8 5, 6 1 8

and that therefore Hanover should recover from United the difference between what it paid United in shoe machine rentals and what it would have paid had United been willing during the relevant period to sell those machines.

Section 5(a) of the Clayton Act, 38 Stat. 731, as amended, 69 Stat. 283, 15 U. S. C. § 16(a), makes a final judgment or decree in any civil or criminal suit brought by the United States under the antitrust laws "prima facie evidence as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto...." Relying on this provision, Hanover submitted the findings, opinion, and decree rendered by Judge Wyzanski in the Government's case as evidence that United monopolized and that the practice of refusing to sell machines was an instrument of the monopolization. United does not contest that prima facie weight is to be given to the judgment in the Government's case. It does, however, contend that Judge Wyzanski's decision did not determine that the practice of leasing and refusing to sell was an instrument of monopolization. This claim, rejected by the courts below, is the threshold issue in No. 463. If the 1953 judgment is not prima facie evidence of the illegality of the practice from which Hanover's asserted injury arose, then Hanover, having offered no other convincing evidence of illegality, should not have recovered at all.'

Both the District Court and the Court of Appeals concluded that the lease only policy had been held illegal in the Government's suit. We find no error in that determination. It is true that §4 of the decree' on

1 Following the District Court's rejection of United's construction of Judge Wyzanski's opinion and decree, United filed a motion requesting that the District Court certify the question of construction to Judge Wyzanski. United contends that the District Court erred in denying this motion, but we need not pass upon the merits of United's novel request, for the District Court clearly acted within its proper discretion in denying as untimely certification to another court of a question upon which it had already ruled.

"4. All leases made by defendant which include either a ten-year term, or a full capacity clause, or deferred payment charges, and all leases under which during the life of the leases defendant has rendered repair and other service without making them subject to separate, segregated charges, are declared to have been means whereby defendant monopolized the shoe machinery market." [1953 TRADE CASES 67,436), 110 F. Supp., at 352.

In its opinion on remedy. In answering United's objection to Its conclusion that the decree should require United to offer machines

¶ 72,490

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9-30-68

which United relies condemned only certain clauses in the standard lease and that nowhere in the decree was any other aspect of United's leasing system expressly described or characterized as illegal monopolization. It is also arguable that §5 of the decree, which required that United thenceforward not "offer for lease any machine type, unless it also offers such type for sale," was included merely to insure an effective remedy to dissipate the accumulated consequences of United's monopolization. We are not, however, limited to the decree in determining the extent of estoppel resulting from the judgment in the Government's case. If by reference to the findings, opinion, and decree it is determined that an issue was actually adjudicated in an antitrust suit brought by the Government, the private plaintiff can treat the outcome of the Government's case as prima facie evidence on that issue. See Emich Motors Corp. v. General Motors Corp. [1950-1951 TRADE CASES ¶ 62,778], 340 U. S. 558, 566-569 (1951).

Section 5 of the decree would have been a justifiable remedy even if the practice it banned had not been instrumental in the monopolization of the market. But in our view the trial court's findings and opinion put on firm ground the proposition that the Government's case involved condemnation of the lease only system as such. In both its opinion with respect to violation and its opinion with respect to remedy, the court not only dealt with the objectionable clauses in the standard lease but also addressed itself to the consequences of only leasing machines and to the manner in which that practice related to the maintenance of United's monopoly power.' These portions of the

for sale as well as for lease, the court plainly said that United "has used its leases to monopolize the shoe machinery market. And if leasing continues without an alternative sales system. United will still be able to monopolize that market." [1953 TRADE CASES 67,436), 110 F. Supp., at 350. Clearly, if after purging the leases of objectionable clauses United would still be monopolizing by leasing but not selling its machines, the lease only policy must also have made a substantial contribution to United's monopolization of the market during the period prior to the entry of the judgment. Moreover, in its opinion on violation, where the three principal sources of United's market power were Identified, the court pointed to "the magnetic ties inherent in its system of leasing, and not selling. Its more important machines" and to the " 'partnership' aspects of leasing but not selling those machines. [1953 TRADE CASES 67,436). 110 F. Supp.. at 344. The leases assured closer and more frequent contacts be tween United and its customers than would exist if United were a seller and Its customers were buyers." Id., at 343. A shoe manufac 1968, Commerce Clearing House, Inc.

