Kodak's Win

"A right to success "

Another court decision last week will be closely studied by businessmen, especially those in industries with one or a few dominant firms.

A year ago, Berkey Photo (1978 revenues: $199 million) won a major victory over giant Eastman Kodak ($7 billion) in one of the largest private antitrust suits in history. A federal district-court jury in Manhattan found that Kodak, which made more than 80% of the film sold in the U.S. in 1973, when the case was first brought, and garnered over 60% of camera sales, not only had monopoly power in the amateur-photography field but had used this power unfairly. Berkey was awarded treble damages of $87 million. Now, in an equally stunning reversal, the U.S. Second Circuit Court of Appeals has thrown out all but $990,000 of the 1978 award; it dismissed $45.8 million of the damages outright and said that only a new trial could determine if Kodak must pay the rest of the award.

The core of Berkey's complex case was a charge that Kodak abused its dominant position when it launched its 110 Instamatic camera in 1972. The camera used a special-size film that came in an easy-to-install cartridge. Other camera makers were riled because they were caught by surprise and lost sales during the time it took to develop models that could use that cartridge. Berkey argued that Kodak had exploited its dominance in film manufacturing to give its Instamatic an unfair advantage over competitors and that it should have told its competitors in advance about the 110 system.

In his 121-page opinion, Chief Judge Irving R. Kaufman of the appeals court said that the fact that Kodak dominated its field was no reason to penalize it for having taken the lead with the 110 system. "The mere possession of monopoly power does not ipso facto condemn a market participant," Kaufman wrote. Moreover, he added, "the first firm, even a monopolist, to design a new camera format has a right to the lead time that follows from its success."

Kodak officials were naturally delighted with the decision, though their court troubles may not be over. Berkey may try to appeal Kaufman's ruling to the U.S. Supreme Court, or it can return to the district court with the part, of its suit that Kaufman said must be retried (this involved alleged abuses by Kodak of its dominant position in the photographic-paper market).

Antitrust experts are intrigued by Kaufman's forceful insistence that courts should not automatically judge bigness to be badness. That is the issue in the current major antitrust cases that the Justice Department is pursuing against IBM and AT&T. Kaufman's reasoning has yet to be tested in other cases and in higher court. Still, some lawyers find it to be a rare reassertion of what used to be a traditional antitrust rule: that the mere existence of monopoly power does not make a big company culpable under the Sherman Act. In the classic interpretation of antitrust laws, says Washington Attorney Joe Sims, a former Deputy Assistant Attorney General in the Justice Department's antitrust division, it is "at least logically possible that a firm could obtain a monopoly position by doing a better job than everybody else and not doing anything improper at all."

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