C. Lee Cook Manufacturing Company

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IN THE ~1ATI'ER OF C. LEE COOK l\IANUFACTURING CO:MPANY COl\IPLAINT, FINDINGS, AND OlWER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 3 OF AN ACT OF CONGRESS APPROVED OCT. 15, 1914 Docket 5649. Complaint, Apr. 15, 19.:f9-Decision., Sept. 30, 1949 Whete a corporation which (1) 'Yas eng-aged in the manufacture and competitive interstate sale and distribution of metallic packings and metallic packing replacement and repair parts, for use on compression machinery of all types, made by others; (2) sold its said pacldngs to compression engine manufacturers for use as original equipment, and its said product and parts to them and their purchaser customers for replacement and repair; ( 3) had long maintained, throughou.t the United States, and particularly throughout tbe oil and gas fields of the Southwest, an extensive sales and service organization, which sold said replacement and repair packings and replacement and repair parts both for metallic pacldngs of its own make and for replacement and repair of such packings and packing parts ma"cle by others; and, ( 4) with the exception of several who specialized in metallic packings for railway locomotives, was the largest manufacturer of such packings in the United States, and occupied a dominant position in the inclustr~' and particularly so as respects such packings and parts for gas compressors and booster pumps used by tile oil and gas industry- ( a) Made sales and contracts for sale for such packings and packing replacement and repair parts, and fixed prices for such products or discounts from or rebates upon said prices on the condition, agreement or understanding that the purchaser should not use or deal in the metallic packings or parts or other goods or products of a competitor;

(b) Allowed discounts from and rebates upon prices, in such sales and contracts for sale, to purchasers in consideration of their agreement to purchase its metallic packings as standard, factory, oir original "full line" equipment for all engines of certain types made by said purchasers, to the exclusion of other sellers;

(c) Allowed discounts from and rebates upon prices, in su.ch sales and contracts for sale, to purchasers in consideration of their agreement to purchase from it their entire requirements of replacement and repair parts, including renewal rings, for makes of metallic packings other than those made by it and which bad been installed on the manufacturing purchasers' engines, to the exclusion of other sellers, including the original manufacturers of said packings needing repair or replacement parts; Effect of which sales and contracts for sale of said corporation's metallic packings and metallic packing replacement and repair parts, and of the .fixing of prices or discounts from or rebates upon the prices for such products, on the aforesaid condition, agreement or understanding, might tend to substantially lessen competition in the line of commerce in which said Complaint 46F.T.C.

corporation and its customers were engaged; and might tend to create a monopoly in it in the sale and distribution in commerce of such packings and packing replacement and repair parts:

Held, That such acts and practices, under the circumstances set forth, constituted a violation of the provisions of section 3 of the aforesaid Clayton Act. llfr. lVillimn C. Kern for the Commission.

Mr. J. Bond :Srnith, of vVashington, D. C., for respondent. Complaint Pursuant to the provisions of an Act of Congress, entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," commonly known as the Clayton Act, the Federal Trade Commission having reason to believe that C. Lee Cook J\1manufacturing Co., hereinafter referred to as respondent, has violated the provisions of section 3 of said act; and. it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, the Commission hereby issues its complaint stating its charges in such respects as follows: · PARAGRAPH 1. Respondent, C. Lee Cook J\1manufacturing Co., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Kentucky, having its principal office, factory, and place of business at 916 South Eighth Street, Louisville, Ky., and branch offices and places of business located at Baltimore, State of J\Iaryland; Boston, State of J\iassachusetts; Chicago, State of Illinois; Cleveland, State of Ohio; Houston, State of Texas; Los Angeles and San Francisco, State of California; l\1obile, State of Alabama; New Orleans, State of Louisiana; New York, State of New York; Portland, State of Oregon; Seattle, State of Washington; Tulsa, State of Oklahoma; and l\1ontreal, Province of Quebec, Canada.

