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" The existence of monopoly power-"monopoly in the concrete",205 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.20 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 205 221 U. S. 1 62 (1911). 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." 213 Aluminum Co. of America v. United States, 148 F. 2d 416, 429 (2d Cir. 1945). field, and thus is unavoidably possessed of monopoly power.218 In United States v. United Shoe Machinery Corp.,214 Judge Wyzanski illumined such examples: ** * [T]he defendant may escape statutory liability if it bears the burden of proving that it owes its monopoly solely to superior skill, superior products, natural advantages, (including accessibility to raw materials or markets), economic or technological efficiency, (including scientific research), low margins of profit maintained permanently and without discrimination, or licenses conferred by, and used within, the limits of law, (including patents on one's own inventions, or franchises granted directly to the enterprise by a public authority). [Emphasis supplied]. However, even in cases of this type, a company may be held to have "monopolized" if its acquisition or retention of monopoly power is in part caused by other business actions having an exclusionary effect. Such acts may themselves be unlawful under Section 1, or unlawful under some other antitrust provision. Or they may be acts legal in themselves, which in context evidence a purpose sufficient to transform monopoly into "monopolization." For example, consider the recent United Shoe Machinery case. Defendant supplied, on lease terms only, all the principal types of machines used in manufacturing shoes. It dealt with approximately 90 percent of shoe factories, and supplied more than 75 percent of the demand for the types of shoe machinery which it provided This position, coupled with United Shoe's business methods, was considered to result in effective control of the shoe machinery market. The company had prevailed in 1918 against a monopolizing charge,215 and its leasing methods had later been revised to eliminate "tying clauses" to conform to the Supreme Court's adverse holding under Section 3 of the Clayton Act.218 The Court nonetheless concluded that the Company's monoply power was maintained by its business policy, or, at the least, that the defendant had failed to prove its monopoly position was the "inevitable" consequence of ability, natural forces, or law.217 *** United's control does not rest solely on its original constitution, its ability, its research, or its economies of scale. There are other barriers to competition, and these barriers were erected by United's own business policies. Much of 213 328 U. S. 781, 786 (1946). 214 110 F. Supp. 295, 342 (D. Mass. 1953), aff'd per curiam 347 U. S. 521 (1954). 215 United States v. United Shoe Machinery Co. of New Jersey, 247 U. S. 32 (1918). United Shoe Machinery Corp. v. United States, 258 U. S. 451 (1922). 216 United's market power is traceable to the magnetic ties in- In addition to the foregoing three principal sources of United's power, brief reference may be made to the fact that United has been somewhat aided in retaining control of the shoe machinery industry by its purchases in the secondhand market, by its acquisitions of patents, and, to a lesser extent, by its activities in selling to shoe factories supplies which United and others manufacture. These practices, the Court held represent something more than the use of accessible resources, the process of invention and innovation, and the employment of those techniques of employment, financing, production, and distribution, which a competitive society must foster. They are contracts, arrangements, and policies which, instead of encouraging competition based on pure merit, further the dominance of a particular firm. In this sense, they are unnatural barriers; they unnecessarily exclude actual and potential competition; they restrict a free market. * * * 218 erative sful mo unlaw 32. In Anced les Similarly, the Court in the Pullman case relied on Pullman's method of negotiating sleeping-car contracts with the railroads. This contract pattern, legal in itself, nonetheless evidenced Pullman's purpose to retain its monopoly position both in providing sleeping-car service and in building sleeping-cars for its use in providing that service.219 And in United States v. American Tobacco Co.,220 the high-priced purchase and dismantling of plants was likewise important evidence of intent to obtain and preserve a monopoly position. Likewise, the Court in the Alcoa case summed up evidence establishing defendants' intent to monopolize. Alcoa in 1940 was not *** the passive beneficiary of a monopoly, following upon an involuntary elimination of competitors by automatically 218 Id., at 344–345. 218 United States v. Pullman Co., 50 F. Supp. 123 (E. D. Pa. 1943) final order 64 F. Supp. 108 (E. D. Pa. 1946), aff'd per curiam 330 U. S. (1947). 220 221 U. S. 106 (1911). operative economic forces. Already in 1909, when its last lawful monopoly ended, it sought to strengthen its position by unlawful practices, and these concededly continued until 1912. In that year it had two plants *** at which it produced less than 42 million pounds of ingot; in 1934 it had five plants *** and its production had risen to about 327 million pounds, an increase of almost eight-fold. Meanwhile not a pound of ingot had been produced by anyone else in the United States. This increase and this continued and undisturbed control did not fall undesigned into 'Alcoa's' lap; obviously it could not have done so. It could only have resulted *** from a persistent determination to maintain the [Alcoa's 1912] control ***. There were at least one or two abortive attempts to enter the industry, but "Alcoa" effectively anticipated and forestalled all competition, and succeeded in holding the field alone. True, it stimulated demand and opened new uses for the metal, but not without making sure that it could supply what it had evoked. There is no dispute as to this; "Alcoa" avows it as evidence of the skill, energy and initiative with which it has always con-` ducted its business; as a reason why, having won its way by fair means, it should be commended, and not dismembered. We need charge it with no moral derelictions after 1912; we may assume that all it claims for itself is true. The only question is whether it falls within the exception established in favor of those who do not seek, but cannot avoid, the control of a market. It seems to us that that question scarcely survives its statement. It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel. Only in case we interpret "exclusion" as limited to manoeuvres not honestly industrial, but actuated solely by a desire to prevent competition, can such a course, indefatigably pursued, be deemed not 'exclusionary'. So to limit it would in our judgment emasculate the Act; would permit just such consolidations as it was designed to prevent." 221 221 United States v. Aluminum Co. of America, 148 F. 2d 416, 430, 431 (2d Cir. 1945). |