Earl Warren: Mr. Cox, you may proceed.
Hugh B. Cox: When the Court rose, I was addressing myself to the Government's statistical argument on the percentage of du Pont sales that are made to General Motors and I should like to continue with that discussion now. I had just made the point that if the issue is whether du Pont's products are capable on their merits of gaining a position in the market, independent of influence or control or some stock relationship, then the fact that it sold the same kind of paints to other people that it sold to General Motors in a percentage relationship of 80:20 instead of the other way around as it is in the case of the sales to automobile manufacturers was quite significant. I want to meet the Government on the automobile manufacturers themselves meets them on their own ground. Before I do that however, I should like to point out that this larger figure I gave you sales to -- all sales as distinguished from simply sales to automotive manufacturers. And as I said before includes substantial sales of paint used for exactly the same purpose that automotive paint as used, it sold to General Motors. For example, those -- that larger figure includes all of the paint is not reflected in the Government's figure which is sold for refinishing automobiles that --
William J. Brennan, Jr.: Mr. Cox what is the -- what is the figure for over all paint sales?
Hugh B. Cox: The overall paint sales in -- for example, in 1947, Mr. Justice Brennan, ran around the $105 millin so is their sales to everybody abruptly the same kind of paints that we sell to General Motors.
William J. Brennan, Jr.: Now, what is the $30 million figure?
Hugh B. Cox: I beg you pardon?
William J. Brennan, Jr.: What is the $30 million, only that type of paint you describe first just before recess?
Hugh B. Cox: No, the -- I think the $30 million, see I believe that the -- the $30 million figure, Mr. Justice Brennan, is a figure of all sales of all products by du Pont to General Motors. In 1947 for example, I think the precise figures ran about this way. The total sales, everything, paint, fabrics, chemicals ran around $26 million, du Pont sales to General Motors. All that about $19 million are -- consisted of sales of paint, about 71% thereabout. Of that -- of that $19 million of paint, about $12 million consisted of what are called automotive sales which are roughly -- rough -- I think roughly, perhaps accurate to speak of as of Duco acrylic which is a topcoat put on -- on a car. Those --
William J. Brennan, Jr.: Now, is there any product 93% of the sales of which are sold to General Motors?
Hugh B. Cox: Yes, Mr. Justice Brennan. You can -- the Government -- Government's computation is made in this way and that's where the -- the 90% figure comes from. They take all sales of paint to automobile companies for original application to the bodies and to automobile. And that for example -- that figure if I may -- without confusing you, for example, that figure as to General Motors would not include any paint sold to General Motors for refrigerators or house paint or for painting industrial objects that didn't work directly related to the automobile. They then compare that figure with the comparable figure for sales to other automobile manufacturers.
William J. Brennan, Jr.: Now, give me those two figures --
Hugh B. Cox: Well --
William J. Brennan, Jr.: -- one to General Motors and the one to other automobile.
Hugh B. Cox: May I give it to you in percentages, sir. Their percentages, the percentages which they have used are -- my purpose is acceptable. That percentage figure varies, sometimes it's 80%, sometimes it's higher than that and sometimes it's been 90%. But there is no doubt that when you make a computation on that basis, by far, the highest percentage of sales computed that way is made by du Pont to General Motors. We don't --
William J. Brennan, Jr.: Can you give me that same thing in dollar figure?
Hugh B. Cox: I'm not sure that I can readily because these percentages were excerpted from some reports and they're in the record, but we don't test the percentage figure but --
Earl Warren: That figure which you've just given was than 93% that Mr. Davis spoke of?
Hugh B. Cox: Not -- yes, yes, that's the figure I'm talking.
Earl Warren: Is he substantially correct in that?
Hugh B. Cox: He is substantially correct if you compute the figure that way, yes.
Earl Warren: As you have just computed.
Hugh B. Cox: I'll try to explain it to you Mr. Chief Justice Warren.
Felix Frankfurter: As to paint, as to auto paint.
Hugh B. Cox: As to paint sold to automobile manufacturers for original application to automobile.
William J. Brennan, Jr.: Now, Mr. Cox, personally, it's important to me whether it's 93% of aggregate volume of $500 of sales or an aggregate volume of $12 million of sales.
Hugh B. Cox: Well --
William J. Brennan, Jr.: Can you give us that?
Hugh B. Cox: -- let me give you these figures which may help. In 1947, and I think this will show the volume. My recollection is if I'm correct that the sale of paint of this -- of automotive sales were about $12 million. Is that right? Of Duco's -- that's right, it's about $12 million. Now, in the same year, I think my recollection is correct. On the same basis again, the sales made to other automobile manufactures were around $3 million.
Hugo L. Black: What is the answer to the Government's contention that sales of such magnitude even in that limited field show that -- attempt to show or -- or basis for showing there had been favoritism?
Hugh B. Cox: Well, that's what I'm going to talk about now, Mr. Justice Black, and I would like to say at the beginning that so far as that argument is intended to suggest that the sales of the paint to automobile field manufacturers, that particular kind of paint can't make their way on their merits that these sales which we make of the same paint for the same purposes to other people provide a basis for a contrary inference. Let me illustrate what I mean. They say General Motors buy too much Duco and there's something strange about that. Well, now, the fact is that 75% of the Class 1 railroads in this country specify that Duco must be used on the outside of all passenger cars. They also specify that it must be used on locomotives. For that reason, we sell about 75% of the requirements of the electromotive division of General Motors because the railroads tell them they want the Duco used on the locomotives. Now, that figure, I hope I've made clear those sales are not included in this 80%, 90% figure because they are not sales to automobile manufacturers.
Felix Frankfurter: Mr. Cox, may I trouble you before you --
Hugh B. Cox: Yes.
Felix Frankfurter: -- answer Justice Black's question in this larger import. Paint -- speaking of figure, whatever it is, 90% --
Hugh B. Cox: Yes.
Felix Frankfurter: It's part of business.
Hugh B. Cox: Yes.
Felix Frankfurter: (Voice Overlap). You've also told us that the sum total, I think there's agreement. The total sales of du Pont to the General Motors is $30 million.
Hugh B. Cox: 26 and 47.
Felix Frankfurter: What?
Hugh B. Cox: 26 and 47.
Felix Frankfurter: That means 18 million to be accountable. Could you, without too much trouble, tell us the percentage of sales of the other commodities included in those 18 with General Motors as compared with other buyers. Did I put my question?
Hugh B. Cox: Yes, I think I understand. The record unfortunately is not entirely clear on that but the next largest paint item for example is $3 million of Dulux that is sold to General Motors to put on Frigidaire, iceboxes, cleaners, washers, dryers and things of that kind. Now, the record doesn't show an exact percentage of the sales to other people, but it shows that du Pont supplies practically 100% of the requirements of Westinghouse, General Electric and Crosley for that kind of paint. So, I think it maybe assumed in view of their position in the refrigerator business that those sales are substantial. Now, in fabrics, you do get a situation somewhat like the paint situation. The fabrics -- the great percentage of the fabrics sold to automobile manufacturers for use in the original construction of automobiles is sold by du Pont to General Motors. Now, they do sell a very substantial amount of fabric to other people who use it for the same purpose that General Motors does. For example, people -- much of this is used for upholstery in trucks and things of that kind where you need something heavier than the cloth fabric. The du Pont Company sells substantial amounts of -- of fabrics for that purpose to people who make theatre seats and --
Felix Frankfurter: Make what?
Hugh B. Cox: Theatre seats. Manufactures -- seat -- seats or --
Felix Frankfurter: Well, I thought our basic comparison must be in the automotive industry.
Hugh B. Cox: Well, I'm -- I'm making the same point again. I say as to the automobile industry, the percentage is what the Government calls a disproportionate percentage. Now, their -- invest about other products. There are some other products involved. One of them -- important one, are the chemicals that are used in case hardening. That's --
Stanley Reed: Well, before -- before you leave the -- the paint, would you straighten me up on this? If Duco goes to the General Motors in the percentage of 93% of what they used, what -- what about the other automobile manufacturers that you apply to their cars? Why don't they use a proportionate amount of Duco? Why is it that only General Motors, if I understand it correctly, it's only General Motors that takes the percentage, anything like that?
Hugh B. Cox: From the du Pont Company?
Stanley Reed: The Du Pont.
Hugh B. Cox: That's right and I'm -- I'm going to speak about that, Mr. Justice Reed, if I can in just a moment. In fact, I shall do now -- do so now. And I'd like to begin by saying that of course as I take it, the court realizes that what we are concerned here is that it's a problem of why General Motors buy so much as compared with other people who don't buy as much. So, what we are inquiring into are the reasons really why the purchases are greater on the one side than on the other. The Government says the reason is stock. Now, for that inference just as a matter of logic to have any force, I think you have to know something about the reasons why the other people don't buy more from -- from du Pont and that's what I'm about to tell you. Of course, if they didn't buy, if there was any evidence that they didn't buy because of some doubts about the quality or the price or the service of du Pont's product, I think the Government would have a -- have a basis for its inference. I'm not prepared to say that even then, that inference would overcome the affirmative testimony we have from these people who buy the paint about why they buy it. But now, let me speak about the reasons why Ford and Chrysler don't buy more from du Pont and that's really what it comes down to because those two companies together with General Motors account for by far the greater part of the -- of the automobile production in this country. Now, each of them is a little different, but I think each of them to the facts, in some of these facts, not all of them, but some of them are in the uncontested findings of the trial court. He didn't cover all of them, but he covered some of it. I think those facts are inconsistent with the Government's inference. Let's take the case of Ford first. Ford for many years before 1939, always bought a substantial amount of paint from du Pont, automotive paint to put on automobiles. But Ford long ago, under the guidance of Mr. Henry Ford Sr. embarked on a policy, not only as to paint and fabrics but as to a lot of other things, of making a major part of its own products. So, they started making their own paint and their own fabric. Now, just stopping there, let me observe. It doesn't seem to me that the fact that Ford decided for reasons of its own to make these things instead of to buy them in the market proves very much about why General Motors buy it. But there's a little more I can say about Ford. The significant thing about Ford is what it does when it goes into the open market and buys the things that it doesn't make. Now, throughout -- most to the period of time covered by this record, when it went into the open market and bought, it bought in large quantities from du Pont. In fact, there was a long period in the late 1920s and 1930s, when it bought from du Pont all of the alkyd resin finish which it used on the outside of cars. That's the automotive paint that we've been talking about. It bought all of that from du Pont that it didn't make. Our time came about 1938 or 1939 when Mr. Henry Ford Sr. decided one day that he wouldn't buy anything more from du Pont, anything and instructions came down to stop. When Henry Ford II took over the company after the war, the purchases resumed. And today, the extent that they don't buy or don't make their own paint, they buy. The record shows. It doesn't show the exact amounts, but they buy substantial quantities of paint from du Pont. Their purchases are included in the $3.5 million worth of paint sold to other automobile manufacturers that I told the Court about. Now, the story -- and I'll stop there again and I -- I'd submit that on that basis, even the inference which the Government tries to draw isn't justified in the case of Ford. I don't even come to the question of whether the inference is enough to overcome the affirmative testimony. Now, Chrysler has a different story. Chrysler, during the 1920s and the 1930s, early 1930s also bought a substantial amount of paint from du Pont. I couldn't get the figures for those remote periods but there is no dispute it did buy. I think there's an uncontested finding on that. Then a time came, I think it was about 1937, when Chrysler adopted a different policy and there's uncontested testimony at least on this, I'm not clear at the moment whether it's in the findings. The man who would -- the du Pont Company who'd been dealing with them came to see them and I think it was Mr. Keller. Chrysler said, “We have adopted a new policy. We have decided that we're going to buy the greater part of our paint, if not all of it, from some company who doesn't really sell paint to anybody but us. We want to have one company that really depends on us for its business.” And the salesman said, “Well, this is a great blow to me. Is there anything wrong with our paint? Is there anything wrong with our service? Have we done anything wrong?" And Mr. Keller said, “No, your product and your service have always been highly satisfactory, but we have just decided that we were going to have one company that -- who would be our principal supplier and who will look to us for the major part of its sales.” Now, I'm sure it will immediately occur to the Court that what that incident indicates is that this so-called disproportionate percentage can occur in a very normal business relationship without any influence of stock or anything else.
