Hamilton Watch Co. v. Benrus Watch Co., Civil Action No. 4276.

• Decision Date: 27 April 1953
• Docket Number: Civil Action No. 4276.
• Citation: 114 F. Supp. 307
• Parties: HAMILTON WATCH CO. v. BENRUS WATCH CO., Inc.
• Court: U.S. District Court — District of Connecticut

114 F. Supp. 307

HAMILTON WATCH CO. v. BENRUS WATCH CO., Inc.

Civil Action No. 4276.

United States District Court, D. Connecticut.

April 27, 1953.

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Thomas G. Meeker, New Haven, Conn., Stephen Ailes and Richard A. Whiting, Washington, D. C. (Gumbart, Corbin, Tyler & Cooper, New Haven, Conn., Steptoe & Johnson, Washington, D. C., and Richard J. Blakinger, Lancaster, Pa., of counsel), for plaintiff-appellee.

Wiggin & Dana, New Haven, Conn., for defendant.

HINCKS, Chief Judge.

Findings of Fact

1. Plaintiff, hereinafter called "Hamilton", is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania and having its principal place of business in Lancaster, Pa., and is therefore a citizen of the Commonwealth of Pennsylvania.

2. Defendant, hereinafter called "Benrus", is a corporation organized and existing under the laws of the State of New York and has its principal office in New York City and therefore is a citizen of New York. Defendant maintains an office and operates a factory in Waterbury, Connecticut, and therefore may be found in and transacts business in the State of Connecticut.

3. This action arises under the antitrust laws of the United States, and more particularly upon the so-called Clayton Act, 15 U.S.C.A. §§ 15, 18, 22 and 26.

4. Hamilton is engaged in the business of manufacturing jeweled lever escapement watches and selling the same under the trade name "Hamilton" directly to over 12,000 retail jewelers throughout the country.

5. Hamilton's dollar volume in these watches amounted in 1950 to $18,719,000, in 1951 to approximately $16,000,000, and in 1952 to approximately $14,000,000.

6. Hamilton's sales in 1950 accounted for at least 11% of the dollar volume of the aggregate sales of branded jeweled watches in the United States by firms having any nation-wide advertising. Hamilton's sales of jeweled watches in 1950 constituted about 6% of the unit sales of all jeweled watches in the United States in that year. In 1950 Hamilton's sales were the fourth largest in the industry in dollar volume. In 1951 and 1952 Hamilton sold somewhat lesser percentages than in 1950.

7. Benrus is engaged in the business of importing jeweled watch movements, which it manufactures in Switzerland. It manufactures cases at its plant in Waterbury, Connecticut, and sells completed watches under the trade name "Benrus" in the United States. The majority of Benrus' watches are sold to retail jewelry stores, including many who also purchase and sell Hamilton watches.

8. Benrus' gross income in 1950 was approximately $16,000,000, in 1951 $18,000,000, and in 1952 in excess of $19,000,000. It may be that a minor part of this was attributable to government war work but I find nothing in the evidence to show this, beyond the denial in Benrus' answer, or if so the volume of such war work.

9. Benrus' sales in 1950 accounted for about 9½% of the dollar volume in nationally advertised branded jeweled watches sold in the United States. Benrus' sales of jeweled watches constituted about 9% of the unit sales of all jeweled watches in the United States in 1950 and were the fifth largest in the industry in dollar volume. In 1951 and 1952 Benrus' sales (in dollars) exceeded the dollar volume of Hamilton's sales.

10. The leading companies selling jeweled lever watches in the United States are Elgin National Watch Company and Bulova Watch Company, each of which in 1951 and 1952 sold in the United States more jeweled lever watches than Hamilton and Benrus combined, as measured both by number of units and by dollar amount. The "Big Six" of the watch industry (Elgin, Bulova, Benrus, Longines-Wittnauer, Hamilton and Gruen) account for about 90% of the sales of nationally advertised branded jeweled watches.

11. Hamilton watches are superior in quality to Benrus watches, and are in part distributed in different trade channels and in different manner from Benrus watches. Hamilton manufactures very fine jeweled lever watches most of which contain 17 jewels and comparatively few 21 jewels. Benrus does not manufacture or sell any watches with more than 17 jewels. Benrus like Hamilton manufactures and sells chronographs and self-winding watches. Hamilton, unlike Benrus, sells pocket watches. Benrus, unlike Hamilton, sells calendar watches. In the eyes of the public the watches of both companies compete.

