Eastman Kodak Co.'s Anti-Trust Suit

Eastman Kodak Co. is one of the dominant market share holders within the camera and other photography-related industries (supplies, film, et al), also referred to as the "consumer durables". The company was formally incorporated in 1901, however George Eastman founded the "original" company in 1880. George Eastman is often credited for the invention of roll film, and the first camera that was meant for the every-day consumer, the Kodak camera. Since its inception, the company has also boasted a number of other innovations including: the first video camera, the Kodachrome color slide film, the Instamatic camera series, and Disc cameras. In the 21^st century, since the company was facing more competition, it decided to divert its attention towards digital photography and supplies. The company, throughout its history, has been a major "player" in the photography industry.

According to reports disclosed in 2005, Eastman Kodak Co. employed approximately 51,000 full-time employees, with approximately 26,000 of those residing in the United States. However, in early 2007, Kodak decided to close some of their factories, which resulted in an employment base of only 40,900 worldwide. Eastman Kodak's corporate headquarters are based in Rochester, New York, and the CEO is Antonio M. Perez. Currently, the Eastman Kodak stock (EK) is trading at approximately $23.76 per share, while the company has a market value of $7 billion. As of the most recent financial report, Kodak had sales of $13.27 billion, a profit of negative $601 million, and total corporate assets of $14.32 billion.

Essentially, the case deals with whether or not Kodak is still the major, dominant market share holder of the color amateur negative film in which they developed. The district (lower) court where this case was first heard, ruled that Eastman Kodak did not possess such power, however, the United States government believes that they do, and it is evident. There are five major film producers in the United States, and they include Kodak, Fuji, Konica, Agfa, and 3M. The government believes a monopoly is present because they possess a high market share (which is true), and such a feature is a sign of monopolistic power. As they possess the dominant market share, they are able to adjust their prices accordingly. An expert economic calculated that Kodak has an "own" elasticity of demand of 2, so Kodak's prices are set at twice their marginal costs, this leads to a high persistent profitability. Additionally, almost all photography (or related) stores carry Kodak, however, some retailers exclusively carry Kodak and not their competitors. This allows Kodak to achieve a 75% market share of sales revenues in the industry.

Also, the government states that Kodak controlled the photofinishing market in 1954 (for purely technological reasons), and in 1954 there was an anti-trust decree requiring Kodak to license the technology to their competitors. However, since this anti-trust degree, Kodak has recaptured the dominant market share of the photofinishing market through their acquisitions, and now holds over 70% of the nation's macrolab photofinishing market.

There are obvious barriers to entry in both the film and photofinishing markets, as Kodak possesses the dominant market share and both and utilizes such a fact to their benefit. They raise prices, negotiate exclusive deals with retailers, and essentially cut their competitors' throats, so to speak. However, Kodak achieved its market share through legal (and more honorable) means, and while still attempting to increase their profits, they aren't using shady tactics to achieve their goals.

The conclusion of the case was that Kodak had violated the Sherman Anti-trust Act, specifically Section II, and Kodak was required to liquidate several of their recent acquisitions.