*1 SHOE, HANOVER INC. SHOE UNITED MACHINERY CORP. Argued 5,

No. 335. March 1968. Decided June 1968.* *Together Machinery with No. United Shoe Corp. v. Hanover Shoe, Inc., also certiorari to the same court. *2 Hayes argued V.

James in petitioner cause No. 463. him respondent 336 and No. With on the briefs P. Robert Breck McAllister F. Morten. were Ralph M. Carson argued the cause for respondent petitioner No. 335 and 463. No. With him on the Salinger, Potter, briefs were Robert D. Philip Jr., C. Roland W. Donnem. opinion delivered of the Court.

Mr. Justice White (hereafter Hanover Inc. Shoe, Hanover) is a manu- facturer of shoes and a customer of United Shoe Ma- chinery Corporation (hereafter United), manufacturer machinery. and distributor of shoe In 1954 this Court judgment affirmed the of the District Court for the of Massachusetts, District 110 F. Supp. 295 (1953), in *3 favor in of United States a civil against action 4§ United under of the Sherman Act, 26 Stat. 209, United 15 4.§ Machinery Shoe U. S. C. Corp. States, United 347 U. S. 521. In 1955, Hanover brought the present treble-damage against action United in the District for the Pennsyl- Court Middle of District vania. In 1965 the District judgment Court rendered for Hanover and awarded trebled including damages, of interest, $4,239,609, as well as $650,000 in counsel fees. 245 Supp. F. 258. On the Court appeal, Appeals of the Third Circuit finding liability affirmed the but disagreed with the District Court on certain questions relating to the damage award. 377 F. 2d (1967). 776 Both sought Hanover and United review of the Court Appeals’ granted decision, and we petitions. both 818 (1967). U. S.

I. against Hanover’s alleged action United that United monopolized machinery had the shoe industry in viola- tion of 2 Act; § of the Sherman practice refusing and to sell complicated its more important shoe machinery had been an instrument of the unlawful monopolization; and that therefore Han- difference between recover from United

over should and what in shoe machine rentals paid what during willing paid been have it would period to sell those machines. relevant Clayton Act, 38 Stat. (a)5 of the Section a final (a), C. 16 makes 283, U. S. amended, 69 Stat. brought any suit civil or criminal or decree judgment "prima under the antitrust laws by States the United respecting which said to all matters ... as facie evidence as between the estoppel would be an or decree judgment Hanover provision, on this Relying . . ..” parties thereto opinion, decree rendered findings, submitted Government’s case as evidence Wyzanski Judge refusing practice monopolized and that that United monopoliza- an instrument of the machines was to sell prima weight facie does not contest tion. United given judgment to the in the Government’s is to be Wyzanski’s Judge It does, however, contend case. practice of leasing determine that decision did not refusing monopolization. instrument sell was below, the courts is the threshold claim, rejected This prima If is not facie judgment 463. issue No. which illegality practice evidence of *4 injury Hanover, having then arose, Hanover’s asserted convincing of illegality, no other evidence should offered at all.1 have recovered con- Appeals Both the District Court and Court only illegal in policy cluded that the lease had been held 1Following rejection of the District Court’s United's construction Wyzanski’s opinion Judge decree, motion United filed a certify requesting question that the Court District construc Judge Wyzanski. tion United contends that the District Court motion, pass denying upon erred but we need not the merits of request, clearly for the District United’s novel Court acted within untimely proper denying as its discretion in certification to another upon already question of a which it had court ruled.

the Government’s suit. We no error deter- find mination, It is true that 4 of the which § decree2 on only United relies condemned certain in the clauses standard lease and that nowhere in the was decree any aspect other leasing system expressly United’s described or illegal characterized as monopolization. It arguable is also decree, required which that United thenceforward not “offer for lease ma- any chine type, unless it also offers type such for sale,” was merely included to insure an remedy effective to dissipate the accumulated consequences of monopoliza- tion. areWe not, however, limited to the decree deter- mining the of estoppel resulting extent judg- ment in the Government’s case. If by reference to the findings, opinion, and decree it is determined that issue actually adjudicated in an brought antitrust suit Government, private plaintiff can treat out- come of the prima Government’s case as facie evidence on that issue. See Emich Motors Corp. General Motors Corp., 340 U. S. 558, (1951). 566-569

Section 5 of the decree have a justifiable been remedy practice if the even it banned had not been instrumental monopolization in the of the market. But in our view the trial findings opinion court’s put firm ground the proposition that the Government’s case involved condemnation of the only system lease such. In opinion both its respect with to violation and opinion respect remedy, only court not dealt objectionable with the clauses in the standard “4. All leases made defendant which include either a ten- year term, capacity clause, payment a full charges, or deferred during and all leases under which the life of the leases defendant repair has making rendered other service subject without them separate, segregated charges, are declared to been means have *5 whereby monopolized machinery defendant the shoe market.” 110 Supp., F. at 352. consequences itself to the addressed

lease but also in which that to the manner only leasing machines and monopoly of United’s the maintenance to practice related opinion are well court’s portions of the These power.3 estop which also United findings fact, by its supported consti- which therefore Government and against We have set out in case. facie evidence prima tute this opinion. findings Appendix relevant in lease to show They are themselves sufficient monop- in role United’s system significant only played findings machinery market. Those of the shoe olization provisions United’s particular limited to were not answering objection remedy, to its opinion In on its require machines United to offer the decree should conclusion plainly “has lease, the court said United for sale as well as machinery And if monopolize shoe market. its leases used system, will alternative sales leasing without an continues Supp., monopolize at 350. that market.” F. still be able objectionable Clearly, purging clauses United the leases of after machines, monopolizing leasing selling but not its still be only policy also have made a substantial contribu must the lease during period monopolization of the market tion to United’s opinion entry Moreover, prior judgment. in its to the power principal violation, the three sources of United’s market where pointed magnetic identified, to “the ties inherent court were system important leasing, selling, its more machines” “ ” selling 'partnership’ aspects of but not those and to the Supp., The leases assured “closer and machines. 110 F. at 344. frequent customers than more contacts between and its buyers.” and its if United were seller customers were would exist by leasing Id., A shoe manufacturer was “deterred more at 343. machine, or if it on a than if he owned that same United he held simple provisions carrying rental and a reasonable short lease Id., charge before the end of the term.” at 340. for cancelation system system maintaining pricing The had “aided United lease id., types,” which between machine at discriminates discrimina monopoly later tion which the court said evidenced “United’s perpetuation power, it, Id., and a cause of its a buttress ....’’ 349. at

