United States v. Penn-Olin Chemical Company

PETITIONER: United States
RESPONDENT: Penn-Olin Chemical Company
LOCATION: New York Supreme Court Appellate Division, First Department

DOCKET NO.: 503
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 378 US 158 (1964)
ARGUED: Apr 30, 1964
DECIDED: Jun 22, 1964

Facts of the case

Question

Media for United States v. Penn-Olin Chemical Company

Audio Transcription for Oral Argument - April 30, 1964 (Part 2) in United States v. Penn-Olin Chemical Company

Audio Transcription for Oral Argument - April 30, 1964 (Part 1) in United States v. Penn-Olin Chemical Company

Earl Warren:

Number 503, United States, Appellant, versus Penn-Olin Chemical Company, et al.

Mr. Solicitor General.

Archibald Cox:

Mr. Chief Justice, may it please the Court.

This case here on appeal from the District of Delaware raises a novel and an unusually interesting question under the antitrust laws.

It's novel also in that the facts are essentially very simple.

Two of the appellees, Pennsalt and Olin Mathieson, each a large well equipped firm, actively interested in entering an important market on its own, although not fully committed to the venture, agreed to combine forces and to enter the market jointly, thereby, foreclosing any possibility of competition between the two in that market, either immediately or sometime in the longer run in the future.

The ultimate question here is whether that combination violated, which was accomplished through a subsidiary corporation whose stock they acquired, violated either Section 7 of the Clayton Act or Section 1 of the Sherman Act.

The question -- neither the question nor any question like it has been before this Court previously.

The District Court prepared a careful and independent-minded opinion, which not only establishes the facts, but which I think offers the best avenue for coming to grips with the legal issues in the case.

The Court found that in the southeastern United States, there's an important market for sodium hydrochloride, a chemical that is used in the pulp and paper industry for the purposes of bleaching.

Sodium hydro -- hydrochloride is the, agreed to be, the line of commerce in the case and the southeastern United States are agreed to be the relevant section of the country.

In 1959, there were three suppliers in that market.

Hooker was a plant in Mississippi, which sold 49% of the market, American Potash, also, was a plant in Mississippi, which sold 41% and Pennsalt, which sold just under 9%.

I should say that Pennsalt's ability to compete in the market with its existing plants was distinctly limited by the fact that the only plant in existence was way out on the west coast, so that for all practical purposes, you had only two suppliers.

During the 1950s, the southeastern market for sodium hydrochloride became more and more attractive to new investors.

Olin Mathieson and Pennsalt, each gave long and careful consideration to building its own sodium hydrochloride plant in the southeast.

The District Court expressly found on page 1574, that's in volume 2 of the record, that Pennsalt and Olin, right at the top of the page, "Each had had extensive background in sodium chloride," skipping, "That a suitable location for a plant was available to each company and then, in short, that Pennsalt and Olin, each possessed the resources and general capability needed to build its own plant in the southeast and to compete with Hooker and Am-Pot, American Potash, in that market.

"The Court also discussed the deliberations of each individual management about individual entry and concluded back on page 1573, at the bottom of the text and above the footnote, the possibility of individual entry into the southeastern market had not been completely rejected by either Pennsalt or Olin before they decided upon the joint venture.

I ought to pause here to call attention to page 16 of the appellees' brief where they quote an excerpt from the testimony of Olin's president intended to indicate that Olin had not -- had decided not to build the plant on its own even if there were no joint venture.

Now, that argument was made to the District Court and the District Court squarely rejected it when it found that the possibility of individual entry had not been completely rejected by either before they decide it upon the joint venture.

Furthermore, that finding, as a footnote to the opinion, immediately below the quotation, the opinion shows, was based upon the statement of Olin's own president in his deposition which was introduced in evidence.

The reference unhappily is not there and we neglected to print the deposition but, of course, it's here in the Court.

The reference as to plaintiff's Exhibit 402, unprinted in full, pages 28 and 29 of the original exhibit and there, the president stated as quoted, "That the question had never reached the point of final decision".

Furthermore, the testimony quoted by counsel, as they also overlook, was qualified on cross-examination and it was substantially inconsistent with testimony by one of Olin's vice president, both in his deposition and also as given at the trial.

So that, I think that the findings so amply supportive were certainly entitled to take it as a fact in this Court that Olin, like Pennsalt, had not turned its back on the possibility of individual entry.

I now come to the crux of the matter, both in the opinion and in our analysis of the case.

On page 1575, after finding at the start of the first full paragraph, that Olin and Pennsalt, each had the capability of building a plant and competing individually.

The District Court ruled "that those facts were important,"skipping a few lines, "only -- only as a factor in determining whether, as a matter of probability, both companies would have entered the market as individual competitors if Penn and Olin had not been formed.

Only in this event", the Court said "would potential competition between the two companies have been foreclosed by the joint venture.

" He then went on to say that there was no evidence to support a finding that there was a probability that both companies would've simultaneously entered the bargain and he held that if we fail to prove that, we were entitled to judgment only if we showed that Penn-Olin, the subsidiary combination, would be a less effective competitor than Olin alone or Pennsalt alone.