NW Controls, Inc. v. Outboard Marine Corporation

Decision Date28 October 1971
Docket NumberCiv. A. No. 3730.
Citation333 F. Supp. 493
PartiesN. W. CONTROLS, INC., a Pennsylvania corporation, Plaintiff, v. OUTBOARD MARINE CORPORATION, a Delaware corporation, Defendant.
CourtU.S. District Court — District of Delaware

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Brereton Sturtevant, of Connolly, Bove & Lodge, Wilmington, Del., and John T. Synnestvedt, Thomas L. Cantrell and J. Donald McCarthy, of Synnestvedt & Lechner, Philadelphia, Pa., of counsel, for plaintiff.

James M. Tunnell, Jr., William O. LaMotte, III and Lawrence A. Kelly, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., and Max H. Fruhauf, of Butzel, Levin, Winston & Quint, Detroit, Mich., of counsel, for defendant.

OPINION

LATCHUM, District Judge.

This is a civil antitrust action brought by N. W. Controls, Inc. ("N.W.") against the Outboard Marine Corporation ("O. M.C.").

The plaintiff, N. W., is a Pennsylvania corporation with its principal place of business at Vernfield, Pennsylvania. It manufactures and sells remote control cables and control boxes for use on outboard and stern drive boat engines, snowmobiles, and other products. The defendant, O. M. C., is a diversified manufacturing company which produces outboard and stern drive boat motors and accessories, lawn mowers, golf carts, chain saws, snowmobiles and other products. Its principal marine products are Evinrude and Johnson outboard motors, O.M.C. stern drive units, and Gale marine accessories. O.M.C. is a Delaware corporation with its principal marine manufacturing facilities at Waukegan, Illinois, Milwaukee, Wisconsin, and Galesburg, Illinois.

N.W. alleges that O.M.C. has violated Section 1 of the Sherman Anti-Trust Act ("Sherman Act"), 15 U.S.C. § 1, and Section 3 of the Clayton Act, 15 U.S.C. § 14, by tying the sale of its brand of outboard and stern drive remote control cables and control boxes to the sale of its electric gear shift equipped outboard and stern drive engines. N.W. further charges that O.M.C. illegally tied the sale of its control boxes to the sale of its mechanical shift outboard engines by applying coercive pressure upon its engine dealers in violation of Section 1 of the Sherman Act and Section 3 of the Clayton Act. N.W. also alleges that O.M.C. has violated Section 2 of the Sherman Act, 15 U.S.C. § 2, by refusing to deal with N.W., as a supplier, in its purchases of remote control cables, by engaging in predatory price manipulation in the remote control cable market,1 and by setting up a competitor to N.W. in an effort to injure N.W. during the pendency of the present lawsuit. N.W. seeks treble damages, pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, and permanent injunctive relief, pursuant to Section 16 of the Clayton Act, 15 U.S.C. § 26. Jurisdiction exists in this Court by virtue of 28 U.S.C. § 1337 and venue is properly laid in this district under 28 U.S.C. § 1391, 15 U.S.C. § 15 and 15 U.S.C. § 22.

In order to fully understand the main contentions made, a brief background is necessary. Outboard motors were originally one or two cylinder engines of small horsepower which were mounted on the transom of small fishing boats. The development of the modern outboard motor dates from the 1922 entry of the Johnson Motor Company (formerly Johnson Motor Wheel Company, a manufacturer of bicycle engines)2 into the outboard motor field. (Tr. 1111).3 Outboard motors became lighter, higher powered, better balanced and more portable. (Tr. 1115.) Around 1930 electric starters were introduced. (Tr. 1116.) In 1948 mechanical gear shifts were placed on outboards. (Tr. 1117.) In 1958 multiple cylinder engines came on the market. (Tr. 1117.) Since that time horsepower has been increased until today outboards in excess of 100 horsepower are available.

In the early models, and today with smaller horsepower engines, all control functions (steering, throttling, and, after its introduction, gear shifting) were all performed by the operator seated at the rear of the boat next to the motor. However, as boats and motors became larger, it became more difficult and dangerous to operate the boat seated next to the motor. Remote control stations began to be used. These remote control stations contained a steering wheel and remote control box with levers which controlled throttling and gear shifting functions. The controls at the remote station were connected to the motor by means of flexible remote control cables.

For throttling and mechanical gear shifting, the two engine control functions, the control cables consist of elongated flexible conduits containing freely moving core wires. Specially configured end fittings attach to mated fittings at the motor and control box end. At first, two control cables, one for the mechanical shift and one for the throttle, were run from the motor to a control box and there attached to two separate levers, appropriately designated for the shift and throttle. In the early 1960's, single lever control boxes, capable of mechanically controlling both the throttle and gear shift operation by means of one single lever, were developed. However, two separate control cables were still needed, one for the throttle and one for the mechanical shift.

In the 1962 model year, which began in the fall of 1961, O.M.C. introduced the first outboard engines with electrically operated gear shift. At about the same time, O.M.C. introduced its first stern drive units.4 All O.M.C. stern drives have been equipped with electric shift. For these outboard and stern drive engines, gear shifting is done by means of an electric solenoid operated clutch.5 Shifting is done by an electric switch on the control box, linked to the engine's shift mechanism through a harness of wires which plugs into the engine. The throttle, however, is still operated mechanically by means of a remote control cable attached to a single lever on the control box.

