United States v. Continental Can Company – Oral Argument – April 28, 1964 (Part 1)

Media for United States v. Continental Can Company

Audio Transcription for Oral Argument – April 28, 1964 (Part 2) in United States v. Continental Can Company

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Earl Warren:

— United States, Appellant, versus Continental Can Company et al.

Mr. Spritzer.

Ralph S. Spritzer:

Mr. Chief Justice, Your Honors.

This case, brought by the United States under Section 7 of the Clayton Act, involves the acquisition by the Continental Can Company of the Hazel-Atlas Glass Company.

The acquisition was consummated in 1956, following the denial of a restraining order.

The case did not come on for trial until June 1960, at which time it was heard by Judge Frederick Bryan in the Southern District of New York.

The trial lasted in all for some six weeks.

During its course, the Government introduced more than a thousand exhibits then presented 70 odd witnesses.

After the Government’s case was completed, the District Court on Continental’s motion dismissed the case out of hand.

In granting the motion to dismiss, the Court issued a brief oral opinion.

That was in December of 1960.

More than two years later, in April of 1963, the Court issued an elaborate opinion of some 80 printed pages which it said, would also constitute its findings of fact.

No further hearings (Inaudible)

Ralph S. Spritzer:

No.

There was briefing in the (Inaudible) Your Honor.

The case, we think, is one of large importance.

One striking aspect, I’m not suggesting that it alone is decisive, is at this litigation involves the amalgamation of two national giants.

Both of the companies in question were among the country’s 500 largest corporations.

Another aspect which makes the case a portentous one in these days of widespread diversification by entry into the fields of substitute products is that we deal here very largely with interindustry, as distinguished from intraindustry competition.

Indeed, the essence of the Government’s case is that there is highly significant competition between two reasonably interchangeable products, the tin can and the glass container.

And a strong reason to apprehend that the acquisition will, in Section 7 terms, substantially, lessened that competition.

Now, I’m not, for a moment, proposing to deny that glass containers and tin cans have distinguishable characteristics, nor am I suggesting that each of them does not constitute by itself, an identifiable line of commerce.

Surely, if Continental Can were to acquire American Can Company next week, the antitrust division would question that merger and surely it would say that it was unnecessary to look beyond the confines of the can industry in order to determine whether its effects made such a merger a forbidden venture.

I think it’s a truism that whenever there are two products, which from the standpoint of the users of those products, have a degree of interchangeability or substitutability but are not so close to one another as to be fungible that there’s bound to be both intraindustry and interindustry competition.

In the economists terms, the cross-elasticity of demand as between the two products will vary from user to user.

If, for example, one packer finds it advantageous to place his goods in a transparent container, he almost certainly is going to use glass even if the tin can maybe somewhat cheaper.

Conversely, a packer who wants an opaque container is surely going to use the tin can.

A — a third producer who doesn’t care much either way, may be guided by a comparative price.

My example of course is an oversimplified one.

Many perhaps most users will consider a variety of characteristics before striking a balance.

Potter Stewart:

There are other alternative packaging materials —

Ralph S. Spritzer:

Yes, there are, and I shall —

Potter Stewart:

— although in a competition allude to that with varying elasticity of demand on the —

Ralph S. Spritzer:

Certainly.

Potter Stewart:

— paper bags, cardboard carton —

Ralph S. Spritzer:

True.

Potter Stewart:

— various kinds of plastic containers.

Ralph S. Spritzer:

Oh, yes.

Potter Stewart:

(Voice Overlap) —

Ralph S. Spritzer:

And I’m — I’m going to refer to —

Potter Stewart:

Yes.

Ralph S. Spritzer:

— that kind of competition also.

We take the du Pont cellophane case that is suggested one here, Judge Bryan found support for his judgment in the comment in this Court’s cellophane opinion, I quote it, “One can think of building materials as in commodity competition, but one can hardly say that brick competes with steel or wood or cement or stone in the meaning of Sherman Act litigation.

The products are too different.”

And Judge Bryan, as I say, relied on that.

Yet of course, that very case, the cellophane case, held that du Pont’s monopoly position was not to be measured solely by its reference to its power vis-à-vis the other manufacturers of cellophane.

But was to consider additionally, the manufacturers of glassine, wax paper, pliofilm, kraft paper and various other flexible packaging materials, albeit, those materials had differing qualities and characteristics.

Now, whether or not cellophane’s distinguishing characteristics should have led to the conclusion, as the Government argued in that case, that it might be separately monopolized, no one would question, I take it, that cellophane and the principle substitutes with which it competes would also constitute a relevant market under the antitrust laws and particularly under Section 7, which relates to any line of commerce and which this Court had said, reaches among other things, even conglomerate mergers.

Now, I think the first step in evaluating competition between products has to be an assessment of their general characteristics and uses.Both cans and jars of course are rigid containers and both are impermeable.

This makes them susceptible of uses for packaging an infinite variety of items which come in liquid, solid or even gaseous form.

It permits packaging in a way that will make the content secure from injury or deterioration.

In addition, both types of containers are capable of being heated to relatively high temperatures and accordingly, both are used as — all of us are aware in great quantities, in the important food canning industry, in which of course, the process of preparation involves sterilization by heat, followed by hermetic sealing.

A leading food scientist too was called as a witness, testified that there are no comparable containers from the standpoint of preventing food spoilage.

Now, to be sure, there are also significant differences between cans and glass containers, the cans for one thing, are less bulky, lighter in weight although the record here shows that the glass industry, conscious of this competitive factor, has made important strives in making ware which both lighter and stronger than the traditional glass container.

Witness the throwaway beer bottle, which of course competes actively with the beer can.

Another difference is that glass is chemically inert.

It won’t react with the contents placed therein.

Tin plate on the other hand, will react with various substances, a problem which the can manufacturers meet for their part by using a particular type of lining or coating when the can is designed for certain end uses.

Of course for many end uses, the same kind of can is acceptable.

The same type will be used for foods, for human consumption, for pet foods and indeed for motor oil.

Ralph S. Spritzer:

Now as to the relative cost of the two types of containers from the customer’s standpoint, it is difficult to generalize.

Probably, glass is the more expensive, more often than not but this varies considerably from case-to-case.

For example, the soft drink can and the beer can are somewhat costlier than the bottle.

This results from the fact that those cans have to be specially sealed at the seams in order to resist the pressures of the beverage and this makes them costlier to make.

An important factor from the cost standpoint is whether the user will incur added costs by using one type of container rather than the other.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

We are not — we do not suggest that there is anything like perfect competition.

We say that there is a considerable degree, a high degree of cross-elasticity for many end uses and that establishes competition between them in the same way that cellophane was found to be in competition with other products or be it cellophane was used exclusively for some end uses, such as cigarette packaging.

Arthur J. Goldberg:

The view of your — the course of your argument (Inaudible)

Ralph S. Spritzer:

I shall indeed.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

I’m — I know the one Your Honor means.

At this point, I want to do on the subject of price to call Your Honors’ attention to an exhibit which appears in Volume 3 at Record 2531, which is an exhibit from Continental Can’s files.

In its headed competition of glass versus tin and it begins by saying that attached are data sheets, summarizing information received from division offices on the comparative cost of tin and glass containers for the following products, and it lists a number of them.

