334 U.S. 495 (1948), 461, United States v. Columbia Steel Co.

Docket Nº:No. 461
Citation:334 U.S. 495, 68 S.Ct. 1107, 92 L.Ed. 1533
Party Name:United States v. Columbia Steel Co.
Case Date:June 07, 1948
Court:United States Supreme Court
 
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Page 495

334 U.S. 495 (1948)

68 S.Ct. 1107, 92 L.Ed. 1533

United States

v.

Columbia Steel Co.

No. 461

United States Supreme Court

June 7, 1948

        Argued April 29-30, 1948

        APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

        FOR THE DISTRICT OF DELAWARE

        Syllabus

        1. The United States sued under § 4 of the Sherman Act to enjoin the acquisition by United States Steel Corporation of the assets of Consolidated Steel Corporation, largest independent steel fabricator on the West Coast, as a violation Or §§ 1 and 2 of the Act. The gist of the complaint was (1) that the acquisition would be in restraint of trade, because all manufacturers other than United States Steel would be excluded from the business of supplying Consolidated's requirements of rolled steel products, and because existing competition between Consolidated and United States Steel in the sale of structural fabricated products and pipe would be eliminated, and (2) that the proposed acquisition, in the light of previous acquisitions by United States Steel, was an attempt to monopolize the production and sale of fabricated steel products in the Consolidated market area.

        Held: the proposed acquisition would not violate § 1 or § 2 of the Sherman Act. Pp. 507-508, 519-534.

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        (a) The acquisition does not unreasonably restrict the opportunities of competitor producers of rolled steel to market their product. Pp. 519-527.

        (b) There was no specific intent in this case to accomplish an unreasonable restraint of interstate commerce. United States v. Yellow Cab Co., 332 U.S. 218, distinguished. Pp. 520-527.

        (c) It is not proved in this case that the elimination of competition between Consolidated and the structural fabricating subsidiaries of United States Steel constitutes an unreasonable restraint of trade. P. 529.

        (d) The elimination of competition between Consolidated and National Tube (a United States Steel subsidiary) does not constitute an unreasonable restraint of trade in pipe, in view, inter alia, of the limited extent of the competition between them in this field. Pp. 530-531.

        (e) In the light of previous acquisitions by United States Steel, including that of the government-owned plant at Geneva, Utah, the acquisition of Consolidated does not demonstrate the existence of a specific intent to monopolize, but reflects rather a normal business purpose. Pp. 531-533.

        (f) Considering the various objections in the aggregate and in the light of the charge of intent to monopolize, the acquisition does not violate the public policy manifested in the Sherman Act. Pp. 533-534.

        2. The Sherman Act is not limited to eliminating restraints whose effects are nationwide; but, where the relevant competitive market covers a lesser area, the Act may be invoked to prevent unreasonable restraints in that area. P. 519.

        3. Withdrawal of Consolidated as a consumer of rolled steel products made by other producers does not constitute an unreasonable restraint. Pp. 520-523.

        4. Vertical integration is not illegal per se. Its legality is to be determined by, inter alia, (1) characterizing the nature of the market to be served and the leverage on the market which the particular vertical integration creates, and (2) the purpose or intent with which the combination was conceived. United States v. Paramount Pictures, 334 U.S. 131, and United States v. Griffith, 334 U.S. 100, followed. Pp. 524-527.

        5. There is no declared public policy which forbids, per se, an expansion of facilities of an existing company to meet the needs of new markets of a community, whether that community is nationwide or smaller in area. P. 526.

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        6. The same tests which measure the legality of vertical integration by acquisition are applicable to the acquisition of competitors in identical or similar lines of merchandise. It is first necessary to delimit the market in which the concerns compete, and then determine the extent to which the concerns are in competition in that market. If such acquisition results in or is aimed at unreasonable restraint, then the purchase is forbidden by the Sherman Act. P. 527.

        7. In determining what constitutes unreasonable restraint, dollar volume, in itself, is not of compelling significance. Consideration must also be given to the percentage of business controlled, the strength of the remaining competition, whether the action springs from business requirements or purpose to monopolize, the probable development of the industry, consumer demands, and other characteristics of the market. The relative effect of percentage command of a market varies with the setting in which that factor is placed. Pp. 527-528.

