351 U.S. 377 (1956), 5, United States v. E. I. du Pont de Nemours & Co.

Docket Nº:No. 5
Citation:351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264
Party Name:United States v. E. I. du Pont de Nemours & Co.
Case Date:June 11, 1956
Court:United States Supreme Court
 
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Page 377

351 U.S. 377 (1956)

76 S.Ct. 994, 100 L.Ed. 1264

United States

v.

E. I. du Pont de Nemours & Co.

No. 5

United States Supreme Court

June 11, 1956

Argued October 11, 1955

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

Syllabus

In a civil action under § 4 of the Sherman Act, the Government charged that appellee had monopolized interstate commerce in cellophane in violation of § 2 of the Act. During the relevant period, appellee produced almost 75% of the cellophane sold in the United States; but cellophane constituted less than 20% of all flexible packaging materials sold in the United States. The trial court found that the relevant market for determining the extent of appellee's market control was the market for flexible packaging materials, and that competition from other materials in that market prevented appellee from possessing monopoly powers in its sales of cellophane. Accordingly, it dismissed the complaint.

Held: the judgment is affirmed. Pp. 378-404.

(a) The ultimate consideration in determining whether an alleged monopolist violates § 2 of the Sherman Act is whether the defendant controls prices and competition in the market for such part of trade or commerce as he is charged with monopolizing. P. 380.

(b) A party has monopoly power contrary to § 2 of the Sherman Act if it has, over "any part of the trade or commerce among the several States," a power of controlling prices or unreasonably restricting competition. Pp. 389-394.

(c) Determination of the competitive market for commodities depends upon how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. P. 393.

(d) It is not a proper interpretation of the Sherman Act to require that products be fungible to be considered in the relevant market. P. 394.

(e) Where there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others. P. 394.

(f) In considering what is the relevant market for determining the control of price and competition, no more definite rule can be

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declared than that commodities reasonably interchangeable by consumers for the same purposes make up that "part of the trade or commerce" monopolization of which may be illegal. P. 395.

(g) Cellophane's interchangeability with numerous other materials suffices to make it a part of the market for flexible packaging materials. Pp. 395-400.

(h) On the record in this case, it cannot be said that the variations in price between cellophane and other flexible packaging materials prevent them from being competitive or gave appellee monopoly power over prices. Pp. 400-401.

(i) On the record in this case, it cannot be said that appellee has excluded competitors from the flexible packaging material market. Pp. 402-404.

118 F.Supp. 41 affirmed.

REED, J., lead opinion

MR. JUSTICE REED delivered the opinion of the Court.

The United States brought this civil action under § 4 of the Sherman Act against E. I. du Pont de Nemours and Company. The complaint, filed December 13, 1947, in the United States District Court for the District of Columbia, charged du Pont with monopolizing, attempting to monopolize and conspiracy to monopolize interstate commerce in cellophane and cellulosic caps and bands in violation of § 2 of the Sherman Act. Relief by injunction was sought against defendant and its officers, forbidding monopolizing or attempting to monopolize interstate trade in cellophane. The prayer also sought action to dissipate the effect of the monopolization by divestiture or other steps. On defendant's motion under 28 U.S.C. § 1404(a), the case was transferred to the District of

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Delaware. After a lengthy trial, judgment was entered for du Pont on all issues.1

The Government's direct appeal here does not contest the findings that relate to caps and bands, nor does it raise any issue concerning the alleged attempt to monopolize or conspiracy to monopolize interstate commerce in cellophane. The appeal, as specifically stated by the Government, "attacks only the ruling that du Pont has not monopolized trade in cellophane." At issue for determination is only this alleged violation by du Pont of § 2 of the Sherman Act.2

During the period that is relevant to this action, du Pont produced almost 75% of the cellophane sold in the United States, and cellophane constituted less than 20% of all "flexible packaging material" sales. This was the designation accepted at the trial for the materials listed in Finding 280, Appendix A, this opinion, post, p. 405.

