353 U.S. 586 (1957), 3, United States v. E. I. du Pont de Nemours & Co.
|Docket Nº:||No. 3|
|Citation:||353 U.S. 586, 77 S.Ct. 872, 1 L.Ed.2d 1057|
|Party Name:||United States v. E. I. du Pont de Nemours & Co.|
|Case Date:||June 03, 1957|
|Court:||United States Supreme Court|
Argued November 14-15, 1956
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
This is a civil action brought by the Government in 1949 under § 15 of the Clayton Act to enjoin violations of § 7 of that Act resulting from the purchase by du Pont in 1917-1919 of a 23% stock interest in General Motors. The essence of the charge was that, by means of the close relationship of the two companies, du Pont had obtained an illegal preference over competitors in the sale of automotive finishes and fabrics to General Motors, thus tending to "create a monopoly" in a "line of commerce." After trial, the District Court dismissed the complaint on the ground that the Government had failed to prove its case, and the Government appealed directly to this Court.
Held: the Government proved a violation of § 7; the judgment is reversed, and the cause is remanded to the District Court for a determination, after further hearing, of the equitable relief necessary and appropriate in the public interest to eliminate the effects of the stock acquisition offensive to the statute. Pp. 588-608.
(a) Any acquisition by one corporation of all or any part of the stock of another corporation, competitor or not, was within the reach of § 7 before its amendment in 1950 whenever there was reasonable likelihood that the acquisition would result in a restraint of commerce or in the creation of a monopoly of any "line of commerce" -- i.e., it applied to vertical, as well as horizontal, stock acquisitions. Pp. 590-593.
(b) Failure of the Federal Trade Commission to invoke § 7 against vertical stock acquisitions is not a binding administrative interpretation that Congress did not intend vertical acquisitions to come within the purview of the Act. P. 590.
(c) The record shows that automotive finishes and fabrics have sufficient peculiar characteristics and uses to constitute them products sufficiently distinct from all other finishes and fabrics to make them a "line of commerce" within the meaning of the Clayton Act. Therefore, the bounds of the relevant market for the purposes of this case are not coextensive with the total market for finishes and
fabrics, but are coextensive with the automobile industry, the relevant market for automotive finishes and fabrics. Pp. 593-595.
(d) The record shows that, quantitatively and percentage-wise, du Pont supplies the largest part of General Motors' requirements of finishes and fabrics. Therefore, du Pont has a substantial share of the relevant market. Pp. 595-596.
(e) The test of a violation is whether, at the time of suit, there is a reasonable probability that the stock acquisition may lead to a restraint of commerce or tend to create a monopoly of a line of commerce. Therefore, the Government may maintain this suit, brought in 1949, based upon an acquisition of stock which occurred in 1917-1919. Pp. 596-607.
(f) Even when a purchase of stock is solely for investment, the plain language of § 7 contemplates an action at any time the stock is used to bring about, or in attempting to bring about, a substantial lessening of competition. Pp. 597-598.
(g) On the record in this case, the background of the acquisition and the plain implications of the contemporaneous documents eliminate any basis for a conclusion that the purchase was made "solely for investment." Pp. 598-602.
(h) The bulk of du Pont's production of automotive finishes and fabrics has always supplied the largest part of the requirements of General Motors, the one customer in the automobile industry connected to du Pont by a stock interest, and there is an overwhelming inference that du Pont's commanding position was promoted by its stock interest, and was not gained solely on competitive merit. Pp. 600-605.
(i) It is not requisite to the proof of a violation of § 7 to show that restraint or monopoly was intended. P. 607.
126 F.Supp. 235, reversed and remanded.
BRENNAN, J., lead opinion
MR. JUSTICE BRENNAN delivered the opinion of the Court.
