Earl Warren: -- Appellant, versus E.I. du Pont Company, et al. Mr. Davis.
John F . Davis: Mr. Chief Justice, if the Court please. When the Court rose yesterday afternoon, I was just about to call the Court's attention to a reprint of the opinion and judgment of the District Court, which appears in a grey bound volume, about the size of our brief. It's an -- somewhat unusual procedure to reprint the findings of the court below. But in this case -- outside of the record, but in this case, there appears to be some dispute between the appellees and the Government as to just which sections of this opinion we are attacking and if there is anything that this Court is entitled to know precisely, it is what part of those findings we are attacking. So, we have reprinted the opinion of the court below, underscoring the -- anything in the opinion, which we ask this Court to -- to overturn. On the first page of the opinion, we have listed the pages where the underscoring appears, so that it is easy to find the particular provisions, which are subject to attack here.
Felix Frankfurter: May I at this point ask to be declared (Inaudible) right in thinking that you -- are you attacking some findings, not -- not because the evidence -- you're attacking some findings simply because the evidence has been sustained, is that right?
John F . Davis: We are attacking, I think, none of the basic findings. I think we've -- we -- and I think it's safe to say we're attacking the conclusions, not legal conclusions, but the -- the second step, the conclusions which are based on the findings of fact. I don't think --
Felix Frankfurter: Do you mean by that the inferences --
John F . Davis: The inferences --
Felix Frankfurter: -- and decided to draw?
John F . Davis: The inferences which ought to be drawn from the specific facts.
Felix Frankfurter: I was hoping you would tell me that all I have to do is to read the findings (Inaudible) conclusions that I gathered from what you've said that one really has to go through that letter.
John F . Davis: No. I -- I don't know what I said, I think --
Felix Frankfurter: What do you say? And never mind (Inaudible)
John F . Davis: Yes.
Felix Frankfurter: Hearing your misinterpretation, what do you say on that point? How much of this record do you think I actually read and perhaps to render a traditional judgment?
John F . Davis: It depends how far you go along with me, Your Honor. I believe that there are -- that on the facts, which are found in this document, in this document alone, this Court should reach the opposite conclusion from that which the Court found. If however, their question --
Felix Frankfurter: Are you trying to tell things with time, which -- which findings are rather -- are self-destructive.
John F . Davis: That's right. I will do that. That -- in fact, that is the -- that's the burden of my argument. There's verbal law to argue in this case. It's almost all the question of -- of analyzing these facts and seeing where -- when it comes out.
Felix Frankfurter: (Inaudible)
John F . Davis: However, in order to make the statements of the facts meaningful --
Felix Frankfurter: But if I don't -- if I don't find the Government with such a finding and I do have to go to this (Inaudible)
John F . Davis: Well, you don't have to go through the (Voice Overlap) --
Felix Frankfurter: Do you mind telling us what you think?
John F . Davis: I think this is -- this is what -- where you'll find -- if -- if you cannot go along with me on my primary proposition that these facts support opposition then you're part way along the line because there are conceded, certain basic facts. We stop halfway up the mount in anyway, there's no question as to those. Now then, the question comes, where do you go from there? And I think that the briefs in this case are thorough enough and make sufficient references to the record so that you have a guide to the record and don't have to start in reading at page one and read the record through like --
Felix Frankfurter: Do you mean -- do you and the appellees agree on the pages which (Inaudible) or do you refer to different pages?
John F . Davis: I am sure we'll refer you to different pages.
Felix Frankfurter: If I read all pages, I don't have to read all of it. So, I don't read -- I mean his pages, I don't have to read all of it either, but they happen to be different (Inaudible)
John F . Davis: Well, I shall -- I shall try and persuade you that -- save you the task of reading some of the pages they refer to, because I think they're immaterial to the decision in the case. I think that these facts, which I am about to -- to recite will be more meaningful if I very broadly summarize the nature of the Government's case, so that you'll know why I'm -- I'm reciting some of these facts. We are not here arguing that it is improper for a corporation to buy control of another corporation, nor are we arguing that it is improper for one corporation to carry on business transactions with another corporation in which it has a stock interest. But we do assert that a combination, in restraint of trade, is not less illegal because it is effectuated through a stock relationship. Specifically, it is the Government's claim that the du Pont Corporation formed a combination with the General Motors Company Corporation for the purpose of obtaining a non-competitive advantage over its competitors in selling material to the General Motors Corporation and in developing chemical discoveries made by General Motors. Now, in this case, the combination took the form of infiltrating the General Motors management from the top. In the first place, du Pont bought -- bought 23% of the General Motors stock.
Stanley Reed: What -- what do you mean by du Pont?
John F . Davis: By du Pont, I mean, the E.I. du Pont de Nemours & Company. I mean the --
Stanley Reed: Not the individual?
John F . Davis: No, I mean the corporation.
Stanley Reed: Stockholders.
John F . Davis: Whenever I -- I shall try, whenever I -- it's -- it's a little awkward to use the entire corporate name. And I would like it understood when I say du Pont, I -- I refer to the Corporation. When I refer to an individual, I will try to refer to him by his entire name.
Stanley Reed: All right.
John F . Davis: I will have occasion to refer to Mr. Irenee du Pont, Mr. Lammot du Pont and Mr. Pierre du Pont. But I shall try to give their names when I'll name them individually. Or I may --
Stanley Reed: It appears they were charged having conspired to as I understand it.
John F . Davis: But that I think is not before the Court at the present time. The original complaint charged the conspiracy among the du Pont's, the individual du Ponts, to bring together General Motors, the du Pont Corporation, United States Rubber in a combination whereby they would be captured markets between the three. It was necessary in order to prove that case, to prove a conspiracy because there was no single corporate head that came up to the individual du Pont. We have not brought before this Court on appeal the question of -- of that conspiracy. The only question before the Court now is the combination between the du Pont Corporation and General Motors. And in that case you don't -- the individual du Ponts are no longer defendants. They're not appellees here. Du Pont bought 23% of General Motors stock. It installed its own representatives from the board of directors and on the managing committees, secured the -- the loyalty of the executives from the General Motors Corporation. And since that time it has enjoyed a tremendous volume of trade, selling its products to General Motors, developing General Motors' chemical discoveries. As I just explained to -- to Mr. Justice Reed, here, we are not -- we are not talking about a conspiracy as such. That was as an important factor in the court below, but it has been narrowed, so that it's no longer necessary to go into the conspiracy angle of it. Now, it is sufficient, we believe, to sustain the Government's case, to sustain that this stock relationship between the du Pont Corporation and General Motors is -- is a combination which exercises an influence by nature of -- of the stock ownership, whereby, trade which would ordinarily go to this firm and that firm on basis of free competition is now channeled to the du Pont Corporation itself. This does not occur because there are specific instructions that the trade should go then. It may not happen all the time, but it happens a great deal of the time and sufficient of the trade has been channeled to du Pont, so that we believe there has been a material restraint on commerce. We are dealing here with -- with giants in the American corporate field. General Motors last year, had gross sales of $12,000,000,000. They had a net profit of over $1,000,000,000 and the dividends that flowed to du Pont amounted to a $135,000,000. Du Pont, on the other hand, is the largest of the American Chemical Corporations. It had sales last year of nearly $2,000,000,000 and profits of about $431,000,000. The magnitude of these corporations is relevant in an antitrust case. Not because size by itself is -- is illegal, but because size carries with it the potentiality of -- of abuse. I like the quotation from Colepeper back in 1640 in the debate on the British Monopoly Law, where he said, “These men, like the frogs of Egypt, have got possession of our dwellings and we have scarce a room free from them. They sup in our cup, they dip in our dish. They sit by our fire.” Now, there's one more point I would like to make before I turn to the facts. There occur -- there reoccurs throughout the briefs of the appellees, the suggestion that this course of business or that course of business, did not hurt General Motors or was for the general benefit of General Motors. Now, I want to be clear that I am not arguing that anything that was done in this situation has hurt General Motors. We are not concerned with -- with whether or not General Motors prospered in spite of or because of this combination. We are concerned here with whether or not there has been free competition. The Congress of the United States has said that, “The rule of our economic life shall be an absence of restraints on trade.” And we are concerned here not with the welfare of -- of General Motors or du Pont but with whether or not this is consistent with the -- the antitrust policy which has been established by Congress. In discussing the facts, I -- I shall try to divide them into three parts. In the first place, I shall discuss the evidence which deals with whether or not du Pont acquired control of General Motors. In the second part, I shall discuss whether or not they had an intent to restrain trade when they made their investment in General Motors. And in the third part, I shall discuss whether or not, this preference in the trade has in fact materialized. This case started back in December of 1917. At that time, the du Pont Corporation had accumulated very large earnings from its munitions business during World War I. The question arose whether these earnings should be distributed to the stockholders or whether they should be retained in the corporation in order that the corporation might maintain its -- its earnings. Now, at this time there were some in the management of -- of the du Pont Corporation who were personally interested in General Motors. Principally, there was Mr. John J. Raskob. He was the treasurer of the du Pont Corporation, and Mr. Pierre S. du Pont, who was at that time president of the du Pont Corporation. They had personal investments in General Motors. The president of General Motors at this time was Mr. William C. Durant. Mr. Durant had put the company together back in 1908, and after some problems with his bankers, he was back in control of the company in 1917. Mr. Durant suggested to Mr. Raskob and Mr. Pierre S. du Pont that the du Pont Corporation or the du Pont, he wasn't too specific about it, form a partnership with Mr. Durant to control General Motors. His thought was that he, Mr. Durant, would remain responsible for the financial affairs of the Corporation, and that the du Ponts should take over the financial responsibility. It was contemplated that du Pont would invest in the neighborhood of $25,000,000 in the stock of General Motors. That was made explicitly clear, that between them, Mr. Durant and Mr. du Pont should -- and the -- and the du Pont Company would control General Motors. I say this because we have, as a primary exhibit in this case, exhibit -- Government Exhibit 124, the material portions, which for this purpose are reprinted at page 9 and 10 of our brief. Mr. Raskob, after hearing Mr. Durant's proposal, prepared a memorandum summarizing the proposal and the effects of the purchases, in order to lay this proposition before the governing committees of the du Pont Corporation, the finance committee and the executive committee. In this