# Appendix — Hanover Shoe, Inc. v. United Shoe MacHinery Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0031%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1968 - **Citation:** 392 U.S. 481 ## Text in 9 23: — a REL ES SUPREME COURT. Uy Bi | NOV .24 1 - APPENDIX =i] ws’ —_—_————— ame a | - . Oot: 14 Certified copy of alii, dated October 9, 1967, received from Clerk of Supreme Court grant- . ing petition for writ of certiorari, consolidat- ing this case with S. C. No. 463, allotting 2 hours for oral argument, etc., filed. (S. C. No. 335, Q.T. 1967). (Covers "15626 /15627). Oct. 14 Certified copy of order, dated October 9, 1967, . received from Clerk of Supreme Court ‘grant- , ing petition for writ of certiorari, consolidat- ing this case with S. C. No. 335, “ar we 20 hours for oral argument, etc., filed. (8S. C No. 463, O.T. 1967). (Covers 115626/15627). Bistrict Court of the United States- For THE Minpte District oF PENNSYLVANIA - - Civil Action—File No. 5 395 > 7 @ientinn 2 dy. 4 THE Hanover Suos, Inc., aera e ; Plaintiff, _ y—against— ie ae _ Unrtep Sor. MAcHINERY CorporaTION,* yaa ; aie sa 3 Defendant. A > A, . a t ° ‘ ? Amended Complaint, Jurisdiction: vy. . __ 1. This.action arises under Section 2 of the ct com- monly known as the Sherman Act, 26 Stat. 209, U! S. C., ~ Title 15, Sec.'2 and under Section 4 of the Act comménly known as the Clayton Act, 38 Stat:-731 ; U. S.-C. Title 15, - Section 15. . | Parties: *2: The plaintiff, The Hanover Shoe, The., sometimes — referred to hereinafter as Hanover. is a corporation or- ganized and existing under the laws of the State of Pennsyl- vania and has its principal office and place of business at. Hanover; Pennsylvania. ° 3. The defendant, United Shoe Machinery Corpora- tion, sometimes referred ‘to hereinafter as United. is a cor- poration organized and existing under the laws of the State d | 6 ( ar + Amended Complaint of New Jersey and has its principal office and place of - business at 140 Federal Street, Boston, Massachusetts. The _’ defendant also t cts business ip the\Middle District of » Pennsylvania, ang a place of business and offices at 20 South Fourth Street, Harrisburg, Pennsylvania, and may be found. within said Middle District. The Product anil Ce ommerce Involved: 4. Since 1899 United or its predecesspf has been con- tinuously engaged in the manufacture and distribution of shoe.machinery. The principal part of such shoe machinery _is manufactured at United's faetory at Beverly, Massachu- setts,: and is distributed in interstate ¢onimerce -to, shoe © manufacturers, including plaintiff. Shipments were made to plaintiff at its principal factory at Hanover, Pex#syl- _ Vania, and at its other factories at Middletown and Em- . mitsburg, Maryland, arid-East Berlin, Pennsylvania. __ 5. Hanover is now and, since about 1901, has been engaged in the manufacture and sale of men’s and boys’ shoes. Most of the operations of importance in the making ' of these shoes are done by. machine and Hanover cannot engage competitively in quantity — of —_ “— a such shoe machinery. ; 3 - ‘The operations involved in the manufacture of men’s ~ : and boys’ shoes by Hanover and other shoe manufacturers — _ are known as upper cutting, upper fitting, stock fitting, lasting, bottoming, making, finishing and treeing. These operations, briefly described below, are conducted in seven : . departments or rooms at the shoe factories of Hanover,as follows, and some or all of the United machine types listed 28 Aiaaintes sn ald . B10 SW AGP IS AI a te ESA Lil 8 A YOROAL EIA DROIT the MP hs SEAM A ie FADIA Ts. VB tNatewne é, = 7 Amended Chane “ie in eae 7 through 13 below have been used by Han- over since 1912. + — 7. Cutting Room: hake cutting i is done in this room. This consists of cutting the various parts of the ‘ti om. ‘and linings. The parts of the upper (such as vamps, quarters, tips, back stays and tongues) are isually cut out _ from leather and: fabri by clicking machines and clicking dies. In addition to . shoe uppers, the linings are also -s) cut. Uppers and linings are match-marked, sorted into pairs and stamped for size and case numbers, the latter being for factory identification throughout the remainder * . of the manufacturing process. The following’ United ma- chines are now or were. in the past used by meeneiarde in * «hese operations: ~ Ideal ‘Clicking:, ‘Model. = ~ Tdeal Twin Clicking, Model G 8. Fitting Room: Upper fitting is déne in this room. This immediately follows the cutting operations. It in- cludes a wide range of operations by means of which the separate parts of the upper’ and lining are prepared and ‘assembled to make the completed shoe upper. The number _and: sequence of operations vary greatly and are in direct _ Felation to the complexity of design and to the type of shoe being produced. 4f the shoes are eyeletted, a temporary thread lacing is inserted. in the eyelet holes by a lating _ machine. This is ‘for the purpose of retaining the ‘shoe | shape during the subsequent operations. The following’ - - United machines are now or were in the past used rind Han- © over in these operations : Edging, Model B . i USMC Cementing; Model C a . a 8 oe Lae _ Amended C omplaint Duplex SN Model B USMC Eyeletting, Model C ‘USMC Tip Finishing, Model A . USME Lacing, Model A cr. Goodyear Outsole. Rapid Lockstitch, Model O Pluma ‘Skiving, Model O’ ~ USMC Skiving, Model A. Rae Rapid Kolding, Model J. ‘ oe 9. Stock Fitting Room: Stock fitting i iS = preparation - -of bottom stock.for the shoe. The principal shoe parts pre- pared are outsoles, insoles and platforms (which are ,, cushioned insoles) but they may also include counters, box _ toes, heels and welting. The operations largely involve cutting and shaping the materials used, and applying ad- _— . hesives or-stiffeners to the various parts. The, following ’ United machines are now or were in the ceil used by ' Hanover in these operations: : Economy Insole Lip Cementing. Model C ' Economy Insole Channeling, Model B. Automatic Heel Compressing, No: 6 , Insole Lip Cutting & Scoring, Model E id 2, Improved Gearless Sole Cutting, Model H Planet Sole Rounding, Model E- ~ = ' Economy Insole Lip Setting, Model B USMC Splitting, Models B and: Ge Power Welt Tacking . . Insole Rib Cementing. Model A Insole Rib Reinforcing, Model B. 10. Lasting Room: Lasting is the series of operations ™ by means of which the shoe: upper and lining are drawn eee - NS SSE. $ A mended Complaint ° Le Pz tightly over the wood last. pn which the shoe is made, and- fastened to the insole of the shoe. This operation causes ‘the upper to conform to the shape of the last, imparting thereby the desired style and fit characteristic to the finished shoe. The work of lasting consists of, positioning the insole, upper. (inelading all lining materials), box toes -and 7 “counters in correct relation to one another ; in stretching the upper ; and.in fastening the entire structure together. The upper must be conformed to the last with a high degreg of skill. ‘The following United machines are now or weré in the ‘past used by Hanover in these operations: . Rex Assembling, Model H : USMC Celastic Conditioning USMC Lasting, No. 7 — : -USMC Heel Seat. Lasting, Model E USMC Staple Sidelasting, Model B Rex Pulling Over, Model C , USMC Insole Tacking, No. 1 , USMC Upfer Trimming, Model J - - USMC Toe Lasting, Model Se . 11. Giciiens Room: ‘Desssinien and making are done in this room. Bottoming, includes a series of operation’ by | means of which the shoe bottom is prepared and the out- sole is permanently attached to the lasted upper of the shoe and it may include Some operations upon the outsole which are performed after attaching. Construction of the Good-, year Welt Shoe requires that the welt be sewn on, the sur- plus upper’ material be removed (mseam. trimming), the | _ Welt be beaten out flat “ind trimmed off and bev eled af the - heel breast line,,dind\the outsole and welt be rotigh-rounded to approximately final:shape. The final operation in bot- 4 “~ eg 10 . Affiended Complaint taming generally is leveling, which is performed by ma- chines which apply considerable pressure to the sole bottom either by means of a progressive roll or a matrix form. This operation compacts the shoe bottom and produces the desired smooth contours of the sole surface. ; Making consists of the operations performed, after the outsole has been attached, that have to do with attaching the heel to.the shoe, trimming the heel and the edges of the sole to the required contour, scouring the heels, setting the ‘edges and staining and burnishing the heels. — The following United machines are now o os were in the past used by Hanover in these bottoming and making | operations: ‘ _. * , Goodyear Welt Beating & Slashing ~ Goodyear Welt Indenting & Burnishing Inseam Cerhenting, Model A USMC Sole Cementing, Model C Goodyear Universal Rounding: & Channeling, . Model E . USMC Fibre Pacuehie, Model } B ' Goodyear Automatic Sole Leveling, Model D - _ Goodyear Outsole Rapid ockstitch, Model O Loose Nailing, No. 2 oe ' * Goodyear Stitch Separating, Model B ee Goodyear Upper Stapling, Model B. _ USMC Inseam Trimming, Model C - vs, Goodyear Rapid Bobbin Winding ~ . Goodyear Welt Butting & Tacking, Model B Goodyear Welt Sewing, Model K __ Goodyear Inseam Sewihg, Model B: Goodyear Welt Indenting & a de Model C 2 ‘ ! a -* \ \ \ - ie z _ Amended Complaint 11 ae 12. Finishing Rooin: Finishing is ‘the giving of a _ thorough treatment to the " make: it attractive in appearance and the heels (ifgwood), . entire shoe bottom -surface to ¥. 2 are permanently attached. The bottom treatment consists\ oe of a variable combination of operations according oheaty and effects desired and includes buffing and the application of different finishes. The following United machines are now or were in the past used by Hanover in these opéra4 . tions: McKay Automatic Heel eo & Attaghing, - Model B Crest Heel Blacking, Model C | * _ USMC Jointing, Model G _ Twin Edge Setting, Model D Universal Slugging USMC Edge Trimming, Model H | 5 -Heel Breast Scouring and Aligning, Model.A USMC Edge Trimming, Model L USMC Twin Edge Setting, Model F 13. Treeing Room: Treeing is the operation in which the shoes are: given. their final treatment before being packed in boxes. The following Uriited machine is used by Hanover in this operation : a USMC Embossing. Model G 2 The Vi iolation of Law C omplained of: " 14, Prior to and “continuously from the year 1912 the defendant. United Shoe Machinery Corporation, has been * violating the antitrust laws of the United States, by: (a) monopolizing i in the shoe machinery’ i terstate trade and commerce ° industry of the United States; o 12 ; Amended Complaint (b) monopolizing interstate trade and commerce of the United States in substantially all shoe machinery required and used by sonra in the manufacture of . ~ men ’sand boys’ shoes.: : 15. ‘Monopolization by United as aforesaid and the - © exercise by it of its monopoly powers has enabled United ‘to dominate and control the ‘market in*shoe machinery, to. restrict actual competition and to excuate potential com~ petition in said market. The Principal Means Used to. Accomplish the V ivlation of Law: * 16. At all times prior to May 17, 1954, the date of the decision of the United States, Supreme Court affirm- ing a judgment that United - violated Section 2 of the Sherman Act by munopolizing the shoe machinery trade and ‘commerce among the several States, United declined to sell most of its shoe machines and made such machines available to shoe nanufacturers only upon leases which reserved to United: the sole and exclusive property in the, machines and w hich granted to lessees the right to use the machines only ‘ToR the purposes specified in the leases. At all times prior to said May, 17, 1954, United offered on lease only all of the major, important machines used by Hanover in the operations described in paragraphs 7 ‘through 13 above and listed in. those paragraphs. 17. United’s ge for most of its machines, ineluding all such leayes between United and Hanover, provided for the payment by shoe manufacturing lessees of flat rental - charges or of su-called unit charges based upon the number ,. of ‘shoes upon which’ the machines were:used or upon the © * 43 Amended omphaint number of operdfions. performed by the machines. Leases for the rest of its machines, ineluding all such leases ‘be- tween United and Hanover, provided for the payment of both rental and unit charges. Where unit charge machines were adaptable for more than one kind of operation, sepa- rate charges were assessed by United for each marys of “operation. ' . 18.- At all times prior to said May 17, 1954, all leases ~ of United, including all leases entered into between’ United - ‘and Hanover, included the following provisions. which, alone or,in combination with one ‘@& more of he others, deter and prevent shoe manufacturing lessees,, including Hanover, from. replacing with a competitive machine each . . of the shoe nfichines le sed from United. (a) That’ *the lessee shall use the mactiine for’a fixed period of time, never less than 10 years, subject ; to rénewal for a period.of not less than five years; that upon the expiration of the origifial term or the renewal _ term, the leases provided that the machinery shall con- ‘tinue tinder the lease indefinitely subject to the right of United ‘or the lessce-to terminate the lease upon 60 days’ notice. In practice United did not leave the ma- chinery, subject to: termination on 60 days’ notice but required the execution of a further renewal lease; (b) That the lessee of each unit dines machine shall use the machine to its full capacity upon all shoes made by the lessee upoh which. the ‘machine is capable - of being used; . . (c) ‘That the lessee of each unit charge machine’ shall: use ‘the machine each month upon a stipulated 4 Amended Complaint > minimum niieobes of pairs of shoes, and shall pay to United a stipulated sum of money at the conclusion of | each ‘month during which the machine is not used upon said minimum number of pairs of shoes; _ (d) That upon termination of the. lease the lessee _. Shall surrender the machine to United in good order and . condition, shall reimburse United for the cost of all - broken or missing parts, and shall pay to United a _ stipulated sum of money, called a deferred payment or — return charge, varying in ameunt according to the ma- chine leased from about 30% to 40% of the manufac- - . turing cost plus the developmental cost’of the machine type,: although there is no tte formula by which the amount is determined. 