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July 1, 1980

Fleer Corp.
Topps Chewing Gum, Inc. and Major League Baseball Players' Association.

The opinion of the court was delivered by: NEWCOMER

Findings of Fact and Conclusions of Law

NEWCOMER, J.: Topps Chewing Gum, Inc., is the sole significant manufacturer and seller of baseball cards in the United States. Fleer Corporation, a competing bubblegum manufacturer, has sued under the antitrust laws to obtain the right to sell baseball cards in competition with Topps, alleging that Topps and the Major League Baseball Players' Association have unlawfully restrained trade in baseball cards. After trial of the action, the Court has determined that Topps and the Players Association have restrained trade in the baseball card market in violation of § 1 and § 2 of the Sherman Act. The Court makes the following Findings of Fact and Conclusions of Law pursuant to Rule 52(a), F. R. Civ. P.

Findings of Fact

 1. The plaintiff, Fleer Corporation, is a Delaware corporation whose principal place of business is Pennsylvania. The company manufactures bubble gum, candy, toys and novelties primarily for sale to children.

 2. Topps Chewing Gum, Inc., one of the two defendants in this case, is a New York corporation with offices in New York City. Its principal manufacturing and distribution facility is in Duryea, Pennsylvania. Topps, like Fleer, manufactures bubble gum, candy and novelties primarily for sale to children.

 3. Defendant Major League Baseball Players Association is a labor organization whose primary responsibilities are to negotiate, administer and enforce collective bargaining agreements reached with baseball team owners on behalf of the players.

 4.This is an antitrust action brought by Fleer against Topps and the Players Association. Fleer alleges that Topps and the Association have monopolized and unlawfully restrained trade in baseball cards in violation of §§ 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2.

 5. Topps is the only significant seller of baseball cards in the United States.It is the only company that sells baseball cards in the form with which the public is most familiar -- a package of about ten baseball cards containing one piece of bubble gum. (P-241). *fn1"

 6. Topps's best-known product is "Bazooka" bubble gum, but the company also produces a great variety of other products. Those products include "Garbage Candy" (candy sold in a miniature plastic garbage can); "Crunchy Lunch"; "Ring Pop"; "Krypton Gum"; and a variety of editorial (non-sports) trading cards such as "The Incredible Hulk", "Charlie's Angels", "Superman", and others.

 7. Thpps also manufactures and sells football cards, basketball cards and hockey cards, which like baseball cards are sold only in the part of the year during which a given sport is played.

 8. In 1978, Topps's total domestic and foreign sales were about 67 million dollars. Fleer's total sales were about 15.2 million dollars.

 9. Fleer's best-known products are "Dubble-Bubble" bubble gum, and "Gatorgum", a soft chewing gum that is designed to help quench thirst. The company has also marketed products such as "Fireplugs", "Mr. Bones" (hard candies in a plastic coffin), and "Bubble Burger" (bubble gum shaped like a hamburger), among others.

 The Contrats

 10. Since 1966, Topps has entered into a baseball card contract with virtually every new player entering professional baseball at either the minor or major league level.

 11. Every contract between Topps and a player is and has been on a standard form contract (P-54, P-55, P-56), which grants Topps the exclusive right to sell that player's name and picture "alone or in combination with chewing gum, candy and confection, or any of them", for the first five baseball seasons in which that player is in the major leagues, no matter when those seasons occur.

 12. Topps's form contract forbids a player from granting to another any of the rights covered by the contract before that contract expires. As a result, competitors are not able to secure baseball card rights from players fora period beginning at the expiration of the Topps contract. The best that a competitor can do is to solicit an agreement that the player will not renew his contract with Topps, which would give the competitor an opportunity to make an offer for the rights at the expiration of the Topps agreement.

 13. It has been and remains Topps's practice to renew its contracts with major league players every other year. Renewals are for two year periods, and are solicited by Topps sometime before opening day, whenever a player has less than five (i.e. four) seasons remaining on his contract with Topps. Virtually all major league players sign such renewals. As a result of the renewals, about 50% of the players (at the beginning of the season) are obligated to Topps for five playing seasons, and about 50% (at the beginning of the season) are obligated to Topps for six playing seasons.

 14. In 1966, the Players Association hired Marvin Miller as its first full-time executive director. Mr. Miller's background is in labor relations, and he assumed his position primarily to organize the players' collective bargaining efforts. However, upon his arrival in 1966 he found that the Association was facing a temporary financial emergency.