487 dealt as well with They policy leasing leases. selling important its machines, but not the advan- tages practice United, of that impact with its competition. actual potential and When the applicable determining for monopolization 2§ standard under applied facts, it must these be concluded that District Court and the of Appeals Court err did in holding practice that United’s of leasing refusing major sell its machines was determined to illegal be monopolization in the Government’s case.4

II. The District Court found Hanover would have bought rather than it leased United had been given opportunity so.5 The do. District Court deter- mined that if important United had machines, sold the cost to Hanover would have been than the less rental paid same these machines. This difference in cost, trebled, judgment is the awarded to Hanover in the District claims, Court. Han- however, that over legally cognizable suffered no injury, contending

4 appeal judgment In its brief on from the and decree rendered case, recognized principal the Government’s that “[t]he practices which the Court stressed were that defendant [District] complicated important only offered machines for lease and not for sale and that defendant serviced the leased machines without a separate charge.” Appellant 6, Machinery Brief for United Shoe Corp. States, v. United (1954). 347 S. 521 U. United also said “[e]vidently regarded Court below the fact that United important only by distributes its more machines lease and not objection system.” sale basic to the Id., at 170. Appeals The Court finding affirmed this and we do not disturb it. See also n. agree also We with the courts infra. below that the circumstances of unnecessary this case it was prove explicit for Hanover to during damage period. demand See Continental Ore Co. Union Carbide Corp., & Carbon (1962). S.U. damage period during illegal overcharge charged sold for shoes price reflected Hanover, to its customers and

Hanover charged have prices, at lower bought machines *7 by leasing. it than made profit more made no less Court should the District very least, urges, At the United whether these evidence offered on the have determined like Appeals, The Court of were correct. contentions so-called of the Court, rejected this assertion the District judgment.6 affirm defense, and we “passing-on” S. Stat. 15 U. C. Clayton Act, 38 4 the Section injured any “who shall be person 15, provides § respect issue in the chronology to this of events 6 The conference, sepa pretrial a After the was as follows: lower courts thought might action was set determine the issue which was rate (b). ques general Proc. 42 The pursuant for to Fed. Rule Civ. trial paid illegally high assuming Hanover had whether, tion was passed prices machinery United, from Hanover had the leased for legal injury it customers, and if so whether had suffered cost on to its After the antitrust laws. evidence for which it could recover under by Judge Goodrich, sitting designation, issue, been taken on the pay prices had been forced to excessive ruled that when Hanover United, legal injury: machinery a it had suffered for leased (D. injury.” Supp. 826, price 185 F. 829 C. excessive is the “This 1960). rejected argument M. He the “that the defendant D. Pa. also liability plaintiff passed on to its loss is relieved of because the unnecessary Ibid. In his view it was to determine its customers.” illegal passed on Hanover’s Hanover had the because whether burden complete paid injury the excessive rentals and because when it “ least, tendency law, regard damages general at ‘[t]he ” beyond step’ go is not the first and to exonerate defend Id., consequences. (quoting from reason of remote at 830 ant Co., Southern Co. v. Darnell-Taenzer Lumber 245 U. S. Pacific (1918)). Appeals interlocutory The Court of heard pursuant (b) appeal U. S. C. 1292 and affirmed. 281 F. 2d to 28 (C. 1960). A. 3d Cir. Certiorari was denied. 364 U. S. (1960). preserved presented again the issue and to the Appeals appealing treble-damage judgment Court entered Appeals of the main The after trial case. Court adhered principles prior brought question of its decision. here. property by in his of anything business reason for- may antitrust sue . . bidden laws therefor . damages by shall recover him sus- threefold tained . . . We think it sound hold that when buyer shows that him price paid for materials purchased for in his illegally high use business is and also shows the amount of the has overcharge, he made out prima injury facie damage case within mean- ing § 4.

inIf the face of the overcharge buyer nothing does loss, and absorbs the he damages. is entitled to treble This much seems conceded. The reason that he has is paid more than he should and property his has been illegally diminished, price paid had the been lower his profits would higher. have been It also clear *8 buyer, responding illegal to price, the maintains his own price steps but takes to his increase volume or to decrease costs, his right damages other to destroyed. is not Though may manage he profit maintain his he level, would have made more his purchases if from the defend- ant had him cost less. buyer We hold that the is equally damages price entitled he raises the for his product. own As long as the seller continues to charge illegal the price, he takes from buyer the more than the law allows. At price whatever buyer the the sells, price he pays the seller remains illegally high, profits his greater would be were his costs lower. Fundamentally, by the view stated Mr. Justice Chattanooga Foundry & Pipe Holmes in City Works v. Atlanta, 203 S. 390 (1906), U. where Atlanta sued the defendants damages treble for antitrust violations in connection with the city's purchases of pipe for its system. waterworks The Court a judgment affirmed city in favor of the for an by amount measured price paid difference between the the market what price or fair would have been had the sellers not com- city injured “was saying that bined, the Court of fur in its business if not least, at property, worth more being pay than by nishing water, led is diminished property A whose pipe. person of the injured induced is wrongfully money by payment Id,., approach same at 396. The property.” in his Cayser, in Thomsen v. (1917), 243 U. S. evident respect With antitrust case.7 treble-damage another laws, arising transportation under overcharge cases Holmes Mr. by Justice expressed views similar were Co., Lumber v. Darnell-Taenzer Co. Southern Pacific Brandeis by and Mr. Justice (1918), 245 U. S. In Mills, (1932). 397, 406-408 in Adams 286 U. S. recouped -plaintiffs possibility those cases was held irrelevant overcharges from their customers assessing damages.8 if it the facts is, however, that even be assumed “It contended plain combination, they injury to the illegal not show do show 7 of by contention is untenable. Section thereof. The tiffs reason person any injured gives person in his of action to the act a cause by by anything forbidden the act and property reason of right damages him The sustained. to recover three-fold the alleged charge and the amount plaintiffs over a reasonable rate charge more than a reasonable rate was of it. If be true that combination, the excess over what was reasonable secured Ry. & v. Abilene Cotton injury. Texas Co. was an element Pacific Co., Oil 436. The unreasonableness rate-and 204 U. S. *9 jury submitted to the and the what extent unreasonable was S., represented at 88. verdict their conclusion.” 243 U. 8 Co., Lumber Southern Co. v. Darnell-Taenzer U. S. Pacific reparations by shippers brought (1918), an action for involved unreasonably against shippers alleged exaction of an a railroad. The shippers high should not recover because To the that the rate. claim damage they they pass the sus to their customers were able to the was by paying charge, Court said that answer not tained the the difficult: tendency law, regard damages least, general in at

