Milford Rivet & Machine Co

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF MILFORD RIVET & MACHINE COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION . OF SEC. 3 OF AN ACT OF CONGRESS APPROVED OCT. 15, 1914 Docket 4110. Complaint, Apr. 25, 1940-Decision, Feb. 9, 1944 Where a corporation which was engaged in the manufacture and interstate sale and distribution of tubular and bifurcated rivets to the jobbing· trade and industrial field, and in the manufacture; and outright sale, conditional sale, and lease of automatic rivet setting machines to manufacturers, in competition with others so engaged, and, but for the restrictive leases below set forth, with concerns engaged in interstate sale and distribution of such rivets suitable for use with its said machines; was one of a group of eight manufacturers in the United States engaged in the manufacture and sale of such rivets, and manufacture, sale, and lease of such machines-prices of which range from $150 to $1,000 and more, with the ordinary or more popular machines selling for around $300; and was one of six of said manufacturers, which followed the other two original occupants of the field in the making of such restrictive leases; · Leased its said machines upon the condition that they should be used only for setting rivets made by it or sold under its authority, at yearly rentals which were not sufficient, without the sale of rivets, to warrant the leasing-in connection with which it made no additional charge for servicing-and which were rebated in the event of lessee's using number of its rivets specified therein, prices of which were about ten per cent higher than those of corresponding rivets sold to non-lessees; With the result that through said excluding condition it precluded other concerns from· selling to its lessees rivets suitable for use in such machines, and excluded from the tubular and bifurcated rivet market numerous potential purchasers of such articles from its competitors, and competition in aforesaid market was restricted and contracted in direct proportion to the extent to which it was successful in so leasing its machines; · Effect of which, materially increased by similar practices of the other seven manufac-. turers hereinbefore referred to, might be to substantially lessen competition in sale in commerce of aforesaid.articles:

Held, That through use of acts and practices de~cribed, said corporation had violated and -was violating Section 3 of the Clayton Act. Before ~Mr. Edward E. Reardon, trial examiner. Mr. Lynn C. Paulson and Mr. George W. Williams for the Commission. Marsh, Day & Calhoun, of Bridgeport, Conn., for respondent. COMPljAINT The Federal Trade Commission, having reason to believe that the Milford Rivet & Machine Company, a corporation, hereinafter referred to as respondent, has violated the provisions of Section 3 of the Act of Congress entitled "An 'Act to supplement existing laws against unlawful restraints .and monopolies,· an:d for othet purposes," approved October 15, 1914, and commonly known as the Clayton Act, hereby issues this its complaint against said respondent and states its charges in respect thereto as follows, to-wit:

MILFORD RIVET & MACHINE CO. 181 180 Complaint PARAGRAPH 1. Respondent, Milford Rivet & Machine Company, is a corporation, organized, existing and doing business under and by virtue of the laws of the State of Connecticut, having its principal office and place of business at Milford, Conn.

Respondent is now, and for many years last past has been engaged in t.he business of manufacturing rivet-setting machines and of leasing 11nd hcensing the use of said rivet-setting machines, and of manufacturing and selling tubular and bifurcated rivets. Rivet-setting machines are used to set tubular and bifurcated rivets and tubular and bifurcated rivets are used in the manufacture of many articles of commerce . . In connection with its aforesaid business, respondent has leased and hcensed, and still leases and licenses, its rivet-setting machines, and has sold, and still sells, its tubular and bifurcated rivets to individuals, firms, Partnerships· and corporations located in the several States of the United States arid the District of Columbia, and has caused, and still causes, said machines and rivets, when leased, licensed or sold, to be transported from its principal place of business in Connecticut to the licensees, lessees and vendees thereof located at various points in the several States of the United States and in the District of Columbia, and said respondent now is, and has been for more than three years last past, constantly engaged in commerce in said products between and among the several States of the United States, the territories thereof and in the District of Columbia. In the course and conduct.of its business, said respondent is, and has ~een for several years, in competition with firms, partnerships, corpora- , ttons, and individuals engaged in the manufacture, leasing and licensing of rivet-setting machines and in the manufacture and sale of tubular and bifurcated rivets in commerce between and among the various States ·of the United States, the territories thereof, and in the District of Columbia.

