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of America, which furnished the Cleveland Company with aluminum ingots, desired to lessen competition or to broaden the monopoly of rolling aluminum sheets, all it had to do was to do nothing and allow the losing mill to drop out of business. On the other hand, if it desired to continue the mill as an ingot consumer and to increase the production of aluminum sheets, its only course was to enlarge the mill and increase its production. Such enlargement the Cleveland Company, after its disastrous venture, was unwilling to make itself, but was willing to contribute a minor part if the Aluminum Company would contribute the major part of the funds to enlarge.

What was really done was that the Aluminum Company formed a new company, and by taking the major stock thereof made the new company a subsidiary company of its own, the Cleveland Company becoming a minority stockholder, its mill being taken in part payment for such minority stock. Such was the simple business proposition; a losing plant, enlargement, and increased production, the Aluminum Company forming a subsidiary to take over and enlarge the business and the Cleveland Company contributing the mill and the minority of the money needed to effect enlargement. In point of fact, the situation was in no respect different than it would have been had the Aluminum Company bought the losing mill from the Cleveland Company and itself furnished the entire funds to capitalize the new subsidiary company. In my judgment, the present situation did not fall within the terms of either of the quoted paragraphs, was not an acquisition of stock such as the act contemplated, or one over which jurisdiction was conferred on the Trade Commission by the act. Nor does the construction which is thus given the act create a remediless situation, for, manifestly, if wrong was done, if this transaction was a subterfuge to lessen competition or to create a monopoly, the existing trust laws would have applied. And, indeed, the District Court of the United States for the Western District of Pennsylvania having theretofore taken jurisdiction of a bill fled by the United States against the Aluminum Company of America, the Attorney General by proper proceeding in that case could have, and can now prevent that company taking this step if it tended to lessen competition or create a monopoly. And this prior, general, and effective jurisdiction of courts over such matters Congress recognized when it created a Trade Commission of defined and limited power by providing in the act: “ This section shall not apply to corporations purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the

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formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen competition," and at the same time making it clear “That nothing in this section shall be held or construed to authorize or make lawful anything heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal provisions thereof or the civil remedies therein provided."

Being of opinion the case was one to which the limited jurisdiction of the Trade Commission was not extended by the act of Congress, I respectfully record this my dissent.



(Circuit Court of Appeals, Third Circuit. July 14, 1922.)

Nos. 2599, 2609, 2632.



Аст. If the practice of wholesale dealers in gasoline in loaning or leasing without rental to many thousands of retailers, throughout a territory comprising more than half the population of the United States, equipment for the storage, measurement, and delivery of gasoline, on their agreement to use it exclusively for the storage and handling of gasoline purchased from the wholesaler, is illegal, it so affects the public as to authorize proceedings under Federal Trade Commission act, paragraph 5 (Comp. St., par. 8836e), providing for a proceeding when it shall appear to the commission that such a proceeding would be to



STORING LENDER'S GASOLINE HELD Not UNFAIR COMPETITION. The loan or lease without rental by wholesalers to retailers of equipment for the storage, measurement, and delivery of gasoline on the retailer's agreement to use it solely for gasoline purchased from the lender, but without any agreement not to purchase gasoline from others, does not constitute unfair competition under Trade Commission act, paragraph 5 (Comp. St.,

• Affirmed in Sinclair Refining Co. et al. v. Federal Trade Commission, April 9, 1923, 261 U. S. 463, 43 Sup. Ct. 450.

par. 8836e), and Clayton Act, paragraph 3 (Comp. St., par. 8835c), as to the public, other wholesalers, retailers, or manu

facturers of such equipment. 3. MONOPOLIES KEY No. 10—SCOPE OF CLAYTON ACT DEFINED.

The Clayton Act seeks to reach monopolies in their incipiency and stop their growth, but is not intended to reach every remote lessening of competition, or every dim or uncertain tendency to monopoly, or any possible lessening of competition, or possible creation of monopoly, but only acts which probably lessen

competition substantially and actually tend to create a monopoly. 4. MONOPOLIES KEY No. 12 (2)—LEASE OF MACHINERY ON AGREE


BY ITS EFFECT AS WELL AS BY ITS TERMS. Under Clayton Act, paragraph 3 (Comp. St., par. 8835c), declaring it unlawful to lease machinery, etc., on the agreement or understanding that the lessee shall not use or deal in the goods, etc., of competitors of the lessor, where the effect may be to substantially lessen competition or tend to create a monopoly, such a tying contract is to be construed, not by its terms alone, but by its effect as well.

(The syllabus is taken from 282 Fed. 81.) Petitions for Review from Federal Trade Commission.

Original petitions by the Standard Oil Co., by the Gulf Refining Co., and by the Maloney Oil & Manufacturing Co. to set aside orders of the Federal Trade Commission. Orders set aside and complaints dismissed.

James H. Hayes and Chester 0. Swain, both of New York City, for Standard Oil Co.

