United States v. Johns-Manville Corporation

• Decision Date: 29 September 1966
• Docket Number: Civ. A. No. 31791.
• Citation: 259 F. Supp. 440
• Parties: UNITED STATES of America v. JOHNS-MANVILLE CORPORATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

259 F. Supp. 440

UNITED STATES of America v. JOHNS-MANVILLE CORPORATION.

Civ. A. No. 31791.

United States District Court E. D. Pennsylvania.

September 29, 1966.

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Raymond K. Carson and Rodney O. Thorson, Antitrust Division, Dept. of Justice, Washington, D. C., for plaintiff.

Howard Gittis, Philadelphia, Pa., and Ralph M. Carson, New York City, for defendant.

MEMORANDUM OPINION SUR MOTION OF DEFENDANT, JOHNS-MANVILLE CORPORATION, FOR SUMMARY JUDGMENT UNDER RULE 56 (Document 87)

VAN DUSEN, District Judge.

This case is before the court on the motion of Johns-Manville Corporation (hereinafter J-M or defendant) for summary judgment under F.R.Civ.P. 56 (Document 87).

On July 25, 1962, the United States Government filed a Complaint under § 4 of the Sherman Anti-Trust Act (15 U. S.C. § 4) against J-M, Keasbey & Mattison Company (hereinafter K & M) and Certain-teed Products Corporation (hereinafter Certain-teed), seeking injunctive relief against alleged violations of §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). The Complaint alleges that the above-named companies combined and conspired in unreasonable restraint of, and to monopolize, interstate and foreign trade and commerce, and that defendants have attempted to monopolize the aforesaid interstate and foreign trade and commerce in asbestos-cement pipe and couplings (Document 1).

K & M sold its asbestos-cement pipe and coupling business to Certain-teed on or about April 16, 1962 (Document 37, par. 5). On December 22, 1964, this court granted K & M's motion for summary judgment, principally because that company had abandoned its business activity in the asbestos-cement pipe and coupling field and there was a lack of evidence of any probability that it would ever resume it. United States v. Johns-Manville Corporation, 237 F.Supp. 885 (E.D.Pa.1964). Certain-teed's Motion for Summary Judgment was granted on August 10, 1965, principally because there was no evidence showing that that company (which had been in the asbestos-cement pipe and coupling business for only two months before the complaint in this case was filed) had joined in any illegal activities in which J-M and K & M might have been involved. United States v. Johns-Manville Corporation, 245 F.Supp. 74 (E.D.Pa.1965).

The documents which constitute the record in this case are enumerated in the margin.¹ Rulings on the motions of both parties to strike certain portions of the Gerin and Hogan depositions, plaintiff's motions to strike certain portions of the defendant's affidavits filed in support of the instant Motion, and plaintiff's supplemental motions to strike certain portions of affidavits filed in support of Certain-teed's Motion for Summary Judgment are set forth in Appendix A to this opinion.²

As noted above, the Government has charged J-M with violation of both §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). Under § 1, the Government alleges a two-pronged conspiracy: first, a conspiracy with other domestic producers (chiefly K & M and later Certain-teed) to maintain domestic asbestoscement (hereinafter a-c) pipe prices at a uniform level, and second, a conspiracy among the same companies to keep foreign-made a-c pipe out of the United States market. The latter aspect of the conspiracy is sudivided into two parts: first, a campaign to promote the adoption by the American Society for Testing Materials (ASTM), the American Water Works Association (AWWA), and municipal authorities of certain restrictive specifications for a-c pipe for the sole purpose of excluding foreign-made pipe, which does not meet such specifications, and, second, miscellaneous concerted activities designed and intended to exclude foreign pipe.

Under § 2 the Government alleges that J-M and co-conspirators have attempted to monopolize interstate and foreign commerce in a-c pipe.

I. Alleged Conspiracy to Fix Prices

In ruling on the defendants' motion for acquittal in the companion criminal case (United States v. Johns-Manville Corporation, et al., D.C., 231 F.Supp. 690), this court found that there was evidence in the record which would support a jury finding that J-M and K & M agreed on prices during the period 1954-1959.³ United States v. Johns-Manville Corporation, 231 F.Supp. 690, 696 (E.D. Pa.1964). The record in this case contains no direct evidence of any price-fixing activity since that period.⁴ In order to show, as it must in this suit for an injunction, that the defendant is engaged in a presently existing conspiracy to maintain prices on a-c pipe and couplings, the Government relies upon evidence of alleged identical list prices maintained by J-M and K & M up until 1962 and thereafter by J-M and Certain-teed (brief for plaintiff, p. 9). In short, the Government contends that evidence of conspiratorial behavior occurring about four years before the filing of the Complaint and eight or nine years before the filing of the instant Motion for Summary Judgment, plus a continued identity of book prices, establish a continuing conspiracy to fix prices.

