*1 v. E. I. du PONT NEMOURS STATES UNITED de
& CO. et al. Argued 14-15, 3, 1957. November 1956. Decided June No. 3. *2 John F. Davis argued the cause for the United States. him With on the brief Rankin, were Solicitor General Attorney Asistant Hansen, Victor H. Kramer Margaret H. Brass. Hugh B. Cox argued the cause for E. I. du Pont de Nemours Co., appellee. & himWith on the brief were O’Brian, John Lord A. Horsky Charles and Daniel M. Gribbon. for the the cause argued L. Stern
Robert him on brief appellee. With Corporation, A. Henry Hogan, M. Robert Seeley, G. were Miles A. Grier. Nitschke William Joseph Leonard filed brief for the C. Scott and Philip al., et appellees. Co. Christiana Securities opinion of the delivered Brennan Justice Mr. Court. Expediting under Act1 appeal §
This is a direct for the of the District Court Northern judgment Illinois,2 dismissing the action District of Government’s Clayton in 1949 15 of the Act.3 brought § under resulting the Act4 complaint alleged a violation 7 of *3 from I. du Pont de Nemours and Com purchase by the E. pany in 1917-1919 of a stock interest General 23% the Corporation. appeal This dismissal is of as to Motors and the cor Pont, the action General Pont porate large stock, holders of amounts of du Chris- Realty & tiana and Delaware Corporation Securities Company.5 Investment Pont’s command- primary
The issue is whether du of ing position supplier as General Motors’ automotive 1 823, amended, The noted 15 U. S. C. 29. Court 32 Stat. as § probable jurisdiction. S. 815. 350 U. Supp.
2 126 F. 235. 3 ed.) (1946 736, 38 15 ü. S. C. Stat. § governed by Clayton the Act as was before This action acquisi amendments, inapplicable to their terms are which U. S. C. 18. n § 1125, 15 prior tions to 1950. 64 Stat. alleged complaint 2 of violation of 1 and The amended also §§ 693, amended, S. C. Act. 26 50 Stat. 15 U. Sherman Stat. deciding case, our we are 2. In view of determination not §§ appeal from the dismissal of the action under Government’s Sherman Act.
finishes and competitive fabrics was achieved on merit or alone, acquisition because its Motors’ stock, consequent intercompany and the close relation- ship, led to the insulation of most of the Motors’ market from free competition, with the resultant likeli- hood, at the time of suit, monopoly the creation of of a line of commerce. paragraph first 7, pertinent here, provides: corporation
“That no engaged in commerce shall acquire, directly or indirectly, any part the whole or of the stock or other share capital of another cor poration engaged also commerce, where the effect such may to substantially lessen be competition corporation between the whose stock is acquired so and the corporation making the acquisi tion, or to restrain such in any commerce section or community, or tend to monopoly create a of any line of commerce.” Section 7 is designed to arrest its incipiency only the substantial lessening of competition from acquisi- tion one corporation of any the whole or part of the stock of a competing corporation, but also to arrest their incipiency restraints or monopolies in a relevant market which, as a reasonable probability, appear at the time of suit likely to result from acquisition by one corporation of all any part of the stock other *4 corporation. The section is violated whether or not actual restraints or monopolies, or the substantial less- ening of competition, have occurred or are intended. Acquisitions solely for investment excepted, only are but if, and so long as, the stock is not by used voting or other- wise to bring about, or in attempting to bring about, the substantial lessening competition. of
6 731, (1946 38 Stat. ed.) 15 U. S. C. 18. §
590 argument that with the the threshold are met at
We only an to 1950, applied amendment before its 7,§ corporation, competing stock of a corporation of by supplier an acquisition not to words, that the other corporation aof customer stock —in not vertical only to horizontal and applied statute question presenting the first case This is acquisitions. Trade Co. Federal Shoe v. International in this Court. Mfg. Co. v. Fed Thatcher Comm’n, 291, and 280 S.U. Comm’n, 554, corporate involved Trade U. S. eral competitors. acquisitions brought, the this action was years the 35 before During against acqui- vertical invoke 7§ did not Government that has said The Federal Trade Commission sitions. See acquisitions. vertical apply not the section did Mergers Acquisitions, Report Corporate C., F. T. on Cong., 1st Sess. 169, H. Doc. No. 84th (1955), R. 1950 revision Also, considering the the House Committee thought “. . . it has been some of 7 stated that only to the so-called applies legislation this [the Act] 1191, . .” No. 81st Rep. . H. R. mergers. horizontal Report adds, however, 11. The 1st House Cong., Sess. . . 1950 amendment “. to make purposed that the types mergers and applies to all clear that the bill hori- conglomerate vertical and as well as acquisitions, added.) . (Emphasis zontal . . duty
This Court has the to reconcile administrative policies laid interpretations with broad antitrust Co. Fed- Cf. Automatic Canteen v. Congress. down Comm’n, eral Trade 74. The failure of the U. S. binding Commission act is not a administrative inter- pretation not Congress acquisi- did intend vertical Accord, purview tions to come within the Act. Jackson, Baltimore & Ohio R. Co. v. S. U. paragraph disjunctive, The first written in the 7,§ only reach plainly corporate acquisi- framed to *5 the competing corporation, tion of stock of a where effect substantially competition them, to may be lessen between any the of corporate acquisition corpora- but also stock of competitor be tion, not, may (1) or where the effect either in any (2) to restrain commerce section or or community, to monopoly any tend create a of line of commerce. amended complaint allege does not that effect of acquisition may any du Pont’s be restrain commerce to community section or alleges but the effect was “. . monopoly . tend to create a in particular lines of commerce . . . .”
Section 7 paragraph dealing contains second with holding company’s acquisition of stock two or more corporations.7 legislative history Much of the of the section deals the alleged holding company with evil.8 history This interpretation does aid in because our concern here is with first paragraph of section. is, pertinent There however, legislative history which does support aid and our construction. Chilton,
Senator managers one of Senate of the explained bill, the House conferees insisted that to prohibit just acquisitions where the effect was “substantially” to lessen competition would not accom- plish the aim designed statute, “a because cor- poration might acquire the corporation, stock another paragraph provides:
7This corporation directly “No shall acquire, indirectly, or the whole any part or or capital stock other share of two or more cor- porations engaged acquisition, in commerce where the effect of such or the use of voting granting proxies such or or other- wise, may substantially be competition lessen between such cor- porations, any them, or capital whose stock or other share is so acquired, or any to restrain such community, or commerce section monopoly tend create a 731, line of commerce.” 38 Stat. (1946 ed.) 15 U. S. C. 18.§ g., See, e. Rep. Cong., S. No. 13; Rep. 63d 2d H. R. Sess. No. Cong., 63d 2d Sess. *6 but the lessening competition, of no there would be to restrain monopoly or might to create tendency be Chil- “Therefore,” Senator said or commerce.” trade restrain the ‘Or to following: . . . “there was added ton, community or or tend to any in commerce section such ” 9 This con line of commerce.' monopoly any of create a separate section, embracing as three struction of recog also been acquisition, of stock has distinct effects a by a number of federal courts.10 nized of all corporation any acquisition hold that one We competi- corporation, of another any part of the stock is reach of the section whenever not, tor or within the that will appears likelihood reasonable or in the creation of a restraint of commerce result although any Thus, of line of commerce. monopoly are not a viola- competitors, du Pont and General Motors a result of the if, tion of the section has occurred there at the time of suit a reasonable acquisition, any Judge of a of line monopoly likelihood of commerce. Board correctly Corp. Maris stated Transamerica v. of Governors, 169: 206 F. 2d power
“A
. . .
monopoly involves
to
exclude
monopolist
to do so.
competition when the
desires
necessary . .
Obviously, under
7 it was not
.
Section
actually
find
. . .
to
has
[the defendant]
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to
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end. For
9 Cong.
Rec. 16002.
;
v. Federal
Appellees argue that there *7 meaning probable monopoly of a restraint or within fin- Motors market for of 7 because the total General only negligible percentage ishes and fabrics constituted includ- uses, market materials for all the total for these Motors ing uses. It is stated the General automotive Motors brief that in 1947 du Pont's finish sales to General users, constituted all finishes to industrial sales of 3.5% comprised and that Motors its fabrics sales type of the of fabric used total market for the 1.6% industry. the automobile necessary
Determination of the relevant market is a predicate finding Clayton to a of a violation monopoly Act the threatened must be one because substantially competition which will “within the lessen 11 area competition.” Substantiality of effective can be only determined of the market affected. The terms record shows that automotive finishes and fabrics have peculiar sufficient characteristics and uses to constitute products sufficiently them distinct all other finishes 11 293, States, Standard Co. Oil v. United 337 U. S. of California 299, Act, n. 5. Section 3 of the with which the Court was concerned Oil, agreements in Standard makes unlawful certain . where the may substantially competition . effect . . be to lessen tend to monopoly create a line commerce." 38 Stat. 15 U. S. C. (1946 ed.) added.) (Emphasis 14.§ within them a “line of commerce” to make and fabrics Camp & Sons Clayton Act. Cf. Van meaning Co., Thus, 245.13 Can 278 U. S. American Co. v. following in the du Pont is said as to finishes example, the For brief: to General largest single du Pont sells finish item which
“The pat- lacquer, low-viscosity discovered is a nitrocellulose . . . is ‘Duco’. its trademark ented du Pont and for which truly represented a development of ‘Duco’ “The invention production making in the paint significant in the art of advance would production of automobiles automobiles; without ‘Duco’ mass possible. been not have finishing materials better “By early 1920’s the need for method then used urgent .... varnish had become automobiles by auto- at the trial finishing in detail was described automobiles required with varnish Finishing automobile pioneers .... an mobile nu- apply the intolerably long up to or weeks—to an time — longest complete, its life the finish merous coats needed. When began peel off before year, it and often expectancy was less than a . .” delivered. . the car was Nickowitz, as to testified since Pont’s Director of Sales Du as follows: to automobile manufacturers fabrics sold generally speaking years, true that “Q. Now, isn’t over selling to the automobile policy in its fabrics has followed the du Pont *8 try to sell competitors price? You don’t undercutting field of competitor, by any quoted other price a lower than on you? do go based on our costs. in and we bid Well, we don’t know. We
“A. industry, a situation than we have Now, in automotive different example, you an where have trade, you do in the furniture for price. established industry, uses each see, in the automobile “You manufacturer peculiar They ideas all have their own construction. different dyed backs, and they Some want about these what want fabrics. any prices you finishes, don’t have standard so some want different added.) industry.” (Emphasis automobile in the court, opinion in the of the trial extended discussions And see id., 288-292, fabrics, finishes, Supp., as to at 296-300. 126 F. at 13 any comprehensive and phrase line of is “The commerce’] [‘in tendency produced in one effect or is if the forbidden means
595 for purposes bounds of the relevant market this case are not coextensive the total market for with finishes are in fabrics, but coextensive with the automobile for dustry, the relevant automotive finishes market fabrics.14
The market affected be must substantial. Standard Co., Fashion Magrane-Houston Co. v. S. 357. 258 U. Moreover, in order to 7 the establish violation of Gov prove ernment must a likelihood that competition may be “foreclosed a substantial share of . . . mar [that .”15 requirements Both are satisfied this case. ket] substantiality The of a relevant market comprising the industry undisputed. automobile is substantiality of General Motors’ fully share of that market estab lished the evidence.
General Motors is the giant colossus of the automobile industry. It accounts annually upwards for of two-fifths of the total sales of automotive vehicles in the Nation.16 out of all the commerce, various lines of the words 'in line literally commerce’ are S., satisfied.” 278 U. at 253. 14The General Motors brief states: “If the products solely mainly market for these were Corporation, industry or the whole, automobile as a present Motors’ industry might volume of the share automobile large enough constitute rely a market Government on.” 15Standard Co. v. States, Oil United 337 U. S. at of California 16 Moody’sIndustrials proportion lists General Motors’ industry:
Percent Percent 1938 ... 1947 ... 38.5 42+ 1939 ... 1948 ... 38.8 42+ 1940 ... 45.6 1949 ... 42.7 1941 ... 45.3 ... 45.6 1942 . W. W. II ... 41.8 .W.W.II ... 40.3 1944 . W.W.II ... 44.7 1945 . *9 1954 W.W.II ... 49.9 1946 1955 . 36.3 ... 48.8 596 and first in sales second ranked Motors 1955 General corporations17 industrial among
in all States United assets over a bil corporation to earn the first and became In 1947 net income.18 General in annual lion dollars from du Pont were products of all purchases Motors’ total pur (71%) represented $18,938,229 of which $26,628,274, latter Division. Of the du Pont’s Finishes chases 19and used to “Duco” the thinner purchases amount 20 and “Dulux” $12,224,798 (65%), apply “Duco” totaled Purchases General $3,179,225. totaled purchases $3,700,000, in amounted to Pont fabrics 1948 Motors of du Fabrics Divi account of du Pont’s largest it the making supplied du percentages, Pont Expressed sion. 67% in 1946 for finishes requirements Motors’ General supplied In fabrics du Pont and 1947.21 52.3% 68% in 1947.22 Because and requirements 38.5% almost Motors for one-half accounts sales, requirements for industry’s annual automobile represent approxi must automotive finishes and fabrics market for these materials. mately one-half of relevant clearly that quantitatively Because the record shows largest part Pont of Gen percentagewise supplies du Pont requirements, eral Motors’ we must conclude du has a market. substantial share of the relevant appellees argue the Government could not applicable this because 7 is maintain action only holding to the not to Directory Largest Corpora- Fortune U. Industrial S. tions, July 1956, p. 2. Times, 3,1956, p. 1, N. Y. Feb. col. 19A developed specially by Pont finish use as an automotive finish. refrig- synthetic developed by A enamel du Pont which is used on erators, also manufactured General Motors. Supp.,
21 126F. at 295. 22Id., at 300-301.
