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COMMONWEALTH EDISON CO. v. ALLIS-CHALMERS MFG. CO.

United States District Court, Northern District of Illinois, E.D


July 19, 1965

COMMONWEALTH EDISON COMPANY ET AL., PLAINTIFFS,
v.
ALLIS-CHALMERS MANUFACTURING COMPANY ET AL., DEFENDANTS.

The opinion of the court was delivered by: Robson, District Judge.

  The above captioned actions are part of the more than nineteen hundred related treble damage antitrust actions involving the electrical equipment industry which were filed throughout the country during the early 1960's.*fn1 Plaintiffs in the instant cases are seeking damages for alleged overcharges on their purchases of power switchgear assemblies.

Seventeen of the twenty-one power switchgear assembly actions originally brought in this District have been dismissed. Twenty-seven additional power switchgear assembly cases have been transferred here from six other districts, one of which has been dismissed, leaving thirty suits pending. All of these actions have been consolidated for pre-trial purposes, and this Court has set one or more of them for trial on October 4, 1965.

Plaintiffs have moved pursuant to Rules 11 and 12(f), F.R.Civ.P., to strike defendant I-T-E Circuit Breaker Company's defense of economic coercion.*fn2 Extensive pre-trial discovery has been completed and the cases are now entering the final pre-trial stages. Efficient handling of this complex litigation requires that the real issues in dispute be sharply delineated, and the immaterial issues eliminated. Though motions to strike are not favored by the federal courts,*fn3 they provide a useful and appropriate tool where the parties disagree only on the legal implications to be drawn from uncontroverted facts, or where questions of law are involved. To this end the Court on March 2, 1965 entered Local Pre-Trial Order No. 4 which required I-T-E to file "a detailed written statement stating in separately numbered paragraphs all facts and contentions which relate to or bear on your defenses of `coercion, duress and compulsion * * *' and your inability to refrain from participating in the alleged conspiracy in this product line, or any attempts made by you to withdraw from the conspiracy in this product line."*fn4

The Court has concluded that plaintiffs' motions so strike should be granted for three reasons. First, economic coercion is not a legal defense to treble damage actions. Second, I-T-E has failed to assert facts sufficient to meet the legal criteria of economic coercion as developed through judicial decision. Third, this sanction should be imposed on I-T-E for failure to comply with Local Pre-Trial Order No. 4 and subsequent directions of the Court.

I. Legal Sufficiency of the Economic Coercion Defense in Treble Damage Actions.

I-T-E's coercion defense attacks the heart of plaintiffs' causes of action. For plaintiffs to recover from I-T-E in these cases they must first prove that I-T-E has violated the antitrust laws. The theory of the coercion defense is that a party who is forced to participate in an illegal conspiracy has not violated the antitrust laws. I-T-E alleges that its participation in the conspiracy resulted from economic coercion by the larger electrical equipment manufacturers, "(General Electric, Westinghouse and, from time to time, Allis-Chalmers)",*fn5 and accordingly, that it has not committed the tort necessary to create liability to plaintiffs.

This result would overlook the significance of the following discussion in United States v. Paramount Pictures, Inc., et al., 334 U.S. 131, 161, 68 S.Ct. 915, 931, 92 L.Ed. 1260 (1948) (an equitable proceeding):

    "There is some suggestion on this as well as on
  other phases of the cases that large exhibitors with
  whom defendants dealt fathered the illegal practices
  and forced them onto the defendants. But as the
  District Court observed, that circumstance if true
  does not help the defendants. For acquiescence in an
  illegal scheme is as much a violation of the Sherman
  Act as the creation and promotion of one." (Emphasis
  supplied.)

Although it may be arguable that the economic coercion defense is less applicable in an equitable suit for remedial relief than in a punitive criminal or treble damage action, this Court has concluded that Paramount is binding precedent and, accordingly, that plaintiffs' motions to strike should be granted.*fn6 I-T-E attempts to distinguish the word "acquiescence", used in Paramount, from the "coercion, duress, and compulsion" inflicted upon it. The defense asserted in Paramount was that "illegal practices" were "forced" upon certain of the defendants. Similarly, here it is asserted that I-T-E has been coerced into various actions. The attempt to distinguish between "forced acquiescence" and "coercion" is pure semantics.

The defense of economic coercion has not barred recovery by treble damage plaintiffs in any case reported to date. The Ninth Circuit commented on the defense in two treble damage actions. The first of these, Flintkote Co. v. Lysfjord et al., 246 F.2d 368, 375 (C.A.9 1957), was a suit by an acoustical tile contractor against a tile supplier (Flintkote), a contractor's trade association and certain of its members. The complaint charged a conspiracy to monopolize the acoustical tile industry and a threat by the Association and its members to boycott Flintkote's products unless it discontinued supplying plaintiff. Holding that there was sufficient evidence to support the jury's findings of Flintkote's participation in the conspiracy, the Ninth Circuit relied on Paramount and stated:

    "* * * There was no direct evidence that Flintkote,
  as a seller of tile and not an installer,
  participated directly in that original conspiracy
  between the dealers, but there was evidence from
  which an inference might have been drawn by the trier
  of fact warranting the belief that the defendant
  Flintkote, through acting as supplier to the
  conspirators on some of the jobs, could have acquired
  knowledge of the conspiracy; and there was evidence
  which warranted the conclusion that Flintkote, with
  such inferred knowledge, participated in the
  conspiracy, and aided it, by its refusal to sell to
  plaintiffs. If that refusal was not the result of the
  exercise of ordinary business judgment, but the
  result of threats made and pressure applied by
  members of the known conspiracy to and against
  Flintkote, the act of refusing to sell would
  constitute knowing participation. Because one is
  coerced by economic threats to participate in or aid
  and abet an illegal scheme does not excuse the
  actor."

The Ninth Circuit made no reference to Paramount in Fox West Coast Theatres Corp. et al. v. Paradise Theatre Building Corporation, 264 F.2d 602, 605 (C.A.9 1958) (treble damage suit against six motion picture producers-distributors-exhibitors) which expressed the opposite view:

    "* * * Once it is found that there was substantial
  evidence that these three organizations combined
  unlawfully to discriminate against Paradise, then
  evidence of action by others tending to produce the
  unlawful result may be corroborative of the charge,
  even though these others may not be found eventually
  to have been conspirators. The jury may clear some
  participants in parallel action for lack of knowledge
  of the scheme or unlawful design or because they were
  coerced. Thus, although each may have been a
  participant in acts which tended to effectuate the
  result complained of, the jury may have found them
  innocent tools of the conspirators whom the jury
  found unlawfully formulated, carried on and did overt
  acts charged to bring about the isolation of
  Paradise. The jury had a right and the duty to
  consider the record as a whole and determine who, if
  any, were participants in an unlawful combination."

The court's discussion in both cases is dictum. In Flintkote, supra, coercion was not advanced as a defense but was introduced by plaintiff to prove defendant's knowledge of and knowing participation in the conspiracy. In Fox West Coast Theatres, supra, the Ninth Circuit considered the sufficiency of the evidence (i.e., inferences to be drawn from parallel behavior) to sustain the verdict finding only three of six defendants liable. The court's language in the latter case means only that where proof of conspiracy is circumstantial, it is for the jury to decide whether a particular act resulted from participation in the conspiracy, or from coercion which made the defendants
the "innocent tools of the conspirators. * * *"*fn7

II. I-T-E Has Failed to Assert Facts Sufficient to Meet the Legal Criteria of Economic Coercion.

Because of the absence of authority directly on point this Court chose not to rule on the sufficiency of the economic coercion defense in a factual vacuum. The factual background was to be provided by the responses ordered to Local Pre-Trial Order No. 4. I-T-E's response was intended to serve as an offer of proof for all the facts and contentions in support of this defense.*fn8 Its response does not assert facts sufficient to meet the basic criteria of coercion as established by judicial decisions. These criteria include: (1) the coerced party was deprived of its free will; (2) it had no available alternative course of action; (3) the threatened consequences were such that the remedy at law was insufficient; (4) the threatened acts were illegal; and (5) the coercion was exercised by the party against whom the defense is asserted. (6) In addition, the party asserting the defense must have promptly disavowed the involuntary acts or acquiescence will be implied as a matter of law.

  (1) I-T-E has failed to show any instances where it was
      deprived of free will.

Coercion principles which have long been applied in the criminal law have been extended to other branches of the law by modern decisions. Business compulsion is now recognized as a species of duress.*fn9 There is no litmus paper test indicating when such coercion occurs. Rather, the coercive acts must be examined to determine their effect on the complaining party. Duress is present only when the individual is deprived of his free will and judgment. As stated in Winget v. Rockwood et al., 69 F.2d 326, 330 (C.A.8 1934) (suit to rescind a contract for the sale of stock):

    "* * * There is no legal standard of resistance
  with which the victim must comply at the peril of
  being remediless for a wrong done, and no general
  rule as to the sufficiency of facts to produce
  duress. * * * In other words, duress is not to be
  tested by the character of the threats, but rather by
  the effect produced thereby on the mind of the
  victim. The means used, the age, sex, state of health
  and mental characteristics of the victims are all
  evidentiary, but the ultimate fact in issue is
  whether such person was

  bereft of the free exercise of his will
  power. * * *"*fn10

I-T-E has not demonstrated the absence of free choice necessary to constitute coercion. On the contrary, the statement in response to Local Pre-Trial Order No. 4 repeatedly relates instances of I-T-E's independent action. For example:

    "8. In subsequent meetings of competitors at about
  this time [1931] and during the year or two which
  followed, General Electric and Westinghouse
  continually urged Scott [I-T-E's President] to make
  I-T-E's prices and terms and conditions of sale
  similar to those of General Electric and
  Westinghouse. Uniformity was insisted upon even for
  the items where I-T-E's price was higher than its
  competitors'. When Scott refused to lower I-T-E's
  price on such items, General Electric said that it
  would raise its prices to achieve the desired
  uniformity notwithstanding the possible substantial
  loss of business it was getting in that product line,
  a position from which Westinghouse did not
  dissent. * * **fn11 (Emphasis supplied.)

    "33. In November 1952 I-T-E submitted a quotation
  for the 440 volt auxiliary switchboards for CVA 60,
  the aircraft carrier Saratoga. General Electric had
  been awarded similar equipment on the first vessel of
  this class and I-T-E planned to get the second, if
  possible. When Scott instructed I-T-E's Sales
  Manager, Fred Getz, to make every effort to obtain
  the job, Getz told him that, based upon his
  conversations with General Electric and Westinghouse
  and his past experience, there was absolutely no
  doubt that General Electric and Westinghouse would
  not permit I-T-E to take it and, if I-T-E was
  competitive, there would be severe commercial
  repercussions affecting other business. In spite of
  the warning, Getz was instructed to proceed and I-T-E
  got the job at $1,400,000 as compared with General
  Electric's bid of $1,800,000 for the first vessel of
  this class.*fn12 (Emphasis supplied.)

    "67. Notwithstanding discussions among competitors
  at the Traymore meeting referred to in paragraph 57
  and at other meetings, I-T-E personnel were
  instructed to run I-T-E's business their own way. For
  example, when Buck reported to Scott the proposed 4%
  allocation of sealed-bid business, Scott told him to
  forget it and Buck gave similar instructions to his
  subordinates."*fn13 (Emphasis supplied.)

In the above instances, I-T-E acted in direct defiance of the larger manufacturers' commands. Defendant cannot claim in one breath that it lost its will by "the threats and acts of coercion [which] are largely to be found in a mosiac of incidents stretching in time throughout virtually the entire history of the electrical manufacturing industry * * *,"*fn14 and in the next assert that it was an aggressive competitor exercising its own business judgment. The examples cited by I-T-E lead inevitably to the conclusion that it acted freely at all times to pursue those goals which it believed were in its best interests.

  (2) I-T-E has failed to show that acquiescence was the only
      available alternative.

Although coercion need not result from a single act,
*fn15 the threatened party to successfully urge the defense must prove that it was deprived of any opportunity for alternative action*fn16 and that the threat was imminent and certain. In A/S Glittre v. Dill, 152 F. Supp. 934, 938 (S.D.N.Y. 1957) (suit to recover a fine), the coerced payment was made to secure clearance papers needed for docking in U.S. ports. The court granted defendant's motion for summary judgment, finding that duress did not exist as a matter of law where the payment was made five weeks prior to the vessel's docking.

    "* * * Hence, plaintiff's payment was anticipatory.
  It was not induced by a present, immediate and urgent
  necessity, but by a desire to avert a prospective and
  contingent event which presumably might take place in
  five weeks."

I-T-E has failed to cite a single instance in the 1940's or 1950's where its independent actions resulted in prompt retaliation against it by the major producers. This failure of proof is critical in view of the numerous examples of such actions described in its responses. Many years of participation in a conspiracy cannot be justified on grounds of coercion without a showing that harm resulted from attempts to throw off the illegal yoke.

  (3) I-T-E at all times had the alternative of a meaningful
      legal remedy.

An adequate remedy at law will defeat the defense.*fn17 In Hartsville Oil Mill v. United States, 271 U.S. 43, 49, 46 S.Ct. 389, 70 L.Ed. 822 (1926) (contract suit against the Government), the Government moved to modify the contract (pursuant to its provisions) and threatened default unless the new contract was accepted within one hour. The Supreme Court held that "[b]efore the coercive effect of the threatened action can be inferred, there must be evidence of some probable consequences of it to person or property for which the remedy afforded by the courts is inadequate."

