Ohio Valley Electric Corp. v. General Electric Co.
| Decision Date | 31 August 1965 |
| Citation | 244 F. Supp. 914 |
| Parties | OHIO VALLEY ELECTRIC CORPORATION, Indiana-Kentucky Electric Corporation, Plaintiffs, v. GENERAL ELECTRIC COMPANY, Westinghouse Electric Corporation, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Kaye, Scholer, Fierman, Hays & Handler, New York City, Milton Handler, James B. Henry, David Klingsberg, Michael Malina, Franklin G. Lehmeier, Stephen Banner and William M. Borchard, New York City, of counsel, for plaintiffs.
White & Case, New York City, Chadwell, Keck, Kayser, Ruggles & McLaren, Chicago, Ill., Edgar E. Barton, Thomas B. Leary, George J. Caspar, New York City, John T. Chadwell, John W. Thomas, Luther C. McKinney, Chicago, Ill., of counsel, for defendant General Electric Co.
Cravath, Swaine & Moore, New York City, Albert R. Connelly, Richard F. de Lima, George J. Wade, New York City, of counsel, for defendant Westinghouse Electric Corp.
Criminal antitrust proceedings were brought in 1960 by the United States Government against electrical equipment manufacturers in the Eastern District of Pennsylvania. Thereafter, various purchasers of electrical equipment filed an unprecedented number of private antitrust actions against the manufacturers.1 This case is the first of those suits to come to trial in this court. It grows out of the purchase of eleven steam turbine generators in 1952 by plaintiffs Ohio Valley Electric Corporation (OVEC) and Indiana-Kentucky Electric Corporation (IKEC) from defendants General Electric Company (GE) and Westinghouse Electric Corporation (Westinghouse). Plaintiffs sue for treble damages under section 4 of the Clayton Act, 15 U.S.C. § 15, alleging a price fixing conspiracy among GE, Westinghouse and other manufacturers in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. After extensive national and local pre-trial discovery and conferences, the non-jury trial commenced on February 16, 1965, and ended approximately two months later.2 There were thirty-six witnesses, many by deposition, over 5,200 pages of transcript, and over 690 exhibits.
OVEC is an Ohio corporation owned by various investor-owned electric utility companies in the Ohio River Valley. IKEC is an Indiana corporation and a wholly-owned subsidiary of OVEC. Both plaintiffs were incorporated in 1952 to construct and operate facilities required to provide an unusually large supply of electric power to a new plant of the United States Atomic Energy Commission (AEC) near Portsmouth, Ohio. OVEC owns steam electric generating facilities in Ohio at its Kyger Creek plant, which contains five steam turbine generators known as Kyger Creek 1-5. OVEC is and has been engaged in the generation and transmission of electric energy in Ohio and the transmission of electric energy in Kentucky. IKEC owns steam electric generating facilities in Indiana at its Clifty Creek plant, which contains six steam turbine generators known as Clifty Creek 1-6. It is and has been engaged in the generation and transmission of electric energy in Indiana. The purchase of the Kyger Creek 1-5 and Clifty Creek 1-6 units gave rise to this suit.
OVEC and IKEC provide power to the AEC and also to other utilities, including their sponsoring or participating companies. These companies agreed to purchase any surplus power available from the new facilities and not required by the AEC, including power made available through cancellation of the arrangements with the AEC. The utilities so agreeing, as well as those owning OVEC's capital stock, are as follows:
% Participation
Name of Company Equity Power
American Gas and Electric Company3 37.8
Appalachian Electric Power Company 15.2
Indiana & Michigan Electric Company 7.6
Ohio Power Company 15.0
The Cincinnati Gas & Electric Company 9.0 9.0
Columbus and Southern Ohio Electric
Company 4.3 4.3
The Dayton Power and Light Company 4.9 4.9
Kentucky Utilities Company 2.5 2.5
Louisville Gas and Electric Company 7.0 7.0
Ohio Edison Company 16.5 14.5
Pennsylvania Power Company 2.0
Southern Indiana Gas and Electric Company 1.5 1.5
The Toledo Edison Company 4.0 4.0
The West Penn Electric Company 12.5
Monongahela Power Company 3.5
The Potomac Edison Company 2.0
West Penn Power Company 7.04
Defendant GE is a New York corporation with its principal place of business in Schenectady, New York. At all relevant times, it manufactured and sold steam turbine generators of varying sizes. It has maintained plants for the manufacture of such units at Schenectady, New York; West Lynn, Massachusetts; and Fitchburg, Massachusetts. IKEC's six units (Clifty Creek 1-6) and one of OVEC's units (Kyger Creek 1) were purchased from GE.
