Archibald Cox: -- colleagues tell me that I spent 42 minutes arguing about the wrong chemical. The situation isn't quite as bad as that sounds. I spoke, apparently, on several occasions about sodium hydrochloride. The chemical we're concerned with is sodium chlorate. Whether there is any such thing as a sodium hydrochloride, I don't know. I couldn't possibly tell them apart. I should have said sodium chlorate on all those occasions.
Byron R. White: How does that (Inaudible)
Archibald Cox: Well, I leave you to interpret that observation, Your Honor.[Attempt to Laughter] Second, I would like, in an effort to pull together what I've been saying thus far, to stand off a little and examine from a distance this problem of what should the antitrust rule be, what is the application of the statute where two firms are thinking of entering a market in which neither of them has previously been engaged and then they combine for the purpose of entering it, and I'm thinking of two firms who could clearly go it alone. Now, one possibility is to say, well, neither of them was there. Any entry is no competition and we'll let them do as they please. This seems to me to turnover to businessmen the opportunity to determine for themselves how far the normal economic laws governing a free enterprise economy will be permitted to operate in new geographic or new technological markets and, I suggest that it would come very close to meaning that, while we might keep what competition we have with respect to old products, in old geographical areas, we really would have very little opportunity of preserving a free market in -- where new technologies develop.
Potter Stewart: What relief did you ask for in this case?
Archibald Cox: The question of the relief was put to one side, the ultimate -- the first request was for temporary injunction and, ultimately, it would've been to require some kind of disposal of this, but there was no evidence offered. There was, apparently -- as I read the record, there was, apparently, some kind of a stipulation that neither side would put in testimony on that point.
Potter Stewart: What -- what relief do you think would be appropriate?
Archibald Cox: Well, I would think that -- I would think there were a number of possibilities. One would be to require one company to buy out the other, leaving it to them which did the buying.
Tom C. Clark: Clearly, that's a job, was it?
Archibald Cox: Yes, yes. Justice Stewart said what I think were the possibilities. I said one was to let -- require either to buy out the other or to let them sell off the property to a third or, conceivably, in some other fashion, dispose of the shares of Pennsalt.
Byron R. White: And, I suppose, just the--
Archibald Cox: Penn-Olin.
Potter Stewart: The solution would be exactly wrong here.
Archibald Cox: Well, the plants there and we certainly -- I assume we would hate to see the plant torn down.
Potter Stewart: Exactly.
Archibald Cox: But, it seems to me, there are plenty of ways to free at least one of these companies to come into the market later if it wishes, which is the important thing. Now, I was attempting, as I say, to stand off and to suggest what are the possibilities here but one is to leave the whole matter to private agreement wherever you have a new geographical or technological area. The second, which seem to me to be -- to attempt to estimate these probabilities in every individual case and to apply some general adjective deprivable enough and then tell district courts to make a finding on that because no finding was made on it here. The third, which I was trying to suggest, was that whenever the conditions that I stated exist, as they plainly do in this case, although I haven't devoted myself much to the fact, then the prospect that more active competition will be foreclosed by the combination are truly very real. I don't suggest that anybody can measure the probabilities accurately. But, in most cases, given an attractive market, given few suppliers, and I wouldn't call this a competitive market, it's just two companies, given few suppliers, that two other companies engaged in substantially that kind of business, interested and well equipped to enter then, you have a significant chance, perhaps not a probability, the district judge found not a probability here, but a significant chance they'll both go in. After all, there were two new entrants in this market, one, the combination and, the other, Pittsburgh Plate Glass.
Tom C. Clark: Mr. Solicitor, are you saying that Pennsalt had 9% of the market?
Archibald Cox: Had what?
Tom C. Clark: Had 9% of the market before?
Archibald Cox: Yes. It was marketed -- I was somewhat elliptical. It was -- part of that was marketed through Olin. They had a marketing agreement. Pennsalt manufactured on the west coast and Olin marketed, not all, but I think some of that before --
Hugo L. Black: This is prior to the joint venture?
Archibald Cox: Just prior to the joint venture, yes. And, of course, Pennsalt was making this chemical on the west coast. It had 50% of the west coast market.
William J. Brennan, Jr.: How much did Penn-Olin pick up in the market? More than 9 (Inaudible)
Archibald Cox: I don't -- I don't recall the figure. I'm sorry. The market has continued to expand and Penn-Olin, I feel very sure in saying, has some-tens of thousands of tons, but I don't really know. While you have -- may have a significant chance that both will go in, that certainly shouldn't be disregarded, you have a much greater chance, I would think, that it was merely always a probability that one would go in and having a very few companies in the market, the potential competition is all the more important. Now, of course, the argument that you have in these probabilities rests upon the basic theory of a competitive economy that potential suppliers will come forward to meet the demand when the price, other market conditions offer an opportunity for profit, provided only that combinations and restraints of trade are eliminated. The combination of two companies in a condition such as this interferes with the operation of those normal market forces. The theory of Section 7 is that the forces will work out. Here, given the postulated conditions, there is a very great likelihood that they will work out and it follows, we submit, that any combination involving an inter-corporate stock acquisition should, therefore, be found under those conditions to -- to be one which may substantially lessen competition within the meaning of Section 7. The other point that is raised by way of defense, one that the District Court didn't consider, is the argument that, since Penn-Olin was a brand new company and since Section 7 applies to acquisitions of stock of companies engaged in commerce, Penn-Olin was brand new and wasn't engaged in commerce at the time of the acquisition and, therefore, there is no violation. We've dealt with that in our brief. We submit that "engaged in commerce" is simply an adjective intended to describe those corporations that are subject to federal, as opposed to state jurisdiction and that any effort to make this depend on the twinkling of an eye with relation to the exact moment of the acquisition of the stock and the exact moment when you make your first shipment in any interstate commerce would defeat the purpose of the statute.
Earl Warren: Mr. DeLone.
H. Francis Delone: Mr. Chief Justice, Your Honors please. I represent Pennsalt Chemicals Company and Albert Connelly, who represents Olin, will divide the argument for the appellees with me. I shall deal sincerely, and what might seem to be somewhat illogically at first, with the facts and how they relate to whether or not there has been a violation of Section 7 of the Clayton Act. In other words, assuming, for purposes of my discussion, the applicability of Section 7 to this type of transaction because that discussion -- the facts and that question are so intimately related, they don't lend themselves to any division and, with the Court's indulgence, Mr. Connelly will then take up the point last mentioned by the Solicitor General, whether Section 7, in any event, has any application to a transaction such as this and, if not, whether Section 1 of the Sherman Act has been violated in this case. Prior to the argument which I've just heard, I thought we were all pretty much in agreement, both, the Government, the appellees in the court below about the issue in this case. The Government stated the issue in its jurisdictional statement at page 16, saying, "The District Court properly recognized that the lessening of competition standard," that is, the lessening competition standard under Section 7 of the Clayton Act, "Lessening of competition standard requires a comparison between the competitive situation brought about by the chairman of transaction and the situation which, with reasonable probability, would have existed had the transaction not occurred. This appears again in the Government's brief now at page 28 and, in effect, the Government, the court below, and indeed, all of us have thought up to now, that what was involved in order to decide this case was a comparison between the competitive situation which existed in the southeastern sodium chlorate market prior to Penn-Olin and the situation which existed or came into being after Penn-Olin. So that, if Penn-Olin brought about a more competitive situation, enhanced competition to a greater degree than would've been the case if the joint venture had not been formed, then there's no violation of Section 7 because competition has not been lessened.
Potter Stewart: It's not to prolong discussion of chemistry. But what is sodium perchlorate, which also sneaks under this case?
H. Francis Delone: Ammonium perchlorate is the product.
Potter Stewart: Ammonium perchlorate.
H. Francis Delone: That is a product made from sodium chlorate which is used in connection with -- well, it has various classified uses, as a matter of fact, sir. I'm not able to explain them competently in any of it (Voice Overlap) --
Potter Stewart: There's a higher profit in that, is there not?
H. Francis Delone: There is -- there may be a higher profit, depending on what the Government, which is the chief customer, pays for the profit.
Potter Stewart: I see.
H. Francis Delone: This involves some, first of all, getting on a phrase -- just what the profit might be.
Potter Stewart: Well, I didn't --
H. Francis Delone: Yes. Now, this is, however, essentially, I think we all agree, a decision which rests on undisputed facts and which must be made, both sides agree, accepting the findings of the court below. Mr. Cox did not devote too much time to the facts because on his argument, it seems to me, the facts become relatively unimportant. But if one is going to make the type of analysis of whether there really was a lessening of competition in this case because of this joint venture, it seems to me, it is necessary to pause to look at the facts, at least briefly. The situation prior to the formation of Penn-Olin, it was formed by Pennsalt and Olin Mathieson in the early part of 1960. Prior to that time, in the southeastern sodium chlorate market, which is admittedly the relevant market and the relevant product in this case, no dispute between us, the situation had been that for almost a decade, there had been no new entrants into that market. Prices had been stable. There had been no innovations and Hooker Chemical Company and American Potash, often referred to in this record as Am-Pot, had -- they dominated the market. The Solicitor General has mentioned what the figures were. They held some 91-- a little over 91% of the market in the year 1960. 9% -- to come to -- Mr. Justice Clark's question, 9% did -- had been shipped in that year, that is 1960, the year when these statistics -- to which these statistics apply, had been shipped from Tacoma -- from Pennsalt Tacoma, Washington Plant into the southeast under a temporary arrangement between Pennsalt and Olin aimed at exploring the possibility of the joint venture which did, ultimately, materialize. These sales have been going on for a period of three years. Prior to 1960, only one-third as much had been sold by Olin, as was sold in the year 1960 when the joint venture was announced. In other words, once it was announced that the joint venture was coming in, then, Olin was enable to sell more of this product in anticipation of the joint venture and --
William J. Brennan, Jr.: When did Olin (Inaudible)
H. Francis Delone: Olin got it for two years prior to that time in quantities of 2000 tons -- or a little over 1000 tons a year from Pennsalt Company.
