Variations in Relevant Markets under the Clayton and Sherman Acts, Slides of History

Download Variations in Relevant Markets under the Clayton and Sherman Acts and more Slides History in PDF only on Docsity! 1962] NOTES PRODUCT MARKET DEFINITION UNDER THE SHERMAN AND CLAYTON ACTS The allegation of lessened competition necessary to support charges under several of the antitrust provisions must be tested with reference to a market which defines where and in what this competition exists.' Sev- eral recent cases have suggested, for the first time in the reported opinions, that the relevant market to be examined in determining whether competi- tion has been affected may vary depending on which of the antitrust pro- visions is in question.2 More particularly, it has been suggested that the relevant market under section 7 of the Clayton Act 3 differs from that under section 2 of the Sherman Act 4 with respect to what products are included in the market. This Note will examine the legislative history of section 7 of the Clayton Act to determine if any changes in market delineation standards from those of the earlier Sherman Act were intended by the later act's authors, compare the differences between the relevant markets delineated in cases under the two acts, and analyze the reasons for and the propriety of those variations which appear to exist. I. LEGISLATIVE HISTORY OF SEcTIoN 7 A. Drafting and Amendment In 1914 Congress passed the Clayton Act with the declared purpose of invalidating certain trade practices against which, "singly and in them- selves," the Sherman Act was not a sufficient bar.5 This was the specific intention of the House Judiciary Committee, which wrote the Clayton Bill.6 The commentators, looking on section 7 in its final form, have not concluded that Congress intended to create a new definition of product 1 See, e.g., Arr'x, GEN. NATL Comm. ANTITRUST REP. 44-48 (1955). 2 See United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 593-95 (1957); Crown Zellerbach Corp. v. FTC, 296 F.2d 800, 814-15 (9th Cir. 1961), petitionz for cert. filed, 30 U.S.L. WEEK 3297 (U.S. March 16, 1962) ; United States v. Bethlehem Steel Corp., 168 F. Supp. 576, 593 n.36 (S.D.N.Y. 1958). a64 Stat. 1125 (1950), 15 U.S.C. § 18 (1958). 426 Stat. 209 (1890), as amended, 15 U.S.C. §2 (1958). 5 S. REP. No. 698, 63d Cong., 2d Sess. 1 (1914). 051 CONG. REc. 9070 (1914) (remarks of Rep. Webb in opening the House discussions on the Clayton Bill). (861) 862 UNIVERSITY OF PENNSYLVANIA LAW REVIEW market for use under the Clayton Act.7 But a careful reading of the legis- lative history suggests that the authors of the original bill are quite likely to have sought to meet the weaknesses of the Sherman Act in this very way. As originally reported to the House by the Judiciary Committee on May 6, 1914, the relevant portion of section 7 (then numbered section 8) reads as follows: [N]o corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition is to eliminate or substantially lessen competi- tion between the corporation whose stock is so acquired and the corporation making the acquisition, or to create a monopoly of any line of trade in any section or community.5 The first clause-concerning the substantial lessening of competition -sheds little light on product market delineation; here the focus, both in the bill and in the final act,9 was on competition between the acquired and acquiring firms. But the second clause-dealing with the effect on the market as a whole of the creation of monopoly--can only have strengthened the test of the Sherman Act by means of a changed market definition or by removing the requirement of intent and confining the inquiry to anti- competitive effects. The subsequent legislative history of section 7, however, suggests that the draftsmen of the bill did not conceive of that section as not requiring proof of intention. In the course of debates 10 it was objected that the Clayton Act's test, in inquiring into effects, was weaker than the Sherman Act as interpreted in Northern Sec. Co. v. United States," wherein the Supreme Court had held that in order to show a violation of section 1 7 See, e.g., MARTIN, MERGERS AND THE CLAYTON AcT 20-56 (1959); Mann & Lewyn, The Relevant Market Under Section 7 of the Clayton Act: Two New Cases- Two Different Views, 47 VA. L. REv. 1014 (1961); cf. Handler & Robinson, A Decade of Administration of the Celler-Kefauver Act, 61 COLUm. L. REv. 629 (1961). 