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
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.
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.
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
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.
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.
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.
In 1917 Brandenberger assigned his patents to La Cellophane Societe Anonyme and joined that organization.
In 1923 du Pont organized with La Cellophane an American company for the manufacture of plain cellophane. The undisputed findings are that:
Subsequently du Pont and La Cellophane licensed several foreign companies, allowing them to manufacture and vend cellophane in limited areas. Finding 601. Technical exchange agreements with these companies were entered into at the same time. However, in 1940, du Pont notified these foreign companies that sales might be made in any country,
An important factor in the growth of cellophane production and sales was the perfection of moistureproof cellophane, a superior product of du Pont research and patented by that company through a 1927 application. Plain cellophane has little resistance to the passage of moisture vapor. Moistureproof cellophane has a composition added which keeps moisture in and out of the packed commodity. This patented type of cellophane has had a demand with much more rapid growth than the plain.
In 1931 Sylvania began the manufacture of moistureproof cellophane under its own patents. After negotiations over patent rights, du Pont in 1933 licensed Sylvania to manufacture and sell moistureproof cellophane produced
Between 1928 and 1950, du Pont's sales of plain cellophane increased from $3,131,608 to $9,330,776. Moistureproof sales increased from $603,222 to $89,850,416, although prices were continuously reduced. Finding 337. It could not be said that this immense increase in use was solely or even largely attributable to the superior quality of cellophane or to the technique or business acumen of du Pont, though doubtless those factors were important. The growth was a part of the expansion of the commodity-packaging habits of business, a by-product of general efficient competitive merchandising to meet modern demands. The profits, which were large, apparently arose from this trend in marketing, the development of the industrial use of chemical research and production of synthetics, rather than from elimination of other producers from the relevant market. That market is discussed later at p. 394. Tables appearing at the end of this opinion (Appendix A. Findings 279-292, inclusive, post, pp. 405-410) show the uses of cellophane in comparison with other wrappings.
II. The Sherman Act and the Courts.—The Sherman Act has received long and careful application by this Court to achieve for the Nation the freedom of enterprise
Judicial construction of antitrust legislation has generally been left unchanged by Congress. This is true of the Rule of Reason.
Difficulties of interpretation have arisen in the application of the Sherman Act in view of the technical changes in production of commodities and the new distribution practices.
III. The Sherman Act, § 2—Monopolization.—The only statutory language of § 2 pertinent on this review is: "Every person who shall monopolize . . . shall be deemed guilty . . . ." This Court has pointed out that monopoly at common law was a grant by the sovereign to any person for the sole making or handling of anything so that others were restrained or hindered in their lawful trade. Standard Oil Co. v. United States, 221 U.S. 1, 51. However, as in England, it came to be recognized here that acts bringing the evils of authorized monopoly— unduly diminishing competition and enhancing prices— were undesirable (id., at 56, 57, 58) and were declared illegal by § 2. Id., at 60-62. Our cases determine that a party has monopoly power if it has, over "any part of the trade or commerce among the several States." a power of controlling prices or unreasonably restricting competition. Id., at 58.
If cellophane is the "market" that du Pont is found to dominate, it may be assumed it does have monopoly power over that "market."
