United States v. Eastman Kodak Co.

• Decision Date: 24 August 1915
• Docket Number: A-51.
• Citation: 226 F. 62
• Parties: UNITED STATES v. EASTMAN KODAK CO. et al.
• Court: U.S. District Court — Western District of New York

226 F. 62

UNITED STATES v. EASTMAN KODAK CO. et al.

No. A-51.

United States District Court, W.D. New York.

August 24, 1915

John Lord O'Brian, U.S. Atty., of Buffalo, N.Y., and Mark Hyman, Sp. Asst. Atty. Gen., for the United States.

Philipp Sawyer, Rice & Kennedy, of New York City (James J. Kennedy and William S. Gregg, both of New York City, and S. Wallace Dempsey, of Lockport, N.Y., of counsel), for defendants.

HAZEL District Judge.

This is a bill in equity brought by the United States Attorney for the Western district of New York under the direction of the Attorney General against the Eastman Kodak Company, a corporation of New Jersey, the Eastman Kodak Company, a corporation of New York, George Eastman, Henry A. Strong Walter S. Hubbell, and Frank S. Noble, to restrain the violation of the Sherman Anti-Trust Act. The Eastman Kodak Company of New Jersey, which was organized in the year 1901 with a capital of $35,000,000 is owner of the capital stock of the Eastman Kodak Company of New York, a corporation engaged in the manufacture of photographic materials and supplies, and of two other corporations, one English and one Canadian, similarly engaged. The individual defendants are officers and directors of the defendant corporations, and together they are charged with having entered into contracts and combinations in restraint of interstate trade and commerce, and with monopolizing a part of such trade.

The bill alleges substantially that during the years from 1902 to 1906 the principal defendant, the New York corporation intentionally monopolized the business of manufacturing and selling cameras, plates, photographic paper, and film in the United States, by acquiring the capital stock, property, patents, and good will of about 20 competing companies, which were afterwards dissolved, the plants dismantled, and their businesses absorbed or removed to Rochester, N.Y.; that the Eastman Kodak Company of New Jersey acquired by purchase many stock houses engaged in different states in selling photographic supplies manufactured by defendants and their competitors; that the defendants, with the intention of monopolizing the importation thereof, acquired the exclusive right to sell in the United States and Canada raw paper stock from European paper mills, a necessity in the manufacture of photographic papers; that they also acquired by purchase a substantial part of the dry plate industry throughout the United States, and monopolized the manufacture and sale of photographic film; that from 1899 to 1908 all photographic supplies manufactured by the Eastman Kodak Company were sold by dealers under restrictions forbidding them to handle or sell the articles of competitors and fixing the sales prices, such restrictions being enforced by the payment of special discounts to dealers observing them, thus stifling competition.

It is also alleged that such special discounts were discontinued in the year 1908, but that subsequently so-called terms of sale were adopted containing conditions that dealers carry only such materials for sale to customers as were sold to them by the Eastman Kodak Company at listed prices, and that no articles were to be consigned by them to others without first obtaining the permission of the manufacturing company. It was also provided in the terms of sale that the articles sold to dealers should not be sold by them to other dealers, and furthermore that the sale by them of specified patented articles in violation of the conditions of sale would entail a revocation of the right to deal in any of the Eastman commodities. By the acquisition of properties and the enforcement of said terms of sale the defendants, according to the bill, acquired the largest percentage of the trade in photographic materials, unlawfully restrained such trade, and obtained an illegal monopoly thereof. The relief prayed is a dissolution of the defendant companies, and a disintegration of their business.

The defendants deny restraining trade or competition, or engaging in a monopoly, and asseverate that their status in the business of manufacturing and selling photographic supplies was a result solely of the creation and development within their plants of products of a superior quality, and of the manufacture of a type of camera in which it was the conceded pioneer.