8 H.R. REP. No. 627, 63d Cong., 2d Sess. 3 (1914). (Emphasis added.) o S. Doc. No. 584, 63d Cong., 2d Sess. 8 (1914). The words "substantially lessen" are meaningful without an assumption that competition in the market as a whole was meant. Nor is it necessary, in order to give them meaning, to require that the area in which the merging firms competed was a substantial part of the firms' business. It has been suggested that the word "substantially" was intended to deal with the situation where only part of the stock of a competitor was acquired, giving the acquirer less than complete control, and a degree of control which was not in each instance related in the same way to the proportion of stock acquired. See MARTIN, MERGERS AND THE CLAYTON AcT 47 (1959). A discussion in American Crystal Sugar Co. v. Cuban-American Sugar Co., 152 F. Supp. 387 (S.D.N.Y. 1957), aff'd, 259 F.2d 524 (2d Cir. 1958), is illustrative. The district court said, "[T]here has been no proof that defendant's acquisition of stock has so far resulted in a lessening of competition. The defendant so far has only a minority interest in the voting stock of the plaintiff [the acquired] company." The defendant's purchase of the plaintiff's stock was, however, admitted to be but one step in its program of lessening competition. Id. at 395. 10 51 CONG. REc. 9271 (1914) ; see id. at 14464. 11193 U.S. 197, 327, 332 (1904). [Vol.llO :861 PRODUCT MARKET DEFINITION market, finding that two lines of comparably priced men's dress shoes were not in competition because of differences in style, construction, and market- ing techniques. Once again, the result of narrow market definition was to make the acquisition valid under section 7.26 The markets defined in these two cases appear to be narrower than those used under Sherman Act cases of the same period,27 although the opinions do not articulate either an intention to apply a different market definition or any reason for such a difference. Interestingly, the result of this apparent difference is to render the Clayton Act's provisions less rather than more stringent than those of the Sherman Act, despite a clear congressional intention to the contrary. C. The 1950 Amendments The declared purpose of the 1950 amendments of the Clayton Act was "to cope with monopolistic tendencies in their incipiency and well before they have attained such effects as would justify a Sherman Act proceed- ing," 2 8 and "to limit future increases in the level of economic concentra- tion resulting from corporate mergers and acquisitions." - Although the main thrust of the 1950 amendments to section 7 was to include asset as well as stock acquisitions within the section's scope, 0 the section was further changed to prohibit either sort of acquisition "where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." 31 The test of a restraint of commerce in any section or community was omitted entirely. Thus, the phrase "in any line of com- merce" was retained to define the product market and was applied to the lessening of competition as well as the tendency to create a monopoly. The geographic market definition, changed to relate to "any section of the country," was likewise applied to both these effects. The legislative history of the 1950 amendments is not illuminating on the question of whether the section 7 market (or the similarly defined sec- tion 3 market 32) was intended to differ in any way from the markets under the Sherman Act or the 1914 version of the Clayton Act. The meaning of the qualifying phrases was discussed only in the most general terms.8 8 26 Id. at 298-99. 27 See, e.g., United States v. Aluminum Co. of America, 148 F.2d 416 (1945); United States v. Corn Prods. Ref. Co., 234 Fed. 964 (S.D.N.Y. 1916), appeal dLs- missed, 249 U.S. 621 (1919). 2s S. REP. No. 1775, 81st Cong., 2d Sess. 4-5 (1950). 29Id. at 3. 80 Handler & Robinson, vipra note 7, at 652. a'64 Stat. 1125 (1950), 15 U.S.C. § 18 (1958). 32 Section 3 of the Clayton Act prohibits exclusive dealing or tying contracts where the effect "may be substantially to lessen competition or to tend to create a monopoly in any line of commerce." 38 Stat. 731 (1914), 15 U.S.C. § 14 (1958). 3 The House Judiciary Committee, for example, stated that "the test of sub- stantial lessening of competition or tending to create a monopoly is not intended to be applicable only where the specified effect may appear on a Nation-wide or industry- 866 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol.110:861 In the committee hearings George Van Camp & Sons Co. v. American Can Co.34 was cited to demonstrate that any line of commerce means any line of commerce. But that case determined only that the effect of a price discrimination in lessening competition need not be shown in the line of commerce in which the discriminator was engaged and that the line of commerce affected need not be "a large part of the business of any of the corporations involved in the acquisition." 