19. Beginning Sania: Re: 1923, United, by written | ~ . notice to its lessees established a plan whereby a stated i centage (2% from January 1, 1923, increased to 3% be- ginning February 1, 1927 and to 4% beginning: August 1, 1939) of all unit charges, rentals and minimum charges on a machine were set aside by United to the credit of the lessee solely for the purpose of being applied by the lessee, — if the lessee desired, to deferred (or return) payments and, since 1939, to payments for. use of the machine less than minimum that might be due or beconie due under the terms — of the lease on that ‘machine or on other machines under lease in the factory. The amount so set aside by United to _the credit of the lessee is commonly known as. the “right of deduction fund. oh 20.: In the event that any lessee, including Hanover, has desired to return a United machine to be replaced with - another United machine, United permits such return upon 15 A mended C oimplaint payniin ie the lessee, as required wielias United's aii of the cost of transportation of such machine to United at Beverley, Massachusetts, the cost of replacement. of all broken or missirigy parts at the regular prices established _.by United therefor and the return charge established for such machine in the lease. Where a lessee, including Han- over, wished to return a United machine solely to replace _ it with a competitor’s machine, United permits the return only on the*payment, in addition to the items just stated, of an adjustment or commutation of sums that would have — _accrued thereafter which is calculated, in the case of a ma-- chine leased without any unit charge, at 25% of the monthly rentals payable for the balance ofthe term and, as to a machine leased ‘in whole or in part on the basis of unit charges, at 50% of the minimum monthly payment for the _ balance of the term after the waiver of four months for each of the remaining yéars of the term; that these charges are, at the lessee’s option, payable in cash or charged against the right of deduction fund. | . 1. Abnough not required to do so by its leases, United we as all times undertaken to repair its machines without extra charge to the lessee except for such parts as -are. required. As a result no independent repair or service organizations have been, able to: grow up, and potential or . existing competitors of United in the manufacture of shoe machinery must either offer repair service with their ma- - chines or suffer the competitive disadvantage of marketing machines to shoe manufacturers, all of whom know that repair setvice will be difficult to provide. 22. As a further means of preventing competition, ex- cluding competitors and expanding its share of the market, | 16. Amended res omplaint United has, where faced with competition in the market- ing of one, or more types of shoe machinery made by it, adopted, among others, the following practices: (a) Reduced its own rates on the machinery type or types threatened by competition; — (b) Introduced new models at lower rates than for comparable old models; (c) Maintained rates on a particular machine type . despite a policy of increasing rates on other, machine types to meet increased costs of manufacture ; (d)° Introduced new ‘models so designed and’ priced - as to reach only that area ‘of the shoe manufacturing _ industry in which a competitor is attempting to market a machine. , : ’ Extent of United’s M Mopoly ) and Control of Market: 23. By means’ of the unlawful conduct hereinbefore. , described, United has placed in shoe factories most of the shoe machinery used in the manufacture of shoes in the. - United States. United supplies from 75% to 100% of -“almost all of the different types of shoe-machinery used in - ; the United States,’ exclusive of dry thread Sewing ma- chinery. - 24. The following types of shoe machinery (more par- ticulary identified in paragraphs 7 through 13 above) are required by Hanover in the manufacture of men’s and boys’ shoes and are or have been leased by Hanover from United. United supplied approximately the following percentages of ? | . “Amended C — ay the total of all guch machines i in | American en factories about. pany 1, 1947: : ee me United’s Share of Total Shoe in Shoe Factories . ; . in the United States at & as of about Machine Types _ - , : : May 1, 1947 Clicking oe Eyeletting : - 81% Cutting Press (Dinking) 91%. Pulling. Over - - CR Lasting oe 3 Heel Seat Lasting’ | ‘ Staple Side Lasting Bed Lasting Welt Toe Lasting Inseam Trimming Welt Sewing . Rough Rounding Outsole Stitching . Loose Nailing Outsole Leveling Fibre Fastening - Heel Attaching - Slugging : ' Fitting Room Department ee ie Skiving pare , 80% Folding © " 62% + Upper Cementing ee Lacing gs . 99% - Edging “a 100% Tip Finishing . 99% United's Share of _in Shoe Factories ng 2 in the United States Yetta: as of about . ¥ Machine Types . May 1, 1947 General Department , Edge Trimming. 88% _ Edge Setting 90% Sole Leather Splitting . . Cementing _ . 83% Sole Rounding - ©: 100% Heel. Blacking ns 100% Jointing - - 100% ~ Insole Lip Cutting and —_ . 97% Goodyear Department . ae Insole Channeling . BPD% ~ Rib piiehiniee” 93% - Bobbin Winding + B% ' Welt Beating & Slashing 99% , ; ‘Lip Turning & Setting . 99%: ; Lip Cementing 9% } Welt Butting . 100% Upper Stapling 98% Rib Cementing . ‘ B% Heeling Department © 7 Bare As Heel Compressing ere 89% an Lasting Department % eae Insole Tacking . - GG Pulling Over ee - wn _ Assembling — . 100% Celastic Co onditioning ~ _. G% Upper Trimming ow 98% Effects of United’s Monopoly: ae. 25. The aforesaid practices and-conduct of United, its ‘monopolization of interstate commerce in shoe machinery, _ a Amended Complaint the restriction of existing. competition and ae IR - i a potential competition in the manufacture, leasing and sale of shoe machinery has had the‘following effects on Hanover : ‘(a) United has collected from Hanover. excessive, arbitrary. and non-competitive rental, unit and a charges for its products and services; . (b)° Hanover has been prevented from acquiring shoe machinery, new or used, as owner either from United or elsewhere ; (c) United has extracted from Hanover for the use . of its shde machinery, large sums of money in excess of the reasonable value of such machinery and of the serv-". | ice rendered by United on, such machinery. SEs 26. As a result of the foregoing montipalization in ¥i0- “4 pe! latioa of the antitrust laws and as a result of the acts. done. in furtherance of such monopolization, Hanover has been. damaged in the amount of $1,750,000. 3 ‘Wnenerore, plaintiff asks that judgment be entered against the defendant hereinabove named in the amount of $5,250,000, being three times the actual damage suffered by plaintiff and that in addition plaintiff recovera peer ~ attorney’s = amd costs as — by Statute. * : ‘ ad an | - 290 | Amended Complaint — Nea Oar Han By Russet J. O’MaLrEey -Member of the ‘Firm’ - Miller Building Scranton 3, Pennsylvania Lairp & BUCHEN © . Hanover Trust Building . Hanover, Pennsyl*ania A torneys for Plaintiff” Of Counsel: Donovan LetsurE NEwTon & InvINE Breck P. MCALLISTER JAMES V. Hayes “Ropert F. MortEN f 2 Wall Street | New York 5, N. Y: ae 21 Second Amended Answer to Amended ‘Complaint ‘DISTRICT COURT OF THE UNITED STATES For THE MippLeE District oF PENNSYLVANIA dy. [SAME TITLE] © ae y% a Defendant by its attorneys Davis Polk Wardwell Sunderland & Kiendl for its second amended answer to the amended complaint: ~ er a 1. Is without knowledge as to the truth of paragraph 5 thereof except that defendant admits that plaintiff is _~ not and-was not able to engage competitively in the quan- tity production of men’s and boys’ .shoes without shoe ~ machinery. | ) + * without knowledge as to the truth of ‘paragraph 6 pt it admits (a) that the operations used in’ the manufacture of men’s and boys’ shoes are by shoe manu- facturers generally grouped under the descriptions in. said paragraph and (b) that some or all of the United machine ‘types listed in paragraphs 7 through. 13 thereof have been used by Hanover since 1939 at least. easy 3, Is-without knowledge as to the truth of paragraphs 7 to 13 thereof inclusive except it admits (a) that the operations described in those paragraphs are generally per- . formed in the manufacture of shoes and in the departments so designated and (b) that one or more United machines of the types referred to in said paragraphs are now or ° were in the past leased by Hanover from. defendant. Bs Sthond Amended Answer to A — Complaint 4. Denies © paragraphs 14, 15, 22, 23, 25 .and 26 thereof. o : 5. Denies paragraph 16 thereof except it admits (a) that before 1955 it was the practice of defendant to offer for lease only 37 out of the 47 machine types listed in paragraphs 7 to 13 ‘thereof while offering 10 of said 47 machine types either for lease or for purchase at the cus-__.. tomer’s option and (b) that underpits leases the leased - machinery remained the sole and exclusive property of the defendant with the right in the lessee to use the: same besa the conditions contained in the lease. 6. Denies owinvalls, 18 thereof. except it admits that at all relevant times defendant made with plaintiff and ' others leases substantially in the form annexed as Exhibit A to defendant’s answer dated May 2 1956 to the original complaipt and that renewal leases were executed for a five-year term, which terms and conditions: have at all times _ been the same for all lessees of defendant. 7. Denies paragraph 19 thereof except it admits that, beginning January 1 1923, by written notice to its lessees . defendant established’ a plan under which there would be applied by United, unless the lessee elects otherwise, a stated percentage (2% from January 1 1923, mcreased to 3% beginning February 1 1927 and 4% beginning August 1. 1939) of -all unit charges, rentals and minimum charges received by defendant in respect of a machine, to liquida- tion of any deferred (or return) payments for which the lessee became obligated and, since 1939, to the payments for use of the machine less the minirhum that might be due or become dué under the terms of the lease on that i 23. | Second Amended Answer to Amended Complaint | machine or op other machines under lease in the factory. “The amount available for such application on the lessee’s ~ election and instructions. is ‘commoely known as the “Right of Deduction Fund’’. 8. Denies paragraph 20 thereof except it admits that at all relevant times it has accepted the return of. each machine which’ a lessee. has desired to return even though . the contract term of the applicable lease has not expired; — that where return before expiration of the contract term of the lease has been d¥sired by the. lessee either because the operation performed by the machine is no longer to be used or is to be performed: by hand or by another machine of defendant, either’ newly or previously leased, - . or because the defendant’s machine does not successfully perform the operation which can be successfully performed- by a machine of other manufacture or because the lessee is ceasing to do business, in each such case the return has been accepted upon paymént by the lessee ef the cost of broken and missing parts, the deferred payment, if any, and the cost of trarfsportationi to defendant’s factory. at Beverly, Massachusetts, all as provided in the lease; that where return of the machine before expiration of the con- tract term of the lease has. been desired by the lessee solely for the purpose of substituting in performance of the opera- ‘tion, a machine of other manufacture, in.each such case the return has™Been accepted on payment of.an additional ‘sum amounting, in the case of 4 monthly rental machine, to 25% of the monthly rentals for he unexpired term of the lease’; or, in the case of a unit charge machine}to 50% - of two-thirds of the aggregate minimum monthly c arges. * for the urlexpired term of the lease; or, in the caseof a machine leased upon monthly rental and unit charge (with Second Amended Answer to. Amended Coniplaint | no provision for minimum monthly charges), to 50% of - the aggregate monthly rentals for the unexpired term of the leasex and that in each stich case the lessee was entitled at his election’ to cause any amount available under the plan .known as the Right.of Deduction Fund to be applied to discharge in whole or in part the obligation of the lessee to make to the defendant the deferred + sae if ‘any, ’ provided i in the lease. A 9. Denies paragraph 21 thereof except it admits that defendant has at all relevant times undertaken to repair its machines on lease with plaintiff and with other lessees without extra charge to the lessee except for such parts as are required and in addition to this repair service. has rendered planning, shoe-making and other . services to plaintiff without charge, all of which services plaintiff has received and accepted and on occasions requested. 