597 argument use of the This subsequent or stock. miscon 7 is objective § ceives the toward which directed. The Clayton supplement intended to Act was the Sherman primarily apprehended Act.23 Its aim was to arrest con sequences intercorporate relationships before those could their relationships evil, may work which be at or any acquisition, depending upon time after the the cir particular of the case. The cumstances Senate declared objective Clayton Act to be as follows: Broadly stated, bill, “. . . in its treatment of unlawful restraints and monopolies, pro- seeks to hibit and make unlawful certain trade practices rule, and in which, singly themselves, are not July covered the Act of 2, 1890 Sherman [the Act], existing or other antitrust acts, thus, making these practices illegal, arrest the crea- trusts, conspiracies, tion of monopolies incipiency their consummation. . . .” before Rep. 698, S. No. 63d Cong., (Emphasis 2d Sess. 1. added.)
“Incipiency” in this context denotes not the time the acquired, any stock was but time when the ripen prohibited threatens to into a effect. See Trans Corp. Governors, america v. Board 206 F. 166. 163, 2d accomplish congressional To aim, the Government may at proceed any acquisition may time that an be said with reasonable probability to contain a threat may lead ato restraint of commerce or tend to create a monopoly of a line of pur commerce.24 Even when the solely chase is for investment, plain language of 7§ contemplates an action at time the stock is used to Fashion Co. v. Magrane-Houston 23 Standard 258 S. 346. Co., U. Cf. Corn Products Refining Comm’n, Co. v. Federal Trade U. S. substan about, the bring attempting about,
bring competition.25 lessening tial near the time at or brought were under 7 Prior cases v. Fed Shoe Co. g., e. International See, acquisition. Vivaudou, Inc. Comm’n, 291; V. S. eral Trade 280 U. Trade Comm’n, Federal 273; F. 2d Trade v. Federal Co., rev’d Mfg. 5 F. 2d Thatcher Comm’n v. States 554; United S. ground, another U. part on *11 In Vanadium- re 117; F. Corp., Steel Supp. 11 Republic v. Co., these cases
Alloys 194. None of Steel 18 F. T. C. fore is suggests, that the Government holds, or even a at time when bringing the action closed from evident. effects is prohibited threat of the District Court’s con argument to this Related rea negated “any years 30 of nonrestraint clusion that the time of the of such a restraint” at probability sonable of a mere course, proof of true that is, suit.26 While tendency to mo possibility prohibited of a restraint or statutory requirement not establish the nopoly will “may be” such restraint the effect of an by the District Court the basic facts found tendency,27 of demonstrate the error its conclusion.28 commanding position as Company’s The du Pont shortly until supplier was not achieved 25 part: provides, pertinent 7 in Section purchasing stock apply corporations such “This section shall not to using by voting solely or otherwise and not the same for investment bring bring attempting about, the substantial about, or (1946 ed.) lessening competition. 15 S. C. . . .” 38 Stat. U. §18. 26 Supp., 126 F. at 335. 27 Magrane-Houston Co., Fashion v. 258 U. S. Standard Co. at 356-357. 28 pertinent to significant dispute to the facts There is no basic provision of here with the the decision. are thus not confronted We findings be set Proc., (a), of fact shall not Fed. Civ. Rules clearly aside unless erroneous.
after purchase its of a sizable block General Motors in 1917.29 time production At that for the auto industry mobile sales to and its General Motors were rela tively insignificant. produced only Motors then about production the total automobile and its 11% requirements, relatively substantial, while far short were proportions they forged assumed as it ahead to its present place industry. in the years
At acquisition, least before the stock over a Company, century Pont the manufacturer of military and commercial had explosives, expand decided to its business into other fields. It foresaw the of its loss explosives Army market for after the States United Navy decided their operate construct plants. Nitrocellulose, own cotton, nitrated principal raw material used du Pont’s manufacture of powder. A search smokeless for outlets for this raw requirements material uncovered in the manufacture lacquers, celluloid, artificial leather and silk. artificial step purchase first taken was the du Pont *12 of Company, the Fabrikoid largest then the manufac- turer leather, of artificial reconstituted as the du Pont Company Fabrikoid expansion program barely however,
The was started, when I Company World War intervened. The du Pont suddenly engulfed found itself military with orders for explosives from foreign nations later to be of the allies war, United States and it had to its increase capacity plant and 700,000 facilities from to 37,000,000 pounds per month exceeding at cost $200,000,000. Profits accumulated and ultimately amounted $232,- 000,000. postwar The need find expanded uses for its organization facilities and being greater now ever, than supplied Before du Pont General Motors with fabrics. coated Supp., 126 F. at 297. the war during program expansion its Pont continued
du In purpose. for the $90,000,000 aside setting years, Works, one Arlington bought Pont 1915, du September In June companies. celluloid largest two Nation’s of the rubber- producers of Company, Fairfield Rubber 1916, the tops, was taken carriage automobile and fabrics for coated was 1917, purchase In March by Pont Fabrikoid. over du manufacturers Company, Brothers and made of Harrison inorganic chemicals varnish, acids certain paint, Harrison Shortly afterwards, manufacture. in paint used manufac- Company, a color Chemical absorbed Beckton Finishing Bridgeport Wood turer, also in and, a varnish manufacturer. Company, Motors stock of General before the first block Thus, only for seeking Pont markets not du was acquired, leather, cellu but also the artificial nitrocellulose, paints and varnishes goods, and loid, rubber-coated connection, companies. that by demand automobile reports that . .(cid:127) expressly found the trial court invest at or near the time other documents written representatives were well aware ment show du Pont’s products large Motors was a consumer General Raskob, by Pont,” the kind offered du and that John J. promoter treasurer principal du Pont’s Pont investment, one, thought “for that du would ulti . .”30 mately all that business . . get Company’s buying into General Motors interest Pont, Pierre S. du then was stimulated Raskob and acquired personal holdings president, Pont’s who stock in 1914. Motors was C. Durant organized years six earlier William acquire independent automobile manufactur- previously Oakland and Oldsmo- ing companies Buick, Cadillac, *13 — ' by in brought Chevrolet, organized bile. Durant later Supp., F. at power, during temporarily him he was out when a controlled General 1910-1915, group bankers’ dead Motors. when Durant and the bankers they resolved Directors, locked on the choice of Board of an under Pierre S. agreement deadlock which du Pont of the was named Chairman Board, Pont, and Pierre S. du Raskob and two nominees By of Mr. du Pont neutral were named directors. Durant settled his differences with the bankers and in presidency controlling position resumed and his prevailed upon General Motors. He Pierre du Pont S. in Raskob continue their interest General Motors’ affairs, which both did members of the as Finance Com mittee, working closely with Durant matters of finances operations expansion. and plans for future Durant persistently urged “Wilmington both men and the people, it,” buy he called more stock Motors.
Finally, Raskob broached to Pierre pro- S. du Pont the posal part of the fund expan- earmarked for du Pont purchase sion be used of General Motors stock. At this time about $50,000,000 $90,000,000 of the fund was still in hand. Raskob foresaw the of the success industry opportunity automobile and the great profit in a purchase substantial of General Motors stock. On December 19, 1917, Raskob submitted a Treasurer’s Report to the du recommending Pont Finance Committee a purchase of General Motors stock the amount of $25,000,000. That report makes clear that more than just profitable contemplated. investment was A major consideration was an expanding General Motors provide would a substantial market needed burgeoning du Pont organization. summary Raskob’s reasons in support purchase this includes state- Supp.,
31 126F. at 241. *14 Company in the General interest ment: “Our Fabrikoid, us the entire for undoubtedly secure will business those and varnish Pyralin [celluloid], paint (Emphasis is a substantial companies, which factor.” added.)32 result would purchase thought,
This was market, substantial obtaining a new and du Pont’s reports and 1918 annual Company’s echoed “Though appears: report In the 1917 to stockholders. promise great it is one of activity, this is a new line to the character of to be well suited one that seems and very large are companies motor The organization. our paints as well as Pyralin our Fabrikoid consumers of added.) report The 1918 (Emphasis varnishes.” and fabrikoid paints, varnishes says: consumption “The gives another common of automobiles in the manufacture interest.” particularly the acquisition, of the background
This documents, contemporaneous of the plain implications purchase was for a conclusion that destroys basis Moreover, immediately “solely investment.” made for of it growing Pont’s influence out acquisition, du after to achieve to bear within General Motors brought was supplier Pont as Motors’ primacy for du and finishes. automotive fabrics purchases total pass before du Pont’s years Two were to brought percentage its Motors stock of General 23% aggregate outlay stock and outstanding of the du Pont and Durant During period, $49,000,000. arrangement giving primary du Pont under an worked responsibility Durant for finances and responsibility Pont’s sales Haskell, But J. A. former operations. vice-president, became General Motors manager and operations committee. charge vice-president “. . . willing Haskell to under- judge said that trial Supp., 126 F. at 241. responsibility keeping take the du Pont informed of General Motors affairs . . . during regime Durant’s frankly openly gaining Haskell set about the maxi- mum share of the General Motors market for du Pont. In a contemporaneous 1918 he reveals his inten- document, *15 tion “pave way perhaps general adoption to a more of our material,” thinking and that he was “how best to get cooperation General Motors Divi- several [from whereby makers priced of such of the low cars as sions] possible it would seem will get and wise to transferred in put necessary be the frame of adoption mind for its Pont’s artificial [du leather].” up
Haskell set of communication within General lines Motors to be in what position a to know at all times du products products competi- Pont and what of du Pont tors were being imagination sup- used. It is not pure pose that an such surveillance from that source made impressive impact upon purchasing officials. It would be as understandably interpret difficult for them not to meaning a Pont preference given that was to be to du products. actively pushed program Haskell also genuine substitute Fabrikoid artificial leathers for leather sponsored Pyralin use sheeting through of du Pont’s arrangement up liaison set between himself and the du Pont sales organization. sprung quickly swept
Thus from the du barrier, Pont commanding competitors, into a lead over its who were never afterwards in serious contention. Indeed, General principal paint supplier, Motors’ then Flint Varnish and in Works, early handwriting Chemical 1918 saw the on The president asking wall. Flint came to Durant be bought out, telling Durant, judge found, the trial as bought that he “knew du Pont had a substantial interest paint Motors and was interested General . . . industry; that felt he would lose a valuable [he] Supp., 126 F. at Company- Pont Motors.” du customer, General it. Flint and later dissolved bought Works Lammot by August 1921, years, less than four vice-president and later Chair- Pont, du then du Pont response to a Motors, man of the Board query Pont, from Pierre S. du then Chairman Motors, Board of both du Pont and General “whether its entire taking requirements General Motors was Pont,” reply du Pont from du was able to products bought eight operating four of Motors’ divisions and var- requirements paints from du Pont their entire four requirements Fabrikoid, five their entire nishes, their entire and seven their requirements cloth, of rubber requirements entire Lammot Pyralin and celluloid. quoted department feeling du Pont Pont’s sales improving eventually “the condition is and that satis- factory every branch, conditions will be established *16 they seeing things going but wouldn’t mind a little faster.” responded change Pierre du Pont that “with the S. at and management Cadillac, Oakland Olds [Cadillac taking very paints little but varnishes, Oakland 50%; taking only part requirements Olds was of its for you I fabrikoid], believe that should be able to sell sub- all stantially paint, products varnish and fabrikoid needed.” He also suggested that “a drive should be made Body any why the Fisher business. Is there reason they have not dealt with us?” Body
Fisher was stubbornly resistant to du Pont sales pressure. Motors, 1920, during time, Durant’s acquired Body Company. stock control of Fisher 60% However, voting trust was Fisher giving established powers management. They brothers broad on insisted running their years own show and for withstood efforts of high-ranking du Pont and General Motors executives to Supp., 126 F. at 267. get them to switch to du Pont from their accustomed supply. sources of Even after General Motors obtained in stock control the Fisher brothers retained 100% power By sufficient to hold out. 1948, however, Fisher collapsed, proportions resistance had and the requirements its supplied compared favorably du Pont purchases by with the other General Motors Divisions. the du Pont officials felt that too much Gen- eral going competitors. Motors business was to its When Pierre S. du Pont and expressed Raskob Lam- surprise, gave mot du Pont them a breakdown, by amounts, dollar purchases made competitors. from du Pont’s This showed, breakdown however, only Fisher Body the General Motors any divisions was obtaining sub- proportion stantial requirements from du Pont’s competitors.
