United States v. Continental Group, Inc., Crim. No. 76-514.

Decision Date20 July 1978
Docket NumberCrim. No. 76-514.
Citation456 F. Supp. 704
PartiesUNITED STATES of America v. CONTINENTAL GROUP, INC., Chase Bag Company, James K. Cooper and Harrison B. Rue.
CourtU.S. District Court — Eastern District of Pennsylvania

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COPYRIGHT MATERIAL OMITTED

Walter L. Devany, Morton M. Fine, Donald C. Klawiter, James A. Backstrom, Jr., Trial Attys., Antitrust Div., Philadelphia, Pa., for United States.

Larry L. Williams, Washington, D. C., Patrick T. Ryan, Henry T. Reath, H. Francis Delone, Robert W. Sayre, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER

BECHTLE, District Judge.

INTRODUCTION

On October 29, 1976, Continental Group, Inc. ("Continental"), American Bag & Paper Corporation ("American"), Chase Bag Company ("Chase"), Harley Corporation ("Harley"), St. Regis Paper Company ("St. Regis"), James K. Cooper ("Cooper"), David Mawicke ("Mawicke"), Peter J. Weggeman ("Weggeman"), Stanley A. Schottland ("Schottland"), Harrison B. Rue ("Rue"), William H. Versfelt ("Versfelt") and Edward W. Weikum ("Weikum") were charged in a one-count indictment with having engaged, together with several unindicted coconspirators,1 in a continuing combination and conspiracy in unreasonable restraint of interstate trade and commerce, in violation of Section 1 of the Act of Congress of July 2, 1890, as amended, 15 U.S.C. § 1 ("Sherman Act"). The indictment charged that the combination and conspiracy consisted of a continuing agreement, understanding and concert of action among the defendants and coconspirators, the substantial terms of which were to raise, fix, maintain and stabilize the prices and the terms and conditions for the sale of consumer bags. Consumer bags were defined in the indictment as follows:

Consumer bags, also known in the trade as "small bags," are made from one or more plies of paper and may be combined with other materials used as linings and/or coatings. Consumer bags are preformed by the manufacturer in many styles and sizes according to customer specifications. Most consumer bags have printed exterior designs as specified by the customer. Consumer bags are designed for capacities of less than twenty-five pounds. They are normally used to pre-package products which are then marketed in such bags.
Consumer bags are used for packaging a variety of products including, among others, pet foods, cookies, tea, coffee, kitty litter, chemicals, and agricultural products. Consumer bags also include airsickness bags.

The conspiracy and combination with which the defendants were charged was alleged in the indictment to have begun as early as 1950 and to have continued until the date of the return of the indictment on October 29, 1976.

Pleas of nolo contendere were entered by Harley on December 10, 1976, and by Schottland and American on June 1, 1977. The trial of the remaining defendants commenced September 30, 1977, before this Court and a jury. At the close of the Government's case, the motions of Mawicke and Versfelt for a judgment of acquittal, pursuant to Fed.R.Crim.P. 29(a), were granted by the Court. At the close of the entire case, the jury on November 23, 1977, returned a verdict of guilty as to Continental, Chase, Cooper and Rue, and a verdict of not guilty as to St. Regis, Weggeman and Weikum.

The total proceedings in this case, including five days of voir dire, the jury's deliberations and the return of the jury's verdict, lasted 43 days — from September 26 to November 23, 1977. From the date the indictment was returned and until the jury rendered its verdict, approximately 140 written motions were filed with the Court by the defendants. During the course of the trial, in which 4 Government counsel, 21 defense counsel and numerous assistants and paralegals participated, 14 witnesses were called by the Government and a total of 30 witnesses were called by the defense. The combined total of demonstrative exhibits (charts, graphs, documents) introduced at trial numbered in excess of 5,000. Subsequent to the jury's verdict, the four convicted defendants filed post-trial motions with the Court which totaled in excess of 300 pages.

Presently before the Court are the motions of defendants Continental, Chase, Cooper and Rue for judgment of acquittal or, in the alternative, for a new trial or for an arrest of judgment, pursuant to Fed.R. Crim.P. 29(c), 33 and 34, respectively. For the reasons stated below, each of these motions will be denied.

SUMMARY OF THE EVIDENCE

A brief summary of the evidence, construed in a light most favorable to the Government, will facilitate an understanding of this Opinion.

