Irving Silverstein trading as Silverstein Brothers

Text (OCR of the scan at left; may contain errors)

Ix THE ),J..\TTER OF IRVING SILVERSTEIX TRADING ~\S SIL" ER~TEIX BHOTHERS CO::\TSENT Dillon, ETC. , IX Rn;.\Im TO TIn: _\LlXCED YI0L\TION OJ' Tile FEDERM, TR.\DE CO:)L\IJ8SION "\.XD THE Frn l~JWD1.TT') L.mELlX(; "\(,'1'8 Docket 8SSil. Complaint May 1, 1961-Deci8iuH, Sept. 23 1961 Consent order requiring a Doston funicI' to cease violating the Fur PI'ot1acts LnlwJing A(, t IJ~' faiJin;;: 10 set fi)Ilj1 tilc' term " Sl'tOlH11HlJ1(1" YYl1('rE' required ,, , Complaint 59 Ii' on labels and invoices, and failing in other resl)acts to comply T\-ith labeling and invoicing requirements.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Fur Products Labeling Act and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Irving Silverstein, an individual trading Sil verst-ein Brothers, hereinafter referred to as respondent, has violated the provisions of said Acts and the Hules and Regulations pronlLdgated under the Fur Products Labeling Act, and it appearing to the Commission that a proceeding by it in respect thereof would in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PAIV\GR..U'H 1. Respondent Irving Silverstein is an individual trnc1ing as Silverstein Brothers with his office and principal place of business located at 59 Temple Place, Boston, j)Iassachusetts. PAn. 2. Subsequent to the eflective date of the Fur Products Labeling Act on August 9 , 1952, respondent has been and is now engaged in the introduction into conllnerce and in the sale, advertising, and offering for sale, in comInerce, and in the transportnt.ion and distribution, in commerce, of fur products; and has sold, advertised ohm"ed for sale, transported and clistributed fur products ,,-which have been made in whole or in part of fur which had been shipped and receil-ed in coml11erce, as the terms "COl11merce fur" and "fur product" are defined in the Fur Products Labeling Act. PAn. 3. Certain of said fur products were lnisbranded in that they were not labeled as required under the provisions of Section 4 (2) of the Fur Products Labeling Act and in the manner and form prescribed by the Rules and Regulations promulgated thereunder. PAH. 4. Certain of said fur products were misbranded in violation of the Fur Products Labeling Act in that the.y were not labeled in aecordnllce with the Rules and Regulations promulgated thereunder in the following respects:

(n) Information required under Section 4 (:2) of the Fur Products Labeling Act and the Rules and Regulations promulgated thereunder was mingled ,with non-required information, in violation of Rule 29 (a) of said Rules and Regulations.

(b) Information required under Section 4(2) of the Fur Products . Labeling Act find the Rules and Regulations promulgated thereuIlder as set forth in handwriting on labels, in violation of Rule 29 (0) of said Rules and Re.gulations.

(c) The term 'secondhand", where required, was not set forth labe.ls in violation of Rule 23 of said Rules and Regulations. SILVERSTEIN BROTHERS 605 603 Decision (d) Require.d item numbers were not set forth on labels, in viola60n of Rule 40 of said Rul~s and Regulations. PAR. 5. Certain of said fur products were falsely and deceptively invoiced by respondent in that they were not invoiced as required by Section 5 (b) (1) of the Fur Products Labeling Act, and in the manner and form prescribed by the Rules and Regulations prol11ulgatecl thereunder.

PAR. 6. Certain of said fur products were falsely and decept.ivel~y invoiced in violation of the Fur Products Labeling Act in that they were not invoiced in accordance with the Rules and Regubtions promulgated thereunder in the following respects: (a) Information required under Section 5 (b) (1) of the Fur Products Labeling Act and the Rules and Hegubtions promulgated thereunder was set forth in abbreviated form in violation of Rule 4 of said Rules and Hegulations.

(b) The disclosure "secondhnncr' , where required, '"as not set forth on invoices in violation of Hule 28 of said Rules and Reg-ubt.ions, (c) Required item numbers "ere not set forth on invoices in violation of Rule -'10 of said Rules and Regulations. -\R. 7. The aforesaid nets and practices of respondent, as herein alleged, are in violation of the Fur Products Labeling Act find the Rules and Regulations promulgated thereunder and constitute unfair and deceptive acts and pracbees in commerce under the Federal Trade COllli11ission Act.

JlIT. ilIichael P. JI1lghes for the Commission. Respondent pto Be.

INITIAL DECISIO~ BY EDGAR A. BUTTLE, I-IL\RING EXAi\IIxn: On ~lay 4, 1961 , the Federal Trade Commission issued its complaint against the above-named respondent charging him with violation of the provisions of the Federal Trade Commission Act and the Fur Products Labeling Act and the Rules and Regulations promulgated under said Fur Products Labeling Act in connection \'.'ith the introduction into commerce, and the snJe, advertising and offering for sale transportation and distribution of fur products. On .June 28, 19tH , the respondent and counsel supporting the complaint entered into an agreement containing consent order to cease and desist in 8ccorc1nnee with Section 3. 25 (a) of the Hules of Practice and Procedure of the Commission.

Under the foregoing agreement, the respondent ndmits the jurisdictional fa.cts alleged in the complaint and agrees, among other things tlwt the cease and desist order there set forth may be entered without Order 59 F.

further notice and shall have the same force find effect as if entered after a full hearing. The agreement includes a "aiver by the respondent of all rights to challenge or contest the validity of the order issuing in accordance therewith; and recites that the said agreement shall not become a part of the official record unless and until it becomes a. part of the decision of the Commission, and that it is for settlement purposes only, does not constitute an admission by the re.spondent that he has violated the law as alleged in the complaint, and that said complaint may be used in construing the terms of the order. The hearing examiner finds that the content of said agreement meets all the requirements of Section 3. 25 (b) of the Rules of Practice. This proceeding having now come on for final c.consideration by the hearing examiner on the complaint and the aforesaid agreement for consent order, and it appe,nring that said agreement provides for an appropriate disposition of this proceeding, the aforesaid agreement is hereby accepted and is ordered filed upon becoming part of the Commission s decision in accorcbnce 'with Section 3.21 of the Uules of Practice; and in consonance with the terms of said agreement, the hearing examiner makes the following jurisdictional findings and order:

1. R.espondellt Irving Silverstein is an individual trading as Silverstein Brothers, with his office and principal place of business located at 59 Temple Place, Boston, ~lassf\ehllsetts. 2. The Federal Trade Commission hns jurisdiction of the subject mn t.t.cr of the proceeding an() of the respondent hereinabove named. The eompbint states a cause of action against said respondent under the Federn.l Trade COl11J11ission Aet., and this proceeding is in the interest of the public.

ORDER It is ordered TJmt Irving Silverstein, an individual trading as Silverstein Brothers, or under any other trade name, and responclent~ representatives, agents and employees, directly or through any corporate or other device, in connection with the introduction into comme-rce, or the sale, advertising, or offering for sale, in commerce, or the transportation, or distribution in commerce of fur products, 01' in connection with the sale, advertising, offering for sale, t.ransportation, or distribution of fur products which are made in "Whole or in part of fur which hn.s been shipped and received in commerce, ns commerce fur" and " fur product" are defined in the Fur Products Labeling Acl do forthwith cease and desist from: 1. :Misbranc1ing fur products by:

A. Failing to affix labels to fur products showing in words and figures plainly Jegible an the information required to be dise1osec1 SILVERSTEIN BROTHERS 607 603 Decision by each of the subsections of Section 4 (2) of the Fur Products Labeling Act.

B. Setting forth on labels affixed to fur products: 1. Information required under Section 4 (2) of the Fur Products Labeling Act and the Rules and Regulations promulgated thereunder mingled with non-required information. 2. Information required under Section 4(2) of the Fur Products Labeling Act and the Rules and Regulations promulgated thereunder in handwriting.

C. Failing to use the term "secondhand:' where required. D. Failing to set forth on labels the item number or mark assigned to a fur product.

2. Falsely or deceptively invoicing fur products by: A. Failing to furnish invoices to purchasers showing in words and figures plainly legible all the information required to be disclosed by each of the subsections of Section 5 (b) (1) of the Fur Products Label- B. Setting forth information required under Section 5 (b) (1) of theing Act.Fur Products Labeling Act and the Rules and Regulations promulgated therelUlder in abbreviated form.

C. Failing to use the term "secondhand" where required. D. Failing to set forth on invoices the item number or mark assigned to a fur product.

DECISION OF Tl-IE CO::\I:l\IISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice published :May 6, 1955, as amended, the initial decision of the hearing examiner shall, on the 23rd day of September 1961, become the decision of the Commission; and, accordingly: 1 t is ordered That respondent herein shall, within sixty (60) days after service upon him of this order, file with the Commission a report in "\writing setting forth in detail the manner and form in which he has complied with the order to cease and desist. Complaint Ix THE J\fatter OF EVELYN :M:ILLER. TRADING AS VIT ALIFE, ETC. CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO3DnSSION ACT Docket 8398. Cmnplaint, May 1961-Decision, Sept. 23, 1961 Consent order requiring an individual in Cedar Rapids, Iowa, to cease making false therapeutic claims for her "Vitalife Vitamins and Minerals" in circulars, brochures, and radio commercials, as set forth in the order below. CO3fPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Evelyn :Miller, an individual trading as VitaJife, Vitalife Vitamins, Vitnlife Products and Vital fIealth-Foods Co. , hereinafter referred to as respondent has violated the p1'oyision8 of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Evelyn J\Iiller is an individual trading as Vit-alife, Vitalife Vitamins, Vitalife Products and Vital I-Iealth- Foods Co., with her principal office and place of business located at 1404 First A venue East, in the City of Cedar Rapids, State of Iowa. PAR. 2. Respondent is no\\, and for some time last past has been engaged in the sale and distribution of a preparation containing ingredients which come within the classification of food, as the term food" is defined in the. Federal Trade Commission Act. The designation used by respondent for her said preparation, the formula. thereof and directions for use are as follows: Dfsi,gnation: VHalife Vitamins and Minerals Form1l1a:

Each capsule contains:

Vitamin B-12 (as bl stroptomyces fermentatioll extractives) -- .1.0 mcg. Vitamin A (syntbetic) -------------- 000 D. P. Units Vitamin D (irradiated Ergosterol) ---- 000 D. P. Units Vitamin B-1 (Thiamine Mononitrate) ----------- 20.0 mgm. Vitamin B- (Riboflavin) 0 mgm. Vitamin B- (Pyridoxine Hydrochloride) ------- 0 mgm. Vitamin C (Absorbic Acid) --------------------- 100.0 mgm, Liver Desiccated (defatted) -------------------- 50.0 rngm. Calcium Pan tothenate______--- --- 0 mg-m Calcium (as Dicalcium Phosphate Anhydrous) is.O mgru. , _ . VITALIFE , ETC. 609 608 Complaint FO1' mu.la Con tin lied Each capsule contains :-Continued Phosphorus (Dicalcium Phosphate) ---- ---------- 54.0 mgm. Niacinamide_----_-----------------------------_. 30.0 mgm. Iron (as Ferrous Sulfate Dried)----_----------- 20.0 mgm. Folic acid_-__ 25 mgm. Rustin___-------------- -----. 10.0 mgm Vitamin E (as di-alpha Tocopheryl Acetate equivalent by biological assay to) --------------- 2.5 I. U. Glutamic Acid-__-_------------------------------ 12.0 mgm. Inositol-____------------------------------------ 20.0 mgm. Choline Dihyclrogen Citrnte-__-------------------- 20.0 mgm. Potassium Iodide______-------------------------- 0.15 mgm. :;\langnnese (as :\langanese Sulphate Anhydrous) --- 0.3 mgm. Copper (as Copper Sulfate) ---------------------- 0 2 mgm. ~Iagnesinm (as l\Iagnesium Sulfate) 0.4 mgm. Zinc (as Zinc Sulfate)_____---------------------- 0.08 mgm. In a base of Brewer s Yeast Di' rections Adults-l capsule daily or as directed by the physician. PAR. 3. Respondent causes the said preparation, when sold, to be transported from her place of business in the State of Iowa to purchasers thereof located in various other States of the United States and in the District of Cohunbia. Respondent maintains, and at all times mentioned herein has maintained, a course of trade in said preparation in commerce, as "commerce" is defined in the Fede-ral Trade Commission Act. The volume of business in such commerce has been and is substantial.

PAR. 4. In the course and conduct of her said business, respondent has chsseminated, and caused the dissemination of, certain advertisements concerning the said preparation by the United States mails and by various means in commerce as "commerce" is defined in the Federal Trade Commission Act, including, but not limited to, circulars and brochures, and by means of radio broadcasts transmitted by radio stations located in various States of the United States having sufficient power to carry such broadcasts across State lines, for the purpose of inducing, a.ncl \\hieh were. likely to induce, directly or indirectly, the purchase of said preparation; and has disseminated, and caused the dissemination of, advertisements concerning said preparation by various means, including but not limited to the aforesaid media, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of said preparation in commerce, as "commerce is defined in the Federal Trade Commission Act. PAR. 5. Among and typical, and illustrative, but not all-inclusive of the statements and representations contained in said advertisements disseminated as hereinabove set forth are the following: 693-490--64----40 .

Complaint 59 F.

If you tire easily, if ron feel run-down or are subject to stress and strain due to a vitamin and mineral deficiency, '" * '" try * '" * VITALIFE * Don t let a nutritional deficiency rob you of youthful vigor and vitality. Replenish your body with high potency VITALI FE Capsules to help you feel better look better, sleep better.

If you '" '" * are subject to '" '" * tension due to a vitamin and mineral deficiency '" '" '" take '" '" '" VITALIFE and feel the difference in just a few days time! Don t think you are getting old because you are constantly tired, weak, rundown and nervous. . . or, if you suffer from digestive distress, restless, sleepless nights, due to a lack of vitamins and minerals! Why not test'" '" '" VITA. LIFE This time of year, during changeable wea ther, is when those miserable colds :meak up on us! If you re tired, wealr, nervous and run-down because of a vitamin and mineral deficiency, a cold can develop into something much more llangerous! ,~ '" '" Tal,e high-potency VITALIFE! VITA~IIN A-A deficiency of Vitamin A, may cause poor complexion, night blindness, rough dry skin, may reduce resistance to infections of the mucous membranes.

YITA:\lI~ B- A deficiency of Vitamin B-1 (Thiamine) may cause nervousness, poor digestion, vague aches and pains, constipation, tiredness, sleeplessness, sluggish gall bladder, heart palpitation.

VITA~IIN B- deficiency of Vitamin B- (Riboflavin) may cause sore lips, sores about corners of the mouth, itching and burning of the eyes, cataracts, low vitality, tongue and mouth inflammation. YITA:\IIN B- deficiency of Vitamip B- (Pyridoxine) may cause extreme muscular weakness, leg cramps, dermatitis, certain nervous disorders. VITAMIN B-12-A deficiency of Vitamin B-12 may cause anemic conditions tiredness, weakness, sluggish conditions.

VITAMIN C-A deficiency of Vitamin C (Ascorbic Acid) may cause bleeding gums, rheumatic, arthritic aches and pains, muscle stiffness, brittle bones, infection, pyorrhetic conditions, weakened blood vessel walls. YITA:\IIN D-A deficiency of Vitamin D may cause poor bone structure, bad teeth, calcium deficiency, rickets, arthritis. IRON-A deficiency of Iron may cause anemia, lack of pep, energy, vitality, pale complexion, improper development of red blood cells, palpitation of the heart, & general run-down condition.

CALCIUj\I-A deficiency of Calcium may cause muscle soreness, headachL's rheumatic, arthritic aches and pains, nenousness, wasting, shrinking and fragility of the bones, spasms, poor teeth, low metabolism, nttaCKS of cramping leg muscles while in bed at night.

NIACINAMIDE-A deficiency of Niacin (Niacinamide) may cause nervousness, mental inactivity, headaches, dizziness, insomnia, digestive distress, despondency.

CALCIUM P ANTOTHEN A TE- deficiency of Calcium Pantothenate may cause gray hair, loss of hair, inflrlllllDatioD of intestinal tract, certain types of nerve degeneration.

PAR. G. Through the use of t.he said advertisements and others similar thereto not spec.ifical1y set out herein, respondent has repre- , ,, , VIT ALIFE, ETC. 611 608 Complaint sented and is now representing, directly and by implication, that Vitalife Vitamins and :Minerals (a) ,Viii be of benefit in the prevention and treatment of colds sluggish gall bladder, heart palpitation, cataracts, rheumatic and arthritic aches and pains, arthritis, pyorrhetic conditions, shrinking of the bones, low metabolism, grRY hair, loss of hair, inflanll11ation of the intestinal tract and certain types of nerve degeneration. (b) 1Vill be of benefit in the treatment of tiredness, weakness, nervousness, nervous disorders, restlessness, sluggishness, insomnia, lack of pep, energy, vigor and vitality, mental inactivity, headache, dizziness, constipation, digestive distress, despondency, poor complexion rough dry skin, infections of the mucous membranes, sore lips, mouth sores, bleeding gums, ocular itching and burning, inflammations of tongue and mouth, muscular \veakness, leg cramps, dermatitis, muscle stiffness, infection, weakened blood vessel walls, bad teeth, pale complexion, general run-down condition, brittle bones, wasting and fra. gility of the bones, and spasms.