memorandum, he summarized -- I appointed -- printed in our brief the -- the summary of the -- of the reasons for purchasing it. On page 9 he says, “Summarizing the above, we have an opportunity to make a substantial investment in the motor industry with the following points in favor thereof. One, with Mr. Durant, we will have joint control of the companies. Two, we are immediately to assume charge and be responsible for the financial operation of the company." Skipping through to page 10, about halfway down where it speaks of management. "Perhaps it is not made clear that the directorates of the motor companies will be chosen by du Pont and Durant. Mr. Durant would be continued as the president of the Company. Mr. P. S. du Pont would be continued as Chairman of the Board, the finance committee will be ours", and by ours, he means du Pont because he's addressing this to the du Pont committee." The finance committee will be ours and we will have such representation on the executive committee as we desire. And it is the writers belief, that ultimately, the du Pont Company will absolutely control and dominate the whole General Motors situation, with the entire approval of Mr. Durant, who I think will eventually place his holdings with us taking his payment, therefore, in some securities mutually satisfactory." The executive committee and the finance committee approved the purchase of this stock on the basis of this memorandum. This memorandum was again read to the Board of Directors itself. This is in December of 1917.And the Board of Directors, having heard this memorandum, also approved the purchase. It went through. They bought 250,000 shares of the stock. It amounted to about 23% of the stock even in those days. Within the next two years they increased their -- their investment to about $48,000,000 and their percentage of control rose to 28%. And pursuant to the agreement with Mr. Durant, the du Pont representatives were elected to the Board of Directors and to the committees, and the partnership became effective. Now, it's about three years after this, in 1920 that Mr. Durant got into trouble by over extending himself on the stock market in supporting General Motors stock. He was in grave danger of -- of bankruptcy. The du Pont Corporation took over, paid off his loans, and took over his stock themselves. Thus, it was late in the -- in 1920 that du Pont became the holder of 38% of the General Motors stock, with an investment of $75,000,000 and Mr. Durant was out of the picture. Mr. Pierre S. du Pont was --
Earl Warren: What was that approximate date, Mr. --
John F . Davis: That was in December of 1920 of -- of January of 1921, and I used the date of December 1920. It's about three years after the original purchase. Mr. Pierre S. du Pont became president of General Motors. Du Pont nominees took a majority of the positions on both the executive committee and the finance committee of General Motors. Now, speaking of the interlocking directorates, which commence back in this time, it's noteworthy to, right in the beginning to notice that Mr. Pierre du Pont, served as Chairman of the Board of both du Pont and General Motors, continually from 1919 until 1929. And when he retired from the Chairmanship of the General Motors Board, his brother, Mr. Lammot du Pont, who was then president of the du Pont Corporation, proceeded to take over as Chairman of the -- of the General Motors Board and he held the position from 1929 until 1937. Now, this isn't the only connection between the two corporations, but when the Chairman of the Board of the Corporation is closely tied in to the du Pont as -- as this situation shows, we -- we don't have really any question but there is a close interlocking of the directorates of the two corporations. It was also during this early period that the man who really bridges the span from the early days to -- to the present days came into the picture, namely, Mr. Alfred P. Sloan. Mr. Alfred P. Sloan was in the General Motors setup before the du Ponts bought in. He had been the president of the United Motors Corporation, which was a manufacturer of automobile parts. And it had been made a part -- and that Corporation had been made a part of General Motors while Mr. Durant was president. Mr. Sloan had come with the corporation and become a vice president of -- vice president of General Motors. But when in 1923, Mr. Pierre S. du Pont decided to step down as president, it was he -- it was he who recommended that his successor should be Mr. Alfred P. Sloan. Now, the court below and the appellees in their briefs, based a good deal of their argument with respect to the independence of General Motors upon the independence of Mr. Sloan. And it seems clear to -- it seems clear that Mr. Sloan was certainly not a yes man in any sense of the word. It's also equally clear, that he was originally picked for his position as Chief Executive by Mr. Pierre S. du Pont himself. Mr. Raskob wrote, we have done a splendid job in electing Alfred, president of General Motors. And within two weeks after he was elected president of General Motors, he was elected the Director of the du Pont Corporation itself. He was richly compensated under the General Motors bonus plans, the allotments of which -- under which were primarily responsibility of -- of du Pont connected personnel. Moreover, Mr. Sloan is the man who in 1926, wrote a letter to Mr. Irenee du Pont, then president of the du Pont Corporation saying, “You must recognize that I am essentially or at least, believe and hope I am, a member of the du Pont family.” I don't mean that Mr. -- Mr. Sloan was a nominee of the -- of the du Pont's. He came up through the management but there's no question that he was placed in his position, rewarded, promoted in his position, and rewarded by the du Ponts. And he -- he could not help but have known and trusted them and have been inclined to -- to favor them whenever a choice arose. As to -- as to actual nominees on the du Pont Board, I'd like to call the Court's attention to appendix B to our main brief, starting at page 154, where we have reprinted a General Motors exhibit, which lists throughout the years the du Pont nominees on the General Motors Board, that generally amount to about six, sometimes only five in later years, five or six directors, specifically nominees of the du Pont Corporation, of the du Pont Company, but one should not be mislead by the terms, management and du Pont, over this list. The fact that a man is listed under the management list, doesn't necessarily mean that he has no connections with the -- with the du Pont Corporation. They list under management, such men as -- as Mr. Brown who appears in several of these lists as a management director, and yet, Mr. Brown was with du Pont long before he was with General Motors. He remained with du Pont after he went to General Motors, and I believe is -- he's now listed as a du Pont representative. These men in the management were in many cases, placed there and promoted by -- by the du Ponts themselves, and one shouldn't think that we have the management as against du Pont. They are really allies rather than opponents. Now, in addition to this situation of interlocking directorates and these committee positions, the committees -- the important committees are also listed in this exhibit. Following, they show the members of the executive committee, the finance committee with the personnel which is involved, so that one can trace the du Pont personnel through the committee setup. In addition to -- to these methods of making control effective, an important feature in securing the loyalty of the General Motors personnel were the bonus plans, which were sponsored by the du Pont Company. The most important of these and the first, was the managers' securities plan, which was initiated shortly after Mr. Pierre S. du Pont left the presidency of the company. He suggested when he left, that there should be a distribution of sale to the executives of General Motors of the stock which du Pont had acquired from Mr. Durant, about $25,000,000 worth of stock which they had taken over at the time they paid his debts. This stock was to be sold on an installment plan to the executives of the General Motors Corporation. It had -- this installment plan of purchase had -- had two benefits. In the first place, it enabled the du Pont Corporation to retain the voting power of the stock until sometime in the mid-1930's. And in the second place, it made it easy for these executives to buy the stock and the -- the profits which they made from this plan are fabulous. We list on page 27 of our brief, a -- a short table which shows how much these executives profited in the -- in the first few years of holding the stock. Mr. Sloan, for example, subscribed to $80,000 worth of stock. This was in 1923 and 1924. By 1926, his stock was worth $2,154,000. And it became even more valuable by 1929. Mr. Raskob, placed the value of $20,000,000 on his stock in 1929. I'm not suggesting that the loyalties of these business executives were for sale, and I'm not suggesting that the people who made these allotments of these bonuses, considered whether or not the directors purchased enough paint and fabric from du Pont. What I am suggesting is that the individuals could not help but be well-disposed towards the people who held their -- who were the source of so much wealth, it -- it's inevitable that they must have -- must have felt kindly towards the du Pont people who were making it possible for them to -- to prosper so -- so extravagantly.
Felix Frankfurter: Mr. Davis, may I ask you without interrupting the flow of your argument whether there was any difference in the purchases from du Pont at -- between these in respect to the period when they held on 22% of the stock (Inaudible)
John F . Davis: I don't think there was any -- any ascertainable difference in -- in the amounts. That's -- it's a hard question to answer, because there were such -- there were such variety from time to time in sales to different divisions of General Motors. I -- I'm going to attempt to sketch what does sales actually were and --
Felix Frankfurter: I knew you were coming to that --
John F . Davis: And I think --
Felix Frankfurter: (Inaudible) at the moment.
John F . Davis: Yes. But I don't think -- I don't myself see any pattern which would make any distinction between the 23% and the 38% or any --
Felix Frankfurter: (Inaudible)
John F . Davis: Well --
Felix Frankfurter: -- (Inaudible) it is significant.
John F . Davis: You see after this general -- after this managers' security plan distribution, their stock fell back to the 23%. So then we would have a question on this control if they lost control then, and if they were using control, then we had accept this -- expect the stock drop in -- in -- as we would have expected a rise perhaps before. There were other subsequent bonus plans after the managers' securities plan. They were also provided very large compensation but not as -- not as fabulous as the first. And always, always the du Pont personnel were in the key position in determining who should get the bonuses. Up to the time of trial, du Pont continued to hold 23% of the General Motors stock. Today it is carried on the du Pont balance sheet at some $700,000,000. So far as the record show, du Pont has always supported the management slate of directors at the stockholders meeting. And that is natural, if we are correct in our -- in our assertion that the management slate and the du Pont slate were one and the same thing. Anyway, there is no other block of stock, which is held in any substantial concentration. Actually, the -- the rest of the stock of General Motors is widely distributed and -- and held by about half a million stockholders. At the stockholders meetings, du Pont has often, more in the early years than now, had often cast more than half of the -- more than a majority of the stock which was represented at the -- at the annual meetings. That is not so of late years. Of late years, it has -- it has cast about 30% of the stock which is cast at the -- at the annual meetings.
Earl Warren: Do you know what the next largest unit to ownership is, percentage-wise?
John F . Davis: No, I don't, Mr. Chief Justice. Although, my -- my thought would be that probably Mr. Sloan's holdings, at least until they were distributed this year was -- were -- were the next largest holdings to -- but that may not be so. I -- he -- he sold about $55,000,000 worth of stock in a public offering in 1956 and I would guess that he was well up in -- into the -- the next highest.
Earl Warren: That will be about one-twelfth of the du Pont ownership? I thought you said $700,000,000 was --
John F . Davis: Well that -- that's the book figure that they carry it on. I -- I -- it -- it has not its market value. I -- no, I can't -- I can't guess -- I can't guess at the proportion.
