13

The Commission says the November 16, 1948 contract was an agreement to divide customers and thus create a

monopoly. But the record clearly indicates the execution

of the contract prevented a monopoly in the supplying of mechanical shorthand machines. In 1948 LaSalle was greatly in

need of many machines. Its jigs and tools were worn and obsolete; it had exhausted the possibilities of getting others to

manufacture the machines. In desperation LaSalle turned to Petitioner. Had the contract not been executed it is a fair

inference LaSalle would have had to abandon the manufacture of Stenotype machines

and Petitioner's Stenograph machine would have been alone in the field. Instead of creating a monopoly in that respect

the contract prevented a monopoly.

15

The Commission apparently detects something sinister in LaSalle's changing from the Co-operative Plan to the Package

Plan. In May, 1948, six months prior to the execution of the contract, LaSalle called in all its Institute Registrars and

announced the change from the Co-operative Plan to the Package Plan. As previously pointed out, this change was in the

exercise of good business management. LaSalle's net profit was thereby increased $20 per sale. The net effect of the

change was to remove the burden of the salesmen's commissions from LaSalle and to place that burden upon the

schools. There is no substantial evidence in the record which connects up this change in policy with the November, 1948

contract.

16

LaSalle realized that its change to the Package Plan might prove unacceptable to certain schools which had a

considerable investment in the promotion of mechanical shorthand instruction. It was a genuine advantage to LaSalle to

be able to require Petitioner to supply mechanical shorthand machines to such schools. It would obviate the possibility of

an action for breach of contract.

17

M. H. Wright, testifying as to his understanding of Paragraph 7 of the contract, said: "I think the essence of the agreement

is that if this package that LaSalle was offering was not acceptable to a school, and LaSalle so told us, we would be willing

to take that school over, so they wouldn't be deprived of the service they had advertised." Kendall, Manager of LaSalle,

testified to the same effect.

18

In addition to relying on Paragraph 7 of the agreement, the Commission relied on several letters which passed between

Petitioner and LaSalle, and on certain correspondence between LaSalle and its customers or potential customers. The

letter principally relied on was dated December 9, 1948 and was written by T. K. Elliott to Herman Miller. In 1948 Elliott

had the title of Vice President and Sales Manager of Stenotype. By the date of the contract Elliott, because of the

condition of his health and business mistakes, had been relieved of many of his responsibilities. He had no part in the

negotiation of the November 16 contract. He denied under oath that prior to the hearings he had ever heard of Paragraph

7 of the contract. As Elliott testified "* * * I was the sales manager on the way out. I wasn't included in the negotiations and

I thought at the time I should have been." Miller was the owner of a school in Los Angeles, California, known as "The

Stenotype Company of California," and a school in San Francisco known as "Stenotype Certified School." He had a ten-

year contract due to expire in May, 1949, whereby he represented LaSalle on the West Coast.

19

In the letter Elliott informed Miller that LaSalle had arranged with Petitioner to manufacture a new Stenotype machine. He

then stated: "Naturally, this deal entails some agreements between us. One of those agreements was that we would not

try to steal customers from each other. We agreed with Wright that we would not try to open any new schools which are

not at present franchised if he has another school in the immediate territory. * * *"

20

If this letter had been authorized by LaSalle or written by an officer in authority, there might be an inference that Petitioner

and LaSalle were intending to avoid raiding tactics upon each other. But it does not imply an agreement to transfer

customers from one to the other. It does not show an agreement to confine sales activities to certain types of customers.

Under the circumstances we do not consider the letter to be substantial evidence in support of the Commission's charge

of an illegal agreement.

21

The Commission refers to isolated sentences in other letters and documents. We shall not narrate them in detail. We have

given them careful consideration. We quoted from the Elliott-Miller letter because it was, by far, the strongest bit of

evidence which the Commission produced. We conclude that the contract of November 16, 1948, together with the letters

and documents referred to by the Commission, do not provide substantial evidence to support the Examiner's findings

which were approved by the Commission.

22

Comment should be made upon one further point urged by the Commission. The Commission found that as of 1951

Petitioner was doing business with fifteen schools bearing the name of "Stenotype" or "Stenotype Institute," but this fact

cannot be considered evidence to demonstrate the carrying out of an alleged illegal agreement. The record shows

Petitioner commenced selling to seventeen Institutes prior to the filing of the complaint, and it had sold to fifteen prior to

the date of the alleged illegal agreement. Only two of the seventeen were "acquired" by Petitioner in the more than four

years after the date of the contract and one of these was "reacquired" by LaSalle in 1951.

23

We are convinced from a study of the entire record that following the date of the alleged agreement Petitioner made about

the same inroads into LaSalle's business as it had made prior to the date of the agreement. On the record as a whole we

conclude that there is no substantial evidence to support the Commission's charges, and that its order dated March 18,

1955 should be vacated and set aside.

CC∅ | Transformed by Public.Resource.Org

How Stenograph Machines Began (Cont’d)

14

Apparently the Commission approved the Examiner's conclusion that for LaSalle to agree that Stenographic was to

become its source of supply of Stenotype machines was a "suspicious circumstance." There seems to us to be no

substantial basis for such conclusion. The agreement provided LaSalle with a new source of supply of Stenotype

machines; it obtained new dies and tools to replace obsolete ones; it obtained an enforceable contract right to receive

25.000 machines over a five-year period.

233 F.2d 755

STENOGRAPHIC MACHINES, Inc., Petitioner,

v.

FEDERAL TRADE COMMISSION, Respondent.

No. 11458.

United States Court of Appeals Seventh Circuit.

May 29, 1956.

L. M. McBride, Robert B. Gerrie, Chicago, Ill., James T. Welch, Washington,

D. C., McBride & Baker, Chicago, Ill., of counsel, for petitioner.

Robert B. Dawkins, Asst. General Counsel, J. B. Truly, Attorney, Earl W. Kintner,

General Counsel, E. K. Elkins, Attorney, Washington, D. C., for Federal Trade

Commission.

Before DUFFY, Chief Judge, and MAJOR and LINDLEY, Circuit Judges.

DUFFY, Chief Judge.