Court Opinion

ID: 9643873
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:42:21.843955+00
Date Added: 2024-06-11T12:28:16.374692
License: Public Domain

MANTON, Circuit Judge
(dissenting in part).
I-agree with the conclusion of Judge HOUGH’S opinion which results in affirming that part of the order requiring the Eastman Kodak Company to cease and desist from acting in or carrying out the agreement with the operators to refrain from operating the laboratories known as the Paragon, the G. M., and the Sen Jacq Laboratories, as long as foreign films are not purchased by the existing defendant laboratories. The order to cease and desist provides against the use by the Eastman Kodak Company or the ownership and possession of said Paragon, G. M., and Sen Jacq Laboratories and their equipment and capacity for producing positive prints of cinematograph films from exposed and developed cinemato*997graph films to induce, compel, and coerce the Allied Film Laboratories Association, Inc., and ita members, to use in their laboratories, for the manufacture of positive prints of cinematograph films, exclusively A-merican-made positive raw cinematograph film stock, of which the Eastman Kodak Company has a monopoly in the manufacture and sale. American-made positive film was Eastman’s, because at this time it controlled 96 per cent, of the negative film product.
The order further recites that: “The continued ownership hy the Eastman Kodak Company of the Paragon, G. M., and Sen Jacq Laboratories, and the, maintenance of the same in readiness for immediate operation for the production of positive prints of cinematograph films, or any other dominant control of the production, or capacity for production, of positive prints of cinematograph films from exposed negative einematogaph films.” And: “Utilizing any other equivalent means, not hereinbefore stated, to accomplish the object of unfairly forestalling, preventing, hindering, oor restraining the manufacture and sale of positive raw cinematograph film stock and the making of positive prints of (rinematograph films from exposed negative cinematograph films, or the sale thereof, in interstate and foreign commerce.” And, further, “that, for the purpose of preventing the maintenance and extension of the monopoly of the Eastman Kodak Company in the manufacture and sale of positive raw cinematograph film stock to the use thereof in making positive prints of cinematograph films, and of restoring competitive- freedom in the distribution, and sale of positive raw cinematograph film stock, the Eastman Kodak Company shall, with all due diligence, sell and convey the said Paragon, G. M., and Sen Jacq Laboratories to parties not connected directly or indirectly in interest with the Eastman Kodak Company.”
The facts found point out that the reason the direction “to sell and convoy with due diligence” the laboratories which it had purchased is founded upon the conclusion that the purchase of the laboratories wherein positive films were to be manufactured, was with the idea of using them as a means to restrain competition, in the manufacture and sale o-f raw positive film. There is justification for this conclusion. In. 1921 the Eastman Company and Brulatour, who was associated with it, as stated in the prevailing opinion, conceived the idea of having the Eastman Company acquire these laboratories, which were equipped or were being equipped to manufacture prints of motion, picture films, and which had a capacity greater than the combined capacity of all the laboratories east of Chicago which wore engaged in similar business. After negotiations wore concluded, and the transfer of the property made, the Eastman Company published in the trade papers the announcement of such acquisition and its intention to operate the same. The reason therefor was frankly stated to be that they were acquired for operation because of the rapidly increasing importation of foreign film. The purpose was to eliminate from the market the foreign film, and this was to he accomplished by coercion, and to compel the users thereof — that is to say, the laboratories engaged in manufacturing prints — to use the Eastman Company film. This would maintain or tend to maintain the 96 per cent, control or monopoly of the business which the Eastman Company already had. It was selling over 500,000,000 feet of film annually, and it was then that it began to use the phrase “American-made films.”
It was easy to compel the independent laboratories to surrender to the plan of purchasing from the Eastman Company, when there was constantly hanging over them the dread of the Eastman Company operating these purchased laboratories, which would put upon the market what was to- he a gigantic production. The control of the negative film was then absolutely in the hands ox the Eastman Company. The negative film was used by the producers of motion pictures, and they could get it from no- one else than the Eastman Company and through. Mr. Brulatour. The making of prints of motion pictures from negatives in which the laboratories were engaged was the business obtained from these producers. Since the Eastman Company controlled the production of the negative film, the- producers could bo greatly influenced by having their laboratory work do-ne by the laboratories of the Eastman Company. The acquisition of these properties and the ano-unced intention of operating the laboratories was nothing short of a threat, and therefore a means of coercing the purchase from it of film, and this, coupled with the agreement entered into- to exclude foreign competition, insured .the success of their effort, which amounted to a restraint of trade.