Competitors did obtain higher percentages of the Gen- eral business in later years, although high never enough at substantially time to affect the dollar amount of du Pont’s appears sales. Indeed, likely that probably General Motors turned to outside sources of supply part at least because its requirements out- stripped du Pont’s production, when pro- General Motors’ portion of total automobile sales grew greater and the company took its place as the sales leader of the automo- industry. bile For an example, undisputed Government exhibit shows General Motors took of du Pont’s 93% production automobile Duco in 1941 and in 1947. 83% The fact that sticks out in this voluminous record is *17 that the bulk of du Pont’s production always sup- has plied largest part requirements of the one customer in the automobile industry connected to du Pont by a stock interest. The overwhelming inference is du Pont’s commanding position promoted by was its stock interest and was gained solely not on competitive merit. that considerations court the trial agree with
We by either overlooked not and service were price, quality and in products Pride its Motors. Pont or General success would Motors’ in General financial stake high But supply the best. try to to du Pont naturally lead cannot obscure judgment of this business the wisdom pur that du Pont by record, plainly revealed fact, open the General pry to its stock employed posely supplier primary as the to entrench itself Motors market finishes for automotive requirements Motors’ of General and fabrics.35 written epitomized in a 1926letter policy is well The du Pont vice- Pratt, Motors employee, L. when a General former du Pont J. general Committee, to the president and member of the Executive
manager of a Motors Division: General pur- manufacturing, glad your chemical to- know that “I am possibly they be in better hands chasing feel would divisions companies. From a business with dealing with than local duPont give organization to your would be influenced standpoint doubt no However, conditions, business, equal to the local concerns. under recognize the sacrifice that when Motors divisions I think General 1921, keep to Company in 1920and made the duPont very light publicly duPont being put in bad Corporation from —the borrowing $35,000,000 on its notes going extent of Company to the debt, prevent a entirely in order to company free of when the open being on the thrown large Motors stock amount my give weight mind more they to this which should market — words, In other of local conditions. than over-balances consideration quality, equal standpoint of from the where conditions are I feel that major share Company have the price, the duPont should service those items that the duPont business on Motors divisions’ of General price. quality, If it service and Company take on the basis of can company I do product than one possible use the from more business, give any company .all of the one not think advisable situation, always competitive other- keep a I it is desirable to think seeing you grow have any supplier is slack wise liable possible. price best service my personal in this letter to expressed own sentiments
“I have might my point view, but I you do you order that have against organization any way your that would be wish to influence *18 in Similarly, high the fact that all concerned executive posts honorably in each companies fairly, both acted and in the honest conviction that his actions were in the best company any design interests his own and without anyone, overreach including competitors, du Pont’s does right defeat the Government’s to relief. It is not requisite to proof of a violation of 7 to show that § monopoly restraint or was intended. statutory policy
The fostering competition free is obviously furthered when has an supplier advantage no over his competitors from an acquisition his customer’s likely have the effects condemned the statute. repeat, We that the whether, test of a violation of 7 is at suit, the time of probability there is a reasonable likely is in to result the condemned restraints. upon The conclusion inescapable this record is that such proved likelihood was as to acquisition. this The fire that was kindled in 1917 continues to smolder. It burned briskly to forge the ties that bind General Motors market to du if Pont, quieted it has down, it remains hot, and, past likely is at performance, any time to blaze and make the complete.36 fusion judgment
The must therefore be reversed and the cause remanded to the District Court a determination, for after further hearing, of the equitable relief necessary and appropriate public interest to eliminate the effects of the acquisition offensive to the statute. The District Courts, framing equitable decrees, are clothed your good own judgment, keeping in prime mind that above all the consideration is to thing Delco-Light do the best Company, regard considerations Company to the duPont or other secondary, concerns are your feeling.” and I am sure this is potency of the influence of du- Pont’s stock interest 23% greater today remaining because of the which, diffusion of the shares by 436,510 were stockholders; held owned no more than 92% each, 100 shares owned no more than 25 shares each. 60% Supp., F. at 244. judgments their fit to model large discretion “with Salt Co. International particular case.” exigencies *19 States, 392, S. 400-401. v. United 332 U. Com- Securities appellees of the Christiana
The motion Company Realty Investment and pany and Delaware seems them denied. It of the appeal dismissal pending they parties be retained as that appropriate relief be the District Court of by determination granted.
It is so ordered. Clark, Harlan and Justice Justice Mr. Mr. Mr. part took no the consideration Whittaker Justice of this case. decision Burton, Frank- Justice Justice whom Mr.
Mr. joins, dissenting. furter brought this civil
In the United States June the Northern District Court for action in the United States and Act under 4 of Sherman § of Illinois District violations enjoin alleged Act to Clayton § of the Clayton Act. Act, 2 of and §§ and the Sherman pertinent insofar as to the complaint, The amended that Pont and General here, alleged du issues in a con- since combination and engaged, have been trade, and monopolize to restrain and interstate spiracy Motors’ stock had that Pont’s of General du restraining tending and to create the effect of trade by alleged that, means monopoly. brief Motors, relationship between du Pont and General an obtain, illegal did obtain, intended to Pont competitors preference over its the sale products, illegal preference a further Motors of its development made in the chemical discoveries Appellees charges. General Motors. denied the nearly months. issues took seven The trial of these including most of witnesses, heard 52 The District Court exhibits. 2,000 and received over principal actors, 8,283-page transcript contained The evidence facts record covers in minute and intimate detail that du bearing charge Pont, on the Government’s influence, had interfered coercion, agreement, control or unlawfully purchasing and manu- with General Motors’ facturing policies. evidence, On the basis of this failed to District Court found the Government had and, specifically, (a) du Pont did not prove its case (b) control there had been “no limita- Motors, tion upon or restraint General Motors’ freedom to deal freely fully competitors upon with of du Pont” or *20 ... to deal with chemical and discoveries,” “freedom in (c) years resulted, after 30 which no such restraint had a finding there was no “basis for there is or has been that probability reasonable of such a restraint within the meaning Clayton Supp. 235, of the Act.” 126 F. 335. in Government’s basic contention this Court is that du Pont in §§ violated and of the Sherman Act that, alleged Motors, means of its control of General it preference respect obtained an unlawful with to Gen- eral purchases Motors’ of materials. In closing pages brief, of its in argument, for few minutes its oral the Government added the assertion that du Pont had violated 7 of the in Clayton § Act that its stock interest in General Motors “has been used to channel General purchases Motors’ to du Pont.”
This Court, ignoring the Sherman Act issues which have point eight years been the focal litigation, now holds that du acquisition Pont’s of a stock interest 23% in General Motors during years 1917-1919 violates Clayton § of the Act because “at the time of suit probability there a reasonable [in that 1949] [was] acquisition likely to result in the condemned [was] conclusion, this Ante, reaching In p.
restraints.” Clayton applies Act 7 of (1) § holds that the Court acquisitions; stock as horizontal as well to vertical the stock effect of determining in whether that (2) 7,§ within a restraint as to constitute is such acquisition action bringing by the Government the time chosen of the rather than the time controlling time of at the when, that 7 is violated (3) itself; the stock probability a reasonable suit, there is of com- the foreclosure likely to result acquisition is from a substantial acquiring corporation of the petitors market. of the relevant share pur- case, to this Court principles these applying findings of fact carefully documented accept the ports to overturns numerous Actually, District Court. the District Court now con- well-supported findings of purchase Motors’ cluding that du Pont did that du Pont’s stock interest solely investment; practical working control of General resulted Motors; might that du Pont has used or use this “control” preferences supplying to secure with the relevant market fabrics; automobile finishes only fabrics; includes automobile finishes and and that there at the time of suit in was, even reasonable probability competitors might that du Pont’s be fore- closed from a substantial share of this relevant market. reaching.
The Court’s decision is far Although § *21 in Clayton years of the Act was enacted 1914—over 40 ago is the first case which the or United States —this the Federal sought apply Trade Commission has toit a vertical integration.1 Likewise, appears the this to be first case in which it ever been that is argued has 7§ applicable acquisition to a stock place many which took Verney Mills, Inc., Ronald Fabrics Co. v. Brunswick CCH Trade 57,514 (D. 1946), infra, Cases C. S. D. N. Y. n. ¶ discussed private damages. a action for treble years Court, accepting before.2 The both of these the of contentions, disregards language purpose statute, years the of administrative and all practice, precedents the one except District Court decision. The sweeping the pronouncement character of Court’s is fur ther evident from the fact that to make its the case Court requires no showing any misuse of stock interest— either at the time of acquisition subsequently gain—to preferential treatment from the acquired corporation. All that if required, this case is to be our guide, is that some in some year persuaded court future be that a “rea sonable probability” then advantage exists that an over competitors in narrowly construed may market be ob tained as a result of the stock interest. Thus, over 40 years after the enactment Clayton of the Act, it now becomes apparent for the first time 7§ has been a sleeping giant all along. Every corporation which has acquired a stock interest in corporation another after the enactment Clayton Act in 1914, and which has had business dealings with corporation is exposed, retroactively, to the bite of newly discovered teeth of §7.
For the given reasons I below, believe that the Court has erred in (1) applying 7 to a vertical acquisition; (2) holding that time chosen the Government bringing the action is controlling rather than time stock itself; (3) concluding, dis- regard of the findings of fact the trial court, that facts this case fall within theory of illegality.
I.
Section 7 of
Clayton
Act, quoted in full in Appendix, post, pp. 655-656, does not make unlawful all
Corp.
Transamerica
Governors,
Board
v.
(C.
Cm t—4 CO not does mergers.3 It acquisitions intercorporate only applies It assets.4 physical of apply acquisitions to impor then with and even stock, of acquisitions to certain is 7, of which paragraph § The first exceptions. tant case, in this primarily involved statutory provision the provides— in shall commerce engaged corporation no
“That any part or indirectly, or the whole directly acquire, corpora- of capital another share of the stock or other of the commerce, where effect also engaged tion com- substantially lessen may to such be is so the whose stock corporation petition between acquisi- making the acquired corporation and the any section restrain such commerce tion, or to any monopoly of or tend to create community, 731-732, 15 S. C. line of 38 Stat. U. commerce.” (1946 ed.) 18.§ intercorporate only
This makes those paragraph unlawful of three acquisitions may stock which result substantially competition between (1) effects: lessen 3 ed.) 731, (1946 Clayton 7 15 Act, Section 38 Stat. U. S. C. 18, application, was 1950 so 64 Stat. amended in as to broaden § inap 1125, amendments, by terms, 15 U. 18. The their were S. C. § governed plicable acquisitions 1950. Thus made before this case original 7, language and not amended. § § rulings was One the earliest of-the Federal Trade Commission prohibit acquisitions. 7 did asset 1 F. 541-542. T. C. § bring acqui- primary purpose of the 1950 asset amendments Proponents sitions within 7. of the 1950 amendments asserted § acquisitions on of asset several occasions omission Cong. original See, g., Clayton Act had been inadvertent. e. However, history Clayton legislative 16443. Act Rec. purpose prevent demonstrates that of 7 was to the formation holding peculiar acquisitions, companies and certain evils secrecy ownership. Cong. 9073,' particularly the See Rec. 14456; 14254, 14420, Rep. 627, Cong., H. R. No. 2d 63d Sess. 17; Rep. Cong., 63d S. No. 2d Sess. *23 (2)
acquiring acquired corporations; and the restrain any (3) commerce in section or tend to community; a monopoly any create of line of commerce. The Gov- ernment concedes that and du have General Motors Pont never in competition been with each other. Since substantially competition applies only lessen clause acquisitions involving competing corporations (generally referred to as horizontal acquisitions), clause con- cededly applicable is not questions to this case. The before us are whether the other effects, namely, unlawful restraint of in any commerce section or community and tendency to create a monopoly commerce, of line of applicable are to this if case, and, so, whether the 1917- 1919 acquisition of General Motors’ stock du Pont may resulted or result in either of those unlawful effects. Section 7 never authoritatively has been interpreted as prohibiting acquisition of stock in a corporation that is not engaged the same acquir- line of business as the ing corporation. Although the language the Act is ambiguous, the relevant legislative history, administra- practice, judicial tive interpretation support the con- clusion that apply § does not to vertical acquisitions.
