Full opinion text
MEMORANDUM OPINION ZIRPOLI, District Judge. On October 27, 1969, pursuant to pretrial orders previously entered by this Court, trial began in the 24 above numbered civil actions filed by six different dealer plaintiffs seeking to recover damages for alleged violations by four named defendants of the state and federal antitrust laws. By stipulation of the parties, filed November 27, 1968, jury trial was waived and trial was held before the Court sitting without a jury. Pursuant to pretrial orders No. 15, dated April 1, 1969, and No. 17, dated June 26, 1969, the issues of the first phase of the trial were limited to alleged violations by defendants of Section 1 of the Sherman Act (15 U.S.C. § 1), and impact on the dealer plaintiffs. Broadly stated, the issue presented was whether any of the defendants combined, conspired, or agreed with any other defendant or co-conspirator in violation of Section 1 of the Sherman Act. Defendants filed answers denying the material allegations of the complaint and after 23 pretrial orders had been entered, trial commenced before the Court on the date hereinabove stated. Plaintiffs in their post-trial brief assert that the principal acts of the defendants’ combination and conspiracy were (1) the stabilization of prices and elimination of competition through verification of price and terms exceptions; and (2) direct price fixing through the concerted withdrawal of price and terms exceptions occurring on December 15, 1965 (price); on March 1, 1966 (credit) ; and in late 1966 (packaging) . After plaintiffs had presented their evidence and concluded their case, defendant Fibreboard Corporation moved for dismissal of the cases against it (Nos. 48549, 46640, 48797, 48214 and 48798). On February 19, 1970, the Court granted said motion and on April 17, 1970, made and entered its findings of fact, conclusions of law and judgment in favor of Fibreboard. Following the granting of Fibreboard’s motion, the remaining defendants presented their evidence. The remaining defendants are United States Gypsum Company (hereinafter referred to as “USG”), National Gypsum Company (hereinafter referred to as “National”) and Kaiser Gypsum Company (hereinafter referred to as “Kaiser”) . Plaintiffs offered no rebuttal evidence. On March 19, 1970, the taking of evidence was concluded and the Court took the cases under submission, subject to the presentation by the parties of proposed findings of fact and conclusions of law, together with supporting briefs. The Court, having considered the evidence, the proposed findings, briefs and arguments of the parties, makes the findings and conclusions of law hereinafter set forth in this memorandum opinion. In its consideration of the claims of plaintiffs that defendants engaged in the conspiratorial activities asserted in (1) and (2) above, the Court will treat each claim separately. Preliminary thereto, the Court deems it advisable to and makes its findings as to the Court’s jurisdiction, the parties to the litigation, the nature of the product involved, the structure and performance of the industry, the economic climate in which such industry operated during the years involved in this litigation and the pricing practices of the industry. The factual background relating to the withdrawal of price and terms exceptions occurring on December 15, 1965 and March 1, 1966 will be separately reviewed, following the Court’s ruling on the effect of the verification communications of the defendants as to price and terms exceptions (deviations from list or published prices and terms). Jurisdiction. The Court has jurisdiction of the subject matter and the parties to this litigation. Its jurisdiction to adjudicate the claims of plaintiffs under Section 1 of the Sherman Act and the proper venue of these cases has been conceded by all parties. Except as otherwise stated or required by context, the facts found in this memorandum opinion occurred or existed within the period January 1,1959 to December 31,. 1968, and occurred or existed within the continental United States. Parties Plaintiff. Plaintiff Wall Products Co. is a California corporation organized in October, 1960. It actively engaged in business exclusively as a dealer in wallboard from July, 1963 to August or September, 1966, under various fictitious names, including “Delta Supply.” Plaintiff Ranier Enterprises, Inc. is a California corporation organized in August, 1964. It actively engaged in business exclusively as a dealer in wallboard from September, 1965 through June 30, 1966, under the fictitious name of “Delta Counties Supply.” Plaintiff Cover-All Building Materials, Inc. is a California corporation organized in February, 1964. It actively engaged in business exclusively as a dealer in wallboard from February, 1964 to 1967. Plaintiff Di-Wal Building Materials was a partnership composed of David C. Walker and George DiCesare. It commenced business as a dealer in various building materials including wallboard in February, 1962. In early 1963 Walker purchased DiCesare’s partnership interest and thereafter operated Di-Wal Building Materials as a sole proprietorship engaged in business as a dealer in wallboard. At varying times from February, 1962 to early 1967 Walker operated yards in San Rafael, Vallejo, Santa Rosa, Berkeley, San Jose and Castro-ville, California. His expansions were financed largely through extensions of credit from the gypsum wallboard producers. Plaintiff Di-Wal, Inc. is a California corporation organized in July, 1964. In July, 1964 Walker transferred the assets of Di-Wal Building Materials in San Rafael to Di-Wal, Inc., and Walker has always been its president and sole shareholder. Di-Wal, Inc. actively engaged in business exclusively as a dealer in wallboard from July, 1964 until early 1967. Plaintiff Walker Wallboard Company, Inc. is a California corporation organized in May, 1965. It conducted business under the fictitious name of “DiWal, Ltd.” and actively engaged in business exclusively as a dealer in wallboard from May, 1965 until early 1967 with its principal place of business in San Francisco. Plaintiff Klamath Lumber Company of San Carlos is a California corporation organized in 1952. It actively engaged in business as a distributor of building materials, including wallboard, from 1952 until approximately February, 1968. Plaintiff E & M Supply Company is a California corporation organized in November, 1963-. It actively engaged in business as a dealer in gypsum products and roofing materials from November, 1963 to September, 1967. Since early 1965 it dealt exclusively in gypsum products. Plaintiff California Supply Company of San Jose, Inc. is a California corporation organized in April, 1948. Plaintiff John Azland is-4he duly appointed trustee of the bankrupt estate of this plaintiff corporation (adjudicated December 30, 1966). It actively engaged in business as a distributor of gypsum wallboard from 1950 or 1951 to May or June, 1966 when its products were sold to plaintiff Wall Products Co. Prior to 1964, California Supply Company of San Jose was the largest volume gypsum wallboard dealer in Northern California. Parties Defendant. Defendant United States Gypsum Company (USG) is a corporation organized under the laws of the State of Delaware with its main office in Chicago, Illinois. USG manufactures a variety of products, including gypsum wallboard. Defendant National Gypsum Company (National) is a corporation organized