United States v. Penn-Olin Chemical Co.

PETITIONER: United States
RESPONDENT: Penn-Olin Chemical Co.
LOCATION: South Boston Court

DECIDED BY: Warren Court (1967-1969)

CITATION: 389 US 308 (1967)
ARGUED: Dec 07, 1967
DECIDED: Dec 11, 1967

Facts of the case


Media for United States v. Penn-Olin Chemical Co.

Audio Transcription for Oral Argument - December 07, 1967 in United States v. Penn-Olin Chemical Co.

Earl Warren:

Number 26, United States, Appellant, versus Penn-Olin Chemical Company.

Mr. Zimmerman.

Edwin M. Zimmerman:

Mr. Chief Justice, may it please the Court.

This case arises out of a joint venture entered into in 1960 by the Pennsalt Chemical Corporation and the Olin Mathieson Chemical Corporation.

The joint venture called the Penn-Olin Company was for the manufacture and sale of a chemical called sodium chlorate in the southeastern region of the United States where the chemical has several uses.

Its major use is to make chlorine dioxide, a bleach for the pulp and paper industry.

In January 1961 the Government filed a suit under the Clayton Act and the Sherman Act attacking the joint venture and the transactions relating to it.

A complaint was amended in August 1961 and trial began in October 1961.

At the first trial, the District Court believed that illegality under the Clayton Act required a showing that but for the joint venture both parents would have entered the market.

Since the District Court did not believe that a showing had been made, that both parents would have entered the market, it dismissed the case.

The appeal was taken to this Court, and in June 1964, this Court reversed and remanded.

This Court stressed the importance of potential competition, of the competition of the firm on the edge of the market whose presence might affect the pricing decisions of those in the market.

This Court therefore told the District Court to make a finding on the question whether one firm would have entered the market and the other firm remained as a potential entrant hovering on the edge of the market.

Further trial was had on this issue and the District Court this time concluded that neither company was a potential entrant.

Since it concluded that neither company was a potential entrant, it did not deem it necessary to find whether one would have hovered at the edge of the market.

We are here today because we believe that the standard use by the District Court for evaluating the question of probable entry is incorrect.

The District Court in effect held that for the United States to prevail in the case such as this, it must show that top management actually decided to enter independently as an alternative to the joint venture.

Let me illustrate what we feel to be the difficulty of the Court's approach.

The District Court's opinion focuses almost exclusively on the fate of internal corporate proposals to enter the market.

The District Court's opinion reveals that both in the case of Olin and in the case of Pennsalt, even looking at this evidence alone we see a growing prospect of near commitment to internal entry.

Hence, in the case of Pennsalt, after more than five years of study, the president in November 1958 is authorized to press the button to make independent entry a reality if he so desires.

He discovers some overestimates of demand and in January 1959, the proposal is revised to take these overestimates into account.

But also in January 1959, the president of Pennsalt has indicated in the District Judges' opinion, page 828 of the record, Mr. Drake accidentally met Mr. Logan of Olin Mathieson and the two discussed the possibility of a joint venture.

At that time the proposal for independent entry was put on ice, pending for the discussion of the joint venture.

Again, we are told by the District Judges' opinion that as of November 1959, independent construction by Olin at page 816 appeared to be definitely more of a possibility that it had been.

But again, a curtain descends and the joint venture itself is shortly entered into.

In fact, neither of the proposals, the Pennsalt plan of January 1959, the Olin plan of November 1959 for independent entry, neither proposal was rejected.

In fact, both proposals represented the culmination of long sustained efforts.

In fact both appeared to make economic sense.

But the District Court states that neither proposal had in fact been presented to top management.