 15. The Association needed funds to pay for its new office space in New York City, and to pay the salaries of a small staff of three or four persons. The solution that Mr. Miller devised was to finance the Association's activities through a group licensing program with the Coca-Cola Company. Coca-Cola wanted to place a series of pictures of 500 major league players on the inside of its bottle caps, and it asked the Association to obtain the necessary authorizations from the players. The Association did so, Coca-Cola paid the Association for those rights, and the funding crisis was resolved.

 16. After the Players Association began to collect membership dues, it decided to return licensing income to the players. TheCoca-Cola license was such a success that the Association decided to continue group licensing on a routine basis. Miller originally conceived the group licensing effort as a stop-gap funding effort, but the players were so pleased with the income that it generated, that they insisted on retaining it on a permanent basis.

 17. The commercial authorization is a contract by which each player grants the Players Association the exclusive right to use his picture, name and signature with other players in a group. In turn, the Association grants exclusive group licenses to various merchandisers. (P-8).

 18. Virtually every player now in the major leagues is a party to a commercial authorization. The standard commercial authorization is distributed to the players in spring training with an Association dues check-off authorization. The commercial authorization has a three year term. Renewals are obtained by a team's player representative, i.e. the player on a team who acts as the union's "shop steward". The record is silent as to how often renewals are obtained, but it is apparent, first, that many players sign at the same time, as part of a group; second, that the player representative determines when renewals are appropriate; and third, that renewals are not necessarily obtained near the end of a player's three-year term.

 19. The standard commercial authorization reads in pertinent part as follows:

 [The]undersigned hereby exclusively authorizes the Major League Baseball Players Association to market rights, together with other Major League players as a group, to the use of his name, picture (still photographs, motion pictures or television, except for Club publicity purposes) and signature. It is understood that such rights will be sold for the players as a group on an exclusive basis and shall not involve a personal endorsement by any individual.

 It is also understood that monies received by the Major League Baseball Players Association for the sale of such group rights will be used to defray the cost of operation of the Players Association and that such monies will be credited to the undersigned individuals as dues paid to the Association.

 Any monies earned from the sale of such group rights which exceed the budget of the Association shall be distributed among all members of the Association who have authorized the sale of such rights.

 Any group licensing contract entered into with an individual company for the promotion of its products, shall exclude players who are committed by contract to competitive products. In the event any such company is interested in securing a personal endorsement, it is understood that such endorsement will require the personal approval of the individual involved and a separate payment directly to him.

 This authorization shall be for a three year period.

 20. The Players Association construes its commercial authorizations to mean that a merchandiser cannot negotiate individually with players to obtain a group of contracts. Topps and bat and glove manufacturers are not subject to that interpretation because they contract individually with players for endorsement or marketing rights while the players are still in the minor leagues. Virtually all players therefore sign their first commercial authorizations after they are already under contract to Topps and the glove and bat companies.

 21. On many occasions between 1971 and 1976 the Players Associationadvised persons or companies who engaged in direct solicitation of marketing rights from players that the Association is the exclusive agent for group licenses for all major league players, and that those persons or companies should desist from direct solicitation of the players. (Miller Dep. 346).

 22. In late 1974, Topps advised the Association that a Michael Aronstein was soliciting players for baseball card rights. The Association wrote Aronstein a letter which said in part:

 It has come to [our] attention that you have been soliciting major league players, coaches and managers to grant permission to have their pictures used in connection with a baseball card collector set.

 The Major League Baseball Players Association is the exclusive assignee of the players, coaches and managers with regard to their property rights in connection with group promotions and group commercial endeavors. A project such as yours cannot be undertaken without a license to do so from the Players Association. In any event, however, a license cannot be granted to you since Topps Chewing Gum, Inc. is by contract our exclusive licensee for baseball cards either sold alone or together with confectionery products. In addition, the individual players, managers and coaches have contracts with Topps granting that company the exclusive rights noted above.

 You are hereby instructed to cease and desist from all your activities in this regard. Should you fail to do so immediately, we will bring an appropriate action for damages and injunctive relief. (P-62).

 23. The Players Association holds all of the rights that are available to license a non-confectionary baseball card product, since the Association's contracts with its members prevent a competitor from engaging in direct solicitation of contracts from the players. Moreover, the Association has an extraordinary degree of cooperation from its members in the licensing area, and is able to enforce its rights.

 24. The major leagues are an open shop. Major league players are not required to join the Players Association. Nevertheless, only three active major league players have declined to join the Association in the past 13 years.