If a large number of buyers and sellers deal freely in a standardized product, such as salt or wheat, we have complete or pure competition. Patents, on the other hand, furnish the most familiar type of classic monopoly. As the producers of a standardized product bring about significant differentiations of quality, design, or packaging in the product that permit differences of use, competition becomes to a greater or less degree incomplete and the producer's power over price and competition greater over his article and its use, according to the differentiation he is able to create and maintain. A retail seller may have in one sense a monopoly on certain trade because of location, as an isolated country store or filling station, or because no
Determination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. For example, one can think of building materials as in commodity competition but one could hardly say that brick competed with steel or wood or cement or stone in the meaning of Sherman Act litigation; the products are too different. This is the interindustry competition emphasized by some economists. See Lilienthal, Big Business, c. 5. On the other hand, there are certain differences in the formulae for soft drinks but one can hardly say that each one is an illegal monopoly. Whatever the market may be, we hold that control of price or competition establishes the existence of monopoly power under § 2. Section 2 requires the application of a reasonable approach in determining the existence of monopoly power just as surely as did § 1. This of course does not mean that there can be a reasonable monopoly. See notes 7 and 9, supra. Our next step is to determine whether du Pont has monopoly power over cellophane: that is, power over its price in relation to or competition with
IV. The Relevant Market.—When a product is controlled by one interest, without substitutes available in the market, there is monopoly power. Because most products have possible substitutes, we cannot, as we said in Times-Picayune Co. v. United States, 345 U.S. 594, 612, give "that infinite range" to the definition of substitutes. Nor is it a proper interpretation of the Sherman Act to require that products be fungible to be considered in the relevant market.
The Government argues:
But 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. If it were not so, only physically identical products would be a part of the market. To accept the Government's argument, we would have to conclude that the manufacturers of plain as well as moistureproof cellophane were monopolists, and so with films such as Pliofilm, foil, glassine, polyethylene, and Saran, for each of these wrapping materials is distinguishable. These were all exhibits in the case. New wrappings appear, generally similar to cellophane: is each a monopoly? What is called for is an appraisal of the "cross-elasticity" of demand in the trade. See Note, 54 Col. L. Rev. 580.
Industrial activities cannot be confined to trim categories. Illegal monopolies under § 2 may well exist over limited products in narrow fields where competition is eliminated.
An examination of Finding 59, Appendix B, post, p. 411, will make this clear.
Moreover a very considerable degree of functional interchangeability exists between these products, as is shown by the tables of Appendix A and Findings 150-278.
An element for consideration as to cross-elasticity of demand between products is the responsiveness of the sales of one product to price changes of the other.
We conclude that cellophane's interchangeability with the other materials mentioned suffices to make it a part of this flexible packaging material market.
The Government stresses the fact that the variation in price between cellophane and other materials demonstrates they are noncompetitive. As these products are
The facts above considered dispose also of any contention that competitors have been excluded by du Pont from the packaging material market. That market has many producers and there is no proof du Pont ever has possessed power to exclude any of them from the rapidly expanding flexible packaging market. The Government apparently concedes as much, for it states that "lack of power to inhibit entry into this so-called market [i. e., flexible packaging materials], comprising widely disparate products, is no indicium of absence of power to exclude competition in the manufacture and sale of cellophane." The record shows the multiplicity of competitors and the financial strength of some with individual assets running to the hundreds of millions. Findings 66-72. Indeed, the
The "market" which one must study to determine when a producer has monopoly power will vary with the part of commerce under consideration. The tests are constant. That market is composed of products that have reasonable interchangeability for the purposes for which they are produced—price, use and qualities considered. While the application of the tests remains uncertain, it seems to us that du Pont should not be found to monopolize cellophane when that product has the competition and interchangeability with other wrappings that this record shows.
On the findings of the District Court, its judgment is
Affirmed.
MR. JUSTICE CLARK and MR. JUSTICE HARLAN took no part in the consideration or decision of this case.
[For concurring opinion of MR. JUSTICE FRANKFURTER, see post, p. 413.]
[For dissenting opinion of THE CHIEF JUSTICE, joined by MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS, see post, p. 414.]
VIII. RESULTS OF DU PONT'S COMPETITION WITH OTHER MATERIALS.
(Findings 279-292.)
279. During the period du Pont entered the flexible packaging business, and since its introduction of moisture-proof cellophane, sales of cellophane have increased. Total volume of flexible packaging materials used in the United States has also increased. Du Pont's relative percentage of the packaging business has grown as a result of its research, price, sales and capacity policies, but du Pont cellophane even in uses where it has competed has not attained the bulk of the business, due to competition of other flexible packaging materials.
