MR. JUSTICE BRENNAN delivered the opinion of the Court.
The United States filed this action in 1949 in the District Court for the Northern District of Illinois. The complaint alleged that the ownership and use by appellee E. I. du Pont de Nemours & Co. of approximately 23 percent of the voting common stock of appellee General Motors Corporation was a violation of sections 1 and 2 of the Sherman Act, 15 U. S. C. §§ 1,2, and of section 7 of the Clayton Act, 15 U. S. C. § 18. After trial, the District Court dismissed the complaint. 126 F.Supp. 235 (D. C. N. D. Ill. 1954). On the Government's appeal, we reversed. We held that du Pont's acquisition of the 23 percent of General Motors stock had led to the insulation from free competition of
On remand, the District Court invited the Government to submit a plan of relief which in its opinion would be effective to remedy the violation. The court also appointed two amici curiae to represent the interests of General Motors and du Pont shareholders, respectively, most of whom, of course, had not been made parties to this litigation. The Government submitted a proposed plan of relief. That plan included diverse forms of injunctive relief, but its principal feature was a requirement that within 10 years the du Pont company completely divest itself of its approximately 63 million General Motors shares. The Government proposed that about two-thirds of these shares be distributed pro rata to the generality of du Pont shareholders in the form of dividends over the 10-year period. The other one-third of du Pont's General Motors holdings—stock which
The District Court held several weeks of hearings. The evidence taken at the hearings, largely of expert witnesses, fills some 3,000 pages in the record before us, and, together with the numerous financial charts and tables received as exhibits, bears mainly not on the competition-restoring effect of the several proposals, but
In sum, we assign to the District Courts the responsibility initially to fashion the remedy, but recognize that while we accord due regard and respect to the conclusion of the District Court, we have a duty ourselves to be sure that a decree is fashioned which will effectively redress proved violations of the antitrust laws. The proper disposition of antitrust cases is obviously of great public importance, and their remedial phase, more often than not, is crucial. For the suit has been a futile exercise if the Government proves a violation but fails to secure a remedy adequate to redress it. "A public interest served by such civil suits is that they effectively pry open to competition a market that has been closed by defendants' illegal restraints. If this decree accomplishes
Our practice reflects the situation created by the congressional authorization, under § 2 of the Expediting Act,
These principles alone would require our close examination of the District Court's action. But the necessity for that examination in this case further appears in the light of additional considerations. First of all, the decree was fashioned in obedience to the judgment which we sent down to the District Court after our reversal of that court's dismissal of the Government's complaint. We have plenary power to determine whether our judgment was scrupulously and fully carried out. Chief Justice Taft, speaking for the Court, said in Continental Ins. Co. v. United States, 259 U.S. 156, 166 (1922), "We delegated to the District Court the duty of formulating a decree in compliance with the principles announced in our judgment of reversal, and that gives us plenary power where the compliance has been attempted and the decree in any proper way is brought to our attention to see that it follows our opinion."
Before we examine the adequacy of the relief allowed by the District Court, it is appropriate to review some general considerations concerning that most drastic. but most effective, of antitrust remedies—divestiture. The key to the whole question of an antitrust remedy is of course the discovery of measures effective to restore competition. Courts are not authorized in civil proceedings to punish antitrust violators, and relief must not be punitive. But courts are authorized, indeed required, to decree relief effective to redress the violations, whatever the adverse effect of such a decree on private interests. Divestiture is itself an equitable remedy designed to protect the public interest. In United States v. Crescent Amusement Co., supra, where we sustained divestiture provisions against an attack similar to that successfully made below, we said, at p. 189: "It is said that these provisions are inequitable and harsh income tax wise, that they exceed any reasonable requirement for the prevention of future violations, and that they are therefore punitive. . . . Those who violate the Act may not reap
If the Court concludes that other measures will not be effective to redress a violation, and that complete divestiture is a necessary element of effective relief, the Government cannot be denied the latter remedy because economic hardship, however severe, may result. Economic hardship can influence choice only as among two or more effective remedies. If the remedy chosen is not effective, it will not be saved because an effective remedy would entail harsh consequences. This proposition is not novel; it is deeply rooted in antitrust law and has never been successfully challenged.
The Court concluded in that case that, despite the alleged hardship which would be involved, only dissolution of the combination would be effective, and therefore ordered dissolution. Plainly, if the relief is not effective, there is no occasion to consider the third criterion.
Thus, in this case, the adverse tax and market consequences which the District Court found would be concomitants of complete divestiture cannot save the remedy of partial divestiture through the "pass through" of voting rights if, though less harsh, partial divestiture is not an effective remedy. We do not think that the "pass through" is an effective remedy and believe that the Government is entitled to a decree directing complete divestiture.
It cannot be gainsaid that complete divestiture is peculiarly appropriate in cases of stock acquisitions which violate § 7.