under the laws of the State of Delaware with its main office in Buffalo, New York. National manufactures a variety of products, including gypsum wallboard. Defendant Kaiser Gypsum Company, Inc. (Kaiser) is a corporation organized under the laws of the State of Washington with its main office in Oakland, California. Kaiser manufactures insulated wallboard products and gypsum products, including gypsum wallboard. Defendant Fibreboard Company (Fibreboard), as to whom the Court granted a motion to dismiss, is a corporation organized under the laws of the State of Delaware with its main office in San Francisco, California. Plaintiffs have from time to time alleged or asserted that certain other gypsum wallboard producers, listed below, were co-conspirators with the named defendants. For the purposes of brevity such other producers will be referred to herein by the indicated abbreviated terms: The Flintkote Company and The Blue Diamond division of The Flintkote Company or Blue Flintkote Diamond American Gypsum Co. (now a division of Susquehanna Corp.) American Georgia-Pacific Corp., Bestwall Gypsum Division Georgia-Pacific Bestwall Fabricated Products Division and Barrett Division, Allied Chemical Corporation Allied Dierks Forests, Inc. Dierks Grand Rapids Gypsum Company Grand Rapids Texas Gypsum Company Texas Gypsum Republic Gypsum Co. Republic The Celotex Corporation a division of Jim Walters Corporation Celotex Johns-Manville, Inc. Johns-Manville The Ruberoid Co. Ruberoid Big Horn Gypsum Company Big Horn Flintkote was named as a party defendant in some of these actions but was voluntarily dismissed as a party prior to trial. During the course of the trial plaintiffs’ counsel asserted that Bestwall was sometimes in and sometimes out of the alleged conspiracy. The Gypsum Association is a trade association founded in 1930 by 13 producers of gypsum products. In 1962 the Association was incorporated under the Illinois Not-For-Profit Corporation Act. At the time of trial its members were Celotex, Flintkote, Georgia-Pacific, Grand Rapids, Kaiser, National, Republic, Texas and USG. Its members at the time of trial produced over 90 per cent of the products made from calcined gypsum in the United States. Each defendant is or has been engaged in interstate commerce in the manufacture, distribution and sale of gypsum wallboard and gypsum wallboard is sold and shipped in interstate commerce by the other producers of gypsum wallboard with whom the defendants compete. Product Description and Industry Structure and Performance. The principal product involved in these cases is gypsum wallboard (wallboard) which is made from the mineral gypsum (CaS042H20), one of the commonest minerals in existence, found all over the world with many large deposits in 23 states in this country. It is found in rock form and is extracted by blasting the face of the mine or quarry. After it is crushed, ground and calcined (cooked) to drive out the water of crystallization, it is known as plaster of Paris or stucco. When water is added back to stucco the gypsum reverts to its original rock form. Wallboard is made from essentially the same stucco that is used for wall plaster. The stucco is mixed with water to form a slurry which is then imposed upon a moving sheet of paper and another sheet of paper (both fed from rolls) is superimposed on the top of the stucco. As this “sandwich” moves along a long belt the stucco sets and reverts to its original rock form. At the end of the board machine a knife cuts the typically four foot wide wallboard into adaptable lengths. After passing through a kiln where excess moisture is removed, the board attains its maximum strength. Because of the inherent fireproofing qualities of gypsum wallboard and continuous developments and improvements made in it, the product grew in acceptability as a wall covering. The demand for such wallboard increased at a rapid rate after World War II and in 1969 it probably accounted for well, over 90 per cent of all interior partitions and ceilings in one and two family residential construction. Gypsum plaster accounts for most of the remaining residential partition and ceiling construction. The demand continued substantially unabated into the early 1960’s and during this period most gypsum companies were operating at a very high level of capacity utilization, frequently exceeding the rated capacity of the then existing facilities to produce and supply gypsum wallboard. Total demand for gypsum wallboard is not materially influenced by changes in the current price of gypsum wallboard since the cost of wallboard is a relatively small element in the total cost of a residential or commercial structure. The cost of gypsum wallboard used in the construction of an average sized house calculated at approximate 1969 published prices in the San Francisco Bay Area is $382. This compares with the total estimated construction cost of an average house for 1968 of $18,000 (not including the cost of the land, builder’s profit or financing cost). Otherwise stated, the cost of wallboard amounts to only about 2 per cent of the total construction of a typical house. As a consequence, the demand for such wallboard is inelastic to price and even substantial changes in gypsum wallboard prices are not likely to change the quantity consumed. Between 70 per cent and 75 per cent of the wallboard sold is 1/¡ or % of an inch in thickness with 1/2 inch predominating. With relatively few exceptions the wall-i board purchased by plaintiffs in these! proceedings was y2 or % of an inch in, thickness. Gypsum wallboard is a homogeneous product in that there are no substantial quality differences between brands. Buyers ordinarily select a particular brand of wallboard for reasons other than quality. Each brand of wallboard is interchangeable in use with any other brand of wallboard. Gypsum plaster and gypsum wallboard prior to World War II were sold by gypsum producers to lumber and building material dealers located in practically every community throughout the country. The function of the lumber and material dealer was to warehouse the product and sell it to local contractors and homeowners as needed for use in the erection and repairing of walls and ceilings. Gypsum plants producing wallboard were not built to have much storage space — the storing of the product was one of the functions of the dealer. The huge demand for housing which began immediately after World War II and the speed with which gypsum wallboard could be installed, necessitated new distribution practices and brought into being the specialty wallboard dealer, the class of purchasers represented by the plaintiffs. This greatly accelerated demand for housing brought with it large tract builders, building two or three hundred or more homes at a time, having for their basic objectives speed of installation and economy. Gypsum wallboard was a natural product for such builders. To obtain the speed and expertise that ordinary carpenters did not provide, such builders subcontracted the wallboard installation work to contractors who became known as Special Wallboard Applicators. The special wallboard applicator improved the technique of attaching wallboard to the stud and taping the joints to make a smooth, monolithic surface. The increased availability of such wallboard applicators (trained mechanics with new tools) increased the acceptability of wallboard in building construction and by 1960 the use of wallboard