U.S. Supreme Court United States v. E. I. du Pont de
Nemours & Co., 351
U.S. 377 (1956) United States v. E. I. du Pont de
Nemours & Co. No. 5 Argued October 11,
1955 Decided June 11, 1956 351
U.S. 377 APPEAL FROM THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF
DELAWARE Syllabus In a civil action under § 4 of the Sherman Act, the Government
charged that appellee had monopolized interstate commerce in
cellophane in violation of § 2 of the Act. During the relevant
period, appellee produced almost 75% of the cellophane sold in the
United States; but cellophane constituted less than 20% of all
flexible packaging materials sold in the United States. The trial
court found that the relevant market for determining the extent of
appellee's market control was the market for flexible packaging
materials, and that competition from other materials in that market
prevented appellee from possessing monopoly powers in its sales of
cellophane. Accordingly, it dismissed the complaint. Held: the judgment is affirmed. Pp. 351 U. S.
378 -404.

															(a) The ultimate consideration in determining whether an alleged
monopolist violates § 2 of the Sherman Act is whether the defendant
controls prices and competition in the market for such part of
trade or commerce as he is charged with monopolizing. P. 351 U. S.
380 .

															(b) A party has monopoly power contrary to § 2 of the Sherman
Act if it has, over "any part of the trade or commerce among the
several States," a power of controlling prices or unreasonably
restricting competition. Pp. 351 U. S.
389 -394.

															(c) Determination of the competitive market for commodities
depends upon how different from one another are the offered
commodities in character or use, how far buyers will go to
substitute one commodity for another. P. 351 U. S.
393 .

															(d) It is not a proper interpretation of the Sherman Act to
require that products be fungible to be considered in the relevant
market. P. 351 U.S.
394 .

															(e) Where there are market alternatives that buyers may readily
use for their purposes, illegal monopoly does not exist merely
because the product said to be monopolized differs from others. P. 351 U.S. 394 .

															(f) In considering what is the relevant market for determining
the control of price and competition, no more definite rule can
be Page 351 U. S. 378 declared than that commodities reasonably interchangeable by
consumers for the same purposes make up that "part of the trade or
commerce" monopolization of which may be illegal. P. 351 U. S.
395 .

															(g) Cellophane's interchangeability with numerous other
materials suffices to make it a part of the market for flexible
packaging materials. Pp. 351 U. S.
395 -400.

															(h) On the record in this case, it cannot be said that the
variations in price between cellophane and other flexible packaging
materials prevent them from being competitive or gave appellee
monopoly power over prices. Pp. 351 U. S.
400 -401.

															(i) On the record in this case, it cannot be said that appellee
has excluded competitors from the flexible packaging material
market. Pp. 351 U. S.
402 -404. 118 F.
Supp. 41 affirmed.

															MR. JUSTICE REED delivered the opinion of the Court.

															The United States brought this civil action under § 4 of the
Sherman Act against E. I. du Pont de Nemours and Company. The
complaint, filed December 13, 1947, in the United States District
Court for the District of Columbia, charged du Pont with
monopolizing, attempting to monopolize and conspiracy to monopolize
interstate commerce in cellophane and cellulosic caps and bands in
violation of § 2 of the Sherman Act. Relief by injunction was
sought against defendant and its officers, forbidding monopolizing
or attempting to monopolize interstate trade in cellophane. The
prayer also sought action to dissipate the effect of the
monopolization by divestiture or other steps. On defendant's motion
under 28 U.S.C. § 1404(a), the case was transferred to the District
of Page 351 U. S. 379 Delaware. After a lengthy trial, judgment was entered for du
Pont on all issues. [ Footnote
1 ]

															The Government's direct appeal here does not contest the
findings that relate to caps and bands, nor does it raise any issue
concerning the alleged attempt to monopolize or conspiracy to
monopolize interstate commerce in cellophane. The appeal, as
specifically stated by the Government, "attacks only the ruling
that du Pont has not monopolized trade in cellophane." At issue for
determination is only this alleged violation by du Pont of § 2 of
the Sherman Act. [ Footnote
2 ]

															During the period that is relevant to this action, du Pont
produced almost 75% of the cellophane sold in the United States,
and cellophane constituted less than 20% of all "flexible packaging
material" sales. This was the designation accepted at the trial for
the materials listed in Finding 280, Appendix A, this opinion, post, p. 351 U. S.
405 . Page 351 U. S. 380 The Government contends that, by so dominating cellophane
production, du Pont monopolized a "part of the trade or commerce"
in violation of § 2. Respondent agrees that cellophane is a product
which constitutes "a "part" of commerce within the meaning of
Section 2." Du Pont brief, pp. 16, 79. But it contends that the
prohibition of § 2 against monopolization is not violated, because
it does not have the power to control the price of cellophane or to
exclude competitors from the market in which cellophane is sold.
The court below found that the "relevant market for determining the
extent of du Pont's market control is the market for flexible
packaging materials," and that competition from those other
materials prevented du Pont from possessing monopoly powers in its
sales of cellophane. Finding 37.

															The Government asserts that cellophane and other wrapping
materials are neither substantially fungible nor like priced. For
these reasons, it argues that the market for other wrappings is
distinct from the market for cellophane, and that the competition
afforded cellophane by other wrappings is not strong enough to be
considered in determining whether du Pont has monopoly powers.
Market delimitation is necessary under du Pont's theory to
determine whether an alleged monopolist violates § 2. The ultimate
consideration in such a determination is whether the defendants
control the price and competition in the market for such part of
trade or commerce as they are charged with monopolizing. Every
manufacturer is the sole producer of the particular commodity it
makes, but its control in the above sense of the relevant market
depends upon the availability of alternative commodities for buyers
-- i.e., whether there is a cross-elasticity of demand
between cellophane and the other wrappings. This interchangeability
is largely gauged by the purchase of competing products for similar
uses considering the price, characteristics and adaptability of
the Page 351 U. S. 381 competing commodities. The court below found that the flexible
wrappings afforded such alternatives. This Court must determine
whether the trial court erred in its estimate of the competition
afforded cellophane by other materials.

															The burden of proof, of course, was upon the Government to
establish monopoly. See United States v. Aluminum Co. of
America, 148 F.2d 416, 423, 427. This the trial court held the
Government failed to do, upon findings of fact and law stated at
length by that court. For the United States to succeed in this
Court now, it must show that erroneous legal tests were applied to
essential findings of fact or that the findings themselves were
"clearly erroneous" within our rulings on Rule 52(a) of the Rules
of Civil Procedure. See United States v. United States Gypsum
Co., 333 U. S. 364 , 333 U. S.
393 -395. We do not try the facts of cases de
novo. Timken Roller Bearing Co. v. United States, 341 U. S. 593 , 341 U. S. 597 .
[ Footnote 3 ]

															Two additional questions were raised in the record and decided
by the court below. That court found that, even if du Pont did
possess monopoly power over sales of cellophane, it was not subject
to Sherman Act prosecution, because (1) the acquisition of that
power was protected by patents, and (2) that power was acquired
solely through du Pont's business expertness. It was thrust upon du
Pont. 118 F. Supp. at 213-218.

															Since the Government specifically excludes attempts and
conspiracies to monopolize from consideration, a conclusion that du
Pont has no monopoly power would obviate examination of these last
two issues.

															I. Factual Background. -- For consideration of the
issue as to monopolization, a general summary of the development of
cellophane is useful. Page 351 U. S. 382 In the early 1900's, Jacques Brandenberger, a Swiss chemist,
attempted to make tablecloths impervious to dirt by spraying them
with liquid viscose (a cellulose solution available in quantity
from wood pulp, Finding 361) and by coagulating this coating. His
idea failed, but he noted that the coating peeled off in a
transparent film. This first "cellophane" was thick, hard, and not
perfectly transparent, but Brandenberger apparently foresaw
commercial possibilities in his discovery. By 1908, he developed
the first machine for the manufacture of transparent sheets of
regenerated cellulose. The 1908 product was not satisfactory, but,
by 1912, Brandenberger was making a saleable thin flexible film
used in gas masks. He obtained patents to cover the machinery and
the essential ideas of his process.

															It seems to be agreed, however, that the disclosures of these
early patents were not sufficient to make possible the manufacture
of commercial cellophane. The inadequacy of the patents is
partially attributed to the fact that the essential machine (the
Hopper) was improved after it was patented. But more significant
was the failure of these patents to disclose the actual technique
of the process. This technique included the operational data
acquired by experimentation. [ Footnote 4 ]

															In 1917, Brandenberger assigned his patents to La Cellophane
Societe Anonyme and joined that organization. Page 351 U. S. 383 Thereafter, developments in the production of cellophane
somewhat paralleled those taking place in artificial textiles.
Chemical science furnished the knowledge for perfecting the new
products. The success of the artificial products has been enormous.
Du Pont was an American leader in the field of synthetics, and
learned of cellophane's successes through an associate, Comptoir
des Textiles Artificiel.

															In 1923, du Pont organized with La Cellophane an American
company for the manufacture of plain cellophane. The undisputed
findings are that:

															"On December 26, 1923, an agreement was executed between duPont
Cellophane Company and La Cellophane by which La Cellophane
licensed duPont Cellophane Company exclusively under its United
States cellophane patents, and granted duPont Cellophane Company
the exclusive right to make and sell in North and Central America
under La Cellophane's secret processes for cellophane manufacture.
DuPont Cellophane Company granted to La Cellophane exclusive rights
for the rest of the world under any cellophane patents or processes
duPont Cellophane Company might develop."

															Finding 24.

															Subsequently, du Pont and La Cellophane licensed several foreign
companies, allowing them to manufacture and vend cellophane in
limited areas. Finding 601. Technical exchange agreements with
these companies were entered into at the same time. However, in
1940, du Pont notified these foreign companies that sales might be
made in any country, [ Footnote
5 ] and, by 1948, all the technical exchange agreements were
canceled. Page 351 U. S. 384 Sylvania, and American affiliate of a Belgian producer of
cellophane not covered by the license agreements above referred to,
began the manufacture of cellophane in the United States in 1930.
Litigation between the French and Belgian companies resulted in a
settlement whereby La Cellophane came to have a stock interest in
Sylvania, contrary to the La Cellophane-du Pont agreement. This
resulted in adjustments as compensation for the intrusion into
United States of La Cellophane that extended du Pont's limited
territory. The details do not here seem important. Since 1934,
Sylvania has produced about 25% of United States cellophane.

															An important factor in the growth of cellophane production and
sales was the perfection of moisture-proof cellophane, a superior
product of du Pont research and patented by that company through a
1927 application. Plain cellophane has little resistance to the
passage of moisture vapor. Moisture-proof cellophane has a
composition added which keeps moisture in and out of the packed
commodity. This patented type of cellophane has had a demand with
much more rapid growth than the plain.

															In 1931, Sylvania began the manufacture of moisture-proof
cellophane under its own patents. After negotiations over patent
rights, du Pont, in 1933, licensed Sylvania to manufacture and sell
moisture-proof cellophane produced Page 351 U. S. 385 under the du Pont patents at a royalty of 2% of sales. These
licenses, with the plain cellophane licenses from the Belgian
company, made Sylvania a full cellophane competitor, limited on
moisture-proof sales by the terms of the licenses to 20% of the
combined sales of the two companies of that type by the payment of
a prohibitive royalty on the excess. Finding 552. There was never
an excess production. The limiting clause was dropped on January 1,
1945, and Sylvania was acquired in 1946 by the American Viscose
Corporation with assets of over two hundred million dollars.