I-T-E cannot show its remedy at law was insufficient. Two legal remedies existed which it failed to pursue to fruition. The first was to bring suit for injunctive and/or treble damage relief under the Clayton Act.*fn18 The second was to report the illegal activities to the Justice Department. In 1940 I-T-E, through Mr. Scott, its President, took the initial step in this direction, and reported to the Justice Department that antitrust violations were occurring in the circuit breaker industry. Thurman Arnold, then Assistant Attorney General, responded requesting that Mr. Scott "* * * communicate with me [Arnold] concerning this matter."*fn19 Mr. Scott did not communicate further. His present explanation is that he "* * * rather expected they [the Justice Department] would approach me further, which they never did."*fn20 He decided "with the changed circumstances accompanying the war * * * not to risk the competitor retaliation which he expected might follow from pursuing such a complaint."*fn21

I-T-E has failed to establish that its two legal remedies were worthless, Although the possibility existed that retaliation might occur, the clear evidence of I-T-E's corporate vigor since discovery of the conspiracies argues the contrary. World War II afforded I-T-E an ideal opportunity to free itself of the alleged coercion. The favorable market for electrical equipment at the time*fn22 and its expansion into defense activities made I-T-E particularly invulnerable to retaliation.

(4) I-T-E has failed to show any illegal threats.

Unless the threatened act is illegal, it does not constitute coercion.*fn23 This principle was succinctly stated in Automatic Radio Mfg. Co. Inc. v. Hazeltine Research, Inc., 176 F.2d 799, 804 (C.A.1 1949) (suit for royalties under a patent license allegedly entered into under threat of an infringement suit):

    "* * * Not all economic pressure constitutes
  `duress' rendering a contract voidable. * * * [T]he
  pressure exerted must be wrongful; * * * a threat to
  resort to civil litigation is not such duress as to
  justify rescission of a transaction induced thereby
  even though there is no legal right to enforce the
  claim, * * *." (Emphasis supplied.)

There is no showing that the coercion allegedly exerted was illegal. I-T-E argues that General Electric's sales policy of meeting the lowest price quoted by a competitor "went beyond the requirements of fair competition for any single sale since that policy has as a substantial purpose the establishment of a uniform price and the elimination of price competition on succeeding transactions."*fn24 The meeting of competitors' prices may be completely legal. A major aim of the antitrust laws is an open economy in which the meeting of competitors' prices is the rule rather than the exception. I-T-E has not established that General Electric would have violated any law by carrying out its threats.

(5) The alleged coercion did not stem from plaintiffs' acts.

A further ground for striking I-T-E's coercion defense is that the duress did not emanate from the plaintiffs in these actions. The party asserting the defense must demonstrate that duress resulted from the opposing party's wrongful and oppressive conduct. I-T-E has neither alleged nor proved such facts.

In W.R. Grimshaw Co. et al. v. Nevil C. Withrow Co., Inc., 248 F.2d 896, 904-905 (C.A.8 1957) (action by a subcontractor for extras allegedly not covered by the contract), one element of the alleged coercion consisted of defendant's threat to cancel the subcontract for plaintiff's non-performance, which in turn would have resulted in a cancellation charge to plaintiff by a sub-subcontractor. The court stated:

    "An examination of the cases in the field of duress
  and economic coercion makes it clear that three
  elements are common to all situations where
  actionable duress has been determined to exist: (1)
  that one side involuntarily accepted the terms of
  another; (2) that circumstances permitted no other
  alternative; and (3) that said circumstances were the
  result of coercive acts of the opposite party. * * *

    "Withrow [the subcontractor] contended that the
  Ware Laboratories [the sub-subcontractor] might
  impose a cancellation charge if Grimshaw [the prime
  contractor] cancelled the contract, and that because
  of his financial condition, this might bankrupt him.
  But the contention seems to be without merit, in that
  the alleged danger of a cancellation charge by a
  third party cannot be made the basis of a claim of
  duress between contracting parties. * * *"*fn25
  (Emphasis supplied.)

Threats of third parties cannot be used by I-T-E as a defense against plaintiffs' actions.

  (6) I-T-E's failure to disavow the coercion promptly
      constitutes acquiescence.

Failure to disclaim an involuntary act upon cessation of the coercion constitutes acquiescence which bars the defense. In Barnette v. Wells Fargo Nevada National Bank et al., 270 U.S. 438, 444, 46 S.Ct. 326, 328, 70 L.Ed. 669 (1926) (suit to cancel a deed three years after the conveyance), the Supreme Court held the contract valid based on plaintiff's delay in asserting coercion and disavowing the contract:

    "* * * Nor need we consider any of the numerous
  defenses interposed, except the acquiescence of
  appellant in her deed, and her delay in asserting her
  rights, which, in the circumstances, are decisive of
  the case.

    "* * * If there was duress here, appellant, as soon
  as she was relieved from its operation, was in a
  position either to disaffirm her conveyance or to
  allow it to stand undisturbed as the free and formal
  disposition of her rights. * * * In that situation
  she was subject to the requirement of equity that an
  election to disaffirm * * * must be exercised
  promptly."*fn26

I-T-E was obligated to disclaim its participation in the electrical equipment conspiracies at the earliest opportunity or be foreclosed from pleading the defense. I-T-E could have repudiated the conspiracy in those instances where it defied the larger manufacturers.*fn27 After the electrical equipment indictments in Philadelphia, it had ample opportunity to disavow by asserting the defense in the Government's suits, or by cross-claiming against other defendants in the private damage actions.

III. I-T-E Has Failed to Comply with Local Pre-Trial Order No. 4.

Additional grounds for striking I-T-E's coercion defense is its failure to comply with Local Pre-Trial Order No. 4. Rule 16, F.R.Civ.P., authorizes pre-trial proceedings to aid in the disposition of lawsuits by simplifying and reducing the issues in dispute. Not only are the courts authorized to limit the issues, but it is their duty to do so. As stated in Brinn v. Bull Insular Lines, Inc., 28 F.R.D. 578, 579 (E.D.Pa. 1961) (a maritime case in which a pre-trial order was entered limiting the issues to whether defendant or third party defendant was liable):

    "If the pre-trial procedure is to have any
  meaningful purpose whatever, it is incumbent on the
  Court to narrow the issues reasonably and with
  discretion. * * *"*fn28

Pre-trial is particularly needed in protracted antitrust litigation.*fn29 In United States v. E.I. Du Pont De Nemours & Co., 11 F.R.D. 308, 310 (D.C.D.Del. 1951), the court observed:

    "The issues pertaining to any action should be
  crystallized by the pleadings and by pretrial
  procedures. This seems specially apt to the trial of
  an antitrust suit involving complex facets of an
  industry under scrutiny. * * *"

Local Pre-Trial Order No. 4 was designed to crystallize the areas of dispute respecting I-T-E's coercion defense. It required a detailed statement of I-T-E's coercion evidence under nineteen separate topic headings. Defendant's response is completely insufficient and does not meet even minimum standards of compliance.

Paragraphs (3)(c) (iv) and (v) required I-T-E to describe "all understandings and agreement * * * reached at or as a result of any such [coerced] communication, conversation or meeting" and "each course of conduct undertaken by you as a result of any such communication, conversation or meeting * * *." As the following examples show, the response to these paragraphs is particularly deficient:

    A. Paragraph 15 of I-T-E's Statement alleges that
  Tom Watts of Westinghouse told Max Scott in 1934 that
  I-T-E "had better conform to a uniform price policy"
  for circuit breakers. The statement does not indicate
  whether I-T-E agreed to a uniform price policy, or
  what practice it in fact followed.

    B. Paragraph 17 alleges that in 1936 R.W. Davis of
  Allis-Chalmers instructed Mr. Scott what price I-T-E
  should quote on a high tension bus job for Carnegie
  Steel Company. The statement does not relate I-T-E's
  response to this order, or the bid I-T-E submitted.

    C. Paragraphs 18 and 19 allege that I-T-E received
  warnings in the mid-1930's about charging lower
  prices and upsetting the price levels on sales to
  steel mills and certain utilities. The statement does
  not reveal I-T-E's reaction to these warnings, or the
  policy followed.

    D. Paragraph 29 alleges that shortly after World
  War II Mr. Tinnerholm of General Electric instructed
  I-T-E to protect General Electric's bid on a Ward's
  Island New York sewerage plant job. There is no
  indication whether I-T-E agreed to and did bid higher
  than General Electric.

    E. Paragraph 31 alleges that in 1947 Mr. Tinnerholm
  told Mr. Scott that General Electric was content to
  leave the pricing of power switching equipment to the
  smaller manufacturers, but that if they failed to

  maintain price stability, General Electric would take
  over policing the product line. The statement gives
  no information on whether I-T-E charged stable prices
  and policed the prices of other manufacturers.

    F. Paragraphs 45 and 46 allege that in early 1958
  I-T-E attended a series of competitors' meetings
  concerning quoting book prices on electrical
  equipment (particularly switchgears). Initially, H.L.
  Buck of I-T-E refused to agree with competitors'
  proposals, but further meetings were held. The
  statement fails to reveal if I-T-E maintained its
  original position, if it capitulated and agreed to
  quote book prices, and if in fact subsequent sales
  were made at book.

    G. Paragraph 49 alleges that in late 1957 or early
  1958 I-T-E was told to raise its power switchgear
  assembly prices or face a general lowering of the
  price level. No information is provided on I-T-E's
  reaction when the price level did in fact drop.

I-T-E predicated its coercion evidence with the qualification that it did not "provide every matter and every detail referred to in Local Pre-Trial Order No. 4 * * * [but that it set] forth the substance of the facts and contentions which are at least illustrative of I-T-E's position. * * *"*fn30 Local Pre-Trial Order No. 4 was explicit in requiring "all facts and contentions" relating to I-T-E's defense. Illustrative examples are not sufficient to determine submissibility when a complete offer of proof has been required.*fn31

I-T-E's non-compliance in its original statement resulted in the Court's directing the filing of an amended coercion statement*fn32 within two weeks. The amendment, when filed, consisted of only three pages and was confined to specific examples of non-compliance which the plaintiffs' statement had pointed out. Subsequently, I-T-E was allowed two weeks in which to file a reply to plaintiffs' second statement in response to Local Pre-Trial Order No. 4. It did not avail itself of this opportunity. Thus, not only has I-T-E failed to comply with Local Pre-Trial Order No. 4, but it has made no meaningful effort to provide the Court with the information available and necessary for this decision.

I-T-E has been given every opportunity to submit a complete and sufficient statement. When a party does not comply with the court's order, there is no alternative but to apply sanctions. It is clear that courts have, as indeed they must have, authority to regulate their practice and compel compliance with their reasonable mandates. This principle is codified in Rules 37 and 41, F.R.Civ.P., which specify sanctions for failure to comply with orders. The courts also have inherent power to enforce their orders. As stated in Link v. Wabash R.R. Co., 291 F.2d 542, 546 (C.A.7 1961), aff'd. 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962) (where the district court dismissed an action on its own motion for failure to prosecute):

    "Courts may exercise their inherent powers and
  invoke dismissal as a sanction in situations
  involving disregard by parties of orders, rules or
  settings. * * *"

For this Court to do otherwise would be unjust to plaintiffs in these cases and to litigants in other actions pending before it. It is apparent that this defense was without foundation and was dilatory. In view of the time and effort that has been required to reach this conclusion, the Court would consider a motion to assess attorneys' fees and costs reasonably expended by plaintiffs.

IV. Order

For the foregoing reasons, it is ordered that:

1. Plaintiffs' motions to strike all portions of I-T-E's defenses of economic coercion in the actions listed in the caption to this memorandum are granted.

2. The pleadings in these actions are deemed modified to conform with the rulings on these motions without need for further formal amendment.

Appendix A

LOCAL PRE-TRIAL ORDER NO. 4

A pre-trial conference having been held, counsel having been heard, and due deliberation having been had, it is ordered severally in the above actions that:

(1) "Identify" when used as to an individual person means to state his full name and present address, if known, and his present or last known business position or affiliation. "Identify" when used with reference to a document means to state the date and author, type of document (e.g., letter, memorandum, telegram, chart, etc.) or some other means of identifying it and its present location or custodian. If any such document was, but is no longer, in the answering party's possession or control, state what disposition was made with respect to it.

(2) As used herein, the term "document" shall mean any book, pamphlet, periodical, letter, report, memorandum, record, study, working paper, paper, chart, graph, index, data sheet, data processing card or table, or any other writing, except those documents prepared solely for the purpose of this litigation.

