118 F.Supp. 41 (D.Del. 1953), Civ. A. 1216, United States v. E.I. Du Pont De Nemours & Co.

Docket Nº:Civ. A. 1216.
Citation:118 F.Supp. 41
Party Name:99 U.S.P.Q. 462 UNITED STATES v. E. I. DU PONT DE NEMOURS & CO.
Case Date:December 14, 1953
Court:United States District Courts, 3th Circuit, District of Delaware
 
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118 F.Supp. 41 (D.Del. 1953)

99 U.S.P.Q. 462

UNITED STATES

v.

E. I. DU PONT DE NEMOURS & CO.

Civ. A. 1216.

United States District Court, D. Delaware.

Dec. 14, 1953

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[Copyrighted Material Omitted]

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William Marvel, U.S. Atty., of Wilmington, Del., James L. Minicus, Julius C. Renninger, Philip L. Roache, Jr., Joseph M. Fitzpatrick, Matthew Miller, Forrest A. Ford, Newell A. Clapp, Marcus A. hollabaugh, Margaret H. Brass, Mollie Strum, William Amory Underhill, Joseph F. Tubridy and William J. McAuliffe, Jr., Sp. Assts. to the Atty. Gen., all of Washington, D.C., for plaintiff.

Hugh M. Morris and Alexander L. Nichols (of Morris, Steel, Nichols & Arsht), of Wilmington, Del., Gerhard A. Gesell, William M. Aiken, James H. McGlothlin, David C. Acheson, Harvey Levin and George Kuehnl (of Covington & Burling), of Washington, D.C., and Francis J. Zugehoer, of Philadelphia, Pa., for defendant.

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TABLE OF CONTENTS.

COMPARISON OF THE ECONOMIC AND LEGAL CONCEPTS OF MONOPOLY.

THE PRESENT ECONOMIC AND LEGAL VIEWS OF MONOPOLY AND COMPETITION

a. Competition and monopoly in the economic sense.

b. The competition intended by the Sherman Act.

c. The economic view of the effect of potential competition upon monopoly.

d. The economic view of the effect of substitute products upon monopoly.

PART I-CELLOPHANE.

A. DuPONT'S POSITION DOES NOT VIOLATE § 2 of the SHERMAN ACT.

1. DuPONT DOES NOT HAVE MONOPOLY POWER.

a. Plaintiff must establish duPont has sufficient power arbitrarily to raise prices or to exclude competitors.

FINDINGS OF FACT.

I. Description of Defendant duPont (Findings 1-6).

II. Description of Cellophane (Findings 7-12).

III. DuPont's Entry Into the Cellophane Business and Organization of duPont Cellophane Company (Findings 13-36).

IV. The 'Market Setting' in Which Cellophane is Sold (Findings 37-79).

V. DuPont Competed by Research to Improve Quality and Lower Cost (Findings 80-122).

VI. DuPont Competed by Lowering Prices (Findings 123-149).

VII. Competition Between Cellophane and Other Flexible Packaging Materials (Findings 150-278).

SPECIFIC USES:

1. WHITE BREAD.

2. SPECIALTY BREADS.

3. CAKE AND SWEET GOODS.

4. MEAT.

5. CANDY.

6. CRACKERS AND BISCUITS.

7. FROZEN FOODS.

8. POTATO CHIPS, POP CORN AND SNACKS.

9. CEREALS.

10. FRECH PRODUCE.

11. PAPER GOODS AND TEXTILES.

12. CIGARETTES.

13. BUTTER.

14. CHEWING GUM.

15. OTHER FOOD PRODUCTS.

16. OTHER TOBACCO PRODUCTS.

17. CHEESE.

18. OLEOMARGARINE.

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VIII. Results of duPont's Competition With Other MAterials (Findings 279-292).

IX. DuPont Competed With Sylvania (Findings 293-330).

X. The Basic Moistureproof Patents (Findings 331-339).

XI. DuPont Did Not Engage in Predatory Practices as Alleged.

A. DuPont's decisions as to changes in its business capacity were made on the basis of proper business considerations, and not to suppress competition or to create artificial shortages (Findings 340-353).

B. Potential competitors were not excluded (Findings 354-388).

C. Distribution outlets were not controlled (Findings 389-455).

D. Patents were not abused (Findings 456-532).

XII. DuPont Did Not Conspire to Monopolize.

1. PATENT LICENSE AGREEMENT (FINDINGS 533-591).

2. PRICES (FINDINGS 584-591).

B. With foreign concerns to exclude imports (Findings 592-645).

XIII. DuPont Did Not Attempt and Is Not Now Attempting to Monopolize.

A. General (Findings 646-660).

B. Olin license (Findings 661-686).

XIV. DuPont Has Not Monopolized (Findings 687-732).

CAPS AND BANDS (Findings 733-819).

OTHER FACTS (Findings 820-834).

CONCLUSIONS OF THE MASTER FACTS (Findings 835-854).