 25.In late 1966, Marvin Miller met with the president of Topps, Joel Shorin, to discuss the terms of Topps's contracts with the players. Miller was concerned that the players were not receiving sufficient compensation for the rights they were granting.

 26. At that time, Topps paid each minor league player $5.00 for his signature on an initial contract, and $125.00 for each season he was in the major leagues for 31days, or for any year in which his picture was used in a baseball card series. Topps paid no royalty. Miller told Shorin that Topps's contracts were unfair to the players; Shorin disagreed.

 27. Miller and Shorin continued their discussions, but Topps was unwilling to give up any of its rights. During a meeting among Marvin Miller, Joel Shorin and a prospective licensee of the Players Association, Shorin refused even to define the limits of Topps's rights. Topps nevertheless threatened legal action if those rights were infringed. (P-15)

 28. In February of 1968, Miller related the difficulties he had been having with Topps to the Executive Board of the Players Association. (The Executive Board is the Association's governing body. It consists primarily of designated player representatives). The Executive Board voted to recommend that Association members -- virtually all major league baseball players -- cease renewing their individual contracts with Topps. That recommendation was accepted, and very few players signed renewals with Topps. Realizing that Topps faced a formidable opponent in the Association, Shorin contacted Miller to determine if an end to the dispute could be negotiated.

 29. As negotiations began, the Players Association demanded a uniform expiration date for all of Topps's contracts; an agreement that the Association would at some point offer the rights on a bid basis; a limitation on Topps's rights to sell baseball cards "alone"; and more money for the players.

 30. Topps offered only more money. The Players Association threatened to persuade the players[who] [entered] into agreements with it not to renew their contracts with Topps. (P-21)

 31. Shorin and Miller met again on April 23, 1968. At that time, Shorin gave Miller a legal memorandum that stated that the Association's group licensing program violated the antitrust laws. (Miller Dep. 232-233). Shorin also tried to persuade the Association to make a joint statement to the players that Topps's new money offer and proposed contract were fair. (P-24)

 32. The Association, in turn, believed that Topps's contracts with the players violated the antitrust laws, and Richard Moss, counsel to the Association, so advised Shorin.

 33. The Players Association submitted a counter-proposal in the form of a contract between Topps and the Association. The proposal suggested higher royalties and a uniform expiration date for Topps's contracts.

 34. Negotiations between Topps and the Players Association continued. By late September, 1968, Topps and the Association had reached tentative agreements on most issues.

 35. On November 19, 1968, Topps and the Association entered into an eight page contract which provided as follows:

 (1) All contracts between Topps and major league players were amended to increase the payments to individual players from $125 per year to the greater of (i) $250 peryear, or (ii) a pro rata share of 8% of Topps's sales up to$4,000,000 and 10% of Topps's sales in excess of $4,000,000;

 (2) Major league players were guaranteed royalties equal to those paid by Topps to professional football players for the use of their pictures on football cards.

 (3) Pictures 5 feet X 7 feet or larger with a sale price of 25 cents or greater were excluded from Topps's rights, except that Topps retained a right of first refusal as to any such merchandising proposal;

 (4) The Association would not "interfere with the Topps contracts, its procurement of such contracts or its policy during the existence of this Agreement."

 (5) Topps would advise the Association as to whether Topps would release its rights under its contracts with the players to permit the Association to license any proposal which otherwise infringed Topps rights. (P-1)

 36. In 1973, Topps and the Association extended their royalty agreement for an additional five year period, i.e., from 1976 to 1981.

 Fleer's Standing

 37. In September of 1974, Donald Peck, the president of Fleer, approached Marvin Miller of the Players Association about Fleer's obtaining a license from the Association. Fleer sought a license to market 5 feet X 7 feet satin patches, to be sold at 25 cents each, picturing active major league players.

 38. Fleer sought a license for a 5 feet X 7 feet product because that was the only type of product resembling baseball cards that it believed the Players Association might be willing to license.

 39. Fleer had a number of discussions about the 5 feet X 7 feet proposal with representatives of the Players Association. Marvin Miller called Topps to determine whether Topps would exercise its rights to market the product (derived from its right of first refusal). Topps declined to do so. Fleer's offer included a $25,000 guarantee and a royalty of 15% on sales.

 40.The Executive Board of the Players Association refused to license Fleer's proposal. Its principal reason for doing so was its fear that Fleer's product would remain unsold on store shelves, prompting store owners to cut back on orders of Topp's baseball cards until the 5 feet X 7 feet items were sold. (TR 2397-98) The Players Association receives substantial income from sales of Topps's baseball cards, and it did not want to jeopardize that income by licensing the Fleer Proposal.