The testimony in this case, which is one of much public importance, was taken before me at different times, and the case was fully argued on both sides by skilled and able counsel. The record comprises upwards of 3,000 printed pages of testimony and three volumes of printed exhibits. The trial has been ingenuously and fairly conducted, without resort to technical objections to testimony, and without endeavor to conceal any of the acts claimed by the government to have been wrongful, and by the defendants to have resulted from the ingenerate growth of the business or to have been necessary to its proper development. Although there is little, if any, conflicting evidence, the different inferences drawn by the litigants, even from the conceded facts, are so divergent that it is not without difficulty that the conclusions hereinafter set forth have been reached. Nor was it an easy task to apply the facts to the law, as the many adjudications cited in the briefs for my guidance are thought to be differentiable, necessitating a determination of this case upon the peculiar facts and circumstances presented, and requiring me to ascertain whether they come within the prohibitions of the Sherman Act as construed by the Supreme Court of the United States in Standard Oil Company v. United States, 221 U.S. 1, 31 Sup.Ct. 502, 55 L.Ed. 619, 34 L.R.A. (N.S.) 834, Ann. Cas. 1912D, 734, and in United States v. American Tobacco Co., 221 U.S. 106, 31 Sup.Ct. 632, 55 L.Ed. 663, and whether the standard of reason rule emphasized in such decisions requires a holding that the defendants were simply beneficiaries of the natural expansion of the photographic art and the business of manufacturing and selling photographic materials, or of the conspicuous skill, industry, and sagacity of Mr. Eastman, who organized the Eastman Kodak Company, and whether the merging of the various enterprises was merely supplementary to an established business first in the field, and not for the purpose of protecting it, or whether, indeed, the defendants are guilty of forming a conspiracy or device to corral or concentrate the business, with a view to monopolizing interstate trade or commerce by the adaptation of unfair methods which tended to, and did, diminish or destroy the business of their competitors.

If the contracts between the Eastman Kodak Company and others, and the acquisitions of property complained of under the evidence, eventuated in an undue and unreasonable engrossment of trade, then without doubt, the act in question has been violated, and the government may resort to the courts to suppress such violations. Monopolies are created in various ways, and may constitute partial restraints of trade which of themselves are not unreasonable, and contracts or combinations creating them are not necessarily invalid. The statute prohibits only such monopolies as are unjust and unreasonable restraints of trade. In Nash v. United States, 229 U.S. 373, 33 Sup.Ct. 780, 57 L.Ed. 1232, the Supreme Court, referring to the Standard Oil and Tobacco Company Cases, said:

'Those cases may be taken to have established that only such contracts and combinations are within the act as, by reason of intent or the inherent nature of the contemplated acts, prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade.'

Section 1 of the Sherman Act specifies restraint of trade by contracts, combinations, or conspiracies, while section 2 specifies monopolization or attempted monopolization, of any part of the trade or commerce among the states by combinations or conspiracies. In its lucid construction of this statute the Supreme Court in the Standard Oil Case included equally restraint of trade or monopoly, either by a corporation or combination of corporations, or by an individual or combination of individuals, as falling within the prohibition; and whatever indefiniteness exists in the text of the act is obviated by the language of Chief Justice White, who said:

'The ambiguity, if any, is involved in determining what is intended by monopolize. But this ambiguity is readily dispelled in the light of the previous history of the law of restraint of trade to which we have referred and the indication which it gives of the practical evolution by which monopoly and the acts which produce the same result as monopoly, that is, an undue restraint of the course of trade, all came to be spoken of as, and to be indeed synonymous with, restraint of trade. In other words, having by the first section forbidden all means of monopolizing trade, that is, unduly restraining it by means of every contract, combination, etc., the second section seeks, if possible, to make the prohibitions of the act all the more complete and perfect by embracing all attempts to reach the end prohibited by the first section, that is, restraints of trade, by any attempt to monopolize, or monopolization thereof, even although the acts by which such results are attempted to be brought about or are brought about be not embraced within the general enumeration of the first section.'

And in United States v. Union Pacific R.R. Co., 226 U.S. 61, 33 Sup.Ct. 53, 57 L.Ed. 124, the Supreme Court said:

'The act is intended to reach combinations and conspiracies which restrain freedom of action in interstate trade and commerce and unduly suppress or restrict the play of competition in the conduct thereof'

-- and...