RESUMPTION OF THE OPINION.

b. Competitive condititions preclude acquisition of market control and hence of monopoly powers over cellophane.

i. 'MARKET SETTING'.

ii. CANDY-A CASE HISTORY.

iii. TESTIMONY OF INDEPENDENT WITNESSES.

c. DuPont has not 'power to raise cellophane prices'.

d. DuPont has not the 'power to exclude competition'.

1. GENERAL.

2. POTENTIAL COMPETITORS.

3. PATENTS.

4. SYLVANIA COMPETITION.

e. Application of recognized economic tests further evidences the lack of monopoly power.

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2. DuPONT'S POSITION IS NOT TO BE ATTACKED BECAUSE IT RESULTS FROM TECHNICAL SKILL AND COMPETITIVE ACTIVITY.

a. The moistureproof patent is, I conclude, a defense.

b. Monopolization requires a factual showing of illegality.

c. Technical skill and other competition were responsible for duPont's position in the field.

B. IS ORIGIN OF DuPONT'S POSITION LAWFUL?

C. WAS DuPONT'S POSITION MAINTAINED BY PREDATORY ASSERTION OF MONOPOLY POWER?

1. TESTS TO BE APPLIED.

2. ALLEGED SUPPRESSION OF SYLVANIA.

a. The Moistureproof Patent License Agreement.

b. The Alleged Price Agreement.

3. PATENT PRACTICES.

1. ULTRA-VIOLET LIGHT LICENSE.

2. RIBBON LICENSES.

3. ETHYLENE GLYCOL LICENSE.

4. MARATHON LICENSE.

5. THE SEALING LICENSES.

6. INTERFERENCES.

7. TYING PROVISIONS.

4. CONTROL OF DISTRIBUTION OUTLETS.

5. EVIDENCE PLAINTIFF IGNORES.

PART II-CAPS AND BANDS.

NO FACTUAL BASIS EXISTS FOR CLAIMING A VIOLATION OF § 2 AS TO CAPS AND BANDS.

CONCLUSION OF LAW.

LEAHY, Chief Judge.

This is a civil suit by United States of America under § 4 of the Sherman Act, 15 U.S.C.A. § 1 et seq., charging defendant with monopolizing, attempting to monopolize and combining and conspiring to monopolize trade and commerce among the several states of the United States in cellophane and caps and bands. The Act of July 2, 1890, 26 Stat. 209, commonly known as the Sherman Act as amended, provides in part:

'Sec. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of f misdemeanor * * *. (15 U.S.C.A. § 2).

'Sec. 4. The several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney-General, to institute proceedings in equity to prevent and restrain such violations. * * * (15 U.S.C.A. § 4.)'

This case was instituted originally in the District Court of the United States

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for the District of Columbia on December 13, 1947. On April 28, 1949, the case was transferred to the District of Delaware.

Defendant, E. I. DuPont de Nemours and Company, is a Delaware corporation. It is successor to DuPont Cellophane Company Inc. Throughout the period covered by the complaint, it or its predecessors manufactured and sold, in interstate and foreign commerce, regenerated cellulose in the form of film (cellophane) and in the form of bands. Prior to the filing of the complaint in this case, it also manufactured and sold cellulosic caps.

DuPont entered the cellophane business in 1923. It collaborated, under written agreements with La Cellophane (a subsidiary of the Comptoir which is the largest French rayon producer), in establishing the first DuPont cellophane company. In 1929 DuPont Cellophane Company, Inc., was reincorporated as a wholly owned subsidiary of DuPont. In 1936, DuPont took over the operation of this business and dissolved DuPont Cellophane Company, Inc.

In addition to La Cellophane, the following European producers have been named as co-conspirators but not party defendants: British Cellophane, Ltd. (England); Canadian Industries, Ltd. (Canada); Kalle & Co. (Germany); Viscose Francaise (France); and Viscose Development Company, Ltd. (England).

Plaintiff's argument and briefs treated in a highly interesting fashion the comparison of the economic and legal concepts of monopoly. But the final legal definition of the economic view of monopoly is to be left for decision by the Supreme Court.

COMPARISON OF THE ECONOMIC AND LEGAL CONCEPTS OF MONOPOLY.

Economic philosophies concerning monopoly and what should be done about it are legion; not one view can be said to be 'the economic' concept. While these philosophies can not be classified into air-tight compartments, they do fall into distinct schools of thought. These schools are presently engaged in debate over the degree of monopoly power which is economically desirable and which the law should permit. The economic discussion had its genesis in an attempt to bridge what was believed to be a gap between the legal and economic concepts of monopoly. This discussion has resulted in some agreement among economists upon classifications of various types of competition which exist in the market today, but in sharp disagreement upon their significance as indicia of monopoly.

Plaintiff contrasted first the legal and economic concepts of competition and monopoly as presently understood, and as affected by potential competition and the presence of substitute products. Second, it discussed the coalescence of the old patterns of economic and legal thought. Third, it discussed the economic concepts of monopoly whose application is proposed for the future and their contrast with the existing legal tests of monopoly.

THE PRESENT ECONOMIC AND LEGAL VIEWS OF MONOPOLY AND COMPETITION.

Recent economic discussion has focused attention upon differences of opinion which exist among economists themselves and between economists and the...

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