There are in the United States, and have been during the time re- ~pondent has been in business, other corporations, firms, partnerships and I~dividuals who have been and are engaged in the sale of tubular and · btfurcated rivets in commerce among and between the several States, · ~which tubular and bifurcated rivets are suitable for and may be used In and with respondent's rivet-setting machines; and with whom, but for the restrictive condition of respondent's contracts of license and lease, -~s hereinafter set forth, respondent would have been and would now be lJ?. active, substantial competition in the sale of tubular and bifurcated nvets.

Said respondent is now, and for more than four years last past has been, a large manufacturer and distributor, licensor and lessor of rivetsetting machines, and now occupies an important position in the rivetsetting industry. ' PAR. 2. The respondent in the course and conduct of its said business hereinabove described in paragraph 1, has leased and licensed and is now leasing and licensing its said rivet-setting machines for use in the several States and territories of the United States and in the District of Columbia on and with the condition, agreement or understanding that the lessees or licensees thereof shall use the respondent's rivet-setting machines only for setting rivets manufactured by the respondent or sold under its authority, and on the further condition, agreement or understanding that the lessees or licensees thereof will allow the respondents 182 FEDERAL TRAD~ COMMISSION DECISIONS Findings 38 F. T.c.

or its agents to inspect the said machines at any time during the usual business hours. · . . PAR. 3. The effect of the said provisions in said license and lease agreements or understandings set forth in paragraph 2 hereof, may be to substantially lessen competition or tend to create a monopoly in respondent tubular and bifurc~ted rivets in co~llllerce ?et:veen and among the several States of the Umted States and m the D1stnct of Columbia. PAR. 4. The a.foresaid acts, practices and methods of respondent constitute a violation of the provisions of Section 3 of the hereinabovementioned Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and . for other purposes," approved October 15, 1914 (the Clayton Act). . REPORT, FINDINGS AS TO THE Facts, AND Onnim Pursuant to the provisions of that certain Act of Congress of the United States entitled, "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914, commonly known as the Clayton Act, the Federal Trade Commission on April 25, 1940, issued and subsequently served its complaint in this proceeding upon the respondent, Milford Rivet & Machine Company, a corporation, charging it with the violation of the provisions of Section 3 of said act. After the issuance of said complaint and the filing of respondent's ans>ver thereto, testimony and other evidence_ in support of, and in opposition to, the allegations of said complaint were mtroduced before a trial examiner of the Commission theretofore duly designated by it, including testimony and other evidence taken in Com~ission's proceeding under Docket 4111 (Judson L. Thomson Manu· factmmg Company),! which by stipulation upon the record wei·e made? part of the record in this proceeding, and said testimony and other evJ· donee were duly recorded and filed in the office of the Commission. There· af~e~, this proceeding regularly came on for final hearing before the Com· mission on said complaint, answer thereto, testimony and other evidence, re!!ort ?f the trial examiner upon the evidence and exceptions filed thereto, lmefs Ill support of ~he complaint and in opposition thereto, and oral argument of counsel; and the Commission, having duly considered. the mutter and being now fully advised in the premises, makes this its findmgs as to the facts and its conclusion drawn therefrom. FINDINGS AS TO THE FACTS : ARA~RAPH 1. Respondent, Milford Rivet & Machine Company, is a 0~ 1 fJoratwn, organized, existing, and doing business under and by virtue 0 1e laws ?f the State of Connecticut, having its principal office and 1P ace of busmess at Milford, Conn. Respondent is now, and for many ;e~_rs last past has been, engaged i~ the business of manufacturing an~ e tmg t~bular and bifurcated rivets and also in the manufactme 0 ~u om~tlc rivet-setting machines, which the respondent leases and sells .? vtanous manufacturers of commercial articles for use in setting suchllVC S. · ca~AR .. 2. In the course and conduct of its business, the responcle_nt tub 1s lts aut?matic rivet-setti11g machines when leased or sold, and !ts -~-~- -~Hfurcated rivets when sold, to be transported from its pnn- ' See ante, p. 135.