The report of the House Committee on the Judiciary, presented by Representative Clayton, emphati- stated cally that the provisions relating acquisitions to stock corporations, which originally appeared as bill, 8 of the were intended to holding eliminate the evils of companies. H. Rep. R. No. 627, 63d 2d Cong., Sess. 17. Although “holding company” was defined as “a company that holds the stock of another company or companies,” the one “evil” referred to was a holding company “is a means of holding under one control the competing companies whose stocks it has acquired.” thus (Emphasis sup- plied.) Ibid. minority Two statements appended to Report House evidence a similar understanding that provisions of the bill were limited to cor- competing substance Id., p. Pt. 8. The 2, p. 6; Pt.
porations. by the Senate Committee adopted Report the House No. report Rep. the bill. S. Judiciary on on the 13, 43, 46. 63d 2d Sess. Cong., House the bill each debates on extensive many detailed discussions Congress contain acquisitions. stock relating intercorporate provisions any suggestion that are devoid of These discussions theOn apply acquisitions.5 to vertical provisions were to repeatedly provisions of the bill were these contrary, of com prohibiting described as *24 The a ver specific one reference to peting companies.6 pro during the entire on these acquisition tical debate by a flat statement Senator Reed visions ended with (containing the bill as then written effect that not tendency monopoly but the restraint toward clause a clause) manufac prevent of commerce would not steel pro ore turing acquiring from stock an corporation ducing type integration.7 a of vertical corporation, classic
5 ante, by majority, of Senator relied on remarks Chilton p. 591, thought 7 applicable do that he that not indicate § merely thought acquisitions. vertical His statements indicate that he entirely monopoly that of 7 were not restraint clauses § synonymous substantially competition with the lessen clause. 6 id., See, g., Cong. (Representative Carlin); e. Rec. 9270-9271 id., (Senator (Representative Barkley); at 9554 at 14254-14255 (Senator id., Cummins); id., Reed); at 14313 15856-15861 at (Senator id., (Senator Walsh); Nelson); id., at at (Senator Chilton); id., Floyd). (Representative at 16320 7 Cong. Rec. Senator Reed had offered an amendment prevented paragraph corpora- to the of 7 first which would have § acquiring corporation engaged from the same tion stock another attempt line of This was an in order business. the bill stiffen proving competition to relieve the from that had been Government substantially acquisition, proof an element which lessened thought he, Cummins, quite would Senator others be difficult. 14254-14255, Cong. See 51 Rec. 14419-14420. Senator Chilton asked prevent corporation his Senator Reed whether amendment would engaged acquiring in the manufacture steel stock in a cor- history A reading legislative of the bill leaves the impression distinct intercorporate relationships be buyers tween and sellers which in noncompetitive resulted preferences were intended to be with exclusively by dealt the provision forbidding interlocking (§ directorates 8 of Clayton if Act), specific covered prohibi tions of certain price (§2), discriminations and of certain selling exclusive or leasing (§ 3).8 contracts Forty years of practice administrative provides addi tional support for this view. Department Neither the of Justice nor the Federal Trade Commission, the two principal enforcing agencies, brought any has action under old 7 (other § than the case) instant that has not involved a in allegedly competing cor porations. The Federal Trade repeatedly Commission has declared its understanding prior to its amendment 1950, applied only to competing corporat ions.9 In a recent report it stated without qualification:
“While the 1914 applied act solely to horizontal mergers, the 1950 act applies not only to horizontal poration engaged production in the of iron replied ore. Senator Reed that his amendment would not bar acquisition, such an but that neither would the bill as written:
“But I call the Senator’s attention to the fact that if the illustration he by uses would not be language covered my the of amendment it certainly would by not be language covered the I seek to amend. argument go His against would as much that, and even more than against my I amendment. do not stop everything. claim that this will I claim long that it step will be a in that Id., direction.” at 14455. disputed No one Senator interpretation Reed’s of 7.§ 8See, g., e. by Representative statement Carlin, one of the managers of the bill House, in the to the interlocking effect that the provision directorate prevent contained in 8 would a director § corporation a supplied which railroads with becoming materials from and, a railroad effect, “buy[ing] director in supplies from himself.” Cong. 51 Rec. 9272. 9See, g., e. C., F. T. Rep. Ann. for 1929, 6-7, Fiscal Year 60, where the Commission stated that it could take no corrective action under
616 acqui- conglomerate and to vertical
acquisitions but competition substantially lessen might sitions which on C., Report F. T. monopoly.” a to create or tend 1955), Acquisitions (May and Mergers Corporate 1st Sess. Cong., 169, No. 84th 168, H. R. Doc. Trade Commission the Federal 1927, Beginning Congress a in its annual recommendations included inadequacies. remedy amended § be request 1125, 64 Stat. in 1950. This result was achieved opinion, in its recognizes C. 18. As the Court § S.U. in7 ante, amending § for p. one of the reasons 590, on the Report amend- of the House was, the words to all applies clear that the bill ments, make it “to conglom- acquisitions, vertical types mergers Rep. 1191, . .” H. No. . . R. erate as horizontal well Forty years of established 1st Cong., 81st Sess. by recognized in and practice, acquiesced administrative proper scope persuasive evidence of Congress, is Bros., Inc., Trade Commission v. Bunte 7. Federal § 349, S. 351-352. U. exception of Court, The cited with the one cases Mills, Inc., Verney Fabrics Co. v. Brunswick Ronald D. Y. 57,514 (D. 1946),10 C. N. CCH Trade Cases S. ¶ Clayton against large industry Act consolidations the food through though the consolidation was effected “even exchange capital stock,” because “most of these consolidations acquisitions corporations engaged were of in the distribution of noncompetitive C., Rep. products.” also, but F. T. Ann. allied See Kelley 1927, 13-15; Fiscal Year Counsel Statement Hearings a on the before Subcommittee of Senate Committee Judiciary Cong., 37; Report H. R. 2d on 81st 1st and Sess. Interlocking Directorates, Trade R. of the Federal Commission on H. Cong., Doc. No. 81st 2d Sess. 1. rayon alleged case, Ronald Fabrics converter that a by acquiring competing corporation had commerce restrained control rayon. supply this of a source of District Court held that allegation Clayton of action under 7 of the stated cause Act.
617 applies that support § the Court’s conclusion do In Aluminum Co. America v. acquisition. vertical Commission, (C. A. 3d F. 401 Cir. Federal Trade had Company, previously Aluminum which 1922), the in produced aluminum monopoly of all sheet had an inter- through States, acquired the control United aluminum competing of a sheet mediary corporation A established divestiture order company upheld, the court hold- Federal Trade Commission was substantially lessened com- ing acquisition that the stock petition monopoly and tended to create a of the sheet England aluminum States v. New business. United F. hold- Exchange, (D. 1919), Fish C. Mass. two virtually ing companies acquired which had the stock of trading England all the wholesale fish dealers on the New all the Exchange, Fish which handled about 95% ground sold in interstate commerce fish United States, provisions were held to have violated the of 7.§ Each of these cases was concerned with the directly competing corporations acquisi- vertical —not opinions, tions. Statements not essential to decisions, merely proposition stand for the entirely monopoly restraint and clauses of 7 are not § synonymous substantially competition with the lessen clause.
Assuming that the three unlawful effects mentioned an entirely synonymous other,11 7 are not with each such Walsh, minority Senate, 11 A in the led Senators Cummins and sought language of monopoly” to strike out the “tend create a Cong. 14314-14316, They argued Rec. 14459-14461. §7. language monopoly superfluous that this of a because creation always substantially competition, and the Sherman lessened because language, danger Act contained similar and that there was a language implied repeal would be considered as an of the Sherman tendency Act. The failure of these efforts to toward eliminate monopoly (the clause restraint of commerce clause had not been added
618 7 that was require § the conclusion
assumption does not acquisitions as well as to vertical apply intended to in engaged the Corporations acquisitions. horizontal in areas do not neces- activity different same business other so that their combina- with each sarily “compete” between substantially competition lessen would tion in a might result though their combination them, even tendency monopoly or a toward restraint of commerce possibility presented 7. a was violative of Such § Governors, F. 206 2d Corp. Transamerica v. Board of banking corporation a (C. 1953), A. 3d Cir. where 163 stock in 48 local through acquired a of transactions series were located banking corporations, most of which acquired. A communities which no other bank was ground divestiture order of the Board was reversed on the proved acquisitions that the Board had not the substantially banks in either these five western States monopoly. or tended to create a competition lessened Finally, apply- has twice construed old 7§ this Court only acquisitions involving competing to stock ing cor- porations. International Shoe Co. v. Federal Trade Commission, (1930), 291 the 280 U. S. Court held the acquisition largest manufacturing of the fifth shoe company by largest shoe manufacturer did not vio- late either substantially competition lessen clause or pre- the restraint of commerce clause of 7 because the § existing competition between the corporations two was insubstantial, acquired corporation and because the time) tendency this monopoly at indicates that toward § already clause was not intended to be limited to situations encom- passed by substantially competition Similarly, lessen clause. Chilton, quoted by Cong. remarks of Senator the Court from 51 Rec. ante, pp. 591-592, thought tendency that he indicate monopoly something. toward restraint commerce clauses added they IBut find no evidence that what did add included vertical acquisitions. pre-exist- Substantial financial condition. precarious for violation of requisite to be a was said
ing competition
An even
at
303.
S.,
U.
either clause of
Mfg. Co. v.
in Thatcher
holding is found
more direct
Commission,
(1926),
where
S.
Federal Trade
U.
of the lower court’s
portion
affirmed that
this Court
milk
manu-
bottle
Thatcher,
had
decree which
allowed
a bottle manu-
Woodbury,
facturer, to retain
assets
*28
bottles,
whiskey
in
and
condiment
specializing
facturer
any of
acquisition
the
did not violate
ground
on the
that
in
Thatcher
not
com-
the
of 7 since
§
three clauses
in
Woodbury.
S.,
560, affirming
at
petition with
U.
in
Commission v.
reversing
part
and
Federal Trade
part
Co.,
(C.
1925).
II. In this the is challenging, case Government acquisition place stock that took The 1917-1919. Court, advancing support without reasons to its conclu- sion, determining holds that whether of the the effect acquisition is such as to violate the time chosen 7,§ by the in bringing controlling Government its suit is acquisition rather than the time of the the of stock. This ignore seems to me to language and structure of § adminis- existing all Act, Clayton of purpose precedents. judicial trative corpora “no provides paragraph § The first another ... . the stock acquire . . . . . shall tion may acquisition of such the effect . . . where corporation as if provision this Yet the Court construes be . . . .” or continue acquire . . . shall corporation it read “no . . . corporation another ... . . . the stock hold acquisi effect of such that the appear it shall whenever . . . .” Continued holding may be continued tion or under action prerequisite is a holding, sure, to be the violation longer held, is if the stock no because, 7§ But nothing to divest.12 and there is purged has been the Govern holding does not allow the fact of continued necessity proving with the dispense ment to described The offense unlawfully acquired. stock was holding use, acquisition, 7 is the offense, made, has been stock. When the statutory language unequiv if is any, complete. acqui probable It makes the test the effect ocal. not at acquisition, the actual sition at the time of *29 arbitrarily by the Govern some later date to be chosen in bringing ment suit. para- in carefully
The distinction made the several and an graphs acquisition of 7 between an unlawful § The unlawful use of stock reinforces this conclusion. in paragraph speaks only first of terms of 7,§ which acquisition stock, solely purchase of is concerned with the corporation.” only provi- of stock in “another is the It in applicable para- sion that this case. The second graph, expressly prohibits which both use, purchases is concerned with stock in “two or more corporations.” applicable it is not here. Concededly, Congress When chose to make unlawful the use of stock 554, Federal Trade Commission v. Western Meat Co., 272 U. S. 561. specific did so in terms. acquisition, its
subsequent to by phrase the “or the use of such stock The omission of voting granting proxies otherwise,” or contained the paragraph from the first paragraph 7,§ the second phrase the was not inadvertent. The therefore section paragraph be read into the first of 7.13 § cannot the Clayton replace Act was not intended to Sher- remedying monopolies. man Act in actual restraints and by Its the Act purpose supplement was Sherman incipiency, tendencies in their checking anticompetitive point before the at which Sherman Act they reached the purpose This well stated the play. comes into Report Senate on the bill:
“Broadly stated, treatment of unlaw- bill, the ful prohibit restraints and seeks to monopolies, make practices which, unlawful certain trade as a rule, singly themselves, are not covered the July 2, 1890, acts, act of or other existing antitrust and thus, making practices illegal, these to arrest monopolies the creation of trusts, conspiracies, and in their incipiency and before consummation.” Rep. Cong., S. No. 63d 2d Sess.