35 Although the House judiciary Committee report approved International Shoe 36 with respect to its hold- ing that a substantial lessening of competition, to be illegal, must be in the market as a whole and not merely between the acquired and acquiring com- panies,37 it should not readily be concluded that this approval extended to the market analysis used in that case. This seems particularly true in the light of the telling dissent of Justices Stone, Holmes, and Brandeis, which showed the doubtful economic validity of the analysis as applied to the facts of International Shoe itself.38 D. Conclusion An examination of the legislative history of section 7 of the Clayton Act, both as originally enacted and as amended in 1950, reveals no articu- lated attempt to provide market definition standards different from those under the Sherman Act. Nevertheless, it seems likely that Congress, in drafting the 1914 act, intended to effect some change in market definition. This likelihood is supported by the facts that (1) different market-defining language was used, (2) at least as to geographic market, this language clearly defined a market narrower than that which had been used in previous Sherman Act cases, and (3) unless this language defined a market different from that under the Sherman Act, the standard of illegality relating to the creation of a monopoly would have been of little effect as originally proposed. The history of the 1950 amendments is even less illuminating. Never- theless, it seems fair to say that the narrow market of International Shoe was not there enacted into law. As to the more difficult question, it seems wide scale. The purpose of the bill is to protect competition in each line of commerce in each section of the country." H.P. REP. No. 1191, 81st Cong., 1st Sess. 8 (1949). In discussing the changed geographic market definition, the Senate Committee stated that the elimination of the word "community" was specifically intended to rule out the testing of the anti-competitive effects of a merger in any area such as a small town. S. REP. No. 1775, 81st Cong., 2d Sess. 4 (1950). The phrase "section of the country," it was stated, could not be rigidly defined, although certain broad standards could be set forth to guide the courts and the Commission in their interpretation. Id. at 5-6. The Senate Committee approved the definition of the market set forth by the Supreme Court in the Standard Stations case, Standard Oil Co. v. United States, 337 U.S. 293 (1949), in terms of the "area of effective competition." 34278 U.S. 245 (1929). See Hearings on H.R. 2739 Before a Subcommittee of the Senate Committee on the Judiciary, 81st Cong., 1st & 2d Sess. 192 (1949-50). 35 S. REP. No. 1775, 81st Cong., 2d Sess. 5 (1950). 3 6 International Shoe Co. v. FTC, 280 U.S. 291 (1930). 37 H.R. REP. No. 1191, 81st Cong., 1st Sess. 7 (1949). 38280 U.S. at 304-05. The court's holding is all the less meaningful in that the opinion also grapples with the "failing company" doctrine. See id. at 299-303. PRODUCT MARKET DEFINITION impossible to demonstrate that the legislative intention was clearly either to create a market definition different from that existing under the Sherman Act or to require that the Sherman Act standard be applied under section 7. In fact, it seems difficult to show that market definition was considered at all in any meaningful way. II. MARKET DEFINITION IN THE COURTS To the economist, the concept of a market is stated in terms of the behavior of buyers and sellers: "[T] wo products belong in the same market if a small change in price (or product) causes a significant diversion in a relatively short time of the buyers' purchases or the sellers' production from one product to another." 39 The courts have somewhat limited the first part of this definition by including in a single market only those products which are also functionally interchangeable with the products sought to be placed in the market. Both functional interchangeability and production flexibility have been examined in Sherman and Clayton Act cases requir- ing a delineation of the relevant market. It is necessary, then, to examine the cases to determine whether these theories of market definition have been differently applied under the two acts. A. Production Flexibility In United States v. Columbia Steel Co.,40 it was charged that United States Steel, a producer of rolled steel products, had restrained commerce under the Sherman Act by acquiring Consolidated Steel, a purchaser of steel plates and shapes, a type of rolled steel product. Because rolled steel producers can make other products interchangeably with shapes and plates, the Court concluded that the relevant market for testing the effects of the acquisition was the market for all rolled steel products-although no actual shifts in production were shown.4 This interpretation of production flexibility does not appear to be economically significant in terms of market delineation for two reasons. First, Columbia Steel considered only the technological feasibility of pro- duction shifts, not whether such shifts occurred in actual practice. But it is only "where producers can and do produce several products interchange- ably [that] the capacity currently devoted to one of those products under- states the amount that should fairly be deemed to be 'in' the market." 42 Second, the economic concept of cross-elasticity of supply as a definitiont of what products are included in the market is based on shifts in produc- tion resulting from changes in price43 It hardly seems applicable when 3 9 KAYSEN AND TURNER, ANTITRUST POLICY: AN ECONOMIC AND LEGAL ANALYsIs 27-28 (1959). 