PAR. 7. The said advertisements were and are misleading in material respects and constituted, and now constitute false advertisements:' as that term is defined in the Federal Trade Commission Act. In truth and in fact "Vitalife Vitamins and l\linerals (a) ,Vill not be of benefit in the prevention or treatment of colds sluggish gall bladder, heart palpitation, cataracts, rhemnatic or arthritic aches or pains, arthritis, pyorrhetic conditions, shrinking of the bones, low metabolism, gray hair, loss of hair, inflammation of the intestinal tract, or any type of nerve degeneration. (b) Except in a small minority of persons in whom such symptoms are caused by an established deficiency of one or more of the nutrients provided by the preparation, will not be of benefit in the treatment (If tiredness, weakness, nervousness, nervous disorders, restlessness, sluggishness, insomnia, lack of pep, e,energy, vigor or vitality, mental inactivity, headache, dizziness, constipation, digestive distress, despondency, poor complexion, rough dry skin, infections of the mucous membranes, sore lips, mouth sores, bleeding gums, ocular itching or burning, inflammations of tongue or mouth, muscular weakness: leg cramps dermatitis, nluscle stiffness, infection, weakened blood vessel walls, bad teeth, pale complexion, general rundmnl condition, brittle bones, wasting or fragility of the bones, or spasms.

Furthermore, the statements and representations in said advertisements have the capacity and tendency to suggest and do suggest to persons who are tired, weak, nervous, restless, sluggish, despondent and constipated, \vho have nervous disorders eakenec1 blood vessel walls: bad teeth and pale complexion, who lack pep, energy, vigor and vitality, who are mentally inactive, and "Tho suffer from headache 612 FEDERAL TRADE COML\IISSION DECISIONS Decision 59 F.

dizziness, digestive distress, insomnia; poor eomplexion, rough dry skin, infections of the mucous membranes and other infections, sore lips, mouth sores, ocular itching and burning, inflammations of tongue and mouth, muscular weakness, leg cramps, dermatitis, bleeding gums music1e stiffness, brittle bones, wasting and fragility of the bones, and spasms that there is a reasonable probability that they have symptoms which will respond to treatment by the use of respondent's pre,paration. In the light of such statements and representations, said ac1vel'~ tisements are misleading in a material respect and therefore constitute false aclYertisements:' as the term is defined in the Federal Trade Commission Act, because they fail to reveal the material fact that in the great majority of persons having any of the symptoms set ont above in subparagraph (b) of P ARAGRAPI-I SIX, none of these said symptoms is caused by -a.11 established deficiency of one or more of the nutrients lwoYided by "Vitalife Vitamins and :Minerals :' and that in such cases the said preparation will be of no benefit. PAIL 8. The dissemination by the respondent of the false ach-ertisements, as aforesaid, constituted, and now constitutes, unfair and deceptive acts and practices, in commerce, within the intent and meaning of the Federal Trade Con1J11ission Act.

1111'. Bel' rymanDavis lor the Commission. Frank E. and A?,tku1' Gettleman by 1117' Fnmk E. Gettlenwn. Chicago, Ill., for the respondent.

INITIAL DECISION BY HAY:l\IOXD J. LYNCH, I-IEAHING I~X.DIINER The complaint in this proceeding, issued :May 15, 1961, charges the above-named respondent with violation of the provisions of the Federal Trade Con1l11ission Act.

On July 31, 1961, there was submitted to the undersigned hearing examiner an agreement between respondent and counsel supporting the complaint providing for the entry of a consent order. Under the foregoing agreement: the respondent admits the jurisdictional facts alleged in the complaint. The parties agree, among other things, that the cease and desist order there set forth may be entered without further notice and have the same force and effect as if entered after a full heating and the c1oclU11ent includes a ""aiver by the respondent of all rights to challenge or contest the validity of the order issuing in accordance therewith. The agreement further recites that it is lor settlement. purposes only and does not constitute an admission by the respondent that she has violated the law as alleged in the complaint, and that the complaint may be used in construing the terms of the order.

VITALIFE, ETC. 613 608 Order The hearing examiner finds that the content of the agreement meets 'all of the requirements of Section 3.25 (b) of the Rules of the Commission.

The hearing examiner having considered the agreement and proposed order, and being of the opinion that they provide an appropriate basis for settlement and disposition of this proceeding, the agreement is hereby accepted, and it is ordered that said agreement shall not become a part of the official record unless and until it becomes a part of the decision of the Commission. The following jurisdictional findings are nlade and the following order issued.

1. Respondent Evelyn J\liller is an individual trading as Vitalife Vitalife Vitamins, Vitalife Products, and as Vital Health-Foods Co. with her ofiice and principal place of business located at 1404 First Avenue East in the City of Cedar Rapids, State of Iowa. 2. The Federal Trade Commission has jurisdiction of the subject matter of tills proceeding and of the respondent, and the proceeding is in the public interest.

ORDER It is orde7' That Evelyn :Miller, an individual trading as Vitalife Vitalife Vitamins, Vitalife Products and Vital Health- Foods Co. under any other trade name or names, and respondent's representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of the preparation designated Vitalife Vitamins and J\linerals, or any other preparation of substantially similar composition or possessing substantially similar properties, whether sold under the same name or any other name, do forthwith cease and desist, directly or indirectly~ from:

1. Disseminating or causing to be disseminated any advertiselnent by means of the United States mails or by any means in commerce, as commerce" is defined in the Federal Trade Commission Act, which advertisement represents directly or indirectly: (a) That said preparation will be of benefit in the prevention or treatment of colds, sluggish gall bladder, heart palpitation, cataracts rheumatic or arthritic aches or pains, arthritis, pyorrhetic conditions shrinking of the bones, low metabolism, gray hair, loss of hair, inflammation of the intestinal tract, or any type of nerve degeneration. (b) That said preparation will be of benefit in the treatment of tiredness, weakness, nervousness, nervous disorders, restlessness, sluggishncs, insomnia, lack of pep, energy, vigor or vitality, mental inactivity, headache, dizziness, constipation, digestive distress, despondency, poor complexion, rough dry skin, infections of the mucous membranes, sore lips, mouth sores, bleeding gums ' ocular itching or ,, 614 FEDERAL' TRADE COMMISSION DECISIONS Syllabus 59 F.

burning, inflammations of tongue or mouth, muscular weakness, leg cramps, dermatitis, muscle stiffness, infection, weakened blood vessel . walls, bad teeth, pale complexion, general rundown condition, brittle bones, wasting or fragility of the bones, or spasms, unless such advertisement expressly limits the effectiveness of the preparation to those persons whose symptoms have been caused by an established deficiency of one or more of the nutrients provided by the preparation and further, unless the advertisement clearly and conspicuously reveals the fact that in the great majority of persons these symptoms are caused by eonclitions other than those which may respond to treatment by the use of the preparation, and that in such persons the preparation will not be of benefit.

2. Disseminating or causing the dissemination of any advertisement by nny means for the purpose of inducing or ,,-which is likely to induce directly or indirectly, the purchase in commerce, as "commerce" is defined in the Federal Trade Commission Act, of said preparation ,which advertisement contains any of the representations prohibited in paragraph 1 hereof.

DECISION OF THE COl\HnSSION AND ORDER TO FILE REPORT OF COl\IPLIA N CE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall on the 23rd day of Se.ptember 1961 become the deeision of the Commission; and, accordingly :

It is ordered That the respondent herein shall, within sixty (60) days after service upon her of this order, file with the Commission a report in writing setting forth in detail the manner and form in hieh she has complied with the order to cease and desist. I X THE ~lA TTER OF UNION CARBIDE CORPORATIO~ ORDER , ETC. , IX REG.ARD TO THE .\ALLEGED YIOL,\TION OF SEC. /' OF THE CLAYTON ACT Docket 682G. CO1111Jlaint, .Jul!! S, 195/-Dccision, Sept. 25, 1ge! Order requiring the nation s second biggest chemical company and largest producer of polyethylene resins used for making polyethylene film, to divest itself of the largest manufacturer of polyethylene film, formerly an important customer, which it acquired OIl Dec. 31, 1956, in an exchange of its stock for the acquired company s assets.

UNION CARBIDE CORPORATION 615 614 Complaint CO:MPLAINT The Federal Trade Commission, having reason to believe that the party respondent named in the caption hereof, and hereinafter more particularly designated and described, has violated and is now violating the provisions of Section 7 of the Clayton Act (15 U. C. Sec. 18), as amended and approved December 29, 1950, hereby issues its complaint, charging as follows:

PARAGRA,PH 1. Respondent Union Carbide Corporation, hereinafter referred to as Union Carbide, is a corporation organized and existing under the laws of the State of New York, with its principal office and place of business located at 30 East 42nd Street, New York, N e.i\ York. Union Carbide is the second largest chemical company in the United States and almost twice as large as the next largest chemical company in terms of sales and assets. In 1950 it had assets of $869 175 000 and sales of approximately $758 254 000. By 1956 it had assets of $1,459 748 000 and sales of approximately $1 324 506 000; percentage,yise an increase of 75% in sales and 68% in assets since 1950. Union Carbide does business worldwide, with properties and faeilities throughout the United States and foreign countries. Its manufacturing and distributing facilities are divided into five major groups: (1) alloys and metals aecounting for 25% of total sales; (2) chemicals, accounting for 28 % of total sales; (3) electrodes, carbons and batteries, accounting for 12% of total sales; (4) industrial gases and carbides, accounting for 15% of total sales; and (5) plastics, accounting for 20% of total sales in 1956. Union Carbide is engaged in the sale and distribution of the above-named product groups, including polyethylene resins and vinyl resins, throughout the several states of the United States, in commerce, as "commerce" is defined in the Cl ayton Act.

Union Carbide s plastics are sold and distribntec1 in commerce, as aforesaid, through the Bakelite Company, a division of Union Carbide. Bakelite s plant locations for the production of high-pressure polyrthyle,ne resins include plant sites at Texas City and Seadrift, Texas; Torrance, California; and at Sonth Charleston, ,Yest Virginia. flighpressure polyethylene resins are sold and distributed by Bake1ite~ for various uses, to :1, number of processors among which are extruders engaged in the manufacture or polyethylene film, tnbing and sheeting, hereinafter referred to fis pol yet hy lene film. OOO In 1955 Union Carbide had polyethylene resins sales of $85 481 which aecounted for approximately 61 % of the total national sales of $138 264 000 by all producers. Its polyethylene resins sales of 891 302 000 in 19;)0 ,ye::,'e approximately~' ::Ll:% of its tot-a 1 pln!:;tic sales find __ ____ ____ _ .complaint 59 F.

were greater than the sale of any other plastic resins manufactured by Union Carbide.

Union Carbide had a capacity in 1956 for the production of approximately 300 000 000 pounds of high-pressure polyethylene resins, or approximately 46% of the estimated total national capacity of 650 000 000 pounds. Its capacity for production of said polyethylene resins in 1956 was more than double that of its nearest competitor E. 1. du Pont de N emours & Co. Inc.

PAR. 2. Visking Corporation, hereinafter referred to as Visking, a corporation organized October 27, 1925, was, prior to December 31 1956, doing business under and by virtue of the laws of the State of Virginia, with its principal office and place of business located at 6733 'Vest 65th Street, Chicago, Illinois.

In 1950 Visking s sales \\ere $24 580 000 and its assets were $17 460 000. By 1956 its sales had increased to $56 022 000 and its assets had increased to approximately $38 309 000; pereentagewise an increase of 128% in sales and 119% in assets since 1950. Visking was engaged primarily in the manufacture of synthetic sausage casings and polyethylene fihn. Its synthetic sausage casings were sold principally to meat packers and sausage makers. The major part of its polyethylei1e film \Vas sold directly to converters and a minor part. to certain direct consumer industries such as the construction industry. It sold and distributed said products throughout the several states of the United States, in commerce, as "commerce" is defined in the Clayton Act.

Visking had two basic divisions, the Food Casing Division, with headquarters in Chicago, Illinois, and the Plr.stics Division, with headquarters in Terre I-Iaute, Indiana. Visking had plants for the production of synthetic sausage casings and polyethylene film in the follmying locations:

Synthetic Poly- Location sausage ethylene casings fihn United States: Chicago, IlJinoisn -- - --- - _un - - --- -- __-nu--_uun - - nn_ - n n -- --- Loudon, Tennessee- ___on - - n n - - - - n -- nn - - _uu_- -- -- - - __n_- n ---- - n Terre Haute, IndiatHL - -- n_-- _n____n_U- -- ----__u_u_n_n_uu_un__n u_--u__ Flemington, '" ew .Terse)' n nn --- - n- - u_ -- - n- - n- n n - - n___- _u_----- nn --- Fremont, California- -- n_ n n n_- - - n -- n - - n - _-n -- nn - h - - - n _n -- n___- - - -n_ Canada:

V~king, Ltd- - Dominion Viscose Products, Ltd____ --_nn___nn__u_ _--n_n_nn- England: Viskase, Ltd. (50 percent owned)nn__u_--_n_-_n_u_nn_-_nn_n_-_un X British Visqueen (33 percent ownedL-- _n- -_n_n _u_-_n_nn__n__ nnn- --_n__un-France: Viseora, S. A. (50 percent owned)_ nn_---nn_ _n_n_-_n_n_nn- X Italy: Pirelli,S. A. (20 percellt ownedLun---n-_u__un_n_--_n_- _n_n__n n _n__Brazil: Visking do Brasil (50 percent ownedL-_n_ -_n__h__U_ _n_---_n- X UNION CARBIDE CORPORATION 617 614 Complaint Visking was the first to introduce cellulose. sausage easlllgs and its sales accounted for approximately 75% of the synthetic sausage casings sold in 1954. In 1956 it sold 12 201 000 pounds of cellulose sausage casings va.Jued ak $25 591 000; it also sold approximately 858 000 pounds of plastic sausage casings valued at $1 498 000. Viskillg has been the largest producer of polyethylene film for several.I years. Its sales of polyethylene film in 1956 accounted for approximately 40% of total national sales. In 1956 it sold approximately 47 830 000 pounds of polyethylene film valued at approximately $27 000 000. AR. 3. In 1956 Union Carbide s sa.les accounted for over 50% of the high-pressure polyethylene resins sold in the United States. was also a major producer of vinyl and other plastics. Its sales of polyethylene resins had increased from approximately $85 482 000 in 1955 to $91 302 000 in 1956 and its total shipments had increased by 045 370 pounds over 1955. It was the principal supplier of polyethylene resin to extruders of polyethylene film. It had approximately nine competitors engaged in the manufacture and sale of polyethylene resins.

In 1956 Visking sold approximately 65% of the synthetic sausage casings and approximately 40% of the polyethylene film sold in the United States. Its sales of synthetic sausage casings were $27 089 000 and its total shipments were 13 059 000 pounds in 1956. Its sales of polyethylene film were approximately $27 000 000 and its total shipments were approximately 47 830 000 pounds in 1956. Substantially all synthetic sausage caslllgs are manufactured from regenerated cellulose. Some are manufactured from plastics, such as polyethylene and vinyl. Polyethylene film is manufactured from polyethylene resin. Visking had two competitors in the manufacture and saJe of cellulose sausage casings, both of whom operated under a licensing arrangement with Visking. It had approximately fifty competitors engaged in the manufacture and sale of polyethylene film. Six of these competitors were licensed by Visking under a uniform licensing agreement to manufacture polyethylene film.

In addition to the aforesaicllicensing arrangements which Visking had with certain of its competitors, it held a royalty-free non-assignable license from Union Carbide for the production, use and sale of vinyl fiJnl, sheeting, rods, tubes and monofilaments. Visking had also granted Union Carbide a Jicense to certain patents regarding the manufacture and use of plastics as it had or might get at any future date. Visking further had contracted with Union Carbide. for the conduct of a development and testing program on such synthetic resins as might be submitted.d to it hy Union Carbide for commercial suitability tests. During 1956 Union Carbide made pa.yments of Complaint 5D F.

$300 000 to Visking in connection with their research and patent derelopment contract, and $250 000 under their patent license agreement.

In 1055 Visking s purchases of polyethylene resin amounted to 41 820 000 pounds valued at approximately $16 326 000, of which approxinlately 82% or 35,116 000 pounds valued at $13 434 000 were purchased from Union Carbide. In 1956, 47 953 000 pounds valued at $18 031 000 of Visking s total polyethylene resin requirements of 127 000 pounds valued at $19 965 000 were purchased from Union Carbide.

On January 1, 1955, Union Carbide entered into an agre,ement with Visking providing for discounts on polyethylene resin purchased the following scale:

Discoull t.

