EMD Antitrust Case

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This page was last updated on November 4, 2024.

Overview

This page is a collection of research notes and comments about the federal government's antitrust case against General Motors, with the argument that railroads that did not buy EMD locomotives were being discriminated against and not being given business from other GM divisions.

[This page is not meant to be a definitive history of the EMD antitrust case.]

The federal criminal indictment against GM and its Electro-Motive Division was filed on April 12, 1961. The story was carried by hundreds of newspapers.

The federal civil case against GM and EMD was filed on January 14, 1963. The story was carnied by very few newspapers.

The criminal action was dismissed on December 28, 1964. The civil action was dismissed on June 2, 1967.

As part of a discussion in the LocoNotes online discussion group in 2003, James Mischke wrote on April 22, 2003:

This was in 1961, and proceedings dragged out until 1965. The essence of this criminal case was that EMD leveraged its massive high tariff freight traffic to arm-twist railroads into buying EMD locomotives. The Justice Department held grand jury proceedings and criminal indictments resulted.

I have been very interested in this case and looked up the district court case transcript at the National Archives branch in Chicago. There are about seven solid feet of paper, which I went through. Mostly lawyers arguing the law in open court. Not the facts. The specifics are in the preceding grand jury testimony, which are forever off limits to anyone other than U. S. attorneys.

Bottom line is that General Motors stonewalled until the government gave up. The discovery process was thwarted by GM at every turn (we don't know where that manager is anymore, he retired; we don't have those records anymore; which pages do you want again? What do you mean you want the whole file copied, that's unreasonable ......). It never came to trial.

Other GM Divisions

Andre Kristopans, a well-qualified historian of the bus manufacturing industry and companies and public agencies that operate buses, has said the the antitrust investigations extended beyond GM's ownership of its Electro-Motive Division. Andre wrote in 2003, "There was more than just EMD involved. The Truck & Coach division was forced to sell GM motors and transmissions to competing truck and bus builders."

Along similar lines, separate research looking into the history of GM's plants in Cleveland, and separate research covering GM's ownership of the Euclid Road Machinery Company from 1953 to 1968 when GM was forced to sell its Euclid Division, makers of off-road construction equipment, indicates that the government's antitrust investigations went way beyond just EMD locomotives.

The Euclid case...

https://law.justia.com/cases/federal/district-courts/FSupp/183/858/1973615/

Research Notes

In November 1955, H. L. Hamilton testified before the Senate Antitrust and Monopoly Subcommittee (also known as the Kilgore Subcommittee) in regard to the diesel locomotive industry. In 1957 the United States Department of Justice initiated an antitrust investigation; and, grand jury subpoenas were issued to General Motors in 1959. General Motors sought out and interviewed Hamilton at great length in 1957 and again in 1959.

General Motors was indicted under the antitrust laws on April 12, 1961. On May 25, 1961, the case was transferred from the Southern District of New York to the Northern District of Illinois, Eastern Division, on the ground of more convenient forum. A government civil anti-trust action was also filed on January 14, 1963, charging General Motors with monopolizing the diesel locomotive business and with violating Section 7 of the Clayton Act through acquisition of the Electro-Motive Corporation and the Winton Engine Company. The relief sought in the civil action was divestiture of the Electro-Motive Division located at LaGrange, Illinois.

The criminal action was dismissed on December 28, 1964. The civil action was dismissed on June 2, 1967.

United States v. General Motors Corporation, 61, Cr. 356 (S.D.N.Y.), transferred on May 25, 1961 to the Northern District of Illinois, Eastern Division; United States v. General Motors Corporation, 63 C 80 (N.D. Ill.)

The criminal action...

https://casetext.com/case/united-states-v-general-motors-corporation-6

The civil action...

