

any. reasons therefor at any time upon thirty (30) days’

notice, Bet they are informed -and believe artd therefore

allege. that such cancellation Clause has not béen exercised

Bem >

. *

because a jobber licensee was not following the policies vas)

prices of the major oil companies. or market leaders.

16. They deny each and every ‘allegation of paragraph

16‘of said Petition except that they admit that the defend-

ant cérpération has a number. of field representatives whose

eee. function is to promote the sale of: gasoline treated-

t > 4"

ee eee —

i. ; 407;

. t. . '

: a

~ with Kgbyl and “<Q? uids and also to see to it. that health |

at are being observed and to protect and promote a

the goég will of defendant corporation, and that,said field =

representatives s do’ investigate and report to the defendant ‘

corporation many conditions in respect to. the marketing of }

gasoline, including information sometimes as to the market- _.

ing practices and prices observed by jobbers in their retail -

outlets and by the retail dealers to whom they sell,,and de-

fendants allege that said field representatives, as a part of

_ gaid investigations and reports, obtain samples of gasoline

treated with. Ethyl and ‘‘Q”’ fluids ‘for the purpose of its

being analyzed as ‘to quality and as to its compliance with.

the regulations of the United’ States Public Health Service

_dnd the-license. agreements aforesaid. Defendants admit »

that in some instances no records hay e been made of pre-.

served disclosing the reason why licenses to jobbers have ©

been refused, and defendants adniit that said. field. repre-

sentatives are located throughout the United. States, and ©

that the report and recommendation of the field soaggrenoirk WE

tive determines largely whether a license will be granted, ‘

[fol. 56] and that the recommendations of the field igre

sentatives as to whether a license should be: granted are’

generally: followed. Vey: =

_ 17. Upon information and belief . hy each s

every allegation of paragraph 17 of the Petition.

18. They deny each and every allegation of paragraph 18

of the Petition except: that they. admit that the defendant

corporation has from time to time required that each job-

ber licensee contract to purchase all his requirements of

Ethyl Gasoline from one refiner supplier; and it has re-

quired i in a number of instances a: jobber licensee to pur-

chase-all his requirements of “Q” treated gasoline from

a single refiner supplier. They also admit that the defend-

‘ant corporation has in some cases refused a license to a

jobber who desired to change his source of suphly upon

the ground that said jobber was under contract to purchase

his’ Ethyl or ‘*‘Q’’—treated gasolines from an existing re-

finer supplier, which request, if granted, would in the opin-«

ion of the defendant corporation have breached the con-

tract which the jobber licensee had with his existing, source

-of supply,-although in a very few cases a jobber has con-

tended that such .contract had already,been abrogated or

for other reasons was not enforceable against him.

ante =

ohn” a

; ; Foor: ’

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. . °

; ° : . . . y ps 17

19: They dug pore and every y allegation of paragraph

19 of the Petition. _—_-

20. They deny each and, every allegation of paragraph

20 of the Petition.

21. Defendants further allege that the defendant corpo-

-. ration is the owner of valuable trade-mark rights covering ~

the manufacture and distribution of Ethyl and “Q” anti-

_knock compounds (herein referred to as-Ethyl and ‘‘Q”’

fluids) ‘arid covering the sale of Ethyl gasoline and gaso-

lines containing’ ‘‘Q’’ fluid and tetraethys lead; that “de-

‘fendant corporation has expended a ‘large ‘sum ‘of money ©

and: labor in developing and promoting the said trade-

_ mark rights, the good will, reputation and business ,of the — ».

- [fols. 57-60] defendant corporation ; and that the licensing ss

policies of defendant corporation are reasonable and neces-

sary for the protection of said trade-mark rights, the good

will, ——— and business of the defendant corporation. —

22. Defendants therefore deny that Potitioné? is entitled

to the relief prayed for_i ‘etition or to any part

thereof, or te-any. relief whatsoever against these defend-

8 or any of. them, and. defendants aver that Petitioner is , .

without equity in’ “the premises, and defendants therefore

pray that the Petition be dismissed.

Note. ~ Tefeadante heioe heretofore trasieaathie’ to Peti-

tioner a request for further particulars of Petitioner’s said

Petition, and this answer is filed pursuant to an tnderstand-

‘ing and agteement with Petitioner that it may be filed with- |

out prejudice to defendants’ right to move heréafter for

- further parti¢ulars in accordance with such request.

Ethyl Gasoline Corporation, Earle W. Webb and

John Coard Taylor} by (signed) Cooper, Kerr &

‘Dunham, Their Solicitors.

(Sigyed) Drury W. Cooper. Harold W. Norman. "Robert:

S. Dunham, of Counsel. ai " .

% >

Duly sworn to. by Earle W. Webb ond. John 0. Pais:

Jurats omitted in printing. : -

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ee agin

‘fol, 61] ib Ix Unitep States District Caprt -

f Boers (Title omitted] aimee ae ee

z hiiners sini OF Facts —

Plains? having filed its petition herein. and defendants.

having filed their answer, it is hereby stipulate and agreed ,

that the i isguies raised by,said pleadings shall be determined:

withowt the introductiéggpf other evidence on the basis of .-

_ the following statement of fact®, agreed to solely for the,

‘poses of this suit, subject to objections by either side

~on the ground of. relevancy or materiality, the right “to in-

terpose such objections being expressly reserved: ,

1. Defendant Ethyl! Gasoline Corporation is a corpora- —

. tion organized in 1924 under the laws of of the State of

Delaware, and _has_a principal place of business at 135

half of its capital stock is owned by the Staridard Oil Com-,

[fol. 62] pany (New Jersey), and ‘the remainder is owned

by General Motors setae and E. I. du Pont de Ne-

Coard Taylor are President and Vice-President in charge

of sales, respectively, of Ethy] Gasoline Cor poration. De-

fendant Webi is a citizen of the State of ¢ ‘onnecticut, and

resides in. the town of Greenwich in that’ State. Defendatit

“Taylor is a. citizer of the State of New Jersey —_ resides

in the town of Montelair in that State. a

2. Defendant corporation has been for a numbex of years

continuously engaged in the production and sale of an anti-

knock compound. or fluid’ (hereinafter referred to as

‘*fluid?”), consisfing principally of ttrac Du used in

increasing theeetane, or ‘anti- -knock, rating motor fuel,

| principally gasoline. When a mixture.of gasoline and air

pression, ‘knocking’ oecurs at frequent intervals, _ This

‘*knocking”’ is reduced or’eliminated if the mixture of gaso-

line-and air is burned in the presence of the vapors of this

Fast 42nd Street, in the g¥ty and State of New York. One-

- mourg Company. Defendants Earle W. Webb and John |

‘is burned in an automobile engine. of relatively high conf- -

fluid.. Comniercially this result has heey obtained by mix- ,

‘ing with gasoline, af the refineries, gelatively minute quanti-

ties of fluid so that the fluid will be in the combustion cham-

- ber of the automobile engine when the gasoline is burned.

Automobiie engines of recent years have generally been of

relativ ely high compression.

. fe

By ae ® .

The compression of an automobile efigine is the: extent to :

which the mixture of gasoline vapor and air is compressed

in ‘the cylinder by the piston moving upward. | The higher

the compression of an automobile. engine the: greater is its

inherent efficiency, i. e., it will develap more power and run:

t giver quantity of gasoline, hence. .

[fol. 63]- longer with

— i . a ." . : Set . 19

it may .be ‘smaller in’ size an& still suitable for a certain °

task. However, in order -to reajize these advantages the

gasoline used must be of a correspondingly high compres.

sion value (high ‘‘critica] coinpression pressure’’, i.-e., high

anti-knock value) ; : otherwise, ‘‘knocking’’ with a loss of

. power, instead™of an increase, will occur whenever, as is

frequent -i in normal driving, the automobile engine is called

- upon to do more than_a smal! amount of work. Generally*

stated, the ocfane nuniber of gasoline is a rating,.on a con-:

venjent arbitrary® scale, of its critical compression pres-

‘sure—that is, the: compression to which a_ ‘mixture of the

gasoline and air: may be subjected without ° causing a’

_% knock?” and consequent loss of power, in.an automobile |

engine. Engines of high compression may be made, by re-: °

tarding of the spark, to operate without knock on.fuels of

lower gritical compression pressure than those of higher

octane’rating, but this results in a reduction in both power

~ and economy, thus defeating the purpose for which the high

compression feature of: the engine was designed. | ee

‘The present composition of fluid, for use in automobile

gasolines, is as follows, jn percentages by weight :\

_ Tetraethyl Jead ..... a BO 63.3

’ Ethylene dibromide ..'. 20.0. ,..... 25.75

Ethylene dichloride ..... Rieweeepeeoms: > i

Kerosene, | 2 a re pepe

3, Defendant . corporation. is’ the sole producer of fluid

. in the United States, and is the owner of Letters Patent .

of the ‘United States: No. 1,573,846, issued February 23,

*[fol. 64] 1926; No. 1,592,954, issued July 20, 1926; No. 1,668,-

. 022, issued May 1, 1928 and No. 1,787 419, issued December’ ‘

_ 30, 1930, copies of which are attached hereto as Exhibits

ey 8-B, 3-C and 3-D respectively.” -

“Patent No. 1,573,846 (Exhibit 3-A): Seecvibes and claims |

an improved nrotor fuel: which is more efficient. atid, higher.

in anti-knock ‘value ‘than ‘the » gasoline from which: it is

made, The patent claims a produét, comprising gasoline

, and, an anti-knock ingredient, ec.. g., tetracthy} lead » and |

—

_. of gasoline and air

’ 20 ¢ ; { ‘ G

gasolipt treated with fluid (both Ethyl and ‘‘regular’’), as

descrybed in this stipulation, i is a product which is claimed —

in-each of the. claims of the patent.. Patent ‘No. 1,592,954

(Exhibit 3-B.) deseribes and claims compositions of matter

relating to motor fuels, whereby a halide compound, ‘such *

asa chloride or.a bromide, or a contpound of like properties,

. is included with a.lead anti-knock ingredient so, that when

aes the fuel is burned, the lead will. form only -a’‘ ngh-fluxing

compound and deleterious. effects of lead on. ¥: plug

-points and other motor parts, possile- éver. a period of

time, will be avoided: - As described iti this stipulation, fluid

is a, product. which is claimed in claims 9 and. 10 of this

patent, and. ge: gasoline treated) with fluid (both Ethyl and

regular’) is“a prdduct whick.is claimed-in ¢laims’t to 7, ° -

inclusive. Patent No. 1,668,022 (Exhibit 3-C) describes and”

claims compositions of matter : relating to motor fuels,

wherein one feature’ involves the use of- volatile bromide

eompotinds sueh as ethyleng dibromide, as specifiéally ad-

vantagebus substances for pieventing Phe formation of flux-:

ing compounds and consequekt deleterious effects on motor

parts, When a lead anti-knock ingredient is-used. As de-

scribed in this stipulation, fly “4 a product which is claimed »

[fol. 65]. in claims 21, 22 gid 23 of thiis patent, and: ge’

line treated with fluid (b rth Ethyl and ‘‘regular’’) is a

product which is claimed in Mims 9, 10, 1Yand 12. * Patent.

No, 1,787,419 (Exhibit 3-D) deseribes dnd claims: an, im-

proved method for ‘using fhotpr fuels, such as gasoline,

whereby improyed efficiency and an inhibition of Rnocking

are “obtained ; and whereby low: ‘compression gasoline may

bused in motors of relatively high. compression. pressure.

The claims of ,this patent claim they burning, in’ a. motor

of retytively high col ‘igre of the combustible mixture

t.2., the mixture produced in the @ir-

buretor of a motor) in ‘ain presence of vapors of an’ anti-

knock ingredient, e. g., tetraethy! lead. The present com- ..

mercial method of introducing tetraethyl lead into the com- |

bustion chamber of the motor-is by mixing it with gaso-

line at the refinery socthat when the mixture of gasotine and .

. air enters the ‘combustion chamber. the’ vepors from ie-

traethyl lead are present at the Same time: This result was

“at one time accomplished | by mixing fluid’ with gasoline at

_the filling. station pumps ; direct injection of fiuid into the

intake manifold’ of the engine has been used/to a limited

' extent by one of the airways.

PF" tn ‘ i

_ 4. No other sabat cts of like. disitnchet 3 is manufactured .

-or sold commercialy.~To. explain’ the position of fluid: in

e the petroletm industry it is necessary to describe briefly

the manufacture of gasoline. Speaking generally, gasoline

is preduced by all.or some of the following processes :-— -

(1) The crude Oil is distilled,and the distiHate boiling Within.

the range of gasoline is separated f ra the higher and lower -

boiling constituents. Such gasoline is known as ‘‘straight”

[fol. 66] run’’-or ‘‘virgin’’ gasoline or naphtha. (2) All

or some portions of the products of higher boiling range’

than gasoline are subjected to high teiiperatures and _

(usually) high pressures, and undér ihese, conditions are

_ partially converted into préduets boiling in the gasoline”

range. This process, W hich may be carried out under widely” A

varying conditions, i is known as ‘‘eracking,’’ and-the gaso-

line so’ ‘produced is known as ‘‘eracked gasoline. ” .In.the’

United States at-present the amounts of stra it run and

tracked gasoline produced are abot 7 equal. (3). Gasoline

is produced by compressing natural gas (thus condensing

out some of the gasoline yapors usually contained therein)

or by scpubbing natural gas with oil, (thus ‘absorbing some,

of" the gasoline vapors). “Gasoline produced by such pro-

cesses is, known as ‘‘natural gasoline’? or “absorption

gusoline,’’ and is génerally a very volatile pane (4).