															Between 1928 and 1950, du Pont's sales of plain cellophane
increased from $3,131,608 to $9,330,776. Moisture-proof sales
increased from $603,222 to $89,850,416, although prices were
continuously reduced. Finding 337. It could not be said that this
immense increase in use was solely or even largely attributable to
the superior quality of cellophane, or to the technique or business
acumen of du Pont, though doubtless those factors were important.
The growth was a part of the expansion of the commodity packaging
habits of business, a by-product of general efficient competitive
merchandising to meet modern demands. The profits, which were
large, apparently arose from this trend in marketing, the
development of the industrial use of chemical research and
production of synthetics, rather than from elimination of other
producers from the relevant market. That market is discussed later
at p. 351 U.S. 394 . Tables
appearing at the end of this opinion (Appendix A, Findings 279-292,
inclusive, post, pp. 405-410) show the uses of cellophane
in comparison with other wrappings. [ Footnote 6 ] See the discussion infra, p. 351 U. S. 399 et seq. II. The Sherman Act and the Courts. -- The Sherman Act
has received long and careful application by this Court to achieve
for the Nation the freedom of enterprise Page 351 U. S. 386 from monopoly or restraint envisaged by the Congress that passed
the Act in 1890. Because the Act is couched in broad terms, it is
adaptable to the changing types of commercial production and
distribution that have evolved since its passage. Chief Justice
Hughes wrote for the Court that,

															"As a charter of freedom, the act has a generality and
adaptability comparable to that found to be desirable in
constitutional provisions." Appalachian Coals, Inc. v. United States, 288 U.
S. 344 , 288 U. S.
359 -360. Compare, on remedy, Judge Wyzanski in United States v. United Shoe Machinery
Corp., 110 F.
Supp. 295 , 348. It was said in Standard Oil Co. v. United
States, 221 U. S. 1 , 221 U. S. 50 ,
that fear of the power of rapid accumulations of individual and
corporate wealth from the trade and industry of a developing
national economy caused its passage. Units of traders and producers
snowballed by combining into so-called "trusts." Competition was
threatened. Control of prices was feared. Individual initiative was
dampened. While the economic picture has changed, large
aggregations or private capital, with power attributes, continue.
Mergers go forward. Industries such as steel, automobiles, tires,
chemicals, have only a few production organizations. A considerable
size is often essential for efficient operation in research,
manufacture and distribution.

															Judicial construction of anti-trust legislation has generally
been left unchanged by Congress. This is true of the Rule of
Reason. [ Footnote 7 ] While it
is fair to say that the Rule Page 351 U. S. 387 is imprecise, its application in Sherman Act litigation, as
directed against enhancement of price or throttling of competition,
has given a workable content to antitrust legislation. See note 18 infra. It
was judicially declared a proper interpretation of the Sherman Act
in 1911, with a strong, clear-cut dissent challenging its soundness
on the ground that the specific words of the Act covered every
contract that tended to restrain or monopolize. [ Footnote 8 ] This Court has not receded from
its position on the Rule. [ Footnote
9 ] There is not, we think, any inconsistency between it and the
development of the judicial theory that agreements as to
maintenance of prices or division of territory are in themselves a
violation of the Sherman Act. [ Footnote 10 ] It is logical that some agreements and
practices are invalid per se, while others are illegal
only as applied to particular situations. [ Footnote 11 ]

															Difficulties of interpretation have arisen in the application of
the Sherman Act in view of the technical changes in production of
commodities and the new distribution practices. [ Footnote 12 ] They have called forth
reappraisal of the effect of the Act by business and government.
[ Footnote 13 ] Page 351 U. S. 388 That reappraisal has so far left the problems with which we are
here concerned to the courts, rather than to administrative
agencies. Cf. Federal Trade Commission Act, 38 Stat. 721.
It is true that Congress has made exceptions to the generality of
monopoly prohibitions, exceptions that spring from the necessities
or conveniences of certain industries or business organizations, or
from the characteristics of the members of certain groups of
citizens. [ Footnote 14 ] But
those exceptions express legislative Page 351 U. S. 389 determination of the national economy's need of reasonable
limitations on cutthroat competition or prohibition of monopoly.
"[W]here exceptions are made, Congress should make them." United States v. Line Material Co., 333 U.
S. 287 , 333 U. S. 310 .
They modify the reach of the Sherman Act, but do not change its
prohibition of other monopolies. We therefore turn to § 2 ( note 2 supra ) to
determine whether du Pont has violated that section by its
dominance in the manufacture of cellophane in the before-stated
circumstances.

															III. The Sherman Act, § 2 -- Monopolization. -- The only statutory language of § 2 pertinent on this review is:
"Every person who shall monopolize . . . shall be deemed guilty. .
. ." This Court has pointed out that monopoly at common law was a
grant by the sovereign to any person for the sole making or
handling of anything so that others were restrained or hindered in
their lawful trade. Standard Oil Co. v. United States, 221 U. S. 1 , 221 U. S. 51 .
However, as in England, it came to be recognized here that acts
bringing the evils of authorized monopoly -- unduly diminishing
competition and enhancing prices -- were undesirable, id. at 221 U. S. 56 -58,
and were declared illegal by § 2. Id. at 221 U. S. 60 -62.
Our cases determine that a party has monopoly power if it has, over
"any part of the trade or commerce among the several states," a
power of controlling prices or unreasonably restricting
competition. Id. at 221 U. S. 85 . Page 351 U. S. 390 Senator Hoar, in discussing § 2, pointed out that monopoly
involved something more than extraordinary commercial success,
"that it involved something like the use of means which made it
impossible for other persons to engage in fair competition."
[ Footnote 15 ] This exception
to the Page 351 U. S. 391 Sherman Act prohibitions of monopoly power is perhaps the
monopoly "thrust upon" one of United States v. Aluminum Co. of
America, 148 F.2d 416, 429, left as an undecided possibility
by American Tobacco Co. v. United States, 328 U.
S. 781 . Compare United States v. United Shoe
Machinery Corp., 110 F.
Supp. 295 , 342. [ Footnote
16 ]

															If cellophane is the "market" that du Pont is found to dominate,
it may be assumed it does have monopoly power over that "market."
[ Footnote 17 ] Monopoly power
is the power to control prices or exclude competition. [ Footnote 18 ] It seems apparent Page 351 U. S. 392 that du Pont's power to set the price of cellophane has been
limited only by the competition afforded by other flexible
packaging materials. Moreover, it may be practically impossible for
anyone to commence manufacturing cellophane without full access to
du Pont's technique. However, du Pont has no power to prevent
competition from other wrapping materials. The trial court
consequently had to determine whether competition from the other
wrappings prevented du Pont from possessing monopoly power in
violation of § 2. Price and competition are so intimately entwined
that any discussion of theory must treat them as one. It is
inconceivable that price could be controlled without power over
competition, or vice versa. This approach to the determination of
monopoly power is strengthened by this Court's conclusion in prior
cases that, when an alleged monopolist has power over price and
competition, an intention to monopolize in a proper case may be
assumed. [ Footnote 19 ]

															If a large number of buyers and sellers deal freely in a
standardized product such as salt or wheat, we have complete or
pure competition. Patents, on the other hand, furnish the most
familiar type of classic monopoly. As the producers of a
standardized product bring about significant differentiations of
quality, design, or packaging in the product that permit
differences of use, competition becomes, to a greater or less
degree, incomplete, and the producer's power over price and
competition greater over his article and its use, according to the
differentiation he is able to create and maintain. A retail seller
may have, in one sense, a monopoly on certain trade because of
location, as an isolated country store or filling station, or
because no Page 351 U. S. 393 one else makes a product of just the quality or attractiveness
of his product, as, for example, in cigarettes. Thus, one can
theorize that we have monopolistic competition in every
nonstandardized commodity, with each manufacturer having power over
the price and production of his own product. [ Footnote 20 ] However, this power that, let us
say, automobile or soft-drink manufactures have over their
trademarked products is not the power that makes an illegal
monopoly. Illegal power must be appraised in terms of the
competitive market for the product. [ Footnote 21 ]

															Determination of the competitive market for commodities depends
on how different from one another are the offered commodities in
character or use, how far buyers will go to substitute one
commodity for another. For example, one can think of building
materials as in commodity competition, but one could hardly say
that brick competed with steel or wood or cement or stone in the
meaning of Sherman Act litigation; the products are too different.
This is the inter-industry competition emphasized by some
economists. See Lilienthal, Big Business, c. 5. On the
other hand, there are certain differences in the formulae for soft
drinks, but one can hardly say that each one is an illegal
monopoly. Whatever the market may be, we hold that control of price
or competition establishes the existence of monopoly power under §
2. Section 2 requires the application of a reasonable approach in
determining the existence of monopoly power just as surely as did §
1. This, of course, does not mean that there can be a reasonable
monopoly. See notes 7
and | 7 and S.
377fn9|>9, supra. Our next step is to determine whether
du Pont has monopoly power over cellophane -- that is, power over
its price in relation to or competition with � 7 and S. 394� other commodities. The charge was
monopolization of cellophane. The defense, that cellophane was
merely a part of the relevant market for flexible packaging
materials.

															IV. The Relevant Market. -- When a product is
controlled by one interest, without substitutes available in the
market, there is monopoly power. Because most products have
possible substitutes, we cannot, as we said in Times-Picayune
Pub. Co. v. United States, 345 U. S. 594 , 345 U. S. 612 ,
give "that infinite range" to the definition of substitutes. Nor is
it a proper interpretation of the Sherman Act to require that
products be fungible to be considered in the relevant market.

															The Government argues:

															"We do not here urge that in no circumstances may competition of
substitutes negative possession of monopolistic power over trade in
a product. The decisions make it clear at the least that the courts
will not consider substitutes other than those which are
substantially fungible with the monopolized product and sell at
substantially the same price."

															But where there are market alternatives that buyers may readily
use for their purposes, illegal monopoly does not exist merely
because the product said to be monopolized differs from others. If
it were not so, only physically identical products would be a part
of the market. To accept the Government's argument, we would have
to conclude that the manufactures of plain, as well as
moisture-proof, cellophane were monopolists, and so with films such
as Pliofilm, foil, glassine, polyethylene, and Saran, for each of
these wrapping materials is distinguishable. These were all
exhibits in the case. New wrappings appear, generally similar to
cellophane -- is each a monopoly? What is called for is an
appraisal of the "cross-elasticity" of demand in the trade. See Note, 54 Col.L.Rev. 580. Page 351 U. S. 395 The varying circumstances of each case determine the result.
[ Footnote 22 ] In considering
what is the relevant market for determining the control of price
and competition, no more definite rule can be declared than that
commodities reasonably interchangeable by consumers for the same
purposes make up that "part of the trade or commerce"
monopolization of which may be illegal. As respects flexible
packaging materials, the market geographically is nationwide.

