FORM XVII.-PETITION UNDER ANTI-MONOPOLY LAW.

[Sustained 238 U. S. 516.]

IN DISTRICT COURT OF THE UNITED STATES FOR THE
DISTRICT OF NEW JERSEY.

THE UNITED STATES OF AMERICA, PETITIONER,

V.

THE DELAWARE, LACKAWANNA & WESTERN RAILROAD COMPANY AND THE DELAWARE, LACKAWANNA & WESTERN COAL COMPANY, DEFENDANTS.

ORIGINAL PETITION.

To the honorable the judges of the District Court of the United States for the District of New Jersey sitting in equity.

I. Your petitioner, the United States of America, by John B. Vreeland, its attorney for the district of New Jersey, acting under the direction of the Attorney General, brings this proceeding in equity against The Delaware, Lackawanna & Western Railroad Company, a Pennsylvania corporation, and The Delaware, Lackawanna & Western Coal Company, a New Jersey corporation, for the purpose of preventing and restraining them from further violating the provisions of the act of Congress approved July 2, 1890, entitled "An act to protect trade and commerce against unlawful restraints and monopolies" (the antitrust act) and also the provisions of the commodities clause of section 1 of the act to regulate commerce as amended June 29, 1906 (34 Stat. 584), which prohibit a railroad company from transporting in interstate or foreign commerce articles or commodities, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole, or in part, or in which it may have an interest, direct or indirect, except those intended for use in its business as a common carrier. And upon information and belief, your petitioner alleges and showsII. Defendant, The Delaware, Lackawanna & Western Coal Company, is a corporation organized and existing under the laws of New Jersey, with its principal office at Hoboken therein and outstanding capital stock of $6,590,700. Among the objects for which it was established and the perpetual powers granted to it are the following shortly stated: To purchase, mine, produce, prepare, manufacture, and sell or deal in coal, coke, and other commodities and to act as sales and purchasing agent or factor of other corporations. To purchase, buy, or lease coal or ore mines and all manner of interest in lands, and to develop, improve, lease, and dispose of the same. To buy, build, construct, or otherwise, acquire and maintain and operate piers, docks, and all necessary conveniences and means of transportation incidental to carrying on the business of buying, selling, and trafficking in coal and other commodities and for the development and operation of lands and mines. To acquire by purchase or otherwise

and to hold as investments and to guarantee the principal, interest, and dividends of the bonds or shares of other corporations. To aid any corporation or association whose securities it may hold and to conduct its business in the State of New Jersey and in all other states and foreign countries. It is now and, since the second day of August, 1909, has been engaged in the business of dealing in anthracite coal within the states of New Jersey, Pennsylvania and New York at the various places, towns, and cities reached by the lines of The Delaware, Lackawanna & Western Railroad, especially at Hoboken, New Jersey, where are situated the New York harbor terminals to which that railroad constantly transports from the mines in Pennsylvania large quantities (to wit, 3,000,000 tons per annum) of the coals accepted there by the defendant coal company under the terms of the agreement hereinafter described. It also has agents and of ficers in other states and carries on business therein.

The Delaware, Lackawanna & Western Railroad Company is a corporation duly organized and existing under and by virtue of the laws of Pennsylvania, with offices therein at Scranton, also in New York City, and within this judicial district. It is authorized by its franchises to carry on the business of a common carrier, to own and operate coal mines in the State of Pennsylvania, and to buy and sell coal. For a long time it has owned, leased, and operated as one system of lines of railroad in the states of New Jersey, Pennsylvania, and New York, connecting among other places therein Hoboken, Scranton and Northumberland, and Utica, Binghamton, Oswego, and Buffalo; also many lateral and branch lines, some of which reach the anthracite coal mines owned by it and also some owned by others lying within the counties of Lackawanna and Luzerne, Pennsylvania, and in the Wyoming region of the anthracite and coal fields. Over such lines this defendant is now and for thirty years and more last past has been engaged in interstate and foreign commerce as a common carrier of passengers and freight, especially of anthracite coal not intended for its own use. Over some of them it has been so engaged for more than fifty years. It likewise owns and operates a fleet of marine barges which carry anthracite coal from Hoboken, N. J., to points in New England. At various times (commencing prior to 1860) the defendant railroad company has acquired by purchase or lease and now holds some 15,000 acres of lands containing anthracite coal lying in said Lackawanna and Luzerne Counties. Approximately one-half of these were acquired after January 1st, 1874, when the present constitution of Pennsylvania became effective That instrument, Art. XVII, sec. 5, provides:

