United States v. Bausch & Lomb Optical Co.

• Decision Date: 27 May 1942
• Citation: 45 F. Supp. 387
• Parties: UNITED STATES v. BAUSCH & LOMB OPTICAL CO. et al.
• Court: U.S. District Court — Southern District of New York

45 F. Supp. 387

UNITED STATES v. BAUSCH & LOMB OPTICAL CO. et al.

District Court, S. D. New York.

May 27, 1942.

COPYRIGHT MATERIAL OMITTED

Samuel S. Isseks, Sp. Asst. to the Atty. Gen., and Irving Glickfeld, John E. McCracken, and John S. James, Sp. Attys., all of New York City, for the government.

Simpson, Thacher & Bartlett, of New York City (Whitney N. Seymour and Francis X. Fallon, Jr., both of New York City, of counsel), for defendant Bausch & Lomb Optical Co. and others.

Lehrich & Lehrich, of New York City (Henry Lehrich, Benjamin S. Kirsh, and Hyman D. Lehrich, all of New York City, of counsel), for defendant Soft-Lite Lens Co., Inc., and others.

RIFKIND, District Judge.

This is a civil action by the United States under the provisions of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq. The two corporate defendants are Bausch & Lomb Optical Co., a manufacturer of opthalmic goods and Soft-Lite Lens Co., Inc., a distributor of unpatented, pink tinted lenses, under the trademark "Soft-Lite", for use in spectacles and eye glasses. The individual defendants are officers of one or the other corporation.

The complaint charges the defendants with violations of sections 1 and 3 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1, 3, by unlawfully contracting, combining and conspiring to restrain interstate trade and commerce in tinted lenses and, more particularly, by contracting, combining and conspiring: "(a) to designate and select according to certain arbitrary rules and regulations, wholesalers and retailers to handle, deal in, and sell certain tinted lenses known as Soft-Lite lenses; (b) to sell such tinted lenses only to such designated and selected wholesalers and retailers; (c) to restrain such wholesalers and retailers from selling to other wholesalers and retailers not so selected; (d) to force such wholesalers and retailers to observe certain arbitrary and unreasonable prices in reselling such tinted lenses; and (e) to limit the sale and distribution in interstate trade and commerce of tinted lenses similar to Soft-Lite lenses".

The complaint further charges that the defendants combined and conspired to establish and maintain a closely regulated scheme of manufacture and distribution by means of which the defendants would control completely all phases of the marketing of these unpatented tinted lenses, including the selection and designation of wholesalers and retailers of such lenses and the fixing and maintenance of minimum retail prices of such lenses; and that the object of this combination and conspiracy was effectively carried out by an exclusive manufacturing arrangement between Bausch & Lomb and Soft-Lite, by employing corporations affiliated with Bausch & Lomb to distribute approximately two-thirds of all Soft-Lite lenses, by price conferences and agreements, by a system of selecting wholesalers and licensing retailers and by requiring retailers to resell the lenses at the price prevailing in their respective localities.

As a result of the conspiracy and its effectuation, dealers who refuse to abide by the control exercised by defendants have been denied the right to deal in Soft-Lite lenses and consumers have been compelled to pay arbitrary and non-competitive prices.

The relief prayed for includes injunctions against the unlawful practices of the defendants, cancellation of the manufacturing agreement between Bausch & Lomb and Soft-Lite, cancellation and injunctions against the continuance of the distribution arrangements and licenses between Soft-Lite and its wholesalers and retailers.

The answers admit that Soft-Lite lenses move in interstate commerce, that they are manufactured by Bausch & Lomb exclusively for Soft-Lite, that defendant Soft-Lite licenses retailers to deal in Soft-Lite lenses. The answers deny substantially all the other material allegations and deny the violation of the Sherman Anti-Trust Act.

For several years prior to 1919, Morris Singer was purveying pink tinted lenses, for use in eye glasses, through several retail shops operated by him in the City of New York. These lenses were marketed under the trade-mark "Soft-Lite" owned by him. Soft-Lite lenses were ground for Morris Singer by several manufacturers out of pink tinted glass imported by him from France.

In 1919 Morris Singer and Nathaniel Singer, his son, formed Optical Service Corporation to engage in the wholesale distribution of Soft-Lite lenses. The name of Optical Service Corporation was in 1929 changed to Soft-Lite Lens Co., Inc., and it will hereinafter be so identified.