Stanley Reed: The Chrysler illustration is so contrary to the general policy of large manufacturers as I understand it is to have many sellers.
Hugh B. Cox: I think that is true, Mr. Justice Reed, and in many cases I also go after -- go outside the record a little bit, but I have heard of cases where purchasers, particularly large scale purchasers thought it was to their advantage to be in a position where they were buying. They had a supplier who is largely dependent on them for their business. Now, there's another example in the record which I'm reminded of that --
Earl Warren: May I ask if Chrysler does buy it from -- from a company that sells only to it or -- or substantially.
Hugh B. Cox: It now buys -- it has continued to buy, Mr. Chief Justice Warren, from the Pittsburgh Plate Glass Company. And while we couldn't get any figures, there are two exhibits in the record which there are trade reports, contemporaneous documents made in the ordinary course of business which say that Chrysler is the principal customer of Pittsburgh Plate Glass Company. And their documents also indicate that Chrysler buys by far the major part of its requirements from Pittsburgh Plate Glass Company. Just as bearing on this so-called disproportionate percentage, I should like to give the Court one more example which I think is -- is -- makes my point too. One of the companies that sells paint in pretty substantial quantities to General Motors is a company called Rinshed-Mason. It sells topcoats for automobiles to some of these divisions that won't buy it from -- from du Pont. Now, there are exhibits in the records, I think it takes about four exhibits. Unfortunately, we didn't get this in our brief, but there are exhibits in the record from which you can compute Rinshed-Mason's total automotive sales and established a relationship between those sales and its sales to du Pont. And it appears that in the case of that company, it sells upwards of 90% of its paint on this same basis to du Pont. No suggestion I suppose by anyone that General Motors buys from Rinshed-Mason on some favored or noncompetitive position.
William J. Brennan, Jr.: Mr. Cox, is there any evidence whether or not in the cases of the decision in a division as I understand it, it makes its own of what finish to specify?
Hugh B. Cox: Yes.
William J. Brennan, Jr.: Any testimony whether or not those decisions were arrived at after comparative tests of the available finishes?
Hugh B. Cox: Yes.
William J. Brennan, Jr.: And what -- what is evidence in that regard?
Hugh B. Cox: There was a witness, Mr. Justice Brennan, named (Inaudible) who testified at some length about that and he said that they constantly -- that's one of the staff functions as performed in the central office. They constantly test these finishes and they then -- that goes on all the time. They then report to the various provisions what lacquers and topcoats meets the standards and the divisions themselves then make a decision as to which one they will take.
William J. Brennan, Jr.: Well now, does the evidence go so far as to show that in fact the specification of Duco by those divisions which did specify it was made after a consideration of these other available finishes?
Hugh B. Cox: Yes, I think that's -- that certainly the -- the purport of that testimony. What this witness said was that they generally have found three suppliers whose finishes are satisfactory. And they -- they found no one whose finishes are any better than that.
William J. Brennan, Jr.: And you say this was a witness from the staff --
Hugh B. Cox: This is -- this was the witness from staff whose business was to test these lacquers.
William J. Brennan, Jr.: Well, was there any -- any testimony from the operating divisions who testified?
Hugh B. Cox: Yes, there was -- let me say this first. This witness who testified from the staff was qualified by examination with respect to the buying practices of the divisions and testifying about that, and his testimony was not shaken on cross-examination.
William J. Brennan, Jr.: Is there a finding incidentally?
Hugh B. Cox: Well, there is a finding, yes, in the sense of the judge's clear finding that shows that the judge relied upon his testimony.
William J. Brennan, Jr.: Is that -- is that one of the challenged or not of the finding.
Hugh B. Cox: Yes, that's a challenged finding, Mr. Justice Brennan. That finding is on the record. It's in the -- or in the Government's appendix. I think at about page 395 -- 396. Clarity Williams and (Inaudible) all made it clear. (Inaudible) is the test -- is the witness that I have been talking about. There was also a testimony of the same kind, very significant testimony from a man named Vector who for many years had been in Buick, who was an operating man and who had been there through the period when competitive lacquers had appeared and when the Government says they should have made some switch, and he testified that they never found any competitive lacquer in Buick to take up --
William J. Brennan, Jr.: Do those divisions which now use other finishes or they did they at any time used Duco?
Hugh B. Cox: Oh, yes. There was a -- a period, Mr. Justice Brennan, in the 1920s when they bought 100% of their topcoats from du Pont because they -- the research people wouldn't approve full range of colors made by anybody else. Then, the time came in 1926. They were all -- at that time, they were constantly trying to find competitive finishes. They approved some in 1926 and then these divisions began to split up. And the judges made -- at least his findings indicated reliance on his testimony as I have indicated. Now, I have -- I have dealt with that percentage argument, somewhat in more length than I have intended because it seems to me the only argument that the Government really had made on the facts. And I want to say it again to the Court to their best and I -- I'm also conscious that I'm doing something I shouldn't. I am arguing this case to this Court as if I were in the District Court and of course that's not the issue here, but it's very hard for me to avoid it. But I remind the Court that -- that there is affirmative testimony in this record about why these purchases were made. And the real question I suppose is whether the inference the Court wants to -- the Government is trying to draw from the percentages will overcome that testimony and show that these findings are clearly erroneous. Now, even if I had to concede weight to the inference which I don't, that question would remain but we think the inference doesn't really have any weight at all. The -- thus I've been explaining. I'd like to say this too before I leave the matter of the percentages which is really a repetition in effect of something I said to -- to Mr. Justice Frankfurter. The Government also attacks findings as to other commodities. It attacks all these purchases. The purchases, the refrigerator paint, the purchases of the antifreeze and the purchaser and the purchases of casehardening. Now, I have explained about Dulux. In the case of the antifreeze, the record shows that only 20% of du Pont's purchases or sales are made to General Motors. There's a table in the record about it and the percentage varies from time to time. It may go up from that but it's -- it's -- I think roughly in a 20% to 30% range.
Earl Warren: It's in the relative field of -- of refrigerator manufacturers or all of the paint, all of the finish in the paint.
Hugh B. Cox: This -- this -- in the case of antifreeze --
Earl Warren: Oh, antifreeze -- antifreeze.
Hugh B. Cox: -- this is -- these are the general sales at antifreeze --
Earl Warren: Yes.
Hugh B. Cox: -- put in automobiles which is --
Earl Warren: Yes.
Hugh B. Cox: -- the same thing that -- and the antifreeze, Mr. Justice Warren, I should explain, that is sold to the General Motors is sold for resale so that there, the comparison really is I think on the same basis.
Earl Warren: They sell it (Voice Overlap) --
William J. Brennan, Jr.: While you're at the antifreeze, you're going to treat of this Kentucky Alcohol Company?
Hugh B. Cox: I -- in the division of our laborers in this case, Mr. Stern is going to handle that --
William J. Brennan, Jr.: Your case.
Hugh B. Cox: -- but I -- I can't -- well, I won't -- I'd like to talk about it but I will -- got to go ahead.
Earl Warren: Well, Mr. Cox, before you leave the percentages again, may I ask this question. We've been -- we've been discussing here the products of du Pont that have been purchased by General Motors in large percentages.
Hugh B. Cox: Yes.
Earl Warren: Are there any products used by General Motors and -- and manufactured by du Pont that are not used by General Motors or only used in very small quantities?
Hugh B. Cox: Yes. I was about to mention some of those in connection with this point I was making about their attack on the findings. The chemicals are one thing and would fall in that -- I mean particularly the case -- these case-hardening chemicals which are used to harden gears and things of that kind. Now, the facts on those are that we sell -- du Pont sells far more to other automobile manufacturers just looking at them than it does to -- to General Motors, for example Ford, I think it buys something like 70% of its requirement to something from du Pont and buys more of those case-hardening chemicals than all the General Motors division put together to. That's one illustration. Another illustration is in --
Earl Warren: What percentage does -- what percentage does General Motors use, do you know?
Hugh B. Cox: Well, I think in terms of their -- I have those figures here, some place in the 45. I think that the -- speaking in terms of our -- the percentage of du Pont sales that are made into different groups, about 20% of the casehardening sales are made to General Motors and I think about 56% to Ford, that's the relationship.
Earl Warren: Yes, but what -- what percentage of -- of that kind of commodity used by General Motors does it buy from --
Hugh B. Cox: Oh, that percentage I think is around 25% or 30% in that -- that neighborhood. It buys the balance of it from somebody else.Now, there are other commodities, Mr. Chief Justice Warren.
Earl Warren: All right. Mr. Cox, you don't have to do it.
Hugh B. Cox: In the chemical field particularly in anode, they -- which we've tried to sell them, they buy about a million, three of anodes in 1947 from other people about $2000 worth per month. They made some pretty -- the evidence shows some pretty strenuous sales efforts there with no success. In the field of solvent, for example in 1947, which is another important chemical product which is -- might think the du Pont Company would have some success, they sold about $400,000 to General Motors in 1947 and it bought $300,000 from somebody else -- $3 million, I'm sorry. That was a very serious mistake. The other argument that the Government makes which is its only suggestion here in support of its attack on the affirmative evidence that these purchases are made independently has to do with Fisher Body. And I should like to some -- say something very briefly about that. They, as Mr. Davis outlined it to you this morning, take the position that for many years, Fisher Body was operated within General Motors with a considerable degree of independence. And Mr. -- the Government attributes that to the character and personality of the Fisher brothers. That is a point of view which we embrace and it's a principle we would like -- and we apply it more widely in this situation. There, General Motors had complete voting control of Fisher brothers and yet the Government itself recognizes that this question of control as is proved depends on the people that were involved. Now, the Government says that there was a long period of time when they were independent and that while they were independent, they didn't buy anything and not very much from du Pont or at least not as much as the other division did. And then a time came when the -- a loss to independence, they now say that was when the Fishers retired about 1944. And then, the Government says there was a change in the pattern with purchase. Now, each step really in that argument, except for the concession that the Fisher brothers were independent, it seems to us to be incorrect and not supported by -- by the record. In the first place, it isn't true that before 1944, Fisher didn't buy very much from du Pont. As the table and their statistics in the record which indicate when you put them together that in a 10-year period, between about 1927 to I think the end of 1936, in every year, Fisher bought more from -- from du Pont than all of the other divisions of General Motors combined. The second thing that's wrong with it is that there never was any change in the -- so far as Fisher's independence is concerned. And there is an uncontested finding by the trial court to that effect. Trial court found that Fisher at all times exercised freedom in making its own purchases. The Government seems to read that finding is confined to some period before 1944, but that's not what the finding says, and it's accompanied by a finding in which the Court -- further finding in which the Court says, “The evidence requires me to reject the charge that Fisher is -- is a captive market for du Pont.” So that their attempt -- and let me add this that those findings are fully supported by the evidence. The evidence shows that after 1944, Fisher bought from du Pont in just the same way that it did before. The only suggestion that the Government ever made in its briefs that has any difference was a -- an erroneous figure which it produced, which said that in 1947 and 1948, Fisher was buying I think 65% or 70% of its fabrics from du Pont. Well, the trial court again made an uncontested finding that in 1947 on, Fisher bought between 37% and 45% of its fabrics from du Pont and there is evidence in the record that shows that those percentages don't differ significantly from the percentages before 1944. So, that the Fisher argument really gives them no part at all. Now, with this -- this affirmative evidence in the record, there's been no preference or favoritism.