															Industrial activities cannot be confined to trim categories.
Illegal monopolies under § 2 may well exist over limited products
in narrow fields where competition is eliminated. [ Footnote 23 ] That does not settle the issue
here. In Page 351 U. S. 396 determining the market under the Sherman Act, it is the use or
uses to which the commodity is put that control. The selling price
between commodities with similar uses and different characteristics
may vary, so that the cheaper product can drive out the more
expensive. Or the superior quality of higher priced articles may
make dominant the more desirable. Cellophane costs more than many
competing products, and less than a few. But, whatever the price,
there are various flexible wrapping materials that are bought by
manufacturers for packaging their goods in their own plants or are
sold to converters who shape and print them for use in the
packaging of the commodities to be wrapped. Page 351 U. S. 397 Cellophane differs from other flexible packaging materials. From
some it differs more than from others. The basic materials from
which the wrappings are made and the advantages and disadvantages
of the products to the packaging industry are summarized in
Findings 62 and 63. They are aluminum, cellulose acetate,
chlorides, wood pulp, rubber hydrochloride, and ethylene gas. It
will adequately illustrate the similarity in characteristics of the
various products by noting here Finding 62 as to glassine.
[ Footnote 24 ] Its use is
almost as extensive as cellophane, Appendix C, post, p.
412, and many of its characteristics equally or more satisfactory
to users. [ Footnote 25 ] Page 351 U. S. 398 It may be admitted that cellophane combines the desirable
elements of transparency, strength, and cheapness more definitely
than any of the others. Comparative characteristics have been noted
thus:

															"Moisture-proof cellophane is highly transparent, tears readily
but has high bursting strength, is highly impervious to moisture
and gases, and is resistant to grease and oils. Heat sealable,
printable, and adapted to use on wrapping machines, it makes an
excellent packaging material for both display and protection of
commodities."

															"Other flexible wrapping materials fall into four major
categories: (1) opaque nonmoisture-proof wrapping paper designed primarily for convenience and protection in handling
packages; (2) moisture-proof films of varying degrees of
transparency designed primarily either to protect, or to display
and protect, the products they encompass; (3) nonmoisture-proof
transparent films designed primarily to display and to
some extent protect, but which obviously do a poor protecting job
where exclusion or retention of moisture is important; and (4)
moisture-proof materials other than films of varying
degrees of transparency (foils and paper products) designed to
protect and display. [ Footnote
26 ]"

															An examination of Finding 59, Appendix, B, post, p. 351 U. S. 411 ,
will make this clear. Page 351 U. S. 399 But, despite cellophane's advantages, it has to meet competition
from other materials in every one of its uses. Cellophane's
principal uses are analyzed in 351
U.S. 377 appa|>Appendix A, Findings 281 and 282. Food
products are the chief outlet, with cigarettes next. The Government
makes no challenge to Finding 283 that cellophane furnishes less
than 7% of wrappings for bakery products, 25% for candy, 32% for
snacks, 35% for meats and poultry, 27% for crackers and biscuits,
47% for fresh produce, and 34% for frozen foods. Seventy-five to
eighty percent of cigarettes are wrapped in cellophane. Finding
292. Thus, cellophane shares the packaging market with others. The
over-all result is that cellophane accounts for 17.9% of flexible
wrapping materials, measured by the wrapping surface. Finding 280,
Appendix A., post, p. 351 U. S.
405 .

															Moreover, a very considerable degree of functional
interchangeability exists between these products, as is shown by
the tables of 351
U.S. 377 appa|>Appendix A and Findings 150-278. [ Footnote 27 ] It will be noted, 351
U.S. 377 appb|>Appendix B, that, except as to permeability to
gases, cellophane has no qualities that are not possessed by a
number of other materials. Meat will do as an example of
interchangeability. Findings 205-220. Although du Pont's sales to
the meat industry have reached 19,000,000 pounds annually, nearly
35%, this volume is attributed "to the rise of self-service
retailing of fresh meat." Findings 212 and 283. In fact, since the
popularity of self-service meats, du Pont has lost "a considerable
proportion" of this packaging business to Pliofilm. Finding 215.
Pliofilm is more expensive than cellophane, but its superior
physical characteristics apparently offset cellophane's price
advantage. While retailers Page 351 U. S. 400 shift continually between the two, the trial court found that
Pliofilm is increasing its share of the business. Finding 216. One
further example is worth noting. Before World War II, du Pont
cellophane wrapped between 5 and 10% of baked and smoked meats. The
peak year was 1933. Finding 209. Thereafter, du Pont was unable to
meet the competition of Sylvania and of grease-proof paper. Its
sales declined, and the 1933 volume was not reached again until
1947. Findings 209-210. It will be noted that grease-proof paper,
glassine, waxed paper, foil and Pliofilm are used as well as
cellophane, Finding 218. Findings 209-210 show the competition, and
215-216 the advantages, that have caused the more expensive
Pliofilm to increase its proportion of the business.

															An element for consideration as to cross-elasticity of demand
between products is the responsiveness of the sales of one product
to price changes of the other. [ Footnote 28 ] If a slight decrease in the price of
cellophane causes a considerable number of customers of other
flexible wrappings to switch to cellophane, it would be an
indication that a high cross-elasticity of demand exists between
them -- that the products compete in the same market. The court
below held that the "[g]reat sensitivity of customers in the
flexible packaging markets to price or quality changes" prevented
du Pont from possessing monopoly control over price. 118 F. Supp.
at 207. The record sustains these findings. See references
made by the trial court in Findings 123-149.

															We conclude that cellophane's interchangeability with the other
materials mentioned suffices to make it a part of this flexible
packaging material market.

															The Government stresses the fact that the variation in price
between cellophane and other materials demonstrates they are
noncompetitive. As these products are Page 351 U. S. 401 all flexible wrapping materials, it seems reasonable to
consider, as was done at the trial, their comparative cost to the
consumer in terms of square area. This can be seen in Finding 130, 351
U.S. 377 appc|>Appendix C. Findings as to price competition
are set out in the margin. [ Footnote 29 ] Cellophane costs two or three times as much,
surface measure, as its chief competitors for the flexible wrapping
market, glassine and grease-proof papers. Other forms of cellulose
wrappings and those from other chemical or mineral substances, with
the exception of aluminum foil, are more expensive. The uses of
these materials, as can be observed by Finding 283 in 351
U.S. 377 appa|>Appendix A, are largely to wrap small packages
for retail distribution. The wrapping is a relatively small
proportion of the entire cost of the article. [ Footnote 30 ] Different producers need different
qualities in wrappings, and their need may vary from time to time
as their products undergo change. But the necessity for flexible
wrappings is the central and unchanging demand. We cannot say that
these differences in cost gave du Pont monopoly power over prices
in view of the findings of fact on that subject. [ Footnote 31 ] Page 351 U. S. 402 It is the variable characteristics of the different flexible
wrappings and the energy and ability with which the manufacturers
push their wares that determine choice. A glance at "Modern
Packaging," a trade journal, will give, by its various
advertisements, examples of the competition among manufacturers for
the flexible packaging market. The trial judge visited the 1952
Annual Packaging Page 351 U. S. 403 Show at Atlantic City, with the consent of counsel. He observed
exhibits offered by "machinery manufacturers, converters, and
manufacturers of flexible packaging materials." He stated that
these personal observations confirmed his estimate of the
competition between cellophane and other packaging materials.
Finding 820. From this wide variety of evidence, the Court reached
the conclusion expressed in Finding 838:

															"The record establishes plain cellophane and moisture-proof
cellophane are each flexible packaging materials which are
functionally interchangeable with other flexible packaging
materials and sold at same time to same customers for same purpose
at competitive prices; there is no cellophane market distinct and
separate from the market for flexible packaging materials; the
market for flexible packaging materials is the relevant market for
determining nature and extent of duPont's market control; and
duPont has at all times competed with other cellophane producers
and manufacturers of other flexible packaging materials in all
aspects of its cellophane business."

															The facts above considered dispose also of any contention that
competitors have been excluded by du Pont from the packaging
material market. That market has many producers, and there is no
proof du Pont ever has possessed power to exclude any of them from
the rapidly expanding flexible packaging market. The Government
apparently concedes as much, for it states that

															"lack of power to inhibit entry into this so-called market
[ i.e., flexible packaging materials], comprising widely
disparate products, is no indicium of absence of power to exclude
competition in the manufacture and sale of cellophane."

															The record shows the multiplicity of competitors and the
financial strength of some with individual assets running to the
hundreds of millions. Findings 66-72. Indeed, the Page 351 U. S. 404 trial court found that du Pont could not exclude competitors
even from the manufacture of cellophane, Finding 727, an immaterial
matter if the market is flexible packaging material. Nor can we say
that du Pont's profits, while liberal (according to the Government
15.9% net after taxes on the 1937-1947 average), demonstrate the
existence of a monopoly without proof of lack of comparable profits
during those years in other prosperous industries. Cellophane was a
leader over 17%, in the flexible packaging materials market. There
is no showing that du Pont's rate of return was greater or less
than that of other producers of flexible packaging materials.
Finding 719.

															The "market" which one must study to determine when a producer
has monopoly power will vary with the part of commerce under
consideration. The tests are constant. That market is composed of
products that have reasonable interchangeability for the purposes
for which they are produced -- price, use and qualities considered.
While the application of the tests remains uncertain, it seems to
us that du Pont should not be found to monopolize cellophane when
that product has the competition and interchangeability with other
wrappings that this record shows.

															On the findings of the District Court, its judgment is Affirmed. MR. JUSTICE CLARK and MR. JUSTICE HARLAN took no part in the
consideration or decision of this case.

															[For concurring opinion of MR. JUSTICE FRANKFURTER, see
post, p. 351 U. S.
413 .]

															[For dissenting opinion of THE CHIEF JUSTICE, joined by MR.
JUSTICE BLACK and MR. JUSTICE DOUGLAS, see post, p. 351 U. S.
414 .] Page 351 U. S. 405 | 351
U.S. 377 appa| APPENDIX A VIII . RESULTS OF DU PONT'S COMPETITION WITH OTHER MATERIALS (Findings 279-292.) 279. During the period du Pont entered the flexible packaging
business, and since its introduction of moisture-proof cellophane,
sales of cellophane have increased. Total volume of flexible
packaging materials used in the United States has also increased.
Du Pont's relative percentage of the packaging business has grown
as a result of its research, price, sales and capacity policies,
but du Pont cellophane even in uses where it has competed has not
attained the bulk of the business, due to competition of other
flexible packaging materials.

															280. Of the production and imports of flexible packaging
materials in 1949 measured in wrapping surface, du Pont cellophane
accounted for less than 20% of flexible packaging materials
consumed in the United States in that year. The figures on this
are: Thousands of Square Yards Glassine, Grease-proof and Vegetable Parchment

															Papers . . . . . . . . . . . . . . . . . . . 3,125,826

															Waxing Papers (18 Pounds and over). . . . . . 4,614,685

															Sulphite Bag and Wrapping Papers . . . . . . . 1,788,615

															Aluminum Foil. . . . . . . . . . . . . . . . . 1,317,807

															Cellophane . . . . . . . . . . . . . . . . . . 3,366,068

															Cellulose Acetate. . . . . . . . . . . . . . . 133,982

															Pliofilm, Polyethylene, Saran and Cry-O-Rap. . 373,871

															----------

															Total . . . . . . . . . . . . . . . . . 14,720,854

															==========

															Total du Pont Cellophane Production. . . . . . 2,629,747

															Du Pont Cellophane Per Cent of Total United

															States Production and Imports of These

															Flexible Packaging Materials . . . . . . . . 17.9% Page 351 U. S. 406 281. Eighty percent of cellophane made by du Pont is sold for
packaging in the food industry. Of this quantity, 80% is sold for
packaging baked goods, meat, candy, crackers and biscuits, frozen
foods, fresh vegetables and produce, potato chips, and "snacks,"
such as peanut butter sandwiches, popcorn, etc. A small amount is
sold for wrapping of textiles and paper products, etc. Largest
nonfood use of cellophane is the overwrapping of cigarette
packages.