13 might argued subsequent It be misuse in mention of enlarges paragraph proviso, third investment paragraph paragraph substantive content of the This first of 7.§ provides apply purchasing corporations that “This section shall not solely using by voting such stock for investment and not the same bring about, attempting bring about, or otherwise to or in lessening competition.” substantial But the mention of use paragraph limiting exception in this has the effect of it con- tains, e., exception purchased “solely i. for stock for invest- exception subsequently ment.” This is lost if the stock is misused. exception paragraph But the contained in this does not come into *30 play acquisition unless the prohibi- first comes within the substantive paragraphs tion of the first two of 7. This limitation on the § exception expand prohibition cannot the substantive to which the exception applies. anticom- probable on the emphasis places purpose
This as viewed or occurrences of transactions petitive effects The determination their occurrence. date of of the out probable predicting the Act is one required by acquisition here an transaction, particular of a come stock at the time of the If, corporation. in another stock competition apparent, is threat to potential a acquisition, other If, on the § under is unlawful acquisition appar is not then competition to threat hand, potential unless subse is not involved antitrust violation ent, an a restraint of trade constitutes use of the stock quent by the Act.14 prohibited Sherman all-important lawfulness or ignores the The Court or about the time acquisition at of the stock unlawfulness the probable anti- occurred, and limits its attention holding of the stock effects of the continued competitive years later. The result is to suit, at the time of some 30 made, acquisition, stock lawful when subject good-faith holding may the stock the hazard that the continued through develop- unforeseen acquisition illegal make the supported by statutory a view is not ments. Such elementary principles violates fairness. language and Clayton subject to brought under Act are not Suits limitations, statute of and it is doubtful whether applies against doctrine of laches the Government. unexpected is that develop- The result and unforeseeable occurring after a long ments can be challenge legality holding used to of continued In such an action, only stock. the Government need probable prove anticompetitive rather than actual 14 may inapplicable It be when the fails Government § bring period suit within a after the reasonable consummation of acquisition. so, years the stock If the 30 here involved would exceed period incipiency. though Clayton a reasonable Even 7 of the Act, theory, inapplicable, any alleged under this would be restraint could be dealt with under the Act. Sherman *31 may The Government time of suit. as of effects exist the entirely lawful which aside a transaction thus set been have showing that would merely by made, when suit, many years at the time of had it occurred unlawful a fortui corporation, acquired growth later. The the or the competitors, in the number of its tous decline diffusion of other by an accidental of control achievement rendering orig in test, this may result, under Strikingly unlawful ab initio. acquisition lawful inally in this case.15 are involved all of these factors enough, individuals who is unfair to the holding The Court’s justified assumption, on the entered into transactions judged would be their actions language 7,§ they made their to them at the time by the facts available decision. parties who is addressed prohibition
“The [of 7] and is merger transactions contemplate engaging in deciding them instance, guide in the first meant, they only The standard upon a course of action. cir- one addressed to the capable applying are is proposed cumstances viewed as of the date which transaction. Since this the standard whether to undertake parties apply deciding must transaction, it seems reasonable to conclude that agencies it is standard which enforcement should apparently The Court concedes that du Pont’s stock “its sales to in General Motors was lawful when made because Gen- relatively insignificant” eral Motors were at that time and because produced only Motors then about of the total auto- “General 11% Ante, production p. Throughout, mobile . . . Court Ante, 595-596, growth pp. stresses the in size of General Motors. is not 599. The decline in the number of automobile manufacturers mentioned, that diffusion but is well known. And Court states through years has “The of General Motors’ stock increased potency Pont’s stock interest . . . .” of the influence of du 23% Ante, p. 607, n. 36. the transaction violates deciding whether
apply
Trans-
Clayton Act and the
Neal,
the statute.”
L.
220-221.
5 Stan.
Rev.
Case,
america
its new
authority
support
cites no
The Court
statute. On the other
40-year-old
of this
interpretation
brought
or more cases
the dozen
hand, examination of
*32
every
inquiry
the
heretofore
that in
case
§
under 7 reveals
anticompetitive effects
probable
on the
has centered
the time it was made.16
at or near
acquisition
the stock
Federal Trade Com
International Shoe Co. v.
See,
g.,
e.
mission,
v.
(1930);
Corp.
291
Transamerica
280 U. S.
Governors,
(C.
1953);
A.
has not been Nevertheless, the cases cited in spell proof required the text out the for a violation of thus § important bearing have problem. an on this subsequent does it that events Nor mean evidence necessarily anticompetitive irrelevant. Evidence that have and that these acquisition, effects occurred since than original acquisition effects are to the rather traceable may an that factors, support other inference such effects probable” were at the time of “reasonably acquisition. necessary link element causation is the with past. if However, subsequent acquisition events occurred, indicate that no have anticompetitive effects may support evidence an inference that an unlawful potential acquisition. did not exist at the time of Evi- happened dence to what after the is rele- vant to extent on central question bears whether, at the time of the acquisition, there was a rea- probability sonable of a competition. threat I agree with the not require Court that 7 does find- ings anticompetitive and conclusions of effects. actual merely requires proof Unlike Sherman of a Act, § 7 *33 probability reasonable of a lessening substantial of com- petition, restraint of commerce, tendency or toward monopoly. International Shoe Co. Federal Trade v. Commission, 291; 280 U. S. Corp. Transamerica Board v. Governors, F. 206 2d 163. acquisi- When a vertical tion is involved, legality thus on turns whether there is a reasonable probability competi- that it will foreclose tion from a substantial share of market, by either significantly restricting supplies access to needed significantly limiting the any product. market for See Report of the Attorney General’s National Committee to Study Antitrust (1955) Laws 122-127. The deter- probable mination of such consequences economic re- quires study of the markets affected, companies involved relation to those markets, probable and of the immediate and future on competition. effects A mere showing that a substantial dollar volume sales is involved cannot suffice. says, As the Court “The market ante, and “Substan- p. 595, substantial,” must be affected of the market only terms tiality be determined can case-by- a ante, requires thus p. 593. Section affected,” factors. economic of the relevant analysis case brings pro- a the Government when, here, However, it must a years purchase, after stock nearly 30 ceeding (i. e., made when acquisition was unlawful prove that the that time that at probability a there was reasonable from a sub- be foreclosed competitors would Pont’s and also that market), stantial share of relevant be harmful to com- acquisition continued to effect of the Illegality at the brought. petition at the time suit paragraph first required time of is obtaining illegality prerequisite is a 7; continuing § Co., T. Grant United States v. W. equitable relief. See Society, Oregon v. Medical 629; 345 U. United States S. Co., v. R. 333; United States South U. S. Buffalo true under particularly 774. This is U. S. prophylactic designed prevent since a measure it is a have deleterious probably which will acquisitions has not competition. competition effect Proof that on period following during long in fact harmed a stock been in the acquisition itself restraint future indicates case, acqui- In such a the actual effect of the unlikely. probable supplants conjecture sition as to its largely upon. effects otherwise must be relied which case, the Court found that the chal- this District lenged acquisition, place thirty years which took “over ago,” had not resulted in “In restraint trade . many intervening years those . . .” District *34 had properly that, Court concluded when there been no any restraint “there is not . . . for a years, basis finding probability that there . . . reasonable Clayton such restraint within meaning Act.” F. Supp., supports at 335. If the evidence the Dis- trict there Court’s conclusion that has been no restraint for below years, judgment must be affirmed.
III. The remaining (1) issues are factual: whether record establishes the existence aof reasonable probabil- ity that du competitors Pont’s will be foreclosed from securing General trade, (2) Motors’ whether record establishes such if foreclosure, probable, involves a substantial share of the relevant market and significantly limits the competitive opportunities of others trading that market. In discussing these factual I issues, meet the Court on its own ground, is, I assume that the old 7 applies § to vertical acquisitions, and that potential at the threat time of suit is con- trolling. Even on that basis the record does not support the Court’s conclusion that 7 was violated this acquisition. 1917-1919 stock
A. FORECLOSURE OF COMPETITORS. This is case where a supplier corporation has merged with its customer corporation with the result that the supplier’s competitors are automatically and com pletely foreclosed from the customer’s trade.17 In this case, the only connection between du Pont, the supplier, and General Motors, the customer, is du Pont’s 23% stock interest in General Motors. A conclusion that such a stock interest automatically forecloses du Pont’s com petitors from selling to General Motors would be without justification. Whether a foreclosure has occurred past or is probable in the future is a question of fact turn ing on the evidence the record.
The Court, at the outset of its opinion, states that the primary issue is whether du position Pont’s as a substan-
17Cf. United States v. Co., Columbia Steel 495, holding S.U. that even the competition exclusion of resulting complete verti- integration cal does not violate the Sherman competition Act unless portion in a substantial of a market is restrained. *35 on .achieved com- Motors “was
tial to General supplier du Pont’s stock resulted from alone,” petitive merit Ante, pp. 588-589. Motors. in interest General the “basic facts” states that issue, the Court resolving this unnecessary it to set dispute in and hence are not clearly as Court of of the District findings fact aside the (a). basic Proc., 52 The Fed. Civ. See Rules erroneous. a standing no du Pont had to be that facts are said purchases stock before the supplier Motors’ General after “commanding position” a gained 1917-1919, that that certain items evidence purchases, the and stock hoped that du Pont record tend to indicate gigantic this in General Motors’ actually get preference get did alleged these facts the Court draws trade. From its that du Pont has misused stock conclusion 23% itself Motors “to entrench as the interest General for requirements Motors’ primary supplier Ante, “The p. fabrics.” finishes and automotive the Court “that overwhelming,” concludes, inference is its commanding position promoted du Pont’s stock solely competitive was not on merit.” gained interest and Ante, words, overturns the 605. With these the Court p. findings District to the effect that unequivocal Court’s prior principal supplier du Pont was General Motors Pont main- purchases, to the 1917-1919 that du stock years following pur- tained position this 30-year chases, period preceding and that entire products of du Pont’s suit, purchases General Motors’ solely on merits of competitive were based those products. findings supporting evidence these may District Court be summarized as follows: Du Pont is primarily a manufacturer chemicals products. products chemical Thousands could be manufacturing automobiles, used appliances machinery. Despite du Pont’s sales period buys efforts over a years, of 40 General Motors many of Pont produced by the commodities from competitors.18 du Pont’s The Court, ignoring many products buy which General Motors declines to *36 buys only Pont or it quantities, which small con products centrates on few which du Pont has sold large to for many years paints volume General Motors — examining fabrics. Before the history large- of those volume purchases, to essential understand where and purchasing whom decisions within General Motors made. have been
For many years, organized General Motors has been into operating some 30 divisions, each of has final which authority make, to and does make, purchasing its own decisions. This management system places decentralized responsibility full purchasing decisions on the officers of the respective To speak “selling divisions. is, General Motors” therefore, misleading. A’prospective supplier, instead of selling Motors, sells to Chevrolet, or Frigidaire, or Ternstedt, Light, or Delco divisions. Moreover, when there plants are several within a division, each plant frequently pur- has own chasing agent and presents separate job. selling following The compares table purchases, General Motors’ products of several purchases from du with its Pont of the same products competitors from of du Pont. Purchases Gen- Purchases Total Percent of
Type product from purchases from com- eral Motors’ petitors purchases du Pont from du Pont du Pont Pinishes..... $18,724,000 $8,635,000 $27,359,000 (imitation Fabrics leather coated fabrics). 38.5 3,639,000 6,815,000 9,454,000 Adhesives. 3,056,000 3,068,000 12,000 .4 Chemicals: Anodes.... 2,000 1,208,000 1,206,000 .2 Solvents. 439,000 3,183,000 3,622,000 12.1 51.0
$22,816,000 $21,895,000 $44,711,000 buys inde- each division record discloses from greatly buying varies pattern pendently, each division and that within another, one division to greatly have fluctuated du Pont purchases competitive other quality, service and price, response only divi- is the example, For Oldsmobile considerations. Pont and one of from du antifreeze buys sion which Duco. its cars with not finish which does two car divisions enamel, Cadillac buys du Pont motor Buick alone exclusively. copper electroplating du Pont’s alone uses Pont’s arising from du nefarious influence alleged Thus the anti- affects the Oldsmobile apparently interest paint buyer; buyer, not the Oldsmobile freeze but Pontiac, but Chevrolet, Buick and paint buyers at and the electro- electroplating buyers; the antifreeze or *37 paint buyer Cadillac, at but not Cadillac plating buyer. had marked many years,
