FTC Staff Comment Before the U.S. International Trade Commission In the Matter of Certain Electrically Resistive Noncomponent Toner and Black Powder Preparations Therefore

COMMISSION	UNITED STATES 	INTERNATIONAL TRADE
WASHINGTON, 	D.C.
Before John J. 	Mathias
Administrative 	Law Judge
,-~-(f'/
COMMISSION AUTHORIZED
~JJJJ.;
,
~
IN THE MATTER OF
CERTAIN 	ELECTRICALLY 	RESISTIVE
MONOCOMPONENT 	TONER AND 	"BLACK
POWDER" 	PREPARATIONS 	THEREFORE
)
)
)
) 	INVESTIGATION NO. 	337-TA-253
)
--------------)
PREHEARING STATEMENT OF
THE 	FEDERAL TRADE 	COMMISSION
INTRODUCTION
The 	Federal 	Trade 	Commission 	("FTC") 	has 	sought 	and
received 	permission 	from 	the 	International 	Trade 	Commission
("ITC") 	to 	participate 	in 	the 	proceedings 	before 	Your Honor. 1
Because 	certain 	issues 	in 	this 	proceeding 	appear 	to 	be much 	the
same 	as 	those 	that 	arise 	in many 	cases 	under 	the 	antitrust
laws,2 	our 	limited purpose 	herein 	is 	to 	offer 	our viewpoint, 	as
an 	agency 	chartered 	to 	enforce 	the 	antitrust 	laws, 	on 	the
proper 	analysis 	of 	those 	issues. 	We 	expressly 	take 	no 	position
on 	the 	ultimate 	factual 	questions 	in 	this 	proceeding. 	Rather,
our 	sole 	intent 	is 	to 	urge 	Your Honor to 	resolve 	these
questions 	by employing the 	established 	legal 	and 	economic
antitrust 	principles 	set 	forth 	below 	in 	considering 	the
evidence 	to 	be 	presented 	in 	this 	case. 	These 	principles
indicate 	that 	Canon must 	prove 	either that ERM toner 	for 	Canon
1 	Request 	of 	the 	Federal 	Trade 	Commission 	to 	Intervene
and 	Become 	a 	Party 	(December 	22, 	1986): 	ITC Action 	and 	Order
(February 	18, 	1987).
2 	See 	infra 	note 	4.

copiers 	is 	a 	meaningful 	line 	of 	"trade 	and 	commerce" 	or 	that
Canon has 	market 	power within 	a 	larger 	copier market.
DISCUSSION
In 	its 	complaint under 	section 	337 	of 	the 	Tariff Act 	of
".
1930, 	as 	amended, 	19 	U.S.C. 	§ 	1337, 	Aunyx 	charges 	that 	the
respondent 	Canon 	has 	monopolized 	or 	attempted 	to monopolize 3
the 	"trade 	and 	commerce,,4 	in 	electrically 	resistive
monocomponent 	toner 	("ERM toner") 	that 	is 	compatible with
Canon's 	business 	line 	of 	copier machines. 5 	Specifically, 	Aunyx
accuses 	Canon 	of: 	(1) 	using 	leverage 	over 	its 	own 	dealers 	to
prevent 	them 	from 	purchasing ERM toner 	from Aunyx, 	and 	to 	force
them 	to 	buy 	such 	toner 	only 	from 	Canon; 	(2) 	interfering with
3 	"The 	basic 	allegations 	of 	the 	complaint 	charge
respondents 	with monopolization 	and 	attempted monopolization."
ALJ 	Order 	No.7: 	Initial 	Determination 	Designating 	the
Investigation 	as 	More 	Complicated 	at 	1 	(November 	19, 	1986); 	ALJ
Order No. 	17: 	Initial 	Determination Granting 	Joint Motion 	to
Designate 	the 	Investigation 	"More 	Complicated" 	and 	to 	Extend 	to
Eighteen Months 	in 	Duration 	at 	2 	(April 	9, 	1987).