															The breakdown of du Pont cellophane sales for the year 1949
was: Use Sales Percent of (M pounds) Total Sales TOBACCO

															Cigarettes . . . . . . . . 20,584 11.6

															Cigars . . . . . . . . . . 3,195 1.8

															Other Tobacco. . . . . . . 1,657 0.9

															------- ----

															Total . . . . . . . . . 25,436 14.3

															FOOD PRODUCTS

															Candy & Gum. . . . . . . . 17,054 9.6

															Bread & Cake . . . . . . . 40,081 22.5

															Crackers & Biscuits. . . . 12,614 7.1

															Meat . . . . . . . . . . . 11,596 6.5

															Noodles & Macaroni . . . . 2,602 1.5

															Tea & Coffee . . . . . . . 1,380 0.8

															Cereals. . . . . . . . . . 2,487 1.4

															Frozen Foods . . . . . . . 5,234 2.9

															Dried Fruit. . . . . . . . 333 0.2

															Nuts . . . . . . . . . . . 2,946 1.7

															Popcorn & Potato Chips . . 6,929 3.9

															Dairy Products . . . . . . 3,808 2.1

															Fresh Produce. . . . . . . 4,564 2.6

															Unclassified Foods . . . . 8,750 4.9

															------- ----

															Total . . . . . . . . . 120,478 67.7 Page 351 U. S. 407 MISCELLANEOUS

															Hosiery. . . . . . . . . . 1,370 0.7

															Textiles . . . . . . . . . 3,141 1.8

															Drugs. . . . . . . . . . . 1,031 0.6

															Rubber . . . . . . . . . . 317 0.2

															Paper. . . . . . . . . . . 2,736 1.5

															Unclassified . . . . . . . 18,602 10.5

															------- ----

															Total . . . . . . . . . 27,197 15.3

															Domestic Total. . . . . . . . 173,011 97.3

															Export. . . . . . . . . . . . 4,820 2.7

															Grand Total . . . . . . . . . 177,831 100.0

															282. Sales of cellophane by du Pont in 1951, by principal uses,
were approximately as follows: Pounds White bread . . . . . . . between 8 and 9,000,000

															Specialty breads. . . . . . . . . 15,700,000

															Cake and other baked sweet goods. 22,000,000

															Meat. . . . . . . . . . . . . . . 19,000,000

															Candy (including chewing gum) . . 20,000,000

															Crackers and biscuits . . . . . . 17,000,000

															Frozen foods. . . . . . . . . . . 5,800,000

															Cigarettes. . . . . . . . . . . . 23,000,000

															283. 1949 sales of 19 major representative converters whose
business covered a substantial segment of the total converting of
flexible packaging materials for that year showed the following as
to their sales of flexible packaging materials, classified by end
use: End Use Quantity Percent (Millions of Total BAKERY PRODUCTS sq. in.) End Use Cellophane . . . . . . . . . 109,670 6.8

															Foil . . . . . . . . . . . . 2,652 .2

															Glassine . . . . . . . . . . 72,216 4.4

															Papers . . . . . . . . . . . 1,440,413 88.6

															Films. . . . . . . . . . . . 215 .0

															--------- -----

															1,625,166 100.0 Page 351 U. S. 408 CANDY

															Cellophane . . . . . . . . . 134,280 24.4

															Foil . . . . . . . . . . . . 178,967 32.5

															Glassine . . . . . . . . . . 117,634 21.4

															Papers . . . . . . . . . . . 119,102 21.6

															Films. . . . . . . . . . . . 484 .1

															--------- -----

															550,467 100.0

															SNACKS

															Cellophane . . . . . . . . . 61,250 31.9

															Foil . . . . . . . . . . . . 1,571 .8

															Glassine . . . . . . . . . . 120,556 62.8

															Papers . . . . . . . . . . . 8,439 4.4

															Films. . . . . . . . . . . . 79 .1

															--------- -----

															191,895 100.0

															MEAT AND POULTRY

															Cellophane . . . . . . . . . 59,106 34.9

															Foil . . . . . . . . . . . . 88 .1

															Glassine . . . . . . . . . . 4,524 2.7

															Papers . . . . . . . . . . . 97,255 57.5

															Films. . . . . . . . . . . . 8,173 4.8

															--------- -----

															169,056 100.0

															CRACKERS AND BISCUITS

															Cellophane . . . . . . . . . 29,960 26.6

															Foil . . . . . . . . . . . . 192 .2

															Glassine . . . . . . . . . . 11,253 10.0

															Papers . . . . . . . . . . . 71,147 63.2

															Films. . . . . . . . . . . . 8 .0

															--------- -----

															112,560 100.0

															FRESH PRODUCE

															Cellophane . . . . . . . . . 52,828 47.2

															Foil . . . . . . . . . . . . 43 .1

															Glassine . . . . . . . . . . 96 .1

															Papers . . . . . . . . . . . 51,035 45.6

															Films. . . . . . . . . . . . 7,867 7.0

															--------- -----

															111,869 100.0 Page 351 U. S. 409 FROZEN FOOD EXCLUDING DAIRY

															PRODUCTS

															Cellophane . . . . . . . . . 31,684 33.6

															Foil . . . . . . . . . . . . 629 .7

															Glassine . . . . . . . . . . 1,943 2.1

															Papers . . . . . . . . . . . 56,925 60.3

															Films. . . . . . . . . . . . 3,154 3.3

															--------- -----

															94,335 100.0

															284. About 96% of packaged white bread produced in the United
States is wrapped in waxed paper or glassine, and about 6% in
cellophane. The cellophane figure includes sales by all U.S.
producers.

															285. Forty-eight percent of specialty breads are wrapped in du
Pont cellophane, the remainder in other cellophane or other
materials. Most of this balance is wrapped in waxed paper and
glassine.

															286. Approximately 45% of cake and baked sweet goods packaged by
wholesale bakers is wrapped in du Pont cellophane. The balance is
wrapped in other cellophane or in waxed paper or glassine.

															287. Between 25% and 35% of packaged candy units sold in the
United States are wrapped in du Pont cellophane.

															288. Of sponge and sweet crackers and biscuits combined,
approximately 25 to 30% of the packaged units produced in 1951 were
wrapped in du Pont cellophane.

															289. Du Pont cellophane at the present time is used on
approximately 20 to 30% of packaged retail units of frozen foods.
The remainder use waxed paper, waxed glassine, polyethylene,
Pliofilm, Cry-O-Vac, or vegetable parchment.

															290. Approximately 20 to 30% of packages of potato chips and
other snacks are wrapped in du Pont cellophane. Most of the
remainder are packaged in glassine and other flexible wraps. Page 351 U. S. 410 291. Approximately 4 to 6% of the packaged units of cereal are
wrapped in du Pont cellophane. The principal flexible packaging
materials used are waxed paper and glassine.

															292. Du Pont cellophane is used as an outer wrap on the
paper-foil packages for approximately 75 to 80% of cigarettes sold
in the United States. Sales for this use represent about 11.6% of
du Pont's total sales of cellophane. Page 351 U. S. 411 | 351
U.S. 377 appb| APPENDIX B 59. The accompanying Table compares, descriptively, physical of
cellophane and other flexible packaging materials:

															bwm:

															PHYSICAL PROPERTIES

--------------------------------------------------------------------------------------------------------------------------------------------------------------------

															Water Wrapping

															Tear Absorption Dimens. Resistance Machine

															Packaging Heat Print- Strength Bursting in 24 hrs. Moisture
Permeability Change With to Grease Running

															Materials Sealability ability Clarity (Elmendorf) Strength
Immersion Permeability to Gases (2) Humid. Diff. & Oils
Qualities

--------------------------------------------------------------------------------------------------------------------------------------------------------------------

															Cellophane (plain) Yes (if Yes Highly Transparent Low High High
High Very Low Large Excellent O.K.

															coated)

															Cellophane Yes (if Yes Highly Transparent Low High High
Low-Medium Very Low Large Excellent O.K.

															(Moisture-proof) coated)

															Plain grease-proof No Yes Opaque Good Low High High Medium
Moderate Good O.K.

															paper

															Plain Glassine No Yes Commercially Trans- Good Low High High Low
Moderate Good O.K.

															parent to Opaque

															Lacquered Glassine Yes Yes Commercially Trans- Good Low Low
Low-Medium Low Moderate Good O.K.

															parent to Trans-

															lucent

															Waxed Glassine Yes (1) Commercially Trans- Good Low Low Low Low
Moderate Good O.K.

															parent to Trans-

															lucent

															Vegetable Parchment No Yes Tends to be Opaque Good Good High
High Low Moderate Good O.K.

															Waxed Paper Yes (1) Commercially Trans- High Good Low Low-Medium
High Moderate None O.K.

															(18 lbs. or over) parent

															Aluminum Foil No Yes Opaque Low Low Nil Very Low Very Low None
Excellent O.K.

															Aluminum Foil Yes Yes Opaque Low Low Nil Nearly Nil Very Low
None Excellent O.K.

															(Heat Sealing)

															Cellulose Acetate Yes Yes Highly Transparent Low High Low High
Variable Very Small Excellent O.K.

															Pliofilm (rubber Yes (3) Yes (3) Highly Transparent Medium High
Low Medium Low Very Small Excellent Good (3)

															hydrochloride) with Slight Haze

															Saran (Vinylidene Yes (3) Yes (3) Highly Transparent High High
Low Very Low Very Low None Excellent Poor (3)

															Chloride)

															Polyethylene Yes (3) Yes (3) Transparent with High High Low
Medium High None (4) Poor (3)

															Slight Haze

															Cry-O-Rap Yes (3) Yes (3) Transparent with High High Low Medium
Low None Excellent Poor (3)

															Slight Haze

															Sulphite (high fin- No Yes Opaque High Medium High Very High
High Moderate None O.K.

															ish wrapper and

															label paper)

--------------------------------------------------------------------------------------------------------------------------------------------------------------------

															ewm:

															References:

															(1) Normally printed before waxing.

															(2) The permeability to gases can vary greatly depending upon
the gas and the humidity conditions. The levels indicated in this
chart apply particularly to flavor type volatiles as found in many
food products.

															(3) Plastic films may require special heat sealing techniques,
and printing processes or special machines.

															(4) Not affected by greases but penetrated by some oils.

															(5) The information on this chart is based upon the generally
accepted properties of the materials listed; however, materials
produced by different processes, formulations, coatings, raw
materials, surface treatments, and thicknesses can show
considerable variation from the properties indicated. Page 351 U. S. 412 | 351
U.S. 377 appc| APPENDIX C (Finding of Fact 130) 1949 average wholesale prices of flexible packaging materials in
the United States were:

															Price per Price Yield

															Packaging Material 1,000 sq. in. per lb. per lb.

															Saran (cents) (cents) (sq. in.)

															100 Gauge #517 . . . . . . 6.1 99.0 16,300

															Cellulose Acetate

															.00088". . . . . . . . . . 3.3 82.0 25,000

															Polyethylene

															.002"-18" Flat Width . . . 5.4 81.0 15,000

															Pliofilm

															120 Gauge N 2. . . . . . . 3.8 80.8 21,000

															Aluminum Foil

															.00035". . . . . . . . . . 1.8 52.2 29,200

															Moisture-proof Cellophane

															300 MST-51 . . . . . . . . 2.3 47.8 21,000

															Plain Cellophane

															300 PT . . . . . . . . . . 2.1 44.8 21,500

															Vegetable Parchment

															27#. . . . . . . . . . . . 1.4 22.3 16,000

															Bleached Glassine

															25#. . . . . . . . . . . . 1.0 17.8 17,280

															Bleached Grease-proof

															25#. . . . . . . . . . . . .9 15.8 17,280

															Plain Waxed Sulphite

															25# Self-Sealing . . . . . 1.1 15.2 14,400

															Plain Waxed Sulphite

															25# Coated Opaque. . . . . .7 11.9 17,280

															Cry-O-Rap . . . . . . . . . . Sold only in converted form.