The divestiture only of voting rights does not seem to us to be a remedy adequate to promise elimination of the tendency of du Pont's acquisition offensive to § 7. Under the decree, two-thirds of du Pont's holdings of General Motors stock will be voted by du Pont shareholders— upwards of 40 million shares. Common sense tells us that under this arrangement there can be little assurance of the dissolution of the intercorporate community of interest which we found to violate the law. The du Pont shareholders will ipso facto also be General Motors voters. It will be in their interest to vote in such a way as to induce General Motors to favor du Pont, the very result which we found illegal on the first appeal. It may be true, as appellees insist, that these shareholders will not exercise as much influence on General Motors as did du Pont when it held and voted the shares as a block. And it is true that there is no showing in this record that the du Pont shareholders will combine to vote together, or that their information about General Motors' activities will be detailed enough to enable them to vote their shares as strategically as du Pont itself has done. But these arguments misconceive the nature of this proceeding. The burden is not on the Government to show de novo that a "pass through" of the General Motors vote, like du Pont's ownership of General Motors stock, would violate § 7. United States v. Aluminum Co. of America, 91 F.Supp. 333, 346 (D. C. S. D. N. Y. 1950). It need only appear that the decree entered leaves a substantial likelihood that the tendency towards monopoly of the acquisition condemned by § 7 has not
Du Pont replies, inter alia, that it would be willing for all of its General Motors stock to be disenfranchised, if that would satisfy the requirement for effective relief. This suggestion, not presented to the District Court, is distinctly an afterthought. If the suggestion is disenfranchisement only while du Pont retains the stock, it would not avoid the hazards inherent in du Pont's power to transfer the vote. If the suggestion is permanent loss of the vote, it would create a large and permanent separation of corporate ownership from control, which would not only run directly counter to accepted principles of corporate democracy, but also reduce substantially the number of voting General Motors shares, thereby making it easier for the owner of a block of shares far below an absolute majority to obtain working control, perhaps creating new antitrust problems for both General Motors and the Department of Justice in the future. And finally, we should be reluctant to effect such a drastic change in General Motors' capital structure, established under state corporation law.
Appellees argue further that the injunctive provisions of the decree supplementary to the "pass through" of voting rights adequately remove any objections to the effectiveness of the "pass through." Du Pont is enjoined, for example, from in any way influencing the choice of General Motors' officers and directors, and from entering into any preferential trade relations with General Motors. And, under ¶ IX of the decree, the Government may reapply in the future should this injunctive relief prove inadequate. Presumably this provision could be used to prevent the exercise of the power to transfer the vote. But the public interest should not in this case be required to depend upon the often cumbersome and
We therefore direct complete divestiture. Since the District Court's decree was framed around the provision directing only partial divestiture, and since General Motors, Christiana, and Delaware acquiesced in its provisions only on that basis, we shall not pass upon the provisions for ancillary relief but shall vacate the decree
We believe, however, that this already protracted litigation should be concluded as soon as possible. To that end we direct the District Court on receipt of our judgment to enter an order requiring du Pont to file within 60 days a proposed judgment providing for complete divestiture of its General Motors stock, to commence within 90 days, and to be completed within not to exceed 10 years, of the effective date of the District Court's judgment, and requiring the Government to file, within 30 days after service upon it of du Pont's proposed judgment, either proposed specific amendments to such du Pont judgment or a proposed alternate judgment of divestiture. The District Court shall give precedence to this cause on its calendar.
The judgment of the District Court, except to the extent ¶ VI is affirmed, is vacated and remanded for further proceedings consistent with this opinion.
It is so ordered.
MR. JUSTICE CLARK and MR. JUSTICE HARLAN took no part in the consideration or decision of this case.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE WHITTAKER and MR. JUSTICE STEWART join, dissenting.
In United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, the Court held that the acquisition and continued ownership by E. I. du Pont de Nemours & Co.
As the Court described it, the "primary issue" in the Government's suit against du Pont, General Motors, and related parties was "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 intercompany 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." 353 U. S., at 588-589. The question was asked in the context of these facts.
The transaction out of which the case arose was the acquisition by du Pont, during the period 1917-1919, of
Du Pont's "commanding position as a General Motors supplier" was not achieved until after its acquisition of a substantial fraction of General Motors' stock. At the time of this purchase, du Pont was actively seeking markets for its nitrocellulose, artificial leather, celluloid, rubber-coated goods, and paints and varnishes used by automobile manufacturers. Leading du Pont executives in 1917 and 1918 indicated that the acquisition of General Motors stock was due in part to a belief that it would secure for du Pont an important market for its automotive products.
This Court agreed with the trial court "that considerations of price, quality and service were not overlooked by either du Pont or General Motors." 353 U. S., at 606. However, it determined that neither this factor, nor "the fact that all concerned in high executive posts in both companies acted honorably and fairly, each in the honest conviction that his actions were in the best interests of his own company and without any design to overreach anyone, including du Pont's competitors," 353 U. S., at
The purpose of this provision was thus explained in the Court's opinion:
Thus, a finding of conspiracy to restrain trade or attempt to monopolize was excluded from the Court's decision. Indeed, as already noted, the Court proceeded on the assumption that the executives involved in the dealings between du Pont and General Motors acted "honorably and fairly" and exercised their business judgment only to serve what they deemed the best interests of their own companies. This, however, did not bar finding that du Pont had become pre-eminent as a supplier of automotive fabrics and finishes to General Motors; that these products constituted a "line of commerce" within the meaning of the Clayton Act; that General Motors' share of the market for these products was substantial; and that competition for this share of the market was endangered by the financial relationship between the two concerns:
On the basis of the findings which led to this conclusion, the Court remanded the case to the District Court to determine the appropriate relief. The sole guidance given the Court for discharging the task committed to it was this:
This brings us to the course of the proceedings in the District Court.