Tinted lenses had been sold in the market as far back as 1908. Pink tinted lenses, however, were apparently introduced into the American market by Morris Singer. They won public favor slowly and in 1924 Soft-Lite was still doing a very small business. At that time Nathaniel Singer estimated that the company's sales for the year would amount to about fifty thousand pairs.

On June 11, 1924, Bausch & Lomb entered into an arrangement to grind pink tinted lenses for Soft-Lite out of glass imported and provided by the latter. In connection with this arrangement and at the time it was made Bausch & Lomb was supplied by Soft-Lite with a list of its customers to whom Bausch & Lomb referred in an office memorandum as jobbers and retail licensees. Bausch & Lomb agreed that any orders for pink tinted lenses which it might receive it would transmit to Soft-Lite.

Shortly thereafter, in August, 1924, a change occurred in the relationship between the two companies. Bausch & Lomb became not only the grinder of Soft-Lite lenses but the exclusive manufacturer of the pink tinted glass from which the lenses were ground. Furthermore, it was understood that Bausch & Lomb would manufacture pink tinted glass only for Soft-Lite and that it would not compete with Soft-Lite in the sale of pink tinted lenses.

The parties have given this arrangement a more precise construction from time to time. Thus on September 13, 1926, Bausch & Lomb wrote to Soft-Lite as follows:

"Since the very beginning of our relations with you, in connection with this transaction, it has been understood that we would safeguard your interests in every way and it has never been our intention to make competition for you by either marketing a tinted lens of our own or producing similar tinted glass for other manufacturers and it is our intention to abide by this understanding.

"On the other hand, however, it is difficult to foresee the progress of science in producing glass possessing better properties than is obtainable at the present time and in that event we feel certain that you would not in any way desire to impede our progress in that direction.

"We hope that this may be sufficient guarantee to you that we do not wish to do anything that would look like competition in connection with the Soft-Lite and we naturally expect that your efforts in the sale of same will be continued as at present for an indefinite period unless by consent of both parties concerned a different arrangement is agreed upon.

"Yours very truly "Bausch & Lomb Optical Company

"P.S. Tinted lenses such as Crookes, Fieuzal, Smoke, Amber, etc. which we are now manufacturing it is understood will not come under the above arrangement".

This construction of the understanding of the parties was accepted by Soft-Lite.

The character of the basic relationship between the parties again came up for review in 1932 in connection with a patent application by Bausch & Lomb on Nokrome lenses. On July 6, 1932, Bausch & Lomb wrote to Soft-Lite, in part, as follows:

"Insofar as the marketing of product manufactured under this patent involves the use of Soft-Lite glass as such, we are willing to grant you the exclusive distribution under the same general conditions as we have agreed to in the letter written by our company to you under date of September 13, 1926".

Except for a change with respect to second quality lenses, the arrangements embraced in these communications have, in substance, governed the relation between the two corporations to this day. With respect to second quality lenses it was provided sometime between 1924 and 1935 that Soft-Lite would no longer be obliged to accept them; that Bausch & Lomb would not sell them in the United States but only abroad, in countries in which Soft-Lite had no offices, and at prices agreed to by both corporations.

These arrangements were developed through arm's length negotiations. Soft-Lite's object was to obtain from a highly regarded domestic source a product of uniformly good quality. Bausch & Lomb's object was to secure a prospectively increasing outlet for its manufactures.

These objects have been attained. The distribution of Soft-Lite lenses has grown rapidly. In 1938, Soft-Lite sold 447,171 pairs for $807,000; in 1939, 518,129 pairs for $910,000; in 1940, 563,113 pairs for $987,000.

Others have entered the pink tinted lens field. The most prominent are American Optical Company, Titmus Optical Company, Shuron Optical Company and Continental Optical Company. The aggregate sales of pink tinted lenses by the companies mentioned, including Soft-Lite, are as follows: 1938, 1,150,523 pairs for $1,598,179; 1939, 1,406,713½ pairs for $1,887,868; 1940, 1,433,583½ pairs for $1,939,502.

Pink tinted glass for lenses has been manufactured not only by Bausch & Lomb but also by Pittsburgh Plate Glass Company, which supplied the companies above-mentioned other than Soft-Lite, and by L. J. Houze Convex Glass Company.

Throughout the period mentioned there has been competition between untinted and tinted lenses, as well as in the various tints of lenses and among the distributors of pink tinted lenses.

Soft-Lite is engaged exclusively in selling. It does no manufacturing of any kind. The lenses it markets are purchased exclusively from Bausch & Lomb. Soft-Lite sells its lenses only to designated wholesalers. However, it promotes the sale of its lenses by appealing directly...