United States District Court, Northern District of Illinois, E. D
February 1, 1965
SMITH-VICTOR CORPORATION, PLAINTIFF,
SYLVANIA ELECTRIC PRODUCTS, INC., DEFENDANT.
The opinion of the court was delivered by: Decker, District Judge.
The facts underlying the plaintiff's amended complaint can
be stated generally. The plaintiff, one of several
manufacturers, made and sold what is called a "bar light" (or
"light bar") which is used, primarily by the amateur, as a
source of illumination for taking motion pictures; plaintiff's
"bar light" consists of a length of hollow metal bar on which
are mounted two or four incandescent photoflood lamps of 300
to 375 watts. In 1960, the defendant, Sylvania, introduced its
"Sun Gun," which is used for the same purpose as the
plaintiff's "bar light." The "Sun Gun" is a unit resembling a
traditional press-type flash gun, which provides light from a
single halogen light source.
Plaintiff alleges that, as a result of certain actions taken
by the defendant in the marketing of its "Sun Gun," to be
described more fully below, its sales diminished significantly
so that it sustained damages.
In general, the amended complaint alleges the following:
Count I — "In the promotion and sale of said product,
Sylvania made false claims for its `sun gun' and disparaged the
products of the plaintiff by said false statements."
Count II — The advertisements of Sylvania stated that the
"Sun Gun" provided as much light as the plaintiff's bar light;
that this statement was untrue and thereby disparaged the
plaintiff's product by indicating that it produced no more
light than the smaller "Sun Gun."
Count III — The false advertising violated an Illinois
criminal statute prohibiting untrue, deceptive or fraudulent
advertisements (Ill.Rev.Stat. 1959, ch. 38 § 249a), and
violated the Federal Trade Commission Act, 15 U.S.C. § 45(a).
Count IV — The defendant violated the anti-trust laws of the
United States by monopolizing the relevant market through the
conduct set out in Counts I and II and by a course of
acquisition which lessened competition substantially.
Count V — The defendant violated the Lanham Act, Section
43(a) by representing falsely the amount of light which its
General, and drastic, loss of business has been alleged;
loss of specific sales has not been alleged.
This case was reassigned from Judge Robson to this Court.
While he had the case, Judge Robson had occasion to pass on
the four counts of the original complaint, which are
represented by the first four counts of the amended complaint.
On December 12, 1961, Judge Robson denied the defendant's
motions for summary judgment on Counts I and II; he held that
the counts stated claims upon which relief could be granted,
but he stated that the motion for summary judgment could be
renewed if further discovery showed that no genuine issue of
fact existed. Discovery procedures have been pursued, and
summary judgment can now be reconsidered.
Judge Robson granted defendant's motion dismissing Count
III. In regard to
the portion which alleged a claim based on the violation of an
Illinois criminal statute, Ill.Rev.Stat. 1959, ch. 38 § 249a,
he held that the claim must be dismissed because, (a) there is
no provision for civil liability in the statute, and (b) no
civil liability to this plaintiff could be implied from the
statute because the class of persons which the statute
protected was consumers and not competitors. See Heimgaertner
v. Benjamin Mfg. Co., 6 111.2d 152, 155, 128 N.E.2d 691 (1955).
As to the claim based upon Section 5 of the Federal Trade
Commission Act, 15 U.S.C. § 45, Judge Robson ruled that a
private cause of action could not be brought; he relied upon
Moore v. N. Y. Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70
L.Ed. 750 (1926), and Samson Crane Co. v. Union Nat. Sales,
87 F. Supp. 218 (D.Mass. 1949).
I feel that Judge Robson's ruling was correct and can see no
reason to disturb it; therefore, Count III of the amended
complaint must be dismissed.
Count IV of the original complaint was also dismissed by
Judge Robson; this count has been amended significantly and
will be discussed below.
The case is now before me on plaintiff's motion for summary
judgment as to liability on Counts I, II and V, as well as
defendant's motion for summary judgment on Counts I, II, IV
Counts I, II and V.