Stanley Reed: When -- when you speak of the presence of du Pont in the stockholders meeting, does that mean they were there with someone representing then to both?
John F . Davis: That -- that's right.
Stanley Reed: Not a proxy?
John F . Davis: Well, they gave -- well I'm not sure --
Stanley Reed: Well, they -- they must have given proxy to someone --
John F . Davis: That's right.
Stanley Reed: -- if both of you --
John F . Davis: They had an agent there who voted their stock, get them on the stock.
Stanley Reed: And get -- that -- that would be being there, it refers to me that they were there represented by someone who had authority to vote their stock. Well, was that what do they have there, 23% of the stock?
John F . Davis: 23% of the stock.
Stanley Reed: That probably took 50% for a quorum?
John F . Davis: Well, actually the quorum is now 30% in -- in General Motors.
Stanley Reed: (Inaudible)
John F . Davis: It -- it was reduced within a few years ago to 30% and before that I assume it was 50%. I don't recollect.
Stanley Reed: So, they can have -- there could have been other representations there in the last few years besides du Pont?
John F . Davis: That's right. They -- they were in a position for many years to -- if they wanted to, to break a quorum, if they withdrew from the stockholders meeting. There wouldn't have been of a quorum -- a quorum then to vote. There's never been any occasion for this kind of -- of power voting. I mean there's never been a fight in -- in this situation. I don't really know, Mr. Justice Reed, whether they gave their proxy to the -- to the --
Stanley Reed: Well, that -- that would be --
John F . Davis: -- management or not.
Stanley Reed: What I was thinking of -- of proxies from stockholders, other than du Pont, whether they were -- whether you were speaking of actual presence there?
John F . Davis: No, I'm speaking of proxies there that this -- the votes -- the -- the stock which was represented at the meeting.
Stanley Reed: So a great many stockholders didn't even bother to send their proxy?
John F . Davis: Oh, yes, that's -- that's right and they wouldn't unless there was some --
Stanley Reed: I believe you can call fights (Inaudible)
John F . Davis: Yes. Now, we believe that these facts, which I've recited, are the principal facts bearing on the issue of control and it's noteworthy that almost all of them are recited in the findings of the court below. Nevertheless, the court below came out with the conclusion that General Motors did not control -- that Du Pont did not control General Motors. Its findings are on this subject are at page 322 of the -- of the opinion. Otherwise, the pagination of this opinion may confuse you. It's the same pages, which appear on the record. We've just -- so that you don't have the opinions with two separate numbers. When I say 322, that is the number which appears in volume 1 of the record and that's why it appears that way.
Felix Frankfurter: Mr. Davis, did the District Court give its criteria or criterion for determining what constitutes the code?
John F . Davis: Not specifically, Your Honor. It recited many of these facts and then it made this finding at page 322 which may indicate its criteria. It says irrespective of what its position may have been before and during the Durant crisis. Since the 1920's, du Pont has not had and does not today have practical or working control of General Motors. On the basis of all the evidence, the court finds as a fact that du Pont did not and could not conduct itself for the past 25 years as though it were the owner of a majority of the General Motors stock. We believe that this --
Earl Warren: May I ask before you leave -- leave that. When did the control of -- of du Pont cease over the stock that was sold to these various people, their pension plan and so as to get rid of their voting rights.
John F . Davis: It ceased entirely in the mid-1930s, about 1935. It was distributed bit by bit. So until 1930, they held the entire 38%. Then it decreased bit by bit until, I think, it's 1935, maybe 1937. It was sometime in the mid-1930s when all of the management plan stock was distributed.
Earl Warren: Yes.
John F . Davis: It is our -- it is our position that the courts findings on control, show a misconception of the relationship which is necessary to find in order to -- to establish a combination in restraint of trade and maybe the very use of the term control is responsible for -- for that misleading standard. After all, all that is -- is necessary to prove was that the du Pont relationship was such that it influenced, it restrained trade more specifically that it interfered with the normal routes of trade and resulted in it being channeled from competitors to the du Pont Company. Now, that doesn't require that the du Pont Company be in a position to give orders to General Motors.
Stanley Reed: Power to control alone?
John F . Davis: Well, not even power -- I -- I think there was power to control, Your Honor, but I think as a minimum for --
Stanley Reed: Well, assuming there's a power then is that all you have to prove?
John F . Davis: Yes, I think so. But I don't think we have to prove power for general control. I think as a minimum in order to establish the -- the combination and influence with -- a -- a sufficient influence, so that General Motors trade would go -- would go to the du Pont Corporation. Maybe it wouldn't -- maybe it wouldn't be a general power. Maybe it would just be that it would influence trade in the majority of cases.
Stanley Reed: Have a tendency to do it?
John F . Davis: Have a tendency to do it. There's --
Felix Frankfurter: But aren't you -- you've -- you've indicated to me at least that -- that you think argumentation, discussion about the concept to control is a confusing factor in this -- as a factor in the equation.
John F . Davis: Yes, I think --
Felix Frankfurter: We're going to talk about control as such, using that's an irrelevant discussion and confusing the term, is that right?
John F . Davis: I think that's right, unless --
Felix Frankfurter: I think --
John F . Davis: -- it's -- it's a shorthand way of defining an inside influence and it's been used as control throughout and that's why I use it, but I think it is not control in the generally accepted sense. I don't think it is necessary to prove its control in the generally accepted sense.
William O. Douglas: What is the generally accepted sense?
John F . Davis: Control in the generally accepted sense would mean that they have the power if they wish to give orders to the -- to the officers of -- of General Motors. I would think, Mr. Justice Douglas, that we've come closer here to what the Utility Holding Company Act would call an absence of arm's length bargaining, which is the -- which is the standard which is used in addition to -- to control in -- in the Utility Holding Company Act. And if you'll remember the -- the standard for an absence of arm's length bargaining, which is the rule of thumb, is a 5% ownership rather than the -- the 10% ownership which is used as a rule of thumb for control.
Felix Frankfurter: But you indicated the rule earlier that the dominant -- you gave me the impression. The dominant fact in the situation as you organize it is that General Motors should be predisposed that just to the human fact they would be predisposed in favor of du Pont as against other sellers?
John F . Davis: Yes, that is right.
Felix Frankfurter: And if that is so, that has nothing to do with control because that predisposition isn't due to -- is derived from buyers rather than pressure from the sellers, if -- if you can separate the two it --
John F . Davis: Well --
Felix Frankfurter: -- it -- it derives in the relationship of the parties not because one can exert some authority.
John F . Davis: Well, if Your Honor please --
Felix Frankfurter: Did you say if -- if exertion of authority is involved, then you do have control or part of the control. If you mean the natural predisposition of people who are linked together to favor their friends, that's a different story.
John F . Davis: Well, in the corporate -- in -- in corporate relationships today, one rarely has absolute power in these cases.
Felix Frankfurter: Right.
John F . Davis: And if one gets into a -- into a proxy fight and is on the wrong side, he can -- he can lose a -- a proxy fight even though he has more stock than the other because there is always the big floating supply of stock in the hands of the general public. So that actually in the terms of corporate control as -- as has been before this Court in the Holding Company Act cases and others, we're talking about historic relationships about the -- not about people giving orders but about --
Felix Frankfurter: In this case?
John F . Davis: In this -- in this case, we're not talking --
Felix Frankfurter: In -- in the Holding Company Act, one does -- one does have to be considered with the concept control, doesn't it?
John F . Davis: But they used the term control, but again as they say the test isn't whether you can win at the proxy fight.
Felix Frankfurter: I understand that. I'm not suggesting. I'm saying -- I'm talking about the idea with which I have to wrestle.
John F . Davis: Yes.
Felix Frankfurter: In the Holding Company Act, I have to wrestle with the idea of control. That's in the statute.
John F . Davis: That's right. There is no such term in the statute. You're quite right. The question is whether or not this sort of relationship, whether whatever it is, is a combination which results in a restraint in trade. That is our question and I think that is not faced up -- faced up to by the court below. I think that they were thinking of control in a more arbitrary sense.
Stanley Reed: Now, when you use the word combination, does that mean that there's a combination here between General Motors and du Pont?Perhaps you're going to take up --
John F . Davis: No, well, I -- well, (Voice Overlap) --
Stanley Reed: (Voice Overlap) been discussing only facts. I don't want to bring in the (Inaudible).
John F . Davis: Well, I'll be glad to discuss that now because --
Stanley Reed: Well, don't -- don't do it if it interrupts you.
John F . Davis: No, it doesn't because I think this is the time that it should be made clear. By combination, I mean in the sense of this argument. I mean specifically a stock -- a -- an intercorporate relationship, not an agreement but this entire stock relationship is what I call a combination. And --
Stanley Reed: If -- if I -- well if du Pont buys the stock with General Motors, that makes a combination?
John F . Davis: That certainly would make a combination, whether it's a combination in restraint of trade, I don't know but --
Stanley Reed: It -- it doesn't have a -- the sense of an agreement between two?
John F . Davis: That is right. That is the sense I'm using combination.
Stanley Reed: And -- and, of course, the word combination --
Felix Frankfurter: To what sense?
Stanley Reed: -- appears in this Act. So you're not using it at -- in a sense, that you're using it in the sense of -- as though it were a conspiracy, combination conspiracy in restraint of trade?
John F . Davis: I'm using it as an alternative.
Stanley Reed: Of the contract?
John F . Davis: As -- yes, I mean notably alternative.
Stanley Reed: Is there a contract here?
John F . Davis: There is no contract here. We tried to prove a --
Stanley Reed: I understand there's no conspiracy (Inaudible)
John F . Davis: That's right and there is no -- at least as far as the argument in this case goes, there is no such.
Stanley Reed: Yes, yes. No -- no contract and no conspiracy?
John F . Davis: I -- I want to throw out and I could have a win with it, there may have been sorts of contracts and conspiracy. I'm -- I'm not conceding that there weren't but I'm not arguing them here.
Stanley Reed: Mr. Davis, the -- of what -- then or do you rely on, too, to the attempt to monopolize?