Then further down, Continental observes in general, the glass package is less expensive to the packer of non-processed food items.

The closure cost of the jar makes the glass package more expensive for processed food.

And then on the next page, Continental can illustrates this by referring various types of — various commodities which are packaged in the two containers.

It says, “For processed foods from a price standpoint, we are in a favorable position and consumer preference will dictate how much goes in glass.”

On baby food it says, “Our baby food can prices would seem to offer attraction to the packer to use tin but the customers here appear to prefer glass.”

On insecticides, they say the packer seems to prefer tin but should our can prices further increase, the lower cost of glass may offer a saving which the buyer cannot afford to pass up.

On instant coffee, they observed, “We will have to guard against any material increase in the price of our soluble coffee if we want to make in droves on the glass container volume.

Vacuum-packed coffee, the Continental fears — feels its position is secure.

Ovaltine, it says, we have priced ourselves out of this market, similarly, in the case of backing soda.

And then on syrup it says, “We are not competitive with glass and are losing business on that item.”

Tom C. Clark:

Can you give me those pages again, please?

Ralph S. Spritzer:

This is 2531 and 2, Your Honor.

Tom C. Clark:

Thank you.

Ralph S. Spritzer:

There is also in the record, a chart, I will not take the time to deal with it but it is at record 2548, which is a graph prepared by Owens-Illinois, the largest manufacturer of glass containers which undertook price comparisons, glass versus tin and that graph shows that on some, the can is costlier on some of the glasses.

Potter Stewart:

These are exhibits in this litigation?

Ralph S. Spritzer:

Yes.

Potter Stewart:

Were — were they prepared specifically for this litigation?

Ralph S. Spritzer:

No, they were discovered during the course of pretrial discovery.

Potter Stewart:

This thing prepared —

Ralph S. Spritzer:

What I just read you is the Continental Can memorandum from its files.

Potter Stewart:

(Voice Overlap) —

Ralph S. Spritzer:

And what now referring to is from Owens — came from Owens-Illinois.

Potter Stewart:

Something which is already in existence —

Ralph S. Spritzer:

Yes.

Potter Stewart:

— and obtained by this pretrial discovery?

Ralph S. Spritzer:

Right.

The significant fact here, as to the matter of price, and this much one can generalize is that that the differentials are relatively small.

They’re nowhere near the differences.

For example, that one had in the cellophane case, whereas Your Honors will recall, cellophane ran from more than twice to more than seven times as much as some of the various materials found to be competitive with it.

Now, of course, the tin cans and the glass containers come in all forms, shapes and sizes but all that needs to be said on that score is that the major companies are quite capable of making them in all forms, shapes and sizes and to ship very rapidly to meet any orders which could they could obtain.

Let me now shift the focus a moment from the characteristics of the two products to the characteristics of the two industries and the two companies involved.

According to figures accepted by the Court, the can industry, in 1957, produced over 41 billion tin cans and the glass industry, over 18 billion glass containers, a total of approximately 60 billion and a ratio of more than 2 to 1, little more than 2 to 1 in favor of the can.

Now, we had roughly 150 million people in this country in the 1950s which would mean that approximately 400 tin cans or glass containers were being made for each man, woman and child.

About one-half of the glass and more than two-thirds of the tin cans went into one form or another of a food container, using food in its broadest sense.

That incidentally, is an area in which Hazel-Atlas had always been particularly active, the food containers for food products.

It was not so active.

It was relatively small in soft drinks and beer.

It was also active in making containers for the drug, toiletry, cosmetics, industries, and for household and industrial products, but food was perhaps its biggest field of concentration.

Now, who makes these 40 billion odd cans?

The Court found that American Can, the leader, had approximately 38% of that market and that Continental had approximately 33%.

So the two leading can companies have over 70% of the market, not surprisingly, the Economists have cited this as a prime example of duopoly.

Not surprisingly, the indications in the record are that price changes within its industry, took a follow-the-leader pattern.Continental itself was organized in 1913.

It had a rapid growth in part as a result of internal expansion and part is a result of acquisitions of which it made more than 40.

It operates some 70 plants, more than 40 of them in can manufacture.

After its acquisition of Hazel-Atlas in 1956, it had annual net sales and operating revenues of more than a billion dollars.

Turning to the glass industry, the leading company is Owens-Illinois.

Ralph S. Spritzer:

It had about 35% of the total production of glass containers.

Anchor-Hocking was second with about 12% and Hazel-Atlas, third with slightly under 10%.

Hereto, the picture is one of concentration, though not as great.

Byron R. White:

(Inaudible)

Ralph S. Spritzer:

Oh, I think, it probably would be in the realm of 4% or 5% Your Honor, though to give you exact figure.

Byron R. White:

(Inaudible)

Ralph S. Spritzer:

There, I don’t think there are exact percentages for the entire industry Your Honor.

There are indications from which I think one can infer that there’s a drop to that 4% or 5%.

That leaves three companies with approximately 57% of that industry.

Hazel-Atlas was organized about the turn of the century.

It was one of the pioneers in the glass industry.

It grew steadily.

It was consistently profitable until its acquisition.

What its production is today, we don’t know from the record.

We do know that in 1955, Hazel-Atlas produced in one and three-quarter billion glass containers.

In 1957, the first full year after the acquisition, its production was down 140 million units, although the totals for the industry were off.

Those figures are at record 2968.

Now, we do not dispute that there is keen competition for markets by the glass companies.

As with cans, however, it appears that the price structure is a rigid one and is determined by the industry leaders.

This point was succinctly made by the test — in the testimony of the president of Glenshaw Glass who testified at record 394 that his company cannot charge anymore than Owens-Illinois and certainly, wouldn’t take any less.

Other glass manufacturers testified to like effect.

Now, I emphasized this lack of vigorous price competition with in each of the two industries because it seems plain to us that in such industries, the role of the competition provided by substitute products is of particular importance to the company.

Now, as I’ve already indicated, the competition, the — both active and potential, between glass and can, extends over a wide range of categories.

We suggest, therefore, that the most meaningful line of commerce in which to appraise the effects of this merger is the production and sale of containers for all of the many purposes for which metal and glass containers may both be used, including particularly, beverages, foods, household and chemical goods, cosmetic and drugs.

In the District Court, the Government urged that the merger would adversely affect the entire packaging industry and both the can and the glass industries.

In addition, we urged that the merger would impair competition in numerous submarkets, for example, the market for containers provided by food canners.

We’ve dealt with that food canning submarket in our brief but our primary emphasis and I shall confine myself to it here, is to the composites that I have described, the uses for which — the end uses for which these containers compete.

Now, I — I do note in passing, as Mr. Justice Stewart has suggested earlier, that plastics and paper containers are also to a degree in the broad market represented by the end uses of cans and glass containers, that’s toiletries, cosmetics, drugs are not in frequently found in the plastic tube or container.

However, the record does show that for most of the purposes for which glass and metal are used, they alone are practicable.

The time of the merger moreover, the total business in the plastic field was about $30 million as compared to sales of well over two billion for glass and tin cans.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

Frankly, I haven’t looked at our proceedings in that case, Your Honor.

That is pending which is all I — I know about it, but I don’t know that it’s developed to the point where — where I could say what the proof shows or what the Government’s ultimate theory is.