William J. Brennan, Jr.: And what's that amount to in terms of market percentages?
H. Francis Delone: There are not figures of the exact percentages in those earlier years --
William J. Brennan, Jr.: Well, I gather--
H. Francis Delone: As I recall it, sir.
William O. Douglas: -- what the percentage is that Am-Pot (Inaudible) and when -- they really have a 100% of this market, do they not?
H. Francis Delone: Well, virtually, Your Honor. There was one customer who preferred to buy from Pennsalt because he could -- his freight car could move to the west coast and back with various allowances which made it the desirable to him actually to buy it from a distance, but this was a matter of 400 or 500 tons.
Byron R. White: How much -- how much was Pennsalt in position to sale in the southeast just as a matter of plant capacity and things like that?
H. Francis Delone: It --
Byron R. White: I suppose that it had to absorbed freight to sell what it did in -- in the southeast.
H. Francis Delone: In the year 1960, the court found that it lost $80,000 on the sales that it made to the southeast. The freight differential -- the freight, we should have to absorb but some, I think, was $25 a ton. I'm not certain of that figure. It is in Judge Steele's opinion.
Byron R. White: What they were selling down there is what they didn't need in their profitable --
H. Francis Delone: Yes and --
Byron R. White: -- market area.
H. Francis Delone: -- by 1960, they did need it in their west coast operation because they'd expanded in 1957 and, by 1960, their -- their whole capacity was able to be consumed in the west coast so, obviously, they didn't want to continue to ship it into the east, and they did --
Byron R. White: So that, as a practical matter, it had reached its -- the peak as far as penetration of the southeastern marketed.
H. Francis Delone: That's correct. It really had exceeded it solely for purpose of getting into the market in the joint venture. It was not a realistic transaction at 9% in the year 1960.
Hugo L. Black: When did they build the plant?
H. Francis Delone: The plant was built beginning in 1961. Production commenced in September of 1961, and this case was tried in November of 1961.
Tom C. Clark: At beginning of fruitful increase in their side to the market as just found (Inaudible)
H. Francis Delone: The -- the Court summarized this in its opinion at page 1579 with a chart. If I think I have Your Honor's correct -- question correctly, which lists the capacities of the various southeastern plants in 1959 and then in 1962. And you will see that Hooker, the largest, had a capacity of 29,000 in 1959, a capacity of 32,000 in 1962, Am-pot, 12,000 in 1959, 22,500 in 1962. Pennsalt -- Penn-Olin's plant, 26,500, it came in with a substantial plant much larger than the one which either had been considering, which put it on more equal footing with the existing competition. And, PPG, by this time, had also announced -- it announced in July of 1961 and it then comes into the picture as a new entrant with a 15,000-ton plant. So, the capacity in this market had gone from 41,000 to 96,000 between the year 15 -- 1959 and the year our plant was in fact built, 1961, the projection for 1962 as I've just stated.
William J. Brennan, Jr.: Is that market now or --
H. Francis Delone: Sir?
William J. Brennan, Jr.: (Voice Overlap) with that market will absorb this increase, the 41,000 to 96,000?
H. Francis Delone: The Court found that, by 1960, Judge Steele found that the southeast was no longer a deficit area. I think this is as close as one can come to what it would absorb. Because of the date of trial, we do not in fact have in this record, figures as to what each company is today selling in the market, although I would be in a position to state them so far as Penn-Olin is concerned. It's not in the record. In fact, we are not selling at capacity today. As soon as Penn-Olin was announced, there was marked increased competitive activity on the part of both Hooker and Am-pot in this market. They went around to their customers and offered five-year contracts with a guarantee of no price increase. They took on technical service and increased their sales efforts. The Government offered no evidence below from consumers or competitors, all of whom had been interviewed by the Government, as the trial judge pointed out. No evidence whatsoever that competition had been lessened by Penn-Olin. The Government called the sales manager of American Potash, a Mr. Derksen, and Mr. Derksen testified to the contrary that competition continued vigorous and had not been lessened by Penn-Olin. The Court, therefore, found that the advent of Penn-Olin and, later, PPG will in all likelihood increase the competition which theretofore existed and will bring to buyers of sodium chlorate and to the public the benefits which normally result there from. Now, the Government, I take it, doesn't really contest that there was enhancement of competition, but they really are saying it would've been even better to keep these possibilities or probabilities that have been talked about. Mr. Cox indicates there were four possibilities. One, the possibility that but-for Penn-Olin, both Pennsalt and Olin would've entered the market. Two, that one would've entered and one would have stayed in the wings. Three; that they would have gone into a joint venture and four that neither would have entered. He overlooks one but which there was discussion by the trial judge, the possibility that one would have entered and, after that one had entered, the other would have lost interest. This is really a fifth possibility which was dealt with by the court below, and the court below pointed out with reference to that possibility that at least Pennsalt, prior to the time that Penn-Olin was formed, Pennsalt had formulated the judgment that the market could stand only one additional competitor. So that, if you assume that Olin might, otherwise, have gone in, this, under that view, would've meant that Pennsalt would have been -- been eliminated, no longer in the wings, if you will, I think what its purpose.
Potter Stewart: In all fairness to the Solicitor General's argument, he might concede that that would be true for the short term, but he asked us to look at the long term and --
H. Francis Delone: He did --
Potter Stewart: -- for the possibility of it changing in the --
H. Francis Delone: He did indeed.
Potter Stewart: -- standing market.
H. Francis Delone: I agree with you. He did ask you to look at the long term. The difficulty here --
Potter Stewart: Or to look at because you can't look at it (Voice Overlap) --
H. Francis Delone: It's a little hard to look at and no evidence was adduced. He seems to be urging now that the kind of very careful consideration which he concedes was given to this case by the court below should not be given in any Section 7 case. That, instead, you would pose a general rule which would automatically apply and, I think, in its logical extension, would really outlaw every merger without the court coming to grips with whether there was any lessening of competition. It seems to me that that's where his argument takes him.
Earl Warren: Does any other company come into the business after this joint venture?
H. Francis Delone: Yes, sir. Pittsburgh Plate Glass, through its chemical division known as Columbia Southern, entered the market in July of 1961. This was over the actual entry and announcement of it was after Penn-Olin had been announced and shortly before our plant was on stream. So, for practical purposes, they came into the market with a 15,000-ton plant following the formation and the beginning of the construction of the Penn-Olin plant.
Earl Warren: Wouldn't -- wouldn't that negate the fifth point that you made just a moment ago that the joint project here would absorb the market?
H. Francis Delone: It would -- it would negate it from -- so far as PPG is concerned perhaps, but not from the standpoint of the decision making process of the two companies, Pennsalt and Olin. This was Pennsalt's conclusion. If I understand Your Honor’s question, not only one additional company could come in. Now, of course, if two come in, it makes the likelihood that Pennsalt at some future date would enter even more remote. It makes it more an ephemeral possibility, if you will, to use the words I think was the Brown Shoe case. If you look at the record and the findings in the court below, you will see that the Pennsalt management had considered this problem beginning back as early as 1951, that they want to this southeastern market. They'd studied it and restudied it. They'd contemplated plants of various sizes. They'd had various projections made. Each time that they actually came to grips with making a decision, they decided against going forward. The record at page 692 appears the exhibit which, I think, most accurately reflects what was going on within Pennsalt. This was in 1957, some-six years after they started to think about this. Mr. Drake, the President of Pennsalt asked the management crew, "Do we agree that it is unlikely in view of the capital requirements and relatively low return on investments that we alone would approve construction of an eastern chlorate plant?" Second, "Would Olin Mathieson be a logical partner?" The answer to both questions was yes. So that, almost in the words of the statute there, the Pennsalt management faced the question of whether it would enter this market and decided it was unlikely that it would. Never thereafter was Pennsalt satisfied from a business standpoint with the prospects of an adequate return on a plant in the neighborhood of 15,000 tons which it was considering. Olin turned to its consideration at the management level only in 1958, really after Pennsalt had crossed the bridge or -- now, I don't say that the possibility was fully eliminated. I want to make that clear now. We don't say that the lower court found that it wasn't completely eliminated. He said we had not found the return attractive but he couldn't find it was -- we completely eliminated the chance of going in. In any event, Olin had considered the matter first in 1958 and then quite casually, except for in the -- for laboratory studies, for research and development. And then in 1959, the Chemical Division of Olin had recommended its entry into the southeastern sodium chlorate market with a 15,000-ton plant and the management had, at that time, rejected as not being sufficiently attractive. Again, we do not contend that Olin had finally and forever crossed out the possibility. So, we concede there was always a possibility that these companies, which were able, could have entered the market. But, this does not, it seemed to -- seems to us, answer the question. The question is would they have entered the market, and this is what the lower court struggled with. It found first that they would not simultaneously have entered the market and this, Your Honors will see on, well reason, indeed, that point was not seriously contested by the Government.
Byron R. White: Or even probably, I suppose, would satisfy the statute, wouldn't it?
H. Francis Delone: Even probable, yes, sir. There is no question, reasoned by a reasonable probability to use the correct language. But, the court went beyond just determining whether both would've gone in simultaneously. The court said that it had no evidence by which to judge whether if one had gone in, the other would've continued, the other would've entered. This simply wasn't dealt with. The Government didn't adduce any testimony to deal with that situation in the court below. Indeed, in its jurisdictional statement, the Government agreed with the language of the court below that it would be sheer speculation to decide what one would have done after the other had entered. Neither company had really faced that situation and, the Government point -- seems to agree, or did at that time, with Judge Steele who found just that in the court below.