William J. Brennan, Jr.: Excuse me Mr. Cox, will you and Mr. Stern discuss the tetraethyl that's alleged?
Hugh B. Cox: I'm going to talk about that, I hope. I just want to say this that this -- this evidence about how the divisions have bought that they haven't bought from du Pont when they didn't want to, but when they did buy, they had a good business reason for buying, It has driven the Government to -- to take a position which I think deserve some comment, particularly in view of the evidence. On page 20 of their reply brief, they now redefine the strength in somewhat different terms than they've ever said defined it before. And I -- that I think makes it necessary for me to say a word about it. We didn't really deal with this -- it might have been our main brief. They say in the middle of page 20, "We only argue that where a du Pont product was competitive for the products to other manufacturers or where du Pont was on a competitive basis as capable of performing some service as any other company, then the du Pont-General Motors relationship took the place of competition to determine the flow of trade." That statement is interesting for one reason at least because it -- it seems on any basis to concede that this -- even on their terms, taking their full statement of the case, this relationship did not immunize du Pont from the -- from the competition. It didn't have any kind of absolute control over price. It didn't have any power to exclude competitors. But that's not -- I'm not interested in arguing the law, part of it now. What I should like to say is this, that if that statement means anything, it seems to me in something like this that if everything was about equal or if there was any reason to do otherwise, then perhaps du Pont in some cases and to some extent got some kind of a preference. Now, even when you state their case in that vague and attenuated way, the evidence in the record won't support it. And I -- I should like just to -- I can only do this by example and I can't give you the flavor of the record, but here are some examples. In 1920, Chevrolet was using some fabrics for a panel board in a car. Du Pont came along and said, “We can -- we can make a better panel board from -- than that and we can -- we can do it and sell it to you to a price half what you're paying,” and Chevrolet said "All right." And they did it and they sold it to them at half the price. They had the business for a year I think or two years. And then, a competitor came along and got hold of one of these things and of course he was able to imitate it. The man who had been supplying Chevrolet before and he came back and said, "Give me back the business. I'll do it for you with the same price du Pont does," and he got the business. Now, there was something that du Pont made and reduced the price and let them have the business for a year and then they took it for some reason of their own, perfectly proper and gave it back to them but it certainly indicate there wasn't any preference. Now, here's another example. One of the important commodities in the fabric still involved in this case is something called 'teal' which is -- used to be used for tops of your closed cars and it's also used for the tops of convertibles. Fisher was buying teal from du Pont and from somebody else. I think about half and half on 1931 and it said to these two suppliers, "We want you to guarantee that this fabric you're selling us will not fade, shrink from cleaning for a period of two years." And the competitor said, "All right, we'll give you the guarantee," but du Pont took the two fabrics off its own -- its competitors and it tested them and it found that they wouldn't, either one of them really stand up to two years. And it came back and said, "We don't think we can really properly give you that guarantee," and the other fellow got the business. Du Pont worked on the fabric for two years. It developed the fabric that it could give a guarantee for it and it came back and said, "Now, we -- we'll give you the guarantee. We've got a fabric." Fisher says, "No, we're not interested. We're going to keep on giving all of these orders to this other man," and they did. Now, those -- those examples can be duplicated. We -- du Pont has tried to sell seat fabrics to General Motors Truck and Coach Division and the -- the record shows that they're as just good as the one they get to some place else, but they won't buy them. They say, “We're not interested in changing.” I recall one exhibit here on the anodes that I spoke to the Chief Justice about. They've been -- a salesman is going around trying to sell anode. This is a document, they're trading for. He went to Cadillac and he said, "Won't you buy our -- our anodes?” And the Cadillac engineer said, "Well, I have ordered some of them and I'm going to find out whether they are any different from the ones I've been buying from the Revere Copper Company and if they aren't any different, I'm going to continue to buy Revere's." Now, there's just no basis in this record in saying that the du Pont got a preference even when you -- their products were competitive or nearly equal. These decisions were made in these separate divisions in the ordinary way, probably the only way they could be made, an enterprise of this size on ordinary -- on an ordinary business basis. There's a -- a fascinating story in its record about a man trying to sell plastics to the General Motors divisions to be used in making steering wheels and he -- he never won -- here, he got a quarter of the business but he couldn't -- he couldn't -- never could get anymore and he lost that and he finally went to Pontiac where they were -- they were being fabricated in one divisions and he -- used by Pontiac and he went to Pontiac and there was a contemporaneous document on this. It said, "Please, can't you give me some help on getting this plastics business?" And the man from Pontiac, and this is in the document, said "I don't give a damn whether you use your plastic or the plastic of one of your competitor. You go back and see the -- the other fellow," and he never got -- he never got his orders. If you look at this record and I -- I -- it's hard to convey what it means, but if you look at it in terms of the ordinary days that they conduct the business, examine the testimony and look at these documents and show how this -- this enterprise was carried on. It's not a question of this finding being clearly wrong. It's really a question whether a reasonable man could reach any other conclusion on the basis of all this evidence.
Stanley Reed: Suppose that from the time of the purchase, the stock by General Motors or by du Pont and General Motors that every effort that du Pont had made had not been successful in making sales. They haven't been able to increase selling it at all or even get the -- a good part of the General Motor's business. If they had made that purchase for the deliberate purpose of enlarging your sales, would it be unlawful?
Hugh B. Cox: Mr. Justice Reed, I --
Stanley Reed: Should you treat the -- that legal problem later or --
Hugh B. Cox: Well, I will -- I think Mr. Stern may talk about it but I will say this. It seems to me that if in 35 years before trial and this maybe a too simple approach. But if in 35 years before -- during the -- they entered in 35 years, there hasn't been any restraint of trade. They have had no preference. Then -- then --
Stanley Reed: In their effort -- a mere effort to obtain, would --
Hugh B. Cox: I beg your pardon.
Stanley Reed: A mere effort to obtain, restraint would not be enough.
Hugh B. Cox: Well, if you're speaking of a continuing effort, all of that during that time was a continued resistance by General Motors. That proposes a somewhat different problem. But I would say as to that that if you make the assumption if there was power to get the preference and the intent to get the --
Stanley Reed: Inevitably in that power --
Hugh B. Cox: Not power.
Stanley Reed: -- but they wouldn't have (Voice Overlap)--
Hugh B. Cox: And I -- I say as to the intent in the first place that there was no -- there was no intent to get -- to -- to enjoy any preferred position. Now, I'm aware that the Raskob document and I hope to say something about that because I think that is the most -- the most -- the best piece of evidence really in this case the Government has. I sometimes thought if they didn't have that document, they wouldn't have a case. But taking at -- at full weight, let's suppose that Mr. Raskob thought in 1917 that if they bought the stock, they would in some way get an advantage in the trade. I suggest that if in the 35 years that hasn't happened, it doesn't make any difference.
Stanley Reed: If -- if he thought he had been mistaken, if he thought he could exercise power through his stock ownership and therefore du Pont should buy it.
Hugh B. Cox: And if he had the intent to exercise that power, that would raise a different question. But as to that, Mr. Justice Reed in transposing it without conceding your assumption of fact because, let me say here if incase I don't get to the Raskob document, that we accepted that document for what it is on its face which is a statement of an expectation that the stock alone in some way would get du Pont an advantage.
Stanley Reed: It would influence --
Hugh B. Cox: Influence.
Stanley Reed: -- as the question (Voice Overlap) --
Hugh B. Cox: We do not accept it as evidence that Mr. Raskob, much less the du Pont Company, intended to exercise any power that the stock gave it to require or compel or indirectly control the freedom of General Motors. There's a difference between those two things.
Stanley Reed: Our compelled influence, are they all the same?
Hugh B. Cox: Well, I think -- what I'm speaking of in all those three words is the power to impose your will, directly or indirectly on someone else, so that he doesn't act with complete freedom.
Stanley Reed: Anything short of that is not a violation of the antitrust law?
Hugh B. Cox: It may be a violation in -- if it happens, but in terms of intent, I think it is reduced to a mere kind of expectation, Mr. Justice Reed. If they got a preference, then the fact that he anticipated it I think would make it impossible for him to contend that he didn't contend it.
Stanley Reed: He'd have to be successful.
Hugh B. Cox: Yes. Well, you've got to be in this kind of a case. Now, we're not dealing with a conspiracy case where -- and -- but -- again, I look -- it seems to me if you look at this thing in -- in terms of common sense or in simplified terms, if Raskob, when he made that prophecy or whatever he has taught, he may have been right -- he might have been right, he might have been wrong. It turns out he was wrong. The fact showed he was wrong. There hasn't been any restraint of trade. Now, really that on -- on a basis of common sense and in terms of what this statute was supposed to do, that should be the end of this matter. There shouldn't be any -- any problems about these metaphysical problems about intent and -- and control and that's -- that's what happened here. And the difficulty I think that the Government has is it cannot rid its mind of the natural preconception that somebody might have approached this case without knowing the facts in finding out what really happened. Now, I should like to go ahead deal very briefly with -- with tetraethyl lead. I have had to curtail the examples I wanted to give to show that we didn't get any preference, but they're in the record in the brief. The Government makes two points about lead and I want to deal with both of them if I can. One of them is that the fact that du Pont was chosen to manufacture tetraethyl lead shows that there was a -- that there was a tend -- some preferences given. Mr. Kettering testified without any qualification that he was the man who decided to call in du Pont. Now, stopping right there, there are some contemporaneous documents that corroborate this testimony that he was the man who decided it. He also testified that the reason he did it was because he'd been talking to du Pont's for -- off and on for years about some of the chemical problems involved in tetraethyl lead, but he respected their capacity. And there is some contemporaneous documents that corroborate that. He testified explicitly that the decision to call a man as far as he was concerned was not influenced in any degree by the stock relationship. Now, there isn't any document to contradict that. There isn't any evidence to contradict that. The judge made a finding on it. It seems to me that finding can only be rejected if we are to decide that Mr. Kettering is unworthy of belief. Mr. Sloan testified that he approved the decision and he told why he did it, and he said he knew what du Pont had done during the war in handling dangerous chemicals. He didn't know anyone else who was as good and he thought they were the ones to do it.Now again, nothing that impeaches or contradicts that testimony, no document. This is not Gypsum case and these are essential facts in this case. There aren't any -- there's not a choice, a question of a choice between -- between conflicting documents and conflicting testimony. So, there -- those are the facts about how that decision was made and why it was made. Now, Mr. Justice Frankfurter this morning said a very interesting thing which I would like to comment on the Government. Let me say this.We should remember what the chemical industry in this country was in 1922. We really didn't have any of it. It's a development after the First World War. The Government has never suggested in this case even by way of conjecture, the name of a company who would have been better qualified or equally qualified or even the name of any company who would have been interested in doing it. They had Mr. Kettering and Mr. Sloan there and they cross-examined them. They didn't ask them about any companies. It was -- if there had been no stock relationship, if you consider the experience that du Pont had had in making explosives and particularly if you consider the subsequent efforts that they did make to get other chemical companies to do this, the choice is -- is perfectly reasonable. And certainly, there is no basis for rejecting the findings in the absence of some kind of testimony that Mr. Kettering and Mr. Sloan testified a falsehood.