“The of the beyond step. it go first As does not attribute remote is not to the general United seeks to limit the principle the overcharge damaged victim an the meaning within of 4 to the overcharge. extent of that The rule, argues, subject be to the defense that economic should consequences to a proximately defendant him so holds liable if plaintiff plaintiffs the has suffered a loss. The suffered losses to they paid. the amount of the verdict when Their claim accrued theory at in the inquire once of the law and it does not into later ought events. . . The . carrier be to retain his allowed illegal profit, only and the one who can take it from him is the one that alone him, relation with and from whom the carrier Probably took the sum. . public pays . . in the end the damages compensated in most S., cases torts.” 245 U. at 533-534. Mills, Adams (1932), v. 286 U. S. 397 is to the same effect. See States, also I. C. (1933). C. v. United S. 385 U.

Keogh Chicago Co., v. & N. W. R. (1922), 260 U. S. 156 is relied upon by contrary stating United as rule. There the Court affirmed judgment pleadings shipper’s on the in a action under the antitrust charging conspiracy among unreasonably laws high railroads to set approved rates. Because the rates had been as reasonable after a proceeding shipper before Interstate Commerce Commission, the was held to have no cause of action under the antitrust laws. After giving judgment, other reasons for its the Court ended its by opinion saying impossible shipper it would have been for the proved damages say to have since no court could the rate had shipper enjoyed been lower difference; would have the benefit might gone have to his Court, however, customers. The was careful say opinion earlier in its result would have been different unreasonably high, rate approach been an confirmed Mills, supra. Mr. Justice in Adams Brandéis We ascribe no general significance Keogh plain- to the dictum for cases where the prove tiff charged is free to that he illegally high price. has been Court, speaking It should also impossi- be noted that bility proving damages, preclude recovery indicated no intention to Chattanooga Foundry in cases Cayser, supra. such as or Thomsen v. That is where the matter stood in this Court when issue came pressed regularity to be with some in the lower federal courts treble-damage brought by suits customers of vendors who were charged violating by price fixing monop- Sherman Act olization. defense, Some courts sustained the both where the plaintiff complained overcharging for materials or services used *10 492 overcharged buyer the were such

circumstances higher price a because his customers only charge could argued in such It is higher. him price was the over- no loss buyer suffers circumstances said, is where might present, be charge. This situation buyer’s all of a equally overcharge imposed is buyer’s prod- for the the demand and where competitors competitors and his buyer inelastic that so uct of the cost by the amount prices their all increase could in sales. decline suffering consequent without increase argument that sound with impressed are not We A recognizing defense. require of economics laws pricing company’s factors influence range of wide change Normally impact single policies. fact; after the cannot be measured conditions relevant may whether, be to state unable indeed a businessman Co., g., Lead v. National product, produce e. him to his own Wolfe (C. Cir.), (1955), 915 denied, cert. 350 S. 225 F. 2d 427 A. 9th U. purchased resale, fixing for price articles and where the concerned Motors, Co., g., Miller Inc. v. Ford Motor 441 e. 252 F. 2d Co., 119 F. Twin Ports Oil Co. v. Pure Oil (C. 1958); A. 4th Cir. Others, (C. denied, (1941). Cir.), 314 U. S. 644 2d 747 A. 8th cert. beginning Judge Goodrich’s 1960 decision in the case before may us, plaintiff passed on the have deemed it irrelevant Recently, overcharge. example, for burden of the the defense rejected brought against manufacturers of electrical the cases equipment by purchased equipment who at unlaw local utilities fully prices produce electricity it to to the inflated used sold g., City E. Atlantic Electric Co. v. General ultimate consumer. Co., Electric (D. Y.), interlocutory Supp. 226 F. 59 C. S. D. N. appeal refused, (C. 1964). 337 F. A. 2d Cir. 2d