Byron R. White: Where is that reference?
H. Francis Delone: That reference is at record page 1576, so far as the opinion is concerned sir, and the jurisdictional statement at page 17 quotes from Judge Steele's opinion at page 1576. So that, essentially, I think in fairness to Judge Steele --
Byron R. White: Where was the --
H. Francis Delone: I beg your pardon, sir?
Byron R. White: Where was it that the Government actually said that, in argument or in the District Court?
H. Francis Delone: No, in its jurisdictional statement to this Court, Your Honor.
Byron R. White: What page is that?
H. Francis Delone: At page 17.
Byron R. White: But Judge Steele referred to it in his opinion --
H. Francis Delone: Oh --
Byron R. White: -- and that was referring to some statement made by counsel, I suppose.
H. Francis Delone: No, I don't think so, Your Honor. This was what Judge Steele said "On the basis of the evidence, it would be sheer speculation to try to say what would've happened had one of these companies entered, and then -- then you had no clue in the record" is the language he used, and "It would be sheer speculation to say what the other would've done. "This is not a reasonable probability. In other words, there was no reasonable probability developed before Judge Steele and, the Government, before this Court, in its jurisdictional statement seemed to accept and endorse that very language. The net result then, it seems to us, is that Penn-Olin took two companies, neither of which was at all committed to going into this market. Indeed, the fact they had studied it for some time and rejected it suggests they never would. And, it combined Pennsalt's manufacturing experience, which sold and derived in the west coast, and the fact that Olin was well equipped to make sales in this market, it put those two together in order to bring to this market a third competitor. This was the benefit which Judge Steele found flowed from this transaction. The Government has talked at considerable length about the best postulate or that best possible postulate which appears in Judge Steele's opinion at page 1576 and this is the postulate that, at best, one company might have gone in while the other continued to ponder, which is the language of Judge Steele's opinion. And Judge Steele, I think, reading his opinion fairly, finds that, on this record, the Government offered no evidence and the court had no basis by which he could compare the level of competition which would have pertained under that best postulate, not a finding but a postulate, but there's no basis for the comparison. The very comparison which, initially, the Government conceded should be made. How do you compare the before and after? The "but-for Penn-Olin" situation, this is what Judge Steele found lacking in this record and he said at page 1576 of his opinion, "The Government argues that any such comparison to-- with the comparison between competition before Penn-Olin and -- I'm sorry, the competition but for Penn-Olin and the competition with them, any such comparison -- the Government argues that any such comparison is irrelevant in a determination that Olin or Pennsalt would have built its own plant but for Penn-Olin automatically condemns the joint venture. "Such an interpretation would cut the heart out of Section 7. And, Your Honors will see in the footnote at page -- to that portion of the transcript, his opinion at page 1576, Judge Steele copied in there the transcript of the argument where the Government, in effect, told Judge Steele that such a comparison should not and would not be made. Therefore, the fact is that the Government didn't offer any evidence to permit a comparison of the benefits to competition which flowed from the formation of Penn-Olin versus what the condition of competition would've been but-for Penn-Olin. And, that is essentially what brings the Government to the position which has been urged before Your Honors which is that, automatically, without any careful determination, such as was made here, without any careful consideration of the evidence, if four conditions prevail, any transaction such as this should be condemned. Indeed, it's really three conditions, as I understand Mr. Cox's argument. First, he says if there's an expanding market, and I've indicated the judge said this was no longer a deficit area in 1960. Second, each company was in that line of business, and just what he means by that condition, I'm not clear. Olin had never made this product commercially. Pennsalt was not an effective competitor in this market, as the lower court found. So that, whether either was -- was in that line is uncertain to me. That each was fully equipped, and we do not quarrel with the fact that these companies had the ability financially and resource-wise to go into the business. They could have gone into it. And --
William J. Brennan, Jr.: Of course Pennsalt -- of course Olin was in the -- was in the sense to post --
H. Francis Delone: In the limited sense of selling 2000, but not producing. They were not producing. This was --
William J. Brennan, Jr.: No, they weren't producing but it was -- it was marketing for Pennsalt --
H. Francis Delone: That's right.
William J. Brennan, Jr.: -- and, in the 1960, to the extend of --
H. Francis Delone: To the extent of some-3000 tons sold after Penn-Olin had been announced. Previously, they had never sold more than about 1500 tons which is a very drop in the bucket, maybe 2%, 3%. I don't -- because we don't -- I don't have those figures readily available, for those years, I can't give you precise percentages.
William J. Brennan, Jr.: (Voice Overlap) companies with their interest in -- demonstrated interest, at least trying to make up their mind whether to get into the market (Inaudible).
H. Francis Delone: That --
William J. Brennan, Jr.: It is enough to indicate that, indeed, they were business.
H. Francis Delone: Not -- not in the business of manufacturing and selling in the southeast. This --
William J. Brennan, Jr.: There's also finding (Inaudible) to be a holding to make it.
H. Francis Delone: They -- well, they didn't have existing capacity. They had the technological ability to either -- or they could've bought technology presumably with which to construct their plant and enter this business. They've never made the product and the record is quite full of reservations on the part of their management as to their ability to be an efficient and effective producer. Pennsalt had no concern on this score because we've made the product in the west coast. Olin had a concern as to whether it could do a good job. It had not had any manufacturing experience and necessarily, this made projections for them, on the manufacturing side, much more hazardous than for Pennsalt. On our side, the difficulty was how to predict an ability to make sales in sufficient volume to give an attractive return of the company.
Byron R. White: At least that these two companies had never been in competition with one another in this line -- line of commerce.
H. Francis Delone: That is fairly true and -- and I want to make entirely clear also that this little -- this small sale of some thousand 1500 tons began only in 1957. It began after Pennsalt had decided -- I'm sorry it began at the beginning of 1958, after Pennsalt's management have decided they would not go in alone in the passage that I read to you earlier and then, it decided Olin would be a logical partner. In other words, it was exploratory to what ultimately came about. It gave them both the chance to test the market and it was not a transaction that it went into for the -- for the profit which could be derived in those years. This was looking to what ultimately came about in this case. There are, it seems to me, under the Government's argument, a number of shadings of the meaning of the word "potential competitor. " This Court has recently considered potential competition in the El Paso case, although whether that is properly regarded as potential competition or actual competition might be a subject of considerable discussion. Mr. Justice Douglas recognized, in any event, that in that case, Pacific Northwest was a substantial factor in the California market. And, its -- and it referred to its position, has a competitive factor in that market and commented that it actually had been in the market bidding for business. Now, we're not confronted under the decision below, in this case, with a comparable situation of potential -- potentiality. We are confronted purely and simply with capability plus some interest, but not active participation in that market. Now, I think it's important to note when the Government dwells on the benefit to competition of having someone in the wings, rather than on stage, as Penn-Olin is, it's important to note that, in the 10-year-period prior to the formation of this joint venture, there were in the wings Pennsalt and during some of the time, Olin, and Allied Chemical which was selling -- was a sales agent for American Potash and was also one of those rumored to be contemplating entry as the Government proved in the court below or offered evidence in the court below. Also, Wyandotte Chemical, another substantial chemical company rumored to be considering entry, as well as Virginia Chemical & Smelting. Now, the Government in the court below said, "All these companies were cogitating. "I forgot to mention PPG, too, because it, of course, was another company in the wings and yet, in this decade, as the Government complains in its brief, competition was stagnant. There were two companies that had the whole market, that dominated it, they were entrenched. So, what -- where is the value of the evidence in this case of a company in the wings? No value can be discerned from this evidence, so far as those companies were concerned. They didn't contribute. They didn't liven up the market. They didn't have any effect on the market and yet, the court -- the Government would ask this Court to strike down this transaction which brings new competition into this static market, strike this down for this possibility which is, really, it seems to me, all the Government urges, the possibility which it could derive from the fact questionable here of an expanding market from the interest and the capability of these companies. It says that, "Given that situation, you should look no further. Just apply the touchstone and trike -- strike the transaction down. "This, it seems to us, is not what Congress contemplated when it referred in Section 7 to the substantial lessening of competition. The ephemeral possibilities of what might have happened someday, sometime. This can become to grip -- we can come to grips with it as and when it does but, as of now, there has been no showing on this record, after very careful consideration by the court below, that competition has been lessened. It's -- to use an analogy that I think was used during the argument in the El Paso case, the horse race analogy. This situation is one where neither Pennsalt nor Olin were entered in the race. Indeed, they were at a different track and the fact that they were at a different track didn't add any competition to the race between Hooker and Am-Pot in the southeastern track. The -- I suppose the simpler way to phrase it is simply that the Penn-Olin burden have this word "competitively" the two in the bush. The court below concluded, after careful review of the evidence, that Penn-Olin was the means by which the strength of two companies was joined, not for the purpose of further preempting a market which they already occupied, but to break into a market to challenge the supremacy of two companies which were dominating it. Congress, in amending Section 7 of the Clayton Act, recognized that all combinations were not anticompetitive and that, in some -- some instances, combinations may have the effect of stimulating competition, citing of the Brown Shoe case and one might think of many others that follow this line. He concluded the probabilities are that Penn-Olin will have that effect to what the effect of stimulating competition. He made the determination required of him under Section 7 of the Clayton Act. Under that determination, there was, in fact, no lessening of competition in this case.
Potter Stewart: Where does the court conclude that conclusion report?
H. Francis Delone: The conclusion --
Potter Stewart: Did the Court get it?