Counts I, II and V depend upon the same facts and can be
discussed together in considering defendant's motion for
The following facts are uncontradicted:
1. Equal light — The following are representative of the
defendant's advertising and press releases:
"[S]ame light in the area being photographed as
an 18-inch light bar containing R-30 photoflood
"[S]ame usable light as that obtained from four
"[F]ar brighter than any lamp ever before
offered for home movies."
"The Sun Gun is bright. With one quartz iodine
lamp it produces 35,000 center-beam candlepower.
This is the equivalent of the four R-30
photoflood generally used on a movie light bar."
2. Constancy of light output — The defendant has claimed:
(a) That the light output of its light never changed
throughout the life of the lamp.
(b) That a photoflood light output declines as use of the
(c) That the defendant's bulb does not blacken or go dim
with age as does a photoflood bulb.
3. Beam coverage — The defendant claimed:
"The beam * * * floods an area greater than the
coverage of the widest wide angle lens."
4. Rated life — The following are representative of the
defendant's advertising and press releases:
"[It] has a rated life of three times that of a
conventional `R' type Movie Light (like the
"The `Sun Gun' lamp will last much longer than
conventional movie lights. Life is rated,
officially, at 10 hours (as against 3 to 4 hours
for conventional movie lights), but that figure is
conservative. We have lights on our laboratory test
stands right now that have been burning steadily
for twenty hours and more."
5. General statements — The following are representative of
the general statements of comparison which the defendant made
concerning the Sun Gun and the light bar:
"Does away with bulky bar lights forever!"
"No Bar! No Bulk! No Bother!"
"Its ease-of-use would make it extremely
popular with women who wished to photograph their
families indoors but who found a light bar too
hard to handle * * *."
"[D]oes the work of a multiple-light bar * * *
and does it easier and better."
6. At no time did the defendant mention any manufacturer of
light bars by name; the only references were to light bars in
7. Manufacturers other than the plaintiff make and sell
light bars; manufacturers other than the defendant make and
sell single source lights.
8. The plaintiff has not alleged or shown that any specific
customers stopped buying its product as the result of the
defendant's advertising and sales promotion.
Certain facts have not been established, but for the
purposes of the defendant's motion, the Court will assume that
the following could be established by the plaintiff:
1. The Sun Gun does not give light equal to the bar light.
2. The center-beam candlepower of the Sun Gun is less than
3. The light output of the Sun Gun does not maintain a
constancy over the life of the bulb.
4. The beam coverage of the Sun Gun does not give coverage
greater than the coverage of the widest wide angle lens.
5. The rated life of the Sun Gun lamp is not more than two
times that of the light bar bulb.
Common Law Disparagement.
The essence of the plaintiff's claim for disparagement is
stated in its reply brief (p. 35):
"[The] defendant's factual advertising comparing
the Sun Gun with the bar light disparaged the bar
light, in that the Sun Gun was equated with the
bar light on matters such as light output, when
in fact the Sun Gun gave only half the light
output of the typical bar light. The bar light
was lowered to the quality (capacity) level of
the Sun Gun, thereby disparaging the bar light."
In order to bring a suit for disparagement, the plaintiff
must allege and prove that (a) the statements referred to the
plaintiff by name or the public knew that the statements
referred to the plaintiff, and (b) statements were made by the
defendant which disparaged the plaintiff or its product.
