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,
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 off-book prices.
(Exhibits DJM-306E, 302, 302E, 410, 412).
The Government has not shown affirmatively that these deviations from list price conform to a consistent pattern. On the contrary, the evidence indicates that the discounts from list price varied erratically from district to district and from transaction to transaction within each district. Pressure pipe figures for the year 1960 show that the average discount on off-book orders in the Philadelphia Sales District was 8.1%, whereas the average discount in such orders in the St. Louis District was 10.8% and in the Seattle District 13.1% (Exhibit DJM-302E). Pressure pipe figures for 1961 show average discounts of 8.6%, 17.1% and 21.3% in those same sales districts, respectively (Exhibit DJM-303F). Exhibit DJM-434, which shows reductions allowed as a percentage of book price in the St. Louis District in 1960, indicates discounts ranging from 1.6 to 14% in the first quarter, from 2.4 to 12.6% in the second quarter, from 4.3% to 22% in the third quarter, and from 4.8% to 15.8% in the fourth quarter. The proportion of J-M pipe sales made at off-book prices has not declined in the years following the criminal trial. Exhibits attached to J-M's Motion for Summary Judgment (Document 87) show that in 1962 71.6% of total water pipe securements was due to price requests, in 1963 70.9% was due to price requests, in 1964 74.7%, and in 1965 67.9%. In 1962 the percentage of total sewer pipe securements due to price requests was 66.8%, in 1963 it was 61.9%, in 1964 64.9%, and in 1965 77.3%.
Mr. Clarence Marion, who testified as an expert at the criminal trial, concluded from this erratic price behavior that J-M could not possibly have pre-planned such a pricing policy, let alone conspire with another company on it (N.T. 12,553-5, 12,654-5). He further testified that it was unreasonable to believe that businessmen would agree upon a price level at which they knew they could not sell (N.T. 12,664). It is indeed incredible that J-M and other companies diligently worked out mutually acceptable list prices for a-c pipe and then went out into the field and charged anything but those list prices in order to compete with one another on price.
Evidence of conspiratorial behavior occurring eight years ago, plus a continuing identity of book prices, does not create a genuine issue of fact as to the existence of a current price-fixing conspiracy where, as here, the identity of list prices is satisfactorily explained and the actual market situation is shown to be one of vigorous price competition.
The remedy of injunction looks to the future. Douglas v. Jeannette, 319 U.S. 157, 165, 87 L. Ed. 1324, 63 S. Ct. 877 (1943); Unistrut Corporation v. Power, 280 F.2d 18, 23 (1st Cir. 1960). Its "sole function" in antitrust cases is to forestall future violations. United States v. Oregon State Med. Soc., 343 U.S. 326, 333, 72 S. Ct. 690, 96 L. Ed. 978 (1952). The introduction of evidence of vigorous price competition among domestic a-c pipe producers satisfies the defendant's burden of proving abandonment of the price-fixing conspiracy. See United States v. W. T. Grant Co., 345 U.S. 629, 97 L. Ed. 1303, 73 S. Ct. 894 (1953). As noted above, the only company with which J-M could possibly be shown to have conspired is no longer in the business of selling a-c pipe. It cannot be assumed that Certain-teed or any other domestic producer will enter into a price-fixing conspiracy with J-M at some time in the future when there is no evidence in the record that any of these companies has been a party to such a conspiracy in the past. It is, therefore, concluded that an injunction against price-fixing is unnecessary in this case. See United States v. Johns-Manville Corporation, 237 F. Supp. 885, 890 (D.C. 1964), and cases there cited.
II. Activities to Limit Foreign Competition Other Than Contentions as to Restrictive Specifications
The Government's next contention is that J-M and K & M conspired to restrict competition from foreign-made a-c pipe in ways other than the promotion of restrictive specifications (Document 84, pars. 39-42). In support of this contention, the plaintiff has introduced evidence of several activities engaged in by J-M which, it is asserted, indicate the existence of this phase of the conspiracy.
These are: (1) a series of meetings which took place in various European cities in 1959 and 1960 between representatives of J-M and certain European producers of a-c pipe; (2) the institution of a patent suit against Eternit of Genoa and its American importer, Italit, Inc.;
and (3) the use of Mexican-made a-c pipe as a "fighting brand."