 41. Had the agreement between Topps and the Association not existed, the Fleer 5 feet X 7 feet proposal might have been accepted, since Mr. Miller, at least, was at first receptive to the proposal. (TR 154, 157-8).

 42. Fleer's 5 feet X 7 feet proposal was a serious one. Fleer would have marketed the product had it obtained a license to do so. The defendants' arguments that the proposal consisted merely of four lines drawn on a piece of paper and that it was an artifice to permit Fleer to obtain standing for an antitrust suit simply are not supported by the record.

 43. Fleer currently has (and, as of 1974, had) production machinery with which to manufacture baseball cards. It also manufactures low cost novelties. It has shown that it has the ability to finance production and sale of a wide variety of low cost gum, candy and novelty products. Had Fleer chosen, it could have made a credible bid on some form of baseball card rights.

 44. Fleer had some experience and background in the baseball card business. During 1963, it marketed baseball cards with a cookie, and at one point in the 1960's it had entered into non-exclusive contracts with more than 3,000professional baseball players. (In 1966, Fleer sold those rights to Topps for $395,000.) In the 1970's, Fleer began to market (and still markets) team logos (insignia), in the form of "stickers", under license from the major league baseball club owners' licensing group.

 45. Fleer has desired to enter the baseball card market since at least 1968. (The defendants very much dispute whether Fleer made serious efforts to enter the market). Fleer has "intended" to enter the market since at least 1974 when it made its 5 feet X 7 feet proposal.

 46. In April of 1975, Fleer asked Topps to waive its exclusive rights so that Fleer could pursue a license to sell stickers, stamps, and decals depicting active major league players. Topps refused to do so.


 47. In 1978, the standard Topps baseball card package consisted of 14 baseball cards and a slab of gum weighing 4.30 grams. The normal retail price was 20 cents per package.

 48. Topps's baseball cards are 2 1/2 feet X 3 1/2 feet in size. Most of the cards have a name and picture of a single player, in team uniform on the front, and career statistics and personal information (height, weight, age, and how he bats and throws) on the back. Other cases show groups such as "all-stars" or "rookies"; pictures of teams; managers; and series "checklists" which permit collectors to keep track of their acquisitions.

 49. Topps's baseball cards are marketed each year in series. That is, only 100 or so of the 600-700 cards are released at a time. The process of releasing series continues throughout the spring until all of the cards are available. The series concept stimulates collecting. Players are mixed in the packages at random, with no divisions by team, league, position, etc.

 50. Boys, age seven through twelve, are the primary consumers of baseball cards in the United States. Boys not in that age group, girls, and adults also buy some baseball cards.

 51. In 1978, sales of Topps's baseball cards with gum in the primary twenty cent package accounted for $6.6 million in sales out of Topps's total baseball card sales of $9.2 million. $2.6 million dollars of sales were achieved with products such as "Rack-packs" (a large number of baseball cards sold alone) and 500-card vending packs.

 52. Topps's Proposed Finding No. 242 is accurate. "Children buy Topps's baseball cards to obtain both the cards and the bubble gum, but it is the cards they want most. Children in one study felt that the gum in editorial card packs was less desirable than bubble gum sold alone, but said they may chew it anyway. Thus, the gum is also an important part of the package in that it also serves as a treat or attraction."

 53. Topps's baseball cards are sold primarily in convenience stores, discount stores and small local grocery stores. Most baseball card purchasers buy their cards from convenience stores, such as "7-11" stores.

 54. Baseball cards are usually sold on the candy and gum rack of a convenience, variety or grocery store.

 55. Convenience, variety, discount, and similar stores typically offer a wide range of products on their candy and gum shelves, or in their candy and gum sections. This range of products includes bubble gum, regular chewing gum, candy of all kinds, and novelty and low cost toy items such as candies in toy containers, stickers, decals, iron-on and stick-on patches, trading cards, etc. A candy rack usually includes many items, only one of which is baseball cards. Most of the items on such a rack are priced in the 15-50 cent range.

 56. A wide variety of trading cards are currently being sold. Topps, the Donruss Company, and Fleer publish a variety of trading cards, usually sold with gum, featuring characters, celebrities, symbols, scenes and stories drawn from television shows, motion pictures, musical groups, professional sports, and other activities.