40334 U.S. 495 (1948). 41Id. at 510-11. 42 KAYSEN AND TURNER, op. cit. supra note 39, at 134. (Emphasis added.) 43 See text accompanying note 39 supra. 870 UNIVERSITY OF PENNSYLVANIA LAW REVIEW in Alcoa did not consider competition of aluminum with copper and steel,60 the Court in Cellophane confined its market limitation to language. And it continued by saying that it is not "a proper interpretation of the Sherman Act to require that products be fungible to be considered in the relevant market." 61 More specifically, the Court concluded that the relevant mar- ket in a suit charging monopolization of cellophane production and sales was made up of all "flexible packaging materials," including brown wrap- ping paper, wax paper, glassine, polyethelene film, and aluminum foil,62 despite the fact that cellophane combined "the desirable elements of trans- parency, strength and cheapness more definitely than any of the others." 63 In the most recent Supreme Court case concerned with the Sherman Act market, International Boxing Club v. United States,6 4 the Court re- stated the reasonable interchangeability test of Cellophane, but placed greater emphasis on its limitation: "price, use, and qualities considered." Thus, the Court was able to conclude that championship and nonchampion- ship boxing matches were not in the same market-although they might be physically identical, involving the same combatants in the same ring- because of a sizeable price differential ,based on consumer preference.6 5 The Court also noted,66 by way of dictum, that the market which it had defined met the Clayton Act section 7 market definition test as set forth in United States v. E. I. du Pont de Nemours & Co. (the "General Motors" case). 67 The General Motors case contained the first intimation that the rele- vant market for section 7 purposes might be defined in a manner other than that used in Sherman Act monopolization cases. The Court stated that du Pont, after its acquisition of 23% of General Motors outstanding stock, enjoyed a "commanding position as General Motors' supplier of automotive finishes and fabrics . ... " 6 The market delineation issue therefore turned on whether all finishes and fabrics for industrial uses or only "auto- motive finishes and fabrics" comprised the line of commerce for testing the effects of the acquisition. Without referring to the Cellophane case, which had been decided less than a year before, the Court stated: 60 The district court opinion had placed some weight on interindustry competi- tion. United States v. Aluminum Co. of America, 44 F. Supp. 97, 165, 222-23 (S.D.N.Y. 1941). 61351 U.S. at 394. 62 Id. app. A at 405. 63 351 U.S. at 398. 64358 U.S. 242 (1959). 65 Id. at 249-52. 66 Id. at 252 n.8. 67353 U.S. 586 (1957). General Motors was decided under old § 7, but under the phrase making illegal acquisitions whose probable effect was to tend to create a monopoly in any line of commerce. This standard was found by the court to be applicable to a vertical merger such as took place here, du Pont having purchased an interest in its customer, General Motors. Id. at 590-92. 68 Id. at 588-89. [Vo1.110:861 PRODUCT MARKET DEFINITION [TJhe record shows that automotive finishes and fabrics have sufficient peculiar characteristics and uses to constitute them prod- ucts sufficiently distinct from all other finishes and fabrics to make them a "line of commerce" within the meaning of the Clayton Act. . . . Thus, the bounds of the relevant market . . . are not coextensive with the total market for finishes and fabrics, but . . . with [that of] the automobile industry, the relevant market for automotive finishes and fabrics.39 It is not clear whether General Motors attempted to set up standards for determining the section 7 market different from those used under the Sherman Act. However, some subsequent section 7 cases have applied its "peculiar characteristics and uses" test, stating that the reasonable inter- changeability test of the Cellophane case is inapplicable to section 7 litiga- tion. Thus, in Bethlehem Steel,70 the district court stated that "there can be a substantial lessening of competition with respect to a product whether or not there are reasonably interchangeable substitutes." 71 However, the existence of products effectively substitutable for the various steel product lines found to constitute lines of commerce was considered by the court 72 and found not to exist.73 A similar exposition was used by the court in Crown Zellerbach 74 on the authority of Bethlehem Steel, .but again the court noted that the contention that there were interchangeable products was "simply not borne out by the facts." 