4 	In 	full, 	the 	operative 	part 	of 	Section 	337, 	part 	(a),
provides:
Unfair methods 	of 	competition and unfair 	acts 	in 	the
importation 	of 	articles 	into the 	united 	States, 	or 	in
their 	sale 	by the 	owner, 	importer, 	consignee, 	or
agent 	of 	either, 	the 	effect 	or tendency 	of which 	is
to 	destroy 	or 	substantially 	injure 	an 	industry,
efficiently 	and economically operated, 	in the 	united
States, 	or 	to prevent the 	establishment 	of 	such an
industry, 	or 	to 	restrain 	or monopolize 	trade 	and
commerce 	in 	the 	united 	States, 	are 	declared 	unlaWful,
and 	when 	found 	by 	the 	Commission 	to 	exist 	shall 	be
dealt with, 	in 	addition to 	any 	other provisions 	of
law, 	as 	provided 	in this 	section.
19 	U.S.C. 	§ 	1337 	(emphasis 	added).
5 Amended Verified 	Complaint 	at 	Para. 	13 	(July 	29, 	1986).
2

Aunyx's 	ability 	to 	obtain 	raw materials 	necessary 	for 	its
production 	of ERM 	toner: 	(3) 	interfering with Aunyx's 	ability
to market 	its 	ERM 	toner: 	and 	(4) 	using 	leverage 	over Aunyx 	in
its 	capacity 	as 	a 	Canon 	copier 	dealer. 6 	Additionally, 	Aunyx,
~
asserts 	that 	Canon 	conspired with 	certain 	of 	its 	dealers 	so
that 	the 	dealers 	would 	not 	purchase 	ERM 	toner 	from Aunyx, 	but
only 	Canon, 	and 	that 	such 	an 	agreement 	constitutes 	a 	conspiracy
to monopolize 	Canon-compatible ERM 	toner 	and 	illegal 	exclusive
dealing 	that 	substantially 	forecloses 	competition 	in ERM
6 	To 	the 	extent 	that 	this 	conduct 	reflects 	non-price
vertical 	restraints 	imposed by 	Canon 	on 	its 	dealers, 	the
Supreme 	Court 	recognized 	in 	Continental 	T.V., 	Inc. 	v. 	GTE
Sylvania, 	Inc., 	433 	U.S. 	36 	(1977), 	that 	such 	restraints may
serve 	a 	useful, 	procompetitive purpose 	and 	are 	to 	be analyzed
under 	the 	rule 	of 	reason. 	For 	example, 	vertical 	restraints may
promote 	marketing 	efforts 	by protecting dealer 	investments, 	19.
at 	55, 	and 	protect 	product 	quality 	and 	safety, 	19. 	at 	55 	n.23.
Thus, 	if ERM 	toner compatible with 	Canon 	copiers 	is 	not 	easy 	to
develop 	and 	formulate, 	then hypothetically 	one might 	expect
Canon 	to 	discourage 	its 	dealers 	from 	selling possibly 	suspect
non-Canon 	toner, 	in 	order 	to protect the 	quality 	of 	its 	copying
systems. 	Even 	if Aunyx 	toner 	is 	presently 	of 	equal 	quality 	to
that 	of 	Canon, 	Aunyx 	arguably may 	not 	have 	the 	same 	incentive
as 	Canon 	to maintain 	the 	quality of 	its 	toner. 	Thus, 	Your
Honor 	should 	examine whether there 	is 	a 	convincing 	efficiency
explanation 	for 	Canon's 	vertical 	restraints. 	Of 	course, 	such
restraints 	could be 	anticompetitive, 	~, 	if 	imposed 	to
facilitate 	a 	horizontal 	agreement 	either 	at 	the manufacturer 	or
the 	distributor 	level. 	In 	any 	event, 	any 	such 	anticompetitive
effect must 	be 	assessed within 	the 	context 	of 	a 	relevant
market. 	As we 	discuss 	below, 	however, 	ERM toner mayor may not
constitute 	such 	a 	relevant market.