1. has Pont, Paints. —Du paints, varnishes, in the manufacture and sale of success produced In lacquers products.19 1939, related produced dollar of all of the total value finishes 9.5% 19 following compares of The table du Pont’s total sales industrial years finishes in recent with its sales of the same finishes General Motors: Sales to Sales General Motors Total finish
Year percent Other of total Duco finishes sales 1938.. 1939- 1941.. 1946.. 1947- 12,224,798 $4,569,604 6, 911,596 8,876,970 9,768,119 6,312,005 $1,625,625 2,850,091 2,448, 3,518,256 6,713,431 3,757,389 [844] 18,938,229 10,429,852 $6,195,229 13, 525,508 11,727, 8,760,849 [061] $31,357,134 105,266, 75,117,079 38, 61,204,127 44, 974, 514,763 [778] 22.7 22.1 26.1 13.9 18.0 19.8 through years 1945 are omitted from all tables because during production suspension the war. of of automobile and, 1947, years, States In recent United 8.1%. approximately three-fourths du Pont’s total sales to General Motors have of industrial consisted finishes.20 Although principal du Pont has been General Motors’ paint for supplier many General Motors years, con buy tinues to paint requirements about 30% competitors of du Pont.21 Moreover, paint the sales of from du Pont to General large Motors do bulk in the respective purchases total sales and company. either In du Pont’s finish 1948, sales to General Motors were only of its total products; they sales all were 3% an infinitesimal percentage of Motors’ total purchases. products
Two high proportion account for a fin of these ish sales to General Motors: a lac “Duco,” nitrocellulose quer patented by invented and Pont, “Dulux,” synthetic resin enamel developed by du Pont.22 However, Duco and Dulux did not come into commercial use until 1924 and 1931, respectively, position du Pont’s as a typical year, In purchases General Motors’ total of all products from du $26,628,274. Pont were amount, $18,938,229, Of this total, was finishes. 71% paint over 400 manufacturers other than sold du Pont finishes to they General Motors. The total amount sold was $8,635,000, requirements. Twenty-five of General Motors’ 31.6% companies, Pont, other than du each sold amounts of finishes to *38 $30,000 General Motors in excess year; company in one sold $3,205,000. much as 1947, purchases In General Motors’ of industrial finishes from Pont, by type du finish, were as follows: Duco $12,224,798 . 65% Dulux 3,179,225 . 3,534,206 All Others. $18,938,229 100% Thus, comprised Duco and Dulux of du finish Pont’s sales 82% year. General in Motors much was attained of finishes manufacturer
principal earlier. auto- in the leading position a first assumed
Du Pont ma- of a 1918, in acquisition, with its motive finish field at & Color Works the Flint Varnish the stock of jority of before, years for some time, and At that Michigan. Flint, Motors’ on all General finishes used supplied the Flint automobile many also other Cadillac, and except cars Motors’ Du Pont’s companies. Motors’ influence the General in 1917-1919 did not lost 1921, In Flint from Flint. purchasing divisions a 1923, sub- and, business of the Oakland one-half and Buick, Oakland at portion of business stantial at Supp., 126 F. Oldsmobile. early of Duco in development and
The invention technological advance. represented a significant 1920’s applying had been finished previously Automobiles finishing process took of varnish. numerous coats working storage space and days, to 33 completed cars were immense. capital up tied otherwise than a finishes was less expectancy The life varnish a Paint In Motors created year. December paint and Enamel Committee which contacted numerous a attempt quicker drying in an to find manufacturers more durable finish. pioneering had
Meanwhile, doing Pont been work a lacquers. employee du Pont nitrocellulose drying lacquer and durable which con- quick invented large pat- amount of solids. This film-forming tained finish, named was submitted to the General Duco, ented Paint and Enamel in 1922 be Committee tested along with of other After two finishes manufacturers. years testing improvement, the Paint and Enamel superior Committee became satisfied that Duco was far *39 finishing any other method any product other available. automobiles then of Duco some of the General gradual adoption
The in with its conjunction viewed divisions, Motors’ car illustrates inde finish, as an auto proved superiority each division and demonstrates pendent buying of (now Oakland way made its on its own merits. Duco in Pontiac) open Duco for use on its cars adopted first an immense success and 1924. The new finish was year. Buick following all Oakland cars the was used on Cadillac, 1925, in but which adopted and Chevrolet Duco did not aban optional 1925, had offered it as an finish don for Duco until 1926.23 varnish Motors continued to look beginning,
From competitive for materials. were sent to other Letters of their urging samples manufacturers them to submit pyroxylin paint testing. 1927, for Until none of the com- peting lacquers comparable quality to Duco. But develop strenuous efforts General Motors to competitive lacquer eventually sources of a sub- worked change position. stantial the du Pont Oldsmobile and Cadillac switched to a competitor, Rinshed-Mason, 1927, buy exclusively and have continued to almost from company ever Chevrolet, since. Buick and Pontiac buy Duco, partly continued to because of better service nearby du Pont plants, partly repeated because testing superior failed to disclose lacquer to Duco.
Finally, the success of Duco has never been confined to the General Motors’ car divisions. In 1924 nearly all car manufacturers varnish abandoned for Duco. initially Du Pont sold more Duco to other auto manufacturers than it did to General Motors. du Pont’s sales of colored Duco were Motors, 19%; distributed as follows: to General to other manufacturers, auto 33%; others, primary to all market 48%. always industry. clear Duco has been the furniture *40 Cadillac, and Ford cars, except all 1925, By the end Hudson, Studebaker, Packard Nash, Duco. using were in still Duco substan- buy, and bought, have Willys in Chrysler bought Duco Pont. from du tial amounts pursuance in early when, 1930’s large until volume be the most to whom it would suppliers a to obtain policy purchases on one customer, it concentrated its important has Pittsburgh Plate Ford chosen Glass. company, requirements. During the of its own large part make a in low- losing leadership its Ford was 1920’s, when to finish cars it continued its Chevrolet, field to priced said, reported Mr. Ford is have Japan. Black they are long as as black.” color, them “Paint syn- to shift to a Ford was forced 1930’s, in the Finally, During own manufacture. thetic finish of its enamel Pont sold Ford substantial period, this du transition making half and finishes. In Ford was amount of making Pont; by Ford was buying half du buying one-fourth from Pont. three-fourths 1938, Henry Ford Ford “issued instructions more Company purchase any Motor not to material Pont time until Company.” from the du From Henry II management, pur- Ford became active Ford du Pont ceased. Ford practically then, chases from Since purchased very from du Pont in has finishes substantial amounts. paints Motors to test on
General has continued annually. of cars Du Pont has thousands retained position primary lacquer supplier to several General Motors’ divisions because these have divisions felt that Duco their Kettering, best fits needs. who was a leader Motors’ research activities and who had been active in testing development pyroxylin lac- why testified that “one of the quers, reasons” higher Motors’ cars had a comparable resale value than cars “in a paint.” used car lot” “is the
As the
“In
found,
District Court
view all the evi-
record,
dence
only
reasonable conclusion is that
du Pont has
continued to sell Duco
quanti-
substantial
ties to
only
General Motors
because General Motors
believes such purchases best
its needs.”
(Emphasis
fit
supplied.)
from du Pont is Dulux, synthetic enamel finish on used refrigerators appliances. and other Prior develop to the *41 ment Dulux, of widely Duco was used as a finish for refrigerators. However, began Duco to be replaced by porcelain, particularly at Frigidaire, Gen eral appliance Motors’ division. In 1930 and collaboration with Electric, General du developed Pont Dulux, a greatly superior cheaper product. and Since its development, Dulux has exclusively been used by all the major refrigerators manufacturers of and other appli ances —General Electric, Westinghouse, Crosley, and many except Frigidaire, which continues to fin others — ish part of its refrigerators porcelain. with Disinterested witnesses testified as to superior quality and service which has led them to buy continue to Dulux.24 The District Court did not err in concluding Dulux— that
“is apparently an ideal refrigerator finish and is widely used a number major of manufacturers example, For Derau, Westinghouse Van executive, testified that company bought his requirements its entire refrigerator of finishes from du Pont because of quality du Pont’s and service: “Now, another factor —and I think say I can being this without it harmful to suppliers other Pont has the finest trained techni- —du group cal call, at their beck and at the beck and call of the users of materials, anybody of in the business and we have had several times, when we problem, have had a thinking little I and am representatives Motors. Several than General
other testified manufacturers refrigerator competitive requirements of their purchased they that 100% that is no evidence There Pont. from du any reason other du Pont purchased Motors for from buy to competitors prompted those than product, du Pont —excellence Dulux fair (Emphasis continuing quality service.” price at Supp., 126 F. supplied.) to sell Pont’s efforts fails to note The Court than Duco and Dulux paints other Du Pont does considerably less success. have with met undercoats amounts of automotive sell substantial despite continued failed, Buick but it has Chevrolet and Body, Fisher preference of efforts, change sales a competitor’s for purchaser undercoats, largest Pont of other du undercoat. The successes failures divisions em- finish at various General Motors’ products independent buying of each division phasize the is responsible influence negate the notion that coercion Frigidaire large quan- uses purchases what do occur. but varnish, tities and machine has finishing of black A bought products from du Pont since 1926. At C these *42 Spark where Plug Division, Flint, Michigan, located consistently plant, du Pont has a finishes du Pont has been selling a substantial of finishes successful volume however, Division, Delco-Remy used that division. particular going very keep one in where we were find difficult to production overcome, would be I until trouble which called Pittsburgh Chicago office, morning from to the the next one and job, very Pont hours men of du was on and within a few they coming plant kept from their had materials Toledo production. us in laugh They
“You of off that kind service. have been cannot simply excellent, you say, any I know how don’t could better.” insulating purchases requirements most of of varnish competitors. from du Pont’s Electromotive Divi- a prefers competitive lacquer sion for the interior finish of its Duco locomotives, but uses on the exterior because railroads, most of use exterior which Duco of of train, the balance that finish. At specify Guide Lamp Division, developed supplies du Pont and still finish for the of headlight reflectors, inside but a com- petitor developed, and has kept, that division’s substan- primer tial business. At the Inland Division, which produces steering Pont wheels, du had some of the busi- at one time, -completely ness. but has been supplanted competitor offering better service. The du Pont experience at the Packard Electric Divi- sion, quantities high which uses large of and low tension lacquer, cable is illustrative. Until 1932, Packard Elec- separate was a tric company wholly unrelated to General du Motors, and Pont was a principal supplier of low ten- sion lacquer and the sole supplier of black high tension lacquer. Now, as a division General Motors, Packard purchases Electric requirements its entire high tension lacquer du from Pont competitors, produces its own lacquer low tension from film scrap bought du from Pont competitors.
The District Court did not err in concluding, on the basis of this evidence, that in selling du Pont’s success General Motors a portion substantial paint require- of its ments was superior due quality of Duco and Dulux and to du Pont’s continuing outstanding research and service, and that “du position Pont’s was at all times a matter sales keeping General Motors satis- effort There no evidence any that General Motors or fied. Division General Motors hy was ever prevented du Pont using a by one finish manufactured competitors; Pont’s nor is there evidence that
638 its sub- competitively has
General Motors suffered F. (Emphasis supplied.) 126 stantial use Duco.” Supp., at 296. has principal fabrics which Pont Fabrics. —The (du leather Pont’s
sold to Motors are imitation General “Fabrilite”) top open and material for “Fabrikoid” and “Pontop,” “Everbright” Pont’s (du cars convertibles and “Teal”).25 Its sales of these materials about $3,369,000, in 1947 totaled 38.5% materials. total of such purchases Motors’ tops all metal came earlier before closed cars with years, larger pro predominate, these materials constituted automobile than the total fabrics used an portion of apart from the they today. By they averaged, 1946 do yards, about 1.6 convertibles, only for top material principally They are used costing per $2.22 about car. etc. pads, shelves, kick rear tops backs, seat prod and wool Du not manufacture cotton Pont does composed. upholstery most ucts which manufacture of coated fabrics Du Pont entered the Company Fabrikoid of New- purchased when it as it then leather,” York. burgh, New “Artificial following sales of industrial compares table du Pont’s total fabrics, fabrics, in several primarily imitation leather coated products those years, with the same to General recent sales Motors: sales GM percent Total sales as
Year
Sales
Sales to
of total
GM
others
sales
1946-
1947-
1941-
1938..
1940..
1939-
3,639,316
1, 773,079
2,083,166
1,285,
$446,357
803,854
13, 093,469
$6,647,112
14,170,
16,723,610
7, 775,
7,780,1Ó5
16,253,805
$7,093,469
14,866,
20,362,926
9,065,385
579,632
12.8
11.9
14.2
17.9
6.6
9.4
*44
known,
poor quality
was of
had very
and
limited areas
acceptance.
of
As du Pont
in improving
succeeded
both
its quality
appearance,
and
rapidly
use
broadened.
By mid-1913, du
a
Fabrikoid,
pyroxylin-coated
Pont
fabric,
had been
for
accepted
industry
the automobile
upholstery
years
and interior
Three
later,
1916,
trim.
every
almost
company was a
of
purchaser
automobile
Fabrikoid,
a contemporary
and
du Pont
estimate
year stated that
all
produced
of
cars
in the United
60%
States would be equipped with Fabrikoid.
In that same
du
year,
Pont rounded out its
of
acquiring
line
fabrics
the Fairfield
Company,
Rubber
manufacturer
rub-
ber-coated fabrics. Du Pont
thus had
before
achieved,
purchased
its General Motors'
stock,
leading position
in the automotive
field.