National Refining Co. v. Benzo Gas Motor Fuel Co.,
20 F.2d 763, 767, 55 A.L.R. 406 (8th Cir. 1927).
(a) The complaint does not allege, and the facts adduced in
connection with the motion for summary judgment do not show,
that the defendant ever mentioned the plaintiff by name;
therefore, the plaintiff would have to show that the
references to light bars were believed to refer to its light
bars by members of the public exposed to the defendant's
statements. However, I cannot hold, in considering the motion
for summary judgment, that there is no issue of fact in this
(b) Nevertheless, I can come to some conclusion concerning
the disparaging character of the defendant's statements on the
basis of the materials presented in the motions for summary
judgment. The Court, in National Refining Co. v. Benzo Gas
Motor Fuel Co., supra, at page 769, analyzed the cases on this
subject and found that there were three classes of statements:
(1) Those which referred to the rival's goods and imputed to
the rival dishonesty or reprehensible business methods in
connection with the goods; here it is not necessary to allege
special damages since some damage can be presumed;
(2) Those where the statement concerns the quality of the
goods without attributing dishonest or reprehensible business
methods to the manufacturer, in which case special damages had
to be alleged in order to prove that the statements were, in
fact, damaging; and
(3) "Those where the alleged libelous statements amount to
no more than assertions by one tradesman that his goods are
superior to those of his rival. Here no recovery can be had,
though the statements
are false and malicious, and though special damage is
The defendant's statements clearly do not fall within (1).
The defendant argues that the claim under (2) cannot be
sustained because special damages are not alleged; the only
damage alleged is a drastic reduction in the plaintiff's
sales, and the plaintiff does not make allegations which
connect the loss of business to the defendant's statements.
Erick Bowman Remedy Co. v. Jensen Salsbery Laboratories,
17 F.2d 255, 261, 52 A.L.R. 1187 (8th Cir. 1926); Fowler v.
Curtis Publishing Co., 86 U.S.App.D.C. 349, 182 F.2d 377, 379
But even if special damages were properly alleged, the
defendant's motion for summary judgment would have to be
granted. The statements made fall within category (3). All
that the defendant did was to claim equivalence for its
product; even admitting, and I must for the purposes of this
motion, that the defendant's product is inferior to the
plaintiff's product, an unduly favorable comparison is not a
ground for damages. Prosser, Torts, 949 (3d ed.). Nor does
calling the plaintiff's product "bulky" or "hard to handle"
raise these advertisements to the level of an illegal attack
on the plaintiff or its product. Compare Black & Yates v.
Mahogany Ass'n., 129 F.2d 227, 148 A.L.R. 841 (3rd Cir. 1942).
As a matter of law, the defendant's statements do not give
rise to a claim for common law disparagement. The defendant's
motion for summary judgment regarding the portions of Counts
I and II that allege disparagement must be granted.
False Advertising and the Lanham Act.
The defendant sets up two defenses to false advertising. It
contends that whatever advertising was done was within the
puffing privilege. Additionally, the defendant argues that
there is no action unless there was palming off, which is not
the case here.
A. Puffing — To say that a merchant's advertisements are
puffing, states, in effect, that no cause of action can be
based upon the representations. As Dean Prosser states:
"The `Puffing' rule amounts to a seller's
privilege to lie his head off, so long as he says
nothing specific, on the theory that no
reasonable man would believe him, or that no
reasonable man would be influenced by such talk."
Prosser, Torts, 739 (3d ed.).
Plaintiff claims that the defendant's statements were not
within the privilege because some of them were very specific,
especially the claims that the defendant's product produced
35,000 candlepower and lasted ten hours. For the purposes of
the defendant's motion, it must be assumed that these
statements are untrue.
Although the parties tend, at times, to combine false
advertising with disparagement, I feel that a line can be
drawn between the claims put forth which give rise to one or
the other. In disparagement, puffing involves a comparison
between the two products; as long as the comparison attempts
primarily to enhance the quality of the advertiser's product
without being unduly critical about the other's product, there
can be no disparagement. On the other hand, false
advertisement occurs when the advertiser makes statements
about its own product which are false.
In the case of false advertisement, puffing must be analyzed
apart from who may sue; standing to sue is another matter.
Both parties agree that advertising which merely states in
general terms that one product is superior is not actionable.
Statements such as "far brighter than any lamp ever before
offered for home movies," and "the beam floods an area greater
than the coverage of the widest wide angle lens," fall in this
category. Lewyt Corp. v. Health-Mor, 84 F. Supp. 189 (N.D.Ill.
1949), ("New and Revolutionary"); Anheuser-Busch v. DuBois
Brewing Co., 175 F.2d 370 (3d Cir. 1949), ("original" and
"comparable in quality").