Now, the District Court did address itself, to this question of inter — interindustry competition and its focus follows at record 1603 and 1604.

Potter Stewart:

Before you — before you go on to that, did either one of these companies make either plastic or —

Ralph S. Spritzer:

Yes, Continental Can —

Potter Stewart:

— or paper?

Ralph S. Spritzer:

— has both plastic and paper.

It’s going into those businesses by other acquisitions.

Potter Stewart:

Before this merger?

Ralph S. Spritzer:

Yes.

Potter Stewart:

It was already — but not — but not the — not Hazel-Atlas, it was only glass?

Ralph S. Spritzer:

Hazel-Atlas was exclusively a glass company.

Potter Stewart:

Yes.

Ralph S. Spritzer:

The District Court stated on this matter of interindustry competition, Hazel-Atlas and Continental were part of an overall industrial pattern, each in a recognized separate industry producing distinct products but engaged in interindustry competition for the favor of various end-users of their products.

At another point, it said this interindustry competition was substantial, but the Court then proceeded to hold that this was insufficient to make such products which it repeated, came from separate and distinct industries, a line of commerce for Section 7 purposes.

And that is our basic quarrel with the decision below.

We suggest that the Court had an erroneous and two exacting, a view.

That it believed apparently, that there must be substantial parody or equivalents between the substitute products in order for the competition to be protected by the Clayton Act.

I infer this from its constant emphasis upon the fact that the industries are separate.

From its preoccupation with the fact that variables enter into the buyer’s choice whether it take a can or a glass container for his packaging needs from its reliance upon the steel versus wood language of the cellophane opinion to which I referred earlier.

And finally, from some of the comments to which I shall soon refer, which it made in connection with the evidence offered at the trial.

Now, it’s not — I repeat, our contention that there is anything like perfect or plastic competition between these two differing products.

We do say that there is substantial or be it imperfect competition that each product exercises a significant limiting force upon the price which the other can command as indeed, each of the industries as acutely aware that these limitations are particularly important in the context of two industries, each of which is concentrated and characterized by a lack of strenuous internal price competition and that the preservation of this interindustry competition is within the purposes of Section 7.

Now, one of preliminary ways in which the Government showed that cans and glass containers are reasonably interchangeable, this was a rough and preliminary line of proof but we think, persuasive nonetheless, was by sending investigators into various retail establishments in numerous cities, into grocery stores, drugstores, supermarkets.

They surveyed what was on the shelves, making appropriate notations whenever they saw that same item or type of item in both can and glass.

As a sample, I should refer Your Honors to the alphabetical listing at record 3123 in volume 4, which was made up by FBI agents who went to a series of Los Angeles stores.

And you’ll find there about five or six pages of items.

Under (a) for example, you’ll find among others ammonia, anchovies, antiseptics, apple sauce, apricots, artichokes, asparagus, aspirin and goes on for pages.

Some of the lists prepared by the FBI agents are more detailed, giving sizes or brands or prices of the items as well.

Ralph S. Spritzer:

Now, Continental Can attacks these surveys.

It says they take insufficient account of material differences.

For example, in cross examining, one of the FBI agents who had noted on his list that Nescafe which is a soluble or instant coffee was put up in both bottles and in cans.

Continental’s lawyers brought out quite properly on cross-examination that Nescafe in the tin was an after-dinner style coffee and not so in the glass jar.

Also, that there was a marked difference in price between the two varieties.

The fact that the contents were not the same is — is relevant.

The point remains, however, in our view, that if the instant coffee, whether French after-dinner style or American garden variety, can be packed in either tins or in glass but it does show that the packer has a substantial alternative or choice.

Judge Bryan, however, agreed with the appellees.

He stated that since the Nescafe was of two different varieties, the evidence that was packed in two different containers and I quote him, “Had no probative value, none whatsoever.”

And that appears on record 1053.

Now, this is an indication of what I meant when I suggested earlier that the District Judge appeared to us to have rather an elastic views on cross-elasticity.

Perhaps, this point is — is worth illustrating further.

The defendants took the same FBI agent to test because he reported seeing olives in both jars and in tins.

Their point again and perfectly a proper one was that green olives were always found in glass and black olives were always found in the tin.

Again, however, I think one is fairly left with the conviction that packers of olives, whether green or ripe, must have a significant choice.

Nonetheless again, the District Court — Court agreed with appellees and said that this evidence had no relevance at record 1055.

To this, I add the footnote that if you go to the delicate test and order, the supermarket today, you can find black olives in jars as well as in tins.

Indeed, you can find black and green olives in the same jar, in the so-called banquet assortment.

I don’t offer this testimony to supplement the record but I do make the point that it is not unfitting in administering a statute which calls for an element of prediction to take into account that which is plausible ,if not, indeed are fixed.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

Well, this illustrates the — the fact that you can see the same product in both.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

You don’t have good statistical data on this, Your Honor because the same standard-sized glass jar, 10 million of them, may be shipped by Owens-Illinois to Heinz Company or to the ANP and then they use that same jar for 50 different uses.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

This is the Continental (Inaudible)

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

Well, let me come right to that because this is an exhibit prepared by Continental, Your Honor, not the Government Exhibit.

It was prepared — I’m — I’m going to rely on it nonetheless.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

Well, let me — let me explain.

Ralph S. Spritzer:

The Government had called the Staff Director of the Glass — Glass Container Manufacturers Institute to the stand as its witness, that’s portrayed at the Glassmakers Trade Association, and he identified many documents, he testified as an expert.

On cross-examination, Continental Can prepared a list of items, the list which you see before you on pages 26 to 29 and then asked this witness to estimate on the basis of his expert knowledge how much of each of this listed items went into glass and how much went into tin cans.

He did so.

Now, Continental suggests that indicates a lack of product interchangeability and I submit that it suggests to the contrary.

I say that for this reason, the list shows to be sure that as to most of the items packaged, one of the two types of containers is markedly predominant.

Yet, I would ask Your Honors to note that of all of the commodities listed, and these were selected and listed by Continental.

All of the — of all of the commodities listed on these four pages, it is said of only one item, paint, that none of it is packaged in glass.

And it is said, of only one item, salad dressing, that none of it is packaged in tin cans.

In all other instances where the witness uses the word, all, he follows it by the words, “Or substantially all.”

Now, I have little doubt on the basis of this record that packers tend to — to move in packs, to adopt similar packaging techniques and marketing techniques until one enterprising company breaks the pattern.

For example, at one time, Your Honors, 100% of all baby foods came in cans, then Hazel-Atlas initiated the glass jar for baby foods, and ultimately, glass took over 80% of that market.

I suggest to you that even if 98% or 99% of a particular commodity is found in glass or 98% or 99% in tin, the 1% or 2% remaining is highly significant because it — it shows that there is an option, an alternative way of packaging.

It shows that there are some competition already present and not merely an overhang.

Take soft drinks for example, which is on this list.

Now, our friends had exact figures on that.

It show — and the list shows 98.5% in bottles and 1.5% in cans.

Is that 1.5% insignificant?

I can say unequivocally to Your Honors that this record shows that when the soft drink can came on the market, the glass industry was alarmed.

The glass manufactures and their trade association, GCMI, undertook a most vigorous campaign to counteract this threat.

