Kodak
Kodak Case Study
Company Argument
MBA-565
Summary In a 1921 consent decree, the government concluded that Eastman Kodak, the pioneer firm of amateur photography, had violated Section 2 of the Sherman Act. By buying competitors and establishing exclusive dealing contracts with retailers, the government claimed that Kodak was acting as a monopoly. The 1921 decree barred Kodak from continuing with these practices. By 1954, Kodak enjoyed a 90% share of the color film market and a 90% share of the color photofinishing market at the same time. Because Kodak sold their color film only as a package deal with processing included in the price, the government filed an antitrust suit resulting in a consent decree in 1954. Under this decree, Kodak could no longer connect the sale of film with the sale of processing. Kodak was also required to license the photofinishing technology to competitors. In 1994, the district court terminated both decrees in their entirety, determining that Kodak no longer has the power of controlling prices or unreasonable restricting competition. The text includes an argument challenging the district court’s ruling, citing among other things that Kodak’s market share and the premium price charged by Kodak for its product proves that Kodak is operating non-competitively and that the district court’s ruling should be reversed. We are taking the position of Kodak, and it is our contention that the recommendation to reinstate the decrees has no merit.
Assumptions The world of photography has changed radically since 1994 when this case was presented. For simplicity, we will write this case study as if it were 1994. With that in mind, we will assume that digital photograph technology is in its infancy and that Kodak has no idea of the gravity that this technology will have on the industry. We are assuming that store-brand film (film carrying the Walgreens or K-Mart name, for example) is manufactured by one of the five
Company Argument
MBA-565
Summary In a 1921 consent decree, the government concluded that Eastman Kodak, the pioneer firm of amateur photography, had violated Section 2 of the Sherman Act. By buying competitors and establishing exclusive dealing contracts with retailers, the government claimed that Kodak was acting as a monopoly. The 1921 decree barred Kodak from continuing with these practices. By 1954, Kodak enjoyed a 90% share of the color film market and a 90% share of the color photofinishing market at the same time. Because Kodak sold their color film only as a package deal with processing included in the price, the government filed an antitrust suit resulting in a consent decree in 1954. Under this decree, Kodak could no longer connect the sale of film with the sale of processing. Kodak was also required to license the photofinishing technology to competitors. In 1994, the district court terminated both decrees in their entirety, determining that Kodak no longer has the power of controlling prices or unreasonable restricting competition. The text includes an argument challenging the district court’s ruling, citing among other things that Kodak’s market share and the premium price charged by Kodak for its product proves that Kodak is operating non-competitively and that the district court’s ruling should be reversed. We are taking the position of Kodak, and it is our contention that the recommendation to reinstate the decrees has no merit.
Assumptions The world of photography has changed radically since 1994 when this case was presented. For simplicity, we will write this case study as if it were 1994. With that in mind, we will assume that digital photograph technology is in its infancy and that Kodak has no idea of the gravity that this technology will have on the industry. We are assuming that store-brand film (film carrying the Walgreens or K-Mart name, for example) is manufactured by one of the five