(3)(A) In this paragraph, "you" or "your" shall mean I-T-E Circuit Breaker Company, its domestically domiciled subsidiaries and its merged or acquired predecessors, its present and former officers, agents and all other persons acting on behalf of I-T-E Circuit Breaker Company, or such subsidiaries or such predecessors, including all past or present employees exercising discretion, making policy and making decisions or participating in any of the foregoing functions with respect to the sale, pricing, marketing or manufacturing of power switchgear assemblies or components thereof;

(B) On or before March 9, 1965, you shall file with this Court a detailed written statement stating in separately numbered paragraphs all facts and contentions which relate to or bear on your defenses of "coercion, duress and compulsion" (First and Fourth Defenses) and your inability to refrain from participating in the alleged conspiracy in this product line, or any attempts made by you to withdraw from the conspiracy in this product line;

(C) Such written statement shall state the facts in sufficient detail for the Court to determine the submissible issues, to distinguish between those facts which you contend on the basis of the complaint or otherwise are admitted, and those which are contested, to determine the admissibility of the evidence offered to prove each of such facts;

(D) Such written statement shall:

      (i) state the location and date of all
          communications, conversations and meetings
          which relate to or bear on such defenses;

     (ii) identify the parties to or the participants
          in each such communication, conversation, or
          meeting;

    (iii) describe fully the circumstances and
          substance of each such communication,
          conversation or meeting;

     (iv) describe fully all understandings and
          agreement (whether explicit or tacit) reached
          at or as a result of any such communication,
          conversation or meeting;

      (v) describe fully each course of conduct
          undertaken by you as a result of any such
          communication, conversation or meeting;

     (vi) identify and describe fully the contents of
          all documents which relate to, bear on or
          reflect the details of any such
          communication, conversation or meeting;

    (vii) set forth all facts respecting your
          inability to refrain from participating in
          the alleged conspiracy in this product line;

   (viii) set forth your contentions respecting your
          inability to refrain from participating in
          the alleged conspiracy in this product line;

     (ix) set forth all facts respecting any attempts
          made by you to withdraw from participating in
          the alleged conspiracy in this product line;

      (x) set forth your contentions respecting any
          attempts made by you to withdraw from
          participating in the alleged conspiracy in
          this product line;

     (xi) identify and describe fully the contents of
          all documents which relate to, bear on or
          reflect the facts respecting your inability
          to refrain from participating in the alleged
          conspiracy in this product line;

    (xii) identify and describe fully the contents of
          all documents which relate to, bear on or
          reflect your contentions respecting your
          inability to refrain from participating in
          the alleged conspiracy in this product line;

   (xiii) identify and describe fully the contents
          of all documents which relate to, bear on or
          reflect the facts respecting any attempts
          made by you to withdraw from participating in
          the alleged conspiracy in this product line;

    (xiv) identify and describe fully the contents of
          all documents which relate to, bear on or
          reflect your contentions respecting any
          attempts made by you to withdraw from
          participating in the alleged conspiracy in
          this product line;

     (xv) identify the portions of all national
          depositions which relate to or bear on your
          defenses of "coercion, duress, and
          compulsion," and your inability to refrain
          from participating in the alleged conspiracy
          in this product line, or any attempt made by
          you to withdraw from participating

          in such alleged conspiracy;

    (xvi) identify and describe fully the contents of
          all documents produced in a national document
          depository which relate to, bear on or
          reflect your defenses of "coercion, duress,
          and compulsion," and your inability to
          refrain from participating in the alleged
          conspiracy in this product line, or any
          attempt made by you to withdraw from
          participating in such alleged conspiracy;

   (xvii) identify all potential trial witnesses in
          these actions whose testimony would relate to
          or bear on your defenses of "coercion,
          duress, and compulsion," and your inability
          to refrain from participating in the alleged
          conspiracy in this product line, or any
          attempt made by you to withdraw from
          participating in such alleged conspiracy, and
          describe separately the testimony of each
          such potential witness;

  (xviii) identify and describe fully the contents
          of all other documents and set forth in
          detail all other facts which relate to, bear
          on or reflect your defenses of "coercion,
          duress, and compulsion," and your inability
          to refrain from participating in the alleged
          conspiracy in this product line, or any
          attempts made by you to withdraw from
          participating in such alleged conspiracy;

    (xix) identify and describe fully the contents of
          all other documents and set forth in detail
          all other of your contentions which relate
          to, bear on or reflect your defenses of
          "coercion, duress, and compulsion," and your
          inability to refrain from participating in
          the alleged conspiracy in this product line,
          or any attempts made by you to withdraw from
          participating in such alleged conspiracy;

(4)(A) On or before March 23, 1965, plaintiffs in these actions shall file with this Court a detailed written statement in reply to the statement herein ordered to be filed by I-T-E Circuit Breaker Company.

(B) Such written statement shall state in separately numbered paragraphs the contentions of such plaintiffs with respect to each fact and contention set forth in I-T-E Circuit Breaker Company's written statement, and such additional facts and contentions which such plaintiffs believe relate to or bear on I-T-E Circuit Breaker Company's defenses of "coercion, duress, or compulsion," its inability to refrain from participating in the alleged conspiracy in this product line, or any attempts made by it to withdraw from participating in such alleged conspiracy.

(C) Such written statement shall state the facts in sufficient detail for the Court to determine the submissible issues, to distinguish between those facts which plaintiffs contend on the basis of the answers or otherwise are admitted, and those which are contested, to determine the admissibility of the evidence offered to prove each of such facts.

(D) In preparation for such written statement, plaintiffs shall have such discovery by depositions, written interrogatories or otherwise, as they shall deem necessary on any issues raised or made by the written statement of I-T-E Circuit Breaker Company.

(5) Any factual issue, legal issue, contention, claim, affirmative matter, or defense not set forth in detail as provided herein in paragraphs (3) and (4) shall be deemed abandoned, uncontroverted, or withdrawn in further proceedings, the pleadings and other papers on file herein to the contrary notwithstanding, except for facts, issues, contentions, claims, affirmative matters, or defenses of which a party may not be aware at the time of filing a written statement in the exercise of reasonable diligence. Any such matters of which a party is not aware in the exercise of diligence at the time of filing a written statement may be presented by supplemental written statement upon a showing of good cause.

Appendix B

WRITTEN STATEMENT OF DEFENDANT I-T-E CIRCUIT BREAKER COMPANY
    REQUIRED BY LOCAL PRETRIAL ORDER NO. 4

Defendant I-T-E Circuit Breaker Company makes the following written statement as required to be filed on or before March 9, 1965 by Local Pretrial Order No. 4 which was entered by the Court on March 2, 1965, over I-T-E's objection.

I.

Among other things, some of which are set forth at the foot of this written statement, the nature of I-T-E's Fourth Defense and related portions of its First Defense as set forth in its answers to the plaintiffs' complaints, the nature and extent of the information in support of it which is presently available, and the time available for the preparation of this written statement are such that it is impossible for I-T-E to provide every matter and every detail referred to in Local Pretrial Order No. 4. However, I-T-E believes that the following statement sets forth the substance of the facts and contentions which are at least illustrative of I-T-E's position with respect to its Fourth Defense and related portions of its First Defense.

II.

1. The facts upon which these defenses are based are not a few sharp, isolated events susceptible of clear and precise description. On the contrary, while there are some such events, the threats and acts of coercion are largely to be found in a mosaic of incidents stretching in time throughout virtually the entire history of the electrical manufacturing industry and across many product lines. Many of the incidents, seemingly colorless to an outside observer, have significance to a person who has grown up in the industry when viewed in the context of past events and traditional patterns of action on the part of the largest companies in the industry. Every statement made or action taken by a responsible official of General Electric or Westinghouse or Allis-Chalmers must be weighed in the light of that company's position in the industry and its past attitudes and practices.

2. In evaluating the statements or actions of General Electric, Westinghouse and, to a lesser extent, Allis-Chalmers, the officer or manager of a smaller electrical manufacturer has a background of knowledge and awareness of:

(a) The gigantic size of his major competitors.

    General Electric and Westinghouse have had annual
  sales in recent years of four or more billion dollars
  and about two billion dollars, respectively. Since
  the turn of the century, they have occupied the same
  relative position with respect to their smaller
  competitors, for the most part, although, of course,
  their sales volume then was smaller than at present.

(b) The diversification of their activities.

    Each of the major companies, and particularly
  General Electric and Westinghouse, have income from

  sales of products unrelated to any single product
  which might be the subject of competitive controversy
  with the smaller, single-line or short-line
  manufacturer.

    (c) Uniform action and cooperation of the major
        companies.

    General Electric and Westinghouse, and frequently
  Allis-Chalmers, have acted uniformly and cooperated
  with each other to the disadvantage of their smaller
  competitors on innumerable occasions over many years.

3. Another overriding principle affecting an evaluation of the significance of the major companies' statements and acts is an understanding of the respective goals of the larger and the smaller companies. One of General Electric's business methods has been to preserve price uniformity and to eliminate price competition in each segment of its business over the long run. It has been willing to sell at any reasonable price, whether high or low, and sometimes at unreasonably low prices, so long as that price and those of its competitors did not reflect significant variations. This approach is directly opposed to what is generally true for other smaller companies who for a variety of reasons, many of which are transient in nature, exercise some flexibility in pricing one or more of their products. Over the years, Westinghouse has shared these goals and methods with General Electric.

4. The business which is now I-T-E began in 1888. In 1891, it was incorporated as Cutter Electrical and Manufacturing Company, a New Jersey corporation. In 1927, the company's name was changed to I-T-E Circuit Breaker Company. In 1939, the present I-T-E Circuit Breaker Company, a Pennsylvania corporation, succeeded the earlier New Jersey company.

5. In 1930, and again in 1931, E. Swift Newton, then I-T-E's Sales Manager, who was impressed with the impending problems of competition with General Electric and Westinghouse and of the depression, negotiated with John Upp, then Manager of General Electric's Elmwood Avenue Switchgear Works, for the sale of I-T-E to General Electric. Such a sale was virtually completed on two occasions, once in 1930, and then again in early 1931, but was forestalled each time by other stockholder interests.

6. When General Electric's efforts to buy I-T-E failed, Upp through E. Swift Newton drew W.M. Scott, Jr., now the President of I-T-E, into a series of conversations relating to the pricing of what were then its only products, low voltage large air circuit breakers and switchgear assemblies. Others present at one or more of these meetings included F.W. Patterson, and possibly Starbuck, of General Electric, R.A. Neal, Jack Butts, and, sometime later, Tom Watts, of Westinghouse. At these early meetings, Scott was told, principally by Upp, that I-T-E should get together with the industry to discuss uniform prices, that the electrical industry was operated that way, that many customers knew about it, and that, notwithstanding some opposition, some accepted it. Scott was specifically told that I-T-E would have to cooperate on prices and stop quoting non-uniform prices. One transaction which served as an illustration in that discussion was a bid to American Gas & Electric for a 440 volt switchboard costing about $40,000. Upp said that General Electric was not concerned as much about the gain or loss of the job as it was about the non-uniformity of the prices. Such non-uniformity on I-T-E's part caused great embarrassment when customers compared the range of prices for such equipment with the virtually identical prices submitted by General Electric and Westinghouse in the heavier lines such as steam turbine generators and oil circuit breakers. General Electric and Westinghouse had theretofore explained such similarity on the basis that each manufacturer used about the same amounts of labor and material to produce a given item and thus the prices might reasonably be expected to be alike, but this explanation was questioned when a smaller company submitted a significantly lower bid than General Electric in another related product line.

7. With reference to the illustrative example, Upp said that, as soon as a significant deviation appeared, General Electric had quoted substantially below what it expected I-T-E's price to be even though it believed the fair price was substantially above I-T-E's price. He said that General Electric would uniformly take this action unless it was informed in advance of I-T-E's price. Whether it made a profit on the sale or not, General Electric had to be virtually certain that it would equal the low bidder or it would submit a bid which almost certainly would be low. A far more important consideration to General Electric was forestalling the attack upon the uniform pricing of million dollar items which would arise from I-T-E's refusal to cooperate on much smaller items. However, General Electric could always explain a difference in price if it was the low bidder by attributing I-T-E's higher price to the inefficiency of a small company.

8. In subsequent meetings of competitors at about this time and during the year or two which followed, General Electric and Westinghouse continually urged Scott to make I-T-E's prices and terms and conditions of sale similar to those of General Electric and Westinghouse. Uniformity was insisted upon even for the items where I-T-E's price was higher than its competitors'. When Scott refused to lower I-T-E's price on such items, General Electric said that it would raise its prices to achieve the desired uniformity notwithstanding the possible substantial loss of business it was getting in that product line, a position from which Westinghouse did not dissent. On other occasions, General Electric and Westinghouse insisted that I-T-E change its pricing policy from one which was "f.o.b., Philadelphia, customer pays the freight" to "f.o.b., Philadelphia, freight allowed", thus looking toward a uniform price at the point of delivery. Similarly, the two major companies insisted that an I-T-E 10% discount for cash purchases of large air circuit breakers be eliminated or, alternatively, that the net price after discount be the same as the net prices of General Electric and Westinghouse.

9. In 1932, I-T-E and Westinghouse entered into negotiations looking toward the licensing of I-T-E to manufacture and sell molded case circuit breakers under certain Westinghouse patents. At the time of these negotiations, Westinghouse had substantial patent control over the manufacture and sale of this product, which was a necessary component of some switchboards and switchgear assemblies. In its dealings with the independent switchboard assemblers, Westinghouse had sometimes insisted that the assembler who wanted molded case circuit breakers buy Westinghouse large air circuit breakers as well and, at other times, it had refused to sell molded case circuit breakers at all except as components of switchboards assembled by it. Westinghouse had given licenses for the manufacture of these circuit breakers to about six important assemblers who, under the terms of those licenses, were obliged to sell complete switchboards and panelboards at prices determined by Westinghouse.

10. During the course of the negotiations referred to in paragraph 9 which were carried on by Scott for I-T-E and Victor Beam of Westinghouse, it was stated that Westinghouse was not so much interested in receiving royalties under the patent licenses as it was in using such licenses for fixing prices. At the stage of the negotiations when it appeared that the patent licenses would be granted to I-T-E, Westinghouse made it known that it was simultaneously attempting to subject the independent switchboard and panelboard assemblers to price control through the terms of licenses based upon the Jennings patent, a significant circuit breaker panelboard patent. This move in itself constituted a grave threat to I-T-E since the sale of circuit breakers to the independent assemblers constituted I-T-E's largest market and any limitations imposed upon the assemblers' ability to price their product freely would undoubtedly restrict their sales and have a direct and immediate impact upon I-T-E as their supplier.

11. Initially, the Westinghouse objective in the negotiations referred to in paragraph 9 was a license which would have precluded I-T-E from selling molded case circuit breakers except as parts of completely assembled switchboards which, in turn, would be subject to Westinghouse price control. During these negotiations, Scott was told by Ray Frenger and Anderson of Westinghouse, who were Beam's associates in the negotiations, that only companies who would cooperate with Westinghouse on prices in general would be considered for patent licenses. As granted, the license provided that I-T-E might sell molded case circuit breakers separately but only at prices to be determined by Westinghouse and, further, that there should be no deviation from such prices either directly or indirectly by giving to the customer any other consideration, the effect of which would be to sell at more favorable prices, terms and conditions of sale. The latter provision was interpreted to mean that, if molded case circuit breakers were sold with other I-T-E equipment, the price charged for the latter could not be less than prices regularly charged by I-T-E for such items. The four licenses, denominated "A", "B", "C" and "D", were dated August 1, 1933. "A", "B" and "C" were the licenses for molded case circuit breakers. "D" related to patents on large air circuit breakers but this license was never used by I-T-E. The pricing provision referred to is in Article VI. The price fixing provisions of these licenses continued in force until about 1948 when Westinghouse brought about their cancellation.