Concerning passing-on generally, Clark, defense see The Damage Damages Treble Bonanza: New Doctrines of in Private Suits, (1954); Pollock, Standing Mich. L. Rev. 363 Antitrust Sue, Injury, Passing-On Doctrine, and the Remoteness (1966); Note, Damage L. A. B. A. Antitrust J. Treble Private Damages Antitrust Suits: Measure Destruction of All or Business, (1967). Part of a 80 Harv. L. Rev. 1584-1586 *11 been (a single had one fact different supply less ex- general pensive, economic conditions more buoyant, or the labor market example), for he would have tighter, price. chosen different Equally determine, difficult to in the real economic world than an rather economist’s hypothetical model, is what in change effect a com- pany’s price will have on Finally, its total sales. costs per unit for a different volume of total sales are hard to estimate. if Even it buyer be shown that the could price raised his in response to, in the amount of, the overcharge and his margin profit total sales had not thereafter declined, remain the there would nearly insuperable difficulty demonstrating the particular plaintiff could or not would not have raised prices his overcharge absent the higher maintained the price overcharge had the been discontinued. Since es- tablishing the applicability of the passing-on defense require would a convincing showing of each of these virtually figures, unascertainable normally task would prove On hand, insurmountable.9 other is not unlikely that if the existence of the defense is generally confirmed, antitrust defendants will frequently seek to applicability. establish its Treble-damage actions would require long often additional complicated proceed- ings involving massive complicated evidence and theories. price The mere fact that a rise followed an unlawful cost increase undamaged. does not show sufferer of the cost increase was may ripe price His customers earlier; have been for his rise if a cost merely price rise is the occasion for a increase a businessman could imposed costs, have absent the rise his the fact that he was earlier enjoying higher price permit not the benefits of the should not supplier charges price who an unlawful to take those benefits from being damages. him merely recog without liable This statement principle possessor right nizes usual that the of a can recover for deprivation previously its unlawful whether or he exer cising it. subjected passing-on buyers are addition, In would buy from them also have who those defense, higher price they passed challenge meet in to- consumers, These ultimate their customers. have single pairs shoes, buyers case day's interest at- and little a lawsuit tiny stake only *12 those who vio- consequence, action. In a class tempting monopolizing price fixing or antitrust laws late the illegality no one because the of their retain fruits would against Treble- them. bring suit who available was the has of Court importance which damage actions, the substantially reduced be many emphasized, would times in effectiveness. injury and the proved Hanover that conclusion

Our of treble- purposes of for the its damages its amount overcharged that proved when it damage suit the amount of and showed damage period during it not entitled to assert United was overcharge; recognize might be that there We passing-on defense. buyer has overcharged when instance, situations —for making easy contract, thus “cost-plus” a pre-existing damaged con- he not been prove that has —where be passing-on defense not requiring siderations present. would not be We also in this case permitted proved where no can be be- differential recognize charged price price unlawfully some tween establishing dam- required by charge, law to the seller was showing profits of of to the ages might require a loss buyer.10 price appear courts to have treated discrimination eases Some category. g., See, Act as this e.

under the Robinson-Patman Canning Co., (C. Russellville 191 F. 2d 38 A. American Can Co. v. 919, Juices, v. Bruce’s F. 1951); American Can Co. 2d 8th Cir. (C. petition opinion modified, Cir.), 190 F. 2d 73 A. 5th for cert. (1951). dismissed, U. S. 875

III. that Hanover The District Court held was entitled to damages July the period commencing 1, 1939, terminating September 21, The former date repre- 1955. greatest retrospective sented the permitted reach under applicable statute the latter date limitations, was upon which Hanover In filed suit. addi- tion to somewhat shortening the forward' reach of the damage period,11the Court Appeals ruled that 10, June July rather 1946, than marked the 1, 1939, commence- ment the damages period. June date Court decided American Tobacco v. United Co. States, 328 S. 781, U. which endorsed the views of the Appeals Court of for the Second Circuit United States America, Aluminum Co. 148 F. 2d 416 In (1945). the case before us Court Appeals concluded that decisions Alcoa-American Tobacco fundamentally *13 monopolization altered the law of prior to them it —that was necessary prove to the existence of predatory prac- tices as well monopoly power, whereas afterwards proof of predatory practices was not essential. The Court of Appeals was of also the view that because in prior litigation escaped United’s leases had condemnation as predatory practices illegal under § United’s conduct should not be held to have any violated at prior time to June 1946. 377 2d, F. at 790. holding This has been challenged, and we reverse it. Appeals The Court of held that Hanover was entitled to dam ages only up 1, 1955, upon to June Judge Wyzanski the date which approved plan terminating for outstanding all leases and converting rights ownership. the lessee’s Because Hanover could legally required have United to selling convert 1, 1955, as of June Appeals Court of held it was not entitled damages for United’s failure to offer machines for sale after

that date. This challenged determination has not been in this Court. have been theory Appeals of seems to of Court

The a upon clear significantly relied party a has when applica- retrospective doctrine, and and established upset newly doctrine of declared tion considera- injury, substantial reliance to his justifiable rule the new require that justice tions of and fairness decisions only. Pointing to recent apply prospectively Court law, area of the criminal in the this Court which why the considerations could see no reason Appeals in those cases only prospective application favored area, espe- civil as well as applied should not be no is, course, There cially treble-damage in a action. us have before theory confront unless we reason to clearly judicial declared in which there was a situation which its and under which relied upon doctrine which was overruled lawful, was doctrine conduct according performed which conduct of a rule favor new unlawful. would have been upon old rule in reliance such a presents that this case Because we do not believe theory pass upon no occasion to situation, we have Appeals. of the Court of Amen- opinion in Alcoa nor opinion

Neither the novel, the issue involved indicated that can Tobacco necessary it, were to resolve principles that innovative in a manner in prior been cases that the issue had settled ruling In by those courts. contrary to the view held guilty to be necessary competitors to exclude it was not Second Appeals the Court monopolization, *14 in this Court long line of cases upon relied Circuit con- 148 at 429. The 2d, to 1912. F. stretching back are monopolization will show that actions which clusion honestly was manoeuvres not industrial” “limited to not Court, particu- earlier of this opinions premised also Co., 106, 286 116 & U. S. larly States Swift (1932). case, American Tobacco this Court noted In the