This Court's judgment was filed in the District Court on July 18, 1957. The first pretrial conference—held to appoint amici curiae to represent the interests of the stockholders of du Pont and General Motors and to consider the procedure to be followed in the subsequent hearings —took place on September 25, 1957. At the outset, the Government's spokesman explained that counsel for the Government and for du Pont had already held preliminary discussions with a view to arriving at a relief plan that both sides could recommend to the court. Du Pont, he said, had proposed disenfranchisement of its General Motors stock along with other restrictions on the du Pont-General Motors relationship. The Government, deeming these suggestions inadequate, had urged
Counsel for du Pont indicated a preference for the submission of detailed plans by both sides at an early date. No previous antitrust case, he said, had involved interests of such magnitude or presented such complex problems of relief. The submission of detailed plans would place the issues before the court more readily than would discussion of divestiture or disenfranchisement in the abstract. The Court adopted this procedure with an appropriate time schedule for carrying it out.
The Government submitted its proposed decree on October 25, 1957. The plan called for divestiture by du Pont of its 63,000,000 shares of General Motors stock by equal annual distributions to its stockholders, as a dividend, over a period of ten years. Christiana Securities Company and Delaware Realty & Investment Company, major stockholders in du Pont, and the stockholders of Delaware were dealt with specially by provisions requiring the annual sale by a trustee, again over a ten-year period, of du Pont's General Motors stock allocable to them, as well as any General Motors stock which Christiana and Delaware owned outright. If, in the trustee's judgment, "reasonable market conditions" did not prevail during any given year, he was to be allowed to petition the court for an extension of time within the ten-year period. In addition, the right to vote the General Motors stock held by du Pont was to be vested in du Pont's stockholders, other than Christiana and Delaware and the stockholders of Delaware; du Pont, Christiana, and Delaware were to be enjoined from acquiring
On motion of the amici curiae, the court directed that a ruling be obtained from the Commissioner of Internal Revenue as to the federal income tax consequences of the Government's plan. On May 9, 1958, the Commissioner announced his rulings. The annual dividends paid to du Pont stockholders in shares of General Motors stock would be taxable as ordinary income to the extent of du Pont's earnings and profits. The measure, for federal income tax purposes, of the dividend to individual stockholders would be the fair market value of the shares at the time of each annual distribution. In the case of tax-paying corporate stockholders, the measure would be the lesser of the fair market value of the shares or du Pont's tax basis for them, which is approximately $2.09 per share. The forced sale of the General Motors stock owned by or allocable to Christiana, Delaware, and the stockholders of Delaware, and deposited with the trustee, would result in a tax to those parties at the capital gains rate.
Du Pont's counterproposal was filed on May 14, 1958. Under its plan du Pont would retain its General Motors shares but be required to pass on to its stockholders the right to vote those shares. Christiana and Delaware would, in turn, be required to pass on the voting rights to the General Motors shares allocable to them to their own
On June 6, 1958, General Motors submitted its objections to the Government's proposal. It argued, inter alia, that a divestiture order would severely depress the market value of the stock of both General Motors and du Pont, with consequent serious loss and hardship to hundreds of thousands of innocent investors, among them thousands of small trusts and charitable institutions; that there would be a similar decline in the market values of other automotive and chemical stocks, with similar losses to the stockholders of those companies; that the tremendous volume of General Motors stock hanging over the market for ten years would hamper the efforts of General Motors and other automobile manufacturers to raise equity capital; and that all this would have a serious adverse effect on the entire stock market and on general business activity. General Motors comprehensively contended that the Government plan would not be "in the public interest" as required by the mandate of this Court.
The decrees proposed by the amici curiae were filed in August of 1958. These plans, like du Pont's, contained provisions for passing the vote on du Pont's General Motors shares on to the ultimate stockholders of du Pont, Christiana, and Delaware, except that officers and directors of the three companies, their spouses, and other people living in their households, as well as other specified
In a memorandum filed on September 26, 1958, the Government, on the assumption that divestiture was required under the Clayton Act, suggested various ways in which its decree might be modified to ameliorate its harsh tax consequences. The Government stated that it would have no objections to the modifications discussed in the memorandum but it did not submit amendments to its original proposal.
On the same day, the Government filed a motion for a preliminary injunction, seeking to restrain du Pont, Christiana, and Delaware from exercising their voting rights in General Motors stock, to prevent du Pont, Christiana, and Delaware from having any director, officer, or employee in common with General Motors or nominating any such person to serve in General Motors,
After further preliminaries which need not be recounted, the trial of the issues on the appropriate relief commenced on February 16, 1959, and continued to a conclusion on April 9, 1959. The Government presented its evidence on twelve hearing days; the defendants and amici also presented evidence on twelve days; and the Government took four more hearing days for the presentation of rebuttal evidence. Briefs were filed and the case was submitted to the court in June 1959. The court's decision was announced on October 2, 1959.
The printed record of the proceedings below covers 3,340 pages. Of this, trial of the issues pertaining to the terms of the decree fills 2,380 pages. An additional 543 pages contain exhibits. In the course of the trial twenty-nine witnesses were called by the Government and thirty-two by the defendants and amici. The printed exhibits number 193 submitted by the Government, thirty-two by du Pont, thirty by General Motors, nine by Christiana and Delaware, and one by amicus Dallstream. The bulk of this mass of evidence bore principally upon disputes over the market and tax consequences of divestiture of du Pont's General Motors stock and upon the requirement of resort to this remedy for the effective enforcement of § 7.
Thus it appears that the Government stood on its original proposal, rather than on alternative suggestions.
And so one comes to consider how the court dealt with the issues presented by the parties.