10. Denies paragtaph 24 thereof except it admits ‘ machines of the types listed. in paragraphs 7 to. 13 thereof are required in plaintiff’s manufacture of men’s and boys’ shoes and are or have been leased by plaintiff from de- fendant; and admits for the purposes of this case only that the information available to United, known to be in- complete and inaccurate, with respect to use by shoe manu- facturers as of about May 1 1947 of machines of the first 17 types listed therein, eacly first developed, introduced and distributed to shoe facturers by defendant: and progressively improved by defendant:since its introduction, ‘indicates that the percentages thebein alleged as being the proportion of all machines then used by shoe manufacturers for the operations performed by such machine types, re- spectively, represented by machines of defendant’s types and , Mee 25 ae ern _ Second a Answer to Amended c sapien . cline are appronidiate witiiin limits rendering in- accuracies probably immaterial for the purposes of this case. wie Ue | For A First DEFENSE. ** 11. Says that plaintiff’s claims did not accrue within the time limited for action, and are barred by the Massa- chusetts one-year statute of limitations governing actions for penalties or forfeitures under penal statutes ( Mass. “Sy G. L. Ch, 260 § 5) as made applicable to this case by the — statutes of Pennsylvania (12 Purdon’s Statutes § 39). For A Secon AND PARTIAL DEFENSE 12. Says that all plaintiff’s claitns for the period prior to July, 1 1939 did not accrue within the time ‘limited for action and are barred by the renneyivania six-year statute. of limitations. For A’ THIRD DEFENSE 13. Says that such pre-eminence as defendant has or has had in the soe machinery industry has been due to its initiatjve, enterprise, research, experience, knowledge and development of Superior products and of business methods e adapted to promote entrance into business and competitive success of lowe | and shoe manufacturers generally, and © such pre-eminerf€e has been accompanied ‘by an increase rather than a diminution of competitive opportunity for plaintiff. a ~« 26. Second Amendcd Answer to Amended Complaint For A FourtH DEFENSE 14. Says that the right of action, if any, set forth in the complaint is. barred by laches, estoppel, waiver and acquiescence on the part of the plaintiff. WHEREFORE defendant prays for judgment dismissing . the complaint.on the ‘merits together with costs and: dis- - bursements. of this action. Davis PotK WarRDWELL SUNDERLAND & KIENDL ' ' By -Racpuw M. Carson | A: Member of the. Firm ok eer Attorneys for Defendant pags ot Meier 15 Broad Street _ Ban \ _ New York 5, N. Y. New York, N. Y. | Ree a February 24-1961 ir te FINDINGS OF FACT, CONCLUSIONS OF LAW AND OPINION _ UNITED STATES DISTRICT COURT _ For tHE Mippte District or PENNSYLVANIA ; : e & - [SAME TITLE] dy a I. INTRODUCTION _ . ‘This is a private antitrust action which arises under | _ Section 2 of the Sherman Act, Act of July 2,°1890, c. 647, 26 Stat. 209,'as amended, 15 U. S. C. A. § 2, and under ~ Section 4. of the Clayton’ Act, Act of October 15, 1914, c. 323, 38 Stat. 731, 15 U.S.C. A. § 15, to recover treble damages for defendant’s alleged monopolization of the Shoe machinery industry, and, particularly, its alleged monopolistic practices with respect to substantially all shoe machinery required and used by_ plaintiff, The Hanover Shoe, Inc. (Hanover). ; | The complaint, as amended, alleges in paragraph 14 that “Prior to and continuously. from the year 1912 the ' defendant, United Shoe Machinery Corporation [United], has been violating the antitrust laws of the United States . by: (a) monopolizing interstate trade and commerce in * the shoe machinery industry of the United “States; (b) . monopolizing interstate trade and commerce of the United States in “substantially all shoe machinery required and used by Hanover in the manufacture of men’s and boys’ shoes.” In paragraph 15 it is alleged that “Monopoliza-_ 28 dings of Fact, C oncluston's g Law and Opinion a tion -by United ‘as aforesaid and the exercise by it" of its monopoly powers has enabled United to dominate and con- trol the market, in shoe machinery, to restrict. actual com- petition and to exclude potential competition in said market.” | ; ‘The complaint then sets forth allegations with respect. to the principal means used by United to accomplish the violation of law. ‘It is alleged that.“‘At all times’ prior to May 17, 1954, the date of the decision of’ the United States ‘Supreme Court affirming a judgment that United _violated Section 2 of the Sherman Act by monopolizing the shoe machinery trade and commerce among the several States,, United declined to sell most of its shoe machines and made such machines available to shoe manufacturers only upon leases . . .” and that United “offered on lease only all of the major, important machines used by Han- over” in the sHioe manufacturing operations described in other paragraphs of. the complaint. It is alleged that United’s leases for most of its machines, including all such leases with Hanover, provided flat rental charges or unit rental charges based on the number of shoes produced or. ‘on the number of operations performed. by the machines, and on the rest’ of its machines, including those on lease to Hanover, provided for payment of both rental and unit charges. It is alleged that in these leases, the 10 year term, full capacity, minimum charge, and machine return clauses, alone or in combination with one or more of the other clauses, deter and ‘prevent shoe manufacturing lessees, ‘in- cluding Hanover, from replacing with a competitive ma- chine each of the machines leased from United. Other means ised by United to deter competition are alleged to be the establishment of a “right of deduction fund” whereby a: percentage of rentals was sete aside by yer ieee ee ee eae ret pen eet e “a Findings of Fact, Conclusions of Law and Opinion United to be applied by United, if desired by the lessee, to — machine return charges or minimum rental charges; the re- }. that lessées pay transportaticn and parts replace- ment costs, and a sum equaling either 25 or .50 percent of the remaining rental for the term if a lessee, including Han- over, desired to replace'a United machine with that of a United competitor; and United’s voluntary assumption of ~ machine repair with no separate charge to the lessee, there- by deterring the establishment and growth of competitive repair service organizations. The complaint alleges that as a further means of preventing competition, United, when faced with competition, reduced its own rates on machinery types threatened by competition; introduced new models at lower rates than those rates for comparable old models;- maintained rates on a particular machine type despite a pol- icy of increasing rates on other machine types to meet in- creased costs of manufacture; and introduced new models ” ‘so designed and priced.as to reach only that area of the shoe manufacturing industry in which a competitor was attempt- ing to market a machine. Hanover alleges that these: practices affected it in the following ways: (a) United collected from Hanover exces- sive, arbitrary and non-competitive rental, unit and other charges for its products. and services; (b) Hanover. was prevented from acquiring shoe machinery, new or used, as . owner either from United or elsewhere; (c) United ex- tracted from Hanover for the use of its shoe machinery, large sums of money in excess of the reasonable value of such machinery and of the service rendered by United on such machinery. | : | Hanover claims damages of $2,000,000, and pursuant to the treble damage provisions of the Clayton Act, requests sin of $6,000,000. OO stouekey SOR RE OR , opr 7 30 | Findings of Fact, Conclusions i of Law ond Opinion - In its answer United denied many of the significant alle- gations of the complaint and set up as affirmative defenses the statute of limitations, laches, estoppel, waiver and ac-. quiescence on the part of Hanover. United also contends that its pre-eminence in the shoe machinery, industry is due _ to its initiative and enterprise and. its business methods, which were adopted to promote success of manufacturers generally, | and has been accompanied by an increase of - portunity for Hanover. . The action was tried to the court without a jury. oo FINDINGs oF Fact, Conctusions or Law A. Background: | Plaintiff, The Hanover Shoe, Inc., 1S-a corporation " organized and existing under the laws of the State of Penn- sylvania, with its principal office and _ of business in Hanover, Pennsylvania. Defendant, United Shoe’ Machinery Corporation, is -a ‘corporation organized and ‘existing under the-laws of the State of New Jersey, with its principal office and place of _ business in Boston, Massachusetts, and also with offices — - and a place of business in Harrisburg, Pennsylvania, within *_ ‘this district. . . Since 1899 Hanover via engaged in the manufacture of men’s shoes: by the Goodyear’ welt. process, and until the early 1950’¢ also engaged in the manufacture of boys’ shoes by the same process. Except for large quantities of military shoes martufactured during World War II, and for shoes sold to Montgomery Ward and J. C. Penney since World War II, Hanover has sold the shoes it manufactured: di- foe Findings of Fact, C onclusions of Law and Opinion p rectly through retail men’s shoe ;storés operated by its _‘ wholly owned subsidiary, Sheppard & Myers,.Inc. There are currently about 110 tetail stores,.Hanover’s manufac- — ture of shoes during’ the period from 1939, the beginning of the complaint period of this action, to-1955, the year in which the action was instituted, ranged in volume from a. _ low of 1,006,768 pairs in 1939 to a high of 1,939,289 pairs in 1944. In 1955 Hanover was the shoe machinery market which it ae i. The Antitrust Vidlation: ‘1. The Findings and Decree in the GoveKannass case. - Hanover relies primaril ly on the decree, a Pee con- clusions, and opinions in the Goyernment case, as proof of United’s illegal monopolization of the shoe machinery in- ~ 36 nae: a Findings of Fatt, Conclusions of Law and Opinion dustry in the United States, pursuant to Section 5 of the Clayton Act, 15 U. S.C. A. § 16, which provides: “(a) A final judgment or decree heretofore or. ' hereafter rendered in any civil or criminal proceed- ing brought by or on behalf of the United States ‘ under the antitrust laws to the effect that a defendant _has violated said laws shall be prima facie evidence : against such defendant ‘in any action or proceeding brought by gny other party against such defendant \under said laws or by the United States under section \ Sa of this title, as to all matters respecting which id judgment or decree would be an estoppel as be- tween the parties thereto: . . .” : United urges that even with the aid of the decree in the Gover case, Hanover has not proved a monopoliza- tion; that the four clauses in the Form A lease, the ten . year term, the full capacity, the deferred, payment or return charge, and the repair clause; were the orly factors relied on by Judge Wyzanski as the basis of his decree; that these clauses were not in their actual operation restrictive or . monopolizing practices, and had no effect on “Hanover ; and that all other charges were dismissed. with prejudice. - The findings, conclusions and decree in the Government ' case show that the four clauses of the Form A leasé, and also the lease-only System were in their operation restrictive ‘ or monopolizing practices.* 2 | "The coirrt clearly indicated this in the following parts of its opin- ion (page numbers refer to 110 F. Supp.). ° “The effect of United’s leasing system as it works in practice may be examined from the viewpoints of United, of the shoe manufacturers, . © and of competitors potential or actual..p. 323 - : - “Yet as already noted, a shoe manufacturer may psychologically or economically be more impeded by a leasing than by a selling system. e . “s a / ' that it is a restraint of trade under § 1 fora ip ES tet De Findings of Fact, C onclysions of Law and Opinion , . \ «= The court spoke of the lease-only system, and its “fea- _ tures” which have a “special deterrent effect”; the lease- And‘ this general observation is buttressed-by a study of features in the United leasing system which have a special. deterrent effect. Though these features are stated separately, and some of them alone — are important’ impediments, they must’ be appraised collectively to appreciate the full deterrent effect. p. 324 | : ' “However, United’s leases, in the context of. the present shoe i market, have created barriers to the entry by competitors into the shoe machinery field. p. 340” ee ds “First, the complex of obligations and rights accruing under ited’s leasing system in operation deter a shoe manufacturer from disposing of a United machine and acquiring a. competitor’s machine. He is deterred. more than if he owned that same United machine, or if he held it on a short.lease carrying simple rental provisions and a reasonable charge for cancellation before the end of the term. The © ‘lessee is now held closely to United by the combined effect of the 10 year term, the requirement that if he has work available he must : use the machine to full capacity, and by the return charge which "can in practice, through the right of deduction fund, be reduced to in- significance if hekeeps this and other United machines to the end of the periods for which he leased them. p. 340 eS ; N “Second, when a lessee desires to replace a United machine, United gives him more favorable terms if the replacement .is by an- other United machine than if it is by a competitive machine. p. 340 - “Third, United’s practice of offering to repair,. without separate charges, its leased machines, has had the effect that there are. no independent service organizations to repair complicated machines. - In turn, this has had the effect that the manufacturer of a complicated - machine must either offer repair service with his machine, or must face the obstacle of marketing his machine to customers who know that repair service will be difficult to provide. p. 340 ; .° . Psi “If the matter were res integra, this Court would adopt the first /. approach, and, as a preliminary step to ruling upon § 2, would hold company having on over- ‘ whelming share of the market, to distribute its more deaportunt prod- © ucts only by leases which have. provisions that go- beyond assuring f prompt, periodic payments of rentals, which are not terminable cheaply, which invalve discrimination against com ition, and which - combine in = contract the right to use the product and to have ‘it _ serviced. p. 343 ee _ “. , In the relatively Static shoe machinery market where there 4 “ate no sudden changes in the style of machines or in the volume of | “a 38. Findings of Fact, Conclusions of Law and Opinion only system and the. “complex of obligations and rights”, accruing thereunder. which “in operation” deter a shoe manufacturer from disposing of United's and acquiring. a | ‘demand, United has a network of long- -term, complicated leases with over 90% of the shoe factories. These leases assure closer and more , frequent contacts be'ween Untied and its customers than would exist if United were a seller and its customers were buyers. Beyond this general quality, these leases are so drawn and so applied. as to strengthen United’s powers to exclude competitors. .. . p. 343 . These considerations would all affect potential competition, and have not been without their effect on actual competition. p. 344 , “Much of United’s market power is. traceable to the magnetic ties inherent in its system of leasing, -and not selling, its more important machines. The lease-only system of” distributing complicated ma- chines has many ‘partnership’. aspects, and it has exclusionary fea- * tures such as the 10-year term, the full capacity clause, the return charges, and the failure to segregate service ‘charges from machine charges. Moreover, the leasing system has aided United in maintain- - ing a pricing system which discriminates between machine types. oH p. “i to... are contracts, arrangements, and policies which, instead of encouraging. competition based on pure merit, further the domin- ance of a particular firm. In this sense, they are unnatural barriers; they unnecessarily exclude actual and potential competition ; ad re- strict a free market. . . . pp. 344-5 . United is denied the right to exercise effective control of the sinaaaet by business policies that are not the inevitable consequences of its capacities or its natural advantages. That those Policies are not imihoral js irrevelant. . . . p. 345 Defendant intended to engage in the leasing practices nib . pricing policies which maintained its market power. That is all the - intent which the law requires when both the complaint: and the judg- _Mment rest on a charge of ‘monopolizing’, not merely. ‘attempting to —e. Defendant having willed the means, has willed the — | end. . . p. 346 . All that this opinion has ruled is that when control of the ene has been obtained in large part by such leases, the market . pewer cannot be said to have been’ thrust upon-its holder through its ‘own skill, energy, and initiative, or through tec ological conditions of production and aeiriegion, or the inevitable c racteristics of the market. . ; .” : P- 346 “s . the leasing system and the miscellaneous activities just re- . - ee ee a ee ee ee ee ee eee ad neler: dee Ab te 6 Abeta) or ann htc OB, if 39. Findings of Fact, C onclusions of Law and Option ‘competitor's machine; the distribution of itil only o on leases which “assure closer and more frequent contacts” with customers than if United were a seller, and “beyond this general quality” the four clauses which are “so drawn * and applied” as to “exclude competitors” were the business policies with a deterrent effect; the business policies which erected “barriers” to competition and were traceable to the “‘lease-only system”, and its “partnership aspects” and “éx- clusionary features”. The court found that United -in-. tended to engage in leasing practices and pricing policies which maintained its market Power and in so doing’ monop- olized. - The conclusion is buttressed by the’ part of the opinion dealing with remedy. In discussing the remedies and their’ effects, the court glearly indicated that the lease-only sys- _tem, restrictive clauses and related practices were the policies to be banned.