agreed to carve out the Philadelphia vicinity as Armstrong's "exclusive" territory; that USMP could not sell any of its fireproofing products, particularly DC/F, to any other applicator or party without first consulting with Armstrong; that Armstrong could not sell DC/F unless it first cleared it with USMP; that USMP would aggressively seek out fireproofing business and channel it to Armstrong; that the defendants were not unilaterally implementing a long-standing policy of any type; and finally that these acts were undertaken solely to deprive the plaintiffs of their contracts so that Armstrong might be substituted.
The plaintiffs maintain these inferences are reasonable notwithstanding that Armstrong has been in the fireproofing business as an applicator for 75 years and has never been engaged as a retailer or distributor of fireproofing products; that there was no economic advantage whatsoever to USMP's selling to Armstrong in lieu of Venzie or FMV or Turner; that USMP had had unfavorable business experiences with Venzie in the past, culminating in the termination of Venzie's license; that USMP at this time sold its fireproofing products only to licensed applicators; that neither Armstrong nor USMP in any way caused plaintiffs' legal complications with the City of Philadelphia; and that if USMP had the only available product it was purely a historic accident and due to its technological expertise.
Construing the facts most favorably towards the plaintiffs, the Court must conclude that the record when viewed in its entirety does not reasonably support the inferences which the plaintiffs now advance.
One of the troublesome issues emerging from the facts of this case was superbly and succinctly articulated by the United States Supreme Court in Theatre Enterprises v. Paramount Film D. Corp., 346 U.S. 537, 540, 74 S. Ct. 257, 259, 98 L. Ed. 273 (1954), where it remarked that "[the] crucial question is whether [defendants'] conduct toward [plaintiffs] stemmed from independent decision or from an agreement, tacit or express." Now that this Court has once again had the opportunity to review thoroughly the instant record, it is still firmly convinced that the impetus of defendants' conduct was predicated upon each of them acting unilaterally, separately, and not in concert. Each defendant was actuated by independent grounds although the decision-making process may have manifested itself by a similarity of behavior. Moreover, even if the Court concluded there were some concerted activity by the defendants the facts, as are borne out by this record, clearly do not demonstrate that either the purpose or the effect of the conduct was so pernicious and anti-competitive that there consequently arose an unreasonable restraint of trade which should thereby saddle the defendants with treble damages under the antitrust laws. Cf. Albrecht v. Herald Co., 390 U.S. 145, 88 S. Ct. 869, 19 L. Ed. 2d 998 (1968); American Tobacco Co. v. United States, 328 U.S. 781, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946); Bergen Drug Co. v. Parke, Davis & Co., 307 F.2d 725 (3rd Cir. 1962), and Gamco, Inc. v. Providence Fruit & Produce Bldg., 194 F.2d 484 (1st Cir. 1952).
The Court in reaching this judgment is not unmindful that where there are allegations of conspiratorial elements or clandestine agreements, the plaintiffs necessarily might rely heavily on circumstantial or indirect evidence to prove and buttress their case. Theatre Enterprises v. Paramount Film D. Corp., supra, 346 U.S. at 540-541, 74 S. Ct. at 259-260. Resorting to circumstantial evidence nonetheless does not wholly relieve the plaintiffs of their obligation of coming forward with substantial evidence establishing the formation or nature of an unlawful agreement rather than resting on mere suspicion or conjecture. Johnson v. J. H. Yost Lumber Co., supra, 117 F.2d at 61. Cf. Schad v. Twentieth Century-Fox Film Corp., supra, 136 F.2d at 996. Parallel business behavior in and of itself or a similar pattern of conduct does not automatically compel, or conclusively warrant, a finding of a conspiracy or concerted action or other liability under the Sherman Act. Winchester Theatre Co. v. Paramount Film Distributing Corp., 324 F.2d 652, 653 (1st Cir. 1963); Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 661-665 (9th Cir. 1963); Gold Fuel Service, Inc., v. Esso Standard Oil Co., 306 F.2d 61, 64 (3rd Cir. 1962); Delaware Valley Marine Sup. Co. v. American Tobacco Co., 297 F.2d 199, 202-206 (3rd Cir. 1961), cert. denied, 369 U.S. 839, 82 S. Ct. 867, 7 L. Ed. 2d 843 (1962); North Penn Oil & Tire Co. v. Phillips Petroleum Co., 358 F. Supp. 908, 922-923 (E.D. Pa. 1973); United Shoppers Exclusive v. Broadway-Hale Stores, Inc., 1966 CCH Trade Cas. P71,727 at 82,271 to 82,272 (N.D. Cal. 1965), and United States v. Twentieth Century-Fox Film Corp., 137 F. Supp. 78, 85 (S.D. Cal. 1956).