3

toner. 7 	Aunyx 	claims 	that 	these various 	charges 	describe
"unfair methods 	of 	competition and unfair 	acts" 	subject to 	ITC
jurisdiction under 	Section 	337. 8
Unlawful 	monopolization 	under 	Section 	2 	of 	the 	Sherman
f
Act, 	15 	U.S.C. 	§2, 	requires 	proof 	of 	the 	following 	two
elements: 	(1) 	the 	possession 	of monopoly power 	in 	a 	relevant
market; 	and 	(2) 	the willful 	acquisition 	or maintenance 	of 	that
power 	as 	distinguished 	from 	its 	growth 	or development 	as 	a
consequence 	of 	a 	superior product, 	business 	acumen, 	or historic
7 	As 	with monopolization 	and 	attempted monopolization
charges, 	in 	an 	exclusive 	dealing 	claim 	it 	is 	critical 	to 	focus
on 	the 	definition 	of 	the market 	in which 	the 	defendant 	is
alleged 	to 	have 	market 	power. 	In 	a 	concurring 	opinion 	in
Jefferson 	Parish 	Hospital 	District 	No.2 	v. 	Hyde, 	466 	U.S. 	2,
45 	(1984), 	four 	Justices 	of 	the 	Supreme 	Court 	said:
In 	determining whether an 	exclusive dealing
contract 	is 	unreasonable, 	the 	proper 	focus
is 	on 	the 	structure 	of 	the 	market 	for 	the
products 	or 	services 	in 	question 	-- 	the
number 	of 	sellers 	and 	buyers 	in 	the 	market,
the 	volume 	of 	their 	business, 	and 	the 	ease
with which 	buyers 	and 	sellers 	can 	redirect
their purchases 	or 	sales 	to 	others •••• When
the 	sellers 	of 	services 	are 	numerous 	and
mobile, 	and 	the 	number 	of 	buyers 	is 	large,
exclusive 	dealing 	arrangements 	of 	narrow
scope 	pose 	no 	threat 	of 	adverse 	economic
consequences. 	To 	the 	contrary, 	they may 	be
SUbstantially procompetitive by 	ensuring
stable markets 	and encouraging 	long 	term,
mutually advantageous 	business
relationships.
As 	we 	suggest 	below, 	the market 	for 	assessing 	the
anticompetitive 	effects 	of 	Canon's 	conduct may 	be 	the market
for 	copier systems, 	rather than 	ERM toner. 	If 	so, 	an 	exclusive
dealing 	arrangement 	in toner would 	be 	unlikely 	to 	cause 	the
requisite 	competitive 	concern.
8 	See 	note 	4, 	supra.
4

accident. 	United 	States 	v. 	Grinnell 	Corp., 	384 	U.S. 	563
(1966). 	"Monopoly 	power" 	generally 	refers 	to 	the 	power 	to
control 	prices 	or 	exclude 	competition. 	U.S. 	v. 	E.I. 	du 	Pont 	de
Nemours 	& Co., 	351 U.S. 	377 	(1956). 	An unlawful 	attempt 	to
monopolize 	under 	Section 	2 	of 	the 	Sherman Act 	requires 	proof 	of
(1) 	specific 	intent 	to 	control 	prices 	or 	destroy 	competition,
Times-Picayune 	Publishing 	Co. 	v. 	United 	States, 	345 	U.S. 	594,
626 	(1953); 	(2) 	exclusionary 	or 	anticompetitive 	conduct, 	jg.;
and 	(3) 	a 	dangerous 	probability 	of 	success. 	Swift 	& Co. 	v.