(no citation)

1955 Senate Hearings

Testimony Before The Subcommittee On Antitrust And Monopoly Of The Committee On The Judiciary

Part 6, GM (Hamilton testimony)

https://www.google.com/books/edition/_/ml0oBzfcoKIC?hl=en&gbpv=0

Part 7, GM (only general comments)

https://www.google.com/books/edition/_/3p8TAAAAIAAJ?hl=en&gbpv=0

Part 8, GM (Osborn testimony)

"General Motors Diesel Locomotives," Statement by C. R. Osborn, Vice-President, General Motors, before the Subcommittee on Antitrust and Monopoly of the U.S. Senate Committee on the Judiciary, Washington, 9 Dec. 1955

https://www.google.com/books/edition/_/Zp8TAAAAIAAJ?hl=en&gbpv=0

H. F. Hamilton's Part In The EMD Antitrust Case

After H. F. Hamilton retired in 1955, and died in 1969, his heirs sued General Motors in 1973 about the lack of compensation for Hamilton's testimony and dispositions prior to, and during the EMD antitrust case, 1955-1964.

Following is quoted from the 1973 appeal, laying out Hamilton's involvement with GM's antitrust defense.

Hamilton v. General Motors Corporation (490 F. 2d 223)

http://openjurist.org/490/f2d/223/hamilton-v-general-motors-corporation

https://law.justia.com/cases/federal/appellate-courts/F2/490/223/122400/

Harold F. Hamilton was one of the pioneers in the development of the diesel locomotive industry. In 1922, he formed Electro-Motive Engineering Corporation, which manufactured electrically-powered gasoline locomotives. In 1930, Electro-Motive was sold to General Motors Corporation in a stock transaction. Hamilton built and headed General Motors' diesel locomotive plant at LaGrange, Illinois. He held the title of Vice President of General Motors upon his retirement in 1955 at age 65.

By 1955, the diesel locomotive, which was virtually unknown in 1922, had entirely supplanted the steam engine, with General Motors' Electro-Motive Division capturing 85% of the locomotive market with total sales in excess of $200 milllion annually.

Hamilton's compensation from General Motors from 1942 to his retirement in 1955 was $30,000 per year. His retirement benefits which commenced June 30, 1955, were only $13,800 annually. He was not required to perform any services for that sum.

In November 1955, Hamilton testified in regard to the diesel locomotive industry before the Senate Subcommittee on Antitrust and Monopoly, chaired by Harley Kilgore of West Virginia. Known as the Kilgore Subcommittee.

In 1957 the United States Department of Justice initiated an antitrust investigation and grand jury subpoenas were issued to General Motors in 1959. General Motors sought out and interviewed Hamilton at great length in 1957 and again in 1959.

(United States v. General Motors Corporation, 61, Cr. 356 (S.D.N.Y.), transferred on May 25, 1961 to the Northern District of Illinois, Eastern Division; United States v. General Motors Corporation, 63 C 80 (N.D.Ill.))

After the filing of the criminal action in 1961, the General Motors' trial attorneys, who were located in Chicago, and corporate legal staff from Detroit again sought out and interviewed Hamilton, who was living in California. From February 1962, to September 1966, Hamilton performed the following services at the specific request of and for the benefit of General Motors: Building upon the Senate hearing testimony of Hamilton in 1955 and upon his interviews in 1957 and 1959, a comprehensive memorandum of his knowledge was developed by the trial lawyers. They met with Hamilton four times in late 1962 and early 1963, three times in California and once in Chicago, developing the basic statement. The criminal action was dismissed on December 28, 1964, without the necessity of Hamilton testifying.

Three additional meetings then took place in 1965 and early 1966, one in California and two in Chicago, aimed primarily at preparing Hamilton for his deposition, which was taken in California from March 22 through March 31, 1966 and comprised 692 pages. In April, Hamilton reviewed the transcript of his deposition and ultimately signed it in September 1966.

In addition, throughout the period of 1962-1966 correspondence moved between Hamilton and the General Motors' attorneys, relating to details of his statement and ultimate deposition and concerning exhibits, 79 of which were identified during the deposition. The complaint alleged that Hamilton came out of his retirement and thereafter for approximately ten years regularly devoted substantially all of his time and effort in assisting GMC officials and counsel in this regard.