280. Of the production and imports of flexible packaging materials in 1949 measured in wrapping surface, du Pont cellophane accounted for less than 20% of flexible packaging materials consumed in the United States in that year. The figures on this are:
Thousands of
Square Yards
Glassine, Greaseproof and Vegetable Parchment
Papers .................................... 3,125,826
Waxing Papers (18 Pounds and over)........... 4,614,685
Sulphite Bag and Wrapping Papers............. 1,788,615
Aluminum Foil................................ 1,317,807
Cellophane................................... 3,366,068
Cellulose Acetate............................ 133,982
Pliofilm, Polyethylene, Saran and Cry-O-Rap.. 373,871
__________
Total ............................... 14,720,854
__________
__________
Total du Pont Cellophane Production ......... 2,629,747
Du Pont Cellophane Per Cent of Total United
States Production and Imports of These
Flexible Packaging Materials............... 17.9%
The breakdown of du Pont cellophane sales for the year 1949 was:
Use Sales Percent of
TOBACCO (M pounds) Total Sales
Cigarettes................... 20,584 11.6
Cigars....................... 3,195 1.8
Other Tobacco................ 1,657 0.9
_______ _____
Total..................... 25,436 14.3
FOOD PRODUCTS
Candy & Gum.................. 17,054 9.6
Bread & Cake................. 40,081 22.5
Crackers & Biscuits.......... 12,614 7.1
Meat......................... 11,596 6.5
Noodles & Macaroni........... 2,602 1.5
Tea & Coffee................. 1,380 0.8
Cereals...................... 2,487 1.4
Frozen Foods................. 5,234 2.9
Dried Fruit.................. 333 0.2
Nuts......................... 2,946 1.7
Popcorn & Potato Chips....... 6,929 3.9
Dairy Products............... 3,808 2.1
Fresh Produce................ 4,564 2.6
Unclassified Foods........... 8,750 4.9
______ _____
Total ..................... 120,478 67.7
Use Sales Percent of MISCELLANEOUS (M pounds) Total Sales Hosiery....................... 1,370 0.7 Textiles...................... 3,141 1.8 Drugs......................... 1,031 0.6 Rubber........................ 317 0.2 Paper......................... 2,736 1.5 Unclassified.................. 18,602 10.5 _______ ____ Total....................... 27,197 15.3 Domestic Total................... 173,011 97.3 Export........................... 4,820 2.7 Grand Total...................... 177,831 100.0
282. Sales of cellophane by du Pont in 1951, by principal uses, were approximately as follows:
Pounds
White bread......................... between 8 and 9,000,000
Specialty breads................................ 15,700,000
Cake and other baked sweet goods................. 22,000,000
Meat............................................. 19,000,000
Candy (including chewing gum).................... 20,000,000
Crackers and biscuits............................ 17,000,000
Frozen foods..................................... 5,800,000
Cigarettes....................................... 23,000,000
283. 1949 sales of 19 major representative converters whose business covered a substantial segment of the total converting of flexible packaging materials for that year showed the following as to their sales of flexible packaging materials, classified by end use:
Quantity Percent
End Use (Millions of Total
BAKERY PRODUCTS sq.in.) End Use
Cellophane.................... 109,670 6.8
Foil.......................... 2,652 .2
Glassine...................... 72,216 4.4
Papers........................... 1,440,413 88.6
Films......................... 215 .0
_________ _____
1,625,166 100.0
Quantity Percent End Use (Millions of Total CANDY sq. in.) End Use Cellophane......................... 134,280 24.4 Foil............................... 178,967 32.5 Glassine........................... 117,634 21.4 Papers............................. 119,102 21.6 Films.............................. 484 .1 _______ ____ 550,467 100.0 SNACKS Cellophane......................... 61,250 31.9 Foil............................... 1,571 .8 Glassine........................... 120,556 62.8 Papers............................. 8,439 4.4 Films.............................. 79 .1 _______ ____ 191,895 100.0 MEAT AND POULTRY Cellophane......................... 59,016 34.9 Foil............................... 88 .1 Glassine........................... 4,524 2.7 Papers............................. 97,255 57.5 Films.............................. 8,173 4.8 _______ ____ 169,056 100.0 CRACKERS AND BISCUITS Cellophane........................ 29,960 26.6 Foil.............................. 192 .2 Glassine.......................... 11,253 10.0 Papers............................ 71,147 63.2 Films............................. 8 .0 _______ ____ 112,560 100.0 FRESH PRODUCE Cellophane......................... 52,828 47.2 Foil............................... 43 .1 Glassine........................... 96 .1 Papers............................. 51,035 45.6 Films.............................. 7,867 7.0 _______ ____ 111,869 100.0
End Use Quantity Percent FROZEN FOOD EXCLUDING DAIRY (Millions of Total PRODUCTS sq. in.) End Use Cellophane......................... 31,684 33.6 Foil............................... 629 .7 Glassine........................... 1,943 2.1 Papers............................. 56,925 60.3 Films.............................. 3,154 3.3 _______ _____ 94,335 100.0
284. About 96% of packaged white bread produced in the United States is wrapped in waxed paper or glassine, and about 6% in cellophane. The cellophane figure includes sales by all U. S. producers.