* . . *‘From the opinion on defendant’s violations it follows that some form of relief regarding defendant’s leases and leasing practices is" proper and necessary. _p. ..the Court agrées with the Government that the leases should be purged of their restrictive features. In the decree filed herewith, the term of the lease is shortened, the full capacity clause is eliminated, the discriminatory commutative charges are removed, and United is required to segregate its charges for machines from its charges for repair servic¢. .. . p. 349 “The Court also agrees w ith the Cnventions that if United chooses to contiriue to lease any machine type, it must offer that type of machine also for sale. The principal merit of this-proposal does not . lie in its primary impact, that is, in its effect in widening. the choices open to owners of shoe factories. For present purposes it may be | assumed that the anti-trust laws are not designed, chiefly, if at all, to give a customer choice as to the selling methods by which his supplier offers that supplier's ewn products, The merit of the Government’s proposal is in its secondary impact. Insofar as United’s machines are sold rather than leased, they will ultimately, in many ~ cases, reach a second-hand market. From that market, United will r 40 Findings of Fact, Conclusions of Law and Opinion The decree effectuated the court’s intent as expressed in the opinion. After holding that United monopolized the shoe machinery trade and commerce among the several . _ States, in violation of § 2 of the Sherman Act, the court } enjoined United from using the Jease-only system and purged the leases of the restrictive effects of the four ae clauses. . : . If the lease-only system was not a monopolistic practice by the aid of which United maintained its monopolistic po-. sition, it would have been unnecessary for the court to order its cessation since it is a practice which could exist inde- pendent of the other lease. provisions and practices. The complaint in the Government case, .the court’s summariza- tion of the charges in the complaint, the findings and opin- ions, and the decree show that the charges which were - dismissed with prejudice related to certain charges of mo- nopolizing and attempting to monopolize in certain areas other than ‘shoe machinery. ; face a type of sulstitute competition which will gradually weaken the prohibited market power which it now exercises. Moreover, from that market, or from United itself, a competitor of United can acquite a United miachine in order to study it, to copy its unpatented features, and to experiment with. improvements in, or alterations of, the ma- chine. Thus, in another and more direct way, United’s market power will be diminished. p. 349 “Furthermore, the creation of a sales market together with the purging of the restrictive features of the leases will, in combination, gradually diminish the magnetic hold ‘now exercised by what United properly describes as the partnership features of the leasing system. As United’s relationships with its customers grow feebler, com- ‘ petitors will have an enhanced opportunity to market their wares. p.. - \ 350. ‘ “It has used its leases to monopolize the shoe machinery sieilan ‘And if leasing continues without an alternative sales system, United will still be able to monopolize that market. To root out monopolization and to bring United, in the future, in the same class - as,its competitors, it is necessary not merely to place limitations upon ’ United’s leases, but also to ie United to offer for sale any ma- . chine type which it leases. . . p. 350. Ree tee ren one ty 41 ; : Findings of Fact, Conclusions of Law and Opinion United advances several reasons why the four “Form A” clauses had no effect on Hanover. eerie Full Capacity. One argument is that Judge Wyzanski held this clause to be a “deterrent” to competition on the basis of certain testimony® by United’s president in which the witness merely adopted that’word as used by the court, and to which the court gave unwarranted weight. United offered previous testimony by the same witness in the Government case to show that the witness may have thought that the court was using “deterrent” as applicable to past general practice, particularly since the testimony in the instant case shows that the full capacity clause. was never enforced since the early 1940’s. . - ~ Judge Wyzanski, after reviewing instances when the full capacity clause was invoked, found that this clause and other clauses‘ were invoked in accepting returns of ma- chines before the lease terminated, or in billing lessees for 5“The Court: If -I have understood your answer correctly, you said that the full capacity clause operates as a deterrent to a factory taking on a competitor’s machine, and it is a deterrent which the factory owner is not always aware of when he signs. the lease. Have I misinterpreted your answer? . “The Witness: No, I think that is quite true. Very often they are not fully aware of the full capacity clause, or the way in which _. the obligation would devolve upon them. “Q. Well, what I want to make clear is that even in the case where you have done that, have you told him that he coutdn’t return your machine. A. No, sir. On the contrary, we have gone to great - lengths in most instances, and our branches I believe do so in all _cases, because he has three alternatives, of course. Heafay return the machine if he wishes to, upon the basis I have outlined previously. If he wants to retain the machine, then we expect him to live up to the full capacity obligation in the lease; that is, that he will use the machine to full capacity. a . ' “Q. And that is when he has work for it to do? A. That is - _right. Or if he wishes to use the other machine and not use ours, we expect that payment will still be made to us, of course, under the full capacity ‘clause.” (United’s Exhibit 107) . x : 42 Findings of Fact, C onclusions sii Law and Opinion . ° * machine use, if the lessee desired to use a non-United ma- chine in place of the United machine, whereas these clausés were not invoked if the lessee had some other reason for _ returning a United machine or for non-use of the United “machine. Judge -Wyzanski concluded that this “discrim-. '- ination is designed to operate, and does operate as, a method - of excluding from the shoe factories shoe machinery com- petitive with United.” Having so concluded, the court added” “Tf this were otherwise doubtful, this finding is confirmed’ by the statement in court of United’s president ‘that the full-capacity clause operates as a deterrent to a factory taking on a competitor’s machine.’” Thus, the court reached its conclusion after a review of evidence other than the president’s testimony. . Moreov er, United’s president: was advised by counsel that his answers were to apply to the past. as well as the present: “*And if I ask you. questions*jn the present tense, I also mean them to apply to the general practice in the past ' tense as long as .you have been familiar with the matter, Mr.: Brown.” | - 4 United also’ argues that the prcabdent’ s adoption of ° “deterrent” is negatived by a previous question and -his answer: “Has it evér been the practice of your company to invoke this full capacity clause to deter or prevent any - of your lessees from replacing a machine which you have leased to him with a competitive machine’ A. Never.”. United’s president was then asked to explain why the. “clause does not have that operation.” He answered that-a lessee may at any timé install-a non-United machine if the lessee uses the United machine to ‘full capacity. This ex- planation is no more than a description of the.lessee’s rights under the lease. Sanctions under the full capacity clause could hot be imposed, no matter what machinery was being ° Arestin’ Paneth oh ond a mann ja 0 ding eM essen inane ei wt ike oth ’ m Pe ae. bine or PRL Dei ties ilald AR orb tn re, Sar 43 Findings of Fact, Conclusions of Law and Opinion used, if the United machine was being used to full capacity. Thus, any adoption os. “deterrent” was not negatived by . previous testimony. - United points to she testimony of bens: Sheppard of Hanover, Mills of Endicott Johnson Corporation, Erb of Melville Shoe Company, and Jones ef Commonwealth Shoe ~ Company that the full capacity clause was‘never enforced against these companies, and, in the ‘case of Mr. Erb, that the existence of the clause did not prévent his company from installing a competitive ‘machine. The relevance of - this testimony, for the most part, is not apparent. judge ‘Wyzanski found that the full capacity clause was not con- sidered by United to “have been violated’ unless the lessee failed to use the machine on work for which the machine was capable of being used, and instead performed such work by using a competitor’s machine. Judge Wyzanski said:*“In other words, it is not treated as’a violation i P, the - lessee fails to use United’s machines because he perfortns the work by hand, or because he discontinues the type of opera- tion for which.the machine is capable of being used.” The ; evidence of non-enforcement and that in certain instancés shoe manufacturers were not prevented from .installing non-United machines. Ww ould be meaningful ‘if there was also evidence that use of a competitor’s machine caused the. United machine to be operated at less — full capacity. There was no such evidence. F inally, United argues that ‘the uncontroverted testi-” mony is that the full capacity clause has not been enforced since the early 1940’s. This.testimony was given by one of- Unitéed’s employees, who stated that since 1942 nq attempt was made to enforce the clause because of the administra-— tive difficulties involved. It is not clear as to whether this was.intended to bea “company wide” or “location” aban- - - * ‘ a4 _ Findings of Fact, Conclusions of Law and .Opinion donment of enforcement of the clause. But assuming it was a company wide policy, the full capacity clause was not -deleted from the leases, and the. company’s jntention to abandon enforcenmfent was not otherwise cOmmunicated to ‘the lessees. In the absence of such communication, the lessee - would expect enforcement of the clause. ie: Return Charge. United relies on testimony by Messrs. — "Sheppard, Erb, Jones and Mills that the return. charge in no way prevented them from returning a United machine, either for replacement by 4 competitive machine or for any other reason. Mr. Sheppard’s testimony dealt with the re- turn of United machines because they were surplus,.or in exchange for other or new United machines, and was not concernéd with the return of United machines to be replaced by non-United machines. The other three witnesses testified the return charge did not prevent the return of United ‘machines for replacement by non-United machines, because they had. accumulated substantial. credit under United’s “Right of* Deduction Fund”,’ which. would offset machine | return charges. This testimony does not overcome Judge Wyzariski’s finding that this clause was a deterrent or mo- nopolizing practice. Judge’ Wyzanski found that the right of deduction fund was an informal policy which United had not expressly committed itself-to continue, and that discrim- inatorily higher charges’ were. assessed if.a machine was a eroaat ae ies ®The Right of Deduction Fund is a plan, not part of. the leases, ~ > but established by United in written notices to lessees, whereby (since ~ _ 1939) 4 percent of all unit charges, rentals, and minimum charges on a machine is credited to the lessee: The ctedit*is solely. for the purpose of being applied, if the lessee desires, to deferred (or return) . payments, and (since 1939) to payments for use less than minimum, due on that machirie or other machines in that factory. The credit is not ayailable if. the lessee is in default on ‘any payment due United, or if the lease has been terminated by reason of the lessee’s breach or insolvency. ‘ ash 2D cieseos baw 45. | Findings of Fact, Conclusions of Law ond Opinion é returned, before the end of the term, to’ be replaced by’ a- _ non-United machine, as compared with the. lower charges assessed if thé machine were returned for another reason. It should be noted also that Judge Wyzanski ordered United to discontinue the right of deduction fund and not substi-¢ tute anything similar. in any plari or lease.. - _N on-Segregated Repait Service Charges. The lease provided that the lessee was to-make all repairs at its ex- pense. Instead, United made the repairs at no additional cost. United argues that ‘while. Judge Wyzanski found this practice tended to prevent the entry and existence of ’ large-scale independent repair compahies and hence put a stumbling block in the way of competing machinery manu- facturers, it was a boon for the lessees. United states that Hanover realized it was "getting repair service without additional. expense, and insisted on- efficient service at all times. Judge Wyzanski found United’s practice of render- ing repair service without separate charge “bas. brought - about a situation” in which there are almost fio large-scale independent repair. companies. It was not a boon because - Hanover paid for it. Judge Wyzanski found that United set monthly and unit charges high enough to pay for the services rendered. Judge Wyzanski pointed out this prac-” tice was an advantage to some shoe manufacturers, not be- | cause United. performed the service when it was not obli- *. _ gated to do so, but because the manner of recovering costs ~ '. ‘therefor, through inclusion of a factor in machine rentals, we worked tes the advantage of those manufacturers that had high service requirements to the disadvantage of those that . .