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TELEFLEX INDUS. PRODS. v. BRUNSWICK CORP.

October 29, 1968

Teleflex Industrial Products, Inc., Plaintiff,
v.
Brunswick Corp., Defendant


Davis, D.J.


The opinion of the court was delivered by: DAVIS

Before the Court is a motion for a preliminary injunction, 15 U.S.C. § 26. The underlying cause of action is asserted under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and Section 3 of the Clayton Act, 15 U.S.C. § 14. The latter statute which is directed inter alia against tying agreements, states in relevant part that: . . . .

 
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale . . . on the condition, . . . that the lessee or purchaser thereof shall not use or deal in the goods . . . of a competitor . . ., where the effect of such lease [or] sale . . . may be to substantially lessen competition . . . .

 Background

 The plaintiff is a corporation which manufactures instrument panels for the marine pleasure craft market. These panels contain three general categories of instruments and equipment. The first category consists of instruments designed to monitor the operation of a boat propulsion system, such as the ammeter, tachometer, oil pressure indicator and temperature gauge.

 In addition, a typical panel as installed in a pleasure craft will contain instruments of the second category, which are required principally by consumer demand, and which are not operationally essential, such as the speedometer, fuel gauge, flow meter (continuous measurement of fuel consumption) and hour meter.

 Finally, the third category of equipment which an instrument panel contains consists of a group of switches. The ignition switch is the most essential and critical from the standpoint of operational reliability. A typical panel manufactured by the plaintiff may also contain switches to operate lights, bilge pumps, blowers and horns.

 Similarly, additional panels or panel designs may be dictated by the boat builder, if the craft is to be equipped with a flying bridge, or if the craft is to be propelled by dual engines.

 The Kiekhaefer Mercury Division of the defendant Brunswick Corporation has manufactured marine propulsion systems since about 1938, in three basic configurations -- inboard, outboard and stern drive.

 In this action we are concerned only with the latter. The stern drive utilizes an inboard engine mounted in the aft section of the craft with power transmitted to the propeller by way of a "stern drive" or outboard unit, which is located outside the craft, through an opening in the transom. This system is said to incorporate the stability and reliability of an inboard system, with the maneuverability and efficiency of the outboard system.

 The defendant started manufacturing and marketing the stern drive system in about 1962, under the "MerCruiser" trade name. Today, it is the largest and dominant manufacturer of this type of system, with at least 50% of the total sales of stern drives of the United States, which is the relevant market. In 1967, this market consisted of about 46,000 units, representing total sales of about $60,000,000. Three other major manufacturers -- Outboard Marine Corp., Chrysler Corp. and Eaton, Yale and Towne, Inc. - have approximately 33%, 8% and 8% of the market respectively. The selling prices of MerCruiser stern drive systems range from $1978.63 for the 120 horsepower model, to $4,133.18 for the 325 horsepower model. Eight models are listed in their 1968 price list (D 21). *fn1"

 The Controversy.

 Recently, the defendant began rigorously enforcing a "policy" which required purchasers of its MerCruiser stern drive unit to also purchase its instrument panel. Although the defendant claims that it has always sold its inboard-outboard engines as a "package", which included the instrument panels, the ...


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