Straight run gasoline or naphtha may be modifiéd in i

ical eomposition by subjecting it to heat anppressure u

conditions similar to those of cracking. Such a proves s ‘ne

known as <‘reforming,”? and the product eis called ‘4re-:

_ formed gasoline.’’ (5 Gases formed in the refining, pro-

cesses and natural gas max be subjected to treatment which

results in chemical reattions :gWwhich form gasoline from

“these gases.; Such a process - -is known as polymerization

and the produet is known as ‘‘ polymerized gasoline.”

Each of these five types of gasoline has its own ape a

arid physical properties, and the’refiner usually blends them |

‘or some of them into one or more commercial grades, de-

_. pendjng upon his own marketing set up. Straight run gaso-

line has an antitknock value which depends on the nature

of the: crude oil from: which it was fhade. This may he

-[f6l.67] quite high in the case of a limited’number of crud¢

oils (70 octane number or better) atid as low as 30 octane

., number in a limited number of other cases, but the range of

anti-knock values of straight run gasolines ‘distilled fron™

the greater part of crude oil produced i in the United Statées

“4 ?

1 cr"

‘

is from forty to’sixty octane number. The anti-knock value

of cracked gasoline depends both upon the nature of the

crude oi! an \ the nature of the cracking process, but mainly

on the latter? It is usually higher than that of the straight

run gasoline from the same crude and may range as high

as 70 octane number atid sometimes ‘as high as 72 or 73

octan™number, but usually does hot exceed 68 or 69 octane

number.’ The anti- knock value. of reformed gasoline is al-

ways higher than that of the straight run gasolige and may-

%* made’ very high. However, it is usually tue that: the

higher the anti-knock value obtained, the greater the losses

in the form of gas and coke. Natural or absorption gasdline

(the quantity of which is limited by the amount. of natural —

' gas available) varies:in anti-knock value with, the source,

and being extremely volatile, is used for blending with other

gasolines to give them increased volatility.. Polymerized

gasoline is usually of very high anti-knock value (80 octane

nuniber or better), but:the amount which any refinery can

produce is limited to the amount ‘of refiner} y or natural gases

available’ *° |

—Kach of the improved refining processes described above

is patented, and there are seyeral distinct groups of patents

covering each or all of such processes, under which licenses

are Offered by their respective owners. Many refiners have

paid-up ‘licenses under one or more. of these groups of

[fol.48] patents, and eurrent royalty fees are nota con-

trotling factor with refiners in deciding whether to improve

the anti-knock value of their- gasoline by the addition of

‘*fluid’’ or by the use of patented refining processes. All

or nearty all refiners.do’some ¢racking. °In_practice. there

is wide variation in theprocedure which different, refinérs

select. for; producing gasoline of high anti-knock value.

- Some companies find it most ° econpinical. to do as little

is possible of-cracking and‘ ‘reforming, .thus producing at

first a gasoline of low anti-knock value, and to,add thereto

a relatively large amount of ftuid. Other refmers find it

mere economical to do more cracking, reforming, and. poly-

merizing, and to add litle | or no fluid te the gasoline. The

* same refiner may tm one\refinery. add the Maximum amount

of fluid, and in «another réfmery add no fluid at all, depend-

ing upon the. paydienlar cirenmistances at the two refineries.

All major oil companies except Suri Oil Company, Ameri-

~ ean Oil Company and the Shell Companies use some fluid in

substantially ali their regular and premium gasoline, ‘and

_ fe

eee

ie a i i i el ot ad ae a i

Vere A She mee SeenON ETE a eT SEN eT NTN) ORE CERN N ANN N aN SN nN NI

. . 2 . .

ie ‘Shell Companies use fluid in their premium and in a

part of their regular gasoline. Sun Oil Company, ne

refiner, has never applied for a license to use“fluid, and

Shell Companies, constituting one’ of tlie largest refiners, ©

although licensed by defendant corporation to do so, do not

use fluid in most of their. regular gasoline. The regular

gasoline from these two companjes is sold competitively

with regular gasoline treated witk@fuid., Sun Oi] Company”

doex’not generally do business through jobbers. American °

Oil Company does business only along the Kast C oast of the

United States. ~ :

High anti-knock values may be and are dlso obtained oy

[fol. 69] the addition to eaxoline of benzol and alcohol, but

insufficient quantities of the former are available to permit

its use in gny*Jarge amounts of gasoline (the percentage of

gasoline so treated being about 2%), while alcohol has not —

been used commercially in the United States to any sig-

nifieant extent, Pay it has been used extensively abromk, -

-for many years. -¥®he American Oil Company, a large: re-

finer, has a. license for the use of fluid, but by preference sells

a benzol treated gasoline at a price higher than that charged

in the same territory for gasoline treated with fluid.

Spéaking generally, ‘most refiners find it eeonomical and

‘advantageous to obtain a part of the anti-knock value of

their regular and premium gasoline by the use of ‘fluid.

D. Approximately 70% of all gasoline manufactured. and

sold in the Unitéd States is treated with fluid. Nearly

all of the gasoline manufactured. and sold in the United

Statés contains ‘some eracked or reformed gasoline but: ap-

proximately 20% of the total gasoline sold in the United

States is not processed so as té obtain'a high octane rating.

A substantial amount of this 20° % of low octane.gasoline is

sold as so-called third grade gasoline. Approximately

B5% % of all gasoline sold in the United States which has

heén sprocessed so as to obtain - -a high octane rating. is

treated with fluid.

6. Defendants do not manufacture, dias: or sell any

gasoline, and only* in exceptional cireumstances does dé-

fendant corporation itself mix fluid with. wad of others. -

Defendant corporation manufactures the fluid and sells the

same to licensed refiners, to be'mixed by the latter with their

.{fol. 70] gasoline, intending that the treated gasoline shall

he used as a motor fuel. Defendant corporation does. not

sel] uid commercially to any persons other than licensed -

} e ee ale, “?

9 2 . are "98

Lat

24 Bi pure : .

refiners. Defendant alesse makes its profit solely

-\from the sale of fluid. and its annual profits have been and

"are very substantial. Fluid is delivered by“efendants in

intestate commeree to the refineries and some .terminal

points in specially built tank cars, tank trucks’and drums.

The process of. treating gasoline with fluid is purely a

mixing process at the receiving points, in which the fluid is

‘added to gasoline by means of carefully designed equip-

ment which accomplishes t the unloading and mixing opera-

tion through a closed system entirely by vacuum for the

‘purpose of decreasing or eliminating possible health hazards

-due to spillage of tetracthyl lead in‘ concentrated form,

The building and machinery constituting the plant by which

the fluid is unfoaded, handled and mixed by the refiners with

gasoline are ‘required by defendant corporation to be built.

in strict compliance with blueprints submitted to and ap-

proved by defendant corporation. A typical plant is illus-

trated by Exhibits 6-A and 6-B attacked hereto. The aver-

age cost of! such a plant and equipment is around $10,000.

Defendant corporation further requires that the process of -

handling: and ¢nixing fluid be carried ‘out in ac-ordance with

_its printed regnlations, a copy of which is attached hereto

as Exhibit 6-C. .

7. Gasoline is manufactured from crude petroleum at

refineries located in various States of the United States,

principally in the States of Texas, Oklahoma, California,

a 71} Illinois, Indiana, Missouri, New Jersey, Pennsyl-

ania, . New York, Kaltsas, Wyoming, Michigan, Louisiana, ©

Ohio: Kentucky, Montana, and West Virginia. The greater

_part of all casoline mannfactured.at such refineries, and the

greater part of all vasoline treated with fluid, is sold and

transported in interstate commerce frem the States in

which such refineries are Igcatéd into each of the other

States of the United States, including the State of New

York and the Southern District of New York, wherein such

gasoline is sold for consumption. ySaid gasoline is sold in

part through wholesale and retail outlets owned and con-

trolled by refining. companies ; in part to independent retail

dealers and consumers; and in part to so-called semua for

resi ile to retail dealers and-consumers. .

8. Jobbers usually own or lease and operate bulk storage

plants conveniently located so as to serve gasoline pur-

chased by them from. refiners, by. their (jobbers’) tank

’ truéks-er tank wagons, to retail service stations, either

t 4 i Ps

owned or operated by . them, or independently owned or

operated by retail dealers, i in the various marketing terri-

tories served by them. There are approximately 12,000 job-

bers of gasoline doing business in the several States of the

United States, and they distribute a substantial part of all

gasoline sold and distributed in the United States:. The

greater part of all gasoline, and of the gasoline treated with

fluid, purchased by said jobbers’is purchased by them in tank ©

car quantities, and is delivered to them from the States in

which said gasoline is refined to the States in which said

jobbers are engaged i in business. A small part of the gas-

oline sold by jobbers is sold and distributed by them in inter-

[fol. 72] state commerce from the States in ‘which their bulk

storage plants are located . to service stations located in

adjoining States.

‘9. Defendant corporation, acting with and thyough de-

_fendants Webb and Taylor and others of its officers and em-

- ployees, Itas entered into namerous agreements with, refiners |

‘of gasolin@, copies of typical forms of which are attached

hereto as Exhibits 9-A; 9-B and 9-C, pursuant to which fluid

is sold-and delivered by defendant corporation to said re-

finers from time to time, and pursuant to which said re-

finers are licensed to mix said fluid with gasoline and to sell.

gasoline containing the satwe, as follows: Said license agree-

ments purport to authorize said refiners to treat gasoline

| manufactured by them with sufficient: fluid (not, exceeding 3

, enbie centimeters of tetraethyl lead per gallon ‘of gasoline) ©

to make the gasolinepqual i in anti-knock value to the stand-

rd of Etliyl gasoline as. fixed by the defendant corpora-

tion, which standard now consists of an octanté rating of not

_ less than 76 (the gasoline so treated being known as Ethyl!

gasoline), or with an amount of fluid to make the resultant

product have at the time of sale to the consumer an anti-

knock value-of not riore than sev enty (70) octane number

(such gasoline being known as regular gasoline and some-.

times referred to as ‘‘Q’’ gasoline). The licensing with

regard to regular gasoline was inaugurated i in the spring of

1933. - Reference in .this stipulation to gasoline of high

- octane or anti-knock value shall be deemed to,refer to gaso- .

line having an octane rating of 68 or more. Regular gaso-.

line, as referred to in this stipulation (whether treated with

[fol. 73] fluid or not), almost t universally is of high octane or

-anti- knock value.

Ee nee

6 ;

10. An” average of. approximately 0.9 eubic centimeters -

of tetraethyl lead per. gallon, or one part of tetraethyl lead.

to 4200 parts of gasoline, is used to produce regular gaso-

_line. The average quantity of tetraethyl lead used to. pro-

duce. Ethyl gasoline is approximately. 2 25 eubie centimeters

per gaflon of gasoline, or one part of tetraethyl lead to 1700

parts of gasoline. Approximately 94% -of all gasoline

treated with fluid is regular garoline.

11. Defendants have.issued licenses to approximately 133,

refiners, who together refine and sell approximately 88%

of all gasoline sold in the United States. All except one

(Sunt Oi) Company) of the major, (i. e., large, integrated)

refiners of gasoline in the United States have entered into

such license agreements with defendant corporation, and all

except two (Shell Companies and Américan Oil Gompany)

of said major company licensees treat with flui& Substanti-

ally all of their regular or so-called house brands of gaso-

‘ling. Gasoline treated with fluid constitutes between 75%

and RO of alé%asoline manufactured and sold by ‘said

major company licensees (except Shell and American) and

between ‘70% and 72% of all gasoline manufactured and

sald by other than major company licensees... Most of said

major company licensees-sell some quantities’ of regular.

gasoline which contains no fluid, -prinejpally to special com-

mercial accounts.

12. Each of said refiners’ license ‘agreements pur ports to.

' [fol. 74] Impose a restriction upon the réfiner licensee with

respect to’ the minimum differential at which Ethyl gaso-

line may be sold’ by it to jobbers, dealers and consumers’

above the price of the-licensee’s best non-premium grade |

of gasoline, and a restriction that regular gasoline fre: ited

with Huid shall be sold by the refiner as the next highest

priced motor fuel below refiner’s Ethyl gasoline and shall

be the refiner’s best non-premium gasoline referred to in

the agreement between refiner and. defendant corporation

in respect to the manufacture and sale of: Ethyl gasoline.

‘All deliveries of fluid to refiners are made -subsequent to

the making of such license agreements. and in conformity

with the provisions thereof. '

13. Each of said refiner licens® agTeements contains the

provision (almost invariably complied with by refiner li-

censees) with respect tossales to jobbers purporting to re-

strict the refiner licénsee to selling gasoline when treated

7“ fluid to those jobbers only who hold licenses from the

. “*

. ‘Mi

ey t

. .

. " . :

ee ee nee

| 27

defendant corporation to tetas. such seal Job-

bers have been licensed by defendant corporation under. two

forms of licenses, one purporting to license the handling

of Ethyl gasoline and the other of regular gasoline contain-

ing fluid, copies of each of said forms of jobber licenses being

attached hereto as Exhibits 13-A and 13-B respectively.

