United States v. Grinnell Corporation

PETITIONER: United States
RESPONDENT: Grinnell Corporation
LOCATION: Duluth Harbor Basin

DOCKET NO.: 73
DECIDED BY: Warren Court (1965-1967)
LOWER COURT:

CITATION: 384 US 563 (1966)
ARGUED: Mar 28, 1966 / Mar 29, 1966
DECIDED: Jun 13, 1966

Facts of the case

Question

Media for United States v. Grinnell Corporation

Audio Transcription for Oral Argument - March 28, 1966 in United States v. Grinnell Corporation

Audio Transcription for Oral Argument - March 29, 1966 in United States v. Grinnell Corporation

Earl Warren:

Appellant, versus Grinnell Corporation et al.

Daniel M. Friedman:

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

When the Court rose at the recess yesterday, I had completed my discussion of the relevant market.

Now, I'd like to turn to showing that the District Court correctly held defendants have monopolized that market.

The offense of monopolization under Section 2 of the Sherman Act involves two elements.

The first is the existence of the monopoly power and the second is the conscience or willful acquisition or maintenance of that power.

And we think the record in this case shows that defendants possessed both of those elements.

The monopoly power has been described as the power to fix prices or to exclude competition.

Now when -- in this case, when Grinnell acquired an 87% interest in these companies by acquiring -- controlling interest of them over four-year period, it put together a combination, in one hand, of the overwhelming share of the market.

And this kind of a share of the market under the control of one person is ordinarily enough, we think, to show the existence of monopoly power.

I'd like to refer this Court to a passage of the opinion of Judge Learned Hand in the Alcoa case which this Court‘s specifically approved in the subsequent American Tobacco decision.

There, Judge Hand stated, “We may start therefore with the premise that to have combined 90% of the producers of ingot would have been to “monopolize” the ingot market and so far as concerns the public interest, it can make no difference whether an existing competition is put an end to or whether prospective competition is prevented.”

Now in the Cellophane case, this Court assumed that if Cellophane were the relevant market that du Pont's control of 75% of that market would be enough to give du Pont monopoly power.

In this case, the share of the market 87% is very close to the 90% that Alcoa had.

And in addition here to the just the percentages themselves, we have other -- in the issue of monopoly power, the existence of substantial price discriminations, and the further fact that within this market, after the three companies which Grinnell acquired, there's no one else that has anywhere near this share.

The two largest companies after that have roughly 1.5% and then it goes down very rapidly.

Now, the combination that Grinnell put together in this case not only acquired this large share of the market but it further prevented the resumption of competition among the defendant alarm companies that was a -- to be anticipated when these old restrictive agreements were about to expire.

Shortly before the agreements were due to expire in the late 1940s, Grinnell and ADT had a series of discussions as to what the future relationships of the company should be.

Under the old agreement, Grinnell was supplying these devices in return for 25% share of the revenues generated by the services for which the devices were provided.

And Grinnell indicated it would like to continue this arrangement.

But ADT's counsel advised that in its view, this arrangement by which Grinnell had supplied the devices was an illegal exclusive dealing agreement that violated the Sherman Act.

And during the course of these discussions between Grinnell and ADT, Mr. Fleming, the president of Grinnell stated as follows, and this is at page 1433 of the record.

Mr. Fleming stated that Grinnell -- that he did not feel that Grinnell would be prepared to go completely out of the supervisory business in 1954 even if no agreement were reached for the ADT company.

As we very definitely had in mind in such contingency, and we're preparing now to go into the central station business generally, including both supervisory, burglary etcetera service, if this became necessary, although, we would still much prefer to renew our arrangements with the ADT on a fair basis.

Now at the trial, Mr. Fleming testified that there were more than -- there's more than one reason why they acquired Holmes.

He stated as Holmes' counsel has advised the court that it was acquired as an investment.

He also stated that they had another reason for acquiring Holmes and this is at 676 of the record which was -- so that we would know something about or have someone in the organization who knew something about the burglar alarm business, so we could compete with ADT.

And he also testified at record 688 that after Grinnell had acquired both AFA and Holmes, and before it acquired ADT, the company considered whether we would merge Holmes and AFA, whether we would be in a better position to compete with ADT.

So this record we think shows that prior to the time that Grinnell had acquired ADT, it was seriously considering going in to the central station business.

Now, the effect of its acquiring ADT was to eliminate any possibility of this competition because it had now combined in one source these different companies which were potential competitors.