497 precise question pre- that before it had not been viously S., gave 328 and no decided, 811, U. at indication thought radically adopting interpre- it new that it Sherman Act. tation Like the Court of Appeals, this Court for upon existing relied its conclusion authori- These cases make it ac- ties.12 clear that there was no 12Although the defendants American Tobacco had been found guilty conspiracy attempt conspiracy to restrain trade and and monopolize monopolization itself, grant to as well as of of cer- question tiorari was “limited whether to actual exclusion of com petitors necessary monopolization is to the crime of 2 under of the § (1945). noting 324 Sherman Act.” S. 836 After 1 2 U. that “§§ require proof conspiracies recipro of the Sherman Act which are cally distinguishable independent from and of each other . ,” . . 328 S., 788, jury U. at Court determined that could have found conspired id., that monopolize, the defendants combined and to conjunction 797, “only at and that it would be with such a com conspiracy bination or precedent,” that these cases will constitute a id., at 798. The support Court authorities stated “[t]he determining view that the material consideration in whether a monopoly prices exists is not that competition are raised and that actually power is prices excluded but that exists raise or to exclude competition S., when it is so,” (emphasis desired to do 811 U. at quoted added), approval Patten, from United States v. (C. 664, F. (1911)), grounds, C. S. D. N. Y. reversed on other monopolization (1913), 226 U. S. 525 for there be “[i]t necessary power thus obtained should be exercised. Its existence is sufficient.” The Court also said: interpretation “A correct of the statute the authorities makes monopolizing, the crime of Act, under of the Sherman parties, cases, conspire as in these acquire to combine or or power competitors any part maintain the to exclude among trade or foreign commerce the several nations, states with provided they power they able, also have such a are group, as a potential competition to exclude pro- actual or from the field and they purpose vided that power. have the intent and to exercise that Socony-Vacuum Co., See United States v. Oil 310 U. S. n. 59 and authorities cited. particular

“It is not the form of the combination or the means used but the result be achieved that the statute condemns. It

498 con- Act which of Sherman interpretation

cepted 2 upon monopolization § under of finding ditioned monopolist.13 by the practices showing predatory of abrupt and funda- an there such case was In neither entirely new constitute doctrine as to mental shift Whatever an older one. replaced in effect rule which accomplish the importance used whether means is not of S., 328 U. objective lawful or unlawful.” are in themselves unlawful added.) (Emphasis at 809. S., 328 opportunity endorse, U. also welcomed The Court Alcoa, Judge 148 following of Chief Hand views 813-814, the at 2d., F. at 431-432: competitors; we can but it never excluded insists that

“[Alcoa] progressively to embrace than more effective exclusion think of no every newcomer opened, to face opportunity as it new each organization, having great already geared capacity into a with new of experience, and the elite advantage trade connections interpret to ma- Only 'exclusion' a's limited personnel. case we solely by a honestly industrial, desire to but actuated noeuvres indefatigably pursued, be course, prevent competition, can such a judgment ‘exclusionary.’ limit it would in our So to deemed not just Act; permit such consolidations as it was emasculate designed prevent. power monopolist 2, must have both the to fall within “In order monopolize. passage To read the intent to monopolize, and the it, for no demanding any ‘specific,’ intent, makes nonsense doing.” of what he monopolizes unconscious

monopolist monopolization which would Any of the earlier law view opinion, requirement of erroneously in our to find a attempt, rely heavily practices on certain dicta in predatory must (1920) (Mr. Corp., States Steel 251 U. S. States v. United Court), and United States v. a four-to-three Justice McKenna for (1927) (Mr. Co., 274 U. S. Justice International Harvester Steel). reiterating U. the dicta in S. The commentators Sanford proposition predatory practices were cited place prior major Tobacco required to Alcoa-American reliance cursory conclusory my event, the In nature these dicta. provide sufficiently strong proof clearly of a writings does not these justi permitted sort prevailing opinion as to the law to have generate prospectivity argument. alone could reliance which fiable *16 development in antitrust law brought was was about great based to a existing extent on authorities and was an extension of doctrines growing which been had developing years. over the These did cases not consti- a sharp tute break in the line of earlier authority or an avulsive change which caused current of the law thereafter to flow between new say banks. We cannot prior that to those potential cases antitrust defendants justified thinking have been that then current antitrust permitted doctrines them to do con- all acts ducive to the creation or maintenance of a monopoly, long so as they avoided direct exclusion of competitors or other predatory acts.14 heavily

United relies on three Sherman Act cases brought against predecessors it or by its the United States and decided this Court. argues United these cases demonstrate both that before Alcoa-American Tobacco the law substantially was different and that leasing practices been deemed this Court not to be instruments of monopolization. United States Winslow, 227 U. S. 202 (1913); United States v. United Machinery Shoe Jersey, Co. New 247 32 (1918); U. S. United Shoe Machinery Corp. States, v. 258 U. S. (1922). 451 opinion, In our however, United overreads exaggerates the significance of these three cases. In Winslow, charged groups Government the three companies merged which had to form United with a vio lation of 1.§ The trial court construed the indictment pertain only merger to the companies and not practices which merger; business resulted from the significantly, most policies excluded United’s independent argument Wyzanski’s Judge United makes the fundamentally decision the Government’s case so altered law monopolization damages it should not be held liable for prior February down, the date decision was handed 1953. reject We this contention for the reasons set forth in the textual dis previous cussion of Alcoa-American Tobacco and the United cases. stated specifically The Court consideration. from contem- of a combination validity leases or “[t]he case.” upon in this passed cannot be them plating at 217. S.,U. brought § under case,

The decided third Act. than 2 of the Sherman rather Clayton Act mak- enjoining affirmed decree This Court condi- clauses, terms, containing certain ing leases *17 predatory that Nothing in that case indicates tions. charge monopoly 2§a prove be shown practices which were or the clauses in them the leases, or that demonstrate adequately would not undisturbed, left by monopoly power. with enterprise an monopolization supports strongly cases, the 1918 case most the three Of by the States a civil action United It involved United. 1 2 Act. of the Sherman charging §§ violations machinery contended that United’s The Government agreements had been used to consum- and license leases A court dismissed the three-judge violations. mate both of 4 to 3. There is by affirmed vote bill and this Court they as were then consti- but that the leases question no for 1; the § under reasons were held unassailable tuted 2 for the we can- ruling charge, § not clear. As are as what course of con- opinion specifying the read 2 if monopolization § under en- would amount duct by monopoly power. a concern At most gaged prove that leases themselves did not holding was the the monopoly power charge prove a 2 not themselves § —did monopolization. But the issue in the case as well leasing system now is not whether United’s us before but monopoly power whether, monopoly once proves way leasing sufficiently United leased power shown, is exercise power. an intent There is little, shows that opinion in the 1918 which anything, illuminating may fairly holding Indeed, this issue. be read as monopoly power not have did over the market at claim rejecting for in all, practice illegal by when used a corporation dominant market, Court said: “This, is assertion however, relies founda- upon tion assumption illegal dominance Company the United has been found not to exist. This element, put must therefore, be to one regarded side and the leases in and of themselves the incentives induced their execu- _” tion at 60. S.,U.