 57. With few exceptions, editorial (nonsports) cards rarely sell for more than one, or at most two, years. Editorial card series are usually based on short-lived popular interests -- "fads" -- such as movies and television shows. The normal editorial card series contains only 66 cards, and there are not usually convenient units, such as professional sport teams, to serve as goals for collectors.

 58. Sports cards, especially baseball cards, are perennial favorites. The popularity of baseball cards has spanned many decades, and the yearly changes in a player's career statistics, as well as trades to different teams, guarantee that each year's series holds new interest for the collector.

 59. Baseball cards have been marketed in very large (600-700 card) series. Consumers who are interested in collecting are able to make purchases over many weeks without completing the series.

 60.Trading, collecting and learning about players are the most common reasons for children to purchase baseball cards. Editorial cards are purchased primarily because of the appeal of the subject matter, which is presented in a variety of entertaining ways, e.g. action pictures, satire, etc.

 61.Topps's baseball cards are sold to wholesalers from February through August, although a sharp drop in sales occurs in May.Topps's football cards are sold from August through November; Topps's hockey and basketball cards are sold from October through January.

 62. Baseball cards are most often sold with a premium -- Topps's bubble gum -- but, occasionally, baseball cards are sold as a premium. For example, baseball cards have, in the past decade, been sold with cereal, cupcakes, candy and hamburgers. Baseball cards sold as premiums are difficult to collect as a series because of the cost of underlying products.

 63. A variety of low cost novelty items which have "play value" may be found on a typical candy rack. "Container" candy ("Fireplug", "Mr. Bones", "Pez", etc.), editorial trading cards, bubble gum, carbonated candy, iron-ons, and baseball cards all satisfy a child's desire to play (and often to eat at the same time). Broadly speaking, most novelty items compete with most other novelty items for a child's money.

 64. Baseball cards are by far the most consistent trading card item (in terms of sales) sold in the United States. The record shows only one example of a trading card product having achieved more sales than baseball cards (in 1973-74); that item was called "Wacky Packages".In 1976, Baseball card sales accounted for about 46 percent of all trading card sales (exclusive of hockey, basketball and football cards). In other years, baseball cards have garnered about one-third of all such sales. (P-380).

 65. The level of public perception of baseball cards as a distinctive product is high. Baseball cards are viewed by consumers and the public as "baseball cards" more than as a sub-species of trading cards, or as a novelty. They are, in fact, viewed as a separate market.

 66. Baseball cards have a number of peculiar uses. They are used for trading in childhood simulations of actual player trades in the major leagues. Also, baseball cards are collectable in a way that distinguishes them from other trading cards. The buyer of editorial cards (e.g., "Superman" cards), has only an arbitrary number of cards as a goal for his collecting (usually 66). A baseball card consumer, on the other hand, knows (for example) if he has not yet found Dave Winfield, Keith Hernandez, Robin Yount or Ron Guidry, and can plan the number of this purchases accordingly. Baseball cards are the only product on a typical candy rack to set forth baseball statistics. They are, in other words, an education in baseball. Baseball cards have lasting play value rather than ephemeral play value. They can be saved for weeks, months or years. Very few products on a candy rack have the same sort of lasting play value.

 67. Children have a fairly keen sense of the nature of the products they purchase (TR 2101). Furthermore, they "rotate" their purchases, that is, they buy a large variety of items. (DT5381, IIA; Table 14). Such rotation satisfies different needs with different purchases. (TR 4061).

 68. Children make as many as half of their gum, candy and confection purchases on impulse, that is, their decision as to what to purchase is often made after entering the store. (DT 5381; Table 5).

 69. Topps's baseball cards are the only product on a typical candy rack to picture virtually all active major league players.

 70. The principal function, or end use, of baseball cards is to satisfy a child's desires to learn about major league players, collect their pictures and trade their pictures. (P-161, Tables 25, 26).

 71. "Play" is a function performed by baseball cards. However, the consumer studies in evidence did not show that children emphasized wanting to have fun or wanting to play as their reason for purchasing baseball cards. It is not likely, therefore, that all other low cost products with "play value" a reperceived by children as being good substitutes for baseball cards.

 72. Baseball cards also function as "treats". They gratify a child's urge to buy something pleasant at a convenience or grocery store.

 73. Baseball cards require unique production facilities in two respects. First they are cut and wrapped on a "DF" machine, which is necessary for efficient production of trading cards. Second, and more important, a producer cannot sell baseball cards unless it first obtains permission from major league baseball players to do so. See Haelan Laboratories, Inc. v. Topps Chewing Gum,Inc., 202 F.2d 866, 868 (2d Cir. 1953).