The Government does not dispute that the latter two activities were carried on exclusively by J-M. However, the Government contends that J-M initiated them to fulfill a threat made at a meeting in Paris in March of 1960 by J-M Vice President, Robert Orth, who was acting pursuant to a prior agreement with K & M (brief for plaintiff, Document 133, p. 37). There is evidence on the record indicating that Mr. Orth attended the Paris meeting to persuade the Europeans to agree to limit their exports of a-c pipe to the United States to $5,000,000 worth per year and to divide up the American market geographically among themselves (N.T. 7904-6, 7919).
There is further evidence that he threatened reprisals if agreement was not reached on these matters (N.T. 7939). There is, however, no evidence from which it could legitimately be concluded that Mr. Orth was acting on behalf of anyone besides J-M. There is testimony that Mr. Colton, Vice President of Johns-Manville International, conversed with Mr. Bateman, managing partner of Turner & Newall, Ltd., which owned all the stock of K & M, for about ten minutes on the evening of the meeting in Brussels in June of 1959 (N.T. 7898-7900), and it is not disputed that Mr. Orth met Mr. Bateman at the London airport after the Paris meeting in 1960 (N.T. 9338-40, 13,343-4).
There is no evidence, however, of the contents of the brief discussion between Colton and Bateman, and the only evidence of what was said at the Orth-Bateman meeting is Orth's testimony that he told Bateman (his version of)
what had transpired at the Paris meeting (N.T. 13,364-5). These brief meetings
do not support an inference that Mr. Bateman or Turner & Newall, Ltd., was engaged in a conspiracy with J-M. Moreover, the undersigned has previously ruled that the evidence produced at the criminal trial was insufficient to support the charge that Turner & Newall, Ltd., was a party to the conspiracy alleged in the indictment, Application of Turner and Newall, Ltd., 231 F. Supp. 728 (E.D. Pa. 1964), and that there is no evidence of illegal action on the part of Mr. Bateman. United States v. Johns-Manville Corporation, 237 F. Supp. 885, 893, n. 12 (E.D. Pa. 1964). Mr. Costa, an officer of Eternit of Genoa, who was present at the European meetings, testified that Orth told the Europeans that "the American manufacturers" were tired of foreign competition and would take all possible measures to protect their market (N.T. 7936, 7939). However, the record contains no evidence that Orth had authority to speak for K & M, which, at that time, was the only other American manufacturer of a-c pipe. Mr. Costa also testified that Orth told the Europeans not to worry about whether K & M would go along with the agreement because he (Orth) would go to London to see Turner & Newall on the subject of K & M. Assuming that Mr. Orth did make this statement, it does not indicate that he had any prior agreement with K & M. On the contrary, the statement indicates that if the Europeans agreed on the $5,000,000 quota and the division of United States markets, then Mr. Orth would seek K & M's consent to abide by the arrangement. This evidence does not create a triable issue of fact as to conspiracy when viewed as a whole. The picture it presents is one of unilateral action by J-M. No employee of K & M or Turner & Newall, Ltd. was present at any of the European meetings, and there is absolutely no evidence that either of these companies authorized Mr. Orth to speak for it at the meetings.
Since there is no showing that the alleged miscellaneous activities (enumerated under (1) - (3) above) directed against foreign competition (excluding evidence of acts designed to effect restrictive specifications, which subject is discussed below) were carried on in pursuance of a conspiracy between J-M and some other entity, the Government's case on this aspect of the alleged conspiracy must fail.
In any event, the Government concedes that any efforts to obtain agreements to restrict foreign competition have been abandoned (brief for plaintiff, p. 40). Therefore, even if it were established that such efforts were made, an injunction should not issue. United States v. Oregon State Med. Soc., supra.
III. Asbestos Cement Pipe and Couplings As a Relevant Market
In the companion criminal case, the undersigned ruled that there was no evidence in the record from which the jury could conclude beyond a reasonable doubt that a-c pipe constituted a relevant market for purposes of the alleged violation of § 2 of the Sherman Act. United States v. Johns-Manville Corporation, 231 F. Supp. 690, 698-701 (E.D. Pa. 1964). After reviewing extensively some of the massive evidence of vigorous competition among the producers of the various kinds of pipe,
the undersigned said:
"There is every indication in this record that the above types of pipe were 'reasonably interchangeable' by consumers for the same purposes, except in certain soils such as are present in Southwest Texas. See United States v. E. I. Du Pont, 351 U.S. 377, 395, 100 L. Ed. 1264, 76 S. Ct. 994 . . . . Even in such soils, plastic, tile and concrete pipe were used."