Nevertheless, statements which ascribe absolute qualities to
product, such as 35,000 candlepower and 10-hour life, could
give rise to a legal liability if they were not true. These
exceed the traditional bounds of puffing.
B. Standing to sue — Assuming that advertisements were
false, and that they were not covered by the puffing privilege,
who has standing to bring suit must still be determined.
(1) Common law — The courts had to face this question under
the common law and came to the conclusion that a direct injury
was required for a person to obtain damages or an injunction
from the court. The plaintiff cites Restatement of Torts,
Section 761, for the proposition that a competitor can bring
suit. This view is not supported by the cases which apply
In an action for false advertising, a plaintiff does not
have standing to sue unless the defendant has palmed off his
goods as those of the plaintiff, or unless the plaintiff has
a complete monopoly of the goods involved, so that injury can
be readily inferred. American Washboard Co. v. Saginaw Mfg.
Co., 103 F. 281, 50 L.R.A. 609 (6th Cir. 1900), and Mosler
Safe Co. v. Ely-Norris Co., 273 U.S. 132, 47 S.Ct. 314, 71
L.Ed. 578 (1927).
The crux of the reasoning in these two opinions is that, in
an open market, it is generally impossible for the plaintiff
to prove that a customer, who may have been diverted from the
plaintiff and to the defendant by means of false advertising,
would have bought the goods of the plaintiff if the
advertisements of the defendant had been truthful; in other
words, the plaintiff cannot show that he has been damaged. As
Mr. Justice Holmes said (273 U.S. 132, 134, 47 S.Ct. 314):
"It is consistent with every allegation in the
bill and the defendant in argument asserted it to
be a fact, that there are other safes with
explosion chambers beside that for which the
plaintiff has a patent. The defendant is charged
only with representing that its safes had `an'
explosion chamber, which, so far as appears, it
had a perfect right to do if the representation
was true. If on the other hand the representation
was false as it is alleged sometimes to have
been, there is nothing to show that customers had
they known the facts would have gone to the
plaintiff rather than to other competitors in the
market, or to lay a foundation for the claim for
a loss of sales."
Mosler Safe Co. v. Ely-Norris Safe Co., supra, remains the
common law today. Jack Daniel Distillery v. Hoffman Distilling
Co., 298 F.2d 606 (6th Cir. 1962); Chamberlain v. Columbia
Pictures Corp., 186 F.2d 923 (9th Cir. 1951); Lewyt Corp. v.
Health-Mor, 84 F. Supp. 189 (N.D.Ill. 1949); Developments in
the Law — Competitive Torts, 77 Harv.L.Rev. 888, 905-07
Clearly, Sylvania made every effort to distinguish its
product from the plaintiff's product; therefore, there can be
no palming off. Furthermore, since there are many other
producers of light bars and even of devices similar to the Sun
Gun, the plaintiff could not show that it had been damaged by
the defendant's false advertising. Mosler Safe Co. v.
Ely-Norris Co., supra.
The defendant's motion for summary judgment regarding the
portions of Counts I and II that allege false advertising must
be granted. As the result of this disposition, the plaintiff's
cross motion for summary judgment on Counts I and II must be
(2) Lanham Act — The question remains whether the Lanham
Act, Section 43(a), 15 U.S.C. § 1125(a)*fn1 gives the
plaintiff standing to bring suit for pecuniary loss.
The defendant argues that this Count must be dismissed:
(a) Because the Lanham Act refers only to trademarks, and no
trademark is involved;
(b) Even if a trademark is not necessary, Section 43(a),
when read in connection with the legislative history, retained
the common law requirement of palming off; and
(c) Even if Section 43(a) is read literally, insubstantial
exaggeration, analogous to puffing, is not included within the
term false description.
I have already determined that several of the defendant's
statements, such as the claim that the Sun Gun produced 35,000
candlepower, are not insubstantial exaggeration; since these
statements of fact must be considered as untrue for the
purposes of this motion, exaggeration is not a defense to this
The plain words of the statute include unfair competition
without a trademark annexed. The legislative history cited by
the defendant on this point does not negative a federal cause
of action for unfair competition. In fact, Section 45 of the
Lanham Act, 15 U.S.C. § 1127, states that:
"The intent of this chapter is to regulate
commerce within the control of Congress * * * to
protect persons engaged in such commerce against
unfair competition * * *."