PAR. 2. Respondent is now, and for many years last past has been, engaged in the manufacture, distribution and sale of metallic packings and metallic packing replacement and repair parts for use on compression machinery of all types manufactured by companies other than respondent. A large portion of respondent's said busil1ess is concentrated in the manufacture, distribution and sale of metallic packings and metallic packing replacement and repair parts suitable for packing and use on reciprocating rods of machinery units in which gaseous substances are being either compressed or expanded, typical of which is the machinery known as gas-driven compression machinery and used in the oil and gas industry, in booster pump equipment of transmission pipe lines, and in refineries. C. LEE COOK MANUFACTURING CO. 125 123 Complaint Respondent is now, and for many years last past has been, engaged in the sale of such metallic packings and replacement and repair parts thereof to manufacturers of such compression machinery and to purchasers of such machinery from such manufacturers located throughout the several States of the United States a,nd the District of Columbia. In the course and conduct of its business aforesaid, respondent transports the said products, or causes the same to be transported, from the State and place of their manufacture to its customers and purchasers thereof located in States other th•an the place of manufacture thereof, and there is now, and has been for many years; last past, a constant current of trade and commerce in said products between and among the various States of the United States, the territories thereof, and in the District of Columbia. PAR. 3. Commerce in the sale and distribution of metallic packings has two main divisions; first, the sale of metallic packings to compression-engine manufacturers for use as original equipment; second, the sale of metallic packings and metallic packing replacement and repair parts for replacement and repair of original equipment, such sales being made to compression-engine manufacturers, which service their engines and which enjoy a considerable replacement and repair business from the purchasers and users of their said engines, and to the purchasers of the engines from the engine-manufacturing companies. Respondent maintains, and for many years last past has maintained, an extensive sa.les and service organization throughout the United States and particularly throughout the oil and gas fields of the southwestern part of the United States which organization not only performs service and repair functions but in connection therewith is active in selling replacement and repair metallic packings and metallic packing replacement and repair parts not only for metallic packings of respondent's make and manufacture, but for the replacement and repair of metallic packings and metallic packing parts manufactured by persons, firms, and corporations other than respond.;. ent. Respondent, exclusive of several manufacturers specializing in metallic packings for the railway locomotive industry, is the largest manufacturer of metallic packings in the United States, and occupies a dominant position in the industry and particularly in the manufacture of metallic packings and metallic packing replacement and repair parts for use on gas compressors and booster pumps used by the oil and gas industry. There are now, and have been for many years last past, only four engine mmnlfacturing companies in the country engaged in the manufacture of gas-driven compressors; and 126 FEDERAL TRADE COl\HIISSION DECISIONS Complaint -±G F. T. C. respondent for more than ten years last past has had contracts in force with each of said companies containing the restrictive covenants and agreements hereinafter described.

There are in the United States, and have been during the time respondent has been in business, other corporations, firms, partnerships, and individuals who have been and are engaged in the sale of metallic packings and metallic packing replacement and repair parts suitable for use in compression machinery, including gas-driven compressors and booster pumps used by the oil and gas industry and steam ·engines used by· other industries: ''"ith which but for the restrictive ·Covenants and agreements of respondent's contracts of sale and the discounts and rebates from respondent's list prices made upon restrictive conditions contained in said contracts of sale, as hereinafter set forth, respondent \Youlcl have b2en, and would now be, in substantial competition in the sale of metallic packings and metallic prrr.king replacement and repair parts.

PAR. 4. In the course and conduct of its business described in paragraphs 1, 2, and 3, respondent in the course of such c.commerce has made sales and contracts for the sale, and is still making sales and contracts for the sale, of metallic packings and metallic packing replacement and repair parts. and has fixed and still is fixing prices charged therefor, or disc.count from or rebate upon said prices upon the conditions, agreements, and understandings that the purehasers thereof shall not use or deal in the metallic packings, or metallic packing replacement and repair parts, or other goods, wares, metehandise, machinery, supplies, or other commodities of a competitor or eompetitors of the. respondent. Included in such sales and eontracts for sale, but not limited thereto, have been and are those in which discounts from and rebates upon its prices have been allowed a.nd given to some of its purchasers in consideration of the agreement by said purchasers to purchase as standard, factory, or original "full line" equipment on all engines of certain t:vpes manufactured by said purchasers, the metallic packings used thereon from the respondent to the exclusion of other sellers and of other prospective and potential sellers. Included likewise in such sales and contracts for sale. but not limited thereto, have been and are those in which discounts from and rebates tq:ion its prices have been allowed and given to some of its purchasers in consideration of the agreement by such purchasers to purchase of respondent their entire requirements of replacement and repair parts, including renewal rings, for makes of metallic packjngs other than those manufactured by respondent and installed on · said manufacturer purchaser's engines, to the exclusion of other sellers C. LEE COOK MANUFACTURING CO. 127 123 Findings and of other prospective and potential sellers, including the origin a Ji manufacturer of said compressor packings needing repair or replacement parts.

PAR. 5. The effect of said sales and contracts for sale, or the fixing of said prices or discounts from or rebates upon said prices as afore-· said, on such conditions, agreements, and understandings, may be to substantially lessen competition in the line of commerce in which the respondent is engaged and in the line of commerce in which the customers of respondent are engaged; or tend to create a monopoly in respondent in the commerce aforesaid, of metallic packings and metallic packing replacement and repair parts.

PAR. 6. The aforesaid acts of respondent constitute a violation of ihe provisions of Section 3 of the hereinabove mentioned Act of Congress enbtled "An Act to supplement existing laws against unlawful restraints and monopolies and for other purposes" approved October 15, 1914 (Clayton Act).

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of that certain act of Congress entitletl "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approyed October 15, 1914 (the Clayton Act), the l1""'ecleral Trade Commission on April15, 19-::1:9, issued :mel subsequently served upon the respondent, C. Lee Cook ~1anufac­ t tuing Co., a corporation, its complaint in this proceeding, charging said respondent with having made s:1les and contracts for the sale of metallic packings and metallic packing replacement and repll i r parts, and with having fixell prices charged for such products, o1· discounts from or rebates upon said prices, on the condition, agreement, and understanding that the purchasers thereof should not usc or deal in the metallic packings or metallic packing replacement and repair parts, or other gooods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the rebpondent, C. Lee Cook ~fanufactnring Co., in violation of the provisions of section 3 of said Act.

After the issuance of the complaint, and on June 10, 1949, the re- · spondent filed its answer, in which answer it admitted all of the matm·ial allegations of fact srt forth in said complaint and waived all intervening procedure and further hearing as to said facts. Thereafter, this proceeding regularly came on for final hearing before the Commission upon the complaint and the answer thereto; and the Com- Findings 46 F. T. C. mission, having duly considered the matter and being now fully acl- ''ised in the premises, makes this its findings as to the facts and its conclusion drawn therefrom:

FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent, C. Lee Cook ~Ianufacturing Co., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of I\:entucky, 'i\ith its principal office, factory, and place of business located at 916 South Eighth Street, Louisville, Ky., and branch offices and places of business located in Baltimore, :Mel.; Boston, 1\Iass.; Chicago, Ill.; Cleveland, Ohio; Houston, Tex.; Los Angeles and San Francisco, Calif.; :Mobile, Ala.; New Orleans, La.; New York, N. Y.; Portland, Oreg.; Seattle, \Vash.; Tulsa, Okla.; and l\Iontreal, Province of Quebec, Canada. P .AR. 2. The respondent is now, and for many years last past has been, engaged in the manufacture and in the distribution and sale of metallic packings and metallic packing replacement and repair parts, for use on compression machinery of all types, manufactured by companies other than the respondent. A large portion of the respondent's business is concentrated in the manufacture, and in the distribution and sale, of metallic packings and metallic packing replacement and repair parts suitable for packing and use on reciprocating rods of machine.ry units in which gaseous substances are being either compressed or expanded, typical of which is the machinery known as gasdriven compression machinery used in the oil and gas industry, the machinery in booster pump equipment of transmission pipe lines, and the machinery in refineries.

The respondent is now, and for many years last past has been, engaged in the sale of such metallic packings and replacement and repair parts thereof to manufacttirers of such compression machinery, and to purehasers of such machinery from such manufacturers, located throughout the several States of the United States and in the District of Columbia. In the course and conduct of its business as aforesaid, the respondent transports its products, or causes the same to be transported, from the State and phce of their manufacture to its customers and purchasers of such products located in States other than the place of manufacture thereof, and there is now, nncl for many years last past there has been, a constant current of trade and commerce in said products bet,,een and among the various States of the United States, the territories thereof, and in the District of Columbia. C. LEE COOK MANUFACTURING CO. 129 123 Findings PAR. 3. Commerce in the sale and distribution of metallic packings has two main divisions; first, the sale of metallic packings to compression engine manufach1rers for use as original equipment; and second, the sale of metallic packings and metallic packing replacement and repair parts for re.placement and repair of original equipment, such sales being made to compression engine manufacturers, which service their engines and ''which enjoy a considerable replacement and repair business from the purchasers and users of their · said engines, and to the purchasers of the engjnes from the engine manufacturing companies. The respondent maintains, and for many years last past has maintained, an extensive sales and se1~vice organization throughout the United States, and particularly throughout the oil ancl gas fields of the southwestern part of the. United States, which organization not only performs service and repair functions but in connection therewith is active in selling replacement and repair metallic packings and metallic packing replaeement and repair parts both for metallic packings of the respondents make and manufacture and for the replacement and repair of metallic packings and metallic packing parts manufactured by persons, firms, and corporations other than the respondent.

Except for several manufacturers specializing in metallic packings for the railway-locomoti-ve industry, the respondent is the largest manufacturer of metallic packings in the United States, and it occupies a dominant position in the industry, particularly in the nianufactur~ of metallic. packings and meta1lie packing replaeement and repair' parts for use on gas compressors and booster pumps used by the oil and gas industry. There are now, and for many years last past them have been, only four engine manufacturing companies in the country engaged in the manufacture of gas-driven compressors; and for more than ten years last past the respondent has had contracts in fore~ with each of said companies containing the restrictive eoYenants and agreements hereinafter described.