In United States v. Colgate & Co., 250 U.S. 300, 39 S. Ct. at 465, 63 L. Ed. 992 (1919), the Supreme Court sought to harmonize the provisions of the Sherman Act invalidating all restraints of trade with the right of a merchant unilaterally to engage in business with whom he desires. "In the absence of any purpose to create or maintain a monopoly, the act does not restrict the long recognized right of trader or manufacturer to engage in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal; and, of course, he may announce in advance the circumstances under which he will refuse to sell." Id. at 307, 39 S. Ct. at 468. Conversely, group boycotts or concerted refusals to deal create a per se liability under the antitrust laws because the restraints intrinsically are so unduly restrictive and anti-competitive. See, e.g., Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 659-660, 81 S. Ct. 365, 367, 5 L. Ed. 2d 358 (1961); Klor's Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 211-212, 79 S. Ct. 705, 709, 3 L. Ed. 2d 741 (1959); Otto Milk Co. v. United Dairy Farmers Coop Ass'n., 388 F.2d 789, 797 (3rd Cir. 1967), and Jones Knitting Corp. v. Morgan, 361 F.2d 451, 459 (3rd Cir. 1966).
The Supreme Court has observed however in White Motor Co. v. United States, 372 U.S. 253, 261-264, 83 S. Ct. 696, 701-702, 9 L. Ed. 2d 738 (1963), that not every vertical arrangement between a manufacturer and a distributor resulted in establishing per se liability, and that the standard of the "rule of reason" should be applied. An examination of the business practices and the restraint of trade inherent therein must be fully explored in weighing and assessing the anti-competitive impact of the particular arrangement. An exclusive distributorship is an illustration of a vertical restraint of trade which has received widespread judicial santion. Alpha Distrib. Co. of Cal., Inc. v. Jack Daniel Distillery, 454 F.2d 442, 452-453 (9th Cir. 1972); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 76-80 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S. Ct. 752, 24 L. Ed. 2d 755 (1970); Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283, 286-287 (6th Cir. 1963); Packard Motor Car Co. v. Webster Motor Car Co. 100 U.S. App. D.C. 161, 243 F.2d 418, 420-421 (D.C. Cir. 1957), cert. denied, 355 U.S. 822, 78 S. Ct. 29, 2 L. Ed. 2d 38 (1957); and Peerless Dental Supply Co. v. Weber Dental Mfg. Co., 283 F. Supp. 288, 289-290 (E.D. Pa. 1968). In Seagram & Sons Inc., supra, the Court expressly found that absent the existence of an anti-competitive purpose and/or effect, "the decision of the seller to transfer his business from A to B is valid even though B may have solicited the transfer and even though the seller and B may have agreed before the seller terminates his dealings with A." 416 F.2d at 78.
The Court acknowledges that the case at bar does not involve an exclusive dealership although at all times relevant hereto USMP had only a single franchises applicator, Armstrong, in the Philadelphia vicinity. But other non-exclusive dealership settings have gained judicial approval even though the vertical relationship produced some measurable restriction in competition. Weather Wise Co. v. Aeroquip Corp., 468 F.2d 716, 718 (5th Cir. 1972), cert. denied, 410 U.S. 990, 93 S. Ct. 1505, 36 L. Ed. 2d 188 (1973); Ark Dental Supply Co. v. Cavitron Corp., 461 F.2d 1093, 1094 (3rd Cir. 1972); Bushie v. Stenocord Corp., 460 F.2d 116, 119-120 (9th Cir. 1972); Elder-Beerman Stores Corp. v. Federated Dept. Stores, Inc., 459 F.2d 138, 144-148 (6th Cir. 1972); and Tripoli Co. v. Wella Corp., 425 F.2d 932, 936-939 (3rd Cir. 1970), cert. denied, 400 U.S. 831, 91 S. Ct. 62, 27 L. Ed. 2d 62 (1970).
Plaintiffs strenuously maintain that in many of the cases heretofore cited, there had been explicit findings that there were other products reasonably interchangeable or the plaintiffs had failed to show that there were no such alternatives available. Considerable emphasis is placed on language in United States v. Arnold, Schwinn & Co., 388 U.S. 365, 376, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967), where the Court stated:
"At the other extreme, a manufacturer of a product other and equivalent brands of which are readily available in the market may select his customers, and for this purpose he may 'franchise ' certain dealers to whom, alone, he will sell his goods. Cf. United States v. Colgate & Co., 250 U.S. 300, 39 S. Ct. 465, 63 L. Ed. 992 (1919). If the restraint stops at that point -- if nothing more is involved than vertical 'confinement ' of the manufacturer's own sales of the merchandise to selected dealers, and if competitive products are readily available to others, the restriction on these facts alone, would not violate the Sherman Act." (Emphasis added.)