H. Francis Delone: Is at record 1579. The earlier comment about joining the strength of the two companies is at page 27 and 28 (a), I do not have the -- of the opinion as printed in jurisdictional statement. I'm sorry, sir.
Potter Stewart: Alright.
H. Francis Delone: I don't have the precise language elsewhere.
Arthur J. Goldberg: (Inaudible) El Paso here, completely decided. I assume that it existed and therefore it's correctly in the argument and I read the -- the El Paso case and the Pacific Northwest (Inaudible), investor, Pacific Northwest (Inaudible) to compete with El Paso (Inaudible)
H. Francis Delone: I think that's true, sir.
Arthur J. Goldberg: (Inaudible)
H. Francis Delone: Yes, yes. I should like --
Byron R. White: Would you --
H. Francis Delone: I should like to say about --
Byron R. White: You wouldn't --
H. Francis Delone: About El Paso one further point. That, in that case, this Court was confronted with just one question. Was the lessening there involved a substantial lessening? There was no -- there could be no suggestion that competition had been -- been enhanced, as it has been found to have been enhanced here. There was no new competition brought to the California market. The only question was whether competition in that market was substantially lessened by the elimination of a competitor, whether you treat it as an actual or potential competitor.
Byron R. White: So your argument doesn't have to -- that you make doesn't reach that case.
H. Francis Delone: It doesn't reach El Paso, no, sir.
Byron R. White: And you wouldn't suggest, under your argument, that -- that such a joint venture would be legal.
H. Francis Delone: That such a joint venture would be. No, I would not, under --
Byron R. White: But how about this case? Assuming that Mathieson -- Olin Mathieson had been engaged in making this product, say, in the Midwest and the -- Pennsalt had been engaged in making it and distributing it in the Farwest, and then they both -- both substan -- they were -- have both been in this line of commerce and then they had -- but not in competition with another, and then they had both entered into the southeastern market. Your -- your approach does cover that situation, I would take it.
H. Francis Delone: I think, sir, that is quite a different situation and one which the Court here --
Byron R. White: You would put that aside.
H. Francis Delone: That -- for some later market extension case, Your Honor, yes.
Byron R. White: Or, and you would put aside where two competitors for majority joint venture to develop new technology (Voice Overlap) --
H. Francis Delone: I don't think we're really faced at all here, sir, with General Motors and Ford.
Byron R. White: Yes.
H. Francis Delone: I think, for the reasons I have endeavored to explain, we contend there was no violation of Section 7 even were it applicable here but, against the possibility that I might not have persuaded Your Honors to this effect, Mr. Connelly will deal with the fact that, in any event, Section 7 does not apply to this type of transaction and if Section 7 does not apply, it could not be condemned under Section 1 of the Sherman Act.
Earl Warren: Mr. Connelly.
Albert R. Connelly: Your Honors, I shall address myself to these two points very briefly. I'd like to start with the observation that Section 7 of the Clayton Act does not purport to cover all acquisitions. It does not cover, for example, any non-corporate acquisitions and in the case of corporate acquisitions, its application is limited to situations where the acquired corporation is engaged in commerce. With reference to Penn-Olin, the parties here are in entire agreement that a new corporation is not engaged in commerce at the moment of its incorporation. We're also in agreement that, therefore, Section 7, in this respect, is not to be literally construed but that provision must be interpreted. Where we differ is in the interpretation. The Government would say that the test to be applied in the case of a new corporation is the subjective intent of its incorporators. If the incorporators desire or intend to have it at some point get into interstate commerce, that that is sufficient to bring it within the language of the Act. In my view, that ignores the historical purpose of Section 7 which was aimed specifically at the elimination of existing enterprises in actual or potential competition. That is to say, dealing with assets which were then engaged in commerce initially, of course, with ref -- by reference to the acquisition of stock control and then by the 1950 Amendment dealing with the acquisition of the assets themselves. And, as this Court pointed out in the Brown Shoe case, the dominant theme of the 1950 Amendment of Section 7 was a fear of what was considered to be a rising tide of economic concentration in the American economy. So far as we know, there has not been any decision dealing with the precise point that I am now presenting to Your Honors. The only cases which have dealt with the acquisition of stock in a newly formed company are entirely consistent with the view that I have expressed. They each involved an element of concentration by the elimination of the independence of assets then engaged in commerce. As, for example, in the Alcoa case where a new corporation was formed to takeover the existing business of a competitor, Cleveland Metal Products Company, a producer of aluminum sheets and in the old New England Fish Exchange case, by the formation of a series of new companies to takeover the existing wholesale fish business of companies then in existence. The text writers have taken the same view. I would like to call Your Honors' attention if I may, to one which is not cited in our brief but should've been perhaps, that's Kingman Brewster's Text on Antitrust and American Business Abroad, published in 1958. At pages 206 and 207, Professor Brewster dealt with the subject of joint ventures and I would like to read to Your Honors just a brief quotation, if I may. "We assume that Section 7 of the Clayton Act will not be applicable to most joint ventures since, prior to the joining, the venture was not engaged in commerce. However, it should be noted that, in form, financing of a joint venture may involved the purchase by one company of the stock of a paper subsidiary of another which was formed for the purpose of bringing into being an active industrial or extractive enterprise. If jointness is achieved by partial acquisition of a preexisting enterprise, we assume Clayton Act standards would apply. "Although the argument is not fully articulated, there is a suggestion made in the Government's brief that, perhaps, Penn-Olin was formed to takeover Pennsalt's existing business. That, I think, has been dealt with by -- dealt with already in the argument today to indicate that, in fact, Pennsalt did not have any existing business and that the only shipments that it made, apart from the Penn-Olin exploratory venture, the only shipments it made into this territory were by virtue of special customer relationships. But, I should like to call Your Honors' attention to the fact that, if it were true that Penn-Olin had been formed to takeover an existing business of Pennsalt, then that would bring into play the third paragraph of Section 7, under which, the test of the legality is not the probability but the actuality of lessening competition. Your Honors have that paragraph in mind, the one which deals with nothing shall prevent a corporation engaged in commerce from causing the formation of subsidiary corporations, etcetera, where the effect of such formation is not to substantially lessen competition. The fact is that, apart from these exploratory activities with Olin, Penn-Olin was not in the market at all and made no attempt to sell there. It's a completely new enterprise. It was not formed to take over any existing facilities or assets that had been devoted to interstate commerce. There is no element of concentration involved in Penn-Olin, so far as the chlorate industry is concerned. On the contrary, it added new production and new sales to a market up to then dominated by Hooker and American Potash.
Byron R. White: Well, Mr. Connelly, I gather that your argument would cover the one or two examples I chatted with your colleague about, where two existing competitors form a new company together, like Penn-Olin to -- to enter a new market, your argument would apply.
Albert R. Connelly: Yes, sir.
Byron R. White: And, similarly, in -- between -- in agreement between two competitors to use such instrumentality to develop new technology in this.
Albert R. Connelly: Well, that's a -- that's a rather broad statement about developing new technology. If it's within the line --
Byron R. White: To develop a new product.
Albert R. Connelly: With -- if it were within the existing -- an existing line of commerce, of course it would. I can conceive of -- of some hypothetical situation where there might be something so novel that its attempt by two companies which were actually engaged themselves in a related field might, nevertheless, be justified. But, I just don't want to answer your question --
Byron R. White: Yes.
Albert R. Connelly: -- too broadly on that. Turning now to the Sherman Act argument of the Government, first, Your Honors will have in mind that it's a very limited argument that they make in this connection. They say Sherman Act only if Section 7 is held not applicable because here, the acquired company was not in fact engaged in interstate commerce. The substance of their argument involves two steps. First, a paraphrase of the statement made by this Court in Time-Picayune to the effect that the specific standards of the Clayton Act may be looked at to illuminate the general policy of the Sherman Act. Then, secondly, I should like to put this in appellant's own words. The fact that an acquisition would violate the substantive provisions of Section 7, if the jurisdictional prerequisite had been satisfied, should be given great weight in determining whether it amounts to an unreasonable restraint of trade in violation of the Sherman Act. Now, there are two fallacies in that argument. In the first place, the point that's being made here is not a jurisdictional objection. There's no difficulty, jurisdictionally speaking, from having Section 7 apply to corporations -- to the acquisition of assets not theretofore engaged in commerce. It is just as substantive as the limitation of Section 7 which prevents it from applying to the acquisition of partnership assets by way of illustration, but more importantly, the reliance upon that statement suggests a confusion between those provisions of the Clayton Act which may properly be regarded as specifics relating to types of practices specified, and those provisions of the Clayton Act which relate to the standards of illegality. So far as the former is concerned, we have no question. We don't quarrel with the proposition that, of course, we can look at the Clayton Act, its provisions with reference to exclusive dealing arrangements, its provisions with reference to the acquisition of stock or assets as a description of practices that may properly be looked at in terms of the application of the Sherman Act. But, when we get to the question of the provisions of the two Acts relating to the test of illegality, the situation is entirely reversed. There is nothing specific and, indeed, I can envisage nothing more general than the test of the Clayton Act where the effect may be substantially to lessen competition, a test which was designed specifically to cover situations that had not yet become restraints of trade reachable under the Sherman Act. And therefore, there cannot be a substitution of the probability test of the Clayton Act for the actuality test of restraints of trade under the Sherman Act. So far as I know, in every case in which an acquisition has been held to be violative of the Sherman Act, it involved a situation where the acquiring company was then a major factor in the market and where the acquisition has eliminated a competitor, actual or potential. And, of course those were recently reviewed in the bank cases and the old railroad cases. Here, neither company was a factor in the market. The purpose and effect of Penn-Olin was not to eliminate any competition but to provide new competition for the two companies then dominating the market. Now, appellant says that the fact of a joint venture, the fact of Penn-Olin is a joint venture doesn't limit the applicability of the Sherman Act. Well, of course it doesn't. We don't make any contention that it does, but the fact that the venture is joint, by the same token doesn't involve any per se illegality. The joint venture took place here only because the parties, having considered separate entry, had decided or had not reached the decision to move forward and had decided that the returns were not sufficiently attractive. Putting together the two activities, taking the benefit of -- of Pennsalt's production experience in which Olin was deficient, and taking advantage of Olin's sales position in the market and other chemicals being sold to the same paper producers created a situation which did make it sufficiently attractive for the two companies to move forward. The significant part of the term "joint venture" in this context is not the word "joint," but it's the word "venture," the introduction of an entirely new competitive factor and taking away nothing. Your Honors will recall that, in the du Pont Cellophane case, the du Pont Cellophane Company was established as a joint venture between the du Pont Company and the French Company. The Government, here, argued with reference to an agreement -- an alleged agreement between the two to divide markets that there was illegality there. But, so far as the finding of the District Court, neither the Government nor this Court challenged that finding that the joint venture itself was entirely lawful, that the organization of the new company and the continued ownership was lawful, and the Court there said, "It is not the purpose of the Sherman Act or the common law of restraints of trade to discourage establishment of a new business in a new territory. "In any view of its case, therefore, we submit that the judgment below was right and should be affirmed.