1917,
sup-
fabric
Before
it was
plying substantially all of the
requirements
coated fabrics
at Chevrolet and
half
Oldsmobile,
require-
about
Buick,
ments at
requirements
about a third of the
at Oakland. At the
division,
Cadillac
Pont supplied
du
all of the
coated fabrics
trim
interior
but none of the
top material.
Although year there have been variations from year to from one car division response to another competitive considerations, generally du Pont has main- pre-1917 tained its position as principal supplier coated and combined fabrics to General In Motors. 1926, General purchased Motors about of these 55.5% from Pont, largely fabrics du because Chevrolet switched entirely to du Pont an after unfortunate experience with competitive products during year. the preceding By proportion had declined 31.5%, about du Pont was selling more fabrics to Ford than to Motors. At the time suit, du Pont’s share had 38.5%, increased to the remainder being supplied by du Pont’s competitors. Dis- supporting of evidence mass addition as the purchases “such finding
trict Court’s of fabrics Pont made du have divisions from exercise upon each division’s based time were time to result du Pont and are not judgment its business at F. Supp., supplied), (emphasis domination” can and Pont’s fabrics clearly indicates that the record *45 industry on their way in the automotive their have made prin- du Pont was early 1920’s, to the Prior merits. all of the then to three of fabrics supplier coated cipal and Willys-Overland General major producers Ford,— their Willys began produce to and After Ford Motors. for much turned to du Pont they still coated fabrics own Chrysler purchased produce. they not what could of early until, in the from Pont amounts substantial supplier principal policy on its of one it embarked 1930’s, com- Textileather, du Pont product and for each chose sup- largest to be Ford’s Du Pont has continued petitor. it does not manufacture plier for the material which years, a has over the supplied, Du Pont likewise itself. fabrics of part of the coated and combined considerable companies. most the smaller automobile concluding The did err District Court Pont, shows, position its “Du the record has maintained through Motors principal supplier as the fabric by concentrating upon early leadership field satisfactorily meeting changing require- General Motors’ delivery.” quality, (Emphasis ments as to service and 126 F. supplied.) Supp., at only that 3. Other Products. —The Court concludes preference given du Pont has been an unlawful with respect paints By limiting and fabrics. the issue to products, these it eliminates deserved consideration buy in products those Motors does not which General Pont.26 Yet the from du proportions large quantities relation the stock argument of the Court’s logic —that has inevitably Motors ship between du Pont products— for du Pont preference in a or will result relations commercial of the total requires consideration if “influence,” Du Pont companies. the two between apply prod to all any, expected be there were would du Pont makes and which General ucts which buys. at- shows that du Pont has
However, the evidence Motors’ divisions tempted to sell to the various General paint fabrics, in addition to range products wide only when these doing and that it has succeeded so judg- divisions, exercising independent their own business quality, service and ment, have decided on the basis their interests would best be served price that economic by purchasing groups prod- from du Pont. such Six ucts considered in detail the District Court: were following amount, compares the table dollar *46 products departments with du Pont’s total sales of the of its various by it Motors: the amount sold to General Sales to General Pont Total du Du sales Type General product Pont Motors, sales percent of Motors total sales Ammonia.. Electrochemicals.... Fabrics.-. Finishes.. Plastics. Pigments.. Explosives. Payon. Photo Products.. Grasselli Organic Chemicals.. Chemicals.. $18,938,229 3,639,316 1,019, 1, 1,742,416 024,320 105,422 45,616 26,032 3,530 $105,266,655 20,362,926 50, 320,207 34,828,026 47,687,843 74, 212,311 31,496,024 58,875,482 25,699,756 94, 632,256 467, 514 17.9 18.0 3.5 2.1 0.3 0.1 1.4 (*) (*) (*) (*) 3.4 $26,628,274 $793,849,000 0.1%. *Less than casehardening materials, electro-
plastics, fluid, brake safety synthetic and rubber and plating materials, glass, A F. at 319-324. few Supp., rubber chemicals. 126 findings from the will suffice. examples drawn (du Du Pont’s sales to Motors of celluloid Pont’s used as in the side curtains “Pyralin”), windows after the early automobiles, initially declined only improved prod- and revived when an purchase, adopted by large uct all auto manufacturers. safety glass fluid and purchasing Instead brake embarked, during 1930’s, du Pont, General Motors production on its own of these substantial items. With has respect casehardening materials, General Motors purchased Pont, less than half from du requirements purchased while other have amounts auto manufacturers larger proportion quantity. Although du Pont’s and processes widely adopted new were in the electroplating only and automobile other industries the 1930’s Cadil- lac processes exclusively, has used du Pont’s Oldsmobile and Pontiac have used it occasionally, Chevrolet except periods. Buick never have used it for brief Neo- synthetic prene, developed by Pont, rubber du has been greater by Chrysler used to a much extent and Ford than Chrysler uses, helped Motors. also synthetic develop, Pont’s rubber adhesive for brake linings, prefer but the General Motors’ a more divisions expensive type synthetic rubber. supports
The record the conclusion of the District Court: upon
“All of the evidence bearing du Pont’s efforts to sell these various products miscellaneous to Gen- eral supports finding bought the latter *47 buy solely or refused to in accordance with the dic- purchasing tates its own judgment. There is no evidence that General Motors was constrained to favor, buy, product solely because it was offered discloses the record hand, On the other Pont. by du re- Motors in which General instances numerous one of those of in favor of products du Pont’s jected cir- variety situations competitors. its rejections occurred such cumstances which satisfies limitation whatsoever no there was the Court buy or to to Motors’ upon refuse freedom (Emphasis it pleased.” Pont as buy Supp., F. at supplied.) disre- Court, the Court. —The by Relied on Evidence District supporting mass of evidence garding purchased that General Court’s conclusion competi- of their solely fabrics because paint and du Pont passages on contrary conclusion for its merit, relies tive years during documents written from several drawn Pont that because du fallacy logical and on the 1918-1926, of Gen- portion a substantial supplied long period over fabrics, position its paint requirements eral Motors’ interest of its stock obtained misuse have been must considerations. competitive rather than intent pressure or alleged instances of The isolated (1) are four: preferences noncompetitive obtain letters of (2) several 1917; report of December Raskob 1918-1920; (3) certain during Haskell, A. written J. during Pont and Lammot du letters of Pierre reports and L. Pratt. Pas- a 1926 letter of John 1921-1924; (4) do not documents from these 1918-1926 sages drawn Each reached Court. justify the conclusion which cannot significance disputed is a matter of them the motivation and passing on be evaluated without specific Each failed to achieve intent of the author. to which in the context of the situations object. Read with addressed, entirely each is consistent they were du Pont that, although finding of the District Court Motors’ business as get as much General trying free- Motors’ no restriction on General could, there was *48 buy dom to as it chose, buyers and that General Motors’ did not in regard any way themselves as limited.27 More if over, even paragraphs isolated these documents, taken from their context, given are some significance, quotes fully Because the from, appears place Court to special weight on, Pratt, the 1926 letter of J. L. a brief discussion appropriate by way Ante, 606-607, it is pp. of illustration. n. 35. only purports expression personal letter be to an of Pratt’s views—he makes it paragraph expressing clear the last he is opinions his policy. has, therefore, own and not General Motors’ It comparatively bearing little Moreover, on du Pont’s intent. it is significant that Pratt’s attitude toward du Pont was based not on relationship, the stock but on the fact that du Pont saved General Motors from views, apparently, financial disaster in 1920. His would have the been same whether or not du Pont owned stock in General any event, says Motors. that, making pur- all that Pratt chases, “always keep competitive situation,” General Motors should a prime and “the thing Delco-Light consideration is to do the best Company (Pratt writing general manager was to the Delco, division.) a General Motors’
An examination of the circumstances in which this letter was disposes any expressed policy notion that it written prefer products Motors should they equal du Pont’s when were quality, price. service and The circumstances were these: Delco Light buying paint competitor from a of du Pont. When competitor the paint problem failed to Delco, solve which confronted help. called on du However, although Pont for du Pont solved the problem and obtained paint, one order for Delco asked du Pont to delivery withhold competitor given so that the could be another opportunity to Understandingly, retain the business. Elms Department Pont Paint piqued by was somewhat this, he personal wrote a asking letter to his friend Pratt for his assistance. general manager Pratt’s letter to the of Delco was the result. Despite product the fact that the du Pont was offered at a lower price and the fact that thought technical staff at Delco product du Pont superior, buy Delco nevertheless continued to from competitor. Du Pont never did receive business to which correspondence Judged related. by either its content or its result, poor example the Pratt letter alleged is a of an du Pont policy “purposely employ [ing] pry open stock to the General Ante, p. Motors market . . . .” period relating
the other evidence entirely ignored, 1926 is all of the evidence after 1926 affirmatively establishes without essential contradiction that du did not use its stock Pont interest receive *49 preferential treatment from General Motors. can present illegality presumed
Nor be from the bare fact that du Pont has continued to make substantial sales products of several to Motors.28 In place, General the first affirmatively record products shows that the new which du Pont has sold to since 1926 at way, have made their General Motors as on elsewhere, their merits. Sales of Duco, Dulux, Fabrilite and Teal are in any way not attributable to dealings the earlier period. Secondly, the presumption Court’s is based on the fact that du Pont does not sell to all other automo bile proportion manufacturers the same as it does to General Motors. But why there is no reason it should— the Government has normally not shown that sellers sell all industry to members of an in the same proportion. In any event, fully explains record the disproportion. Since du Pont’s sales to other members of the indus try have proportionately declined, largely because Ford major has chosen to make the share of its requirements of paint and fabrics, Chrysler and because has followed the policy of a selecting single supplier to whom it can be important most customer. The fact is that du Pont has continued to sell in substantial amounts to the smaller members of the automobile industry. growth The in the Court, referring without supporting evidence, conjecture ventures the probably that “General Motors turned to supply part outside sources of requirements at least in because its outstripped production Ante, p. du Pont’s . . .”. 605. As I read record, actively soliciting du Pont was more business from Gen- eral throughout period Motors and others covered in this suit. I find no hint that du Pont was surfeited with business and unable to fill General Motors’ orders. Chrysler Ford and Motors, of General
dominance —com- for more than account together panies which 85% policies with combined production automobile —when why explains Chrysler, adequately Ford and adopted by fabrics to proportion paint a larger du Pont sells a whole. industry as to the Motors than does require Clayton Act does It is true that 7 of of an in- proof anticompetitive effects proof actual crucial But these matters become tent restrain trade. du Pont’s stock when the Court rests conclusion solely to relating interest the Act on evidence violates noncompetitive obtain a alleged an du Pont intent finding Motors, and on preference from General the un- actually through secured preference such Preference du Pont’s stock interest. lawful use of has the Government intent are also relevant because If no *50 the event. actual brought years this case 30 after prob- the during long period, has occurred this restraint Espe- is ability slight. of in the future indeed a restraint years has only is the in recent cially change this so when diminishing participa- of Pont’s direction du been the tion in Motors’ affairs. sum- foregoing This Case.—The (a)
Rule 52 Governs pur- Motors’ mary relating of the evidence to General comparatively from du paint Pont, of and fabrics chases as that a multitude of factual issues is, brief reveals events, The the reasons underlie this case. occurrence of the men why place, events took and the motives of these question. participated in them are drawn who great importance. of is of The District credibility issue the of Judge opportunity had the to observe demeanor credibility judge and to their at first hand. the witnesses is Thus, proper application this one case (a) in Rule 52 of the Federal Rules principle embodied amended, 861: Procedure, “Findings U. S. Civil clearly erroneous, fact shall not be set aside unless of the trial given opportunity shall be to the regard due credibility of the of the witnesses.” United judge court to Oregon Society, 326, 330-332, Medical S. States v. U. Co., States v. Yellow Cab 338 U. S. 339; United 341-342. testimony a situation in oral is con
This which by contemporaneous United tradicted documents. See Co., States Gypsum v. United States U. S. case, supported are findings
this District Court by contemporaneous both oral documents and testi mony. For example, General Motors’ search for better automotive finish, superiority product devel oped by Pont, Motors’ continuous efforts equally good lacquer to secure an from other sources are all proved by reports letters and early written 1920’s as well as testimony many oral witnesses. Similarly, contemporaneous prove exhibits that General purchased fabrics from du Pont because of the superiority of products, du Pont and that on other occasions it competing suppliers though turned to even product just du Pont’s as good. Appellate review of detailed findings testimony based on substantial oral corroborative documents must setting be limited to aside those that are clearly erroneous. The careful and de findings tailed of fact of the District in this Court case cannot be so labeled.29
29The Court also express finding overturns the District Court’s purchased that du Pont solely *51 General Motors’ stock investment. for alleged Court does this purpose on the basis of an du Pont to noncompetitive preference secure a expressed which the Court finds in the Raskob letter and in certain statements in du Pont’s reports documents, however, to its stockholders. These are not finding inconsistent with the District Court’s of an invest- purpose. ment The District Court said: report, testimony “Raskob’s the of Pierre S. and Irenee du Pont and all the leading up acquisition circumstances to du Pont’s of this
B. Market. Relevant the Finally, assuming even the correctness of Court’s competitors been or will that du Pont’s have conclusion paint trade, from Motors’ and fabric be foreclosed General one issue in favor necessary it is still to resolve more in order to reverse the District Court. Government necessary proved It is hold that the Government that rele- foreclosure involves a substantial share of the this Motors, by record, interest substantial in General shown acquisition essentially Its establish that an investment. large part profitable employment was the motivation of a expansion surplus du which Pont had available uncommitted of its own business. reports or near the and other documents written at
“Raskob’s representatives were time of the investment show that Pont’s products large that Motors was a consumer well aware General one, thought by Raskob, the kind offered du Pont. for ultimately get business, but there is no would all that du Pont by expected Motors trade that Raskob to secure evidence General buy suppliers any upon imposing limitation its freedom to also du Pont’s continued of its choice. Other documents establish selling the extent of the Motors —even to interest suggestion requirements they similarly make no entire latter’s —but limiting to be the desired result was achieved contrary, of them purchasing On a number Motors freedom. only be recognized secured explicitly that General trade could competitive Supp., 242, F. at basis.” 126 on a largely on turns purchase is an investment Whether Pennsylvania R. Interstate Com- purchaser. Co. v. intent of court, Commission, equally divided F. 2d aff’d an merce finding with case, the District Court’s S. 651. this since U. clearly erroneous, unequivocal reference to that intent proviso, in the third within the stated the stock falls “solely acquisitions excepting made paragraph expressly of § investment.”