Jobbers desiring to apply for such licenses are génerally |

_required by defendant corporation to apply through their

prospective refiner-suppliers who in turn submit such jobber

applications to defendant corporation. In many cases the

sane jobbers have been licensed under both forms of jobber-

license. Approximately eleven thousand (11,000) of the

[fol. 75] twelve thousand (12,000) jobbers aforementioned *

have been granted such licenses by the defendant corpora-

tion and numerous applications for jobber licenses have

‘been denied. Complaints have been received by the De-

"partment of Justice, from time to time during the last

several years, from jobbers whose applications for jobber

_ licenyes have been denied. Many licenses were granted to

licensdes to whom licenses were at‘first denied. Apart from

the issuance of licenses tg jobbers, the only business rela-

_ tions of the defendant corporation with jobbers are in the

promotion of sales by the jobbers of gasoline treated with

fluid and in connection with the investigation of the jobbers.

14. Gasoline containing fluid was first placed on sale.

“February 1, 1923, and about 300,000,000 gallons of such

vasoline had been sold up to May, 1925. During this period

several serious cases of lead poisoning occurred in the

inanufacture of tetraethyl lead and, concentrated fluid.

Certain of these cases achieved wide newspaper publicity

in which no distinction was made betweef the manufactur-

ing hazard and the possibility of a public health hazard

which might exist in the use of treated gasoline. “In July,

1924, a committee was appointed by the President of Gen-

eral Motors Company consisting of representatives of Gen-

eral Motors Company, Standard Oil Company (New Jer-

sey) and E. I. Dupont de Nemours Company to investigate.

“the public health problems involved in the manufacture,

sale and distribution of tetraethyl lead and Ethyl] gasoline..-

_ This committee requested the United States Bureau of

Mines and Columbia University, as ‘impartial parties, to

conduct experimentation on this subject. Although the

_ [fol. 76]. Bureau’ of Mines was of the. opinion that’ the

* United States Public Health Service ‘was the proper, gov-

“Ds

ae ges &

‘ ernmental body to conduct the experimentation, uttaie: con-

sultation with the United States Public Health Service, the

Bureau of Mints agreed to comply with the request of the

conimittee, in view of the fact that the Public Health Serv-

ice. had no fundg available for that purpose. Defendant

_ corporation had established a medical department in its

own organization, through which it had undertaken an in-

tensive study of the pulgic health problems involved in the

manufacture, sale and use of its product.

Late in 1924 while all the above experiments were being

conducted, the Surgeon General -was requested by indi-_

viduals interested in the matter but net” ‘connected with

defendants to call a conference to determine whether or not

there was a public health question involved in the manu-

"facture, distribution or use of gasoline containing tetraethyl

lead. “Upon completion .of a preliminary report of the

Bureau of Mines and after conferring with the staff of that

. Bureau conducting the experiments and. the medical com-

_ mittee at Columbia University studying the problem, the

Surgeon General called a conference on May 20, 1925, of

state and municipal health officials, repkesentativ es of labor,

authorities on industrial. health and hygiene; physiologists

and physicians, as well as representatives of the defendant -

corporation, General Motors Company, Standard Oil Com- -

‘pany (New Jersey), and: E. I. Dupont de Nemours Com-

pany, and defendant -Webb. Defendant corporation volun-

tarily on’ May 5, 1925, discontinwed the sale of ‘the fluid

pending the outcome of the conference, and did not resume

said business until June, 1926. The results. of the studies

{fol: 77| of the Burean of Mines and Columbia’ U niversity

_as well as the independe mt observations and opinions of

medical and public health authorities were before the con-

ference. The followihg resolution was adopted by the con-

ference: | |

o? oc

“It is the sense of this conference that the'Surgeon Gen-

‘eral of the United States Public Health Service appoint a.

committee of seven reegenized authorities in clinical medi-

cine, physiology, and industrial hygiene, to present to him, _

if possible, by January 1 next, a statement as to'the health

hazard involv ed in the retail distr ibution and general use of

tetraethyl lead gasoline motor fluid; and that this confer-

ence indor ses as wise the decision of the Ethyl] Gasoline Cor-

poration to discontinue temporarily the sale of ‘ethyl gas;

ean a 29

‘that this inv Festigation shall be paid for exclusively out of

public funds; and that the results of this inve stigation shall

be reported back te a public conference called for the pur-

pose by the United States Public Health Service, at which

labor shall be represented,’

The Surgeon; #eneral thereupon espointed a conittee:

consisting of I “David L. Edsall, Dean of Harve ‘Padical

School, Dr. Wilfiam TI. Howell, professor of Pbysfology at.

. John- Hopkins Medical School, Dr. Rei¢ Hunt, proféssor of

Pharmacology at Harvard Medical School, Dr. Walter S.

Leathers, professor of Preventive Medicine at. Vanderbilt

University, Dr. Julius Stieglitz, prefessor of Chemistry at-

the University of Chicago, and Charles KE, Winslow, pro-

fessor of Publié Health at Yale University. :

Prior to the investigation by the 4‘ommittee appointed by

the Surgeon General, no more than 3 ewbie centimeters of

[fol. 78] tetraethyl lead per gallon of gasoline had been

used, due to the facet that licensees’ would not have found it

profitable to use a greater cone entration..

On January 17, 1926 the aforesaid committee vt to

the Surgeon General in part as follows: Y ie

A ee . ° . . . . .

“= *@)n the basis of this investigation, the committee feels

. That the following general conclusions are justified

1. Drivers of cars using ethyl gasdline as a fuel and in

whieh the concentration of tetraethyl lead was not greater

than 1 part té 1,300 parts by volume of gasoline showed

no definite signs of lead absorption after exposures ap-

_ proximating two years.

2. Employ ees of garages ens gaged in the handling and.

repair ing of automobiles and employees of automobile serv-

ice stations may show evideneé of lead absorption and

_ storage, as indicated liy the lead content of the“feces and

the appearance of stippled cells in the blood. In garages

and statians in which ethyl gasoline was used the amount

of. apparent absorption and storage was somewhat in-

) sey but the effect was slight in comparison with that .

severe lead hazard (Group E) and for the periods of ’ex-

posures studied was not sufficient to produce detectable

symptoms of lead poisoning. ee

iown by workers in other industries where there was a.

3. In‘ the regions in’ which ethyl iia has been used -

to the greatest extent as a motor fuel for a period of between |

two and three years no definite cases. have been discovered

of recognizable lead poisoning or other disease resulting

from: the use of. ethyl gasoline.

‘In view of these conclusions your committee, begs to .

report that in their opinion there are at present no good

{ fol. 79] grounds for prohibiting the use. of ethyl gasoline

of the composition specified (i. ¢., not exceeding 3 eubic -

centimeters of tetraethyl lead per gallon of gasoline) #as

a motor fuel, provided that its distribution and use are con-

trolled by proper regulations. The committee feels that the

formulation of specific regulations in regard to the manu-

" facture, distribution and use of tetraethyl. lead, ethyl! fluid,

and ethyl gasoline for adoption and “enforcement ‘by the

several States belongs properly to the office’ of the Surgeon

(General of. the Public Health Service. Im an appendix ‘to

this report, attention is called to Ae a suggestions which

have been made in the course of the discussions. of this eom-

mittée and which it is believed should be taken into con-

siderati a in making such regulations.

In conclusion we beg 3to say that we are conscious of the

fact that the conclusions to which we have come in this: °

report, although based upon most careful and conscientious

investigations, are subject to the criticism that they have

been derived from the; study of a relatively small number

of individuals who were exposed to the effects of ethyl gaso- -

line for a period of time: comparatively brief when we con- .

sider the possibilities in. connection with lead poisoning.

“A more extensive study, was not possible on account ‘of the

Jiinited time. It reniains possibile that, if the use of leaded

vasolines becomes widespread, conditions may arise yery

differant from those studied by us which would render its

use moye of a hagard than would appear to be the case from

this investigation. Longer experience may show that even

such slight storage of lead as was observed. i in these studies

may lead eventdally in susceptible individuals to: reeagniz-

able lead poisoning or to chronic. degenerative diseases’ of

{fol. 80} committee feels that the investigation begun under

their direction must riot be allowed to lapse. The respective,

States would be dependent upon the findings of such invesfi«

gations fe changes in their regulations. With the experi-

-a less obvious character. In view of such possibilities the |

"5"

ence obtained and the exact methods now-available, it should |

. be possible to follow closely the outcome of a more extended

“31

tise of this fuel: and to determine whether or not it may con-

stitute a menace to the health of the.general public after

prolonged use or under condjfions not now foreseen.”’ ..

‘Tn accordance with the recommendation.of the committee, .

the Surgeon General in 1926 proposed-that certafh regula-

tions éovering the manufacture, shipments and handling of*:

_tetraethy! lead and fluid, and the distribution and sale of -

treated vasoline be adopted and promulgated by the several

states’ and municipalities 6f the United States; a copy of

said réyulations is’ attached hereto as Exhibit 14-A and a

copy of certain changes in said regulations, made and pub-

lished by the Surgeon General November 30, 1928 as appears

in said copy, is attached- hereto as Exhibit 14-B. No states _

or municipalities have promulgated these or similar regula- ~

‘tions. Defendant corporation, which had‘ cooperated with _

the Public Health Service during the investigation, assured .

the Surgeon General that it would abide by , air it has volun-

tarily abided by, the -regulations. proposed by the Surgeon .

General. Accordingly, all of its licenses, both refiner and

jobber, have included provisions that the said regulations —

proposed by the Public Health Service shall be maintained.

‘United State Public Health Service has at all times since

the publication of its proposed regulations manifested an

[fol.'81]. active interest in the:eompliance by defendant cor-

‘poration and members of the petroleum industry with such -

proposed regulations.

In conformity with the aforesaid recommendations of the

United States Public Health Service, defendant corporation:

has provided in its jobber licenses that the jebber licensees”

shall maintain-certain notices on pumps from whith is dis-

‘pensed gasoline containing fluid, to’ the effect that said

gasoline ‘‘contains lead (tetraethyl)’’ and is “for-use as a

motor fuel only.’’ The type of notice or sign first commonly

hibit 14-D, attached hereto, *was’ proposed at a later time,

~and this second type of sign was approved by the Surgeon.

General, who advised defendant ‘corporation that in the

opinion of himself and other officers of the Publig Health |

Service, either of the signs would be satisfactory for use

- under the proposed regulations as modified November 30,

employ ed after 1928.is exemplified by the sign Exhibit-14-C, |

attached hereto. Another form of sign, exemplified by Ex. F

39 ee

1928, and that he and the other ‘ie: saw no pobidiein to

the use Sf these signs interchangeably on pumps selling.

Ethyl and regular gasoline te the: public. No authentic -

cases of lead poisoning or other injury to health from-gaso-

line containing fluid have ever been discovered which can

' ain any way ributed to the presence of fluid in such:

gasoline, In the opiniorf of the executives.of the defendant —

corporation and of the medical and other experts in the em--~

ploy of said corporation, formed after, fourteen years of,

experience and exhaustive scientific experiments, tests and

studies, the addition of fluid to gasoline in the proportions

| provided for in. refiners’ licenses has not to date caused or ;

Ffol. 82] produced: any dangers or ‘hazirds @ health and - :

such ‘treated gagoline is yo more dangerous to health than

ordinary uritrea aed gasoline, when used asa motor fuel. . ~

The proposed regulations of the Surgeon-General have

not been materially changed or ‘modified, except as other- |

wise noted herein. The defendant corporation has -eon-

tinued and still contindes to maintain its medical ‘depart-_

ment. The chief work of that department-inelddes making,

field surveys of the effects-of lead-treated gasoline on human

beings; “foutine examination of persons who handle leaded ©

_ gasoline and fluid; and extensive scientific experiments,

tests and studies relative to, the physiological aspects and

- effects of lead in gasoline. . Ft

In association and cooperation with the medical depart.

ment, but in addition thereto, defendant corporation also

‘maintains a safety department, which consists of super-

vising officials and a number: of field men who devote their

entire time to the safety work of this department... That

work includes : supervision ofthe transportation, unloading’ .

and handling of fluid, and supervision of its blending with

gasoline; supervision’ of the cléaning of tanks, including |

jobbers’ storage tanks, which have been used-for. storing’

leaded gasoline, both Ethyl and regular; ascertainment and

investigation of various possible leag\hazards ; particularly,

the invéstigation of the use of fluid, to prevent the same

from being handled or used by unauthorized persons. Priors

_ to the formation of the safety departnient.in August, 1936,

its present work was conducted by the‘entire- staff of field

representatives of the defendant “corporation and -by cer--

‘tain members of its medical department. he r

[fol. 83] Similar investigations eafried out in ‘other coun-

tries have come to substantially ms same eonclusions as

Oe . . : (ae ee

_ those of the United States Publi¢ Health Berviee: Thus the

report’ of the Committee on ‘Ethyl Petrol of the British

Minist¥y. of Health in 1930 contained the following /« con-

“clusions

-. 96 (i) The reall of our experiments agree with. the re-

’ sults of the-experiments carried out in the. United States of

Ameri¢a, whether on If of the United States dovern-.