(Percent) 0-4Quantitymillion__--_- ------ ------------ 0 (Pounds) 4-8 million_____-- --- 4 8-14 million_-____ ---- 7 14-221h million- ----------- -------------------------- 81h 221;2 million and over__-__--------------------------------- 10 Visking was the only polyethylene film extruder purchasing polyethylene resin from Union Carbide in quantities sufficient to qualify for discounts of 7% or more under this schedule. Similar agreements were not entered into by Union Carbide \\ith its other customers engaged:in the manufacture of said film.

PAR. 4. On September 14, 1956, Union Carbide and Visking entered into a memorandum agreement providing for the purchase of Visking by Union Carbide. On that date the stock which Union Carbide agreed to exchange for Visking s assets was ynJued at about $102 437 000 and Visking s stock ,vas valued at about $85 364 000. On or about December 31 : 1956, Union Carbide acquired all, or snbstnntially all, of the assets of Visking by exchanging about 864 449 shares of its stock for the business and assets of Visking. Visking is presentry opeTnted as Visking Company, a division of Union Carbide. PAR. 5. The effect of the aforesaid acquisition of Visking by Union Carbide may be substantially to lessen competition or to tend to create a monopoly in the manufacture, sale and distribution of polyethylene resin polyethylene film~ and synthetic sausage casings in the United States within the meaning of Section 7 of the Cbyton Act, as amended. The probn bJe aforesaid effects may include the following, nmong others:

1. Ljnion Carbic1e~ the largest producer of polyethylene resin, by acquiring Yisking, the largest producer of polyethylene film, extended its business in such n manner as may substantially increase its position ) UNION CARBIDE CORPORATION 619 614 Decision in the manufacture, sale and distribution of polyethylene resin and film; and it may exercise the inherent pmyers of its acquired position to substantially lessen competition or to tend to create a monopoly in the manufacture, sale and distribution of polyethylene resin or polyethylene film.

2. This acquisition has the effect of lessening actual or potential competition by foreclosing or tending to foreclose other manufacturers of polyethylene resin from a substantial share of the market for polyethy lene resin.

3. ~'--S the principal source of supply for poJyethy lene re.sin and as the principal competitor of other polyethylene film extruders, Union Carbide has acquired a position Iyhereby it may manipulate prices or use other means to Jessen competition or tend to create a monopoly. 4. This acquisition may eliminate or restrict opportunities which extruders of polyethylene film have to influence. the supply or price of said product, or to engage in independent market behavior contrary to the interest of Union Carbide.

5. This acquisition may preclude or limit entry of actual or potential competitors in the manufacture and sale of polyethylene film. G. The acquisition of Visking, the dominant manufacturer ~U1d distributor of synthetic sausage casings, by Union Carbide, :1 company which hns a. much greater financial, research, and resource position may tend to lessen competition and exclude actual or potential competitors from entering the synthetic sausage casing business. 7. lInion Carbide, in acquiring Visking, has eliminated any potential comnetition bet,,-een itself and Visking." in the manufacture. sale or distribution of polyethylene resin, polyethylene film, or synthetic sausage casmgs.

PAR. G. The foregoing acquisition, acts and practices of respondent, fls hereinbefore alleged and set forth, constitute a. violation of Section 7 of the Clayton ~\..ct (15 U. C. Sec. 18) as amended and approved December 29 1950.

Ai CS8/'S. .7. lV allace Adai' and David l. ill elf ean for the Commission;

If e77 ey~ DJ'ye, iYe'LclwU ill agjnne8 by .I~l eS81'8. Joseph H. S?l7tzth lVizz,ia-!n E. 11'L(.th~ F1'ancls S. Ben8el~ l11ilton l-landle7', Stanley D. Robinson nnc1I( enn.eth J. Jones N el\ York, N. , for respondent. IXITL\L DECISION BY Am.mn E. Ln' SCO::HB, HE"\IUXG EXAMINER A. Tile CO::\IPL.UXT .\~D XXSWER 1. The complaint. in this proceeding was issued on July 8, 1957 charging the respondent. corporation with yiolabng ~ 7 of the Clayton . . .

Decision 59 F.

Act (15 D. C. S 18), as amended, by acquiring "all or substantially aU" of the assets of the Visking Corporation. Specifically, the complaint a.alleges that. the effect of the acquisition may be substantially to lessen competition or to tend to create a monopoly in the manufacture and sale of three products, namely: (a) polyethylene resins which were and are manufactured and sold by Union Carbide; (b) polyethylene film, which was manufactured and sold by the Visking Corporation, and (c) synthetic sausage casings, which were also manufactured and sold by the. Visking Corporation. The part of the Clayton L\..ct upon which the complaint is based provides that no corporation subject to the jurisdiction of the Fedei'al Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, 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.

An answer was submitted by Respondent on September 25 , 1957 which in general denies the material allega6ons of the complaint. B. HE.\RI:\"GS IX SUPPORT OF Tile C.\SE-IX-CI-IIEF 2. I-Ieal'i!lgs in support of the ca~e- in-chief commenced on November 12, 1057, and "'ere held before the late Hearing Examiner Frank Irier in Ne,,' Yor1\:, Philadelphia, Chicago, and ,Yashington, D. , on various days in November and December, 1957, and in ~rarch, 1958. Counsel supporting the complaint rested their case-in-chief on :\larch 1958.

C. TI-IE ?IOTION TO DISMISS THE CO::\IPLAINT AND RULINGS THEREOX 3. On ~Iny 12, 1958, the Respondent, prior to presenting any defe.nse, submitted to the late I-Iearing Examiner I-lier a motion to clismiss the complaint. The motion averred that counsel in support of the complaint had failed tp present prima facie. evidence that rege.n- ('rated cellulose sausage and meat casings, polyethylene film and polyethylene resin each constitutes a line of commerce or relevant market within the meaning of S 7 of the Clayton Act, as amended; and furthe. , that. regardless of how lines of commerce or relevant markets might be. defined, counsel supporting the complaint had failed to present prima facie evidence that the eflect of Respondent's acquisition constituted a violation of 8 7 of the Clayton Act, as amended. 4. On ~\l1gust 19, 1958, the late I-Ienl'ing Examiner I-lier issued an order and opinion granting in part and denying in part Hespondenfs motion to dismiss the complaint. He ruled, in substance, as follows: (1) That a prima facie case had been developed that high-pressure process polyethylene resin sold for film extrusion purposes eonstitutec1 UNION CARBIDE CORPORATION 621 614 Decision a line of commerce or relevant market and that there existed a reasonable probability that competition may be lessened in such market by reason of the acquisition of the Visking Corporation by the Union Carbide Corporation;

(2) That polyethylene film is sold and used in substantial quantities in five fields, namely: flexible packaging, agricultural, construction, industrial, and decoration; there is a reasonable probability that competition may be lessened in the relevant market of polyethylene film sold to and used by the converters for flexible packaging; but that counsel supporting the complaint has made out no such prima facie case as to the polyethylene film sold for agricultural, construction, industrial and decorative purposes. Accordingly, the motion to dismiss was denied as to polyethylene film sold for flexible packaging purposes, but granted as to polyethylene film used for the four other purposes named above; and (3) That a prima facie case has been established that regenerated cellulose sausage and meat casings constitute a line of commerce or relevant market, but that counsel supporting the complaint had failed to establish a prima facie ease of a reasonable probability that the acquisition in question may substantially lessen competition or tend toward a monopoly in that line of commerce, and the motion to (11smiss the complaint as to that charge was granted. No appeal was taken from the above-described order. D. HEARINGS FOR THE RESPONDENT AND PROPOSED FINDINGS 5. Thereafter, Respondent presented its defense, hearings being held in November, 1958, and in January, February, April and June, 1959 until they were halted on June 10 , 1959, by the accidental death :Hearing Examiner Hier. On June 18, 1959, the present hearing examiner was assigned to hear this proceeding in lieu of I-Iearing Examiner Hier, and by order dated July 23, 1959, he adopted in substance the above-described order granting in part and denying in part Respondent' s motion to dismiss the complaint herein. 6. Subsequently, further hearings were held on behalf of the Re.. spondent in August, September and November, 1959, and in January, February and :March, 1960. Respondent rested its defense on I\iarch 1 1960, and counsel supporting the complaint presented rebuttal in ~fay and June. A short surrebuttal hearing was held in vVashington , on June 17, 1960, and the re.cord was then closed for the reception of evidence. The record contains more than 9 100 pages of transcript, oyer 1 200 exhibits, and numerous proposed findings as to facts and proposed conclusions. Opposing reply briefs were submitted on November 30, 1960.

Decision 59 F.

E. THE ACQUIRING CORPOH. TION-UNION CARBIDE CORPORA.TION A CORPORATION 7. The R.respondent Corporation, sometimes hereinafter referred to as Union Carbide, is a corporation organized and existing under the la,,-s of the State of New York, with its principal ofllce and place of business located at 30 East 42nd Street, New. Yark, New York. 8. Union Carbide is the second-largest chemical company in the United States, with properties and facilities located in various parts sales ofof the country. In 1950 it had assets of $869 175 000 and approximately $758 254 000. By 1956 it had acquired assets of $1 459 748 000, including the assets of The Visking Corporation, fll1d had increased its sales to approximately $1 324 506 000, including the. net sales of The Visking Corporation.

9. Union Carbide s business is divided into seven major groups of products, as follows: (1) alloys and metals; (2) carbon products; (3) chemicals; (4) industrial gases and carbides; (5) plastics; (6) nuelenr products, and (7) consumers' products, such as Prest one and Trex PY1'ofaxanti-freezes Eveready flashlight cases and batteries, and total sales in 1957bottled gas. Approximately ten percent of its consisted of such consumer products. Respondent' s various operating activities are carried on through numerous corporate divisions and subsidiaries, \\which in 1957 \\ere substantially as follows: Electro Metallurgical Co. : Produces more than 100 different alloys and alloying metals for use in making steel, cast-iron and nonferrous metals, also silicon metal and high-silicon alloys. These products are added to metals while molten to cleanse them of impurities and impart desirable properties such as strength, toughness, and resistance to wear, heat and corrosion. Chromium alloys, for il1stance, make steel "stainless." The Division also produces calcium carbide, sold by Linde Company for use in maldng acetylene; Haynes Stellite Co. : Produces a wide variety of special alloy metals designed to withstand extreme heat, corrosion and weal'; Union Carbide Ore Co. : Procures domestic and foreign ores used by the corporation for metallurgical and other purposes; Union Carbide Chemicals Co. : Produces more than 400 synthetic organic chemicals, such as ethylene oxide, ethanol, isopropanol; the etbanolamines; acrylonitrile, a major starting material for new synthetic fibers; hydroxyetbyl cellulose ("Cellosize ) widel;\! used in paints and emulsions; and others, which enter into every important bran(:h of industry; Pnion Carbide Olefins Co. : Produces and sells ethylene and other related products that are used in the preparation of organic chemicals; Silicones Division: Produces a large number of various chemieal specialties and industrial chemicals, including raw materials for silicone metal, and silicone products;

National Carbon Company: Produces a wide range of carbon and graphite products used in essentially every segment of industry; UNION CARBIDE CORPORATION 623 614 Decision Kemet Company: Primarily engaged in the manufacture and sale of barium getters and other devices used in the manufacture of vacuum tube grids, and other materials for the electronics industry; Linde Company: Principally engaged in the extraction of various gases from the air and the sale of these industrial gases, together with the equipment necessary for their use;

Bakelite Company: Sells many different formulations based on each of the four major types of plastics: polyethylene, vinyl, phenolic, and styrene; also two new types, epoxies and silicones;

Visking Company: Produces synthetic food casings and plastic films, used in packaging processed meat and sausage products and in manufacture of skinless frankfurters, and polyethylene film for flexible packaging material under the trade-mark "Visqueen Pyrofax Gas Corporation: Markets portable cylinders of liquefied gas for consumer use, and gas appliances utilizing this gas; Union Carbide Canada Limited: Has six divisions operating 39 plants and sales offices throughout Canada;

Union Carbide Development Company: Promotes the overall growth and expansion of the corporation;

Union Carbide International Company: Handles export sales of Corporation products and represents the Corporation for numerous affiliated producing and selling companies abroad; and Union Carbide Nuclear Company: Has more than 100 uranium mines in Colorado; capacity for processing uranium ores in Colorado and Utah 2,400 tons per day. Operates the Atomic Energy Commission s production and de'-elopment installations at Oak Ridge, Tennessee, and Paducah, Kentucky. 10. It must be remembered that, although Union Carbide and its various divisions and subsidiaries manufacture many and varied products, the only ones with which we are directly concerned herein are polyethylene resin, which has been continuously manufactured and sold by Union Carbide since prior to its acquisition of The Visking Corporation, and polyethylene film and synthetic sausage casings which were manufactured and sold by The Visking Corporation, but not by Union Carbide, prior to that acquisition. F. THE ACQUIRED CORPOPu'\.TION-THE VISKING CORPORATION 11. The Visking Corporation, hereinafter sometimes referred to as Visking, was incorporated in the State of Virginia on October 27, 1925 and prior to its acquisition by Union Carbide on December 31 , 1956 was doing business by virtue of such incorporation, with its principal office and place of business located at 6733 1Vest 65th Street., Chicago Illinois.

12. In 1950 Visking had assets valued at $17 460 000, with sales for that year of $24 580 000. By 1956, the year of the acquisition in question, its assets had increased to approximately $38 309 000 and its yearly sales to $56 022 000; percentagewise, an increase of 119 % in , Derision 59 F.

assets and 128% in sales since 1950. As observed by the late Hearing Examiner Hier, too, has a dynamic and aggressive history- 13. Visking was engaged primarily in the manufacture of two products, namely, synthetic sausage casing and polyethylene film. Its synthetic sausage casings were sold principally to meat packers and sausage makers. Its polyethylene film was manufactured from polyethylene resin, a large amount of which it purchased from Union Carbide. Visking sold its film directly to converters and to end users and distributed its products throughout the several states of the United States in commerce, as "commerce" is defined in the Clayton Act, as amended.

14. Visking had two basic divisions, the Food Casing Division, with headquarters in Chicago, Illinois, and the Plastics Division, with headquarters in Terre Haute, Indiana. Its plants for the production of synthetic sausage casings in this country were located in Chicago Illinois, and in Loudon, Tennessee. Its plants for the production of polyethy lene film in this country were at Terre Haute, Indiana Flemington, New Jersey, and Fremont, California. G. THE ACQUISITION OF VISKING BY UNION CARBIDE 15. As of December 31, 1956, Union Carbide acquired substantially all of the property, assets, good will and business as a going concern of The Visking Corporation in exchange for 864 449 shares of Union Carbide common stock, pursuant to the provisions of a Plan and Agreement of Reorganization, dated N O\~member 21, 1956, and a memorandum agreement, dated September 14, 1956, between Union Carbide and Visking. On November 21, 1956, based on the closing price for the day on the New York Stock Exchange ($105.125 per share), of which judicial notice is taken, the value of said Union Carbide shares \\as approximately $90 875 201. The Plan of Reorganization also provided for the assumption by Union Carbide of Visking liabilities, the prompt dissolution of Visking and the distribution of Union Carbide stock to the stockholders of Visking according to their respective interests. In the course of the reorganization the Visking stockholders in effect exchanged their stock in Visking for stock in Union Carbide at the rate of one share of Union Carbide voting stock for each 2.5 shares of Visking stock held by them. 16. Since January 1, 1957, the properties and business acquired by Union Carbide pursuant to the approved Plan of Reorganization have been operated as a division of Union Carbide under the name of the Visking Company Division of Union Carbide Corporation. , :: ? , UNION CARBIDE CORPORATION 625 614 Decision H. LINES OF CO::\UIERCE 17. As we have previously observed s 7 of the Clayton Act prohibits the acquisition of one corporation by another "-where in any line of C07n'lnerCe in any section of the country: the effect of such acquisition may be substantially to lessen competition or to tend to create a monopoly . The questions at once arise: "'hat is meant by "line of commerce': and "section of the country 18. The words "section of the country': obviously refer to the geographical area in \\which a line of commerce moves in trade. In the present case we are fortunate in having no conflict bet\yeen counsel as to the meaning of the phrase "section of the country, because all counsel recognize that R.respondent's products are bought and sold throughout the United States. Accordingly, \\e may look anywhere in the United States for the eflects of the acquisition upon the relevant lines of commerce.

19. In common parlance, the phrase "line of commerce': signifies a commodity or class of commodities which is bought and sold in trade among the several states. It is difficult, ho,vever, if not impossible, in a case such as this, to find or formulate an authoritative definition of "line of commerce" which is, at the same time, broad enough to satisfy the demands of Respondent's counsel, and nalTO\\ enough to satisfy Government counsel.

