June 3

This Day in History

Automotive

Jun 3, 1957:

U.S. Supreme Court rules against Du Pont in General Motors suit

On this day in 1957, the U.S. Supreme Court rules that the chemical company E. I. Du Pont de Nemours & Co. must give up its large stock interest in the Detroit-based automobile company General Motors on the grounds that it constituted a monopoly, or a concentration of power that reduced competition or otherwise interfered with trade.

Between 1917 and 1919, Du Pont invested $50 million in GM, becoming the automaker's largest stockholder, with a 23 percent share. The chemical company's founder, Pierre S. Du Pont, served as GM's president from 1920 to 1923 and as chairman of the company's board from 1923 to 1929. By that time, GM had passed Ford Motor Company as the largest manufacturer of passenger cars in the United States, and had become one of the largest companies in the world, in any industry.

In 1949, the U.S. Justice Department brought suit against Du Pont, charging that the chemical giant's close relationship with GM gave it an illegal advantage over competitors in the sale of its automotive finishes and textiles. This advantage, according to the suit, violated the 1890 Sherman Antitrust Act, Congress' first attempt to regulate monopolies.  The case dragged on for five years before Chicago's U.S. District Court Judge Walter J. LaBuy dismissed the government's suit, ruling that it had "failed to prove conspiracy, monopolization, a restraint of trade, or any reasonable probability of a restraint."

The Justice Department appealed to the U.S. Supreme Court, and on June 3, 1957, the Court handed down its decision. It based its reversal of LaBuy's verdict not on the Sherman Act but on Section 7 of the Clayton Act, which had been passed in 1914 to clarify and support the Sherman Act. This section, to which government lawyers had dedicated only a tiny portion of their case, prohibited any corporation from purchasing stock in another "where the effect of such acquisition may be [to restrain commerce] or tend to create a monopoly of any line of commerce."

The four justices in the majority were Chief Justice Earl Warren, William Brennan, Hugo Black and William Douglas; Brennan wrote the majority opinion, which stated that the "inference is overwhelming that Du Pont's commanding position [in the sale of automobile finishes and fabrics to GM] was promoted by its stock interest and was not gained solely on competitive merit." Justices Harold Burton and Felix Frankfurter dissented from the majority, while two justices--Tom Black and John Marshall Harlan--disqualified themselves from the case: Black had been attorney general in 1949, when the Justice Department brought the case, and Harlan had previously represented Du Pont as a lawyer.

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