285. Forty-eight percent of specialty breads are wrapped in du Pont cellophane, the remainder in other cellophane or other materials. Most of this balance is wrapped in waxed paper and glassine.
286. Approximately 45% of cake and baked sweet goods packaged by wholesale bakers is wrapped in du Pont cellophane. The balance is wrapped in other cellophane or in waxed paper or glassine.
287. Between 25 and 35% of packaged candy units sold in the United States are wrapped in du Pont cellophane.
288. Of sponge and sweet crackers and biscuits combined approximately 25% to 30% of the packaged units produced in 1951 were wrapped in du Pont cellophane.
289. Du Pont cellophane at the present time is used on approximately 20 to 30% of packaged retail units of frozen foods. The remainder use waxed paper, waxed glassine, polyethylene, Pliofilm, Cry-O-Vac, or vegetable parchment.
290. Approximately 20 to 30% of packages of potato chips and other snacks are wrapped in du Pont cellophane. Most of the remainder are packaged in glassine and other flexible wraps.
292. Du Pont cellophane is used as an outer wrap on the paper-foil packages for approximately 75 to 80% of cigarettes sold in the United States. Sales for this use represent about 11.6% of du Pont's total sales of cellophane.
(Finding of Fact 130.)
1949 average wholesale prices of flexible packaging materials in the United States were:
Price per Price Yield
Packaging Material 1,000 sq.in. per lb. per lb.
Saran (cents) (cents) (sq.in.)
100 Gauge # 517..................... 6.1 99.0 16,300
Cellulose Acetate
.00088"............................. 3.3 82.0 25,000
Polyethylene
.002"—18" Flat Width.......... 5.4 81.0 15,000
Pliofilm
120 Gauge N 2....................... 3.8 80.8 21,000
Aluminum Foil
.00035"............................. 1.8 52.2 29,200
Moistureproof Cellophane
300 MST-51.......................... 2.3 47.8 21,000
Plain Cellophane
300 PT.............................. 2.1 44.8 21,500
Vegetable Parchment
27# ................................ 1.4 22.3 16,000
Bleached Glassine
25# ................................ 1.0 17.8 17,280
Bleached Greaseproof
25# ................................ .9 15.8 17,280
Plain Waxed Sulphite
25# Self-Sealing.................... 1.1 15.2 14,400
Plain Waxed Sulphite
25# Coated Opaque................... .7 11.9 17,280
Cry-O-Rap............................... Sold only in converted form.
No unconverted quotations.
I concur in the judgment of the Court and in so much of MR. JUSTICE REED'S opinion as supports the conclusion that cellophane did not by itself constitute a closed market but was a part of the relevant market for flexible packaging materials.