- had low service requirements. The repair service clause. plus United’s conduct was a deterrent. Hanover paid for ‘the service. To have non-United service meant double pay- . : ° oe ° % * *~ 46 Findings of Fact, Conclusions of Law and Opinion "ment. Thus, independent service companies did not — - and Hanover was at the mercy of United. Ten Year Term. United argues that by 1939 its ma- chines had been’ under lease for more than 27 years, and those prior to 1929 were all on 5 year~renewal terms; that the only exception after 1939 would be for new machines installed after that date. The anwer is there were a sub- stantial number either on 10 year terms for new machines, or on terms in excess of 5 years for those whose original - term had not expired. Neither the individual clauses nor the lease-only sys-. tem:-can be viewed separately. “The evil is the result of their collective use. As Judge Wyzanski said, “. . . some of them alone are important impediments [but]. . -: eer must be appraised collectively to appreciate the full deterrent ef- fect.” Judge Wyzanski found that if. shoe machinery were available upon a sale basis, some. shoe manufacturers would have ‘been able~to provide service at: less cost than that, charged by United. They would not be subject to the uni- lateral decision of United whether or not to continue or modify: the informal policies hy which it administered its leases, thereby réleasing shoe manufacturers from some of ’ the logical and economic power United exercised ‘over them. ‘In Futuro Argument. United submits that the decree in the Government .case was intended to operate prospec- | tively only, citing “may” in listing the effects of the. full’ ‘eapacity clause. Judge Wyzanski did not us¢ “may” in describing the effects on the other clauses. He characterized - - the four clauses as features which “have” a special deterrent effect, and spoke of the deterrent, effects of United’s policies’ - on the shoe machinery er: "It i is clear that he had in- ' See footnote 3, oupen. 7 = a “7 Sm Findings of Fact, C onclusions of Law and Opinion mind the eae ae the clauses and practices did have, and. not merely the effects they might have. This is confirmed by the conclusion that United’s practices operated as a method of excluding competitive shoe machinery from the Shoe factories, baséd on findings of such practices in the 90 instances United invoked the full capacity; return, or like provisions of the standard lease during 1927-1948, ~ / In its brief United states, “We are relying upon a unique record Of res judicata and upon the fact “that, as Judge Wyzanski acknowledged, the practices now attacked were in prior cases not only ‘uncondemned’ but also ‘were in part endorsed’.’””* It maintains that its preponderant position, as measured by percentages of machines in shoe factories, is not enough to sustain Hanover’s burden ‘of proof of mon- opoly ; that this position is die to its original constitution, which Judge Wyzanski regarded as protected by res judi- cata, and the superiority ofits products; that Judge ,Wy- zanski found the leasing system honestly industrial; and that even the full capacity clause had been approved in a prior case. ‘ The prior Government cases do not bag the holding of monopolization. Judge Wyzanski was awage of them when he framed his findings, opinion and decree. HeYindicated _ that but for the prior cases he would have held United in violation of Section 1, as well as Section 2 of the Sherman — Act. There is no support for the.statement that United’s preponderant position is due to its original constitution and product superiority. . Judge Wyzanski pointed to these two . factors and the leasing sy¢fem and its aspects as the principal *Three. earlier antitrust cases involved United: United States v. Winslow, 1913, 227 U. S. 202; United States v. United Shoe - Machinery Company of-New Jersey,’ 1918, 247 U. S. 32; and United Shoe Machinery Corp. v. United States; 1922, 258 U. S. 41. - ~ 48 "y \ : - Findings of Fact, C onclusions of Law and Opinion ‘sources of United’s power. ‘In corinection with prodtict de- velopment, gic is closely related to product superiority, Judge Wy2fnski found that the rate at which United ‘im- ‘ proved old-machine types did-not Create a formidable record, and United’s research.in the shoe machinery and in allied developrrents was neither tke basic cause of its success nor far beyond what could be achieved’in a monopoly free - market. The leasing system and its aspects were the barriers to competition, and were the basis for the decree of monopo- _ lization. It is immaterial that Judge Wyzanski said the ori- ginal constitution was protected-by res judicata, and that he did not criticize the other sources of United’s power. And while he did say that the leasing system and practices were _ honestly industrial, he also said that they représent policies which are unnatural barriers to competition, unnecessarily excluding actual and potential . competition and restricting a free. market: There is also the contention that Judge Wyzanski’s judgment gave effect to what he récognized to be a change in the law beginning with United States v. Aluminuni Co. of America, .2 Cir. 1945, 148 F. 2d 416 ; that while courts can.overrule thetr own decisions and change the law retro- actively, they also can limit a precedent, reversing decision _ to prospective application; and that retroactive application ‘of an overruling; decision is inequitable and is not invoked when persons have acted in reliance on the prior. decision. Assuming that the decision in the Aluminum Co. case repre- sented a change in the law, effective in 1945, Judge Wyzan- ski did not attempt to limit his decree to the future. There- . fore, there is no merit to this argument. See American Amusement Co, v. Ludwig; D. Minn. 1949, 82 F. Supp. 265, 267; United States v. Calamaro, E. D. Pa. 1956, 137 F. Supp. 816, 820, rev'd on other grounds, 3 Cir.’ 1956, 236 Ph ee Findings of Fact, Conclusions of Law and: Opinion ° , ‘wy F. 2d 182, aff'd 1957, 354°U. S. 351. Some of the relief. looks to the future, but this does not mean that the..court did not find a monopolization, or did not intend its decree to be retroactive. The decree. operated “both ways. The court required United to cease certain practices and also to terminate outstanding leases. Pe Ia summary, the findings, conclusions and decree in the Government case established that United’s preponderant position coyipled with its lease-only system, the four clauses _ and its practices with respect thereto constituted a viola- _ tion of Section 2 of the Sherman Act, and that such policies and practices were restrictive or monopolistic during the ‘complaint period in this action, and had a restrictive effect on Hanover and other shoe manufacturers. . With the aid of the decree Hanover has proved a monopolization. _, 2. The Estoppel Aspects.and Relevance of the Govern” ment Decree. | | ee : . The estoppel aspects andggelevance of the Government _ “decree have been termed by some courts the “target area.” These courts have held that if the decree, fairly construed, does not embrace the plaintiff as a target of the antitrust — violation, there can be no recovery. The injury: and ,the damage must not be remote from the violation. A plaintiff “must show that his claiméd injury stemmed directly and proximately from the type of practi¢e condemned in the Government action.” Iffternational Shoe Machine Corp. ‘v. United Shoe Machinery Corp:, 1 Cir. 1963, 315 F. 2d “449, cert. denied 1963, 375 W. S. 820. The difficulty does not lie in the principle, but in its application. “It is not pos- sible toformulate any general rule by which to determine - what injuries are too remote to bring a plaintiff within the scope of the Act... . Each casé must be dealt with on its » _. Findings of Fact, C onclusions of Law and Opinion - - own facts.” Harrison v. Paramount Pictures, Inc., E. D. Pa. 1953, 115 F. Supp. 312, aff'd per curiam, 3 Cir. 1954, 211 EF. 24405.” . ' Prior to the trial, there was a trial on a smn’ issue — _ in accordance with Fed. R. Civ. P. 42(b), 28 U. S.C. A.. The issué was to determine whether excessive shoe ma- chinery costs constituted an injury in that all such costs . were passed on by Hanover to its customers. The late Judge _ Goodrich of the Court of Appeals, sitting asa : district judge, found for Hanover. Hanover Shoe, Inc. v.. United Shoe. - Machinery Corp., M. D. Pa. 1960, 185.F. Supp. 826. The .. Court of Appeals affirmed. 281 F. 2d 481. The order for. . the separate trial assumed that (1) the violation of law as alleged existed, and (2) the excessive cost of shoe ma- chinery as alleged existed. Judge Goodrich held that “The - _-causal relation between defendant’s -wrong and plaintiff’s _ harm is obvious.” - > In La Chapelle-v. United Shoe Machinery Corp., D. Mass. 1950, 90 F. Supp. 721, the complaint charged that an inventor was forced to sell his product to United at less than its value because of United’s monopoly. The court refused ie to dismiss the complaint. “The more frequent complaint against a monop- oly is by one who seeks to buy and complains that — since the monopolist controls the market he must therefore -buy from the monopolistic seller at the latter’s price, or not at-all. But the i injury is equally -great to one who wishes to sell his product in a market subject to monopolistic control and must sell to the monopolist as the only available buyer, again on the monopolist’s terms, or not at all.. Here the. injury is the direct resut of the monopolistic condi-. : Findings of Fact, C onclusions of Law and ‘Opinion _ tion which has been created, and the injured seller . may recover r under § 15.” (90 F. Supp. at p (wae). After an answer was filed, the court ‘(granted Aafeidant’s motion for summdry judgment because thee plaintiff had previously filed a complaint against the defendant alleging | the same-cause of action, which had been dismissed with prejudice. The reason for the dismissal does not appear. . No appeal was prosécuted:. Consequently, La Chapelle is still authority for the proposition that the target area is not limited to a monopolist’s competitors.. See Congress Build-' ing Corp, v. Loew’s, Inc., 7 Cir. 1957, 246 F. 2d 587; Vines. i Genet | Outdoor Advertising Co., 2 Cir. 1948, 171 F. 2d 487. — ae Chattanooga Foundry & Pipe Works v. . City. of. Atlanta, 1906, 203 U. S. 390, plaintiff purchased pipe at an excessive price due to an illegal arrangement. between de- fendant.and others. The court held+the plaintiff “.. . was’ injured in its property,-at least, if not in its business of furnishing water, by being led to pay more than the worth of the pipe.” United attempts to distinguish this case be- cause the excessive pfice of the pipe represented property diminished by ‘the payment of money wrongfully induced by a conspiracy ; whereas, here there is no wrongful induce- | ment because the rentals were paid in accordance with valid _ leases. In Chattanooga the sale. was lawful, but the motayes .and inducements to make it constituted a wrong, that is, a : combination of members of a‘trust who. arranged, for the sale at an excessive price after simulated competition which induced the buyer to buy. .The court said: . .. Finally, the fact that the sale was not so con- ae in its terms with the unlawful combination as to be unlawful, Connolly v. Union Sewer Pipe Co., 4 52 é Findings of Fact, Comclusions cf Law and Opinion 184 U. S. 540, in no way contradicts the proposi- tion that the motives and inducements to make it were so affected. by the combination as to constitute a wrong. . - ; United citi the validity of the leases with the motives | and inducements behind them. Hanover was. induced to enter into the leases by the absence of suppliers brought about by the monopolistic practices, including the lease-only : policy. The motives and inducements were so intertwined with the monopolization practices as to constitute a wrong. | Both Atlanta and Hanover, were buyers from an antitrust .violator. The damages sought in both cases are the higher business costs caused by the wrongdoers. The cases can-, not be distinguished. The cases relied on by United are ‘distinguishable. ‘In Eagle Lion Studios, Inc. v. Loew’s, Inc., 2 Cir: 1957, 248 F. 2d 438, aff’d by an equally divided court, 1958, 358 U. S. 100, the court interpreted the decree in the ‘Government case as deciding that defendants: monopolized only with re-° spect to a segment of the market. Theyll had restricted the films of the major distributors, but not those ef: the plaintiff and other independent producers. The practices of United were directed at the shoe machinery trade and commerce, and, therefore, at Hanover, a’substantial and captive cus- tomer. In Conference of Studio Unions v. Loew’s, Inc., 9 — Cir. 1951, 193 F: 2d 51, cert. denied, 1952, 342 U. S. 919, the court held that the i injury to plaintiffs, a unfon and its . members, did not flow from the injury ,to the competitive situation of the motion picture industry caused by the re-_ - striction of activities of independent producers by defend- ants, a rival union and major film producers. The plaintiffs were not in the business of making or weal motion - gee ae ge ae ate er Findings of Fatt, Conclusions of Law and. Opinion sofa . tures, did-not sii with’ defendants, did not. buy from — them, and were not even employees of the companies which the defendants intended to destroy.» The remoteness ‘of plaintiff’s injury. was apparent. In Karseal: Corp; .v. Rich- field Oil Corp., 9 Cir. 1955, 221. F. 2d 358, Karseal and _ Richfield were manufacturers of wax. *Richfield applied ° restraints to capture the independent gas station market. The court held Karseal was in the target area. The fact that Karseal marketed its, product through middlemen, while - Richfield dealt directly with retailers, was immaterial. The - fact pattern for a direct injury was strong in Karseal. The - court said: “Assuming Karseal was ‘hit’ by the’ effect of the Richfield antitrust violation, was Karseal, ‘aimed at’ with at precision to entitle it to maintain a treble dam- age suit . . .?” Since Karseal was directly in Richfield’s aim, ‘the case sheds little light on the standard by which fenough precision” can be measured.:-—--- While Eagle Lion Studios, Caine of Studio Unions | and Karseal are distinguishable on the facts, under‘ the tar- get area tests suggested by these cases Hanover’s injury flows proximately from the monopoljzation. The complaint ‘in the Government case listed the effects of the monopolistic practices on the shoe manufacturers, as well as on United’s. competitors. One of the effects-on the lessees was United’s extraction of large sums of money in excess'of the reason- able value of machinery. and of, the ser@ice rendered by ‘ United. A similar charge is, included in Hanovet’s com- plaint. Judge Wyzanski found that United’s: policies have “.. . mot necessarily promioted in the shoe manufacturing field the goals of a competitive economy and an-open s0- ciety.” He pointed out that if United shoe machinery were available ona sale basis, United’s psychological and .eco- nomic control over shoe manufacturers would be releas ‘Sak Laas a 7 7 54 a 2 - Findings of Fact, Conclusions of Law and Opinion which in turn .would cause: some sine Seiaidactanets. tor financial and psychological reasons, to be more willing to ” dispose of: United’s machines and take on.either competitors’ vf . machines or. United “‘mnachinery available in a secondhand ' market. Itis obvious that-the financial considerations were thaf soma manufacturers would find, it less costly to own + g® than-to-lease machinery. Thus, a charge and finding of ° detriment to a particular class of persons, as seemingly «' required by Eagle Lion Studios, is present. | ‘The’ facts satisfy the test of the Conference of Studio. Unions | case. Shoe machinery is not absorbed by the general public; it is meant for use solely by- shoe manufacturers. They consume all of it, and its cost is 2 factor in.the j pricing - of shoes.’ Shoe manufacturers are directly interested in the devélopment of better machinery, and in the quality of exist- ing machinery. It i is clear that a shoe manufacturer is “ --within that area of the economy which is endangered ee a breakdown of competitive conditions .. .” in the shoe ma- chinery industry. ‘ The stifling of the business of competing shoe machinery manufacturers was a direct object of United’s actions, but: it‘was not the only object. "It permitted United to}deal with . Shoe manufacturers on United’s terms, and the terms wa ae turn permitted U United to-stifle the competition. The monop- ¥ ry . i olistic terms, such as the lease-only system and the related , ‘w clauses and .practices, causéd both the injury claimed by. Hanover and the injury to United’s competitors. There is nothing strange about an actor having more than one im-. . ‘mediate object of his acts. The aim was wide enough to accomplish both. Hanover was “aimed” at and _ ” the test of Karseal. | . United accuses Hanover of. an attempt to bring itself within®the target, area * a ee ee eee ee ee . - SOR Me ee Ss Oma | ; “tf ‘ ; &. Findings of Fact, Conclusions of. Law and Opinion “... by saying it was obliged to ‘obtain its machinery from defendant at a cost in excess of what it would shave to pay absent the monopolization’’ (Pl. br. 9). It tries to use its claim of excessive price to show in-* jury as a result of antitrust violation. So far’as the a. decree is concerned, it is enough here to point out- ne that that claim was dismissed by Judge. Wyzanski. Decree par. 2 dismisses with prejudice all other. charges of violation than those there enumerated. . ° * Amiong those charges was the charge of excessive-_ ae ness contained in par. 97 of the Government com- : plaint as follows:”. si weir ae ‘This argument confuses Hanover’s primary and alternate\ = damage claims. Excessiveness relatee} principally to‘the al- ternate damage flowing from the differefice between the rent and royalty charges United exacted from lesseeS when faced with competition and the ‘higher charges exacted.when it - was not so faced. Hanover’s. primary claim is measured by the difference between the higher cost of leasing mia- ‘chines and the cost of owning them. The primary claim: does not necessarily imply excessive returns to United. _ The complaint in the Government case included an alle- gation that United collected excessive, arbitrary and non- competitive charges for its products and services and © thereby made excessive arid unreasonable profits. . Judge - Wyzanski noted that while United generally followed a policy of setting prices so its shoe machinery business re- . - turned income to cover- costs plus, a profit, there were _instances in which the rates were adjusted to meet or defeat competition, and to ——. xpand United's share of the market: He found no evi Ribd that United secured a monopoly profit on its entire or machinery branch opera- ». ° e , \ - Te ° ° r) ~ \ . . \ Biren. a, , > FRET PR Ong nr rE MORLEY LT WED: Aesctovpenagage — oe —— TPS Oy FNM, a See Findings of Fact, c onclusions of Law and Opinion tions. “He did not mer a finding that mere were exces- sive or unreasonable. While he found thaf the discrithina-_ tory, pricing policy was eviderice of United’s monopoly power, a. buttress to it and a cause of its perpetuation, he’ , stated his decree w ould not deal. with the price discrimina- tion aspects Of United’s policy. hecatase some not too rigid . ‘price discrimination is inevitable, some is justified as rést- ” ing on patent monopolies, some is, desirable in promoting a competitive market, and an order to eradicate such discrimi- ’ ‘natiyn could not be enforced. The doctrine of collateral. estoppel by judgment extends only’ ag to'those matters in issue or points controverted, upon the determination of which the findjng or verdict was . , rendered. Partmar Corp. v. Paramount Pictures Theatres ' Corp., 1954, 347 U.S. 89; Emich Motors Corp. v. General Motors Corp., 1951,340 U..S. 458. The findings and con-. clusions on the price discrimination aspects of the pricing - policy cannot be considered matters upon- the determination * of which the. findigg or verdict was rendered in view of the specific langyage that, the decfee would not attempt to deal with these matters. This, there cannot be an estoppel. “ ‘Hanover also relies for its alternate damage on certain documents in evidence in this case. One is a summary of. 19 instances in which United reduded rents and royalties on certain: machines because of competition.+ These 19 in- s stances were taken from:mére than 50 instances in evi- dence before Judge Wyzanski, and. from which he drew9y for detail analysis jn arriving at his findings. Hanover asks, © 4. this court tg infer bit the sunimary and from the evidence of overwhelming market control that, if competition existed, “Hanover would have had the benefit 6f reductions similar to those listed on the summary. Admittedly, few, if any, Of the machines on this ‘summary. were used by Hanover, 4 ~ a * ‘ c@° FIO ES FOTIA AOS PO. ROE IES, DALE. AAO IG WO or’ _s agri trs yelors: m “~ 57 Findings of Fact,.Conclusions of Law and Opinion * and most of the reductions took place prior to the complaint period inthis case. The sumfnary is irrelevant» The infer- ‘ence urged by Hanover cannot be. drawn. International Shoe Machine Corp. v. United Shoe Machinery Corp.,315_ F. 2d 449, supra. The decree created no estoppel with respect to the findings based on the evidence of 50 instances of reduced rentals, so that the only evidence before this court is the summary of.the 9 instances. Hanover also introdftced i in evidence a schedule of the. percentage of revenues to machine or bulletin costs’ The machine or bulletin cost is not the only item considered before a machine rental is set. The development expenses, installation costs, 10 year service costs, and interest on the ~ last two items, are also‘considered. The rental woutd include all these, plus a profit, so that the percentage derived from the comparison does not demonstrate a “high rate of return.” Moreover, while Hanover points to high percentages it con- _ siders “startling,” the schedule contains percentages | which are extremely low. The schedule also invites other com- parisons such asthe comparison of revenues with Hanover’s - . computed sales price, also on the schedule, which. would re- _ duce the percentages considerably. There is no evidence of the normal rate of return if the omitted cost: factors were included. In short, the schedule and related evidence are not . ‘sufficiently probative of the alleged high rates of return to | U ited. Hanoyer has failed to” prove its sieoveane damage claim. : This doe¢ not. affect its primary claim measured by the difference between the cost to operate its ‘business with lease-only machinery and the cost to own ‘the machinery. The rental returns may not ha; os ey excessive, but there ‘isa differenice betweeri non-excesSive returns. and machinery costs in excess of*those which would have been incurred had the machinery been purchasable. As stated by Judge 4 ‘ fs" e- 58 Findings of Fact, C ontclusions of Law and Opinion Wyzanski, “Some truth lurks in the cynical remark that not high profits but a quiet life is the chief reward of a monopoly power.” Machine’ reifitals which return costs plus a reasonable profit to United may be substantially in excess of the machine costs to a shoe manufacturer dealing in an unrestricted market. A supplier’s costs may be inflated due . ' to inefficiency, excess personnel,‘or other reasons. Such ‘ conditions might not exist in a competitive market. There is - no necessary inconsistency between a reasonable rate of "return and proof that the rentals were substantially in excess of the cost of ownership. If the “quiet life” brought about _ by the monopolistic practice of United’s lease-only system «produced some excess costs to’Hanover, it nged not rely on excess returns to United to show damage.-Hanover’s claimed ; primary injury is injury flowing from United’s leage-only policy and practices, provided Hanover was at. all times * ready, willing and able to buy machinery. Judge Wyzanski did find there was: virtually no ex- pressed dissatisfaction from cofsumers respecting the leas- ing. system; and that all shoe rhanufacturers who testified on the point expressed a preference for the leasing system: This was not a finding that shoe manufacturers were not hurt by the leasing system. Judge Wyzanski pointed out that “It cannot be said whether this absence of expressed dissatisfaction is due to lack of: actual dissatisfaction, to. practical men’s preference for what they regard as a fair system, even if it should be monopolistic, or to fear, inertia, or reluctance to testify.” He then pointed out the system’s adverse effects on the goals of a competitive economy and on nape society as related to the shoe manufacturing field. 4. Choice of Marketing’ ares United: urges that the language of Judge Wyzanski negates a-duty tosell:, . 59 4 Findings of Fact, C onclusions of Law and Opinion » “*The Court alie. agrees with the Government that if United chooses to continue to lease any ma- chine types it must offer that type of machine also . for sale. The principal merit of this proposal does not We i in its primary impact, that is, in its effect in to give a customer choice as to the selling methods . by which his supplier offers that supplier's own products. The merit of the Government’ s proposal is in its secondary impact [i.e. creation of a second- hand market]. (Emphasis en . 110 F. Supp., at 349, 350 © Judge Wyzanski found that the lease-only system and lease Clauses enabled United to monopolize the shoe machinery market, and ‘to end this monopoly it would be necessary not widening the choices open to ownérs of shoe fac- tories.. For present purposes it may be assumed that. _ the anti-trust laws are not designed, chiefly, tf at all, : “s J only to place limitations or United’s leases, ‘but also to re- quire United to offer the machines for sale.- ‘Thus, United. had a duty to refrain from illegal'‘trade practices, See Con- gress Building Corp. v. Loew’s, Inc., 246 F. 24-587, 594; 596, 597, supra. If one of the practices by which it monop- olized the market was its lease-only policy, it had a duty to abandon that policy. The only effective way was by’an alternative sales system. .The antitrust laws were’ designed to prevent monopolistic practices. They are not to be thwarted because an incidental effect of the decree may give a customer a choice of the supplier’s marketing meth- ods. While ordinarily a supplier may: determine his own business practices, they will be condemned as illegal if they 7 *Quotation as it appears in United's brief at page 24. Tire origi- nal opinion did. not contain the material: in earned or the emphasis... * F re . . ae, ~ _ - 60 Se , ot eee & Findings of Fact, Conclusions of Law and Opinion are used to achieve a’ monopoly. “A refusal to sell, while it a may be lawful pér se, cannot be used in order to achieve an illegal result.” United States v. Klearflax Linen Looms, * Inc., D: Minn, 1945, 63 F. Supp. 32, 39. It is only another . step to-say a refusal to sell coupled with a willingnéss to -. lease may--be lawful, but Judge Wyzanski found these _achieved an illegal resiilt : “Tt has used its leases to monopolize the Shoe ma- -chinery market. And if leasing continues without an alternative. sales system United will still be able to monopolize that market: To root out monoholiza- ~ tion and to bring United, in the future, in the same class as its competitors, it is necessary not merely to place limitations upon United’s leases, but also to * require United to offer. for sale arly machine type which it leases.” ‘110. F. Supp., at 350. x The Legality. of the Leases.: ae Unrifted relies on the legality of- the leases as a complete defense. It cites Bruce’s Juices, Ince v. American Can Co., . 1947, 330°U.-S. 743, 755; Kelly y. Kosuga, 1959, 358 U. S.. 516, 518, 520; Turner Glass Corp. v. Hartford-Empire Co., | 7 Cir. 1949, 173 F. 2d 49, 52) for the-proposition that since the Form A leases are enforceable’ as contracts the courts will not. sanction a belated antitrust. action, to’ avoid legal obligations now completely performed. | ; Whether the leases are legal is, not important in this lawsuit because Hanover is not suingsonthem. United ap- ; parently contends that it would be unjust for Hanover to recover monies which would in effect offset rentals and royalties. paid under a yalid contract. It would also be un- just to allow a monopolist to escape liability. for injury and damage inflicted on another even though the contractual e a OL Ee ky, oe & "Findings of. Fact, C onclusions of Law and Opinion dealings between them were legal. United’s products and services may ‘have been efficient, the prices not excessive, and the leases tawful, but-it runs the risk that its monopo- listic acts may ¢ause actionable injury. In..Chattanooga .