12. These Westinghouse patent licenses, which dealt with an increasingly vital element of I-T-E's product line, were a powerful weapon for Westinghouse for a period continuing at least until the late 1940's and early 1950's, and, in some respects, until about 1959. The problems which could have been created for I-T-E by virtue of these licenses were significant factors in bringing I-T-E into discussions with competitors relating to prices.

13. The threat presented by the Westinghouse patent licenses was magnified by Scott's knowledge of earlier patent litigation against I-T-E. During the years 1905 to 1909, I-T-E (then Cutter) had been the defendant in patent litigation involving the Wright-Aalborg patent, which was important in the manufacture of what are now called large air circuit breakers. The ostensible plaintiff was Westinghouse, but it later appeared that the controlling force in the litigation was the Board of Patent Control, a committee jointly established by General Electric and Westinghouse to police a cross-licensing agreement entered into by the two companies in 1896. The outcome of this disastrous litigation was its settlement in 1909 on a basis which provided for the transfer of 49% of Cutter's stock to General Electric which, in turn, transferred 39% of its interest to Westinghouse. (This division of Cutter stock between General Electric and Westinghouse was consistent with Scott's understanding that the 1896 agreement provided for a division of the business available to General Electric and Westinghouse on a 60-40 (or 62 1/2-37 1/2) basis by providing, among other things, for an ascending schedule of royalties to be paid to the party getting less than its agreed upon share of the business.) General Electric and Westinghouse continued as shareholders until 1911 when they resold their stock to its former owners.

14. The events which followed further demonstrated to Scott the extent to which General Electric and Westinghouse, working together, dominated the electrical manufacturing industry. In October 1934, I-T-E submitted a bid and was awarded a contract for segregated phase metal-enclosed bus (the forerunner of isolated phase bus) for Boulder Dam. I-T-E's bid was about $225,000 and the bids of the four other suppliers were grouped at about $500 intervals at about $285,000, with Westinghouse the lowest of the four. This was I-T-E's first experience in this product line and the uniformity of the bids of the other companies tangibly reinforced Upp's earlier statements about the extent to which the industry was controlled and the dominant position of General Electric and Westinghouse in the industry.

15. The power of General Electric and Westinghouse was further demonstrated when I-T-E made its first sale of circuit breakers to the U.S. Navy about 1934. After I-T-E got the job, Scott was told by Tom Watts of Westinghouse, in the presence of representatives of General Electric, that, now that I-T-E was in this product line, it had better conform to a uniform price policy. Watts pointed to the ability and intention of General Electric and Westinghouse to combine the sale of circuit breakers and switchgear with the auxiliary power turbine generators in a way which minimized the number of jobs which I-T-E would get. He also pointed to the degree of cooperation which existed between General Electric and Westinghouse, which went so far as agreeing not only about the price to be submitted for such turbine generators but the efficiency rating as well. The effort of General Electric and Westinghouse on this occasion was to persuade I-T-E to increase its prices for this equipment. The effect of such action at the time would have been to tend to slow I-T-E's expansion as a newcomer in this product line since, at equal prices, the established manufacturers had greater customer acceptability.

16. Another illustration of General Electric-Westinghouse cooperation occurred in 1935 or 1936 when Scott was accused of making a low bid by Harold Winder of General Electric. When Scott demurred, Winder showed him a memorandum from Westinghouse reporting I-T-E's price notwithstanding the absence of any publicly available information about I-T-E's price on that job. This exchange of information about the competitive activities of smaller companies continued among General Electric, Westinghouse and, to some extent, Allis-Chalmers until at least the mid-1950's. On numerous occasions, one of the major companies would couple with the report of its knowledge of the smaller company's bid a statement that low quotations by the smaller company would necessarily bring lower quotations from the major companies as well.

17. About 1936, I-T-E quoted a price for high tension bus to be supplied the Duquesne Works of Carnegie Steel Company. As I-T-E was preparing to quote, Scott was called by R.W. Davis of Allis-Chalmers, who said that he had met with General Electric and Westinghouse to arrange the prices for all of the equipment to be supplied and I-T-E was to quote $36,000 (?) for the bus portion of the job. The call was not pre-arranged and was entirely unsolicited by I-T-E, although it was not surprising to Scott in view of the intense interest which the major companies demonstrated in sales to large industrial purchasers such as steel mills. When Scott suggested to Davis that Scott had planned to bid $3,000 or $4,000 more, Davis, in essence, said "No, that's the price. If you don't want it, then bid higher and someone else will take it."

18. In the mid-1930's, the principal suppliers of large steel mill motors and motor-generator sets were General Electric, Westinghouse and Allis-Chalmers. Since General Electric and Westinghouse supplied their own large air circuit breakers for the control of such equipment, Allis-Chalmers was the principal market for I-T-E. Scott was told by Davis that Allis-Chalmers would not buy I-T-E's 600 volt circuit breakers for these applications unless I-T-E did not disturb the price agreement for steel mill electrical purchases then existing among the three major manufacturers.

19. Scott learned of the special interest of General Electric, Westinghouse and Allis-Chalmers in sales to steel mills on at least two occasions during the period 1934-1938. Scott was warned by Francis Fairman, then an important official of General Electric's Switchgear Works, and Davis, of Allis-Chalmers, that the price levels for at least some electrical equipment sold by General Electric, Westinghouse and Allis-Chalmers to steel mills were somewhat higher than the price levels to other purchasers and that in no circumstances would I-T-E be permitted to charge lower prices to such purchasers. The major companies believed that they could obtain the higher prices from steel mills because of their large purchases of steel. A similar situation existed for purchases by utilities who employed certain consulting engineering firms. There, the additional engineering detail that was required by the outside consultants was alleged to justify the higher price. There, too, I-T-E was warned not to upset the price levels.

20. About 1937 I-T-E quoted to the Bethlehem Steel Company a price of approximately $40,000 for a 250 volt DC switchboard which was about 10% lower than that which was offered by General Electric. General Electric learned of I-T-E's bid and cut its own quotation by twice that amount. Thereafter, General Electric's Francis Fairman told Scott that General Electric would always cut its price twice as much as any I-T-E cut if I-T-E ever ventured to underbid General Electric again.

21. In the mid-1930's Davis, of Allis-Chalmers, told Scott that there was no alternative to uniform prices. Davis said that free quoting was absolutely impossible and any such free quoting would result in a price war with prices of 40% off book, which would be absolutely ruinous to the manufacturers, and Scott understood that this was specially applicable to I-T-E.

22. During the depression the major companies attempted to use the NRA as a tool to minimize the price competition of their smaller competitors. Among other things, the code applicable to I-T-E required filing of price lists and prohibited sales at other than the price-list prices until such time as the price lists were changed after giving appropriate notice. When these measures were adopted, Scott was told by Ray Frenger, of Westinghouse, and by others, that finally the pricing practices of the independent companies had been tied down.

23. About the middle of 1938 I-T-E introduced 5 KV metal-clad air switchgear. It was I-T-E's desire to sell this improved product at about the same level as the corresponding equipment of General Electric and Westinghouse which employed oil circuit breakers. General Electric and Westinghouse insisted that the price level should be about 130% of switchgear embodying oil circuit breakers. Scott was told this at least once and R.E. Murphy, then I-T-E's Sales Manager, was also probably given the same instruction.

24. By 1938 or 1939, the concept of the low voltage unit substation was becoming very rapidly accepted. In such equipment, transformers and switchgear were manufactured and sold together as a single unit, thus eliminating the necessity of their connection by the purchaser. I-T-E was at a disadvantage since it did not then make transformers for such an application. However, I-T-E redesigned its switchgear so that it could be readily bolted by means of a throat connection to transformers manufactured by others. I-T-E was summoned to attend three or four meetings with General Electric, Westinghouse and Allis-Chalmers. It was told that the sale by I-T-E of separate switchgear adapted for substation connection created a variety of non-uniform price situations and that I-T-E must stop selling switchgear with throat connections or there would be a price war. As an inducement, General Electric and Westinghouse said that Allis-Chalmers would buy from I-T-E all of its requirements for circuit breakers for installation in such substations but Allis-Chalmers informed I-T-E that it would require a substantial discount on such purchases. If I-T-E did not acquiesce, the prices to be quoted by the major manufacturers would deteriorate quite rapidly. They also announced that they would not separately sell medium power transformers with throat connections so that it would be useless as a practical matter for I-T-E to sell throat-connecting switchgear with the expectation of later connection to transformers of these suppliers. General Electric and Westinghouse continued to refuse to sell such transformers to I-T-E through World War II and thereafter, although, in time, Allis-Chalmers did supply some transformers and by the 1940's I-T-E had persuaded independent transformer manufacturers such as Wagner Electric and Pennsylvania Transformer to fill its orders. Even this was not a completely satisfactory solution since the acceptability of the smaller transformer manufacturers was significantly less than that of General Electric and Westinghouse. A similar situation existed after the war with respect to air-insulated power transformers which came to be used in such substations. Both General Electric and Westinghouse persisted in their refusal to sell such transformers to I-T-E for this application. One or more of the meetings referred to above were attended by Scott and R.E. Murphy for I-T-E.

25. Sometime before Pearl Harbor, about 1938 or 1939, I-T-E determined to quote on the 440 volt auxiliary switchboards required for battleships 55 and 56 (the North Carolina and Washington). Scott was approached by H. Van Erben, then Manager of the Switchgear Works of General Electric, and subsequently a Vice President of the company. Van Erben announced that General Electric and Westinghouse had agreed that General Electric would get the job, that he had heard that I-T-E would bid, that I-T-E should bid a figure above General Electric's, and that other ships would be assigned to I-T-E in due course. Furthermore, he warned I-T-E that, if I-T-E got the job, General Electric would refuse to sell it shockproof relays which were a necessary component of the switchboards. When Scott suggested that he would go to Westinghouse for these relays, Van Erben replied that Westinghouse had already agreed that General Electric would get the job and, accordingly, he was sure he could persuade Westinghouse not to sell the relays to I-T-E. I-T-E bid about $750,000 and General Electric took the job at about $550,000, which I-T-E believed to be an unreasonably low price. The Navy Department subsequently indicated that it had expected to pay about a million dollars for this equipment. This transaction was further proof that General Electric was prepared to undersell drastically any competitor who ventured to interfere with General Electric's getting a contract it wanted.

26. About the start of World War II, I-T-E was visited by an agent of the Department of Justice, who was investigating a problem related to the manufacture and sale of transformers using a General Electric non-inflammable, liquid insulating material called Pyranol. This visit, coupled with the difficulties I-T-E had had in obtaining transformers for unit substations, led Scott to tentatively consider a complaint to the Justice Department. However, with the changed circumstances accompanying the war, Scott decided not to risk the competitor retaliation which he expected might follow from pursuing such a complaint.

27. I-T-E's experience with attempts of General Electric and Westinghouse to control prices through patents was paralleled by other members of the industry. Thus, Allis-Chalmers was subject to price control from Westinghouse and General Electric through patent licenses on network transformers and an insulating material variously referred to as Pyranol, Inerteen or Askerol.

28. Immediately after World War II, apparently in concert, Westinghouse and General Electric further demonstrated their power over I-T-E by refusing to sell I-T-E low voltage network protectors over which they exercised complete control by, among other things, patents and design and manufacturing techniques. This put I-T-E at a substantial competitive disadvantage in the sale of some switchboards for which this product was an essential component.

29. Another incident, shortly after World War II, involved equipment needed for the sewage plant for Ward's Island, New York. Scott was told by Tinnerholm, of General Electric, that General Electric was going to get that job at any price and I-T-E should protect General Electric's bid or General Electric would bid an inordinately low price.

30. During the period 1945-1949, General Electric increased the number of products for which it developed printed price sheets. Scott was told by General Electric's Jack Hoffman that he had been ordered to get everything possible in the switchgear lines on printed price sheets since General Electric was worried about antitrust problems and the use of price sheets might minimize the risks in that respect. In a context where General Electric sought to control prices, this report to Scott was a further threat that prices were to be uniform and that printed price sheets would make it easier for General Electric to monitor the pricing of each of its competitors.

31. About the time in 1947 when I-T-E acquired Railway and Industrial Engineering Company, a manufacturer of power switching equipment, Scott spoke with Tinnerholm of General Electric about the power switching equipment business. Tinnerholm said that General Electric was primarily interested in the stability of prices of power switching equipment and that it was satisfied to leave that product line and the price policing of it largely to the independent companies so long as there was price stability even though it cost General Electric some business. However, Tinnerholm said that, if the independent companies failed to maintain stable prices, General Electric would compete aggressively and take action which might very well result in cuts of 40% below book prices if that were necessary to bring about stability.

32. Shortly after World War II Tinnerholm explained General Electric's pricing policy to Scott. He used an item for which the General Electric price might be assumed to have been $1,000. General Electric did not object if I-T-E could sell that item at that price on the basis of quality, delivery, service or friendship but General Electric did object to nonuniform price offers. If I-T-E lowered its price to make the sale, General Electric would systematically lower its price to I-T-E's or lower, first on a job-by-job basis and then it would very quickly lower its catalogue price. This would occur whether the I-T-E price was $999, $800 or $600 and without regard to the unreasonableness of the lower price. Therefore, why doesn't I-T-E give up and sell at $1,000 in the first place? The same thought was expressed by Tinnerholm in conversations with Scott on several occasions and, on numerous occasions, approved by representatives of Westinghouse.

