Review of Industrial Organization 17: 301–311, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
United Shoe Machinery and the Antitrust
Signiﬁcance of “Free” Service
ROGER D. BLAIR and JILL BOYLSTON HERNDON
University of Florida, Department of Economics, Gainesville, FL 32611, U.S.A.
Abstract. In United States v. United Shoe Machinery Corp., United Shoe Machinery was found
guilty of illegal monopolization due to its leasing practices. Existing scholarship on this case largely
focuses on the issue of leasing versus selling. In contrast, we examine a particular practice of United’s
that was condemned: its policy of providing service for its leased machines without a separate ser-
vice charge. Our analysis demonstrates that this practice served an important insurance function by
shifting risk from the shoe manufacturers to United, a more efﬁcient bearer of risk, and concludes
that this practice was efﬁciency enhancing.
Key words: Antitrust, durable goods, leasing practices.
When Congress enacted the Sherman Act in 1890, it condemned “[e]very person
who shall monopolize . . . any part of the trade or commerce among the several
States....”Sincethestatutorylanguage failed to articulate clearly what constituted
illegal monopolization, it was left to the federal courts to develop the standards for
illegal monopolization in a common law fashion. One of the major steps in the
evolutionary process was Judge Wyzanski’s opinion in United Shoe Machinery.
Its importance in understanding the modern test for illegal monopolization can
be seen by its prominence in the leading antitrust casebooks.
Recently, this case
has attracted several academic commentaries with conﬂicting views of the wisdom
of the court’s ruling.
In the present paper, we do not seek to resolve this differ-
Huber Hurst Professor, University of Florida, and Associate in Economics, University of
Florida, respectively. For helpful comments, the authors thank Keith Hylton, Francine Lafontaine,
Richard E. Romano, David Sappington, and two anonymous referees, but they cannot be blamed for
United States v. United Shoe Machinery Corp., 110 F. Supp. 295 (D. Mass. 1953); afﬁrmed per
curiam, 347 U.S. 521 (1954).
See, e.g., Areeda and Kaplow (1997, pp. 465–473) and Sullivan and Hovenkamp (1994, pp.
Those who question the court’s wisdom include Wiley et al. (1990); Bork (1993); and Masten
and Snyder (1993). In contrast, Brodley and Ma (1993) and Waldman (1997) ﬁnd merit in the court’s