"No incorporated company doing the business of a common carrier shall, directly or indirectly, prosecute or engage in mining or manufacturing articles for transportation over its works; nor shall such company, directly or indirectly, engage in any other business than that of common carriers, or hold or acquire lands, freehold or leasehold, directly or indirectly, except such as shall be necessary for carrying on its business; but any mining or manufacturing company may carry the products of its mines and manufactories on its railroad or canal not exceeding fifty miles in length."

Upon the lands so acquired and held there are many collieries which have long been and now are being constantly operated by the defendant railroad company in its own name; and at all times the coals therefrom, when ready for transportation, have been mined and produced by and the full legal title thereto vested in it. Their annual output has been at the approximate rate of 7,000,000 to 10,000,000 tons; and this probably will continue indefinitely. Great quantities of the same, intended for sale and distribution in different states, to wit, from 7,000,000 to 8,000,000 tons annually, not necessary or intended for defendant's use in its business as a common carrier, have long been and now are loaded upon its cars at the mines or adjacent breakers and then carried by it in interstate and foreign commerce to various points outside of Pennsylvania. Part moves to the North and West, while approximately 3,000,000 tons-mostly small sizes has been and is carried each year to Hoboken, New Jersey, on the New York Harbor and sold there; and defendant intends to continue to transport the same substantially as heretofore. For a long time this defendant has been accustomed to buy almost the entire output-75 per cent or more-shipped from the mines and breakers located along its lines which are owned and operated by others-in 1911, 1,500,000 tons; has transported most of the same in interstate and foreign commerce, and intends hereafter to continue the s same course of action.

III. Anthracite coal is an article of prime necessity in general use for domestic purposes throughout New England and the Middle Atlantic states, and is also largely burned in other sections of the Union and in Canada. The smaller sizes are much in demand for steam purposes in and about New York City, Boston, and other large cities in the East. The course of the entire supply, except a small amount of inferior quality, is in northeastern Pennsylvania, where the deposits underlie an area of about 484 square miles, divided for trade purposes into the Wyoming, the Lehigh, and the Schuylkill regions. The total annual output of all the mines is approximately 75,000,000 tons. About 12 per cent is consumed at or near the collieries, while the remainder (with insignificant exceptions) is carried away over the lines of the nine railroad companies named below which extend thereto-four-fifths being transported and sold in interstate and foreign commerce, viz: Philadelphia & Reading Railway Company; the Central Railroad Company of New Jersey; Lehigh Valley Railroad Company; the Delaware, Lackawanna & Western Railroad Company; Erie Railroad Company; the New York, Susquehanna & Western Railroad Company; the Delaware & Hudson Company; Pennsylvania Railroad Company; New York, Ontario & Western Railway Company. Except the lines of the Delaware & Hudson Company, all these railroads reach New York harbor and carry there, where the same is ultimately sold, 25 per cent of the total shipments of anthracite moving by rail, their rates therefore being approximately the same, irrespective of the length of the haul. This is by far the most important market for such coal. In it from 18,000,000 to 20,000,000 tons are annually sold, and distribution is made therefrom by water or otherwise, to points in various states. Being the chief distributing point, prices prevailing there largely fix and regulate those in other