John F . Davis: Yes, I do. That is the second point that as we come to the intent of -- under which they -- they inquired (Voice Overlap) --
Stanley Reed: (Voice Overlap) -- at this part your argument you're directing yourself to (Inaudible) combination?
John F . Davis: To the combination and I've completed that part of my argument. I was now going to turn to intent.
William J. Brennan, Jr.: I was wondering if you're suggesting this. That the relationship is one by reason of which General Motors would not think ordinarily of buying from someone else what can be purchased from du Pont, not because under any instructions only to buy from du Pont but because of the situation between the two companies, the ordinary impulse would be to get from du Pont what can be purchased from du Pont.
John F . Davis: Yes, that's -- that's the minimum position. I think there must be more than that here. I think --
William J. Brennan, Jr.: Well, if that's the minimum, are you suggesting that if the record supports that much then necessarily not a conspiracy for combination in the sense intended by the statute has been true --
John F . Davis: Yes --
William J. Brennan, Jr.: -- which has held as the consequences which you suggest it does --
John F . Davis: Or was done with the intent. There are two angles, if it was done with the intent which I shall now try to -- to (Voice Overlap) --
William J. Brennan, Jr.: Well now then you are going beyond to suggest to us that Government doesn't establish a case without also establishing intent?
John F . Davis: Yes.
Stanley Reed: Before we -- before we leave the first section of combination, what -- what do you say in your brief as to the -- whether any such interpretation has ever been placed on the word combination.
John F . Davis: Well, I call attention merely to the -- to the stockholding cases where there are a series of cases where a control -- actually in these cases they're not as then a control or as this type of control but there is the early railroad cases and some of the others speak of stock relationship that is being a combination. Now, the question before this Court is whether this particular relationship is that kind of a combination and then it's our argument that it is but there's no authority on this Court that this stock cups out of a -- in a corporate relationship is a combination.
Stanley Reed: No -- no such authority.
John F . Davis: The closest we come to it is -- well, I don't think we come close -- very close to it and this Court in calling the antitrust provision.
Felix Frankfurter: You mean by -- you mean by combination, I'm not talking about the combination in history isn't enough to have a combination.
John F . Davis: That's right.
Felix Frankfurter: It must be in restraint of trade.
John F . Davis: But -- but just combination.
Felix Frankfurter: Just combination. Do you mean anymore to that conscious joinder of action?
John F . Davis: Well, Mr. Justice Frankfurter, that sounds like a consensual arrangement and I don't mean --
Felix Frankfurter: I didn't mean consensual. I mean two people acting and both knowing that they're acting rather than somebody being in a (Inaudible)
John F . Davis: That -- well, that's what I mean.
Felix Frankfurter: (Inaudible)
John F . Davis: That's what I mean.
Felix Frankfurter: As against conspiracy?
John F . Davis: That is right.
Felix Frankfurter: To people knowing what they're about, acting together. Is there any more than that?
John F . Davis: It -- it -- it's in the same nature. It takes the place. Maybe if -- if you put beside conspiracy which is in agreement or a contract which is a form of it it's -- it's a means by which you restrain trade. It's a -- it's a joining together of two people, a combination, a joining together of the two people in a way which restrains trade.
Felix Frankfurter: Congress used different terms and I should myself find there's nothing difficult to think a combination is not -- is not a means of conspiracy nor synonymous with a contract.
John F . Davis: Well, they think it used all these terms in the broadest possible sense. The antitrust laws were -- were drafted with an idea that they would -- would be given a -- a broad construction like the Constitution and the question is to apply them to -- to economic conditions as they occur.
Stanley Reed: Combination would be like the foreign products were used (Inaudible) the companies that manufacture foreign products for instance?
John F . Davis: Well, in most of those -- I think in that case, you also have -- you have a conspiracy. You have like the --
Stanley Reed: But even if you have --
John F . Davis: In many of the cases you have both --
Stanley Reed: It never had the putting together of -- of all of the manufacturing process as we assume they're shipping.
John F . Davis: Those -- those are -- are by and large -- well, I don't know but they -- they generally talk -- talk also in terms of conspiracy, Your Honor. I -- I -- the early railroad cases, I -- I referred in my reply brief to some of the cases which I think are the -- are the straight combination cases. Sometime later in the argument I'll try and -- and call to you and eventually --
Stanley Reed: No, no. I'm really worried about restraint of trade, I think --
John F . Davis: I think -- I think that may be so. We -- we come to the second question and that is the intent with which du Pont purchased this interest in -- in General Motors. And this is important because there's nothing illegal per se in -- in one corporation controlling another. It is only when that relationship is used as an instrument to affect an illegal restraint or where it is intended to effect an illegal restraint and it falls outside the law. Now obviously, there's some artificiality in talking about the intent of a corporation. A corporation has no mind of its own and -- and so strictly speaking the corporation as such doesn't intend anything. But what we are talking about is the -- really the collective intention of -- of the Board of Directors which directed and authorized this purchase. And the Board of Directors in this case acted upon the recommendation of the two important committees, the Finance Committee and the Executive Committee. Now, there's no transcript of the discussion which took place in those committees, I don't suppose any was made at the time. Necessarily, the recollection of those who were present was dimmed by the passage of some 35 years but fortunately the record in this case provides us with the memorandum, the -- the prospectors -- prospectors as it were, which Mr. Rascob laid before the committees when they acted upon this matter. This is committee -- the Government Exhibit 124 which I referred to a few minutes ago and I refer to it again because I think that this is very nearly conclusive on what the intent of the corporation was at the time it made its investment. Mr. Rascob prepared this memorandum and it was reviewed by Mr. Pierre S. du Pont before it went to the committee. And then it had to be summarized -- the reasons for making the purchase and he summarized them as follows. Summarizing the above, we have an opportunity to make a substantial investment in the motor industry with the following points in favor thereof.
William J. Brennan, Jr.: Where are you reading from?
John F . Davis: I'm reading from page 9 of our brief, Mr. Justice Brennan. The following points in favor thereof and then I turn to point five. "Our interest in the General Motors Company will undoubtedly secure for us the entire Fabrikoid, Pyralin paint and varnish business of those companies, which is a substantial factor." The -- the court below in referring to this memorandum said this is a forecast by Mr. Rascob, he thought that this would happen but that doesn't show anything about intent. Well, I respectfully suggest to the Court that when the governing Boards of du Pont voted on a proposition, it was laid before them in writing and one of the purposes, one of the aims of making the purchases set out to obtain this business there's more than a forecast. It is in that case that it is a proposition. They -- they were voting on whether or not they wished to buy the stock in order to acquire this business and they voted in favor of buying the stock. And when they reported to their stockholders in 1917 and 1918, they made reference to the fact that they had purchased the stock. In their reports to the stockholders, they called to their attention that the General Motors Corporation and du Pont -- the General Motors Corporation did a big business in the -- in the products which du Pont manufactured. I think this -- these prospectors if you please, on what they were doing in 1917 is much more important than the present recollection of the -- of the people who were there. Mr. Pierre S. du Pont and Mr. Irenee du Pont testified during the trial and they said that as far they were concerned, they didn't think about the trade at the time they purchased the stock. They said that they didn't remember that there was any discussion of the trade at the -- and before the meetings. Well I don't -- I don't question -- I don't question their honesty in this mistake. I -- I think -- I do suggest that 35 years may dim memory but whether or not they're entirely honest on it, still it seems to me that the written record, the contemporaneous record which was made at the time after the purchase of -- of the -- of purpose of the purchase is more important than present recollection. And I suggest to the Court that as far as the intent of the purchase we can rest our case entirely on -- on Government Exhibit 124.
William J. Brennan, Jr.: Will there be anything else that you rest tonight?
John F . Davis: The reports to the -- I've -- I -- well, yes there is more but it's tied in also with the restraints. We will find as we talk about what happened in the sales, that there was an exercise of -- of influence that they -- that they used -- used their position in order to get the -- the purchases which in turn must relate back to the what their intent was at the time they made the purchase. This is all I have as to the intent at the time.
William J. Brennan, Jr.: And all that you have as to intent otherwise is the subsequent conduct?
John F . Davis: That's right.
William J. Brennan, Jr.: In the --
John F . Davis: Subsequent conduct I think confirms this. I -- I say not only this -- this memo but also the reports of the stockholders which I mentioned --
William J. Brennan, Jr.: Well, do I gather also, Mr. Davis, that if this in combination with the conduct doesn't support a finding of intent then the Government's case fails?
John F . Davis: Well, yes, unless -- and the Government's case has three legs. It has one, the -- the power to exercise restraint, control whenever we want it. It has the intent and it has the question of whether restraints have been imposed. I think that the third leg of this triangle can be implied from either of the other two. If we prove a power to control -- power to restrain and if we prove actual restraints, I think we can imply from those two an intent to restrain. If on the other hand we prove a power to restrain plus an intent to restrain, the Courts have said that it is then unnecessary to -- to prove actual restraints. The three -- the three legs support each other and insofar as they are consistent, they support the Government's case if one is weak, it weakens the Government's case.
Felix Frankfurter: It's supposes your record actual does in fact as between had bid done on General Motors had a bid done (Inaudible) they needed. And in fact so far as the record shows the quality of the goods to the various bidders was equal and in fact a more or less (Inaudible) higher bid of the du Pont against XYZ suppose we have that in the record or will pressing around that he loses his real intent?
John F . Davis: No, if I had a stronger case as that by --
Felix Frankfurter: But I'm not saying -- I'm not saying if you haven't got it, you haven't got intent.
John F . Davis: I --
Felix Frankfurter: All I'm saying is that -- that --
John F . Davis: I don't --
Felix Frankfurter: -- to prove restraint you need to worry about intent. If you don't prove restraint, I mean, de facto, then -- then you've got a problem.
John F . Davis: Well, it's difficult.
Felix Frankfurter: I'm not saying you haven't got in this a problem --
John F . Davis: Yes.
Felix Frankfurter: -- good answer but you even got a different problem.
John F . Davis: Here we do if -- I think -- we think that the record does show restraints, not -- and -- and we think that that supports the idea there was an intent to restrain and that is the third part of the argument to which I am coming now is to show what the dealings have been in the years since -- while this control has been in effect.