7r Two other section 7 cases which have applied the "peculiar characteristics and uses" test are A. G. Spalding & Bros. v. FTC 76 and Reynolds Metals Co. 77 Spalding, in con- sidering the merger of two athletic goods producers who sold chiefly high quality goods for athletic competitions, used a product market which ex- cluded low quality athletic goods used for toys.78 Reynolds involved a 69Id. at 593-95. As noted by the dissent, id. at 650, the majority failed to specify just what these peculiar characteristics and uses were, mentioning only that du Pont's automotive finish was a great contribution to the automobile industry, id. at 594 n.12. 7 0 United States v. Bethlehem Steel Corp., 168 F. Supp. 576 (S.D.N.Y. 1958). In this case a merger between the second and sixth largest steel companies, both integrated, was attacked by the Government. The court held that the relevant lines of commerce included both lines consisting of certain steel products and a line embracing the entire industry. Id. at 589-95. 71 Id. at 593-94 n.36. 72 Ibid. 73 Id. at 593. 74 Crown Zellerbach Corp. v. FTC, 296 F.2d 800 (9th Cir. 1961), petition for cert. filed, 30 U.S.L. WEEK 3297 (U.S. March 16, 1962). 75 Id. at 814. 76 301 F.2d 585 (3d Cir. 1962). 77 TRADE REG. REP. f128533 (FTC Jan. 21, 1960). 78 A. G. Spalding & Bros. v. FTC, 301 F.2d 585 (3d Cir. 1962). In both Spalding, id. at 628, and United States v. Bethlehem Steel Corp., 168 F. Supp. 576, 594 (S.D.N.Y. 1958), the courts defined an industrywide line of commerce, in addition to a series of narrower lines as a relevant market. Although common parlance might thus characterize an entire industry, definitions of the phrase "line of commerce" under the Clayton Act have otherwise been confined to products competitively related in 872 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol.110:861 forward vertical acquisition of a customer, a converter of aluminum florist foil. The relevant market was limited to florist foil, after a discussion of its peculiar characteristics and uses. 79 The FTC concluded that there were no practical substitutes for florist foil, but went out of its way to state that a question of end-use interchangeability, such as was presented in Cello- phane, was not "involved" in Reynolds.80 On the other hand, the doctrine of interchangeability has been im- plicitly adopted in two section 7 cases which applied it without considera- tion of whether or not relevant market boundaries were to be judged by the same standards in section 7 as in monopolization cases. Thus in American Crystal Sugar Co. v. Cuban-American Sugar Co.,81 the relevant market was held to include both beet and cane sugar since they were found by the court to be functionally interchangeable.m And in Erie Sand & Gravel Co. v. FTC,83 it was found that pit and bank sand were function- ally interchangeable with lake sand, and therefore to be included within the relevant market absent any disparity in freight costs which would have meant that pit and bank sand could not compete in the relevant geographic market.84 In the recent decision in Brown Shoe,8 5 the district court in effect combined the tests of functional interchangeability and peculiar character- istics and uses. The court cited the definitions of relevant markets set forth in both Cellophane and General Motors,s 6 and fixed the boundaries of the market by examining "the practices in the industry, the characteristics and uses of the products, their interchangeability, price, quality and style S. .,s In United States v. Columbia Pictures Corp.,88 the district terms of end use, or, less frequently, production flexibility. The FTC in Spalding found that there were competitive relationships among the various individual products. A. G. Spalding & Bros., TRADE REG. REP. 28694 (FTC March 30, 1960). However, it seems unlikely that competition between baseballs and footballs could be more intense than that among different quality lines of one or the other product, and neither the court's nor the FTC's opinion so suggests. The choice of industrywide lines of commerce in these two cases was not significant in terms of the judgments rendered, since in each case the court found a substantial lessening of competition likely within the individual product lines. The broader market thus defined might be significant in the rare case in which the merged firms' lines were concentrated in different sections of this broad market. 7 9 TRADE REG. REP. 1 28533, at 37253-54. so Id. at 37256. 81259 F.2d 524 (2d Cir. 1958). 82 In another context, the court noted that certain types of consumers showed a preference for cane sugar. However, the court did not feel that this demonstrated an absence of competition between cane and beet sugar, "but only that for the time being as to certain customers one or the other form of the product for one reason or another has forged ahead in the competitive race. . . ." Id. at 530. 83 291 F.2d 279 (3d Cir. 1961). 84 Id. at 281. 85United States v. Brown Shoe Co., 179 F. Supp. 721 (E.D. Mo. 1959), prob. juris. noted, 363 U.S. 825 (1960). 86 Id. at 729-30. 87 Id. at 730. 