‘ment Committees or of the Hthyl Gasoline Corporation, and

fully confirm the view we expr¢ essed in our Interim Report

.that the fiydings of the United States Government Commit-

» tee were justified. “

-(ii) The, widéspr aC be use of Ethyl Petrol as a motor fuel

for inotor vehicles would not, in our opinion, jnerease the

propagation’ of ' particulate lead in the atmosphere of our

streets to such an extent as to constitute a risk even to the .

_ health of that part of the population which is most exposed—

namely, police officers on traffic control duty and drivers, of

motor and other vehicles. ;

(iii) In a properly ventilated garage there would be no

danger to health from the exhausts of motor vehicles, or

from. the evaporation of Ethyl Petrol owing to spillage.

Even in a badly ventilated garage the danger due to spillage

would not be serious. We wish, however, again to repeat the _

warning given in our Interim, Report that adequate ventila- *

tion of all garages, whether or not Ethyl Petrol is used, is a —

matter of considerable importance, and that the danger from

_ carbon monoxide i ian unv entilated garage is very serious.

Sd iol 84) “(iv) The risk arising from the absorption of Jead ©

ra-ethy] owing to the contact of Ethyl Petrol with the skin

smail as to.be negligible. :

hey. While the deposits from cylinder heads, ete., of cars |

using Ethyl Petrol, contain phigh percentage of lead, the

quantity and nature of these deposits are ‘such as to make

them'of little significance:to garage workers, if due regard

_is-had ‘to ordinary: cleanlinéss. “~ *®

(vi) There j is no danger to water supplies from the use of

Ethyl Petrol. 6

In view of the conclusions set out above we are of the opin- .

ion that there are no reasons for prohibiting the use of Ethyl . .

~ Petrol in this country and we do not recommend any legisla-

3—526- Monet mies /

A dace yi | ia

* , ‘ t

secure. the continued er of ae -precautions.

| Thes¢ precautiqns are: o e

Ps motor fuel.

in 1, 300 parts by volume or about 1 in 650_by weiglit.’ *% Ke

octane number. The requirements imposed in thé refinens’

. normally be met*by any gasoline of good, quality: Sub-

5 2" impose the restriction that- gasoline containing fluid should

* inv olved, in view of the refiner’s interest in maintaining the® |

‘times Ethyl and sometimes regular, through pumps which

tive yen so ne as the terms of the a oeie a between the

proprietors of the tu@l"and the distributors in this country —

(i) That cans and pumps ‘should be'labelled to indicgte the

presence,of leadgiti‘the fuel and to warn the user to avoid

spillage “and not’ to: use the: fuel for othgr purposes than

’ (ii). That the fuel should Go dyed 2 as an additiofial check

against its use otherwise than as a motor fuel. -

(iii) That the amount of lead fetra- ethyl i in the fuel sold -

for ordinary commercial purposes should not exceed 1 part

’

15. Né! niininiuim. octane requirement is limposed by ‘de-

fendants .with respect to regular gasoline containing fluid,

[ fol, 85] Substantially all such gasoline is between 68 and 70

licenses.with respect to distillation, sulphur, corrosion and

gum qualities’ (see Exhibit 9-A hereto) are such as would °

stantially all Ethyl gasoline is between 76 and 80 octane

naumber, the major part ay eraging ‘about 78, octane number. :

16. Defendant corporation’ s jobber licenses arport to

ng be diluted or otherwise adulterated. - Dilution or

ulteration has not in practice been found to oceur (so far’

as deffndants have Leen able to ascettain) to any but avery

small extent so far‘as regular gasoline treated with fluid is °

cwmeerned. Dilution or-adulteration of regular gasoliné’

treated with fluid with untreated gasoline of similar general

characteristics is difficult to detect, but dilution with gasoline ©

of distine ‘thy inferioy quality or with kerosene may be teadily

detected. W hen dilution 6r:adulteration of regular gaso-

line has been discovered, it has ordinarily been necessary

only to report the matter to the refiner whose gasoline was

quality, of his product.

A number of instances have been found where jobbers s or

their retail dealers have been selling treated gasoline, some-

did - earry Reach warning sigis, aud where there has been

dilution of Ethy) seaeiiliiin? as sold*to the public, substitution

of untreated for treated gasoline in pumps bearing lead . > ae

warning signs, an? deterioration of Ethyl] gasoline through

[fol. 86] long storage in jobbers’ or dealers’ tanks; and de-

fendaft corporation, particularly through its field xepresen-

_ tatives, has made it a practice to investigate stich instances

‘ and to endeavor to prevent the occurrence or_recurrence of

the same on the part of licensed jobbers or their dealers.

17: Since April, 1929 each applicant fora jobber license

has been investigated by a field representative of defendant

corporation. Numerous field representatives are employed

by defendant corporation and are located throwghout the

United States. ‘Said. representatives exercise wide dis-

cretion inyrecommending the granting or refusal of jobber

licenses, { he recommendation of a fild representative de-

termines largely whether a license will be issued. Said field

representatives are required to report up®n’ their inyesti-

gationsson certain report forms. Exhibit 17-A is the form

which has been employed with Hnmaterial changes from

April, 1929 to January, 1935. Exhibit 17-B is the form which’ |

“has been in use since ‘January, 1935. Said reports are sub-

anitted by the field: representatives to the respective division

managers, and are by the division managers forwarded for”

final approval to the head office of the company in New York

City. Following the customary practice of the company,

the field representatives usually have not.set forth the fea-

sons why recommendations have been made against the is-

", suance of licenses. To a large extent this was due to the re-

-luctance.on the part of defendant corporation -to preserve

in its records the’extent to which, maintenance of ggisoline

prices and marketing policies by jobbers. entered into the. -

granting of licenses. Officials of the company charged with ..

‘[fol. 87] reviewing said jobber reports have almost in-

variably adopted the recommendation of the field repre-

sentative whén approved by his Division Manager., In 90%

to 95% of Hl cases the approval or disapproval of the Di-

_ Vision Manager was indicated only-by the word ‘‘yes”’ or the

word ‘*no”’’ on the face of the report. Usually and oily ex-

cepting in some cases where the division manager had inde-

pendent knowledge of pertinent facts, the action of: the di-

vision manager in approving the report of the field repre-

sentative was perfunctory in character. Usually yo records

. other than the reports themselves have been made or pre-

7°

Go Oe oe 4

served disclosing the reasons why jobber licenses have been -

refused. A copy of instructions issued to field representa-

tives in 1931 and of supplemental instructions issued in 1932

is ‘attached hereto as Exhibits 17-C and 17-D respectively.

The defendant corporation has not made a practice of giving

detailed written. instructions. to its field representative on

any subject, including the conduct of jobber investigations

“or the consider ations to which weight should be given in such

investigations. The amount.of reliance placed by defend-

ant corporation and its officers and employees on the so-

called business ethies of jobbérs‘has normally not been dis-

closed i in their records and communications. |

18, From April, 1929 to January, 1939, as appears in Ex-

hibit 17-A, one of the questions appearing on the form of

jobber report related to the ‘business ethics’’ of the jobbek) *:

applicant. Said term has been. employed by defendants to -

denote) compliance with marketing policies and prevailing

prices ofthe petroleum industry as deseribed in paragraph

21.) In January 1935, said question. with reference to busi-

[fol 88] ness ‘ethies was eliminated from the form of jobber

report, as appears in. Exhibit 17-B.° But the ‘business —

ethics?’ of the jobber. has contihued to be among the prineipal

subjects of vestigation, the findings of the field representa-

tives with respect théreto-being incorporated in the recom-

mendations of: the field represeiitatives for or against the

‘issuance of: a, ticénse, made at the end of the report. An

adverse finding upon. the business ethies of a prospective

jobber licensee is alone in.many instanees sufficient ground

for defendant ‘corporation to refuse such jobber a licensé.

The greatest number. of jobber applicants who were denied

Jicenses were turned down on the basis of adverse findings

of field representatives as to ‘business ethies.”’ In a num-_

ber of instances where ligenses were, granted to jobbers

whose pragices were previously considered unsatisfactory,

they were granted after representation. that the jobber’s

marketing practices would be chatiged. In at least an equal.

aumber of instances licensgs were, refused by, defendants

after similtir Fepresentation.

‘Gasoline treated with fluid: deteriorates with prolonged in

storage. Some applications for Ethyl jobber licenses and fi

few for regukar gasoline jobber licenses have been refused

because th. volume of*business of the jobber was not suffi-

cient; in the opinion of defendant corporation, to move the:

~ -

gasoline with sufficient rapidity to avoid deterioration in

storage. A number of jobber licenses have been refused be-

cause in the opinion of defendant corporation the physical

equipment of the jobber lent itself to the actual or accidental’

mixing of different grades or brands of gasoline or because

[fol. 89] in the opinion of defendant corporation the retail -

outlets of the jobber were shabby or _disreputabte in ap-

pearance or lovation, or because in the opinion of defendant

corporation the jobber’s reputation in his community was *

bad, or because in.the opinion of defendant corporation the

jobber had a reesrd of tax evasion, dilution, substitution, or

misbranding. Employees of defendant corporation would é

testify that in passing upon applications for jobber licenses .

they were guided by their respective individual judgments —

“as to what was in the best intérests of the corporation ,in-

reference to the good will of the corporation with its refining, *

‘licensees or tlie public. :

19; § Supplementa ry investigations of licensed jobbers are © .

_ made from time to time and reports thereon made on the .

same report forms (Exhibits 17-A and 17- B hereto) as are

used for.the initial inv estigations. a

20, Testimony ‘of witnesses_for the government would |

tend to establish that a large number of refiners. and a ma-

jority of jobbers believe that a jobber must maintain ‘‘busi-_

less ethies’’ in order to obtain a license, and that a num-

cher of jobbers believe that jobber licensees are: required

to maintain the ‘prices and abide by the marketing practices

and policies of the major oil companies. Defendants have

not issued any statement or instructions to the effect that

» Ahey would cancel licenses for such reason, and there has

been and is a great deal of cutting of p ices below the posted

prices on the part of licensed refiners, including major oil .

companies. and licensed jobbers.

[fol. 90] 2t. Defendants -have refused om issue licenses to

a number of jobbers wh, investigation showed, were not

abiding by. the marketing policies. prevailing or ostensibly

prevailing i in the industry or-who Were nét maintaining the

retail-prices' on: easoline posted generally in the industry or .

whose retail dealers were not maintaining said prices. Such

marketing policies and posted prices were those. atlopted

by the major oil companies or the market. leaders: among

such compatues, oe major: oil companies ‘refining about

85 per cent of the gridoline sold>in the United States and ~~ :

distributing the major portion of the gasoline sold through-

out the United States through their own outlets.and through

jobbers. The operations of jobber licensee¢s have been in-

vestigated by defendant corporation as hereinafter set

forth to determine the method of securing supplies, gal-

lonage, pump markings, facilities of bulk plant and nature

of other physical equipment, number, character and appear-

ance of outlets, sales effort, and whether the said licensees

were maintaining the marketing policies, practices. and

- prices prevailing or ostensibly prevailing in the industry. 4G

Defendants have issued licenses to a number, of © jobbers

who, investigation showed, were not abiding by the prices

prevailing or ostensibly prevailing in the industry or who

were not maintaining retail prices on gasoline posted gen-

erally in the industry or whose retail dealers were not main-

taining said prices prevailing or ostensibly prevailing in

the industry. There are numeroas instances where ‘jobber.

licensees havé not followed the marketing practices prevail-

ing or ostensibly prevailing in the industry and where job- |

ber licensees have not maintained retail: prices posted gen- |

[ fol. 91]. erally i in the industry concerning whom no aétion 4

has been taken by def fendants. ,

Some of the division managers and field representatives |

of defendant corporation have from time te time reported.

_to the jobbers’ suppliers that such jobbers have.not been j

abiding by such suppliers’ marketing polici ies and practices, 7

and there have been sporadic instances in which representa-

tives of defendant corporation in cooperation with the job-

ber suppliers, have persuaded jobbers to market gasoline |

in accordance with the suppliers’ marketing prattices.:

— oe eS

ba ies ek ee ee

ran!

Se en ee

22. 899% of the jobbers licensed by defendant corporation

‘ sold under a refiner’s brand on Feb. 15, 1926, and 88% on |

Feb. 15,1987, and 87% on Feb. 15, 1938, the remainder in _ ,

-each ease selling under their owni brand. Each time ‘a a

jobber licensee who is selling under a refinér’s brand changes |

his ‘seurce of, supply he is required to apply for a new li-

cense. Except in cases of breach of license agreement, or’

where the jobber’s contract with the supplier had not been |

terminated (in which case the jobber’s existing license was

continued in effeet) defendant corporation in most cases

has granted a new license to a jobber who wanted to change

his sonrce of supply, irrespective of the jobber’s mainte-

nance or noh-maintenance (prior to or at the time of change)

‘of the policies, practices, and-prices of the major oil com-.

panies or market leaders. Ina few instances it has not done

so. Each jobber license contains a provision whereby either

party is authorized to cancel such license without stating

any reason therefor at any time upon thirty days’ notice.

Jobber licenses have not been cancelled because of the fail-

|fol. 92] ure of a jobber te maintain the policies, practices, -

_ and prices of the major oil companies or market leaders.