in walls and ceilings had far exceeded the use of plaster. To meet these changes, occasioned by the accelerated demands of the applicators, increased stocking facilities and prompt delivery service of a quality not normally supplied by local lumber or building material dealers, there came into being specialty wallboard dealers, who operate relatively small businesses possessing the necessary equipment and offering the convenience of location needed to provide these special services. With the increased usage of wallboard, gypsum producers enlarged their existing wallboard production facilities and built new plants, and the new entrants into the industry also built new plants. During the period 1945 to 1960 the capacity to manufacture gypsum wallboard more than tripled. The continuing increased ratio of demand to capacity brought relatively stable prices and industry profits were quite attractive. This, combined with the general expectation that the 1960’s would see a further boom, resulted in another period of rapid expansion in gypsum wallboard capacity and made new entry into the industry relatively easy for those prepared to undergo the substantial initial cost of plant construction. , - 'The gypsum wallboard industry in the United States is oligopolistic in structure and because the product ’is basically homogeneous or undifferentiated it is described by defendants' expert as “a classic type of undifferentiated oligopoly." In 1960 industry capacity, expressed in millions of square feet (MMSF) of % inch wallboard on a 290 day year basis, was approximately 8,388. This capacity rose to 9,698 in 1963, 9,933 in 1964, 10,-795 in 1965, 11,440 in 1966, 11,519 in 1967 and 11,822 in 1968. Thus a total of 3,434 MMSF of capacity was added during this 8-year period (an increase of 41 per cent). A substantial portion of this increment (1,507 MMSF or 44 per cent) was added during the years 1965 and 1966. In comparison, only 235 MMSF of capacity were added during the year 1964 and only 79 MMSF during 1967. The defendants USG, National, Kaiser and Fibreboard, together with Flintkote, added 1,287 MMSF of capacity during the two year period of 1965 and 1966, accounting for about 85 per cent of the total capacity added by the industry during those years. The period 1960 to 1968 was a period of significant growth for single plant producers. The number of single plant producers tripled during this period and the total capacity of all such producers was expanded from approximately 300 MMSF to 900 MMSF. By .the end of 1968 single' plant producers thus accounted for 7.8 per cent of total industry capacity as compared to the 3.8 per cent of total industry capacity which they held in 1960. Seventeen plants were added throughout the United States during the period 1960 to 1968 with the result that there were 78 operating plants in 1968. The defendants owned 50 of these plants, distributed as follows: USG 24, National 19, Kaiser 6, and Fibreboard 1. , ÍJ í Over the period 1960 to 1968 the nationwide gypsum wallboard market shares of the two largest producers, USG and National, declined while there was a significant increase in the market shares of the other smaller multiplant producers. The number of single plant producers increased from two in 1960 to six in 1968. USG’s share of the gypsum wallboard market in the United States in 1960 was approximately 43 per cent. This share declined steadily thereafter to a low point of 31.5 per cent in 1967 and then increased to 33.2 per cent in 1968. National’s share of said gypsum wallboard market in 1960 was approximately 28.4 per cent. This share declined steadily thereafter to 21.2 per cent in 1968. Kaiser’s share of “said gypsum wallboard market in 1961 was approximately 5 per cent. This share declined steadily thereafter to a low point of 4.6 per cent in 1966. This market share increased thereafter to 6.5 per cent in 1968. Flintkote’s share of said gypsum wallboard market in 1964 was approximately 5 per cent. This share steadily rose thereafter to about 7 per cent in 1968. Fibreboard’s share of said gypsum wallboard market in 1960 was approximately 3 per cent. This share increased thereafter to 4 percent in 1963 and declined steadily thereafter to less than 1 per cent in 1968. Fibreboard ceased selling gypsum wallboard in 1969. The share of producers other than defendants and Flintkote of said gypsum wallboard market in 1960 was in the range of 15 to 20 per cent. This share rose steadily thereafter to about 32 per cent in 1968. In/Í968jthe industry was composed of 14 producers with the two largest producers having*“56.4 per cent of industry sales. The four defendants and Flintkote had 71.5 per cent of the industry capacity an3“"accounted for 68.3 per cent of industry sales. The remaining nine producers had 28.5 per cent of the industry capacity and 31.7 per cent of industry sales; three of these were multiplant producers with 20.6 per cent of the industry capacity and six were single plant producers with a combined total of 7.8 per cent of the industry capacity. The structure of the gypsum wallboard industry in the 16 counties surrounding San Francisco Bay is also oligopolistic. These counties are Alameda, Contra Costa, Marin, Monterey, Napa, Sacramento, San Benito, San Francisco, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus and Yolo. In the year 1968 USG accounted for 19.5 per cent of the sales in this Bay Area market, National accounted for 14.4 per cent, Kaiser accounted for 19.7 per cent, Flintkote accounted for 17.1 per cent, Fibreboard accounted for 3.9 per cent and all remaining producers accounted for 25.4 per cent. As in the national market, there was in the Bay Area market during the mid-1960’s a substantial decline in the market shares of USG and of defendants as a group. USG’s share of the Bay Area gypsum wallboard market in 1963 was approximately 38 per cent. This share declined steadily thereafter to a low point of 16.5 per cent in 1967 and increased to about 20 per cent in 1968. National’s share of the Bay Area gypsum wallboard market in 1963 was approximately 5 per cent. This share rose steadily thereafter to a high point of 15.5 per cent in 1967 and thereafter declined to 14.4 per cent in 1968. Kaiser’s share of the Bay Area gypsum wallboard market in 1963 was _ 26 per cent. This share rose to a high point of 27.7 per cent in 1964 and declined steadily thereafter to 19.7 per cent in 1968. Flintkote’s share of the Bay Area gypsum wallboard market in 1963 was 16.4 per cent. This share declined steadily thereafter to a low point of 13.0 per cent in 1965 and fluctuated up and down thereafter to a high point of about 17 per cent in 1968. Fibreboard’s share of the Bay Area gypsum wallboard market in 1964 was 11.5 per cent. This share rose thereafter to a high point of about 13 per cent in 1966 and thereafter declined to about 4 per cent in 1968. Fibreboard ceased selling gypsum wallboard in this market in 196jh_ /The share bf producers other than defendants and j Flintkote of the Bay Area gypsum wall-I board market in 1963 was less than 5 \ per cent. Their share of this market ^thereafter rose steadily to a peak of 'about 25 per cent in 1968.1 ' There was a substantial amount of shifting from seller to seller by the buyers in the Bay Area market. They customarily purchased from more than one supplier and in varying proportions. There is a very close relationship between residential construction and the demand for gypsum wallboard. There is also a very close relationship between the general availability of credit and residential construction. As construction increases, the amount of wallboard used increases and conversely, slumps in construction activity show up in decreased demands for gypsum wallboard. The total value of residential construction put in place in California dropped from $3.5 billion in 1963 to $3.2 billion in 1964, to $2.5 billion in 1965 and to $1.6 billion in 1966. The prime rate of interest in the San Francisco Bay Area was 4% per cent from August, 1960 to December, 1965, when it rose to 5 per cent. Thereafter the rate rose steadily, except for a slight decline during 1967, to 7 per cent in January, 1969. In the period 1964-1965 the rate of growth in demand for gypsum wallboard began to decline. The principal causes for this decline were the increasing satisfaction of the post-war demand for new housing units and the lessening growth in demand attributable to substitution of gypsum wallboard for other wall coverings, the latter for the reason that by the mid-1960’s gypsum wallboard already constituted between 80 per cent and 90 per cent of all residential wall construction. During the same period, construction was completed on new and expanded wallboard manufacturing facilities which had been independently planned and commenced in the early 1960’s by defendants and other producers. The decline in construction began earlier and was more severe in California than in the United States generally. - USG’s net earnings for 1960 were 14.4 per cent of assets applicable to gypsum wallboard. This annual rate of return declined steadily to a low point of 7.6 per cent for 1968, except for a slight upturn for 1967. The quarterly net earnings as a percentage of such assets for 1964 and 1965 were as follows: Quarter 1964 1965 1st Q 11.6% 8.4% 2nd Q 14.7 10.7 3rd Q 14.4 10.6 4th Q 9.8 7.1 National’s company-wide net earnings as a percentage of the company’s total net worth for the year 1960 was 10 per cent. This rate declined steadily to a low point of 6.1 per cent for 1966 and 1967, and then rose to 7.0 per cent for 1968. National’s quarterly net earnings as a percentage of net sales for 1964 and 1965 were as follows: Quarter 1964 1965 1st Q 15.0% 11.6% 2nd Q 15.2 12.1 3rd Q 14.9 9.9 4th Q 12.5 6.1 Kaiser’s net profit, before taxes, as a percentage of fixed assets applicable to gypsum products for 1960 was 3.1 per cent. This rate rose steadily to a peak of 10.4 per cent for 1963, declined to 4.2 per cent for 1964 and thereafter for each of the years 1965 through 1968 Kaiser experienced losses which for 1967 reached a loss of 4.7 per cent of its fixed assets applicable to gypsum products. Fibreboard’s Gypsum Division sustained a net loss for 1960 of $582,000 and earned a net profit for 1961 of $216,000. Fibreboard’s Gypsum Division’s net profits increased steadily thereafter to a peak of approximately $1.1 mülion for 1963 and then declined for Í964 to approximately $800,000. For each of the years 1965 through 1968 Fibreboard’s Gypsum Division sustained losses reaching approximately $1.2 million for the year 1966. Flintkote’s gypsum divisions’ net profits for 1960 were approximately $2 million. These profits rose to a peak of about $2.4 million for 1962 and then declined steeply to losses of more than $1 million for each of the years 1965 and 1966. Thereafter these divisions earned small profits of about $150,000 for 1967 and 1968. USG and National each had total company assets in the range between $250 million and $1 billion. The average percentage return on net worth after taxes for the years 1960 through 1968 of all U. S. manufacturing corporations having assets in the range between $250 million and $1 billion compared with the returns on net worth, company-wide, of USG and National for the were as follows: same period All Mfg. Year Corps. USG National 1960 9.6% 12.7% 10.0% 1961 9.3 11.7 8.7 1962 9.2 11.3 8.6 i 1963 9.6 11.7 8.6 1964 10.9 12.0 8.2,. 1965 12.4 9.4 6.6 1966 12.9 8.3 6.1 1967 11.6 7.9 6.1 1968 12.0 8.2 7.0 Pricing Practices in the Industry. a. General Pricing Practices. Prior to about 1962, Gypsum Wallboard was sold in most of the country delivered to the customer on an F.O.B. plant price plus carload rail freight to the customer. When there was a freight advantage, as a result of which the delivered price to a customer from a competitor’s plant was lower, the freight was equalized to match the competitor’s delivered price. The two notable exceptions to this pricing system were the East Coast and California where zone delivered pricing was used. The F.O.B. system of pricing, with the equalization of freight frequently necessary to be competitive with another competitor’s plant, became increasingly difficult and complex. F.O.B. plant prices were not always the same, product weights varied from company to company, new plants were constructed from which it was necessary to calculate freight, a more complex product line with varying weights was developed and the adoption of truck delivery in some parts of the country, made it very difficult to compute the price to the customer. As a result of the problems caused by F.O.B. pricing, zone-delivered pricing was adopted in various parts of the country at various times. After 1962, most of the country was divided into delivered price zones, and in 1965 this process was completed with the zoning of the remaining parts of the country. It was then easier for the sales force and the customers to know what the price was. As a result of these changes, by the end of 1965, all gypsum was sold on the basis of zone delivered pricing. At that time, USG and National had 148 price zones in the United States, while the other manufacturers had somewhat fewer zones due to their not selling wallboard in all parts of the United States. Zone-delivered prices were arrived at by taking into account plant locations, lower competitive prices in areas that were closer to competitors’ plants, the cost of transporting the product to the market, and possible price discrimination where competing dealers were located in close proximity to each other on opposite sides of a zone boundary line. Where plants of competing producers were different distances from a particular market, their list prices for delivery in that zone were ordinarily the same regardless of the distance. This was so because the distant competitor, in order to compete in that market, had to meet the price of its competitor whose plant was in close proximity to the market. If the distant competitor wanted to enter the market and compete, his price had to be as low as his competitor’s price even though his freight cost was higher. This required a more distant producer to absorb freight with a resulting decrease in its mill net. The proximity of a gypsum wallboard producer’s manufacturing plant to a particular market area had a substantial effect upon its ability to compete in and serve that market area. Consequently, producers in several instances were faced with the alternative of constructing new plants or storage facilities in a particular marketing area or withdrawing from that market. For example, Kaiser was forced to cease its sales of gypsum wallboard and to withdraw from the Texas market because the freight cost from its Rosario, New Mexico plant did not permit it to compete in the Texas market (other than in the El Paso area) and show a sufficient return. Similarly