MR. JUSTICE REED has pithily defined the conflicting claims in this case. "The charge was monopolization of cellophane. The defense, that cellophane was merely a part of the relevant market for flexible packaging materials." Since this defense is sustained, the judgment below must be affirmed and it becomes unnecessary to consider whether du Pont's power over trade in cellophane would, had the defense failed, come within the prohibition of "monopolizing" under § 2 of the Sherman Act. Needless disquisition on the difficult subject of single-firm monopoly should be avoided since the case may be disposed of without consideration of this problem.
The boundary between the course of events by which a business may reach a powerful position in an industry without offending the outlawry of "monopolizing" under § 2 of the Sherman Act and the course of events which brings the attainment of that result within the condemnation of that section, cannot be established by general phrases. It must be determined with reference to specific facts upon considerations analogous to those by which § 1 of the Sherman Act is applied. These were illuminatingly stated by Mr. Justice Brandeis for the Court:
Sections 1 and 2 of course implicate different considerations. But the so-called issues of fact and law that call for adjudication in this legal territory are united, and intrinsically so, with factors that entail social and economic judgment. Any consideration of "monopoly" under the Sherman law can hardly escape judgment, even if only implied, on social and economic issues. It had best be withheld until a case inescapably calls for it.
MR. CHIEF JUSTICE WARREN, with whom MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS join, dissenting.
This case, like many under the Sherman Act, turns upon the proper definition of the market. In defining the market in which du Pont's economic power is to be measured, the majority virtually emasculate § 2 of the Sherman Act. They admit that "cellophane combines the desirable elements of transparency, strength and cheapness more definitely than any of" a host of other packaging materials. Yet they hold that all of those materials are so indistinguishable from cellophane as to warrant their inclusion in the market. We cannot agree that cellophane, in the language of Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 613, is "the selfsame product" as glassine, greaseproof and vegetable parchment papers, waxed papers, sulphite papers,
The majority opinion states that "[I]t will adequately illustrate the similarity in characteristics of the various products by noting here Finding 62 as to glassine." But Finding 62 merely states the respects in which the selected flexible packaging materials are as satisfactory as cellophane; it does not compare all the physical properties of cellophane and other materials. The Table incorporated in Finding 59 does make such a comparison, and enables us to note cellophane's unique combination of qualities lacking among less expensive materials in varying degrees.
If the conduct of buyers indicated that glassine, waxed and sulphite papers and aluminum foil were actually "the selfsame products" as cellophane, the qualitative differences demonstrated by the comparison of physical properties in Finding 59 would not be conclusive. But the record provides convincing proof that businessmen did not so regard these products. During the period covered by the complaint (1923-1947) cellophane enjoyed phenomenal growth. Du Pont's 1924 production was 361,-249 pounds, which sold for $1,306,662. Its 1947 production was 133,502,858 pounds, which sold for $55,339,626. Findings 297 and 337. Yet throughout this period the price of cellophane was far greater than that of glassine, waxed paper or sulphite paper. Finding 136 states that in 1929 cellophane's price was seven times that of glassine; in 1934, four times, and in 1949 still more than twice
The inference yielded by the conduct of cellophane buyers is reinforced by the conduct of sellers other than du Pont. Finding 587 states that Sylvania, the only other cellophane producer, absolutely and immediately followed every du Pont price change, even dating back its price list to the effective date of du Pont's change. Producers of glassine and waxed paper, on the other hand, displayed apparent indifference to du Pont's repeated and substantial price cuts. DX-994 shows that from 1924 to 1932 du Pont dropped the price of plain cellophane 84%, while the price of glassine remained constant.
Surely there was more than "a slight decrease in the price of cellophane" during the period covered by the complaint. That producers of glassine and waxed paper remained dominant in the flexible packaging materials market without meeting cellophane's tremendous price cuts convinces us that cellophane was not in effective competition with their products.
Certainly du Pont itself shared our view. From the first, du Pont recognized that it need not concern itself with competition from other packaging materials. For example, when du Pont was contemplating entry into cellophane production, its Development Department reported that glassine "is so inferior that it belongs in an entirely different class and has hardly to be considered as a competitor of cellophane."