As to the alleged continued identity of book prices, there is no evidence in this record that J-M and Certain-teed or any other domestic producer are currently using identical price lists.⁵ However, assuming that J-M and Certain-teed are using the same list prices, there is testimony in the record that it was K & M's policy to follow the J-M book prices (Reichel Deposition, p. 93; N.T. 10,551), and that Certain-teed continued the pricing policy which had been employed by K & M (Reichel Deposition, pp. 66-67). There is also in the record expert testimony that the only practicable course for a small producer like K & M or Certain-teed in an oligopolistic market is to follow the prices of the larger producer (N.T. 11,069-73). It is well settled that evidence of consciously parallel pricing will not alone support a finding of conspiracy under the Sherman Act. United States v. Johns-Manville Corporation, 245 F.Supp. 74, 80 (E.D.Pa.1965), and cases there cited.

Moreover, the defendant has submitted the affidavits of the three J-M officials who have responsibility for setting a-c pipe prices (all these affidavits are attached to Document 87). Mr. Orth, who has the final responsibility for approving changes in J-M's list prices for a-c pipe, denies conferring with any competitor on such price changes (Orth affidavit, par. 26). The other two affiants, Mr. Wahl and Mr. Sandt, deny that they ever discussed price changes with any competitor and state affirmatively that they know of no discussions of price changes between J-M employees and the employees of any competitor (Wahl affidavit, par. 6; Sandt affidavit, par. 7). It is noted that such evidence was not in the record at the criminal trial.

The crucial flaw in the Government's price-fixing case, however, is that the record fails to deny or explain the defendant's evidence on transaction prices, i. e., the prices at which sales were actually made as opposed to the official list prices. There is massive and convincing evidence in the record that since 1958, the last year for which there is any direct evidence of meetings between J-M and K & M representatives,⁶ J-M has made a considerable portion of its sales at "off-book" prices, i. e., prices which are below those listed in the official J-M price sheets. This evidence demonstrates two things: (1) that there is vigorous price competition among domestic a-c pipe producers, and (2) that it is extremely unlikely that such producers are currently involved in a price-fixing conspiracy.

Whenever a J-M district manager permits his salesmen to sell "off-book," he must submit a form called a price request to the Product Manager. The price request must contain a statement of the reason why the district manager has had to go off book. Several hundred of these price requests were received in evidence at the criminal trial (Exhibits DJM-1001 to 1680). The frequency with which the reason "to meet K & M competition" appears in these price requests leaves little room for doubt that there is effective price competition among domestic a-c pipe producers. The record also contains extensive evidence of price concessions made by K & M to compete with J-M (e. g., Exhibits DKM-61, 63, 76, 77, 77A, 85, 93).

The Government contends that all these sales at off-book prices were the result of prior agreement between J-M and K & M to meet price competition from "others" (Document 84, pars. 14, 16, 18). The only evidence of this in the record is the testimony of Vernon F. Stompler, the former manager of K & M's a-c pipe department, that on several occasions up until 1958 he was a party to telephone conversations in which K & M and J-M officials agreed to quote the same off-book price on particular jobs (N.T. 3029-30, 3084-7, 3155-6, 3159, 3166-9). There is no evidence of collusion on off-book prices since that time. On the other hand, there is substantial evidence of widely varying transaction prices, which could not possibly be the result of a price-fixing conspiracy.

Exhibits introduced at the criminal trial show for the years 1958-1961 the large proportion of total J-M sales made at off-book prices. In 1958, 44.6% of J-M's pressure, sewer and irrigation pipe business was done on the basis of price requests; in 1959 the amount of such business done on the basis of price requests increased to 59.8%. For the years 1960 and 1961, the comparable figures are 50.8% and 55.8%, respectively (Exhibits DJM-401, 400A). Some districts sold off book more frequently than others, and pressure and sewer pipe were sold at off-book prices more frequently than was irrigation pipe. For example, in the New York Sales District in 1960, off-book orders represented 99.2% of total sewer pipe business; in the Denver Sales District in 1959 and 1960, 108.5% and 117.4%, respectively, of total business in pressure pipe was done at...