33. In November 1952 I-T-E submitted a quotation for the 440 volt auxiliary switchboards for CVA 60, the aircraft carrier Saratoga. General Electric had been awarded similar equipment on the first vessel of this class and I-T-E planned to get the second, if possible. When Scott instructed I-T-E's Sales Manager, Fred Getz, to make every effort to obtain the job, Getz told him that, based upon his conversations with General Electric and Westinghouse and his past experience, there was absolutely no doubt that General Electric and Westinghouse would not permit I-T-E to take it and, if I-T-E was competitive, there would be severe commercial repercussions affecting other business. In spite of the warning, Getz was instructed to proceed and I-T-E got the job at $1,400,000 as compared with General Electric's bid of $1,800,000 for the first vessel of this class.

34. In 1953, Tinnerholm, who had been general manager of General Electric's Switchgear Division, told Burens that he had the industry under his thumb and that General Electric's competitors would do what he asked them to do.

35. In late 1954 and continuing into 1955, there was a price war, sometimes referred to as the "white sale", involving many heavy electrical equipment product lines, including most of such lines made by I-T-E. During this period, the prices were lowered to a point far below cost, where I-T-E and many similarly situated companies could not long continue to do business.

36. It was the policy of General Electric's divisions which sold power equipment such as the transformer division to quote the same prices at the same general levels to all types of customers. During the "white sale" in 1954 and 1955, it was the belief of the General Electric managers that the only way to stop prices of power transformers from deteriorating further was for General Electric to continue to be very aggressive at the market-place with the hope that prices would firm up and get back to some kind of a survival level. Ginn of General Electric discussed this policy with his associates R.W. Smith and Seaman and with more highly placed people at General Electric such as Paxton and Erben, who urged him to continue to be aggressive.

37. Late in 1954, Burens believed General Electric was not getting a large enough share of the business so he instructed his subordinates to quote whatever lower prices were necessary to get the orders.

38. Late in 1955 or early in 1956, Scott discussed the price war situation with James Jewell, Westinghouse's Vice President of Sales. Jewell said that the price war had been a terrible thing for Westinghouse and that he had sat on a daily basis with Gwilym Price, Westinghouse's President, discussing developments in the deeply cut prices then being quoted. Jewell described it as very serious, and said that "we were fighting for our lives" and that a similar experience in the future could lead to the serious damage or impairment of Westinghouse. When Scott suggested that these price war problems could have been avoided if each manufacturer freely quoted prices at which it could economically do business, Jewell said that such a course was impractical, that Scott had underestimated the impact of what General Electric would do if prices were freely quoted by others, and that even some relatively small deviation might quite possibly trigger a price war in the future. With respect to the 1954-55 price war, Jewell also observed, "I could have stopped it all if I could have gotten to Van, but unfortunately Van was in the hospital." (The "Van" referred to is Van Erben of General Electric.) To Scott this conversation was a clear warning that material price deviations by I-T-E and others should be eliminated in the future, that, if they were not, there would probably be another price war, that such a price war of an intensity sufficient to damage or impair Westinghouse would certainly ruin a much smaller company such as I-T-E, and that the relationship between General Electric and Westinghouse was such that they could together control events for the future of the industry.

39. In the second half of 1955, Scott had a conversation with either Tinnerholm or possibly George Burens, of General Electric. The General Electric representative said that Kelman Electric and Manufacturing Company, a manufacturer of outdoor power circuit breakers in Los Angeles which was subsequently acquired by I-T-E, had been a considerable thorn in General Electric's side for a long time. Prior to the 1954-1955 price war, General Electric had felt it unwise to do much about Kelman because it did not wish to depress the prices of power circuit breakers nationally. However, the price war had had one advantage in that it had offered an opportunity for General Electric "to settle old scores" with Kelman. General Electric had then quoted prices cut to approximately 53% to a purchaser in southern California who regularly did business with Kelman (either the Los Angeles Department of Water and Power or Southern California Edison). The General Electric representative then observed that he thought this action should go a long way toward impairing Kelman's competitive position in the future.

40. At one of the 1958 meetings of the Electrical Manufacturers' Club, at the Homestead Hotel, Hot Springs, Virginia, Scott had a conversation with Joseph Singleton, an Allis-Chalmers Vice President. Singleton told Scott that General Electric, Westinghouse and Allis-Chalmers had been successful in stabilizing turbine-generator prices and had just put through a 3% price increase. Singleton, among other things, stated that I-T-E's Switchgear Division was quoting free prices in its product lines, which, in turn, was upsetting the electrical power equipment industry. When Scott asked about General Electric's attitude, Singleton offered to arrange an appointment with a highly placed General Electric official. Again, Scott found a threat in this conversation from the critical nature of the comments made by a highly placed officer of a larger competitor and the representation that the three largest companies in the industry were working together to enforce price stability for the industry.

41. It was probably at this same meeting of the Electrical Manufacturers' Club, or perhaps a preceding or succeeding one, that Scott was shooting skeet in the presence of A.C. Monteith and Hodnette, Vice Presidents of Westinghouse. One of the two observed to Scott that there was such a thing as "turn about" to be used against companies that quoted too low prices. To Scott, the implication was clear. "Turn about" was the practice employed from time to time by competitiors participating in price discussions whereby each would take a turn at quoting an extremely low price when a non-participating competitor was known or expected to bid.

42. The situation with respect to Kelman illustrates the manner in which General Electric has dominated the industry by containing its smaller competitors and preventing their natural expansion. Kelman had been a long established manufacturer of oil circuit breakers, with its plant in Los Angeles and most of its customers in the Southern California area. In 1937 Kelman was drawn into patent license negotiations with General Electric, which were conducted by Fred Cole for Kelman, and Strang, Van Erben and Traver for General Electric. During the course of the negotiations, Cole stated Kelman's intention of moving east and was met with the General Electric reply that, if that happened, General Electric would have to lower its prices. Kelman did not come east and the patent license entered into as of November 20, 1937 effectively limited Kelman's sales to the Southern California area by permitting it to make royalty-free sales at prices determined by it in that area while sales made outside that area were required to be at General Electric's prices and subject to a 5% royalty. The price-fixing provision of the Kelman license was cancelled by General Electric about 1947. I-T-E, believing the license to be illegal for this and other reasons, terminated it in all respects in 1957, shortly after its acquisition of Kelman. See Articles 3, 4, 6 and 11 of that agreement.

43. I-T-E had never been in the outdoor oil circuit breaker business before it acquired the stock of Kelman in the summer of 1956. As pointed out above in paragraphs 39 and 42, Kelman was a small company with a narrow product line, most of which it sold to a small number of purchasers in southern California. I-T-E could not immediately expand Kelman's marketing activities because of the inherent limitations of Kelman's organization. Kelman's marketing and testing were not as extensive and thorough as those of other companies and, in fact, it only had about eight salesmen. However, I-T-E was determined to market outdoor oil circuit breakers nationally and it took steps toward that goal. By January of 1958, Kelman was making its first earnest effort to become a national competitor of the principal manufacturers of power circuit breakers, General Electric, Westinghouse, and Allis-Chalmers. It was at this point that I-T-E's competitors attempted to talk with I-T-E employees about Kelman's business.

44. I-T-E was also aware of the vigorous efforts being made by General Electric in 1957 and 1958 to keep Federal Pacific from getting a beachhead in the power switchgear assembly market. Sometime in the summer of 1957, Spencer of I-T-E met in Pittsburgh with Dave Webb of Allis-Chalmers and Wally Payne of Westinghouse to discuss the extremely low prices Federal Pacific was quoting in its endeavor to enter an already depleted market and General Electric's action in meeting and quoting even lower prices whenever Federal Pacific bid. Sometime thereafter, Spencer met with Rives of General Electric. Rives acknowledged Spencer's observation that it was the policy of General Electric to meet Federal Pacific wherever it quoted business and that "they [General Electric] were not at all interested in having them enter into this business, so they would be meeting them on every bid."

45. Early in 1958, I-T-E was invited to attend meetings with General Electric, Westinghouse and Allis-Chalmers concerning the prices of some types of electrical equipment. Harry L. Buck, an I-T-E Vice President, attended about four such meetings in or about January, February and May 1958, probably at Pittsburgh, Philadelphia and New York. At each of these meetings, Buck was told by George E. Burens, then Vice President and Manager of General Electric's Switchgear and Control Division, that, unless everyone, including I-T-E, agreed to sell at book price levels, General Electric would quote the lowest prices of anybody to every purchaser, every time, every place. When Buck refused to agree to the proposals of other companies at the May meeting, Frank E. Stehlik and Clarence E. Burke, then General Managers of General Electric's High Voltage and Low Voltage Switchgear Departments, who were present for the first time at that meeting, said that General Electric would publish lower prices which would force I-T-E into the pattern General Electric wanted and make it difficult for I-T-E to depart from the price levels General Electric established. Also present at these meetings were Landon Fuller of Westinghouse and L.W. Long of Allis-Chalmers. In addition, J.W. McMullen was present at the first meeting in January and R.L. Bobo of Federal Pacific was present at the meetings other than the first meeting in January. H.F. Hentschel of General Electric was also present at the May meeting.

46. Some time after Buck attended the January 1958 meetings, Scott wanted to determine the attitude of officials of General Electric, Westinghouse and Allis-Chalmers more highly placed than those with whom Buck had been meeting. For that purpose, Buck asked Fuller whether he might meet with James Jewell or someone else familiar with corporate pricing policy. Fuller said that Jewell was not the man to see since he was concerned with other matters and was no longer significantly concerned with pricing. Fuller suggested that Buck meet with Barry Walker, who was then a staff assistant to A.C. Monteith, the Vice President and General Manager of Westinghouse's Apparatus and Products Division. Buck met Walker in late March or early April 1958 at the Roosevelt Hotel in Pittsburgh. During the course of the conversation, which lasted several hours, Walker said he was familiar with the discussions Buck had been having with Fuller and others and that it was necessary to correct the unreasonably low prices in the switchgear industry. Walker saw absolutely no alternative to immediately raising the prices of switchgear to book on all jobs large and small. He commented upon his own background as assistant to Monteith over a long period of time, during which Monteith had assigned the responsibility for the pricing and sales to him. He also mentioned that, from his own experience in transformers and turbines during the 1954-1955 price war, he was satisfied that the only way to correct the pricing problems of the switchgear industry was a complete and immediate return to book prices. To Buck and to Scott, this conversation clearly implied that any failure on I-T-E's part to do what General Electric, Westinghouse and Allis-Chalmers were seeking could only result in a continuation of the abnormally low price levels then being quoted for switchgear. The threat was enhanced by Walker's clear statement of his position in the Westinghouse hierarchy.

47. Following a meeting of a NEMA statistical committee about March of 1958, Dusch of Federal Pacific was given a group of sheets of past history of the sealed-bid power circuit breaker business by Boyd of Westinghouse who told Dusch that Federal Pacific was getting far too large a share of the sealed-bid business.

48. About April 3, 1958, Scott met with Robert Paxton, then a Vice President of General Electric who within a matter of weeks was elevated to the presidency of that company. During the course of that meeting, Paxton commented on a low bid submitted by I-T-E on isolated phase bus for the St. Lawrence Seaway Project of the New York Power Authority and on the activities of a west coast company which Scott understood to be Kelman, then a subsidiary of I-T-E. Paxton then observed that there had been and might be more trouble with the switchgear prices, that the then current price cutting in switchgear was an indication prices were too high anyway, and that for that reason General Electric had better lower its list prices. Based upon Scott's experience over several decades, there was no doubt in his mind that Paxton's remarks were a threat and a direction to Scott to quote book prices for switchgear or face the prospect of General Electric lowering book prices until I-T-E came into line.

49. In late 1957, early 1958 or the summer of 1958, Fred G. Schmidt, Manager of I-T-E's Switchgear Division, and N.S. Spencer of I-T-E attended a meeting with H.F. Hentschel, General Manager of General Electric's Medium Voltage Switchgear Department, J.T. Thompson, of Westinghouse, and McGuire, of Allis-Chalmers, at the Pittsburgh Airport Motel. General Electric, Westinghouse and Allis-Chalmers were disturbed about I-T-E's pricing of 5 KV and 15 KV power switchgear assemblies and particularly with I-T-E's success in selling 5 KV switchgear assemblies to public utilities. Hentschel told Schmidt that, if I-T-E didn't raise its prices, "the boom would be lowered" on I-T-E, that is, that General Electric would lower its prices to or lower than I-T-E's prices so that I-T-E would not sell a single piece of such switchgear. The I-T-E representatives were told by Hentschel of General Electric that, as long as I-T-E chose to continue to quote low prices, at least General Electric would quote those levels or lower until I-T-E changed its level of quotations and that the General Electric Company could stand quoting at those levels longer than I-T-E could. Others who may have been present were Rives of General Electric and Payne of Westinghouse. Thereafter, General Electric lowered its prices for equipment of this type in a way which presented great difficulties for I-T-E.

50. During the period Burens was general manager of General Electric's Switchgear Division (October 1951 to January 1959), it had a larger portion of the switchgear business than any of its competitors. In the summer of 1958, its share of the market for the switchgear products it manufactured was between 36% and 42%.

51. It was the policy of Burens, general manager of General Electric's Switchgear Division, to be competitive on price. With some variations, General Electric would bid at the lower levels of its competitors to get what it regarded as its share of the business. When a competitor lowered a price, General Electric would quote at that lower level until there was a definite trend up. In other words, it was Burens' policy to follow the competitors' prices down and then follow them up. Burens understood that there was a fine line between predatory pricing and running the competition out of business. He also believed in 1957 and 1958 that General Electric could stand to sell its Switchgear Division products at the prices then existing longer than any of its competitors, including Westinghouse. It was Burens' view in the summer of 1958 that a continuation for another six months of the low price levels for some switchgear products, which were then near costs and sometimes below costs, would result in increased prices "through natural economic forces".