— Foundry, & Pipe Works v. City of es 203 U. S: 390, > at 92% 397, supra, the court said: ; . In most cases where the resi complained of as s springing from a tort is*a contract, the contract is lawful, and the tort goes only to the motives which’ led to its being made, as when it is. induced Aes . duress or fraud.”- : : The cases cited by United do. not ‘support its hiding In Turner Glass Corp. v. Hartford-Empire Go., supra, plain- - tiff offered no evidence to prove a. pecuniary damage by reason of defendant’s memb€rship in a conspiracy to monop- ‘ olizé, but contended that the payment of license. fees. to de- fendant was evidence of pecuniary damage. Plaintiff ad- mitted that if the license agreements were not inherently . illegal, it could not prevail. The court held for defendant because they were not inherently illegal. Similarly, i in Bruce’s Juices, Inc. v. American Can Co. supra, in an action for the purchase price of goods, the court refused to allow the defense of illegality of prices, but told the defendant it could prove the illegality i in the bead | damage action, which was pending. ~~. Moreover, if Bruce can in this suit prov’ hat the prices respondent charged were illegal, as ‘sust , in order to win, it can do the.same in a triple C —— . suit. . . .” Page 752. The court simply refused to add another sanction to the antitrust ages Ars, 62. Findings of Fact, Conclusions of Law and Opinion Then, after suggesting that the argument for the additional “The Act prescribes sanctions, and it does not make uncollectibility of the purchase price one of them. Violation of the Act is made criminal -and upon conviction a: violator may be fined or impris- oned. 49 Stat. 1528, 15 U. S. C: § 13a. Any person | who is injured in his business or property by reason of anything forbidden therein may sue and recover three-fold the damages by him sustained and the costs of suit, including a reasonable attorney’s fee. 38 Stat. 731, 15 U. S. C. § 15. This triple damage provision to redress private injury:and the criminal proceedings to vindicate the public interest are the , only sanctions provided by Corigress. “It is contended that we should act judicially to add a sanction not provided by Congress by declar- ing the purchase price of goods uncollectible where ‘ the vendor has yiolated the Act. . . .” Page 750. " sanction might be a persuasive. one for Congress, the court said : “cc . It is clear Congress intended to use private self-interest as-a means of enforcement and to arm ' injured persons with private means to retribution when if gave to any injured party a private cause of action:in which his damages:are to be made good . threefold, with costs of suit and reasonable attor- sad s fee.” Page 751. In Kelly v. Kosuga, supra, it is clear that the court decided _that the avoidance of private contracts is not to be added | to the sanctions provided by the Sherman Act. Implicit i in these cases is that the sanctions of the Sherman Act remain ee eee ee ee ee Se ia ti on ci \ * + s Findings of Fact, C onclusions of Law and Opinion wndtihved A bend ‘ial enftibesatile’ contract. doés not | ‘insulate a monopolist from liability to contracting parties. D. The Injury. 1. Demonstration of Anjury. Hanover relies on Judge Goodrich $ opinion in the sepa- ~~ rate trial of the “passing on” issue to prove injury. United . answers that this is erroneous because Judge Goodrich ‘went beyond the two assumptions on which the i issue was tried, and made = causal connection. himself inf order to decide the -issue.*° | | Judge Goodrich clearly ruled that on: thie basis of the ’ assumptions Hanover suffered actual injury. He did -not supply assumptions. His: ruling shows that if the stipu- lated assumptions are proved, the other elements, the injury and the causal connection, are present as a matter of law. United, misconstrues Judge Goodrich’s statement “ -— there are affirmative defenses or other complicating legal issues, they are not before the Court at this time.” The ~ fact of injury is not an-affirmative ceiense, but an essential element of the cause of action, and the “other” issues refer to issues of which he was not aware. He'was aware of the need to establish injury. The hypothesis in the pan before Judge Got. rich, was broad enough to cover Hanover’s primary claim. — of damages. Judge Goodrich analogized this tort to negli- gence: . . there is (1) a legal duty on defendant’s part (to obey the antitrust laws), (2) a violation of that duty, e ‘Similarly, there is a right i in Hanover to conduct its The two assumptions were (1) that the yislation of the law as alleged existed, and (2) that the excessive cost. of shoe machinery . as alleged en. > 64 Findings of Fact, C onclusions of Law and Opinion business in a m ket free from-thg awe of a monopo- list. United’s opolistic practices violated that right. United’s violation of that right caused an injury. If Han- over: proves the amount of damagé, as Judge Goodrich stated, the causal ‘relation between United’s wrong and Hanover’ s harm is obvious. This court fully agrees with Judge Goodrich, and finds that Hanover sustained redress- ‘able injury by United’s acts. Thus, while United’s char- acterization of the trial of the “passing on” issue as a “mere motion to dismiss” makes: no-difference with respect ‘to whether this court. can. and should ‘follow such decision as the law of. the case, 1A Moore, Federal Practice, ‘Para. 0.404(4) at page 4213, Para. 0.404(10-) (2d ed.) ; United States v. Wheeler, 3 Cir. 1958, 256 F/2d 745, 747, °% view of this court’s finding, Vnited’s argument with respect to ’ the law of the case need not be fully discussed. 2. The Impact of Monopolization on Hanover. As a final and complete defense to the antitrust viola- . tion United contends Hanover has not shown actual impact of monopolization on it. Some of the reasons ad- vanced are: There was no written purchase policy or expression by the Board of Directors; Hanover bought ~ : machines only when it was advantageous to do so; Hanover. leased 136 optional machines; Hanover never prétested its ‘inability to purchase lease-only machines; the 1955-1956 purchases disprove a purchase policy because important machines were retained on lease, same were replaced by non-United machines, 39. were returned, and in buying Hanover used its credits in the Right of Deduction Fund © - as part of the purchase price; both foreign and non-Unitéd domestic machines were available; Hanover’s attitude to- _-ward United’s leasing policy is the result of a quarrel 9 — | 65 Findings of Fact; Conclusions of Law and Cpe between its president and certain United officials ; Hanover and its competitors enjoyed equality ofgtreatment since the— lease terms were uniform, and, thus, there could not be an injury; and Judge Wyzanski’ found virtually no shoe manufacturer was dissatisfied with the leasing system. There was testimony that singe the 1920’s Hanover was actively engaged in a search to buy non-United Good- year welt shoe machinery. , Mr. Sheppard, president of Hanover, described clicking machines which were pur- chased to replace United’s. machines. He told. of visits in the 1920’s and 1930’s to various other welt shoe factories ° ..in a search for machines. In the early 1940’s Hanover purchased some: sole leather dieing hines to replace © their United counterpart. The search fér machines was dormant shortly before and during World War II. .When- tever shoe makers gathered, there was tally about the pur- chase of foreign machines after the war ended. Hanover and other shoe factories.tested many foreign machines. when they became available in 1948'and 1949. The various shoe | manufacturers exchanged the test information.’ The tests and other evidence showed: that between 1939 and 1955 only a few non-United machine. types, comparable to- United lease-only machines, could be used satisfactorily in the Goodyear welt process. Only three such machine types were _ found and in each case Hanover purchased them. In 1949 the National Shoe Manufacturers Association — - (N.S. MeA.), of which Mr. Sheppard was president from 1946 through 1949, and representing A to 95 percent of the shoe manufacturing industry, form¢d a congmittee, with ’’Mr. Sheppard as’a member,‘ to study numerous problems — - | poncerning shoe machinery costs, to search for and dis- seminate information’ on modern non-United shoe -ma- e @ AZ Pe ie ee Findings of Fact, C onclustons of Law and Opinion . die to assist members i in the evaluation of machinery, and to persuade United to offer more of its machinery for _ Sale. The absence of a- written declaration of a policy to hay machinery, the lack of such an expression . t 4 ° Findings of Fact, Conclustons of Law and Opinion sulted about rate increases particularly “. . since the only choice a shoe manufacturer | has is to pay ‘the | increases or - ‘stop making sh¢ shoes.” --~~* Th _Mr.: Sheppard was ane by representatives of. —United prior to the Government case. - The purpose of the interview was not to obtain Hanover’ s complaints agains ‘United, but to obtain Mr. Sheppard as a witness for Gaited in the Gsovernment case. He was asked whether he had any - objections to the*leasing system, but he was not asked whether he would. prefer to buy rather than lease. . The leasing system had many facets of which lease-only was one. Jn view of the shoe machinery market, a reasonable interpre- tation of the question is whether there was any objection tc the leasing system as it existed. In the interview he men- _ tioned an incident when he ‘refused to lease’ clicking ma- chines because United insisted that Hanover ‘acknowledge in the lease that Unitell owned the machine dies which Han- _over had purchased. Before the matter could be resolved. Hanover purchased 11 Reece clicking machines. Mr. Shep-- pard described the rejection of the United machines as brazen and “perhaps ‘stupid,” because the Reece machines were unsatisfactory and later abandoned with a return to _ United machines. This one instance does not support an ‘inference that Hgnover would have purchased machines if _only when the lease térms were unacceptable. « Optional Machines. ‘During .the complaint period Han- over leased 136 optional machines. The optional: machings | -were. the minor, simpler, less complex machines. .Some were not purchased because he price was too high. During the same period Hanover purchased non-United machinery., ex- ° -clusive of dry thread sewing machines, for prices totalling - about $335, 000. This was almost four times the rentals of © wr ‘ . 68 ee ’ Findings of Fact, C onclusions of Law and Opinion both United and non- -United machinery it could have pur- chased during the same period. In addition, Hanover pur- > chased United optional machinery totalling about $29,600. The rentals for non-United machinery totalled about $101,- 100, of which about $76,900 was for lease-only. Total rents and royalties paid United were about $2,417,700, but only about $64,700 or 2.68 percent was for optional machines. The effect of optional machine rentals, which were flat rate, could be minimized through efficiency and quantity production, and this would offer less incentive for owner- __ Ship than in the case of lease-only machines. The- latter, with few exceptions, were offered only on a royalty’ or rental and royalty. basis. The leasing of some optional ma- chinery because the purchase price was too high, the sub- stantial purchases of machinery from non-United sources, the low percentage of. optional rentals to rental and ‘royalty expense, and cost savirigs. which could be achieved through . efficient use of optional machines point to a Hanover pur- chasing policy,-rather than to a leasing policy. , The 1955-56 Purchases. Pursuant to order of the dis- trict court in the Government tase, a plan for the termina- |» tion of all outstanding Form A leases became effective on ~ ‘June 1, 1955. All lessees were given the option to terminate _ their leases, and to purchase the machines at prices com- 7 <> puted in a discount schedule,set out in the plan. In October, 1955, Hanover purchased 205 of the 306 machines it then held on Form A leases, deferting action on the remaining machines for various reasons. By December, 1956, Han- over had purchased an additional 7 maghine. types, consist- . ing of 58 machines, and it returned 37/machines to United: ‘The total cost of the machines purchased by Hanover in 1955 and 1956 was about $613,900. In 1960 two addi- ‘tional machines were purchased, three were returned and; one remajned on‘lease.. Also, in 1955 when United offered »3. 3 .69 - Findings of Fact, C onclusions of Low and | Opinion its lessees the ila to service their own machinery, ayith a credit of 13.3 percent against lease charges, Hanoves® ‘chose to do so.. These purchases show a disposition by Hanover to buy if it could do so advantageously. It is true that the prices were at discounts and the result 6f negotia- - tions, and that Hanover postponed for one year a decision . to buy about $100,000 worth of machinery. United says the prices were bargains; at the time the N.S.M.A. said they were too high. The 1955 prices were the product extended discussions in which factors such as age, obsoles- cence, etc., were applied. . Even if the prices were bargains, - it“does not follow that Hanover would not have bought at higher prices. There is no evidence that Hanover s€fused to buy unless prices were a bargain. Also, the evidence is that Hanover retained the $100,000 worth of machines on lease, not because it preferred leasing, but because certain . - ’ newly developed United and non-United machines were about to be marketed which -might make those machines obsolete. Most.of these were subsequently purchased. Han- over weighed. many factors, such as price, the years te quired for a return of the investment, etc., before it decided . to purchase. This was sound business judgment. Undoubt- ” edly; these same factors would have been considered in 1939 and subsequent years. This does not justi¥y an. inference Hanover would not have bought during the complaint period. It authorized the purchase of machines of $500,000 from United and $250,000 from non-United sources. ‘The few-instances pressed by United to support a contrary in- ference are not convincing. In its brief. United states that since did not buy important machine types such as heel seat lasters, toe lasters, -and Goodyear stitchers, bat. retained them on lease. This was the testimony of Mr. Ray Purtell who had not been ow 9 70 Es ; a Findings of Fact, C onclusions of Law arid Opinion | employed by Hanover since 1956, and who testified “to the _ best of my memory.” The credible evidence shows, how- ever, that Hanover purchased four heel seat Jasters and 14 toe lasters.in the first group of purchases in 1955, and that none remained on lease. Also, 17 Goodyear stitchers ° were included in the first group of purchases; and