Felix Frankfurter: I'm merely suggesting that the subject for this thing called intent, it isn't mens rea is it?
John F . Davis: No, it is not mens rea.
Felix Frankfurter: All right.
John F . Davis: It certainly isn't. It's a question of -- and I think I should be clear on that, too. That I'm not sure there was -- I don't believe there was ever any guilty feeling on the part of the du Pont Corporation in -- in this case. I'm sure they thought what they were doing was for their benefit, was for the benefit of the -- of the General Motors Corporation and if you please, for the benefit of the United States. I -- I don't have any idea of accusing --
Felix Frankfurter: We're on the brink of (Inaudible) [Laughter]
John F . Davis: I won't make it more -- more definite.
William J. Brennan, Jr.: There's nothing -- I take it there's nothing in the record that shows any over direction that you do by du Pont, there's nothing in that?
John F . Davis: Yes, there is some evidence of that. It's mostly in the early days but there is -- there is some evidence of -- of an attempt to use direct pressure from the stock interest to buy and I -- I'll -- I'll mention something that I was going to mention a little later. Early in the -- early in the relationship in the 1920s, a memorandum was prepared for Pierre S. du Pont as to what the different divisions of General Motors were buying of the du Pont products and it appeared from this memorandum that the Fisher Body people were not buying as large a percentage of -- of products from du Pont as the others.
William J. Brennan, Jr.: A subsidiary of General Motors?
John F . Davis: Yes, but they were a subsidiary of General Motors. But the interesting thing is that when they were acquired the -- they were -- it was a separate corporation run by the Fisher brothers themselves and there was originally a voting trust setup, so that after the majority stock control went over to General Motors, under the voting trust, the Fisher brothers retained the authority to run their own show. They were kept in management and they -- even after voting trust stopped, the Fisher brothers, who would run the Fisher Body rights from the beginning were -- were very independent out of people. They didn't take orders from anybody. Well, as a result we find that sales to Fisher Body were falling far below sales to the other divisions in the -- in the General Motors setup. And this was brought to the attention of Pierre du Pont and he said -- wrote to his brother, I think it was to Mr. Lammot du Pont and said, “We better go after this business.” And in the record and it's referred to in -- in our brief, there were least two letters written by Mr. Lammot du Pont to the Fisher brothers in which he said, “In view of our stock interest, in view of the relationships between the company, the du Pont company and General Motors, it would seem that you should be buying more of our product." Now, that's -- I mean that isn't any statement you must or any indication you should buy all or anything like that, but it is the kind of thing which I refer to as showing that they use the stock relationship, the combination as a device for -- for getting trade.
William J. Brennan, Jr.: You mean the subtle way of saying (Inaudible)
John F . Davis: We -- yes. The -- the appellees -- the appellees would have us believe that the relationships between General Motors and the du Pont Corporation are precisely the same as they are between General Motors and any other supplier or du Pont and any other supplier. And I think that's an impossible conclusion from this record. There -- there is a difference in the relationship between du Pont and --and General Motors, and -- and those companies and others. The question before this Court is whether there is enough special about that relationship, whether the relationship is strong enough or extensive enough, whether it diverts enough trade to -- to du Pont to constitute a violation of the Antitrust Law. But it seems to us transparent on the face of this record that there is something special in this relationship.
Felix Frankfurter: Suppose -- suppose one could say unequivocally that the record show this last thing you mentioned that there was no difference overwhelming the extent there was no difference between du Pont and other suppliers of General Motors. Suppose in the record there wasn't a -- applied things to contradict that conclusion, would you say that --
John F . Davis: I --
Felix Frankfurter: -- nevertheless, that's immaterial because the -- in view of the relationship of the parties that the restraint, inherent?
John F . Davis: I don't think I could, Your Honor. I think that if there was 35 years of this relationship there hadn't been some evidence of restraint that I would have to conclude that I was wrong either in the power to restrain or the intent to restrain. That one of those two was wrong if -- if during all this period that -- if suppose they'd been -- take the extreme case. Suppose there'd never been a sale from any commercial transaction between General Motors and du Pont. It would seem perfectly clear then there was no restraint on trade, unless it was a restraint on du Pont's trade to General Motors, which --
Felix Frankfurter: Well, unless that if you actually had 52% ownership, then -- then your -- talk about control we had some (Inaudible) there, wouldn't it? I don't mean to say it hasn't now, but have we? Then you -- you could really stand here and argue that the mere fact that they didn't exercise the title of power before (Voice Overlap) --
John F . Davis: Well --
Felix Frankfurter: Not unless, you got a combination?
John F . Davis: I would have -- I -- I think not, Your Honor.
Felix Frankfurter: No.
John F . Davis: I think if you had 52%, I would still have to prove either an intent to control. I think there's nothing wrong in -- in --
Felix Frankfurter: That you started out with that the mere ownership of stock.
John F . Davis: That's right.
Felix Frankfurter: One corporation and another, no matter how (Inaudible) the ownership.
John F . Davis: Even if it's 52%, if there's not an attempt to restrain trade through it.
Felix Frankfurter: And even though you had interlocking directors?
John F . Davis: There is --
Felix Frankfurter: In other words --
John F . Davis: There is -- there is one -- one caveat on that. It is possible that by getting 52%, even though they desired not to restrain trade, the relationship was such that they have to be presumed to desire the natural consequences of their act and so even though du Pont wrote to General Motors, “Don't buy from us, buy from everybody else.” That they would know that the -- the relationship was such that du Pont could do nothing else.
Felix Frankfurter: It won't have a problem under the Clayton Act, anybody?
John F . Davis: Yes, you'll have problem under Clayton Act. The appellees concede and I think it's a matter of understatement that du Pont has sold substantial quantities of materials to General Motors. I think it -- I think the easiest way to -- to analyze the relationship is that du Pont has always been and still is the largest single supplier of fabrics and paint, antifreeze too, which General Motors has had in good years and bad since they acquired this interest. For 35 years, du Pont has been dependent upon General Motors for the backbone of its automotive business. In the last year, which is covered by the record, du Pont sold to General Motors $30,000,000 worth of -- of these products and in view of the expanded automobile production in recent years, we can assume that figure may be well under what it is since the record was closed.
William O. Douglas: Is it 30,000,000 --
John F . Davis: $30,000,000.
William O. Douglas: Gross sales?
John F . Davis: Gross sales.
William O. Douglas: Did you suggest earlier that du Pont's gross sales were some 2,000,000,000 a year?
John F . Davis: Yes, that's right.
William O. Douglas: And that is all of its --
John F . Davis: That is right.
William O. Douglas: -- all its products?
John F . Davis: Of all its products.
William O. Douglas: This is 30,000,000 out of 2,000,000,000?
John F . Davis: That is right. I overstated its sales a little. It's 1,900,000 in -- in 1955. It would not be fair to assert that the entire amount of this $30,000,000 of sales is directly attributable to -- to a controlled situation. It's hard to draw the line to say what portion of it would have gone to General Motors, would have gone to du Pont without the -- without the corporate relationship.
William O. Douglas: Excuse me, Mr. Davis, do we also have the figure of the volume of purchases from other suppliers of du Pont, on those same products?
John F . Davis: Yes, we do.
William O. Douglas: (Inaudible)
John F . Davis: We -- we do and I -- I think I can give them to you. In recent years of fabrics and by that we mean largely artificial leathers since du Pont doesn't deal in the part fabrics, the woven fabrics. But artificial leather, I believe they've have sold 40% to 50% of General Motors requirements in recent years and as to paint, it has sold between 70% and 71% of General Motors automotive -- of General Motors requirements of those products which du Pont sells them.
Hugo L. Black: Do you have figures as to sales to other automobile companies on that manufacturing --
John F . Davis: By du Pont?
Hugo L. Black: Yes.
John F . Davis: Yes, I did that, too About 80% of du Pont's sales of fabrics go to General Motors, in -- in -- this is in recent years. That's not back in the early years. About 80% of du Pont sales of products have been going to General Motors and about 93% of its sale of paints have been going to General Motors. In other words, General Motors which manufactures or during the period involved here, manufactured about 40% to 45% of the automobile's manufacturing, was buying 93% of du Pont's production of paint.
Hugo L. Black: You -- and you do not have the direct amount of sales to afford another automobile manufacturer?
John F . Davis: No, I don't have the -- I don't have the dollar figures.
Hugo L. Black: You reached it by showing that a major portion of du Pont sales went to General Motors, is that it?
John F . Davis: Well, more than the major portion --
Hugo L. Black: Yes.
John F . Davis: -- of the figures.
Hugo L. Black: (Voice Overlap)
John F . Davis: What I -- I think those figures are very significant, too. Du Pont attempted to sell its -- its products, its -- its paint and its fabrics to the entire automotive industry. They were outstandingly successful in selling it to only one branch of the industry. In other words, they sold, as I said about 80% of their fabrics and about 93% of their paint to one branch of the industry, namely, General Motors. Now, the question is why does that -- why does that happen? Now, there may be a number of reasons but it's certainly consistent and it supports our view that the stock relationship had something to do with it, that there was -- that the stock ownership and the company that bought such a large portion of their goods from du Pont, coincide.
Felix Frankfurter: I knew that the findings as yet I don't really have to (Inaudible) What did the District Court say about that if any?
John F . Davis: The District Court draws no conclusion about that. I think it says at one period that they sold --
Felix Frankfurter: I don't think (Voice Overlap) --
John F . Davis: I've got to check on the findings, I'm --
Felix Frankfurter: I have --
John F . Davis: -- not sure.
Felix Frankfurter: -- I didn't to the question, the accuracy of your findings. And I wondered if the District Court thought about the relevant facts to deal with.
John F . Davis: If -- if they advert a little attention to it. There -- there is some reference to -- to sales report in it and I'll have to check, Your Honor, that I may be able to do it at lunch or something but --
Felix Frankfurter: As you said not only this -- not only did they sell this 5% of -- of these lead outputs to the General Motors. But you -- I think I heard you say, they tried to sell them to others?
John F . Davis: Oh, yes. The record shows that there was (Voice Overlap) --
Felix Frankfurter: (Inaudible) was that there was something in the situation that disabled them from getting that market but they did get the market in which they had this relationship?