I hold that a cause of action is so provided.
The most difficult point is whether the common law
requirement of palming off has been incorporated into Section
43(a). On this point, the courts are in conflict. Compare
Chamberlain v. Columbia Pictures Corp., supra, with L'Aiglon
Apparel v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir. 1954).
Section 43(a) does not refer to palming off or to false
advertising about the plaintiff's product by the defendant; it
does refer to the advertising which a person publishes
concerning his own product. Defendant argues that several
cases which support the plaintiff's position do so only in
dicta, and that they should be restricted to their facts which
provide an analogy to palming off. In these cases, L'Aiglon
Apparel v. Lana Lobell, Inc., supra, and Zandelin v. Maxwell
Bentley Mfg. Co., 197 F. Supp. 608 (S.D.N.Y. 1961), the
defendants were misrepresenting their products as being
identical to the plaintiffs' products; in fact, each alleged
that a photograph of the plaintiffs' product was used by the
defendants to advertise their products. Nevertheless, these
fact situations analogous to palming off do not diminish the
explication and reasoning which each opinion offers.
Furthermore, two cases cited by the parties are in point. In
Gold Seal Co. v. Weeks, 129 F. Supp. 928 (D.C.D.C. 1955),
aff'd. S.C. Johnson & Son Inc. v. Gold Seal Co., 97
U.S.App.D.C. 282, 230 F.2d 832 (1956), cert. denied
352 U.S. 829, 77 S.Ct. 41, 1 L.Ed.2d 50 (1956), the plaintiff sought to
register the trademark "Glass Wax" used in connection with a
liquid cleaner for glass and metal; the compound contained no
wax, and a competitor, which sold cleaning compounds
containing wax, sought to enjoin the use of the word "wax" as
false advertising and sought damages and an accounting as a
result of the alleged false advertising; the Court upheld the
cause of action under Section 43(a), but found that the
evidence did not sustain an injunction nor damages. In
Mutation Mink Breeders Ass'n. v. Lou Nierenberg Corp., 23
F.R.D. 155 (S.D.N.Y. 1959), the plaintiffs, who raised and
sold mink used to manufacture wearing apparel, brought suit
against the defendant corporation which produced synthetic
mink garments labeling them
"Normink;" the complaint brought under Section 43(a) was held
sufficient to withstand motions to dismiss and for summary
judgment. In both of these cases, the plaintiffs sought relief
because the defendants represented their products as having
qualities which the plaintiffs' had, but which the defendants'
No decision in the Seventh Circuit binds me to follow one
line of cases or the other. I must determine which
interpretation of the statute is most reasonable. The plain
language of the statute applies to a case such as the one at
bar. Where the language of the provision is clear, and when
that language is not inconsistent with other provisions of the
statute, then the provision must be considered as it is
written. Mandel Bros., Inc. v. Federal Trade Comm.,
254 F.2d 18 (7th Cir. 1958), reversed on other grounds, 359 U.S. 385,
79 S.Ct. 818, 3 L.Ed.2d 893 (1959).
I agree with the Court in L'Aiglon, when it stated
(214 F.2d 649, at 651):
"We find nothing in the legislative history of
the Lanham Act to justify the view that this
section is merely declarative of existing law.
Indeed, because we find no ambiguity in the
relevant language in the statute we would doubt
the propriety of resort to legislative history
even if that history suggested that Congress
intended less than it said. It seems to us that
Congress has defined a statutory civil wrong of
false representation of goods in commerce and has
given a broad class of suitors injured or likely
to be injured by such wrong the right to relief
in the federal courts. This statutory tort is
defined in language which differentiates it in
some particulars from similar wrongs which have
developed and have become defined in the judge
made law of unfair competition. Perhaps this
statutory tort bears closest resemblance to the
already noted tort of false advertising to the
detriment of a competitor, as formulated by the
American Law Institute out of materials of the
evolving common law of unfair competition. See
Torts Restatement, Section 761, supra. But
however similar to or different from pre-existing
law, here is a provision of a federal statute
which, with clarity and precision adequate for
judicial administration, creates and defines
rights and duties and provides for their
vindication in the federal courts."