MILFORD RIVET & MACHINE CO.

Findings cipal place of business in the State ofConnecticut to the purchasers and lessees of such products located in various other States of the United States.. Respondent maintain~, an~:l at all tim~s mentioned herein has m11intamed, a course of trade m said products m commerce among and between the various States of the United States. PAR. 3. In the comse and conduct of its business, said respondent is, ,1nd for several years last past has been, in ·competition with firms, part- ~erships, corporations, and individuals engaged in the manufactme and ,:\le in commerce among and between the various States of the United States, of tubular and bifurcated rivets, and in the manufacture, sale, and leasing of automatic rivet-setting machines for use in setting such rivets. . . There are in the United States other corporations, individuals, firms, and partnerships who have been, and are, engaged in the sale in commerce among and between the various States of the ·United States of tubular 11nd bifurcated rivets suitable for use in, and with, respondent's rivetsetting machines and with whom, but for the. restrictive conditions .of respondent's contracts of lease as hereinafter set forth, respondent would h:we been, and would now be, in active, substantial competition in the sale of tubular and bifurcated rivets.

PAR. 4. Tubular rivets are rivets which have the end of the shank of the rivet away from the head drilled or punched out so that a portion of this end of the shank forms a tube. When the rivet is set, the metal in this tubular part of the shank is caused to spread or flow so as to form a clinch. Bifurcated rivets have a v-shaped slot cut in the shank at the end away from the head and are set by causing the prongs on each side of this slot to be spread in opposite directions. Tubular and bifurcated rivets ate sold to two classes of customersfirst, to manufacturers in the industrial field, who use them for the purpose of assembling their products or as component parts of their products, and second, to the carton or jobbing trade, which includes the sale of rivets through mail-order houses and hardware jobbers and others for replacement and repair purposes. Rivets used in the industrial field by manufacturers are generally set in automatic-feed setting· machines. Rivets sold to the carton or jobbing trade are as a rule not used in automatic-feed machines but, instead,· are used in small hand-feed machines [Llld some in special brake-lining machines. , Automatic rivet-.setting machines all operate on the same general principles. The essential parts of such machines are the automatic feeding mechanism, the plunger or driving stem, the pocket, and the anvil. The rivets are poured into a hopper at the top of the machine and assorted mechanically so that they slide down a track. At the end of the track there is a cutoff in the feeding mechanism which releases one rivet at a time from the track and delivers it to the pocket. The pocket holds the rivet while it is being driven by the driving stem, ~which comes down on top of the rivet from above and pushes the rivet through the m~terial to be riveted and against the anvil. The operation of the driving stem against the anvil spreads the prongs of bifurcated rivets or, in the case of the tubular rivets, causes the metal §ides of the tube on the end of the shank to flow against the materials and cl!nch the rivet. A split or bifurc.ated rivet punches its way through the material to be riveted, and the nvet is clinched on a fixed anvil. The tubular rivet is clinched on a disappearing-point anvil.

•0 Findings 38F. T. C.

PAR. 5. There are eight companies in the United States, including the respondent, engaged in the business of selling tubular and bifurcated rivets and in·supplying automatic rivet-setting machines for the setting of such· rivets. All of said companies were, at the time of the filing of the com.:. plaint herein or prior thereto, engaged in the practice of leasing automatic rivet-setting machines on the condition and understanding that the lessee shall not use said leased machinery for setting any other rivets than those made and sold by the lessor.