John F . Davis: Yes -- I -- I --
Felix Frankfurter: Is that right?
John F . Davis: I think that is right and I think one type -- one line of produce helps us to understand this picture. Now, I'd like to mention the -- the sales of Duco, a particular type of paint which was developed by du Pont in -- in the 1920s. At the -- at the time du Pont developed Duco, a trade name, D-U-C-O the finishing of automobiles was very different than it is today. They were painted and then they were varnished and rubbed down and it took days, weeks for them to dry and it was a very arduous process to -- to finish the automobiles and the -- and the industry was crying for a new and a better finish. Du Pont developed Duco, which is a -- a quick-drying lacquer, nitrocellulose lacquer, and this -- this product was something that -- that had never been used on automobiles before. Everybody wanted it. There was no question then about du Pont selling to General Motors or anybody else. Say anybody, anyone on manufacturing an automobile was anxious to get hold of Duco because competitively they were out of it if they didn't. And so for a few years after they manufactured Duco, sales were made throughout the industry. Then other paint manufacturers began to manufacture the same kind of -- of finish. What happened? Du Pont retained its General Motors business in Duco. Still has it. Chevrolet, Buick, Pontiac use Duco almost entirely today. But their sales to the other companies as soon as competitive products were on the market fell off. So that -- as I have mentioned a minute ago, today 93% of the -- of the paint sales and a large part of that is Duco. 93% go to the General Motors cars.
Hugo L. Black: What happened during the sales, during the period when Duco was scarce and hard to get was there any different then?
John F . Davis: I -- you mean that --
Hugo L. Black: (Voice Overlap)
John F . Davis: -- they favored General Motors?
Hugo L. Black: Yes.
John F . Davis: No, I don't think they did. It started out on Pontiac. Pontiac was the first company to use it. And Pontiac probably had used it more than anybody else because they were the first customer. Actually, General Motors asked du Pont. They said, "Can have an exclusive on -- on this Duco product?" And du Pont said, they didn't think it would work well that other competitors would come into the field if it were done that way and that they preferred to sell to the industry generally and they refused to give an exclusive right to General Motors to buy them, to buy product. I don't know that that proves anything one way or the other, but I mean that's specifically what happened.
Stanley Reed: Do you happen to have figures of the total purchases of General Motors, all lines still?
John F . Davis: No, I think you'd have to get a cost of -- maybe I could get a cost of fail -- it's not good
Stanley Reed: It's not important if you don't have it right (Inaudible)
John F . Davis: I'm afraid I don't have the figures. It'd be perfectly huge. However, because they're gross sales, as I -- as I mentioned it was 12 -- $12,000,000,000 and -- and so their cost of sales, I don't know what it would be but it would be --
Stanley Reed: (Voice Overlap) -- varnish and chemicals is very small (Inaudible)
Hugo L. Black: I must have misunderstood you. I -- I didn't understand you did rather say that -- that General Motors never was 93% of the output of Duco?
John F . Davis: I -- I say that General Motors takes 93% of du Pont's production of paints, automotive paints and that that is largely Duco. Oh, and let me correct that and say if it goes in the record and in 1947 or 1948, I don't know what it is at the present time. Those are the last figures in the record.
William J. Brennan, Jr.: In the fabrics field, Mr. Davis, did you say that there are woven fabrics which compete with the du Pont fabric (Inaudible)
John F . Davis: No, I didn't mean to give the impression that they compete. They used but what I merely meant to say was that the fabrics is a more limited field because most of the upholstery in cars is made of a substance, which du Pont doesn't sell and the artificial leather, which is used for trim and things like that, isn't generally used for the general upholstery of cars.
William J. Brennan, Jr.: Well, what I was trying to get at, whether -- was whether there had been any decline in the purchases of the du Pont type of fabric with the introduction of these newer types of fabric.
John F . Davis: Yes, in the early -- in the early days of the automobile industry, there was much more use for du Pont products before the steel top on the car, there was an -- a -- a top, a fabric top which was used on -- on even closed cars. The window curtains and other -- other fabrics in the cars were, a much larger percentage of them whether the kind that du Pont manufactured in the early days than -- than it is sold now. I want to make reference to two transactions, two courses of business which I think illustrate the -- the business relationships between these two companies. The first one is in money, isn't very important, but I think it's extremely revealing. In 1925, the du Pont Company acquired the Kentucky Alcohol Corporation, the manufacturer of alcohol. And thereupon, a du Pont vice president wrote to Mr. Alfred D. Sloan, who was president of General Motors and he mentioned the acquisition of this alcohol company by the du Pont Company. Then he mentioned the current dispute which was -- had arisen about whether alcohol or glycerine was the preferable mixture to be used as an antifreeze in -- in automobile radiators. And he wrote as follows, and I quote his letter, "The Kentucky Alcohol Corporation inquires whether the General Motors Corporation is giving their official approval to publicity, favoring glycerine rather than alcohol. If so, it is suggested that their attention be called to the interest which the du Pont Company will have in the future in its manufacture and sale." Mr. Sloan wrote back and he said, "We can't take sides in a matter like this as to which is the best product to be used. We have to go upon the facts." Nevertheless, there were three of the divisions of -- of General Motors, Chevrolet, Buick and Cadillac, which were all recommending glycerine as an antifreeze in their instruction books. And all three of these companies -- well, two of them began to recommend alcohol and the other took a neutral position. And the important thing about this is that at the very time they took this position, the research people in General Motors were firmly of the position that Prestone was the preferable antifreeze.
Earl Warren: That was glycerine?
John F . Davis: Glycerine, it was a glycerine combination. At the -- there's in -- in -- referred to in my brief, there are a series of letters on this. The way it ends up is that Mr. Sloan said -- said, "We've decided to follow up policy. What we'll do is to include in our instruction books a fair statement as to, which to you, as to the advantages of each" and the fair statement was like this, "Alcohol is -- is cheaper but if it's spilled on -- on the surface, on the -- on the finish, it will mark it. Glycerine is more expensive and if used strictly in accord with the manufacture's instructions, it is satisfactory. But if -- if the connections aren't tight, it will eat out the engine and it may clog the radiator. And this at the time that General Motors was itself using solely glycerine in its cars. As I say, money-wise, it isn't important but from a point of view of showing the -- the influence of a stock relationship in this kind of a business, I think it is highly significant. Far more significant in terms of money is the lead, the tetraethyl lead picture. Lead is a compound which -- tetraethyl lead is a compound, which today is added to gasoline to improve its performance in internal combustion engines. The discovery of this substance was made by two General Motors inventors, a Dr. Midgley and Mr. Kettering. It'd be hard to overemphasize the importance of this discovery at the time it was made. It was immediately recognized by both du Pont and General Motors that the addition of lead to the gasoline would tremendously improve its performance and it was a very important thing in the automobile industry. Now, du Pont had no facilities at this time for manufacturing tetraethyl lead. Nobody had manufactured tetraethyl lead up to that time. It was a -- it was a laboratory product. It's interesting the -- the extreme informality which -- with which this invention was turned over for development by General Motors to du Pont. The first manufactured by du Pont for General Motors was done without any contract at all. Later on, a formal contract was made. Now, the court below found that Mr. Kettering was responsible for bringing du Pont into the picture and some emphasis was placed on the point of view that Mr. Kettering had no -- no allegiance to du Pont. Well, actually, of course, it was far too important a matter for Mr. Kettering himself to decide and the records shows that Mr. Sloan certainly participated in it. And the final contract, the contract which turned the development of this tremendously important substance over to du Pont was signed by Mr. Pierre S. du Pont for General Motors and Mr. Irenee du Pont for the du Pont Corporation. And du Pont proceeded thereupon to be the sole manufacturer of tetraethyl lead for distribution through what was called the Ethyl Corporation. Now, the Ethyl Corporation was formed by a combination of Standard Oil Company of New Jersey, which had had a patent for the manufacture of this material which was much cheaper than the way du Pont had done it and General Motors. They each owned -- Standard Oil of New Jersey and General Motors each owned one-half of the stock of this distributing corporation and they bought all of their lead from du Pont. General -- Standard of New Jersey was quite anxious in the early days to get into the production of this material. It's interesting that Mr. Sloan for General Motors and the du Ponts stood firm against letting any competition in on -- on the production. Now, it's asserted that this was a dangerous product and indeed it was dangerous product, and that only -- and that only du Pont who was accustomed to handling dangerous things could -- could do it. And to support this -- this view with the appellees point to the fact that Standard Oil had a pilot plant and that eight people were -- eight people were killed through lead poisoning, through their experimentation. What they don't point out is that the only way to learn how to manufacture this stuff was by manufacturing it and that a larger number of people were actually -- contracted lead poisoning and died in the -- in the du Pont manufacture than did the in the Standard Oil. Anyway, throughout the years, until the patents ran out, the exclusive manufacturer of this material was the du Pont Corporation. And they made in all, $86,000,000 in gross sales of -- of tetraethyl lead to -- to the Ethyl Corporation. Perhaps, it was good business for General Motors to turn the manufacture of this over to a chemical company and very likely du Pont was well equipped to -- to do this manufacturing for them. But the important thing in this picture is not that they did it but the way almost automatically happened and the way the -- the parties assumed that this -- this was in du Pont's field and no one else should -- should stand in the way. At one time, Mr. Sloan wrote -- put in writing this statement, du Pont will always be the manufacturing agents of Ethyl Gasoline Corporation, whether we make tetraethyl lead or whatever we make, now or in the future.
Felix Frankfurter: Is that in any of the record during the case that there were in fact other chemicals concerned equally well equipped to use it?
John F . Davis: Well, there was nobody that was equipped to do this at the time they took it over. That's the truth of the matter. There is some evidence that --
Felix Frankfurter: Nobody including du Pont could use it?
John F . Davis: Well, du Pont had to learn it as I -- as I point out they had to --
Felix Frankfurter: Is there anybody else equally equipped to learn it?
John F . Davis: Well, I -- I think there's no one --
Felix Frankfurter: And I'm -- I'm not -- I was just wondering (Inaudible) the record about this.
