Opinion ID: 105516
Heading Depth: 2
Heading Rank: 2

Heading: relevant market.

Text: Finally, even assuming the correctness of the Court's conclusion that du Pont's competitors have been or will be foreclosed from General Motors' paint and fabric trade, it is still necessary to resolve one more issue in favor of the Government in order to reverse the District Court. It is necessary to hold that the Government proved that this foreclosure involves a substantial share of the relevant market and that it significantly limits the competitive opportunities of others trading in that market. [30] The relevant market is the area of effective competition within which the defendants operate. Standard Oil Co. of California v. United States, 337 U. S. 293, 299-300, n. 5. [T]he problem of defining a market turns on discovering patterns of trade which are followed in practice. United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 303, aff'd per curiam, 347 U. S. 521. Determination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. United States v. E. I. du Pont de Nemours & Co., 351 U. S. 377, 393. This determination is primarily one of fact. The Court holds that the relevant market in this case is the automotive market for finishes and fabrics, and not the total industrial market for these products. The Court reaches that conclusion because in its view automotive finishes and fabrics have sufficient peculiar characteristics and uses to constitute them products sufficiently distinct from all other finishes and fabrics . . . . Ante, pp. 593-594. We are not told what these peculiar characteristics are. Nothing is said about finishes other than that Duco represented an important contribution to the process of manufacturing automobiles. Nothing is said about fabrics other than that sales to the automobile industry are made by means of bids rather than fixed price schedules. Dulux is included in the automobile market even though it is used on refrigerators and other appliances, but not on automobiles. So are other finishes and fabrics used on diesel locomotives, engines, parts, appliances and other products which General Motors manufactures. Arbitrary conclusions are not an adequate substitute for analysis of the pertinent facts contained in the record. The record does not show that the fabrics and finishes used in the manufacture of automobiles have peculiar characteristics differentiating them from the finishes and fabrics used in other industries. What evidence there is in the record affirmatively indicates the contrary. The sales of the four products principally involved in this caseÔÇöDuco, Dulux, imitation leather, and coated fabrics ÔÇösupport this conclusion. Duco was first marketed not to General Motors, but to the auto refinishing trade and to manufacturers of furniture, brush handles and pencils. In 1927, 44% of du Pont's sales of colored Duco, and 51.5% of its total sales, were to purchasers other than auto manufacturers. Although the record does not disclose exact figures for all years, it does show that a substantial portion of du Pont's sales of Duco have continued to be for nonautomotive uses. [31] It is also significant that Duco was a patented product. Prior to the expiration of the patent in 1944, only five years before this suit was brought, du Pont issued over 250 licensesÔÇöto all that appliedÔÇöcovering its patented process. If Duco is to be treated as a separate market solely because of its initial superiority, du Pont is being penalized rather than rewarded for contributing to technological advance. Dulux has never been used in the manufacture of automobiles. It replaced Duco and other lacquers as a finish on refrigerators, washers, dryers, and other appliances, and continues to have wide use on metallic objects requiring a durable finish. Yet the Court includes it as a finish having the unspecified but peculiar characteristics distinctive of automotive finishes. Ante, p. 593. In 1947, when du Pont's sales of Duco and Dulux to General Motors totaled about $15,400,000, the total national market for paints and finishes was $1,248,000,000, of which about $552,000,000 was for varnishes, lacquers, enamels, japans, thinners and dopes, the kinds of finishes sold primarily to industrial users. [32] There is no evidence in this record establishing that these industrial finishes are not competitive with Duco and Dulux. There is considerable evidence that many of them are. It is probable that du Pont's total sales of finishes to General Motors in 1947 constituted less than 3.5% of all sales of industrial finishes. The record also shows that the types of fabrics used for automobile trim and convertible topsÔÇöimitation leather and coated fabricsÔÇöare used in the manufacture of innumerable products, such as luggage, furniture, railroad upholstery, books, brief cases, baby carriages, hassocks, bicycle saddles, sporting goods, footwear, belts and table mats. In 1947, General Motors purchased about $9,454,000 of imitation leather and coated fabrics. Of this amount, $3,639,000 was purchased from du Pont (38.5%) and $5,815,000 from over 50 du Pont competitors. Since du Pont produced about 10% of the national market for these products in 1946, 1947 and 1948, and since only 20% of its sales were to the automobile industry, the du Pont sales to the automobile industry constituted only about 2% of the total market. The Court ignores the record by treating this small fraction of the total market as a market of distinct products. It will not do merely to stress the large size of these two corporations. The figures as to their total salesÔÇö $793,000,000 for du Pont and $3,815,000,000 for General Motors in 1947ÔÇödo not fairly reflect the volume of commerce involved in this case. The commerce involved here is about $19,000,000 of industrial finishes and about $3,700,000 of certain industrial fabricsÔÇöless than 3.5% of the national market for industrial finishes, and only about 1.6% of the national market for these fabrics. The Clayton Act is not violated unless the stock acquisition substantially threatens the competitive opportunities available to others. International Shoe Co. v. Federal Trade Commission, 280 U. S. 291; Transamerica Corp. v. Board of Governors, 206 F. 2d 163; V. Vivaudou, Inc. v. Federal Trade Commission, 54 F. 2d 273. The effect on the market for the product, not that on the transactions of the acquired company, is controlling. Fargo Glass & Paint Co. v. Globe American Corp., 201 F. 2d 534. [33] The Court might be justified in holding that products sold to the automotive industry constitute the relevant market in the case of products such as carburetors or tires which are sold primarily to automobile manufacturers. But the sale of Duco, Dulux, imitation leather, and coated fabrics is not so limited. The burden was on the Government to prove that a substantial share of the relevant market would, in all probability, be affected by du Pont's 23% stock interest in General Motors. The Government proved only that du Pont's sales of finishes and fabrics to General Motors were large in volume, and that General Motors was the leading manufacturer of automobiles during the later years covered by the record. The Government did not show that the identical products were not used on a large scale for many other purposes in many other industries. Nor did the Government show that the automobile industry in general, or General Motors in particular, comprised a large or substantial share of the total market. What evidence there is in the record affirmatively indicates that the products involved do have wide use in many industries, and that an insubstantial portion of this total market would be affected even if an unlawful preference existed or were probable. For the reasons stated, I conclude that  7 of the Clayton Act, prior to its amendment in 1950, did not apply to vertical acquisitions; that the Government failed to prove that there was a reasonable probability at the time of the stock acquisition (1917-1919) of a restraint of commerce or a tendency toward monopoly; and that, in any event, the District Court was not clearly in error in concluding that the Government failed to prove that du Pont's competitors have been or may be foreclosed from a substantial share of the relevant market. Accordingly, I would affirm the judgment of the District Court.