Stanley Reed: What was the arrangement made that was made in du Pont?
Hugh B. Cox: Well, roughly, the arrangement --
Stanley Reed: Financial related.
Hugh B. Cox: Roughly, the arrangement was this, Mr. Justice Reed, and from about 1922 until 1937, du Pont made tetraethyl lead and sold it to -- to the Ethyl Corporations.
Stanley Reed: Well, it's a patented product.
Hugh B. Cox: Yes, it was a patented --
Stanley Reed: Did General Motors continued to manufacture?
Hugh B. Cox: Yes or Ethyl Corporation I think owned the patents. I believe they were --
Stanley Reed: Well, it started out in General Motors?
Hugh B. Cox: Yes, it started out -- and the decision in 1922 was a General Motors' decision. Ethyl was not organized until 1924, I think.
Stanley Reed: It was passed to Ethyl.
Hugh B. Cox: That I think the patents went to the Ethyl Corporation.
Stanley Reed: And how -- General -- General Motors got all the stock?
Hugh B. Cox: Half the stock and the Jersey Company Standard Oil of New Jersey owned the other half, a vessel.
Stanley Reed: General Motors owned half the stock, du Pont have none?
Hugh B. Cox: No, du Pont had never had any stock in Ethyl at all. Its relationship was just a manufacturing and selling relationship until 1937 when it became a manufacturing agent for Ethyl and didn't sell anymore. And then, I think in 1946 to 1947, Ethyl when its patent expired, Ethyl went its own way. And today, the two companies are manufacturing and selling in competition. This lead situation has no current significance. Its only value to the Government is in evidentiary sense. They are not complaining as any present restraint of trade about lead as I understand it. They simply say it proves what happened in the past. Now, just let me say this. Does that answer your question?
Stanley Reed: Well, I wasn't clear and I still -- I -- I thought General Motors had a patent that was worth something to it and they -- they understood that it had a good patent.
Hugh B. Cox: Yes.
Stanley Reed: Now, Mr. Kettering had (Voice Overlap) --
Hugh B. Cox: Yes, that's right.
Stanley Reed: Then -- that -- that was disposed of, you say to the Ethyl Corporation.
Hugh B. Cox: Yes. I don't think the -- I don't --
Stanley Reed: In which the stock was half went to the Standard Oil and half went to --
Hugh B. Cox: Yes.
Stanley Reed: -- retained by General Motors?
Hugh B. Cox: Yes, that's right.
Stanley Reed: So the du Pont never had any interest in it at all, except it was employed to develop the --
Hugh B. Cox: It was employed is --
Stanley Reed: What it alleged --
Hugh B. Cox: It was employed to manufacture the tetraethyl lead.
Stanley Reed: And it was paid for that work?
Hugh B. Cox: It was -- it sold the tetraethyl lead to Ethyl Corporation and made its profit out of the sale.
Stanley Reed: What page? So, General Motors got its profit from the --
Hugh B. Cox: From the sale of the tetraethyl lead which it got half of the profits of tetraethyl lead. And the Government, I -- the -- well, I won't go into that but that was the nature of the arrangement. I -- I don't think the Government charges that du Pont took the patent. I think it charges rather that we seized upon the opportunity to get into the manufacturing. Perhaps, somebody else might manufacture. That's the -- the nature of the charge there, I think.
Stanley Reed: I understood that they thought that you gave that -- General Motors gave you an advantage.
Hugh B. Cox: Well --
Stanley Reed: -- while -- by -- so that you could make money out of it.
Hugh B. Cox: They did. That's the contention and du Pont did make money out of it. It made quite a lot of money out of it, Mr. Justice Reed, but our position here is that it was perfectly proper arrangement made for the reasons that Mr. Kettering and Mr. Sloan said. The -- they didn't want to manufacture this. They knew they would -- it was dangerous. They wanted a chemical company. They wanted somebody who had experience in handling dangerous commodities and they chose du Pont. Now, by-and-by they made arrangements with Standard to manufacture and they let Standard start out with the same size plant that du Pont started out. And their original choice of -- of -- du Pont was fully justified because Standard unwisely used a process or method of manufacturing rather. Not a process but a method of manufacturing that du Pont saw and said to them, “You'd better not do this. This is dangerous.” And they went ahead and they -- there was a disaster in that plant which they poisoned the entire working force. And that cured the -- by and large cured the Jersey Company. They didn't want to have anything more to do with manufacture. They continued in distributing them. Now, it's quite true what Mr. Davis says that there were people killed in the -- in the du Pont plants but the significant thing about that disaster is that -- that it -- it was a thing that -- that kept the Jersey Company thereafter for manufacturing. It's also significant that du Pont never did anything in the same kind the Jersey Company did. No two accidents in the du Pont plants ever happened for the same reason. They never -- never poisoned an entire staff of the factory because they -- they did it carefully and gradually, but I'd really think that sense [Laughter] But -- I think that it would pass [Laughter]. I appear that I misspoke.
Earl Warren: Mr. -- Mr. Cox, I -- I understood Mr. Davis to -- to think there were some significance to the -- to the informality with which General Motors turned this patent over to du Pont without any -- without any deliberation, without any negotiation, just sort of turned it over to them and then at a later date, they reduced it to a contract. You -- you seemed to feel that -- that wasn't dealing at arms length as you would expect between a patentor and a manufacturing company.
Hugh B. Cox: Mr. Chief Justice Warren, I think that if you could read the documents and the testimony of Mr. Kettering and Mr. Sloan that that would be quite understandable. Mr. Kettering had been dealing with these people and it wasn't -- it wasn't quite as informal as Mr. Davis suggest. The -- I think first, Mr. Irenee du Pont went out and visited with Mr. Kettering the laboratory in Dayton and there were some arrangements made. It was -- it is true that the arrangements initially were made without the execution of a formal contract and we don't dispute that, but I don't believe that fact quite bears the significance that Mr. Davis tries to put on it. And certainly, it doesn't establish really that the choice was dictated or controlled by preference. I think it's -- if you read the testimony and look at the documents, particularly the contemporaneous documents, I think you'll get a very different impression to that.
Earl Warren: And also, the -- you figured there's no significance to the fact that when du Pont signed it for General Motors and the other du Pont signed it for the du Pont --
Hugh B. Cox: Mr. Chief Justice, well, we can't --
Earl Warren: I -- I'm just asking.
Hugh B. Cox: No, we can't deny that in that period from 1920 to 1923, Mr. Pierre S. du Pont was President of -- of General Motors and of course, he did sign it. And if that -- if that fact overcomes the testimony of Mr. Kettering and Mr. Sloan about why this thing was done, they were the people who really made the decision. There is no suggestion that Mr. P.S.du Pont really had any active part in it. It's that formal fact that he signed the contract, overcomes that testimony. I fear we have no answer to it. But again, I think if you read the testimony and look at the document and consider that -- that formal of that act, it becomes clear that there wasn't any -- there wasn't really any lack of arms-length duty. There are other documents. I must say this, Mr. Chief Justice Warren, in this record which shows that Mr. P.S. du Pont was highly scrupulous when he was president of General Motors in dealing with these intercorporate relationships. And there is either -- even documents written to him by the people in this one document, I remember in the du Pont Company, which shows the consciousness of the fact that they couldn't expect him to do anything for them while he was president of General Motors. Those are not contrived after -- as they were written 25 years ago and I think genuine expressions of the attitude of which these men were in discharging their responsibility. Again, I think if you look at all those things together, you get a very different impression. I can understand why Mr. Davis would think it's -- it's clear but of course things of that kind is sometimes done in business here or inference were made on that basis. And certainly in this case record, I think you loose any doubt that it might be clear. It is not impossible for me in the time that I have because I want to reserve time for Mr. Sloan to deal as fully with the question of intent. As I should like to, I have intended to speak about more details about Mr. Raskob. I think I've said as much as I shall. I do want to say this that there are -- those -- there are two letters in this record and only two letters in which a man in du Pont, writing to somebody in General Motors, referred to the stock as a means -- in connection with a sales effort. Those are the two letters that Mr. Davis mentioned that Lammot du Pont wrote to the Fisher brothers back in 1922 or 1923. Now, there are some letters inside General Motors referring to the stock and I think there's one -- one or two letters inside du Pont intra-company. But those two letters from Lammot du Pont are the only two letters at the time in the record, 34 years and I invite the Court to read those letters because I think they don't really bare the -- quite the construction which the Government puts on. It's truly mentioned to stop but hardly enough he mentioned it when he made much of it in this kind of a context. He said, “You really ought to buy from us. We're a stockholder and you can be sure that we will give you the best possible treatment. We'll give you a preference over other people because we do own the stock.” It's also perfectly clear from those letters that he recognized that he had to sell paint and that's what he was talking about on the merits because the whole burden of the letters except for the -- the reference stock was. “What's wrong with our paint? What can we do to improve it to make it satisfactory to you?” Now, there is one more to --
Hugo L. Black: What -- what was meant by the statement, “We'll give you a preference?”
Hugh B. Cox: He said -- I think what he was thinking of, Mr. Justice Black and I think the text bears this out that if you should get into a position where there was short supply, this is pretty clear from the letter. He said, “We'll -- we'll take care of you as against everybody else except somebody else in General Motors.” He thought he was thinking ahead of the time sometime and they wouldn't -- perhaps, there would be a shortage of paint or something of that.
Hugo L. Black: Suppose the evidence showed that was a practice, what would you say about that? Would that have any difference -- make any difference on your own?
Hugh B. Cox: I don't believe it did because I understand that the Government -- that's one thing the Government doesn't charge us with. They don't say that there's anything -- that we gave any preference -- that du Pont gave any preference to General Motors or did anything wrong that it would raise some questions. And one more thing that I -- I should like to say because I --
Stanley Reed: (Voice Overlap) before you start on that, what -- what do you have to say in regard to whether this is a combination or not? Do you concede that?
Hugh B. Cox: Mr. Justice Reed, I am -- I am prepared to say that -- that if it restrain trade --
Stanley Reed: It would be a combination.