After disposing of two preliminary questions—ruling in favor of the amenability of General Motors, Christiana, and Delaware, as parties not condemned as violators of § 7, to the enforcing power of the court, and against the amenability to direct enforcement of holders of both du Pont and Delaware stock who were not parties to the suit—the court thus defined the central issue before it:
The Government's first major contention—that by the terms of the Clayton Act the court had no choice but
A second economic consequence of the Government's divestiture scheme would be its impact on the market value of the securities involved. The Government relied on three types of evidence to show that its plan would have little influence on the market prices of General Motors and du Pont stock. The first type was expert testimony that there was a regular flow of investment money coming into the market. However, upon detailed review of the testimony of a dozen witnesses, the court concluded that "there was no convincing evidence in this category that any substantial portion of this investment
The Government's second type of evidence relating to the market consequences of its decree was the statistical testimony of academic and professional analysts. The court noted that it was shown no charts or statistics relating to a situation "remotely approaching" the forced sale of 2,000,000 shares of General Motors stock each year for ten years, attended by additional sales of both General Motors and du Pont stock for tax and other purposes. Further, it found that one Government expert admitted he would defer to the judgment of investment bankers in the matter of the price for which the General Motors stock could be sold; another testified that in the past an increase in stock supply of twenty percent had been associated with price declines of between ten and fifteen percent; the testimony of another Government witness was based on inadequately drawn statistical tables, and his demeanor on the witness stand deprived his evidence of credibility; a fourth witness' opinions had no foundation in factual evidence.
The Government's third type of evidence related to securities offerings in the recent past. The court determined that the circumstances of these offerings—i. e., their background, magnitude, timing, and duration— made them dissimilar to a divestiture of du Pont's interest in General Motors. In any event most of these offerings did have a depressing effect on the market value of the stock involved. None of this evidence, the court found, gave assurance that the Government proposal would not cause serious loss on the sale of General Motors and du Pont stock during the divestiture period.
The defendants countered the Government's case with a variety of evidence. Two experienced underwriters testified that the Government's ten-year divestiture
Several trust management executives testified that because of the tax consequences of the Government's decree and the difficulties of allocating equitably the General Motors shares received as dividends by the trusts, they, and presumably others in their position throughout the country, would be forced to make mass sales of du Pont stock. Executives of several insurance companies and an investment trust company predicted declines in the value of General Motors stock and expressed an intention to buy it for their concerns only at considerably reduced prices. Many witnesses concurred in the view that the Government's decree would render future financing by General Motors highly uneconomic and very difficult to accomplish.
The court then appraised the evidence bearing on possible voting control of General Motors, under a decree of less than total divestiture, by corporations or individuals affiliated with du Pont. It determined that the Government's broadest grouping—individuals who were stockholders of Delaware, additional individuals named du Pont, and certain corporations in which both groups
On the basis of its appraisal of the evidence, the court reached its essential conclusions. The first question was what provision to make with respect to du Pont's 63,000,000 shares of General Motors. It determined that a careful and detailed plan for a "pass-through" of the votes of these shares to du Pont's stockholders and an injunction to prevent du Pont and General Motors from sharing common officers, directors, and employees were necessary. The court then considered whether title to the stock, stripped of these vital incidents of ownership, must also be taken from du Pont, "in order to remove and to guard against the probability of restraint or monopolization of trade which was the consequence the Supreme Court found to be offensive to the statute." 177 F. Supp., at 40. "There is no evidence," it concluded, "on which the Court could make such a finding." 177 F. Supp., at 40.
What was on the other side of the ledger? The evidence indicated that divestiture of legal title would visit upon thousands of innocent investors adverse tax and market consequences, always severe even if varying in detail depending on the variation of the Government's plan. The court concluded that any plan for divestiture of legal title to du Pont's interest in General Motors would either impair the value of the property interests involved or impose severe tax consequences on du Pont's stockholders. Moreover, any plan that produced as a by-product the accumulation of vast amounts of cash by du Pont would have the undesirable result
The court dealt with the Government's two objections to its result. The fear that block voting of the passed-through votes on the General Motors shares by investors who were related by blood or business interest would leave control of General Motors in the hands of du Pont's close associates was met by precluding the stockholders of Christiana and Delaware, as well as other specified persons, from voting their allocable shares of du Pont's General Motors stock. The objection that retention by du Pont of any financial stake in General Motors, even on behalf of its stockholders, would provide incentive to intercorporate favoritism between the two, while deemed merely a "naked suggestion," was answered by providing specific relief against preferential trade relations between du Pont and General Motors. In light of the proof and of these precautionary prohibitions, the court concluded that to order divestiture of du Pont's title to the General Motors stock would "constitute a serious abuse of discretion." 177 F. Supp., at 49.
The questions presented by this appeal must be considered in the setting of the proceedings, summarized above, that led to the District Court's conclusions in formulating its decree. Since the Court rejects the Government's
If a District Court is not subject to any statutory requirement to order divestiture in a § 7 case, is it left without guidance or direction in fashioning an appropriate decree as a court of equity? Of course not. There is a body of authority, both procedural and substantive, by which it is to be guided. It is, however, well to remember that the wise admonition that general principles do not decide concrete cases has sharp applicability to equity decrees. Any apparently applicable policy or rule, abstractly stated, must be related to the specific circumstances of a particular case in which it is invoked and applied. Care must be taken to consider phrases used in relation to the particular facts of the cases relied on.