Earl Warren: Mr. Solicitor General.
Archibald Cox: Mr. Chief Justice, may it please the Court. Counsel, at the beginning of their argument, stated that it had been their understanding that the issue is clearly drawn in the lower court and in this Court up until the oral argument today that, previously, they had understood it to be that what must be compared was the competitive situation as it existed before the combination with the competitive situation as it existed after the combination. Now, we agree that that is the question. Indeed, I think that I have been addressing myself to that question all along. The problem is to be sure what one means about competitive situation. By "competitive situation," the District Judge and Mr. DeLone apparently mean to look only to the companies who are actually then in the market selling the product. Whereas, by "competitive situation," we mean not only those facts, but also the possibility or degree of probability or likelihood, as the case may be, that other companies who are interested in this field and capable of entering it may now or in the future, become competitors in the market. It seems to us that that is very clearly an important part of the administration of both Section 7 and of the Sherman Act. Not that I'm right in what I say with respect to the District Court's view, it appears very clearly on page 1576 of the opinion, just below the middle of the page, Judge Steele says the most favorable assumption that could be made from the Government's standpoint is that either Pennsalt or Olin, but not both, would have entered the market as an independent competitor. But, even this hypothesized situation affords no basis for concluding that Penn-Olin had the effect of substantially lessening competition. Whether or not it did, depends upon the competitive impact which Penn-Olin would have had -- will have as against that which might have resulted if Pennsalt or Olin had been an individual market entrant. The Government argues that such comparison, that is the effectiveness of one of those in the market as against the other party in the market is irrelevant. Well, we agree that that's irrelevant. One is good as the other.
Potter Stewart: You mean you -- they say you argue that.
Archibald Cox: The Government argues that any such comparison that is between Penn-Olin and the market, or Penn and the market, or Olin and the market --
Potter Stewart: You do not mean concession --
Archibald Cox: -- is irrelevant.
Potter Stewart: You're agreeing with your own argument, in other words.
Archibald Cox: I'm saying that we haven't gone back on that.
Potter Stewart: Yes.
Archibald Cox: Yes, that we -- that we quite agree with that, but that what the judge left something wholly out of a count. He left it out of a count that, with Olin in the market, you'd have Pennsalt available to go in at any time and that with Pennsalt and you'd have Olin available to go in at any time, but this way, you have, in effect, the covenant by Pennsalt and by Olin that neither of them will go in.
Byron R. White: Mr. Solicitor General, would you agree that having your -- if Olin went in just the fact that Pennsalt is on the sidelines is rather a neutral fact --
Archibald Cox: I think --
Byron R. White: -- to characterize it in some way that it probably would've gone in or possibly would've gone in --
Archibald Cox: I think that --
Byron R. White: -- or would've gone in.
Archibald Cox: I think the fact that they were there -- would be there ever ready to go in, in the event that the conduct of the limited number of firms in a concentrated industry should ever raise prices or otherwise create traditions that made it desirable to go in, gives them a -- puts a limiting factor on the economic power of those concentrated firms.
Byron R. White: But their ever readiness that you do -- you must deduce from certain other facts that --
Archibald Cox: Partly, we do --
Byron R. White: -- that are in the record, certain numbers --
Archibald Cox: And we think --
Byron R. White: -- the evidence that was addressed specifically to that issue is -- isn't very favorable.
Archibald Cox: I should think the -- I would disagree on that. I would think that the evidence take Pennsalt first. Here is a company, an established manufacturer of sodium chlorate.
Byron R. White: But these are these other facts argued.
Archibald Cox: These are the other facts. Here's a company that, for 10 years, has been studying this. Now, Mr. DeLone says "Well, the market had been stagnant for 10 years, so apparently, potential competition doesn’t amount to anything." Of course, the market had been stagnant and then there was a sudden change. Why? Because there was a great due process suddenly developed. There was a demand quadrupled in that 10-year-period. The projected demand doesn't project the same rate of increase but Olin, in 1958, projected that the market would be 77 -- the -- other than captive market would be 77,000 in 1960 and 105,000 in 1964. That's a 40% increase almost in five years. What had happened was this new oxidizing process for the pulp and paper bill.
William J. Brennan, Jr.: That's forecast in (Inaudible)
Archibald Cox: That is a forecast all in made in 1957 or 1958.
William J. Brennan, Jr.: Well, is that 104,000 figures from sales 96,000 figures for capacity?
Archibald Cox: I think so, but I'm not entirely sure. The record reference is 874.
William J. Brennan, Jr.: I can't find it, Mr. Solicitor General, but did the trial judge (Inaudible) say something about presently it's a deficit market?
Archibald Cox: He said that, in 1960, it was not a deficit market, but of course, what he was comparing was the added capacity of these new firms without making any of the projected inquiries and for the projected inquiries, we rely first on the fact that it had been growing so and second, upon these projections by Olin's and others like Arthur D. Little Company who were advising Pennsalt and Olin on the advisability of going in. Now, I would like to address myself to this further point. It was suggested that our argument results in an automatic rule that would condemn all combinations to enter in the market. I suggest that the Shoe is on the other foot. I heard no qualifications in Mr. DeLone's argument. It would indicate when firms couldn't combine to enter a market in which neither had previously been selling. Whereas, I think our standards recognized the need for some selection and that they do require a careful examination of the fact. True, not as subjective intention of what was going in, in somebody's mind, but a fact you can take hold off, of the capabilities of these companies, of the -- of the activities that they had been engaged in, their size and independent qualification, and of the degree of their interest. And it's worth noting that Pennsalt, which had constantly been studying this, one of the last minutes of the corporate directors' meeting recites that if we don't go on the joint venture then Dr. Somebody who was in charge of projecting their new plant will report again on the possibility. And Olin, too, had this, the Chemical Division, pressing hard with a new variant proposed of their plant. They were going to put in there with the reports for 1960 which never came forward because the merger had the combination that they had agreed upon. But, we do look at those four facts and we do think this permits a discrimination which would permit companies that can't go in alone to combine and enter a new market but which would prevent those who can go in alone, at least in these circumstances, from combining and thus, covenanting that each of them will stay out, impliedly covenanting, so as not to compete with their subsidiary.
Arthur J. Goldberg: (Inaudible)
Archibald Cox: Well, I would be very suspicious of any such fixed corporate policies. As this record here, the fixed corporate policy of these companies is not -- was not to go in unless you have a certain estimated rate of return.
Arthur J. Goldberg: (Inaudible)
Archibald Cox: And never made any exceptions?
Arthur J. Goldberg: (Inaudible)
Archibald Cox: Well, I would think that this might bear on something akin to capability. I hear the words. They said they had some policies but I also noted that it was suggested by one of the divisions that, well, maybe they'll make an exception. They weren't giving up upon the strength of the policy here. I would be a little hesitant to say that any such declaration of policy, standing by itself, were conclusive. I think not. I would think it might bear on the question, which won't always be easy, of capability and that it would bear, Mr. Justice Goldberg, on the question of interest. Now of course, here, we have clear evidence of interest. As fixed a policy as you seem to envisage, might mean that you excluded interest from the case and under those circumstances, it would be different from the case we have at bar.
Arthur J. Goldberg: (Inaudible)
Archibald Cox: Well, I -- I hesitate to go any farther.
Earl Warren: Very well.


Earl Warren: --versus Erie Resistor Corporation, et al. Mr. Come.
Norton J. Come: May it please the Court. I indicated at the conclusion of the argument yesterday that a bargaining meeting of May 28th, the Company had indicated to the union that the superseniority that they thought they needed would have to be in the neighborhood of 20 years. Well, in ensuing weeks, this superseniority plan, this 20-year plan, was announced to the employees. There was, first a letter by the Company on June 10 to all the employees and members of the union indicating that 20 years additional seniority would be given to employees who went to work during the strike. After that announcement, the number of returning strikers drastically shot up. Up to that point, there had only been about eight strikers who had returned. With the June 10 announcement, the number shot up to 87, and the next week there was a further announcement and the number shot up to 125. At that point, which is about June 25th, the union capitulated and decided that it would have to call on to strike. A contract was entered into reserving the superseniority question for a further litigation before the Board and the courts.
Earl Warren: Was that -- was that made open to outsiders also or just to the members of the union that were on strike?
