United States v. United Shoe Machinery Corporation

PETITIONER: United States
RESPONDENT: United Shoe Machinery Corporation
LOCATION: WAFB TV

DOCKET NO.: 597
DECIDED BY: Warren Court (1967-1969)
LOWER COURT:

CITATION: 391 US 244 (1968)
ARGUED: Apr 01, 1968
DECIDED: May 20, 1968

Facts of the case

Question

Media for United States v. United Shoe Machinery Corporation

Audio Transcription for Oral Argument - April 01, 1968 in United States v. United Shoe Machinery Corporation

Earl Warren:

Versus United Shoe Machinery Corporation.

Mr. Turner?

Donald F. Turner:

Mr. Chief Justice and may it please the Court.

This is a direct appeal from an order of the District Court to the district of Massachusetts in denying the government's petition to modify the Antitrust Decree which is entered in 1953 after an adjudication that the United Shoe Machinery Corporation had unlawfully monopolized the manufacture of shoe machinery in violation of Section 2 of the Sherman Act.

Now, in the earlier proceeding, the Court found that United was supplying over 75% and probably around 85% of the current demand in the American shoe machinery market, that this constituted monopoly power and that the position of such power violated Section 2 because it was not attributable solely to defendant's ability, economies of scale, research or natural advantages.

The Court found that United's monopoly power was also attributable in short to practices which though not necessarily unlawful in and of themselves were exclusionary of actual and potential competition.

Most prominent of these practices was United's leasing system whereby it refused to sell many of its machines and required long-term leases which obligate or pressured lessees to use United's machinery regularly and over a long period of time.

Now, in fashioning its remedies, the District Court described the purpose of an antitrust Decree in an unlawful monopolization case as follows, and I quote, “Where a defendant has monopolized commerce in violation of Section 2, the principal objects of the Decrees are to extirpate practices where that have caused or may hereafter cause monopolization and to restore workable competition in the market.”

The Court rejected the request by the Government that United be divided into three equal sized shoe machinery manufacturing firms.

United conducted all manufacturing in -- of shoe machines in one plant in Beverly, Massachusetts, the Court concluded that the government had not shown that the kind of divestiture it sought was realistic or feasible in such circumstances.

The Court also declined to order a prohibition of all leasing by United which hence finally the government itself had not requested.

The Court found that in the circumstances, particularly the likelihood that many, if not, most shoe manufacturers could not afford purchase, such a restriction would be undesirable, at least until milder remedies had been tried.

Instead, the Court imposed a variety of conditions and restrictions upon -- upon United's activities designed, and I quote, “to recreate and independent market.”

These included an injunction against monopolizing and requirement that United offer for sale at comparable terms all the machines that it leases, that certain restrictive clauses be eliminated from the leases and they run for no more than five years, that the United dispose of facilities for the manufacture of various sundry items, that it charged separately for servicing, that it issues a reasonable royalty licenses to any applicant or on all patents held by it, and a few other clauses which I shall not mention.

Now, the Decree contained the usual retention of jurisdiction clause providing that jurisdiction be retained, and I quote, “for the purpose of enabling either of the parties to apply to this Court at any time for such further orders and directions as may be appropriate, or the correction, construction or carrying out of this Decree, and to set aside the Decree and take further proceedings, if future developments justified that course in the appropriate enforcement of the Antitrust Act.

That was paragraph 23 of the Decree.

In addition however, paragraph 18 of the Decree provided that ten years after its entry, and again I quote, “both parties shall report to this Court the effect of this Decree and may then petition for its modification in view of its effect in establishing workable competition.

If either party takes advantage of this paragraph by filing a petition, each such petition shall be accompanied by affidavit setting forth the then structure of the shoe machinery market and defendant's power within that market.”

United appealed this Decree attacking both the findings and the Decree itself.

The Government did not appeal and after oral argument, this Court affirmed for corium simply stating that the District Court's findings were justified by the evidence and support of the Decree.

There was no discussion, was there I suppose, for the opinion of the Decree as such?

Donald F. Turner:

No, sir.

Now, on January 1, 1965 acting under paragraph 18 of the Decree, which I've just quoted, United States reported to the District Court that in its view, United retained a dominant share of the market and that workable competition had not been established in the shoe machinery industry and accordingly petitioned for additional relief.

United cross-petitioned to be relieved from certain provisions of the Decree.

In our position -- in our petition, we ask that United be required to submit a plan under which it would establish an independent full line shoe machinery manufacturing company capable of competing with the defendant in the shoe machinery market, to hold hearings, to assure that such a plan was feasible and equitable, would not result in a forfeiture to defend stockholders, and promised a fair chance of said company being able to compete with defendant, and to grant such other and further relief as might be necessary to establish workable competition in the market.

United on the other hand asked for a determination that workable competition of the shoe machinery and shoe machinery had now been established and that the Decree accordingly be revised to retain only those provisions requiring United to sell on comparable terms, as well as leases machines to charge separately for installation and servicing and to avoid in its leases certain of the restrictive clauses that the Court had earlier enjoyed.

After hearing the District Court on April 11, 1967 denied both petitions, at the outset of its opinion, the Court citing United States versus Swift & Company 286 US 106 stated that its original Decree could not be changed unless the Government made a clear showing of grievous wrong invoked by new and unforeseen conditions.

The Court found that paragraph 18 of its Decree contemplated nothing beyond that standard and conferred no broader authority on the power of the Court to honor its Decree.

When read in light of its original opinion, the Court stated and I quote, “The object of the Decree was during a ten-year period not to restore so-called workable competition but to move toward establishing it.”

Thus, the Court said it was simply inviting information as to how successful the Decree had been in gradually eroding, and that's the Court's phrase, United's 1953 power to monopolize the market.