Du Pont's every action was directed toward maintaining dominance over cellophane. Its 1923 agreements with La Cellophane, the French concern which first produced commercial cellophane, gave du Pont exclusive
As predicted by its 1923 market analysis,
The trial court found that
This further reveals its misconception of the antitrust laws. A monopolist seeking to maximize profits cannot raise prices "arbitrarily." Higher prices of course mean smaller sales, but they also mean higher per-unit profit. Lower prices will increase sales but reduce per-unit profit. Within these limits a monopolist has a considerable degree of latitude in determining which course to pursue in attempting to maximize profits. The trial judge thought that, if du Pont raised its price, the market would "penalize" it with smaller profits as well as lower sales.
The majority opinion purports to reject the theory of "interindustry competition." Brick, steel, wood, cement and stone, it says, are "too different" to be placed in the same market. But cellophane, glassine, wax papers, sulphite papers, greaseproof and vegetable parchment papers, aluminum foil, cellulose acetate, Pliofilm and other films are not "too different," the opinion concludes. The majority approach would apparently enable a monopolist of motion picture exhibition to avoid Sherman Act consequences by showing that motion pictures compete in substantial measure with legitimate theater, television, radio, sporting events and other forms of entertainment. Here, too, "shifts of business" undoubtedly accompany fluctuations in price and "there are market alternatives that buyers may readily use for their purposes." Yet, in United States v. Paramount Pictures, 334 U.S. 131, where the District Court had confined the relevant market to that for nationwide movie exhibition, this Court remanded the case to the District Court with directions to determine whether there was a monopoly on the part of the five major distributors "in the first-run field for the entire
The majority hold in effect that, because cellophane meets competition for many end uses, those buyers for other uses who need or want only cellophane are not entitled to the benefits of competition within the cellophane industry. For example, Finding 282 shows that the largest single use of cellophane in 1951 was for wrapping cigarettes, and Finding 292 shows that 75 to 80% of all cigarettes are wrapped with cellophane. As the recent report of the Attorney General's National Committee to Study the Antitrust Laws states: "In the interest of rivalry that extends to all buyers and all uses, competition among rivals within the industry is always important."
The foregoing analysis of the record shows conclusively that cellophane is the relevant market. Since du Pont has the lion's share of that market, it must have monopoly power, as the majority concede.
Nor can du Pont rely upon its moistureproof patents as a defense to the charge of monopolization. Once du Pont acquired the basic cellophane process as a result of its illegal 1923 agreements with La Cellophane, development of moistureproofing was relatively easy. Du Pont's moistureproof patents were fully subject to the exclusive pooling arrangements and territorial restrictions established by those agreements. And they were the subject of the illicit and exclusionary du Pont-Sylvania agreement. Hence, these patents became tainted as part and parcel of du Pont's illegal monopoly. Cf., Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661, 670. Any other result would permit one who monopolizes a market to escape the statutory liability by patenting a simple improvement on his product.
If competition is at the core of the Sherman Act, we cannot agree that it was consistent with that Act for the enormously lucrative cellophane industry to have no more than two sellers from 1924 to 1951. The conduct of du Pont and Sylvania illustrates that a few sellers tend to act like one and that an industry which does not have a competitive structure will not have competitive behavior. The public should not be left to rely upon the dispensations of management in order to obtain the benefits which normally accompany competition. Such beneficence is of uncertain tenure. Only actual competition can assure long-run enjoyment of the goals of a free economy.
We would reverse the decision below and remand the cause to the District Court with directions to determine the relief which should be granted against du Pont.
FootNotes
"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 a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding fifty thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court." Id., § 2.
"The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1-7 of this title . . . ." 15 U. S. C. § 4.
"Question has been raised within our organization as to the existence of territorial limitations under our agreements with your company relating to regenerated cellulose film. In order that our position may be clearly and frankly established, we desire to record with you our conclusions.