Norton J. Come: The superseniority was offered to outsiders as well. It was offered to new hires, to employees who returned to work, who were in the layoff category as well as to employees who were on strike. So it was --
William J. Brennan, Jr.: [Inaudible]
Norton J. Come: Yes, a 125 came back who were striking.
William J. Brennan, Jr.: Out of how many?
Norton J. Come: There were 478 on strike --
William J. Brennan, Jr.: How many -- how many strikers came back before the announcement of the seniority?
Norton J. Come: Before the announcement of the seniority, you had about eight strikers who had returned.
William J. Brennan, Jr.: [Inaudible]
Norton J. Come: That is correct, Your Honor.
William J. Brennan, Jr.: [Inaudible]
Norton J. Come: About that, yes, sir. That would be 125. The Company then began to recall the strikers who had not been replaced in order of seniority and built up its workforce gradually back to about 450 levels. This was around June and July. However, in September and May into the next year, it was necessary to layoff, and as a result, a substantial number of strikers were laid off who were reduced to junior status solely as a result of this 20-year superseniority program.
Arthur J. Goldberg: Theres no attempt to strike in the labor contract as [Inaudible] testified, isn't that correct? This is a strike over the contract, is that correct?
Norton J. Come: Yes, Your Honor.
Arthur J. Goldberg: What is the theory as to what obligations the employer has for contract [Inaudible] with respect to seniority? Is there any move that Congress [Inaudible]?
Norton J. Come: Well, I think certainly he cannot unilaterally alter the existing condition without bargaining with the union. It was at all --
Arthur J. Goldberg: [Inaudible] based on the character or no opinion?
Norton J. Come: Well, of course as you appreciate, Your Honor, that is a problem that is being litigated in the -- in the courts right now. That was in the Glidden case, it's been in the Ross Gear case and we're at the threshold of answering that question. In this case, however, since they did enter into a new contract which continued the seniority provisions of the -- of the old contract, I think you had the two superimposed, one upon the other so quickly that -- that we don't have that gap here. The only new thing that was added was this superseniority program which favored those who had returned to work during the strike for purposes of future layoffs.
Arthur J. Goldberg: The contract itself does not resolve as to that specific requirement, is that correct?
Norton J. Come: That is correct, Your Honor.
Arthur J. Goldberg: [Inaudible]
Norton J. Come: That is correct, Your Honor. Now a complaint was issued --
Potter Stewart: This -- this was add -- this superseniority, as you call it, was added at a time as Justice Goldberg has pointed out when there was no collective bargaining agreement in effect between the representatives and the employers, isn't that right?
Norton J. Come: That is correct.
Potter Stewart: And that it's also represented in the briefs for the -- for the respondent that continual efforts were made to bargain about this during that period, during that interim period.
Norton J. Come: That is correct, Your Honor, but the Board found that although the company was willing to bargain about the number of years or the form of the superseniority, at all times it was insisting that it had to have some kind of an arrangement which would give a preferential seniority advantage to those employees who returned to work during the strike. So that I think that, although the number of years might have been left open, there was no question that at all times the Company was taking the position that it had to prefer those who went to work during the strike ahead of the strikers.
William J. Brennan, Jr.: Mr. Come, I gather there's no doubt the union -- there's no question that the union status has exclusive representative, was it?
Norton J. Come: There was no question, Your Honor.
William J. Brennan, Jr.: Well is it -- is it the Board's position then that notwithstanding there was, of course, no agreement than existing, nevertheless, even though there was a strike going on, this was a subject matter of mandatory bargaining?
Norton J. Come: Well, I think that the Board's position is that, whether there was a contract in effect or not, this kind of a seniority clause is illegal and that the company could not insist upon it.
William J. Brennan, Jr.: But what I'm trying to get at -- what I'm trying to get at is why is illegal --
Norton J. Come: Well I'm --
William J. Brennan, Jr.: Because they couldn't unilaterally adopt it that is the subject matter of bargaining or --
Norton J. Come: No, I want to -- I want to get to that right now. It was illegal because the Board found that such a clause is inherently discriminatory and restrains the exercise of the right to strike in violation of Sections 8 (a) (1) and Section 8 (a) (3), and I'd like to turn to that right now. Section --
William J. Brennan, Jr.: There was no -- there was no 8 (a) (5) charge here.
Norton J. Come: There was an 8 (a) (5) charge here but the 8 (a) (5) charge flows from the finding that the clause is violative of Section 8 (a) (1) and (3) because it --
William J. Brennan, Jr.: What's the case we had last year? I wrote it, I can't think of the name of it.
Norton J. Come: The case that you had, Your Honor, was the Katz case.
William J. Brennan, Jr.: Katz.
Norton J. Come: In which it was held that it was a violation of Section 8 (a) (5) to grant a unilateral wage increase in the course of negotiations.
William J. Brennan, Jr.: Does that -- does that have any relevancy to this present case?
Norton J. Come: It has only a tangential relevance in that it shows that if you -- there are certain kinds of conte -- conduct which might be so inconsistent with the provisions of the Act that it could be a violation in a per se sense, let us say without necessarily finding that the company had a bad motive here.
William J. Brennan, Jr.: But in any event, for the purposes of this case, the Board's position is only that this is an 8 (a) (1) case.
Norton J. Come: It's an 8 (a) (1) and an 8 (a) (3) case.
William J. Brennan, Jr.: Yes.
Norton J. Come: The Board found that it violated both sections and if the Board is sustained on that, then there's no question that the 8 (5) would follow because it's an 8 (5) to insist upon in the illegal clause. Now, I'd like to address myself to the 8 (a) (1) aspect of the -- of the case for us. Now, Section 8 (a) (1), as the Court is well aware, makes it an unfair labor practice for an employer to restrain or coerce employees in the exercise of Section 7 rights. Now, a normal strike for economic objective is of course, a concerted activity protected by Section 7. Now, a seniority program that prefers nonstrikers to strikers, which is what this program did, manifestly restrains and coerces employees in the exercise of the right to strike irrespective of what the company's ultimate motive may have been. Now, the worker who accepts employment during the strike and the employee who returns to work are rewarded. They get their seniority standing boosted. Well, the employee who stays on strike is penalized solely because he has elected to continue to exercise his right to strike and the reward and the penalty are inextricable. They're like a double-edged sword because seniority is, by its very nature, a relative thing, and if you're going to boost up one person's seniority, you're necessarily going to reduce the relative seniority advantage.
William J. Brennan, Jr.: Well suppose -- suppose -- suppose instead of offering superseniority, the employers said they will pay 10 cents or 15 or 25 cents more an hour than we've been paying so anyone would take employments. Would that be the same case?
Norton J. Come: That might be a different case, although I --
William J. Brennan, Jr.: It would have the same effect, wouldn't it?
Norton J. Come: Well, superseniority has a much more pervasive effect and as I'm going to try to show you, this is a question of balancing competing interests here and the superseniority clearly tips the scales. My own view is that at the offering of the additional wage incentive would also tip the scales and I think that you have cases that would support them, although, an argument could be made in the other direction. Not --
Arthur J. Goldberg: [Inaudible]
Norton J. Come: Well, I think that that is exactly what we have to get down to and I'm going to try to show the Court that the effects of -- of this superseniority policy are much more drastic and pervasive than the kind of replacement that was permitted in Mackay. But the thing that I wanted to point out before I get to Mackay is that the key to these cases is not merely, whether or not, the employer has an ultimate business motive for what he has been doing here. Now, it's true that not every interference with Section 7 activity amounts to a violation of Section 8 (a) (1) of the Act or 8 (a) (3) of the Act. It's been recognized by the Board and the courts including this Court that the National Labor Relations Act has to be read in such a way as to accommodate other competing legitimate interests. And for that reason, for example normal business decisions such as granting a wage increase or reducing wages even though it may have an incidental consequence of affecting union or concerted activity may be privileged if motive is a legitimate one and you lose that privilege if the motive is not legitimate. By the same token, however, there are -- is a class of activity and that's usually the situation where union or concerted activity is singled out as the basis for discrimination where the effect on the exercise of the Section 7 right is so drastic that it cannot be -- it is not privileged even though the employers' ultimate objective may be a business one. Now, in Mackay, the Court held, and that was in 1938, that in economic strike, the employer in the interest of continuing his business could hire replacements for the strikers and give them permanence. That was an accommodation that was made in the interest of enabling the employer to run his business.
Byron R. White: Well, isn't that -- doesn't granting seniority rather pay in comparison to people losing jobs?
Norton J. Come: Well I think, Your Honor, that when you look at the way it works, it is not held. I appreciate you -- you can view it as something lesser because after all you are taking the employee back and he doesn't -- he doesn't lose a job, but let me try to show you what does happen and in the Board's view, this is -- this is far worse.
Byron R. White: Well, a fellow who comes back -- the union member who comes back after the strike with standing behind 20 years of seniority, but he certainly is standing -- at least he's standing there in the plant. And then some of his friends, they aren't even back to the plant.
Norton J. Come: Well, let me make clear first of all that the Company here did not need this superseniority plan in order to guarantee the permanence which Mackay is talking about. Mackay says that if you replace a striker with a replacement permanently, that striker is not entitled --
Byron R. White: This isn't really an important issue of that point. Is it that you would make the same argument whether it was or it wasn't, because it may have been -- I'm assuming you're arguing the case on the assumption that, that it was necessary to give the superseniority, to get the fellow in at all, and in that sense, it was essential in order to give -- in order to give him permanence --
Norton J. Come: And was there --
Byron R. White: And by you wouldn't have given -- you wouldn't have even the plan at all.