:20. As might be expected, we have herein a sharp difl'erence of opinion on the part. of counsel as to the criteria to be employed in determining the scope of the relevant lines of commerce. For example does the line of commerce of basic resins include all basic resins, or is it limited to those basic resins and compounds manufactured and sold for film-extrusion purposes only? Also: is the line of commerce including polyethylene limited to polyethylene film manufactured and sold for flexible-packaging purposes only, or does that line of eommeree inc)ude all flexible-packaging products, regardless of the materia) of which they may be made? 21. The problem of selecting satisfactory criteria for determining the. scope of a relevant line of commerce was discussed in some detail by the late Hearing Examiner Hier in his ruling on Respondent's motion to dismiss the complaint herein. lie compared the two Supreme Court decisions which are generally referred to as the Cellophane Craie and the d'ilPont- Genf3ral il1otoT3 Case (U.S. v. E. J. d~I.Pont de 1Venw-u,'J"S :351 U.S. 377 (1956) and :353 u. S. 586 (1957) J. lie pointed out. that the Cellophane Case wherein the Court defined a line of eomme-rce "in terms of reasonable interchangeability for which (the prodacts~1 are proc1ueec1-price, use and qualities eonsiderecF as a pro- 693-490--64---- . . . , :,::: 626 FEDERAL TRADE COMMISSION DECISIONS. Decision 59 F.

ceeding under the Sherman Act and, as a result, the issue was whether an actual monopoly existed, rather than whether there was a reasonable threat of monopoly. This fact, he asserted, caused the Court to employ a broad, liberal test for determining the relevant line of commerce. The dupont-Generrill'rl motors acme he pointed out, involved the merger of two corporations under S of the Clayton Act, a proceeding in which the issue was not whether there was actual monopoly shown, but merely whether there was a reasonable probability that monopoly might result from the nlerger. This fact, he asserted, resulted in the use of a less broad and less liberal test than that applied by the Court in the Cellophane Case automobile finishes and fabrics have sufficient peculiar characteristics and uses to constitute them products sufficiently distinct from all other finishes and fabrics to make them a " line of commerce" within the meaning of the Clayton Act.

From this comparison Hearing Examiner Hier concluded that Study of these two cases, apart from the small avalanche of commentary ,which immediately followed the latter, lead me after considerable mental travail to the conclusion that the two cases are antithetical in approach and philosophy and that dupont-General Motors is controlling here. 22. Counsel supporting the complaint herein maintain I-Tearing Examiner Hier s conclusion, and base thereon their contentions regarding the scope of the relevant lines of commerce here involved. Counsel for the Respondent, ho\vever, take the contrary position, and assert that " The key language in dupont-Genf!J' aZ illoto1's is simply a verbal variant of the Cellophane formulation . They state in fact that:

The most comprehensive discussion of this question to date appears in Judge Herlands recent decision in United States v. Columbia Pictures Co.rp. (Trade Reg. Rep. (1960 Trade Cas. ) Par. 69,766 (S. Y. 1960)), where he sustained the legality under Section 7 of an acquisition by Screen Gems, a Columbia subsidiary, of rights to distribute Universal's pre-1948 feature films to television. In so holding, the court ruled that the pertinent line of commerce was not limited to the distribution of feature films to television stations, as claimed by the Government, but that it encompassed all forms of televi!':ion programing material. In the course of its opinion, the court stated: To determine whether or not there is a reasonable probability of a substanmallessening of competition, Section 7 of the Clayton Act demands an exn 111ination into economic realities. All competition ?nust be cons' dered, 'including competition ja.ced by the product i.n qllest1.on from other prod1wts. The tests enunciated by the authorities are consistent. Effectively, the test reasonable interchangeability for the purposes for which (the products) are produced-price, use and qualities considered ' and the test ' suffident peculiar characteristics and uses to constitute them products sufficiently distinct. . . to make them a "line of commerce" within the meaning of the Clayton Act' are' but different verbalizations of the SMne crite1'ion. ((;

UNION CARBIDE CORPORATION 627 614 Decision The~require the same accumulation and scrutiny of facts and application judgment. The task is to find the area of effective competition. The 'chara.cteriSti.C8 ana uses' formulation does not limit the co'ltrt' s inq1ti1-Y to physical attl' ibutes and foreclose inquiry into the competUive situa.tion. of B1'illo 007npany, Inc. Doeket 23. The Commission in the matter No. 6557 (l\1ay 23, 1958), in discussing the tests for determining the scope of a line of commerce, stated:

The test * * * is whether these products are shown by the facts to have such peculiar characteristics and uses as to constitute them sufficiently distinct from others to make them a "line of commerce" within the meaning of the Act. United States v. E. I. dupont den emours Co., 353 U. S. 586 (1957). That the acquired and acquiring corporations both made industrial steel wool was only one circumstance to be cons;idered. Additional factors which ('ould have been taken into account include data relating to the manner in which the products are marketed, their physical characteristics, prices and possibly other things bearing on the question of whether or not they may be d'istingui8hed competUively from other wares. (T)he mere fact that articles other than steel wool are marketed for industrial use as abrasives is not adequate legal warrant for including all abrasive products in the relevant line of commerce. * * * The Conu11ission, in the case of Reyn.olds Ai etaZs 007npm/y: a corporation, Docket No. 7009, reiterated the idea expressed in the B'J'illo opinion, that additional factors to be considered in defining a line. of commerce " * * * included data relating to the manner in which the products were marketed, the physical characteristies, prices and possibly other things bearing on the question of whether 01' not they may be distinguished competitively from other wares." The Commission further concluded thatinc1ustr:v snell It is clear that while a "line of commerce" may include an entire as "the iron and steel industry," it may also be confined to a lesser portion of the whole industry, United States v, Bethlehem Steel Corporation (168 F. Supp. 57() (1958)). In any such instance, the practices in the industry are of gn~at significance. Each case requires an examination of its own particular facts before' a determination can be made.

24. In the opinion of the I-Iearing Examiner, it is not necessary, for in this procee.ding, to con-.the purpose of defining "line of commerce" sider ,vhether the legal approach and philosophy which determined Sherman Ad Cellophanethe scope .of the "line of commerce" in the Case is antithetical in approach and philosophy to that which det~l'l11inea'. the line of commerce in the dupont-General :Motors 97 deci- Commission has statedsion.:' It is sufficient we think, that the in suqstance, that the appropriate test for defining the line of commerce, in a proceeding such as this, is to determine whether the products which counsel contends should be included in such line of commerce are shown by the evidence to have such peculiar characteristics and uses as to constitute them sufficiently distinct from other products , ,, ,, Decision 59 F.

to make them a " line of C'commerce within the meaning of the Act. At the same time, according to the Commission, \ye should also COll- ~idel' data. relevant to the manner in \\"hieh the products are marketed, their physical eharacteristics and prices~ and whether the products manufactured by the merged corporations are distinguishable COJrlpetitively from each other and from other competitive products. other \\"ords. we must examine and evaluate the competitive realities as they exist. and as they may have resulted from the acquisition ill question.

1. POLL:"'ETHYLENE RESIXS-LIKES OF CO::\fl\IERCE 2tJ. ~\s pn'violl~ly ob~ern'(l, the complaint alleges that an eflect of the aef!lli8ition ill question might he substantiany to le::;~;ell competition or to tend to create a monopoly in the mallllfacture, sale and distribllt ion of polyethylene resins. Early ill this proceeding, however, ('oun- ~,.'1 ::llpporting the. C'ompJaint contended, and no\\" contend, for the recognition of an additional line of commerce consisting of filnl-grade polyeth~-lene resins-the grade of polyethylene resins actually sold to l\lanufncturers of polyethylene tilrn.

~G. Polyethylene resin is a thermoplnstic material produced from the hydi'ocarbon ~ eth~-lene gas, by the polymerization, or linking togetty:'l' ill thain- like form ~ of ethylene molecules to form polyethylene HlOlecules. This linking together is aecomplishec1 by subjecting the eih~-l('ne gas to high temperatures and pressures in the presence of a catalyst. whidl initiates and speeds the reaction of ethylene with it~eH 10 form polyethylene.

:tl. Ethylene gas, the starting raw material for the process, is colorless gas \which is one. of the eonstituents of natural gas, and ean be obtained therefrom by refining~ or as a by-product gas from petro- It' um-refining operations. In making polyethylene resin, ethylene gas of high and rigidly-controlled purity is first liquefied. Next it is compressed to an intermediate pressure, above that of the original ethylene gas, but. belm\" the final pressure used. ~\t this intermediate. pressure point. the eatalyst, and a chain transfer agent or a diluent, if any is used, are introc1need. The ethylene is then compressed to a much higher pressure, and heated. The combination of heat, pressure, and catalyst causes the ethylene to react TI"ith itself and to polymerize to form polyethylene.

28. The polyethylene formecllmder these conditions flows to a sep~1rat or here the. unreaeted gas is remo\-ed and recycled. The polyethylene. is then extruded into thin ribbons or strands, which are cooled, solidified and then cut into 1!s-inch cubes grannIes, or pellet:: kno' nl as "basic resins UNION CARBIDE CORPORATION 629 614 Deei:,;ion 29. The manufacturing process is continuous, \with liquE'field1, compressed ethylene gas being fed into one end of a. reactor, \yhile the mixture of polyethylene and unreaeted ethylene gas is wlthtlrawn from the other end. Since the pressures used are in excess of 000 a tmospheres, or approximately 15 000 pounds per square inch, the reaction equipment is necessarily strong and heavy in order to ,yithstand such tremendous forces, Unje)J1 Carbide has about forty resin-producing units. These units produce one particular resin for several (bys at a time without s\yitehing to another rf'sin with different. characteristics. Since IDGG rnion Carl)ide h;lS Opt'l';ltell it~.; l'e~i;l pJn111"S i3(i5 (bys pel' year, 24 hours 11 day.

30, Polyethylene \' as developed by the Imperial Chemicals Industry, commonly referred to as ICI, in England in about. 1933. The method of manufacture employed by ICI involved the ftpplication of extremely high pressures in the polymerization of ethylene gns. Consequently resin produced by the. rci process is frequently referred to as "high pressure l)recess~~ I)QlyethyleJle resin. 3J. Union Carbide began the production of polyethylene resins in about. 1942 under an immunity from the ICI patents granted to it during the \y~U by the lnited States Goyernment. After the war clllPont became the excll1siye licensee of rci in the 'United States flnd :1. non-exclusive sub-license ,yas extended by dupont to Union Cubicle. from 194fi to 1952. In 1952 Union Carbide secured a license directly from ICI , \\'J11C11 continl1ec1llntil the TCI patents expired in 195G.

32. From April, 1943 until November, 1954 Union Carbide and dllPont. were the only manl1facturers of polyethylene resin in the rnitec1 States. In November, 195J, Eastman Kodak commenced the manl1Jact.ure of such resins. In 1955 fivn more companies entered the iieJd-DO\y Chemical Company, I\::oppers Company, Inc.~ ~lon- 8a111' o Chemical Company, National Petro-Chemical Corporation (now n, subsidiary of N ationa 1 Distillers and Chemical Corpol'fttion and kno\yn as United States Industrial Chemicals Company or ''IT.S.I.'' and Spencer Chemical Company. At the present time an eight companies are manufacturing and selling pol~' e.thylene resin. 3:3. Polyethylene resin is manufactured and sold for nine principal . uses or materials, as follows:

n. Inject-ion ill 0 ZcUng. Common houseware articles such as tumblers bmyls and wftstebaskets are typical injection-molded articles; b, Blow illolding. Squeeze bottles and other nan'ow-neck containers illustrate the. products made. by this process; c. lV ire and Cable Oo~'eling. A large number of different types of \yil'e and cable serving the electronics and communications field are coated with a protective covering of polyethylene; g. ) ,, Decision 59 F.

d. Pipe Extrusion. Polyethylene pipe is used to transport "after and corrosive liquids for various purposes; e.. Contour Exf1'usion. A monofilament, or strand, of polyethyle. js one of the principal contour-extruded products. ~lo11ofilaments are used to make such things as polyethylene rope; f. Ca1 endei'ing. I-Ieavy gauge polyethylene sheeting is produced by calendering. The sheeting may be used to produce, among other items, pressure-sensitive tapes employed as pipe wraps, electrical insubtion and other such protective covering functions; Ton-Extrusion Coating. Polyethylene-wax mixtures are used as a non-extrusion coating on milk cartons, bread wrappers, freezer paper and other similar items;

h. E;d /(8 ioll. ('oofl.ng. Paper and paperboard extrusion-coated ",it.ll polyethylene are used in R variety of packaging applications such as multi- all shipping bags; and i. Film Extru.r;don, Polyethylene film is used as a flexible paclmging material in various forms, including bags and sheets for wrapping purposes. It is also used in a large number of agricultural, building and construction, industrial, and consumer goods. 34. Polyethylene resin possesses three properties which determine the physical characteristics of the products manufactured from the resin. These are:

(a) :Melt index, or a ,-erage moleculflr weight (b) Density, and (c) ~Iolecular weight distribution.

Variations in these properties are built into polyethylene resins by regulating the operation controls of pressure, temperature, reaction tillie', catalyst, Rnd, if used, chain-transfer agents or diluents. (a) J! elf index is the measure of the rate of flow of molten polyethylene under certain standard test conditions. This rate bears an inyel'sP. relationship to the average molecular weight of polyethylene. The higher the rate of How, or melt index, the Imyer the average molecular "eight and vice versa. :Melt index, or average molecular weight, has a bearing on the ease with which.h resin may be processed. The higher the melt index (or the lower the average molec.ular ,veight), the less viscous is the n10lten resin, Viscosity affects the rate. of speed at which polyethylene resin can be processed into an end product. J\Ielt index is also significant in relation to the strength of products manufactured from polyethylene. The higher the melt index: or the lower the molecular weight, the weaker the product. (b) Den~dy is the standard unit volume of a material. 'With polyethylene. this is usually represented as grams per cubic centimeter. Hjgh pressure process polyethylene resin (also kno"-n as low density UNION CARBIDE CORPORATION 631 614 Decision resin) ranges in density from .910 to .945. Variations in density affect the stiffness, the melting temperature, the permeability to liquids and gases and the impact strength of products made from the resin. (c) il1olecular 1ueig ht distl'ibu.tion refers to the spread or distribution in the resin of molecule.s of various molec.ular weights. There is no reliable analytical method for accurately determining molecular weight distribution. It may be roughly clnssified, however, as broad or narrO"\Y, based on empirical test data. At a given melt index, resins of a broa-d molecular weight distribution process more e.easily than resins of narrow molecular weight distribution. j\Iolec.ular weight clistribubon has an efiect on film clarity, 10\" temperature brittleness and stress-cracking resistance.

Union Carbide tests representative samples of polyethylene. resin after it has been pelJetized, to determine the. quality of a particular lot of resin. Lots that meet the same performance specifications are blended together by mechanieal means. The fu1ished basic resin, then rea-dy for cOlnmercial use, may be shipped directly to customers, to warehouses for inventory, or it may be fmiher processeel by hot processing or compounding. flot processing improves the homogenity of a resin; it does not change the chemical composition of a basic resin or its density; it does not change the melt index to any significant extent; it may change, slightly, the molecular weight distribution. the Examiner visually observed, hot processed resins have the same appearance, size, color, and form as basic polyethylene resins. The principal additives employed by Union Carbide in compounding are colorants and blacks, anti-oxidants, slip agents and anti-block agents. Colorants impart color to the end products; blacks are use.d prineipally to adel weather resistance to polyethylene pipe, wire covering protect theand film used for agricultural purposes. Anti-oxidants resin, or the end product, from oxidation by exposure to air. Slip agents reduce friction bet:\yeen la.yers of film, extrusion-coateel substrates or nested molded items; they also improve machinability of agents recluc.efilm and mold release in injection molding. Anti-block the te-neleney of two layers of film to cling together. Compounding results in only a physical mixture of the basic resin find the additive or additives; it does not change the c.henlical composition or the density of a. basic resin: it doe.s not change the melt index to :llly si!!nifi~,ant extent; it ma)T change, slightly, the. molecular weight dlsibution of a basic resin. As observed by the Examiner, most compounds have the same appearance, size, color and form as ba.sic polyethylene resins, unless colorants or blacks are added. sold for film extrusion 35. Although basic resins are occasion any wjt,hout the addition of additives, by far the greate.r amount of resins sold for film extrusion is specifically selected and compounded. Re- .

Decision 59 F.

spondent contends that such additives do not change the physical llatur~ of resins. The. evidence eonvinces me, however, that the selection of basic resins, combined with the use of additiyes, constitutes the process by \\which the product is fitted for its intended end use, in this instance film extrusion.

36. Visking has itself recognized, in contract negotiations \\ith eustolllers, the above-discl1ssed distinctions between different types of basic resins, by referring to prices for film-grade re.sins, and the record shmTs that it bought only such resins. Respondent, in its proposed findings, refers to Visking s use of the term "film-grade resin as a, colloquialism, asserting that "the term film-grade resin is used colloquially among film resin producers and film extruders as a. shorthand method of describing purchases by film extruders . \Ve agree. Colloquialisms, however, arise to describe articles or practices already esta.blished and sufficientlv distinct from other articles or l)raet.ices to need a. special designation. The existence of a colloquial term such as ';film-grade resin, indicates the existence of a specific product different enough from other similar proclu~ts to need a distinctive name. One does not coin a word, and then search for or invent something for the word to mean. Such terms arise, rather, in response to the need for a. specific c1esigna.tion for some article or practice 'which "ords already in common use fail to designate precisely. It may well be said that the existence of a colloquialism is consequent to and must be predicated on the prior existence of the specific article or practice which it "as devised to designate.