52. During the "white sale" in 1955 and again in 1958, the prices of power switchgear assemblies were below cost and unreasonably low. The price levels in 1955 were far below the levels at which even Allis-Chalmers could survive in the switchgear business and, if they had persisted, Allis-Chalmers would have been forced out of the switchgear business.

53. By the fall of 1958, the Scranton plant of Federal Pacific, which manufactured assembled switchgear, was in "a heavy loss position" and its San Francisco plant, which manufactured a variety of products, including power circuit breakers and power switches, was having "a very difficult time" with sales below cost.

54. On September 11, 1958, Federal Pacific Electric Company submitted a bid to TVA in response to Invitation #2-1274 for several 69 KV, 1500 MVA, 1200 ampere circuit breakers. Although the unit book price was about $20,500, the Federal Pacific bid was $8,990 per unit. On the next day, bids in response to Invitation #2-1125 were opened by TVA for a single circuit breaker of the same rating. On this occasion, General Electric met Federal Pacific's prior bid of $8,990 to the dollar. To I-T-E, this experience reaffirmed its belief that General Electric's studied policy was to be undersold only once and tangibly underscored repeated statements to that effect to I-T-E.

55. About October 6, 1958, Scott had lunch with Burens of General Electric. During the course of that meeting, Burens insisted that there was only one thing to do, and that all the power circuit breaker manufacturers should go back to book prices immediately. He made it quite plain that, unless such action was taken, the existing low price levels would stay where they were. Scott regarded these statements as a threat. During the same discussion, Scott was also much impressed by Burens' remarks that he had conferred with Fuller of Westinghouse about a detailed allocation of $10,000,000 of sealed bid power circuit breaker business in a way which would have been most satisfactory to both of them. To Scott, this was another indication of cooperation between the two largest companies which would make continued resistance to their schemes by the smaller competitors impossible. In this conversation, Burens stated that he was under pressure from General Electric's other division managers who feared their pricing structures would be under attack from customers because of the chaos which then existed in the switchgear and oil circuit breaker markets. This recalled to Scott the similar circumstances of inter-divisional pressures within General Electric which resulted in I-T-E being dragged into meetings in the 1930's.

56. Prior to a meeting at the Astor Hotel in New York, on October 8, 1958, which had been arranged by Fisher Black, then Editor of Electrical World and now a utility executive, Scott instructed Buck not to enter into any arrangement with competitors, but only to go there and listen.

57. Prior to the meeting at the Traymore Hotel, Atlantic City, New Jersey, on November 9, 1958, Scott had instructed Buck that he was not to enter into any arrangements with competitors, except as a last desperate expedient. At the meeting, Buck refused for hours and at one point was actually leaving the meeting when he was brought back in by the other persons present. Before the meeting ended, it was clear to Buck that the only choice for I-T-E was to return to pricing some sales of some equipment at book or to face a continuation of the then existing price war with many sales at prices below a level that I-T-E could stand. Even the discussion at that time of the allocation of power circuit breaker sealed bid business showed: First, the intent of the major companies to confine Kelman's sales to Southern California, as had theretofore been done by the 1937 General Electric-Kelman license, by insisting that not more than 2% of Kelman's 4% was to be outside Southern California; and, second, the monolithic nature of the General Electric-Westinghouse combination which reserved to itself about 72% without disclosing at that time precisely how it would be divided between them.

58. J.D. Hoffman, of the Hi-Voltage Equipment Co. of Joslyn, attended a meeting in November 1958 at which representatives of Westinghouse (Wilbur Pyle), General Electric, I-T-E and others were present. At the meeting, the Westinghouse representative, in accord with General Electric, said that price cutting had to stop, and that in order to see that it did stop they were going to put into effect discounts of 10% on switches rated below 46 KV, 15% on switches rated from 69 KV through 161 KV, and 20% on the higher voltage ratings. This, they said, would take the desire out of the industry to cut prices anymore. They also said, "Now, if this does not stabilize the market, maybe discounts of 20, 30 and 40 will."

59. At meetings of competitors where prices of power circuit breakers were discussed, Dusch of Federal Pacific, lied about his intentions with respect to the sealed-bid market because of fear of recrimination by competition. More particularly, he was concerned about a price war, similar to the experience he had had, where price cutting took the prices below the direct material and direct labor content of the equipment itself.

60. General Electric had been sensitive for a long time to I-T-E's position as a supplier of components to small switchboard assemblers who compete with the switchgear manufacturers, and in fact one of General Electric's managers had described I-T-E as "long recognized as the `saviour' of the independents".[fn*a] In April 1959, Buck attended a meeting at the Penn-Sherwood Hotel in Philadelphia with Burger and Stehlik of General Electric, Fuller of Westinghouse, Bobo and perhaps Benson of Federal Pacific, and Leo Lipscomb of I-T-E. At that meeting Stehlik said that General Electric had made a study of the profits of the independent switchboard builders, which were estimated to be about 3% and, to minimize their competition, he believed that there should be a 4 or 5 to 7% increase in the prices of large air circuit breakers. It was apparent to Buck that the object of this move was to decrease the switchboard builders' profit, or possibly eliminate it, by increasing the prices of the large air circuit breakers which were a vital and substantial element in the assemblies manufactured by them. This was of paramount importance to I-T-E since it had long been the principal supplier of this product to the independent assemblers. Buck protested that General Electric's analysis was in error and that there was no problem large enough to warrant further consideration. Stehlik was not persuaded.

61. Shortly following the meeting referred to in paragraph 60, F.G. Schmidt attended a meeting at Hot Springs, at which a representative of General Electric proposed an increase in the prices of low voltage circuit breakers of about 15% to 23%.

62. After the meeting at Hot Springs, Schmidt attended two meetings with representatives of General Electric, including Stehlik and Gezon, at which General Electric repeated its proposal to increase the prices of low voltage circuit breakers. Schmidt continued to stall while hoping that the problem would go away. At these meetings the General Electric representatives told Schmidt that, unless I-T-E went along on the proposed increases in the prices of the low voltage circuit breakers, General Electric would reduce the price of the power switchgear assemblies of which the low voltage circuit breakers were components.

63. On August 4, 1959, Stehlik called Buck and told him that General Electric had waited unduly long for an adjustment by I-T-E of the large air circuit breaker prices, which General Electric had urged for months, and that it would wait no longer. In fact, since there had been no change in the circuit breaker prices, Stehlik was sending to his field sales force an announcement of a 10% decrease in the prices of the assembled low voltage metal-enclosed switchgear. Buck was told in that conversation or one later that day that this General Electric action was irreversible.

64. At a meeting on the following day, August 5, 1959, N.S. Spencer, an I-T-E Sales Manager, was told by Houston Jones of General Electric that General Electric had lowered the prices of low voltage switchgear because of I-T-E's refusal to increase low voltage power circuit breaker prices, that General Electric had made this move entirely on its own to narrow the gap between the price levels of the power switchgear assemblies sold by General Electric and the equipment sold by the switchboard builders who bought I-T-E low voltage circuit breakers, that there was no longer room for "Buck's ifs, ands" and that, if I-T-E were to lower low voltage circuit breaker prices to perpetuate the gap, General Electric would lower the assembled prices still further. Notwithstanding these events, I-T-E independently lowered its circuit breaker prices to the assemblers in an effort to relieve them from the pressure created by General Electric's action, which had been designed to minimize their profit margin. Memoranda of N.S. Spencer relating to this and other meetings with competitors where this subject was discussed are in the depository, have been marked as NX1805, 1803, 1804, 1802, 1808J and are identified as 211997, pages 26, 47, 41, 55 and 20. See also 211997-30.

65. The efforts of General Electric and Westinghouse to increase the price at which the low voltage circuit breakers used as components were sold to switchboard builders extended beyond I-T-E to other manufacturers of low voltage circuit breakers, such as Allis-Chalmers.

66. General Electric's concern with and design for the switchboard builder market had existed for several years. In contrast to the pressures sought to be applied to the independent assemblers by General Electric by the 1959 low voltage switchgear price decrease, it has on earlier occasions attempted to dominate the assembler market by increasing its sales of circuit breakers using temporary price cutting as a principal tool. This is demonstrated in the memorandum dated December 28, 1956, by R.W. Ayres, Jr. After a comprehensive analysis, he sets forth General Electric's objective for the switchboard builder market as: "Our goal is to obtain 45% of the available business within a three-year period" (page 10). It is made clear that price competition by small competitors is not to be an obstacle to the success of the General Electric plan. Such action is to be dealt with by an adjustment of prices downward uniformly across the board to all customers but in a way "which will provide the necessary control for return to the proper levels" when General Electric's goal has been reached (page 14).

67. Notwithstanding discussions among competitors at the Traymore meeting referred to in paragraph 57 and at other meetings, I-T-E personnel were instructed to run I-T-E's business their own way. For example, when Buck reported to Scott the proposed 4% allocation of sealed-bid business, Scott told him to forget it and Buck gave similar instructions to his subordinates.

68. At a meeting in Philadelphia in or about September 1959, Buck was told by Stehlik of General Electric and Lewis J. Burger, then General Manager of General Electric's Switchgear and Control Division, that, unless I-T-E agreed to sell power circuit breakers at the same price as General Electric, General Electric would drop its prices to the I-T-E level or lower to force I-T-E into the pattern General Electric thought desirable and that General Electric could continue to make sales at low prices longer than the smaller companies. Also present at this meeting were Landon Fuller of Westinghouse, Lipscomb of I-T-E and Bobo and Benson of Federal Pacific. The threat was executed within the following weeks and months as the prices began to sag and General Electric announced with respect to some products that it was going to publish a 5% lower price every time the market level moved down. To people acquainted with market practices this could mean only one thing: quote General Electric's published prices or General Electric will drop its prices around your neck until you do.

69. The meetings themselves and procedures at them were used as devices by General Electric and Westinghouse to keep control over the smaller companies such as I-T-E. For example, at meetings in the 1940's, Spencer was told by the representatives of General Electric and Westinghouse the jobs I-T-E could get. Similarly, under "the light-of-the-moon" sheets distributed by Westinghouse in November or December of 1958 and in early 1959, even for periods when I-T-E was in a position to quote low, either General Electric or Westinghouse was to be the next lowest bidder, thus minimizing the significance of I-T-E's low position. Moreover, the lack of significant price differentials between the smaller companies, such as I-T-E, and the largest companies, such as General Electric and Westinghouse, puts the smaller company at a disadvantage with the engineering and purchasing personnel of many buyers who have less incentive to deal with the smaller company. I-T-E deviated from price levels discussed at meetings and quoted lower levels whenever it felt it could get away with it.

70. In the absence of meetings, another technique used by the largest companies, such as General Electric and Westinghouse, which make and sell a large number of different products is, "packaging". Under such a device the multi-product seller gives a single lump-sum quotation for all of its products. If the purchaser requests the item price for a single product, such as a power switchgear assembly, to compare with I-T-E's quotation on that item, the multi-product manufacturer takes it out at a token value which I-T-E cannot meet.

71. W.R. Swoish, of Pennsylvania Transformer, subsequently a division of McGraw-Edison, observed that General Electric was in telephone communication. with Westinghouse even when General Electric was not meeting with others. The smaller transformer manufacturers, such as Pennsylvania Transformer, were told by General Electric and Westinghouse what percentage of the sealed-bid business was allocated to them, and what the pricing rules were to be. Swoish attended meetings with General Electric representatives because he was afraid that, if he did not, there would be another "white sale" during which General Electric had reduced the price of equipment involved in these cases below McGraw-Edison's cost of production so that McGraw-Edison either had to withdraw from the market or sell at a loss.

72. Prior to the Philadelphia indictment, George R. Fluehr, President of Kuhlman Electric, a manufacturer of distribution transformers, had received threats from representatives of General Electric to the effect that, if Kuhlman didn't line up, it would be pressured into lining up and this was in connection with Kuhlman's attendance at meetings of competitors.

73. In addition, events and statements since 1959 illustrate and confirm in some respects the position of the major defendants, particularly General Electric, in the years prior to 1960 as it was and as I-T-E believed it to be. Furthermore, they show that General Electric's ultimate pricing policy of enforced uniformity has continued unchanged since I-T-E first learned of it and demonstrate General Electric's power and willingness to employ such a policy. Thus, for example, early in May 1960, following shortly after an earlier 15 to 20% reduction, General Electric announced a further 5% reduction in the price of medium power transformers, saying that it would continue to lower its prices to meet "market-generated levels" and that a 5% differential between its prices and those of its competitors would bring this change about. (Electrical Newsletter, May 6, 1960.) Adherence to that policy was reflected in an additional 4% decrease which appeared in the press the next month. (Electrical Newsletter, June 17, 1960.)

74. Shortly after D.B. Lawton, General Manager of General Electric's Medium Transformer Department, announced the policy described in paragraph 73, there were trade reports that the same policy was being applied to the sale of General Electric's power capacitors (compare Electrical Newsletter issue of May 6 with those of May 13 and July 15, 1960) and large power transformers (Electrical Newsletter, September 2, 1960).

75. What has happened in the pricing of power capacitors illustrates the application and effect of General Electric's pricing policy. Since the summer of 1960, the manufacturers of power capacitors other than General Electric have made numerous independent efforts to obtain what they regarded as a fair price level for their products, which according to the press reports appeared to have been about $117 or $120 for a 50 kvar unit. After a January 1960 price reduction of 5%, General Electric announced slight increases in July, September and early December 1960 which would have brought the price to $108 effective December 12, 1960. Effective December 22, 1960, however, in obvious retaliation against the entire industry because of reported isolated price deviations in four states, it reduced its price across the nation to $100. General Electric's intolerance of any price deviation was further reflected on March 1, 1961, when, at a time its competitors were increasing their book prices to $117, General Electric reduced its price not only for the future orders but for all orders on its books to $97.33, again allegedly because of the prices on five sales to utilities covering a period of weeks. (Electrical Newsletter, January 1, 1960, July 8, and 15, 1960, September 2, 1960, December 16, 23 and 30, 1960, March 3, and 10, 1961.) It appeared that the market level which had been established by General Electric was well below cost, which was said by some manufacturers to be about $103. (Electrical Newsletter, September 23, 1960.)

