Full opinion text
DECISION PENCE, Chief Judge. In October 1967, International Telephone and Telegraph Corporation (ITT) filed a Clayton § 16 complaint in this court against General Telephone & Electronics Corporation (GTE) and Hawaiian Telephone Company (Hawaiian), in essence maintaining that by GTE’s acquisition of Leich Electric Company (Leich) in 1950, Automatic Electric Company (AE) in 1955, and Lenkurt Co., Inc. (Lenkurt) in 1959, all being manufacturers and distributors of telecommunications equipment, it became a vertically integrated telephone company, with its telephone operating companies buying almost all of their transmission equipment, switching systems, apparatus and other telephone communieations equipment from GTE’s own manufacturing subsidiaries. ITT further complained that by GTE’s acquisition of telephone operating companies, during the above period and thereafter, particularly the acquisition of California Water and Telephone Company, West Coast Telephone Company, The Southwestern States Telephone Company and Western Utilities Corporation in 1964, Central Iowa Telephone Company (Central Iowa) in April 1967, Hawaiian in May 1967, and Northern Ohio Telephone Company (Northern Ohio) in November 1967, the manufacturing competitors of GTE’s subsidiaries AE, Lenkurt and Sylvania Electric Products, Inc. (Sylvania), i. e., the independent manufacturers of telecommunications equipment (Western Electric Company Incorporated (WE) not being included in that category) have been and will be foreclosed from selling telephone equipment and supplies to GTE’s operating companies, to the detriment of actual and potential competition by such manufacturers. ITT charged that the acts of GTE were in violation of §§ 1 and 2 of the Sherman Act, and § 7 of the Clayton Act, 15 U.S.C. §§ 1, 2 and 18. ITT also charged that the acquisition of Hawaiian violated §§ 2, 5 and 7 of Act 190 of the Hawaii Laws of 1961. ITT requested only equitable relief, including a request that GTE be ordered to divest itself of its interests in Peninsular Telephone Company (Peninsular), the Western Utilities Group, Central Iowa, Hawaiian and Northern Ohio, as well as its manufacturing subsidiaries AE, Lenkurt and Sylvania, to the end that the independent telephone operating companies market for telecommunications equipment (i. e., excluding the American Telephone and Telegraph System (Bell)) would be opened to competition among all the independent telecommunications equipment manufacturing companies. As indicated, in essence ITT purported to act in the status of a “private attorney general” in this action against GTE. ITT asked for no money damages under its federal claims. It did ask for costs and attorneys’ fees for its claims under the Hawaiian Act. GTE answered, denying any violations, and filed a “contingent counterclaim”, also under § 16 of the Clayton Act, asking (contingent upon ITT’s success) for equitable relief thereunder for violations by ITT of §§ 1, 2, 3 of the Sherman Act and §§ 3 and 7 of the Clayton Act because of ITT’s vertical integration through its ownership of Vitelco (Virgin Islands) and Ricotelco (Puerto Rico), telephone operating companies, its acquisitions of companies manufacturing telecommunications equipment, and its interests in telephone operating and manufacturing companies in South America and Europe. ITT responded to this with an amended complaint, adding an additional allegation of foreclosure by GTE of Canada and other foreign telecommunications equipment markets. Subsequently this court ordered that ITT’s claims in chief re the United States and Canadian markets, as well as the Virgin Islands and Puerto Rico aspects of GTE’s counterclaims, would be tried together. The problem of ITT’s “other foreign markets” was continued for later disposition. After a multitude of motions had been disposed of, extensive discovery had been completed and a trial date set, in April 1970 GTE moved under Rule 19 that ITT be required to join as defendants other vertically integrated United States telephone companies, in-eluding Bell, United Utilities, Incorporated (United) and Continental Telephone Corporation (Continental). This motion was resisted by ITT as well as by Bell. After a hearing at which Bell appeared as amicus in opposition, this court in an oral bench decision, in substance held that because of the 1956 Consent Decree filed in United States v. Western Electric Co., 1956 Trade Cases 68,246 (D.N.J.1956), Bell’s vertical integration and its operating and manufacturing activities had been encapsulated and severed apart from that of the remaining telephone- operating and equipment manufacturing companies in the U. S., commonly called the “independents” or “nonBell”, and it was not necessary for the determination of ITT’s action or GTE's counterclaim that Bell and the other two named telephone companies be made parties to the suit. After even more intensive and extensive pretrial preparation, four years after it was filed this matter was tried in January and February 1971. Thereafter extensive post-trial briefs and proposed findings were also filed by the parties. But the legal cannons were not yet stilled. After “the tumult and the shouting” had subsided, and this court had started writing its decision, in May 1971 GTE filed a motion to dismiss ITT’s complaint for failure to state a claim upon which relief could be granted (F.R.Civ.P. 12(b)(6)) and alternatively claimed that the court lacked subject matter jurisdiction. GTE urged that ITT’s suit was barred by the proviso of Clayton § 16, insisting that the Federal Communications Commission (FCC), as successor in the communications field to the Interstate Commerce Commission (ICC), had sole regulatory power over GTE and only the U. S. could possibly bring a Clayton § 7 divestiture action against GTE. This was argued and taken under submission in June 1971. On the state of the pleadings, therefore, both GTE’s motion raising the issue of subject matter jurisdiction and motion to dismiss must first be decided. Application of % 16 Proviso The proviso of § 16 of the Clayton Act which GTE maintains is an “inseparable bar to relief” sought by ITT, in essence states that no “private attorney general” may sue under the provisions of § 16 for equitable relief against any common carrier subject to the Commerce Act of February 4, 1887, whose acts are under the jurisdiction of the ICC; only the U. S. may be plaintiff. GTE’s position is that it is being sued as a telephone common carrier subject to the provisions of the Communications Act of 1934, that the relief requested by ITT is directed toward matters subject to the regulation, supervision, or jurisdiction of the FCC, and despite the absence of any specific reference to the FCC in the § 16 proviso, that Congress nevertheless intended the proviso also to bar private injunctive suits under § 16 against FCC regulated carriers in the same manner as it applies to ICC regulated carriers. Subject Matter Jurisdiction GTE’s motion to dismiss for want of subject matter jurisdiction is denied. Jurisdiction vis-á-vis merits must not be confused. “By jurisdiction we mean power to entertain the suit, consider the merits and render a binding decision thereon; and by merits we mean the various elements which enter into or qualify the plaintiff’s right to the relief sought. There may be jurisdiction and yet an absence of