Hugh B. Cox: It would be a combination. I don't -- I think there maybe some questions about it, but my -- my stand today is on the fact. There is one more incident which because I think it's a kind of an epitome of the Government's case that I'm going to call the Court's attention. It's something that Mr. Davis talked about, and I -- I think it will serve to illustrate and make my point finally. He talked about Mr. Pratt and he talked about a letter that Mr. Pratt wrote to somebody in Delco-Light about paint, and that's a pretty good letter from the Government's point of view. If I were in there to choose, I would -- would emphasise it too. Now, in that letter, it was quoted two or three times I think in their brief. Mr. Pratt said in effect, “Du Pont came to the rescue of General Motors in 1920, and they prevented this company from going into receivership,” which is true by the way. And I think if all other things are equal, probably, they ought to get. If they can get it on the basis of price quality and service, they ought to get a part of the business, major part of the business. That's the letter, and Mr. Davis says it's like an iceberg and it is like an iceberg in that one respect that there's a great deal beneath it that I'd like to tell you about because I -- I think it illustrates the danger of dealing in this case in fair fragments which is -- I think the tendency the Government have. Here is what happened in that case. Delco was buying a varnish from a competitor of du Pont's and it was spraying all around on some appliances. It changed its method of operation and had the dip in this product it was getting from the competitors, it didn't work. So, they -- they heard that Chevrolet was doing some dipping and they said to Chevrolet, “Where do you get your paint?” Said du Pont. They asked du Pont if it could develop a paint and said it could and it did. It developed a paint that would dip. And Delco gave them an order for one carload, and before they could deliver the carload, they got a telephone call or wire from Delco saying, “Don't deliver it. We have decided we'll give our old supplier a chance to do this, get this business anyway.” And then Mr. Elms who was an old personal friend of Mr. Pratt has told he had been treated unfairly. So, he wrote a letter to Mr. Pratt and Mr. Pratt read that letter over the telephone to Mr. Bekaert, a man in Delco and said, “What about this? And then Mr. Bekaert wrote back and he said, “Well, here is the situation,” and he explained it and he said in his letter, “we are looking into it. I find that our engineering people think they might do better to deal with du Pont." And then he wrote another letter saying, “We find out we can buy from du Pont more cheaply than we can buy from this local supplier.” And then what happened? Well, they took the one carload from du Pont and that's all that business du Pont ever got. They went back. They went back to the old supplier and continued to buy from him from that time on. Now, that's a microcosm in a sense of the Government's case. It's got everything including the fact that Mr. Bekaert got a very handsome allotment out of his manager's security plan that the Government says would influence these people. And we have Mr. Pratt writing a letter and yet it didn't happen and that's -- that I see is the ultimate comment on his case. Now, I maybe wrong about the facts in this case, counsel sometimes are, but I am sure the facts are here. And as I conclude, there are just two points I'd like -- I'd like to make. We submit that the case should be decided on the facts. You think it should be decided on all facts and not just part of the facts, the fragments, fragments of the fact and it's on that basis that we submit our case and ask the judgment of the District Court to be affirmed.
William O. Douglas: Who's going to discuss the Clayton Act?
Hugh B. Cox: Mr. Stern is going to discuss the Clayton Act.
Earl Warren: Mr. Stern.
Robert L. Stern: May it please the Court. The major portion of this argument allotted to me have been to -- to the questions of control and what questions of law remained to be discussed after we finish discussing the facts which we think are most significant here. Before getting into the major point, I'm going to discuss the question of control. I want to correct both Mr. Davis and Mr. Cox on one of these percentage figures which the Court may think is of some significance. That 93% of everybody has been talking about on paint, was a figure for 1941. The Government's own brief says that figure for 1947 is 83%. If you take out -- the reason I mentioned, that's on page 64 on the Government's brief. If you look at the -- if you take out Ford & Chrysler, 83% as we analyze in our brief isn't really disproportionate at all. It was mathematical. Taking out Ford & Chrysler would be about 80%, so I just make that little correction. Now, I also want to say a word before I get into the question of control about the -- this antifreeze episode way back in 1925 and 1926 which for some reason, the Government thinks is so significant now. Of course it has no significance now at all, it's supposed to show some favoritism back then. But the Government says that -- is that the General Motors deliberately slanted its manuals so as to favor alcohol which du Pont was making as against glycerin which other people were making. Well, all General Motors did was provide eventually that its manuals would state, “Alcohol is cheaper and hurts the paint and glycerin is more expensive.” It will work properly as Mr. Davis said unless things aren't fitted correctly and then it may severely damage the motor and nobody suggest that isn't true. The Government says that's slanted because the damage to the motor without -- where the damage to the paint in the eyes of the motors is as it would. “But it was true, and even the glycerin manufacturers according to the record didn't -- didn't object to that statement, only the Government objects to it. And how is it unfair or unreasonable for General Motors to give it to make a true statement impartially for the benefit of the public which buys alcohol or glycerin antifreeze, we have some difficultly in seeing. Now, Mr. Davis said, “But General Motors bought glycerin itself, which shows that it really didn't believe alcohol was better.” Well, there again, there's a little confusion. As far as the record shows, General Motors didn't buy -- didn't start buying glycerin about seven years later, 1933 to 1936. By that time, the industry, the people who -- who serviced automobiles were permitted with it. They knew how to tighten up automobiles so it wouldn't hurt the motors, we all use it today but that wasn't at the time of this particular episode. The emphasis the Government puts on it that our mind indicates how far they've got to go to try to -- to try to make a factual case here. Now, on this question of -- of control, it's a basic control or whatever the Government now calls it. They called it control all the time in the case up to now, but now, they're diluting it and diluting it and diluting so I don't know if that really is control anymore or not. What they said in their briefs was that this control is a -- is a power in du Pont to direct, sometimes say to influence, the business policies of General Motors closed again in economic advantage over its competitors. Now, there are two aspects of that which are important.First, it's a -- it's a power as they defined it in their briefs at least. And secondly, it has to relate to business policies or trade because of this -- this case relates to restraints of trade and we're not talking about anything else. Now, what does power mean? It means normally in this context that one group of men can make another group of men do it at once. And here, the question is, "Does the du Pont Company, the du Pont directors or officers, can they make the General Motors officers or directors do what they want?" We know that in corporation laws, it's often thought that minority stockholders have great power but their -- the substantial minority is here but it's also -- also were recognized that the management may have great power. And the question here is does the minority stockholder cannot tell the management what to do? That's an issue of fact. Nobody denies that and it's determined on the basis of the facts of each case as this Court has -- has several times held. Well now, the Government seems to be backing away from this a little bit. They say that the -- they admit that the General Motors executives are independent people that they won't do anything contrary to the interest of General Motors, but they still say that they were put in by the du Pont people, Mr. Sloan at least who was in -- in power from 1923 to 1946. Presumably, he appointed everybody in that period or the people he appointed, appointed the other people. And therefore, necessarily, du Pont had infiltrated the management. The only specific examples they would have to refer to on that are Mr. Sloan if you can call him a du Pont man.He was promoted on his merits entirely from within the company after he impressed Mr. Pierre du Pont of how capable an executive he was. The Government makes a lot of the fact that Mr. Pierre appointed him, but that's the only thing the record shows as to the reason. Mr. Pratt, he is also called by the Government a du Pont man. I refer Your Honors, I'm not going to read it, to General Motors' Exhibit 201. It's on -- most of it is quoted on page 20 of our brief, but I commend that to you to find out how much of a General Motor of a du Pont's dude Mr. Pratt was. He told the du Pont's of a lot whenever he was dealing with Mr. du Pont. When he was dealing with some of the subordinates, he would do them very occasionally. Well anyhow, let's get back to how these executives that infiltrated General Motors so they would -- so the General Motors people would do what du Pont wanted. We don't have to speculate as to this, as to whether they would -- du Pont minding which is really what the Government is talking about. Mr. Raskob, you've heard about. He is the man who in 1918 predicted that General Motors would be controlled by du Pont. Look what happened to him in 1928. In 1928, he became Chairman of the Democratic National Committee and Mr. Sloan didn't think that was consistent with his job as spokesman and Chief of the Financial Department of General Motors, and he told him he had to resign one job or the other. The whole du Pont family came to the support of Mr. Raskob. They thought it was all right for a man to be in business and in politics at the same time. This included the Republican du Pont as well as the Democratic du Ponts. There were some Democratic du Ponts. [Laughter] But, what happened? Mr. Raskob was forced to resign and all of -- later, he remained in the General Motors Board of Directors. Never again was he a member of the General Motors executive branch. And Mr. Pierre du Pont who was the Chairman of the Board as you've all heard, he resigned because he was so angry at what Mr. Sloan did to Mr. Raskob. And Mr. Raskob --
Hugo L. Black: What did you say they -- they've made Mr. Raskob resign?
Robert L. Stern: Yes.
Hugo L. Black: Why did you say -- what would you say was the reason?
Robert L. Stern: He resigned because Mr. Sloan didn't think he should be Chairman of the Democratic National Committee, at the same time, he was the Head of the Financial Department of General Motors. He didn't put it on political grounds, Your Honor. He said it would have been the same if it'd been a Republican Committee.
Hugo L. Black: Where are you at? [Laughter]
Robert L. Stern: But Mr. -- Mr. Coleman du Pont, Ex-Senator Coleman du Pont supported Mr. Raskob, so this isn't a part as it matter at all, Your Honor. In any event, the great power of the du Ponts over General Motors as Mr. Raskob had predicted didn't protect Mr. Raskob 10 years after he made the prediction, which supports what we have said already about the trade relations. Whatever Mr. Raskob predicted in 1918 as to du Pont getting a General Motors business was in a couple of years just proved it wasn't so. They competed for it just as they did for anything else. Well, there are number of other incidents in which the du Ponts made suggestions to the General Motors people, told them what they thought should be done. I haven't got time to go into many of them in the argument, there in our brief. The whole du Pont family opposed Mr. Sloan's ideas as to reorganization of the General Motors Committees in 1937. All three du Pont brothers and Mr. Carpenter I believe, but Mr. Sloan went ahead and reorganized the committees as he wanted to have it done. In the chapter of the lead episode of which -- of which you've heard, Mr. Irenee du Pont didn't want General Motors to negotiate with Standard. Oil, he said du Pont should negotiate with Standard Oil. But Mr. Sloan went ahead and joined with Standard Oil informing the Ethyl Corporation without even telling the du Ponts about it. Mr. Irenee du Pont opposed Sloan's policy of specifying to get standards for ethylized gasoline. He opposed Sloan and Sloan is the one who insisted on closing down the ethyl production plans after the disaster at Bayway which you've heard about. All of these things Sloan did or at least they did what Sloan wanted and not what the du Pont's wanted. And finally, the du Pont's opposed the Ethyl Corporation going into the production of gasoline which eventually brought them into intense competition with the du Pont Company but they went ahead anyhow and did it. That doesn't sound as if General Motors or the Ethyl Corporation for that matter was controlled by du Pont. Well, now, the Government now says that it doesn't deny that the General Motors official's act could always in the interest of General Motors. And I call your attention to the findings which are unchallenged on pages 316 and 321 of the record. One sentence on 316 says, “Sloan's testimony on the record as a whole as convincing that at all times, he acted independently and steadfastly in the interest of General Motors.” That's an unchallenged finding." And then if you turn over to 321, the Court said about the same thing or this time, he included all of the top General Motors executives in the finding, right in the middle of 321. It's also unchallenged. He said, “Sloan, Kettering, Pratt, Lawrence Fisher, Lyna and Wilson are among those who would have been influenced if the Government's testimony is correct.” These men, the record shows, acted at all times solely in the best interest of General Motors, and I think that means they weren't considering du Pont at all certainly in the context in which it has spoken. They were thinking only of General Motors. Now, what does the Government mean then by this control which it's talking about? I think it comes closer to what Mr. Justice Frankfurter was suggesting earlier. It really isn't a control at all. It means that in the field of purchasing, if a product is sold by du Pont, the General Motors people will look at it and if they think it's about as good as -- as the competitive product, they'll buy that without being told. The significant thing is they make the decision. Du Pont doesn't make the decision. Du Pont doesn't tell them what to do. It never has told them what to do except in these sales efforts to which Mr. Cox referred as to Lammot du Pont. Mr. Cox in the haste to finish the time he had available over, he forgot to say that all those efforts by Lammot du Pont were successful. He never made any of those sales he was trying to make when he referred to the stock interest. Well --
Stanley Reed: Well, whom -- whom do you mean when you say they and General Motors, the executive officers?