76. In the summer of 1960, George R. Fink, then an employee of General Electric's Switchgear Division, told Joseph Chapman, a stockbroker who Fink knew was also an I-T-E director, that low prices for electrical equipment would not last too long, that General Electric had taken corrective action, and that this action had been reported in Electrical World, giving the page reference. Chapman repeated the message to Scott. When Scott looked at Electrical World he found only a notice that General Electric had announced a 40% decrease in the catalogue prices of some oil circuit breakers and other decreases for some products of General Electric's Switchgear Division. (See page 60, Electrical World, August 8, 1960.) When Chapman called Fink and said that the article referred only to a big price cut, Fink said that it was the first step toward raising prices. Chapman said he did not understand and Fink then said, "Your friends up at 19th and Hamilton can read between the lines", or words of like effect. I-T-E's principal plant and executive offices are at 19th and Hamilton Streets, Philadelphia.

77. Starting about 1960, Westinghouse carried out a predatory pricing policy which resulted in the establishment of prices below cost for the purpose of eliminating competition in steam surface condensers. The prices so established by Westinghouse were frequently 10% below the bare shop manufacturing costs of Westinghouse's competitors without giving any effect to commercial costs or overhead costs. Westinghouse increased its percentage of the business from 20% to about 50% in two years' time.

78. In the spring of 1961, General Electric tried to obtain a price increase of 3% on bus and switch insulators which, inasmuch as such insulators are components of power switching equipment, would have the effect of further squeezing the independent power switching equipment manufacturer by raising his costs. (Electrical Newsletter, March 31 and April 7, 1961.) I-T-E, as a manufacturer of power switching equipment, purchases some bus and switch insulators, which it does not make itself, and was notified of General Electric's price increase on those items by letter dated March 17, 1961, and by oral statements on March 20 and April 4, 1961, to J.O. Knott, the Purchasing Agent of I-T-E's Greensburg Division, from C.B. Vaughn, Manager-Marketing of General Electric's Insulator Department, and D.P. Lacock, General Electric's Pittsburgh District Manager. The General Electric representatives, who knew that I-T-E also manufactures insulators, made three points: (1) If General Electric's price increase was not followed, General Electric would probably cut its prices and "a price war would follow"; (2) "General Electric was determined to increase their share of the market and if necessary would slash prices to accomplish this"; and (3) General Electric places a considerable amount of business with I-T-E and therefore General Electric should be given consideration by I-T-E in its purchases of insulators. Knott prepared a memorandum dated April 4, 1961.

79. All these events are to be evaluated in the light of public statements of company policy made by General Electric's Chairman, Ralph Cordiner. He has said that he has measured the propriety of any given price by the effect that such a price has upon General Electric's share of the market, noting, on occasion, that General Electric's failure to secure what it regards as an adequate volume of business is an indication that prices may be too high. (Electrical Newsletter, December 9, 1960.) In his testimony before the Senate Antitrust Subcommittee, he made it plain to all his competitors that General Electric's policy did not tolerate any price deviation, saying, "* * * whenever you do a stunt like that [deviate from book price], you establish a new national price." NX1631, at page 17755. This is an explicit statement of General Electric's pricing policy: General Electric's "national price level" for every sale, every place, is the lowest bid of any competitor, any time, any place. The alternatives to the small companies have been either to follow General Electric's price or face the crippling of their businesses.

80. Among the other considerations taken into account by I-T-E in weighing the statements and acts of its larger competitors were their size and how that size had been obtained. Using 1958 as illustrative, General Electric's net sales exceeded $4,120,000,000 and Westinghouse's net sales exceeded $1,895,000,000. In contrast, I-T-E's 1958 sales were less than 3% of General Electric's. Furthermore, the economic power of the two largest companies is measured not merely by the sales figures but by the diversity of their activities. General Electric is involved in about 13 of the nation's 21 basic major industries. General Electric has four main product groups. Using 1958 figures as illustrative, consumer products accounted for 26% of its sales; industrial components and materials, 26%; defense sales, 24%; and 24% from heavy capital goods, which includes not only electric generation, distribution, and transmission equipment for utilities but other heavy goods for industry such as locomotives. (General Electric 1958 Annual Report, page 5.) The Westinghouse situation is roughly comparable. For 1959, its net sales by product groups were: Apparatus and general products, 54%; consumer products, 28%; and atomic and defense products, 18%. (Westinghouse 1960 Annual Report, page 7.)

81. General Electric's ability to subsidize from sales in other lines the low sale prices of any or all of the products involved in these and related cases is demonstrated by the fact that all of the products subject to antitrust cases amounted to only 10% or less of General Electric's total business.

82. With respect to the manner of growth of the larger companies, I-T-E was very much aware that, particularly in earlier years, it was in large part due to the acquisition by the larger companies of many of their smaller competitors. Scott knew not only about the earlier Cutter and I-T-E experience previously referred to but of the experience of others including General Electric's purchase of Trumbull, a significant panelboard and switchboard manufacturer, and a substantial interest in Pacific Electric, a leading west coast manufacturer of circuit breakers. In fact, at some point in the 1930's, Scott was told by General Electric's Paul Turk, who had investigated the Pacific Electric operation before General Electric acquired an interest in it, that he did not recommend the acquisition from a purely financial view and that General Electric's desire to purchase a dominant position in the west coast circuit breaker market was decisive.

83. It can be said that the coercive threats and acts of the larger companies, and particularly General Electric, were directed to two objectives: First, the achievement of uniform prices and, second, the containment of smaller competitors. It was necessary from the point of view of the three major companies to have price uniformity for each product manufactured by a smaller, short-line company so that there would be no adverse customer reaction to uniform prices in the heavier product lines, which were more fully occupied by the major companies, and from which a more significant portion of their revenues was obtained. A second benefit of price uniformity was the elimination of factors leading to price wars. The third, and perhaps most important, benefit of price uniformity to a large company was the denial to a smaller company, organizationally less rigid, of the competitive advantage of flexible pricing in the marketing of its products.

84. There are many variables which go into the businessman's determination of the price he will charge for a specific transaction. Included among them is his estimate of the prices which his competitors will bid, and, of course, his knowledge of or beliefs concerning his competitors' past pricing will be significant factors in formulating his estimate of his competitors' future conduct. However, General Electric's policy of a "national price level" for every sale, every place at the lowest bid of any competitor, any time, any place went beyond the requirements of fair competition for any single sale since that policy has as a substantial purpose the establishment of a uniform price and the elimination of price competition on succeeding transactions.

85. As a result of the threats and acts referred to above, officers and employees of I-T-E attended and participated in meetings relating to the pricing and allocation of sales of some types of power switchgear assemblies and some other types of electrical equipment, which meetings have been identified in this written statement, by officers and employees of I-T-E in the course of discovery proceedings in this and other pending litigation, and in papers filed in such litigation such as answers to complaints, answers to interrogatories and briefs and memoranda. However, I-T-E's participation in such pricing discussions permitted it to continue as an effective competitor over the years and to pursue its policy of competition in price and other respects to an extent which would not otherwise have been possible in the face of the economic power arrayed against it and the limitations imposed upon it by the events referred to above. Thus, prices for electrical equipment of the types manufactured by I-T-E have been more favorable to purchasers than they would have been had I-T-E followed any other course.

III.

National Depositions:

  Deponent and
Present or Former
    Employer                Date                 Pages

W.M. Scott, Jr.           5/27-28/64      N33664-5, N33672-5,
   I-T-E                                  N33698, N33703-4,
                                          N33712-7, N33726-7,
                                          N33731-3, N33746,
                                          N33825-30, N33833-5,
                                          N33855-9, N33890-3

                                          NX1865, pages 17494,
                                          17498-503, 17508,
                                          17511-2, 1751515,
                                          17518

H.L. Buck                    5/28/64      printed pages 14-7,
   I-T-E                                  20-32, 47-64, 67-8,
                                          70-78, 91-2, 94, 102,
                                          104-10, 113

F.G. Schmidt                 5/22/64      N33256-9, N33270-1,
   I-T-E                                  N33277-87, N33337-8

N.S. Spencer              5/14-19/64      N32214-7, N32225-8,
   I-T-E                                  N32236-46, N32249,
                                          N32274-5, N32343-5,
                                          N32499-501, N32511-2,
                                          N32598-610, N32630-2
                                          NX1781, 1782, 1783,
                                          1803, 1804, 1806,
                                          1808J

R.F. Schall                   3/5/63      printed pages 22, 69
   I-T-E

C.E. Burke               11/27-28/63      N4842-4, N4885-9
   GE                        9/20/63      N20788-94
                                          NX1083, pages 3-7

G.E. Burens                9/9-11/63      N19453-4, N19489,
      GE                                  N19643-6, N19660-4,
                                          N19691-2, N19772-3,
                                          N19779-80, N19815-21,
                                          N19826-55

J.W. McMullen             3/16-19/64      N30451-2, N30460-1,

   Allis-Chalmers                         N30456-7, N30462,
                                          N29970-1, N30136-44

J.D. Hoffman                10/21/63      N22744-5, N22712-5,
   Joslyn                                 N22734-5

W.S. Ginn                11/29-30/62      N5479-80, N5483-90
   GE

J.W. Seaman                 9/4-6/63      N19187-8, N19306,
   GE                                     N19308, N19126-7
                                          NX1059F & G

R.W. Smith                9/16-17/63      N20200-1, N20186-8
   GE

R.J. Cordiner              3/9-12/64      N29493-5, N29549,
   GE                                     N29559-60, N29560-8
                                          NX1609, NX1631,
                                          pages 17755, 17673

W.R. Swoish               8/19-20/63      N18193, N18152-4,
   McGraw Edison                          N18162, N18224-5,
                                          N18165-70, N18399-401,
                                          N18088-93

L.W. Long                 9/19-20/63      N20371-5, N20571-4,
   Allis-Chalmers                         N20601, N20484-7,
                                          N20512-5

L.B. Gezon                   5/25/64      N33495-9, N33524
   GE

H.F. Hentschel               5/20/64      N3781-91; NX1830
   GE

F.M. Nolan                   5/29/62      printed page 4
   Allis-Chalmers

J.V. McGuire                  6/5/64      N34749-51
   Allis-Chalmers

G.A. Dusch                6/24-26/63      N15747-9, N15532-4,
   Federal Pacific                        N15544-7, N15527

F.H. Roby                    6/26/52      printed pages 22, 13
   Federal Pacific

W.M. Wood               5/5 and 7/64      N31228-31, N31245-6,
   Schwager-Wood                          N31649-50, N31659-61

Perry M. Green, Jr.         11/17/64      N35819-20, N35815-6
   Kuhlman

F.E. Stehlik                 5/19/64      N32729-30, N32731-4,
   GE                                     N32752

W.A. Wirene                 9/4-5/63      2N3219-51, 2N3255-63
   GE

W.H. Feldmann                2/11/65      2N10912-4
   Worthington

Frank Mason                  2/12/65      8N1382-6, 8N1389-90
   H.K. Porter
                                          8NX90, 91, 92

IV.

Documents in addition to those identified above:

1. A letter dated August 1, 1933, related to Westinghouse  —
I-T-E patent licenses of the same date.

2. A memorandum of a meeting attended by W.M. Scott, Jr., on March 23, 1933.

3. "Men and Volts, The Story of the General Electric" by J.W. Hammond, 1941, J.B. Lippincott Company, especially page 272.

4. One of the Cutter stock certificates evidencing the General Electric and Westinghouse interests in Cutter.

5. Hearings before the Subcommittee on Antitrust and Monopoly, of the Senate Committee on the Judiciary, 87th Congress, First Session, Parts 27 and 28.

6. Patent license between Kelman and General Electric entered into as of November 20, 1937, and papers relating thereto bearing numbers 61006-83.

7. Letters from Newton to Scott dated May 1, 1931 and Scott to Newton dated May 13, 1931, which relate to the air circuit breaker discussions with competitors.

8. Thurman Arnold's letter to Scott, Jr., dated May 9, 1940.

9. Spencer's notes as follows:

     211997-24 to -29
     211997-39 to -43
     211997-44 to -49
     211997-50 to -61
     211997-95 to -100
     211997-143 to -151
     211997-137 to -142
     211997-152 to -153

10. Annual Reports of the General Electric Company for such period as may be available, including but not limited to 1956 to 1960 inclusive.

11. Annual Reports of Westinghouse Electric Corporation for such period as may be available, including but not limited to 1956 to 1960.

12. Annual Reports of Allis-Chalmers Manufacturing Company for such period as may be available, including but not limited to 1956 to 1960.

13. Letters from Victor S. Beam to William Scott, dated April 24, 1933 and August 7, 1933.

14. Letter dated June 23, 1932 to A. Edward Newton from W.M. Scott.

15. Papers relating to the "60-40" agreement between General Electric and Westinghouse referred to by W.M. Scott, Jr., in his deposition on May 27-28, 1964.

16. The works of T.K. Quinn, including: "Giant Business, Threat to Democracy", Exposition Press Inc., 1953; "Unconscious Public Enemies", The Citadel Press, 1962; "Giant Corporations, Challenge to Freedom", Exposition Press Inc., 1956.

17. Letter dated November 13, 1962 from W.M. Scott, Jr., to Lee Loevinger and Mr. Loevinger's reply of November 19, 1962.

V.