_ 23. On February 11, 1929 the petroleum industry adopted

certain Trade Practice Conference Rules knowr in the in-

dustry as the Petroleum Code, attached hereto as Exhibit

23-A, On August’ 10, 1931, said code was modified, said

modified code being attached hereto as Exhibit 23-B. As

appears on Exhibits 23-A ‘and.-23-B, all of the provisions of

said codes were either approved or accepted by the Fed-

eral Trade Copnmission. On August 19, 1933, the President

approved The Code of Fair Competition for the Petroleum

Industry, which was in éffect until May 27, 1935. Said code

is attached hereto as Exhibit 23-C. On September,5, 1937, —

the Federal Trade Commission issued an order, attached

hereto as Exhibit 23-D, withdrawing its approval and ac-

ceptance of the Trade Practice Conference Rules adopted

August 16, 1931 (Exhibit 23-B).

_ 24. The defendant corporation has:usually required that

each jobber licensee purchase all his requirements of Ethyl

vasoline from a single refiner-supplier of his own selec-

tion. Jobbers selling regular gasoline under their supplier’s

brands are required to purchase such gasoline from. such

‘supplier; otherwise jobbers selling regular gasoline may

obtain their gasoline ‘from any licensed supplier. The de-

fendant corporation has-in some cases refused a license to

a jobber who desired to change his source of supply upon

the ground that such jobber was, or was claimed by the

refiner-supplier to be, under contract to purchase his Ethyl

[fol. 93] or regular gasoline from an existing refiner-sup-

‘plier, and that the request, if.granted, would in the opinion

of the defendant corporation have breached such contract

or claimed contract. In-a few of these cases the jobber has

contended that his contraet with the existing refiner-sup-

plier had already been abrogatéd or fer_other, reasons was

not enforceable against him. - ora:

25. Since 1924 as to ‘‘Kthyl’’ and since 1933 as to ‘‘Q”’,

defendarit corporation has-been and is the original and the

exclusive user of trade-mgarks-embodying the words ‘‘ Ethy]”’

and ‘‘Q’’ as applied to fluid. All containers-of fluid sold

bear either the word ‘‘Ethyl’’ or the word ‘‘Q’’..” Copies

of registrations in the United States Patent Office, which -

are owned by defendant’ ee are attached hereto

as follows: 7 99 ee

Exhibit 25-A—Registration No. 187 410 |

Exhibit 25-B—Registration No, 202,275

Exhibit 25-C—Registration No. 215,282

Exhibit 25-D—Registration No. 292,242.

All licensees, except Standard Oil Company (New Jer-.

sey), inelude the word ‘‘ Ethyl”’ as a part of the brand name

under which Ethyl gasoline is sold, said company-using the

trade name ‘‘Ksso’’ for most of its Ethy! gasoline and the

name ‘‘Spartan Etbyl’’ for the rest of its Ethyl. gasoline.

All licensees are required to display the registered’ trade-

mark design, Exhibit 25-C, whenever they sell, offer to sell

or adgyertise Ethyl gasoline. No persons except, such’ li-

censees and their customers have been or‘aré users of the

word ‘Ethyl’? or of such trade-mark design for: ‘gasoline —

and the only gasoline for which sygh word and design have

fol. 94]. been used is Ethyl gasoline as identified in this

stipulation. Defendant corporation has also registered the

word ‘*Kthy!’’ and the aforesaid 4lesign, under state laws,

,in every state of the United States except one (Wisconsin),

copies of the registrations in the State of New Jersey. which

may be taken as typical of all said state regist ‘ations, being

attached hereto-‘as Exhibits 25-6 and 25-F,. Since June,

1926 defendant corporation has carried on a ‘large amount

of advertising of the Ethyl trade-mark and Ethyl gaso-

line, including full page advertisements appearing fre-

quently each year in a large number of popular magazines ;

and including ‘billboard advertising. The refining licensees

of defendant corporation have done a large amount of ad-

vertising of their respective brands of Ethyl, gasoline.

Numérous users ‘of gasoline would testify that the name

‘*Ethvl’’ and the aforesaid trade-mark design have become

associated: in their minds with high guality gasoline of

high anti-knock qualities and that Ethyl indicates to them

~chanies, and others having to‘«

a a Sa

the use of lead in gasoline. Defendant corporation has de-

voted efforts to promoting the use of regular gasoline by

fleet owners (i. e.,;owners of truck, taxi, bus and like fleets) |

and other large users, oftentimes, in such promotional work,

designating such gasoline as ‘‘Q’’ gasoline.

Exhibit 25-G, attached hereto, comprises copies of ad-

vertisements of regular gasoline (treated with fluid) which

‘have been published in newspapers throughout the United.

States by licensees of defendant corporation; the adver-

tisements in Exhibits 25-G, which were published as ap-

‘pearing thereon, being representative of a great many

{fol. 95].similar advertisements, similarly deseribing regu-

lar gasoline, which have’ been published by many of de--

fendant corporation’s licensees (both refiners and jobbers)

at those and other times, in a large number of newspapers

and other periodicals (and on uesnoarde and other media)

throughout the country. Exhibit 25-H, attached hereto,

comprises copies of advertisements published by defend-

ant corporation in various magazines and newspapers, some

of circulation to farmers and in rural districts, and. others

of urban and general circulation; the advertisements in’

Exhibit 25-H, which were published as appearing thereon,

being. representative of many similar advertisements,—

similarly referring to the defendant corporation’s manu-

facture of anti-knock fluid and tetraethyl] lead, for regular

gasoline,—which haye been similarly published by defend-

Ce het

ant corporation in the years 1934, 1935 and 1936 and also

singe 1936. On occasion, filling station attendants, garage

propriétors and workmen, caper dealers and me-

lewith the sale or recom-

mendation of gasoline, have advised meinbers of the: gaso-

line-purchasing publie that regular gasoline, as dispensed

from pumps containing the lead warning sign, is ** just about

the same as Ethyl gasoline’?, or contains the same anti-

_ knock ingredients as Ethyl gasoline, or contains lead ‘made

by the Ethyl Gasoline peaple”’, or is “‘like Ethyl gasoline”?

or contains lead like Ethyl gasoline; or have otherwise

. i ? "

passed on to the public, by word of mouth, their knowledge

or belief that regular gasoline, dispensed from pumps con-

taining lead warning, signs, is related’ in some manner to

Ethyl gasoline or to defendant corporation. 7

[fol. 96] The lead warning signs, Exhibits 14-C and 1 14-D |

- (supplied by defendant. corporanen at a charge of seyen

cents apiece), are used interchangealily on pumps dispens- -

ing Ethyl and regular gasoline, so that every filling station

pump which dispenses Ethyl or regular gasoline treated —

with fluid has or should have one or more of these signs,

disposed thereon in accordance with the proposed regula- 4

tions of the Surgeon General. In recent years, lead signs

of the type of Exhibit 14-D ‘have been most used, and are

now regularly supplied, for’ both Ethyl’ and .‘tregular’

pumps,—unless special Request i is made for the type 14-C,

as where a new sign is desired for a pump already drilled

to receive the sign 14-C. - Except in instances not authorized

by defendant corporation, the only gasoline dispensed to

the publie’ from filling station pumps which bear lead warn-

_ing signs is gasoline treated with fluid manufactured by

defendant corporation. The common practice of filling sta- 4

tions is to have the pumps for Ethyl and regular gasoline

side by side, with the Warning sign Exhibit 14-D similarly

displayed on each; Exhibit 25-1, attached hereto, compris-

ing photographs of typical pany arrangements in filling

_stations, :

26. Each of the-acts and practices of defendant corpora.

tion herein referred to’ has been done with or throughSor -

under the authority, éxpress or implied, of defendants, W ebb |

and Taylor, except as otherwise noted herein. 2

27. While defendant ‘corporation’s license agreements

are paraphrased i in part herein, it is not intended to vary in|

{fol. 97}: aty respect the language of said agreements, to

which final resort shall be had in the event of,any dispute

as to. the interpretation of said agreements expressed in

this stipulation.

John Henry Lewin, Hammond E. Chaffetz (W. B.

Watson Snyder, Grant W. Kelleher, Special Assist-

ants to the Attorney General. é B

Thurman Arnold, Assistant Attorney General; Lamar

Hardy, United States Attorney.

‘Cooper, Kerr & Dunham, Solicitors for Defendants.

Of Counsel: Drury W. Cooper, Harold W. Norman,

‘Robert S. Dunham.

Dated: April 22, 1938.

we 48

(fol. 98] Ix Unrrep States District Court, Sovrnern Dis-

. Trict, oF New York:

EK, 84-321

v7 ’ Sad ' i °4°

Unitep Srates or America, Petitioner,

: against

-Erny. Gaso.ine Corroration, Marte W. Wes ‘and Joun

Coarp Taytor, Defendants

Honorable Lamar Hardy, by John ‘Henry Lewin, Esq.,

Hammond E. Chaffetz, Esq., W. B..Watson Snyder, Esq.

Grant W. Kelleher, Esq., Nelson A. Scharfman, Esq., Thur-

~man Artiold, Esq. and ciel K. Darby, Jr., Esq., for the

_ Petitioner. ith

Messrs. Cooper, Kerr & Dunham, by Drury W. Cooper,

Ksq., Harold W. Norman, Esq. and Robert 8. Dunham, Esq., a

for: Defendants. a,

Opinion ~ i.

Bonpy, District Judge:

This is a suit in equity by the United States to enjoin the

Ethyl Gasoline Corporation and its president and vice-

president in charze of. sales, from violating the Sherman.

Anti-Trust Act of Juiy 2, 1890." The’ case clas been sub-.

nitted tpon an‘agreed statement of facts.

fol. 99] The defendait corporation is engaged in the pro-

duction andesale of a fluid, consisting pripcipally-ef tetra-—

ethyl lead. This finid is used in increasing the octane, or

anti-knock, rating of gasoline. The mixture of this fluid

with gasoline reduces or eliminates the knocking that nor- .

mally occurs when-a mixture of gasoline and air is burned

in av antomobjle engine of relatively high compfession:

_ *The defendant corporation is the sole producer of tetra- — -

ethyl lead fluid in the United States. It is the owner of —

United States: letters patent. which cover the anti-knéck

fluid, the combination consisting of the fluid and gasoline,

andthe method whereby g mixture of gasoline and air is

burned in‘a motor of relatively high compression, in. the -

presence of vapors-¢f.an anti-knock ingredient. No other

substance similar tO tetraethyl] lead fluid is manufactured

ne /

or sold commercially, . There are other competitive methods

‘by which a high octane value of gasoline may be obtained.

Most refiners, however, find it economical and advantageous - .

to obtain a part ‘of the enti-knock value of their regular’

and preniium gasoline by the use of fluid. Approximately

70% of all gasoline manufactured and sold in the United

States is treated with fluid, and approximately 85% of all

gasoline sold in the United States which has been processed

fol 100] so as to obtain a high « octane rating is treated with

fluid.

The de fondant corporation does not ‘manufacture, refine

or sell any gasoline. It manufacturés fluid and sells it

only to refiners licensed by it, who mix the fluid with their

own gasoline pursuant to the regulations and directions pre-

seribed by the defendant corporation. It derives its profits,

which are-very substantial, solely from-the sale of fluid.

The greater part ofall sasoline manufactured at re-

fineries and the greater part of all gasoline treated with

fluid, js sold and transported in interstate commerce from

the states in which the refineries are loc ated into each of

‘the other states of the United States.

The refining companies sell’ gasoline partly ‘through

wholesale and retail outlets owned. and controlled by them.

They also sell gasoline to independent retail dealers and

consumers and to Jobbers for resale to retail dealers and

consumers. There are approximately 12,000 jobbers if the

United States. They distribute a substantial part of, all

the gasoline soldand distributed in this country: |

The defendant corporation has issued licenses to approxi-

mately 123 refiners, who together refine and sell about 88°

of all the wasoline sold: in the United States. All but one

of the major refiners in ‘this country have entered into

such license agreements and all but two of the licensees

[fol. 101] treat with fluid substantially all of their régular

“- gor so-called house brands of gasoline, Defendant cerpora-

tion licenses the refiners to produce “Ethyl”? gasoline and .

‘‘regular’’ gasoline, by treating their gasoline with the

fluid manufactired and sold by it. Ethyl gasoline has ‘a

higher octane rating than regular lead-treated gasoline.

The former contains approximately one part of fluid to 1700

parts of gasoline and the latter one part of fluid to 4200

parts of gasoline. About 94% of all gasoline treated with

fluid is regular gasoline.

4 45

_ The license agreements with the refiners require each

refiner to maintain a minimunrdifferential in price between

his Ethyl gasoline and his best non-premium ‘grade of gaso-

line, and provide that regular gasoline treated with fluid

shall. be sold as the next highest priced motor fuel below

the refiner’ s Ethyl gasoline and shall be the refiner’ s best

non-premium. camping. 7,

The refiners are permi ted under their Beonsee to tell.’

treated gasoline to such/jobbers only as are licensed by.

defendant corporation to’ distribute treated gasoline. This

provision has almost. invariably been complied with by

refiner licensees. Jobbers desiri ing liceihses are required “

make application therefor through their prospective refiner-

suppliers, who submit such applications to the defendant -

Tfol. 102] corporation. -It issues separate licenses to ‘thers

. for distributing Ethyl]: and regular treated gasoline. _Ap-

proximately 11,000 of the 12,000 jobbers in the country have

been granted sich licenses.- Numerous applications for

_ jobber licenses have been denied. Many licenses were

granted to persons to whom licenses were at first denied.