Robert L. Stern: Well, that comes to the point I'm about to -- I'm about to make that differentiation, Your Honor. The record indicates that all that General Motors is purchasing except during the period of the General Purchasing Committee are made by the buyers for the -- for the divisions, the people whose credibility the Government doesn't challenge and whom it admits buys on the merits. Now, I would like to give a couple of examples about that. The one Mr. Cox cited about plastic for steering wheels isn't in the briefs, the one where the General Motors buyer said that he didn't give a damn of who produced the product, du Pont or anybody else. That's Exhibit -- du Pont Exhibit 401 if you are interested in following that dramatic expression up. Mr. Weckler who was a disinterested witness who bought for Buick for 12 years, but by the time he testified, he'd been with the Chrysler Company for 20 years ending up as General Manager of Chrysler. When asked why he bought Duco for Buick, was he motivated in anyway by filling if there was an obligation of favor that du Pont Company, he said, “No, sir, and that's an idea that never occurred to me. And I never know in my experience that the Buick Motor Company had any difficultly in buying any material from anyone at anytime." And the antifreeze buyer who -- present General Motors antifreeze buyer testified.” For a while, they bought almost all their antifreeze from du Pont until sometime after the war when they found that somebody out -- they could get it from somebody else on better terms and they turned to this other supplier. So at that -- by that time, only automobile bought antifreeze from du Pont. He was -- he said, “No one ever indicated to me that we should favor du Pont. When you are running a big organization, you just can't run it with a lot of strings tied to it.” "Were there are any strings tied to your purchases of antifreeze?" "Absolutely not." There are some other -- some other exhibits as to casehardening, a du Pont report. This is a contemporaneous document written in 1931. There is only a slight difference in price that's favoring us, du Pont, and practically no difference in composition between ours and the competitive result. But here again, prejudice is against us, that's at General Motors. These instances are typical of the bias which exist in favor of some of our competitors in their materials, irrespective of price. And I mean you can call that a salesman's exaggeration. He was running to his own people, this wasn't prepared for the Court. And another du Pont report in 1934 on break clearly says, “Contacts at General Motors' research laboratories have been much less satisfactory than anywhere else. In fact, only there have we met other than a cordial reception.” And he points out how they're selling Chrysler in Rio, the very same products. They can't even get a reception on it, the General Motors research laboratories. Those are exhibits also not in the briefs, du Pont Exhibit 369 and 384. This record was just so vague that we couldn't find evert -- think of everything in time even to put in this big reason and they're also pretty big as you may have observed. There is some talk about arms length -- absence of arms-length bargaining here of the very fact that they couldn't -- that du Pont couldn't sell to General Motors all these times when it tried to. Proves arms-length bargaining in itself, but there are great many general agreements situations which show arms-length bargaining. And I'd like to call the Court's attention to a passage on page 1905 of the record to 1906 in which a du Pont representative told about his difficulties in bargaining as to a price for the sale of stock of the Kinetic Company when du Pont bought it from General. As I won't read that, it will take too long but I -- the bargaining took 10 months before they could agree on a price and on a basis that it was even greater length and arms length, the record would indicate. Well, the Government didn't want to talk about the people who do the actual buying and selling. It wants to talk about the central management of General Motors. It doesn't attack the credibility of the buyers and sellers who testified they weren't influenced by the stock ownership. So far as I can see, it doesn't attack the credibility of the officers of General Motors. It admits in its reply brief that Mr. Sloan was credible. That means it isn't attacking his -- his credibility and it doesn't seem to attack anybody else's. It doesn't attack anybody's credibility, it just asks this Court to make findings that everything they testified too was wrong which is just about the same thing because no documents clearly require any such conclusion. But the only time when the general management had participated in the buying for General Motors was in the period of -- of the General Purchasing Committee, 1923 to 1931. That Committee was composed of the leading buyers for the General Motors divisions, Mr. Pratt, Mr. Sloan, Mr. Lyna who was the executive secretary and one or two other people from the central management. The Government originally said that that Committee was the heart of the conspiracy. Now, they don't want to talk about it at all. There, the trial court made findings that actions taken by the Committee were seriously detrimental to du Pont in a number respects and that it dealt with du Pont only in the same manner as it did with other suppliers and the Government doesn't challenge that finding. Now, the philosophy of that committee which was headed by Mr. Sloan and Pratt, the people of the Government says were du Pont representatives, the people who du Pont put into General Motors, is stated in the letter by the secretary, Mr. Lyna to a du Pont affiliate. This isn't -- this isn't something written for the trial in 1928.He says, “They were trying to get some business.” And he said, “In the making of our purchases, we believe that each transaction sustained on its own feet and its own merits. If the quality of your product and service consistently with prices quoted are the best he can obtain, he will buy it from you.” That means the General Motors Division. There's a contemporary document that General Motors Exhibit 201 to which I referred you is another example of Pratt's speaking for the General Purchasing Committee. Now, this committee headed by the top General Motors executive in the period closest to Pierre's presidency in General Motors. In fact, it was appointed originally by Pierre du Pont. It made strenuous efforts to get a competitive product for Ducos, as soon as Duco is invented to make sure that General Motors would buy from other Corp companies as well as du Pont. It insisted upon a two-source of supply policy across the Board not just for du Pont, but it wanted to make sure that they would have other sources of supplies in du Pont as well as from other people, not at that the result of reducing du Pont's sales although everything else was equal. Nobody contended at that time Duco or du Pont products weren't as good as the others but they wanted to have other sources of supply. Importantly, the -- this Committee insisted and got du Pont to grant what is called a “super discount,” a greater discount than other people were giving, overall discount in order to get increased business. They weren't just allowed to meet somebody else's price, they had to give a bigger discount to get the business. That doesn't sound as if these people were motivated by a desire to favor du Pont. Now, this Committee operating in the field in which -- closest to that in which that Mr. du Pont was the President of General Motors, and we don't deny that -- he control General Motors in a sense between 1920 and 1923. The judges' finding was that since then, there hadn't been any control. This Committee not only didn't favor du Pont, if the Government has completely given up on the strong argument it made in the court below that there was any favor to them as a result of that Committee's activities. Now, one other fact --
Earl Warren: Do you contend Mr. Stern that the control ended in 1923?
Robert L. Stern: Well, in one sense, Your Honor. There wasn't -- only in those three years, Mr. Pierre was the President of du Pont. Theoretically, as president, he could have made them do what he wanted.Actually, the record for those years shows two things. First, all the main steps he made were in the direction of getting out of lessening du Pont's control of General Motors. Secondly, when it came to these purchasing matters, he wrote letters indicating he was interested in what -- of the amounts du Pont sell to General Motors, but he kept his hands up. On these two sources of supply powers, he said, “I disagree with that policy but I can't -- I'm not going to say you can't do it.” So that -- although he was a chief executive, there was no more favoritism in purchasing for General Motors during that period and there wasn't any other. As to general control, I can't say he didn't control during that period.
Earl Warren: All right. Now, when did this control cease?
Robert L. Stern: His control as chief executive ceased when Mr. Sloan became chief executive in 1923.
Earl Warren: Do that -- that mean also that the control of du Pont over General Motors ended at that time?
Robert L. Stern: To that, it certainly, if -- if you call what happened before their control and in the sense it was, it ended at that time and it's been going -- and whatever participation there has been by du Pont and General Motors, I guess has been going downhill ever since, the -- well, let me get into some of these other (Voice Overlap) --
Earl Warren: For instance, the -- the reason I ask you is because they retained the voting rights on all the stock, the difference between 38% and --
Robert L. Stern: Oh, I see what you mean.
Earl Warren: -- and 23 for a number of years. The last of it is about 37%, I think 38%.
Robert L. Stern: That's right. That's -- that's right.
Earl Warren: Now (Voice Overlap) --
Robert L. Stern: Well, they retained -- the voting --
Earl Warren: Do you -- how do you make the dividing line?
Robert L. Stern: The voting -- the voting state retained up to 37% or 38% up to an upper -- a lot more than 23% of the voting rights. It doesn't appear that they control the company during that period. Mr. Sloan and his assistants controlled the company. That gets down to these other factors. We don't think that 23% or for that matter of 38% necessarily controls the company. Its -- its evidence from which an inference can be drawn. But the fact, the most important facts as to whether one company or one group of people controls another is -- is, did they control them to -- could they make them do what they wanted? I think the Government has given up on that, Your Honor. It doesn't say that du Pont could make -- du Pont people could make the General Motors people what do if they wanted, a lot further back in 1937. But I had also -- supposing they control it up to 1937. This case wasn't brought to 1949 and now, its 1956, you find it 1956. You don't grant relief under the Sherman Act for things which terminated at least 12 years before a suit was brought and -- and we don't think there wasn't any control up to that period. The Government stresses membership on the Board of Directors. Well, the trial judge found and that this finding isn't challenged that Mr. Sloan or the president picked the management members of the directors. They were the majority of the directors at all times and they were elected automatically after he picked him. He didn't consult with anybody as to that. There were five or six du Pont directors. There were some outside directors as to which everybody was consulted which everybody agreed on, but the trial judge found that -- that didn't show that these outside directors were du Pont representatives even though du Pont's like others were consulted and sometimes suggested who should be named as outside directors. But the Government -- Government also stresses du Pont membership on committees. Now, I haven't got time to go into that except to say, and there's one thing about the committees as another thing about the Board and the committees together. The Operating Committee, the only one which would have charged of purchasing or things of that sort hasn't had a du Pont on it since 1946. And for the prior period when there were two committees, it didn't have a du Pont under there after 1934, from 1934 to 1937. But more importantly, neither the Board of Directors nor any of these committees so far as the record shows, there was anything to do with purchasing or the types of transactions we're concerned with here. In fact the record shows the contrary because the affirmative evidence was that they didn't deal with any of these things, and in a corporation as big as General Motors, he wouldn't expect the Board of Directors to be concerned with the kind of things we're dealing with here. Now, the one thing the Government lays great stress on is the compensation plan system. The Government says that because an original compensation plan in effect between 1923 and 1930, that was the last date, gave the General Motors executives tremendous amounts of money which it did. They were necessarily loyal to du Pont from hence -- form hence forward I assume. Now, the General Motors compensation plans provided and remained except for these two plans, one of which expired in 1930 that bonuses are paid of certain percent of the return now to about up to 10,000 of the employees of General Motors. Now, what they get depends upon how well the company does, how well their individual division does and how much they can contribute to it individually. There isn't a shred of evidence to show that any of them were influenced or that anybody tried to influence them by -- in relation to what they did for -- for the du Pont Company. The Government -- in fact, the evidence shows that -- that these plans are just a contrary effect as one -- one witness, Mr. Carpenter of du Pont testified. He said it would have just the reverse effect. These men know that the amount they get depends upon how much General Motors makes and the du Pont Company could go bankrupt for all the effect it would have on their compensation.
Earl Warren: Did I understand Mr. Davis correctly when I thought he said that -- that in the early days when Mr. Sloan, Mr. Raskob and the other people who were shown in this exhibit as having gotten this big stock interest for one-tenth of the --
Robert L. Stern: Yes.