37, It should also be observed that Respondent's film-grade resins are sold by highly-trained salesmen who "1\:no', how these materials ct in his L the customer s J particular end use . A.another charactel'ist.ie of film-grade resin is the fact that it takes n distinct kncm" hcny successfully to produce and sell quality film-grade resins. I-Iearing Examiner Hier observed:

And ('yen though Dow Cllemical, no ~rowiJ1g boy in chemical 3))(1 technical l;;now-hnw, is a resin manufacturer competing in the sale thereof with re::::poJ)dent, its film extrudin~ subsi(1iary, Dohednm1ll, purchnsed the gre;lt mnjorit:- of film grade resins from respondent. because "we cannot take stnndnrd resins. generally speaking, and 1'se them in their present stntc. \Ve must have. to gpt maximum efficiencies from our equipment and top quality film, nc1.illstmenis in the standard formulation to get it through our equipment" 38. Based upon the reliable, probative and substantial evidence it is our conclusion that polyethylene resins sold for film-extrusion purposes have sufficient peculiar characteristics and uses to constitute them products distinct from other polyethylene resins to make them a "line of commerce" "within the meaning of the Clayton Act. _ __ _ _ __ ___ _ _ ___ _ ____ _ _ __ ____ UXION CARBIDE CORPORATION 633 614 Decision J. Tile Pl:0BABLE EFFECT OF THE ACQ'CISITIOX OX THE :FILL\f -GRADE RESINS LINE OF CO1\DIERCE 39. The next question to be resolved is whether the acquisition in question may substantially lessen competition or tend to create a monopoly in the line of CO1nmerce consisting of film-grade resins. In 195G about 331/3 % of all domestic shipments of resins 'Tent to film extruders. By 1958, that percentage had risen to approximately 40.8%, and in 1959 to approximately 43%. During those ye.ars Union Carbide manufactured and shipped not only the largest amount of polyethylene resin produced by any manufacturer in this country for filmextrusion purposes, but also the largest amount of polyethylene resins for all purposes. The following table shows the amount of high-pressure process polyethylene resins, the type of resin with which.h ,ye are he.re principally c.oncernec1, produced and shipped for domestic. purposes by polyethylene manufacturing companies in 1956, 1958 and 1959, and the proportion thereof consisting of film-grade resin shipped for film-manufacturing purposes.

f1.000 polJnd~J Total Domestic Shipments Company uomestic shipments to o\\'n film- shipments for mill making unit;

Fnion Carhide___- n- _ -_h- n-- n_- h_h - - - n -- -- -- -- _un 188. 159 0;,7 _nhn__u-Du Pon L-n-__h n - -- - -- n__ - - _U_U -- - -- - 8~. \III:! l' , 3.1- ----- ---- -- n- -- - - n -- - -- - -_U _h - __h__ 37. 7fH ,,Gi5005__h ___nf:Pl' I1elr n_- - - - - n - - --- - -n -_- ---- -- _h - -- -- - - n _h- -- - h- __h__- 33. l.5!; "111 _u__ u_-- Eastman___ --- ------n- - -- - -n 17. 259 84. Do\\' --- -- h - - -- - - - h - - - -- - - n -- - - - - - - - n - - --n -- - - - - - - _h - - - - - - - - -- 12, 927 202 --n_h_u-l\Ionsanto - - -- - -- - _-_h - h u- - --- 11. 53. 128 _Uh____ Koppl' rs- -- - __hh_h__h- -- -- - - - - - -- - -- n n ____h__- 973 , , (;~n G."5 I Total-_____ ----------h --_u_u_-- ----h----- --- 392. 897 I 120 I, .1f)3 678 Shipments for film :l~ a percent of ail domestic_ ___h___ n_n__ n_- -----_u---- 33. a _mn Shipments for film to own units as 11 percent of alj flIm Shipments___ !--_n_U_u- u_- L;) 000 pound::) Total Domestic Shipments Company donwstie shipments to own fiJm- shipments for film making units Union Carbj(le_--_- -- u- -- - -- _u __h - - -- -- - - - u - - --- 251. 302 133, 237 (JR. 277 Du PonL-- - _u __h_____- -_n__- - -- 9~. 000 18, 44(; ~!i r ,SJ - - u_- -- -- h --- - - u _h - _h _h_ - - _u -- - - -- u_- 72, 400 32, 200 914 Spencer--_ - _--h _- - -- - _h -- - - - - - - - - -- - h 35. :m1 200 Eastman _u h____ --_n - - -- _h_- n- - - -- --- 26. 938 9. 1:~, --u_n__- Do\\' - -_u - _h_n - n -- _h _h u- -- - -- - - __h- - 30. 908 5f\O , 8~5 \J Ollsanto- - - -- n- - h --- -- -- - - -- - h ~8. 273 971 u_--u_-- Koppers- ------- - ___ _h___h_n___ _- _u - -- - h__ _h_- - - -- _u- -- --- 22, 633 269 252 Total- - -- u-_nhUU --- - - - - - - - - - u 561, i64 229 018 314 Shipments for film as a percent of an domestic- -------------u--- -_n 40. 8 - _h_Shipments for film to own units as a percent of all film shipments__- n_h_h U - _-__h_- 40. :::::::::::::: :: :::::::: : : : : , , Decision 59 F.

000 pounds) Total Domestic Shipments Company dome!'tic shipments to own filmshipments for film making units Union Carbidenn- - -0- - n - nn- - n u_- Ou- u n - _hnnu u - 302, 740 153, 109 72. 381 Du Pontn- _u- - _u _u__u- n- - - - 00 -- - - n - - - - -00- - u. - _u --u_- -- 00- 109, 800 20, 000 3. 90n I - - 00-- -- -- nn -- -- - - - - -- --00 u_-- - - -n-- 105, 128 50, 835 871) Spencer______------- - --- - , 500 7S0 --____---00- Ea.stman___ 45, 156 24. 087 -_u_.u_- Dow -- - - - - - - - _0 0 - - - -- - - - - 0 - - - - - - - -- - - - - 56. 597 22, 831 8. 060 :!\Ionsanto - - - - - -- --- - h__ - --- -- - - - - n -- - - n 00 00- - -- - - -- -- -- 232 18, 300 -U-_un_ Koppers- -- -- _--n - - -- - -- -- n - - -- 0- -- 0- u - - - - -- , 846 883 872 Totalo - 0- - - 0 - - - - - - - - - - - 727, 999 312, 795 124 , OS!J Shipments for film as a percent of all domestic- - _n___ -___-_n--n ------------ 43. h______---- Shipments for film to own units as a percent of all film shipments_-- --_u_uu_- u_--------- 39. 40. In 1956 Koppers, Union Carbide s smallest competitor, was the only manufacturer who was producing film from its own polyethylene resins. In that year, however, Union Carbide acquired Visking, and by 1958 a number of its competitors had likewise acquired filmextruding plants as outlets for their production of resins. As we hate previously observed, based on 1956 figures, Union Carbide s acquisition of Visking integrated the largest polyethylene-film extruder with the largest domestic-resins manufacturer. The U. I.-Kordite Consolidated acquisition integrated the second-largest film maker ,,-ith the fastest-growing domestic resin producer. The Dow-Dobeckmun acquisition brought together the fourth-largest film extruder and the sixth-largest resin manufacturer. The follo\ying table shows the relevant details of these various acquisitions: Domestic Purchase~ !'hipments of resin by Dat.e of of resin by acquired Resin manufacturer Film manufacturer acquired acquisition acquiring company company 000 0 ,ann pounds) pounds) Koppersu_---._-_n_-_nunu Durethenc Corp---_n--n_--- October HJ5Su 8, 97:~ 1:14 Union Carbide_--nn_----- -- Visking Corp-_u_n_n_ ------ December 188, 15\1 120 1956.

r . L --00 00 - 00_- - 00_' 0000-- 00- Rorclite Co- - -----0_ ---00___-- Au!!,mt 19.';8__- 37. 794 "1:2 Do\\' n_- 00- --- - ---- ---- -00 - 00 00 Dobeckmun Co_ u--__-__n--- Au!!'usf; 1957__- 12 927 6\HJ Dow - --- -00 00__-- -- -- -- - - __ -00- Extruders, Inc__--n--n-nn- April 1958--_-- n_n--n_ 3. \j:37--:\lons3nto-- ___- -- - - - - _00 - - - - - -- Flax Corp. (50% inte.rcsI.) 1 !\ ovember 11. 635 434 1957.

259. 488 i 82. 17\1 Perce:!t ~ = 10n i :1:2 ::= 1 =: = = I I Discontinued manufacture of film in October 1958. ! 12071 41. Although the legality of the acquisitions set forth in the table is not subject to question here, they are. relevant as part of the pattern of concentration shown to have existed for some years in the poly- ___ _ ___ UNION CARBIDE CORPORATION 635 614 Decision ethylene-resin industry. The table indicates that in 1956 the filmextruding companies acquired by polyethylene-resin manufacturers purchased approximately 32% of all domestic resins shipped by those manufacturers. Both Dobeckmun and Korc1ite were integrated into film-conversion, or the manufacture of polyethylene film into end products, at the time each was acquired. In that connection it should be observed that Visking has also recently entered the film-conversion business. It is evident that such entry by Visking into that business is simply the latest of a series of integrations, the end result of ~which has been the expansion of Union Carbide until it embraces within itself, inde.pendently, all the processes necessary to the entire basicresin industry, from the manufacture of polyethylene resin to filmgrade basic resin to film extrusion to film-conversion into the end product.

42. In 1956 the resin manufacturers shipped 129 678 000 pounds of polyethylene resins to film extruders. By 1959, these shipments ha(l increased to 312 795 000 pounds. A pproximateJy two-thirds of this increase, which amounted to about 141%, was accounted for by the increase of resin shipments by manufacturers to their own newlyacquired film extruders.

43. Respondent's share of the total shipments from 1956 to 1959 declined from 59.42% to 48.95%, Of the increase in the amount resin shipped during those years, however, Union Carbide accounted for 76 000 000 pounds, or 41.5% of the total increase. It appears therefore, that during this period the smaller manufacturers expanded more rapidly than did Union Carbide.; but nevertheless, Union Carbide whose rate of growth ,,'as already stabilize. , obtained a substantial proportion of the overall increase of polyethylene resins shipped. D. , the second- largest shipper of film-grade resins, in 1959 sho\\ed an increase of about 36 000 000 pounds, accounting for about 19. 890 of the total increase in polyethylene resins shipped. The following table shows the total amount of polyethylene film-grade resins shipped by the various manufacturers during the years 1956, 1958 and 1959 19:'1tJ 1958 1959 Company 000 Perc~ent 000 percen t 000 Percent pounds of total pounds of total pounds of tot-al Union Carbide_ 77. 057 .'i9. 42 133 237 58. 18 153, 109 48. 9:'1 Du PonL__ 005 20. 446 , 000 L ----- - 675 11. 32 200 14. , 835 16. Spencer_- -------- )11 1. 63 200 750 EastmaIl- - - 845 91i 135 087 Dow---- ____h --- -- - - 202 . Iti 5lio 831 Monsanto- u_- -- - -- -_u- - 128 971 300 Koppers- -- -- -- - - 655 1. 28 269 . Ii 883 Total-_-_-----_. ------- J29 678 100. 00 229, OJ8 100. 312 795 100. ,,, ,, , ,, j . 636 FEDERAL TRADE CO~I:i\nSSION DECISIONS Decision 59 F.

44. Union Carbic1e hen it aeqllired Yisking, acquired the. power to remove. from the market and allu(,;11e toit~elf exclusion'ly the purchasing power of the. largest single customer in the market for film-grade polyethylene resins. In 1956, Visking reportedly purchased about 51112 million pounds of resins, which "- as about 39. ;.. of all the resins shipped by resin manufacturers to film extruders in that year. In J 958, Visking purchased over 75 mill ion pounds, or an increase of :\bou1. :W million pounds over its J 956 purchases. The amount of this iller~,\Se ,,"as greater than the 10;38 totnlresin shipments made by each of six of the resin manufacturers to film extruders, excepting Union Carbide and F. I. In 1959 Visking purchased nearly 84 million pounds of resin, an amount. almost. eqnnl to the combined shipments of 8-1.8 million pounds to film extruders by dupont-, Spencer, Do,\", 1\10nsanto and Koppers, 45, The increased production of polyethylene resins hereinabove ~hmnl has been aceompiishecl by lnrge ell-(,stahlished chemical ('0111- panies, and not. by new entrants into the ficlf1. In fact, the probability of such ne'" entrants obtaining a foot hold in this field is slight. l\Ir, Turner, President of rnion Carbide Plastic Company, testified that the. cost of constructing the smallest effic.ient pbnt for the manufacturt', of polyethylene resins, ,,'itll an ::lllllllnl capacity of 25 million pounds, ,,' ould be, as of .Jannary 1 1957, npproximate1y nine or nine and a half million dollars, In addition, he expressed the opinion that it ,,'ould take two years to construct such a plant, and about two years after commencing operation, to train its stair to sell polyethylene resins eompetiti,"ely. It is clear, therefore, that in the face of these difficulties, only large ell-established corporations~ experienced in chemical nwmlfnctllre and ampl:)'" financed, would have any prospect of successful entry into the polyethylene resin field. :1:6. The fnets and figures which ""e lun-e examined shmv that commercein all polyethylene resins, and particularly in film-grade polydh~'lene resins, is substantial. Respondent's share of the market in H);')() y, as slightly under GO/c:, almost three times that of its nearest competitor. In 1959, Respondent's share of the market although it had declined to slightly under 50j'c' as still very great. Thus, Responcle11t ,,' as at the time of the acquisition, and still is, the major factor ~n the polyethylene resin market ~ and pmticularly in the polyethylene film-grade resin market. ~Ye IJ:lve seen further that quantitatively the Bespondent, the largest producer of polyethylene resins lws acquired the largest pl1rclUlSer of such resins, and has the po\\" to exclude. the seven other prodllcers of polyethylene resins from the suhshll11ial segment of the buying market represented by Visking. The suppress!n' efrec.t of such exclusion upon competition is obvious. UNION CARBIDE CORPORATION 637 614 Decision 47. 'Ve have seen that entry into the polyethylene-resin market by any but a giant corporation is financially and technically almost impossible. The acquisition of technique, equipment, and personnel in this field is costly in both time and money. The late Hearing Ex:nninpr flier aptly observed:

Further, respon1l1ents point to the fact that Vi~king is pnrchflsing resins from respondent' s eompetitors in increasing proportions. But this is besi(le the point, which is that by the acquisition respondent acquired the po\yer to shut them out-it is the power that counts, not its exercise. As long fig the po\yer is there, it l11ny be exercised-that such exercise may he benevolent or sportsmanlike this year is no guarantee that it may not be anti-competitive next. There \yould probably be no antitrust laws if society hfld not long since learned that foreclosure power, in private hands, bent on plll' ate )n'ofit, eou1f1 not be trnste(1. Upon the basis of the reliable, probati\"e and substantial evidence in the record, ,ye conclude that there is a reasonable probability that the eiTect of lInion Ca,rbide s acquisition of Visking may be substantially to lessen competition or tend to create a monopoly in the manufacture and sale of polyethylene film-grade resins. 48. It is further concluded tlwt, regardless of ,whether the relevant line of commerce be eonsiderecl to be polyethylene film-grade resin only, 01' polyethylene resin for any and all uses, the effect of the acquisition of Visking by Union Carbide ma,y be substantially to lessen competition or tend to create a. monopoly in the acquiring corporation. K. I)OLYETHYLENE FIL::\r .:\ FLEXIBLE PAClC-\GIXn ::\L\TERL\L 40. Our next problem arises from the allegation in the complaint that polyethylene film constitutes n. line of commerce in ,,-hieh competition might be lessened by the acquisition in question. Respondent in its answer, denies that polyethylene film constitutes a relevant ma.rket, alleging that Visking has been and Union Carbide is subject to substantial and effective competition, not only from ot her manufacturers of polyethylene film, but also from nnmer011S malll1facturers of other flexible packaging materials, such as eel1ophane, paper, metal foils and other wrappings, both coated and uncoated. Respondent further alleges that such other flexible packaging materials have the same end use as polyethylene film, are functionally interchangeable with it, a,nc1 are acceptable substitutes therefor, in the same relevant market. Respondent contends, therefore, that the relevant line of CO111meree ShOllJd not be confined to polyethylene film, but should be expanded to include a vast number of other flexible-packaging materials. Obviously, in such an expanded line of commerce the effect of the acquisition would be minimized and more difficult to discern. :30. Polyethylene film, "which is made from polyethylene resins and componnds, i~ n stiff', strong, plastic. film varying in thiekness. Since Decision 59 F.

no material other than the resin or resin compound enters into its manufacture, the cost of resins represents a large percentage of the cost of the finished film. Although there are several methods of extruding polyethylene film, the most generally used is the "blown film process, which was developed and patented by Visking. . By this process, hot resin is extruded through a ring-shaped die into the form of a continuous tube. Compressed air is injected through the die into the tube, and the tube is blown up somewhat like a balloon or bubble. This expanded bubble of film is cooled and passed between 1'011e.rs, which flatten it. Some of such film is sold as tubing, which is thereafter made into bags and other products; while other film is sold in flat sheets.

