United Shoe MacHinery Corp. v. United States

Background

The federal government sued a very large shoe‑machinery company and its officers under the Clayton Act, challenging lease forms that tied customers to the company’s machines, supplies, and services. The lower court found the company occupied a dominant share of the market (over 95% as found below) and enjoined several lease clauses, including exclusive‑use, exclusive‑supply, discriminatory royalties, forfeiture rights, and other tying provisions; the company appealed.

Reasoning

The central question was whether those lease provisions, even though the machines were patented, could be barred under §3 of the Clayton Act when their practical effect was to reduce competition or build monopoly. The Court held that §3 covers patented as well as unpatented goods, that a patent only gives an exclusion right and does not protect contracts that lessen competition, and that the earlier Sherman‑Act litigation did not preclude this different Clayton‑Act claim. The Court concluded the challenged clauses effectively compelled lessees to avoid competitors and therefore violated the statute.

Real world impact

The decision prevents a dominant equipment supplier from using lease terms to force customers to buy its machines or supplies or to forfeit leases for using competitors’ equipment. It applies where machines are shipped as part of interstate transactions, so the ruling affects national commerce and was affirmed by the Court.

Dissents or concurrances

Justice McKenna dissented; the opinion records his disagreement but gives no detailed reasons in the text provided.