DuPont vs US

Facts

E. I. du Pont de Nemours and Company (du Pont) (defendant) was a manufacturer of

cellophane, a clear-film material used as a wrapping for foodstuffs and other items. du Pont
owned a patent for a moisture-proof version of cellophane that was especially desirable as a
wrapping material. du Pont’s cellophane was very popular, and the United States (plaintiff)
brought an action against du Pont, claiming that du Pont had monopolized the market for
cellophane.

du Pont argued that the government’s alleged product market was too narrow and that
cellophane was a product within the larger market for flexible packaging materials (e.g.,
aluminum foil, waxed paper, and Saran wrap). During the relevant period, du Pont maintained
a share of 75 percent of cellophane production in the United States but less than 20 percent of
flexible-packaging production. The district court accepted du Pont’s market definition after
determining that consumers had treated other flexible packaging materials as functional
substitutes for cellophane. Based on this definition, the district court determined that du Pont did
not possess a monopoly in violation of § 2 of the Sherman Act. The government appealed.

U.S. Supreme Court

United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586 (1957)

United States v. E. I. du Pont de Nemours & Co.

No. 3

Argued November 14-15, 1956

Decided June 3, 1957

353 U.S. 586

Syllabus

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. 353 U. S. 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. 353 U. S. 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. 353 U. S. 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

Page 353 U. S. 587

fabrics, but are coextensive with the automobile industry, the relevant market for automotive
finishes and fabrics. Pp. 353 U. S. 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. 353 U. S. 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. 353 U. S. 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. 353 U. S. 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. 353 U. S. 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. 353 U. S. 600-605.

(i) It is not requisite to the proof of a violation of § 7 to show that restraint or monopoly was
intended. P. 353 U. S. 607.

126 F. Supp. 235, reversed and remanded.

Page 353 U. S. 588

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

United States v. E. I. du Pont de Nemours & Co.

No. 5

Argued October 11, 1955

Decided June 11, 1956

351 U.S. 377

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. 351 U. S. 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. 351 U. S. 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. 351 U. S. 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. 351 U. S. 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. 351 U. S. 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. 351 U. S. 394.

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

Page 351 U. S. 378

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. 351 U.
S. 395.

(g) Cellophane's interchangeability with numerous other materials suffices to make it a part of the
market for flexible packaging materials. Pp. 351 U. S. 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. 351 U. S. 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. 351 U. S. 402-404.

118 F.Supp. 41 affirmed.