~)1. The late IIearing Examiner flier found in his opinion on Respondent~s motion to dismiss the complaint herein, as we observed earlier in this opinion, that polyethylene film is sold and used in substantial quantities in five markets, namely: flexible packaging, agricultural, industrial, construction, and decoration or needle-work prodnets. I-Ie further found, however, that only in the flexible-packaging market had a prima facie ease been developed establishing a reasonable probability that competition might be lessened by reason of the acquisition. ,Ve have coneurred in that finding, and consequently \\e are now only concerned \"ith polyethylene film manufactured and sold tor flexiblepaekaging.

52. The principal areas of use for polyethylene film as a flexiblepackaging material are as follo\vs: (1) fresh produce, (2) candy, (3) (tried foods, (4) baked goods, (5) meat, poultry and fish, (6) soft goods, (7) dry-cleaner and laundry, (8) household, (9) hardware and automotive, (10) toys, sporting goods and novelties, (11) paper prodnets, and (12) garden supplies. The use of polyethylene film in each of the above areas of end use is substantial. 53. Respondent contends that polyethylene film is in competition in the flexible-packaging industry \with various other materials, the names of which, including polyethylene film, \with the approximate da tes of their first use for flexible-packaging purposes, are listed by Respondent as follo\\s:

* * * kraft and sulphite paper-190S; altuninnm foil (usually combined ,,-ith another material or coated )-1928: cellophal1e--1928; glassine--1933; cellulose aretnte-1933; me'8'h-1933; Pliofillll-1938; Vinyl-1943; polyethylene--1948; . Sl1ranand Cryoyac-HHB; ~lylar-1955; polystyrene--lfJ:)7. 5-4:. Respondent has presented extensive evidence and many exhibits sho\ving that many and varying articles are ,,"rapped in various materials, as well as in polyethylene film. Respondent contends, therefon' ~ that all flexible-packaging materials are in competition \\ith each other and \"itll polyethylene film. In a menSlll'e this is of , UNION CARBIDE CORPORATION 639 614 Decision course, true. The problem of wrapping things has been with us a long time, and the use of polyethylene film as a wrapping material is very recent. Since its introduction into the market, however, about 1943, the demand for it as a wra.pping material has steadily increased. 55. The desirable characteristics inherent in polyethylene film have resulted in its quick acceptance as a packaging material, and its use has become \\idespread. Polyethylene film has a certain degree of elasticity, and under sudden impact will resist rupture. In the thinner gauges it can be made very clear and transparent. The film is limp and has a soft texture. It is almost completely inert chemically. It is easily sealable to itself, so that various kinds of packages and bags can be readily fabricated from it. It will take printing. It is ,'\'afterproof, and to a high degree even impervious to water vapor. Visking has prepared a chart for use in selling polyethylene film which shows the distinctive physical characteristics thereof as compared with certain other flexible-packaging products. This chart is apparently based on Respondent's belief in the particular qualities of polyethylene film as distinct from the qualities of other flexible-packaging materials.

56. In addition to the unique characteristics and uses of polyethylene film which Respondent has recognized and proclaimed in its aclyertising, Respondents pricing practices show that the primary competition involving its patented "Visqueen" polyethylene film is between that film and the polyethylene films of competitors, rather than behveen "Visqueen:' and other types of wrapping material. ~fr. Bernard, one of Responde.nrs officials, testified that in November, 1959 Visking met any price reduction by polyethylene film manufacturers sneh as Chippewa and Plastic I-Iorizons. In fact, he testified in that connection that "up,'\'ard of 50%" of Visking s shipments of polyethylene film for flexible-packaging purposes "'as being billed to Cllstomers below "the price of Visking s published.c1 list as a result of meeting competition . In addition, we observe that Visking chimed that its polyethylene film '" is the outstanding leader in quality, nniformity and strength~' , thus intensifying its competition with other polyethylene films rather than with possible substitutes therefor. For a period in 1959 , about 50% of Visking s polyethylene film "'as sold, not according to a published price list, but at a price reduced to meet the exigeneies of competition offered by other polyethylene film manufacturers. From this fact, it would appear that Visking recognized that it "as engaged in a line of commerce consisting of polyethylene film, rather than in a line of commerce involving flexiblepackaging material generally.

57. Another factor which shows that in the sale of polyethylene film Respondent has been competing primarily with other film manl1- : ) 640 FEDERAL TRADE C0l\IMISSION DECISIONS Decision 59 F.

facturers rather than with manufacturers of aU types of flexiblepackaging material is service and delivery. The tenor of Respondent' s witnesses' testimony "-as that certain competitors, such as Durethene, Plastic Horizons and Chippe,,- , could give faster del ivery polyethylene film, and in smaller amounts, than could the Respondent and that, therefore, some polyethylene film business "-as lost to Hespondent' s competitors. It appears: there.fore, that this competition eentel'ec1 upon polyethylene film, not upon other fiexible-pacJmging materials, such as paper and foil.

58. From our consideration of the reliable: probative and substantia'! evidence in the record, we conclude that polyethylene f1hn manufactured and sold for flexible-packaging purposes possesses suflieient peculiar eharacteristics and uses to constitute, and that it does constitute, a line of commerce distinct from any line of commerce which includes other flexible-packaging materials, within the jJ1tellt and meaning of the Clayton Act.

~I. PROBABLE EFFECT OF _\CQUISITIO~ ox l'()LYETHYLEXE :FIL1U LIXE OF CCrJDIERCE 59. "\tve must 11my consider ,whether the acquisition in ql1eshon may substantially lessen competition or tend to create a monopoly in the line of commerce consisting of polyethylene film manufactured for flexible-packaging purposes.

60. In 1956 there were approximately sixty companies engaged in extruding polyethylene film, which shipped a total of approximately 113 544 064 pounds of film to customers. Of this total, Visking shipped 45 673 4,17 pounds, or 40.23% of such shipments, by far the largest production by anyone manufacturer in that ye~ll' . In fact Visking s poundage exceeded the total of the next ten largest companies by over 1 800 000 pounds. The company ranking second in this market accounted for about 6. % of the total, or about OJ1~-sixth of in llj8 market.Visking s shipments, Forty of the sixty companies each shipped less than one million pounds of film: and col1ert.ively accounted for about 7.4% of the total. In this connection it should be observed that Visking has continued to gro"~ in n very 8'.Jbstantia 1 manner. From January, 1956, to June, 1960 , Visking pm'chased n total of 56 fUm-extl'uc1ing machines, "it h an aggregate yearly capacity of almost 108 000 000 pounds. These new machines of Visking s are capable of making more film than "-as shipped by all the rest of the industry in 1956.

61. Although the record does not contain figures for total polyethylene film shipments for flexible packaging, or the ammmt of such shipments by Yisking for 1958 or 1959, the Respondent estim:1tes that , , ,, .. U~ION CARBIDE CORPORATION 641 614 Deeisiol1 Yisking s share of the. total sales of polyethylene film for flexiblepackaging purposes ,vas 24.38% in 1058, and ID.22jic) in 1050. If these estimates be correct, Viskjng s share of the market has obviously decreased percentagewise since the year of the acquisition. It must be observed, hmvevel', that such a relatiyely small decrease. in total market share. has not changed Union Carbicle-Visking s position as the leader in the inc1nstry, nor substantially lessened the mutual competitive ach'antages gained by that acquisition. 62. In 1960 Visking began converting a part of its film into garment bags. Respondent contends that this in no sense ma.kes Visking a significant conyertel' of film into finished products. 1-10""e"er that may , the fact that Visking is now a converter of at least. a part of its o\\n film is certainly significant. As a completely-integrated company transforming ethylene gas to resins, resin to film, and film to finished products, Union Carbide, by its ac.quisition of Visking, has acquired the power to shield itself from the economic. pressure or competitjon in the. film-grade resin market ith the inevitable result that Union Carbide has frained thereby a distinct advantage over its smaller competitors in the sale of its polyethylene film products. G3. The machines necessary for entry into the fiJm-extrtlsion business cost from :1 about ~H; ()OO to about 8, OOO, depending upon size and capacity. In view of the rather large number of entnmts into this relatively ne\\ field, it appears, however, that entry therein is rather easy, but, judging from the various complaints of the new entrants, success in meeting the competition therein is not so easy. It appears that the principal inducement for entry into the film-extrusion business has been the immediate and substantial consumer acceptance of polyethylene film as a "Tapping material. 64. Bebyeen ~Janl1aly 1 , 195:3, and~Iarch 5 ~ H);,57, Viskillg has made five announced price reductions on film. :Mr. Schechter, President of Chester Products, testified that his companies price change of .J anuary 11 , 1956, ,vas made specifically to meet Visking s prices. He testified that "'Ve met the Visking price list. ~fr. Albert l\loss, President of Extrudo-Film when asked why his price list sho,-ved the same prices as Visking, replied The reason is that \ve have always been forced to follow Visking s price. :Mr. Kelle.her of Durethene and 1\11'. Voskian, Vice-President of Polyplastic Products Inc., testified to the same effect.

65. Dr. Lecky, product manager of polyethylene resins for the dupont Company, was asked about that company s June, 1956, price reduction. He replied It was the result of pressure from a number of our customers for a price concession to put them in a more competitive position with the price concession which they felt Bakelite was giving to Visking.

693~490-64- Decision 59 F.

66. Respondent, during its defense, presented evidence showing that at times a number of its competitors sold polyethylene film at off -list prices and at prices below those of the Respondent. Such evidence does not, however, alter the fact that the polyethylene film industry has been consistently sensitive to changes in Visking s prices and has responded to such changes by changing its own prices accordingly, every time Visking has announced a price change. It therefore appears that Visking s prices set the standard for the industry, and except in a few special instances, the smaller polyethylene film manufacturers are compelled to accept that standard and to adapt their own prices to the fluctuating ceiling so established byVisking. 67. It appears that the acquisition of Visking by Union Carbide has increased Union Carbide s economic power over both film-grade resins and polyethylene film-to the extent that, if exercised, that power can substantially affect competition in both lines of commerce. As the late Hearing Examiner I-lier aptly stated, Union Carbide- '" '" has acquired the power to act independently of its competitors pricewise. In at least one sales bulletin, issued coincidentally with a film price reduction, Visking brags: "We plan to continue to remain as the leader in this indusposition totry. It is able to substantially lower its costs '" and is in a squeeze, if it chooses, the margins of independents'" '" '" to their costs in many cases.

68. In the light of the reliable, substantial and probative evidence in this record, we conclude that the acquisition of Visking by Union Carbide may be substantially to lessen competition or tend to create a monopoly in the manufacture and sale of polyethylene film for flexible-packaging purposes.

N. Dls)IISSAL OF TI-IE CO~IPLAIXT AS TO SYXTHETIC Sausage CASINGS 69. The complaint alleges that the effect of the acquisition of Visking by Union Carbide may be substantially to lessen competition or tend to create a monopoly in the manufacture, sale and distribution of synthetic sausage casings. Upon the completion of the Government' case-in-chief, this allegation was dismissed by the late I-Iearing Examiner I-lier. Under the Commission s Rules of Practice when a Hearing Examiner dismisses a complaint in part in the course of a proceeding he "* * * shall enter his ruling on the record and take it into account in his initial decision . The reasons for this dismissal as ably presented by the late I-Iearing Examiner I-lier, are as follo\\s: The last issue is whether Visking s other line of business-synthetic sausage casings-constitutes a "line of commerce" adversely affected by the acquisition. , as opposedAn official of Visking first conceived the idea of a synthetic animal tissue casing, as a competitor thereof and a substitute therefor. "'hat ",as desired was a casing of uniform predetermined thiclmess, width and length UNION CARBIDE CORPORATION 643 614 Decision permeable to smoke, and made of domestic ra,v materials which are normally in plentiful supply, Such a casing was first produced by Visking in 1926 made of cellulose derived from cotton linters, water and glycerine, seamless and transparent, permeable to smoke, stable in the presence of heat, water, meat juices and curing agents, nontoxic, with the strength to withstand handling and stuffing strains, yet elastic enough to stretch and shrink with the meat and adhere closely thereto. The entire process was patented by Visking. The competitive and financial success of this new product, (versus) animal tissue casings, was steady and striking. Thus, by 1956, Visking s sales of this product were in excess of 12 000 000 pounds valued at $25 591 000, or about GO percent of all such casings sold domestically. The record, however, shows that the term "synthetic sausage casings" includes liot only those described above, namely from regenerated cellulose, but also casings made from nitrocellulose, plastic film, such as polyethylene, vinyl and Saran, and from cellophane, all of which Visking did and does produce. However Yisking itself bas represented to the public that its regenerated cellulose meat casings are unique from others- there is no other material now in sight which has the necessary qualities, " and "regenerated cellulose sausage casings alone satisfy tbe above requirements" of strength, smoke permeability, Ilontoxicity, stability, flexibility, adherence to tbe meat, low weight, size uniformity, printnbWty. The record shows that regenerated cellulose sausage casings, (versus) nil other sausage or meat casings, are made from different basic ingredients by far different processes, have a number of unique characteristics, the chief one being smoke permeability and removability thereafter. * * * The conclusion is that the relevant market here is that consisting of sausage and meat casings of whatever size made of regenerated cellulose under the vatented processes used by the Visking Corporation.

Is it reasonably probable that the acquisition will substantially lessen competition or tend toward a monopoly in this marlret? This acquisition in this field is entirely conglomerate--respondent was neither a supplier to, nor a competitor of, Visking in this line of commerce, There has therefore been no removal of a competitive unit from the market, nor any power acquired to exclude suppliers to, or purchasers from it. Visking had a monopoly in this field by reason of patent protection until some years ago when it licensed American Viscose Corporation, and 'reePak Inc. to use these patents and they became competitors in this market. ~either however, were substanital as compared with Visking-sales of the. hitter accounting for about 60 percent of the market, quantitatively, in 1956. The market is substantial, amounting to over 30 million dollars in 1956, and :Visking share thereof was likewise substantial. However, the patents ",hose protection gave Visking its former monopoly, and then protected its position as the dominant member of the subsequent oligopoly, expired in December 1957, so that the field is now open to one and all. There is no evidence whatever of' what -'entry into this market would cost, financially, technically or distributively.; . Consequently, I cannot assume that the Visking lendership will continue . . At least two competitors ha,e their feet in the door, one rather firmly, and have the set-up to manufacture and market now. One. American Viscose Corporation is no financial pygmy and the other s business has shO'VI1 increuses. The complaint alleges that the acquisition has eliminated any potential competition between respondent and Yisking in this market. Of course there -never ,,"as any actual competition and I can find nothing whatever in the record to 811g:gest that any was ever C'ontempJntec1. Decision 59 F.

* * * While past competitive conduct of the acquiring corporation furnishes ::t best an ullstead~~ footing from ,yhieh to prognosticate such conduct in the future with the newly acquire(l unit, it is some help in forecasting the future state of competition in the new line of commerce. ~one of that is here. .\11 that is here essentially, is that in this market t,YO commercial strangers ha united and the product of one, sausage casings, now has the financial backing of a billion and n half dollar l'S of a:-::sets (HJ57) instead of something less than 100 million formerly, and that, ergo, this financial po,yer can be use(l to (hive everyone e18e out of the market. Such a forecast on this loose and spotty record calls for a temerity and clairvoyance which I do not possess. The verdict is a Scotch one-not proved, and nccordingly the motion to dismiss this portion or charge of the complaint is well taken and will be granted. O. RULINGS ON PROPOSED FINDINGS OF FACT , PROPOSED CONCLUSIONS AND PROPOSED ORDERS 70. Consideration has been given to the entire record he.rejn, including the proposed findings as to the facts, proposed conclusions of fact and of la\\, proposed orders, and briefs and reply briefs in support thereof. All these documents, although \\written from the viewpoint of the advocate, ha-ve been helpfnl to the hearing Examiner. Counsel for the Respondent has vigorously requested separate rulings on each proposed finding. In the opinion of the Hearing Examiner, such !:l detailed l'lllil1g is unnecessary because it. \\ould not. contribute substantially to the clarity of the initial decision, and \\ould, at the same time, overburden the decision with a lengi'hy disc-l1ssion of evidentiary details. Therefore, those proposals "which have been accepted have been, in substance, incorporated herein, and all proposnls not incorporated are hereby rejected.

P. SUJ\BIARY OF CONCLUSIONS 71. The acquisition of Visking by Union Carbide, except for the line of commerce ,,'hieh includes synthetic. sausage casings, as herein found constitutes a violation of S 7 of the Clayton Act (15 U. C. ~ 18), as ameneled and approved December 29, 1950.