 74. There is insufficient evidence on the record to determine whether Topps's competitors consider baseball cards to be a separate market or submarket. Fleer has therefore failed to prove that the industry recognizes baseball cards as a separate market.

  75. Baseball cards do not have distinctive prices. They are priced at about the same level as candy bars and many different types of chewing and bubble gum.

  76. Sales of Bubble Yum, a soft bubble gum introduced nationally by Lifesavers, Inc. in 1976, had a huge adverse impact on the sales of traditional hard bubble gums, such as Topps's "Bazooka"and Fleer's "Dubble Bubble."

  77. Close substitutes should show reciprocal sales movement.*t78. Sales of baseball cards are not affected by sales of editorial (non-sports) cards. Editorial cards are not meaningful substitutes for baseball cards.

  79. Topps often sells its editorial cards at a lower price than its sports cards. $83. Topps introduced into evidence an elaborate market study conducted by Child Research Service, Inc., a child marketing research firm headed by June Esserman. Mrs. Esserman testified as an expertat trial. The study consisted of an analysis of the results of interviews with boys ages 7-12 conducted during successive weeks outside of candy and convenience stores in three separate cities (Rochester, Cincinnati and Minneapolis). The children were asked a great variety of questions about what they had considered purchasing, what they actually purchased, what they paid, etc.

  81. During the first week of the Esserman study, the price of Topps's baseball cards was 20 cents. During the second week, the price of baseball cards was raised to 40 cents. Baseball cards suffered a precipitous drop in sales during the second week. A large percentage of those boys who considered baseball cards but did not buy them "bought something else instead" -- largely because the price was too high.

  82. The Esserman study was designed to show (and did show to an extent) the existence of price cross-elasticity among the items on a typical candy rack.

  83. Sales of baseball cards were shown to be sensitive to a price increase of 100%. The Esserman study showed that a rise in price from 20 cents to 40 cents caused an 88% decline in sales of baseball cards. (DT 5381, Tables 1 & 4).

  84. There is little evidence in the record to show whether sales of baseball cards are sensitive to small changes in price. In 1974, the price per card in the standard package rose about 4% (adjusted for approximately 6% inflation) over the 1973 price, and sales rose about 35% (adjusted for inflation). In 1975, the price per card in the standard package rose about 17% (adjusted for inflation) over the 1974 price, and sales fell about 17% (adjusted for inflation). In 1978, the price per card in the standard package fell about 12% (adjusted for inflation) compared to the 1977 price, and sales rose about 32% (adjusted for inflation). (P-182 through P-187; DT 5431R; stipulation of counsel).

  85. Baseball cards are unique. For decades, they have been an important and distinctive part of many childhoods, Baseball cards have achieved a type of public recognition that distinguishes them from such items as other trading cards, bubble gum and candy. Cardboard, wallet-size pictures of active major league players have existed for generations. Even if the product was merely a casual idea of a long-forgotten promoter in the 1880's, and even if there are hundreds of variations and substitutes which logically might exist, the concept is now so embedded that baseball cards literally define themselves. Thepermanence of those cardboard pictures is a market reality which the Court must recognize.

  86. The baseball cards themselves are the part of Topps's package that are primarily sought by children. The gum is of lower quality than Topps's normal bubble gum, and is offered simply as a premium for the cards. In fact, many children do not chew it. A number of low cost (perhaps baseball related) non-confectionary products would also serve as potentially attractive premiums, among them felt insignia, plastic novelties or emblems, magnets in the form of team logos, a batting average calculator (cf. DT 267), or iron-on patches.

  87. The relevant economic submarket in which baseball cards are sold consists of all pocket-size pictures of active major league players, sold alone or in combination with a low cost premium, in packages priced from 15 cents to 50 cents.

  Competitive Impactof the Challenged Restrictions

  88. Topps has faced no serious competition in the baseball card market since the 1950's. Since 1978, the interlocking contracts at issue in this case, as they have been applied (P-1, P-8, P-56), have made entry into the baseball card market very difficult or impossible.

  89. Topps's rights are not protected by any patents or copyrights, nor were they at any time protected by patents or copyrights. There is no legal requirement that either Topps or an individual enter into an exclusive, as opposed to a nonexclusive, contract for the use of the player's picture. Topps did not have its market position "thrust upon" it.

  90. Topps does not vary the format of its baseball card product. It markets only that type of card described in Finding 48, supra.