This is a direct appeal under § 2 of the Expediting Act1 from a judgment of the District Court for the Northern District of Illinois,2 dismissing the Government's action brought in 1949 under § 15 of the Clayton Act.3 The complaint alleged a violation of § 7 of the Act4 resulting from the purchase by E. I. du Pont de Nemours and Company in 1917-1919 of a 23% stock interest in General Motors Corporation. This appeal is from the dismissal of the action as to [77 S.Ct. 875] du Pont, General Motors, and the corporate holders of large amounts of du Pont stock, Christiana Securities Corporation and Delaware Realty & Investment Company.5
The primary issue is whether du Pont's commanding position as General Motors' supplier of automotive
finishes and fabrics was achieved on competitive merit alone, or because its acquisition of the General Motors' stock, and the consequent close inter-company relationship, led to the insulation of most of the General Motors' market from free competition, with the resultant likelihood, at the time of suit, of the creation of a monopoly of a line of commerce.
The first paragraph of § 7, pertinent here, provides:
That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.6
Section 7 is designed to arrest in its incipiency not only the substantial lessening of competition from the acquisition by one corporation of the whole or any part of the stock of a competing corporation, but also to arrest in their incipiency restraints or monopolies in a relevant market which, as a reasonable probability, appear at the time of suit likely to result from the acquisition by one corporation of all or any part of the stock of any other corporation. The section is violated whether or not actual restraints or monopolies, or the substantial lessening of competition, have occurred or are intended. Acquisitions solely for investment are excepted, but only if, and so long as, the stock is not used by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition.
We are met at the threshold with the argument that § 7, before its amendment in 1950, applied only to an acquisition of the stock of a competing corporation, and not to an acquisition by a supplier corporation of the stock of a customer corporation -- in other words, that the statute applied only to horizontal, and not to vertical, acquisitions. This is the first case presenting the question in this Court. International Shoe Co. v. Federal Trade Comm'n, 280 U.S. 291, and Thatcher Mfg. Co. v. Federal Trade Comm'n, 272 U.S. 554, involved corporate acquisitions of stock of competitors.
During the 35 years before this action was brought, the Government did not invoke § 7 against vertical acquisitions. The Federal Trade Commission has said that the section did not apply to vertical acquisitions. See FTC, Report on Corporate Mergers and Acquisitions, 168 (1955), H.R.Doc.No. 169, 84th Cong., 1st Sess. Also, the House Committee considering the 1950 revision of § 7 stated that " . . . it has been thought by some that this legislation [the 1914 Act] applies only to the so-called horizontal mergers. . . ." H.R.Rep. No. 1191, 81st Cong., 1st Sess. 11. The House Report adds, however, that the 1950 amendment was purposed " . . . to make it clear that the bill applies to all types of mergers and acquisitions, vertical and conglomerate as well as horizontal. . . ." (Emphasis added.)
This Court has the duty to reconcile administrative interpretations with the broad antitrust policies laid down by Congress. Cf. Automatic Canteen Co. v. Federal Trade Comm'n, 346 U.S. 61, 74. The failure of the Commission to act is not a binding administrative interpretation that Congress did not intend vertical acquisitions to come within the purview of the Act. Accord, Baltimore & Ohio R. Co. v. Jackson, 353 U.S. 325, 331.
The first paragraph of § 7, written in the disjunctive, plainly is framed to reach not only the corporate acquisition
of stock of a competing corporation, where the effect may be substantially to lessen competition between them, but also the corporate acquisition of stock of any corporation, competitor or not, where the effect may be either (1) to restrain commerce in any section or community, or (2) tend to create a monopoly of any line of commerce. The amended complaint does not allege that the effect of du Pont's acquisition may be to restrain commerce in any section or community, but alleges that the effect was " . . . to tend to create a monopoly in particular lines of commerce. . . ."
Section 7 contains a second paragraph dealing with a holding company's acquisition of stock in two or more corporations.7 Much of the legislative history of the section deals with the alleged holding company evil.8 This history does not aid in interpretation, because our concern here is with the first paragraph of the section. There is, however, pertinent legislative history which does aid and support our construction.
Senator Chilton, one of the Senate Managers of the bill, explained that the House conferees insisted...
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