One principle has comprehensive application. It is that courts of equity, as this Court advised the District Court in remanding the case to it to fashion the appropriate relief, "are clothed `with large discretion to model their judgments to fit the exigencies of the particular case.' " 353 U. S., at 607-608. This is a commonplace,
If, indeed, equity's characteristic flexibility is deeply rooted in history, the administration of justice makes greater demands upon it now than ever before. As business transactions become increasingly complex, they multiply and complicate the issues presented to courts even in litigation of ordinary dimensions. How much more is this true of a suit of the magnitude and reach of the one before us, with inevitable impact far beyond the interests of the immediate parties. In such a case we need to be specially mindful that the purpose of equity jurisdiction is to adapt familiar principles of law to intricate, elusive, and unfamiliar facts. As one member of this Court recently put it: "Equity decrees are not like the packaged goods this machine age produces. They are uniform only in that they seek to do equity in a given case." United Steelworkers of America v. United States, 361 U.S. 39, 62, 71 (dissenting opinion).
First, what was open to consideration in the District Court? Its overriding concern had to be for the protection of the public interest. It was its duty to hear all the evidence bearing on that question and in any conflict with private interests decisively to resolve doubts in favor of the general welfare. The account of the District Court's procedures, and of the considerations on which it reached its reflective conclusions, in Parts II and III of this opinion establishes, I submit, that it fully conformed to this essential requirement. Although it considered the Government's case on the likelihood of block voting of the votes of the General Motors shares passed through to Delaware and Christiana of doubtful
Did the District Court fail in its duty because it deemed relevant for consideration as one factor in striking the balance involved in its conclusion the consequences of divestiture to thousands upon thousands of blameless stockholders and other so-called private interests? The decisions of this Court gave full warrant to the District Court that it did not exceed its discretionary powers in doing so. The weighty words of United States v. American Tobacco Co., 221 U.S. 106, 185, are apposite:
And in Standard Oil Co. v. United States, 221 U.S. 1, 78, the Court admonished that "the fact must not be
This Court's decisions leave no doubt that it was proper for the District Court to attend to the likelihood of danger to the public welfare that might arise from the serious adverse market consequences of divestiture and to the likelihood of extensive loss to innocent investors through both market decline and tax levy. It is apparent that the Department of Justice recognized the relevance of the tax impact. In a statement on proposed legislation to alleviate the tax burden of divestiture decrees, Robert A. Bicks, then Acting Assistant Attorney General in charge of the Antitrust Division of the Justice Department, said:
It is obvious from the context of these remarks that their immediate objective was to smooth the way toward obtaining divestiture in this very case.
In a case such as du Pont, in which the challenged transaction occurred approximately thirty years prior to the initiation of suit, the force of these considerations is greatly enhanced. The relationship between General Motors and du Pont stood uncondemned by the Government through successive administrations throughout that period. This is not remotely to hint any form of estoppel against resort to divestiture as relief for the illegality, however belatedly established, were it otherwise the required means for correction of past misconduct or its future avoidance. I do maintain that, as this Court has recognized, it was altogether proper for the District Court—even incumbent upon it—to take "account of what was done during that time—the many millions of dollars spent, the developments made, and the
In short, the factors that influenced the District Court were fit considerations for judicial scrutiny. But we still have to inquire what criteria were open to the District Court for appraising the relevant variables and how that court's determinations are to be reviewed by this Court.
The very foundation for judgment in reviewing a District Court's decree in a case like this is the inherent nature of its task in adjudicating claims arising under the antitrust laws. The sweeping generality of the antitrust laws differentiates them from ordinary statutes. "As a charter of freedom," wrote Mr. Chief Justice Hughes for the Court, "the [Sherman] Act has a generality and adaptability comparable to that found to be desirable in constitutional provisions." Appalachian Coals, Inc., v. United States, 288 U.S. 344, 359-360. This is no less true of the Clayton Act's prohibition "where the effect . . . may be to substantially lessen competition." Correspondingly broad is the area within which a District Court must move to fit the remedy to the range of the outlawry. Far-reaching responsibility is vested in the court charged with fashioning a decree and the decree it fashions must be judged on review in light of this responsibility.
Partly on the basis of these views, the Attorney General's National Committee to Study the Antitrust Laws recommended that divestiture "not be decreed as a penalty," that it "not be invoked where less drastic remedies will accomplish the purpose of the litigation," and that possible disruption of industry and markets as well as effect on the public, investors, customers, and employees be taken into account. Report of the Attorney General's National Committee to Study the Antitrust Laws (1955), pp. 355-356. This statement fairly reflects the views of this Court, to the effect that a decree must not "impose penalties in the guise of preventing future violations," Hartford-Empire Co. v. United States, 323 U.S. 386, 409; that the least harsh of available measures should be adopted when the Court is satisfied that they will be effective, e. g., Timken Roller Bearing Co. v. United States, 341 U.S. 593, 603 (concurring opinion); and that injunctive relief may well be an adequate sanction against continued wrongdoing, id., at 604 (concurring opinion), and Standard Oil Co. v. United States, 221 U.S. 1, 77. Add to this that we have recognized a sound basis in reason for distinguishing palpably illegal activity from conduct that was arguably permissible, and for dealing with the latter less severely than the former. See Federal Trade Comm'n v. National Lead Co., 352 U.S. 419, 429; United States v. United States Gypsum Co., 340 U.S. 76, 89-90.
The Government urges, however, that divestiture is, if not the required relief, at least the normal and ordinary relief in stock acquisition cases. The contention is that, as the safest remedy, i. e., the surest of anticompetitive results, divestiture is, and has been considered to be, the preferred relief for all save a few exceptional cases. Support for this view is drawn from a long line of cases in which divestiture has been decreed. The contention calls for detailed scrutiny.