markets. The terminals of the railroads carrying such traffic on New York harbor are at separate points on the New Jersey side, from Edgewater on the north to South Amboy on the south; and at these points, after passing the larger sizes over screens, the coal is weighed, dumped into barges, and is quoted and sold free on board thereof. The abovementioned anthracite carrying railroads and the great coal companies united or affiliated with them severally in ownership or management have long engrossed the output of the collieries. Each road directly or through one or more coal companies has contrived to gain control over the output of most of the mines served by it and the sale of the same. This is especially true of coal moving to New York harbor, and as a consequence f. o. b. prices of anthracite at the various terminals there are made and controlled by the defendant railroad and other railroad companies and their affiliated coal companies. These prices or their averages are reported monthly by the sellers to a bureau of statistics sustained by them jointly, and the result is then sent out to all of them. The substantially uniform prices for anthracite f. o. b. New York harbor now quoted and demanded are from $5.25 per ton for certain prepared sizes down to $1.80 for the size known as barley. These necessarily depend upon the freight charges demanded by the railroads, and under normal and natural conditions would vary with the same; and these charges have long been and now are exceedingly high, in fact, excessive. The present tariff schedules fix them at approximately $1.50 per ton for prepared sizes down to $1.10 for the small sizes, or from about 25 per cent to 60 per cent of the f. o. b. prices New York harbor, of coal transported.

IV. Prior to August 2, 1909, the defendant railroad company, acting openly in its own name, mined coals from its own collieries and whilst holding full legal title thereto transported the same to the markets in different states for sale therein and not for use in its business as a common carrier. Almost the entire production of all the anthracite mines along its lines was also sold by it in the markets of different states, the output of those not owned having been purchased at the breakers as above shown. In order economically and expeditiously to transport and sell this coal, the defendant railroad company constructed at points in different states, adjacent to or connected with its tracks, extensive terminal facilities, storage yards, depots, docks, wharves, transfer trestles, coal trestles, sale yards and other accessories essential or convenient for carrying on such business. Its great financial ability, its power and position as a common carrier, and the exclusive use of these facilities, put other producers and operators at a serious disadvantage when seeking to market their coal in competition with it. In consequence the railroad was enabled to and did purchase so much of the output of colliers owned and worked by others as, added to its own, gave it the disposition of more than 90 per cent of the entire production along its lines, complete dominance of the market therefor and a monopoly thereof; and gave it the power arbitrarily to fix prices at all points not reached by another railroad. But for such purchases most of this coal from mines not owned by it would have been sold in interstate and foreign commerce in competition

with the railroad; and if not so purchased in the future will be so sold in competition. The business of the defendant railroad has been immensely profitable and its financial strength is very great. A majority of its stock has long been and is now held in large blocks by less than twenty-five individuals and interests who act in concert and unity. A still smaller number have and do dominate and control its affairs, being enabled thereto by their stock holdings and their unity of purpose and effort.

V. Section 1 of the act of Congress approved February 4, 1887, entitled "An act to regulate commerce,' as amended by the act approved June 29, 1906 (34 Stat. 584), provides: "From and after May first, nineteen hundred and eight, it shall be unlawful for any railroad company to transport from any State, Territory or the District of Columbia to any other State, Territory, or District of Columbia, or to any foreign country, any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole, or in part, or in which it may have any interest direct or indirect except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier." The inhibitions of this provision rendered it unlawful after the first of May, 1908, for defendant railroad to transport in interstate and foreign commerce coal purchased by it or produced by the mines which it owned and operated while having an interest in such commodity unless intended for use in its business as a common carrier. The combined business of buying, mining, transporting and selling anthracite had been immensely profitable to the railroad and to its stockholders; and those who dominated and controlled its affairs desired to preserve for themselves such profits and to continue the business substantially as theretofore conducted, notwithstanding the manifest purpose of the provisions of the act above quoted. To that end, accordingly, they determined to cause the organization of a new corporation to be under their own control-whose stockholders would be substantially the same as those of the railroad company-and through it to conduct the business theretofore carried on by the railroad sales department, thus securing, in effect, the continued unity of mining, transporting, and selling, in substance as theretofore, and depriving the public of the benefits which the aforesaid act was intended to produce. Thereupon, they caused their representatives and nominees to organize under the laws of New Jersey, on or about June 30, 1909, defendant, The Delaware, Lackawanna & Western Coal Company, with an authorized share capital of $6,800,000-one-fourth of the then outstanding capital of the defendant railroad-such shares being intended for pro rata distribution among the railroad's stockholders. Their further purpose was to cause the two defendants to enter into the contract and arrangement hereinafter described. Accordingly, about the first of July, 1909, they caused the railroad company to declare a cash dividend of 50 per cent and took the further action described in the communication then sent out, a copy of which follows:

"To the stockholders of the Delaware, Lackawanna and Western Railroad Company: