## Facts

- United Shoe Machinery Corp. dominated the shoe-machinery market and generally leased, rather than sold, its principal machines.
- In a prior civil antitrust action, the United States obtained a judgment that United had unlawfully monopolized the industry under Sherman Act § 2; that judgment was affirmed by the Supreme Court.
- Hanover Shoe, Inc., a shoe manufacturer and long-time lessee of United’s machines, filed a private treble-damages suit under Clayton Act § 4 alleging that United’s leasing and refusal-to-sell policy was an instrument of its illegal monopolization.
- Hanover invoked Clayton Act § 5(a) to use findings and the decree from the earlier government case as prima facie evidence of United’s antitrust violation.
- The district court awarded Hanover treble damages largely measured by the difference between (a) the rentals paid and (b) what Hanover would have paid under a hypothetical purchase arrangement, for the limitations period reaching back to 1939 through the 1955 filing date.
- The court of appeals affirmed liability but altered the damages calculation by (a) limiting the start of the damages period to 1946 based on intervening Sherman Act doctrine and (b) directing reductions for alleged tax advantages from leasing.
- The Supreme Court granted review on petitions by both parties.

## Issues

1. Whether the prior government antitrust judgment established, as prima facie evidence in Hanover’s private action, that United’s leasing and refusal-to-sell policy was part of illegal monopolization.
2. Whether an antitrust defendant may reduce or defeat a direct purchaser’s Clayton Act § 4 damages by showing the purchaser “passed on” any overcharge to its own customers.
3. Whether the damages period and calculation could be limited based on later doctrinal clarifications and whether damages had to be reduced by alleged tax benefits from leasing.

## Decision

- The Court held that the earlier government judgment, as applied through Clayton Act § 5(a), established that United’s leasing and refusal-to-sell practice was an element of unlawful monopolization for purposes of Hanover’s case.
- The Court rejected the “pass-on” defense in a direct purchaser’s Clayton Act § 4 action; a buyer is damaged when it pays an overcharge, even if it may have shifted some of the cost to customers.
- The Court approved Hanover’s overcharge measure comparing actual rentals to a reasonable reconstruction of purchase costs, including allowance for capital costs, without requiring highly speculative refinements.
- The Court rejected limiting the start of damages to 1946; the statute of limitations, not later changes in legal doctrine, controlled the recoverable period.
- The Court declined, on this record, to require a reduction in damages for alleged tax advantages attributable to leasing.
- The judgment was affirmed in part and reversed in part, resulting in restoration of Hanover’s recovery consistent with these rulings.

## Legal Principles

- A prior government antitrust judgment is prima facie evidence in a subsequent private action under Clayton Act § 5(a) as to matters that would be preclusive between the parties to the government case, as reflected in the findings, opinion, and decree.
- In a Clayton Act § 4 treble-damages action by a direct purchaser, the defendant generally may not assert that the purchaser suffered no injury because it passed on an overcharge to downstream buyers.
- Antitrust damages may be proven by a reasonable estimate of the overcharge attributable to the violation; courts need not require speculative reconstructions that would make recovery impracticable.
- The recoverable damages period is governed by the applicable statute of limitations rather than by later judicial clarifications of Sherman Act standards.
- Courts are not required to offset a direct purchaser’s antitrust damages by alleged tax benefits where doing so would introduce speculative and burdensome accounting disputes on the record presented.

## Conclusion

The Court held that Hanover could rely on the earlier government monopolization judgment as prima facie proof and could recover the overcharge it paid as a direct purchaser without reduction based on alleged pass-on or tax-benefit offsets, with the damages period determined by the statute of limitations rather than later doctrinal developments.


Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (1968)