															No unconverted quotations. Page 351 U. S. 413 [ Footnote 1 ] United States v. E. I. du Pont de Nemours &
Co., 118 F.
Supp. 41 . The opinion occupies 192 pages of the volume. The
Findings of Fact, 854 in number, cover 140 pages. The citations to
findings in our opinion, where references are not made to our
appendices ( post, p. 351 U. S. 405 et seq. ), are to the Federal Supplement. We noted probable
jurisdiction October 14, 1954, 348 U.S. 806.

															[ Footnote 2 ]

															"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. . .
."

															15 U.S.C.1952 ed. Supp. III, § 1.

															"Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a misdemeanor, and, on
conviction thereof, shall be punished by fine not exceeding fifty
thousand dollars, or by imprisonment not exceeding one year, or by
both said punishments, in the discretion of the court." Id., § 2.

															"The several district courts of the United States are invested
with jurisdiction to prevent and restrain violations of sections
1-7 of this title. . . ."

															15 U.S.C. § 4.

															[ Footnote 3 ] See also United States v. Yellow Cab Co., 338 U.
S. 338 ; United States v. Oregon State Medical
Soc., 343 U. S. 326 , 343 U. S. 339 ; United Shoe Machinery Corp. v. United States, 347 U.
S. 521 .

															[ Footnote 4 ]

															Initially, the proper cellulose content of the viscose must be
determined. This viscous fluid is ripened according to a "ripening
index," a test whereby viscose is put in a salt solution and shaken
to bring out the coagulation point. The requisite strength of this
solution varies according to the ripening time. Fourteen additional
baths follow the first coagulating bath. The most advantageous
ripening time, temperature, size, composition, and duration of each
of the baths were all determined by the trials and errors of
Brandenberger and La Cellophane, the corporation he directed. It
was estimated that, in 1923, it would have taken four or five years
of experimentation by a new producer of cellophane to attain this
production technique.

															[ Footnote 5 ]

															Substantially identical letters were sent in this form:

															"Question has been raised within our organization as to the
existence of territorial limitations under our agreements with your
company relating to regenerated cellulose film. In order that our
position may be clearly and frankly established, we desire to
record with you our conclusions."

															"Based upon the provisions of the contracts, and in the light of
legal developments in this country, we construe these agreements as
imposing no restrictions upon the sale of regenerated cellulose
film in any country in which the public is free to sell. Thus, we
regard each party as free to export such film to any country in the
world, subject only to such limitations as lawfully may be based
upon the unauthorized use of patented inventions or trademarks in
the country of manufacture, or in the country of use or sale."

															"This letter is not intended to modify any of the provisions of
our agreements involving the exchange of technical
information."

															R. 3323.

															[ Footnote 6 ]

															Further information from the findings as to competition will be
found in Findings 150-278.

															[ Footnote 7 ]

															This was set forth and defined in Standard Oil Co. v. United
States, 221 U. S. 1 , 221 U. S. 58 -62.
It was based on the generality of §§ 1 and 2 of the Sherman Act,
which were said to be "broad enough to embrace every conceivable
contract or combination which could be made concerning trade or
commerce" and therefore required a "standard." The standard of
reason, drawn from the common law, was adopted. See Adams,
The "Rule of Reason," 63 Yale L.J. 348; and Oppenheim, Federal
Antitrust Legislation, 50 Mich.L.Rev. at 1156, notes 11 and 13.

															[ Footnote 8 ]

															221 U.S. at 221 U. S. 86 et seq. [ Footnote 9 ] United States v. Columbia Steel Co., 334 U.
S. 495 , 334 U. S. 529 ; Times-Picayune Pub. Co. v. United States, 345 U.
S. 594 , 345 U. S.
614 -615.

															[ Footnote 10 ] See United States v. Trenton Potteries Co., 273 U. S. 392 ; American Tobacco Co. v. United States, 328 U.
S. 781 , 328 U. S. 813 ; Timken Roller Bearing Co. v. United States, 341 U.
S. 593 .

															[ Footnote 11 ] Cf. Oppenheim, Federal Antitrust Legislation, 50
Mich.L.Rev. 1139, 1151-1152; Adams, The "Rule of Reason", 63 Yale
L.J. 348; and The Schwartz Dissent, 1 Antitrust Bulletin 37,
47.

															[ Footnote 12 ] United States v. Columbia Steel Co., 334 U.
S. 495 , 334 U. S.
526 .

															[ Footnote 13 ]

															Final Report, Investigation of Concentration of Economic Power,
S.Doc. No. 35, 77th Cong., 1st Sess.: Monograph No. 38 of that
Investigation, Handler, A Study of the Construction and Enforcement
of the Federal Antitrust Laws, 76th Cong., 3d Sess., Effective
Competition, Report to the Secretary of Commerce, Charles Sawyer,
by his Business Advisory Council, December 18, 1952; Report of the
Attorney General's National Committee to Study the Antitrust Laws,
March 31, 1955; Oppenheim, Federal Antitrust Legislation, 50
Mich.L.Rev. 1139; Kahn, A Legal and Economic Appraisal of the "New"
Sherman and Clayton Acts, 63 Yale L.J. 293; Adams, The "Rule of
Reason," 63 Yale L.J. 348; Rostow, Monopoly Under the Sherman Act:
Power or Purpose? 43 Ill.L.Rev. 745.

															[ Footnote 14 ]

															Numerous Acts contain specific exemptions from the operation of
the antitrust laws: Clayton Act, 15 U.S.C. § 17 (1946) (all labor
organizations); McCarran-Ferguson Act, 15 U.S.C. § 1013 (1952)
(insurance companies); Webb-Pomerene Act, 15 U.S.C. § 62 (1946)
(limited exemption for foreign trade associations); Capper-Volstead
Act, 7 U.S.C. §§ 291, 292 (1927) (farm cooperatives); Interstate
Commerce Act, 49 U.S.C. § 5(11) (1952) (carriers participating in
an approved transaction); Civil Aeronautics Act, 49 U.S.C. § 494
(1952) (exemption for acts ordered by the CAB).

															Market entry is carefully regulated in some of the country's
largest businesses: Natural Gas Act, 15 U.S.C. § 717f (natural gas
companies); Federal Communications Act, 47 U.S.C. § 307(a) (1952)
(limits new stations); Civil Aeronautics Act, 49 U.S.C. § 481(d)
(1951) (limits market entry); Motor Carrier Act, 49 U.S.C. § 307
(1952) (motor vehicle common carriers). Price fixing in some areas
is authorized by the legislature: Reed-Bulwinkle Act, 49 U.S.C. §
5b (1952) (railroad rate agreements); Civil Aeronautics Act, 49
U.S.C. § 492 (1952) (approval of transportation rate agreements);
Miller-Tydings Act, 15 U.S.C. § 1 (1946) (resale price
maintenance); Shipping Act, 46 U.S.C. § 814 (1952) (water carriers'
rate agreements).

															Combination of strong competitors in some major instances has
been encouraged: Federal Communications Act, 47 U.S.C. §§ 221(a),
222(c)(1) (1952); Federal Power Act, 16 U.S.C. § 824a(b), (1952);
Interstate Commerce Act, 49 U.S.C. § 5b (1952) (all common
carriers).

															That competition is not always to be encourage is made evident
by noting that the farmers have been actually barred from
production in most major crops and some groups of workers are told
that they may not, in production of commodities for commerce, work
for less than a minimum wage. Fair Labor Standards Act, 29 U.S.C. §
206 (1952). See Report of Attorney General's National Committee to
Study the Antitrust Laws, pp. 261-313, for discussion of
"Exemptions From Antitrust Coverage."

															[ Footnote 15 ]

															21 Cong.Rec. 3151:

															"Mr. KENNA. Mr. President, I have no disposition to delay a vote
on the bill, but I would like to ask, with his permission, the
Senator from Vermont a question touching the second section:"

															" Every person who shall monopolize, or attempt to monopolize,
or combine or conspire with any other person or persons, to
monopolize any part of the trade, etc."

															"Is it intended by the committee, as the section seems to
indicate, that if an individual engaged in trade between States or
between States and Territories, or between States or Territories
and the District of Columbia, or between a State and a foreign
country, by his own skill and energy, by the propriety of his
conduct generally, shall pursue his calling in such a way as to
monopolize a trade, his action shall be a crime under this proposed
act? To make myself understood, if I am not clear --"

															"Mr. EDMUNDS. I think I understand the Senator."

															"Mr. KENNA. Suppose a citizen of Kentucky is dealing in
shorthorn cattle and, by virtue of his superior skill in that
particular product, it turns out that he is the only one in the
United States to whom an order comes from Mexico for cattle of that
stock for a considerable period, so that he is conceded to have a
monopoly of that trade with Mexico; is it intended by the committee
that the bill shall make that man a culprit?"

															"Mr. EDMUNDS. It is not intended by it, and the bill does not do
it. Anybody who known the meaning of the word 'monopoly,' as the
courts apply it, would not apply it to such a person at all, and I
am sure my friend must understand that." Id. at 3152:

															"Mr. HOAR. I put in the committee, if I may be permitted to say
so (I suppose there is no impropriety in it), the precise question
which has been put by the Senator from West Virginia, and I had
that precise difficulty in the first place with this bill, but I
was answered, and I think all the other members of the committee
agreed in the answer, that 'monopoly' is a technical term known to
the common law, and that it signifies -- I do not mean to say that
they stated what the signification was, but I became satisfied that
they were right and that the word 'monopoly' is a merely technical
term which has a clear and legal signification, and it is this: it
is the sole engrossing to a man's self by means which prevent other
men from engaging in fair competition with him."

															"Of course, a monopoly granted by the King was a direct
inhibition of all other persons to engage in that business or
calling or to acquire that particular article, except the man who
had a monopoly granted him by the sovereign power. I suppose,
therefore, that the courts of the United States would say in the
case put by the Senator from West Virginia that a man who, merely
by superior skill and intelligence, a breeder of horses or raiser
of cattle, or manufacturer or artisan of any kind, got the whole
business because nobody could do it as well as he could was not a
monopolist, but that it involved something like the use of means
which made it impossible for other persons to engage in fair
competition, like the engrossing, the buying up of all other
persons engaged in the same business."

															[ Footnote 16 ] See p. 351 U. S.
381 .

															[ Footnote 17 ] Compare Standard Oil Co. v. United States, 221 U. S.
1 , 221 U. S. 74 , and American Tobacco Co. v. United States, 328 U.
S. 781 , 328 U. S.
813 -814; United States v. Socony-Vacuum Oil
Co., 310 U. S. 150 , 310 U. S. 226 ,
last paragraph, note 59.

															[ Footnote 18 ] See American Tobacco Co. v. United States, 328 U.
S. 781 , 328 U. S. 811 ; Apex Hosiery Co. v. Leader, 310 U.
S. 469 , 310 U. S. 501 ; Standard Oil Co. v. United States, 221 U. S.
1 , 221 U. S. 58 . See Stocking and Mueller, The Cellophane Case and the New
Competition, XLV American Economic Rev. 29, 54; Cole, An Appraisal
of Economic Change, XLIV American Economic Rev. 35, 61; Wilcox,
TNEC Monograph No. 21, pp. 9, 11; The Schwartz Dissent, 1 Antitrust
Bulletin at 39; Report of Attorney General's National Committee to
Study the Antitrust Laws, p. 43; Neal, The Clayton Act and the Trans-America Case, 5 Stan.L.Rev. 179, 205, 213.