And I can tell you also from the record that the counterpart association, the Can Manufacturers Institute, undertook a vigorous campaign including institutional advertising at a cost of millions of dollars to convince the public of the attractiveness of the soft drink can.

Let me turn now from what can be seen on the supermarket shelves to some items of evidence which reflect the attitude of those who buy and use containers.

One such witness was the Director of Purchasing of Linens ‘n Things, a large toiletries and cosmetics concern.

He testified that for many items packaged by his company, metal and glass represent practical alternative and that the comparative prices of the two are significant, though not necessarily crucial in the company’s choice.

He said this was especially so in the case of low cost items because as to such items, the cost of the container might be 15% or 20% of the total price of the article.

Several small vegetable packers testified that until 1955 or 1956, they had canned all of their produce in tin, at which point, they begun to put a portion in glass.

Now, our opponents criticized this evidence because they say these packers are small and insignificant companies.

They were chosen, however, because they were small.

If two little vegetable canners find it within their means to switch readily from an old tin line to a tin and glass line, it is the more evident that there is flexibility and that the cost of the switch-over, are not prohibitive.

Incidentally, one of these vegetable packers that estimated his cost of putting in the glass line at $2000, the other at $3000 to $5000, and that testimony is at record 466 and 474.

Now, I think perhaps, most revealing is what the glass manufacturers and the can manufacturers themselves have said and done.

Ralph S. Spritzer:

I suggest that this record shows that they are as keenly conscious of the competition of the other as the manufacturers of olive oil or butter.

Now, GCMI, the trade association to which I earlier referred, had numerous industry-manned committees, one important one was the Marketing Committee.

Correspondence and minutes of that committee and its staff appear at length in the record.

I’ll have time to note that one or two items.

One of these is the letter at record 1659 in which the Staff Director of the Marketing Committee reports that Continental Can had putout information implying that glass chips may find their way into baby food.

And further, the Continental Can had exaggerated the cost saving which might be affected by putting baby food in cans.

He describes this display of competition as really vicious.

Perhaps, the most suggestive activity of the GCMI Marketing Committee is that it continually conducted studies and surveys concerning the competition being experienced by glass and suggested ways and means by which glass sales could be expanded at the expense of that competition.

You will find, again, I won’t take the time to go over it, a chart in one of these GCMI reports that appears at record 1757 and 1758, which lists numerous categories of items which are put up in glass and makes note of those items on which there is competition for metal.

GCMI estimated that it was experiencing such competition on more than half of the items listed — listed and that there was potential competition on others.

Arthur J. Goldberg:

If the Government (Inaudible)

Ralph S. Spritzer:

Well, I am conceding Your Honor that there is intraindustry as well as interindustry competition as I said at the outset.

I wouldn’t have any question that Continental Can acquired American Can that you wouldn’t have to look beyond the can industry.

That that does not indicate, it seems to me, that there is not a broader area of competition, which if one can prove it is threatened with impairment, is also entitled to protection under the Clayton Act.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

I think one must always show that there is significant competition if the — if the Court was right, if the District Court was right in this case, in suggesting that metals and glass containers are like steel and wood, then I would say that the mere fact that there is some remote competition would not suffice.

I’m attempting to put meat on the Court’s finding that there was substantial interindustry competition.If one does that, I think one is led to the conclusion that this substantial interindustry competition does delineate a significant line of commerce.

Arthur J. Goldberg:

(Inaudible)

Ralph S. Spritzer:

I think one must determine in each case, whether the cross-elasticity of demand is such, that there is significant competition.

I think the Clayton Act is flexible.

I don’t think it should be stretched or narrowed capriciously on the — I — that’s why I’m making the burden of my argument and attempt to show that there is realistically, the most vital kind of competition for many uses between the two products with which we here deal.

And I’d like to turn you now to what some of the manufacturers themselves have said about this competition.

The chairman of the board of Owens-Illinois, in his testimony, spoke of the shock which the glass companies experienced when tomato juice first appeared in a can.

He also confirmed the fact that his company in establishing price for its glass containers takes into account the price of tin plates and of metal containers.

I don’t know whether steel manufacturers take into account reinforced concrete but the President of Owens-Illinois says they do take that into account.

That’s at record 97.

Coming still closer to home, I’d like to take a few minutes to refer to another exhibit from Continental Can’s files.

This is in volume 3, beginning at record 2553 and this I think is an important and very suggestive exhibit.

You will find on 2553, the picture of a design of a new type of can which Continental had developed, a can with a screw on top that made it easily reusable and which was given the name “saver lock,” the saver lock can.

This exhibit is literature of Continental’s can which had put out apparently to its own personnel to acquaint them with this new development and to enable them to sell it to customers.

Ralph S. Spritzer:

Now, Continental says, “These containers have been designed to meet the specific needs of many products now being marketed in glass.”

Going on, turning to 2556, it says, “Prospect to our comparing the merits of saver locked cans versus glass jars will find that the adoption of the saver locked can will enable them realize substantial savings.”

Then it illustrates that by many specific illustrations.

It says at 2558, “No attempt will be made here to list all of the product candidates for saver locked cans as almost any powdered or granulated product food or non-food is a possibility.”

It illustrates by saying that the saver locked can ought to offer an opportunity to takeover the instant coffee or a portion of it from glass jars.

That the saver locked can should be very interesting to the concerns looking for a superior package to compete with glass jars in packaging dry milk.

It should be a powerful merchandising vehicle for those products which are now packaged principally in glass, in the sweetening or syrup field.

It says that it should be an excellent container for pharmaceuticals like boric acid, Epsom salt, aspirin tablets and vitamins, all of course, usually in — in glass.

And it concludes by stating, summing up information which will show — and I quote, which will show that packer that is, “That conversion of the glass jar line to a saver locked can line is relatively simple and inexpensive.”

It seems to me that one cannot possibly fail to recognize the keen consciousness of competition as between these industries.

To complete the picture, perhaps I should take a moment to refer to a few exhibits in Hazel-Atlas pre-merger.

At the beginning of volume 4, starting at page 2821, are theories of several letters which came from field officers of Hazel-Atlas to the headquarters.

In 1953, there had been a general 7.75% price increase on glass containers and the letter at 2821, reports that some of the canners are — two can companies are resisting this increase, as to food packers.

And the writer says that these companies said that they would cut down on the use of glass as it would be too far out of line with the cost of their tin package, if this price increase were put fully into effect.

The next exhibit in similar vain, shows the field man of Hazel-Atlas reporting, one of our syrup accounts is in sense to the price increase and said that any business that could be swung over to tin would be fully explored.

The next exhibit at 2824 reports, again, a letter from the field to the main office, that a group of merchants in the food packing line had grouped together as an association to try to get to the bottom of the recent price advance made by most of the glass companies.

They were all working along a certain line to try to get some of the glass companies to rescind as advanced or turn to some other kind of packaging.

Assuming as I do, that the Government’s evidence which was all I emphasized, the District Court had before it when it undertook to dismiss this case that it required the conclusion that there was very significant competition between glass and can.

There remains the question, and on this issue to the District Court found against the Government, there remains the question whether the disappearance of Hazel-Atlas says, an independent company may substantially impair that competition.

The District Court said, even assuming there’s a line of commerce, I find no showing of injury.

I’ve already mentioned that Hazel-Atlas was one of the pioneers of this industry, of the glass industry, and a company of very formidable size.