Norton J. Come: It was not essential for him to retain that job vis-à-vis the striker that he replaced because this superseniority policy, as I pointed out yesterday, apply only in cases of future layoffs. It could not be used for bumping and the testimony in the record makes it quite clear that if you put into a job, let us say a replacement and the striker who had that job at 30 years seniority came back, he couldn't claim that job even without this 20-year superseniority. The only thing that the 20-year program did was to guarantee that the replacement, not only would be able to oust the striker who he replaced which is what Mackay says, the employer can do, but that repla -- but that replacement would, in the event of layoffs at sometime in the future, also have the additional advantage of being able to bump out other strikers who were not replaced during the strike and had returned for work.
Arthur J. Goldberg: [Inaudible]
Norton J. Come: Well, I think it is, Your Honor, and I think that demonstrates the very serious impediment that is imposed upon employees who have exercised their lawful protected right to engage in --
William J. Brennan, Jr.: Well your point, Mr. Come, I gather is that, this gives the new employee a preference not only to the fellow who's left out in the street because he takes his job, but also in the event of layoff, it gives him a preference over someone who actually had come back to work after the strike, but who now, by reason of this 20-year, has lesser seniority in the --
Norton J. Come: That is correct, Your Honor and for that reason, we submit that the Board correctly concluded that this was far different and far more serious than the right to permanent replacement that is recognized by --
Byron R. White: Mr. Come, isn't this just a rule of permanency? I mean that the thing is that the time it's really going to operate, is raised in the time of layoff, the fellow seniority doesn't get laid off and seniority has the more permanent job than the fellow without seniority.
Norton J. Come: But look to what it --
Byron R. White: That is the -- that's the only way it operates, isn't it, in terms of permanency?
Norton J. Come: But, Your Honor, look also what it does to the exercise of the right to strike. I've shown you on the facts of the --
Byron R. White: Well, I'm sure I gather you're really saying that Mackay was wrong.
Norton J. Come: No, Your Honor, I'm not saying that Mackay is wrong. I'm saying that Mackay rests upon a balancing of the conflicting interest. The interest of the employer in running his business as against the impairment to the right to strike, and at some point, you go too far and the question is whether the Board was reasonable in concluding that the way this superseniority policy operates, that the gain, the possible gain to the employer is so outweighed by the detriment to the employees and the impairments of the right to strike that on balance it is not privileged by the Act. We submit that the Board was reasonable --
Hugo L. Black: You mean on this particular case?
Norton J. Come: What is that, Your Honor?
Hugo L. Black: You mean on balance on this particular case under the circumstances of this particular case or you're saying always that way?
Norton J. Come: I think the Board's position is always that a -- that any plan which would discriminate on the basis of whether the employee remained out on strike or not in terms of seniority, by its -- by its--
William J. Brennan, Jr.: I mean what -- if what -- this does come down to this that Mackay said that an employer may displace a striker if it's an economic strike, but Mackay did not say that it may also displace a striker who returns to work at some later date when a later layoff comes along.
Norton J. Come: Yes, Your Honor.
William J. Brennan, Jr.: And your position is that to the extent that it gives the employer not only the right to displace a striker, but also gives him the right to oust on a later layoff someone else that that is an interference and made a -- with the right to strike which goes too far.
Norton J. Come: Yes, Your Honor, and it also violates Section 8 (a) (3) for reasons that I've set forth in my brief.
Arthur J. Goldberg: [Inaudible] Suppose that the job that was replaced is on the production job, suppose that under [Inaudible] labor board or that he have to yield to the striker who comes back?
Norton J. Come: He may have to yield to the striker who comes back, Your Honor. I'm not familiar that -- with any particular case on that point but --
Arthur J. Goldberg: [Inaudible]
Norton J. Come: That may well happen. Thank you.
Earl Warren: Mr. Wayman.
John G. Wayman: Mr. Chief Justice, Honorable Justices. The sole issue in this case is the Board's declaration of what it calls superseniority is per se unlawful in violation of Section 8 (a) (3) and derivatively of 8 (a) (1). Because when I say derivatively of 8 (a) (1) because at the very beginning of this case, counsel for the Board said he was not claiming any violation of 8 (a) (1) aside from this so-called superseniority. And there is not a word of evidence in this case unlike almost every other case that we have seen, that could support a finding of violation of Section 8 (a) (1). Put another way, in the absence of the illegality, the per se illegality of what the Board called superseniority, Erie Resistor was found guilty of no unfair labor practice. The affirmative findings are that it was not guilty of an unfair labor practice, that it did bargain in good faith, that it had a lawful, legitimate, economic motive for what it did. Up until the day, I have not heard the word per se mentioned in this case from the time of the original hearing. This suggests to me as I suggested to the Circuit Court, that perhaps the Board is not proud of its doctrine, I think it should not be proud of its doctrine per se. Furthermore, as it clearly appears here from the argument made by my worthy opponent, the Board wants us to argue every case of superseniority, as they call it. They want us to say that superseniority is absolutely privileged, that it matters not what the circumstances. Under Mackay, any employer can grant superseniority just as he can replace employees. We have never said that. We do not say that now. It is not the theory of this case. It is not even in the Court with the facts of this case, it never has been. This case, however, was selected by the Board as a vehicle to establish a per se illegality doctrine. The Board's counsel said so at the outset of the hearing. It upset my client a good deal to be in the middle of defending himself against this charge. At the very time, the General Counsel issued a ruling, SR 509, in which on identical facts, General Counsel found another employee not even required to answer a complaint on the proposition that he had a lawful economic motive and that this was in accord with Mackay Radio and Olin Mathieson. We didn't think that was the way a board ought to operate, because this is a serious matter to the smaller company. It involves something over a million dollars in back pay and that's not a small amount of money to a company that employs 450 people or so. This is a threat to every man in that plant. Not just to replacements, but the strikers who have returned who incidentally are all working today, thanks to the fact the company has recovered from this strike after about two and a half years of struggle. The complaint against Erie Resisor had a number of counts. One of them was this per se illegality, which was the real reason for the case. Another was that in adopting the policy of superseniority, as they call it, their purpose was not to save the plant but to punish the strikers. This count was completely disapproved. There is not a word of evidence to support it in the record. The Board did not find out to be the fact. The trial examiner found that not to be the fact. Consequently, if motive be the test, Erie Resistor is not guilty. There were many counts for refusal to bargain in various ways. After all the hearing that we went through in the trial examiner's report and Board's decision, we were found not guilty of any of those charges. This is an extraordinary thing in a case where an employer is charged with the violation of 8 (a) (3), because it leaves standing naked and alone this per se illegality of what the Board calls superseniority. We have referred to the trial examiner's findings, page 59-a of the record and page 64-a of the record. Yesterday, I believe the question was asked whether or not there was a finding that this so-called superseniority was necessary to get replacements to come to work, and that's a rather extraordinary example of the treatment the Board has given to this case. Perhaps 350 or 400 pages of these thick books are devoted to prove that it was necessary to give what they call superseniority to the replacements to get them to come to work not simply because it's obvious that every man wants a permanent job and not a temporary one, but because we had extraordinary violence on the picket line here. And as you will see if you read the record, I believe it's the testimony of Mr. Burton that many people who were hired didn't come to work. They were afraid to come to work. We had 300 applications, yes, but you can't run a plant with applications. You have to have people and we couldn't get the people because they would not risk crossing the picket line and risk the censure of these neighbors of theirs unless they were assured of a permanent job. It was necessary. This is a finding of the trial examiner. The Board did not reverse that finding. Instead, on page 19 and not 29, the Board said it refused to consider this fact. It would not pass upon it because in the Board's view, any superseniority is illegal per se. They didn't use the words per se, of course, but any superseniority is illegal and therefore they didn't even consider this fact. And now when we come before the Supreme Court, I heard the argument made and it was not necessary to have this additional seniority for replacements in order to get them to come to work. We could only wish that that was so, but it is not so and the record will not support such a statement. Now, we have to suggest that, and I think we have in our briefs suggested that the Board hasn't defined what it means by superseniority except to indicate that in its eyes it's something pretty bad. After about 20 years of dealing with labor unions, big ones and little ones, and negotiating many contracts, I don't know what the word means.
Arthur J. Goldberg: Well, Mr. Wayman, [Inaudible]
John G. Wayman: Indeed you have, sir, in fact, you and I on occasion.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: I will certainly do, Your Honor.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: That is sir, Your Honor, but seniority itself means nothing unless it's more than someone else has, so the term -- the term superseniority to me is meaningless unless it is defined in context and in the circumstances of a particular case and contract and this is my point exactly. I can't defend the term superseniority and I don't intend to.
William J. Brennan, Jr.: It doesn't it mean to credit for service not served? It's an artificial and synthetic seniority, is that right?
John G. Wayman: It could. It could mean that. I don't know what the Board has in mind.
Potter Stewart: Well, that's what it means in this case. That's what it means in this case. You're getting somebody credit for 20 years that is not on payroll.
John G. Wayman: In respect we gave them credit for 20 years but not in the respect that you use seniority generally because he is limited in his ability to use it. All this so-called superseniority did was to give him the right to stay in the plant. It did not fix a term. In other words, it didn't say this superseniority will go on for a year or a day, although in the settlement agreement, they did said, “It would continue until decided by the courts,” but had the union been willing to bargain on the matter, perhaps, we could have done something with that. Mackay Radio doesn't fix the term either. Under the circumstances of this case, there was no way at all for this company to assure these replacements of permanence of tenure and to keep the promise, which I suppose everybody would want them to do, unless they either gave these people some additional seniority beyond the date that they were hired, the artificial credit that mentioned, or made some other arrangement with the union. Because we had on the date the strike began, about 450 people on layoff and under the contract that was in effect when the strike began, there was no terminal point for this seniority. It just went on and on. As Mr. Justice Goldberg would agree, I think, this is an unusual feature in a contract that there it was. We had 450 people with no prospects of reemployment but having seniority. As a practical matter, certainly it would make no sense to replace people on layoff because nobody would take a job simply to be laid off. We had to replace people that were working and if we did and if we give the replacement seniority just from the date they started to work, as soon as the strike ended, they would go to the bottom of that 450-man layoff list and there would be no permanence of employment the fact that might just as well find. This was a problem that faced this Company, unlike many companies it's an unique situation.