Defendant Westinghouse is a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania. At all relevant times, it manufactured and sold steam turbine generators of varying sizes. It has maintained plants for the manufacture of steam turbines at Lester, Pennsylvania and Sunnyvale, California, and a plant for the manufacture of generators at East Pittsburgh, Pennsylvania. OVEC purchased four of its units (Kyger Creek 2-5) from Westinghouse. Each defendant is an inhabitant of, or is found or transacts business in, the Southern District of New York.
Allis-Chalmers Manufacturing Company (Allis) was also originally named as a party defendant. However, by stipulation just prior to trial, plaintiffs dismissed the action against Allis without prejudice, but amended the complaint to allege that Allis was a co-conspirator.5 Allis is a Delaware corporation which, at all relevant times prior to 1963, was engaged in the manufacture and sale of steam turbine generators and maintained a plant for the manufacture of such units at West Allis, Wisconsin. At the time of the purchases sued upon, GE, Westinghouse and Allis were the three largest manufacturers and sellers of steam turbine generators in the United States. On January 1, 1963, Allis went out of the steam turbine generator business. Another co-conspirator named in the complaint was Elliott Company (Elliott), now a subsidiary of Carrier Corporation, a Delaware corporation. At all relevant times, Elliott was engaged in the manufacture of steam turbine generators.
Plaintiffs claim that, because of the alleged price-fixing conspiracy, they paid substantially more for the eleven steam turbine generator units purchased from defendants than they would have paid in a competitive (non-conspiratorial) market. To understand the contentions of the parties, some description of a steam turbine generator and the manner in which it is sold is necessary. A steam turbine generator unit is an assembly of a turbine and a generator used in the production or generation of electric energy on land by the use of steam. Steam turbine generators are complicated and frequently massive machines. They are made in a great variety of sizes, types and capabilities, with varying accessories and features, to perform under a number of operating conditions. For example, turbines differ according to the amount of kilowatts of electricity that can be generated, the type of fuel required, and the number of large shafts driving the generator.6 Specifications are detailed and extensive. The time required for manufacture of a unit is generally two to three years after date of order and sometimes even longer.
Steam turbine generators manufactured by both defendants have been sold and shipped in interstate commerce throughout the United States to investor-owned electric utilities and to federal, state and local governmental agencies for use in the generation of electricity. The pricing of these machines is complicated and requires the use of price books issued by the manufacturers. These books serve both as a technical manual and as a measure for comparing prices of machines made by different companies and of different types of machines made by the same company. From such a book, a price for a basic unit can be determined, after certain specifications have been assumed; e. g., electric output required. The prices contained in the price books are known to the trade as the "book" or "list" or "published" price. Similarly, the actual sale price or price agreed to be paid at the time of order for a steam turbine unit is known as the "order price."
Plaintiffs assert that during the existence of the alleged conspiracy, sales were generally made at book prices or at prices close to the book price level, that order prices below the book level were frequently expressed as a percentage discount from the appropriate book price, or "discount off book," and that book prices over the years were essentially the same for all three manufacturers. Plaintiffs claim that defendants conspired to establish uniform book prices and to keep order prices as close as possible to book, and that the order prices in 1952 for the eleven OVEC and IKEC units were, therefore, unlawfully fixed. Plaintiffs claim damages of $8,167,773, trebled, based upon a discount off book theory, which will be set forth in greater detail below.
Plaintiffs also suggest another theory of damages. In the manufacture of steam turbines, there is substantial delay between date of order and date of delivery and installation. Accordingly, in the 1950's, it was not uncommon for a manufacturer and a buyer to agree, as was done here, that...
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