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The Government contends that, by so dominating cellophane production, du Pont monopolized a "part of the trade or commerce" in violation of § 2. Respondent agrees that cellophane is a product which constitutes "a "part" of commerce within the meaning of Section 2." Du Pont brief, pp. 16, 79. But it contends that the prohibition of § 2 against monopolization is not violated, because it does not have the power to control the price of cellophane or to exclude competitors from the market in which cellophane is sold. The court below found that the "relevant market for determining the extent of du Pont's market control is the market for flexible packaging materials," and that competition from those other materials prevented du Pont from possessing [76 S.Ct. 999] monopoly powers in its sales of cellophane. Finding 37.

The Government asserts that cellophane and other wrapping materials are neither substantially fungible nor like priced. For these reasons, it argues that the market for other wrappings is distinct from the market for cellophane, and that the competition afforded cellophane by other wrappings is not strong enough to be considered in determining whether du Pont has monopoly powers. Market delimitation is necessary under du Pont's theory to determine whether an alleged monopolist violates § 2. The ultimate consideration in such a determination is whether the defendants control the price and competition in the market for such part of trade or commerce as they are charged with monopolizing. Every manufacturer is the sole producer of the particular commodity it makes, but its control in the above sense of the relevant market depends upon the availability of alternative commodities for buyers -- i.e., whether there is a cross-elasticity of demand between cellophane and the other wrappings. This interchangeability is largely gauged by the purchase of competing products for similar uses considering the price, characteristics and adaptability of the

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competing commodities. The court below found that the flexible wrappings afforded such alternatives. This Court must determine whether the trial court erred in its estimate of the competition afforded cellophane by other materials.

The burden of proof, of course, was upon the Government to establish monopoly. See United States v. Aluminum Co. of America, 148 F.2d 416, 423, 427. This the trial court held the Government failed to do, upon findings of fact and law stated at length by that court. For the United States to succeed in this Court now, it must show that erroneous legal tests were applied to essential findings of fact or that the findings themselves were "clearly erroneous" within our rulings on Rule 52(a) of the Rules of Civil Procedure. See United States v. United States Gypsum Co., 333 U.S. 364, 393-395. We do not try the facts of cases de novo. Timken Roller Bearing Co. v. United States, 341 U.S. 593, 597.3

Two additional questions were raised in the record and decided by the court below. That court found that, even if du Pont did possess monopoly power over sales of cellophane, it was not subject to Sherman Act prosecution, because (1) the acquisition of that power was protected by patents, and (2) that power was acquired solely through du Pont's business expertness. It was thrust upon du Pont. 118 F.Supp. at 213-218.

Since the Government specifically excludes attempts and conspiracies to monopolize from consideration, a conclusion that du Pont has no monopoly power would obviate examination of these last two issues.

I. Factual Background. -- For consideration of the issue as to monopolization, a general summary of the development of cellophane is useful.

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In the early 1900's, Jacques Brandenberger, a Swiss chemist, attempted to make tablecloths impervious to dirt by spraying them with liquid viscose (a cellulose solution available in quantity from wood pulp, Finding 361) and by coagulating this coating. His idea failed, but he noted that the coating peeled off in a transparent film. This first "cellophane" was thick, hard, and not perfectly transparent, [76 S.Ct. 1000] but Brandenberger apparently foresaw commercial possibilities in his discovery. By 1908, he developed the first machine for the manufacture of transparent sheets of regenerated cellulose. The 1908 product was not satisfactory, but, by 1912, Brandenberger was making a saleable thin flexible film used in gas masks. He obtained patents to cover the machinery and the essential ideas of his process.

It seems to be agreed, however, that the disclosures of these early patents were not sufficient to make possible the manufacture of commercial cellophane. The inadequacy of the patents is partially attributed to the fact that the essential machine (the Hopper) was improved after it was patented. But more significant was the failure of these patents to disclose the actual technique of the process. This technique included the operational data acquired by experimentation.4

In 1917, Brandenberger...

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