These members believe it would be a "fair inference from this analysis that in this case the dissenting opinion represents the law as it now stands better than that of the plurality."

Also important in defining monopoly power, the Committee believes, are American Tobacco Co. v. United States,191 United States v. Paramount Pictures, Inc.,192 United States v. Aluminum Co. of America,193 United States v. Pullman Co.194 and United States v. United Shoe Machinery Co.195 The last three cases dealt basically with single companies providing the bulk of supply in a market. In the Tobacco and Paramount cases, however, the defendants, who were found to have conspired and combined to monopolize, faced significant competition from rival firms. The conclusion that they were monopolists therefore required extended consideration of the nature of their market position, and the factors on which it depended.

In the Tobacco case, the jury found that the three largest cigarette sellers had combined and conspired to monopolize the national cigarette market, especially for burley blend cigarettes.196 While the three large companies had sold 90 percent of American cigarettes in 1931, their combined percentage had dropped to 68 percent by 1939, which was the equivalent of 80 percent of the burley blend cigarettes produced in that year. The three companies also produced 63 percent of smoking tobacco and over 44 percent of the chewing tobacco sold in 1939. These market shares, the Court said, held in roughly equal proportions by the three major defendants, "inevitably increased the power of these three to dominate all phases of their industry." 197 The jury had found an intent to use this power in combination to maintain a monopoly.198 Under these circumstances "the natural program for maintaining a monopoly here" was one of preventing potential competition, rather than actually excluding existing competitors.199

This program was carried out by (1) combined efforts to fix prices and to exclude undesired competition in the purchase of domestic tobacco, through refusal by one of the Big Three to purchase at auctions unless the other two were represented, the setting of auction price ceilings in advance, grading of tobacco to minimize competition among the Big Three, and bidding up the price of cheaper grades in order to handicap manufacturers of lower priced cigarettes; and (2) price fixing and the limitation of competition in the sale of cigarettes,

195 110 F. Supp. 295 (D. Mass. 1953), aff'd per curiam 347 U. S. 521 (195). 196 328 U. S. 781, 794-796 (1946).

through concert of action in price changes and resale price policies which the Court concluded were "circumstantial evidence of the existence of a conspiracy and of a power and intent to exclude competition coming from cheaper grade cigarettes" 200 This class of evidence included proof of concert of action in bringing about uniform price rises during the depression of 1931, resulting in high profits in 1932, and a loss of sales to cheaper brands; uniform Big Three price cuts in 1933; and efforts on their part to persuade and require their dealers for a period of adjustment to sell their product at a retail price not more than 3 cents a package above the prevailing price of the 10 cent brands. Defendants' monopoly power was thus primarily defined as their power over price, inherent in their relative shares of market supply, and their capacity by concerted action to influence the price at which they and others bought and sold.

The Court held that these facts supported the conclusion that Section 2 had been violated, without "proof of exertion of the power to exclude nor proof of actual exclusion of existing or potential competitors". 201 Relying on Alcoa, the judgments below were affirmed.

In Paramount, the elements of monopoly and combination were similarly related to show that eight defendants together had acquired the dominant market power of monopolists in parts of the movie distribution and exhibition business through concerted programs, many of which violated Section 1. Defendants in combination possessed, not merely monopoly power over the price at which films were exhibited in theatres, but power based on theatre ownership and control, to deny rivals access to first-run theatres, where films could be shown during a protected time interval at relatively higher admission prices. The Supreme Court reversed not merely because the District Court had wrongly defined the relevant market, but also because it believed the court below erred in identifying the element of intent under Section 2 and failed to find whether vertical integration in this case violated the Sherman Act by reason either of the power it created or its attendant purpose.

On remand, the District Court found that five of the eight defendants who owned theatres held at least 70 percent of the first-run theatres in the 92 largest cities of the country, and 60 percent of the first-run theatres in cities between 25,000 and 100,000 in population. In addition, they received 73 percent of domestic film rentals, except for that apparently distinct product, the "western" film. "These figures certainly indicate, when coupled with the strategic advantages of vertical integration, a power to exclude competition from these markets when

200 Id. at 804-805.

201 Id. at 810.

desired.202 While the Court did not find that the companies had agreed to divide markets, the existing pattern of their ownership of theatres meant that in many areas only one or two of the defendants had theatres, so the competition among them was minimized, and each was dependant on the others for outlets in areas where it had not theatres itself. In this case, the system of theatre ownership by each of the five major defendants was held to be a means for a variety of restraints through which the defendants had achieved and kept their monopoly position. For "the ownership of what was generally the best first-run theatres, coupled with the possession by the defendants of the best pictures, enabled them substantially to control the market" 203 The facts were held to show actual exclusion of competitors made possible by the defendants' collective power to fix clearances and runs and their ownership of theatres. Divorcement of theatre ownership from distribution was therefore ordered, as "the only adequate means of terminating the conspiracy and preventing any resurgence of [defendants'] monopoly power" 204

From all this it seems clear that under Section 2 an illegal degree of power over price is a good deal more than the absence of a perfectly elastic demand curve, i. e., more than the availability of alternatives in pricing policy, which many producers have to some degree. There must be monopoly power on the part of a single firm or a combination. This power, especially when considered as a power to control the competitive opportunity of rivals, need not necessarily be associated with any given or fixed degree of market occupancy, but may in some circumstances stem from some other strategic position in the market.

Measuring monopoly power depends upon a full evaluation of the market and its functioning, to determine whether on balance the defendants' power over the interrelated elements of supply, price and entry are sufficiently great to be classed as monopoly power. While the decisions illuminate the economic theory of the courts in evaluating these facts, they provide no magic formula for simplifying the inquiry.