Arthur J. Goldberg: What was the -- what was the Mackay Radio problem [Inaudible], is that correct?
John G. Wayman: That is certainly my understanding in Mackay, Your Honor.
Arthur J. Goldberg: [Inaudible] are you arguing that for each case the Board would have to make a determination that where there's the order of superseniority that [Inaudible]?
John G. Wayman: That is certainly a part of our argument because that's the holding of all the circuit courts which have dealt with the subject of superseniority.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: I would say that in determining whether or not there was a violation of the Act by granting additional seniority under the circumstances, it was reasonably necessary for the employer to grant this or to use this tactical device in order to obtain the replacements and this is what the Courts of Appeal have said. They have never said there's an absolute privilege to grant superseniority. I wouldn't expect them to. We didn't expect them to. The Company in this case complied religiously with those decisions. It followed them exactly. They had good counsel, Mr. Murphy. He told them they should follow the law and they did follow the law. And this is why they were so distressed when after the matter was all over having followed the law conscientiously, they find themselves accused of a violation of the law and not permitted to make any defense at all. This is the thing that shocked us. This is the narrow point in this case; not whether or not the Board correctly found facts because it didn't find any facts. It said it didn't have to consider the facts. All additional seniority for replacements is unlawful. That's the proposition. The Court of Appeals would not accept that proposition. The Court properly said, in violation of 8 (a) (3), motive is an indispensable factor and so it is under every case that has been decided in the Courts of Appeal or in the Supreme Court. Let us consider now what the Company might have done in this situation. It might have simply replaced these people, said nothing at all to the union, and gone ahead and kept them out after the strike. It could have replaced every one of the strikers, which would have broken them. It could have simply not negotiated a contract containing seniority because the contract had expired and after the expiration of that contract, there was no seniority. To the company's everlasting credit it did none of these things. It never ceased to try to make a contract with the union. It never refused to sit down with the union and try to make a contract that had some usually satisfactory seniority arrangement. It is not true that the Company insisted on superseniority. The word “superseniority” was put into Mr. Farrell's mouth, but if you look at page 156-a of the record and 161-a of the record as examples of Mr. Farrell's efforts to make this clear, he said, “We took a positive position where we're going to have to have some sort of protection for these people in the way of giving them job assurance that we have told them they would have.” He did not say superseniority and at page 161-a, he was asked about superseniority by General Counsel and he said, “I object to superseniority per se because my company said the Company consistently evidenced its willingness to negotiate with the union as to the form of the assurance would take.” In this particular case, what we are talking about is the Company's effort to keep a lawful promise to the replacements that they would not be discharged when the strike was over. Now, they could have done this with -- excuse me sir.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: If they did, Your Honor, the Board did not consider it an unfair labor practice because this promise was made before May the 28th and the Board said there was -- there was no unfair labor practice up to that time.
Arthur J. Goldberg: But in our case, putting aside [Inaudible]
John G. Wayman: I would say, sir, that that is correct in any case in which you replace employees with permanent replacements. This is always true. It makes it much more difficult to bargain. There's no question about it. But this is not due to the particular case we have here. This is true of every case in which you have permanent replacements because the union's ultimate position was all the replacements have to be discharged. Well that made it very difficult to get a contract, but again, to the company's credit, they did get a contract. The strike did end and strangely enough, well, they're criticized for it, the record shows clearly that they hired only so many permanent replacements as they absolutely had to have in order to survive. When this college let out in June, they hired college boys and told them, “This is temporary.” They used clerks who make awfully poor production people, I might say, and sometimes labor relations men who are worse. And they try to get by with any method they could without displacing any of their striking employees, but if this plan didn't operate, it would die and it almost did die. This was no question of just building up the profit. This was a question of surviving. What was done here was purely defensive, but really no choice. And yet in spite of this dreadful fact, the Company still tried to bargain with the union, it never took the position that the union is out or break the union. It wouldn't make the contract of the union exactly the contrary is true. Instead of condemning a company like this, it should be commended. This is not to say there was no problem. Indeed, there was, and there still is, but I do believe it's a kind of a problem that could have been solved by collective bargaining as the union had been willing to bargain. I want to say one word too but the emphasis that's been placed on the additional seniority granted. My friend, Mr. Come suggests in his presentation that perhaps the purpose of this grant of additional seniority was to entice strikers to come back. That is absolutely unsupported in this record. The record shows that the contrary is true. This Company carefully avoided an invitation or enticement to the strikers to return, but when they did or if man who wanted to come back to work, the Company didn't say, “No, you can't do it,” but the need for replacements was not to get the strikers to abandon the strike, it was to get strangers and outsiders to come in to work and this was the only reason that this policy was adopted. Furthermore, the policy was adopted only after about 11 unsuccessful negotiating meetings in which it appeared that there was no chance of getting the union to agree to any arrangement that would allow the replacements to stay at work.
Earl Warren: There's a notice in the record, the notice that they -- they put out concerning the reemployment of strikers.
John G. Wayman: It is, sir. The notice itself or several notices on May the 3rd, the company sent a letter to all its employees, strikers, and others, telling them that on May the 6th or 7th, they would begin to hire permanent replacements and that anybody who is replaced could have his job only to that point then he'd have no job. Then they began to bargain with the union on the very first day they hired a replacement, suggesting different ways of handling this but not getting any where. On May the 28th, they handed this so-called 20-year proposal to the union. The union, of course, rejected it along with everything else, but oddly enough on May the 30th, the union got on the television station and broadcast this all over Erie. The Company has -- had said this is confidential, we're trying to bargain on, but the union got on the television and said, “This is the company's policy.” So on that day, the union broadcasted and then people did indeed began to come in, not by any announcement on our part, but by an announcement on the union's part. Finally, on June the 10th, a letter was sent out and published, saying that the policy had been adopted and on June the 15th, a notice was posted on the bulletin board. Those, I believe, are the notices concerning the policy. No special letter, which I am aware of, was sent to the strikers, but if the striker came in and said, “I want to go to work”, we said, you can go to work. We would be glad to have them of course. It's not by any special inducement. In this respect, I should like to answer one other question that was asked, whether or not, this differs from offering say replacement, an additional 10 cents per hour. Yes, it does in our view because offering a replacement an additional 10 cents per hour has nothing to do with his permanence of tenure. There is a vast difference between a permanent replacement and a strike breaker. We do not believe we have no favor for strike breakers. If I want to hire a strike breaker, this is the way I would do it. I would offer him a big bonus to come in and work during the strike with the understanding that he can get out as soon as the strike is over. This is a strike breaker. But if I want --
Arthur J. Goldberg: [Inaudible]
John G. Wayman: Well it's a distinction that Congress made. I think it's a very real one, Your Honor.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: I think it is, Your Honor, and I think there are two keywords in what you said to do what is necessary. In other words, I think that the decisions of the Courts of Appeals have said that you must demonstrate a need not simply that you -- I thought it was a good idea but you had a genuine need, not something subjective but objective through. And this we offered and this was never refuted.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: If that's the definition that's put on it, yes, but whenever you say do what is necessary, then I think you come back into the definition of these various Courts of Appeals. If your purpose is simply to punish the strikers, it's unlawful. If your purpose is solely to operate the plant, and I think you ought to demonstrate a need to do it, then it's lawful.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: He has that right.
Arthur J. Goldberg: Did he have a record?
John G. Wayman: Indeed he does.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: I don't think it's irrelevant. I think that there is a difference between a man who operates because he has to, to survive and here I'm talking about defensive as opposed to offensive weapons, economic weapons, there is a difference.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: It has nothing to do with or under Mackay.
Arthur J. Goldberg: [Inaudible]
John G. Wayman: I don't believe that that's the kind of weighing that the Board ought to do whenever they declare something per se unlawful. This is balancing for Congress, not for the Board. However, I do say this that there is a distinction between operating the plant and hiring replacements, a distinction made in Mackay. You may operate your plant even though it's an unfair labor practice strike, but you may not hire permanent replacements in an unfair labor practice strike and this is a very significant difference, but we met the test in Mackay, every one of them. We satisfied them all on this record. Unless this is per se unlawful, we were guilty of no wrong.
Byron R. White: Well, would you in Mackay, would you say that -- would you say that at the moment the strike started, the company offered jobs to permanent replacements or look suddenly for permanent replacements and at that moment offered superseniority, I take it, you would almost think you'd have to try first to get replacements without superseniority.
John G. Wayman: I do believe that is correct, Your Honor. I think you must.
Byron R. White: And you must -- you must -- you would think they offered superseniority at the very outset then you might be in more trouble than you think you are now.
John G. Wayman: Well, I think we are not in trouble now. We would be then, yes Your Honor.
Byron R. White: But -- if you try to fail the -- then succeeded with superseniority, I take it, you think you are on -- in the preferential right.
John G. Wayman: I believe that is entirely within the law, Your Honor, yes sir.
Byron R. White: Then that's what you think these facts are.
John G. Wayman: Indeed they do. There can be no other conclusion drawn from this record.
Byron R. White: And in that sense, you've demonstrated need.
John G. Wayman: Yes, sir.
Earl Warren: Thank you, Mr. Wayman.