The question remains whether Count V states adequately a
claim for damages. This Count, after alleging that the
defendant made false representations, recites the following:
"32. By reason of defendant's wrongful conduct
plaintiff's sales have been drastically
curtailed; its profits have been eliminated and
its good will destroyed. Plaintiff's business has
been rendered valueless.
"Wherefore plaintiff prays that damages may be
awarded against Sylvania in the amount of
The connection between the plaintiff's alleged damages and the
defendant's alleged false representations is stated only
A comparison between common law disparagement, common law
false advertising, and Section 43(a) helps to determine what
connection the plaintiff's loss must have with the advertising
of the defendant.
To state a cause of action for common law disparagement, the
plaintiff had to allege not only that the statements were
disparaging, either per se or by reason of special damages, but
also that the statements referred specifically to the
plaintiff. National Refining Co. v. Benzo Gas Motor Fuel Co.,
20 F.2d 763, at 767 (8th Cir. 1927). The connection had to be
In common law false advertising, the nexus between the
defendant's words and the plaintiff's alleged injury is much
less obvious; thus, the common law
required the close connection of palming off.
The scope of Section 43(a) is much broader than the scope of
common law false advertising; nevertheless, there must still
be a connection between the advertisement and the damages
claimed by the plaintiff. The tenuous connection between what
one says about his own product and the injury to a competitor
probably accounts for the reluctance of some courts to
recognize a cause of action for false advertising which does
not include palming off. See, e. g., Chamberlain v. Columbia
Pictures Corp., 186 F.2d 923 (9th Cir. 1951).
Some of the cases in which the courts have applied Section
43(a) have drawn the distinction between a suit for an
injunction and a suit for damages. In Parkway Baking Co. v.
Freihofer Baking Co., 255 F.2d 641, 649 (3d Cir. 1958), Chief
Judge Biggs said:
"In cases of injunction, however, there seems
to be no requirement that purchasers actually be
deceived, but only that the false advertisements
have a tendency to deceive. This seems to be the
result desired by Congress in that Section 43(a)
confers a right of action upon any person who
`believes that he is or is likely to be damaged'
by defendant's practices. While it would be going
too far to read the requirement of customer
reliance out of this section so far as damages
are concerned, we believe that this is a
recognition that, as with most equitable relief
by way of injunction, Section 43(a) may be
asserted upon a showing of likelihood of damage
without awaiting the actuality. Weil,
Protectibility of Trademark Values Against False
Competitive Advertising, 44 Cal.L.Rev. 527
(1956); Derenberg, Federal Unfair Competition Law
at the End of the Lanham Act; Prologue or
Epilogue? 32 N.Y.U.L.Rev. 1029 (1957)."
See also, Note, Torts: Intentional Interference with Contract
and Unfair Competition; False Advertising as a Basis for a
Civil Action by a Competitor, 9 U.C.L. A. L.Rev. 719 (1962).
Regarding recovery of damages, the Court in Gold Seal said
(129 F. Supp. 928, at 940):
"We also deny relief under Section 35 of the
Lanham Act in the form of an accounting for
profits and damages. Suffice it to say Johnson's
attempt to analogize Section 43(a) to a libel
action, making proof of actual damages
unnecessary, is totally without support in law or
reason. Pecuniary recovery must be
individualized, loss of sales must be shown.
Section 43(a) was to promote fair business
dealings. It was not to provide a windfall to an
overly eager competitor."
Thus, at trial, the plaintiff will have to prove not only
that the advertisements were false, but also that they were
relied upon by potential customers for home movie lighting
equipment, as a substantial reason for making purchases.