Apart from the issuance of licenses to jobbers, the only

business relations of defendant corporation with jobbers |

are in coneetion with the pramotion of sales by jobbers.

of treated gasoline and the investigation of jobbers.

When tetraethyi fluid was first “introduced, the question “

arose whether the manufacture, distribution and use of: the

fluid and of treated gasoline might ‘not create a serious

health hazard. An investigation was conducted ‘by distin-

enislied. scientists appointed by ‘the Surgeon General ef the

United States, who found that there was no serious menace’

to health if certain precautionary measures were ‘taken.

In conformity with the recommendations of the United

States Public Health Service, the ‘license agreements with

jobbers provide that jobber licensees shall maintain. on

‘pumps from which treated gasoline is dispensed, notices

that the gasoline: contains lead and ‘is for use as a motor

fuel only. /

The jobber licenses prohibit dilution and ulitilallion of’

the treated gasoline. On the rare occasions when dilution -.

(fol. 103] or adulteration of regular tréated gasoline has

been discovered by the defendant/ corporation, it has ordi-

narily been necessary oniy to report the matter to the re- *

finer-supplier, in view of the latter’s interest in the quality

of his produet. ie ae customarily investi-

Vie

gates instances where the lead warning signs have not been

placed upon the dispensing pumps, and where ‘untreated —

gasoline has been substitufed for treated gasoline in pumps

bearing such signs. It also seeks to prevent dilution. of

* Ethyl gasoline and déterioration of such gasoline a,

long storage in jobbers’ or dealers’ tanks.

~The Ethyl Gasoline Corporation ‘is the.exclusive user ‘of

* trade-marks’ embodying the words ‘Ethyl’? and *Q”’ as —

applied to fluid. All licensees except one, include the word

- Ethyl’? as a part of the brand name under-which Ethyl

gasoline is sold. All licensees are required to display

defendant corporation’s registered trade-inark design when-

ever they sell, offer to sell é6r advertise Ethyl gasoline..

. Defendant corporation has, registered this design and the

word ‘*Ethyl’’ in every: state of the United States ‘except

one. It has extensively advertised the Ethyl trade-mark

and ‘Ethyl gasoline, and the refiner licensees have exten-

sively advertised their respective brands.of Ethyl gasoline.

| fol. 104] The defendant corporation, however, obligates its:

refiner and jobber licensees not to use its trade-marks, de-

signs, or its name in the sale, offering forssale or adver-

-‘tising of regular lead-treated gasoline.c It is stipulated |

that numerous users of gasoline would testify that the name

‘‘Ethyb’ and, the trade-mark design have become associated

in their minds with high quality gasoline of high anti-knock

qualities and that Ethy! indicates to them the use of lead

in gasoline. —

Since April, 1929 each applicant tee a jobber sued has. :

been investigated by a field representative of the defendant

corporation. These representatives ¢xercise wide discre-’

tion in recommending the granting or refusal of jobber

licenses and. their recommendations largely determine

whether a license’ will’ be issued. Officials of the corpora-

tion charged with reviewing these jobber reports have al-

most invariably adopted the field representative’s recom- .

mendation when apprdyed by his division manager. The

gaction of ‘the division manager in this regard is usually -

perfunctory. . *

A manual issued by the corporation to its field representa-

tives states that the reason for inv éstigations prior to the

‘issuange of ‘license agreements is to ensure that all market-

ers of Ethyl gasoline will be of a high type and will be

‘{fol. 105] people who will maintain the quality of ‘the gaso-

line, protect the r reputation that the Ethyl corporation has

Pe eee ee pn ee ee ae

established for its product and will not resort to unethical

methods ih competing with other licensed jobbers -and re-

~ finers. : ‘

Following the corporation’s customary practice, its field

representatives, usually have not set forth the reasons why

recommendations have beer’made against the issuance of

licenses, largely due to its relugtance to preserve in. its

records the extent to which maintenance of gasoline prices

and marketing policies: by jobbers entered into the granting

«of licenses. Usually no ‘records other than the reports them-

selves have been made or preserved disclosing the reasons

why jobber licenses have been:refused. The extent of the

réliance placed by the corporation on the ‘‘business ethies”’

of jobbers has normally not been disclosed in its records

and commuhications. Def endants employed the term ‘‘busi-

_ness ethics’? to denote compliance with marketing policies

and prevailing prices of the petroleum industry.

From April, 1929 to January, 1935 one of the questions. -

appearing on the form of jobber report Felated to the ‘‘busi-

ness ethies’’ of the jobber applicant. In January, 1935, this

— was eliminated rg the form of. the jobber report,

The findings of the field repr salniekives with reser thereto

are incorporated in the recommendations fof or against the

issuance of a license, made at the end of the report.

An adverse finding upon the ‘‘busifess ethies’’ of a pros-

pective jobbers licensee is alone’in many instanges sufficient

- ground for defendant corporation to refuse. such jobber a °

license. The greatest.number of jobber applic: wits Who were

denied licenses (and- numeroys applications have ° been

denied) were rejeeted on the basis of adverse findings of

field representatives concerning the’ jobbers’. ‘business

ethies.’”’ In a number of instances where licenses. were

granted to jobbers whose practices were. previously con-

sidered unsatisfactory, they were issued after representa-

tion that the jobber’s $ marketing practices would be changed.

In at least an equal nuniber of instances, licenses were re-

fuséd by defendants after similar representations.

It isalso stipulated that defendants have refused to issie

lteenses to a number of jobbers who, investigation showed,

Were not abiding by the marketing policies; prevailing or

‘ostensibly prevailing in the industry or who were not main-.

taining the retail prices on gasoline posted generally in |

thie industry (that i is, the policies of, and prices posted by, :

[fol. 107] the major’ oil companies or the market leaders:

among such companies) or whose _— dealers were not

maintaining such prices.

_ It is stipulated that testimony capiitesinns for the Gov-

ernment would tend, ta establish that a large number’ of re-

.finers and a majority of jobbers s believe that a jobber must

maintain ‘‘ business ethics’’ in order to obtain a license, and

that a number of jobbers believe that jobber li¢ensees are

-required to maintain the prices and abide by the marketing

practices and policies of the majer oil companies.

Supplementary’ investigations of licensed jobbers are_

made from time to time by the defendants and reports

thereon made on the same. report forms as are used for the.

initial investigation. The operations of jobber licensées |

have been investigated: partly to determine whether they

were maintaining the marketing policies, practices and

prices prevailing or ostensibly prevailing in the industry.-

In the corporation’s instructions to its field representatives; -

as states that through these supplementary investigations

“eo

it has been able to correct the Ethyl marketing picture to a

considerable extent and has suecéeded in eliminating from

its jobber-lists some of its former accounts which were not

Yo ae

Some of the division managers and field representatives

have froan/ime to time reported to the jobbers’ suppliers

that jobbérs have not been abiding by the suppliers’ market-

[fol. 108] ing policies and practices, and, there have been

sporadic instances in which representatives of defendant

corporation in cooperatien with the suppliers, have _per-

suadéed jobbers to market gasoline in accordance with the

suppliers’ marketing practices. . ‘

Some applications for Ethyl jobber licenses and a few for

regular gasoline: jobber licenses have heen refused iii

the volume of business of the jobber was not sufficient,

the opinion of defendant corggration, to move the sain

with sufficient rapidity to avoid: deterioration ‘in storage.

A number,of jobber licenses have béen refused, because in.

the opinion of defendant corporation the physical equipment

of the jobber lent itself to the actual or accidental mixing

of ‘different grades or brands of gasoline, or the retail out-

lets of the jobber were shabby: or disreputable im appear-

ance or location, or “ jobber’s reputation i in his community

i 49

. was ed, or tit’ ‘jobber had a record of in evasion, dilution,

substitution or misbranding.

- ° Defendant corporation has issued tien toa number’ of

jobber ‘s who, investigation showed, were not abiding by the

prices prevailing or ostensibly prevailing in the industry

or who were not maintaining retail prices on gasoline posted

generally i im the industry or’ whose retail dealers were nol

[fol. 109] ° maintaining the prices prevailing or ostensibly

prevailing in the industry.

Defendant corporation has investigated the operations of

jobber licensees to determine the method of securing sup-

vlies, gallonage, pump markings, facilities of bulk plant and

nature-of other physical equipment, number, character and

appearance of outlets and sales effort. .-.

Defendants have. not issued any statement or instructions?

to the efféct that they would cancel licenses for the failure

to niaintain ‘business ethies’’ and there has been and is a

great deal of cutting of prices below the posted prices on

-the part of licensed refiners, including matjor ‘oil companies,

‘and licensed jobbers. ‘Jobber licenses have not been can-

celled because of the failuge of a jobber to maintain the

policies, practices and prices of the major oil companies or.

market leaders... There are mumerous instances where

jobber licensees have not followed the marketing practices’

prevailing: or ostensibly prevailing’ in the industry and

where jobber licensees. have not maintained ° retatl prices

posted generally in the industry concerning whom no action

has been taken by defendants. Except i in cases of breach of

license agreement, or where the jobber’s contract with his

supplier had not been terminated (in whith case the jobber’ 8.

[fol. 110] existing license was continued in effect) defendant

corporation in most cases hag granted - a new license to.a

_ jobber whd wanted to change his source of supply, irrespec-

‘tive of the jobber’s maintenance or non-maintemance_of the,

‘< policies, practices and prices of the major oil companies of

/ - market leaders. In:a few instances it has not done so. ; | ~

_ The petition prays that the monopoly, combination and

‘conspiracy described therein-be declared illegal and in-vio- ._

lation of the Sherman Anti-Trust Act; that the defendants

be enjoined from continuing the ‘unlawful -practices -de-

scribed and, particularly, from exacting agreements from

the refiners limiting the sale of lead-treated gasoline to such

jobbers only as-defendants license gr otherwise designate,

and from requiring jobbers to procure licenses.

4— 536

;

‘

;

‘Pheod™aibibete restraints first, upon jobbers..to whom:

The Government,in its brief states that ‘‘this case is con-

cerned only with the legality of that part of the defendants’,

licensing system and practices which ‘relates to gasoline °

jobbers, whereby refiner ‘licensees have each agreed with

defendant cor poration to Sell fluid treated vasoline to such

~ jobbers only as have ree eived licenses: from the-defendant _

corporation.’ ; :

The Government contends that: the deteydants ‘have iin-

licenses have been issued, by compelling them to participate

{fol.111] in agreements or understandings to maintaiti re-

sale prices Mand second, upon jobbers to whom licenses have

been denied, who have been excluded from the market as a

result of defendants’ agreements with the refiner licensees.

First. A price maintenance agreement between a manu-

_facturer or trader ayid his dealers'is torbidden by the Sher

man Act. pat Miles Medical Co. v. Jehn D. Park & Sons \

(o., 220 U. 8S. 373. -The interdiction of the statute extends

to informal ae implied from a eourse of dealing or

other circumstances. United States v. Ac Schrader’s Son;

Ine., 2az2 U.S. 85; Federal Trade Connnission vy. Beech-Nut

Packing ('0., 257 U.S. 441; ef. Frey & Son, Ine. v. Cudahy

- Packing Co., 256 U.S. 208.- No 4mimiinity is conferred by

the fact that the article whose price is being regulated is.a

patented product. Bauer & Cie. v. O'Donnell, 229 U.S. 1,

Straus v. Victor T alking Machine Co., 2483 U.S. 490,

In the abyence of an agreement or understanding between.

them, or of the Suppression’of the freedom of competition

by methods in which the manufacturer secures the coopera-

tion of his distributors and customers, Federal Trade Com-

mission Vv. Beech-Nut Packing Co.; 257 U.S, 441,-455, it is

[ fol. 112] rot milawful for a manufacturer to suggest resale

“prices to. his dealers, refuse to sell goods to those who -do-

hot ‘maintain those prices and announce to the trade that

such ischis policy. United States ve Colgate-& Co., 250 U

300; Frey & Son, Ine. v. Cudahy Packing Co., supra. These

activities are consideredMawful incidents of the right of a

‘*trader or manufacturer engaged in anentirely private busi-

ness freely to exercise hips own inde pendent discretion as to

parties with ser he will deal.’’ United States, v. Colgate.

& Ca., 250.0. 300, 307. .The investigation’ by a manu-:

facturer of a price policies of his déalers is not per se

unlawful; Toledd Pipe-Threading Machine Co. v. Federal!

Trade Commision, 11 F. (2d) 337; Cream of Wheat Co. v.

fyi. ; | ee?

Federal Trade Commission, 14 F, (2d) 40, although when

combjned with other significant facts, it may support a find.

' ing of unlawful price control. Federal Trade C ommisgion

, Beech-Nut Packing Co., supra,

It,is evident that while the distinctions between lawful

and ‘unlawful activities may be quite clear in theory, it is

not always easy in practice to determine whether the trader

has kept within the bounds of his privilege. It is unfortu-

nate, therefore, that the present ease has-been submitted

upon an agreed statement of facts, thus depriving the court

Ifol. 113] of the benefit of the direct testimony of witnesses.