There are in the United States, and during the time the respondent has been in business there have been, other corporations and firms, partnerships and individuals also engaged in the sale of metallic: packings and metallic packing replacement and repair parts suitable for use in compression machinery, including gas-driven compresso~·:-:; and booster pumps used by the oil and gas industry and steam engine-s used by other industries. At all times mentioned herein the respondent has competed with such other corporations and with such firms, partnerships and individuals in the sale and distribution of met all ie Findings 46 F. T. C. packings and metallic packing replacement and repair parts in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 4. In the course and cond net of its business as described in Paragraphs One, Two, and Three hereof, the respondent has made sales and contracts for the sale, and is still making sales and contracts for the sale in commerce, of metallic packings and metallic packing rE'placement and repair parts, and has fixed and still is fixing prices charged for such products, or discounts from or rebates upon said prices on the condition, agreement, or understanding that the purchasers thereof shall not use or deal in the metallic packings, or metallic packing replacement and repair parts, or other goods, wares, merehandise, machinery, supplies, or other commodities of a competitor or competitors of the respondent. Included in such sales and contracts for sale, but not limited thereto, have been and are those in ~rhich discounts from and rebates upon prices have been all o~red and given to purchasers in consideration of the agreement by such purchasers to purchase as standard, factory, or original "full line" equipment f1)r a1l engines of certain types manufactured by said purchasers, the respondent's metallic packings, to the exclusion of the metallic packings of other sellers and of other prospective and potential sellers. Included likewise i~1 such sales and contracts for sale, but not limited thereto, have been and are those in "·which discounts from and rebate3 upon prices have been alloted and given to purchasers in consideration of the agreement by such purchasers to purchase from the respondent their entire requirements of repla.cement and repair pa.rts, including renewal rings, for makes of metallic packings other thn11 those manufactured by the respondent, '"which ha Ye been insta lle.d on said manufacturer purchasers' engines, to the exclusion of other sellers and of other prospective and potential sellers, including the m·ig:inal manufacturers of said packings needing repair or replacement parts.

PAR. 5. The effect of the respondent's sales and contracts for the sn Je of its metallic packings and metallic packing replacement an,] repair parts, and of the fixing of prices or discounts from or rebates upon the prices for such products, on the a.foresaid condition, agreement or understa.nding may be to substantially lessen competition in the line of commerce in which the respondent is engaged and in the line of commerce in which the customers of the respondent are engaged; and may tend to create a monopoly in the respondent in the sale and distribution in commerce of metallic packings and metallic packing replacement and repair parts.

C. LEE COOK MANUFACTURING CO. 131 123 Order CONCLUSION The acts and practices of the respondent, as hereinabove set out, constitute a violation of the provisions of section 3 of the Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved Octobel' 15, 1914 (th~ Clayton Act).

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the respondent's ~mswer thereto, in which answer said respondent admitted all of the lilaterial allegations of fact set forth in the complaint and waived all intervening procedure and further hearing as to said facts; and the Commission having made its findings as to the facts and its conclusion that the 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, and for other purposes~'~ approyed October 15, 1914 (the Clayton Act): It is onle?·ed, That the respondent, C. Lee Cook :11manufacturing Co .. a corporation, and its officers, agents, representatives and employees: 1lirectly or through any corporate or other device, in connection ''ith the sale or distribution in commerce, as "commerce'' is defined in the aforesaid Clayton Act, of metallic packings or metallic packing replacement and repair parts, do forthwith cease and desist from : ( 1) Selling or making any contract for the sale of any such products on the condition, agreement or understanding that the purchaser thereof shall not use or deal in the metallic packings or the metallic 1 packing replacement and repair parts, or other goods or merchandise, of a competitor or c.ompetitors of the respondent. (2) Fixing the price charged for any such products, or granting a discount from or rebate upon the price therefor, on the condition: agreement, or understanding that the purchaser of such pro(lucts shall not use or deal in the metallic packings or the metallic packing replacement and repair parts, or other goods or merchandise, of a competitor or competitors of the respondent.

( 3) Enforcing or continuing in operation or effect any condition, agreement or understanding in or in connection with any existing sn1t· or contract for the sale of any such products, which condition, agreement, or understanding is to the effect that the purchaser of such prod- 854002--52----12 132 FEDERAL TRADE COlVC\lission DECISIONS Order 46 F. T. C.

uets shall not use or deal in the metallic packings or the metallic packjug replacement and repair parts, or other goods or merchandise, of a competitor or competitors of the respondent. 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 ··Nriting setting forth in detail the manner and form in which i_t has romplied with this order.

:i\I. B .. "WATERMAN & CO. ET AL. 133 Syllabus