Furthermore, in order to recover damages, the plaintiff must
prove that the alleged false advertising caused the plaintiff
to lose sales which it otherwise would have made.
Whether the plaintiff is entitled to relief, and in what
amount, are matters for trial. I hold that Count V meets the
notice pleading requirements of Rule 8(a), F.R.Civ.P.; and
that the general demand for relief, alleging only loss of
unspecified business, is sufficient so that a motion to
dismiss cannot be granted. Furthermore, the statute does not
indicate that Section 43(a) requires damages to be
specifically alleged as special damages; for this reason, Rule
9(g), relating to the pleading of special damages, does not
Plaintiff's cross motion for summary judgment on the issue
of false advertising regarding Count V must also be denied; on
the basis of the evidence presented concerning plaintiff's
motion, it is clear that there are genuine issues as to
material fact; for example, certain admissions
made by the defendant's personnel may be important evidence at
trial, but I do not think that they establish conclusively
that the advertising was false.
The original Count IV, based solely on violation of Section
2 of the Sherman Act, 15 U.S.C. § 2, was dismissed by Judge
Robson on December 5, 1961. At that time, Judge Robson said:
"No facts are alleged to indicate either an
intent on the part of the defendant to monopolize
the trade, or the probability that defendant may
achieve a monopoly."
Mackey v. Sears, Roebuck & Company, 237 F.2d 869 (7th Cir.
1956) was the basis for this ruling.
Judge Robson granted leave to amend; the amended complaint
is now before this Court. Amended Count IV, in general,
alleges the following:
(a) The parties engage in interstate commerce.
(b) The defendant is a wholly-owned subsidiary of General
Telephone and Electronics Corporation.
(c) General Telephone and Electronics Corporation has
acquired many manufacturing businesses in many fields relating
to electronics and to telephone service. Defendant was
acquired by General Telephone in 1959; some of the assets
acquired by General Telephone were transferred to Sylvania.
Sylvania has also been acquiring other companies and the
assets of other companies since 1936.
(d) The defendant has great wealth and market power.
(e) The plaintiff is a small family-owned enterprise.
(f) "Sylvania determined to employ its market power to
destroy the plaintiff and other manufacturers of lighting
equipment for amateur motion picture photographers."
(g) Four overt acts of the attempted monopolization are
specifically mentioned: (1) the "Sun Gun" was designed and
manufactured, (2) huge sums were spent advertising the "Sun
Gun," (3) the advertising intentionally misrepresented the
defendant's product and disparaged the plaintiff's product,
and (4) the defendant reduced its prices sharply in the late
summer of 1961 to clog the channels of distribution ahead of
normal peak sales.
(h) "Defendant Sylvania's conduct was affected with a
dangerous probability of success in achieving its intended
monopoly. In fact, defendant Sylvania has succeeded in
crippling its competitors and greatly reducing their sales.
The course of conduct engaged in by defendant Sylvania has
caused it to gather to itself a huge proportion of the market
in lighting equipment for amateur motion picture
The amended complaint also alleges a new claim based upon
Section 7 of the Clayton Act, 15 U.S.C. § 18, that "The
acquisitions above described" emphasized defendant's wealth and
economic power and resulted in a substantial lessening of
Damages are alleged in the following manner:
"By reason of defendant's wrongful conduct
plaintiff's sales have been drastically
curtailed; its profits have been eliminated and
its good will destroyed. Plaintiff's business has
been rendered valueless."
The Count ends with a prayer for treble damages, attorneys'
fees and divestiture.
A. Section 2 of the Sherman Act.*fn2
Judge Learned Hand wrote: "In order to fall within § 2, the
monopolist must have both the power to monopolize, and
the intent to monopolize." United States v. Aluminum Co. of
America, 148 F.2d 416, 432 (2d Cir. 1945). The amended
complaint does allege an intent to monopolize coupled with
certain overt acts of the attempt; however, the allegations
concerning the defendant's power to monopolize are stated in
the broadest general manner. As Judge Robson said, supra, "No
facts are alleged to indicate * * * the probability that
defendant may achieve a monopoly." (Emphasis added.) The
amended Count IV still does not provide facts to supplement the
bare allegation that the defendant may achieve monopoly.