"Based upon the provisions of the contracts, and in the light of legal developments in this country, we construe these agreements as imposing no restrictions upon the sale of regenerated cellulose film in any country in which the public is free to sell. Thus we regard each party as free to export such film to any country in the world, subject only to such limitations as lawfully may be based upon the unauthorized use of patented inventions or trade-marks in the country of manufacture, or in the country of use or sale.
"This letter is not intended to modify any of the provisions of our agreements involving the exchange of technical information." R. 3323.
Market entry is carefully regulated in some of the country's largest businesses: Natural Gas Act, 15 U. S. C. § 717f (natural gas companies); Federal Communications Act, 47 U. S. C. § 307 (a) (1952) (limits new stations); Civil Aeronautics Act, 49 U. S. C. § 481 (d) (1951) (limits market entry); Motor Carrier Act, 49 U. S. C. § 307 (1952) (motor vehicle common carriers). Price fixing in some areas is authorized by the legislature: Reed-Bulwinkle Act, 49 U. S. C. § 5b (1952) (railroad rate agreements); Civil Aeronautics Act, 49 U. S. C. § 492 (1952) (approval of transportation rate agreements); Miller-Tydings Act, 15 U. S. C. § 1 (1946) (resale price maintenance); Shipping Act, 46 U. S. C. § 814 (1952) (water carriers' rate agreements).
Combination of strong competitors in some major instances has been encouraged: Federal Communications Act, 47 U. S. C. §§ 221 (a), 222 (c) (1) (1952): Federal Power Act, 16 U. S. C. § 824a (b) (1952); Interstate Commerce Act, 49 U. S. C. § 5b (1952) (all common carriers).
That competition is not always to be encouraged is made evident by noting that the farmers have been actually barred from production in most major crops and some groups of workers are told that they may not, in production of commodities for commerce, work for less than a minimum wage. Fair Labor Standards Act, 29 U. S. C. § 206 (1952).
See Report of Attorney General's National Committee to Study the Antitrust Laws, pp. 261-313, for discussion of "Exemptions From Antitrust Coverage."
"Mr. KENNA. Mr. President, I have no disposition to delay a vote on the bill, but I would like to ask, with his permission, the Senator from Vermont a question touching the second section:
" `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, etc.'
"Is it intended by the committee, as the section seems to indicate, that if an individual engaged in trade between States or between States and Territories, or between States or Territories and the District of Columbia, or between a State and a foreign country, by his own skill and energy, by the propriety of his conduct generally, shall pursue his calling in such a way as to monopolize a trade, his action shall be a crime under this proposed act? To make myself understood, if I am not clear___
"Mr. EDMUNDS. I think I understand the Senator.
"Mr. KENNA. Suppose a citizen of Kentucky is dealing in shorthorn cattle and by virtue of his superior skill in that particular product it turns out that he is the only one in the United States to whom an order comes from Mexico for cattle of that stock for a considerable period, so that he is conceded to have a monopoly of that trade with Mexico; is it intended by the committee that the bill shall make that man a culprit?
"Mr. EDMUNDS. It is not intended by it and the bill does not do it. Anybody who knows the meaning of the word `monopoly,' as the courts apply it, would not apply it to such a person at all; and I am sure my friend must understand that."
Id., at 3152:
"Mr. HOAR. I put in the committee, if I may be permitted to say so (I suppose there is no impropriety in it), the precise question which has been put by the Senator from West Virginia, and I had that precise difficulty in the first place with this bill, but I was answered, and I think all the other members of the committee agreed in the answer, that `monopoly' is a technical term known to the common law, and that it signifies—I do not mean to say that they stated what the signification was, but I became satisfied that they were right and that the word `monopoly' is a merely technical term which has a clear and legal signification, and it is this: It is the sole engrossing to a man's self by means which prevent other men from engaging in fair competition with him.