The defendant corporation, although neither a manufac-

turer of, nor trader in, lead-treated gasoline,- concededly

takes an interest in and investigates, the price policies of

its jobber licensees and of applicants for jobber licenses,

and it is also admitted that jobbers have been refused li-

~censes because their price policies were offensive to the.

defendant cor poration. But although a majority of jobber s

believe that a jobber must have maintained resale prices in

order té obtain a jobber license and a number of them also

believe that they are required to. maintain prices after the

-issuance-of a license, ‘there is ho evidence, that the defend-

ants have inféraret any jobber to that effect and it affirma-

tively: appears that’ ‘defendants have not issted any state-

* nent, or instructions that they y wonld cancel licenses for

failure to maintain prices, Moreover, there has been and

isa great deal of price cutting on the part of licensed job-

bers, yet licenses have not been cancelted for that reason,

It ix stipulated that in a number of instantes where Ii-

censes were granted to jobbers whose ‘practices’? were

previously considered unsatisfactory, they were issued after

_representation that Ahe jobbers “harketing practices’?

would be changes; that some of the defendant corporation’s

employees have from time to time reported: to the jobbers’

[fol. 114] suppiiers that jobbers have not been abiding by

the suppliers’ ‘‘marketing policive and practices’ and

that, there have been sporadic instances in which repre-

sentatives of defendant cor poration, in cooperation with the

jobbers” suppliers, bave persuaded jobbers to market gas-

dline in accordance with the suppliers’ ‘‘marketing prac-

tices’, The Government relies heavily upon .these facts.

But. it is not certain that the ‘marketing ‘policies’? and

“marketing practices’? referred to, include ‘price. poli-

cies”) in vi ew: of the separate and apparently distinctive

”

o ict

stipulation of facts defines ‘* business ethies’’ as including.

oO a

use of these terms ‘in the stipulation of facts. Although the

the ‘marketing policies and prevailing prices of the petro-

leum industry’’, it does not state that ** marketing policiés’’

or ‘‘anarketing practices’’- are synonymous with ** price

policies ”’. :

A clear cake of price maintenance thus is ‘nat made out,

“especially in view of the indefinite language of thé stipula-

tion. That an agreement or understanding for the main-

Co. 297 Fed. 791; ef

tenance of prices existed, between defendants and their job-

ber licensees is perhaps a’ permissible but not. a necessary

conclusion from. the stipulated facts. As the case can be

; disposed of on other grounds, it is unnec essary to pass upon

this issue. : 2°

[fol. 115] Seeond. ni he ‘Ethyl Gasoline Corporation has

entered into license agreements with approximately 123 re-

finers, who together refine and sell about 58% of all the

gasoline sold in the United States. These include all except:

one of the major refiners in this country. Eath of the

refiner license agreements provides. that lead-“treated gus-

oline may ‘be sold to those jobbers only who are licensed: by:

the defendant corporation and this provision is‘almost i

variably complied with by the refiner licensees. Since the

de fendants have denied numerous applic ations for jobber

licenses, many persons desiring to engage as jobbers in the

sale of lead-treated gasoline, which comprises about 70%

A all the gasoline manufactured and sold in the United

ates, have been exfiuded from the niarket. The unsatis-

fae tory business Ahic ‘s’? of the jobbers has been the prin-

cipal reason for such éxclusien.

This ‘prevision of the refiner leense agreements clearly

ix in restraint of trade. Each agreetient calls for cooper-

ative action between the defendant corporation and its re-

finer licensee in the exchision of unlicensed jobbers: from

the market. | White a gaanufacturer or trader may. refuse

to deal with those who'd not observe the resale prices sug-

gested by him, heanay not combine or enter into agreements:

| fol. 116} with inte rmediate distributors to cut off the Sup- °

plies of such dealers. Victor Talking Machine Co. v.

Kemeny, 271 Fed. eg Neto v. Victor Talking Machine

ederal Trade Commission v. Beech

Nat Packing Co,, supra. Although this record may not war-

rant a finding that the refiner licetisees have entéred- into

a combination or cas aan od with each other and with the

1 .

” 53

‘defendants, the conceded facts are that’one hundred and

twenty-three -exclusion agreements have been séparately

made by the defendants and their‘ refiner licensees. - Each °

‘such agr eonient deprives the unlicensed jobber of, one source

of supply, while the aggregation of agreements deprives

liim of all-access to the lead-treated gasoline market. De-

fendants, through these separate agreements, have aeccom-

plished what the refiners, without the defendants’ aid, could |

achieve only by a concerted refusal to deal with the jobbers

who did not maintain ** business cthies’’. The defendants

can fare no better with their system of separate agreements

than eould the refiners if they formed such a combination...

“See. Dr. Miles Medical Co. v. John D. Park & Sons, 220 .

UL S. 375, 408. The agreements between the defendants

ind their refiner’ licensees accordingly constitute a forbid-

den restraint of trade. Cf. Straus v. American Publishers’

Association, 231 U.S: 222; astern States Retai Lumber

[fol. 117] Dealers’ Associetion v. United States, 234 U. S.

600; Binderup v. Pathe Exchange, 263 U. S. 291; United

—s v. American Livestock Commission Ce., 279 U. S.:

435; United States v. First National Pictures, Inc., 282

U; S. 44; United States v. Sugar Institute, 297 U.S. 353.

‘The defendants, attempting to establish the reasonable-

ness of their actions, Standard Oil Co. v. United States, 221

U.S. 1; United States v. Amivrican Tobaeco Co., 221 U.S.

106; Sugar Institute, <P 4, United States, 297 U.S. 553;

Interstate Cirenit, Inc. ¥. United States, decided by the

Supreme Court Pobriary ‘13, 1939, contend that they have

the right to require that jobbers dealing-in lead-tre: ited vas-

oline be licensed, in order to presérve the trade-marks, good

will and reputation of defendant corporation in lead-treated

vesoline, to protect the public from adulteration and to

secure compliance with the regulations proposed by the Sur- '

xeon General of the United States governing -the sale of

lead-treated gasoline to the public. These objectives, how-

ever ae no relation to, and, in the absence of statutory

permission, do not require or justify, the exclusion from the”

inarket of jobbers because their-marketing or price policies

are repugnant to the defendants. It is because the cefengl-

‘ants have not confined themselves to the attainment of the

ends mentioned but have used their licensing system for

other purposes that the Government seeks to restrain their

[fol. 118]: licensing activities. Cf. Sugar Institute, Ine. v.

United States, 297 U. S. 553, 599, 601.

Defendants iad. that they are . vitally interested in

‘protecting the health-of persons handling lead-treated gas-

oline and in securing eompliance with the regulations pro- .

posed by the Surgeon General .of the United States. While

it may be true, as the Government.contends, that the health-

hazard ‘relates to the handling of the tetraethy]! fluid itself

and not to the fluid-treated gasoline, the court cam not say

‘that the defendants have not: a legitimate interest in the

maintenance of lead warning notices on the pumps from

which treated gasoline is dispensed to the public, which ap-

parently is the only one of such health regulations appli-

cable to the handling and distribution of treated gasoline

by jobbers. ; |

The refiner licenses contain a provision, which is not.

attacked in this suit, requiring refiners, first, to obligate

their jobbers to comply with the health regulations. and to

impose similar obligations upon. purchasers from them for

‘resale, and second, to reserve the right to cancel contracts

of sale in the event that the jobber does not comply with

such regulations. Defendants contend that the refiner has

been tried and found wanting, but this apparently was due

[fol. 119] to an.unwillingness on the part of refiners to con-

_ duct their own investigations of the jobbers’ retail outlets.

There does riot appear to be any reason why this provision

in the refiner license agreements can ‘not accomplish its pur-

pose when supplemented by investigatyons Conducted by the

defe ndant corporation itself, just as is presently done. Fhe

‘court is not concerned with determining de fendants’ future

policies. or practices regardiug the’ enforcement of these

health regulations, but the court is Satisfied that the jobber

licensing system is not the only method by. which: observ:

ance of the health Feeulations by jobbers can be enforced.

-Moreover, as the Government points out, there would seen?

ta be a complete’ absence of anv temptatfon on the part of

jobbers to, avoid compliance with the regulations coneern-

ing lead’ warting signs since these signs are supplied by

the Ethyl corporation at a-charge of only Seven cents each.

It is equaliy evident that whatever interests the defend-

ant cerporation has in preventing dilution, adulteration

and deterioration of treated gasoline in the hands of job-

‘bers may be protected without any resort to the jobber

a nse device. Cf. International Busmess Machines Corp.

wU nited States, 298 U: S. 131, 139, 140.

as |

;

rT 2

pie i AR ed i Bin ing tl dD ea ie

Defendants seek to avoid the effect of the anti-trust laws ,

[fol. 120] and to support their requirement that jobbers be

licensed on the ground that they are merely taking advan-

tage of their patent rights, relying upon the nature of

patent monopoly and the decision of the Supreme C ourt in

United States v. General Electric Co., 272 U. S. 476.

‘The defendant corporation. concededly is entitled to the

full benefit of its patents. But the rights which attach to

the ownership of a patent are not limitless. The courts

have frequently defined and limited the scope of the patent

monopoly. >

In the-General Electric case, 272 U. S. 476, 489, 490, the

Supreme Court established the principle that a patentee

may grant.a license ‘fupon any condition the performance

of which is reasonably within the reward which the patentee

by the grant_of the patent is entitled to secure,’’? and may

restrict the Selling of the patented article by: his licensee

- by limiting the method of sale.and the price, ‘‘provided the |

conditions of sale are normally and reasonably adapted to

secure pecuntary reward for the patentee’s monopoly. ”” See

also General Talking Pictures Co. v. Western Electric Ca.,

305 U.S, 124,127. The reasonimg in both eases establishes.

that the legality of the conditions imposed by the. patentee

upon his licensee is a question to be determined by the

court and not, as contended by defendants, a question of

~ [fof 121] poliev reserved for: the judgment of the patentee. ,

In the General lectric-case both the patent owner and its

licensee mantfactured and sold the patented product. “The.

court merely decided that the patent owner couid fix the:

prices and preseribe the method of sale of the patented

prodnet manufactured by the lcensee in order to sustain

the prices af which the former sold the patented product.

See EK. Bement & Sonx’v, National Harrow Co., 186 U.S.

70; Mraight Side Bisket Corp. v. Webster. Basket Co., 82:

F. (2d) 245, 246.

The defendant corporation does not charge any rovalty

for the use of its patents, aor does it manufacture, refine

or sell any gasoline,- whether treated with fluid or not. It

is engaged only in the sale of fluid and derives its profits |

solely from the sale of fluid to its refiner licensees. Its

pecuniary interest, if any, in the marketing and price poli-

cies of the jobbers selling gasoline is obviously very remote.

(f. Dr. Miles Medical Co. y. John D. Park & Sons Co., 220

U. S. 373, 407; Bauer & Cie. v. O’Donnell, 229 U. S. i, 16.

‘sales of treated gasoline by refiners to licensed jobbers so

“monapoly.”* United: States v. General lect ric Cg, 202

refiner licensees, apparently without consulting the defend-

fel. 1228] who do not maintain ‘business ethies’’, the court

‘tion is not selecting its own customers when it determines

56.

Moreover, the Ethyl Gasoline Gerporation does not. itself

determine the prices or policies, the failure “to abide by

which has often resulted in the denial of a: jobber license.

They are the prices and policies established by some of the.

[fol. 122] ant corporation. ‘There is no evidence that the

refiner licensees can not adequately protect such interests

as they may lawfully have in the maintenance of the resale -

prices of their jobber customers, without any intervention

by the Ethyl corporation. : |

General Talking Pictures Co, v. Western Electric Co.

supra, involved a limitation. in a dicehfse to manufacture |

and sell a patented product, rest ricling the licénsee to sales

of the*product for private-use in radio reception, as dis-

tinguished froin Commercial use in talking picture equip-

ment. Since the patentee therein retained the’ right to,

license other persons to-manufacture and sell the product

for use in the conimercial field, the limitation obviously bore

a direct relation to the patentee’s pecutiary reward. The

Ethyl Gasoline Corporation, however, does not restrict

as to enable it to exploit sales to the excluded group in. some

other wat.” Rather its restrictions result. in the perpetual

exelusion of nontlicensed jobbers from.the market: of lead-

treated Gasoline, thus depriving. its refiner licensees of the,

opportunity to sel] to the excluded group. -

Miso far, there fore, as the provisions of the refiner license

agreements are used fo excludy from the market jobbers

believes that they are not conditions ** normally and reason-

ably adapted to secnre pecuniary reward for the patentee’s

U.S. 476, 490, : : /

The defendant corporation attempts to identity its posi-

tion with that of?a manufacturer or trader and contends,

that, as the latter possesses the privilege ‘of se ‘lecting his.

own customers, see United States v. Colgate & Co., 250 ULS.

300, so the defendant corporation may select the jobbers to

he Hieensed, upon any hasis’satisfactory to itself. This argu-

ment, however, ignares the fact that the defendant corpora-

what jobbers may sell Jead-treated gasoline. The Etliy!

Gasoline Corporation, manufactures tetraethy! fluid; its sole

‘customers are its refiner licensees. Its selection of refiner

“-

noe ae

licensees is not under attack.. The jobber is in no sense-a

dealer in the article manufactured by this corporation. The

jobber is a dealer in lead-treatéd gasoline, of which the de-

fendant corporation produces merely an ingredient, It is

the refiner and not the Ethy! Gasoline Corporation, who

produces lead-treated gasoline. The government does not

. question the right of each refiner licensee to make an ‘inde-

[fol..124] pendent selection of his jobber customers.