It is significant that as long as the agreement was kept the laboratories were not operated, and as long as there was this threat to operate, and thus to become a potential *998competitor, the ease with which they might coerce the action of the other petitioners in their purchase is plain. The result was a protest which was published in the trade journals in the form of a statement on August 26, 1921. It was after this statement that a conference took place between the Eastman Company, Brulatour, and the representatives of the laboratories, whereof Mr. Brulatour wrote on September 8th to the Eastman Company: “It will please you to know we are having daily conferences with the laboratory people, and that they are very enthusiastic, and that things are taking a very nice course.”
On September 9,1921, the laboratory owners, having formed the Allied Film Labora- • tory, Inc., entered into the agreement to use American-made raw film stoek exclusively, which was in effect the Eastman Company’s product. It is this agreement which caused .the Trade Commission to issue its order to cease and desist its being carried out. On September 14, 1921, the Eastman Company wrote a letter to the members of the association in which it agreed not to operate the laboratories it purchased commercially so long as the members adhered to the agreement to use only American-made film stoek, and agreed to co-operate with said members "to protect them against any invasion of foreign raw film stock.” This undoubtedly took away the right of independent action by the laboratories and created at least a tendency unduly to hinder competition.
The binding force of this agreement is pointed out in the letter of Mr. Blair of the Eastman Company to Mr. Brulatour, in which he wrote: “I don’t know the reason for the statement made by Mr. Rothaeker that the Allied Laboratories were permitted to use 5 per cent, of foreign film; at any rate Mr. Rothaeker said that Harry Goetz had told him this was the ease,, and, as you know, this is entirely contrary to the agreement.” To which Mr. Brulatour answered: “He is absolutely wrong about this; it was not in the agreement.” ¡-
On February 28th, the Eastman Company wrote a letter to the association, releasing the laboratories from the obligation to use only American-made film, and stated: “Whether we open for operation the laboratories which we control, or not, will not depend in any way upon the action of the members of your association with respect to the kind of film used in their laboratories.”
This 'note indicates that the Eastman Company had kept its part of the agreement not to operate the laboratories. They also inspected or caused to be inspected the laboratories of the members of the association to be made, to ascertain whether or not they were using any foreign manufactured film. It is evident that these laboratories were equipped and never operated, but were maintained in readiness for operation for this purpose only. It was not the purchase of the laboratories with an idea of extending its business in the manufacture or carrying on the manufacture of raw positive film, but was used as a powerful elub by which the business of the members of the association would be diminished or destroyed in case the agreement was violated.
Both the purchase and holding of the laboratories in the manner described, coupled with the agreement entered into, was such action as amounted to a hindrance with free competition if, indeed, it did not create a monopoly. United States v. Eastman (D. C.) 226 F. 62. When men deliberately and intelligently go to work and acquire power that enables them to control the market, if they choose to exercise it, it is no use for them to say that they did not intend to control the trade or limit competition. United States v. Internatl. Harvester Co. (D. C.) 214 F. 987. “If the power given by the volume of a particular business is improperly used to injure either a competitor or the public, or if such power evidently tends toward the injury of either, the mischief either done or threatened is condemned by the statute.” United States v. Keystone Watch Case Co. (D. C.) 218 F. 502.
The Clayton Act was intended to render unlawful practices not theretofore held to bp violations of the Sherman Law. Standard Fashion Co. v. Magrane-Houston Co., 258 U. S. 346, 42 S. Ct. 360, 66 L. Ed. 653. The function of the Commission is to preserve competition and protect competitive business from further inroads by monopoly by preventing the use of unfair methods of competition before any act should be done or condition arise violative of the Anti-Trust Act. Federal Trade Commission v. Beechnut Packing Co., 257 U. S. 441, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882. While the Commission is not a court, and exercises no judicial power, it has the power in the proper case to order a respondent to dispose of property acquired by it which it is found using as a means to unfair competition in trade. Indeed, it may order the disposing of the plant or property which it uses in part or whole in creating a monopoly. Federal Trade Commission v. Thatcher, 5 F. (2d) 615, decided April, 1925 (C. C. A. 3).
*999The Commission’s jurisdiction extends over matters of foreign as well as interstate commerce, and in the public interest it may-deal with matters of foreign trade; where agreements are made, such as here, which restrict competition. By this action it may incidentally assist foreign trade. But, since it is lawful that there may be importation of foreign film, it became the duty of the Commission to direct the cessation of interference with such competition. Congress alone has the power to prohibit or restrict it. It may deem such a policy in public interest, and it may do so by a tariff barrier or otherwise; hut, while this freedom of trade exists, the performance of duty demanded action by the Commission to prevent the interference or attempted interference by this petitioner.
The order should be affirmed in all its directions.