															[ Footnote 19 ] United States v. Columbia Steel Co., 334 U.
S. 495 , 334 U. S. 525 ; United States v. Paramount Pictures, 334 U.
S. 131 , 334 U. S. 173 ; Apex Hosiery Co. v. Leader, 310 U.
S. 469 , 310 U. S. 501 ; cf. Rostow, 43 Ill.L.Rev. 745, 753-763; Oppenheim, Federal
Antitrust Legislation, 50 Mich.L.Rev. 1139, 1193.

															[ Footnote 20 ] See Chamberlin, Theory of Monopolistic Competition, c.
IV.

															[ Footnote 21 ] See United States v. Columbia Steel Co., 334 U.
S. 495 , 334 U. S. 527 ; Times-Picayune Pub. Co. v. United States, 345 U.
S. 594 , 345 U.S.
610 ; Standard Oil Co. v. United States, 283 U. S. 163 , 283 U. S.
179 .

															[ Footnote 22 ] Maple Flooring Assn. v. United States, 268 U.
S. 563 , 268 U. S.
579 :

															"It should be said at the outset that, in considering the
application of the rule of decision in these cases to the situation
presented by this record, it should be remembered that this Court
has often announced that each case arising under the Sherman Act
must be determined upon the particular facts disclosed by the
record, and that the opinions in those cases must be read in the
light of their facts and of a clear recognition of the essential
differences in the facts of those cases, and in the facts of any
new case to which the rule of earlier decisions is to be
applied."

															[ Footnote 23 ]

															The Government notes that the prohibitions of § 2 of the Sherman
Act have often been extended to producers of single products, and
to businesses of limited scope. But the cases to which the
Government refers us were not concerned with the problem that is
now before the Court. In Story Parchment Co. v. Paterson
Parchment Paper Co., 282 U. S. 555 , a
conspiracy to monopolize trade in vegetable parchment was held to
be a violation of § 2. Parchment paper is obviously no larger a
part of commerce than cellophane. Recovery, however, was based on
proven allegations of combination and conspiracy to monopolize, and
the scope of the market was not in issue. 282 U.S. at 282 U. S. 560 .
Similarly, Indiana Farmer's Guide Pub. Co. v. Prairie Farmer
Publishing Co., 293 U. S. 268 ,
ruled that a combination or conspiracy for the purpose of
monopolizing the farm paper business in the north central part of
the Nation would be illegal by reason of the second section of the
Sherman Act. Lorain Journal Co. v. United States, 342 U. S. 143 , a
case not cited by the Government, was concerned with even a smaller
geographical area (dissemination of news in a community and
surrounding territory). But the Court held only that defendant had
attempted to monopolize -- not that he had in fact monopolized.
Also, this Court found in United States v. Columbia Steel
Co., 334 U. S. 495 ,
that the "relevant competitive market" for determining whether
there had been an unreasonable restraint of trade (or an attempt to
monopolize) was the market for "rolled steel" products in an
11-state area. Women's dresses of "original design," Fashion
Originators' Guild of America v. Federal Trade Comm'n, 312 U. S. 457 ;
"first run" motion pictures, United States v. Paramount
Pictures, 334 U. S. 131 ; the
news services of one news agency, United States v. Associated
Press, 52 F. Supp.
362 , aff'd, 326 U. S. 326 U.S.
1, and newspaper advertising, as distinguished from other means of
news dissemination, Times-Picayune Pub. Co. v. United
States, 345 U. S. 594 ,
have all been designated as parts of commerce. All four were
concerned only with the question of whether there had been an
attempt to monopolize. United States v. Aluminum Co. of
America, 148 F.2d 416, did involve the question of
monopolization. Judge Hand found that the relevant market for
measuring Alcoa's power was the market for "virgin" aluminum; he
refused to consider the close competition offered by "secondary"
(used) aluminum. The reason for the narrow definition was that
Alcoa's control over virgin aluminum permitted it to regulate the
supply of used aluminum even though the latter should be actually
sold by a competitor. Consequently, the case is not particularly
helpful in the problem of market definition now before the
Court.

															[ Footnote 24 ]

															"62. . . . Grease-proof paper is made by beating wood pulp in a
vat filled with water until the fibers become saturated and
gelatinous in texture. Resulting product is translucent, and
resistant to oil and grease."

															"Glassine is produced by finishing grease-proof paper between
highly polished metal rollers under heat and at pressure. This
process develops the transparency and surface gloss with are
characteristic of glassine. It is grease-proof, and can be sealed
by heat, if coated. It is made moisture-proof by coating and with
appropriate lacquers or waxes, and may be printed."

															[ Footnote 25 ]

															"63. There are respects in which other flexible packaging
materials are as satisfactory as cellophane:"

															" * * * *" " Glassine " "Glassine is, in some types, about 90% transparent, so printing
is legible through it."

															"Glassine affords low-cost transparency."

															"Moisture protection afforded by waxed or lacquered glassine is
as good as that or moisture-proof cellophane."

															"Glassine has greater resistance to tearing and breakage than
cellophane."

															"Glassine runs on packaging machinery with ease equal to that of
cellophane."

															"Glassine can be printed faster than cellophane, and can be run
faster than moisture-proof cellophane on bag machines."

															"Glassine has greater resistance than cellophane to
rancidity-inducing ultraviolet rays."

															"Glassine has dimensional stability superior to cellophane."

															"Glassine is more durable in cold weather than cellophane."

															"Printed glassine can be sold against cellophane on the basis of
appearance."

															"Glassine may be more easily laminated than cellophane."

															"Glassine is cheaper than cellophane in some types, comparable
in others."

															[ Footnote 26 ]

															Stocking and Mueller, The Cellophane Case, XLV Amer. Economic
Rev. 29, 48-49.

															[ Footnote 27 ]

															There are eighteen classifications: White Bread; Specialty
Breads; Cake and Sweet Goods; Meat; Candy; Crackers and Biscuits;
Frozen Foods; Potato Chips, Pop Corn and Snacks; Cereals; Fresh
Produce; Paper Goods and Textiles; Cigarettes; Butter; Chewing Gum;
Other Food Products; Other Tobacco Products; Cheese;
Oleomargarine.

															[ Footnote 28 ]

															Scitovsky, Welfare and Competition (1951) 396; Bain, Pricing,
Distribution, and Employment (1953 rev.ed.) 52.

															[ Footnote 29 ]

															"132. The price of cellophane is today an obstacle to its sales
in competition with other flexible packaging materials."

															"133. Cellophane has always been higher priced than the two
largest selling flexible packaging materials, wax paper and
glassine, and this has represented a disadvantage to sales of
cellophane."

															"134. DuPont considered as a factor in the determination of its
prices the prices of waxed paper, glassine, grease-proof, vegetable
parchment, and other flexible packaging materials."

															"135. DuPont, in reducing its prices, intended to narrow price
differential between cellophane and packaging papers, particularly
glassine and waxed paper. The objective of this effort has been to
increase the use of cellophane. Each price reduction was intended
to open up new uses for cellophane, and to attract new customers
who had not used cellophane because of its price."

															[ Footnote 30 ] See, e.g., R. 4846.

															[ Footnote 31 ]

															"140. Some users are sensitive to the cost of flexible packaging
materials; others are not. Users to whom cost is important include
substantial business: for example, General Foods, Armour, Curtiss
Candy Co., and smaller users in the bread industry, cracker
industry, and frozen food industry. These customers are unwilling
to use more cellophane, because of its relatively high price, would
use more if the price were reduced, and have increased their use as
the price of cellophane has been reduced."

															"141. The cost factor slips accounts away from cellophane. This
hits at the precarious users, whose profit margins on their
products are low, and has been put in motion by competitive
developments in the user's trade. Examples include the losses of
business to glassine in candy bar wraps in the 30's, frozen food
business to waxed paper in the late 40's, and recent losses to
glassine in cracker packaging."

															"142. The price of cellophane was reduced to expand the market
for cellophane. DuPont did not reduce prices for cellophane with
intent of monopolizing manufacture or with intent of suppressing
competitors."

															"143. DuPont reduced cellophane prices to enable sales to be
made for new uses from which higher prices had excluded cellophane,
and to expand sales. Reductions were made as sales volume and
market conditions warranted. In determining price reductions,
DuPont considered relationship between its manufacturing costs and
proposed prices, possible additional volume that might be gained by
the price reduction, effect of price reduction upon the return
duPont would obtain on its investment. It considered the effect its
lowered price might have on the manufacture by others, but this
possible result of a price reduction was never a motive for the
reduction."

															"144. DuPont never lowered cellophane prices below cost, and
never dropped cellophane prices temporarily to gain a competitive
advantage."

															"145. As duPont's manufacturing costs declined, 1924 to 1935,
duPont reduced prices for cellophane. When costs of raw materials
increased subsequent to 1935, it postponed reductions until 1938
and 1939. Subsequent increases in cost of raw material and labor
brought about price increases after 1947."

															MR. JUSTICE FRANKFURTER, concurring.

															I concur in the judgment of the Court and in so much of MR.
JUSTICE REED's opinion as supports the conclusion that cellophane
did not, by itself, constitute a closed market, but was a part of
the relevant market for flexible packaging materials.

															MR. JUSTICE REED has pithily defined the conflicting claims in
this case.

															"The charge was monopolization of cellophane. The defense, that
cellophane was merely a part of the relevant market for flexible
packaging materials."

															Since this defense is sustained, the judgment below must be
affirmed, and it becomes unnecessary to consider whether du Pont's
power over trade in cellophane would, had the defense failed, come
within the prohibition of "monopolizing" under § 2 of the Sherman
Act. Needless disquisition on the difficult subject of single-firm
monopoly should be avoided, since the case may be disposed of
without consideration of this problem.

															The boundary between the course of events by which a business
may reach a powerful position in an industry without offending the
outlawry of "monopolizing" under § 2 of the Sherman Act and the
course of events which brings the attainment of that result within
the condemnation of that section cannot be established by general
phrases. It must be determined with reference to specific facts
upon considerations analogous to those by which § 1 of the Sherman
Act is applied. These were illuminatingly stated by Mr. Justice
Brandeis for the Court:

															"The true test of legality is whether the restraint imposed is
such as merely regulates, and perhaps thereby promotes,
competition, or whether it is such as may suppress, or even
destroy, competition. To determine that question, the court must
ordinarily consider the facts peculiar to the business to which Page 351 U. S. 414 the restraint is applied; its condition before and after the
restraint was imposed; the nature of the restraint and its effect,
actual or probable. The history of the restraint, the evil believed
to exist, the reason for adopting the particular remedy, the the
purpose or end sought to be attained, are all relevant facts. . .
." Board of Trade of City of Chicago v. United States, 246 U. S. 231 , 246 U. S.
238 .

															Sections 1 and 2, of course, implicate different considerations.
But the so-called issued of fact and law that call for adjudication
in this legal territory are united, and intrinsically so, with
factors that entail social and economic judgment. Any consideration
of "monopoly" under the Sherman law can hardly escape judgment,
even if only implied, on social and economic issues. It had best be
withheld until a case inescapably calls for it.

															MR. CHIEF JUSTICE WARREN, with whom MR. JUSTICE BLACK and MR.
JUSTICE DOUGLAS join, dissenting.