Continental Can of course, is one of the true giants with roughly a-third of the can market.

Perhaps the most vital competition which bears upon these two oligopolistic industries is the cross-competition between them.

Let us suppose for a moment that the big three of each of these industries got together, that American Can and Anchor-Hocking say — the National Can and Owens-Illinois, that they follow the pack of Continental Can and Hazel-Atlas.

How vigorously would these two industries then seek to penetrate each others’ markets and engage in price competition?

Let me note only that three such mergers would represent 70% of the combined production of these two industries.

The single merger with which we deal here, results in an aggregation of more than 25% of their combined production.

This merger obviously represents far more than a small start.

Only a few weeks ago of course, this Court dealt with a consolidation of the first and fourth largest banks in Fayette County, Kentucky.

It expressed the view that at least where two companies are major competitive factors in a relevant market, the elimination of competition as between them by itself, constitutes a violation of the Sherman Act.

Ralph S. Spritzer:

Now, I need notch the debate, the requirement of the Sherman Act under which the Government normally has a much heavier burden.

It is enough here, we think, to point out that we are dealing with much, much more important competition than was involved in the Lexington, Kentucky area.

Competition between two of the major companies in a great national market and that the charge here is laid under the prophylactic provisions of the Clayton Act, on that we rest.

Earl Warren:

Mr. Johnson.

Helmer R. Johnson:

Mr. Chief Justice, and may it please the Court.

This case does not, I believe, present any questions of law whatsoever.

It’s a pure, simple fact case.

The Government — the District Court decided the case and the appellee are all in agreement as to the law.

The District Court, in his oral statement indicating his decision to dismiss the case, had this to say, record 1537, “The basic defect in the Government’s case does not lie in its theories within the nature and quality of its proof.”

Many of the propositions of fact on which the Government relies, finds support only in argument.

Others rest on most insubstantial and evanescent evidentiary foundations.

Statements of counsel as to what the facts may be or inferences based on incomplete, yet not misleading statistics or mere glittering generalities cannot be substituted for evidence, cannot be substituted for proof, and they cannot furnish a basis for finding of facts necessary to sustain the Government’s case.

The Government insists that there’s a question as to whether interindustry mergers come under Section 7.

However, both the District Court and the appellee agreed that they do if the statutory tests are met.

The Government, however, is asking this Court to make new findings with respect to lines of commerce and with respect to the effects of the acquisition.

Prior to the acquisition here in question, Continental Can did not make glass containers or any other product that Hazel-Atlas Glass Company made.

Hazel-Atlas on the other hand did not make anything that Continental made.

Neither one was a supplier of the other.

They served entirely different markets.

The record shows no instance of their meeting in the marketplace.

They were not in competition with each other.

Section 7 cases break quite naturally into two parts, delineation of a market and the examination of the effects of the merger in question.

With respect to the first question, this Court has many times given careful attention to the matter of delineating the market, some of these cases, Times-Picayune, cellophane, du Pont, General Motors, International Boxing, Brown Shoe, Philadelphia Bank, more recently, El Paso, and Lexington Bank.

The market test in these cases has been expressed in several ways, but they’re all essentially the same.

What is the real market?

How do products move in commerce?

Who really competes with whom?

What are the realities of the marketplace?

Du Pont, General Motors expressed the market test in terms of peculiar — of peculiar characteristics and uses.

Brown Shoe expressed that in terms of reasonable interchangeability of use for cross-elasticity of demand.

Helmer R. Johnson:

All of these cases have recognized that the line must be drawn somewhere.

In a general way, all products and all services compete.

There are substitutes for all products, but the problem is to find out what is the real market.

With respect to this second question in Section 7 cases, the effect in competition, it’s clear that the test is the reasonable probability of anticompetitive effects, not mere possibility, not speculation.

In the court below, the Government proposed 10 lines of commerce.

They were carefully defined to result of interrogatories, pretrial hearings.

Some of these lines were interindustry lines, some were industry lines, many of them were fragmentation lines.

The Government called its witnesses to produce its evidence with respect to each of the proposed lines.

It called can manufacturers.

It called representatives of principle glass container manufacturers.

Except for some testimony relating to beer containers, the Can people in general said they knew nothing about glass and the glass people said they knew nothing about cans.

The Government called its experts, but they failed to support the proposition that cans and glass are in the same market.

The evidence in this case is such that it is possible to use the indicia of markets referred to in Brown Shoe and to go right down the line as to what they are.

The District Court did that.

The Brown Shoe case, having been decided after the judge below announced his oral decision to dismiss the complaint but before he filed his formal findings.

Indicia referred to industry and public recognition.

The can industry and the glass container industry are separate and well-defined rather its peculiar characteristics and uses.

Cans and glass containers were made of different materials, have different physical characteristics.

Unique production facilities, can and glass container manufacturing equipment is not interchangeable.

The use or point of view is not possible to use a canning line designed to use one type of container to pack a product in the other.

Distinct customers, there are different customers for the different types of containers.Distinct prices, glass containers, cans are priced separately.

The price of cans is determined primarily by the cost of tin plate.

The price of glass containers are determined primarily by the cost of labor.

Sensitivity to price changes, prices one type of containers except in the separate instance of beer perhaps that I will come to, are not changed in response of price movements of the other type.

Specialized vendors, can company sell their own cans, glass company sell their glass, no jobbers handle both, no distributors handle both.

The District Court made a most careful examination of the evidence produced by the Government and found three lines of commerce.

The can industry, the glass industry, and containers for beer.

These findings were made by applying the tests described by this Court.

The District Court made a most careful examination into the question of how products actually move in the marketplace.

The Government has said both in its brief and here today, the District Court failed to consider interindustry competition.

Helmer R. Johnson:

They say that his decision was based on the — largely on the separate characteristics of the different containers is not so at all.

What the District Court did is exemplified in this treatment of containers for beer.

There are, of course, beer cans, there are beer bottles.

The District Court examined the evidence relating for the two types of containers, found that they were in the same line of commerce because he said there were prima facie evidence of interchangeability and use in cross-elasticity of demand.

On this appeal, the Government argues for two lines of commerce.

The first of these is, all cans and all glass containers.

Here, the Government says that since they can both be used to hold things, they’re in the same line of commerce.

The Government calls this functional interchangeability.

And they would disregard everything having to do with actual usage including the evidence of their own expert witnesses.

The record doesn’t support functional interchangeability.

Many products can be sold only in one container or the other.

Many of them require different formulations for processing, depending on the container that’s used.

Liquor, example is always sold in glass containers.

Fresh milk cannot be sold in metal cans.

Potter Stewart:

Well, why not?

I know it’s not but why not?

Helmer R. Johnson:

I’d have to go outside of the record on that but it’s just not possible to seal it.

Potter Stewart:

It’s in glass and nowadays in — in cardboard containers, isn’t it?

(Inaudible)

Helmer R. Johnson:

Oh, I’m sorry.

I was — I thought you were thinking of canned milk, no.

Fresh milk conceivably, could be sold in metal cans except for the price I think.

Bottles, there have and — and one other thing that I will come to, a question of tradition.

They’re just not sold in — in metal.

Potter Stewart:

Tradition has it — where do you come to that?