"Of course a monopoly granted by the King was a direct inhibition of all other persons to engage in that business or calling or to acquire that particular article, except the man who had a monopoly granted him by the sovereign power. I suppose, therefore, that the courts of the United States would say in the case put by the Senator from West Virginia that a man who merely by superior skill and intelligence, a breeder of horses or raiser of cattle, or manufacturer or artisan of any kind, got the whole business because nobody could do it as well as he could was not a monopolist, but that it involved something like the use of means which made it impossible for other persons to engage in fair competition, like the engrossing, the buying up of all other persons engaged in the same business."
"It should be said at the outset, that in considering the application of the rule of decision in these cases to the situation presented by this record, it should be remembered that this Court has often announced that each case arising under the Sherman Act must be determined upon the particular facts disclosed by the record, and that the opinions in those cases must be read in the light of their facts and of a clear recognition of the essential differences in the facts of those cases, and in the facts of any new case to which the rule of earlier decisions is to be applied."
"Glassine is produced by finishing greaseproof paper between highly polished metal rollers under heat and at pressure. This process develops the transparency and surface gloss which are characteristic of glassine. It is greaseproof, and can be sealed by heat, if coated. It is made moistureproof by coating and with appropriate lacquers or waxes and may be printed."
.....
"Glassine.
"Glassine is, in some types, about 90% transparent, so printing is legible through it.
"Glassine affords low cost transparency.
"Moisture protection afforded by waxed or lacquered glassine is as good as that of moistureproof cellophane.
"Glassine has greater resistance to tearing and breakage than cellophane.
"Glassine runs on packaging machinery with ease equal to that of cellophane.
"Glassine can be printed faster than cellophane, and can be run faster than moistureproof cellophane on bag machines.
"Glassine has greater resistance than cellophane to rancidity-inducing ultraviolet rays.
"Glassine has dimensional stability superior to cellophane.
"Glassine is more durable in cold weather than cellophane.
"Printed glassine can be sold against cellophane on the basis of appearance.
"Glassine may be more easily laminated than cellophane.
"Glassine is cheaper than cellophane in some types, comparable in others."
"133. Cellophane has always been higher priced than the two largest selling flexible packaging materials, wax paper and glassine, and this has represented a disadvantage to sales of cellophane.
"134. DuPont considered as a factor in the determination of its prices, the prices of waxed paper, glassine, greaseproof, vegetable parchment, and other flexible packaging materials.
"135. DuPont, in reducing its prices, intended to narrow price differential between cellophane and packaging papers, particularly glassine and waxed paper. The objective of this effort has been to increase the use of cellophane. Each price reduction was intended to open up new uses for cellophane, and to attract new customers who had not used cellophane because of its price."
"141. The cost factor slips accounts away from cellophane. This hits at the precarious users, whose profit margins on their products are low, and has been put in motion by competitive developments in the user's trade. Examples include the losses of business to glassine in candy bar wraps in the 30's, frozen food business to waxed paper in the late 40's, and recent losses to glassine in cracker packaging.
"142. The price of cellophane was reduced to expand the market for cellophane. DuPont did not reduce prices for cellophane with intent of monopolizing manufacture or with intent of suppressing competitors.
"143. DuPont reduced cellophane prices to enable sales to be made for new uses from which higher prices had excluded cellophane, and to expand sales. Reductions were made as sales volume and market conditions warranted. In determining price reductions, duPont considered relationship between its manufacturing costs and proposed prices, possible additional volume that might be gained by the price reduction, effect of price reduction upon the return duPont would obtain on its investment. It considered the effect its lowered price might have on the manufacture by others, but this possible result of a price reduction was never a motive for the reduction.
"144. DuPont never lowered cellophane prices below cost, and never dropped cellophane prices temporarily to gain a competitive advantage.
"145. As duPont's manufacturing costs declined, 1924 to 1935, duPont reduced prices for cellophane. When costs of raw materials increased subsequent to 1935, it postponed reductions until 1938 and 1939. Subsequent increases in cost of raw material and labor brought about price increases after 1947."
"For every product, substitutes exist. But a relevant market cannot meaningfully encompass that infinite range. The circle must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn; in technical terms, products whose `cross-elasticities of demand' are small."
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