united 	States, 	196 	U.S. 	375, 	396 	(1905).9
In 	essence, 	then, 	a 	monopolization 	(or 	attempted
monopolization) 	case must 	focus 	on whether 	the 	defendant
possesses 	(or 	has 	a 	"dangerous 	probability" 	of 	obtaining) 	the
ability 	to 	raise 	and maintain 	prices 	above 	the 	competitive
level. 	Absent 	that 	ability, 	there 	can be 	no harm 	to 	consumers
(and, 	indeed, 	the 	"monopoly" 	would 	appear 	to 	have 	little 	to
offer the 	purported monopolist). 	Reflecting 	this, 	the
Department 	of Justice Merger Guidelines 	("DOJ 	Guidelines")
refer 	to 	"market power" 	as 	the 	ability 	of 	one 	or more 	firms
profitably to maintain 	prices 	above 	competitive 	levels 	for 	a
significant 	period 	of time. 10
There 	is 	a 	threshold 	issue 	that must 	be 	resolved 	before
any 	assessment 	of 	actual 	or 	potential 	market power can be made:
9 	See 	also, 	International 	Telephone 	& Telegraph 	Corp.,
104 	F.T.C. 	280, 	400 	(1984).
10 	DOJ 	Guidelines, 	49 	Fed. 	Reg. 	26,827 	(1984).
5

what 	is 	the 	relevant market 	in which 	to 	test 	the 	defendant's
power 	over 	price? 	"without 	a 	definition 	of 	[the 	relevant]
market 	there 	is 	no way to 	measure 	[a 	defendant's] 	ability 	to
lessen 	or 	destroy 	competition." 	Walker 	Process 	Equip., 	Inc ..
v. 	Food Mach. 	& Chern. 	Corp., 	382 	U.S. 	172, 	177 	(19~5).
Again, 	the 	definition 	of 	a 	relevant market 	turns 	on 	the
ability 	of 	incumbent 	firms 	successfully 	to 	impose
anticompetitive 	prices. 	The 	DOJ 	Guidelines 	provide 	a
comprehensive 	framework 	for 	determining 	a 	relevant market,
which 	they 	define 	as:
a 	product 	or group 	of 	products 	and 	a
geographic 	area 	in which 	it 	is 	sold 	such
that- a 	hypothetical, 	profit-maximizing
firm, 	not 	SUbject to 	price 	regulation, 	that
was 	the 	only 	present 	and 	future 	seller 	of
those 	products 	in 	that 	area 	could 	impose 	a
"small 	but 	significant 	and 	nontransitory"
increase 	in 	price 	above 	prevailing 	or
likely 	future 	levels. 	11
To 	determine 	whether 	such 	a 	price 	increase would 	be
profitable, 	the 	Guidelines 	recommend 	an 	analysis 	of 	four 	types
of 	supply 	and 	demand 	responses 	to 	a 	hypothetical 	"small 	but
significant 	and 	non-transitory price 	increase." 	These 	include
(1) 	consumers 	switching to 	other products: 	(2) 	consumers
switching 	to 	the 	same 	product produced by other 	firms 	in 	other
areas: 	(3) 	producers 	switching existing production 	facilities
to 	produce 	the 	product: 	and 	(4) 	producers 	substantially
11 	DOJ 	Guidelines, 	49 	Fed Reg. 	26,827 	(1984).
6

modifying 	existing 	facilities 	or 	constructing 	new 	facilities 	to
enter 	into production 	of 	the 	product. 12
Thus, 	in 	our view, 	the 	critical 	question 	to 	be 	asked 	and
answered 	throughout 	the 	course 	of 	this 	hearing 	is, 	"Could Canon
~
profitably 	raise 	the 	price 	of 	ERM 	toner 	above 	the 	competitive
level 	for 	a 	substantial 	period 	of 	time?" 	More 	specifically,
because 	ERM 	toner 	is 	used 	as 	one 	component 	of 	a 	larger 	copier
system, 	Your Honor 	should 	determine 	whether 	an 	effort by 	Canon
to 	exercise market 	power 	over ERM 	toner 	used 	in 	Canon machines
would 	in 	fact 	be 	profitable. 	It may 	be 	that 	Canon 	system users
could 	simply 	turn 	to 	competing 	copier 	systems 	if 	the 	costs 	of
Canon 	supplies, 	and 	therefore 	Canon 	systems, 	became
noncompetitive.