Helmer R. Johnson:

I don’t rely on the fact that the record doesn’t support functional interchangeability.

I don’t have to go that far.

It’s not possible, I’d say, to determine usage or demand by physical interchangeability.

The Solicitor General here the other day in arguing Alcoa said, he said quite properly, that what is technically possible is not necessarily commercially possible.

The market —

Byron R. White:

Well, has — Mr. Johnson, has a — has metal replaced any glass in the packaging business or the container business?

Helmer R. Johnson:

Over long periods of time, it — it has to —

Byron R. White:

And has glass —

Helmer R. Johnson:

–some extent.

Byron R. White:

— and has glass replaced metal?

Helmer R. Johnson:

Yes, over periods of time, it has.

Byron R. White:

Well, what is that process of replacing, is that —

Helmer R. Johnson:

Well —

Byron R. White:

You don’t — you called that competition or something else or non —

Helmer R. Johnson:

It’s —

Byron R. White:

— interchangeability or interchangeable?

Helmer R. Johnson:

It’s a — it’s a process — it’s a — an aspect of competition, yes.

Some examples.

Can of coffee, ground coffee was packaged in cans before the war.

The war came along, metal was very hard to get and was severely rationed.

Glass was easier to get.

So coffee for a while, during the war, was packaged in glass.

When the war was over, the coffee reverted to its traditional package, the can.

Byron R. White:

Well, really there is no denying to say that — that metal is replacing glass and glass replacing metal.

Helmer R. Johnson:

No, sir, there’s not.

Byron R. White:

And — and it’s going on currently one way or the other.

Helmer R. Johnson:

Yes to a — to very minor extent.

Byron R. White:

Well, as it — your point is that there’s not — there isn’t competition, there has been none in that —

Helmer R. Johnson:

Well, not that there isn’t competition, but there isn’t very much but it’s of a different kind and quality.

Byron R. White:

What kind is that?

Helmer R. Johnson:

Well, it is not a direct competition.

It’s a long range, slow moving, depending on — on other market factors but just customer preference for example.

It is not the kind of competition that is within the — the term of cross-elasticity of demand.

Byron R. White:

Well, I’m really worried about Section 7, that’s like cross-elasticity, Section 7.

What kind of Section 7 doesn’t talk about cross-elasticity because —

Helmer R. Johnson:

Both.

Byron R. White:

— it’s about competition.

Helmer R. Johnson:

That’s right, but the — the preliminary question in any Section 7 action is to determine the line of commerce which the effect in competition is to be measured.

Byron R. White:

Yes, but admittedly, there is some competition between the — the tin and glass.

Helmer R. Johnson:

Yes, sir, there is.

Byron R. White:

And Section 7 says that — that no mergers if it may — may (Voice Overlap) competition.

Helmer R. Johnson:

In any line of commerce.

Byron R. White:

Yes.

Helmer R. Johnson:

Substantially, lessen competition.

Yes, sir.

Byron R. White:

But your — your point is there’s not enough competition as there are in commerce.

Helmer R. Johnson:

Both.

Arthur J. Goldberg:

(Inaudible)

Helmer R. Johnson:

There are all kinds of variations on that metal and plastic, metal and paper, tin — tin and aluminum in the same container.

Unquestionably, there are all kinds of variations of containers of that type.

Arthur J. Goldberg:

(Inaudible)

Helmer R. Johnson:

No, sir, I don’t believe so.

The market still has, always had variations — various factors which will determine usage.

The various with the type of — of container, of some of them are weight for example.

Tradition is very important in determining what type of container is used.

Consumer preference, I appeal breakability, the shape of the container, the size of — the difference between retail sizes and institutional sizes.

Earl Warren:

Well, is there anything to — to prevent the kind of competition that came into the beer business that Mr. Solicitor spoke up almost overnight.

They — they forgot tradition and they changed from — from bottles to cans.

And — and couldn’t the same thing happen in any — any line of industry if it was competition and — and ingenuity on the part of the manufacturers but perhaps it might not exist if there — if there was no desire to develop those — those different commodities?

Helmer R. Johnson:

Well, conceivably, it could.

The beer business, however, is and about the selling of containers for beer is a thing apart.

There is no — there is no counterpart.

Earl Warren:

Well, there’s no part because it just happened — happened that way —

Helmer R. Johnson:

That is —

Earl Warren:

— it’s ingenuity of the manufacturer, isn’t it?

Helmer R. Johnson:

That is so.

Earl Warren:

And they sold the idea and — and they gave a better competition because of that, didn’t they?

Helmer R. Johnson:

Well, the — the public bought it, beer in cans.

You may recall, came into popularity as a result of the same thing I was referring to before the war conditions under which here is a question await.

Earl Warren:

So the —

Helmer R. Johnson:

Beer and cans was — was packaged for the overseas troupes.

Earl Warren:

If you put these big companies together, is there not a danger of them loosing their incentive to — to change those traditions and — and change the method of packaging —

Helmer R. Johnson:

No —

Earl Warren:

— because it’s easier for them?

Helmer R. Johnson:

No, sir.

I don’t believe there is.

Here, we had Continental Can in the can industry, Hazel-Atlas in the glass.

By acquiring Hazel-Atlas, Continental simply went into the glass container business and had to, thus compete there just Hazel-Atlas.

Earl Warren:

I thought Mr. Spritzer read a — a letter or a — or a memorandum or something to the effect that the — that the glass industry was shocked when the — when the beer can appeared.

Helmer R. Johnson:

I think that’s — that’s probably so, yes.

Earl Warren:

If they control both of them, they wouldn’t want to shock themselves, would they?

Helmer R. Johnson:

Well, perhaps not.

And I do think that they have come to the — again to the questions of just what is the — the effect of the — the beer can market and a mere — mere container market.

The Court here found that while he found the line of commerce consisting of beer containers, Hazel-Atlas was not that market in any substantial form.

It had no intention of the — and that the effect and competition in that line of commerce —

Byron R. White:

Mr. Johnson —

Helmer R. Johnson:

— was nothing.

Byron R. White:

(Inaudible)

Helmer R. Johnson:

Pardon?

Byron R. White:

(Inaudible) otherwise because —

Helmer R. Johnson:

Without a great deal of course, they do contend otherwise.

Byron R. White:

In their can business.

Helmer R. Johnson:

Yes, I think they have relegated the subject to our footnote in their brief, however.

Byron R. White:

Thank you.

Helmer R. Johnson:

Everyday experience indicates the truth of the fact that containers — the products tend to move — and do move in one type of container or the other.

Helmer R. Johnson:

You don’t have mayonnaise, for example, in glass — in metal cans in your pantry.

You don’t have tuna fish in glass jars.

Jams and jellies are in glass.

It wouldn’t ever occur here to you to order a can of vinegar or a can of ketchup or glass jar of sardines.

For one reason or another, they are packaged as they are packaged in a given type of container and not in the other.

Arthur J. Goldberg:

(Inaudible)

Helmer R. Johnson:

Yes, sir, you have.

I think it’s important and if I may, I will come to the question of what the Government has done with other substitute containers in this case and on this appeal.

The Government refers to the exhibits of the FBI, dissent of the FBI out to purchase apparently, at random under unknown instructions, types of — of products bought in that were packaged, they said, in both types of containers.

And the FBI went out and brought in their findings.

What did they bring in?