John F . Davis: There -- there is some -- there is something in the record to indicate that later on, other chemical companies thought a way from doing it after du Pont against -- against our view. After du Pont had been manufacturing this for a series of years and after the -- the accidents occurred, there was an attempt to -- to get a -- it wasn't really by the du Pont Company but the president of -- of the Ethyl Company thought that he should negotiate to see if he could get a second source of supply. Now, there's no indication that du Pont would have gone along with this if it had been successful and he approached one or two other chemical companies attempting to see whether they would be interested in providing this themselves. Nothing happened. They -- they said that they didn't want to do it, that it was too dangerous or something. So, there was maybe even some indication that at that stage, anyway, no other companies were willing to -- willing to step into the picture. But in the beginning -- in the beginning, when it was important, there was no -- no one had any particular competence in that field. That I think completes in large part my analysis of the facts. I don't think -- I think I would prefer rather than discussing the law at this time, since I think -- once we have these facts, once we have or if we have, maybe I should say. If we have a situation where you have the combination entered into with intent and the resulting restraints, I think the application of a lot of the picture gives relatively little difficulty. There are problems, legal problems which are discussed in our briefs in which I'd be glad to discuss if they're brought up later on, but I think I would prefer to retain the rest of my time for reply rather than going into them at the present time.
Felix Frankfurter: Would you mind taking enough time to summarize what -- they have escaped my ear. What -- there is on your third point, the restraint other than the overwhelming percentage of flow of business from du Pont to General Motors and the Duco thing that you just (Inaudible)
John F . Davis: Well --
Felix Frankfurter: Would you mind doing that?
John F . Davis: Yes, there are -- there are -- maybe it could be divided in the -- the evidence in support of the -- of the restraints could be divided into three parts. One is the statistical material, which we discussed a minute ago. Two is the -- are the particular commercial transactions such as arose with respect to antifreeze, tetraethyl lead. There's another one with respect to Freon, the material which is used in -- in the mechanical refrigerators. Those three are the only ones I recite at length in my brief. That's the second class of evidence. Now, the third class of evidence, it looks like picking and choosing from the record, if you please. I have cited in the brief the various letters, individual statements by officers of du Pont, where they state, we are -- where they call attention. They attempt to make sales on the basis of -- of their stock interest. That's what it amounts to. There were two from Lammot du Pont. There was one from -- there were two from Mr. Pratt. There are individual examples. These would mean nothing if we thought that these individual letters -- if we had just support in on it. It's more like fighting an iceberg. I mean when once in a while, one of these letters pokes up into view, it indicates what is below the surface and we must assume that if -- if you can find the -- these expressions of this view, that it must have occurred in many cases. Now --
Felix Frankfurter: Well, I think they bear upon your statement. They bear on your first and second line of the fact, more than on the third. That they -- if I understand by restraint that the actuality of exercise of companies --
John F . Davis: Well --
Felix Frankfurter: -- on to the other.
John F . Davis: That's -- that's I think that's right. Although, they -- they also bear on the third because a letter, a letter from someone in control to somebody else saying, we'd like you to buy this and call attention --
Felix Frankfurter: Well, the important part that if nothing happened and it's (Voice Overlap) --
John F . Davis: That's right, that's right. That is -- that is true. Now, there's -- I should mention. There's -- there's a great deal of evidence that the appellees put in this record with respect to failure to make sales. They put on -- well, there -- there are two types of evidence that they -- that they rely on. One, they put on a large number of witnesses, many of them salesmen or purchasing agents who gave direct testimony that in their relations they didn't consider. They're the stock ownership and I -- I think that those people didn't. I mean, I think that they -- they carried out the -- they carried out their duties as purchases and sales agents perfectly normally. I don't think that there was any intent on their part to -- the salesmen would have been poor salesmen if they'd tried to -- tried to push the ownership and I think purchasing agents, too, were not under any compulsion to buy these things. The other thing they put in evidence is failure to make sales. They -- they point out times when this or that product was not sold to this or that division of -- of General Motors and this too, we must concede. General Motors didn't -- du Pont didn't get all of the sales that it would have liked to have got. It didn't have 100% of the sales.
William J. Brennan, Jr.: As I understand you, Mr. Davis, is there any evidence that the letters that you referred to ever got past the recipients down further along the line of the organization?
John F . Davis: Well, some of the letters are written fairly well down the line. I mean they're written by people in the executive rank to people in the management rank. So that they -- they --
William J. Brennan, Jr.: Well, I -- the thought occurs when you mentioned that these -- the purchasing agents and other witnesses, who I gather have directly in hand the purchases that -- that are made on behalf of General Motors. You thought --
John F . Davis: Well --
William J. Brennan, Jr.: -- they said that they were not influenced in any wise by the relationship of du Pont in making their purchases?
John F . Davis: Well --
William J. Brennan, Jr.: I gather that the -- the letters that you mentioned too, I suppose they would say had no bearing on that decision.
John F . Davis: Well, some of -- yes. They may -- they might say that it -- it may. I don't know. There -- there are a tremendous number of purchasing agents and salesmen in this -- in this picture. I -- some of them must have -- must have felt some compulsions somewhere along the line or -- or it wouldn't have worked. I mean if -- if everyone who purchased well and walked way down the line had felt complete independence from the stock ownership, it would have had no relationship. So, I think the record itself shows that there was a recognition of that relation.
William J. Brennan, Jr.: Well, that comes out, I gather, at the volume.
John F . Davis: That is right.
William J. Brennan, Jr.: You should have given some volume?
John F . Davis: That's right.
Felix Frankfurter: Before you sit down, may I trouble you with one more question, Mr. Davis. In your appendix if that's what it's called that if you put your fingers (Inaudible) you've underscored the importance of the findings with which you disagree. What I would like to know is this. Is there any complaint by you that the District Court left out the -- I'm not talking about --
John F . Davis: Yes.
Felix Frankfurter: -- the rightness or the wrongness, left out the matter he should have stated which would bear on the truth?
John F . Davis: Well, I don't think -- specifically, I don't think that the District Court paid enough attention to the percentage figures on the tray.
Felix Frankfurter: But he -- but he have them in there?
John F . Davis: Well, he doesn't have them in there in detail as I remember it. This is something I must check during the --
Felix Frankfurter: I just wonder whether -- whether it isn't merely -- whether you affirmatively, erroneously from you point of view --
John F . Davis: The --
Felix Frankfurter: -- sound but what he failed to find because he didn't fairly state what the record caused
John F . Davis: No, I -- this is a pretty fair statement. I mean if I were writing a brief -- if I were writing the opinion from the point of view of the Government, there would be more things I would put in and they --
Felix Frankfurter: I understand that.
John F . Davis: But this is a pretty fair statement of --
Felix Frankfurter: He tried to get his license and --
John F . Davis: This is a pretty fair statement of -- of the facts. It's -- it contains -- there are omissions. There are things that we could put in and the primary one --
Felix Frankfurter: You don't call attention to them as -- as vitiated and thinking that it's mutilating record?
John F . Davis: No, no. This is a pretty fair statement.
Stanley Reed: Is it fair to say that the same arguments the Government makes on the Sherman Act is also applied into the Clayton Act?
John F . Davis: Yes.
Stanley Reed: Now, so far as this case is concerned, the Clayton Act or the Sherman Act?
John F . Davis: Yes, that --
Stanley Reed: It's actually the same --
John F . Davis: As -- as I --
Stanley Reed: Based on the same facts?
John F . Davis: As I see it, the Clayton Act is a cutting out and making specific of this type of -- of restraint in trade. And I afraid our main difficulty with the Clayton Act is that it's intended to act prospectively. It's supposed to act at the time of the acquisition. It -- it is -- impinges upon an acquisition. And our legal question here is whether or not it's appropriate to apply the Clayton Act 35 years after the acquisition has occurred and we say that it is, and the appellees think it's to the contrary.
Earl Warren: Thank you, Mr. Davis. Mr. Cox.