W. J. Guthrie, of Pittsburgh, Pa., for Gulf Refining Co.

Herbert B. Fuller, of Cleveland, Ohio, for Maloney Oil & Manufacturing Co.

E. W. Burr and Adrien F. Busick, both of Washington, D. C., for Federal Trade Commission.

Before Woolley and Davis, Circuit Judges, and Morris, District Judge, Morris, J., dissenting in part.

WOOLLEY, Circuit Judge:

In these proceedings we are asked to review and set aside three orders of the Federal Trade Commission commanding the petitioning corporations forever to cease and desist from a practice found by the commission to violate section 5 of the act creating the Federal Trade Commission (38 Stat. 717, 719) and section 3 of the Clayton Act (38 Stat. 730, 731). The applicable provisions of these statutes are, in the first, “ That unfair inethods of competition in commerce are

* unlawful," and in the second, "That it shall be unlawful for any person engaged in commerce

to lease 80044°—24—VOL 5















or make a sale

of goods, machinery,

or other commodities the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, machinery,

or other commodities of competitors of the lessor or seller, where the effect of such lease or sale, * or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.”

These are three of a large number of cases involving the same practice. They were tried in three groups. The testimony in one group bore most directly on gasoline marketing in States along the Atlantic seaboard. In another it related particularly to business done by companies within the State of Ohio. In the third it concerned business farther west. As the testimony in all cases was in the main identical, the 12 comprising the eastern group (which includes the cases at bar) were combined and heard together.

The testimony discloses a practice which has been widely pursued in the eastern part of the United States by corporations refining and marketing gasoline. It consists of what is practically a loan, or technically a lease without rental, by a wholesaler to a retailer, of equipment for the temporary storage, measurement, and delivery of gasoline to the consuming public. The practice extends mainly to the retailer whose place of business is referred to as a "curb filling station. The leased

. equipment is known as a "curb pump outfit” and comprises a sunken tank for the storage of gasoline and a pump of familiar design by which gasoline is drawn from the tank and delivered to motor vehicles. The retailer is the proprietor of the station and is generally engaged in some other business. Typical of his class are keepers of country stores, residents in hamlets and at crossroads, and farmers. The practice does not relate to retail stations owned and managed by the refining and marketing companies themselves. These are the more elaborate affairs, also familiar to the public and generally known as “ service stations." Proprietors of garages comprise an intermediate class of retailers to whom the practice in some measure extends.

The practice held by the commission to offend against the statutes is found wholly within the terms of the leasing contracts. The form of the contract is important in two respects: First, in what the wholesaler requires the retailer to do; and second, in what it does not require him to do. The form of contract used by the Standard Oil Company is identical in substance with contracts used by the other petitioners. Paraphrased, it is as follows:

Reciting by preamble that the retailer is now purchasing gasoline from the wholesaler for sale to its customers and has requested it to install on his premises equipment for the better storage and handling of the gasoline so purchased, and that in compliance with his request the wholesaler is about to make the installation; it is agreed between them that the equipment shall be used solely for the storage and handling of motor gasoline purchased by the ” retailer from the wholesaler. Then follow undertakings by the retailer that he will maintain the equipment in good condition at his own cost; that he will not encumber or remove it or permit it to be seized or taken in execution; and that he will indemnify the wholesaler from liability for injuries occasioned by leakage, fire, or explosion of gasoline. The contract concludes with four provisions for its termination: First, upon the use of the equipment by the retailer for any other purpose than the storage and handling of gasoline purchased from the wholesaler; second, upon the retailer's failure for 30 days to purchase gasoline from the wholesaler; third, upon the sale of the premises by the retailer; and fourth, by either party upon 5 days' notice in writing to the other party; with the right of the wholesaler in any event to enter upon the premises and remove the equipment.

Having stated what the contract requires the retailer to do, the things which it does not require of him are equally important. The first is he is not required to pay any license fee, rental, or other thing for the use of the equipment; nor is he restricted in his business to the equipment covered by the contract. On the contrary, he may use other equipment leased by competing wholesalers or purchased by himself. Nor does the contract expressly tie him to the wholesaler's products. He may freely deal in gasoline or other petroleum products purchased from competing wholesalers. He may not, however, use the equipment of the contract for storing and handling a competitor's gasoline.

In justification of their practice the petitioners maintain that the curb pump outfit is a natural development of the oil industry. In this industry the distribution and marketing of petroleum products more or less volatile and therefore more or less dangerous has always been a serious problem. The petitioners point out that for many years kerosene and other less volatile oils have been sold to retailers in barrels or direct to householders in cans. The barrels and cans being the property of the wholesaler are returned when the contents are removed. When the market for gasoline and more volatile oils developed, the wholesaler for safety shipped them to the retailer in steel barrels or drums. These also remained the property of the wholesaler and were returned when empty. With the marvelous increase of motor vehicles in all sections, urban and rural, there came a corresponding necessity for wider distribution of gasoline. Distribution from large central reservoirs to dis

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