Number 366-13 6-20-68

court's opinion are well supported by its findings of fact, which also estop United as against the Government and which therefore constitute prima facie evidence in this case. We have set out the relevant findings in an Appendix to this opinion. They are themselves sufficient to show that the lease only system played a significant role in United's monopolization of the shoe machinery market. Those findings were not limited to the particular provisions of United's leases. They dealt as well with United's policy of leasing but not selling its important machines, with the advantages of that practice to United, and with its impact on potential and actual competition. When the applicable standard for determining monopolization under § 2 is applied to these facts, it must be concluded that the District Court and the Court of Appeals did not err in holding that United's practice of leasing and refusing to sell its major machines was determined to be illegal monopolization in the Government's case.

II

[Passing On]

The District Court found that Hanover would have bought rather than leased from turer by leasing was "deterred more than if he owned that same United machine, or if he held it on a short lease carrying simple rental provislons and a reasonable charge for cancelation before the end of the term." Id., at 340. The lease system had "alded United in maintaining a pricing system which discriminates between machine types," id., at 344, discrimination which the court later said had evidenced "United's monopoly power, a buttress to it, and a cause of its perpetuation Id., at 349.

In its brief on appeal from the Judgment and decree rendered in the Government's case, United recognized that "[t]he principal prac tices which the [District] Court stressed were that defendant offered important complicated machines only for lease and not for sale and that defendant serviced the leased machines without a separate charge." Brief for Appellant, at 6, United Shoe Machinery Corp. v. United States [1954 TRADE CASES 1 67,755), 347 U. S. 521 (1954). United also said that "[elvidently the Court below regarded the fact that United distributes its more Important machines only by lease and not by sale as the basic objection to the system." Id., at 170.

The Court of Appeals affirmed this finding and we do not disturb it. See also n. 16, infra. We also agree with the courts below that In the circumstances of this case it was unnecessary for Hanover to prove an explicit demand during the damage period. See Continental Ore Co. v. Union Carbide & Carbon Corp. [1962 TRADE CASES 170,361), 370 U. S. 690, 699 (1962).

The chronology of events with respect to this issue in the lower courts was as follows: After the pretrial conference, a separate Issue which was thought might determine the action

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United had it been given the opportunity to do so. The District Court determined that if United. had sold its important machines, the cost to Hanover would have been less than the rental paid for leasing these same machines. This difference in cost, trebled, is the judgment awarded to Hanover in the District Court. United claims, however, that Hanover suffered no legally cognizable injury, contending that the illegal overcharge during the damage period was reflected in the price charged for shoes sold by Hanover to its customers and that Hanover, if it had bought machines at lower prices, would have charged less and made no more profit than it made by leasing. At the very least, United urges, the District Court should have determined on the evidence offered whether these contentions were correct. The Court of Appeals, like the District Court, rejected this assertion of the so-called "passing-on" defense, and we affirm that judgment."

Section 4 of the Clayton Act, 38 Stat. 731, 15 U. S. C. §15, provides that any person "who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor... and shall recover threefold the damages by was set for trial pursuant to Fed. Rules Civ. Proc. 42(b). The general question was whether, assuming that Hanover had paid illegally high prices for machinery leased from United, Hanover had passed the cost on to its customers, and if so whether it had suffered legal injury for which it could recover under the antitrust laws. After evidence had been taken on the issue, Judge Goodrich, sitting by designation, ruled that when Hanover had been forced to pay excessive prices for machinery leased from United, it had suffered a legal injury: "This excessive price is the Injury." [1960 TRADE CASES 69,614]. 185 F. Supp. 826, 829 (D. C. M. D. Pa. 1960). He also rejected the argument "that the defendant is relieved of liability because the plaintiff passed on its loss to its customers." Ibid. In his view it was unnecessary to determine whether Hanover had passed on the illegal burden because Hanover's injury was complete when it paid the excessive rentals and because "[t]he general tendency of the law, in regard to damages at least, is not to go beyond the first step' and to exonerate a defendant by reason of remote consequences. Id., at 830 (quoting from Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U. S. 531, 533 (1918)). The Court of Appeals heard an interlocutory appeal pursuant to 28 U. S. C. § 1292 (b) and affirmed. [1960 TRADE CASES I 69,754). 281 F. 2d 481 (C. A. 3d Cir. 1960). Certiorari was denied. 364 U. S. 901 (1960). United preserved the issue and presented it again to the Court of Appeals in appealing the treble-damage judgment entered after trial of the main case. The Court of Appeals adhered to the principles of its prior decision. United brought the question here.