The civil action was dismissed on June 2, 1967. In May 1969, Hamilton died. Thereafter his widow and daughter learned that he had not been compensated for these services except for out-of-pocket expenses. After some preliminary discussions with General Motors' representatives, this action was filed on January 26, 1972. Upon dismissal of the action as foreclosed by the applicable statute of limitations, the plaintiffs appealed.

Hamilton rendered services to General Motors and they were valuable. He prepared himself mightily and at length, first in anticipation of being a witness at the trial of the criminal case and later, when that case was dismissed in 1964, in anticipation of testifying upon deposition. His efforts were at least partially responsible for the ultimate dismissal of the civil suit in 1967.

Both at the time he testified on deposition and later after the filing of this suit, the Chicago trial lawyers, the corporate legal staff members and General Motors officials were unstinting in their praise of Hamilton's knowledge, ability and performance as a deposition witness. The lavishness of this praise culminated when the attorneys endorsed Hamilton's copy of the deposition transcript as follows:

". . . And for us who had the job of seeing that the story was told in the defense of the locomotive case, we know, and wish here to declare, that these pages record one of the most remarkable feats of testimony we have ever been privileged to attend, not only in accuracy, detail and sharpness of recollection of thirty years of history, the clarity of expression, and the tremendous knowledge and understanding manifested, but in the solid impression-- favorable to our cause-- made upon opposing counsel, which we are confident played a large part in the ultimate successful outcome."

Hamilton wrote to the chairman of the board of General Motors in 1966: "The tiring part has been the several years of continuous and repeated review of all important phases of the development from 1922 to 1943."

The reason for taking Hamilton's deposition was to perpetuate his testimony at a time when his health was failing, but also because the lawyers were hoping to psychologically demoralize . . . the Government with the force of Mr. Hamilton's testimony. "We hoped that Mr. Hamilton's deposition would be so persuasive that government counsel would decide to dismiss the case." And apparently that is what happened on June 2, 1967.

Although Hamilton may have been one of the foremost experts in regard to some of the matters as to which he had first-hand knowledge and although he may have devoted as much if not more time than an ordinary expert witness would have spent in the preparation of his anticipated testimony, the fact was that he was testifying to matters of his own personal knowledge. Although he was not a party to the lawsuits, his past interest in the subject-matter was such that he could not have qualified as a disinterested, independent or impartial expert.

Jerry Pinkepank Comments

(email dated October 20, 2024, edited by him November 4, 2024)

I was an intern at Justice on that case in the summer of 1963, I was assigned to review the material the railroads submitted in response to a grand jury subpoena regarding any use of traffic reciprocity by GM to promote orders of EMD locomotives.

At the end of my internship one of the attorneys to whom I reported gave me the production records the builders had all voluntarily provided (not sequestered as Grand Jury material) because they didn't have further use for them and they weren't Grand Jury material. These builder-furnished production records I used to make the production data columns in the first Diesel Spotter's Guide, which were for the most part carried forward to the Second Diesel Spotter's Guide because the arrangement I had with Dave Morgan (then books editor at Kalmbach in addition to being the editor of Trains) was that I would avoid unnecessary changes as they were re-using the plates as much as possible to keep production costs low for the new edition. As a result of that provision, the work done October 28, 1972 at Don Dover's house by the assembled group of Don, me, Dave Ingles, Lou Marre, Ken Douglas and Dick Will didn't try to revise pages from the first DSG and concentrated on the enlarged scope of Second DSG to include industrial units and new models.

(ed note: The original Diesel Spotter's Guide was published by Kalmbach in 1967)

(ed note: The Second Diesel Spotter's Guide was published by Kalmbach in 1973)

The first DSG didn't originate from my Justice Department internship, contrary to what others have reported.

It was an idea I proposed to Dave Morgan in April 1962 to which he immediately agreed (he had to convince Al Kalmbach, who thought railfans were only interested in steam, but ACK was no longer actively participating in management and was well aware of DPM's credibility. DPM was one of the initial readers of Extra 2200 South when it was still a Dittomaster publication produced for me by Student Services at Michigan State University starting in May 1961 and he was well aware of the strength of interest in diesels among the Trains readership.