In 	this 	regard, 	it will 	be 	important 	to 	examine 	evidence
concerning 	the 	various 	factors 	that 	affect 	the 	cost 	of
photocopy 	production 	and 	the 	relative 	significance 	of 	the 	price
of 	toner. 13 	Even 	if 	users 	of 	Canon 	copiers 	may 	not have 	the
immediate 	ability 	to 	substitute toners 	supplied 	by other
producers, 	and 	the 	short 	run 	price 	elasticity of demand 	for
Canon 	toner 	is 	therefore 	small, 	the 	evidence 	could show that
Canon 	toners 	may 	still 	compete 'with 	other toners 	in the 	larger
arena 	of 	copier systems. 	Further, 	to 	the 	extent 	that 	copiers
12 	~. 	at 	26,827-28.
13 	The 	ITC 	noted 	Canon's 	claim that 	the 	cost 	of toner
represented 	15-20% 	of ~he total 	cost 	of 	a 	copier system over
its 	lifetime. 	certain 	Copier Toner 	From Japan, 	Inv. 	No. 	731-TA-
373 	(Preliminary) 	USITC 	Pub. 	1960 	at 	7 	(1987).
7

are 	obtained pursuant 	to 	lease 	agreements, 	rather 	than by
purchase, 	customers 	might have 	relatively 	little 	investment 	in
their 	copier 	systems 	and 	have 	little 	difficulty 	in 	switching 	to
other machines. 14
Receiving 	and 	evaluating 	this 	type 	of 	eVidenc~ in 	this
proceeding 	appears 	to 	be 	especially 	important 	in view of 	the
interest 	shown 	in 	the 	subject 	by 	all 	of 	the 	ITC 	Commissioners
in 	a 	recent, 	related 	proceeding, 	Certain 	Copier Toner From
Japan, 	Inv. 	No. 	731-TA-373 	(Preliminary) 	USITC 	Pub. 	1960 	(1987)
("certain 	Copier 	Toner"). 	In 	that 	antidumping proceeding, 	the
Commission was 	called upon 	to 	define 	the 	"like 	product"
affected 	by 	imports. 15 	Although 	the 	majority 	of 	the
Commissioners 	accepted ERM toner 	as 	a 	"like product" 	for
purposes 	of 	the 	preliminary 	antidumping 	investigation, 	they 	did
so with 	reservations, 	"for the 	purposes 	of 	further 	analysis."
The 	majority 	suggested that 	it might 	have defined 	the 	product
differently 	in 	a 	final 	investigation. 	Certain 	Copier Toner at
8. 	Commissioner Rohr 	also 	observed 	that 	"the more 	compelling
argument 	from 	the 	standpoint 	of 	the 	logic 	of 	the marketplace,
14 lsi.
15 	To 	find 	an 	antidumping violation, 	the 	ITC must
determine 	the 	"industry" 	affected 	by 	the 	alleged 	offending
imports. 	The 	statute 	defines 	"industry" 	as 	the 	domestic
producers 	of 	a 	"like product." 	19 	U.S.C. 	§1677(4) (A). 	In
turn, 	"like 	product" 	is 	defined 	as 	a 	product 	alike 	or 	similar
in 	characteristics 	and 	uses 	to the 	product 	subject 	to
investigation. 	19 	U.S.C. 	1677(10).
8

rests 	on 	the 	broader 	definition 	• 	. 	.
at 	20. 16
" certain 	Copier Toner
Chairman 	Liebeler 	and Vice 	Chairman 	Brunsdale went
further, 	writing 	separately 	to 	express 	their view that:
[T]he 	record 	is 	clear 	that 	customers 	buy 	copylng
systems, 	not 	toner, 	and 	that 	per-copy 	cost 	plays 	a
central 	role 	in 	their 	selection 	of 	a 	copying 	system.
