TRW, Inc

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IN THE MATTER OF TRW, INC., ET AL.

FINAL ORDER, OPINION, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND CLAYTON ACTS Docket .9084. Complaint, June 17, 1976 - Final Order, March . 1.97, This order, among other things, requires a Cleveland, Ohio manufacturer and seller of electronic point-of-sale credit authorization equipment to cease having on its board of directors any individual who is simultaneously serving as a director of Addressograph-Multigraph Corp., or any other competitive business entity. The order also prohibits Horace A. Shepard from simultaneously serving as a director ofTRW, Inc. and any other competing company. Appearances For the Commission: John M Mendenhall and Paul P Eyre. For the respondents: Richard W Pogue, Robert H Rawson and Brent L. Henry, Jones, Day, Reavis Pogue, Cleveland, Ohio and Joseph D. McGarth, Baker Heights, Ohio. COMPLAINT The Federal Trade Commission, having reason to believe that the above-named respondents have been and are in violation of the provisions of Section 8 of the Clayton Act, as amended, and Section 5(a)(1) of the Federal Trade Commission Act, as amended, and that a proceeding in respect thereof would be in the public interest, issues this complaint, stating its charges as follows: PARAGRAPH 1. Respondent TRW, Inc., (hereinafter TRW), is an Ohio col-poration and maintains its principal offce at 23555 Euclid Ave., Cleveland ' Ohio. TRW has capital, surplus, and undivided profits aggregating more than One Million Dollars ($1 000 000). TRW is engaged in COinmerce, as "commerce" is defined in Section 1 of the Clayton Act, and is engaged in or its business affects commerce, as commerce" is defined in Section 4 of the Federal Trade Commission Act.

PAR. 2. Respondent Addressograph-Multigraph Corporation (hereinafter Addressograph) is a Delaware corporation and maintains its principal offce at 20600 Chagrin Boulevard, Shaker Heights, Ohio. Addressograph has capital, surplus, and undivided profits aggregating more than One Milion Dollars ($1 000,000). Addressograph is engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act, and is engaged in or its business affects commerce, as Initial Decision 93 F. commerce" is defined in Section 4 of the Federal Trade Commission Act.

PAR. 3. Respondent Horace A. Shepard is an individual. His business address is the same as that of TRW. PAR. 4. On or about April 29, 1969, respondent Horace A. Shepard was elected director and chief executive officer of TRW and has served in such capacities with TRW from on or about April 29, 1969 until the present. On or about November 4, 1971, respondent Horace A. Shepard was elected director of Addressograph and has served in such capacity with Addressograph from on or about November 4 1971, until on or about November 6 1975. PAR. 5. During all or part of the period January 1, 1973 through and including November 6, 1975, the business ofTRW and Addressograph included, but was not limited to, the manufacture, sale and distribution in commerce of point-of-sale credit authorization equipment and teller-operated bank transaction equipment, and other such equipment used for credit validation, check cashing validation recording of deposits and withdrawals from financial institutions, and inventory record keeping.

PAR. 6. By the nature of their business as hereinabove described and location of operations with respect thereto, Addressograph and TRW were competitors, concurrent with respondent Horace A. Shepard' s membership on the Boards of Directors of TRW and Addressograph, during part or all of the period January 1, 1973 through and including November 6, 1975, so that the elimination of competition by agreement between them would constitute a violation of the antitrust laws.

PAR. 7. The simultaneous membership of respondent Horace A. Shepard on the Boards of Directors of respondents TRW and Addressograph constitutes a violation of Section 8 of the Clayton Act, 15 U. C. 19, and Section 5(a)(I) of the Federal Trade Commission Act, 15 U. C. 45.

INITIAL DECISION BY JOSEPH P. DUFRESNE, ADMINISTRATIVE LAW JUDGE DECEMBER 22, 1977 PRELIMINARY STATEMENT In a complaint dated June 17, 1976, the Commission charged that respondents TRW, Inc., Addressograph-Multigraph Corporation (A- M) and Horace A. Shepard, had violated Section 8 of the Clayton Act . .. . . . TRW, lng, ET AL.

325 Initial Decision as amended, (15 V. C. 19) and Section 5(a)(1) of the Federal Trade Commission Act, as amended, (15 VB. C. 45(a)(1)). (2) Section 8, in pertinent part, reads as follows: no person at the same time shall be a director in any two or more corporations, anyone of which has capital surplus, and undivided profits aggregating mote than 000 000, engaged in whole or in part in commerce if such corporations are or shall have been theretofore, by virtue of their business and location of operation competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws. . Section 5(a)(1) provides:

Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. The gravamen of the charges was that the simultaneous membership of Mr. Shepard on the boards of directors ofTRW and A-M from January 1, 1973, through November 6, 1975 (hereinafter referred to as the "critical period"), constituted a violation of the Clayton and FTC Acts (Complaint, mr 4 and 7). This, because during the critical period the business of TRW and A-M ". . . included, but was not limited to, the manufacture, sale and distribution in commerce of point-of-sale credit authorization equipment and teller-operated bank transaction equipment, and other such equipment used for credit validation, check cashing validation, recording of deposits and withdrawals from financial institutions and inventory record keeping" (Complaint, 5).

The result alleged was that, since TRW and A-M were competitors due to the nature of their business and location of operations coupled with Mr. Shepard' s simultaneous membership on the boards of each, elimination by agreement between them of competition between TRW and A-M would constitute a violation of the antitrust laws (Complaint 6). (3) In their answers, in pertinent part, TRW and Mr. Shepard: 1. Denied having violated Section 8 of the Clayton Act, Section 5 of the FTC Act and denied a proceeding, as alleged in the introductory paragraph of the complaint, was in the public interest. They also denied, for want of knowledge suffcient to form a belief, the allegations regarding A-M. (Answers 1 and 3); 2. Admitted (1) TRW's capital, surplus and individual profits aggregate more than $1 000 000, (2) that it is engaged in commerce or that its business affects commerce as "commerce" is defined in the FTC Act, and (3) that Mr. Shepard is an individual whose address is the same as that ofTRW. (Answers, n 2 and 3); 3. Averred that Mr. Shepard became a director ofTRW on March -.rtl TXADE COMMISSION DECISIONS Initial Decision 93 F. , 1957, chief executive offcer of TRW on December 22, 1969, continued in these positions and that on or about March 20, 1971 became and continued to serve as a director of A-M until November 1975. (Answers, 4);

4. Admitted that between January 1, 1973, and December 6, 1975 TRW' s business included the manufacture, and distribution in commerce, of products fallng in the generic categories of equipment described above. They denied knowledge as to A- s products and denied that TRW and A-M were competitors, so that the elimination of competition by agreement between them would constitute a violation of the antitrust laws, during the critical period. They also denied that Section 8 and Section 5 had been violated. (4 The following affrmative defenses were asserted: 1. The complaint did not state a claim upon which relief could be granted (Answers, '17);

2. Mr. Shepard had decided prior to August 8, 1975 (when he first learned of the Commission s investigation - RX 54A; Solganik, Tr. 1961-62), to leave the Board of Directors of A- , did so on November , 1975, and the issues raised by the complaint were moot (Answers, 8);

3. The relevant period was between October 1973, when A-M first sold an AMCAT and November 7, 1974, the date of Mr. Shepard' last election to the Board of A-M (Answers, 9) during which period M and TRW were !lot competitors (Answers 10) and that any alleged competition between them was de minimis (Answers, '111); 4. TRW and Mr. Shepard we;e denied their rights of due process, denied equal protection of the laws and subjected to abuse of process (Answers, 1m 12 and 13);

5. Section 5 of the FTC Act should not be applied to an interlocking directorate which is net violative of Section 8 of the Clayton Act (Answers, 1114);

6. Section 8 of the Clayton Act does not apply to corporations (Answer ofTRW. 15);

7. The proceedings were not in the public interest (Answers, 1m 16 and 15, respectively); and 8. There is neither a reasonable expectation the alleged wrong vould be repeated nor a need for issuance of an order (Answers, 7 and 16, respectively). (5 J Prehearing conferences were held on November 4, 1976 by ALJ aniel Hanscom, to whom the case was assigned ;nitially, and by me I May 9 and 25, 1977, and on June 27, 1977. Motions for summary cision were made both by complaint counsel and TRW. These her have been denied or are denied by this decision. 325 Initial Decision In a negotiated order described in a "Decision and Order" dated August II, 1977, (90 F. C. 144) the charges as to A-M were resolved. In the order, A-M admitted an the jurisdictional facts alleged in the complaint and stipulated that consent to the order did not constitute an admission that the law had been violated. The Consent Order: (1) prohibits A-M from having interlocking directorates with competitors if the elimination of competition by agreement between them would constitute a violation of the antitrust laws; (2) requires preparation of a list by each A-M director of the products, names and addresses of other corporations on whose board the director sits or to which he/she has been nominated; (3) requires A-M to review p ior to each election of directors and to retain for each member of its board of directors and nominees, a descriptive list of all products and services of other corporations whose board the director serves or to which he or she is a nominee; (4) requires A-M to notify the Commission of any proposed assignment, sale, or the like which may affect compliance with the order; and (5) requires fiing of a report within 90 days as to the manner and form in which A-M has complied with the order. The adjudicative hearings in the case-in-chief involving the remaining respondents, TRW and Mr. Shepard, were held in Cleveland, Ohio, and Los Angeles, California, from July 18 - 27 and July 29 - August 1, 1977, respectively. Hearings in the case-indefense were held in Cleveland from August 22 - 29, 1977. Complaint counsel presented the case-in-rebuttal in Cleveland on September 2 1977. The official record consists of 2477 pages of transcript. There are 111 numbered exhibits. Of these, 35 were rejected; however, in accord with Commission Rule 3.43(g), they remain a part of the offcial record. (6 Bases for the Findings of Fact; Abbreviations Used The findings of fact following are based on a review of the allegations made in the complaint, respondents' answers, the documentary evidence, and consideration of the demeanor of the witnesses. In addition, the proposed findings of fact, conclusions and proposed orders, together with reasons and briefs in support thereof filed by each side have been given careful consideration. To the extent not adopted by this decision in the form proposed or in substance, they are rejected.

For convenience, the findings of fact include references to supporting evidentiary items in the record. Such references are intended to serve as guides to the testimony, evidence and exhibits supporting the findings of fact. They do not necessarily represent complete initial Decision 93 F.TC. summaries of the evidence considered in arriving at such findings. The following abbreviations have been used: Tr. - Transcript, preceded by the names of the witness and followed by the page number.

CX - Commission s Exhibit, followed by its number. RX - Respondents' Exhibit, followed by its number. CCPF and CCB - Complaint Counsel' s Proposed Findings and Brief RPF and RB - Respondents' Proposed Findings and Brief. (7) Note: The transcript in this proceeding was not paginated consistently. In order to locate citations to the transcript it may be helpful to use this table. The left hand column alphabetically lists the witnesses and the right hand column gives the date(s) on which he testified. Transcript volumes correspond to the dates of testimony. Witness Name Date Testified Barney July 29, 1977 Bender July 22, 1977 Ben ton August 26, 1977 Bryan July 25, 1977 Bauchwitz August 29, 1977 Close August 25, 1977 Creekmore July 19, 1977 Davis August 23, 1977 Dougherty July 29, 1977 Dugan September 2, 1977 Fleming July 26, 1977 Gorman August 23, 1977 Guthrie July 20, 1977 Kaplan July 21, 1977 Kovar August 24, 1977 Mattes July 27, 1977 Mettler August 22, 1977 Munyon August 24- , 1977 Murphy August 23, 1977 Noel July 18, 1977 Oie August 1 , 1977 Overmire August 1 , 1977 Peterson September 2, 1977 Schmidt July 19, 1977 TRW, INc.

325 Initial Decision Schwartz September 2, 1977 Shepard August 22, 1977 Solganik September 2, 1977 Turley September 2, 1977 T. Walsh July 27, 1977 W. Walsh July 27 , 1977 Weber July 29, 1977 Weedon July 26, 1977 Wolfson July 20, 1977 (8) FINDINGS OF FACT 1. The Parties A. Respondent TRW, Inc.

1. TRW, Inc. (hereinafter TRW) is a publicly held corporation organized and existing under the laws of the State of Ohio. TRW is headquartered at 23555 Euclid Ave., Cleveland, Ohio. (Answer of TRW, 2).

2. TRW and its subsidiaries are principally engaged in the design, manufacture and sale of products for industry and government, and for the performance of advanced systems engineering, research and technical services in electronics and computer based services, domestic car and truck products, international car and truck products, car and truck replacement parts, spacecraft and propulsion products, fasteners, tools and bearings and energy products and services. TRW, during this proceeding, owned and operated plants in the United States, Europe, South America Australia, Canada, Mexico, Africa, Taiwan and the United Kingdom (Moody s Industrial Manual, 8024- , 1977 ed. 000 3. In fiscal 1974, TRW had total current assets of $960,233 net sales and revenues totaling $2 486 022 000 and net income of $254 352 000. In fiscal 1975, TRW had total current assets of $897,592 000, net sales and revenues totaling $2 585 683 000 and net income of $263 903 000 (Moody s Industrial Manual, 3024- , 1977 ed.

4. On April 23, 1974, TRW acquired Financial Data Services, Inc. (hereinafter FDSI) (CX 180; CX 182).

5. TRW, at all times pertinent to this proceeding, engaged commerce as defined in Section 1 of the Clayton Act (15 UB.C. 12 and Section 4 of the Federal Trade Commission Act (15 U. C. 4, (Answer ofTRW, 2; Finding 2).

6. TRW, at all times pertinent to this proceeding, had capit 'KADE COMMISSION DECISIONS Initial Decision 93 F. surplus and undivided profits aggregating more than one milion dollars (Answer of TRW 2; Finding 3). (9 J Addressograph-Multigraph Corporation 7. Addressograph-Multigraph Corporation (hereinafter A-M) is a publicly held corporation organized and existing under the laws of the State of Delaware. A-M is headquartered at 20600 Chagrin Boulevard, Shaker Heights, Ohio. (Answer of A- 3). 8. A-M and its subsidiaries manufacture and sell an extensive line of name-and-data writing, office duplicating and onset duplicating machines and apparatus. A-M, during this proceeding, operated some 38 plants in the United States, Canada, Mexico, Europe, Africa, Japan, Australia and New Zealand (Moody s Industrial Manual, 1108-09, 1977 ed.

9. In fiscal 1974, A-M had net current assets of $147 799 000, net sales and revenues totaling $540 833 000 and net income of $308 000. In fiscal 1975, A-M had net current assets of $150 930 000, net sales and revenues totaling $584 246 000 and net income of $4,908,000 (Moody s Industrial Manual, 1108-09, 1977 ed. 10. A- , at all times pertinent to this proceeding, engaged in commerce as defined in Section 1 of the Clayton Act (15 U. C. 12J, and Section 4 of the Federal Trade Commission Act (15 U.8. c. 44 J (Answer of A-M, 3; Finding 8).

11. A- , at all times pertinent to this proceeding, had capital, surplus and undivided profits aggregating more than one million dollars (Answer of A- 3; Finding 9).

12. A- , by a consent decision and order dated Augu.st 11 , 1977 (supra J, withdrew from adjudication prior to this hearing. C. Respondent Horace A. Shepard 13. Following a distinguished military career, Horace A. Shepard, in 1951, joined TRW as Vice President and Assistant to the General Manager. Shepard became President of TRW in 1962 and chairman and Chief Executive Officer in 1969 (Shepard, Tr. 849 50- 52). (10 J First elected to TRW's Board of Directors in 1957, Mr. hepard has served continuous three-year terms from that date to Ie present. Mr. Shepard, due to TRW's mandatory retirement at e 65 policy, retired as Chief Executive Officer on November 30, 77. Mr. Shepard, however, is permitted to remain on the TRW 1rd until his seventy-second birthday (Shepard, Tr. 852; CX 181). Horace A. Shepard was initially elected to the A-M Board of ,ctors on March 20, 1971 (Shepard, Tr. 874; Davis, Tr. 1158). Mr. 325 Initial Decision Shepard served on the A-M Board through November 6, 1975 (Shepard, Tr. 884; Answer of A- 4). 15. Horace A. Shepard served on both the A-M and TRW Boards of Directors from March 20, 1971, through November 6, 1975 (Findings 13 14).

II. The Alleged Interlock A. How Horace A. Shepard Came To Sit on the A-M Board 16. In 1970, Charles L. Davis was offered and, in 1971, assumed the Presidency of A-M (Davis, Tr. 1154). Charles L. Davis and Horace A. Shepard had enjoyed a friendship dating back to and beyond the period when Shepard was Davis' commanding offcer at Wright- Patterson Air Force Base in Dayton, Ohio (Davis, Tr. 1153; Shepard Tr. 853 54). After having been offered the Presidency of A- , Davis in the course of deciding to accept the position, sought out Shepard' advice (Shepard, Tr. 856 58; Davis, Tr. 1154 55). Even while weighing A- s offer, Davis entertained hopes that Shepard could be persuaded to join the A-M Board (Davis, Tr. 1155 56; Shepard, Tr. 858-59). Because of his desire to have directors of the A-M Board whom he could trust as well as his general lack of familarity with the Cleveland business community, Davis, after assuming the A- Presidency, continued to press the A-M directorship upon Shepard (Davis, Tr. 1156-57; Shepard, Tr. 860). Shepard finally agreed to join the A-M Board with the understanding that he would serve as a director only for a five year period, during which time Davis hoped to reverse A- s fortunes (Davis, Tr. 1157; Shepard, Tr. 858, 860). (11) 17. Horace A. Shepard, for his own part, was initially reluctant due to his other responsibilities, about accepting the position on the M Board (Davis, Tr. 1155-56; Shepard, Tr. 859). Before agreeing to become an A-M director, Shepard conferred with Eugene Ford, then TRW' s General Counsel, and Dr. Rueoen Mettler, then President but now Chief Executive Offcer of TRW. TRW's General Counsel examined all of the relevant facts" and concluded that Shepard could join the A-M Board (Gorman, Tr. 1023; Shepard, Tr. 862 927). Mettler, because of Shepard's busy schedule and a belief that an A-M directorship was of no benefit to TRW, advised Shepard against joining the A-M Board (Metter, Tr. 933- , 956 , 963). It should be noted that, although TRW now employs an extensive screening process to avoid Clayton 8 problems (Gorman, Tr. 1029 42; RX 4; see also RX 58, RX 59), the procedure in 1971 was rather less well developed (Gorman, Tr. 1024), so much so that the TRW Board Initial Decision 93 F. was never notified-either by Shepard or anyone else-that Shepard had joined the A-M Board (Mettler, Tr. 934; Shepard, Tr. 861-62). 18. There is no indication that TRW in any way promoted or took corporate action sanctioning Shepard's assumption of the Adirectorship (Findings 16- 17).

B. Other Alleged Interlocks Involving Horace A. Shepard and TRW 19. In 1967, while serving on the Boards of TRW and Midland- Ross Corporation, Horace A. Shepard was the object of a Section 8 investigation conducted by the Department of Justice. Shepard himself had the question of overlapping TRW and Midland-Ross products researched with the conclusion of no overlap. Nevertheless the Department of Justice requested that Shepard resign from either the TRW or Midland-Ross Board. Shepard, in order to save the two corporations legal expenses and adverse publicity, resigned from the Midland-Ross Board. The Department of Justice then closed the investigation without filing a complaint (Shepard, Tr. 864-68; CX 208, CX 208- , CX 208-E to K, CX 208-0, CX 208-V). (12) 20. In 1968, Shepard was asked to join the Board of White Motor Company. Shepard requested and was denied a "railroad" clearance (i. the submission of a question to the Justice Department with a request for an advisory opinion as to the legality under the antitrust laws of a course of action, Weedon, Tr. 363). As a result of the denial Shepard refused the White Motor directorship (Shepard, Tr. 869-73; Gorman, Tr. 1015-16; Weedon, Tr. 365, 367, 370; CX 210). 21. In 1971, Shepard, while serving on the Boards of TRW, Aand Harris-Intertype Corporation, was again the subject of a Department of Justice Section 8 investigation. On the basis of studies conducted by the three corporations, Shepard concluded that no product overlap existed (Shepard, Tr. 874-78). In a meeting which occurred in Cleveland in the summer of 1971 between Justice Department officials and TRW counsel, it was made clear that the area of concern was the possibility of product overlap between Aand Harris. Further, the Department of Justice had concluded that TRW and A-M were not competitors (Gorman, Tr. 1017-21; Weedon Tr. 353, 356, 361; CX 211-A - B; see also RX 56; RX 57; and Gorman Tr. 1021-23 on the question of any possible ambiguity about the understanding of that meeting and its commitment to writing). Shepard subsequently resigned from the Harris Board (Gorman, Tr. 1021). Shepard regarded the investigation and its resolution as " fact a clearance to continue as director of both TRW and Addressograph-Multigraph" (Shepard, 'lr. 878).

:125 Initial Decision 22. On July 26, 1974, Shepard resigned from the Board of Diamond Shamrock Corporation. Shepard had previously been notified that the Federal Trade Commission intended to fie a complaint against Diamond Shamrock and the Standard Oil Company for alleged violations of Section 8 (Shepard, Tr. 928-24; Weedon, Tr. 881, 884; CX 212; CX 213 to CX 218-0; ex 214 to CX 214-0). (13) III. The Products A. The TRW System 4000/5000 28. Generally: Throughout the complaint period, TRW's key product, for purposes of this proceeding, was its System 4000/5000 (Bauchwitz, Tr. 1838). Although the System 4000 was marketed apart from the System 5000, the two systems were essentially one and the same. The System 4000 was designed as a credit authorization system (on "credit authorization see T. Walsh, Tr. 543-44; Bryan, Tr. 246) for department store house accounts (Bauchwitz, Tr. 1810- 11, 1848; Kovar, Tr. 1230, 1244; Close, Tr. 1547-48; CX 167). The design of the System 5000 concentrated upon the credit authorization needs of banks and other financial institutions (Bauchwitz, Tr. 1886; Kovar, Tr. 1230; CX 158; CX 172). Both systems were optimally suited to environments characterized by the need for clusters of terminals and a high volume of transactional traffc (Kovar, Tr. 1226 1228, 1283; Bauchwitz, Tr. 1811; Bryan, Tr. 280; Close, Tr. 1546-58; Findings 24-25, infra).

24. System Features: The TRW System 4000/5000 used, during 38; seethe complaint period, the 4103 terminal (Kovar, Tr. 1231generally CX 201). Designed to occupy as little retail counter space as possible, the functions of the 4103 were limited to the clerk' s use of the keyboard to transmit information and the receipt and display of the computer s answer (Kovar, Tr. 1234-35). The 4103 terminal lacked both a printer, a device applying text or numbers to a page in response to an electrical impulse, and imprinter, a device transferring raised characters to an inked piece of paper, as well as the ability to communicate directly with a computer (Kovar, Tr. 1231- 1271). In order to communicate over a telephone line with a central computer, the 4103 terminal had to be used in conjunction with a controller (Kovar, Tr. 1235-36). The controller was itself composed of a scanner control, which monitored the various terminals attached to the controller, and the modem, which converted the keypad signal to telephone use (Kovar, Tr. 1238, 1240-41; Close, Tr. 1549). Through the use of the special capabilities of the store located controller, as many as 128 4103 terminals could be simultaneously controlled. The Initial Decision 93 F. effect of this arrangement was to distribute the costs of the controller and host computer among many terminals in a single (14) Tr. 1811-12). Thestore location (Kovar, Tr. 1240; Bauchwitz, 4103 terminal could be upgraded to include an imprinter, card reader and customer identification pads. However, these items would Tr.be included alongside and not in the terminal housing (Kovar, 1334-36).

25. System Uses: The envisioned use of the System 4000/5000 in a multi-clustered terminal environment was borne out in fact. During the complaint period, 70-75 System 4000' and some 60 000 credit authorization terminals-were sold or leased to American department stores (Bauchwitz, Tr. 1813, 1893). Ninety percent of all System 4000 revenues came from department store sales and leases (Bauchwitz, Tr. 1813).

The TRW Validata System 26. Generally: TRW' s Validata System involved the sale of a service rather than mechanical system (Kovar, Tr. 1253). Validata provided the service of verifying transactions involving credit cards, checks and lost or stolen airline tickets (Bryan, Tr. 245, 276). In contrast to credit authorization (see Finding 23 supra), credit verification calls for a search of a "negative" file containing those accounts not to be honored. Validata s "negative" fie was drawn from data supplied by, among others, Master Charge, American Express, Diner s Club, Carte Blanche and BankAmericard (Bryan Tr. 247-48). Validata was designed for use in the clustered or multiterminal environment. Airport terminals were considered to be particularly appropriate sites (Kovar, Tr. 1254), but Validata also was advertised for use in shopping malls (Kovar, Tr. 1326-27). 27. System Uses: Airlines and national car rental agencies were the major subscribers to the Volidata service (Bauchwitz, Tr. 1820 1827; Bryan, Tr. 245, 279). Indeed, 95 percent of all Validata revenues came from airlines and car rental agencies (Bryan, Tr. 279). Validata proved unworkable for shopping malls because of that type of facility s inability to impose upon its tenants the degree of control exercised by airline terminals (Kovar, Tr. 1256). Validata was used in other than multi-clustered environments as an accommoda- (15 J tion to some customers but not frequently (Kovar, Tr. 1320-23). FDSI Terminals 28. On April 23, 1974, TRW acquired FDSI (Finding 4 supra). FDSI devices were predominantly large machines designed for use in 325 Initial Decision banks and savings and loans (Kovar, Tr. 1262-63; Bauchwitz, Tr. 1875). The principal FDSI terminals offered for sale during the complaint period are described in Findings 29- infra. 29. The FDSI TT-115, which lacked an imprinter, was designed for consumer use in the very specialized environment of a supermar ket check stand (Kovar, Tr. 1265; CX 159). The TT-115 System operated along lines very similar to those of the TRW System 4000 (Close, Tr. 1592). The TT-115 was the only TRW or FDSI device which contained a magnetic stripe card reader (Kovar, Tr. 1267). In addition, the TT -115 featured, in order to provide security to the consumer user, a Personal Identification Number (PIN) used in conjunction with the terminal keyboard (PIN pad) (Kovar, Tr. 1264- 65; Bauchwitz, Tr. 1831; CX 163). The TT-115 was designed for and sold only to Glendale Federal Savings and Loan for use in the Smith Food King Chain (Kovar, Tr. 1269; see also, Findings 39- infra). During the complaint period, the TT- 115 cost $1 675 (Bauchwitz, Tr. 1907). Wiliam J. Bauchwitz, a planning staff member of TRW' Communications Systems and Services Division, indicated that the per terminal economics of the TT-115 and AMCAT I were, in some circumstances, comparable (Bauchwitz, Tr. 1909). This parity of economies could be upset, however, by the specific needs of an individual buyer (Bauchwitz, Tr. 1910-14). 30. FDSI, under the auspices of TRW, also produced some 10 prototype models of the TT-116 (Bauchwitz, Tr. 1864). The abilty of the customer to insert a check for validation into the terminal was the distinctive feature of the TT-116 (Kovar, Tr. 1299-1301; Bauchwitz, Tr. 1861; CX 104- 17). The TT-116 prototype models were shown to Wells Fargo (Kovar, Tr. 1310). (16) 31. During the complaint period, FDSI produced foam board mock up models only of the TT-117. The TT-117 was meant to perform credit authorization, check validation and other electronic funds transfer functions at supermarket cash register counters (Bauchwitz, Tr. 1864-65; CX 104- 18; CX 104- 19; CX 244- 29; CX 244- 31).

D. The AMCAT I 32. Generally: M had long been in the business of supplying gasoline companies with Zip-Zap machines (invoice and receipt imprinting devices) for use in credit card sales. Because of the incnasing losses suffered by the oil companies due to credit card fraud, A-M developed a device, the AMCAT I, for transmitting requests and receiving credit authorization information (Cady, Tr. 1713-15). Although A- s hopes for marketing the AMCAT I were Initial Decision 93 F. not realized (Cady, Tr. 1711-12), the AMCAT I was utilzed by some gasoline service stations and small retail stores (see Finding 34 infra).

33. System Features: In contrast to the TRW System 4000, the AMCAT I integrated many of the credit authorization system components into the terminal itself. The inclusion of a modem in the AMCAT I created a "stand alone" terminal. That is to say, the AMCAT I was capable of communicating with a host computer through a specially leased telephone line without the use of a controller or any other externally located piece of equipment (Cady, Tr. 1703-04; Kovar, Tr. 1274; CX 245- 97). The AMCAT I, as a result of its integrated nature, was substantially larger than the TRW 4103 Kovar, Tr. 1257; CX 245- 93). The AMCAT I was capable of reading either magnetic stripe or raised character plastic cards. The AMCAT I also had a display and imprinter/printer device which allowed it to print a receipt from a plastic card (Cady, Tr. 1703, 1756). (17) 34. System Uses: Between January of 1973 and November 6, 1973 AMCAT I's were used predominantly in a "stand alone" environment e., one or two isolated terminals in a relatively small retail establishment (Cady, Tr. 1756-57; Close, Tr. 1568, 1612). Where large retail stores could establish their own system of credit authorization and in-house credit cards, it was not feasible for small retail shops to develop their own credit systems. Small stores tended to look to third party extenders of credit, such as American Express Company, to supply a fully developed electronic credit authorization plan (Close Tr. 1564, 1584). Small stores, as a result, needed a credit authorization terminal possessing magnetic stripe card reading capabilities since the magnetic stripe card was commonly used by third party credit extenders (Close, Tr. 1570). Moreover, the small retail store favored the integrated terminal for this device reduced modem and phone line costs (Close, Tr. 1565). The AMCAT I, which answered all of the above demands, was accordingly utilized by third party extenders of credit, most notably American Express (Close, Tr. 1583; Cady, Tr. 1721). During the complaint period, AMCAT I's were not used by department stores, airlines, car rental agencies or in financial institutions as teller machines (Cady, Tr. 1752-58; Murphy, Tr. 1178, 1205-06).

Other A-M Products 35. During the critical period, any other relevant A-M products were largely variations on the AMCA T I. The AMCA TIC, which was utilized primarily in the First National Bank of Atlanta s "Honest Face" electronic transfer of funds program (see Findings 42g., oJ;:;) InlLlal VeClSlOn infra), was an adaption of the AMCAT I which accepted checks and featured a consumer operated terminal (Cady, Tr. 1726-31; CX 195- V; CX 245- 96). The AMCAT 2 (CX 245- 93) differed from the AMCAT I in its ability to be used in a dial-up telephone system rather than having to be tied to a dedicated telephone line. This modification in the AMCAT I was prompted by the special needs of the oil companies and (18 J their service stations. However, apparently very few, if any, AMCAT 2's were actually sold (Cady, Tr. 1724- 26). The MODCAT and HALFCAT terminals were pared down versions of the AMCA T I. Although shown to potential buyers, these variations on the AMCAT I were apparently never produced in other than cardboard model form (Cady, Tr. 1741-44). IV. Credit Authorization System Transactions Occurring During the Critical Period The Electronic Funds Transfer Market Generally 36. The outstanding feature of the so-called electronic transfer of funds systems marketplace during the complaint period was its highly experimental and developing state (Benton, Tr. 1689; W. Walsh, Tr. 427; Creekmore, Tr. 33; Noel, Tr. 137; CX 171). The general description of electronic transfer of funds can be broken into three rather more specific categories: the authorization of credit card transactions, the verification or guaranteeing of checks, and the true transfer of funds, e., deposits and withdrawals from savings or checking accounts. Indicative of the industry s highly fluid state was the proliferation of systems of different functional capabilities and engineering design. Various systems produced by numerous manufacturers could accomplish one, two or all of the above-named functions (Noel, Tr. 120). Systems, even when similar in the end function performed, were frequently dissimilar in their method of accomplishing that final result (Noel, Tr. 118-20). 37. The following factors were generally agreed to have been taken into account by potential electronic funds transfer systems purchasers: (1) the geographic dispersion of points of sale, department store with many points of sale within that store as opposed to a system of gasoline stations, (2) the physical location of terminals including the amount of space allotted per terminal the difficulties posed by fitting a terminal into a supermarket check stand, (3) the anticipated transactional volume, (4) the type of credit card and credit system used, in-house as opposed to a third party credit system, (5) the specific jobs which the terminal was expected g., Initial Decision 93 F. to do, imprinting and printing capability and (6) the cost of the system (Bauchwitz, Tr. 1577; Bryan, Tr. 273-74). (19) Specific EFT Purchase Transactions 38. Glendale Federal Savings Loan Association: On November , 1974, the Board of Directors of the Glendale Federal Savings & Loan Association, pursuant to a proposal made to the Federal Home Loan Bank Board approved a proposal for placing a number of electronic funds transfer terminals in Southern California supermarkets (Barney, Tr. 650-51). The goal of the Glendale Federal proposal was to set up facilities permitting the acceptance of deposits to and the authorization of withdrawals from savings and checking accounts at retail food store checkout stands (Barney, Tr. 648). In implementing this plan, Glendale Federal desired a terminal small enough to fi into the restricted space of a supermarket check stand, keyboard and digital display, a magnetic stripe card reader and a personal identification number pad (PIN pad) (Barney, Tr. 653- 658-60).

39. Donald J. Barney, Manager of the Information Systems Division of Glendale Federal, personally contacted TRW, NCR, Burroughs and IBM in late June or early July of 1974 to inquire whether those firms had equipment capable of meeting Glendale Federal' s requirements. In addition to those firms solicited, Glendale Federal stood willng to submit its system specifications to any other interested manufacturer. Glendale Federal was approached by representatives of A-M in either late July or early August of 1974. On August 26, 1974, Mr. Barney visited A- s Los Angeles branch and witnessed a demonstration of the AMCAT terminal (Barney, Tr. 651-52). No manufacturer, whether or not solicited, had equipment that would do what Glendale Federal wanted it to do in the fashion desired (Barney, Tr. 653). The AMCAT, for instance, did not operate at a sufficient baud rate (the rate of communicating from the terminal to the computer) so that the rate of communication was too slow for an adequate service response, the A-M Communication Network required the use of an expensive control unit to gain compatability with the central processing unit, the AMCA T terminal was too large to fit on the check-out stand, and A-M did not offer a PIN pad to insure proper user security (Barney, Tr. 652-55). (20 J The TRW 4103 was found to have "the same limitations" such as the lack of a magnetic card reader. However, the 4103 fit the check stand (Barney, Tr. 658). Despite the common deficiencies, Mr. Barney testified "it was clear to me that no manufacturer except TRW was going to be able to design and build a piece of gear and deliver it in ll1.W INC. ET AL. 341 325 Initial Decision our time frame, for the installation of the original 200 machines (Barney, Tr. 655; see also CX 227- , CX 227- 67). A-M persisted in attempting to sell to Glendale Federal, but never submitted a forma) proposal (Barney, Tr. 656, 686; RX 23).

40. TRW began development work on a terminal specially designed for Glendale Federal, the TT-115, in the fall of 1974 negotiated an agreement with Glendale Federal at the end November 1974 and executed a formal contract of purchase in March of 1975. TRW began delivering completed TT- 115' s in May of 1975. The first installation of a TT-115 terminal in a Glendale Federal system supermarket occurred on August 23, 1975 (Barney, Tr. 650- 52).

41. Some time between February 28 and March of 1975, Ashowed Glendale Federal the MODCAT (Barney, Tr. 656-57). The MODCAT appeared to fit Glendale Federal's specifications of the year before; however, in March of 1975, Glendale was not in the market for a terminal (Barney, Tr. 658).

42. First National Bank of Atlanta: The First National Bank of Atlanta, Georgia, had developed an electronic check verification and factoring (i. e., the buying of accounts receivable created by written checks from retail establishments) system. The so-called "Honest Face" system allowed consumer check verification or factoring to take place, by means of a point of sale terminal, at the retail establishment itself (Creekmore, Tr. 11-12). The consumer issued an Honest Face" card operated the point of sale terminal, which verified or factored the consumer s check. Because the terminal was to be consumer operated, First National of Atlanta insisted that the terminal be equipped with an operator lead through, or prompter device, which would lead the consumer through his use of the terminal (Creekmore, Tr. 67-68). Because the "Honest Face" system was to be activated by a specially issued card, the terminal had to have the capability of reading a magnetic stripe card. Finally, in order to actually verify the check, the terminal had to have (21) an imprinter (Creekmore, Tr. 68-69). Although it was envisioned that Honest Face" terminals would be installed in all types of retail stores, at the close of 1975 some 375 terminals had been placed only in grocery stores, liquor stores and other stand-alone locations. Honest Face" terminals were not placed in a major retail store because those stores had too many point of sale locations and because large stores had their own electronic cash registers (Creekmore, Tr. 37- , 73).

43. In its search to find a manufacturer wiling to devise a system featuring a shopper operated terminal, First National Bank contact- 342 FEDERAL Tltft.Lc. v,-..--- Initial Decision 93 F. ed 37 electronic terminal vendors, including A-M and TRW (Creekmore, Tr. 59-60). Robert P. Creekmore, the First National Bank of Atlanta, Georgia offcer who headed up the Honest Face Program, testified that all terminal vendors balked at developing a shopper operated terminal (Creekmore, Tr. 59).

44. Although TRW never submitted a formal bid, (Creekmore, Tr. 77), Mr. Creekmore testified that "over our period of discussions they (TRW) offered to make certain modifications in new products, that in effect would give partial answers to some of the needs that we had in the terminal we desired" (Creekmore, Tr. 65). However, First National of Atlanta s talks with TRW finally broke down because of TRW' s inability to develop a satisfactory shopper operated terminal (Creekmore, Tr. 76-78; Bauchwitz, Tr. 1848). 45. A-M, initially, had neither the hardware to satisfy First National of Atlanta s needs nor the wilingness to modify their existing equipment. A-M so opposed First National's idea that a customer operated terminal was desirable and feasible that First National, for a time, angrily refused to have any further discussions with A-M representatives (Creekmore, Tr. 81; Cady, Tr. 1729). Asubsequently warmed to the idea of the prompter device, developed the AMCAT IC (see Finding 35, supra) and negotiations between Aand First National were resumed (Cady, Tr. 1730; CX 193-V). (22) 46. A- s willngness to meet First National's requirements combined with the unwilingness of the other terminal vendors, allowed A-M to secure, by February of 1975, the "Honest Face contract (Creekmore, Tr. 77, 81).

47. Metroteller/Erie County Savings Loan, Erie, Pa.: Metroteller (or Consumer Save System Corporation and Consumer Service Corporation as it was known during the critical period) was a whollyowned subsidiary of the Erie County Savings Bank (Wolfson, Tr. 21). Metroteller existed to develop l' emote banking facilities, facility which would allow a customer of a financial institution to make savings and checking account deposits and withdrawals while in a retail establishment (Wolfson, Tr. 20- , 33-35). Metroteller provided this service not only to its parent, but to other local financial institutions (Wolfson, Tr. 25). 48. In October of 1974, Erie County Savings Bank began a search for a point of sale terminal. Joseph Wolfson, President of Metroteller, described the search as a process of contacting many terminal vendors and then narrowing the field as it became apparent which suppliers were offering products well suited to Erie National' requirements (Wolfson, Tr. 26-27). Among the half dozen vendors ;i4J 325 Initial Decision contacted by Metroteller were A-M and TRW's FDSI division (Wolfson, Tr. 25; Bauchwitz, Tr. 1874-75). 49. Beginning in July of 1974 and through the end of 1975, Metroteller met with TRW and FDSI representatives to discuss the suitabilty of TRW and FDSI products as remote banking terminals. Metroteller was shown the TT-108. Metroteller offcials were taken to California to observe the TT-115' s used by Glendale Federal (Wolfson, Tr. 45- , 49- , 53). The TT-140, which Metroteller eventually purchased, was not shown during the critical period (Bauchwitz, Tr. 1880).

50. At the same time that Metroteller was being shown TRW' products, A-M was also attempting to sell their AMCAT I and 2 to Metroteller (Wolfson, Tr. 60- , 63-64). Because of programming costs as well as expense in adapting Erie National's existing system to the AMCAT terminals, Metroteller did not purchase any of the A- M terminals (Wolfson, Tr. 64-67). (23 J 51. Buckeye Federal Savings Loan. Columbus, Ohio: During the critical period, Buckeye Federal implemented a remote service unit terminal program. It was anticipated that terminals, located in retail stores, would be able to make deposits, withdrawals, confidential inquiries and guarantee checks (Guthrie, Tr. 86, 87, 91-92). Buckeye decided that it was interested in securing a terminal possessing the capability to print a receipt a ten key pad so that a customer could utilize a personal security code-a magnetic stripe card reader and an imprinter (Guthrie, Tr. 119-20). 52. Buckeye initially attempted to contact "anybody we could think of who had a credit authorization device or was in the terminal business" (Guthrie, Tr. 103). A-M and TRW were among the manufacturers contacted by Buckeye Federal (Guthrie, Tr. 103, 110). M was the only vendor with a terminal integrating all of the above-described functions. Nevertheless, TRW made some efforts or representations of efforts, of attempting to modify their product to meet Buckeye s goals. Stephen Guthrie, Buckeye s Senior Vice President for Marketing and Data Processing, testified that FDSI and TRW products were never seriously considered (Guthrie, Tr. 120).

53. Buckeye eventually installed AMCAT terminals on April 21, 1975 (Guthrie, Tr. 91). Terminals have subsequently been installed at supermarket offces and courtesy windows, and discount stores (Guthrie, Tr. 93, 96).

54. Credit Systems. Incorporated (CSI): Credit Systems, Incorporated, of St. Louis, Missouri, was a processing center for 785 banks handling Master Charge and Visa cards (Bender, Tr. 194). In April of Initial Decision 93 F. 1974, CSI began to formulate the design for a system which would handle check guarantees for retail stores at the point of sale and act as an automatic teller for financial institutions (Bender, Tr. 197 201). The terminals developed were intended to be used in both banks and retail outlets (Bender, Tr. 200). (24) 55. In order to realize their system design, CSI conducted a study of electronic transfer of funds manufacturers. The study s purpose was to ascertain the universe of manufacturers and the particular computer hardware produced by each (Bender, Tr. 202-03). As a result of their survey, CSI classified potential point of sale terminal vendors into one of three categories: (1) mechanical reader with automatic printer/imprinter, (2) mechanical reader, non-printing, and (3) manual input. A-M was placed in the first classification TRW in the last. Neither A-M nor TRW was listed under the mechanical reader, non-printing category (Bender, Tr. 220-22). 56. CSI, during the critical period, sent out requests for quotation to all manufacturers (CX 102), whatever their category, for a point of sale terminal (CX 101). Both A-M and TRW responded to CSI's request for quotation (CX 103; CX 104). Although TRW admitted in its response that its terminal lacked a printing capability, TRW stated that it expected to have such capability by the fan of 1976 (Bender, Tr. 222-23; CX 104- 5). TRW's response, nevertheless talked of the "excellent match" between CSI's needs and TRW' equipment (CX 104-F). Because of legislative and regulatory action CSI did not actually purchase any terminal (Bender, Tr. 213- 14). However, Jay Bender, President of Systems Service for CSI, testified that TRW's present inabilty to supply a terminal with printing and imprinting capacity made TRW's response unsatisfactory (Bender Tr. 228, 233; Bauchwitz, Tr. 1848).

57. American Express: During the complaint period, American Express Company was the major purchaser of AMCAT terminals (Cady, Tr. 1721). This situation was the result of both a good relationship between American Express and A-M (Cady, Tr. 1718-19) and the suitability of the AMCAT terminal to American Express needs (Cady, Tr. 1719-20; Bryan, Tr. 281-82; Finding 33, supra). Peter Bryan, an Executive Vice President of Payment Systems, Inc. a subsidiary of American Express, and a former TRW employee, testified that American Express never seriously considered TRW' terminal. American Express, however, did go to the trouble of assessing whether TRW' s product would answer American Express needs (Bryan, Tr. 282). (25 J 58. Virginia Federal Savings Loan, Richmond, V A.: From 1974 Virginia Federal Savings & Loan began considering the purchase of 325 Initial Decision terminals for a remote unit system similar to that created by Buckeye Federal (Fleming, Tr. 394, 397 , 404; see Finding 51 supra). Virginia Federal, though it ultimately purchased the AMCA T terminal, had no contact with A-M representatives prior to November 6, 1975 (Fleming, Tr. 407). Virginia Federal was aware, however of the existence of the AMCA T and its use by California Federal Savings and Loan (Fleming, Tr. 395; see Findings 60- infra). During the November 1974 - March 1975 period, Virginia Federal discussed the suitability ofTRW' s terminals for the Virginia Federal System (Fleming, Tr. 400-03). The TRW product performed many, but not all, of the functions desired by Virginia Federal (Fleming, Tr. 402-04). Even the AMCAT, which met most of Virginia Federal' demands, was unable to produce receipts (Fleming, Tr. 404-05). The major objections of Virginia Federal to TRW were the diffculties in servicing and the expense of the TRW system due to the fact that a mini-computer would have been required for each location housing a terminal (Fleming, Tr. 402).

59. Continental National Bank: The Continental National Bank of Chicago, Ilinois used the AMCA T in supermarkets to authorize charge account purchases, guarantee checks and for Master Charge transactions (T. Walsh, Tr. 543, 546). Continental did not consider any terminal other than the AMCAT (T. Walsh, Tr. 551). 60. California Federal Savings Loan, Los Angeles, CA.: During the critical period, California Federal Savings & Loan placed electronic transfer of funds terminals, which were activated by plastic cards, at supermarket and liquor store locations. Customers holding California Federal cards could make deposits and withdrawals from their accounts and cash checks (Weber, Tr. 601). This initial system used the AMCAT I. This record contains no evidence about the competitive circumstances surrounding this purchase decision (Weber, Tr. 613). (26) 61. California Federal subsequently began to contemplate expansion of its original system. It wished to expand the terminal network into the Vons Grocery Store chain and hoped to place terminals at the check-out stand counter in addition to special courtesy booths (Weber, Tr. 614, 626-27). While this expansion was being planned, California Federal had discussions with TRW and A-M representatives about terminals suitable for check-out counter use. California Federal was told that the TRW 4103 terminal would function at either a courtesy booth or check-out counter. A-M represented that its MODCAT was suitable for check-out counter use (Weber, Tr. 627- , 640-41; CX 302; CX 303). Due to the lack of a terminal with printing and imprinting capability, negotiations between TRW and Initial Decision 93 F. California Federal eventually broke down. TRW never submitted a formal bid (Bauchwitz, Tr. 1883-85).

62. Bank of America, San Francisco, CA.: As early as 1973, Bank electronic transfer ofof America had designed an experimental funds system (Dougherty, Tr. 693-97). By 1975, Bank of America wanted to enlarge upon the original system. In July of 1975, Bank of America issued a request for information (CX 243- to 243- Y) for terminals, controllers and subsystems necessary to support merchant point of sale operations. These requests for information were issued to some 29 vendors. Bank of America received responses from 10 of those 29 vendors, including A-M and TRW (Dougherty, Tr. 702 710-11; CX 244; CX 245-A). It should be noted that Bank of America recognized a distinction between a request for information and a request for proposal. That distinction was that a request for information was used to determine available suppliers of equipment characteristics of equipment and the ability of suppliers to meet generally basic requirements. By contrast, a request for proposal was viewed as a firm indication of the bank' s intent to purchase some amount of equipment as a direct result of receiving responses (Dougherty, Tr. 728-29; CX 243-A). TRW replied to Bank of America s request for information. TRW offcials testified that TRW was unable to meet Bank of America s specifications (Bauchwitz, Tr. 1889-93). Nevertheless, TRW's response, in its Executive Summary section, refers to "the excellent match between our equipment and the capabilities and system requirements defined in your RFI" (CX 244-K). Later in TRW's response, the following statement appears: The requirement-by-requirement comparison which follows indicates an excellent match between Bank of America s requirements and the capabilities ofTRW" (CX 244-Q). (27) 63. Security Pacific Bank, Los Angeles, CA.: During the critical period, Security Pacific Bank devised an electronic transfer of funds system utilizing magnetic stripe cards. These cards were "read" by terminals located in supermarkets. The terminals were to be connected via leased telephone lines with a central data base in Security Pacific s computer operations center (Oie, Tr. 737-38). Without a formal invitation, TRW representatives paid several visits to Security Pacific during the course of 1975. During these visits TRW representatives loaned a TRW terminal to Security Pacific for a Security Pacific branch manager s show (Oie, Tr. 742-44). During 1975, A-M also visited Security Pacific. A- s calls typically involved conversations with Security Pacific offcials and leaving printed material describing the AMCA T terminal (Oie, Tr. 744-45). Security 325 Initial Decision Pacific ultimately purchased terminals from the Concord Computing Company (Oie, Tr. 740).

64. Wells Fargo Bank, San Francisco, CA.: During the critical period, Wells Fargo Bank developed Wells Service. Wells Service provided credit card authorization, check authorization and check guarantee to retailers (Overmire, Tr. 758). The decision of Wells Service to use TRW terminals was apparently made by default. Wells Fargo Bank did not consider any other vendors, including A- M, for Wells Service (Overmire, Tr. 761 , 776). 65. However, Wells Fargo Bank, also during the critical period considered developing an electronic transfer of funds system for supermarkets (Overmire, Tr. 761). Wells Fargo talked to TRW personnel over the last half of 1975 about the development of suitable terminals (Overmire, Tr. 761-64). TRW, as a result, developed prototypes for Wells Fargo. This involved modification of existing TRW terminals enabling the terminal housing to contain an imprinter with a slot into which a shopper could insert a check as well as electronic modification allowing the imprinter to print on the check (Overmire, Tr. 765-66). (28) 66. During 1975, Wells Fargo Bank also had contact with Aregarding Wells Fargo s proposed expansion of electronic funds transfer services into the supermarket environment. Specifically, Wells Fargo looked at the AMCAT I. Mr. Peter Overmire, Vice President, Finance and Analysis Division of Wells Fargo Bank testified that, in his opinion, the AMCA T I would have satisfied Wells Fargo s supermarket application needs. However, it was also Overmire s opinion that the AMCAT I was unduly cumbersome for check approval (Overmire, Tr. 766-67). It was eventually decided that the TRW terminal was to be used. However, Wells Fargo supermarket application project never went beyond an internal experimental phase (Overmire, Tr. 768-69). V. Respondents' Charges That Due Process Was Denied Them and That the Administrative Process Was Abused 67. By letter of August 8, 1975, the Federal Trade Commission first advised respondents of the investigation leading to the complaint in this matter. A proposed complaint accompanied the August 8 letter (Solganik, Tr. 1961-62; RX 54-A). 68. On September 8, 1975, counsel for respondents met with members of the Cleveland Regional Office of the Federal Trade Commission to discuss the August 8 letter and proposed complaint. Respondents, at the September 8 meeting, informed the Federal Trade Commission that Horace Shepard previously had decided not 294-972 0 - 80 - 23 Initial Decision 93 F. to stand for re-election to the Board of Directors of A-M (Gorman, Tr. 1053; Solganik, Tr. 1965; RX 54-C), but Mr. Shepard told A-M that the Federal Trade Commission s letter was the reason for his decision not to stand for re-election (Shepard, Tr. 884-87). The next day, Mr. Thomas B. Clark, Secretary and Corporate Counsel of Amet with the Cleveland Regional Offce staff to discuss a letter similar to that received by TRW on August 8, 1975, and an attached proposed complaint (CX 306-A and B; RX 54-D). Although Mr. Clark offered to provide the Commission staff with information about As business and products, neither then nor at any other time prior to the service of the complaint did the Federal Trade Commission request information from A-M (Solganik, Tr. 2012; CX 306-A and B; RX 54-E). (29) 69. On October 31, 1975, the Federal Trade Commission requested from TRW information about dollar sales volume for certain TRW products, the date of TRW's acquisition of FDSI and a description of FDSI products. The October 31 letter, which was received by TRW on November 3, 1975, requested TRW to provide this data by November 1975 (Gorman, Tr. 1086-87; CX a05-E). TRW informed the Federal Trade Commission that it would be unable to meet the requested date for submitting the three categories of data (Gorman, Tr. 1087). On November 14, 1975, the Cleveland Regional Offce of the Federal Trade Commission forwarded to Washington, D. , its recommendation that the complaint issue. At that time, respondents had not replied to the October 31 1975 request for information (Solganik, Tr. 2020; RX 54-H to RX 54- 1).

70. After learning about the forwarding of the recommendation respondents requested and had a meeting with staff of the Federal Trade Commission in Washington, D.C., for the purpose of making a presentation as to why no complaint should issue (Gorman, Tr. 1056- 57; Solganik, Tr. 1972-74). On December 10 1975, a meeting was held in the Offce of the Executive Director of the Federal Trade Commission. In attendance were Clinton Batterton, Assistant to the Director, Bureau of Competition, Federal Trade Commission; Robert Davidson, Counsel for TRW; John F. Dugan, Deputy Executive Director for Regional Operations, Federal Trade Commission; Joseph Gorman, Counsel for TRW; Lawrence Fox, Offce of Regional Operations, Federal Trade Commission; Chatles McCormick, Economist, Bureau of Economics, Federal Trade Commission; John M. Mendenhall, Law Clerk, Cleveland Regional Offce, Federal Trade Commission; Richard Pogue, Counsel, Jones, Day, Reavis and Pogue, representing Shepard and TRW; Vivian L. Solganik, Assistant Regional Director, Cleveland Regional Offce, Federal Trade Com- 325 Initial Decision mission; and Daniel Schwartz, Assistant Director for Evaluation Tr. 2048-Bureau of Competition, Federal Trade Commission (Dugan, 49; Solganik, Tr. 1974-75). At the close of the December 10 meeting, received from Mr. Daniel C.Mr. Gorman orally requested and Schwartz, the senior staff person present for the Federal Trade soon asCommission, an assurance that TRW would be informed as proposed complaint was forwarded (Solganik, Tr. 2026-28; Schwartz Tr. 2032-33). (30) 71. Following the December 10, 1975, meeting, respondents next heard from the Federal Trade Commission some six months later, on June 25, 1976 (RX 54-M). By telephone call, Commission staff informed counsel for respondents that on June 17, 1976, the Federal Trade Commission had voted to direct the issuance of a complaint (Gorman, Tr. 1070; Peterson, Tr. 2067, 2071; RX 54-M; RX 55). 72. On July 9, 1976, respondents filed a motion for reconsideration of the issuance of the complaint and, in the alternative, urged the Federal Trade Commission, pursuant to Section 2.21 of the Commission s Rules of Practice, to accept an assurance of voluntary compliance from respondents (RX 53). On July 13, 1976, the Federal Trade Commission referred the motion to an administrative law judge for determination. The Commission itself refused to consider respondents' motion for reconsideration and related relief (RX 3- RX 54-U to RX 54- 3; RX 55-A).

73. On July 22, 1976, respondents were served with the complaint and the presiding administrative law judge was identified (RX 40- RX 54-V).

74. The motion for reconsideration referred by the Federal Trade to theCommission to the administrative law judge was certified Federal Trade Commission by the administrative law judge September of 1976 (88. F. C. 544 (1976)). 75. On October 13, 1976, the Federal Trade Commission denied TRW' s motion for reconsideration (88 F. G 544 (1976)). (31) DISCUSSION The Case Is Not Moot Even Though the Interlock Was Dissolved Respondents argue that Mr. Shepard's decision not to stand for reelection to the A-M Board of Directors moots this proceeding. Administrative tribunals are not under the "case or controversy constitutional constraint federal courts are (U.S. CONST. art. III 2; Powell v. McCormick, 395 U.S. 496 n.7 (1969)), but the doctrine of mootness is substantially the same for either. Compare Tung-Sol g., Initial Decision 93 F. C. 632 (1963) with Walling v. Helmerick PayneElctri, Inc. 63 F. Inc. 323 U.S. 37 (1944).

The Supreme Court has ruled upon the concept of mootness in the context of a Section 8 case:

Both sides agree to the abstract proposition that voluntary cessation of allegedly ilegal conduct does not deprive the tribunal of power to hear and determine the case e., does not make the case moot. A controversy may remain to be settled in such circumstances a dispute over the legality of the challenged practices. The defendant is free to return to his old ways. This, together with a public interest in having the legality of the practice settled, militates against a mootness conclusion. For to say that the case has become moot means that the defendant is entitled to a dismissal as a matter of right. The courts have rightly refused to grant defendants such a powerful weapon against public law enforcement. The case may nevertheless be moot if the defendant can demonstrate that "there is no reasonable expectation that the wrong wil be repeated." The burden is a heavy one. Here the defendants told the court that the interlocks no longer existed and disclaimed any intention to revive them. Such a profession does not suffice t!J make a cae moot although it is one of the factors to be considered in determining the appropriateness of granting an injunction against the now-discontinued acts. Uniud Staus v. T. Grant Co. 34 U.S. 629, 632-3 (1952) (footnotes and citations omitted). (32) A-M has entered into a consent agreement with the Commission which should eliminate, for that firm, further Section 8 difficulties. Mr. Shepard, by contrast, can continue to sit on TRW' Board of Directors for seven more years. Mr. Shepard' s reputation for business acumen makes it likely that his services wil be solicited by other firms and that other improper-interlock questions could arise. See United States v. Trans-Missouri Freight Ass ' 166 U.S. 290 (1897). In my view, respondents have not convincingly met the heavy burden demanded of them by W. T. Grant. Respondents' reliance upon United States v. Cleveland Trust Co., 392 F. Supp. 699 (N. Ohio 1974) is misplaced as they more closely resemble the position of defendant Cleveland Trust, as to whom the proceedings were not moot. Pneumo-Dynamics Corporation, another defendant there had effectively eliminated the means as well as the motive for violating Section 8. Similarly, Paramount Pictures Corp. v. Baldwin-Montrose Chemical Cv., Inc. 1966 Trade Cases 678 (S. Y. 1966), is of no help to respondents because the defendant there also had rid itself of the means for violating Section 8.

The Provisions of Section 8 of the Clayton Act A reading of those parts of Clayton 8 applicable to the interlock 325 Initial Decision between TRW and A-M through Mr. Shepard shows that four criteria must be met before its provisions apply. These are: (1) One of the interlocked corporations must have capital surplus and undivided profits aggregating more than one milion dollars; (2) Each of the interlocked corporations must be engaged in interstate commerce;

(3) Neither of the corporations may be a bank, banking association, savings bank, trust company or common carrier; and (4) The corporations, by virtue of their business and location of operation, must be competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the federal antitrust laws. See generally Wilson Unlocking Interlocks: The On-Again Off-Again Saga of Section of the Clayton Act, 45 ANTITRUST L.J. 324-25 (1976).

(33) Here each corporate respondent admitted that it met the milion dollar requirement and that it was engaged in commerce as defined by Section 1 of the Clayton Act. Neither corporate respondent asserted that it is a bank, banking association, savings bank trust company or common carrier. (Note: The Federal Trade Commission has challenged, under Section 5 of the Federal Trade Commission Act, an interlock between a savings and loan association and a bank. Perpetual Federal Savings and Loan Association, Dkt. 9083 (90 F. C. 608) (FTC Initial Decision, March 28, 1977). The initial decision by FTC Administrative Law Judge Timony holds that the interlocks challenged violated Section 5 of the FTCA. Slip op. 41. That decision is on appeal to the Commission. Both respondent TRW and respondent Horace Shepard, as well as former respondent A- , deny that TRW and A-M were competitors during the critical period (Answer of TRW, 10; Answer of Horace Shepard 10; Answer of A- 6). Thus, the crux of the matter to be resolved, insofar as the charges brought under Clayton 8 are concerned, is whether TRW and A-M were competitors during the critical period. Clayton 8 itself does not indicate who are competitors beyond reciting that the corporations' business and location of operation are factors to be considered. Since both TRW and A-M are large, nationally and internationally engaged firms doing business in many of the same geographic areas (Findings 2- , 8-9), their activities are such that the location of operation language in Section 8 is clearly met. It is not so clear whether their business activities were such during the critical period as to make them competitors. . . . . . g., Initial Decision 93 F. For Purposes of Section 8, TRW And A-M Were Competitors During the Critical Period Neither the Clayton Act nor its legislative history defines "competitors." Judicial opinions and writings regarding Clayton 8 do not go into great detail about the meaning of this word. This, no doubt, is because Clayton 8 decisions are infrequent and the statutory requisite of "competitors" has usually been stipulated. (34J Complaint counsel argue that a showing that two corporations are in a position to form any agreement to violate the antitrust laws makes them, for purposes of Section 8 , competitors (CCB at 16). I do not agree. In United States v. Crocker National Corp. 422 F. Supp. 686 (N.D. Cal. 1976), an argument similar to complaint counsel' s was made. Judge Peckham, in rejecting the argument, stated that the anomalous result of so holding would be that vertically related companies-suppliers and buyers-are competitors. 422 F. Supp. at 703. If followed to its logical end, the argument suggests, contrary to fact, that all corporations compete. This, because any two corporations could agree to do something violative of any antitrust law agree as to prices or to limit production, each of which is a per se violation of the antitrust laws. See REPORT OF THE ATTORNEY GENERAL S COMMITTEE TO STUDY THE ANTITRUST LAWS (1955) at 12. Section 8 requires a finding of both a competitor relationship and the ability of those competitors to eliminate competition by agreement. The first and significant factual determination is whether the interlocked firms are or were competitors. Since Sears. Roebuck United States, 111 F. Supp. 614 (S. Y. 1953), Section 8 has been said to have a "per se character. " Halverson, Interlocking Directorates-Present Antitrust Enforcement Interest Placed in Proper Analytical Perspective, 21 VILL. L. REV. 393, 398-99 (1976). Such statements are only partially correct. Section 8 operates in per se fashion only after the factual determination of a competitor relationship. Judge Weinfeld, in Sears, Roebuck, explained the reason for the controlling effect of a finding of a competitor relationship over the so that hypothetical anticompetitive agreement, portion of Section 8:

This conclusion 1that a per se reading was to be given to the "so that" branch of the Clayton 8 competitors test) is compelled because of the futility of trying to decide whether a given hypothetical merger would violate the pertinent sections of the antitrust laws. The government's position presents no such diffculty. To accept its workable per se test. permits the prohibitory features of to be administered with the full scope which the legislators must have contemplated. 111 F. Supp. at 617. (35 J Section 8 becomes concerned about potential anticompetitive TRW, INC., ET AL. 3::)6 325 Initial Decision agreements only when competing firms with a common director are involved. Once facts are found suffcient to conclude that two firms in interstate commerce compete (the three other statutory requisites of Section 8 having been met), analysis shifts to Section 11, the Clayton Act's enforcement provision.

In Crocker, Judge Peckham also said that, for Section 8 cases, (w)whether two corporations were, in fact, competitors was apparently to be determined according to the traditional tests of competition-common sales in the same product and geographic market. This is the import of the phrase ' by virtue of their business and location of operation.' " 422 F. Supp. at 703- 04. Previous Clayton 8 decisions have found, in seeming conformity with Crocker a substantial quantity of common sales. In Sears, Roebuck, Judge Weinfeld noted that Sears, Roebuck and Goodrich Tire and Rubber Company conceded that they were competitors "in the sale. . . at retail" in 97 communities and 31 states to a volume of $80 000 000 annually of such things as refrigerators, hardware, sporting goods, auto supplies, tires, radios, television sets and toys. 111 F. Supp. at 617, 620. The Federal Trade Commission s recent decision in Kraftco Corporation, 89 F. C. 46, reflects that Kraftco and SCM stipulated that they were competitors in various parts of the United States in the sale of margarine, edible oils and barbecue sauce to a total of some $83 000 000. 89 F. C. at 48. It is important, however, to note that in Kraftco and Sears, Roebuck the statutory requisite of "competitors was either admitted or stipulated. No precedent has been found in which the presence of sales or a certain dollar amount of sales has been conclusive in arriving at a decision about whether two firms were Section 8 competitors.

In my view Crocker test for competitors is too restrictive for it may be read to suggest that the existence of competition hinges upon sales" having been made. There can, however, be intense competitive efforts by firms interested in making a sale without any or al1 of them succeeding in persuading the buyer to purchase. Nonetheless, this effort, even when no sale results, indicates a competitor relationship. (36) More in keeping with my own notion of the type of activity which ought to be been as evidencing tbe existence of a competitive relationship is the opinion of Mr. Justice Stevens, then sitting on the United States Court of Appeals for the Seventh Circuit, in Protectoseat Company v. Barancik 484 F.2d 585 (7th Cir. 1973). The Protectoseal opinion indicates that two corporations competed for tbe same business in selling safety containers, faucets, fittings and accessories for flammable liquids. In fact, the defendant so testified. 484 F.2d at 587. Justice Stevens concluded that the language of Section 8 "con temp- . ... . .

EDERAL TRADE COMMISSION DECISIONS Initial Decision 93 F. lates a. horizontal market relationship between the companies, (which) implics that a market-wide analysis of competition is unnccessary.". 484 2d at 589. In Brown Slwe v. lJnited States 370 U.S. 294 (1962), a Clayton 7 mcrger case, the United States SupremcCourt said that: (A)n economic arrangement between companies performing similar functions in the production or sale of comparable goods or services is S. at 334. Perpetual Fed€ralcharacterized as 'horizontal' ". 370 U. Savings Loan Associatwn in focusing upon urivalry" rather than sale". to support a finding of competitors, further advances understanding of the horizontal c'lmpetitors relationship. The ALJ , in Perpetual found on the basis of a stipulation as well as evidence that the interlocked bank and savings and loan association competed " attracting savings and making residential loans." Slip op. at 20. This discussion has not finally clarified the question as to who are competitors" beyond the elementary notion of a horizontal relationship marked by rivalry. I believe that the way to come to grips with the concept of competitors is to recollect what Section 8 sought to protect. Sears. Roebuck, in its summary of the legislative history of Clayton 8, found that Section 8 was enacted to preserve competitive relationships and, as such, was to be broadly construed. Judge Weinfeld wrote:

Interlocking directorships on rival corprations had been the instrumentality of defeating the purpse of the antitrust laws. They had tended to suppress competition or foster joint action against third party competitors. The continued potential threat to the competitive system resulting from these conflcting diretorships was.the evil aimed at. Viewed against this background, a fair reading of the legislative (37) debates leaves little room for doubt that, in its efforts to strengthen the antitrust laws, what Congrss intended by was to nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates. 111 F.Supp. at 616.

In this light, the best view as to who competitors are, in a Section 8 context, can be seen in the classic definition of competition set forth in United States v. Standard Oil of New Jersey, 4'7 F.2d 288 (E.D. Mo. 1931), a Sherman Act merger decision in which Circuit Judge Stone wrote " competition is, in its very essence, a contest for trade. " 47 2d at 297. To the same effect is language in United States v. The Philadelphia National Bank, 201 F. Supp. 384 (E.D. Pa. 1952), rev. 374 U.S. 321 (1963):

the Congress by use of the word "competition " intended to preserve free and open markets wherein the rivalry of the commercial firms, in the same line of endeavor, for the patronage of the common customer, would be demonstrated by a business atmosphere where free purchasers and free sellers, under no obligation to g., 325 Initial Decision sell, would enter into contracts of purchase and sales (or service contracts) because of the actual inducements red such as quality of product, terms, delivery and the many other factors which make fat good business relations, having in mind the peculiar situations, facts and circumstances which govern the particular transactions between individuals jn organizations. 201 F. Supp. at 352. The foregoing decisions support the view that in looking for standards by which to judge two firms "competitors " the critical element is the "contest" or "rivalry" for trade but an attempt to restrict the concept of "rivals" or "competitors" to a fixed set of circumstances would be unwise. As the quotation from Philadelphia National Bank suggests, the facts which may warrant the conclusion of rivalry for trade are too numerous to catalogue. The manner in which corporations and businessmen compete will change over time but the relationship of "competitors -when firms or individuals find themselves in a contest for trade-is constant. It is the relationship, rather than the ever shifting chain of causal factors which Section 8 seeks to preserve and foster. All of this notwithstanding, (38 J it still is necessary to do more than replace the legal conclusion of "competitors" with the equally unhelpful tag of rivals.

Competitors" in Section 8 does not have to be defined by a narrow set of announced facts because there is a simple method of inquiry for arriving at this legal conclusion. A finding that firms are competitors, for the purposes of Section 8, is reachable by using a conjunctive approach. That is: (1) Does a buyer, at least initially in the purchasing process, perceive, with good cause (e. he observes their advertising, salesman calls, displays at conventions, etc.) that the products or services of two firms are more or less equally suitable to his end use? and (2) Have the charged sellers oriented their marketing efforts toward that buyer? This method of inquiry does not focus exclusively upon consummated sales, but considers all activity in the contest for trade. By considering the question of "Who are competitors?" from both a buyer s and seller s perspective, allegedly illegally interlocked sellers are safeguarded from eccentric buyer perceptions. Further, Section 8 is not rigidified by application of inappropriate antitrust tests. This last point is well ilustrated by attempts to apply the cross-elasticity of demand and product interchangeability tests to a Section 8 case (see Munyon, Tr. 1365- 73). See generally, United States v. dupont deNemours & Co., 351 U.s. 377 (1956); Brown Shoe Co. v. United States, 370 U.S. 294, 325- (1962); see also, R. Posner, Economic Analysis of Law 121-24 (1972). These tests were developed in order to define product markets for Sherman Act and Clayton Act monopoly, trade restraint or merger g., Initial Decision 93 F. cases. In such cases, the antitrust laws are concerned with arriving at an objective economic measure of competitive harm. Section 8 on the other hand is oriented toward preserving the competitive situation as well as instances of objective competition. We are guided by Mr. Justice White s warning that "(I)nterchangeabilty of use and cross-elasticity of demand are not to be used to obscure competition but to 'recognize competition where, in fact, competition exists. United States v. Continental Can Co., 378 U.S. 441, 453 (1963). Crosselasticity of demand and product interchangeabilty are of use in a Section 8 proceeding, but they must not become the beginning and end offactual inquiry. (39 The conjunctive approach leaves open the meaning of terms such as "purchasing process, end use" and "marketing efforts" for application to the facts of a particular case. This is desirable because sophisticated pieces of computer hardware designed for use by large, institutional buyers are sold in a very different manner from the loaf of bread found on the local grocery shelf or the golf balls in a pro shop. Section 8 must be flexible enough to preserve the competitor relationship whether sophisticated devices, specialized products or consumer goods are being marketed by the interlocked corporations. The attempts by TRW and A-M to persuade common prospective users, purchasers and lessees to buy or rent equipment capable of performing substantially identical functions evidences the fact that they were competitors during the critical period (e. Findings 43- 47). The electronic funds transfer and credit validation equipment industry was in its infancy when the interlock existed. There is no extended history with which one can measure competition between M and TRW in this industry before the Shepard interlock. In fact the AMCAT, one of the devices A-M offered to prospects during the period for use in electronic fund/credit transactions, which competed with TRW's 4103 terminal, was not ready for the marketplace until Mr. Shepard became a board member of A-M (Finding 35). This is ironic because a relative scarcity of fully developed off the-shelf hardware " available from these companies during the critical period but with products adaptable to similar end uses, could be the genesis of greater anti-competitive effects from a common director than would vigorous attempts to sell fully developed "hardware. This, because design and production were stil flexible and much of the effort by producers of devices for use in the electronic funds transfer industry such as TRW and A-M was toward persuading potential users to modify their plans and objectives so that the devices the supplier offered would meet the purchaser s needs (e. Findings 40, 45). (40 J ..

325 Initial Decision In order to support the charge that a Section 8 violation occurred complaint counsel does not here allege and need not prove that anticompetitive effects ensued from the interlock. Section 8 is designed to protect the market from future problems as well as present ones, and a developing industry is a most appropriate focus for enforcement. No one can second guess as to the direction in which two interlocked companies would have invested in research and market development had there been no common director. As the court said in Sears, 111 F. Supp. at 620: . .. a director serving in a dual capacity might, if he felt the interests of an interlocking corporation so required, either initiate or support a course of action resulting in price fixing or division of territories or a combination of his competing corporations against a third competitive corporation. The fact that this has not happened up to the present does not mean that it may not happen hereafter. The De Minimis Defense Does Not Apply To Section 8 There are some provisions in Commission orders and in other judicial precedents suggesting that the dollar volume of sales in competition, in terms of the overlap in sales or as a percentage of either of the interlocked corporations' total sales, is significant in determining whether Section 8 has been violated. For example, in United Brands Company, FTC Dkt. 9034 (reported as Kane-Miller. Corp., et aI., 88 F. C. 279), par. II, consent order dated September 1 1976-only sales in excess of $1 000 000 trigger the prohibitory provisions. The same is true of 12 consent settlements in which the order focuses only on overlaps of $1 000 000. These 12 orders bind a group of firms in the energy industry, e., FTC Dkts. 2684 - 2695 TRR 876 (73-6 Transfer Binder), g., C-2684 par. 11, 86 F. 196 198. (41) In Paramount Pictures Corp. v. Baldwin-Montrose Chemical Co., 1966 Trade Cases 678 at 82 065 (S. Y. 1966), the court held that de minimis competition is not encompassed by the proscription of " And in Sears, Roebuck, 111 F. Supp. at 621, the following appears: "Surely the sales of $80 000 000 do not come within the minimis principle. Of Also in Sears, Roebuck the court did say: "(T)he vital distinction between 7 and, however is that the latter omits the 7 test and promulgates its own substantiality standard in the form of the one milion dollar size requirement." 111 F. Supp. at 619. To the same result is language in Crocker National Corp., 422 F. Supp. at 703: The real purpose of the "so that" clause seems to have been the establishment of a per se rule that interlocking directorates among competing corporations (that otherwise meet the requirements of the fourth paragaph of Section 8) are ilegal. Thus, in Initial Decision 93 F. furtherance of this purpose (nipping incipient antitrust violations in the bud), Congress sought to avoid questions as to whether the competition which interlocking directorates could potentially restrain was substantial or de minimus (SIC). To the same effect is a comment by Mr. Wilson: "Accordingly, since no actual restraint is required. Section 8 amounts to a per se prohibition of all corporate director interlocks meeting the four statutory requirements." 45 ANTITRUST L.J. at 325. Recent expressions in Commission adjudicative decisions as to the present state of the law on this point reflect that a de minimis argument is not a defense to a charge that Section 8 has been violated g., Kraftco Corporation. There the Commission accepted without comment the ALJ's observation that: "A strong argument can be made that there is no de minimis defense in a Section 8 case because the statute prohibits interlocks where the competitive relationship is such that elimination of competition by agreement would violate any of tbe provisions of any of the antitrust laws. " 89 G at 53, n. 17. (42) Applicability of Section 5 of the Federal Trade Commission Act The complaint charges that both Section 8 of the Clayton Act and Section 5(a)(1) of the Federal Trade Commission Act were violated by the TRW / A-M interlock (Complaint 7). The legislative history and judicial decisions on Section 5 support the view that Congress intended it to enlarge the scope of existing statutory law so that the Commission could supplement the statutes as it discerned a need. The Senate committee report on enactment of the Federal Trade Commission Act includes the following; The Committee was of the opinion that it would be better to put a general provision condemning unfair competition than to attempt to define the numerous unfair practices, such as local price cutting, interlocking directorates, and holding companies intended to restrain substantial competition. S. Rep. No. 597, 63d Cong., 2d Sess. 13 (1914).

Judicial decisions established long ago that the Federal Trade Commission Act was passed in order to go beyond the proscriptions spelled out in the antitrust laws. F T. C v. Beech-Nut Packing Co., 257 U.S. 441, 453 (1952). More recently, in a landmark case, the Supreme Court said that the FTC was established ". . . to hit (along with the courts J at every trade practice, then existing or thereafter contrived, which restrained competition or might lead to such restraint if not stopped in its incipient stages. . . . The Commission has jurisdiction to declare that conduct tending to restrain trade is . . .

TRW, INC., ET AL. 35Y 325 Initial Decision an unfair method of competition even though the selfsame conduct may also violate the Sherman Act. F T.e. v. Cement Institute, 333 U.S. 683, 693 (1948). (43) It also is well established that FTCA 5 applies to acts and practices which violate the antitrust laws, regardless of whether the violation is in letter or in spirit. F T. e. v. Sperry Hutchinson Co. 405 U. 233, 239-44 (1972); F T. e. v. Brown Shoe, supra, 384 U.S. at 322; F T. e. v. Motion Picture Advertising Service Co. 344 U.S. 392, 394- (1953); F T. e. v. Keppel Bro. 291 U.S. 304, 314 (1934). The Commission has announced its intention to use the FTC Act to supplement the antitrust laws. One example of such an announcement is found in the Commission s August 12, 1976, Statement of Policy (3 TRR 587 at 6956) regarding the naming of individuals in corporate interlock complaints:

While the reach of Section 8 of the Clayton Act to interlocks between banks and other corporations such as sv-vings and loans may not be clear s no similar express statutory provision is contained in Seetien 5 of the FTC Act. The Commission has cited Section 5 as an independent basis of liability in interlock cases. (Note: Footnote 6 is a quote from that part of Section 8 applicable to banks; footnote 7 is a cite to the Kraftco decision.

Certainly, the legislative history of the FTC Act shows that the Congress said quite clearly an interlocking directorate is an unfair trade practice. (See quote above on p. 42; ". . . the numerous unfair practices, such as local price cutting, interlocking directorates. and holding companies. . . .

In the recent initial decision in the FTC Act Section 5 case, Perpetual Federal Savings Loan Association, supra, (pp. 10- slip opn. ALJ Timony noted that, with the exception of certain banking organizations and common carriers, Clayton 8 prohibits interlocking directors between large competing corporations and provides that interlocks between savings and loan associations and banks violate the policy of Section 8 against interlocks of competing firms and amount to incipient violation of the Sherman Act. (15 U.S.c. 1). He (44) concluded that " . . . such violations of the central policy of the antitrust laws clearly violate Section 5." This is in harmony with the very well established interpretation in the 1941 Fashion Originator Guild v. F T.e. case, 312 U.s. 457 at 463. There, the Supreme Court declared that if the defendant' purpose and practice. . . runs counter to the public policy declared in the Sherman and Clayton Acts, the Federal Trade Commission has the power to suppress it as an unfair method of competition." (Emphasis added. Respondents argue that " Complaint Counsel has neither alleged nor shown that Mr. Shepard's simultaneous service on A- "00 FEDERAL TRADE COMMISSION DECISIONS Initial Decision 93 F.T . and TRW's Boards had any impact whatsoever upon competition. Thus, the alleged actions of Respondents could not have been an unfair method of competition 'in or affecting commerce,' and Section 5 cannot apply" (RB, p. 11).

However, the Sears, Roebuck Co. decision supra, 111 F. Supp. at 621, makes clear that the government need not show anticompetitive effects to sustain a Clayton 8 violation. And in Perpetual the ALJ found that a Section 5 violation based on the practice prohibited by Clayton 8 needs no proof of injury to competition or consumers. The latest Commission dual Clayton 8 and FTCA 5 case Kraftco, does not reach the question whether ". . . the substantive standard for judging an interlock may be different under Section 5. . ." (footnote 26 to ALJ' s Conclusions, 89 F. C. at 58, adopted by the Commission 89 F. C. 69) but leaves no doubt that Section 5 applies. With regard to respondent TRW, the situation here parallels Kraftco more than Perpetual In Perpetual, questions were raised about the underlying policy and jurisdictional extent of Clayton 8. Here, the allegedly ilegal interlock, when examined in the light of the evidence, is clearly covered by the provisions of Section 8 and, here, the jurisdictional requisites of the Section were admitted. In such a situation, in contrast to the Kraftco/SCM situation, there is no need to resort to FTCA 5 in order to effectuate the policy reflected by Clayton 8. Enforcement action predicated on Section 8, the statute enacted specifically to bring an end to prohibited interlocking directorates is adequate to accomplish the Congressional purpose. (45) As recently as January 1977 , in its Kraftco opinion supra, C. at 64, when it was addressing the question whether a corporate respondent should be placed under a cease and desist order when violation of both Clayton 8 and FTCA 5 had been charged, the Commission said: ". . . no better ilustration of a practice offensive to the spirit and policy of the antitrust laws if not their letter can be imagined than the employment and retention by a corporation of a director whose presence on the board itself violates the law. Application of Section 5 in such a case does no more than effectuate the clear purpose of the Clayton Act." Even so, it is worthy of particular note that both the Supreme Court in Fashion Originator's and the Commission in Kraftco suggested that affirmative action was critical in their thinking as to whether a violation of Section 5 had occurred. Further, the Commission s language in Kraftco reflects that affrmative corporate action must be found in order to serve as the predicate for issuance of an order under Claytn 8. No such action has been found here. Before interlocked corporations should . ..

325 Initial Decision be placed under either a Clayton 8, or an FTCA 5 order grounded on Section 8, culpability, a history of illegal interlocks, hostility toward or great reluctance in taking steps to avoid improper interlocks, none of which has been evidenced here, but several of which were in Kraftco (89 F. C. At 55- , 65), must be shown. Corporate Liability for Violations of Section 8 Prior Commission decisions make it very clear that corporations may be held accountable for interlocking directorates which are found to be ilegal. Thus, in Kraftco, supra, the Commission said that Section 11 of the Clayton Act provides that only corporations may divest stock and assets and rid themselves of directors "chosen contrary to the provisions of sections 7 and 8 of this (the Clayton) Act " 89 F. C. 46, 62 (1977). The Commission s position on this is not unlike its position regarding a parent corporation s responsibility for the illegal acts of its subsidiaries. ". . . (IJf the facts demonstrate even latent control " the parent may be held vicariously liable for its subsidiaries' acts. Beneficial Corporation and Beneficial Management Corporation, CCH (1973-76 Transfer Binder, TRR 959 at 812 (FTC 1975) (86 F. C. 119 at 159). This view has support from the decision of the sixth circuit court of appeals in P.F. Collier Son Corp. v. F.T.C 427 F.2d 266 270 (6th Cir. 1970). The court said: (46) (W)here a parent possesses latent power, through interlocking directorates, for example, to direct the policy of its subsidiary, where it knows of and tacitly approves the use by its subsidiary of deceptive practices in commerce, and where it fails to exercise its influence to curb ilegal trade practices, active participation by it in the affairs of the subsidiary need not be proved to hold the parent vicariously responsible. Under these circumstances, complicity wil be presumed. Counsel for TRW point out that in United States v. W T. Grant supra, 345 U.S. at 634, the Supreme Court expressly reserved judgment on the question as to ". . . whether corporations may violate Section 8 or, for other reasons, be enjoined under the statute, " n.9. (Counsel also point out that the question currently is on appeal in SCM V. F. T. c., Case No. 77-4978 (2d Cir. 1977).) A different view is found in the comment in "Antitrust Questions and Answers " Edwin S. Rockefeller, BNA Books, 1974 , at p. 5, re the order issued in Sears, Roebuck, supra: The district judge directed the individual defendant to resign his directorship in one or the other of the two companies involved and directed the company chosen to accept his resignation, but the court turned down the Government' s request for a broad injunction against future violations of Section 8, stating in an endorsement on the back of the judgment that such decree "should be granted only where there is , Initial Decision 93 F. evidence showing a persistent purpose to violate or commit recurtences of th condemned act.

A part of the text of the order directed to Sears Roebuck in that case is set forth in United States v. Sears, Roebuck Co. 165 F. Supp. 356 (D. C. S. N. Y. 1958) in connection with an mterpretation requested of Judge Weinfeld. It shows clearly that Sears, the corporation was enjoined along with Mr. Weinberg, the ilegally interlocked director, at 357 and 359. (47) Other Defenses Put Forward In addition to the defenses already addressed, respondents asserted several others (see, pp. 3- supra, pp. 12 and 30). One was that the complaint does not state a claim upon which relief could . granted. A reference to 5 U. G 555 Adjudications " and to the charges made in the complaint, however, is sufficient to show that respondents clearly were charged in the manner prescribed for administrative proceedings and that the allegations raised questions as to whether respondents had violated Section 8 and Section 5. The following expresses the rule:

There is no requirement that a complaint in an administrative proceeding enumerate precisely every event to which a hearing examiner may finally attach significance. The purpose of the administrative complaint is to give the responding party notice of the charges against him. See 1 Davis-in Administrative Law Treatise 998.04-8.05 and CaECS cited therein.'. Thc complaint is adequate if "the one proceeded against be reasonably apprised ofthe issues in controversy, and any such notice is adequate in the absence of a showing that a party was misled. Cella v. United States, 208 F.2d 783 , 789 (7th Cil 1953), ,",to denied 347 U.S. 1016 74 Ci. 864, 98 L. Ed. 1138 (1954); Swift Co. v. United Slates, 393 F. 2d 247 , 252 (7th Cir. 1968). As the Commission case against petitioners unfolded, there was a 'reasonable opportunity to know the claims of the opposing party and to meet them. Morgan v. United States, 304 U.S. 1, 18, 58 S.Ct. 773, 776, 82 L.Ed. 1129 (1938); Swift Co. v. United States, supra, 393 F.2d 247, 252. L. G. Balfour Co. et al. V. F T. C, 442 F. 2d 1 , 19 (7th Cir. 1971). What Justice Brandeis said many years ago remains true: All that is requisite in a complaint before the commission is that there be a plain statement of the thing claimed to be wrong so that the respondent may be put upon his defense. Dissent in R T.C v. Gratz. 253 U.S. 421, 430 (1920). (48) The view of Justice Brandeis later came to be the view of the majority. F. T.C V. Brown Shoe Co., 384 U. S. 316, 320-21 (1966). With regard to the no-public-interest defense, that is a point on which the Commission has said many times that an ALJ possesses no authority. In deciding to issue a complaint, the Commission proper per Section 5(b) of the FTC Act, makes the determination that it has 325 Initial Decision reason to believe" that the proceeding is "to the interest of the public." Complaint counsel validly cites the decision on an interlocutory appeal in Exxon Corp. 83 F. C. 1759 (1974), as a precedent holding that the ALJ has no authority in this area of Commission proceedings. A very recent expression to the same effect was handed down by the Commission in Herbert R. Gibson, Sr., et oZ., Dkt. 9016. on October 12, 1977 (90 F. C. 275J.

Another defense was that one of the grace period provisos in Section 8 obviates a finding of a violation in this case because complaint counsel failed to prove that TRW and A-M were competi- . tors on November 7, 1974, one year before Mr. Shepard left the board of A-M (RB, pp. 30-35). The provisos in the Section authorize, as I understand them, (1) continuance as an ilegally interlocked director for one year from the date of the "disabling" event when elected at a time when the corporation did not meet the $1 000,000 requirement but did later (penultimate paragraph), or (2) a change in the affairs of the corporation "from whatsoever cause" destroyed his/her eligibility (last paragraph). Clearly, here the $1,000 000 criterion exists and the "from whatsoever cause" language does not obviate the basis for the proceeding because TRW and A-M were competitors when they first offered devices to perform functions for members of the electronics-funds-transfer/credit transactions industry (Findings 23, , 33- , CX 171, CX 8).

Section 8 is not clear on the point and neither is the legislative history, but I do not agree with the position of counsel for TRW that the one year grace period runs from the date of the director ejection for the year in which the "diEabling" event occurs. Such a holding could force an interlocked director to leave a board with only a few days of grace if the disabling event occurred just at the end of his term of service. Rather, I believe that it was the intent of the Congress to have the grace period run for at least one year from the date the "disabling" event occurs. In any event, the statutorily provided grace period does not affect my conclusion that instant interlock violates Section. R This, as mentioned above, because TRW and A-M were competitors of each other well before November 7, 1974. (49) The Staff Assurance that Respondents Would Be Apprised Before a Recommendation for Complaint Was Forwarded to the Commission Counsel for TRW argues that respondents were denied due process, equal protection under the law and that they were the 972 0 - 80 - 211 , p.

Initial Decision 93 F. victims of an abuse of the administrative process by the Commission. The specific arguments made are:

(1) The August 8, 1975, letter from the FTC staff in Cleveland Ohio, apprising TRW of the investigation reflected that the staff had concluded from their "findings" to recommend issuance of a complaint; however, TRW had been unaware of the investigation (RB 80).

(2) The Cleveland FTC staff persisted in its attitude even though Mr. Shepard informed them that prior to his having learned of the investigation he had decided to leave the board of A-M at the next election of directors (RB, p. 80) and did so seven (7) months before the complaint issued.

(3) The Cleveland FTC staff requested only three bits of information in a letter dated October 31, 1975, but on November 14, 1975 before TRW could furnish it, the staff forwarded a recommendation to FTC headquarters in Washington, D. , that complaint should issue (RB, p. 81).

(4) At the conclusion of a meeting in Washington, D. , on December 10, 1975, attended by staff members from the Commission s Cleveland Regional Offce and Bureau of Competition and the Assistant Executive Director for Regional Operations, counsel for TRW learned of the opposition of the staff of the Bureau of Competition to the issuance of a complaint. He was told that he would be informed by the staff before they forwarded such a recommendation to the Commission so that attempts might be made to persuade Commissioners to vote against issuance (RB, p. 80). (50 J (5) TRW, in reliance on this assurance, took no further steps (RB, p. 86) and the next contact counsel for TRW had from Commission staff was a telephone call on June 25, 1976, informing him that issuance of a complaint had been voted by the Commission on June 1976 (RB, p. 80).

(6) On July 15, 1976, counsel for TRW was informed that the Commission had (l) rejected a Motion for Reconsideration fied by him on July 9 1976, (2) refused to accept an Assurance of Voluntary Compliance simultaneously filed, and (3) forwarded these documents to an unidentified ALJ (RB, p. 84).

(7) On July 7, 1976, its General Counsel (GC) advised the Commission to take the position, and "hoped it was soon (see RX 55- A) that complaints are issued when its members (three in this instance) vote issuance even though the Commission s Rules do not specify what constitutes "issuance." (Note: The significance of this is that the Commission s Rules provide that all motions are to be sent 325 Initial Decision to and addressed to the ALJ (except those to disqualify him) when a proceeding is before him ( 22); hence, if the complaint were issued" when voted, all motions thereafter were to be handled by the ALJ rather than the Commission. The Commission apparently took the GC's advice and on July 13 , 1977, rejected "Respondents Motion for Reconsideration and Related Relief. . . " dated July 9 1976.

The arguments regarding the paucity of knowledge respondents had regarding the staff investigation, the regional office s inexorable decision to recommend issuance of a complaint and the limited information requested of respondents are a part of the internal workings of the Commission and warrant no additional comment. (51) The abbreviated recital of other actions, however, clearly shows that a most embarrassing and regrettable series of events occurred which would lead to great frustration, anger and resentment. But from a legal standpoint the actions were not so egregious that respondents were denied due process, denied equal protection under the law or subjected to an abuse of process. In an administrative proceeding respondents right is to have due notice as to (1) when and where a hearing wil be held, as well as the nature of the hearing, (2) the legal authority and jurisdictional basis for the hearing, and (3) the matters offact and law asserted. 5 U . C. 554(b). Golden Grain Macaroni Company v. F. T.e., 472 F.2d 882, 885-86 (9th Cir. 1972), cert. denied, 412 U.S. 918 (1973). Respondents have been accorded each of these rights, even though the road they have had to travel was a tortuous one. The complaint and the various interlocutory matters, the prehearing conferences and orders and the adjudicative hearings provided the information and afforded those things to which respondents were entitled as a matter of legal, due process, right.

No one can reasonably argue that the staff assurance was not a professional commitment which should have been fulfilled. But the fact that it was not kept does not warrant a holding that respondents were prejudiced in the legal sense so that dismissal of the complaint would be appropriate. The fact that persons (in the broadest sense of the word) under investigation by the FTC may seek to persuade an individual Commissioner as to what his attitude should be toward investigative results and the fact that the Commission as a collegial body recognizes that this occurs does not establish a right to make such a presentation. On page two of its "Order" in this matter dated October 13, 1976, 88 F. C. 544, the Commission said at 545: Initial Decision 93 F. Neither the Commission s rules nor its practice provide for precomplaint presentations to the Commission, except for consent orders. The staff cannot create such a right by agreement with a respondent. Each Commissioner, in the exercise of discretion, determines whether to afford proposed respondents an opportunity to be heard before voting whether to issue a complaint. (52) Clearly, whether such a presentation will be permitted is solely within the discretion of each Commissioner. There is no Commission rule which authorizes such presentations. That no staff person can grant or deny such permission so that the mission or a Commissioner is bound, in the absence of authorized, specifically delegated authority not present here, has been well established for many years. For example, "The United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit Utah Power Light Co. v. United States 243 U.s. 389, 409 (1917). If this is true of statutory law, it cannot be less so with regard to administrative procedures which an agency establishes. Of course, an agency must rigidly adhere to those procedural rules which it has established (Pacific Molasses Co. F T. C, 256 F.2d 386, 389 (5th Cir. 1966)), but there was Commission rule providing for what counsel frJr respondents was seeking.

Although no decision precisely in point has been found, in Double Eagle Lubricants, Inc., et 01. v. F T.C, 360 F. 2d 268 (10th Cir. 1965), where the Commission did not agree with staff advice as to where a disclosure should appear on a can of rerefined (used) oil, the court said:

The Commission is charged with the protection of the public interest. No principle of equitable estoppel bars it from the performance of that duty because of mistaken action by its subordinates. , Citing in n. P Lorillard v. F. T.e., 186 F. 2d 52, 55 (4th Cir. 1950), cr. United States v. San Francisco, 310 U. S. 16 32 (1940), and FCe. V. Pottsville Broadcasting Co.. 309 U.S. 134, 145 (1940). It is true, as counsel for TRW suggests, that the trend is toward an erosion of sovereign immunity and toward the view that an agency sometimes may be estopped bound by the acts of its employees. See 2 K. Davis Administrative Treatis", Section 1701 et seq. esp. pp. 541-44. The courts, however, have not gone so far that what the staff did and failed to do here would warrant dismissal of the com plaint. Cases cited by counsel for TRW held the government to be estopped when property of the federal government or (53 J business dealings with the government were involved rather than, as here, where the subject matter is enforcement ofthe antitrust laws. For example, the Brandt v. Hickel case which counsel cites, 427 F. 2d 53 (9th Cir. 1970) 325 Initial Decision United States v. Wharton,(RB, pp. 91-92), deals with an oil lease. 1n 514 F.2d 406 (9th Cir. 1975), the Whartons had settled on land on which the government sought to prevent them from getting a patent under the Desert-Land Entry Act of 1877 after the Whartons had acted in accord with government employees' advice (now 43 U.sC. 321, et seq.

, for example, the Commission proper had given Mr. Shepard a favorable advisory opinion per Commission Rule 1.3 as to the interlock challenged here and then issued a complaint without first allowing him to resign, the doctrine of estoppel no doubt would apply. But that example is quite different from what happened to respondents.

Thus, I do not agree with the arguments of counsel for TRW that the Commission failed to comply with its own rules in its refusal to meet with him or his clients or to entertain his motion for reconsideration (RB, pp. 95- 106). First, as noted above, there is no rule" that binds the Commission, or any of the Commissioners, to meet with persons investigated by the staff before a vote is taken to consider whether a complaint should issue. Whether such a meeting is held is completely discretionary with the Commission or Commissioner to whom an approach is maue. See the "Order" cited supra, 88 F. C. 544, 545. Contrary to what counsel argues, the net effect of the GC's advice was no more than to suggest that the rules be made clearer as to when a complaint issues. It was merely a clarification which did not affect respondents' substantive rights. Further, before the adjudicative hearings began, ALJ Hanscom certified the matter to the Commission together with the various documents respondents provided him which had been designed to convince the Commissioners to be approached that the complaint should not issue. See Certification to the Commission for a Limited Purpose of Respondents' Motion for Reconsideration and Related Relief and Various Other Motions and Related Papers," dated September 15, 1976. Thus, the Commission and its members had the benefit of the facts respondents said they wanted to present before the hearings began and could have taken the action counsel for TRW was seeking. (54) That the Commission chose not to does not derogate from the fact that the Commission had TRW's arguments submitted to it. Consequently, respondents were not prejudiced deprived of due process, denied equal protection ofthe laws and were not the victims of an abuse of the administrative process. Respondents must make a case sufficiently strong to convince that there was such substantial prejudice that procedural due process was Initial Decision 93 F. denied them. Arthur Murray Studio of Washington, Inc. v. F T.C 458 2d 622, 624 (5th Cir. 1972). Respondents have not made such a case. The Need for an Order Respondents' counsel argues that a prospective order is unnecessary to protect the public from any future recurrence of an illegal interlocking directorate on the part of Mr. Shepard. He contends that (RB, pp. 74-77): (1) The complaint does not allege the possibilty of future violations; (2) Mr. Shepard has given assurances of future compliance with Section 8 with respect to A-M as well as all other corporations; (3) Mr. Shepard is 65 and wil retire as Chief Executive Offcer of TRW; and (4) Mr. Shepard had been off the A-M board nearly seven months before the complaint was served. The threshold question that underlies the construction of a remedy is what kind of order, within the broad range of an equity court' s remedial powers, would, in the particular circumstances, be most effective to "cure the il effects of the ilegal conduct and assure the public freedom from its continuance. Ekco Products Co., 65 C. 1163 (1964), affirmed, 347 F. 2d 745 (7th Cir. 1965). In both the initial decision of the ALJ and the opinion of the Commission in Kraftco, supra, there is language that affirmative corporate action suggesting culpability as contrasted with indifference or passivity, was persuasive in reaching the determination that SCM, the corporation, should be held accountable. Thus, the initial decision there supported issuance of an order against SCM on the basis that the corporation either did or could have (1) seated interlocking directorates, (2) reaped the anticompetitive benefits, and (3) possibly appointed new interlocking (55 J directors after each was discovered. 89 F. C. at 51. To the same effect, the Commission said that the corporation might maintain an interlocking directorate and, if detected, simply replace the ousted director with another interlocking board member without fear that detection would result in anything more than the director s resignation, 89 F. T.C. at 63. In contrast, there is nothing in the record of this case to suggest that TRW played an active role in Mr. Shepard's becoming a director of A- , that TRW was indifferent or even hostile to the Commission staff's concern over the interlock, that TRW has an extensive history of being involved in interlocked director questions, that TRW was even interested in or resisted the ending of Mr. Shepard's interlock or that TRW was disinclined to take action to prevent the occurrence of ilegal interlocks in the future. This lack of action by TRW in doing those things, which might lead to the adverse competitive consequences with which the Congress was concerned when Section 325 Initial Decision 8 was enacted, persuades me that in this case the corporate respondent should not be placed under an order to cease and desist. This case is very different from the situation obtaining in SCM/Kraftco. supra. (see 89 F. C. at 65) in that:(I) the end of the before theinterlock had been decided upon by Mr. Shepard Commission staff pointed out its concern (Finding 68); (2) it was affected by Mr. Shepard without TRW involvement seven months before the complaint issued (Findings 15, 17, 68); (3) it was a technical infraction rather than a substantive one (Finding 16); and (4) the record contains impressive evidence as to TRW' s steps to improve further its procedures for preventing improper interlocks (Finding 17). Consequently, issuance of an order running to TRW is not called for.

As noted above, once the elements of a Section 8 violation are met as they have been here, attention shifts to Section 11 of the Clayton Act. Section l1's sweeping language makes it clear that it was drafted so that there would be an effective remedy for every Clayton Act violation, but this does not mean that all respondents charged must be the objects of an order if a violation is found. The problem is not the reach of available remedies, but the just exercise of the reach. The question simply stated is: given a violation of Section 8, what are the guidelines governing the application of Section l1' sanctions? (56 J Paragraph (b) of Section 11 empowers the Commission to issue an order to a corporation to ". . . rid itself of the directors chosen In pertinent partcontrary to the provisions of section(s J 8 . . . ." the Section also authorizes modification or the setting as de in whole or in part of an order issued when ". . . conditions of fact or of law have so changed as to require such action or if the public interest shall so require. . . ." If that post-order-issuance discretion exists there is no mandate that an order must issue against TRW since neither the facts adduced in the trial nor the public interest warrant such. In the light of the evidence in the record, neither the language of Clayton 8, the circumstances, nor the public interest calls for the issuance of an order against TRW under either Clayton 8 or FTCA 5. As to the discretion of an administrative law judge to issue an order, see Kraftco. supra. 89 F. C. at 55-56. The order attached has been issued against respondent Shepard because it is the best protection of the public against the recurrence of an ilegal interlock involving Mr. Shepard. It is based on authority set forth in Clayton 8 and FTCA 5 simply because the violation of Section 8 by him also violated FTCA 5.

The order has not been imposed because of a fear that Mr. Shepard . .

Initial Decision 93 FT. would otherwise seek out directorships which violate the antitrust laws. In the past, Mr. Shepard has been asked to participate in the directorship of many large corporations (Findings 19-22), because of his reputation for business acumen. He will, no doubt, be asked to sit on other boards or otherwise to assist other businesses in the future. Although Mr. Shepard wil no longer be the Chief Executive Offcer of TRW, he wil probably remain on the board for several years. (Finding 13).

TRW -is a diversified corporation as are many other large corporations; " and there is, thus, the clear possibility that Mr. Shepard' simultaneous membership either on such -boards of directors, or otherwise as an officer, employee, agent or representative of a business, would violate Clayton Section 8 or (57) FTCA Section 5. Now that one such ilegal interlock has been proven by the government, it would not only be incumbent on Mr. Shepard voluntarily to make absolutely certain that this situation does not again occur, but there also should be a sanction, as this order is, which goes beyond Mr. Shepard' s assurances. The foregoing notwithstanding, it would be disingenuous to say that consideration also was not given to omitting an order running to Mr. Shepard. On balance, however, it is my belief that the public interests calls for the imposition of the order appended. As the Commission stated in Kraftco, 89 F. C. at 66: "(W)e think the violation is itself the best evidence of the possibility of future occurrences, and that the burden rests with respondent to demonstrate that violations wil not recur before consideration may be given to omitting an order. " Discontinuance or abandonment of the violation does not remove the need for an order. Fedders Co. v. F T. , 529 F. 2d 1398 (2d Cir. 1976) ccrt. denied 429 U.s. 818. The mere voluntary assurance by respondent to comply with the law is not necessarily an adequate safeguard for the future. Clinton Watch Co. v. F T. , 291 F. 2d 838 , 841 (7th Cir. 1961), ccrt. denied, 368 U. 952 (1962). Nor does the possibility that other proceedings could be started if he was found again to be the conduit effecting an ilegal interlock demonstrate the absence of a danger of recurrence. Nowhere has Congress suggested that those found to have violated Clayton Section 8 may be allowed several "bites at the apple. " (58) I do not agree with respondents' contention that the complaint must allege the possibility of future occurrences to sustain a prospective order. Respondents were served with the notice order and the trier of fact can go beyond the order accompanying the complaint, sometimes called "fencing in" to fashion an appropriate order to forestall future occurrences of the same or like nature. 3Z5 Initial Decision F. T.G. v. National Lead Company, 352 U. S. 419 (1957); Jacob Siegel Co. v. F. T.G. 327 U.S. 608 (1946). Respondents have also averred, in substance, that the prospective order should not issue because of complaint counsel's "unclean Other Defenses section abovehands " in this case. As discussed in the complaint counsel' s actions are not controlling in determining whether issuance of an order is warranted. It is my view that a need for an order has been shown.

CONCLUSIONS The Federal Trade Commission has jurisdiction over the respondents and the subject matter of this proceeding. These proceedings and the order issued hereby are to the interest of the public.

When these proceedings began, respondents TRW and A-M had, and continue to have, capital, surplus and individual profits aggregating more than $1 000 000.

When these proceedings began, respondents TRW and A-M were and have continued to be, in commerce or their business affected commerce as those terms are defined in the Clayton and Federal Trade Commission Acts.

Respondents TRW and A-M were competitors of one another during the period January 1, 1973, through November 5, 1975, in the manufacture, sale or distribution of point of sale credit authorization equipment, teller operated bank transaction equipment and other such equipment used for credit validation, recording of deposits and withdrawals from financial institutions, and inventory record keeping. (59) Respondent Horace A. Shepard was a member of the Boards of Directors of TRW and A-M throughout the critical period January 1 1973 - November 5, 1975.

The membership of Mr. Shepard on the Boards of TRW and Aduring the critical period violated Section 8 of the Clayton Act and Section 5 of the Federal Trade Commission Act. The order issued should be addressed only to Mr. Shepard. Such an order follows:

ORDER It is ordered, That respondent Horace A. Shepard, shall forthwith cease and desist from serving, and in the future shall not serve, as a director, officer, employee, agent, or representative of any corpora- Opinion 93 F.

tion or other form of business entity if he simultaneously serves as a director, offcer, employee, agent or representative of any other corporation, or other form of business entity, if such corporations or other forms of business entities are, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any ofthe provisions of any ofthe antitrust laws. (60) It is further ordered That within thirty (30) days from the date on which this order is served upon him Mr. Shepard shall file with the Commission a written report setting forth the manner and form in which he has complied with this order.

OPINION OF THE COMMISSION By CLANTON Commissioner:

Background On June 17, 1976, the Commission issued a complaint against respondents TRW, Inc. , Addressograph-Multigraph Corporation ), and Horace A. Shepard, charging them with violations of Section 8 of the Clayton Act, 15 U.S.C. 19 and Section 5 (a)(l) of the Federal Trade Commission Act, 15 V. C. 45(a)(1). The basis for the complaint was the simultaneous membership of Mr. Shepard on the Board of Directors of TRW and A-M from January 1, 1973, through November 6, 1975 (the "complaint period"). The complaint alleged that during this period of time the business of TRW and Aincluded, but was not limited to, the manufacture, sale and distribution in commerce of point-of-sale credit authorization equipment and teller-operated bank transaction equipment, and other such equipment used for credit validation, check cashing validation recording of deposits and withdrawals from financial institutions and inventory record keeping" (Complaint, Paragraph 5). (2) Subsequent to the complaint, A-M negotiated a consent order (90 C. 144) with the Commission on August 11, 1977.' In his initial decision fied with the Commission on December 22, 1977, the administrative law judge ("ALJ") found that Mr. Shepard' s member- , The relevant portions of the consent order provide that A-M: (1) is prohibited from having intcrlrnking directorates with competitors if the elimination of competition by agreement between them would constitute a violation of the antitrust laws; (2) is require t. review and retain 11 list of each A-M director, stating the name "address and products of each corporation for which the director is a member of the Board of Directors or a nomine€" and (3) iE required to review and rew.in prior tu each election of directo!1, for each member of its Board of Directo and nominee, a descriptive liel of all product! and services of other corporations OD whose board the directur or Domine( serves or tu which he or she is a nominee. 325 Opinion ship on the boards of TRW and A-M violated Section 8 of the Clayton Act and Section 5 of the Federal Trade Commission Act. However the ALJ entered an order only against Mr. Shepard on the ground that "neither the language of Clayton 8, the circumstances, nor the public interest calls for the issuance of an order against TRW under either Clayton 8 or FTCA 5" (ID p. 56).2 Both parties (3) have appealed, respondents from the imposition of an order against Horace Shepard and complaint counsel from the ALJ's failure to enter an order against TRW.

II. The Parties and Relevant Products Horace A. Shepard Horace Shepard joined TRW as Vice President and Assistant to the General Manager in 1951. He was first elected to the Board of Directors of TRW in 1957 and has served continuously since that date. While he retired as an officer from TRW on November 30 1977 at the age of 65, he can continue to sit on TRW's Board until he is 72 (ID 13). He was initially elected to the A-M Board on March 20, 1971, and served on that Board until his resignation on November 6, 1975 (ID 14).

TRW, Inc.

TRW is a publicly held corporation with net sales and revenues of 585,683 000 and a net income of $263 903,000 in fiscal 1975 (ID 1 3). During the course of these proceedings TRW was engaged inter alia, in the design, manufacture and sale of a variety of products for industry and government, including those products relevant to this proceeding, as well as performance of advanced systems engineering, research and technical services in electronics and computer based services (ID 2).

TRW offered essentially three relevant product lines during the complaint period: the System 4000/5000, the Validata service, and certain products manufactured by FDS/i, a company which was acquired by TRW in April 1974 (ID 4, 23-31). . The following abbreviations wiJ be use in this opinion - Initial Deision finding number ID ID p - Ioitia! Deision page number - Transcript page number Tr ex - Complaint OJunal's exhibit number RX - Repondents' exhibit number RAB - Respodent.' appeaJ brief CAB - Complaint ('..nnsel's appeal brief RAns - Repondents' answering brief GAns - Complaint CounEiI's answering brief RFl - Repondents propo finding! offad Opinion 93 F.

The System 4000/5000 was a credit authorization terminal designed for use and sold to department stores (4000) and financial and thrift institutions (5000). Although the System 4000 (4) was marketed apart from the System 5000, thc two systems were otherwise identical and used a terminal identified by the numbers 4103. The 4103, which was approximately 9 inches by 7 inches (Tr. 1235), had no ability itself to communicate with a computer. Rather it was connected to a controller which in turn was connected by a dedicated telephone line to the host computer. The controller was located in the department store and was connected to as many as 128 terminals within the store. The computer on the other hand, was located at a central location such as the headquarters of the department store (ID 23, 24; Tr. 1235-124). The Validata was an information service offered by TRW. What was sold was not the equipment but rather "loss protection" by means of an on-line fie of stolen airline tickets, bad credit cards from 15 different credit card issuers, and a bad check fie. Validata was utiized by airlines, car rental agencies, hotels and motels (ID 26 27; Tr. 1819; Tr. 1253-54). Unlike the System 4000/5000, the data base was not maintained by the users but rather by TRW itself (Tr. 1820-21).

The third group of equipment offered by TRW during the complaint period was that which was acquired from FDS/iin 1974 and which formed the basis for TRW's electronic funds transfer system ("EFTS" ' The TT-115, which was similar to the 4103 terminal requiring the use of a controller and dedicated telephone line (Tr. 1837), was used in a point of sale location by Glendale Federal Savings and Loan (ID 29). As so used, it provided for the deposit and withdrawal of money from a plastic card account, and the transfer of funds from a plastic card account to a supermarket account. In addition, the plastic card could be used as an identification card to authorize a personal check to pay for groceries (Tr. 1834- 35).

TRW also offered within this group of products the TT-116 and the TT - 117. Distinctive about the TT -116 was the abilty of a customer to insert a check into the terminal for validation. The TT-117 differed from the other two products in that it was designed to perform credit authorization, as well as the other functions of check , Credit authnri7.ation is a system whereby a clerk or customer enters certain information into an ehx:trunic terminal from which it is communicate to a main computer. The main computer then determineli, from the information it has stored, whether the tramaction should be authoriwd or denied (fr. 246). . EF'TS is an electronic system whereby the "eledronic impulses substitute for paper checks to describe the credits and debits reJate to a financial transaction" (Tr. 1682); in other words, the deposit and withdrawal of funds is made from a hank account without the traditional procesing of checks 325 Opinion validation and electronic transfer of funds. However, neither the TT-116 nor the TT-117 was sold by TRW during the complaint period. TRW produced only prototype models of the TT-116 and 31). (5)foam board mock up models of the TT-117 (ID 30 Addressograph-Multigraph Corporation 1975 net sales M is also a publicly held corporation with fiscal and revenues totalling $584 246 000 and net income for that year of 908 000 (ID 7, 9).

Between January 1973, and November 1975, the relevant products offered by A-M were the AMCAT I, the AMCAT IC and the AMCAT II (Tr. 1723-24). The AMCAT I, which was introduced in the spring of 1973 (Tr. 1710-11), was a credit authorization terminal originally designed to meet the needs of the oil companies for use in gas stations. It contained all the communication functions within itself and therefore could be used in a stand alone environment hooked up directly to a dedicated telephone line (ID 32, 33). It was apprcximately 16 inches long and wide and 8-9 inches high (Tr. 1275). Because the AMCAT I was able to operate in a stand alone environment free from the need for a communicator, it was utilized in small retail establishments which extended credit through third parties such as American Express (ID 34).

The AMCAT IC was a variation of the AMCAT I allowing direct operation by a consumer and containing a check tray for purposes of check verification (Tr. 1727-28). The modifications were made in part at the request of Robert Creekmore of the First National Bank of Atlanta for use in its Honest Face Program (ID 35; Tr. 17- ' Tr. 1728-30).

The AMCA T II was designed for out of the way service stations in which use of the dedicated telephone line would have been too expensive. As such the AMCAT II was meant to be used in conjunction with the regular telephone lines (ID 35; Tr. 1725-26). There were two other variations of the AMCAT-the HALFCAT and MODCAT. Both products were smaller versions of the AMCAT but neither ever got beyond foam board mock ups (ID 35). While the AMCAT family of products was initially designed for credit authorization purposes, it was ultimately adapted for EFTS use. As such, it was sold during the complaint period to Buckeye Federal Savings and Loan (ID 51- 53) and o California Federal Savings and Loan (ID 60). (6) , The trial transcript has ben paginate in three sets: pages I to 180; pages 1 to 115; and pages 1 to 2179- To avoid confusiorJ, we have referred to the first set with a " 1" after the page number and to the second sct with a " a.ft.r the page number. The third Bet of numben; is referred to only by the relevant page number. Opinion 93 F.

III. Mootness argument At the threshold we are confronted with respondents' that this case should be dismissed because the issues raised are now moot. Respondents rely on several factors in making this argument. They contend that Mr. Shepard had determined in late 1974 or early 1975 to resign from A- s Board and that his resignation was effective November 6, 1975, seven months before the Complaint issued. They also assert that TRW has instituted relatively stringent procedures to insure that simultaneous directorships wil not take place in the future with A-M or any other corporation. Finally, they rely on the fact that in January 1977, A-M determined to discontinue its AMCAT product line, and indeed sold that line in June 1977. It is well settled that "voluntary cessation of allegedly ilegal andconduct does not deprive the tribunal of power to hear does not make the case moot." United Statesdetermine the case 345 U.S. 629, 632 (1953). See, e.g.. United States v. W T Grant Co., S. 199, 203 (1968);Concentrated Phosphate Export Ass, Inc. 393 U. Rubbermaid, Inc. v. FTC, 575 F. 2d 1169, 1172 (6th Cir. 1978); Carter Products, Inc. v. FTC, 323 F.2d 523. 531 (5th Cir. 1963). There exist considerations of public policy in determining the legalities of the issues involved, as well as the fact that the respondent is always free legal restraint. United to return to his old ways absent any form of States v. W T Grant 345 U. S. at 632. Nevertheless, if the respondent can demonstrate that there is no reasonable expectation" that the wrong wil be repeated, the case may be moot. Id. at 633. Such a demonstration. however. demands more than simply cessation of the wrong and a disclaimer that it wil not be repeated.' There must be some showing that the cessation or abandonment of the practice was undertaken in good faith. Additionally, and more importantly, the respondent must show that the challenged practices have been surely stopped under circumstances which assure that there is no reasonable likelihood of resumption of said practices. . . thus rendering the issuance of an order unnecessary. Tung-Sol Electric Inc., 63 F. C. 632, 645 (1963). (7) The time of the cessation, although not dispositive, nevertheless bears on the issue of good faith. While Mr. Shepard resigned prior to issuance of the complaint, his resignation occurred only after he was notified that an investigation was underway. Furthermore, there is evidence to indicate that the FTC's investigation was precisely why he chose to resign from A- s Board (ID 68). On the other hand, . We note that frequently cessation or abandonment is use as a synonym for mootncss. AsGrant and other decisions make clear, however, such usage is inaccurate. , 325 Opinion there is testimony, which the ALJ credited, that Dr. Reuben F. Mettler, then President of TRW, learned well in advance of the Commission s investig;'tion that Mr. Shepard intended to resign from A- s Board (Tr. 939).

But even if we were inclined to accept Mr. Shepard' s explanation for leaving A- s Board, that action is not dispositive. In the final analysis, the issue of mootness turns on whether there is a likelihood of resumption of the questioned practice, for "the main goal of the Commission is to protect the public against continued or future violations of the statutes it administers Tung-Sol, 63 F. C. at 646. Here, Mr. Shepard was sworn, as have several offcials of TRW that he wil not again sit on A- s Board, and that TRW wil not violate Section 8. But such assurances are simply not suffcient and do not meet the stringent and heavy burden imposed on respondents by Grant. While Mr. Shepard may not sit on A- s Board, there is no assurance that he will not be in a position where he could violate Section 8 in the future by sitting on other Boards that are competition with TRW. Indeed, respondents do not argue that Mr. Shepard wil refrain from membership on any other Board, but rather that it is unlikely at his age that he will be asked (RAB 10). (8) Likewise, the TRW affdavits relating to the installation of company procedures to prevent Section 8 violations, as well as the sale of the AMCAT product line, are not dispositive. Tung-Sol clearly demonstrates that the likelihood of resumption must be measured against changed circumstances which make it essentially impossible for the illegal activity to be resumed. Thus, for example, in Tung-Sol, there had been a change in industrywide practices such that "there exist(edJ no overall competitive condition which might prompt or even make feasible a return by respondents to the former practices. 63 F. C. at 650.

Other cases have similarly emphasized that the circumstances surrounding the challenged practices must be changed in a way which makes it highly unlikely that they will be repeated. In Carter Products, supra the reviewing court agreed that the case was not moot, and cited the Commission s determination that, "(TJhere has been no showing of unusual circumstances which would indicate that entry of an order is unnecessary nor does it appear that there has been any change in the competitive conditions which may have , While this illue is closly intertwined with that of ultimate relief the two concl!pts are analytically distinguishable and a court could find that a cas is not moot and yet deny injunctiveSCMrelief"Corp. v. , 565 2d807 812(2dCir. 1977) , It is also worth noting that even at the time he was considering whether to resign from A- s Board, Mr. Shepard had already ben invited to beome a member of Procter and Gamble s Board (Tr. 939). . . . .

Opinion 93 F.

influenced respondents to use advertising of the type under consideration. " 323 F.2d at 531 (emphasis added). Discontinuance of the unlawful practices also proved insufficient to serve as a defense in Collier Son Corp. v. FTC, 427 F.2d 261, 275 (6th Cir. 1970),PF where the practices were "capable of being perpetuated or resumed " And, as the Commission noted in Cora, Inc. 63 F. C. 1164 1200 (1963), the respondent had failed to show that its abandonment upon it by business andof the illegal practices was not "forced economic conditions. . . ." In so concluding, the Commission distinguished other cases where, due to "the total and permanent concluded that resumption,character of the abandonment, it was because it would be economically unprofitable, was highly improbable. Id. at 1199-1200 (emphasis added). We are not presented with such a situation here. While TRW no doubt intends to continue its screening procedures, there is in fact nothing which would independently cause it to do so. A- s sale of its AMCAT product line in 1977 may, at this time, eliminate the competitive overlap between the two firms as to credit authorization and EFTS products, but it by no means prevents TRW and Mr. Shepard from intedocking with other (9) firms in the same product area or other lines of businessY l'Aoreover, the very ease with which interlocks may be undertaken and withdrawn only underscores the importance of requiring a stronger showing of changed circumstances than has been presented here. In short, the proof offered by respondents fails to demonstrate with some degree of certainty that violations cannot recur Rubbermaid, Inc., supra, 575 F. 2d at 1172. Thus, we reject respondents' mootness contention. (10) IV. Competition . In furthersu?port of their mootnes argument, respondents citeUnited Statesv. The Cleve/and TrustCo. 392 Supp. 699 (N.D Ohio 1974), where the court dismis$ed a Section 8 count on the ground that one of the interlocking firms, a non-defenclant in the case, had gott.m out of the relevant product line. The court' decision reste primarily on Paramou.nt Pictu.res Corp.v. Baldwin-Montroe Chemical Co., IlIc.. 1966 Trade Cass 678 (S. Y. 1966) There the court, in an alternative holding, concluded that for Sectionrelief to be granted "there t stil! exist a pre. ent abilityto re ump. any competition which may have ceased" Id at 82065. 66 (emphasis added). InParamou.nt the defendant sold its stock interest in one of the competing compani(! , leading the court to hold that this sale, negotiations for which had begun in goo faith before issuance of the complaint, would be suffcient to warrant dllmiS8a! of the Section 8 charge. Here, 'lRW has not withdrawn from the credit authorizt.ion or EFTS busiJwss. A- s exit only reduce one of undoubtely many other possibilities for interlocks in this industry. TRW, as well as Mr. Shepard, clearly has a "present ability" to engage in similar interlocks in the fut.ure, even though A-M may not. To the extent Cleveland Tru:t suggests a different conclusion, we respectfully decline to foHow it Moreover, even complete withdrawal by an interlocking fino from the competitive product Jines might not justify declaring the case moot or refusing to issue an order. Additional evidence suggesting the pos8ibiiity of future law violations, albeit in other product markets, could very well ca!! for some form of prospetive relief. '" Complaint counsel also contend that two prior Section 8 matters involving TRW and Mr. Shepard further undercut respondents' argument that violations are not likely to recur (C. Anssee 9;also ID 19, 21) While these incidents are of limited evidential value, inasmuch as there was no adjudication of liability, they do illustrate the hortomings of relying too heavily on discontinuance, which can be effected with relative dispatch, as a means of ensuring future compliance with Section 8 325 Opinion Respondents next argue that A-M and TRW were not competitors during the complaint period, and thus, that Mr. Shepard's positions on both Boards did not violate Section 8. It is, of course, true that Section 8 requires that the allegedly interlocked corporations "are or shall have been theretofore by virtue of their business and location of operation, competitors so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws.

Though the issue of competition is central to a Section 8 case, in previous litigation under this section the parties have generally stipulated to the existence of competition." That issue, however, is squarely before us here. Respondents contend that the appropriate tests for determining competition are whether there is (1) crosselasticity of demand between the products or (2) reasonable interchangeability of use (RAB 27). By these measures, it is asserted TRW' s and A- s products are not price sensitive nor are they sold to the same customers.

Complaint counsel, on the other hand, urge a more expansive interpretation of the term "competitors" by focusing on the proviso in Section 8 which reads as follows:

so that the elimination of competition by agreement between (the competitors J would constitute a violation of any of the provisions of any of the antitrust laws. This language, it is argued, defines what is meant by "competitors and encompasses any test of competition under the antitrust statutes. Put differently, the relevant issue, as framed by complaint counsel, is whether the interlocking firms can "form an agreement that would violate the antitrust laws under the rule of reason analysis as it was known to Congress in 1914 under the Standard Oil decision" (CAB 33). (11 J The diffculty with complaint counsel's formulation is that it proves too much. As the ALJ noted, virtually any two corporations can fashion some kind of agreement which could violate the antitrust laws (ID p.34). It is not entirely clear what complaint counsel have in mind. If they mean that any competitive relationship may be reached by the statute-whether horizontal, vertical or potential-it seems fairly well settled that Section 8 applies only to firms which are horizontal competitorsY If, on the other hand " Although there Wli apparently no such stipulation inParamou.nt Piture. the Court gave only summary treatment to the issue of competition.

" Prlectuseal Co. v. Bararn:ik. 484 F.2d 585, 589 (7th Cir 1973);United Statesv. Crocker Nationa.l Corp., 422 Supp- 686. 703-04 (N.D. Cal 1976) Se aL Federal Trade Commission Report On Interlocking- Directorate (1951). Of course, Section 5 of the ji'TC Act may reach interlocks involving firms in a buyer/seller relationship Or between potential competitors, an issue we do not address here 9nO- BO- 2!J Opinion 93 F.T.

forcomplaint counsel merely intend to suggest the approach determining whether TRW and A-M are, in fact, competitors on a horizontal level, their interpretation of the Section 8 proviso provides little guidance. Since the case was brought and tried on a horizontal theory, we shift the focus of our inquiry to the criteria for assessing whether such a relationship existed. must be In our view, a finding that two firms are competitors to placegrounded on economic considerations. It is not enough orundue focus on such vague, conclusory terms as "contest" rivalry" for trade, characterizations which are emphasized by both complaint counsel and the ALJ. While it is not inaccurate to describe competition broadly in this fashion, it does not materially advance the inquiry.

In judging whether competition exists, we believe it is appropriate to draw by analogy on concepts applied under Section 7 of the Clayton Act, 15 U. C. 18, and Section 2 of the Sherman Act, 15 UB.C. 2, in defining a relevant product market. This approach is consistent with the language in Section 8 that corporations are competitors "by virtue of their business and location of operation. At the same time, it is clear that we need not get bogged down in a Protectoseal Co. v. Barancik, 484 F.2d 585, 589 marketwide analysis definition (7th Cir. 1973), which requires the kind of product market that would be called for in a merger or monopolization case. (12) As respondents point out, evidence of cross-elasticity of demand or product interchangeability is highly relevant in defining competition and drawing the outer parameters of appropriate product markets in other antitrust contexts. Brown Shoe Co. v. United States, 370 U.S. 294 (1962); United States v. E. 1 dupont de Nemours Co., 351 U.S. 377 (1956). Nevertheless, the Supreme Court has cautioned that these criteria should not be used "to obscure competition but to recognize competition where, in fact, competition exists. United Co., 378 U.S. 441, 453 (1964) (citation States v. Continental Can omitted) (Section 7 Clayton Act case). That guidance is even more relevant in a Section 8 proceeding where the market interaction of all competitive products, including those produced by the interlocking companies, will not be fully explored. Within this framework we turn to the facts of this case.

As was noted at the outset, both TRW and A-M manufactured distributed and sold equipment used for credit authorization purposes." Likewise, both manufactured and sold equipment used for the " TRW'5 products were the System 4000/5000 and the VaJidata service, while A- s products were the AMCAT line of goo 325 Opinion electronic transfer of funds. " Nevertheless, TRWargues that because the equipment was purchased by different types of users and functioned in different ways they were not competitive products. There is no dispute that the products of both TRW and Aaccomplished essentially the same thing. The dispute is only as the significance of "for whom" and "how." Thus, TRW argues that its System 4000/5000 was designed to work in a clustered environment (i. large retail stores or other businesses with multiple check out stands) and in fact was at its economical peak when so placed (RAB 34-35). Nevertheless, the Heritage Bank Corporation in Chicago, Il., placed its TRW credit authorization terminals in retail establishments in which there were no (13 J more than 5-7 terminals (Tr. 94-2). Additionally, there was testimony that TRW's Validata Service, which utilized the same terminal as the System 4000/5000 was used by car rental agencies in off airport premises in which only one or two terminals were used (Tr. 250; ID 18, 21-22). TRW also argues that the various characteristics of the two products are so substantially different as to make them clearly distinct. However, the fact that TRW's 4103 did not have a card reading device could be overcome by ordering a separate piece of equipment from a different manufacturer. Indeed, Donald Kovar testified that the TT-1l5 sold to Glendale Federal contained a separately manufactured card reader (Tr. 1265-66). Both TRW and A-M vied for the business of the same purchasers. There is more than ample testimony to reflect the fact that requests for information went out to, and initial contacts were made with, both companies by the same potential purchasers. Mr. Creekmore of the First National Bank in Atlanta ("FNBA") testified that he initially contacted 37 electronic terminal vendors, including TRW and A-M (ID 43). Mr. Wolfson testified that Metroteller, a subsidiary of Erie County Savings and Loan, also contacted both TRW and A- (ID 48)." Furthermore, at a more serious level of bidding, both TRW and A-M would respond. Credit Systems, Inc. ("CSI"), for example received responses to bids for quotations from both A-M and TRW (ID56).

Beyond these discussions, both TRW and A-M would attempt to " TRW Bod its 'IT-1l5 to Glendale Federa! Savingll and Loan. A-M !\ld its AMCAT to California Federal Savingll and Loan.

" While complaint counoo! alleged four categoriea of competitive equipment, the reord if! silent as to inventory reordkeeping and reveals that A-M never manufacture or oold teHer operate bank trliction equipment ('. 1880). We are thereforeooncerned only with point of sale credit authorition equipment, including creit validation and check cashing validation, and equipm!Jnt use for the ell;tronic withdrawal and depoit of funds from a financial institution, i.e.. EFT. " Thl!rc was similar testimony from Buckeye Federal Savings and Loan (ID 52), CaJiforniaFederal Savings and Ulan (ID 61), Bank of America (ID 62), and Wells Fargo Bank (ID 66). , g., Opinion 93 F.

convince purchasers that what was really needed was the kind of equipment manufactured by each company, respectively. In its response to Bank of America s request for information, TRW urged reconsideration by the Bank of some of its requirements (CX 244). Likewise, Mr. Creekmore testified that TRW continued to attempt to sell FNBA a terminal which was not customer operated despite FNBA's express desire for one which was customer operated (Tr. 66- 2).

If attempts to convince were not effective, the next course of action would be to develop new products or modify existing ones. Mr. Sheldon Kaplan, who was employed by A-M during the relevant time period, testified that he would first try to persuade a potential purchaser to use what A-M had already developed. Only after that first step would he change his tactic to determine what A-M could develop or modify (Tr. 176). Development and modification were in fact used by A-M for FNBA's "Honest Face" program (the AMCAT C) (ID 45), and by TRW to meet Glendale Federal's need (ID 39-40). (14) Attempts by TRW and A-M to persuade, develop and modify are especially significant when it is remembered that both credit authorization and EFTS were infant industries during the complaint period (ID 36). In fact, in many states the use of EFTS was not even statutorily permitted (Tr. 213-14). Thus, the industry was characterized by many products which performed the same function but in different ways. This was matched by customers who, because of the newness of the industry, did not have a particular set of requirements in mind. There was, as Mr. Thomas C. Noel, President of ELCOM Industries put it no specific, one universal set of requirements" (Tr. 137-1).

In view of this situation, it is not surprising that evidence of crosselasticity of demand or product interchangeability would be less conclusive than where the products are fungible, or the technology standardized. At this stage of market development, it is understandable that customer needs would be more individualized, with particular attention devoted to product features and less to price. As a consequence, it could be expected that the products of the two companies would not be readily interchangeable for all purposes. Yet, the adaptive responses of the firms to new demands suggest the kind of competitive response that is likely where a common market exists, even though the contours of that market may not be drawn with great precision. Moreover, despite the fact that for some uses the products may nct have been close substitutes (e. large department stores vs. gasoline service stations), the evidence indi- 325 Opinion cates that the systems were in much more direct competitive confrontation in other situations.

Perhaps the best ilustration of the firms' abilty to meet similar customer needs is found in the use of EFTS terminals in California supermarkets. Both Glendale Federal Savings and Loan and California Federal Savings and Loan decided to place EFTS terminals in Los Angeles supermarkets to allow the deposit and withdrawal of funds from customer accounts (ID 38, 60). While Glendale used the TRW TT-1l5 (ID 40), California Federal used the AMCAT I (ID 60). Glendale s TT-1l5 was small enough to fit into the check-out stand and utilized a personal identification number (PIN) pad. The AMCAT I had neither of these features (ID 39). Nevertheless, both terminals performed the same functions in the same type of retail environment. (15) Furthermore, in response to Glendale s specifications, which included a magnetic card reader as well as a keyboard and digital display, A-M showed Glendale its MODCAT. While this terminal appeared to fit all of Glendale s needs, it was offered only after Glendale had already contracted with TRW for purchase of the TT- 115 (ID 41).

That the market here does not reflect the tidiness that respondents or their expert witness, Dr. Paul Munyon, would like, does not negate the existence of effective competition between TRW and A- Though application of traditional tests for defining competition may lead to imperfect results in instances such as this one, where the market has not yet fully matured, we believe the record demonstrates that meaningful competition does exist and that it satisfies the standard set forth in Section 8. To the extent that the character of the competition, as opposed to its existence, has further significance, it should be considered in the context of fashioning appropriate relief.

One-Year Grace Period Related to the issue of whether TRW and A-M were competitors is respondents' argument that paragraph 5 of Section 8" absolves Mr. Shepard of any liability under Section 8. Paragraph 5 provides for a " Thi paragaph providf! in pertinent paint: When nny person electe or chosn as a director. . . of any. . . corpration subject to the provisions of this Act is eligible at the time of hi elecion or selection to act for such. . . corpration in such capacity his eligibilty to act in such capacity shal! not be affected and he notshallbeome or be deemed amenable to any of the proviions heref by reason of any change in the affairs of such. . corporation from whatsver cause, whether speifically excepte by any of the provisions hereof or not, until the expiration of one year from the date of his election or employment. . .

Opinion 93 F.

one-year grace period from the date of a lawful election before liabilty attaches to an ilegally interlocked director. Respondents maintain that complaint counsel bears the burden of showing that Mr. Shepard was not eligible to be a director of A-M on November 7, 1974, the date of his last election and one year prior to his resignation (RAB 46). Complaint counsel have countered that there should be no exemption beyond the first election. Additionally, complaint counsel argue that the definition of "change in the affairs" should not include competition (C.Ans 38). (16) In attempting to resolve the issue, the ALJ has interpreted paragraph 5 as being triggered by a "disabling" event rather than the date of election (ID p. 48). Without taking issue with the ALJ' interpretation, respondents alternatively argue that the AU erred by not finding such a disabling event (RAB 46). We do not agree with the interpretation of either complaint counselor the ALJ. Complaint counsel's position is based, in part, on the possible inconsistency that would result in subjecting directors (as well as offcers and employees) who serve for terms in excess of one year to greater risk than directors who are elected (and reelected) for one-year terms. This stems from the fact that after one year a "change in the affairs" of a company would subject a director to immediate liability, whereas directors sitting for reelection each year presumably would have more time. Accordingly, complaint counsel urge that the most reasonable interpretation, which would apply fairly to everyone, would allow only one grace period, running from a director s or employee s initial election by the corporation or bank. While there may be some imperfections in the operation ofthis provision, the language of paragraph 5 is not limited to first-time elections. Moreover, the legislative history indicates that the author of the provision apparently felt that the one-year period generally conformed with the normal tenure of directors, at least bank directors. 51 Congo Rec. 9603 (1914). In addition, there would appear to be no reason to assume new directors will be any less knowledgeable about a "change in the affairs" occurring after their election than other directors. That is particularly true where the change may be precipitated by action of the other company or companies involved in the interlock. Thus, we conclude that paragraph 5 applies to all elections of a director by the same corporation. As for complaint counsel's second argument that a "change in the affairs" does not include the development of competition, neither the language of paragraph 5 nor its legislative history convinces us of the correctness of this interpretation. Paragraph 5 applies to a change in the affairs. . . from whatsoever cause. " (emphasis ).

325 UpmlOn added). And, the House debates indicate that the provision was added to address changes other than those relating to the size of the interlocking firms " which might affect the legality of an interlock (Id. Certainly a change resulting in two firms becoming competitors for the first time is as significant as changes in the size of the asset or revenue base of a firm. Consequently, we believe paragraph 5 encompasses changes in the competitive status of interlocking firms that would trigger Section 8 liability. (17 Finally, we find no basis for reading into the statute a requirement that the one-year period runs from the date ofthe "disabling" event as suggested by the ALJ. Paragraph 5 explicitly provides that the grace period runs "until the expiration of one year from the date of (the director s J election. . ." The meaning of that language seems quite clear.

Nevertheless, notwithstanding our interpretation of paragraph 5 we do not find the one year exemption applicable in this instance. Implicit in our holding that TRW and A-M were competitors in the relevant product lines is that they were competitors on November 7 1974. Indeed, TRW and A-M were competitors at least as early as May 1973, when A-M offered its AMCAT product line (RFF 47). Thus, as of the date of his last election to the A-M Board, Mr. Shepard was ineligible to sit as a director. VI. De Minimis Defense In conjunction with its argument on competition, respondents also contend that sales of the allegedly competing products were so small as to be de minimis and thus without the scope of Section 8. There is authority to suggest that such a defense is not appropriate to a Section 8 case United States v. Crocker National Corp.. 422 Supp. 686, 703 (N. D. Cal. 1976); United States v. Sears, Roebuck & Co. 111 FBupp. 614, 619-21 (S. Y. 1953), since the statute is per se in nature and incorporates its own standard of substantiality. TRW and A-M have never disputed that they have "capital, surplus and undivided profits aggregating more than $1 000 000" (ID 6, 11). We need not resolve this issue, though, since we are not persuaded that respondents meet a de minimis standard however formulated. TRW' s sales in the relevant product lines averaged $7 milion annually during the period covered by the complaint (RX 62, RX ," Compare paragaph 4 of Section 8 " Repondents in making their de minimis argument calculate TRW's sales data by excluding sales to department stores, airlines and car rental agencies- They justify this approach by claiming that A"M did not compete for this busines (RAR .'1-6). In view of our disposition of the competition issue, this approach is wholly il1"adequate.

Opinion 93 F.

62A, C.Ans 3), while A-M sales were about $1 milion annually (RAB 5)." Although the sales of the products involved are relatively small in comparison to TRW's and A- s overall revenues, such figures should not be viewed solely from the perspective of the two firm operations. Consideration must also be given to the developing state of the technology and the fact that TRW's sale of its TT 115 EFTS system to Glendale Federal Savings and Loan was the largest EFTS project in the country at the time (Tr. 1688). Under these circumstances, we do not view the amount of commerce involved to be insignificant.

VII. Relief2 The ALJ, having found that Section 8 was violated," entered an order against Mr. Shepard but not against TRW. Complaint counsel appeal the failure to enter an order against TRW, while respondents appeal the order against Mr. Shepard. We have determined that an order should issue against Mr. Shepard, but in a more limited fashion than proposed by the ALJ. We have also determined that under the circumstances, an order should issue against TRW. While we have wide latitude in fashioning a remedy, it must be reasonably related to the unlawful practices found to exist. Mr. Shepard In deciding to issue an order against Mr. Shepard, we believe that Mr. Shepard's current status as a TRW director, together with his past membership on other boards, demonstrates a "cognizable danger" that a violation could occur again. (19 The record contains evidence that Mr. Shepard has been a frequent member of various other boards. Indeed, as noted above, Mr. Shepard was approached by Procter and Gamble at the very time he was considering whether to resign from A-M. Under such circumstances, the likelihood of Section 8 violations is much greater than for an individual less sought after. Moreover, because TRW is a " While the issue was not speificillly referred toProkctoseal,in supra we note th"t one of the corporations had competitive sales of only a million and a half dollars. 484 l".:!d at 5R7 " Although respondents have argued On appeal that broken commitments by the s!;ff are of such a nature as to deny th(!ff due process and the right to a dismisal of this proceeding, we see no need to address this issue again. Our position was madec!ear in our order of October 13, 1976, 881", C. 544, and elaborated upon by the Al.J at p. 49 of t.he Initial Decision. Those deci ions adequately deal with respondents. contentions " The ALJ also found violations of Section 5 of the FT Act, as to both rp.spondents, a deci ion with which we concur (ID p,59). Respondents have argued that in the abfIncc of a Section 8 violation there is no independent basis for finding.. Section 5 violation (RAB 46). In view of our disposition of respondents' liability under Section 8 , we nee not address this aspet of their appeal. " National Society of Prfessional Engineers v. Unitf!d State. 435 U.s. 679, 698 (1978);FT v. Col(ate- Palmoliof! Co.,380 U.s. 374, 394-95 (1965); F'I'C' v. National Lead Co., 352 U,S, 419, 429 (19057); FTv Rubfroid Co. 343 U.S. 470 473(1952).

325 Opinion large corporation with many products, the number of corporations which could be deemed competitive is also large. The combination of these factors persuades us that the public interest would be best served by issuance of an order against Mr. Shepard. We are not inclined, however, to issue an order as broad as the one issued by the ALJ. The coverage of that order extends to Mr. Shepard' s position as an "officer, employee, agent or representative of any corporation." Because the facts are not so egregious as to warrant such broad coverage, we require only that Mr. Shepard cease and desist from sitting on the Board of Directors of any corporation which competes with TRW.

This result is warranted by a combination of factors. In the first place, Mr. Shepard' s age indicates that he may not be sought after by as many corporations as would otherwise approach a younger individual. The record does not indicate what the limiting age is for various corporations, but we suspect that TRW's age limit of72 is not on the low side. At the time the appeal briefs were fied in 1978, Mr. s Board Shepard was 65 years old and was eligible to remain on TRW' for seven more years.

We are further influenced by the fact that Mr. Shepard sought counsel before joining A- s Board (ID 17). While such action does not absolve him of liability, it evidences some awareness of the concerns at stake. Moreover, on at least one occasion, after having sought advice of counsel, Mr. Shepard declined an invitation to become a Director (ID 20). Both instances demonstrate at least some attempt by Mr. Shepard to comply with the mandate of Section 8. (20) Lastly, we note that the nature of the violation is not as egregious as we have found in other instances. While such a distinction does not negate the need for an order, we regard it as mitigating the need for a broad fencing-in provision. Under the circumstances, we feel an order limited to his tenure on the Board of TRW should suffciently sensitize Mr. Shepard to interlock problems that may arise if he chooses to sit on other boards in situations not covered by the order. It should be made clear that our decision to limit the order against rather on the Mr. Shepard does not depend on anyone factor, but combination of all three. In that context, this case presents a unique set of circumstances which we believe justifies a more limited form of relief.

" However, the fact that Mr. Shepard could rely, and apparently did rely, On Department of Justice statements during Ii 1971 investigation about competitive overlap between TRW and A- , does not detract from the need for an order in this instance. Indeed, such reliance merely highlights the nee to be constantly aware of changing products since the issue in the earlier investigation did not involve cn'"jt authorization or EFTS equipment Opinion 93 F.

TRW Our determination to enter an order against TRW is based on different concerns." The ALJ found inte alia, that "there is nothing in the record of this case to suggest that TRW played an active role in Mr. Shepard' s becoming a director of A-M" (ID p. 55). Consequently, he determined that an order was inappropriate. We do not disagree with the ALJ's finding but rather with this conclusion. We think it is precisely TRW's failure to take action which is important. Kraftco Corp. 89 F. C. 46 , 65, remanded on other grounds sub nom. SCM Corp. v. FTC, 565 F.2d 807 (2d Cir. 1977). That TRW may have had no anticompetitive purpose in mind is beside the point. It is precisely to avoid such issues that Section 8 was enacted as a per se statute.

Mr. Shepard testified that he sought counsel from TRW (ID 17). It is therefore without question that TRW was aware of his membership on A- s Board. While there may have been no competition between the two firms at the time Mr. Shepard was first elected to A- s Board, competition arose over the course of time as new products were developed. It was therefore incumbent on 'lRW to monitor the legality of Mr. Shepard' s membership. At a minimum TRW should have evaluated Mr. Shepard' s eligibilty each time he stood for election to TRW's Board. (21 J While TRW now has a screening process to avoid Section 8 problems, which followed on the heels of previous investigations, (Tr. 1026), we nevertheless believe that there is a "cognizable danger that a Section 8 violation could occur again, and that TRW' screening process does not thoroughly insure against such future violations. Mr. Gorman testified that the screening process has been in effect since 1972 (Id.). Yet, Mr. Shepard' s interlock with A-M went unnoticed until August, 1975, and then only after the Commission commenced its investigation.

In an attempt to avoid repetition of this very problem, we have structured the order to require each member or prospective member of TRW's Board to fie with the corporation a written statement listing the products and/or services that are produced or sold by such other corporations on which the individual sits. In this way, TRW will have the benefit of an independently prepared list of products, which by its nature should be more thorough than a list prepared by TRW." Furthermore, TRW wil be prohibited from having on its Board any individual who fails to submit the required information. " We do not understand TRW to iirgue that a corporation i.s not covered by Section 8 Indeed, such an argument has been re\ency rejecwd. SCMCorp. v. FTC, 565 F.2d 81J. 811 (2d Cir- 1977) " 'IRW currently prepares its own !i t from whatever sources it can find (l'r. 1031 35), 325 Final Order This requirement will remain in effect for a period of five years, at which time TRW will be free to utilize whatever other procedures it believes might be as effective.

Finally, we have limited the ban on interlocks with competing corporations to ten years. Normally a perpetual proscription is appropriate in view of the relatively clearcut statutory provisions and ease of compliance. Nevertheless, in view of mitigating factors such as the nature of the violation and previous efforts to institute a screening procedure, even though inadequate, we find it unnecessary to bind respondent forever.

An appropriate order is attached.

FINAL ORDER This matter having been heard by the Commission upon the crossappeals of respondents and counsel supporting the complaint from the initial decision, and upon briefs and oral argument in support thereof and opposition thereto, and the Commission, for reasons stated in the accompanying opinion, having determined to deny the appeal as to respondents and grant the appeal as to counsel supporting the complaint:

It is ordered, That the findings of fact and initial decision of the administrative law judge be adopted insofar as not inconsistent with the findings of fact and conclusions of law contained in the accompanying opinion.

It is further ordered, That the following order to cease and desist , and the same hereby is, entered:

ORDER TRW, Inc.

The following definitions shall apply in this order: Subsidiary" of TRW means any corporation, 50 percent or more of the voting stock of which is owned or controlled, directly or indirectly, byTRW. (2) Parent" of TRW means any corporation which owns or controls directly or indirectly, 50 percent or more of the voting stock of TRW. Sister" ofTRW means any subsidiary of a parent ofTRW. 1. It is ordered, That TRW, Inc., its successors and assigns, shall forthwith cease and desist from having, and in the future shall not have, on its board of directors any individual who either: (a) serves as a director of Addressograph-Multigraph Corp., or any other corporation if TRW, Inc. and Addressograph-Multigraph Final Order 93 F.

Corp., or such other corporation are, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any ofthe provisions of any of the antitrust laws; or Inc. , any statement required by (b) fails to submit to TRW, Paragraph Two of this order to be obtained Ly TRW, Inc. The requirements of this paragraph shan be effective for a period of ten (10) years from the date of this order. 2. It is further ordered That within thirty (30) days of the effective date of this order, and prior to each election of directors or prior to the solicitation of proxies for such election, whichever is earlier, TRW, Inc., shan obtain a written statement from each menlber of its board of directors (exceptdirectors whose terms expire at the next election and who are not standing for re-election) and from each nominee for a directorship (who is not then a director) showing:

(a) the name and home mailing address of each director or nominee; and (b) the name and principal offce mailing address of, and a listing of each product or service produced or sold by, each corporation which the director or nominee then serves as a director, or has been nominated to serve as a director at the time of the statement. (3) The requirements of this paragraph shall not apply to elections of directors occurring after five years from the effective date of this order, nor shall directors or nominees be required to list products or services of subsidiaries, sisters, or parents of TRW, Inc. Nothing in the paragraph shall be construed to relieve respondent of its obligation under Paragraph l(a) hereto due to any error or omission contained in any written statement received pursuant to this paragraph.

3. It is further ordered, That within forty-five (45) days of the effective date of this order and annually for a period of ten (10) years hereafter, TRW, Inc., shall file with the Commission a written report setting forth in detail the manner and form in which it has complied with this order. Copies of the statements obtained pursuant to Paragraph Two of this order shall be submitted to the Commission as part of the reports of compliance required by this paragraph during the first five (5) years. Nothing in this paragraph shall relieve TRW of its obligation to comply with Paragraphs One and Four of this order once it is no longer required to submit reports of compliance to the Commission.

325 Final Order 4. It is further ordered, That TRW, Inc., shall notify the Commission at least thirty (30) days prior to any change in the corporation such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation which may affect compliance obligations arising out of this order. The requirement of this paragraph shall be effective for a period of ten (10) years from the date of this order.

II. Horace A. Shepard It is ordered, That Horace A. Shepard shall forthwith cease and desist from serving, and in the future shall not serve, as a director of any corporation or other form of business entity, if he simultaneously is serving as a director of TRW, Inc., if such corporation or other Inc. , are, by virtue of theirform of business entity and TRW, business and location of operation competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws. ), Complaint 93 F.