  91. Fleer and Topps have essentially agreed that a competitor who could compete evenly with Topps for major and minor player contracts (assuming the Association would not block the major league segment of such an effort), could market a series of about 150 baseball cards within six or seven years. Those estimates were based on relatively complicated assumptions about the average careers of minor league players. (Topps Proposed Findings 155-157;Fleer Proposed Finding 203). Topps, on the other hand, could compete against that series in the sixth year with about a 570 card product.

  92. The assumption that a competitor could compete evenly with Topps for player contracts is an optimistic one. Topps is an entrenched competitor, and its influence with the players is considerable. A competitor facing six (and likely more) years of uncertainty before it can market even an inferior trading card product is likely to take its capital and its energies elsewhere. (TR 733-734, 2589).

  93. Each of the parties agrees that exclusive contracts are necessary in the baseball card business. The Court does not find that assertion credible, if what is meant is that the baseball card market will support only one brand of baseball cards. Topps has an obvious motive to make such an argument, and Fleer needed to make the argument to support its proposed injunctive relief. The Association, moreover, is in the business of granting exclusive licenses.

  94.Exclusivity might be necessary in "fad" licensing, where competition might engender sufficient confusion in consumers' minds about the make-up of a product to ruin a one or two-year marketing effort. Baseball card consumers, on the other hand, have a demonstrably high degree of product awareness, and the permanence of baseball cards as a marketable item insures that competing products would have time to "sort out" in consumers' minds. Nothing in logic or proof at trial has suggested to the Court that the presence of two or more baseball card products on the same candy rack would somehow be harmful to competition.

  95. It is doubtful whether it would be useful to a hopeful baseball card competitor to try to obtain agreements from players not to renew their commercial authorizations. Even assuming that the competitor reached such agreements with a group of players, it would still be required to surmount a clause in Topps's contract. At no time during the term of the contract can a player grant to anyone besides Topps the rights granted to Topps under the contract, even if those rights are to take effect at the expiration of the contract. Moreover, a player cannot, during the term of the contract, grant to another "any rights similar [to ]" topps's rights, even to take effect at the expiration of the contract. The right to market baseball cards with any low cost premiums, either confectionery or nonconfectionary, is a right "similar to" Topps's rights.

  96. Sometime in the fall of 1968, Marvin Miller inquired as to Topps's position on a proposed Association license for the sale of baseball cards with rings. Topps, through Joel Shorin, vigorously opposed the granting of such a license, and said that Topps's attorneys had commented that the proposal would "disrupt [Topps's] program." Shorin advised Miller to advise the prospective licensee of Topps's position. (P-64)

  97.To insure that Topps's rights were not violated, the Association included in its proposed contract with the licensee a provision that the intrinsic value of the rings had to be at least equal to half of the value of the whole product. Thecontract expressly referred to Topps's rights under its Contracts with the players.

  98. Milton Kayle (of Weston Manufacturing Corporation, the Association's onetime licensing agent) assured Topps that the Association would never knowingly do anything to violate Topps's rights under its contracts. Marvin Miller likewise told Topps that he was extremely careful not to violate Topps's rights. (P-69).

  99. Topps and the Players Association routinely consult about whether a proposed Association license infringes Topps's exclusiverights. (TR 2369). The Association is anxious to avoid conflict with Topps.(Miller Dep. 430).

  100. In its discussions with agents of the Association, Topps often cites marbles as an example of a "sham" product, that is, a product which, if sold with baseball cards, would effectively infringe Topps's rights to sell baseball cards "alone." In 1965, the Federal Trade Commission specifically mentioned marbles as a product with which baseball cards could be sold in competition with Topps. In re Topps Chewing Gum, Inc., 67F.T.C. 744, 839 (1965).

  101.In 1974, topps objected to the sale of baseball cards by the Kellogg Company. Based upon a license from the Players Association, Kellogg sold packages of 54 baseball cards for $1.50, plus a box-top from a 60 cent (approximate) package of cereal. (P-85; P-338, p. 9). The Players Association did not yield to Topps's pressure, but instead obtained formal waivers from Topps to continue to license the product. (P-87, P-89, P-137, P-138).

  102. Topps has never stated its opinion as to what the minimum value of a nonconfectionary premium must be to avoid infringing Topps's rights to sell baseball cards "alone." Fleer'sevidence supports the inference, and a finding, that Topps's policy of objecting to baseball card products sold either with confectionary products or with low cost non-confectionary premiums continues at present. Topps has presented no evidence that suggests the contrary.

