Kodak Appeals To Court

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George Eastman founded the Eastman Kodak Company in 1888, and pioneered the photography industry with new technology that would help bring photography to the mainstream. After its inception, Kodak created what many called a "monopoly" in the photography industry. Both in 1921 and in 1954 the company had to endure a consent decree imposed by the US Government in which it was concluded that Kodak monopolized the market in violation of the Sherman Act (the first and oldest of all US federal, antitrust laws). Kodak settled the 1921 decree and agreed to be bound by restrictions. The Company was barred from preventing dealers from freely selling goods produced by competitors. On the other hand, the 1954 decree prevented Kodak from selling a bundle that included the color film and the photofinishing, among other restrictions. This tying arrangement of products is an agreement by a party to sell one product on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier. In this case, Kodak was selling the photo film while conditioning the buyer to also buy the photofinishing product (because it was included in the price). Both decrees had supporting evidence of the high market power that Kodak had at the time, for which both cases were based.

The conventional definition of market power is usually expressed as "the power to raise price." A company with market power has some amount of discretion to set its own price. Others can define market power as the power to force a purchaser to do something that he would not do in a competitive market, and have ordinarily inferred the existence of such power from the seller's possession of a predominate share of the market (Eastman Kodak v. Image Technical Servs, 1992). Market power could also be defined as the power profitably to raise or maintain price above the competitive benchmark price. The competitive benchmark is the price that would prevail in the absence of the alleged anticompetitive conduct. This benchmark price often differs from both the current price and the perfectly competitive price (Salop, Steven C, 1999). In economics, market power is the ability of a firm to alter the market price of a good or service (Wikipedia). A firm with market power can raise price without losing all customers to competitors.

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