From about 1889, when the use of tubular and bifurcated rivets for industrial purposes began, until the year 1914, the Judson L. Thomson Manu.facturing Company (respondent in Commission's proceeding under Docket 4111) and Tubular Rivet & Stud Company (respondent in Commission's proceeding under Docket 4113) were the only companies engaged in the business of selling tubular and bifurcated rivets and supplying automatic rivet-setting machines for setting such rivets. The practice of these companies was to lease their automatic rivet-setting machines and not to sell such machines. The Judson L. Thomson Manufacturing Company has outstanding on lease approximately 8,000 automatic rivetsetting machines, and the Tubular Rivet & Stud Company has approximately 7,412 machines on lease. The total volume of business of the above eight companies in tubular and bifurcated rivets for the year 1939 was $5,180,304.75. Of this amount $1,243,927.86, or about 25 percent, was done by the Judson L. Thomson Manufacturing Company, and $1,331,550.98, or about 25 percent, by the Tubular Rivet & Stud Company.

The Penn Rivet Corporation (respondent in Commission's proceeding under Docket 4563) entered the industrial field and began the manufacture ofbifurcated rivets and automatic rivet-setting machines about the year 1914 and subsequently included tubular rivets. This company both sold and leased its rivet-setting machines. During the period from 1932 to 1936 it made no new leases but resumed this practice in 1936, and now has approximately 500 machines outstanding on lease. While the evidence is not complete as to number of machines sold by this company, it appears that it has sold in excess of 2,000 machines during the time that it has been in business. The gross sales of tubular and bifurcated rivets by the Penn Rivet Corporation amounted to $307,000 in 1939. The Edwin B. Stimpson Company (respondent in Commission's proceeding under Docket 4560) began the manufacture and sale of tubular and bifurcated rivets about the year 1920, and about two years thereafter began supplying automatic rivet-setting machines. This company both sold and leased its rivet-setting machines. It has about 2,000 machines now outstanding on lease, and during the time that it has been in business has sold approximately 300 machines. The gross sales of tubular and bifurcated rivets of this company for the year 1939 amounted to $286,500. In 1920 the Chicago Rivet and Machine Company (respondent in Commission's proceeding under Docket 4562) began the manufacture and sale of tubular and bifurcated rivets but did not supply automatic rivetsetting machines until sometime between the years 1925 and 1928. Since that time it ha{l supplied customers with automatic rivet-setting machines by lease, outright purchase, and on a lease-sale arrangement. The Chicago Rivet and Machine Company had 800 to 1,000 rivet-setting machines outstanding on lease. During the time that this company has been engaged in distributing automatic rivet-setting machines, it has MILFORD RIVET & MACHINE CO. 185 180 Findings sold in excess of 3,000 machines. Its gross sales of tubular and bifurcated rivets for 1939 amounted to $1,011,527, or about 20 percent of the total business done by the eight companies supplying rivet-setting machines. . During the period from 1927 to 1930, the respondent, Milford Rivet & Machine Company, Milford, Mass.; National Rivet & Manufacturing Company, Waupun, Wis. (respondent in Commission's proceeding under Docket 4561); and Shelton Tack Company, Shelton, Conn. (respondent in Commission's proceeding under Docket 4564), began the manufacture and sale of tubular and bifurcated rivets and supplying automatic rivetsetting machines. All three of these companies both lease and sell automatic rivet-setting machines. The machines of these companies outstanding on lease are as follows:

Milford Rivet & Machine Company 2G9 machines National Rivet & Manufacturing Company 96 machines Shelton Tack Company 45 machines The number of automatic rivet-setting machines sold by these companies during the time they have been in business is as follows: Milford Rivet & Machine Company 254 machines National Rivet & Manufacturing Company 207 machines Shelton Tack Company 146 machines The gross sales of these companies of tubular and bifurcated rivets for the year 1939 were as follows:

Milford Rivet & Machine Company $396,574 National Rivet & Manufacturing Company . 390,000 Shelton Tack Company 213,225 These three· companies, together with the Penn Rivet Corporation and Edwin B. Stimpson Company, do approximately 30 percent of the total business done by the eight companies supplying rivet-setting machines. When automatic rivet-setting machines are sold, the prices range from $150 to $1,000 and sometimes more, depending upon the na,ture and extent of special construction. The ordinary or more popular machine sells for around $300. When such machines are placed with customers on a lease basis, the yearly rental is usually upon a more or less nominal basis and is not sufficient to show a profit. Rivets sold tG lessees for' use in leased machines cost approximately 10 percent more than corresponding rivets sold on the open market or sold to persons who do not lease machines. · PAR. 6. The respondent sells tubular and bifurcated rivets and also supplies automatic rivet-setting machines for use in setting such rivets. Respondent supplies such machines by outright sale, conditional-sales contracts, and by lease. At the time of the filing of the complaint the conditional-sale contract or the conditional bill of sale used by the respondent provided for an increase of 15 percent in the regular price of rivets, such increase to be applied to the purchase price of the machine. It was further provided in such contract that until such time as th~ machine is fully paid for, no rivets other than those manufactured by the respondent shall be used in it. Subsequent to the filing of the complaint the respondent discontinued the use of this conditional bill of sale and 591546~6--vol.aS----15 Ffndings 38 F. T. C.

adopted a straight conditional-sales contract providing for specific payments and containing no restrictive clause with reference to the use of rivets in the machine.

When automatic rivet-setting machines were supplied to customers on a lease basis, respondent followed the practice of leasing such machines on a yearly rental basis, which rental was waived or rebated to the lessee if the lessee used a quantity of rivets stated in the lease. The respondent makes a retooling charge when machines are supplied but services the machines without cost during the time that they are on lease. The prices charged by the respondent for rivets used in leased machines are approximately 10 percent higher than the prices of corresponding rivets sold to purchasers who do not lease machines. The form of lease used by the respondent provides that the leased machine shall be used only for setting rivets manufactured by the respondent or sold under its authority and that lessee will allow the respondent or its agents to inspect the machine at any time during usual business hours. Respondent's leases are subject to termination by either party upon ten days' written notice.

PAR. 7. The revenue received by respondent from the leasing of its rivet~setting machines is of minor importance as compared with the revenue received from the sale of its tubular and bifurcated rivets. The primary purpose of leasing the equipment is to enable respondent to sell tubular and bifurcated rivets in or with the equipment, as is evident from the provisions of the agreement rebating rental paid when a specified number of rivets is used by the lessee. The amount of rental charged by the respondent is not sufficient to warrant leasing its rivet-setting machines in the absence of the sale of rivets. PAR. 8. There is on the market an ample supply of tubular and bifurcated rivets for use in or with respondent's rivet-setting machines which is for sale and which can be supplied for sale by concerns which sell or lease rivet-setting machines and by concerns which do not sell or lease such machines. These concerns are prepared to sell tubular and bifurcated rivets to lessees of respondent's rivet-setting machines but are precluded from making such sales by reason of the restrictive conditions in respondent's lease contract. While the respondent manufactures rivets of many various sizes and shapes, many of which are specially designed, such rivets can be duplicated and supplied by any competent rivet manufacturer. PAR. 9. Among the concerns which do not supply rivet-setting machines in connection with the sale of tubular and bifurcated rivets are Atlas Tack Company, New Jersey Rivet Company, Townsend Company, J. W. Coombs Mfg. Co., and Manufacturers Belt Hook Co. · The gross sales of these companies of tubular and bifurcated rivets for the year 1939 were as follows:

