United States v. American Optical Co., Civ. A. No. 46

• Citation: 97 F. Supp. 66
• Decision Date: 09 March 1951
• Docket Number: Civ. A. No. 46,C 1333.
• Parties: UNITED STATES v. AMERICAN OPTICAL CO. et al.
• Court: U.S. District Court — Northern District of Illinois

97 F. Supp. 66

UNITED STATES v. AMERICAN OPTICAL CO. et al.

Civ. A. No. 46, C 1333.

United States District Court N. D. Illinois, E. D.

March 9, 1951.

Willis L. Hotchkiss, Chief Midwest Office, Antitrust Division, Chicago, Ill., for the United States.

Dan Moody, Henry H. Brooks, Austin, Tex., Howard Ellis, Chicago, Ill., for defendants.

LA BUY, District Judge.

The above suit is a civil action filed by the United States against American Optical Company, an association, American Optical Company, a corporate subsidiary of the association, and certain named individuals. As to the individuals named as defendants, it is alleged: "* * * The individuals designated as defendants are fairly and adequately representative of a class of persons so numerous as to make it impracticable to bring all of them before the Court on the charges herein alleged, which involve all of the members of the class and against whom a common relief is sought."

The complaint alleges the class as having the following things in common: (1) all are physicians (commonly known as oculists) who specialize in the science of the eye and its diseases; (2) all, in their professional capacity, regularly make ophthalmic refractions for their patients, and on the basis of such refractions, prescribe ophthalmic lenses for the patients' eyes; (3) all regularly charge patients a professional fee for making ophthalmic refractions and for prescribing the type and power of ophthalmic lenses needed; (4) all refer patients to or have patients who take their prescriptions for ophthalmic lenses to a dispensing branch of defendant American to purchase spectacles or parts thereof as prescribed; and (5) all receive and accept from defendant American rebates or "credits" of part of the purchase price paid by patients.

Defendant American is alleged to be one of the two largest manufacturers of ophthalmic goods in the United States and operates approximately 254 wholesale branches throughout the United States. The offense charged is that since 1938 the defendants have continued an unlawful combination and conspiracy to fix the consumer price of spectacles and parts thereof sold to patients of the defendant doctors in violation of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note; that through said combination and conspiracy (1) defendant American sells spectacles and parts thereof on prescription directly to the patients of the defendant doctors and collects a consumer price consisting of the prescription price plus a fitting fee plus a substantial amount for rebate; (2) said consumer price is as high as the local prevailing prices charged by optometrists and retail opticians; (3) American rebates to defendant doctors the difference between the prescription price, plus fitting fees, and the price collected from such patients by American, and defendant doctors accept said rebates which are customarily one-half the consumer price collected from the patient; (4) American refuses to sell to patients of doctors who turn rebates over to patients or who insist on reduction in charges to patients by the amount of the rebate; (5) defendants refrain from disclosing to patients of the defendant doctors the prescription price of spectacles and the fact of a rebate or its amount.

It is alleged defendant doctors during the time covered by the complaint have entered into agreements and understandings with defendant American under which the defendant doctors have agreed (1) to refer or recommend patients to dispensing branches of defendant American to have prescriptions filled; (2) accept from defendant American a rebate or "credit" of the excess above the prescription price plus fitting fee collected by American from said patients; (3) refrain from turning over such rebates to their patients; and (4) refrain from disclosing to their patients the prescription price of spectacles or parts thereof purchased from American.

It is further alleged that such combination and conspiracy had the following effect: arbitrary and inflated consumer prices for spectacles have been fixed and maintained; patients have been forced to pay such inflated prices caused by rebates or "credits" given to defendant doctors; rebates or "credits" have been paid to said doctors, which amount to approximately one-half the consumer price paid by the patients; defendant doctors have acquired a pecuniary interest in maintaining the price of spectacles; and interstate trade and commerce in spectacles and parts thereof has been unreasonably restrained in violation of the Sherman Act. The prayer of the complaint requests that said combination and conspiracy be declared unlawful and that the defendants be perpetually enjoined from making rebates or participating in any plan of rebates.

In 1948 the government presented a petition for an order to show cause alleging as its basis that the government "seeks to insure that a judgment entered by this Court whether after trial or on consent of the parties, be binding on each of the members of the defendant class" and requesting the court order (1) that each of the persons named in the exhibit attached to the affidavit of the government appear and show cause within thirty days after the service of a copy of the order upon him why the doctors named in the complaint are not fairly and adequately representative of the several persons named in said exhibit and why a decree entered in this cause, after trial or consent of the parties whose names are set forth in the complaint should not be binding against the several doctors named in the attached exhibit; (2) that in the event a person listed in said exhibit desires to and does appear and show cause, he be thereupon designated and named individually as a defendant in said cause and be required to answer within thirty days after service on him of the order to show cause; (3) that in the event any person listed in the attached exhibit does not appear and show cause, he be bound by any judgment entered in this cause; (4) that a copy of the order of this court, a copy of the complaint, copy of plaintiff's petition to show cause, a copy of the supporting affidavit but without the exhibit, be sent by registered mail with return receipt and that such...