Earl Warren: -- the value in the couple of years, were selected by the -- well, yes, that's right.That's -- that's what he said. I think about 80,000, wasn't it? And --
Robert L. Stern: Well, I think --
Earl Warren: -- 80,000 they paid. In about two years, worth two million, isn't it?
Robert L. Stern: Well, let me make two comments on that, Your Honor.
Earl Warren: No, I was going to ask you this. Is it correct that they -- that du Pont selected those men who were to get that?
Robert L. Stern: No.
Earl Warren: I'm -- I'm mistaken on that.
Robert L. Stern: They were selected by a committee of three men of which Mr. Pierre du Pont was chairman. The other two people had nothing to do with du Pont. The record shows that he selected that that committee made a list of people, a lot more than a 100 or 80 to 100 who eventually got these amounts. It wasn't just a few people, 80 to 100. Then, that list was submitted to Mr. Sloan and he made a lot of changes in it. And the record shows that no one objected to any of his changes. They were taken just the way as his nominations always were from then on.He is at the dominations of the heads of the committee. At the present time --
Earl Warren: Well, he was one of the beneficiaries, wasn't he?
Robert L. Stern: Well, he didn't determine --
Earl Warren: (Voice Overlap) --
Robert L. Stern: No, he didn't determine his own compensation. The committee, not in determined the compensation of Mr. Sloan and some of the other executives. Now, they've been very careful about that. That comes to the other committee which the Government says has control of these bonuses. That's now called the bonus and salary committee and it has had two or three du Pont representatives out of five of its members in the last 10 or 15 years since it was created. The reason for that is that they exclude from that committee all management people who might be eligible for bonuses and that -- and a large proportion of the directors who are left are du Pont representatives. But more importantly, you may say, “Well, that still gives them control.” But the fact is, that committee doesn't look and see it, tell to decide how much each of these 10,000 or more people is going to get. It just passes upon the general program, possibly determines how it can be allocated between the divisions of the company. And the evidence affirmatively is that the amount recommended by the president of the company to that committee has never been changed. Now, that -- so, it's just fictitious to say that the General Motors people must be in fear but if they don't cartel to the du Ponts, their bonuses are going to be cut. That just is imaginary, it never has happened. And the uncontested findings of the trial court, on pages 320 and 321, I don't have time to read them, hardly contested and partly uncontested, support what I have said. And the part that uncontested is sufficient to show that there's no evidence whatever to support the inference the Government wishes to draw and it's contrary to all the testimony. Now --
Stanley Reed: The charge -- the charge of the Government here is that it was a purpose planned by (Inaudible) what the -- are you going to discuss that (Inaudible)
Robert L. Stern: Well, I'll be glad to, Your Honor.
Stanley Reed: If -- suppose they failed to do a -- to accomplish what they started out to do?
Robert L. Stern: Well, the Government's case --
Stanley Reed: Taking -- taking Mr. Raskob's statement to start of, assuming that -- you assumed that, then do you have to prove some necessity?
Robert L. Stern: You have to -- the Government's cases consist of three elements. I think that on their own theory, they've got to prove at least two of the three. They seem to think any two were sufficient. They've got to prove either power and intent, that's one of their theories. Assume that Mr. Raskob's statement was in 1917 intent or they've got to prove actual restraint plus intent or just actual restraint without intent. They might -- might not be necessary. We say that if all you have is an intent in 1917 and they haven't cited a thing to show that intent after 1917 or 1918 and Mr. Davis doesn't mention anything else when you asked him. But even if you assume the next couple of years after that, I don't think it makes any difference. All the conduct from then on shows that whatever Mr. Raskob may have intended in 1917, that isn't -- hasn't been any -- an intention for at least 25 years. And we're not dealing with a 1917 case now, we're dealing with a 1949 case. Secondly, if you assume an intention that the du Ponts all along intended, “We're going to make General Motors buy from us. We're going to sell to them everything we can because of our stock relationship,” and nobody paid any attention to it for 35 years. They never sold any because of that or dribble out of a great amounts that have been sold. We don't think that would be a restraint of trade. The reason that power and intent together sometimes been said to be illegal, particularly under Section 2 of the Act is because they lead to -- definitely would lead to a restraint. Well, when you haven't had a restraint for 35 years, to our mind, the intent alone becomes irrelevant and what's more. You can't have both power and intent for 35 years and not have anything that result from it. If you had -- if you had intent and no restraint, there couldn't be power because it just wouldn't work. And if you had power during that period and there was any restraint, you couldn't have intent. So, you couldn't have the two together and this need -- this Court has never said and the Government doesn't even suggest that just an intention for violating antitrust laws or even the just control violate the antitrust law.
Stanley Reed: You -- you had a stock ownership that was important at least in stockholders meaning, and -- and you had du Pont representatives that were on the Board at all times.
Robert L. Stern: Yes, Your Honor.
Stanley Reed: So, you -- you had at least power to influence (Inaudible).
Robert L. Stern: Concededly, you might, Your Honor. The record shows --
Stanley Reed: Some power.
Robert L. Stern: What?
Stanley Reed: Power.
Robert L. Stern: He didn't have power. You had five or six representatives on a board of 34. Now, they -- whether they did have any --
Stanley Reed: I didn't say control. I said influence.
Robert L. Stern: I -- I know, Your Honor. Well, they might have at first -- they conceivably might have if there was no other evidence in the record. We're talking about trade now. We're not talking about everything across the board. If there was nothing else in the record but 23% of stock in five or six members of the Board enlarged purchases, maybe you could infer what the Government wants you to infer. But when you show what the system of purchasing was that it -- that it had to -- it was done by the buyers and then sellers, when it's admitted practically now that they aren't influenced at all.
Stanley Reed: Assuming they had a prima facie case you -- you embed it and overcharge it. That's your position.
Robert L. Stern: They might have had a prima facie case if that's were all this case is and they argued at least in their briefs, Mr. Davis has in particularly orally as if all they have to do here is to make out that prime facie case, but of course that isn't so. We've got findings if they never did just have to make a prima facie case. And now, they've got findings against them. They're going to make out a case. The judge was clearly erroneous. And if --
Felix Frankfurter: Mr. Stern?
Robert L. Stern: Yes.
Felix Frankfurter: I gather, Justice Reed suggest that there might have been resistance, a successful resistance if you will by general voters to a desire as a part of -- of du Pont then sell those combinations to many -- several people involved, and that's your proposition. To themselves that that it -- it will have desire and exerted as much power as they could but were blocked by General Motors. That wouldn't be your (Inaudible) but what Mr. Justice asked.
Robert L. Stern: Well, that's right and when -- when my answer isn't -- that -- that's his suggestion. I don't mean that's -- that's certainly what happened.
Felix Frankfurter: That's what they can with their power or intent on the power that that exclude all ineffective power.
Robert L. Stern: Well, it --
Felix Frankfurter: The other term for ineffective accomplishments of the intent because of its inadequacy of power.
Robert L. Stern: Well, if it's inadequacy of power, it isn't power.
Felix Frankfurter: What?
Robert L. Stern: I -- I assume when you say inadequacy of power that's sufficient for our purposes.
Felix Frankfurter: So that would mean you must have completion of this prohibited desire --
Robert L. Stern: No. Not -- not in all circumstances but when over a long period of years shows that you -- shows that it doesn't come to completion and it's fervently --
Felix Frankfurter: But you argue there's no intent.
Robert L. Stern: Not only can argue as no intent. You can argue either no intent or no power but there can't be both. Now, --
Hugo L. Black: Was that true under Section 7 on page 9?
Robert L. Stern: Section 7, the -- do you want me to go into that Your Honor? I would like to develop that a little --
Hugo L. Black: Now just -- you -- you said that there had to be both.Is that true under Section 7?
Robert L. Stern: Well, under Section 7, there doesn't have to be intent.There just has to be a reasonable probability that there will be a restraint. And the trial judge found that because there had been no restraint for 35 years that he in his opinion, the Government had improved that there had been or is any reasonable probability of restraint. And the Government admits frankly that because of this 35-year period, unless they can show some restraint, it seems to me to admit that they can't quite say that that finding is unreasonable. Now, we have two aspects. I think that's really all there is to the Clayton Act case except I want to add two observations. One is, the Government has to prove both illegality, reasonable probability between 1917 and 1919. That's when the restraint acquisition occurred and that's what the Clayton Act relates to.
Hugo L. Black: Is that the only time?
Robert L. Stern: No. Well, in a normal case, that's the only time when the case is brought right after the acquisition and they just have to prove reasonable probability of restraint at the acquisition. I think when they bring a case 30 years later, they've also got to show a reasonable likelihood of restraint at the time of the case because if it only was reasonable 30 years ago and it never happen afterwards, it not only is absurd, it doesn't violate the policy of the Clayton Act to let this -- let this stock ownership continue when it hasn't had the effects which were feared. They've got to prove it for both periods and the fact that it didn't happen in between is the strongest possible evidence to support a trial judge finding that there wasn't any reasonable probability of what's happening in the future, certainly, beginning in 1949 after there hasn't been any restraint for many years. Now, one other observation which applies both to the Sherman Act and the Clayton Act, Mr. Justice Frankfurter said at one time, “All we're concerned with is the comparison of figures in the automobile industry.” I haven't got time to go into it but in our brief we argue that since we're concerned here with fabrics and finishes paint which is sold the same kind of fabrics and finishes, the record shows, are sold widely outside of the automobile industry, not only -- General Motors is a very tiny, if I might use the word “tiny” 2% to 4% portion of the market for those products. And so, I don't think the comparison from purpose of the market is just the automobile industry. It isn't if you're dealing with engines or tires, but you --
Felix Frankfurter: The function of the market is a very different one from the function of the market in cases of last year. This is a different market function --
Robert L. Stern: That's --
Felix Frankfurter: -- within this -- within this industry through --
Robert L. Stern: But what --
Felix Frankfurter: -- and possibly the power and intent that existed.
Robert L. Stern: I wasn't invoking --
Felix Frankfurter: (Voice Overlap) the preferential treatment.
Robert L. Stern: I wasn't invoking the Cellophane case, Your Honor. I was thinking more of cases like the Columbia Steel case. This is a -- this is something less than a vertical integration. It's 23% instead of a 100%.
Felix Frankfurter: Well, that --
Robert L. Stern: And here, you look at the --
Felix Frankfurter: The smallness of it, that seems to you?
Robert L. Stern: The small -- the small percentage of the market shows there's no impairment of competition. Now, we've developed I --
Felix Frankfurter: I don't understand. If you are -- suppose General Motors and Chrysler and in fact they called it their stock relationship, General Motors was persuaded to buy from --
Robert L. Stern: A lot of paint.
Felix Frankfurter: Do I understand you to say you must compare the volume of the sales with the volume of the sales of fabrics generally?
Robert L. Stern: The volume of sales of that kind of fabrics, the market, the size of the market. You look and see what percent -- there isn't any impairment of competition if the proportion was small enough even -- even if the absolute figures are large.
Felix Frankfurter: Do you mean if -- if the record would show that but for their stock control, General Motors would import from some competitors of du Pont. It becomes relevant to show that this -- that this is only 2% or 3% of the whole fabric market.
Robert L. Stern: Of the market for this -- no, not the whole fabric, the market for this kinds of fabric.
Felix Frankfurter: Yes, but not in the motor industry.
