Law School Case Brief
Berkey Photo, Inc. v. Eastman Kodak Co. - 603 F.2d 263 (2d Cir. 1979)
The use of monopoly power attained in one market to gain a competitive advantage in another is a violation of 15 U.S.C.S. § 2, even if there has not been an attempt to monopolize the second market. It is the use of economic power that creates the liability. But a large firm does not violate § 2 simply by reaping the competitive rewards attributable to its efficient size, nor does an integrated business offend the Sherman Act whenever one of its departments benefits from association with a division possessing a monopoly in its own market. So long as a firm is allowed to compete in several fields, it must be expected to seek the competitive advantages of its broad-based activity. These are gains that accrue to any integrated firm, regardless of its market share, and they cannot by themselves be considered uses of monopoly power.
Defendant Eastman Kodak Company (Kodak) has long been the preeminent firm in the amateur photographic industry. This action, one of the largest and most significant private antitrust suits in history, was brought by Plaintiff Berkey Photo, Inc. (Berkey), a far smaller but still prominent participant in the industry. Berkey competes with Kodak in providing photofinishing services the conversion of exposed film into finished prints, slides, or movies. Until 1978, Berkey sold cameras as well. It does not manufacture film, but it does purchase Kodak film for resale to its customers, and it also buys photofinishing equipment and supplies, including color print paper, from Kodak. The two firms thus stand in a complex, multifaceted relationship, for Kodak has been Berkey's competitor in some markets and its supplier in others. In this action, Berkey claims that every aspect of the association has been infected by Kodak's monopoly power in the film, color print paper, and camera markets, willfully acquired, maintained, and exercised in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. It also charges that Kodak conspired with flashlamp manufacturers in violation of § 1 of the Act, 15 U.S.C. § 1. Berkey alleges that these violations caused it to lose sales in the camera and photofinishing markets and to pay excessive prices to Kodak for film, color print paper, and photofinishing equipment. A number of the charges arise from Kodak's 1972 introduction of the 110 photographic system, featuring a "Pocket Instamatic" camera and a new color print film, Kodacolor II, but the case is not limited to that episode. It embraces many of Kodak's activities for the last decade and, indeed, from preceding years as well. The district court ruled in favor of Berkey in part and in favor of Kodak in part in Berkey's action that alleged Kodak violated the Sherman Act, 15 U.S.C.S. §§ 1 and 2. Both parties appealed.
Did Kodak violate § 2 of the Sherman Act by introducing a new camera and film?
The Court of Appeals for the Second Circuit held that Kodak did not violate § 2 by introducing a new camera and film because Kodak had no obligation to predisclose information of the products to its competitors, consumers were not compelled to purchase the new film, and there was no evidence that Berkey was injured by Kodak's decision to limit the new film to the format of the new camera. The court remanded the film and color paper claims because the district court misapplied the statute of limitations and relied on the incorrect measure of damages. The judgment notwithstanding the verdict on the § 1 claim was reversed because the evidence supported the conclusion that Berkey's agreements with lamp manufacturers violated § 1.
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