With the advent of electric shift engines, O.M.C. began the policy of including, as part of its outboard or stern drive engine "package," remote control cables and control boxes. For stern drive units the cables and boxes were packed with the motor in the shipment.6 Remote control boxes were also packed with Johnson and Evinrude outboard engines. In addition, purchasers of electric shift outboard motors received, with their motor and control box, a "cable certificate" which entitled them to obtain from their dealer one O.M.C. control cable of whatever length was necessary to fit the boat.7 This new policy with regard to remote control cables and control boxes constitues the major focus of N.W.'s claims.

The motion of N.W. for a preliminary injunction was denied by this Court on October 6, 1970. 317 F.Supp. 698. After one postponement, trial was commenced on March 1, 1971. The non-jury trial consumed thirteen trial days between March 1 and March 17. Post-trial briefing having been concluded, the case is now ripe for determination. Each of the major issues will be dealt with separately.

I. TIE-IN SALES OF REMOTE CONTROL CABLES WITH ELECTRIC SHIFT ENGINES.

N.W. has charged that O.M.C. violated Section 1 of the Sherman Act, 15 U.S.C. § 1, and Section 3 of the Clayton Act, 15 U.S.C. § 14, by tying the sale of its O-style cables8 to the sale of its electric shift outboard and stern drive engines.

A tie-in is generally defined as an arrangement under which the vendor will sell one product (the tying product) only on condition that the buyer also purchase another and different product (the tied product). A successful tie-in thus has two anticompetitive impacts. It forecloses the seller's competitors in one market (the tied market) through use of market leverage and power developed in another market (the tying market), and it compels a purchaser to buy a product he may not want in order to obtain one he desires. Northern Pacific Ry. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). Such tie-in sales can rarely be justified because it is said they "serve hardly any purpose beyond the suppression of competition." Standard Oil Co. v. United States, 337 U.S. 293, 305-306, 69 S.Ct. 1051, 1058, 93 L.Ed. 1371 (1949). Accordingly, tie-in sales are almost always regarded as illegal under both Section 3 of the Clayton Act and Section 1 of the Sherman Act. Northern Pacific Ry. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958) (§ 1); International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1947) (§§ 1 and 3); International Business Machine Corp. v. United States, 298 U.S. 131, 56 S.Ct. 701, 80 L.Ed. 1085 (1936) (§ 3).

The standard of illegality under the two Acts is not identical. If the tying or tied products are "goods, wares * * * or other commodities," the case falls within the ambit of the Clayton Act9 and the plaintiff need only show that "a substantial volume of commerce in the `tied' product is restrained." Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 608-609, 73 S.Ct. 872, 97 L.Ed. 1277 (1953). If the tie does not involve a commodity but concerns land, services or credit, which do not fit the Clayton Act's language, it is governed by the Sherman Act and the plaintiff is required to bear the additional burden of proving that the defendant's economic power with respect to the tying product is sufficient to produce an appreciable restraint. However, the "sufficient economic power" test for per se illegality may be inferred if it appears that the seller has the power to impose other burdensome terms, such as a tie-in, with respect to any appreciable number of buyers within the market. Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969).

In the instant situation, there is no question that the tied products—remote control cables and electric shift outboard and stern drive engines—are commodities within the meaning of Section 3 of the Clayton Act.10...

To continue reading

Request your trial
23 cases
  • Jefferson Parish Hospital District No v. Hyde
    • United States
    • U.S. Supreme Court
    • 27 Marzo 1984
    ...247 East Chestnut Properties, Inc., 1975-2 CCH Trade Cas. ¶ 60,491, at 67, 162-67,163 (ND Ill.1974); N.W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, 501-504 (D Del.1971); Teleflex Industrial Products, Inc. v. Brunswick Corp., 293 F.Supp. 106, 107, 109 and n. 6 (ED Pa.1968). S......
  • Consol. Gas Co. of Fla. v. City Gas Co. of Fla.
    • United States
    • U.S. District Court — Southern District of Florida
    • 24 Julio 1987
    ...economic power with respect to the tying product is sufficient to produce an appreciable restraint." N.W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, 500 (D.Del.1971). Thus, City Gas cannot claim that this tying arrangement violates § 3 of the Clayton City Gas has also claimed......
  • McAlpine v. AAMCO Automatic Transmissions, Inc.
    • United States
    • U.S. District Court — Western District of Michigan
    • 3 Abril 1978
    ...and deliberate course of coercive dealing through misrepresentations and threats of cancellation, N. W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, at 511 (D.C.Del.1971), the crucial factor being that economic power be utilized to coerce the purchase of the tied product. Times......
  • Kellam Energy, Inc. v. Duncan
    • United States
    • U.S. District Court — District of Delaware
    • 19 Agosto 1987
    ...that a monopolist has a 68% market share to demonstrate a dangerous probability of market dominance. N.W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, 517 n. 23 (D.Del.1971). Kellam also asserts that International Distribution Centers, Inc. v. Walsh Trucking Co., Inc., ___ U.S.......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT