Court to hear antitrust case on office machine upkeep

June 18, 1991|By Lyle Denniston | Lyle Denniston,Washington Bureau of The Sun

WASHINGTON -- The Supreme Court moved yesterday into a major legal dispute in the competitive business equipment industry, agreeing to explore the impact of antitrust laws on the market for servicing copiers, computers and other high-tech machines.

The specific issue, raised in an appeal by Eastman Kodak Co., is whether a manufacturer of machines may refuse legally to sell replacement parts to companies that compete with it in servicing its machines.

Kodak is seeking to head off the trial of an antitrust lawsuit against it by 18 companies, located in 10 states, which compete directly with Kodak in servicing Kodak copying and microfilming machines. A dozen similar cases now pending in the courts involve the computer, medical equipment and printing equipment industries.

The Kodak appeal to the Supreme Court was supported by a wide array of computer and business equipment manufacturers and trade groups. The manufacturers and groups argued that the case against Kodak threatens to disrupt competition among business equipment makers by making it legally risky for them to try to attract customers by providing quality service and parts as part of a marketing package.

The 9th U.S. Circuit Court of Appeals ruled a year ago that a machine manufacturer may violate the Sherman Anti-Trust Act if it services its own machines and refuses to sell replacement parts to its service rivals or to any customer who gets service from those rivals.

That kind of arrangement, the Circuit Court ruled, may be both an illegal "tie-in" and an illegal attempt to monopolize, even when the manufacturer does not have control over the basic market for the machines themselves. It ordered the Kodak case to go to trial.

The Bush administration joined in urging the Supreme Court to review the case, saying that antitrust law needs clarification as it applies to "technology-oriented sectors of the economy." The Supreme Court's ruling in the case of Eastman Kodak vs. Image Technical Services (No. 90-1029) is expected sometime next year.

The court's action on that case came amid a series of orders on significant business law issues:

* The justices cleared the way for trial in a Texas state court of a $300 million damage claim growing out of an incident of "insider" trading by Wall Street tycoon Ivan F. Boesky during preparations for the merger of Diamond Shamrock Corp. and Natomas Co.

Maxus Energy Corp., the new company that emerged in that merger, complained in the Texas lawsuit that it had to pay $300 million more than it otherwise would have because Boesky was tipped to inside information by Martin A. Siegel, a vice president of Kidder, Peabody & Co. Kidder, Peabody was the financial adviser for the merger deal.

The Securities and Exchange Commission's complaints of illegal trading by Boesky were based partly on that incident. A federal judge in New York City ruled that Kidder, Peabody did not violate federal securities law during the merger deal and blocked the Texas lawsuit based on issues of state law.

A federal appeals court reinstated the Texas case, and the Supreme Court left that ruling standing (Kidder, Peabody vs. Maxus Energy, No. 90-1665).

* Over the dissents of two justices, the court refused without explanation to hear an appeal by the state of Connecticut asking for the right to impose sales and use taxes on purchases that Connecticut residents make from out-of-state by catalog.

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