The objectives of divestiture were thus stated in Schine Chain Theatres, Inc., v. United States, 334 U.S. 110, 128-129:
This tripartite formulation summarizes the considerations that have guided this Court's rulings on divestiture. In Standard Oil Co. v. United States, 221 U.S. 1, the source of modern antitrust law, the defendants were charged with combination and conspiracy to restrain trade in and monopolize interstate and foreign commerce in petroleum products, in violation of §§ 1 and 2 of the Sherman Act. The lower court found both provisions offended by a combination of seven individual defendants and thirty-eight corporate defendants to lodge in the Standard Oil Co. of New Jersey substantial stock ownership of and control over many subsidiary corporations in the petroleum industry and to cause Standard Oil to manage their affairs so as to throttle competition, findings sustained here. Coming to the problem of remedy, while acknowledging that "ordinarily" injunctive relief would be adequate to restrain repetition of the illegal activity, the Court found that the situation presented by the Standard Oil aggrandizement called for stiffer measures: "But in a case like this, where the condition which has been brought about in violation of the statute, in and of itself, is not only a continued attempt to monopolize, but also a monopolization, the duty to enforce the statute requires the application of broader and more controlling remedies." 221 U. S., at 77. (Emphasis added.) Recognition of this need—that intercorporate
The second element of the Schine rationale—depriving antitrust defendants "of the benefits of their conspiracy" —is equally well established. United States v. Crescent Amusement Co., 323 U.S. 173, was a Sherman Act suit in which certain motion picture exhibitors were found to have used their combined buying power to obtain terms more favorable than those received by their independent competitors in licensing films, whereby independents were driven from the field and a monopoly in theater operation developed in many towns. Each corporate exhibitor was required to divest itself of its interest in any other corporate defendant or its affiliates.
The third Schine objective of divestiture was "to break up or render impotent the monopoly power which violates the Act." The role of divestiture in meeting this need was spelled out in the Crescent case:
These, then, are the justifiable bases for compelling divestiture. They explain and define the authorities on which the Government relies. Do they, or any of them, invalidate the District Court's refusal to decree divestiture in the circumstances of this case and justify this Court in overruling that court's exercise of discretion in finding divestiture uncalled for?
The notion that the very existence of an interest by du Pont in the stock of General Motors constitutes a violation of the Act need not detain us. It cannot be questioned that, as the Court's opinion on the merits in this case makes clear, the violation condemned is the effect of the stockholding on competition, not the
Nor is divestiture required as a means of depriving the defendant of the fruits of its violation. While du Pont's interest in General Motors might serve as a tool for the accomplishment of antitrust violations, it is certainly not the fruit of any such violation. The fruit—the benefit —of a violation of § 7 is the unfair competitive position of one corporation through its stock interest in another. Effective termination of this competitive advantage was precisely the design of the elaborate injunctive provisions devised by the District Court.
The final desideratum—vitiating a monopoly power—is not literally applicable to the du Pont situation, since the District Court dismissed the monopoly charge under the Sherman Act and this Court refused to review the dismissal. 353 U. S., at 588, n. 5. But even if this criterion were carried over into a Clayton Act setting to enforce the desirability of avoiding every potentiality of monopoly power, there is no compulsion to decree divestiture. Such
Even in the Crescent case, the Court voiced its concern for the future only by way of support for its conclusion that the District Court's severance of the defendants could not be reversed for abuse of discretion. 323 U. S., at 190. The Court sustained, rather than overturned, the lower court's judgment. To infer that the Court would have found an abuse of discretion had the District Court in Crescent limited itself to a decree of injunctive relief is an unwarranted assumption. But the Government in effect draws such an inference for the purpose of this case, even though the facts of du Pont's violation do not faintly resemble the offense of the movie exhibitors in Crescent. When the powerful interests of James J. Hill and J. Pierpont Morgan coalesce to place in one controlling parent the stock of the Great Northern and Northern Pacific Railways. Northern Securities Co. v. United States, 193 U.S. 197; when the Standard Oil Co. or the American Tobacco Co. obtain monopoly positions in their vast industrial empires, see Standard Oil Co. v.
The grounds thus canvassed furnish the relevant considerations for this Court's review of the District Court's decree. The obvious must be restated. We do not sit to draft antitrust decrees de novo. This is a court of appeal, not a trial court. We do not see the witnesses, sift the evidence in detail, or appraise the course of extended argument, session after session, day after day. (A review of Part III of this opinion abundantly shows the extent to which the District Court's appraisal of the credibility of witnesses, analysis of expert testimony, and reconciliation of the claims of counsel entered into the painstaking process that led to the court's views on complicated issues and ultimately to the formulation of its decree.) In short, this Court does not partake of the procedure and is not charged with the responsibility demanded of the court entrusted with the task of devising the details of a decree appropriate for the governance of a vastly complicated situation arising out of unique circumstances. By its nature, this Court, as an appellate tribunal, lacks the means—the procedural facilities—to evolve a decree in a case like this. For these reasons this
To tell a trial judge that he has discretion in certain matters is to tell him that there is a range of choices available to him. It is to tell him that the responsibility is his, and that he will not be reversed except for straying outside the permissible range of choice, i.e., for abuse of discretion. See, e. g., United States v. Crescent Amusement Co., 323 U.S. 173, 189; Timken Roller Bearing Co. v. United States, 341 U.S. 593, 600-601. In sustaining the judgment in Lorain Journal Co. v. United States, 342 U.S. 143, 156, the Court stated its standard for upholding the trial court's decree as simply that "The decree is reasonably consistent with the requirements of the case and remains within the control of the court below." (Emphasis in the original.) Certainly we ought not to reverse the carefully wrought results of a conscientious trial judge without a showing amounting almost to a demonstration that he exceeded the fair limits of judicial choice which this Court explicitly reposed in him.