Any comfort might have received with respect case to the legality leasing system of its employed by when monopoly one with power should have been short-lived. In case, the third which was brought under 3 of Clayton Act, and which all the remaining making up Justices majority in the except Mr. case Justice McKenna voted with the Court, opinion for the Court described the 1918 decision as follows:

“That the leases were attacked under the former bill *18 as violative of the Sherman they Act is true, but were sustained as valid and binding agreements rights within the of holders of patents.” S., 258 U. at 460.

This view supported by was other references to the 1918 opinion which described the question at issue as there being whether beyond United's leases went the exercise of a lawful monopoly. might

One possibly disagree with this reading the of but it an opinion, was gloss. authoritative After 1922 and expiration after the of the patents on major its there was no sound machines, basis to justify by reliance United on 1918 case as a pronounce- definitive leasing system ment that its provided legally insufficient of monopolization, evidence once power United’s over the market was satisfactorily shown. prior The cases immunized United’s monopoly originated insofar it per- companies allegedly competing merger

in a of But respects. in other to United help some haps are of was 1946 there prior either do establish they Act which of the Sherman interpretation a well-defined Tobacco Alcoa-American in overruled abruptly be considered system could not that United’s monopoly of maintenance for the exercise instrument power. argument circumstances, there is no room

In these only to the back damages reach Hanover’s should Having rejected decision. American Tobacco date changed Tobacco Alcoa-American contention way be which should monopolization law of that Hanover follows effect, it only prospective given by period permitted damages for the entire is entitled to of limitations.15 statute applicable I—f manner m are raised here about questions Two below. the courts computed were damages which re- erred in Appeals argues that the Court Hanover remand, on to take account Court, the District quiring paid, have taxes Hanover would of the additional renting during them machines instead purchased evidently Appeals The Court of years question. argument that because earliest has also advanced the only policy occurred in lease impact Hanover United's year during barred now Hanover’s cause of action arose Pennsylvania applicable statute of limitations. The Court supplemental rejected argument Appeals correctly *19 dealing which, opinion. if occurs not with a violation it We are span. all, specific Cf. some and limited time at must occur within Corp. Corp., v. General Motors 229 F. 2d 714 Emich Motors Rather, (C. 1956), upon we are which United relies. A. 7th Cir. continuing of dealing conduct which constituted a violation continuing accumulating inflicted the Sherman Act and which Although in 1912 for Hanover. Hanover could have harm on sued equally being inflicted, it entitled to in 1955. injury then was sue the only profits felt that since after-tax can be reinvested or shareholders, damaged only distributed 'Hanover was profits extent of the after-tax failed to receive. Appeals The view of the Court of sound theory, but it overlooks fact in practice Internal Revenue Service has taxed recoveries for tor- of deprivation profits tious at the time the recoveries are made, reopening years. not Commis- earlier See Co., sioner Glenshaw S. 426 (1955). Glass U. As points Hanover out, since it will be taxed when it recovers damages from for both the actual trebled damages, damages by to diminish the actual the amount of taxes it would have paid had it received greater years profits in the damaged it was would be to apply double deduction for taxation, leaving Hanover with less income than it would have had United had injured not it. It accounting is true that for taxes in year when damages are received rather year than the profits when were lost can change the amount of taxes collects; the Revenue Service as United actual shows, higher rates taxation were years much some when Hanover injured they than are today. But because the statute limitations frequently will bar the Commissioner recomputing earlier years, and the policy because of underlying the statute limita- tions —the fact that recomputations such immensely are impossible difficult or when a long period has intervened— rough taking result account of taxes for the year of injury taxing but then recovery when received seems the most satisfactory outcome. The District Court therefore not err on did this question, and the Court of Appeals not have required recomputation. should

United contends that if bought Hanover had machines instead them, it would have had to invest its capital own argues the machines. United in computing damages District Court erred because it properly did not take account of the cost of capital *20 years in the found District Court The Hanover. money for be- able to borrow Hanover question in Hanover annum, and that-had per tween 2.5% 2% necessary it have obtained would bought machines this rate. It therefore at about by borrowing capital profits from the component interest deducted 2.5% by purchasing have would earned thought Hanover it of the record convinces us review machines. Our determinations; not in err these courts below did Hanover’s dam- fact, determinations the basis computed.16 properly ages were in Appeals of the Court of is affirmed judgment The part, and the cases are remanded and reversed part opinion. consistent proceedings for further It is so ordered. no in the part took considera- Marshall Mr. Justice of these cases. tion or decision THE OPINION OF COURT. APPENDIX TO Wyzanski’s Opinion in Judge Excerpts From Machinery Corp., Shoe 110 F. States v. United 1953). Supp. (D. 323-325 Mass. Leasing System. Effects leasing system of United’s as works The effect may viewpoints United, be examined practice and of manufacturers, competitors potential of the shoe or actual. says managers United also Hanover’s would have because they