However, I still must face the problem of applying the
liberal federal rules on notice pleading to this case. See
F.R.C.P. 8. The view generally, 2 Moore, Federal Practice
¶ 8.17  (2d ed. 1964), and in the Seventh Circuit, Sandidge
v. Rogers, 256 F.2d 269 (1958), is that there are no special
rules for anti-trust cases, but that Rule 8 of the Federal
Rules of Civil Procedure applies as it is written.
All that is required of a complaint under Rule 8(a) is a
statement of jurisdiction, a demand for relief, and "(2) a
short and plain statement that the pleader is entitled to
relief * * *." In John Walker & Sons v. Tampa Cigar Co.,
197 F.2d 72, 73 (5th Cir. 1952), cited with approval in Sandidge
v. Rogers, supra, the court said:
"It is also elementary that a complaint is not
subject to dismissal unless it appears to a
certainty that the plaintiff cannot possibly be
entitled to relief under any set of facts which
could be proved in support of its allegations."
I feel that it would serve no useful purpose to require the
plaintiff to amend its complaint for another time; the present
amended complaint gives the defendant notice of the substance
of the wrong with which it is charged. Nevertheless, I also
realize that discovery in anti-trust cases can be very
expensive. For this reason, I feel that the scope of discovery
must be limited initially.
On November 16, 1962, discovery under Count IV of the
amended complaint was foreclosed by order of Judge Robson.
Before I will allow discovery to be reopened, the parties must
meet with me in a pre-trial conference. The first stage of
discovery will be limited to determining whether the defendant
controls a share of the relevant market which could give rise
to a conclusion that it has the power to monopolize that
market. At the conference, each side will present a list of the
specific discovery proceeding in which it intends to engage.
B. Section 7 of the Clayton Act.
Section 7, 15 U.S.C. § 18, refers to the acquisition by one
company of interests in other companies "where in any line of
commerce in any section of the country, the effect of such
acquisition may be substantially to lessen competition, or to
tend to create a monopoly."
The defendant argues that the complaint based on Section 7
cannot be upheld, either because there is no private action
for divestiture and treble damages, or because, even if there
is such a private action, allegations of fact connecting the
acquisitions to the lessening of competition are not present.
As to one ground, the defendant is clearly right; nowhere in
the amended Count IV does any allegation set out the nexus
between the acquisitions by the defendant and the alleged
lessening of competition. In absence of such allegations, the
part of Count IV depending upon the Clayton Act must be
dismissed for failure to state a claim upon which relief could
be granted. F.R.C.P. 12(b)(6). The plaintiff is granted
fifteen days to amend its Count IV, if it so desires.
Because of the above disposition of the Clayton Act portion
of amended Count IV, it is not appropriate to consider at this
time whether a private cause of action for damages can be
based upon Section 7. See Gottesman v. General Motors Corp.,
221 F. Supp. 488 (S.D.N.Y. 1963), interlocutory appeal denied
(2d Cir. 1964), cert. denied 379 U.S. 882, 85 S.Ct. 144, 13
L.Ed.2d 88 (10/19/64);
Highland Supply Corp. v. Reynolds Metals Co., 327 F.2d 725,
728, n. 3 (8th Cir. 1964).
For the reasons detailed above, I have on this day entered
(1) Granting defendant's motion for summary judgment on
Counts I and II; denying plaintiff's cross-motion for summary
judgment on Counts I and II; and dismissing Counts I and II;
(2) Denying plaintiff's motion for summary judgment as to
liability on Count V and defendant's motion for summary
judgment on Count V.
(3) Denying defendant's motion for summary judgment on Count
IV, but dismissing that part of Count IV depending upon the
Clayton Act for failure to state a claim upon which relief
could be granted; plaintiff is granted fifteen days to amend
Count IV; and
(4) Setting a pre-trial conference with respect to discovery
under Count IV for Friday, February 19, 1965, at 2:00 o'clock