Q,. TI-IE SCOPE OF THE ORDER 72. Counsel supporting the complaint contends that an order of divestiture should issue herein, which should have the effect of restoring Visking to its former competitive position as a manufacturer and seller of ooth polyethyle.ne film and synthetic sausage casings. Counsel further contends that Union Carbide should be divested of the new polyethylene film plant which it built at Cartersville, Georgia ~ubsequent to the acquisition.

73. Counsel for the Respondent, on the other hand, contend that if any order of divestiture is issued, it should be limited to those assets UXIOK CARBIDE CORPORATION 645 614: Decision now being used by the Visking Division of Union Carbide for the exclusive purpose of producing polyethylene film for flexible-packaging purposes, and should not include assets used for extruding polyethylene film for other purposes, nor should it include the new filmextrusion plant recently built at Cartersville, Georgia. Futhermore thev contend that such an order of divestiture should not include the nssets, including plants, devoted exclusively to the manufacture of synthetic sausage casings, the acquisition of which was herein found to be lawful.

74. The evidence shows that. Visking, prior to its acquisition by Union Carbide, operated three seh-contained and se.pnrately-fnnctioning film-manufacturing plants, one in the East, one in the ~lid,,\est and one in the Far ,Vest. The evidence also ~ho\Ys that the new filmextrusion plant built by Fnion Carbide at Cartersvil1e, Georgia, subsequent to the acquisition ',-as flssignec1 to :md operated by the Visking Diyision of Union Carbide. The evidence further SllO',\S that. Vis1\:ing s synthetic sausage and meat eftsings lun-e been produced in t1\O ~eparate plants having no direct connection ,"ith \~isking s polydhylene film business. It is apparent from these facts that. the ne'" facilities at CartersyjJle, Georgia, are n. Visking asset, under' Visking mann.gement, and represent. simply Visking s normal expansion. As such, these facilities should be retained by Visking as it necessary part of its equipment to meet competition after it is restored to its former status of independent manufacturer of polyethy lene film. It is equal1Jy apparent that, aside from the ne'" plant at Cartersville, to order the separation of assets used to manufacture polyethylene film for flexiblepackaging purposes from those used to manufacture such film for other purposes would be imprnc6cable, and 1\ould result in a serious competitive crippling of the. restored Yisking Corporation. 75. vVe believe, ho1\ever, that Visking can be successfully reestablished as a competitive enbty in the polyethylene film manufacturing business 1\without its former synthetic sausage easing manufacturing plants and business. Furthermore, we believe that :m order of divestiture should not be bro,lder than necessary to accomplish the purpose embodied in S 7 of the Clayton Act, which is to prevent injury to competition in commerce.

R. THE Order It is ordered That. the Respondent, 17union Carbide. Corporation, a corporation, through its officers, directors, agents, representatives, and employees, shall divest itself a bsolutely, in good faith, of all assets properties, rights and privileges, tangible and intangible, including but not limited to all plants, machinery, equipment, trade names, trade- Opinion 59 F.

. marks, good will and business acquired by Union Carbide Corporation as a result of its acquisition of the assets of The Visking Corporation, together with the new polyethylene film manufacturing plant built at Cartersville, Georgia, subsequent to such acquisition, and much of the plant machinery, buildings, improvements and equipment, of whatever description, as has been installed or placed by Union Carbide Corporation on the premises of Visking Company Division of Union Carbide Corporation, as may be necessary to restore Visking Company Division of Union Carbide Corporation to its former status as The Visking Corporation, a competitive entity in the polyethylene film industry, as organized and in substantially the basic operating , "it 11 orm in ,which it existed at or about the time of the acquisition such additional assets as may represent the normal expansion of The Visking Corporation during the time of its operation as a di,'ision of Union Carbide Corporation.

It is fu'J'the'J' o'J'dered That in such divestment no property above mentioned to be divested shall be sold or transferred, directly or indirectly, to anyone who at the time of the divestiture is a stockholder officer, director, employee, or agent of, or otherwise directly or indirectly connected with or under the control or influence of, Respondent. or any of Respondent's subsidiaries or affiliated companies. It .is f~~rther ordered That the complaint herein, insofar as it relates to the manufacture, offering for sale, sale and distribution of synthetic sausage easings, be, and the same hereby is, dismissed. Opnno~ OF TI-IE CO)DIISSIOX By DIXON: Commissioner:

This is an action brought under Section 7 of the amended Clayton Act.! Both parties have appealed the initial decision of the hearing examiner filed February 7, 1961.

On. December 31 , 195G, respondent. linion Ca.rbide. Corporation acquired substantially all of the assets of one of its principal customers, The, Visking Corporation. The. acquisition was effected by an exchange of one share of Union Carbide common stock for 2.5 shares of Visking stock. The 864 449 shares of lInion Carbide stock exchange.c1 had a ma.rket value of approximately $90 875 201 as of Ko- 1 The pertinent wording of the Section provides: That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in an~' 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.

.,.

UNION CARBIDE CORPORATION 647 614 Opinion vember 21 , 1951, the date of the formal merger agreement. The separate corporate entity of Visking has not been maintained and since January 1, 1957, it has operated as a. division of the acquiring company under the name Visking Company Division of Union Carbide Corporation.

The Commission s complaint, issued July 8, 1957, charged that the acquisition 'was unlawful in that its effect may be. to lessen competition or tend to create a monopoly in the manufacture and sale of three products, polyethylene resin, polyethylene film and synthetic sausage casings. After answer, extensive hearings were held in varoius cities throughout the United States. The transcript of the proceedings covers more than nine thousand pages. The record contains 352 exhibits received in support of the complaint and 849 exhibits received in opposition thereto. Briefs, motions and proposed findings comprising many addi60nal hundreds of pages have been filed. Counsel for the complaint rested the case. in-chief on :March 21 1958, and on ~lay 12, 1058 , prior to presenting any evide.nce, respondent filed a motion to dismiss. The motion argued that counsel for the complaint had failed to make a Jyrhna facie showing that regenerated cellulose sausage and meat casings, polyethylene resin and polyethylene film each constituted a " line of commerce" as those words are used in Section 7, and further, that regardless of the " line commerce" definition there had been a failure of proof as to the proscribed adverse effects of the merger. In an order dated August , 1959, the hearing examiner ruled that the sausage and meat casings produced by Visking, composed of regene-rated ce.11ulose, are sufficiently unique from all others to constitute a line of commerce, but that it had not been proved that the acquisition of this part of Visking s business would have the proscribed eflects in the relevant market. The hearing examine,!' also held that no pJ'hna facie ease had been made out of reasonable probability of an adverse effect in four of the five principal markets for polyethylene film, name.ly agricuHure ('.01\strnction, industrial and decoration. ,With respect to the fifth use. polyethylene film, flexible pac.kaging and with respect to polyethylene resin as the basic ingredient of polyethyle.ne film, he ruled that JJl'ilna. facie case had been made out. Thus at that juncture in the proceeding a substantial portion of the complaint was dismissed and the respondent was obligated to defend only t\VO principal charges: (1) that the acquisition may lessen competition or tend to create a monopoly in a. line of commerce consisting of high pressure process polyethylene resin sold for film extrusion purposes; and ,, Opinion 59 F.

(2) that the acquisition may lessen competition or tend to create a monopoly in a line. of com.merce consisting of polyethylene film for flexible packaging purposes.

,Yhile both parties were dissatisfied \yit-h the hearing examiner ruling on the motion to dismiss, neither took interlocutory appeals to the Commission. Respondent rested its defense on IUareh 1 , 19GO. Se.veral re.buttal and surrebuttal hearings \"ere then held and the record was dosed for the. presentation of etic1enee on I line 17, 1960. On February 7, 1961, the hearing examiner filed his initial decision containing an order requiring respondent to completely di\T st itself of the polyethylene film business acquired from Yisking, together with a new film manufacturing plant built in Cartersyille, Georgia, after the acquisition, and any other property or assets as may re.present t. normal expansion of Yisking during its pe.rioc1 of operation as a part of Union Carbide. The. initial decision reaffirmed the earlier dismissal of the complaint with respect to synthetic sausage casings. As noteel above, both parties hate. appealed the hearing examiner decision, Respondent, of course, \,ould hate us vacate the order of divestiture in its entirety. Counsel supporting the. complaint urges only that the dismissal of the sausage cflsing charge be. reverse.d and t hat. Union Carbide should be ordered to relinquish this business as e)1 as the acquire.d polyethylene HIm facilities. ,Ye will consider first the appeal by respondent.

The. products with which this matter is now principally concerned are polyethylene film and its ba.sie ingredient, polyethylene resin. Polyethylene is produeec1 from ethylene gas obtained as a by-product of petroleum refining operations or re.fined from natural gas. The basic resin is produced by applying great pressure and heat to ethylene gas in liquid form. The resultant resin is extruded into thin ribbons which-h when cooled and solidified, are cut into one-eighth inch c-tubes. This is the form in which the resin is then sold to extruders for further proeessing.

Polyethylene was developed and patented by a British chemical company in the early 1930's. Early in ,Yodel 'Var II Union Carbide nt the request of the United States Navy and \with its financial assistnnc-e ~ be.gfln production of polyethylene resin for use as an insulation material in c-oaxial cables for high frequency radar. At about this same. time, E, 1. c1nPont c1eNemours and Co. also entered the field. 2 Polyethylene resin produced by this method is known as high pressure process resin to distinplish it from resin produced by a more recently developed low press11re process. Lo~' pref'sure process pclyethylene resin is a distinctly different product and bas different uses than the high j)l'ci'sure process resin with which we are here concerned. Hereinafter ,dlpI' ever tlJe 1('1'111polyethylene resin appears it refers to high !J!'essnre process polyethylene resin.

_ : _ ! , . UNION CARBIDE CORPORATION 649 614 Opinion From April, 1943, until November, 1954, Union Ca.rbide and dupont ",-ere the only United States manufaeturers of polyethylene resin. There are at present eight producers of these resins in the United States.

Polyethylene film is one of many products produced from polyethylene resin. The method of manufacture is known as the hot melt extrusion process. Polyethylene resin pellets nre conveyed under pressure by fl, SCTew through a heated barrel causing the resin to become molten. It is then forced through a die and solidified by cooling into a thin film ,yhieh is placed on rolls. The. film is extruded in two basic forms depending upon the die used. If an flmmlar die is used the film takes the form of a tube; if a flat die is used the film appears fls a sheet. Sheeting is also produced by slitting polyethylene tubing as it is extruded. Both tubing and sheeting are sold for flexible packagmg purposes, Union Carbide is the country s second lnrgest chemical company with assets, at the time of the acquisition, of approximately $1 421 439 536. Its business is divided into five major groups: alloys and metals; chemicals; electrodes, carbons and ba tteTies; industrial gases and carbides; and plastics. Consolidnte.d net sales fol' the calendar year 1956, not including sales of Visking, "ere npproximately $1 ,279 235 725. .A..approximately 20% of its 1956 sales we.re accounted for by the plastics group which includes polyethylene resin, the basic ra,\"" matedal of polyethylene film. Sales of polyethylene resins and compounds in 1956 were approximately $91 302 000. In 1956 Union Carbide ,vas far and away the country s largest producer of polyethylene resins. The relative position of Union Carbide in the polyethylene resin manufacturing industry is illustrated by the follo\ying tables:

TOTAL DO!llESTIC SHIPI\1E:\TS OF POLYETHYLENE RESI1'\S W51i 195.'3 195\1 Company 000 Percent 000 Percf'nt 000 Percent. pounds pounds pounds man .ar Ie L_..._ 188, ISH 47. 251. 302 44. 302, 740 41. . 9HZ 21. 1 !H. ODD 16. 109. 800 15. B~s 79. 72. 400 12. 105, 128 14. Spf'nCCTu_- - :3::J,1.58 35. 310 li. :3 43. ,'JOO ElJstman-_--h- -- - 17, 259 26. 9:38 ' 15(\ Do\" -- -- - - - n__- 12. 927 :3, 30. !JUS 56, 5\)7 7. S 1\Ionsanto - -- - ---- - - -. ---- - - - - i 11, 6::J, :UJ , 273 5, 1 38, 232 Koppers- - -- - -- 0- - - --- - - 97:3 22. 633 , 846 :3.7 Total -_n -_O __n_- --... - 392. 897 100 0 I 561 , ifi4 100. 'J- 999 , 100. (J Opinion 59 F.

DOMESTIC SHIPMENTS OF POLYETHYLENE RESIN 'I'O FILM EXTRUDERS 1956 1958 1959 Company 000 Percent 000 Percent 000 Percent pounds of total pounds of total pounds of total Union Carbidc- - n_____n_n- 77, 057 59. 133, 237 1i8. 153, 100 48. Du PonL_ _h__nn______n_ , 005 20. 18, 446 20. 000 S. I - --n - n n__- -__n- n_n- 675 11. 32 32. 200 14. 50, 835 16. Spencer -- - - -- - - --- - --- - - - -- - - , 111 1. 63 200 , 750 Eastmann_- - - -- -- 845 135 24. 087 Dow___n h_n__n - h____n 202 560 831 Monsanto - __-un n_- - ----- - 128 11. 971 ~. 23 18. 300 Koppers- -- -- - -- - - - - -- - - - n - - - 655 1. 28 269 883 Total -- - -- _n - - - - n _u - 129 678 100. 00 229 018 100. 00 312. 7lJ5 100. The Visking Corporation in 1956 was the largest producer of polyethylene film with assets of $38 309 000 Rnd annual sales of $56 022 000. Its business was evenly divided between its two principal products synthetic sausage and meat casings and polyethylene film. Visking sales of polyethylene film during 1956 totaled approximately $27/100 000 of which approximately 46.2% was sold to converters, end users and jobbers in the flexiblel)ackaging field. Both Union Carbide. and The Visking Corporation were at the time of acquisition selling their products in commerce throughout the entire United States and the paliies have agreed that the relevant geographic market, i. , the. "section of the countri' involved is the entire country.

As '\ve have indicated, one of the principal issues here is whether the acquisition may have the proscribed adverse eflects at the polyethylene resin level of competition. The hearing examiner decided that polyethylene resin manufactured and sold for film extrusion purposes constitutes in and of itself a "line of commerce" separate and distinct from resins sold for other purposes. But he further concluded that " regardless of whether the relevant line of commerce be considered to be polyethylene film-grade resin only, or polyethylene resin for any alld aU uses, the. effect of the acquisition of Visking by Union Carbide may be substantially to lessen competition or tend to create a monopoly in the acquiring corporation.

Respondent' s appeal urges that the appropriate market is the. sale of polyethylene resins for all purposes and in any event, no matter "here the boundaries of the relevant market are set, that the requisite proscribed effects therein have not been sho,,- The hearing examiner s finding that resins sold for film extrusion purposes constitute in themselves a line of commerce is based almost entirely on physical differences between the so-called film grade resins and resins sold for other purposes, Our review of the evidence convinces 11S of the conectness of this finding. Resin manufactured ,, UNION CARBIDE CORPORATION 651 614 Opinion be processed into polyethylene film most generally contains additives which especially adapt it for film use. In addition, a sizeable amount of basic resin, that is resin which does not contain additives, is sold for film processing but these so-called basic resins are specially designed or selected for film use. There is much additional evidence in the record to support the finding that film-grade resins are in themselves a line of commerce including the fact that the industry itself recognizes the separate identity of these resins; they are apparently more difficult to produce than other resins; and producers occasionally change prices on film-grade resins without changing the prices of others. But as we view it there is no real necessity to determine ,,'whether the line of commerce consists of only film-grade resins or of all resins since the proscribed effects upon both lines have been demonstrated in this record.

By acquiring Visking, Union Carbide secured the power to foreclose competitors from a substantial share of both the film-grade and general use resin markets. The following table indicates that the resin requirements of Visking are substantial whether considered alone or in comparison with either universe.

Vjsking Vjsking share Viskim; s share purchases film-grade of all U.

000 pounds) resin shipments resin shipments 951L 526 39. 13. 1958- - n -- - - - -- - -. -- - - - - - - n n - - - -- - - 75. 219 32. 13. 1959 - -- 861 26. 11. 52 Our economy has not reached a state of development or sophistication here $20 000 000, the approximate value of Visking s purchases in 1956, can be described as anything other than "substantial". Some idea of the importance of the Visking requirements can be gathered from the fact that in 19:'56 and 1958 Visking alone purchased more resin than the combined total shipped to independent film extruder customers by all seven of Union Carbide s competitors. In 1959, despite an increase over 1956 of 6 000 000 pounds in total industry shipments to film extruders, Visking s purchases were approximately equal to the total shipments of resins for film use of six of Union Carbide competitors (excluding Eastman-Kodak). In 1956, Visking s requirements 'were greater than the domestic shipments of all types of resin by each of six of the eight resin producers. By 1959 it still bought more resin than five of the eight resin producers shipped domesticany for all uses.