USG constructed gypsum wallboard plants at the following locations after a competitor’s plant was built or announced in the area: Santa Fe Springs, California; New Orleans, Louisiana; Jacksonville, Florida; Shoals, Indiana; Sigurd, Utah; and Baltimore, Maryland. USG also found it necessary to build a storage warehouse in the Bay Area to meet competitive conditions in that market. The following gypsum wallboard producers built plants at the following locations after USG had a plant in the area: Flintkote at Sweetwater, Texas; Kaiser at Jacksonville, Florida; Bestwall, National, Kaiser and Flintkote in the Philadelphia area; Bestwall in the New York area; and National at Lorain, Ohio and at Waukegan, Illinois. From at least as early as World War II, most of the_ gypsum companies have had published prices" for gypsum wallboard. The formality of the published prices varied from company to company and from time to time. Some companies published prices in written form. Others only wrote letters to the trade announcing the dollar amount of a price increase or decrease, while yet other companies at certain times published their prices by word of mouth through their salesmen. It was the policy and objective of USG, National, Kaiser, Fibreboard and Flintkote to sell at these published or list prices. The general exception to this policy and practice was to meet competition. A similar procedure was followed with regard to other terms and conditions of sale. The various gypsum companies had standard policies and procedures of rail or rail and truck deliveries, packaging of wallboard, credit and cash discount terms, job protection, and points of delivery. The general exceptions were again to meet competition. As a general rule the published or list prices of the basic wallboard sizes in a geographical zone are the same for the major wallboard producers. The terms and conditions of sale, while they may vary from time to time, also tend toward uniformity. The overwhelmingly important factor influencing the buyer’s decision as to which brand of wallboard to buy is price. There is little to choose among the products of the various companies. The buyers are informed technical buyers and the product is tailored to the usage to which they put it, (i. e., it is uniquely designed for building walls and ceilings) so the choice as to seller is not conditioned in any very significant way by brand name or by differences in quality of the product. Even terms and conditions of sale are capable of being translated into monetary equivalents to a considerable degree and tend toward uniformity. There may be some service elements which one company is more capable of offering than another, but these are of lesser importance. As a result, it is exceedingly difficult for one wallboard manufacturer to sell its product at a higher price than its competitors. The changes in the démand capacity situation that overtook the industry in the early 1960’s had an unsettling effect on pricing. With a lower utilization of capacity plant costs go up. In order to reduce the fixed overhead there were strong incentives to cutting prices, extending credit, or “any kind of thing you could get to get an order.” However, there was no sales advantage to publish a lower price. Competition would only promptly meet the lower prices and since total demand was inelastic, the company would sell the same amount of wallboard at a lower price. As a result, price deviations increasingly appeared in the market in the form of exceptions to published (list) prices or terms. While it was the policy of all the defendant companies to sell only at list prices, all (until December 15, 1965) excepted meeting competition from this policy. Thus the deviations, when once introduced had a snowballing effect that affected the entire market. With respect to California, Mr. Harper, until recently the President of Kaiser, described this process as follows: What happened is that you had firms like American, Republic, Texas — I am just using those three — who were new plants and the market was very very poor in their marketing area. So what they did was to sell in California. It was a long haul, but they would reduce the price. That was to, how would you say, justify their ever building the plant or otherwise the plant would have not worked at all. So they shipped out of here and those of us who were in California which at that time was USG, Blue Diamond, Pabco and ourselves, in order to retain the volume of products that we had been selling, we had to meet their prices. Other witnesses similarly expressed the view that the greatest price deterioration was occurring in the areas where there was the greatest competition from the single plant producers. The purchasers of wallboard were prompt in exploiting any weakness in the market and pressing for concessions. They would often attempt to play one manufacturer against another for better prices or terms with the ultimate result that the number of exceptions and deviations spread through the industry. In attempting to remain competitive in the face of increasing reports from the field of deviations, the individuals in the various manufacturing companies with pricing authority were concerned with the uncertainty surrounding reports of claimed competitive deviations. To receive an actual invoice or quotation was extremely difficult. Generally, the decision had to be made on the basis of a judgment of the market and the persons involved with recourse to verification where necessary to avoid violation of the Robinson-Patman Act. Otherwise, defendants faced the ever present dilemma of going too low and possibly causing further price deteroriation or not going low enough and losing the business. In a commodity market in which the products are homogeneous, as is the case with gypsum wallboard, list prices are usually uniform within each marketing area. List price uniformity is even more likely where the principal buyers of such homogeneous products follow the practice of having two or more suppliers of the products. Under such conditions it becomes increasingly difficult for a producer to successfully sell at a higher price than its competitors, and if it sells at a lower price, competitors will quickly learn of it and meet it, thus resulting in uniform prices again, but at a lower level and without any increase in the producer’s share of the market. Except when necessary to meet special conditions in a particular marketing area or as to a particular customer, list price and actual selling price generally coincided. . . (■- /Up to and until December 15, 1965, it cannot be said that the existence of uni¡form list prices and contemporaneous I changes in list prices by competing gyp-1 sum wallboard producers resulted from ¿other than conditions of the market and |the industry, || Each producer was able to and did obtain from its customers almost immediate knowledge of the list price changes of competing producers. Changes or deviations from list price (as contrasted to changes in list price) were obtained from the customers and were often verified in the manner hereinafter described. Increases in the price of gypsum wallboard were usually announced by the initiator of the price increase substantially in advance of the effective date in order to afford an opportunity for customers to meet their existing resale commitments at current prices. In each instance one of defendants, usually USG or one of the other gypsum wallboard producers, initiated the price increase with the expectation that other sellers would follow the increase. i ,r¡ In many' instances the announced increase was followed within a few days by first one and then another of the gypsum wallboard producers. In some instances other producers did not follow with similar announcements, and in such instances the initiator of the price increase and those who had followed found it necessary to withdraw their announcements prior to the effective date thereof. In other instances, instead of following the announced price increase of the initiator, other producers announced different price increases. In those instances in which a competitor announced a lesser increase, the initiator found it necessary to conform its price changes to those of that competitor. A producer who did not withdraw or conform an announced price increase which had not been followed by other major producers found it difficult, in the conditions of the market, to remain an effective competitor. No one producer was always the price initiator. For example, on two occasions Kaiser initiated price increases in West Coast marketing areas but was compelled to withdraw them because its major competitors in the marketing areas involved did not follow Kaiser. Georgia Pacific and National also initiated price changes. Each gypsum wallboard producer if it followed the initiator of a price increase with its own price announcement, usually adopted the same effective date. Each producer following the price announcements of others did not adopt an earlier effective date because it could make no sales of gypsum wallboard at the new higher price while other producers remained at the old and lower price. A later effective date was not usually adopted by such producers because to do so would cause gypsum wallboard producers who had announced an earlier effective date to postpone their effective date to the latest effective date, for the reason that those producers having an earlier effective date could not make any sales of gypsum wallboard at the increased price between that date and the latest effective date. Gypsum wallboard producers, as a matter of customer relations, generally notified major customers of price increases by personal communication immediately prior to general distribution of price announcements to the trade. Price reductions usually were effective immediately upon announcement or retroactively. This was so because if advance notice was given, customers withheld purchases until the effective date of the reduction. Usually price reductions were preceded by a period of time during which the producer found it necessary, to remain competitive, to grant numerous price deviations below its list prices. Prior to IÜG2 most sales by gypsum wallboard producers, including defendants, were at list prices. Commencing sometime in 1962 and through to mid-December, 1965, a gradually increasing number of gypsum wallboard sales were made at off-list prices, in the form of individual price deviations to particular customers to meet competitive prices. Price deviations granted by one producer were usually quickly matched by competitors. The defendants individually adopted and followed the policy and practice of prohibiting the granting of price deviations except to meet competitive offers and each defendant through its officers testified that such deviations were made to achieve faithful compliance with the requirements of the Robinson-Pat-man Act and that the deviations were matched but not bettered because the Act’s “meeting competition” defense to price discrimination does not sanction undercutting a deviation. From time to time in the period from 1962 to December 15,1965, many dealers, including plaintiffs, were receiving deviations below list price from one or more of the gypsum wallboard producers. In the case of plaintiffs, these deviations ranged from $1.00 to $4.00 off list, depending upon the time, the plaintiff and the producer. These price deviations tended to spread and to cause sufficient pressure on list prices to force them down. Thus, reductions in list prices usually reflected a recognition that actual selling prices already had in fact declined. , Despite their stabilizing effect on price, up to and until at least about November 17, 1965, when USG announced its intention to withdraw price exceptions, effective December 15, 1965, jt cannot be said that the foregoing "described practices of the defendants were the result of unlawful agreement or eonspiratorial conduct. They appear to have been the natural market reactions one would realistically expect in an industry composed of relatively few sellers of a homogeneous product and the inevitable consequences of defendants’ efforts to comply with the requirements of the Robinson-Patman Act. There is no substantial or clear evidence to the contrary. Other significant competitive practices were “job price protection” and the use of cashier’s checks payable from the producer to the dealer as a means of allowing the amount of the price deviation. b. Job Price Protection. The term “job price protection” in the gypsum wallboard industry refers to the practice of a producer in agreeing with a customer that the customer might purchase a sufficient quantity of gypsum wallboard from the producer to complete supplying a particular project at the existing or stipulated price. In those circumstances the customer was allowed to continue to purchase up to the protected quantity for the project, notwithstanding that list prices of the producer increased prior to the purchase of all of the gypsum wallboard required for the completion of the project. Job price protection was almost always granted on government jobs, and gypsum wallboard dealers were permitted to purchase the amount of wallboard required for the particular government job at the price in effect at the time the job was bid. Job price protection was also sometimes granted on non-government jobs by gypsum wallboard producers, including defendants. However, it was the policy and practice of each defendant, in order to comply with the Robinson-Patman Act, not to grant job price protection except to meet competitive offers of such protection to a customer by other gypsum wallboard producers. When job price protection was granted, it was given only for the requirements of a specific job and upon the understanding with the customer that the commitment would be reduced to the extent that the job was supplied by a competitor. It was not unusual for a customer to seek job price protection commitments for the same job from several gypsum wallboard producers. Frequently, where there was a price increase before the job was finished, the customer would attempt to buy the full requirements for the job at the protected price from more than one of the gypsum wallboard producers who had granted him job price protection, falsely claiming to each such producer that all of the gypsum wallboard so purchased was for use on the protected job. When job price protection was granted on a project, the producer giving the protection kept a record of the job, its location and the quantity of wallboard required to complete it. c. Cashier’s Checks. At various times some defendants delivered to dealer customers cashier’s checks payable to such customers as a means of allowing the amount of price deviations. Consequently, there were numerous instances where price deviations