															This case, like many under the Sherman Act, turns upon the
proper definition of the market. In defining the market in which du
Pont's economic power is to be measured, the majority virtually
emasculate § 2 of the Sherman Act. They admit that "cellophane
combines the desirable elements of transparency, strength and
cheapness more definitely than any of" a host of other packaging
materials. Yet they hold that all of those materials are so
indistinguishable from cellophane as to warrant their inclusion in
the market. We cannot agree that cellophane, in the language of Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , 345 U. S. 613 ,
is "the self-same product" as glassine, grease-proof and vegetable
parchment papers, waxed papers, sulphite papers, Page 351 U. S. 415 aluminum foil, cellulose acetate, and Pliofilm and other films.
[ Footnote 2/1 ]

															The majority opinion states that "[i]t will adequately
illustrate the similarity in characteristics of the various
products by noting here Finding 62 as to glassine." But Finding 62
merely states the respects in which the selected flexible packaging
materials are as satisfactory as cellophane; it does not compare
all the physical properties of cellophane and other materials. The
Table incorporated in Finding 59 does make such a comparison, and
enables us to note cellophane's unique combination of qualities
lacking among less expensive materials in varying degrees.
[ Footnote 2/2 ] A glance at this
Table reveals that cellophane has a high bursting strength, while
glassine's is low; that cellophane's permeability to gases is lower
than that of glassine; and that both its transparency and its
resistance to grease and oils are greater than glassine's. Page 351 U. S. 416 Similarly, we see that waxed paper's bursting strength is less
than cellophane's, and that it is highly permeable to gases, and
offers no resistance whatsoever to grease and oils. With respect to
the two other major products held to be close substitutes for
cellophane, Finding 59 makes the majority's market definition more
dubious. In contrast to cellophane, aluminum foil is actually
opaque and has a low bursting strength. And sulphite papers, in
addition to being opaque, are highly permeable to both moisture and
gases, have no resistance to grease and oils, have a lower bursting
strength than cellophane, and are not even heat sealable. Indeed,
the majority go further than placing cellophane in the same market
with such products. They also include the transparent films, which
are more expensive than cellophane. These bear even less
resemblance to the lower priced packaging materials than does
cellophane. The juxtaposition of one of these films, Cry-O-Rap,
with sulphite in the Table facilitates a comparison which shows
that Cry-O-Rap is markedly different and far superior.

															If the conduct of buyers indicated that glassine, waxed and
sulphite papers, and aluminum foil were actually "the self-same
products" as cellophane, the qualitative differences demonstrated
by the comparison of physical properties in Finding 59 would not be
conclusive. But the record provides convincing proof that
businessmen did not so regard these products. During the period
covered by the complaint (1923-1947) cellophane enjoyed phenomenal
growth. Du Pont's 1924 production was 361,249 pounds, which sold
for.$1,306,662. Its 1947 production was 133,502,858 pounds, which
sold for $55,339,626. Findings 297 and 337. Yet, throughout this
period, the price of cellophane was far greater than that of
glassine, waxed paper, or sulphite paper. Finding 136 states that,
in 1929, cellophane's price was seven times that of glassine, in
1934, four times, and in 1949 still more than twice Page 351 U. S. 417 glassine's price. Reference to DX-994, the graph upon which
Finding 136 is based, shows that cellophane had a similar price
relation to waxed paper, and that sulphite paper sold at even less
than glassine and waxed paper. We cannot believe that buyers,
practical businessmen, would have bought cellophane in increasing
amounts over a quarter of a century if close substitutes were
available at from one-seventh to one-half cellophane's price. That
they did so is testimony to cellophane's distinctiveness.

															The inference yielded by the conduct of cellophane buyers is
reinforced by the conduct of sellers other than du Pont. Finding
587 states that Sylvania, the only other cellophane producer,
absolutely and immediately followed every du Pont price change,
even dating back its price list to the effective date of du Pont's
change. Producers of glassine and waxed paper, on the other hand,
displayed apparent indifference to du Pont's repeated and
substantial price cuts. DX-994 shows that, from 1924 to 1932, du
Pont dropped the price of plain cellophane 84%, while the price of
glassine remained constant. [ Footnote
2/3 ] And during the period 1933-1946, the prices for glassine
and waxed paper actually increased in the face of a further 21%
decline in the price of cellophane. If "shifts of business" due to
"price sensitivity" had been substantial, glassine and waxed paper
producers who wanted to stay in business would have been compelled
by market forces to meet du Pont's price challenge, just as
Sylvania was. The majority correctly point out that:

															"An element for consideration as to cross-elasticity of demand
between products is the responsiveness of the sales of one product
to price changes of the other. If a slight decrease in the price of
cellophane causes a considerable number of customers of other
flexible wrappings to switch to cellophane, it would be an Page 351 U. S. 418 indication that a high cross-elasticity of demand exists between
them -- that the products compete in the same market."

															Surely there was more than "a slight decrease in the price of
cellophane" during the period covered by the complaint. That
producers of glassine and waxed paper remained dominant in the
flexible packaging materials market without meeting cellophane's
tremendous price cuts convinces us that cellophane was not in
effective competition with their products. [ Footnote 2/4 ]

															Certainly du Pont itself shared our view. From the first, du
Pont recognized that it need not concern itself with competition
from other packaging materials. For example, when du Pont was
contemplating entry into cellophane production, its Development
Department reported that glassine "is so inferior that it belongs
in an entirely different class, and has hardly to be considered as
a competitor of cellophane." [ Footnote
2/5 ] This was still du Pont's view in 1950, when its survey of
competitive prospects wholly omitted reference to glassine, waxed
paper, or sulphite paper, and stated that "[c]ompetition for du
Pont cellophane will come from competitive cellophane and from
non-cellophane films made by us or by others." [ Footnote 2/6 ]

															Du Pont's every action was directed toward maintaining dominance
over cellophane. Its 1923 agreements with La Cellophane, the French
concern which first produced commercial cellophane, gave du Pont
exclusive Page 351 U. S. 419 North and Central American rights to cellophane's technology,
manufacture and sale, and provided, without any limitation in time,
that all existing and future information pertaining to the
cellophane process be considered "secret and confidential," and be
held in an exclusive common pool. [ Footnote 2/7 ] In its subsequent agreements with foreign
licensees, du Pont was careful to preserve its continental market
inviolate. [ Footnote 2/8 ] In 1929,
while it was still the sole domestic producer of cellophane, du
Pont won its long struggle to raise the tariff from 25% to 60%, ad valorem, on cellophane imports, [ Footnote 2/9 ] substantially foreclosing foreign
competition. When Sylvania became the second American cellophane
producer the following year and du Pont filed suit claiming
infringement of its moisture-proof patents, they settled the suit
by entering into a cross-licensing agreement. Under this agreement,
du Pont obtained the right to exclude third persons from use of any
patentable moisture-proof invention made during the next 15 years
by the sole other domestic cellophane producer, and, by a
prohibitive royalty provision, it limited Sylvania's moisture-proof
production to approximately Page 351 U. S. 420 20% of the industry's moisture-proof sales. [ Footnote 2/10 ] The record shows that du Pont and
Sylvania were aware that, by settling the infringement suit, they
avoided the possibility that the courts might hold the patent
claims invalid, and thereby open cellophane manufacture to
additional competition. [ Footnote
2/11 ] If close substitutes for cellophane had been commercially
available, du Pont, an enlightened enterprise, would not have gone
to such lengths to control cellophane.

															As predicted by its 1923 market analysis, [ Footnote 2/12 ] du Pont's dominance in cellophane
proved enormously profitable from the outset. After only five years
of production, when du Pont bought out the minority stock interests
in its cellophane subsidiary, it had to pay more than fifteen times
the original price of the stock. [ Footnote 2/13 ] But such success was not limited to the
period of innovation, limited sales, and complete domestic
monopoly. A confidential du Pont report shows that, during the
period 1937-1947, despite great expansion of sales, du Pont's
"operative return" (before taxes) averaged 31%, while its average
"net return" (after deduction of taxes, bonuses, and fundamental
research expenditures) was 15.9%. [ Footnote 2/14 ] Such profits provide a powerful
incentive for the entry of competitors. [ Footnote 2/15 ] Page 351 U. S. 421 Yet from 1924 to 1951, only one new firm, Sylvania, was able to
begin cellophane production. And Sylvania could not have entered if
La Cellophane's secret process had not been stolen. [ Footnote 2/16 ] It is significant that,
for 15 years, Olin Industries, a substantial firm, was unsuccessful
in its attempt to produce cellophane, finally abandoning the
project in 1944 after having spent about $1,000,000. [ Footnote 2/17 ] When the Government
brought this suit, du Pont, "to reduce the hazard of being judged
to have a monopoly of the U.S. cellophane business," [ Footnote 2/18 ] decided to let Olin enter
the industry. Despite this demonstration of the control achieved by
du Pont through its exclusive dominion over the cellophane process,
the District Court found that du Pont could not exclude competitors
from the manufacture of cellophane. Finding 727. This finding is
"clearly erroneous." [ Footnote
2/19 ] The majority avoid Page 351 U. S. 422 passing upon Finding 727 by stating that it is "immaterial . . .
if the market is flexible packaging material." They do not appear
to disagree with our conclusion, however, since they concede that "
. . . it may be practically impossible for anyone to commence
manufacturing cellophane without full access to du Pont's
technique."

															The trial court found that

															"Du Pont has no power to set cellophane prices arbitrarily. If
prices for cellophane increase in relation to prices of other
flexible packaging materials, it will lose business to
manufacturers of such materials in varying amounts for each of du
Pont cellophane's major end uses."

															Finding 712. This further reveals its misconception of the
antitrust laws. A monopolist seeking to maximize profits cannot
raise prices "arbitrarily." Higher prices, of course, mean smaller
sales, but they also mean higher per-unit profit. Lower prices will
increase sales, but reduce per-unit profit. Within these limits, a
monopolist has a considerable degree of latitude in determining
which course to pursue in attempting to maximize profits. The trial
judge thought that, if du Pont raised its price, the market would
"penalize" it with smaller profits as well as lower sales.
[ Footnote 2/20 ] Du Pont proved
him wrong. When 1947 operating earnings dropped below 26% for the
first time in 10 years, it increased cellophane's price 7% and
boosted its earnings in 1948. Du Pont's division manager then
reported that,

															"If an operative return of 31% is considered inadequate, then an
upward revision in prices will be necessary to improve the return.
[ Footnote 2/21 ]"

															It is this latitude with respect to price, this broad power of
choice, that the antitrust Page 351 U. S. 423 laws forbid. [ Footnote 2/22 ]
Du Pont's independent pricing policy and the great profits
consistently yielded by that policy leave no room for doubt that it
had power to control the price of cellophane. The findings of fact
cited by the majority cannot affect this conclusion. [ Footnote 2/23 ] For they merely
demonstrate that, during the period covered by the complaint, du
Pont was a "good monopolist," i.e., that it did not engage
in predatory practices, and that it chose to maximize profits by
lowering price and expanding sales. Proof of enlightened exercise
of monopoly power certainly does not refute the existence of that
power.