It may be suggested that however faithfully the trial court abided by the other teachings of this Court, it forgot one, namely, "that relief, to be effective, must go beyond the narrow limits of the proven violation." United States v. United States Gypsum Co., 340 U.S. 76, 90. See International Salt Co. v. United States, 332 U.S. 392, 400. This principle is important but it carries no warrant for reversal in this case. It has already been pointed out that the District Court specifically applied this principle in significant provisions of its decree. This Court found a danger of restraint of trade only in the market for automobile fabrics and finishes. The District Court nevertheless extended the injunctive provisions of its decree to all trade relations between du Pont and General Motors, regardless of the products involved. This Court proceeded on the assumption that the officers and directors of the companies had acted honorably and in the best interests of their respective corporations. Yet the District Court, responsive to the Government's urging, though without substantial evidence in the record, chose to sterilize the voting power not only of du Pont's officers and directors, but also of a major block of its large shareholders, the shareholders of Christiana and Delaware. In fact, the District Court exceeded the Government's requests in several substantial respects. This is true with respect to the injunction against cooperative and preferential business practices between du Pont and General Motors,
Moreover, the principle of extending relief beyond the narrow limits of the violation has an important limiting corollary. The trial court is not authorized to order relief which it is without findings to support. "A full exploration of facts is usually necessary in order properly to draw such a decree." Associated Press v. United States, 326 U.S. 1, 22. This Court has unhesitatingly reversed remedial action by the lower courts, both for and against the Government, when wanting in supporting findings. See Hartford-Empire Co. v. United States, 323 U.S. 386, 418; Schine Chain Theatres, Inc., v. United States, 334 U.S. 110; United States v. Paramount Pictures, 334 U.S. 131, 170-174; Hughes v. United States, 342 U.S. 353, 357-358. But if findings on questions of fact, or mixed questions of law and fact, are essential to the formulation of a decree, it becomes virtually impossible to develop a basis for a divestiture order at this stage on this record. The District Court found that once all of du Pont's ties to General Motors, save its stock interest, were severed the record is barren of justification for an inference of reasonable probability of restraint of trade. Conversely, it found that the tax and market consequences of divestiture would be so onerous that, in the absence of any serious anticompetitive danger, it would have constituted an abuse of discretion to enter such a decree. These conclusions were based in significant measure on the firsthand factual analysis that only a trial judge is in a position to make. For the Court to require divestiture, thereby overturning a trial court judgment
The Government suggests that possibly, in "exceptional" cases, some remedy other than divestiture may suffice, but that this is not the "exceptional" case. If this is not an "exceptional" case, what would be? Is it really tenable to regard this an ordinary, a conventional, a run-of-the-mill case?
Du Pont began to acquire General Motors stock while World War I was still in progress. It owned that stock openly for three decades before this suit was instituted to challenge the validity of the acquisition. During that period the number of General Motors and du Pont stockholders expanded from a few thousand to many hundreds of thousands. The value of the General Motors stock greatly increased. The tax laws were substantially changed. The District Court has fashioned a closely knit network of provisions to prevent preferential dealings between General Motors and du Pont. So certain was it that divestiture would, on the basis of its findings, work great and unjustifiable loss on wholly innocent investors, that it considered a divestiture order beyond its discretionary power. The precedents of this Court to which the District Court could look for guidance in the discharge of its duty permitted, at the least, the inferences (1) that the framing of the decree lay within its discretion. (2) that within the scope of that discretion it was free to consider all relevant consequences, both public and private, of the plans proposed, (3) that it was under no compulsion to order divestiture, (4) that there was ample reason to avoid a harsh remedy if it were to conclude that a less severe one would be effective, (5) that both the facts and the formulated reasoning of prior divestiture cases made them distinguishable from the
The essential appeal of the Government's position lies in its excitation of fear of any intercorporate relationship between two such colossi as du Pont and General Motors. It is easy to calm this fear by a requirement of divestiture. Insofar as the Court yields to that fear, it is strange, indeed, that this was not obvious to the Court when it found the illegality for which it directed the District Court to evolve a corrective remedy. Not a single consideration now advanced by the Court for directing divestiture was not available when the case was originally here. For not one of these considerations is based on evidence elicited at the hearing before the District Court, directed by this Court, for determining the relief. Such a limitation on the discretionary decree-fashioning power, upon full hearing in the District Court, certainly could not have been in this Court's mind when it remitted that function to the District Court, otherwise it would have spoken its mind and not left it all to the "large discretion" of the court. In any event it requires prophetic confidence to conclude that that decree is so obviously inadequate as to require reversal before it can be tried in practice. Neither the record when the case was first here nor the facts adduced at the hearing on molding the decree give warrant for this Court to set aside the trial court's finding on the improbability of future restraint of trade in view of the safeguarding terms of the decree. If the Court were to allow the District Court's maturely considered scheme for protecting the dominant public interest
Reversal by way of commanding divestiture is a "judgment from speculation," carrying with it irreversible consequences, whereas the District Court's decree leaves the door open for "judgment from experience," Tanner v. Little, 240 U.S. 369, 386, under its clauses retaining jurisdiction to modify the judgment in the light of changed circumstances. Resort to such safety valve clauses is an established practice in review of antitrust remedies, for they allow the courts to act on the basis of informed hindsight rather than treacherous conjecture. In International Salt Co. v. United States, 332 U.S. 392, 401, the Court enunciated this principle in language pertinent here:
The District Court here concluded that the relief it devised would dispel all potential restraints upon free competition as effectively as would divestiture, while divestiture was likely to cause serious economic disturbance unwarranted by a need for that remedy. Neither in its procedures nor in its consideration of the data presented to it did the court fail to discharge the obligations placed upon it by the decisions of this Court and by the only instruction—to exercise "large discretion"—given it by the Court in this case. In no way did the District Court abuse the discretion entrusted to it. Its judgment should therefore be affirmed.
