Shock for the Champ

Tiny Berkey kayos Kodak in first antitrust round

It was as if Muhammad All, in his hardest fighting trim, had been flattened by some tank-town lightweight. Berkey Photo, a financially rickety New York-based photo-products manufacturer and retailer of cameras, film and chemicals, with sales of about $200 million a year, won a favorable jury verdict in a marathon antitrust action against Eastman Kodak (1976 sales: $5.4 billion). During the trial, which lasted six months, Berkey claimed that it had been grievously damaged by Kodak's alleged monopoly power; Berkey lost $24.2 million in the first nine months of 1977. To the astonishment of many legal experts, the jury agreed, finding that Kodak had monopolized the U.S. market for cameras, film and color-print paper and, to boot, had violated the fair-pricing provisions of the Robinson-Patman Act.

Hard-pressed Chairman Ben Berkey, who, ironically, is trying to dispose of his company's unprofitable camera-manufacturing division, crowed: "I am delighted with the verdict." However, he will have to wait awhile for any money. The jury will not meet until Feb. 21 to decide on an award (Berkey is seeking $900 million). More important, Kodak Chairman Walter Fallen told his top managers at headquarters in Rochester that Kodak will appeal, be vindicated and continue to operate "as we have in the past."

That is not only hubris. Nothing is certain in the murky field of antitrust law, and cases move glacially; the appeal may take several years to decide. And Kodak, with its enormous resources--$780 million in cash and marketable securities --will doubtless fight with fury to preserve the principle, as Fallen sees it, that the antitrust laws should not insulate competitors from the rigors of the marketplace.

Kodak lawyers contended that the company had reached its pre-eminent position in the industry through skill, foresight and creative research. Far from being an invulnerable monopoly, lawyers claimed, Kodak was losing market share in pocket cameras, photographic paper and photo-finishing products. Said the lawyers: "In cameras, the competition is simply amazing."

Most of that competition, however, is coming from foreign companies. In the U.S., only Polaroid, with its instant cameras and film, remains a strong competitor of Kodak's in the amateur camera and film market. GAF abandoned that business last year because, said Chairman Jesse Werner, "it has become impossible to compete." Bell & Howell, which reached an out-of-court settlement of an antimonopoly suit against Kodak, has incurred losses in its consumer photo business since 1974 and has joined forces with two Japanese firms to market their products in the U.S.

Legal echoes of its competitive battles will keep Kodak tied up in court for years, whatever the final Berkey verdict. GAF has filed an antitrust suit asking the courts to splinter Kodak into no fewer than ten separate businesses. Pavelle, a tiny New Jersey firm that sank into bankruptcy in 1975, has brought suit asking, among other things, that the trademark "Kodak" be as freely available to the public as the term aspirin. Polaroid has also sued, contending that Kodak's instant cameras and print film infringed on Polaroid patents. Most ominous of all, the Department of Justice has demanded a mass of Kodak documents, a possible tip-off that it too is preparing an antitrust case.

Nobody on Wall Street is confident enough to assess the long-term legal dangers to Kodak. But the company's stock has been sliding since 1973, when it reached an alltime high of 151%. Last week, in heavy trading after the Berkey verdict, it dropped more than 3 points, to a close of 45%.

That seems a rather drastic devaluation. Kodak, which has spent more than $2 billion on research and development during the past decade, is still a prime moneymaker. In the first nine months of 1977 it earned profits of $417.3 million, down slightly from $429 million a year earlier, but Kodak's pretax operating profit is a lofty 26-c- of each sales dollar. -

This file is automatically generated by a robot program, so viewer discretion is required.