        8. Even though a restraint of trade be reasonable and not unlawful under § 1 of the Sherman Act, it may nevertheless constitute an attempt to monopolize in violation of § 2 if a specific intent to monopolize be shown. Pp. 531-532.

        74 F.Supp. 671 affirmed.

        The United States brought a suit under § 4 of the Sherman Act to enjoin, as a violation of §§ 1 and 2 of the Act, the acquisition of the Consolidated Steel Corporation by the United States Steel Corporation. After a hearing on the merits, the District Court denied the relief prayed in the complaint. 74 F.Supp. 671. A direct appeal was taken to this Court under the Expediting Act. Affirmed, p. 534.

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        REED, J., lead opinion

        MR. JUSTICE REED delivered the opinion of the Court.

        The United States brings this suit under § 4 of the Sherman Act to enjoin United States Steel Corporation and its subsidiaries from purchasing the assets of the largest independent steel fabricator on the West Coast on the ground that such acquisition would violate §§ 1 and 2 of the Sherman Act.1 The complaint, filed on February 24, 1947, charged that, if the contract of sale between United States Steel and Consolidated Steel Corporation were carried out, competition in the sale of rolled steel

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products and in fabricated steel products would be restrained, and that the contract indicated an effort on the part of United States Steel to attempt to monopolize the market in fabricated steel products. After a trial before a single judge in the district court, judgment was entered in favor of the defendants, and the government brought the case here by direct appeal. 32 Stat. 823, 15 U.S.C. § 29.

        The underlying facts in the case are set forth in the findings of the trial court, and, with a few exceptions, those findings are not disputed by the government. We rely chiefly on the findings to indicate the nature of the commerce here in question and the extent to which competition would be affected by the challenged contract.

        The steel production involved in this case may be spoken of as being divided into two stages: the production of rolled steel products and their fabrication into finished steel products. Rolled steel products consist of steel plates, shapes, sheets, bars, and other unfinished steel products, and are, in turn, made from ingots by means of rolling mills. The steel fabrication involved herein may also be divided into structural fabrication and plate fabrication. Fabricated structural steel products consist of building framework, bridges, transmission towers, and similar permanent structures, and are made primarily from rolled steel shapes, although plates and other rolled steel products may also be employed. Fabricated plate products, on the other hand, consist of pressure vessels, tanks, welded pipe, and similar products made principally from rolled steel plates, although shapes and bars are also occasionally used. Both plate and structural fabricated products are made to specifications for a particular purpose; fabricated products do not include standard products made by repetitive processes in the manufacture of general steel merchandise such as wire, nails, bolts, and

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window frames. The manufacture of such standardized finished products is not involved in this case. The facilities required for structural fabrication are quite different from those required for plate fabrication; the former require equipment for shearing, punching, drilling, assembling, and riveting or welding structural shapes, whereas the latter require equipment for bending, rolling, cutting, and forming the plates which go into the finished product.

       The complaint lists four defendants: Columbia Steel Company, Consolidated Steel Corporation, United States Steel Corporation, and United States Steel Corporation of Delaware. United States Steel and its subsidiaries engage in the business of producing rolled steel products and in structural fabrication, but do no plate fabrication work. Consolidated Steel, the sale of whose assets the government seeks to enjoin, is engaged only in structural fabrication and plate fabrication. United States Steel, with its subsidiaries, is the largest producer of rolled steel products in the United States, with a total investment of more than a billion and a half dollars. During the ten-year period 1937-1946 United States Steel produced almost exactly a third of all rolled steel products produced in the United States, and average sales for that period were nearly a billion and a half dollars. In the five-year period 1937-1941, average sales were a little over a billion dollars. Consolidated, by contrast, had plants whose depreciated value was less than ten million dollars. During the five-year period 1937-1941, Consolidated had average sales of only twenty million dollars, and the United States Steel committee which negotiated the terms of the purchase of Consolidated estimated that Consolidated's sales in the future...

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