They brought in products that were obviously different products or packages for different markets.

They bought in ketchup and they bought in — brought in ketchup in a bottle.

They brought in ketchup and they brought it in — in a can, but what was the can?

There’s an institutional size of a can.

You can tell from across — across a court room what the difference in the product were.

They brought in olives.

Olives, ripe ones of course, were in cans, green ones in glass.

They brought in fruit preserves.

Some of the fruit preserves were in glass.

They brought in fruit preserves in cans.

The cans, of course, were the premium imported fruit preserves.

They don’t pack them in cans in United States.

So far from proving that these things were competitive, the Government stipulated that the products were not the same that the agents who picked them up didn’t know anything about prices.

They didn’t know whether they were dietetic products, special products.

They didn’t know how they were processed.

They knew nothing about it.

The very idiom of the English language describes — reflects how products are packaged.You get down the list of them.

A bottle of whisky, a can of paint, a jar of cold cream, can of sardines, bottle of ketchup, bottle of medicine.

You can try them in reverse and see how they sound.

Helmer R. Johnson:

You won’t recognize them.

A can of whiskey, a bottle of paint, can of cold cream, bottle of sardines, can of medicine.

The Government here —

Earl Warren:

How about a — how about a can of aspirin or a — a bottle of aspirin -(Voice Overlap) –

Helmer R. Johnson:

A can of aspirin?

Earl Warren:

— that sort.

Helmer R. Johnson:

A can of aspirin.

Earl Warren:

It might be of comparable size and utility?

Helmer R. Johnson:

You will grow on your own experience, Mr. Chief Justice.

You will know that the aspirin in cans, the little pocket sized, in bottles to medicine, cabinet bottle.

Earl Warren:

No, not necessarily but in some pretty small bottles of aspirin.

Helmer R. Johnson:

There maybe some small ones, sir.

Generally speaking, what I say is correct.

Some point I wish you would discuss the question of what you think the effect of this Court’s decision in the Lincoln National Bank case was and also in the El Paso and Natural Gas case, these two recent decisions.

(Inaudible) National —

Helmer R. Johnson:

(Inaudible)

I’ll do that.

In your own time.

Helmer R. Johnson:

I would be perfectly willing to do it right now.

I don’t — well, I think perhaps I’d better wait until I’ll get to that thing.

The Government here points to various studies, the possible markets for glass and metal containers.

They were referred to these as evidence of competition between the two.

Most of the studies which they refer to — relate to beer.

And unquestionably, as a market consisting of beer cans and one consisting of beer bottles, the District Court found that they comprised one market.

Well, we disputed that below.

We don’t’ challenge that here.

Some of the studies relate to soft drinks.

The record shows that Hazel-Atlas is concerned with soft drink bottles was negligible.

It made no returnable bottles and by brief cans, 1% of the total domestic shipments are none returnable bottles.

Most of the studies referred to are long range ivory tower projects.

Helmer R. Johnson:

Their studies which ask a question, if we could design a can for a product which now moved in glass or paper or some other package in which the public will buy.

What might our market be?

Included here, are studies which relate to such exotic subjects as a possibility of putting wine in cans or of putting ketchup in aerosol cans.

These are type of developmental research that any company must engage in but I submit that it reveals nothing about competition or about interchangeability of usage or cross-elasticity of demand.

Byron R. White:

Mr. Johnson, the (Inaudible)

Helmer R. Johnson:

Yes, sir.

Byron R. White:

Continental (Inaudible)

Helmer R. Johnson:

Yes, sir.

Byron R. White:

(Inaudible)

Helmer R. Johnson:

The —

Byron R. White:

(Inaudible)

Helmer R. Johnson:

The saver lock can —

Byron R. White:

(Inaudible)

Helmer R. Johnson:

The saver lock can which is so glowingly described there, designed to handle practically everything in the world was another failure, couldn’t be sold and you’d never seen it on the market.

I think they couldn’t move into these markets.

These factors of — market factors and actual usage militated so against that that the can was never marketed.

Byron R. White:

I gather that you state that they have a competition (Inaudible) that that involved in Section 7.

It maybe that glass can be placed metal today and from then on, the glass can be just placed metal and there’s no more competition for metal.

Helmer R. Johnson:

That is so.

Byron R. White:

Once there’s a change, why that product would never be packaged again in — in the — in the other container.

Helmer R. Johnson:

That is what has been the history of —

Byron R. White:

I see.

Helmer R. Johnson:

— such changes.

It’s what the long range switches as there had been.

When the Solicitor General, last Thursday, argued here the question of conflict in the Alcoa case, competition between copper and aluminum, he was describing a product which 22% of the market was actually in copper.

He said then, I think I quoted exactly.

“This is not competition in any proper sense of the word.”

And it’s that that point that he went on to say of what is technically possible.It’s not always commercially possible.

The District Court, I believe, was clearly correct when it found no reasonable interchangeability of use between glass containers and metal containers.

Similarly, there is no cross-elasticity of demand.

Helmer R. Johnson:

As I’ve said, can prices relate to price of tin plate, glass prices relate to the cost of labor.

Mr. Spritzer, this morning said that the price differentials between the two types of containers is relatively small.

How does he know?

The record here certainly does not show it.

Price sensitivity is perhaps the most important indicator of cross-elasticity of demand, but the prices or one type of container are not sensitive to price changes of the other.

Manufacturers of one type of container, for example, don’t equalize freight with the other.

Manufacturers of one type don’t meet competition in the Robinson-Patman Act sense of the other.

The pricing practices are different.

Cans are sold therefore be, glass containers on a delivered basis.

The Government calls attention to one exhibit, Exhibit GX773 at page 2821 of the record.

In their brief, they say in at least one instance, a food packer has succeeded in obtaining a reduced price for glass containers, that is by threat to use tin.

In all of this billion dollar glass container industry, billion and a half dollar can industry.

Over the period of years of this case, which in trial with dozens of witnesses, with the FBI up and down the country.

The Government brings out one and it’s the only one.

One instance of food packer, they say, has succeeded in obtaining the reduced price for glass containers.

The report which they relies, a report of a salesman, he said he had heard that a competing glass container manufacturer had not put its full price increase into effect.

Packers reported, they have said that the price increase would cut down on the use of — of glass because it would be two parts of line, with the cost of the packer’s tin package.

The author of the report said he didn’t know whether it was not — whether or not it was true.

This is the Government’s evidence, cross-elasticity of demand, price sensitivity.

I submit that a local justice of the peace would demand better evidence in a dog bite (ph) case.

The Government picks out from all types of packaging, cans and glass.

But at best, the type of competition that exists between these types of containers is the same as that which exist between all kinds of packaging material, and the District Court found nothing but I wish to define such a market.

This is in the courts — this is in the court below as the Government’s packaging line.

The Government here in its brief recognizes that the competitive relationship between cans and glass containers is the same as between paper packages, plastic bags and all other types of packages which goods are packed.

The Government proposes here to ignore all of the other types of packages.

Why they want to do that isn’t really clear.

Mr. Spritzer says that for most of the uses for which cans and glass are used, they alone are usable.

I don’t know how Mr. Spritzer knows that.

The record doesn’t show that.