Atlas Tack Company $ 24,994 New Jersey Rivet Company 40,000 Townsend Company 300,000 J. W. Coombs Mfg. Co. 39,000 Manufacturers Belt Hook Co. 72,000 The Atlas Tack Company sells its rivets to both the hardware and jobbing trade and to industrial users. Its sales, however, have been more or less limited to the hardware and jobbing trade, as it has not had much success in the industrial field. The New Jersey Rivet Com- MILFORD RIVET & MACHINE CO. 187 180 Order pany sells practically all of its rivets for use in automatic rivet-setting machines but has had difficulty in making sales where leased machines are present. The Townsend Company sells to both the hardware and jobbing trade and to industrial users. A representative of this company testified that the use of leased machines by manufacturers curtails outlets and narrows the market for its rivets. The J. W. Coombs Mfg. Co. sells to both industrial manufacturers and to the hardware and jobbing trade. About 80 percent of the rivets sold by this company are sold to orie customer to whom it originally supplied 12 rivet-setting machines. The Manufacturers Belt Hook Company began the sale of tubular and bifurcated rivets in 1910 but did not become interested in the industrial business until 1927 or 1928. It now sells both to hardware and jobbing trade and to industrial users. Sales ani made mostly to industrial users who own their rivet-setting machines.

While the business of all these companies has increased during the past several years, there is no evidence whether such increase was due to a greater demand by the hardware and jobbing trade or by industrial users. However, the testimony of representatives of these various companics clearly indicates that the outlets for their tubular and bifurcated rivets were curtailed, and competition therein restrained, by the practice of leasing rivet-setting machines in the manner hereinabove described. PAR. 10. The Commission finds that the practice of respondent in requiring that the lessees of its rivet-setting machines use in or with such machines no tubular or bifurcated rivets other than those supplied by the respondent, results in the exclusion from the market of numerous parties \~ho, in the absence of such restrictions, would be prospective and potential purchasers of tubular and bifurcated rivets from respondent's competitors. Competition in the tubular- and bifurcated-rivet market is restricted and contracted in direct proportion. to the extent to which respondent is successful in leasing its rivet-setting machines 'under agreements containing such restrictive conditions. PAR. 11. The Commission further finds that the effect of such restrictive conditions under the circumstances set forth herein may be to substantially lessen competition in the sale of tubular and bifurcated rivets in commerce between and among the several States of the United States and in the District of Columbia. Such effect is materially increased by reason of the fa~t that it forms a part of the cumulative effect of the practices of the other companies described in paragraph 5 hereof upon competition in commerce among and between various States of the United States.

CONCLUSION Through the use of the acts and practices described herein, the respondent has violated, and is now violating, Section 3 of the Act of Congress of the United States entitled, "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," commonly known as the Clayton Act.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission Upon the complaint of the Commission, answer of the respondent, testi:. Order 38F. T. C.

mony and other evidence in support of, and in opposition to, the allegations of said complaint taken before a trial examiner of the Commission theretofore duly designated by it, report of the trial examiner upon the evidence and exceptions filed thereto, briefs filed in support of the complaint and in opposition thereto, and oral argument of counsel; and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of that certain Act of Congress of the United States entitled, "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,"" approved October 15, 1914, commonly known as the Clayton Act. It is ordered, That the respondent, Milford Rivet & Machine Company, a corporation, and its officers, representatives, agents, and employees, directly or through any corporate or other device in connection with the leasing, sale, or making any contract for the sale of respondent's automatic rivet-setting machines in· commerce as "commerce" is defined in the Clayton Act, do forthwith cease and desist from: 1. Leasing, selling, or making any contract for the sale of, respondent's automatic rivet-setting machines on the condition, agreement, or understanding that the lessee or' purchaser thereof shall not use in or with such machines any rivets other than those acquired from respondent or from some source authorized by respondent. 2. Enforcing or continuing in operation or effect, any condition, agreement, or understanding in or in connection with any existing lease or sale contract, which condition, agreement, or understanding is to the effect that the lessee or purchaser of respondent's automatic rivetsetting machines shall not use in or with such machines rivets other than those acquired from respondent or from some source authorized by it. It is further ordered, That the respondent shall, within 60 days after service upon it of this.order, file with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this order.

NATIONAL RIVET & MANUFACTURING CO. 18Q Complaint