Robert L. Stern: That's right. If the same kind of thing is sold outside the motor industry and the record shows they are. Well, I -- I don't want to spend anymore time on that. Oh, I do want to say one thing about the Yellow Cab case which is the only case which is really at all close to this on its facts and I'm not going to talk about the majority opinion, which obviously support us but the dissenting opinion. The dissenting opinion of Justices' Black and Reed in the second Yellow Cab case stated that the trial judge, his findings were not sufficient because he had not found that the freedom of the cab companies to buy from the manufacturing company had not been restrained. That finding was lacking in that case. That finding is made over and over again in the findings in this case. And the record plainly shows that the freedom of General Motors to buy as it will has not been restrained. For that reason and for lot of others, we think this case is a much simpler case than the Yellow Cab case among others because there, the company owns 62% of the stock of the -- of the subsidiary company, which obviously was control and still wasn't held to be illegal. They bought 100% of their supplies from it, still wasn't held to be illegal. I haven't covered everything I wanted to any more than Mr. Cox says, Your Honor. I hope that you will -- I hope that you will read these long briefs and find out the rest of what we would have liked to say.
Earl Warren: We will. Mr. Davis.
John F . Davis: If the Court please. First, Mr. Justice Reed asked me about authorities for a stock relationship being a combination, and I stated that there were no cases that I knew of certainly in this Court where a less than a majority of control was held to be a combination, but I said that the stock interest as such, the none consensual type of -- of combination has been recognized. And I report -- refer to the Court to the cases cited at the bottom of page 4 of our reply brief for control for cases where stock control was held to be a combination. In answer to a question by Mr. Justice Frankfurter, I said that there were references in the Court's findings to the sales to Ford and Chrysler, although I did -- did not believe that they were as full as -- as they could be. Looking through this -- these findings during the argument and I may have missed something somewhere else. The reference I would make is to page 381 of the Court's findings.
William J. Brennan, Jr.: Do you say record of -- record 300 --
John F . Davis: I beg your pardon, its 393. I -- I gave the wrong number, 393 at the bottom of the page. That is wrong. I wanted to call attention to 381 of the record, the evidence page I just gave because fairly in Mr. Cox's argument, he said he was going to point out other places in these findings where there were findings by this Court that were inconsistent with positions we took. And I was interested to find where there were findings of the Court that were inconsistent, and the only reference that I heard made was to the findings with respect to Fisher Body which we do not accept too and which appear on page 381. There is a statement there which may be broader than -- than I would make it but I still take no exception to it. It says the record shows that Fisher Body at all times conducted its purchasing with respect to finishes, fabrics and other products in accordance with its own best judgment. And basically, that was our -- that is precisely our position that Fisher Body did that and that that is why there was a difference between the Fisher Body purchases and the purchases of the rest of the divisions. Now, to be sure, there is no cutoff date on this. It doesn't say that Fisher Body ever started in buying like the other -- like the other divisions and maybe in that respect, it is against our position. But basically, this is the position which we take and we have no exceptions to the findings. There was some considerable discussion by Mr. Cox about failure of du Pont to sell products other than paints, fabrics, antifreeze, to the General Motors organization and specific reference was made to case-hardening chemicals and some other chemical products. They tried -- I -- I would say that du Pont tried to sell products to General Motors, all of its products to General Motors. They failed in some cases. We haven't gone into the details as to these minor or less important products. We feel that if we have established that there is a restraint of trade with respect to paints and fabrics which has been the subject of most of our -- the facts in our brief which are the most important products involved. The fact that they failed to restrain trade in other products is -- is not a -- is not an excuse. It's not a -- it doesn't destroy the fact that there is still a restraint on paints and fabrics. There was a suggestion made at the beginning of Mr. Cox's argument that the thorough investigation which the Government had made should have enabled us to produce affirmative evidence of people being hurt. If this is a -- if this is the kind of a restraint of trade which hurts people, then we should have put on the witnesses of the other chemical companies in this -- the paint companies to say that they were hurt. As this case was tried below, it was tried really on a -- on a written record. I think there was probably a feeling that if we ended into competition with the defendants in bringing forth oral testimony that they probably could submerge any testimony we had in -- in many thousands of words of testimony of their own. And so, the case was really tried on -- on the written record as of that time.And the written record does not have any because it comes lively from General Motors and du Pont. It does not have any -- any substantial amount of -- of evidence as to what happened to competitors. There was however, one example, one sole example back in the early days when du Pont first bought General Motors' stock. There was a man by the name of Mr. Mountain that had the Flint Varnish & Color Works. And the Flint Varnish & Color Works at that time sold very substantial amounts of paint to General Motors, most -- most of General Motors' requirements. Well, Mr. Mountain who was not slow to understand of what was going on, he said, “Well, if du Pont has bought this interest in General Motors, I am not going to have any business left.” And he went around and he offered types to make a bargain with -- with du Pont to staying in and start sort of a partnership basis.Now, what really happened was that du Pont then bought out Mr. Mountain entirely. They bought the Flint Varnish & Color Works entirely and Mr. Mountain, I don't say they didn't buy it at fair price, but Mr. Mountain was out of business and du Pont was in the business. With respect to the tetraethyl lead picture, I think it should be made clear that there was no assignment of the -- of the Dr. (Inaudible) patent to -- to du Pont. It wasn't handed over. What happened was that du Pont entered into the manufacturing end of manufacturing tetraethyl lead and sold it to the Ethyl Corporation which in turn licensed gasoline companies to use it. There's one interesting thing about the -- the sales which they made, the -- one would expect in -- in the -- if there was arms-length bargaining that they would have sold the tetraethyl lead at a price which was a fair competitive price that was determined by cost of production -- I don't know, and be determined on some basis that -- of bargaining between the two. What happened in this case however was that du Pont made a calculation, a rough calculation that they would receive one-third of the profits. General Motors would receive one-third of the profits. The Standard Oil would receive -- Standard Oil of New Jersey, the half owner of -- of Ethyl Corporation and --
Stanley Reed: Was this one the contract that was later made?
John F . Davis: That's right. When the contract was made and it was on that basis and the written evidence is clear on this. It was that basis that du Pont set its price in selling tetraethyl lead to the -- to the Ethyl Corporation. Now, that -- that sounds like a partnership deal. That doesn't sound like arms-length bargaining. That sounds as though they were in there as a -- as a matter of -- of convenience for partnership with -- with the General Motors Corporation.
Felix Frankfurter: Was there any stock relation between Standard Oil and either General -- Ethyl or General Motors and du Pont?
John F . Davis: Between Standard Oil? No. Standard Oil had not stock relationship with either.
Felix Frankfurter: With either of these.
John F . Davis: That's right.
Earl Warren: Mr. Davis, how big a business was this tetraethyl that is -- do you have any idea?
John F . Davis: Yes. Well --
Earl Warren: Just generally speaking.
John F . Davis: Yes. Well, there are some figures in our main brief. It's a -- before the patents run out, it amounted to $86 million but there were more figures than that in our main brief. I'll get to the -- the reference. Page 57 of our main brief shows the table showing the -- the net sales in thousands of dollars between 1938 and 1947. And the total figure and total sales appears immediately below that figure.
Stanley Reed: Why -- why would Standard Oil of New Jersey brought into it?
John F . Davis: Standard Oil of New Jersey discovered and patented a method of -- of manufacturing tetraethyl lead which was much less expensive than the method which du Pont was using. Mr. Chief Justice, it's our main brief. Maybe there's confusion between that in the opinion. I don't know any --
Earl Warren: No, I -- I have your brief. I have your brief Mr. --
John F . Davis: In page 57 --
Earl Warren: Your pages are -- are --
John F . Davis: Page 57.
Earl Warren: I think they're -- there doesn't seem to be any 57. Mine goes to 51, 52 and 61.
John F . Davis: [Laughter] There's been a discrimination there against you, Mr. Chief Justice. [Laughs]
Earl Warren: That's what --
John F . Davis: [Laughs]
Earl Warren: -- how far of this affect you.
John F . Davis: [Laughs]
John F . Davis: Without intent [Laughs] --
Earl Warren: Yes.
John F . Davis: Yes. I'd be glad to provide additional copies of the brief. No, Standard Oil of New Jersey invented and discovered a method which was much cheaper and much quicker.
Stanley Reed: I think the question with that patent, General Motors contributed its patent.
John F . Davis: That's right and Standard Oil --
Stanley Reed: And du Pont contributed the know-how.
John F . Davis: And du Pont contributed the know-how. And it -- it is very -- it's very probable that that know-how was very important too. I -- it -- they performed an economic function in this. There's no question that they did. The only question is whether --
Stanley Reed: Your point is that they looked only to du Pont, didn't make any effort to go any place else.
John F . Davis: That is right.
William J. Brennan, Jr.: Did you say Mr. Davis that at least the evidence here, I don't want you to repeat what you said earlier, I was getting that one too, that there was someone else at the time equally qualified to do the job that du Pont did in this connection?
John F . Davis: No. I don't say there is any affirmative evidence to that effect. I say that the evidence shows that this time, nobody was manufacturing tetraethyl lead. Du Pont had no experience in manufacturing tetraethyl lead. They had no experience even in manufacturing any substances closely aligned to tetraethyl lead. It was -- it was a new field and someone had to start in on it.
William J. Brennan, Jr.: There wasn't much for chemical industry at that time?
John F . Davis: As compared with the industry today, no. And in this particular type of thing, there was nothing. It had to be filled up from the beginning.
William J. Brennan, Jr.: But there were large -- other large chemical manufacturing then --
John F . Davis: Yes.
William J. Brennan, Jr.: -- comparable in size.
John F . Davis: Yes. There were other -- there were other large chemical companies and --
Felix Frankfurter: You're just stating a word, what inference you draw from the fact that there was no other? What is the inference from that?
John F . Davis: I'm sorry. There was no other what?
Felix Frankfurter: That at this time, nobody knew this and that there was no -- it wasn't --
John F . Davis: Well, --
Felix Frankfurter: (Voice Overlap) chemical organization that would have done this. And what -- I don't quite get the inference of your emphasis that nobody knew anything about it and du Pont went ahead. What is the inference?
John F . Davis: Well, my inference was that du Pont didn't know anything about it that it was a new --
Felix Frankfurter: (Inaudible) much inference from that. At least there is an inference they did go ahead what they were enterprising.
John F . Davis: No, but that they had no particular competence in manufacturing tetraethyl lead. I mean that they started from the same place that anyone else would have.
Felix Frankfurter: If the others didn't stop and they did have certain -- certain -- what is called good will I suppose, and the past performance is incorrect.
John F . Davis: The others didn't start because the others didn't get a chance to start, Your Honor. This was -- this was something that was handed to them on a -- on a silver platter to start with.
Felix Frankfurter: Well, this was a dangerous business, the chemicals --
John F . Davis: Maybe so.
Felix Frankfurter: I understand the fact that you get what -- you don't see what confidence you get, because that's my point.
John F . Davis: I get small profit from it. One comment and I'll be through. I stated earlier in the argument that it was not our contention that du Pont has been milking General Motors for this relationship. They haven't been using their stock control in order to bring an advantage to them which would be a disadvantage to General Motors and General Motors' stockholders. Now, that must almost be obvious from -- that it would be against their interest to do so. They have a tremendous, a tremendous investment in -- in General Motors. One-third of du Pont's -- a full one-third of du Pont's income during the past 10 years has come from its dividends on General Motors' stock. And therefore, it is important to them, more important to them than it is to any other single stockholder that General Motors be a profitable business as a business by itself, and nothing that they have done would be designed to hurt the General Motors Corporation.