But this maneuver, the Government tries to exclude all the other types of packaging which they found embarrassing to think of some of those, milk cartons, in direct competition with milk bottles, paper cartons for frozen foods, terrific market, in direct competition with cans.

Byron R. White:

Is that the same — is that the same kind of — is that the same kind of competition as between glass and can?

Helmer R. Johnson:

It varies.

Certainly, that between milk bottles and milk cartons, is a direct competition.

This is, I would believe — although we don’t have the evidence here in this record, I would believe that that would be a line of commerce, by applying that the —

Byron R. White:

The — those products for which milk and — for which those two products are in competition?

Helmer R. Johnson:

Yes, milk cartoons and milk bottles.

Byron R. White:

Yes.

Helmer R. Johnson:

Some of them are — are more remote, like simple packaging for example, requires a — a different type of — often times the processing is different or the formulation is different.

You might put, for example, fresh fruits in a plastic bag.

Well, it would be canned and put it in a can.

But it’s the same type of competition exactly that exists between cans and glass generally.

And the Government recognizes that.

They say so in Footnote 18 to their brief.

By this maneuver, they’ve excluded all of the other types of packaging.

The whole range of packaging includes plastic bottles, jars, paper folding cartoons, plastic folding cartoons, plastic films, other flexible packaging, cargo in shipping containers, textile bags, aluminum tumblers, metal tubes, foil tabs, bags, drums, crocks, wooden barrels.

This was their packaging line below.

They have produced no evidence, no substantial evidence to show that there was any cross-elasticity of demand reasonable interchange of usage in this field.

And the — the District Court said there was no evidence by which he could find that this was a line of commerce.

The reason why the Government has tried to gerrymander the market in this way, perhaps, there’s something to do with their attempts to build up percentages.

They — this whole field of packaging would probably amount to 15 billions or more dollars a year.

Now, $15 billion, Hazel-Atlas had less than one-half or 1% of it.

Even at $10 billion, Hazel-Atlas had less than three-quarters or 1%.

Potter Stewart:

You’re talking about the whole field of packaging which —

Byron R. White:

Whole field of packaging.

Potter Stewart:

— include paper bags and barrels, and boxes, and cornflake containers.

Byron R. White:

That’s right.

Everything that would be in the same level of competition exists between cans and glass.

They’ve recognized the weakness in this argument, this attempt to carve out artificial line of commerce and so they have turned to a subsidiary line of commerce as they called containers for can.

Here, they would seize on one physical characteristics, just one, the possibility of creating a hermetic seal on a container which can be heat sterilized and they’d ignored all other characteristics.

Here, they ask this Court to overturn the District Court’s finding that there was no line of commerce for can.

Byron R. White:

They had a great deal of confusion in the court below as to what they meant by this line of commerce.

Sometimes, it would be one thing, sometimes the other.

They couldn’t decide whether products which were hermetically sealed should be in it or not.

They couldn’t decide even which products should be in it.

Their experts couldn’t agree.

The District Court deals with this confusion, this opinion.

It points out, Footnote 79 of 1639, “Excluded from the Government’s definition of canned foods by one or both of the food experts who testified for the Government for such items as coffee, mayonnaise, vegetable oil, shortening, syrup, concentrated fruit juices, pasteurized whole milk, pasteurized barbecue sauce, maraschino cherries, green and Spanish olives, peanut butter, nuts, condiments, frozen foods and vegetables.

Some items such as vinegar, pickles, fruit preserves and fruit jellies were excluded by one expert and included by the other.

This alleged line of commerce, then was fully explored in the court below.

The Government put on an acknowledged food expert, Mr. Hallenbau, but he denied that packaging food in cans was the same as packaging food in glass.

He pointed out that their processing was different, that the cooking time was different.

The packing lines were different, that the economics were different.

Inclusions from this is clear.

Most packers would not use a container different from the one that they normally use if they were given the other one free.

They just couldn’t afford to, price doesn’t even apprehend to it.

There’s no cross-elasticity of demand.

In order to change their — from one type of container to the other, they would have to set up new packing lines, they would have to change their formulations, they’d have to change their method of distribution, they don’t do it.

The Government here in its brief has made heavy reliance on the facts outside of the record.

They cite several times a couple of books by economists.

(Inaudible) decided several times, Mr. McKee has cited several times.

But even these outside the record evidences, things that they didn’t put on in the trial below, don’t support their argument.

I’ve pointed out in my brief, McKee, speaking of glass and can markets since there is no container market.

Their markets are heterogenous.

(Inaudible) says the inflexibility of consumer taste and customs plus the chemical and physical properties of foods placed real limitations on the substitution of one type of container for another.

Although this case was tried, about almost four years after the acquisition, the Government put on no evidence whatsoever to have actual effect on competition.

They put on no evidence of probable effects of the acquisition.

They had representatives of all of the major glass containers on the witness stand.

They suggest that no anticompetitive effects.

One of them suggested somewhat diffidently that there might be some advantage in selling glass containers and in — and closures together.

But he quickly added that his company could make closures if it wanted too.

Byron R. White:

There were no patents that prevented them.

His company had plenty of money to do it.

They weren’t interested.

This doesn’t indicate any real advantage of selling the two containers together.

Well, what did the other people say?

They had one glass container after the other on the stand.

Some of them — I’ll read the excerpts from the testimony of some.

It’s Mr. Levis, Owens-Illinois, “Now, you testified, Mr. Levis, on cross-examination that competition among the glass container industries is keen and correct — vigorous.

Is that correct?

You so testified.”

“Yes, sir.”

Would that be in all of the various lines of glass containers that you manufacture?”

“Yes.”

“Prior to 1956, would you have included Hazel-Atlas Glass Company in that group?”

Answer: “They were competing vigorously for business.”

The Court: “Is the entity that was formerly Hazel-Atlas Glass still competing?”

The witness: “Yes, sir, they are very competitive.”

Mr. Green Fetcher (ph) at 1 — page 185 of the record.

“Would you say that competition in the glass container industry is keen and vigorous?”

Answer: “I certainly would.”

Question: “You do not quote prices to a specific customer for the purpose of meeting can prices, do you?”

“No.”

“You do not equalize freight with any can plants, do you?”

“No, we do not.”

“The location of any can manufacturing plant or plants, does that have any relation to the location of your glass container plant?”

Answer: “If I understand you, you are asking me, if we locate our plants or have that factor as a decision where our plant is located, the answer is no.”

(Inaudible)

Helmer R. Johnson:

They have.

Yes, sir.

(Inaudible)

Helmer R. Johnson:

It’s my understanding that they developed it in connection with a glass company and that they subsequently purchased the interest of the glass company in that market.

So now I believe it’s — it’s wholly on it.

I don’t know how many plants they had.

Going on, some of these glass container witnesses, as Mr. (Inaudible), Pierce Glass, who at the time of the acquisition was President of the Glass Container Manufactures Institute to which Mr. Spritzer referred.”

Now, in selling your glass containers, do you ever lower your price to meet the price of cans?”

“No,” he says, “I have never come in contact with can prices.”

Mr. Foster, Foster Forbes at 578 of the transcript, “Would you say that competition was keen and vigorous in the glass container industry?”

“Yes sir.”

The Court: “Do you find it more keen and vigorous or less keen and vigorous since 1956?”

The witness: “More.”

Earl Warren:

We’ll recess now, Mr. Johnson.