392 U.S. 481 (1968)
Hanover Shoe, Inc., a manufacturer of shoes, was a customer of United Shoe Machinery Corporation, a manufacturer and distributor of shoe machinery.1 In 1955 Hanover filed the present treble-damage action against United in the District Court for the Middle District of Pennsylvania, alleging that United had monopolized the shoe machinery industry in violation of § 2 of the Sherman Act by its practice of leasing but not selling its more complicated machines.2
The government had previously sued United, and in 1953 the District Court for the District of Massachusetts entered judgment against United for monopolizing the shoe machinery market.3 This Court affirmed that judgment in 1954.4 Hanover relied on the 1953 findings, opinion, and decree as prima facie evidence under Section 5(a) of the Clayton Act.5
After trial in 1965, the District Court rendered judgment for Hanover, awarding trebled damages of $4,239,609 plus $650,000 in counsel fees.6 The Court of Appeals affirmed liability but modified the damage award.7 Both parties sought review, and this Court granted certiorari in 1967.8
The damage period ran from July 1, 1939, to September 21, 1955.9 The District Court found that Hanover would have purchased the machines had they been offered for sale and computed damages using a borrowing rate of 2% to 2.5% per annum for the cost of capital.10
Whether the 1953 judgment and decree in United States v. United Shoe Machinery Corp. established that United's practice of leasing but not selling its major machines constituted illegal monopolization under Section 2 of the Sherman Act?11
Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), makes a final judgment in a government antitrust action prima facie evidence as to all matters that would work an estoppel between the parties.12 The scope of estoppel is determined by examining the findings, opinion, and decree to ascertain whether the specific issue was actually adjudicated.13
Yes. The District Court and Court of Appeals correctly concluded that the 1953 judgment established the lease-only policy as an instrument of monopolization.14 The 1953 findings addressed United's policy of leasing but not selling its important machines, the advantages that policy conferred on United, and the policy's adverse impact on actual and potential competition.15 When the monopolization standard under Section 2 is applied to those findings, the lease-only practice is shown to have played a significant role in maintaining United's monopoly power.16
The decree's remedial provisions, including the requirement that machines be offered for sale, were predicated on that underlying violation rather than standing alone as an independent remedy.17
The 1953 judgment supplies prima facie evidence that United's practice of leasing and refusing to sell its major machines constituted illegal monopolization.18
Related opinions on this issue
Justice Stewart dissented on this issue.19 He maintained that the 1953 judgment condemned only particular lease clauses and terms identified in decree section 4, not the general practice of offering machines by lease only.20 Stewart emphasized that decree section 5 was a forward-looking remedial measure to dissipate the effects of the violations already found, not a declaration that the lease-only policy itself was unlawful.21
He noted that Judge Wyzanski's opinion repeatedly focused on the anticompetitive effects of the specific lease provisions rather than the lease-only system as such.22 The opinion expressly disclaimed any intent to widen customer choices through the sales requirement.23
Whether a buyer who paid an illegally high price for machinery may recover treble damages under Section 4 of the Clayton Act without regard to whether it passed the overcharge on to its own customers?24
Section 4 of the Clayton Act, 15 U.S.C. § 15, authorizes any person injured in business or property by reason of an antitrust violation to recover threefold the damages sustained.25 A buyer who proves payment of an illegally high price and the amount of the overcharge establishes a prima facie case of injury and damage.26
Yes. Hanover proved that United overcharged it during the damage period and quantified the overcharge, thereby making out its prima facie case.27 The possibility that Hanover may have passed the overcharge to its shoe customers does not defeat recovery.28 The buyer remains injured by paying more than the law permits and would have earned higher profits had its costs been lower.29 Precedents such as Chattanooga Foundry & Pipe Works v. City of Atlanta confirm that the victim of an overcharge is damaged to the extent of the overcharge regardless of subsequent price adjustments.30
Recognizing a passing-on defense would require intractable inquiries into pricing decisions, sales volume, and unit costs that are virtually unascertainable in real economic conditions and would undermine the effectiveness of treble-damage actions.31
Hanover was entitled to recover treble damages measured by the overcharge without regard to whether it passed the cost on to its customers.32
Whether Hanover was entitled to damages commencing July 1, 1939, rather than June 10, 1946, the date of American Tobacco Co. v. United States?33
A continuing antitrust violation that inflicts accumulating harm permits the plaintiff to sue for damages throughout the period allowed by the statute of limitations.34 A change in antitrust doctrine does not limit recovery to a prospective period unless the new rule represents an abrupt and fundamental shift that overrules a clear prior doctrine on which the defendant justifiably relied.35
Yes. Hanover was entitled to damages from July 1, 1939.36 Neither Alcoa nor American Tobacco announced a novel rule requiring predatory practices for monopolization.37 Both decisions rested on a long line of earlier authorities holding that the existence of monopoly power plus the intent and ability to maintain it suffices.38 The three prior United cases did not establish a clear doctrine that lease-only practices were lawful when employed by a monopolist.39 United could not have justifiably relied on them as a definitive pronouncement after the 1922 Clayton Act decision.40
Because no sharp break in doctrine occurred, the Court of Appeals erred in restricting the damages period to begin in 1946.41
Hanover was entitled to damages for the full period permitted by the statute of limitations beginning July 1, 1939.42
Whether the District Court erred by failing to reduce Hanover's damages to reflect the additional income taxes it would have paid had it purchased rather than leased the machines?43
Damages in an antitrust overcharge case are measured by the difference between the price actually paid and the price that would have been paid absent the violation.44 Tax consequences are accounted for in the year of recovery rather than by adjusting the earlier years of injury.45 The Internal Revenue Service taxes the recovery when received, and reopening closed years is barred by the statute of limitations.46
No. The District Court correctly declined to reduce the damages award for hypothetical taxes Hanover would have paid in prior years.47 Because recoveries are taxed in the year received, reducing the principal damages by the amount of taxes that would have been due earlier would impose a double deduction.48 This would leave Hanover worse off than if United had not violated the law.49 Although actual tax rates varied across the damage years, the policy of the statute of limitations and the practical impossibility of recomputing taxes after many years support leaving the award undiminished for prior-year taxes.50
The District Court did not err in refusing to reduce Hanover's damages to account for hypothetical earlier taxes.51
Whether the District Court erred in calculating Hanover's damages by using a 2% to 2.5% interest rate to account for the cost of capital that Hanover would have incurred had it purchased the machines?52
When damages are computed on the assumption that the plaintiff would have purchased capital equipment, the court must deduct the cost of capital the plaintiff would have incurred, as determined by the borrowing rate the plaintiff could have obtained in the years in question.53
No. The District Court properly deducted an interest component of 2.5% after finding that Hanover could have borrowed the necessary funds at rates between 2% and 2.5% per annum.54 The Court of Appeals affirmed this factual determination.55 The record supports the conclusion that Hanover would have financed the purchases through borrowing at those rates.56 The resulting calculation accurately measured the net economic benefit Hanover would have realized from ownership rather than leasing.57
The District Court did not err in applying a 2% to 2.5% interest rate to account for Hanover's cost of capital.58