of the two retained on lease, one was only a spare or standby machine and the other was eventually replaced by a foreign machine. - United also states ‘that after completion of the 1955- 1956 purchases, Hanover continued three machines on Form A leases until their return in. 1960. The testimony in support of this statement is somewhat ambiguous, and the record otherwise shows the machines were’ retained on the Form B lease.’' One was a machine type of which Han-’ over purc.ased nine, indicating that this may ‘have been an excess machine. Another -was a machine type of which Hanover purchased two, and the evidence is that”the re- turned machine was 4 new machine originally listed for pur- chase. -The third wag, the spare or standby Goodyear stitcher. Hanover also converted to Form B leases certain machinery considered: for purchase.in 1955. Except for the Goodyear stitcher, these machines were later either -’ returned or purchased. ° gry Hanover replaced certain United machines, with non- United machines.. These instances were few, but together with Hanover's contemplated expenditure of $250,000 on non-United machines and its action in waiting for the de- ’ velopment of non-United machinery indicates that Hanover ‘did not prefer to lease United ‘machinery. Hanover’s ™'The Form B leases were the new leases approved as part of the lan to terminate Form A leases. The objectionable features of the orm A lease were eliminated. ger ' i | 4 oe See i ee Sh y 2 5 he Findings eet Fact, C onclusions of Lom. and Opinion disposition to buy. United machinery may- be ites frie both non-United and United machinery purchases in 1955- 1956, particularly if aéceptable non- vue machinery was not available prior to that time. The return of 39 machines at the time of and following the 1955-1956 purchase demonstrates only the unlikelihood | of the purchasé of those machines, but not‘the other ma-- chines. They were only a small part-gf the machjnes eval-. uated for ‘purchase. me were. optional which never en- - teréd into the damage calcirlation. Hanover eliminated _ rental costs frm the remainder-so that only peeves royalty costs remain in the. di amage calculation. . | Availability of Domestic: Non-United Machines. There is little a that major comparable non-United ma- chines for use in the Goodyear welt process were available “ . from United States manufacturers. Mr. Swinney, a retired ~ employee of and consu!tant to Genesco, a shoe manufacturer, _ testified that in 1949 he had seen a Hamlin heel and toe, bed laster in the Hamlin Shoe Co-in Massachusetts; and in 1920 — he had'seen a R. H. Long lockstitch machine in the Rice and Hutchins factory in Massachusetts. While these machines - _ performed: the same function as their United ounterparts, . "Ke did not testify that their performance and gapacity com- ' pared'with United machines. He identified some 15-20 other © | “domestic machines, whose ftinctions were similar to cer- tain United machinesHe only mentioned two that were of . ‘comparable quality. One, the Prime Mawufacturing Rib Re- ; inforcing Machine, was purchased by him in 1949 when. he bought three for a total of $125.00. It is not likely this was comparable. because the 1955 price of one such United machine. was $4,825.00. The other, a Peerless Machine a fp 2 “Findings of Fact, Cc ancineane of Law and Opiates: Works Eyeletting Machine, was purchased by him in 1949; _ but there is-no indication as to how long the machine had. ~ been available for purchase. Neither machine was one of the eight key machine types used in the Goodyear welt pro- cess; Pulling Ov er, Staple Side Lasting, Toe Lasting, Heel Seat: Lasting, ° Inseaming. or Welting, Inseam Trimming, Rough Rounding, and Lockstitching. Moreover, although Mr. Swinnéy ‘had .been associated with the shoe business _ for many. years, most of his observations were limited to . the years 1949-1950. : -. While Hanover purchased three LeMatic Sole Press ve machines and ten Schwabe Clickers in 1951 and subsequent ‘years, there is no evidence of how long these had been avail-. able prior to 1951. The only machine which appears to have been available prior’ to-and since is the Landis stitcher which, while primarily intended for use by the shoe repair- - ing.industry, was also used satisfactorily i in welt shoe manu- facture. Availability of. Foreign Machine. The principal testi- mony was given by Mr: Swinney and Mr. Major, also an employee of Genesco, Mr. Walker, an official of United, and Mr. Becka, general manager of the International Shoe Ma- chinery Company. In 1950 both Mr. Swinney and Mr. Major were connected with the establishment in Israel of a shoe factory in which Genesco had an interest: The fol- lowing i is a summary dee their testimony, together with com- - ment: . Mr. Swinney. The Goodyear welt machines used in the . Israeli factory had been obtained in England from Standard | Engineering Company, a British manufacturer. They per-. ~ formed the same fun¢tion ‘as United machines.. Most of: his observations were limited to machinery he saw in opera- tior in 1949 in connéction with the procurement of ma- — B Findings of Fact, G onclusions of Law and Opinion chinery for the Israeli \fectiory. He identified about 70. foreign machines of various types and manufacture which he had seen in operation. He did not testify that any of . these machines were in operation in the United States be- tween 1939-1955. There were seven machines of different types which he considered comparable to United machines. ' Six of these qzere Standard: There was no evidence that they were available before 1949-1950. Only two were-in the key category. One was a Standard Oscillating Welt Wheeling Machine No. 93, “Very similar in quality and _ quantity of production” when compared with the United - machine, called Goodyear Welt Indenting and Burnishing. The capacity of the Standard machine was 700-800 pairs of shoes per day, and two different United machines of that type had a capacity of 1800 pairs per day. The other was the Standard Heel Seat Lasting machine, on which he ex- presséd no opinion on comparableness. According to the — . catalog, city of the comparabie United machine ex- ceeded the peaad by 300 to 400 pairs per day. Although for a long time Genesco had much informa- tion on foreign machines, and had tried them, it-used only | United machines in its Goodyear welt factories in. the United States. .-It procured none of the Goodyear’ welt. machine types used iri Israel for its United States factories. He remembered seeing only one foreign machine in any domestic Genesco factory, an Albeko Band Knife Splitter, which3 was a machine ype also purchased in 1953 by Han- over. Mr. Major. Mr. Major’ S me was similar to ; that of Mr. Swinney. Mr. Walker. While he was manager of United’s Mil- waukee territory in the 1930’s he saw five foreign machines 74 Findings of Fact, Conclusions of Law and Opinion | of the key ae installed in dninnanie shoe fatiatint a Moe- nus Staple Side Laster, Heel Seal Laster Pulling Over, Welter and: Stitcher and a Standard Welter. These. ma- ‘chines “did a passable job; I ‘don’t think any machines ire. necessarily comparable to the performance of United ma- © chines.” Most of the machines were not even rated as _ passable on United’s Outside “Machine Reports (O. ?1. Rs.), prepared hy him or under his direction, and on scher - United documents prepared at the timie he saw the ma- chines. The Moenus welter was not used at all during a * particular week because a German mechanic was working on it,and the operator’ w ds: having considerable trouble ‘with it. Later the machine was: removed as unsatisfactory, ahd replaced by a United machine. Subsequent reports indicated that ‘the seller was. having trouble placing. the ‘machine in another fac®ry for trial. The Standard Welter, installed in the same factory, was removed in 1937 as a “total failure.” The only machine type other than key machine types was 2 Montreal or a Moenus sole = which’: « 7 also rated as passable. Some foreign machines were described on O. M: Rs. as’ “man killer,” “unsatisfactory,” ‘and “total - failure.’ oar.” -: attempted to explain these ratings by stating that he thought © .that the factories were not interested in making the machines ~ Tun, and it was not his job to encourage or make it possible to make the machines a success. He thought.the machines could have performed satisfactorily. = The explanation is not convincing. It is wulthedy that a conéern would obtain a machine on a trial basis, and have its organization disrupted in an attempt to operate it, if it was not interested in seeing it run. Whether Mr. Walker was. not interested in seeing it run, or in not encouraging its oo, =. _ turer could not very well modify the machines unless e 75. ' Findings of Fact, Conclusions of Law and Opinion success, is immaterial. He was an outsider in no way con- nected with the potential Seller or buyer.* No one would ex- - pect him to breach his loyalty to his employer by encouraging or aiding in the success of a’ competitor’s’ machines. One ‘would expect him to be factual in his reports to his employer. . If a machine was not unsatisfactory, an unqualified rating to that effect would be of little value to United. * Mr. Becka. For a long. time he had been familiar with . foreign shoe machinery and with - United machinery, ee. As aim machines were practically the only machines ...”. In 1954 he made a trip to Europe to examine * . shoe neal Five machine types—heel seat lasters, stitchers, rough FOUNERTR, stapleside lasters and -pulling over machines—were “. . .-equally as good and suitable for use in Canadian or American shoe factories.” Foreign’ machines brought here must be modified for such things as the particular way they are to perform, electrical require- ments, custom installation, and the like: A shoe manufac- it also went into the shoe machinery business. Two American shoe. manufacturers had equipped their factories with enna other than, United, but both had machine shops equipped for the mariufacture of machinery. In the distribution of foreign machines, the spare parts, service, and technical know-how are of major importance, and a shoe manufac- turer could not acquire foreign machines without an assurance of.-a lgcal supply of parts and availability of local service. There were only four organizations which offered this service. He knew of only a few Goodyear welt foreign machines i in place in United States shoe factories. prior to - 1955. : Mr. Becka’s observations were limited to about one year prior to the complaint period, and are.at variance to ‘NG: + Findings of Fact, C onclusions of Law and Opinion hin and reports ‘accumulated by United. And digie 3 is no. . evidence that Hanover: had facilities for the manufacture . of shoe machinery. It.is not necessary to detail Mr. Becka’s’ _ testimony of the four shoe organizations. It is sufficient to ‘say that none would have been adequate if Hanover had *. purchased foreign machinery. ‘There is other evidence of hat“ sioe availablity ot’ acceptable foreign machinery. Mr: Sheppard testified that Hanover would not purchase machines ‘that would not do the work of United machinery-because of Hanover’s policy - of high quality performance and production. Hé testified _ _ that whenever foreign machines suitable to‘-Hanover’s needs were found, they were purchased and substituted for United _ machines. Also, in the Government case United requested the court to find asa fact that as of 1952 | . The evidence is clear that shoe ‘ manufac- turing practices in Great Britain and continental European. countries vary markedly from those of the industry of this country ; that the productivity of such foreign factories: is. universally below that of American factories; that the ‘high production of the American industry i is not a requirement of these - foreign industries; and that machine and operating , characteristics acceptable abroad are rot acceptable to the industry of. the United States. The main és reason for the production superiority of the shoe’ industry of this country lies in the ae de- veloped and introduced by United. - In a communication, dated July 7, 1952; United recog- nized that. “. . . The war brought about a cessation of activities, not only of those [Zuropean shoe machinery] \ « oD ees nex ds =— 77 Findings of Fact, Conclusions of Law and Opinion companies, but of our own foreign companies to a omsider- able extent, and in some~instances the plants of foreign shoe machinery manufacturers were damaged.” The com- munication also noted that of late, foreign manufacturers had recovered from the effects of the war and were making’ ’ efforts to introduce their machinery into the United States, indicating United’s awareness of the absence of foreign machines during the period from the war to 1952. Such foreign machines were described as copies of United's older existing models, and while many were listed as good ma- chines, the communication stated that this rating was 2. based on performanee under European conditions whére the requirements are normally much different from those existing in this country, . . .”, and that United ma-. chinery “. . can deliver superior. performance under the conditions aa requirements of this country... .” The ~ list included key and other machine types used in »'the Good- year welt pfotess* Most of the key machines were by Moenus, Adrian &-Bugch, Standard and Sagem. A statement by Mr. ‘Purtell that the purchase policy was set up only after the availability of United’s lease-only ma- chinery is urged by United wholly out of context. The record . shows: that. this statement was confined to the lease-only . | machines purchased in 1955-1956. , Previously, he had been” asked whether from the beginning of his employment in 1949 he was aware that Hanover had a policy to buy five ‘machinery. He answered, | I believe we purchased machines that were—whiether it be. United’s or anyone else’s, that were. available, on.a purchase basis,.. . .” but that during those years most major United voachinex'y was necessarily on lease. Also, United’s O. M's. in-1951 state _ _ that Hanover preferred to purchasé as many machines as possible, thereby eliminating unit charges. | ¢ Zs : , . E le has » ° . a . ad - ‘ : . pe eg ST ma, 78 - WS ss... - Be Of — a, Sad ‘ tn ee, mond? ~—- 10 ome, ' Findings of Faet, Conclusions of Law and Opinion "On the evidence in this case the conclusion is inescapable that there was very little suitable foreign machinery avail- able and then only toward the end of the complaint period. - But even if foreign machines were comparable in all respects to United machines, it does not mean that shoe manufacturers were free to procure them. Hig pr [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0031%3A01. Public record. Not legal advice.