The ultimate and pivotal question presented in this case can therefore be distilled as follows: Absent an anti-competitive objective, does a manufacturer forfeit the right to select his customers if arguably his product is the only one available? That statement of the issue necessarily assumes that in the case at bar there in fact was only one product, Cafco DC/F, though that assumption was, and still is, vigorously challenged. The above framing of the issue assumes furthermore that this record does not evidence any unlawful, anti-competitive motive of the defendants.
A subsidiary issue in this case is whether the delineation of the relevant product market is a factual determination -- falling entirely within the province of the jury -- or a legal judgment -- which is defined by the Court. Many of the leading antitrust cases have been non-jury and therefore are not totally dispositive of this point. E.g., United States v. Grinnell Corp., 384 U.S. 563, 86 S. Ct. 1698, 16 L. Ed. 2d 778 (1966); Brown Shoe Co. v. United States, 370 U.S. 294, 82 S. Ct. 1502, 8 L. Ed. 2d 510 (1962); and United States v. E. I. DuPont De Nemours & Co., 351 U.S. 377, 76 S. Ct. 994, 100 L. Ed. 1264 (1956). In the non-jury case of Acme Precision Products, Inc. v. American Alloys Corp., 484 F.2d 1237, 1245 (8th Cir. 1973) the Court declared that the definition of the relevant product market was essentially a fact question subject to the application of certain legal guidelines.
DuPont teaches us that the touchstone for ascertaining the relevant product market in a Section 2 context is "reasonable interchangeability" of products. Factors which should be considered are the cross-elasticity of demand, the similarity of price, the adaptability of products, the uses to which the product is put, and its general characteristics. 351 U.S. at 380-381, 394-404, 76 S. Ct. at 999, 1006-1012. In Brown Shoe, where the Court was explicating the parameters of Section 7 of the Clayton Act, it recognized that the relevant product market could consist of a submarket for antitrust purposes.
"The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors." 370 U.S. at 325, 82 S. Ct. at 1524.
The Court in Grinnell likewise found that in a Section 2 matrix there could exist submarkets, but it noted further that it would be permissible to combine "in a single market a number of different products or services where that combination reflects commercial realities." 384 U.S. at 572, 86 S. Ct. at 1704.
Throughout the trial of the instant case, the defendants adopted the position that the relevant product market should include all structural steel fireproofing materials and combination of materials instead of being limited solely to non-asbestos fireproofing spray materials. The Court is in agreement with that contention.
First, it is clear that plaintiff could have utilized an asbestos-bearing, direct-to-steel fireproofing spray had there been 100% containment of the air-borne emissions. Except for the presence of asbestos, those products are reasonably interchangeable with Cafco DC/F.
Secondly, there were generally available on the market a number of non-asbestos cementitious and membrane products which could have been used for structural steel fireproofing. These products performed essentially the identical function and the cost per square foot of fireproofing one inch thick was approximately the same, although the application costs may have been three and four times as expensive as a non-asbestos fireproofing spray or an asbestos containing fireproofing spray. Cf. DuPont, 351 U.S. at 405-413, 76 S. Ct. at 1012-1016. Some of those products are listed in the following chart:
Column Beam Deck Method of Sq. Ft. x
Product Rating Rating Rating Application 1" thick Result
Nat'l Gypsum Co. sprayed to finished
Gypsolite (Types 4 hr. 4 hr. 3 hr. metal lath .12 structural
G, G-2, and G-3). or board member
U. S. Gypsum Co. sprayed to finished
Structolite 4 hr. 4 hr. 3 hr. metal lath .12 structural
(Types R and S) or board member
Gypsum board or sprayed to finished
tile (various 4 hr. 4 hr. 3 hr. metal lath .12 structural
manufacturers) or board member
Fiber board sprayed to finished
(various 4 hr. 4 hr. metal lath .08-.09 structural
manufacturers) or board member
Vermiculite or finished
perlite plaster 4 hr. 4 hr. 3 hr. applied to .08-.10 structural
(various mfrs.) metal lath member
Johns-Manville applied to structural
Blaze-Crete 4 hr. metal lath .12 member
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