The facts of the case do not fall.within the permissive pro-

‘visions of the amendment to section one of the Sherman

Anti-Trust Act effected by the Act of August 17, 1937, 50 -

Stat. 693, 15 U. S. Code, See: 1, and the defendants do not

contend that this amendment has any “application to the

facts of this case.

-The court accordingly is of the opinion that the ane:

ments. between the Ethyl Gasoline Corporation and its

refiner licensees restricting sales of treated gasoline to those

jobbers only whom the former licenses, unre: asonably re-

_ Strain trade and are violative of the Sherman Anti- Trust

Act. ;

The defendants accordingly will be enjoined from re-

quiring jobbers to procure licensés for handling lead- treated

wasoline and from requiring. refiners to’ sell lead-treated

* gasoline to: such jobbers otily as defendant nese

" licenses or otherwise designates.

Submit proposed findings of fact and conclusions of law

in accordance herewith. °

May 19, 1939. ;

Wm. Bondy, United States District Judge.

‘{fol.125] Ix Unireép Srares Districr Court

[ Title omitted] — aed

Findings of Fact and Conclusions of Law

Pursuant to: ‘Rule 52 (a) of the Rules of Civil Procedure,

i find the facts specially and state separately by my ¢on-

clusions of. law thereon, follows: ww

Fispincs or Fact

The parties in this cause having entered into a stipula--—

‘tion which provides that the issues -.raised by the pleadings

. Z ? i f

should be determined without the introduction of other

evidence on @be basis of the facts as therein stipulated, I.

‘ adopt, find, and incorporate herein by reference the facts

as stipulated by the parties and find: » | °

1. By providing that the. refiner licensee ‘may sell lead-

treated gasoline only to those jobbers who are: licensed by

the defendant corporation, each refiner license agreement

calls for cooperative action between the defendant corpo:

ration and its refiner licensee in the exclusion of unlicensed

jobbers from dealing or trading in lead-treated gasoline.

The 123 refiner license agreements: have been separately

made by the defendants and their refiner licensees. Each

‘such dtreement deprives the unlicensed jobber of one source

of supply, while the aggregation of agreements deprives him

of all ace ess to the lead-treated gasoline market as a jobber. -_

Many persons desiring to engage as jobbers i in ‘the sale

of hes treated gasoline, which comprises about 70% of all

the gasoline. manufactured and sold in the United States,

have been excluded from the market by defendant corpora- -

‘tion. The. rages wey ‘‘business ethies’’ of the jobbers

has been the prMcipal reason for such exclusion. ile

[ fol. 126] a. Defendant corporation in phalélsterinn its

jobber licensing system has not confined itself to employing

it for the purpose of préserving the trade marks, edod. cho

er reputation of defendant; corporation in lead-treated gas

oline, protecting the public from adulteration, or securing

compliance with the regulations proposed by the Surgeon .

General of the United States: governing, the sale of lead-

treated gasoline to-the publie,

- 4. Exclusion from the market of jobbers because their

marketing or price policies are repugnant to the defendants

bears no re ationcto,-and. is not required for the purpose of,

preserving the trade marks, good will or reputation of de-

fendant corporation in lead-treated gasoline, protecting the

public from adulteration, or securing compliance with the

regulations proposed by the Surgeon General of the United

_ States governing the sale of lead-treated gasoline Bas the

cageang ae

ifaintonanee of Warning notices on the pumps from’

whieh lead-treated gasoline i is dispensed to the public is the

only one of the health regulations proposed by iota

General of the United States which is applicable to the

handling a cigtribaten of lead- treated sane by job-

bers. ;

6: It can not be said that the deena gut a legiti-

mate: interest in the maintenance of lead warning notices

on such pumps, Defendants’ system of licensing— jobbers

‘is not the only method by which observance by jobbers of,

the health regulations proposed by the Surgeon General .

can be enforced.

7. Jobbers are under no bandits to avoid compliance

with the regulation proposed by the Surgeon General of the

United | States concerning lead warning signs, since these

signs are supplied by the Ethyl corporation at a charge

of only seven.cents each.

8. W hatever interests the. defendant. corporation has in

preventing dilution,‘ adulteration or deterioration of lead-

treated gasoline in the hands of jobbers may be protected

pai resort to the jobber licensing device.

. The defendant corporation does not charge any rovalty

tor ‘the use of its patents, nor does it manufacture, refine

or sell any gasoline, whether treated with ethyl! fluid or not.

[fol. 127]. It is engaged only in the sale of ethyl fluid and

“derites its profits solely from the sale of ethyl fluid to its.

refiner. licensees. The defendant corporation’s pecuniary

interest, if any, in the marketing and price policies of the

jobbers selling lead-treated gasoline is very remote. ~

10. The defendant corporation does not itself determine

the prices or policies, the failure to abide by which has often

resulted in the denial of a jobber license. They are the prices -

and policies established by some of the refiner licensees.

Sagpiges

11. There is no evidence that the refiner licensees can not

adequately protect. such interests as they may lawfully have

in the maintenance of resale prices by’ their jobber custo-

mers, without any intervention by the defendant corpo-

ration. ‘

12. The refiners, wt the defendant corporation, produce

lead-treated gasoline; jobbérs are the customers of the re-

finers, not of the defendant corporation; and the latter is

not selecting its own customers when it. determines what _

jobbers may sell lead-treated gasoline. _ ay <

13. There is no evidence that the defendants have in-

formed any jobber -to the effect that a jobber must have

- maintained resale prices in order to obtain a jobber license or

that they have informed any jobber that jobbers are re-

quired to maintain priées after the issuance of a license.

14. There has been and is a great deal of price cutting on

the part of licensed jobbers,-yet licenses have not been can-

celled for that reason.

15. The petitioner Nine failed to establish a donk case of

‘price maintenance through agreement: or understanding.

with jebbers. = Fe _¢

ConeLt sions or Law - ‘: .

1. The court has jurisdiction of this cause under the pro- -

visions of the Act of July 2, 1890 entitled ‘‘An Act to Protect.

Trade and Commerce Against Unlawful Re@raints and

Monopolies’ Pe

2. A eenndadninnt or trader 1 may refuse to deal with those .

who do not observe the resale prices suggested by hiin, but

he may not combine or enter into agreements with inter-

mediate distr ibutor s-to cut off-the supplies of such dealers.

[fol. 1 28] 3. The defendants, through thei 123 separate

agreements with their refiner licensees excluding unlicensed °

jobbers from.the market of lead-treated gagBline, have ac-

complished. what the refiners, without the defendants’ aide

could achieve only by a concerted refusal ‘to deal with the

jobbers who did not maintain ‘* business ethies’’ but the de-

fendants can fare no better with their sxstem of Separate

agreements than could the refiners ‘if they formed stich a

combination.

a 2 The question whether conditions imposed by a patentée .

upor a licensee are pormatly and réasonably adapted to

secure pecuniary reward to whie h the patentee i is.entitled by

reason of the patent monopoly i is a question to be deter ming

by the Court under all the circumstances of the case and is

not a question. of policy reseryed for the judgment of the

patentee.

: re | ce ‘= he

, 5. Insofar as the provisions of the refinér license agree-

~ nients are used to exclude. from the lead-treated gasoline

market jobbers who do not maintain ‘‘business ethies”’ , they

| are not conditions normally and reasonably adapted to

| secure’ pecuniary reward. for the defendant. corporation’s

| patent monopoly and they are nét within any privileges or

+ immunities which the patent law confers s upon-the def endant

{ corporation by virtue of its patents. .

- 6. The eHedtive prevention of wincbeilnis of jobbers from

the business. of ,marketing lead-treated gasoline because

their price policies, marketing policies and practiees are re-—

pugnant to the defendants requires that the entire jobber

licensing system of defendant corporation be abolished and

rnin, << — °

. The defendants by requiring refiner licensees to whom,

las sell ethyl fluid to-agree to séll gasoline tr cated with this ,

fluid to those jobbers only who are licensed by thé defend-—

ant corporation to distribute such treated gaxoline, having > .

entered into agreements in un: ‘fasonable 1 ‘estraint of inter-

state trade and*commerce, in violation of said act of July 2

1890,

> 8, The petitioner is entitled to an injunction restraining

the defendants from enforcing or attempting to enforce any

provisions in their licensing agreements with refiners which

require said refiners not to.sell lead- treated gasoline to job-

bers who do not hold a license from the defendant corpo- :

ration. LO. ; ~ -

§ The petitionee is entitled to an injunction restraining

the defendants from requiring ae goin to procure licenses

{fol. 129}.-for handling lead-treated gaseline, and from re-

. quiring refiners not to sell lead-tres ated gasoline to jobbers

Who do not hold‘a license from the defendant corporation,

and from entering into any combination. or conspiracy in

restraint of interstate trade or commerce similar to that

herein déelared to be illegal. 7

Wm. pany: United States District Judge.

. ‘August 14th, 1939.

“a tan

Fe ant corporation to sell lead-treated- gasoline; have ‘enter ed *

- who does not hold a license- -from the defendant po gpa he

——— . F

_ said provisions and give due writtén,notice, within twenty

“%

fendant corporation to jobbers purporting to anthorize- jc - .

d - « pa 4 os t — ; :

re etme re”

> ° . *

fol. 1301, ix Unirep "sete District Covkr FOK THE -

‘.@ Sovrnern “Disraiet gr New Yori

Sema | ete In Kquity: No, “B43: 21 Sa " Cr) *o

”

ev. Pp ¢ , ae

J! ™Unrrep Srates. or Amenica, Petitioner,

»f * s .?

e raha th 8 Ve . ,

“3h > ad

rare (ASOLINE Corporation, ‘Fane WwW. W dsp and Joun ‘

o yy >’ ° »Coarp Tayvor,: Defendants. ae

oe age ope

- Fran Decree.

6 ‘e

“This cause having come On for hearing befare this Court

upon the pleadings and the agreed-statement of facts, and

having ‘been argued by counsel, and, the Court having filed

its-opinion hereiagen the 19th day, of May 1939, .

ba ‘isehereby orale, Adjudged and Decreed as follow’s:

I: That the defendants, Ethy] Gasoline Corporation,

Earle W: Webb and John Coard Tay lor, by requiring the re-

finer licensees to-whom they sell the ethy] fluid which the dée-

fendant gorporation. iatiufactures to agree not to sell gaso-

. linestreated: with saidSethyl, fluid (sueh gasoline being; re-

‘ferred to herein as lead: treated gasoline) to any a .

other. reseller, who does not hold a license from the defend-

into agreements: in restraint of interstate trade and com-

“merece in violation of an act of Congress approved. July 2,

1890, entitled ‘‘An act. to Protect. Trade and Commeres

‘against U naw ful Restraints and Monopolies”. aes,

IT. That the provisions of each license agreement. now in’

"elect t bétween the defendant corporation add its refiner li-

censees which. prohibit, or purport to prohibit, the yefiner

licensee from. selling lead- treated, gasoline’fo any. jobber

to sell’ lead-treated gasoline are illegal, null and void, and ~

[fol. 131} that the defendant corporation forthwith cancel

(20) days from the date of this ‘deer¢e, to each such refiner’:

licensee that the said provisions have been, cancelled aud ayes

of no effect.’ oe Sica BO ba RS rhs y YS,

‘

Ill. That all licenses ; now outstanding issued by the de-

"6B

bers. to sell lead-treated. ‘ieiiitiis are “Hiewal, null. and void,

atid that the defendant corporation forthwith cancel said

‘licenses and %ive due written notice, within sixty (6@) days

‘license with sue). jobber has beer? cancelled and is‘ of no ef-

feet, together with a true copy of this ees 2 SO:

¢s

IV. That the defendant ‘corporation and _ its vgicers,

agents, fepresentatives and employees, and each sincditin

defendant, be, and they oe perpetually onioined

restrained :

(1), From enforeing or attempting to ‘eifisies any ae

_ Vision in any license agreement between the defendant éor-

. poration md any refiner of gasoline which prohibits or pur- .

' ports to prohibit the refiner licensee from selling lead-treated — . a

gasoline to any jobber, or other reseljer, who does not hold y's

a ticense from 'the defendant cor poration to sell lead- treated»

gasoline. . ;

corporation” may hereafter enter into or offer to enter into |

With any refiner that the refiner shall not sell lead: -trgated -

‘ gasolizie to any jobber, or other reseller, who does not hold

i license from the defendant ‘corporation to sell lead- treated

gasoline. =. .

(3) From vinboveliier on abninalia: ‘is épforee the’ pros.

visions of any agreement by which the def@@dant corpora- -) |

tion licenses or purports to license any jobber, or other *

reseller, to sell lead-treated gasoline. eo ; re

vy:

(4) From requiring or attempting to require that jobbers,. La

or other resellers, procure a license from the defendant cor-”

poration to sell lead-treated gasoline in,order ter be able to”

huy, sell or otherwise deal in lead- treated gaseline as jobber Be

or as ofher resellers. | ee 4) :

(>) Prom entering: into or carrying out any agr coment i rN

restraint of interstate tradé- 6r commerce shnilar to the Pn

_ agreements declared to be illegal fn paragraph I of this Ae; oe f

, cree, or ayy. combination or conspiracy of similar character. cow!

a V. Phat jurisdiction, of this cause is hereby retained for

I fol. 132] the: urpose of enforcing this decree and of mak-

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