In many of these cases the courts referred to "dissolution" or "divorcement" instead of "divestiture." These terms have traditionally been treated as to a large degree interchangeable, and we so regard them. See Hale and Hale, Market Power: Size and Shape Under the Sherman Act 370 (1958); Adams, Dissolution, Divorcement, Divestiture: the Pyrrhic Victories of Antitrust, 27 Ind. L. J. 1, note 1 (1951).
Du Pont, Christiana, and Delaware were enjoined from acquiring additional General Motors stock except as stock or rights might be distributed to them as stockholders by General Motors.
Du Pont, Christiana, and Delaware, on the one hand, and General Motors, on the other, were prohibited to have common officers, directors, or employees. The former three were also restrained from nominating any person to be an officer or director of General Motors.
Du Pont and General Motors were compelled to terminate, for as long as du Pont, Christiana, or Delaware own any General Motors stock, any agreement between them which (1) requires General Motors to purchase from du Pont a specified percentage of its requirements of any product (with certain time provisos), or (2) grants to either concern exclusive patent rights, or grants to du Pont preferential rights to make or sell any chemical discovery of General Motors.
Du Pont, Christiana, and Delaware were restrained, for the same period, from entering into any joint business venture with General Motors and from knowingly holding stock in any business enterprise in which General Motors holds stock. The same restrictions were applied to General Motors.
Du Pont was enjoined, again for the stock-holding period, from dealing with General Motors with respect to du Pont products on terms more favorable than those on which it is willing to deal with General Motors' competitors. The same restriction was placed upon General Motors in its dealings with du Pont.
Du Pont, Christiana, and Delaware, and their directors and officers, and the members of the families of their directors and officers who reside in the same household with them, were enjoined from exercising their voting rights in General Motors stock owned by them or allocable to them under the decree, and from attempting to influence anyone voting General Motors stock.
The vote on the General Motors shares owned by du Pont was ordered "passed through" to the stockholders of du Pont (subject to the prohibitions of the preceding paragraph), and the notification and proxy machinery necessary to effectuate this provision was out-lined. Provision was made for the appointment of a monitor of these voting procedures.
A procedure was established whereby du Pont and Christiana might sell or otherwise dispose of their General Motors stock.
Two separate provisions preserved the right of any party to apply to the court for modification of the decree in the event of a change of circumstances (such as the advent of legislative tax relief) and for further orders necessary for carrying out the judgment.
Du Pont, Christiana, and Delaware were directed to obtain from their officers and directors, and their families, written consents to be bound by the voting restrictions of the judgment.
For the purpose of securing compliance with the judgment, the Department of Justice was authorized to conduct reasonable inspections of the records and interviews with the employees of du Pont, Christiana, and Delaware and to apply to the court for similar privileges as to General Motors upon a showing of good cause.
"A court of equity may frame its decree so as to protect to the greatest extent possible the conflicting interests of the parties; to accomplish this it may require the performance of conditions, may experiment to determine how best to accomplish its purpose, and may use either the negative or the positive form of decree."
Pomeroy, Equity Jurisprudence (5th ed. 1941), § 109:
"Equitable remedies . . . are distinguished by their flexibility, their unlimited variety, their adaptability to circumstances, and the natural rules which govern their use. There is in fact no limit to their variety and application; the court of equity has the power of devising its remedy and shaping it so as to fit the changing circumstances of every case and the complex relations of all the parties."
"In general the object of the remedies under the anti-trust laws is to prevent the continuance of wrongful conduct, and to deprive the wrongdoers of the fruits of their unlawful conduct, and to prevent the creation anew of restraint forbidden by law. . . ."
"Section 7 of the Clayton Act, as its terms and the nature of the remedy prescribed plainly suggest, was intended for the protection of the public against the evils which were supposed to flow from the undue lessening of competition. . . .
"Mere acquisition by one corporation of the stock of a competitor, even though it result in some lessening of competition, is not forbidden; the act deals only with such acquisitions as probably will result in lessening competition to a substantial degree . . . that is to say, to such a degree as will injuriously affect the public. . . ."
"The determination of the scope of the decree to accomplish its purpose is peculiarly the responsibility of the trial court. Its opportunity to know the record and to appraise the need for prohibitions or affirmative actions normally exceeds that of any reviewing court." 340 U. S., at 89.
In Hartford-Empire the opinion of the Court says "it is unthinkable that Congress has entrusted the enforcement of a statute of such far-reaching importance to the judgment of a single judge, without review of the relief granted or denied by him." 324 U. S., at 571. These words, if given the reading they seem most readily to bear, are certainly unobjectionable, for our power to review the antitrust relief determinations of trial judges is not in doubt. If this language is to be read to authorize de novo consideration here of all the details of a lower court's decree, then it marks a real aberration in this branch of the law. Whatever respect such a view might once have deserved, it deserves none now, for our recent decisions have uniformly adopted the principle of appellate deference to trial court discretion. See cases cited in notes 7 and 16, supra.