Beginning in 1950 or 1951, representatives of the major consumer bag manufacturers in the United States attended meetings at which they discussed the prices to be charged for consumer bags. At these early meetings, the competitors represented included the Benjamin C. Betner Company ("Betner"), the Thomas M. Royal Company ("Royal"), Union Bag and Paper Company ("Union Bag"), American, Arkell and Smith ("Arkell") and Oneida Packaging Products, Inc. ("Oneida"). In 1953, Continental acquired Betner and, in 1967, Chase acquired Arkell. Harley entered the consumer bag industry in the early 1960's, and St. Regis entered the consumer bag portion of the paper industry in 1965. Subsequent to their respective entries into the consumer bag industry, representatives of Continental, Chase, Harley, American and St. Regis regularly attended meetings of competitors. Thus, by 1967, and continuing until the return of the indictment, the core of the group of manufacturers of consumer bags whose representatives regularly attended meetings of competitors consisted of Continental, Chase, American, Harley and St. Regis.

The first of these meetings about which there was detailed testimony at trial was held at the Arkell headquarters in New York in 1960 or 1961. This meeting was attended by price analysts from Continental, Arkell and the Bemis Bag Company ("Bemis"), who had been instructed by their respective superiors to devise a new listprice format for consumer bags which would be used by Continental, Arkell, American, Bemis and Oneida to price orders from customers for consumer bags N.T. 9-182 to 9-189, 12-44 to 12-49. The consumer bag list-price format created at this meeting was a looseleaf binder which contained lists and/or tables of all the possible variable components or factors ("factors") involved in the manufacture of a consumer bag, such as type or plies of paper, printing process or manufacturing charges, and a corresponding price for each factor. Consumer bags are generally manufactured according to customer specifications and, thus, the factors involved in the construction of a particular consumer bag vary according to the particular specifications. Therefore, the price format devised at this meeting not only provided manufacturers with corresponding prices for most of the factors specified by a customer, but also allowed any manufacturer constructing consumer bags according to a particular set of customer specifications to arrive at the identical total price simply by adding the prices for the factors involved in that particular bag.2

Continental, Arkell and American each adopted and employed the list-price format devised at the Arkell headquarters meeting N.T. 9-188 to 9-189, 12-44 to 12-49, as did Chase, Harley and St. Regis subsequent to their respective entries into the consumer bag industry; and all continued to employ the list-price format throughout the period of the indictment. After the implementation of the list-price format, manufacturers entering the consumer bag industry, and existing manufacturers who did not adopt and follow the format, would be invited to attend a meeting of representatives of consumer bag manufacturers. At these meetings, representatives from Continental, American, and later Harley, would advise these competitors that they were selling below the "market price," that they could make a profit without deviating from the list price and that "the other" manufacturers wanted them to price consumer bags from the list-price book and not deviate from it N.T. 3-9 to 3-19, 3-120 to 3-126.

Approximately twice a year during the period covered by the indictment, general or across-the-board increases, wherein each factor contained in the price book would be increased by a certain percentage, were implemented. And from time to time, selective or single-factor increases, whereby the price for only one component or factor, such as paper, would be increased, were also implemented. The general procedure for implementing these general or selective price increases was for Continental to announce the previously agreed upon price increase in the Wall Street Journal and then to distribute revised price sheets to Chase, St. Regis, American, Harley and other competitors pricing from the list-price format N.T. 6-106 to 6-122, 7-102 to 7-108, 14-59 to 14-63, 14-75.

The amount and effective date of the implementation of the general or selective price increases were agreed to by representatives of Continental, Chase, American, Harley and St. Regis at the regular meetings of the representatives of these competitors. During the period from the early 1960's to May, 1971, these meetings of the representatives of the major competitors in the consumer bag industry were held at various country clubs around the country. At these meetings, the representatives discussed various problems of the industry and also discussed and agreed to the prices and the terms and conditions for the sale of consumer bags. For example, in 1962, representatives from Arkell and Continental met at the home of Eugene Pavitt ("Pavitt"), Executive Vice-President of American, to persuade Pavitt to agree to a proposed increase in the cost of heat-sealed consumer bags N.T. 7-188 to 7-192, 12-79 to 12-92. And in the summer or fall of 1969, Cooper and George Landon ("Landon") of Continental, and Frederick Kiendl ("Kiendl") ...

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