88 189 F. Supp. 153 (S.D.N.Y. 1960). PRODUCT MARKET DEFINITION that the market defined be economically meaningful 101-, none of them showed a willingness to widen the market to the degree suggested in Cellophane. In addition, although the Cellophane case's broad language may not in fact be applicable to even Sherman Act cases-not only does the inclusion of such different products as paper and aluminum foil in the same market seem to conflict with the case's own doctrine as to the exclusion of inter- industry competition,10 5 but International Boxing Club,106 by its emphasis on consumer preference, may have narrowed the section 2 monopolization market-this does not imply that the markets are identical under the two acts. Moreover, the fact that the Supreme Court in International Boxing Club, having noted the existence of both the traditional test 10 7 and the new test as used in General Motors,0 8 chose to point out that on the particular facts before it the market delineated met either test may indicate a recogni- tion that under other factual situations the markets may be different.'0 9 III. A RATIONALE FOR PRODUCT MARKET DIFFERENCES The legislative history of the Clayton Act suggests that the relevant market under that statute may have been designed to differ from that under the Sherman Act. However, although courts have recently shown a tendency to delineate different relevant markets under the two acts, this cannot be attributed to the courts' view of that legislative history. It may be significant, on the other hand, that Cellophane, the leading Sherman Act case in which a broad market was defined, was a single-entity monopolization, not a merger-combination case. 0 Since section 7 of the Clayton Act attacks only the latter, the courts may be implicitly drawing a distinction between monopolization and merger. Three considerations appear to justify this distinction: (1) the differences in the severity of the remedies applied; (2) the nature of the conduct involved and the inferences 104 See S. REP. No. 1775, 81st Cong., 2d Sess. 5-6 (1950). 105 See notes 62-63 upra and accompanying text. 106358 U.S. 242 (1959). 107 Id. at 252. 108 Id. at 252 n.8. 109 But see Handler & Robinson, A Decade of Administration of the Celler- Kefauver Antimerger Act, 61 CoLum. L. R-v. 629, 646 (1961), which draws the conclusion that this statement intimates "that the market is the market whether the case arises under the Sherman or the Clayton Act." 110 Although there have been a number of Sherman Act merger cases, the market was significantly discussed in only two, United States v. Corn Prods. Ref. Co., 234 Fed. 964 (S.D.N.Y. 1916), appeal dismissed, 249 U.S. 621 (1919) and United States v. Columbia Steel Co., 334 U.S. 495 (1948). In Corn Products, the de- fendants were charged with monopolizing trade in starch and glucose by means of acquiring other companies. The market was narrowly defined to exclude competing products which cost substantially more to produce, or which enjoyed a substantial margin of consumer preference over the allegedly monopolized products. In Columbia Steel, the Court used production flexibility to define a wide market which, by its inclusion of other products, reduced the share controlled by the defendants. 334 U.S. at 510-11. However, it is doubtful if this application of the theory of produc- tion flexibility will be of lasting effect. See pp. 873-74 supra. 876 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol.110:861 of intent that can be drawn from it; I" and (3) the general policy of the antitrust laws. Thus, the remedy of dissolution normally used in individual monop- olization cases appears to be much more harsh than the divestiture of a recently acquired, previously independent unit. The internal effect on du Pont of the forced sale of its General Motors holdings 11 2 is unlikely to be of the same crippling nature as the forced severance or dissolution of its cellophane department, an integral part of the company, would have been.11 Moreover, mergers may be enjoined, and even when a court refuses to grant a preliminary injunction it may, as did the court in Brown Shoe," 4 require that the businesses of the merging companies be separately conducted so that if divestiture is required in the end, its detrimental effects on the companies may be minimized." 5 Again, in cases of individual monopolization, the inferences which may be drawn from the defendant's conduct-at least when it would not constitute a restraint of trade under section 1 of the Sherman Act-are unclear.1" Not only may monopoly be technologically justified, but it may have been "thrust upon" 11.7 the monopolist as a result of patent ownership, successful meeting of demand, or a limited market for the monopoly's product. Although it is likewise possible for a merger to be technologically justified, this is less likely; the firms existed independently before the merger, and, particularly as the percentage of the market occupied by the combined firms increases, technological advantages are not, in fact, the normal reason for mergers of competitors." 