In the 1962-63 academic year at Columbia University law school, I spent more time in the Engineering library than the Law library, including researching early diesel models for the first DSG. I do think that my internship played a minor role in the case being dropped. In casual conversations with the attorneys I'd many times described the superior availability and lower maintenance costs of EMD locomotives and stated that it was the basis of railroads preferring them. I think that when the Grand Jury material failed to support the indictment, that was when Nicholas Katzenbach, Assistant Attorney General, ordered the criminal case dropped (and later the civil case as well). It's likely the attorneys I worked with would have mentioned what I'd said, though the lack of incriminating Grand Jury material without doubt was the main reason for dropping the criminal case.

I note James Mischke's comment on LocoNotes about the New Haven's reasons for buying the FL9's. That comment is incorrect. After I resumed at Columbia Law for the 1963-64 academic year, and before the criminal case was dropped, Harry Farnsworth Brown, with whom I'd had several cordial meetings in the Yale Club in New York during the 1962-63 academic year, all concerning the subject of railroad electrification including that on the NHRR, asked me to come to the Yale Club in New Haven to meet with a person retired from NH's purchasing department.

Mr. Brown, who had retired in 1952 as the head Electrical Engineer of the New Haven (and who had helped design the 1906 triangular catenary while he was still an engineering student at Yale), wanted to provide information for use in the anti-trust case since he knew about my internship, but I don't think he knew that the indictment concerned only traffic reciprocity. I went up to New Haven on the Merchant's Limited and the three of us had a pleasant dinner. I don't have any record of the date but it was in the autumn of 1963. However, the retired Purchasing man said nothing about reciprocity nor about the FL9 program; indeed, there were no GM plants on the New Haven nor any GM-related traffic. He hinted about corruption of the kind Patrick McGinnis was later convicted of in Federal Court (that happened at the Boston & Maine, after McGinnis left the New Haven at the end of 1956) but neither he nor Mr. Brown wanted to testify to anything out of concern for their pensions (this was before 1974's ERISA). I believe Mr. Brown's intention was that I would tip off the attorneys at the Justice Department and they would pursue an investigation, presumably of McGinnis. I think Mr. Brown had expected his friend was going to say something significant concerning the FL9's because Mr. Brown was very disturbed by the then just-reversed process of downsizing of the New Haven electrification, but there had never been anything in the indictment or Grand Jury proceedings concerning bribery or kick-backs.

The fact was that McGinnis had been faced with an aging diesel fleet of high-maintenance locomotives (Alco and F-M) and a very normal trade-in process had occurred to bring in GP9's and SW1200's to begin dealing with that. The F-M Speed Merchant set with which McGinnis experimented had already failed for reasons of its inflexible consist and poor riding qualities. The FL-9 program was brought on by the desire to shut down the aging Cos Cob power station (Pinkepank, "Why NH re-electrified", Trains, August, 1964, pp. 20-26). It is likely that NH approached GM to design a suitable locomotive rather than the other way around. The first 30 of 60 FL-9's were delivered in October 1956 and July through November 1957, so the program did begin under McGinnis, but was continued by his successor, Frederic C. Dumaine Jr. ("Buck" Dumaine). The second 30, with the slightly up-rated 567D1 engine, came in November 1960.

It was the trustees in New Haven's 1961 bankruptcy that dealt with getting an acceptable commercial power source to replace Cos Cob, and revived the electrification. That revival was already in progress at the time of my meeting in 1963, with the first of the ex-Virginian EF-4's going into freight service in October 1963. At the nadir of the reduction of the electrification begun by McGinnis, seven of out ten EP-5 passenger electrics were out of service. By November 1963 at least seven, and perhaps all ten, were in service. It hadn't been wrong of McGinnis or his successor to seek a locomotive that could handle the entire New York-Boston trip without change (the Pennsylvania also had issues with finding commercial power sources for their electrification) and I think all involved over the 1956-1963 period knew that it wouldn't be economical to rebuild Cos Cob. The revival of the electrification came when the Trustees found a willing commercial partner to handle the Connecticut substations; there had long been commercial power supplying the substations in the State of New York.

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