were not' shown on invoices or credit memoranda. Dealer customers often requested the use of cashier’s checks. Another reason for such use was to maintain the secrecy of the transaction between the producer and the dealer. The use of cashier’s checks became a competitive practice which was met by some competing producers. d. Verification Practices of Defendants. The officials of defendants who had authority to deviate from list prices in selling gypsum wallboard were at all times aware of and concerned with the limitations imposed by the Robinson-Pat-man Act upon their right to cut prices to a particular customer. Such officials had been made aware by their attorneys of the requirements of the RobinsonPatman Act and particularly of the prohibition against sellers discriminating among their customers and the right of sellers to meet in good faith a lawful offer of a competitor to a particular customer. Reliable information concerning price deviations was difficult to obtain and to confirm as to its accuracy. In making representations to gypsum wallboard producers’ salesmen concerning competitive prices, customers for reasons of self-interest were frequently evasive or deceptive about or misrepresented the prices offered to them by competitors. Many customers declined to exhibit or to furnish copies of invoices, credit memoranda or other written evidence which would enable the salesmen to confirm the accuracy of the claimed deviations. The use of cashier’s checks made more difficult the obtaining of documentation to support or confirm the existence of price deviations. When verification occurred, it was often ascertained that the information furnished by customers on claimed deviations was erroneous. As part of their concern over protecting themselves against the consequences of false information, the gypsum wallboard producers were also concerned over the fraudulent practice of some customers to solicit job price protection from more than one supplier and thereby to obtain at the lower protected price wallboard in excess of the quantity that had been committed to them. On the advice of the attorneys for the respective defendants, certain of their officials were authorized to verify with a competitor the reported price offered or charged by such competitor to a particular customer. Pursuant to this advice, an official, on receiving a field report of a price deviation, would, after exhausting other means of confirming the truth of such reported deviation, communicate with an official of the competitor reportedly offering such deviation, state the reported price, the name and location of the customer involved, and ask whether or not the report was true. Pursuant to such advice, an official, on receiving such a communication, if he chose to respond, would reply by stating either that such report was true or that it was false. Each defendant developed, with the advice and aid of its attorneys, its own system for reporting and documenting competitive activity. While there were some differences among the defendants in their procedures for reporting such activity, all of them utilized substantially similar forms for reporting such activity. Generally, with respect to claimed price deviations, the reporting salesmen were required to specify on the forms, among other things, the name of the customer or potential customer, the name of the competitor or competitors offering or giving the claimed price deviation, the amount thereof, the manner of giving it, and whether the reporting salesman had seen written evidence from which the truth of the claimed deviation had been confirmed. The forms required that, if obtainable, written evidence such as copies of invoices or credit memoranda be attached to the forms to substantiate the accuracy of the claimed deviation. The forms of most producers provided that the price deviation was of limited duration. In Kaiser’s case this was stated to be not more than 90 days because of the advice of Kaiser’s attorney that under the Robinson-Patman Act a competitive price deviation could remain in effect only so long as the competitive situation on which it was based continued. Under Kaiser’s established procedure, when the expiration date of a deviation authorization was reached, Kaiser’s sales personnel checked in the field to ascertain that the competitive basis for the original authorization of the deviation still continued in effect before a renewal authorization was issued. Verification among the competing producers was made by telephone pursuant to a mutual understanding among the appropriate officials of defendants and when made the defendants consistently followed the advice of their attorneys as above indicated. The evidence sustains a finding that verification calls were not made unless the caller had received a report from his company’s field personnel of a claimed competitive price deviation offered or given to a customer by a particular competitor. There is no evidence that verification calls were made without the caller first exhausting other means at hand of confirming the reported deviation. A verification call was made only ¡if, because of mistrust of the veracity '¡Jof the customer involved or for some í other reason, the caller remained uncertain of the accuracy of the report. Without significant exception, the caller went no further than to state to the person called the name and location of the customer and the reported price, and to ask whether or not the report was true. The person called usually responded, either then or after obtaining the information, by stating that the report was true or that it was false. Sometimes the person called declined to answer or avoided doing so. In a few instances there was verification of a lower price in a particular locality when a number of price deviations were reported to be in effect therein. As the number of reports indicating sales of gypsum wallboard made by competitors at off-list prices increased, verification calls, also increased, reaching a maximum in 1965. Each defendant generally met such reported competitive prices when it was able to confirm the truth of the reports. When the truth of such reports could not be confirmed, the policy of each defendant required that there be no departure from its list price. In many instances, defendants’ officials were able, without verification with competitors, reasonably to satisfy themselves, by various means, of the accuracy or inaccuracy of the deviation reports. These means included comparison of the report with other reports from the same area, confidence in the veracity of the customer claiming the deviation and written evidence of the deviation, either seen or sent in by the field salesmen. When the reported deviation could not be otherwise confirmed, the official having the competitive report before him, unless he elected to verify with a competitor, was compelled either to forego meeting the reported competitive deviation or to run the risk of a charge of price discrimination. It was only when confronted with these alternatives that defendants verified reported price deviations with competitors. Though these verification calls had a tendency to stem the decline of prices, the fair and reasonable inference to be drawn from the practice is that such calls were made for the purpose of complying with the Robinson-Patman Act and as a means of protection against false representations by customers. There is no reliable evidence that the verification communications of the defendants were intended to serve other purposes. With respect to all defendants, when a reported price deviation by a competitor could not be confirmed, the official having pricing authority was, by the policy of his company, consistent with the Robinson-Patman Act, required to adhere to list price. It is thus clear to the Court that in making verification calls defendants attempted to abide by the provisions of the Robinson-Patman Act, which permitted them in good faith to “meet but not beat” competitive price deviations, even though this good faith meeting but not beating competitive price deviations, policed by a mutual understanding among the defendants to truthfully answer specific inquiries, had a tendency to stabilize price in that it retarded any downward spiral in price deviations. In addition to receiving from their field personnel reports of price deviations by competitors, the officials of defendants also received reports of variances from published terms of sale, including furnishing of services. As used herein the term “terms of sale” refers to the various terms and conditions, other than price, under which gypsum wallboard was sold by the producers. In some instances the officials of some defendants communicated with the competitor who was reported to have offered such a variance to verify the existence thereof. Such verification calls related among other things to extended credit terms, cash discounts, methods of shipping, packaging and job protection. These calls, which were few in number, were responded to with a true or false answer in the same manner that responses were given to specific price deviation inquiries. In their discussion of “the effect of verification” plaintiffs in substance contend that verification permitted the defendants to learn of a price deviation of which they otherwise would not have had knowledge and that consequently verification restricted the granting of price deviations. In advancing this argument plaintiffs ignore the uncontradicted evidence that the reports of price deviation originated in the field and were reported to headquarters. In many instances defendants were able, without verification with competitors, to satisfy themselves concerning the accuracy of the field reports. It was only in those instances in which a field report of a deviation could not be so confirmed that there was verification with a competitor. Thus, plaintiff’s argument puts the cart before the horse. Verification communications did not lead to the discovery of price deviations. Instead, the discovery was made in the field and reported to headquarters, and verification with a competitor occurred only when needed to meet the Act’s “good faith” requirement in those instances in which the field report of a deviation could not be confirmed by other means. The Legality of the Verification Communications. Ever since the Supreme Court decision in United States v. Container Corporation, 393 U.S. 333, 89 S.Ct. 510, 21 L.Ed.2d 526 (1969), plaintiffs have continuously asserted that that decision is controlling here, and that consequently the verification communications of defendants, engaged in long before the decision in Container, violated Section 1 of the Sherman Act. Although this Court recognizes that particular pricing information of the nature involved in the verification communications of the defendants in these cases lends itself easily to concerted price fixing activities and to an unconscious direct retardation of the downward trend of prices, and, hence, a stabilizing effect on price, nevertheless, because the Supreme Court made no reference whatever in its opinion in Container as to the availability of the “meeting competition defense” of Robinson-Patman, for reasons hereinafter indicated, this Court does not interpret Container as precluding a proven good faith RobinsonPatman defense. The manifest_ and basic distinctions between Container and the present litigation are: (1) the lawful purpose of meeting competition in good faith as required in the RobinsonPatman Act, which is clearly proven Jn these cases and which was absent, or at least not found by the Supreme Court, in Container; and (2) a further “controlling circumstance,” protection against fraudulent misrepresentations by customers, which the Supreme Court found absent in Container, is also clearly proven in these cases. This court is satisfied that gypsum wallboard is a homogeneous product demonstrably “of like grade and quality” within RobinsonPatman and that each defendant’s concern about compliance with the Act was genuine and substantial. The Supreme Court in Container distinguished but did not overrule the earlier cases which approved an exchange of pricing information in proper circumstances. Indeed, the Court in Container specifically approved exchanges of price information by stating the “exception of Container” in the following language: While there was present here, as in Cement Mfrs. Protective Ass’n v. United States, 268 U.S. 588, 45 S.Ct. 586, 69 L.Ed. 1104, an exchange of prices to specific customers, there was absent the controlling circumstance, viz., that cement manufacturers, to protect themselves from delivering to contractors more cement than was needed for a specific job and thus receiving a lower price, exchanged price information as a means of protecting their legal rights from fraudulent inducements to deliver more cement than needed for a specific job. (393 U.S. at 335, 89 S.Ct. at 511). This quotation embraces three points: (1) in both Container and Cement Manufacturers there was involved an exchange between sellers of prices to specific customers; (2) there was absent from Container “the controlling circumstance” present in Cement Manufacturers; and (3) the controlling circumstance in Cement Manufacturers was that the exchange of price information between the sellers was a means of protecting their rights from fraudulént inducement by buyers. Thus, by recognizing and distinguishing Cement Manufacturers, Container excepts a case in which sellers exchange price information relating to specific customers where there is present a “controlling circumstance.” Here the defendants’ duty to establish good faith adherence to the dictates of the Robinson-Patman Act, constitutes a circumstance equally as compelling and controlling as that found in Cement. To conclude otherwise would be manifestly unfair and unrealistic. Cement Manufacturers was a suit brought by the government under the Sherman Act to enjoin the continued existence of a cement manufacturers association. The government complained, inter alia, that Section 1 of the Sherman Act was violated by an arrangement whereby the members of the association were required to report to it and that it disseminated to the membership information concerning what were termed “specific job contracts.” Such contracts were in common use in the industry and amounted to an option to a contractor bidding on a particular job to purchase the quantity of cement which he required for that job at the price in effect when the contract was issued. Since the contractor was not obligated to purchase under the contract, he incurred no risk if he entered into such contracts with several manufacturers for cement for the same job. The purpose of the association and its members in collecting and disseminating information concerning the specific job contracts was to prevent contractors