computed capital differently, their costs would not fact have begin purchasing stop and to decided to machines them. The found, however, given Hanover, Court it been District bought opportunity, have rather than leased the machines finding, by Appeals, offered United. This affirmed the Court of evidence, supported we do disturb it. *21 For advantages, United these are the has (a) United enjoyed a greater stability of annual revenues than is customary among capital goods. manufacturers of other But this is exclusively not due to of practice leasing distinguished as selling. It is attributable to the leasing effects of when, United, is the case with market, already predominant lessor a has share (b) United has been able to conduct activities research more than favorably outright. if it sold its machines The leasing system, especially sys- aspect the service of that tem, given has United constant to shoe manufac- access problems. promoted turers their This has United’s knowledge problems of their and has stimulated machinery development. shoe knowledge This research not be diminished if substantially United’s service activities covered fewer factories. But all to access shoe factories were denied the diminution of would be research, great consequence to (c) The steadiness revenues, attributable, above, as stated not to leases but in a alone, to leases market lessor, dominated promote has tended to fairly steady appropriations research. But these appropriations declined in the 1929 depression. expenditures Research might might or if competition be increased were experi- increased. The ence of when with Compo’s process faced cement suggests declining revenues, no steady less than reve- may nues, promote research expenditures, (d) United kept has its leased machines in possible the best con- (e) dition. Under the system enjoyed United has a wide machinery distribution of relatively narrow merely market. But this is way another saying United’s market position, market power, provisions, lease practices give and lease it an advantage competitors. over Upon shoe manufacturers, United’s leasing system has had these effects. It has easy been person capital modest of something less than superior effi- get He can manufacturer. ciency become a shoe are them; his machines serv- buying machines without conveniently charges; he can separate without iced model; model for a new United older exchange an his another; costs change process from one he can closely approxi- machinery produced of shoes per pair manufacturer machinery every other mate the costs produce by the same machinery shoes using same there consequence factors, of these Largely as a process. daily pro- having a 1,300 factories each were factories less; pairs day capacity 3,000 duction *22 and 40 pairs; 3,000 8,000 of to having capacity each a larger manufac- Many of these larger manufacturers. collectively for of the shoe who account turers, 40% way small a States, started production United system. More- under and flourished no virtually testimony in this case indicates over present who are dissatisfied with the shoe manufacturers of ex- system. It cannot whether this absence be said lack of dissatis- is due to actual pressed dissatisfaction they what practical preference for to men’s faction, monopolistic, as a fair it should be regard system, even fear, testify. or reluctance to inertia, or to made it easier has However, system while United’s to manufacturing industry than enter to enter shoe manufacturing industries, other many, perhaps most, manufacturing in the necessarily promoted has shoe not open economy goals competitive field findings that are to make society. attempting Without this much can warrants, precise than the evidence more machinery If shoe were definitely stated. United be then— upon basis, available sale manufacturers would be able to secure (a) Some shoe sales, mortgages, chattel credit whether conditional or devices. other

(b) such a system, suppose Under there is no reason to purchaser's that a first installment on a machine would significantly deposit required now often exceed the new shoe manufacturer United.

A(c) few be to borrow shoe manufacturers would able at comparable rates interest interest at rates which capital. United or raises borrows,

(d) pro- Some shoe able manufacturers be average vide for themselves at a than the service cost less supplying cost to service to lessees United all machines.

(e) bought Those manufacturers who machines United would not be subject, as are those who manufacturers lease United unilateral machines, decision of modify United whether or not in- to continue those policies formal which are not written the leases to which expressly any not committed specific period. future there is no While evidence plans any change in its informal policies, proceeded while United has heretofore alter its policies informal approval basis of its or disap- proval of individual manufacturers, United has not *23 expressly continue, to for example, itself its committed plan right for return of its machines, of deduction n of fund, waiver for months unit charges, or its present high standard of service. United's reserved power respect gives greater these matters some it degree of psychological, greater degree some of control, economic than a of machinery seller would have. (f) bought machinery Some manufacturers who had psychological would find that financial and considerations more than willing made them lessees to dis- be, would already pose acquired of take United machines competitors’ place. machines their looking leasing system In at United’s from the view- potential actual point must be competition, any system selling outset, at the confessed impede company’s will, course, machines leasing one company’s of another the distribution to some extent already acquired has If a manufacturer shoe machines. by outright purchase, machinery either company’s one any terms what- or on lease on by purchase, conditional factory is a in the machine existence soever, the a competitive marketing to the impediment possible machine. may psy- a already manufacturer noted,

Yet as shoe by leasing a economically impeded more chologically or be system. general observation by selling a And than study of features in the United a is buttressed Though effect. system special which have a deterrent some of them separately, and are stated these features impediments, they appraised must be important alone are full deterrent effect. collectively appreciate year long term a commitment. (a) The 10 is already has a United (b) A manufacturer who shoe all work can the available perform leased machine which experiment with may reluctant particular type of a be he wish. He a machine to the extent competitive capac- permission ask for to avoid full may hesitate to ity permission given experimental If for an clause. period too short. may experimental he find the period his may get not a chance to have competitor Thus a tried manufacturer. adequately out shoe machine prefers competitive machine If a shoe manufacturer may know the hand, machine on he to United payments may at which future be commuted. exact rate may outlay he find that a to make knows, If he fresh (which admittedly payments commuted are not those solely protection against but also are for revenue *24 admittedly and which discriminate in favor competition, who a a takes new machine and lessee United not machine) already he competitor’s plus rentals has paid him if bought cost more than he had a similar place machine dispose first and were now to of it in a trade or second-hand market. Thus for a maker of competitive may likely machines he be a less customer initially than buy United had him allowed to machine.

(c) United’s system impossible lease makes a second- hand market in its own machines. This has two effects. prevents It from suffering that kind competi- tion which a second-hand market offers. Also it pre- competitors from acquiring vents United machines with parts view to such copying of the machines as are not patented, view experimenting with im- provements disclosing without them to United.

(d) United’s practice rendering repair only service on its own charge machines separate without has brought about a situation which there are almost no large scale independent repair companies. Hence when a typical small considering shoe manufacturer is whether acquire a complicated shoe he look machine, must to the manufacturer of that for repair machine service. And a competitor of United readily could not market complicated such a machine unless in addition to offer- ing the prepared machine he was supply service. As experience of foreign manufacturers indicates, has proved to be a stumbling serious block to those who have sought to compete with United.