merits [citations omitted], as where the plaintiff seeks preventive relief against a threatened violation of law of which he has no right to complain, either because it will not injure him or because the right to invoke such relief is lodged exclusively in an agency charged with the duty of representing the public in the matter. Whether a plaintiff seeking such relief has the requisite standing is a question going to the merits, and its determination is an exercise of jurisdiction. [Citations omitted.] If it be resolved against him, the appropriate decree is a dismissal for want of merits, not for want of jurisdiction.” (Emphasis added.) General Investment Co. v. New York Central Railroad Co., 271 U.S. 228, 230-31, 46 S.Ct. 496, 497, 70 L.Ed. 920 (1926). Here, too, GTE’s motion to dismiss is an attack on ITT’s standing, as a “private attorney general”, to seek injunctive relief against defendant. Although “lack of standing” does not, as a conceptual matter, neatly fit into the category of “failure to state a claim upon which relief can be granted”, General Investment would authorize treating the motion as such. Failure to State a Claim GTE’s motion to dismiss for failure to state a claim upon which relief could be granted is likewise denied. As indicated above, there is no mention whatsoever in the proviso of § 16 of telephone companies, the Communications Act of 1934, or of the FCC. GTE nevertheless asserts that the proviso is applicable to and dispositive of this case on the following theory: (a) The ICC is charged with the enforcement of § 7 of the Clayton Act “where applicable to common carriers subject to the Interstate Commerce Act.” (b) Although not originally included in the definition of “common carrier” in the original Act to Regulate Commerce of 1887, telephone companies were so defined in the 1910 amendment to that Act. Thus, when the Clayton Act was promulgated in 1914, telephone companies were common carriers subject to the provisions of the Interstate Commerce Act and some part of their activity was subject to the regulation, supervision, or other jurisdiction of the ICC. At that time, therefore, suits in equity against telephone companies, under § 16, could be brought only by the U. S. and not by private litigants. GTE then postures (c) that when the Communications Act of 1934 was passed, transferring to the FCC the regulation of telephone, telegraph and radio communication, formerly performed by the ICC, Postmaster General and the Radio Commission, there was no manifestation of Congressional intent to alter in any way the then existing statutory scheme of antitrust enforcement as the same might apply to telephone companies. Therefore, GTE posits, (d) Congress intended to perpetuate the bar against private Clayton § 7 injunctive suits against telephone companies; that (e) although § 16 was not amended so as to, by its terms, reflect Congress’ intent, nevertheless it should be construed to exclude such private injunctive suits against telephone companies thereafter subject to the provisions of the 1934 Act and the governance of the FCC. GTE’s theory is couched upon several assumptions, viz.: 1. Legislative history compels acceptance of the construction and application GTE attaches to the proviso. 2. GTE’s interpretation of the proviso is commanded by common sense and the history of regulation of the telephone and railroad industries. 3. The subject matter of this suit is one regulated, supervised, or otherwise solely within the jurisdiction of the FCC. 4. This is a suit against a telephone company (common carrier), subject to the provisions of the Communications Act. In order for GTE to prevail on this motion, the verity of these assumptions must mandate the legal conclusion postulated by GTE. A. Legislative History In a period of nearly forty years since the passing of the Communications Act of 1934, the proviso to § 16 of the Clayton Act has remained unchanged, referring therein only to the Interstate Commerce Act and the ICC. GTE can suggest only “congressional oversight” as an explanation for the absence of any direct reference therein to either the Communications Act or the FCC. Congress’ treatment of the Clayton Act in 1934 and thereafter, however, negates any inference of “oversight” by it, then or later. In 1934 Congress was manifestly aware that changes would have to be made in the Clayton Act to take cognizance of the newly created federal commission with sweeping jurisdiction over communications. Congress is always also aware that, as is always the case with any legislation as broad-based as the Communications Act, housekeeping measures are necessary to coordinate the new legislation with previously enacted law. Both these considerations are reflected in the makeup of the 1934 Act. Various provisions of the Interstate Commerce Act relating to communications were adopted in sections of the Communications Act, while the Radio Act and provisions of the Interstate Commerce Act relating to communications were repealed. The Clayton Act required modification as well. The House Report on the 1934 Act states: “The latter section [§ 602] also makes certain changes in other law, including the Clayton Act, made necessary by the setting up of the new Commission and conferring upon it jurisdiction over communications.” (Emphasis added.) H.R.Rep.No.1850, 73d Cong., 2d Sess. (June 1, 1934). One such change was made in § 11 of the Clayton Act. Previously, § 11 had entrusted the ICC with enforcement of various sections of the Clayton Act against common carriers. Section 602 (d) of the Communications Act amended § 11 of the Clayton Act to read as follows: “That authority to enforce compliance with sections 2, 3, 7, and 8 of this Act by the persons respectively subject thereto is hereby vested: in the Interstate Commerce Commission where applicable to common carriers subject to the Interstate Commerce Act, as amended; in the Federal Communications Commission where applicable to common carriers engaged in wire or radio communication or radio transmission of energy * * 48 Stat. 1102. Section 11 of the Clayton Act was thus expressly amended by Congress to transfer enforcement of the substantive provisions of the Clayton Act from the ICC to the FCC with regard to common carriers engaged in communication. Most significantly, however, § 16 was not changed! In view of Congress’ awareness that the Clayton and Communications Acts were interrelated, it must be presumed that the lack of change in § 16 did not result from oversight, but was due to an intentional and affirmative decision to leave the proviso unchanged, and in effect, to remove any barrier to private injunctive suits against telephone companies. Finally, GTE’s “inadvertence” argument is further rebutted by Congressional action in 1950, when the Clayton Act was again amended to take cognizance of the FCC. Section 7 of the Clayton Act as then amended reads: “Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the * * * Federal Communications Commission * * under any statutory provision vesting such power in such Commission * * 64 Stat. 1125. Thus Congress indicated that it was not unmindful of the interplay between the Clayton and Communications Acts. Nothing pertaining to telephone companies, therefore, can now be read into the § 16 proviso that is not already there clearly spelled out. B. History of Regulation of Telephone Industry The reason for barring § 16 private injunctive suits against railroads has been stated as follows: “[The proviso’s] obvious purpose is to preclude any interference by injunction with any business or transactions of interstate carriers of sufficient public significance and importance to be within the jurisdiction of the Commission, except when the suit is brought by the Government itself.” Central Transfer Co. v. Terminal RR Assn. of St. Louis, 288 U.S. 469, 475, 53 S.Ct. 444, 446, 77 L.Ed. 899 (1933). The record of the ICC from 1910 to 1934 suggests that in practice, if not in theory, very little of the business or transactions of telephone companies was considered to be “of sufficient public significance and importance” to stir up any exercise of ICC jurisdiction. Lack of staff, funding, and expertise prevented the ICC from effectively administering the acts regulating the telephone industry. No separate organization existed within the ICC to regulate communications; already existing bureaus handling analogous problems in other areas were responsible for handling similar aspects of telecommunications. Despite the widening of its jurisdiction to include telephone companies, the ICC thus clearly remained a railroad commission. Its performance in the telephone area has been described as “desultory and perfunctory” and as “regulation by default.” The ICC did not initiate investigations; rather it waited until it was presented with complaints. No general rate investigation was ever carried out. From 1910 to 1934 the ICC dealt with telephone rates in but four cases, none of these involving issues of major importance. The contrast between ICC’s activism in regulating railroads and its passiveness in the case of telephones is explained by the different role the federal government has played in the development of the telephone and railroad industries. In the early part of the twentieth century most telephone activity was but of local interest, intrastate, and was dominated by a single firm, the Bell Company, whose dominance engendered in the federal government a “hands-off” philosophy of telephone regulation: “Given Bell’s dominance, together with the absence of significant entry and intermodal rivalry, it is perhaps understandable that regulation became preoccupied with the general level of earnings or revenue requirements. With the possible exception of the Federal Communications Commission’s investigation of the telephone industry in the 1930’s, aggressive regulatory concern over matters affecting market structure and price structure was almost nonexistent. What emerged was a philosophy of ‘natural monopoly’ for common carrier communications in which the promotion of the public interest was equated with the successful operation of the Bell System. Bell was entrusted with the maintenance of systematic integrity and the task of planning for national and regional requirements.” Trebing, Common Carrier Regulation — The Silent Crisis, 34 L& CP 299, 306 (1969). With the fact of Bell dominance conceded, there was no need for the government to concern itself with market structure; with Bell entrusted with planning and operational responsibility, there was little need for government involvement in these areas. Thus the scope and degree of government involvement in telephone communications was quite restricted, a fact confirmed by the lacklustre performance anent that industry of the ICC from 1910 to 1934. By the Transportation Act of 1920, Congress instructed the ICC to form a consolidation plan establishing a limited number of systems earning a similar rate of return in order to guide and plan railroad development to meet national needs. Since the government thus assumed responsibility for planning railroad development, with market and price structure considered in its deliberations, suits by individuals could potentially upset a delicately balanced program of railroad development and operation. The proviso of § 16 was apropos. The same was not true for telephones. The conceded hegemony of Bell and the largely intrastate focus (in 1934) of telephone activity resulted in only a limited role for the government to play. In that industry there was no such apparent need for the inhibition of the proviso to § 16. The performance of the ICC in the telephone area made it obvious that a change both in the statutes and administration of regulation of communications was needed. The House Report to the Communications Act of 1934 clearly recognizes this: “[The Interstate Commerce Commission] was originally created to regulate railroads and still is primarily concerned with the transportation field, but in 1910 an amendment to the Interstate Commerce Act made common carriers engaged in the transmission of intelligence by wire or wireless subject to its jurisdiction. While a series of minor amendments have followed this 1910 legislation, the act has never been perfected to encompass adequate regulation of communications, but has really been an adaptation of railroad legislation to the communications field. As a consequence, there are many inconsistencies in the terms of the act and also many important gaps which hinder effective regulation. In this bill the attempt has been to preserve the value of court and commission interpretation of that act, but at the same time modifying the provisions so as to provide adequately for the regulation of communications common carriers.” H.R.Rep.No.1850, 73d Cong., 2d Sess., June 1, 1934. The 1934 Act created the FCC, to which were transferred the duties, powers and functions in communications formerly exercised by the ICC, Postmaster General, and Radio Commission. More than a mere transfer and consolidation of existing provisions was accomplished in the 1934 Act: “ * -x- -x- for tjje purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the ‘Federal Communications Commission’ * * (Emphasis added.) 47 U.S.C.A. § 151 (1962). The Act contains many new, non-derivative provisions, increasing the scope of federal regulation of interstate communications. In each-of its several sections which separate telephone, telegraph and radio communications are provisions which directly or indirectly refer to the application of antitrust laws to each separate industry. If Congress had intended to extend the § 16 proviso to the FCC, it would not have overlooked doing so. The proviso of § 16 of the Clayton Act does not apply to private injunctive suits against telephone companies. As the above analysis indicates, pursuant to 47 U.S.C.A. 221(a) the FCC could have been tendered primary jurisdiction over the antitrust aspects of any or all of GTE’s horizontal acquisitions herein involved. GTE however chose not to submit its acquisitions to the FCC for § 221(a) processing. Here, both the horizontal and vertical acquisitions of GTE are challenged. Even if it were assumed that § 221(a) gave the FCC like power over vertical acquisitions of telephone companies (a most questionable assumption) since GTE has never made any application to the FCC for possible antitrust immunization, there is no validity whatsoever to GTE’s insistence that the antitrust aspects of its acquisitions have been “regulated or supervised” by the FCC, or that here and now the FCC has sole jurisdiction over the subject matter of this suit. While admittedly the FCC would have primary jurisdiction if GTE’s rates and practices relating