Hugh B. Cox: May it please the Court. At the outset, I should like to say just a word about the Government's approach to the findings of fact in this case and our attitude toward that approach. The Government, of course, attacks, as I think you can see from their very convenient document, all of the important findings that the trial court made on the three issues which Mr. Davis has stated as roughly the issue of control, the issue of intent, and the issue of restraint of trade. Now, the Government in its brief in here characterizes those findings in some different ways and I'm not going to quarrel over terminology. I just want to say that I don't think it makes any difference whether you call them basic or conclusions or ultimate. They're still findings of fact. They're a distillation from the record and they are a distillation from a very large body of evidence. And I also should like to observe at this point that it seems to us that those, there are two things to be said about the Government's attack on those findings. In the first place, we do not agree that its attack is consistent with the findings which it does not attack. I will enforce my argument, I think to point to the two or three -- four important instances where what they argue now is inconsistent with findings that they have accepted. The other observation I should like to make is that in one side, the trial court I think did put in the opinion and findings most of the things which he regarded as significant. But in throughout the opinion, particularly when he reaches a finding, which requires the consideration of a large body of evidence, the trial court makes it perfectly clear that the findings are not necessarily self-sufficient or self-contained. He repeatedly says, I find this on the whole record or I find this on all of the evidence. And when you consider how that he heard this case, listened to the testimony and the witnesses for nearly seven months and at the end of that seven months, after full briefing, there was an argument that lasted 11 days. The kind of paradise for counsel in which the facts were fully discussed to the trial judge, you could understand why he approached the problem in that way. There is one other thing I want to say just so this case, the facts can be viewed in the proper context. Before this, the Government brought this case, there was a full and complete investigation by the Government. The du Pont Company cooperated with that investigation. They came in and we voluntarily opened our files. There was no -- except for privilege document of the counsel, there was no withholding. They copied and took away about 3000 documents and then after that they had a grand jury proceeding, and purchasing agents of General Motors, and officers, and officials of both General Motors and du Pont testified before that grand jury. And we supplied them with information to the grand jury and quite properly as they should. They used some of that information in this case. Now, the only thing I want to say about that is that I think this Court can be sure that when they went in to the District Court in this case, they had in their possession every fact that the apparatus of the Federal Government could get forth. They had everything and they made the best possible case they could. Now, with those preliminary remarks, I think that I should like to address myself at once to the question which seems to me is -- is really crucial on this case and I put it very simply, and that's the question of what has happened or what did happen in the 34 years that this relationship existed? Was there a restraint of trade? Did du Pont get a noncompetitive preferential advantage when it dealt with General Motors in its commercial relation? That seems to me what this case is about. If it -- if on the facts there was no such preferential advantage, it seems to me that these arguments about intent and control certainly have far less significance. But one thing just as an evidentiary matter, as Mr. Davis has quite candidly said. If in 34 years, you can't prove any realization of the intent or any exercise of the power, that's pretty strong evidence that it didn't exist anyway. So that -- that -- it is to that aspect in the case and to the findings which the trial court made on that aspect of the case that I should like to address myself. And I should like also to say this. I think anyone coming to this case and looking simply at the two companies and looking at the stock relationship, seeing the people on the Board of Directors and on the committees, and then looking at the volume of purchases, I think it's quite natural for someone to say, "Well, there must be some relationship between those two things. It just -- just seems reasonable.” But that, I remind the Court is a question of fact and because we might approach that case, anyone I think, naturally and humanly might approach that case with that preconception, for that is what it would be, a preconception based on all of the fact or part of the fact, does not change the problem which is involved, which is the problem of looking at all the facts and seeing whether that first impression or that preconception, as I think it is, natural preconception is really true and that is what was done in this case at great length and in detail. Huge slice of life in his record, 34 years of it, the trial court made its findings on that basis. The evidence in the limits of an appellate argument is not really capable of being dealt with in detail. I shall have to summarize it but there are some general things I should like to say before I try to deal with some aspects of it, including this matter of the volume of sale, that I should in some general things I should like to say. The one which is most important in understanding the case and understanding the situation is this. Since 1922, General Motors has operated on a decentralized basis. That means that except for matters which involve the investment of substantial amounts of capital in all other, in operating matters, each division is autonomous. It makes its own decisions about -- particularly about what it will buy. So that when I speak as I shall or when Mr. Davis speaks of the totality of General Motors purchases, what we're talking about is a result that is achieved by separate and independent decisions made by purchasing agents in the various decisions -- divisions. We're not speaking about a decision made by small group of men in the central office of General Motors. Now, there was a short period of time in the 1920s, when there was a central purchasing committee, which in the case of certain commodities and under certain conditions did some central purchasing. The Government has now abandoned the contentions that it made about that committee. It no longer challenges the trial court's findings which are to the effect that that committee, that central purchasing committee dealt with du Pont just as it dealt with any other supplier. So that I think for the purposes of this -- what I have to say we can dispose -- dispense with as any further talk about the central purchasing committee. And it is because of this autonomy that in my description of the facts, I shall frequently speak of selling to a division instead of selling to General Motors, because that's what the way this business was operating. Now, with those -- with that fact leads to another fact, which I think is extremely important in this case. Speaking generally as I --
Stanley Reed: How -- how is the division related to the general management of General Motors?
Hugh B. Cox: Well --
Stanley Reed: Does the head of the division sit in the directorates of the --
Hugh B. Cox: He may -- yes, and frequently does.
Stanley Reed: That's -- that's the --
Hugh B. Cox: And that there are --
Stanley Reed: He -- he is the way that the joint was placed?
Hugh B. Cox: Yes, that's right and he would -- they -- that doesn't mean, Mr. Justice Reed, necessarily that every head of a division would be a member of the Board of Directors, but they have --
Stanley Reed: You mean that very small divisions, but --
Hugh B. Cox: Yes.
Stanley Reed: -- normally the head of Buick division would be a member of the Board?
Hugh B. Cox: They -- in the case of the very large, when such as Chevrolet, they frequently are. In the case of the rest of them, Mr. Justice Reed, it was not the usual practice for the -- for the heads of the divisions and speaking generally to be on the Board of Directors. That was because the corporation I think that Mr. -- under Mr. Sloan's guidance, early adopted the policy of having the operating people not on the Board of Directors. The Board of Directors performed a somewhat --
Stanley Reed: Policy in operation?
Hugh B. Cox: Policy in operations and they -- the link between the divisions and the top, the central office was performed by committee usually, in which there -- there was one time an operations committee I think that some of these people were and it was -- the coordination was achieved that way and it was also achieved to some extent by having some staff or central services, which were performed in the central office. But on the operations level, the divisions operated in an independent and autonomous way. Accountable of course to the -- to the Board of Directors and to the top management, if they got into trouble or they were in trouble and something happened to them. But within those limits, I think Mr. Sloan, in his testimony has said the head of a division was --
Stanley Reed: You mean that the divisions would compete with one another for the purchase of steel?
Hugh B. Cox: Mr. Justice Reed, I frankly can't answer that question and I'm not sure that the record shows whether they would compete in that sense or not. They certainly competed in some areas in some ways in the sale of cars, in the market as you know but I don't -- sure the record shows what they did as to -- there is an interesting evidence that now, that you remind of it, that in early days at one time when there was a shortage of fabrics, they were sort of competing about which one could get fabrics from du Pont. But I -- I couldn't go beyond that in answering that question. Now this -- this -- speaking very generally about the evidence as Mr. Davis, I think, quite candidly has said. There is ample and substantial evidence in this record that shows that these divisions have bought from du Pont and from other people on the basis of the ordinary business consideration, quality of product, service and price. And as you might expect, that same evidence shows that there has been a great diversity of purchases among the various divisions. Some divisions will buy a product almost entirely from du Pont as Chevrolet does its paint. Other divisions won't buy that product from du Pont at all. Oldsmobile buys very little paint for example from du Pont. Some of them will buy or one division will buy a commodity. There's a kind of paint called engine enamel, which Oldsmobile oddly enough buys from du Pont. No one else in General Motors buy that. They bought fabrics in different amounts and at different times. No -- no pattern at all came out of this, of -- of general survey of these purchases. That's all set forth in the findings of the -- of the trial judge, uncontested findings in large part. We think it is inconsistent with the Government's notion or assertion that this stock relationship in some way affected the sales. I say that particularly in view of the concessions that the Government has made about the way this relationship operates. The Government has never contended that there was any overall direction about this thing from above. There was never any directive, no resolution from the Board of Directors, no resolutions from the top committees, nothing of that kind. And now the Government concedes and I think that it must that the salesmen and the purchasing agents didn't act on any basis of that kind. They testified and the Government takes their testimony. You might almost get the impression that this restraint of trade is rather like a mist that this pervades everything but operates without the assistance of any human hands or any human mind. I don't think the Government really intends it's concession to go quite that far. But it does say that the -- that the inherent, any inheritable effect of the relationship was to poison these transactions, so that General Motors just must have favored du Pont. Now, when they put their point that way, I think they're under a heavy burden of explaining why a relationship that was said to be inherent and inevitable didn't operate in an inherent and inevitable way. Why it wasn't uniform, and constant, and continuing? Why was it that it would operate as to some commodities and not as to others? Why did it operate at one time in one way, and another time in a different way? Why did it operate as to some purchasing agents and not as to others? It seems to me you can't possibly reconcile this notion of the relationship and its effect as they have set it out with this evidence. In their reply brief they -- they feel they have to deal with that problem and they say, well, when General Motors didn't buy from du Pont, that was just because du Pont really wasn't trying to sell to them or didn't really make an effort to exercise its influence. Now, there are a number of troubles with that argument. One of them is that there's an uncontested finding by the trial court that the documents indicate that du Pont was always interested in selling to General Motors to the extent of 100% of its requirements and there's another trouble which I think is even more difficult for the Government when they tried to prove intent. This intent they speak of, the way they prove intent is by documents from the files of the du Pont company that show that du Pont was trying to sell everything it could and beside that we have all the testimony of the salesmen. We have a great deal, much documentary evidence in this case which the defendants, offered showing these constant efforts to sell, many of them unsuccessful. Now, with those general observations about the -- the -- but before I leave that, let me say this. The Government attacks these purchases as being -- they -- they now say that they wanted it all bad. They don't tell us which ones exactly were bad. They suggest some part of the Duco sales were bad. They don't even say as I understand it that all of the Duco sales were bad. Those arguments if they could be justified on the facts, which they cannot, would raise some very difficult questions of law I think as to just what the status of this alleged restraint is but I don't want to talk about the law. I want to talk about facts whether that -- whether they -- they can justify that kind of a finding of fact, which they say the trial court should have made. They did not bring forward any evidence in the District Court that related directly to these sales. They didn't bring forward any evidence that showed that General Motors could have bought things at the same time from anybody else that was good at the same price. They weren't able to find any disgruntled employee come in and testify about directions that he'd been given, and they were not able to find, and this I think very significant throughout this 34-year period, any past or present competitor of du Pont, or anybody operating in these various industries to come in and testify that General Motors had given du Pont some favor, or that he'd been handicapped in some way because of the stock relationship in trying to sell to General Motors. There's just isn't any evidence to that kind to counterbalance the affirmative evidence that we had put in the record, which the trial court took in his findings that these sales were made on merit, were made on the ordinary and unordinary business way. Instead, the Government has to fall back on this argument about the volume of sales. And it's the next thing I should like to talk about because it really is the only argument that the Government has to -- that has anything to do with these sales and it's a statistical argument. I think at the beginning that I should like to clarify one point that I think perhaps Mr. Davis inadvertently left in -- in some uncertainty. When he speaks of 98% of our sales being made to -- to General Motors, that figure is 90% of the sales of automotive paint made to automotive manufacturers for original application on automobiles. Now, that's not all the paint we sell to General Motors. We sell to General Motors paint for all purposes. We sell them paint for -- to put on parts of machinery, refrigerators, locomotives which they make, house paint, all sorts of paint. And we sell that kind of paint, the same kinds of paint to other people and when you compare the sales of the kinds of paint, all kinds of paint that General Motors make or that General Motors buys, which du Pont makes for General Motors, with the sales of the same kind of paint for the same purposes that are made by du Pont to everybody else, the percentage is not 90% it's about 20%. But --
Harold Burton: Is that Duco?
Hugh B. Cox: No that's -- that includes Duco, but it's a lot of other things besides Duco, Mr. Justice Burton. Now, on -- on Duco or on the automotive paint --
Earl Warren: We'll recess now, Mr. Cox.