Regarding one earmark of monopoly power, power over entry, Louis B. Schwartz and a few other members comment, though the majority has made no factual inquiry as to ease of entry in any one industry or generally, that the present pattern of American industry reveals "the American businessman has lost a considerable amount of his freedom to enter the trade of his choice. Certain businesses have been officially removed from the area of free entry." And, even in 'unregulated' business, entry is restricted by private control of raw 202 United States v. Paramount Pictures, Inc., 85 F. Supp. 881, 894 (S. D. N. Y. 1949.)

66

203 Ibid.

204 Id. at 896.

materials or by existing sellers' domination of the channels of distribution." This stems from the fact that many "important industries" are "dominated by a very few corporations. This is true," they feel, "in automobiles, steel, aluminum, tin cans, linoleum, cigarettes, liquor, tires, meats, biscuits and crackers, dairy products, among others. Many of these corporations were created by merger of enterprises that were already fully integrated from a technological point of view. Some of these businesses, e. g., biscuit making, can easily and efficiently be carried on at relatively small scale. We know from a study by the Federal Trade Commission that the merger movement long ago passed the point where integration necessarily promotes efficiency, for the study showed that medium or small operations were generally the most efficient."

(4) The Additional Element of "Deliberateness" Required To Make Monopoly "Monopolization"

" 205

The existence of monopoly power-"monopoly in the concrete", Standard Oil Co. of New Jersey v. United States-does not by itself prove the offense of monopolization. Under Section 2, the offense is the existence of the power to raise prices or exclude competition, coupled with "the purpose or intent to exercise that power" 206 The requisite intent for this purpose is not a "specific" intent to monopolize, but rather a conclusion based on how the monopoly power was acquired, maintained or used. This purpose, required to distinguish "monopoly" from "monopolizing", is sharply differentiated from the proof of "specific" intent to monopolize required where the charge is an unrealized attempt to monopolize.207 In the Standard Oil of New Jersey opinion, evidence considered to show a "specific" intent to monopolize was treated as confirming a presumption, "to say the least", based on the economic position and corporate history of the defendant company. 208

Situations of monopoly may arise or be maintained in various ways. They may result, on the one hand, from the supremacy of the monopolist as victor in a race of competition, by reason of his technical superiority, or his ownership of an important patent. Monopoly may develop, on the other, from the absorption of competitors in violation of Section 7 of the Clayton Act, or Section 1 of the Sherman Act, or of both. Or monopoly can emerge and be preserved by driving com

206 United States v. Griffith, 334 U. S. 100, 107 (1948); American Tobacco Co. v. United States, 328 U. S. 781, 809 (1946).

207

American Tobacco Co. v. United States, 328 U. S. 781 at 813-15 (1946); Swift & Co. v. United States, 196 U. S. 375, 396 (1905); United States v. Aluminum Co. of America, 148 F. 2d 416, 431-432 (2d Cir. 1945); United States v. Columbia Steel Co., 334 U. S. 495, 531-534 (1948).

208 221 U. S. 1 at 75.

petitors out of business, by putting deliberate business impediments in their path, or by combining or conspiring with competitors, as in the American Tobacco 209a and Paramount cases.209

The history and business policy of a monopoly have a distinct bearing on the proof of "deliberateness," as distinguished from "specific intent." Clearly "deliberateness" is shown if monopoly has been established or maintained by means of restraints of trade illegal under Section 1. It is equally satisfied if proof convinces the court that the defendant's business policy-his "specific", subjective intent-is to acquire or to keep a monopoly position. Often the courts will infer that a monopoly position has been "deliberately" maintained in this sense as a matter of "objective" rather than "subjective" intent, relying on business practice to support the conclusion that men intend the natural consequences of their acts. To hold otherwise, in Section 2 cases where the defendant or defendants have actual monopoly power, would "make nonsense" of the act, Judge Learned Hand said, "for no monopolist monopolizes unconscious of what he is doing". 210 In such cases, therefore, no showing of intent is required beyond "the mere intent to do the act." 211

The two types of cases which have given rise to most discussion are: those where defendant argues monopoly was "thrust upon it", as the inevitable result of market forces; and those where a group of companies who singly do not, but together do, possess monopoly power and have acted in concert to gain, pool or hold it.

(5) The Defense of Monopoly "Thrust Upon" the Defendant

An individual company has not violated Section 2 where monopoly power has been "thrust upon it." 212 Judge Learned Hand suggested in Alcoa that monopoly power might be innocently acquired where demand is so limited that only a single large plant can economically supply it; where a change in cost or taste has driven out all but one supplier; or where one company out of several has survived by virtue of superior skill, foresight and industry. In the American Tobacco case, the Supreme Court suggested the additional case of a company which has made a new discovery or is the original entrant into a new

209a 328 U. S. 781 (1946).

209 334 U. S. 131 (1948).

210 United States v. Aluminum Co. of America, 148 F. 2d 416, 432 (2d Cir. 1945). 211 Ibid. One member wishes to caution: "It is not wholly clear what intent the Committee would require to commit the crime of monopolizing under Section 2. Apparently the Report adopts the 'general intent' of recent cases. Those decisions, however, appear to be based upon the 'structure' test of monopoly to which intent is irrelevant. It is likely that the test of 'general intent' is designed to take account of dynamic factors and of indivisibility. Perhaps it would be better so to state than to leave the provision in terms of an intent which in itself can scarcely be meaningful."

212 Aluminum Co. of America v. United States, 148 F. 2d 416, 429 (2d Cir. 1945).