8 Finally, the general policy of the antitrust laws is against increasing concentration. 19 But, whereas section 7 of the Clayton Act is directed against "increases in the level of economic concentration resulting from "'l This theory, insofar as it concerns differences in relevant market definitions under the several Sherman Act violations, is put forward in Turner, Antitrust Policy and the Cellophane Case, 70 HARv. L. Rxv. 281 (1956). 112This seems to hold true even though the acquisition here antedated the antitrust action by more than thirty years and involved an extremely large portion of du Pont's assets. However, no consolidation had taken place. 118 Compare United States v. E. I. du Pont de Nemours & Co., 366 U.S. 316 (1961), with the facts of United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377 (1956). 114 179 F. Supp. 721 (E.D. Mo. 1959), prob. juris. noted, 363 U.S. 825 (1960). 1151Id. at 724 n.4. The remedy in Clayton Act § 3 cases, elimination of the contract, seems less severe than either dissolution or divestiture. 116 Conversely, the nature of the conduct in cases of attempts and conspiracies to monopolize supports inferences clearly unfavorable to the defendants, since specific intent to accomplish the desired end must be shown. See note 51 supra. 117 See United States v. Aluminum Co. of America, 148 F.2d 416, 429-30 (2d Cir. 1945) (dictum). 118 FTC, RELATIVE EFFIciENcy op' LARGE, MEDIUM-SIZED, AND SMA.L Business 12-14 (TNEC Monograph No. 13, 1941); Bowman, Toward Less Monopoly, 101 U. PA. L. REv. 577, 590-611 (1953). 119 See Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457, 467 (1941); United States v. Aluminum Co. of America, 148 F.2d 416, 428-29 (2d Cir. 1945). PRODUCT MARKET DEFINITION corporate mergers and acquisitions," 120 there is no parallel provision interdicting bigness resulting from normal business practices alone until this bigness results in monopoly.m2 Therefore, in cases of individual monopolization, all of the factors considered tend to justify a broad definition of the market, with its resulting increase in protection for the defendant. For, although such a definition of the market, in which are included physically distinct but functionally inter- changeable products, is close to the market as defined by economists,lm the administrative difficulties of a full-fledged inquiry into functional inter- changeability such as took place in Cellophane might not otherwise be warranted. Consideration of these same factors leads to a different conclusion in the merger cases. Since the remedy is less severe, the court need not feel the same solicitude for the plight of the defendant. The inferences to be drawn from the conduct are probably less favorable to the defendant. And the general policy of the antitrust laws against greater concentration is reinforced in this area by specific interdictions of combinations, acquisi- tions, and mergers. It therefore seems proper that the product market be defined for mergers so as to test more strictly their anticompetitive effects. This would usually, but not always, require a more narrowly defined market; 2 3 thus a flexible market is required.124 There is nothing in the language of the Clayton Act which militates against such a flexible market. The reference to any rather than the line of commerce may even support such a market definition. And it may be suggested that the legislative history of the 1914 act can only be rationally explained by an intention that the relevant market under section 7 should be a flexible one.12 5 This reasoning does not support a judicial abdication permittingthe government to define markets however it may choose in order to lead to the invalidation of all mergers. Erie Sand 2 6 indicates that the courts will not accept an FTC definition which is so narrowly drawn that it places fungible products in different markets. Nor is a definition acceptable 120 S. REP. No. 1775, 81st Cong., 2d Sess. 3 (1950). 1 21 United States v. Swift & Co., 286 U.S. 106, 116 (1932); United States v. International Harvester Co., 274 U.S. 693, 708 (1927); see United States v. United States Steel Corp., 251 U.S. 417, 451 (1920); United States v. Aluminum Co. of America, 148 F.2d 416, 430 (2d Cir. 1945). I22 See text accompanying note 39 =rpra. '2 When the firms seeking to merge are not engaged in an identical line of com- merce, a broader market definition will be needed to support a finding of a § 7 vio- lation. See note 20 supra and accompanying text. 124 Although this reasoning would apply to mergers under both the Sherman and the Clayton Acts, the possibility of criminal penalties may make such flexibility appear offensive under the Sherman Act. However, since the amendment of the Clayton Act in 1950, it is not likely that the Sherman Act's provisions will be resorted to by the FTC or the Justice Department to test the legality of a merger. See ATIY GEN. NATL Commi. ANTITRUST REP. 115 n.1 (1955). 1 2 5 See notes 5-20 s-upra and accompanying text. 126 291 F.2d 279 (3d Cir. 1961).