thereto were here being challenged under the antitrust laws, ITT’s action is not so bottomed. The FCC has no jurisdiction over the problems of this ease, in its present posture. GTE’s belated motion to dismiss can only be and is denied. Returning now to the merits of this action, this court makes the following FINDINGS OF FACT I. Parties ITT is a Delaware corporation, a conglomerate industrial colossus, engaged in a wide variety of business in the U. S. and abroad. Through its telecommunications division, ITT Kellogg, it manufactures, distributes and sells telephone equipment, components and supplies in U. S. and foreign commerce. ITT is second only to WE, on a worldwide scale, in the manufacture of telephone equipment, having 67 telephone equipment factories in 30 foreign countries and 5 similar plants in the U. S. (including ITT Caribbean Manufacturing in Puerto Rico). It also has a wire and cable plant in San Diego. As of 1969, it owned and operated approximately 300,000 telephones in Puerto Rico and the Virgin Islands. It has been a vertically integrated telephone company since 1925, when, while operating Ricotelco, it acquired International Western Electric from WE. It commenced the manufacture of telephone equipment in the U. S. after 1940. It acquired Kellogg Switchboard & Supply Co. in 1951 and consolidated its manufacturing divisions under the name of ITT Kellogg. Although prior to the 1960’s it had large interests in foreign telephone operating companies, in recent years ITT, both voluntarily and through expropriation, has disposed of substantially all its telephone companies outside the U. S. Now, certainly in the U. S. and Canada communications markets, it can fairly be characterized primarily as a telecommunications manufacturing company with telephone operations being a relatively minor segment of its business. GTE, a New York corporation, as a holding company, owns and controls 33 telephone operating companies in 34 states of the U. S., serving, in 1969, 9,-146.000 telephones, and another three operating companies in Canada and the Dominican Repubie, serving, in 1969, 1,-157.000 telephones. GTE wholly owns AE, which in turn owns Lenkurt and operates five telephone equipment manufacturing plants in the U. S. GTE also owns and operates GTE Laboratories, Inc. (GTE Laboratories), a telephone equipment research facility. It also owns GTE Service Corporation (GTE Service) ; . General Telephone Directory Company (GT Directory); General Telephone Credit Company, Inc. (GT Credit) ; GTE Communications, Inc. (GTE Communications); GTE Data Service Corporation (GTE Data); Sylvania; and GTE International, Inc. (GTE International). GTE has a total of 116 manufacturing plants throughout the world (including the U. S.). GTE is the successor to General Telephone Company (General), which was formed in 1935 to operate as a holding company for telephone operating companies. Hawaiian, a Hawaii corporation, now a wholly-owned subsidiary of GTE, is a telephone operating company providing statewide telephone and communication services among the islands of the state of Hawaii and between Hawaii and other states, as well as foreign countries. (It is the only GTE subsidiary named as a party to this case.) AE is GTE’s developing, manufacturing, supply and distributing company for telecommunication transmission equipment. It manufactures a substantially complete line of such equipment (AE does not manufacture wire or cable), and is the second largest manufacturer thereof in the U. S. (WE is first), with annual (as of 1969) sales of $180 million of switch gear, $59 million of station apparatus, $33 million of other equipment. In 1969, it distributed $196 million of telecommunication supplies not manufactured by it. The non-Bell, i.e., independent, telephone companies purchase most of their equipment from AE. Lenkurt, an AE subsidiary, is a leading producer of video, voice and data transmission equipment for the communications, industrial and government markets. Sylvania manufactures' a variety of electrical products including specialized electronic equipment for various fields other than the telecommunications industry. The “Bell System’’ means the American Telephone and Telegraph Company (ATT) and Western Electric Company, Incorporated (WE), and their subsidiaries, and the Bell Telephone (Bell) operating companies. Bell blankets the U. S. (see Appendix 1), and the number of telephones owned and operated by ATT in the U. S. has jumped from 14,280,000 in 1935 to 95,942,200 in 1969 (see Appendix 2 for annual growth). The number of telephones in the U. S. in 1935 was 17,465,000, of which 3,185,-000 (18%) were operated by independent telephone companies. At that time General owned and operated 381,000 telephones, i.e., 2.2% of the total in the U. S. or 12% of the independents’ telephones. By 1969 there were 115,501,000 telephones in the U. S., of which 19,559,-000 (17%) were operated by independents. Of these GTE owned 9,022,000, i.e., 7.8% of the total U. S. telephones or 46% of the independents (see Appendix 3). The total gross operating revenue of telephone companies or systems in the U. S. in 1935 was $1,042,000,000, of which $95,000,000 went into the coffers of the independents. Bell took the rest. General’s share of the independents’ revenue was then 12%. In 1969 the national total gross operating revenue from telephones was $18,672,000,000, of which $2,614,000,000 was generated by the independents. GTE’s portion of the independents’ revenue was 49% (see Appendix 4). The total gross plant investment of telephone companies or systems in 1935 was $4,805,000,000, of which the independents had a $596,000,000 investment, and General’s investment was 11% thereof. By 1969 the total gross plant investment was $61,919,000,000, of which the independents had $11,393,000,000. GTE’s plant investment was $5,357,000,-000 or 47% of the independents’ total investment (see Appendix 5). In 1935 there were 6,627 telephone operating companies in the U. S. Bell had 24 of those and 13 were in the General system. By 1969 the number of telephone operating companies had shrunk to 1,919, 25 of which were Bell and 33 GTE (see Appendix 6), and out of 1,894 independent telephone operating companies, the top 25 controlled 81.2% of all independent telephones. The top six of these were as follows: % of Telephones Independent Market 1. GTE 9,022,400 46.13% 2. United 2,233,100 11.42 3. Continental Tel. Corp. 1,248,800 6.39 4. Central Telephone Utilities Corp. 895,900 4.58 5. Mid-Continent Tel. Corp. 496.200 2.54 6. Rochester Tel. Corp. 494.200 2.53 TOTAL 73.59% As indicated above, United is the third largest telephone operating company in the U. S. In 1967 it acquired some nine telephone operating companies with over 500,000 telephones. In 1966 United bought controlling interest in North Electric Company (North Electric) and in 1967 acquired the balance to make it a wholly-owned subsidiary. North Electric manufactures and installs telephone equipment for central office exchanges, including crossbar telephone switchboards and allied products. It also manufactures and installs small telephone switchboards for use in offices and factories. North Electric has contractual and patent licensing arrangements with the L. M. Ericsson Telephone Company .of Sweden, a large international manufacturer of telecommunications equipment. Continental is the fourth largest. As of the end of 1969 its subsidiaries served approximately 1,492,000 telephones in 42 states, Canada and five Caribbean countries, and at the same time was in the process of acquiring 35,000 additional telephones. One of its subsidiaries, Superior Continental Corporation manufactures wire and cable and auxiliary equipment. Other subsidiaries publish telephone directories, render data service, etc. In 1970 Mid-Continent Telephone Corp. purchased Buckeye Telephone & Supply Company of Columbus, Ohio, a distributor of equipment and supplies to independent telephone companies. Buckeye’s sales for the period ending April 30, 1970 were $5.3 million. In-1949 General owned some 1,187,000 telephones but it was vertically integrated only in a de minimis way. In 1950, however, it acquired Leich, which manufactured switching equipment and also was a distributor of telecommunications equipment. At the end of 1962 Leich was merged into AE. General did not “go big”, vertically, until October 1955 when, by acquiring Theodore Gary and Company, it not only added almost 600,000 telephones to its system (in 1954 it had 1,804,000 telephones), but it also brought to General a 78% interest in AE. In 1955, AE was admittedly “the largest producer of communications equipment for the independent telephone industry.” At that time, AE owned a one-third interest in Lenkurt, a manufacturer of electronic transmission equipment, and was Lenkurt’s exclusive distributor. In 1959 the balance of the Lenkurt stock was acquired by GTE. By its acquisition of the Theodore Gary properties, GTE thus became not only a fully integrated telephone company but it also became the largest telephone operating company of all the independents and, as indicated above, had acquired control of the second largest telecommunications manufacturing company in the U. S., the major supplier to non-Bell companies. In 1959 GTE acquired Sylvania, believing that Sylvania’s expertise in the field of electronics would be of great value in the development of the electronics potential for better transmission and services in the telecommunications industry. In 1962 GTE acquired Panhandle Electric, another manufacturer of transmission equipment and made it an AE division. When, in 1967, this suit was brought by ITT, approximately 48 telephone equipment manufacturing companies supplied the entire telecommunications industry in the U. S. Lines of Commerce From its inception, telephone service in the U. S. has been conceived as voice communication between distant points through telephone instruments. Recently this “service” has become involved with other forms of communications, including data transmission. In the U. S. communications systems utilizing “telephone equipment” are principally operated by the telephone operating companies heretofore listed. However, similar communications systems are used by some industrial and other commercial enterprises as well as some federal, state and local government units. In any such communications systems, the most important types of equipment are apparatus, switching equipment and transmission equipment. In the telephone operating company systems “apparatus” consists of the telephone itself and such other items of equipment usually located on the premises of the user. “Switching equipment” interconnects the line and telephone of one user with lines and telephones of other users. Switching equipment includes, without limitation, central office equipment, switches, relays and selectors. There are, of course, two types of switching equipment: centra] office equipment and private branch exchange equipment (PBX). (An automatic PBX is called a PABX.) Central office equipment interconnects the line of one subscriber with the lines of other subscribers connected to the central office of the telephone operating company or with the toll switching network. Toll switching systerns interconnect local central office switching systems with other toll offices. The central office serves as the switching network to connect telephones for local calling purposes as well as to connect that central office with the toll switching point. The toll network is a nation-wide toll network in which all telephone operating companies participate. Any industrial and commercial enterprises, federal, state and local government units operating “communications systems”, if they wish to communicate outside of their own limited, “internal” system, must use the telephone operating companies’ systems and toll network. For example, PBX or PABX equipment while connecting the telephones on the subscriber’s premises with each other, must have some sort of interconnect with an outside central office exchange of a telephone operating company. Transmission equipment is used for transmitting electrical impulses from point to point. Traditionally, from the time that Bell first used a wire for that purpose, wire or cable has been the equipment used in a telephone system for transmitting those electrical impulses necessary to carry the voice from point to point. Of recent years, however, microwave radio has been added to 'the transmission equipment field. The principle companies engaged in the manufacture of a relatively full line of telecommunications equipment for sale to telephone operating companies in the U. S. are: Western Electric Company Automatic Electric (including its subsidiary Lenkurt) Stromberg-Carlson Corp. North Electric Co. ITT Northern Electric of Canada distributes its version of Western Electric type #5 Cross-Bar switching equipment through Stromberg-Carlson, and minor amounts of subscriber apparatus through Graybar Electric. Lenkurt and Collins provide the major portion of transmission equipment sold to the independent telephone operating companies. Neither AE nor Lenkurt manufactures wire or cable. ITT does, as does WE. Wire and Cable GTE has maintained that transmission equipment, for the purpose of determining the relative market in this case, must include wire and cable. In the telephone industry, however, items of transmission equipment which are unique and complex in their construction, compatability and engineering conception are distinguished from the far less sophisticated and generally fungible commodity-type supply items such as wire and cable. WE’s answer to GTE’s written question requesting WE’s sales of transmission equipment did not include sales of wire and cable although it manufactures the same. Thus, wire and cable, poles, pole line hardware, pins, cross-arms, etc., are considered in the telephone industry as supply items, because, as between the various manufacturers thereof, these items are essentially similar in appearance, technology and compatability, no matter who makes them. On the other hand, carrier, microwave radio and radio multiplex equipment, while falling under the broad category of “transmission equipment”, consist of highly complex electronic devices with thousands of diverse components. In this respect they differ markedly from cable and wire— which are simply metal conductors. The manufacturing processes of each are technically poles apart. Most of the companies manufacturing electronic transmission equipment do not manufacture wire and cable, and those which manufacture both electronic transmission equipment and wire and cable generally do so at separate facilities. The manufacture of wire and cable has nothing in common (except wire itself) with the manufacture of highly sophisticated microwave radio. There is a general industry recognition that the cable and wire business is a separate economic unit. We find Mr. Les Warner, GTE’s Chief Executive Officer, saying: " -x- •>:- * [A]s a matter of policy we have attempted to avoid going into the manufacture of the so-called supply or specialty items which include not only wire and cable, but pole-line hardware, poles, pins, cross arms, tools, and things like that, because you can’t really argue the technological advantages of coordination between operations and research and manufacturing in those mundane areas whereas you can on things like central office equipment and even telephone instruments and microwave, radio and multiplexing systems and what not.” PX 2, p. 8, ITT Doc. No. 243. ITT, manufacturing both electronic transmission equipment and wire and cable, itself sells each category of equipment through a separate sales force. As indicated by GTE, there are differences in the number and character of the companies which manufacture each of the three categories of telephone equipment in the U. S. A number of the companies manufacturing electronic transmission equipment are recent entrants into the market, e. g., Farinon Electric, Vicom, Radio Frequency Laboratories, Hughes Aircraft, Microwave Associates and Transcom Electronic. At least 22 companies in the industry manufacture only electronic transmission equipment. There is no dispute, however, that cable and microwave radio, on a strictly functional basis, can be interchangeable, in that either may perform the function of transmitting electrical impulses in a telephone network. Therefore it must be said that, in a broad sense, cable does compete with microwave radio for the same uses. Nevertheless, cable and electronic carrier equipment are not completely interchangeable in that electronic carrier equipment may only be used by applying it to an already-existing cable. In general, it costs more to add additional wirepairs to create new circuits over an existing route than it does to substitute electronic carrier equipment. Similarly, coaxial cable for long distance communication, whether under water or over land, is more costly than microwave radio. The decision as to whether to employ coaxial cable or microwave radio for a particular trunk circuit is a matter of economies, i. e„ which will give the best service at the lowest cost. This does not mean, however, that the market for communications wire and cable is one and the same with the market for microwave and similar electronic carrier equipment. Even though cable may be functionally interchangeable, Brown Shoe Co., Inc. v. U. S., 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962), made it clear that mere potential interchangeability or cross-elasticity may be insufficient to mark the legally pertinent limits of a relevant line of commerce. Sharply distinct sub-markets can exist within the outer limits of a general market, and such submarkets may be the focal point of judicial inquiry under Clayton § 7. See Reynolds Metals Co. v. F. T. C., 309 F.2d 223, 226. “The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.” Brown Shoe, 370 U.S. at 325, 82 S.Ct. at 1524. The number of firms making only electronic transmission products, the gross difference in the manufacturing facilities, the peculiar characteristics thereof, the distinct prices and the general recognition in the industry of a submarket in electronic transmission equipment as a separate economic entity, all impel this court to find that cable and wire manufacture is a separate economic unit of the communications industry and that electronic transmission products constitute a submarket in the transmission equipment field separate and distinct from the submarket in wire and cable. Product Market GTE urges that, since the three types of equipment are not functionally interchangeable, apparatus, switching and transmission equipment are each a separate line of commerce. It further maintains that ITT has failed to prove each market, i.e., the sales involved in each; thus ITT’s case must fall for lack of such proof. Both du Pont and Brown Shoe recognize, as it is here recognized, that within any market, submarkets may exist, “[b]ut the boundaries of the relevant market must be drawn with sufficient breadth to include the competing products of each of the merging companies and to recognize competition where, in fact, competition exists.” Brown Shoe, 370 U.S. at 326, 82 S.Ct. at 1524. GTE recognizes that “for the purposes of this case, the term ‘telephone equipment’ includes only the above three categories of equipment.” The mergers here involved basically affect only the market in telephone equipment. It is in and for that market that in fact the problem of competition exists. It is in that market, ITT maintains, that competition actually has been and “may be substantially lessened.” The relevant market here is “telephone equipment” and perforce must encompass the above three types of equipment. Geographic Market In the broadest sense, of course, since the corporations engaged in the U. S. in the manufacture of automatic switch equipment, station apparatus and transmission equipment offer such telephone equipment for sale throughout the U. S., and also are prepared to export the same to any customers throughout the world, it could be said that the geographic market is “the world.” For the purpose of ITT’s complaint, however, the parties do not seriously dispute that the U. S. is the geographic market for telephone equipment. Due to the sophisticated nature of telephone equipment, transportation is not a significant factor in its cost. With the exception of WE which manufactures most kinds of equipment in several locations, most telephone equipment manufacturers will manufacture each type of equipment at but one location. As indicated, regardless of where a factory may be located, either in the U. S. or out, freight costs, per se, as a general rule have no limiting effect upon competition among U. S. and foreign manufacturers who sell their equipment in the U. S. Customer Market A major disagreement between the parties is whether sales of telephone equipment to every class of customer wherever located in the U. S. are to be included as within the relevant customer market. As is not abnormal in Clayton § 7 cases, defendant GTE wishes the market to be as large as possible in order to effect a decrease in its “market” share percentile. In the obverse, ITT, as a “private attorney general”, contends that a clearly defined submarket exists in telephone equipment sales to independent (non-Bell) telephone companies, a contention which would markedly increase GTE’s “market” share percentile. GTE maintains that customer market for telephone equipment in the U. S. must include not only the telephone operating companies, Bell and non-Bell, but also industry and commercial companies, communications common carriers other than telephone companies, federal, state and local governmental agencies and export purchasers. In its broadest context, that statement is true. There is a “more than $3 billion” annual market in the U. S. for sales of telecommunications equipment. This “total market” however is definitely not wide open to unfettered competition inter se by manufacturers of such equipment. This factor, with others, has created clearly defined divisions of or submarkets within that “total market.” As was pointed out so succinctly in Brown Shoe, the ultimate determination of the relevant “market”, whether customer or geographic, i. e., the market fundamentally affected by any merger, must evolve from the commercial realities of the industry in question. Turning then to the “realities” of the customer market of the commercial telecommunications industry, Bell, as of 1969, controlled 83% of all of the telephones in the U. S. and is the largest single purchaser of telephone equipment. Given this gigantic customer purchasing potential of Bell, it then becomes necessary at the outset to determine if, in the commercial realities of the telephone industry, Bell’s purchases must be included in the relevant customer market here in issue. In this context, therefore, the effect of what has come to be known as the Bell Consent Decree upon competition in the customer market must be analyzed. Bell Consent Decree Beginning in 1901, Bell System companies entered into supply contracts with WE, American Telephone & Telegraph’s (ATT) wholly-owned manufacturing subsidiary. By 1913 each Bell company had entered into such a contract. In 1949, during the Truman administration, the Attorney General initiated an antitrust action against WE and ATT, attacking the legality of their vertical relationship. Undoubtedly the underlying factor for that Sherman §§ 1, 2, 3 action was that through ATT’s vertical integration arising from its ownership of the Bell system operating companies and WE, its telecommunication equipment manufacturing company, non-Bell manufacturers of similar equipment were almost entirely eliminated from competing for the Bell System equipment market. The alleged purpose of the government’s action was to restore competition in the manufacture and sale of telephone equipment. 'The complaint therefore asked that WE be divested by ATT and split into three separate companies; that all contracts and understandings between WE and Bell that Bell companies purchase their telecommunications equipment from WE be terminated. Seven years later, during the Eisenhower administration, the suit was ended with a final judgment against WE and ATT with the consent of the parties and what is known as the Bell Consent Decree was entered. In its pertinent parts the decree: 1. Enjoined ATT and WE from manufacturing any telephone operating equipment of a type not sold to the Bell System companies for use in furnishing common carrier communications and ATT was enjoined from engaging in any business other than furnishing common carrier communication services. 2. ATT and WE were required to grant a non-exclusive royalty-free license under WE’s then U. S. patents to any company wishing to manufacture the same, and to grant similar licenses at reasonable non-discriminatory royalties under all its future patents, as well as furnish all necessary technical information, to patent licensees. Other than that, the decree did not “alter the fundamental relationships between ATT and WE and between these companies and the Bell operating companies.” Thus WE has continued to be the “manufacturing and supply unit of the Bell system.” As conceded by GTE, the Bell System’s vertical integration status under the Bell Consent Decree is virtually impregnable. At the time of the decree it was recognized by the Department of Justice that “the decree would operate as a kind of umbrella over WE’s monopoly.” It cannot be said that thereafter WE has, in any substantiality, competed for the equipment business of independent telephone companies. Following the consent decree WE has steadily withdrawn from the independent market as much as possible, stating, as recently as March 10, 1970 through Mr. J. H. Pursel, General Manager, Pricing and Commercial Relations for WE: “ * * * Western, as manufacturing and supply unit of the Bell System, would like to be able to devote all of its efforts to meet its obligations to the Bell System Operating Companies and the United States Government. Accordingly, we do not solicit business of other customers nor have we authorized Graybar, as our sales agent, to do so. Over the years, we have sought to reduce sales to such other customers and generally we are no longer a source of supply other than directly to communication common carriers for a limited number of products. We, of course, continue to sell material required to repair or maintain Western products which have been sold in the past.” In line with the above policy declaration, Graybar had its agency to distribute WE products terminated at the end of 1970. WE will sell its equipment to non-Bell telephone companies in the U. S. only where comparable equipment is not available from some other source. GTE, nevertheless, has insisted that Bell must be deemed a part of the telecommunications market for the purpose of this case for the reason, among others, that it purchased a substantial amount of telephone equipment from non-affiliated telecommunications manufacturing companies, pointing out that for the years 1955 through 1969 the sales to the Bell System, ITT, North Electric, Collins, Stromberg-Carlson, GTE, Farinon, Lynch and General Electric were some $12 to $16 million per year. During the same period, Motorola’s sales to WE (principally mobile telephone equipment) averaged about $10 million per year. These sales, per se, do appear quantitatively not insignificant, when not evaluated against the total purchases of Bell. In 1968 and 1969 Bell System purchases of telephone equipment from independent manufacturers was only 0.89% and 0.83% of its total purchases. It thus appears that WE supplies 99+% of all telephonic equipment to the Bell System, leaving only crumbs for the independent manufacturers. Superficially, even in the face of this factual picture, it might be (and, by GTE is) argued that the Bell System market is wide open because the Standard Supply Contract in effect between WE and each Bell operating company, while providing, Art. 1, Para. 1, that WE will fill all orders from a Bell telephone company, then specifically adds that the latter is not obligated to purchase any materials from WE. When one sees that without obligation WE is nevertheless called upon to supply over 99% of the Bell System requirements, it can only be concluded that the words of the Bell-WE contract are wonderful to look upon but in market implementation they have no more reality than a western movie set. It was manifest from the evidence that Bell purchased from independent manufacturers only to fill the peaks and windows of its demands, i. e., if WE didn’t make it or didn’t have it, and felt it could use it, then Bell, i.e., WE and the Bell System telephone companies, would buy it from independents — until such time as WE produced it. Thereupon the Bell System no longer would buy it from the independent. Admittedly, ITT and every other independent manufacturer is desirous of selling to Bell whenever possible. The appetite of the Bell giant for telecommunications products is so great that even the crumbs which fall from its board are large enough to be savory morsels for the independents. It is equally evident from the evidence, however, that these same morsels cannot be expected to be annual and competitively open fare for the independent manufacturers. The Bell “market” is available only so long as WE does not decide to consume all of its business itself. In United States v. General Telephone & Electronics, Civil No. 64-1912, GTE alleged in its answer to the government’s complaint: “A result of the Bell System Consent Decree has been the foreclosure of that portion of the market for telephone equipment consisting of the Bell System telephone operating companies from competition by telephone equipment manufacturers other than Western Electric because the Bell System telephone operating companies purchase all their equipment and supplies from Western Electric.” ITT Trial Brief, 50. Unquestionably the ultimate and actual, effect of the Consent Decree, therefore, was to sever Bell’s telecommunications equipment business from the broad' market and establish the independent telephone operating companies as a remaining and realistically distinct sub-market. In 1968, General Telephone Company of California, one of GTE’s major subsidiaries, at a California PUC hearing, placed into evidence the expert testimony of Professor Jules Backman, economist from New York University: “Q. Now, looking to the market for telephone equipment manufacturers, do you consider Bell System part of the market? “A. As a practical matter, it is not in terms of its availability as a buyer, although there may be some small things that are bought.” As a business reality, it is patently manifest that any Bell “market” is not and cannot be conjoined with the “independent” telephone industry market to enlarge the relevant customer market here in question. Industrial and Governmental Customers GTE has also insisted that industrial, governmental and export customers are part of the relevant customer market. Rare indeed is the industrial product which is not used by a broad spectrum of consumers, e. g., paint, aluminum foil, aluminum wire and shoes. All parties agree that some railroads, power companies and governmental agencies, as well as consumers abroad, buy various types of telecommunications equipment. Many manufacturers and suppliers, like North Electric, Stromberg-Carlson and Graybar have separate sales divisions or manufacture specialized equipment for their industrial and governmental customers. While practically every “independent” telecommunications manufacturer and supplier has made and sold some of its products to buyers outside the telephone industry, to each and all, however, the primary market is the independent telephone industry. Every non-Bell industry witness has testified that the principal market for the sale of telephone equipment is the independent telephone industry. GTE’s own files constantly refer to the independent telephone industry as a separate market for the sale of telephone equipment, and in its proposed finding of fact before the FCC in Carterfone, General submitted, that AE “is the largest supplier of telephone equipment to the independent telephone industry.” Then, in a later proceeding before the California PUC, General Telephone of California stated that “Non-Bell telephone companies * * * purchase equipment and supplies in a competitive market. Equipment is manufactured for this market by AE and four other large manufacturers [94% of total] * * *. The market serving non-Bell telephone companies is an industrial market, a legal market * * Mr. Warner, president and chief executive officer of GTE, testified: “One of the things that seems to be little known in the public in general is the fact that the independent industry itself, in total, now has, I think, something in the range of 12 or 14 billion dollars invested in plants and equipment. So that, in any other concept other than by comparison to the Bell System, this is a giant industry * * * » Warner dep., pp. 55-56. As heretofore indicated, telephone operating companies not in the Bell System are known in the industry as “independents” or non-Bell companies. They have their own trade association, the United States Independent Telephone Association (USITA). USITA engages in the full range of trade association activities, publishing statistical and other information concerning the independents and representing the viewpoints of the independents before national and state legislative and regulatory bodies. One function of USITA through its committees is to enable the independents to negotiate on a united basis when dealing with Bell. Carterfone Moreover, GTE has urged that the Carterfone decision has so restructured the customer market for subscriber equipment — PABX, switching equipment, key systems and associated apparatus, that one-half of the market for apparatus (that employed with PABX systems) has been opened up to all competitors and the other half “will be fully opened” when tariffs are revised to permit direct electrical connection. GTE insists that by Carterfone the ultimate market for customer-premise equipment is now a subscriber or other user, and the telephone company status is no longer that of ultimate purchaser but simply that of distributor who must compete with all other sellers or distributors of such equipment to subscribers. Thus urges GTE, Carterfone has cured any antitrust violation that may previously have existed in this field and negated any possible reasonable probability of future foreclosure by any vertically integrated telephone system. The thrust of this contention is that the concept of a total “independent” customer market has been now fragmented by Carterfone, and ITT’s proof of GTE’s percentile control of the apparatus “sub-market” is invalidated; that ipso facto then, this invalidates all of ITT’s “market” facts and conclusions. What the Carterfone decision did was but rule that the tariffs prohibiting interconnecting of customer-owned devices with a public telephone network were invalid. The FCC, however, did not itself adopt new regulations regarding interconnection, and the FCC permitted the use of an interconnecting device “so long as the interconnection does not adversely effect the telephone company’s operations or the telephone system’s utility for others.” The FCC order became effective November 1, 1968, and forthwith all telephone companies — both Bell and non-Bell —filed tariffs with the FCC providing for interconnect of PABX and similar privately owned systems such as microwave transmission systems so long as the telephone company furnished, installed and maintained the interconnect. Unquestionably Carterfone would have an initial effect upon the PABX market, and ITT, along with other American and foreign companies, immediately made optimistic predictions as to the amount of business it would engender — and tried to sell equipment. Unfortunately, the sales actually made did not anywhere reach the optimistic figures of the manufacturers. The market picture was clearly analyzed by Harold S. Geneen, president of ITT, who stated that the effect of the interface tariff was to put a very high premium on the cost of getting a PABX from someone other than the connecting telephone company. It eradicated the small telephone subscribers from outside competition because it became more economical for them to remain with the telephone company without the interface device than to have to buy from an independent supplier and then pay the cost of the interface device. This, alone, knocked out a third of the potential market. The rural market could not be reached because