One 	of 	the 	principal 	elements 	of 	per-copy 	cost 	is 	the
ongoing 	cost 	of 	toner. 	If 	the 	price 	of 	toner
available 	for 	a 	system 	is 	too 	high, 	the 	entire 	system
is 	uncompetitive 	with 	other systems. 	In 	such 	a
circumstance, 	customers, 	other things 	being 	equal,
will 	switch 	to 	a 	different 	copy 	system to 	gain 	the
per-copy 	savings 	resulting 	from 	the 	lower 	priced
toner. 	In 	short, 	from 	the 	customers' 	perspective,
various 	types 	of 	toner 	are 	realistic 	substitutes
because 	the 	different 	types 	of 	copiers 	are 	realistic
substitutes. 	customers 	freely 	choose 	between
different 	types 	of 	toner 	because 	they 	can 	easily
switch 	to 	a 	different 	type 	of 	copier. 17
ThUS, 	it 	would 	appear 	that 	some, 	if 	not 	all, 	of 	the 	ITC
commissioners 	would 	find 	useful 	Your Honor's 	assessment 	of 	the
evidence 	based 	on 	the 	analytical 	approach we 	suggest 	in 	this
brief.
The 	Ninth 	Circuit 	recently 	applied 	this 	sort 	of 	analysis
in 	General 	Business 	Systems 	v. 	North 	American 	Philips 	Corp.,
699 	F.2d 	965 	(9th 	Cir. 	1983), 	a 	case 	that appears 	to be very
similar 	to 	the 	pending matter. 	There, 	General 	Business 	Systems
("GBS"), 	a 	Philips 	distributor, 	charged 	Philips, 	a 	manufacturer
16 	This 	treatment 	of 	the 	"like product" 	definition 	did
not 	affect 	the 	decision 	because 	the 	ITC 	still 	determined 	that
there was 	insufficient market 	injury 	to warrant 	relief 	under
the 	antidumping 	statute. 	Certain 	copier Toner at 	1.
17 	Certain 	Copier Toner at 	28.
9

of 	small 	business 	computers, 	with monopolization 	and 	attempted
monopolization 	of magnetic 	ledger cards 	("mlcs").18
The 	key 	issue was 	whether mlcs 	for 	Philips 	computers
constituted 	a 	relevant 	market 	for 	analyzing 	the monopolization
~
and 	attempted 	monopolization 	claims 	brought by GBS 	against
Philips. 	The 	district 	court 	rejected 	this market 	definition
and 	the 	Ninth 	Circuit 	agreed.
[T]he market 	for 	Philips-compatible mlcs
was 	not 	insulated 	from 	the 	competitive
struggle 	between 	computer systems 	• 	• 	• 	•
Philips 	had 	little 	or no 	power 	to 	raise 	the
price 	of 	its 	mlcs 	without 	reducing 	its
profits 	because 	any 	such 	increase would
diminish 	sales 	of 	its 	computer system 	and
very 	likely 	adversely 	affect 	aggregate
profits. 	Were 	mlc 	prices 	significantly
increased, 	computer 	system buyers 	quickly
could 	shift to 	other 	sellers who, 	in 	turn,
could 	profitably 	expand 	their 	output 	to
meet 	the 	new demand 	• 	• 	• 	. 	[T]he market
for 	mlcs 	cannot 	be 	separated 	from 	the
general 	market 	for 	small 	business 	computer
systems.
18 	Philips 	computers 	stored memory on mlcs 	that were
compatible 	only with 	its 	own 	computers. 	Indeed, 	Philips 	did
not 	attempt 	to 	sell 	its mlcs 	for 	use 	in 	any 	other 	computer.