(e) If a shoe deciding manufacturer whether competitive introduce machines, (either for opera- new replacements tions for United machines on which the lease has expired), he faces the effect of those upon decisions his credit Right under Deduction Fund. If already he has virtually all machines, replaces and if he few of them competitive machines, the Fund will take of substantially care all his so-called may charges, deferred cover some of his minimum payments. This is because credit to the Fund earned *25 of all leased the benefit machine enures

by particular advantage maximum and the factory, machines in the large number is to have shoe manufacturer to the This applied. credit can be to which the machines acquiring manufacturer of shoe advantage to the though machines deters, line keeping full competing of a only mildly, opportunities probably shoe manufacturer. Stewart, dissenting. Justice

Mr. Clayton Act for dam- under the sued United Hanover offering practice of flowing from allegedly United's ages Hanover did for lease not for sale. machines but its practice original matter that this as an attempt prove exclusively it relied Instead, laws. violated the antitrust amended, Stat. as Clayton Act, (a)5 of the upon § provides: which or hereafter or decree heretofore judgment

“A final brought any proceeding or criminal civil rendered under of the United States or on behalf to. effect that a defendant has laws antitrust prima facie evidence said laws shall be violated any proceeding defendant action or against such by any party against such brought other defendant respecting as to all said laws ... matters under estoppel would be an judgment which said decree parties . . .” C. thereto . 15 U. S. between 16(a). damages solely an award of treble Hanover recovered theory judgment and decree in upon the Machinery 110 F. Corp., United States v. United Shoe curiam, 347 per aff’d U. S. had established Supp. 295, practice making the unlawfulness only. lease follows, machines available So it as the says, judgment the 1953 prima is not facie Court “[i]f illegality of the practice from which evidence injury arose, Hanover’s asserted then Hanover, having convincing offered no other evidence of illegality, should Ante, recovered at not have all.” at 484.

I judgment think that the 1953 did not have the broad today. effect the Court attributes to it On the contrary, judgment, me, seems evident held unlawful only particular particular kinds leases with provisions, general practice of leasing only.1 United’s only by precedent

The cited the Court for expansive application (a) is Emich Corp. § 5 Motors v. General Motors Corp., 340 558. U. S. That case dealt estoppel of a general jury effect a verdict in criminal case.

We deal here with a civil case which was tried to a federal who judge, thoroughly rendered opinion considered carefully precise decree. One section of decree, broadly 2,§ set out what the court found United’s antitrust violations to be:

“Defendant violated 2 of § Act, Sherman by U. C. A. 2,§ S. monopolizing machinery shoe trade and among commerce the several De- States. fendant violated same by section of the law monopolizing that part of the interstate trade and commerce in tacks, nails, eyelets, grommets, hooks, which is concerned with supplying the de- mand for products by those shoe factories within the United States. . . .” 110 F. 352. Supp., at Another section of the decree, 4, clearly § specified the unlawful means which these antitrust violations had accomplished, been general and United’s leasing practice was not oiie of those means:

“All leases made defendant which include either ten-year term, or a full capacity clause, or deferred 1 1 am not alone in this view. See Cole v. Hughes Co., Tool 924, 932-933; F. 2d Corp. Laitram King Crab, Inc., Supp. 244 F. 18. See also n. infra. during all under which leases charges, payment repair has rendered leases defendant of the the life making subject them without service and other have are declared to segregated charges, separate, whereby monopolized defendant means been Ibid. machinery market.” shoe setting forth the vio- these two sections In addition to some 20 remedial found, decree contained lations in 2. found § the violations enjoined sections. Section found particular types of leases prohibited the Section 6 decree, 5,§ in 4. Another section to be unlawful future provided further and went for lease. for sale as well as be offered machines must effective, to be commonplace “relief, But it is *27 proven limits of viola- narrow the go beyond the must Co., Gypsum 76, 340 90. States v. U. S. United tion,” Inc., United 53; v. Loew’s 371 S. States U. Co., Lomb Bausch & 321 U. S. 724. States Judge opinion written nothing Wyzanski’s 1 in can find that he lease- suggest to found United’s in the 1953 case of the antitrust such, be violation only practice, to way.2 contrary, opin- in To the that illegal any laws anticompetitive effects repeatedly the emphasized ion carefully illegal, held particular types of leases customers purpose requiring the that explained 2 Judge Wyzanski. Neither, apparently, After the trial could opinion holding that the 1953 decree in action filed its court Judge lease-only practice, applied to United’s had condemned denying appli Wyzanski for of his decree. a construction While willing Judge Wyzanski comity, upon grounds of indicated a cation officially requested by judge the trial in his decree if ness to construe hearing Judge During present the course case, Sheridan. government Judge Wyzanski, his own clear to he made views before counsel: here, you being you are not aware from here are

“Now contended, government previous I never that the never occasions supposes Judge the matter was decided?” ruled, as Sheridan in option purchase the future be to given was to create an eventual market second-hand United’s machines and to make the machines available to com United’s they so that petitors, might study and copy them. Supp., F. at 349-350. opinion specifically The stated ordering the reason for United to offer its machines for sale was not to widen the choices available to customers.3 today Appendix

The Court adds as an opinion— like a deus ex Judge Wyzanski’s findings of machina — fact. But it is irrelevant respect (a) findings lease-only describe United’s practice, when opinion neither the decree nor the held that practice to be unlawful. key why gone

The real astray Court has found, this case is to be I think, concluding sen- of Part I opinion. tence Court’s For there really Court reveals that it is trying to determine Wyzanski Judge what in 1953, decided but is determin- ing instead how this Court would decide the issues the 1953 case were before as an original today.4 matter

In my view the 1953 United Shoe decision does not establish liability I Hanover. do not reach, the other therefore, questions dealt with in the Court’s opinion.

I would judgment reverse the Court of Appeals. *28 Supp., language quoted F. Court, 3 110 at 349-350. The ante, why at n. is statement the District Court in sale, part 1953 ordered United to offer its machines but rather argument of the court’s answer United’s that would be unfair competitors only to make sell while its continued to lease. Supp., 110 F. at 350. applicable determining monopolization “When the standard for applied facts, under to these it must be concluded that §2 Appeals District Court holding and the Court of did not err in practice refusing major sell machines illegal monopolization was determined to be in the Government’s (Emphasis added.) ease.”