vant market and that it significantly competi limits the opportunities tive of others trading market.30 The relevant market is the “area of competi- effective tion” within which the operate. defendants Standard Oil Co. States, v. United 293, 299-300, U. S. of California “[Tlhe n. 5. problem of defining a market turns on dis- covering patterns of trade which are practice.” followed in United States v. United Shoe Machinery F. Corp., 110 Supp. 295, 303, curiam, aff’d per 521. U. S. “Deter- mination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute commodity one for another.” United States v. E. I. Co., du Pont de Nemours & U. S.
This determination is primarily one of fact.
The Court holds that the relevant market this case is the automotive market for finishes fabrics, and not the total industrial products. market for these The Court reaches that conclusion because its view “automotive finishes and fabrics have peculiar sufficient characteris-
30The question District Court did not this reach since it found foreclosure, probability there was any no reasonable competitors by du Pont’s reason of du Pont’s interest 23% Consequently, findings in General Motors. there are no of fact dealing with Also, the relevant market. appears the record deficient questions on such crucial as the products, characteristics of the they put, uses to they interchange- which are the extent to which are competitors’ products, reasons, able with and so on. For these I the Court believe event should remand case to the District give Judge, Court to the District who is more familiar with be, opportunity record, record than we can an to review the argument respect substantiality entertain with to the of the share of the relevant market affected the foreclosure which the Court By declining remand, finds to exist. the Court necessitates a scrutiny huge essentially here of this record for a determination of an question passed Court, factual on the District and not thoroughly argued by parties. briefed or sufficiently dis- products them
tics uses constitute *53 Ante, . . .” . and fabrics all finishes other tinct from “peculiar char- not what these are told We pp. 593-594. other than about finishes Nothing is said are. acteristics” contribution to important an represented that Duco Nothing is said manufacturing automobiles. process of the automobile that sales to than fabrics other about fixed bids rather than of are means industry made in the “automobile” Dulux is included price schedules. and refrigerators other it is on though even used market other finishes So are but on automobiles. appliances, locomotives, engines, parts, on diesel and fabrics used which products appliances other an Arbitrary are not ade- conclusions manufactures. analysis pertinent for facts quate substitute in the contained record. show and finishes
The record does not fabrics peculiar in the manufacture of automobiles have used finishes and differentiating characteristics them there is fabrics used other industries. What evidence affirmatively contrary. the record indicates the involved in this products principally sales of the four leather, Dulux, imitation and coated fab- Duco, case— support this conclusion. rics— Motors, first marketed not to General but Duco was and to refinishing the auto trade manufacturers of furniture, pencils. brush handles and 44% Duco, du Pont’s sales colored of its total 51.5% purchasers sales, were other than auto manufacturers. Although figures record does not disclose exact all years, portion does show that a substantial du Pont’s sales of Duco have continued to be for non automotive uses.31 31The Court states that “General Motors of du took Pont’s 93% production Ante, automobile Duco in 1941 p. 1947.” 83% figures significance. only they
These are of little Not omit the do It is significant also patented Duco was a product. Prior expiration to the patent in 1944, only five years before this suit was brought, du Pont issued over 250 licenses —to all that applied covering patented — process. If Duco is to be treated as a separate market solely because of its initial superiority, Pont is be- ing penalized rather than rewarded for contributing to technological advance.
Dulux has never been used in the manufacture of auto- mobiles. It replaced Duco and other lacquers as a finish on refrigerators, washers, dryers, and other appliances, and continues to have wide use on objects metallic requir- ing durable finish. Yet the Court includes it a finish *54 having the unspecified “peculiar but characteristics” distinctive of “automotive Ante, finishes.” p. 593. crucial sales—those made outside the industry they automobile —but give misleading impression respect with to du Pont’s sales to the industry. automobile previously As stated, Ford chose to make its requirements own after Chrysler about 1935 and desired to concen- purchases trate its supplier. on one figures, Under these after eliminating Chrysler, Ford and deducting and du Pont’s sales to Motors, supplied Pont must nearly have half of the entire requirements of remaining all auto manufacturers in 1941 and an larger portion even in 1947.
The record does not complete figures contain on the amount of Duco sold outside the industry. automobile However, there are figures years. for selected 1927, In example, for of all Duco 51.5% sales were to other than gal- automobile (1,166,220 manufacturers lons, out of a 2,263,000 gallons). total of gross 1948, In du Pont’s purchasers sales to other than General Motors of the same kinds of bought by finishes General Motors $97,000,000; amounted to about sales to year General Motors in the same $21,000,000, were or 21.7% of the total. The record reveals purchases that General Motors’ finishes from du Pont ranged, have years, in recent 14% of du Pont’s sales of such finishes to all customers. The con- 26% clusion seems clear that du Pont’s finishes acceptance have found wide in innumerable industries and dependent that du Pont is not on captive General Motors for paint market. and Dulux of Duco sales Pont’s 1947,
In when du the total $15,400,000, about Motors totaled to General $1,248,000,000, was finishes for and paints national market varnishes, lacquers, was for $552,000,000 of which about of finishes the kinds dopes, thinners and japans, enamels, There no evidence is users.32 industrial primarily sold are finishes industrial establishing these record this There consid Duco and Dulux. with competitive probable are. It is many of evidence that them erable finishes total sales of that du Pont’s of industrial than of all sales less 1947 constituted 3.5% finishes. used types fabrics also
The record shows tops trim and convertible for automobile —imitation in the manufacture used leather and coated fabrics —are rail- furniture, as luggage, products, of innumerable such baby has- cases, carriages, upholstery, books, road brief footwear, belts bicycle sporting goods, socks, saddles, purchased about table mats. General Motors 1947, Of of imitation leather and coated fabrics. $9,454,000 Pont purchased this from du amount, $3,639,000 competi- from over 50 du Pont (38.5%) $5,815,000 tors. about national produced Since du Pont 10% 1947 and products market these only since were to the automobile indus- its sales 20% *55 industry try, the du Pont automobile consti- sales The only tuted about of the total market. Court 2% of the ignores by treating the record this small fraction products. total market as a market of distinct It merely large will do to stress the size these corporations. figures two The total to their sales— Department Census, Commerce, U. S. Bureau of the II Census by Industry, of Manufactures: 414-415. There were Statistics 1,291 manufacturing products. establishments total these Du Pont’s industry. sales were of the 8.1%
$793,000,000 for du
$3,815,000,000
Pont and
for General
Motors in
fairly
1947—do not
reflect the volume of com
merce involved in this case. The commerce involved here
is
$19,000,000
about
of industrial
finishes and about
$3,700,000 of certain industrial
fabrics —less than 3.5%
of the national market for industrial
finishes,
only
about
of the national market for these fabrics. The
1.6%
Clayton
isAct
not violated unless the stock acquisition
substantially
threatens
the competitive opportunities
available to others.
International Shoe Co. v. Federal
Commission,
Trade
291;
U. S.
Transamerica
v.
Corp.
Governors,
Board
206 F.
163; Vivaudou,
2d
V.
Inc. v.
Commission,
Federal Trade
The Court might justified be in holding products sold to the automotive industry constitute the relevant Fargo case, Maytag, In the appliance manufacturer, acquired an in, a purchase stock interest output contracted to the entire 40% of, Globe, gas range a dealer, manufacturer. A Globe who lost his supply source of as a result of the transaction, brought a treble damage alia, alleging, action inter acquisition that the stock violated Clayton 7 of the Act. The evidence showed § that there were about gas ranges, manufacturers of eighteenth and that Globe was about size, selling (about little less than of the national market 2% $5,000,000 year). Appeals The Court of for the Seventh Circuit acquisition held that the stock did not plaintiff violate 7 because the readily had other supply. available sources of governed of an outlet is principles. similar case, question either competitors may substantially whether be competitive limited in opportunities. Assuming their that du Pont purchased had outright, General Motors and thus commanded an consuming outlet about of the national market for industrial 4% finishes and about fabrics, national market for industrial 2% unlikely paint seems competitors that du Pont’s and fabric would substantially be selling products, limited their 98%, when 96% respectively, of open the national market would remain to them. *56 tires or as carburetors such products the case of market in manufacturers. automobile to primarily are sold which and coated leather, imitation Duco, Dulux, of sale But the limited. is not so fabrics that a prove to on the Government
The burden was in all would, market share of the relevant substantial interest stock by du Pont’s be affected probability, 23% only that proved Motors. The Government in General to General finishes and fabrics sales of du Pont’s Motors was volume, in and that General large were later during the automobiles manufacturer of leading not did The Government by the record. years covered large on a not used products were show that the identical many in other industries. many purposes other scale indus- the automobile show that Nor did the Government comprised in particular, in try general, or General Motors share of the total market. What large substantial a affirmatively in indicates that the record evidence there is many have in indus- involved do wide use products total portion that an insubstantial this tries, and preference if an market affected even unlawful would be probable. existed or were Clay-
For reasons I conclude 7 of the stated, that apply did not Act, prior ton amendment that failed acquisitions; to vertical Government a at time probability that there was reasonable prove (1917-1919) of a restraint that, tendency monopoly; commerce or toward any event, clearly the District error Court prove concluding Government failed may have been or be competitors Pont’s foreclosed Ac- from substantial share the relevant market. I cordingly, judgment would affirm the the District Court.
APPENDIX MR. TO JUSTICE BURTON’S DISSENT. 7. That no in corporation engaged “Sec. commerce directly shall acquire, any part or the whole or indirectly, or other share capital corporation stock of another engaged also where the commerce, acqui- effect of such may sition substantially competition be to lessen between corporation the acquired whose stock is so and the cor- poration making the acquisition, or to restrain such com- merce in any section or community, or tend create a to monopoly any of line of commerce. corporation
“No shall directly acquire, indirectly, or the whole or any part of the capital stock or other share corporations two or more engaged commerce where the effect of such acquisition, or use of by such stock voting or granting proxies otherwise, may or be to sub- stantially competition lessen between such corporations, any them, or whose stock capital or other share sois acquired, or to restrain such in any commerce section or community, or tend to monopoly create a of any line of commerce.
“This section shall apply to corporations purchas- ing such solely for investment and not using the same voting or bring otherwise to or in about, attempt- ing to bring about, the substantial lessening competi- tion. Nor shall anything contained this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate business, lawful or the natural legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such forma- tion is not to substantially competition. lessen
“Nor shall anything herein contained be construed to prohibit any common carrier subject to the laws to regu- late commerce from aiding the construction of branches main feeders located as to become
or lines so short or from in such construction company aiding so line of of such the stock any part or owning all acquiring carrier common any such prevent nor lines, branch part of the stock owning all or acquiring and independent an line constructed of a branch or short be- competition there is no substantial company where line so owning branch constructed company tween acquiring main line owning the company and the prevent nor such com- therein, or an property interest *58 through lines extending any its mon carrier or otherwise of stock medium is no substantial carrier there other such common where extending lines and competition company between the stock, or an interest therein company property, whose acquired. is so shall held to contained this section be
“Nothing acquired: impair any right legally or heretofore affect Provided, shall or nothing That this section be held anything authorize or lawful hereto- construed to make laws, prohibited illegal fore or made the antitrust nor exempt any person penal provisions from the thereof 731-732, provided.” the civil remedies therein 38 Stat. (1946 ed.) S. C. 18.§ U.