¶ 72,490

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him sustained

We think it sound to hold that when a buyer shows that the price paid by him for materials purchased for use in his business is illegally high and also shows the amount of the overcharge, he has made out a prima facie case of injury and damage within the meaning of § 4.

If in the face of the overcharge the buyer does nothing and absorbs the loss, he is entitled to treble damages. This much seems conceded. The reason is that he has paid more than he should and his property has been illegally diminished, for had the price paid been lower his profits would have been higher. It is also clear that if the buyer, responding to the illegal price, maintains his own price but takes steps to increase his volume or to decrease other costs, his right to damages is not destroyed. Though he may manage to maintain his profit level, he would have made more if his purchases from the defendant had cost him less. We hold that the buyer is equally entitled to damages if he raises the price for his own product. As long as the seller continues to charge the illegal price, he takes from the buyer more than the law allows. At whatever price the buyer sells, the price he pays the seller remains illegally high, and his profits would be greater were his costs lower.

"It is, however, contended that even if it be assumed the facts show an illegal combination, they do not show injury to the plaintiffs by reason thereof. The contention is untenable. Section 7 of the act gives a cause of action to any person injured in his person or property by reason of anything forbidden by the act and the right to recover three-fold the damages by him sustained. The plaintiffs alleged a charge over a reasonable rate and the amount of it. If the charge be true that more than a reasonable rate was secured by the combination, the excess over what was reasonable was an element of injury. Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U. S. 426, 436. The unreasonableness of the rate and to what extent unreasonable was submitted to the jury and the verdict represented their conclusion." 243 U. S., at 88.

• Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U. S. 531 (1918), involved an action for reparations brought by shippers against a railroad. The shippers alleged exaction of an unreasonably high rate. To the claim that the shippers should not recover because they were able to pass on to their customers the damage they sustained by paying the charge, the Court said that the answer was not difficult: "The general tendency of the law, in regard to damages at least, is not to go beyond the first step. As it does not attribute remote consequences to a defendant so it holds him liable if proximately the plaintiff has suffered a loss. The plaintiffs suffered losses to the amount of the verdict when they paid. Their clalm accrued at once In the theory of the law and ¶ 72,490

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Fundamentally, this is the view stated by Mr. Justice Holmes in Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U. S. 390 (1906), where Atlanta sued the defendants for treble damages for antitrust violations in connection with the city's purchases of pipe for its waterworks system. The Court affirmed a judgment in favor of the city for an amount measured by the difference between the price paid and what the market or fair price would have been had the sellers not combined, the Court saying that the city "was injured in its property, at least, if not in its business of furnishing water, by being led to pay more than the worth of the pipe. A person whose property is diminished by a payment of money wrongfully induced is injured in his property." Id., at 396. The same approach was evident in Thomsen v. Cayser, 243 U. S. 66 (1917), another treble-damage antitrust case.' With respect to overcharge cases arising under the transportation laws, similar views were expressed by Mr. Justice Holmes in Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U. S. 531, 533 (1918), and by Mr. Justice Brandeis in Adams v. Mills, 286 U. S. 397, 406-408 (1932). In those cases the possibility that plaintiffs had recouped the overcharges from their customers was held irrelevant in assessing damages.

It does not inquire into later events.

The carrier ought not to be allowed to retain his illegal profit, and the only one who can take it from him is the one that alone was in relation with him, and from whom the carrier took the sum. Probably in the

end the public peys the damages in most cases of compensated torts." 245 U. S.. at 533-534. Adams v. Mills, 286 U. S. 397 (1932), is to the same effect. See also I. C. C. v. United States, 289 U. S. 385 (1933).

Keogh v. Chicago & N. W. Ry., 260 U. S. 156 (1922), is relied upon by United as stating a contrary rule. There the Court affirmed a judgment on the pleadings in a shipper's action under the antitrust laws charging a conspiracy among railroads to set unreasonably high rates. Because the rates had been ap proved as reasonable after a proceeding before the Interstate Commerce Commission, the shipper was held to have no cause of action under the antitrust laws. After giving this and other reasons for its judgment, the Court ended its opinion by saying that it would have been impossible for the shipper to have proved damages since no court could say that if the rate had been lower the shipper would have enjoyed the difference; the benefit might have gone to his customers. The Court, however, was careful to say earlier in its opinion that the result would have been different had the rate been unreasonably high, an approach confirmed by Mr. Justice Brandels In Adams v. Mills, supra. We ascribe no general significance to the Keogh dictum for cases where the plaintiff is free to prove that he has been charged an

1968, Commerce Clearing House, Inc.