															The majority opinion purports to reject the theory of
"inter-industry competition." Brick, steel, wood, cement, and
stone, it says, are "too different" to be placed in the same
market. But cellophane, glassine, wax papers, sulphite papers,
grease-proof and vegetable parchment papers, aluminum foil,
cellulose acetate, Pliofilm, and other films are not "too
different," the opinion concludes. T he majority approach would
apparently enable a monopolist of motion picture exhibition to
avoid Sherman Act consequences by showing that motion pictures
compete in substantial measure with legitimate theater, television,
radio, sporting events, and other forms of entertainment. Here,
too, "shifts of business" undoubtedly accompany fluctuations in
price, and "there are market alternatives that buyers may readily
use for their purposes." Yet, in United States v. Paramount
Pictures, 334 U. S. 131 ,
where the District Court had confined the relevant market to that
for nationwide movie exhibition, this Court remanded the case to
the District Court with directions to determine whether there was a
monopoly on the part of the five major distributors

															"in the first-run field for the entire Page 351 U. S. 424 country, in the first-run field in the 92 largest cities of the
country, or in the first-run field in separate localities."

															334 U.S. at 334 U. S. 172 .
Similarly, it is difficult to square the majority view with United States v. Aluminum Co. of America, 148 F.2d 416, a
landmark § 2 case. There, Judge Learned Hand, reversing a district
court, held that the close competition which "secondary" (used)
aluminum offered to "virgin" aluminum did not justify including the
former within the relevant market for measuring Alcoa's economic
power. Against these and other precedents, which the Court's
opinion approves but does not follow, the formula of "reasonable
interchangeability," as applied by the majority, appears
indistinguishable from the theory of "inter-industry competition."
The danger in it is that, as demonstrated in this case, it is
"perfectly compatible with a fully monopolized economy." [ Footnote 2/24 ]

															The majority hold in effect that, because cellophane meets
competition for many end uses, those buyers for other uses who need
or want only cellophane are not entitled to the benefits of
competition within the cellophane industry. For example, Finding
282 shows that the largest single use of cellophane in 1951 was for
wrapping cigarettes, and Finding 292 shows that 75 to 80% of all
cigarettes are wrapped with cellophane. As the recent report of the
Attorney General's National Committee to Study the Antitrust Laws
states:

															"In the interest of rivalry that extends to all buyers
and all uses, competition among rivals within the industry
is always important. [ Footnote
2/25 ]"

															(Emphasis added.) Furthermore, those buyers who have "reasonable
alternatives" between cellophane Page 351 U. S. 425 and other products are also entitled to competition within the
cellophane industry, for such competition may lead to lower prices
and improved quality.

															The foregoing analysis of the record shows conclusively that
cellophane is the relevant market. Since du Pont has the lion's
share of that market, it must have monopoly power, as the majority
concede. [ Footnote 2/26 ] This
being so, we think it clear that, in the circumstances of this
case, du Pont is guilty of "monopolization." The briefest sketch of
du Pont's business history precludes it from falling within the
"exception to the Sherman Act prohibitions of monopoly power"
(majority opinion, pp. 351 U. S.
390 -391) by successfully asserting that monopoly was
"thrust upon" it. Du Pont was not "the passive beneficiary of a
monopoly" within the meaning of United States v. Aluminum Co.
of America, supra, 148 F.2d at 429-430. It sought and
maintained dominance through illegal agreements dividing the world
market, concealing and suppressing technological information, and
restricting its licensee's production by prohibitive royalties,
[ Footnote 2/27 ] and through
numerous maneuvers which might have been "honestly industrial" but
whose necessary effect was nevertheless exclusionary. [ Footnote 2/28 ] Du Pont cannot bear "the
burden of Page 351 U. S. 426 proving that it owes its monopoly solely to superior
skill. . . ." (Emphasis supplied.) United States v. United Shoe
Machinery Corp., 110 F.
Supp. 295 , 342, aff'd per curiam, 347 U.
S. 521 .

															Nor can du Pont rely upon its moisture-proof patents as a
defense to the charge of monopolization. Once du Pont acquired the
basic cellophane process as a result of its illegal 1923 agreements
with La Cellophane, development of moisture-proofing was relatively
easy. Du Pont's moisture-proof patents were fully subject to the
exclusive pooling arrangements and territorial restrictions
established by those agreements. And they were the subject of the
illicit and exclusionary du Pont-Sylvania agreement. Hence, these
patents became tainted as part and parcel of du Pont's illegal
monopoly. Cf. Mercoid Corp. v. Mid-Continent Inv. Co., 320 U. S. 661 , 320 U. S. 670 .
Any other result would permit one who monopolizes a market to
escape the statutory liability by patenting a simple improvement on
his product.

															If competition is at the core of the Sherman Act, we cannot
agree that it was consistent with that Act for the enormously
lucrative cellophane industry to have no more than two sellers from
1924 to 1951. The conduct of du Pont and Sylvania illustrates that
a few sellers tend to act like one, and that an industry which does
not have a competitive structure will not have competitive
behavior. The public should not be left to rely upon the
dispensations of management in order to obtain the benefits which
normally accompany competition. Such beneficence is of uncertain
tenure. Only actual competition can assure long-run enjoyment of
the goals of a free economy.

															We would reverse the decision below and remand the cause to the
District Court with directions to determine the relief which should
be granted against du Pont.

															[ Footnote 2/1 ]

															In Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , 345 U. S. 612 ,
note 31, the Court said:

															"For every product, substitutes exist. But a relevant market
cannot meaningfully encompass that infinite range. The circle must
be drawn narrowly to exclude any other product to which, within
reasonable variations in price, only a limited number of buyers
will turn; in technical terms, products whose 'cross-elasticities
of demand' are small."

															[ Footnote 2/2 ] See 118 F. Supp. at 64. The majority opinion quotes at
length from Stocking and Mueller, The Cellophane Case, XLV
Amer.Economic Rev. 29, 48-49, in noting the comparative
characteristics of cellophane and other products. Unfortunately,
the opinion fails to quote the conclusion reached by these
economists. They state:

															"The [trial] court to the contrary notwithstanding, the market
in which cellophane meets the 'competition' of other wrappers is
narrower than the market for all flexible packaging materials." Id. at 52. And they conclude that

															". . . cellophane is so differentiated from other flexible
wrapping materials that its cross elasticity of demand gives du
Pont significant and continuing monopoly power." Id. at 63.

															[ Footnote 2/3 ]

															The record provides no figures for waxed paper prior to
1933.

															[ Footnote 2/4 ] See Stocking and Mueller, The Cellophane Case, XLV
Amer.Economic Rev. 29, 56.

															[ Footnote 2/5 ]

															R. 3549, GX-392. The record contains many reports prepared by du
Pont from 1928 to 1947. They virtually ignore the possibility of
competition from other packaging materials. E.g., R. 3651,
3678, 3724, 3739.

															[ Footnote 2/6 ]

															R. 4070. It is interesting to note that du Pont had almost 70%
of the market which this report considered relevant.

															[ Footnote 2/7 ] See Finding 24; GX-1001, R. 3253; and GX-1002, R.
3257-3260. The agreement of June 9, 1923, in which the parties
agreed to divide the world cellophane market, is illegal per
se under Timken Roller Bearing Co. v. United States, 341 U. S. 593 , 341 U. S.
596 -599. The supplementary agreement providing for the
interchange of technological information tightened the cellophane
monopoly and denied to others any access to what went into the
common pool -- all in violation of United States v. National
Lead Co., 332 U. S. 319 , 332 U. S. 328 .
As was said in United States v. Griffith, 334 U.
S. 100 , 334 U. S. 107 :
"The antitrust laws are as much violated by the prevention of
competition as by its destruction."

															[ Footnote 2/8 ] See Finding 602; GX-1087, R. 3288; and GX-1109, R.
3301.

															[ Footnote 2/9 ]

															Finding 633. On appeal from an adverse decision by the
Commissioner of Customs, du Pont persuaded the United States
Customs Court to order reclassification of cellophane.

															[ Footnote 2/10 ]

															The agreement is summarized in Finding 545, and appears in full
in GX-2487, R. 3383-3408. We believe that, under the principles set
forth in Transparent-Wrap Machine Corp. v. Stokes & Smith
Co., 329 U. S. 637 , 329 U. S. 646 ,
this agreement violated the Sherman Act.

															[ Footnote 2/11 ]

															GX-2811, R. 6073-6074.

															[ Footnote 2/12 ]

															R. 3563.

															[ Footnote 2/13 ]

															When du Pont Cellophane was organized in 1923, du Pont received
52,000 shares of its stock in return for $866,666.67 in cash, or
$16.67 per share. F. 22; DX-735, R. 5402. In 1929, du Pont had to
surrender stock having a market value of $12,129,600 in order to
obtain the 48,000 shares held by French interests, a sum equal to
$252.70 per share. DX-735, R. 5403.

															[ Footnote 2/14 ]

															R. 4155.

															[ Footnote 2/15 ] See Stocking and Mueller, The Cellophane case, XLV
Amer. Economic Rev. 29, 60-63, where the authors compare the
domestic economic history of rayon with that of cellophane. The
first American rayon producer earned 64.2% on its investment in
1920, thereby attracting du Pont. After a loss in 1921, du Pont's
average return for the next four years was roughly 32%. As more
firms began rayon production, du Pont's and the industry's return
on investment began to drop. When 6 new firms entered the industry
in 1930, bringing the number of producers to 20, average industry
earnings for that year declined to 5%, and du Pont suffered a net
loss.

															"From the beginning of the depression in 1929 through the
succeeding recovery and the 1938 recession, du Pont averaged 29.6
per cent before taxes on its cellophane investment. On its rayon
investment it averaged only 6.3 per cent." Id. at 62-63.

															[ Footnote 2/16 ]

															In 1924, two of La Cellophane's principal officials absconded
with complete information on the cellophane process. A Belgian
concern was then set up to use this process in making cellophane,
and it later organized Sylvania as an American affiliate. Findings
615-618.

															[ Footnote 2/17 ]

															R. 2733-2736.

															[ Footnote 2/18 ] See memorandum du Pont submitted to prospective
entrants. R. 3893.

															[ Footnote 2/19 ] See Rule 52(a), Federal Rules of Civil Procedure.

															[ Footnote 2/20 ]

															118 F. Supp. at 206.

															[ Footnote 2/21 ]

															R. 4154-4155.

															[ Footnote 2/22 ] See, e.g., American Tobacco Co. v. United States, 328 U. S. 781 , 328 U. S.
805 -806.

															[ Footnote 2/23 ] See note 31 majority opinion.

															[ Footnote 2/24 ]

															Adams, The "Rule of Reason": Workable Competition or Workable
Monopoly? 63 Yale L.J. 348, 364.

															[ Footnote 2/25 ]

															Report of Attorney General's National Committee to Study the
Antitrust Laws, p. 322. The majority decision must be peculiarly
frustrating to the cigarette industry, whose economic behavior has
been restrained more than once by this Court in the interest of
competition. See American Tobacco Co. v. United States, 328 U. S. 781 ; United States v. American Tobacco Co., 221 U.
S. 106 .

															[ Footnote 2/26 ]

															"If cellophane is the 'market' that du Pont is found to
dominate, it may be assumed it does have monopoly power over that
'market.' Monopoly power is the power to control prices or exclude
competition. It seems apparent that du Pont's power to set the
price of cellophane has only been limited by the competition
afforded by other flexible packaging materials. Moreover, it may be
practically impossible for anyone to commence manufacturing
cellophane without full access to du Pont's technique."

															Majority opinion, ante, pp. 351 U. S.
391 -392.

															[ Footnote 2/27 ] See notes 351
U.S. 377 fn2/7|>7 and 351
U.S. 377 fn2/10|>10, our dissent.

															[ Footnote 2/28 ] See United States v. Aluminum Co. of America, 148 F.2d
416, 431.