  103. The royalty income from sales of Topps's baseball cards is paid directly into the Association's group licensing program. In 1978, the licensing program generated about $1.1 million; Topps's royalty payments accounted for about $847,000 of that total, or more than 75% (P-119; TR 2331).

  104. The Association has never licensed a baseball card product that promised to provide meaningful competition to Topps's product.

  105. Before the signing of the agreement between Topps and the Players Association (P-1), the Association aggressively challenged Topps's market position, explored with competitors the possibilities of licensing a product to compete with Topps, and even contemplated using its influence with the players to gain all of the rights held by Topps.The signing of P-1 enabled the Association's group licensing program to share in the revenues of Topps's gum and baseball card product.

  106. However, P-1 has also been a disincentive for the Association to explore the limits of Topps's rights, especially in the Association's licensing of non-confectionary baseball card products. The evidence shows that, had P-1 not been signed, the Players Association would have continued to test Topps's rights. As it is, the Association's incentive to challenge Topps has been greatly reduced by the substantial income generated by P-1.

  107. In 1970, the Association licensed an organization known as Sports Promotions to sell packages containing four baseball cards and two iron-on patches. Topps objected to the product as an infringement of its rights. Notwithstanding that the licensed product included a non-confectionary product that very arguably did not infringe Topps's rights to sell baseball cards "alone," the Association did not seek to test the extent of Topps's rights. Rather, the Association licensed the product only for 1970, and with the understanding that it would not be sold in the same channels of distribution as Topps's product.

  108. The Association has licensed products that arguably infringed Topps's rights -- as, for example, when it licensed Beatrice Foods and ITT Continental Baking Co. to sell baseball cards as a premium to candy and cakes respectively. It has never, however, granted a license for a product whose principal attraction was the baseball cards themselves, with the possible exception of one stamp album. That product, however, included an album that was at least equal in value to the stamps.

  109. P-1 is not, on its face, anticompetitive. However, because the Association holds and protects all of the rights to market groups of pictures of major league players not held by Topps, the effect of P-1 is seriously and unreasonably to restrain competition. Because Topps has agreed to pay the Association royalties on its baseball card sales, no competition to Topps has arisen.

  110. Topps and the Players Association possess, and have exercised, the power to exclude Topps's competitors from the baseball card market.

  111. Fleer has made a reasonably persuasive showing that Topps's profits on baseball cards are, at the very least, consistent with the existence of monopoly power, although not, in the Court's view, dispositive of the question. Topps's profits on baseball cards are equal to or higher than its profits on high-risk, "fad" trading cards. (Topps's objections to the plaintiff's methodology in calculating relative profits have been considered, and are explicitly rejected as nit-picking). Baseball cards involve virtually no risk of failure each year. Competitors ought to be attracted to the marketing of a low risk product that is as profitable as other high risk products. (Fleer's analogy to bonds is quite apt --under normal market circumstances, the return to investors should decline, rather than rise, as risk decreases.) That no competitors have appeared and profits have stayed high suggests that Topps has the power to control prices and exclude competition. (P-338, pp. 60-64).

  112. Topps's exclusive contracts with the players do not promote competition. Infact, they contain a number of seriously restrictive clauses. For example, during the term of the contract a player cannot assign to another the rights held by Topps, even to take effect after the contract expires. Moreover, a player is under contract to Topps for his first five major league seasons whenever they occur . If a player spends seven years in the minor leagues after signing his first Topps contract, he is committed to Topps, and Topps alone, for twelve years.

  113. Topps's contracts certainly improve Topps'scompetitive position, and any businessman would consider them desirable rights. Nevertheless, they impede rather than promote competition.

  114. Both Topps and the Players Association have acted to exclude competitors who sought to market baseball cards with low cost premiums.

  115. The Association's conduct in (1) refusing to license baseball cards to be sold with low cost premiums, and (2) challenging direct solicitation of the players for marketing rights, inhibits rather than promotes competition in baseball cards.

  116. Topps and the Players Association have combined to restrain trade unreasonably in the baseball card submarket.


  117.Fleer has shown that it was excluded from any meaningful opportunity to compete for player contracts. It has not shown that it suffered any arguably quantifiable pecuniary loss as a result of its exclusion. 118. Fleer has struggled to make a profit in a number of the years during the 1970's. Its net income (loss) in eight of those years was as follows: 1977 $ 346,621 1976 502,257 1975 720,274 1974 (309,261) 1973 382,354 1972 268,926 1971 148,494 1970 (200,016)


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