12. Benrus watches range in retail price from $24.75 up; Hamilton's from $49.50 up. In 1952 Hamilton began to import Swiss movements for ultimate sale in the United States under the name of "Illinois"; this line of watches is to retail from about $30. Some 70% of plaintiff's watches are sold at prices of $71.50 or less; 96% of defendant's watches are sold at prices of $71.50 or less.

13. Hamilton and Benrus compete actively with one another in interstate commerce in the sale of nationally advertised branded jeweled watches and with all other companies selling jeweled watches.

14. The effect of a merger of Hamilton and Benrus may be substantially to lessen the active competition now existing between the two in the sale of jeweled watches in the United States. By the same token such a merger would substantially lessen competition in the sale of jeweled watches in the United States. The control of Hamilton by Benrus or even Benrus' representation on Hamilton's board through its stock ownership would afford an opportunity not otherwise present for collaboration tending to lessen competition.

15. During the year 1952 there were 387,019 shares of Hamilton common stock outstanding. In addition there were 34,900 shares of $100 par cumulative preferred stock (convertible into common stock) issued and outstanding.

16. Prior to March 20, 1952 the largest single block of stock held by any one of Hamilton's stockholders was slightly over 10,000 shares; less than 10 stockholders held as many as 5,000 shares.

17. Hamilton stock prior to the year 1952 had been traded in lightly; between the years 1947 and 1951 the annual average number of shares traded was 39,840 shares.

18. During the first quarter of 1952 Hamilton sustained an operating loss of over $600,000.

19. Hamilton paid regular dividends of $1.00 per share on its common stock during and following the war. In 1950 an extra dividend of 15¢ was paid. During the first quarter of 1952 Hamilton paid its regular 25¢ quarterly dividend in March. At its directors' meeting of April, 1952 Hamilton passed its first dividend since the commencement of World War II. Dividends were also passed during the last three quarters of 1952, but were resumed for the first quarter of 1953.

20. Since 1950 the management of Hamilton has been reorganized, two successive presidents and a vice-president in charge of sales having died.

21. After the outbreak of the Korean war in June 1950, retailers over-expanded their inventories of jeweled watches and in the same period there was intensified competition from imported watches. These factors account in part for the decreased sales of Hamilton.

22. In late May 1952 Hamilton announced that as of August 1952 it was abandoning its traditional method of selling through wholesalers and would sell direct to retailers through a newly recruited staff of salesmen. This resulted in a reduction of its retail outlets from 15,000 to 12,000.

23. Commencing on January 29, 1952 and ending on March 13, 1952, Benrus purchased 22,176 shares of stock in the Elgin National Watch Company at an aggregate cost of $313,859.50.

24. Other than Hamilton, Elgin is the only jeweled watch company all of whose manufacturing operations are within the U. S. and which is manufacturing watches in substantial quantities. Some other watch companies, e. g., Bulova, manufacture watches both in the United States and in Switzerland.

25. The sales of Elgin trebled since 1946 and ever since then the company has continuously paid its regular dividends.

26. Commencing on March 17 and ending on June 18, 1952 Benrus sold its entire holdings of Elgin stock sustaining a net capital loss of $9,079.47.

27. Before purchasing Hamilton stock Benrus ascertained that a considerable amount of Hamilton stock was available, that the directors and management of Hamilton controlled only a small portion of this stock, and that there were no other large stockholders.

28. On March 17, 1952, when Hamilton stock had a book value in excess of $20, Benrus began to purchase Hamilton stock in substantial quantities, all on the New York Stock Exchange. From March 17, 1952 to June 13, 1952 Benrus purchased 51,800 shares. As a result of the decline in the market from 13 1/8 to 11¾ during said period Benrus held this stock at an average price of approximately 12¾.

29. In June 1952, after Benrus had acquired approximately 10% of the voting stock of Hamilton, Benrus advised the president of Hamilton of this fact and stated that the purchase had been made as an investment. The fact of such purchases was duly reported by Benrus to the Securities and Exchange Commission.

30. From June 16, 1952 to September 17, 1952 Benrus purchased an additional 40,400 shares at prices ranging from 12¼ to 18, at an average price of over 16¼; the last purchase was for 2400 shares at 18. The average price for Benrus' entire holdings of Hamilton stock was 14 1/8 and the total cost to Benrus was $1,318,660.54.

31. Benrus during said period often purchased Hamilton stock at different prices on the same day. The widest variation on a single day was on July 15th when the range of prices paid by Benrus was two points. Generally, however, the prices paid on a single day varied by less than one point.

32. At an average price of $14 1/8 per share the common stock of Hamilton on the basis of its regular dividend yields a 7% return.

33. Under agreement dated July 23, 1952 certain of Hamilton's stockholders organized a 10-year voting trust and solicited deposits of stock therein....