Potential trial witnesses:

    Potential
   Witness and             Description of Possible Testimony
Present or Former            by Reference to Paragraphs of
    Employer                   Part II of This Statement

W.M. Scott, Jr.        All
   I-T-E

H.L. Buck              1-3, 42-45, 54, 56, 57, 60-70, 73-76, 78,
   I-T-E               83-85

F.G. Schmidt           1-3, 44, 49, 60-66, 69, 70, 83-85
   I-T-E

N.S. Spencer           1-3, 44, 49, 60-64, 69, 70, 83-85
   I-T-E

R.F. Schall            1-3 43, 67, 83-85
   I-T-E

C.E. Burke             1-3, 45, 51, 55, 79, 83-85
     GE

G.E. Burens            1-3, 30, 34, 36, 37, 45, 50, 51, 55, 57,
     GE                66, 79, 80, 83, 84

J.W. McMullen          1-3, 43, 45, 55, 83, 84
   Allis-Chalmers

J.D. Hoffman           1-3, 58, 83, 84
   Joslyn

W.S. Ginn              1-3, 36, 79, 83, 84
     GE

J.W. Seaman            1-3, 36, 79, 83, 84
     GE

R.W. Smith             1-3, 36, 55, 79, 83, 84
     GE

R.J. Cordiner          1-3, 79, 80, 81, 83, 84
     GE

W.R. Swoish            1-3, 6-8, 14-25, 71, 83, 84
   McGraw-Edison

L.W. Long              1-3, 27, 45, 65, 83, 84
   Allis-Chalmers

L.B. Gezon             1-3, 62, 83, 84
     GE

H.F. Hentschel         1-3, 6-8, 14-25, 45, 83, 84
     GE

F.M. Nolan             1-3, 52, 83, 84
   Allis-Chalmers

J.V. McGuire           1-3, 52, 83, 84
   Allis-Chalmers

G.A. Dusch             1-3, 47, 53, 59, 83, 84
   Federal Pacific

F.H. Roby              1-3, 53, 83, 84
   Federal Pacific

W.M. Wood              1-3, 31, 58, 83, 84
   Schwager-Wood

Perry M. Green, Jr.    1-3, 72, 83, 84
   Kuhlman

F.E. Stehlik           1-3, 45, 60-64, 83, 84
     GE

W.A. Wirene            1-3, 17-20, 83, 84
     GE

W.H. Feldmann          1-3, 77, 83, 84
   Worthington

Frank Mason            1-3, 78,83, 84
   H.K. Porter

George R. Fluehr       1-3, 72, 83, 84
   Kuhlman

J.O. Knott             1-3, 78, 83, 84
    I-T-E
Joseph Chapman         1-3, 76, 83, 84
   C.C. Collings & Co.

VI.

    I-T-E has attempted to comply in good faith
  with Local Pretrial Order No. 4. To the extent
  that it may have been unable to do so in every
  respect, the reasons for any such failure
  include:

      1. There was insufficient time for a task of such
    magnitude, particularly when considered in
    connection with the other obligations of counsel
    in these cases to comply with other requirements
    of local pretrial orders.

      2. By its terms, paragraph 3(D) (xv) requires the
    identification of portions of all national
    depositions "which relate to or bear on" I-T-E's
    Fourth Defense. To date, there have been at least
    60,000 pages of such depositions and it is quite
    possible that portions other than those heretofore
    identified in this statement relate to or bear on
    I-T-E's Fourth Defense. I-T-E's inability has been
    further aggravated by the refusal of General
    Electric, Westinghouse and Allis-Chalmers to sell
    it copies of national depositions taken on behalf
    of defendants.

      3. By its terms, paragraph 3(D) (xvi) requires
    the identification and full description of the
    contents of "all documents produced in a national
    document depository which relate to, bear on or
    reflect" I-T-E's Fourth Defense.

    There are hundreds of thousands of documents in the
    defendants' depository. Most of them were deposited
    by other defendants and are not available to I-T-E
    as a matter of right. There are thousands of
    documents in the plaintiffs'national depository and
    I-T-E has seen only those deposited by some of the
    plaintiffs in these Chicago cases.

      4. By its terms, paragraphs 3(D) (xviii) and
    (xix) require the identification and full
    description of the contents of all documents and
    the setting forth of all other facts and
    contentions "which relate to, bear on or reflect"
    I-T-E's Fourth Defense. Limitations of time, space
    and human ability preclude literal compliance
    beyond what has been done. For example, this
    statement does not identify documents filed in this
    and other pending litigation such as answers to
    complaints, answers to interrogatories and briefs
    and memoranda.

      5. Until I-T-E's discovery program, which
    includes matters related to I-T-E's Fourth Defense,
    is complete, I-T-E cannot make a more definite
    response to Local Pretrial Order No. 4.

Dated: March 9, 1965

                                  Owen Rall
                                  Elroy C. Sandquist, Jr.
                                  Peter M. Sfikas

                                  135 South LaSalle Street
                                  Chicago, Illinois 60603

                                  Attorneys for Defendant
                                  I-T-E Circuit Breaker Company

                           APPENDIX B
  AMENDED WRITTEN STATEMENT OF DEFENDANT I-T-E CIRCUIT BREAKER
        COMPANY AS REQUIRED BY LOCAL PRETRIAL ORDER NO. 4

    Pursuant to the oral direction of the Court on
  March 22, 1965, defendant I-T-E Circuit Breaker
  Company amends its written statement filed on March
  9, 1965, in the following respects and, except as
  otherwise stated herein, adopts and incorporates its
  written statement heretofore filed:

A. Amends paragraph II.8. by adding at the end of it:

    As a result of the coercive activities of General
  Electric and Westinghouse, I-T-E did change its terms
  for freight to "f.o.b., Philadelphia, freight
  allowed." Because of the insistence of General
  Electric and Westinghouse, I-T-E did revise its terms
  for cash discount so as to eliminate that variation
  in its initial bid or quotation.

B.Amends paragraph II.23. by adding at the end of it:

    As a result of these demands of General Electric
  and Westinghouse and I-T-E's fear that failure on
  the part of I-T-E to comply would bring retaliation,
  T-T-E stalled by saying that it would comply with the
  demands and it sometimes but not always did comply

  ply. At that period of time, in the late 1930's,
  I-T-E made relatively few sales of this type of
  equipment and the effect of these demands and I-T-E's
  partial compliance with them, in effect, caused I-T-E
  to withdraw from the market.

  C. Amends paragraphs II.45. and II.48. by adding at the end of
     each of them:

    I-T-E undertook no conduct as the result of the
  events set forth in this paragraph, in themselves,
  except in the sense that such events were part of the
  entire context leading to I-T-E's belief that it had
  no choice but to participate in meetings and
  discussions with General Electric, Westinghouse and
  Allis-Chalmers.

D. Amends paragraph II.57. by adding at the end of it:

    Following the Traymore meeting, I-T-E personnel
  were instructed to run I-T-E's business their own
  way. See paragraph 67. But as a result of the threats
  and acts at the Traymore meeting and the events
  preceding it, employees of I-T-E did attend and
  participate in meetings at which the pricing and
  allocation of sales of some types of power switchgear
  assemblies and some other types of electrical
  equipment were discussed. At some of these meetings,
  I-T-E employees discussed not only so-called "book"
  or catalogue prices but also prices for equipment
  which had been or was to be sold to particular
  customers.

    I-T-E has done its best to comply with Local
  Pretrial Order No. 4, notwithstanding its objections
  to it, which have been heretofore expressed, and its
  belief that the nature and extent of the factual
  material upon which I-T-E relies make it impossible,
  as a practical matter, to do more than it has done.
  It respectfully suggests that it has substantially,
  if not literally, complied with the Court's order.

(s)

                        Owen Rall
                        Elroy C. Sandquist, Jr.
                        Peter M. Sfikas
                        135 South LaSalle Street
                        Chicago, Illinois 60603
                        Attorneys for Defendant
Dated: April 5, 1965.   I-T-E Circuit Breaker Company

    PLAINTIFFS' STATEMENT PURSUANT TO PARAGRAPH (4) OF LOCAL
                      PRETRIAL ORDER NO. 4

I. INTRODUCTION

Of the approximately twenty-eight manufacturers convicted of antitrust violations in the Philadelphia criminal cases, I-T-E Circuit Breaker Company ("I-T-E") alone seeks judicial absolution from treble-damage liability on the alleged ground that it participated in the illegal conspiracies because it was "coerced" by larger competitors. In support of this alleged defense, I-T-E has offered nothing but a jumbled mass of jabberwocky.

The tone to I-T-E's apologia for decades of illegal price-fixing and market allocation is fixed at the outset — "seemingly colorless incidents," we are told, must be viewed in light of the significance they have "to a person who has grown up in the industry." (First Statement, p. 2) I-T-E then takes its own caveat as a license to deal in vague generalities and accusations.

Before examining I-T-E's statement in detail, it is important to place the "coercion defense" in perspective by examining what I-T-E has conveniently ignored:

  Part II — I-T-E's Growth Under the Protective
            Umbrellas of the Conspiracies;

  PartIII — The Personal Profit to Those Who Directed
            I-T-E in Its Illegal Course of Action;

  Part IV — I-T-E's Failure For at Least Twenty-Eight
            Years to Expose the Conspiracies.

Plaintiffs do not in this Statement set forth all of the conspiratorial evidence relating to all of the product lines in which I-T-E was involved, even though it would be appropriate to do so if the "coercion" issue remains at the time of trial. However, because I-T-E generally fails to identify products in the course of its Statements, and I-T-E's conspiratorial activities expanded along with its expansion in the electrical equipment field, we point out that I-T-E participated in illegal conspiracies involving nine product lines:

Power switchgear assemblies

Power switching equipment

  Large circuit breakers (rated in excess of 1,500
  volts)

Low voltage power circuit breakers

Low voltage distribution equipment

Insulators

Isolated phase bus

Navy and marine switchgear

Open fuse cutouts

II. I-T-E'S GROWTH UNDER THE PROTECTIVE UMBRELLAS OF THE
    CONSPIRACIES

1. W.M. Scott, Jr. (Max Scott) admitted that he attended price-fixing meetings with competitors at least as early as 1931. (Deposition, p. 3)[fn*b]

2. As of December 12, 1931, I-T-E's net assets were $1,074,692.14. (I-T-E financial statement dated 12/16/31.)

3. When I-T-E first conspired with competitors in 1931, it manufactured basically two types of products — circuit breakers of 600 volts or less (usually referred to by I-T-E as "large air circuit breakers" and more commonly referred to as "low voltage power circuit breakers") and switchboards, which undoubtedly represent a small portion of its present business.

4. Since 1931, I-T-E has grown into a multi-product, multi-million dollar corporation and consistently joined the price-fixing and market allocation conspiracies affecting its "electrical equipment" products.

5. If there were any merit to I-T-E's allegations of coercion, the necessary conclusion is that I-T-E voluntarily expanded its business knowing beforehand that a necessary concomitant of expansion was further violation of the antitrust laws.

6. Quite apart from whether there is any merit to a "coercion defense" under some circumstance, it is clear that the defense cannot be sustained where, as here, a corporation undertakes business activity for profit knowing beforehand that it has to and will violate the antitrust laws.

7. When I-T-E changed from a New Jersey to a Pennsylvania corporation in 1939, its capital structure consisted of 9,640 shares of common stock, which were owned as follows:

W.M. Scott                          14

W.M. Scott, Jr.                  1,144

A. Clifford Campion, Jr.         1,000

R.E. Murphy                         40

        By or for other members of
          Scott family                   4,384

E. Swift Newton                  2,488

A. Edward Newton                     2

        By or for other members of
          Campion family                   420

        Others                             148
                                         -----
                Total                    9,640

        (Minutes of Shareholders meeting of
          12/22/39.)

8. I-T-E was theretofore and continued to be owned primarily by three families — the Scotts, Newtons, and Campions.

9. At least the Scotts, Newtons, and R.E. Murphy participated in or knew of the price-fixing meetings with competitors. (Scott Deposition, p. 4; Letter from Mr. Scott, Sr. to A. Edward Newton, dated 5/13/31.)

10. Attached as Exhibit A and Exhibit B, respectively, are "ten year statistical reviews" from I-T-E's annual reports for 1964 and 1956. I-T-E's net worth in 1959 was $46,479,263.

11. I-T-E's total net worth, common shares outstanding and net worth per share (for some years prior to those shown on Exhibits A and B and adjusted to reflect a 2 for 1 dividend in 1946 and a 5 for 1 split on August 1, 1947), were as follows:

            Total Net                                 Net Worth
             Worth              Common              Per Share

  1946      $3,949,617           28,920                $136.56
  1945       3,794,595           28,920                 131.21
  1944       4,083,926[fn**]     28,920                 141.21
  1943       3,756,110           28,920                 129.88
  1942       3,215,731           28,920                 111.19
  1941       2,650,138           28,920                  91.62

[fn**] (apparently estimated)

12. I-T-E's growth has been achieved with relatively minor "outside" financing:

(a) In October, 1951, I-T-E issued 60,000 shares of $50 par value, 4 1/2% convertible preferred stock, all of which was converted by the end of 1953.

(b) In April, 1954, I-T-E issued 100,000 shares of $50 par value, 4.6% preferred stock, of which 60,662 shares were still outstanding at the end of 1964.

(c) In March, 1957, I-T-E issued $10,000,000 of 4 1/4% Convertible Subordinated Debentures, of which $9,537,000 remained outstanding at the end of 1964.

13. I-T-E made the following major acquisitions, for I-T-E stock, within the periods of the illegal conspiracies:

I-T-E Stock

Nov., 1947 — Railway & Industrial Engineering
             Company                            122,952
shares*fn*
Dec., 1953 — Victor Insulators, Inc.             53,900 shares
June, 1954 — BullDog Electric Products Company  227,272 shares
Aug., 1956 — The Kelman Elec. & Mfg. Co.         97,300 shares
Dec., 1956 — The Walker Electrical Co.           51,100 shares
      1958 — Canadian Porcelain Co., Ltd.        18,820 shares
      1958 — Wilson Electrical Equip. Co.         8,820 shares
                                                --------------
                              Total             580,164 shares


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