United States v. E. I. Du Pont De Nemours & Co.

Background

The United States sued in 1949, accusing du Pont of violating the Clayton Act after its 1917–1919 purchase of a 23% stock interest in General Motors. The Government argued that the stock tie insulated much of General Motors’ market for finishes and fabrics from competition. The District Court dismissed the complaint as to du Pont and related corporate holders, and the Government appealed.

Reasoning

The Court addressed whether Section 7 of the Clayton Act reaches vertical acquisitions (a supplier buying stock in a customer) and answered yes. The majority treated automotive finishes and fabrics as a distinct “line of commerce,” noted General Motors’ very large share of the auto market, and relied on evidence that du Pont supplied a large share of General Motors’ requirements (high percentages of finishes and fabrics in the record). The Court concluded there was a reasonable probability the acquisition tended to create a monopoly and reversed the dismissal.

Real world impact

The case was sent back to the District Court to decide what equitable relief is needed to undo the acquisition’s effects. The ruling means governments can challenge vertical stock holdings under Section 7 when, at the time of suit, they reasonably threaten monopoly in a defined product market. The decision thus affects large suppliers, their competitors, and customers in concentrated industries.

Dissents or concurrances

The dissent argued Section 7, as originally written, did not cover vertical acquisitions, that the legality should be judged at the time of purchase not decades later, and that the District Court’s factual findings should be left undisturbed.