The 	mlcs 	were 	an 	essential 	component 	of 	the 	computer 	system;
the 	quality 	of 	the mlcs 	materially 	affected the 	system's
overall 	operating performance; 	and 	the 	cost 	of 	the 	replacement
mlcs 	was 	a 	substantial 	part 	of 	the 	total 	operating 	cost 	of 	the
computer system.
The mlcs 	were 	produced 	for 	Philips, 	per 	Philips'
specifications, 	by two 	German 	companies. 	GBS 	successfully
sought 	to 	purchase 	the mlcs 	directly 	from 	one 	of 	the 	German
companies 	and 	to 	compete with 	Philips 	in 	the 	sale 	of
replacement mlcs 	for 	the 	Philips 	computers. 	Philips, 	in
response, 	renegotiated 	its 	contract with 	the 	German company
supplying the 	mlcs 	to GBS, 	and 	the German company then 	ceased
selling mlcs 	to 	GBS.
10

General 	Business 	Systems 	v. 	North 	American 	Philips 	Corp., 	699
F.2d 	at 	972 	(emphasis 	in 	the 	original).19
Thus, 	just 	as 	small 	business 	computer systems, 	rather 	than
mlcs, 	comprised 	the 	relevant 	market 	in 	General 	Business
~.
Systems, 	it may 	be 	that 	the 	monopolization 	and 	attempted
monopolization 	charges 	in 	this 	matter, 	depending 	on 	the 	facts,
should 	be 	evaluated 	in 	the 	context 	of 	a 	copier systems market,
rather 	than 	a 	market 	for 	ERM toner 	or 	canon-compatible ERM
19 	See 	also MLC, 	Inc. 	v. 	North 	American 	Philips
Corp., 	1983-1 Trade 	Cas. 	(CCH) 	Para. 	65,351 	(S.D.N.Y. 	1983).
This 	was 	a 	parallel 	case 	to 	the 	one 	in 	California 	that 	was
brought 	by 	a 	different 	plaintiff, 	MLC, 	Inc., 	a 	company 	that
sought 	to 	import 	and 	distribute 	the 	mlcs 	used 	in 	the 	Philips
computers. 	Here, 	too, 	claims were 	advanced 	that 	Philips
monopolized 	the market 	for 	mlcs 	used 	in 	its 	own 	computers. 	The
district 	court 	extensively 	cited 	and 	agreed with 	the 	Ninth
Circuit's 	opinion, 	and 	dismissed 	the monopolization 	claims.
Another 	case 	that 	specifically 	followed 	the 	Ninth
Circuit's 	analysis 	in 	General 	Business 	Systems 	was 	Slocomb
Industries, 	Inc. 	v. 	Chelsea 	Industries, 	Inc., 	1984-1 Trade 	Cas.
(CCH) 	Para. 	65,932 	(E.D. 	Pa. 	1984), 	where 	the 	principal 	issue
was 	the 	definition 	of 	the 	relevant product market. 	The
plaintiff 	alleged 	that 	the 	defendant monopolized 	the market 	for
extruded vinyl 	profiles 	sold 	to 	fabricators 	of vinyl 	windows.
Window profiles were manufactured 	for 	different window designs
and 	could 	not, 	like ERM toner, 	readily be 	substituted 	for 	each
other.
These 	facts 	lead 	to the 	inescapable
conclusion that 	the 	proper market 	is 	not
extruded vinyl 	profiles. 	The 	real
competition 	is 	plainly not 	at 	the 	component
level, 	because 	the 	components 	are
fundamentally 	different. 	Any competition
between Slocomb 	and 	Poly-Tex would 	clearly
be 	at 	the 	final 	product 	level 	-- 	the market
for 	vinyl 	windows.
Slocomb 	Industries,Inc. 	v. 	Chelsea 	Industries, 	Inc., 	1984-1
Trade 	Cas. 	(CCH) 	at 	68,028.
11

toner. 	Whether 	Canon 	has 	the 	requisite 	market 	power 	in 	copiers
to 	warrant 	further 	antitrust 	concern by 	Your Honor 	or 	the 	ITC
is 	open 	to 	question.
CONCLUSION
Sound 	economic 	analysis 	and 	antitrust 	principles 	suggest
that 	Your Honor 	should 	require 	Aunyx 	to 	demonstrate 	either that
ERM 	toner 	for 	Canon 	copiers 	is 	a 	meaningful 	line 	of 	"trade 	and
commerce" 	subject 	to monopolization 	or 	that 	Canon has
sustantial 	market 	power within 	a 	larger 	copier market.
Respectfully 	submitted,
M:~,;I~If~Director
Bureau 	of 	Competition
E0::1~Jr-j~Assistant 	Director
(International 	Antitrust)
~~.~Steven A. 	Rothman
Attorney
Bureau 	of 	Competition
Attorneys
Federal 	Trade 	Commission
Washington, 	D.C. 	20580
(202) 	326-2936
12

CERTIFICATE 	OF SERVICE
I, 	Steven A. 	Rothman, 	an 	attorney with the 	Federal 	Trade
Commission, 	hereby 	certify that 	the 	original 	and 	fourteen 	copies
of 	the 	foregoing 	Prehearing 	statement 	of 	The 	Feqeral 	Trade
Commission have 	been 	filed 	with 	the 	Secretary of 	the
International 	Trade 	Commission, 	and 	service has 	been made 	on the
following 	parties, 	this 	20th day 	of August, 	1987, 	in the manner
indicated: By Hand
Kenneth R. 	Mason
Secretary
U.S. 	International 	Trade 	Commission
701 	E Street, 	N.W.
Washington, 	D.C. 	20436
By 	First 	Class Mail
The Honorable John J. 	Mathias
Administrative 	Law Judge
Interstate 	Commerce 	Commission Building
12th street and 	Constitution Avenue, 	N.W.
Room 	6317
Washington, 	D.C. 	20036
Stephen L. 	Sulzer, 	Esq.
Commission 	Investigative Attorney
U.S. 	International 	Trade 	Commission
701 E Street, 	N.W.
Washington, 	D.C. 	20436
Harvey M. 	Applebaum, 	Esq.
Paul 	J. 	Tagliabue, 	Esq.
Covington 	& Burling
1201 	Pennsylvania Avenue, 	N.W.
Washington, 	D.C. 	20044
Joseph M. 	Fitzpatrick, 	Esq.
Fitzpatrick, 	Cella, 	Harper 	& Scinto
277 	Park Avenue
New York, 	N.Y. 	10172
Norman Moloshok, 	Esq.
Richard Silberberg, 	Esq.
Delson 	& Gordon
605 	Third Avenue
New York, 	N.Y. 	10158

Bart 	S. 	Fisher, 	Esq.
Patton, 	Boggs 	& Blow
2550 	M street, 	N.W.
Washington, 	D.C. 	20037
Ralph Warren 	Sullivan, 	Esq.
Malloy 	& Sullivan, 	P.C.
59 	Water 	Street
Hingham Harbor, 	Massachusetts
Herbert 	F. 	Schwartz, 	Esq.
Glenn A. 	Ousterhout, 	Esq.
Fish 	& Neave
875 	Third Avenue
New 	York, 	N.Y. 	10022-6250
02043
Mr. 	Charles 	S. 	Stark
Antitrust 	Div./ 	u.S. 	Dept. 	of Justice
Room 	7115, 	Main Justice
Pennsylvania Avenue 	& Tenth 	Street, 	N.W.
Washington, 	D.C. 	20530
Darrel 	J. 	Grinstead, 	Esq.
Dept. 	of 	Health 	& Human 	Services
Room 	5362, 	North 	Building
330 	Independence Avenue, 	S.W.
Washington, 	D.C. 	20201
steven A. 	Rothman
Attorney
August 	20, 	1987