Respondent argues that substantiality alone will not satisfy the competitive impact clause of Section 7 and that the tests used in the ex- Ovinion 59 F.

elusive dealing eases ;:; are not applicable to proceedings under this section. ,Ye do not reach this issue since this record contains much additional evidence to support a finding that the effect of this acquisition may be to substantially lessen competition or tend to create a monopoly in the market for polyethylene resin. It seems clear that the polyethylene resin manufacturing industry is not marked by ease of entry. It takes a minimum expenditure of 000 000 to build a plant of acceptable efficiency. Two years are required to build such a plant and at least a year is required to recruit and train a production and sales staff' Substantial expenditures for continuing research are apparently necessary if a company is to be effective competitor in this field. In 195!J, t-:-union Carbide spent approximately $3 500 000 in research and development of polyethylene 1'e8111S.

)Iergers of this type, that is, the acquisition of customers, beget additional merge.rs. A resin manufacturer faced with a ma.rket over \\which its competitors are acquiring ever-increasing control is forced to protect its position by acquiring for itself control of a segment of the. market and the quickest route to such control is through acquisition. At least four of Union Carbide s seven competitors have acquired film manufacturing companies. ,With one exception, these acquisitions have. taken place after the respondent's acquisition of Visbng. Of course, the control of a sizeable segment of the market by films already established in the industry serves further to discourage the entry of new manufacturers. In 1958 and 1950 approximately 40% of all shipments of film-grade resins were made by resin manufacturers to their owned film producing factories. Thus the market for film-grade resins, eonstituting 43% of the total resin market, is substantiflJly under the control of resin producers. The re-emergence of Visking as an independent purchaser should help to reverse this trend tow~rd an ever-increasingly eon trolled market. It is a basie precept of .American business that the hottest competitive. fight is ,yaged for the business of the large buyer. In fact the. Hobinson-Patman . ct ,yas enacted for the primary purpose of regulating ~nd preventing discriminatory excesses in the battle for the patronage of the big volume. buyer. Visking was and is by far the largest buyer.r of polyethylene resin. Its removal as a source and goal of competitive activity has efi'eeted a lessening of competition at the l'(' sin manufacturing level commensurate "ith its total volume of resin purchases and as \ye hflve ~een, that volume is both quantitatively and comparatively substantial.

3 Kg'. Sto.ndanl Oil Co. of Calijornio. v. UnUed States, 337 U.S. 293, 314 (1949). &:

UNION CARBIDE CORPORATION 653 614 Opinion The argument between the parties order the limits of the relevant product market. at the film level is similar to their disagreement order the resin market.. Respondent argues for a market encompassing all flexible packaging materials including such varied products as ~1Juminum foil, cellophane, Saran, cellulose acetate, kraft paper and '1 mesh. Relying upon the so-called Oellophane case respondent claims that the record shows that. polyethylene film is subjected to continuous competition from other packaging materials" that so-ea.lled "crosselasticity of demancF is present and that the physical characteristics of polyethylene. fihn and the other flexible packaging materials are insufficiently different to be commercially signifieant. The hearing examiner found for counsel supporting the complaint 011 this point holding that polyethylene film sold for flexible packaging purposes has sufficient peculiar characteristics anclllses to constitute it separate and distinct product market. The phrase "sufficient pee-near characteristics and uses" is taken verbatim from the opinion of the Supreme Court in the dupont- Ge' lIeral ..11010ps 5 case indicating l'e1iance upon the interpretive rule and reasoning there employed. Onr review of the record has persnaded us that the hearing exarninel"s decision is correct ~tncl in harmony with both the Cellophane and dupont- Gene7'Cll 310lots decisions. In making this detennination we have weighed carefully all of the usual criteria including one which 'YE'. deem important but which has received little attention. This factor is the preference of users or buyers for a particular product 01' material despite t.he existence of adequate substitutes. Reasoning of this type. was employed by the c.court in the recent (/rown ZeUe1'bach C;lse. In upholding the Commission s determination that the line of commerce there involved "'as limited to " census coarse paper" the court first referred to the dupont- General.:11 total'8 case stating: '~Unquestion- :l h1y the fact that General ~.fotors, the customer, chose to buy these particular finishes and fabrics, sufficiently distinguished them that they constituted by t.themselves the relevant market." It then conc1ndec1: "Here, as the rec.ord and the statistics show, the customers of St. Helens, and the customers of Crown, in ordering and purchasing papers designated as wrapping paper, shipping saek paper, bag paper, envelope paper, etc., by that very fact, demonstrate and create 11 market for those specific products so that they collectively may properly identify the relevant market here involved. Polyethylene film is today the most important flexible packaging material and its sales and usages are growing at a phenOlnenal pace. United Sta.tes v. E. I. dllPont deNemours(t Co. 351 U. S. 377 (1956). United States v. E. I. dupont deNemollTS Co., 353 U. S. 586 (1957). Crown Zellerbach Corpora.Non v, Fen.eral Trade Commission 296 F.2d 800 (9th Cir. 1961.

Opinion 59 F.

Of the 96 converter members of the National Flexible Packaging Association, 81 handle polyethylene film. By co-mparison, 63 members handle cellophane and 42 handle kraft paper, the two next nlost popular materials. D.omestic shipments of resin to film extruders increased from 120 002 893 pounds in 1955 to 312 795 000 pounds in 1959. The tremendous increase in the use of polyethylene as a flexible packaging material is due to its unique eombination of physical eharacteristics. No other single pa.ckaging material does so many jobs so well. Other materials may surpass it in individual particulars but none can approach it in versatility.

The record clearly shows that a.n ever-growing nwnber of sellers deem it importa.nt to present their products in transparent packages. In 1946, polyethylene film had a high haze factor and was more accurately described as translucent than transparent. Techllical pro-gress removed the haze and at the time of suit polyethylene film was almost the equal of cellophane in clarity. Cellophane remains superior in grease resistance and in adaptability to use in high speed wrapping machines. In other respects polyethylene film is quite superior to cellophane. It retains its strength in extremely low temperatures whereas. cellophane cracks and tears very easily. It does not deteriorate as rapidly with age as cellophane and therefore its effective shelf life is substantially longer. Polyethylene film has the limpness and pliability of cloth while cellophane is substantiaUy stiffer and capable of being crumpled like paper. Polyethylene film is a substantially stronger material than cellophane, making it useful for packaging he~tvy items where cellophane is whoUy unsuited. In 1949, the average wholesale price of polyethylene film was more than double that of cellophane and was substantially higher than the price of all other important flexible nlaterials except Saran. Today polyethylene film is lower in cost than cellophane and most of the other flexible packaging materials and this fact is both a cause and product of its success.

The. lmion of polyethylene film s unique aggregation of physical qualities with its lower price has enabled it to usurp large segments of the packaging market. This process has apparently only begun d is proceeding at an amazing pace. This phenomenon has occalled most strikingly in the soft goods packaging field. Cellophane was once the principal transparent material in use in this area but it has now been substantiaUy replaced by polyethylene film. The principal reasons for the shift appear to be polyethylene s longer shelf life, limpness and low cost. Competition among soft goods seUers is another factor which plays a part. Testimony indicates that a competitor s adoption of polyethylene film as a packaging material Jor~es other sellers to likewise adopt the film. J\fany well-knmn1 UNION CARBIDE CORPORATION 655 614 Opinion brands of soft goods once packaged in cellophane today appear only in polyethylene.7 The vice-president of Cellu-Craft Products Corp. a leading converter of flexible packaging products will~ sales of over eight million dollars annually, testified that within fiv~ years from the time that polyethylene film packaging was introduced for soft goods practically all of his soft goods accounts had switched to it from cellophane. At the time he testified 95% of his soft goods business was accounted for by polyethylene. Polyethylene has and is making substantial inroads against established products as a material for packaging candy, potatoes, dry cleaned gai1nents and laundered shirts.

Of course, there is and will continue to be competition between polyethylene film and other flexible packaging materials. This type of inter.:product competition will always exist but it does not preclude a finding that a distinct and separate market exists for polyethylene film as a packaging material anymore than the existence of competition between cotton, silk and linen or between brick, wood and stone forces the conclusion that no separate market exists for these prod ucts.

A packager who desires a package with the physical characteristics of polyethylene film must buy a polyethylene film package just as the housewife who desires a tablecloth with all the characteristics of linen must purchase one of linen. The existence of adequate substitutes does not erase the fact that consumers "ho desire a particular pr:oduct constitute a separate market for that product. And where as here that market is substantial it constitutes a line of commerce as those words are used in Section 7 of the Clayton Act.

To determine whether this acquisition may have the proscribed effects at the film level it is necessary to compare the po"wer and capabilities of Visking before the merger with Union Carbide s power and capabilities after the acquisition. In other words, how has the acquisition c.hanged the competitive picture at the film level '? Visking now has the backing of approximately I1j2 billion dollars in assets as compared to its pre-merger assets of 38 million dollars. But apparently Visking s assets were adequate to enable it to effectively compete in its field. In 1956, approximately 60 companies competed ns extruders polyethylene film. Visking accounted for 40.23% of total film shipments during that year. Its next largest competitor made shipments equal to only 6.5% of the total. Thus it must be concluded that Visking as an independent company had great economic power vis a vis its smaller competitors and that the backing of the additional 7 For example, in the men s ship;~t field!) Ano,,' Manhattnn, Hathnwa~, Van Heusen and Fruit of the Loom are now packaged exclusively in polyethylene film. \\ Opinion 59 F.

assets of rnion Carbide, v;while materially adding to its eompetitiye strength, would not of necessity effect a lessening of competition. But we have more here than the mere amalgamation of the assets of two large ancl po,,-erful corporations. ,Ve are here confronted with the merger of the dominant supplier of 1',,1'"\- material with the dominant processor and resell1er of the same ra\v material. Such a combination is formidable indeed since Yisking is nov insulated from the necessity of procuring its ra"- material in competition with other film extruders. The Union Carbide- Visking combine has the po\ver to lo\\er film prices below', the break-even level of its small, non-integrated film extruder competitors and yet realize a profit on over-aU operati~ns. Respondent cnn, w"without interference from the Robinson- Patman' Act, supply resin to its Visking Division at prices substantinny 10\ver than it charges competing film extruders. ~ s a. part of Vnion Carbide, Visking is protected from shortages ,,-hieh may arise in the supply of film-grade resin and 'will hnye primary access to any technological improyements in the product- ,Vithout doubt, the Union Carbide- Visking combination is a more formidable antagonist to the small film extruders than Visking alone. The eombination -is effectively insulated from many of the factors which restrain its extruder competitors and has the po,,-er to drive them to the \ya.l1. Thus the effect of responclenfs acquisition ,7"isking may be to substantially lessen competition or tend to create a monopoly in the manufacture and sale of polyethylene film. It must be remembered that polyethylene is a relatively ne. product for which new uses and applications are discovered almost daily. ,Yhile apparently teehnically mature, research by respondent and others goes fonyard to further improve and modify the product. ,Vithout doubt each teehnical improvement will further broaden the markets for polyethylene items.

,Vhile monopolies are to be abhorred \yheren'r they appe.al' , it is of particular importance that they be arrested in an infant industry \,which appears destined for far greater expansion and glo\Yth. Strong and vigorous competition is the catalyst of rapid economie progress. Any lessening of competition is therefore doubly harmful in a new industry since its inevitable effect is to slow down the growth rate of the industry. In these times, in the face of threats from abroad to economieally "bury " us, an accelerated rate of economic growth may \yell be. a prerequisite to national 8urvi\,(11. lIndeI' these circ.umstances \ye must be especially yigilant to protect the economy from any obstaeles to its rapid expansion.

,\Te are convinced beyond any doubt that the merger of the polydhylene film business of The Visking Corporation into TJnion Carbide Corporation has lessened and may in the future. even further lessen UNION CARBIDE CORPORATION 657 614 OpiniolJ competition and unless deterred by divestiture, Union Carbide may eventually achieve a monopoly in both polyethylene resin and polyethylene film. Therefore, this acquisition is against the public policy of the United States as expressed in Section 7 of the amended Clayton Act and an order of divestment must issue.

The order issued by the hearing examiner quite correctly requires respondent to divest itself of the polyethylene business acquired from Visking. However, it goes further, requiring divestiture. of a polyethylene manufacturing plant built by Union Carbide sometime after the date of the acquisition. We are of the opinion that under the circumstances present in this record the order should require only the divestiture of that aggregation of assets, rights, good will and properties which "\"ere acquired in the. Yisking acgnisition together with all improvements, including nlachinery and other equipment subsequently installed in the acquired plants and offices. The ultimate aim of an order of divestiture is to restore and assure a market in which competition will be active and vigorous. This goal will be more fully realized if Visking is restored as a competitor with only the facilities it operated at. the time of its acquisition. As so restored it will still he the largest producer of polyethylene film and will be well able to take care of itself.

1Vhile the retention by rnion Om'bide of the plant in question is not without its perils, we feel thn t the presence of lTnion Carbide, as another competitor in the film market outweighs any foreseeable ill effects. A_BY in(,ollsistencies between our ruling on the Cartersvi11e plant and our statements above concerning the anticompetitive effects engendered by the acquisition are more apparent than real. Union Carbide in fun possession of Visking, the dominant film manufacturer, is in an entirely different category from Union Carbide as the operator of one film manufacturing plant and forced to compete in a film market containing a restored Visking. vVe come now to the appeal of counsel supporting the complaint from the dismissal of the complaint charge with respect to that approximately one-half of Visking s business concerned with the manufacture and sale of synthetic sausage casings. As noted above, this count of the eompla-int was aetuaUy dismissed at the conclusion of the case-in-chief and the respondent was the-refore not required and did not ofI'el' any defensive evidence to rebut this charge. Counsel supporting the complaint now asks the Commission to order divpstment of the sausage casings business acquired, but in our view such an order ,\yould be improper since, respondent has not had its day in iscourt '\with respect to this charge. Of course, the appeal itself quite proper-r and -will be considered as n request for a re:verf.:l 1 the hearing examine.r s dismissal and a remand to the hearing exam nel' 6fJ3-4 90-(l-1-'1:~ Opinion 59 F.

to afford the respondent an opportunity to present such defensive evidence as it desires.

The principal sausage easing product produced and sold by Visking is eoll1posed of regenerated cellulose. Visking patented the process and as a result held legal monopoly control from about 1926 until expiration of the patents in 1953. The Visking casing 'was designed as a replacement for animal tissue which at the time of its invention was the predominant product in this field. Because of the unique combination of physical characteristics of the regenerated cellulose casings produced by Visking they have enjoyed a steady and striking 8ucee.ss. By 1956, Visking s sales of this product exceeded t'ITelye million pounds, with a dollar value of $25 591 000. In 1956, Visking sales of cellulose casings accounted for approximately 60% of the total sales of this product. The manufacture of sausage casings is carried on in separate plants located in Chicago, Illinois, and Loudon Tennessee, having no relation whatever to Visking s polyethylene film business.

An adequate sausage en-sing must have many qualities including strength, smoke permeability, nontoxicity, elasticity, adherence to the meat, low weight and printability. The hearing examiner correctly found that regenerated cellulose synthetic sausage casings are sufficiently unique to constitute in and of themsehes a line of commerce.

At the time of the acquisition, Visking had only two competitors in the sale of regenerated cellulose casings, American Viscose Corporation and Teepak Inc. Until recently these two competitors operated under licenses granted by Visking. The expiration of the Visking patents has now opened the field to new e.ntrants. The record contains no evidence as to the degree of economic and technological requirements of entry int.o this market.

,Ve find no error in the dismissal of this charge of the complaint. Union Carbide did not compete with Visking in the sale of regenerated cellulose sausage casings nor did it supply the materials from which they are made. Thjs aspect of the acquisition is purely conglomerate and the worst thing that can be said of it is that the Visking eellulose sausage casings now have the backing of Union Carbide one and one-half billion dollars instead of Visking s thirty-eight million. This showing alone will not support a finding that a lessening of competition is the probable result of Union Carbide s emergence as a sausage casing seller. Such an unfavorable prognosis must be based upon more solid ground.

This is not to say that a finding of proscribed effects in all lines of commerce in \\which the. acquired corporation is engaged is a necessary UNION CARBIDE CORPORATION 659 614 Opinion prerequisite to an order of total divestiture. The Act is violated if the forbidden effect or tendency occurs in any line of commerce. And once a violation has been found, the entire acquisition is subject to a divestment order. Brit total divestiture is not an automatic remedy ,which must be applied in all cases. The choice of remedies is the Commission s to be exercised \'\ith the goal of restoring and assuring the preservation of healthy competition in the relevant markets. Achieving this goal may 011 occasion require ordering divestment of facilities unrelated to the line of commerce afreeted by the acquisition as ~ for example, where the restorfltion of the acquired company as a healthy competitior requires that it be kept intact. Thflt situation is not presented by this record. Visking ,,-ill be an efiective and strong competitor in the polyethylene film market although shorn of its sausage casing business.

Ye would, of course, prefer to see more than three producers competing in the sale of cellulose sausage casings, but this aspect of market cOJltrol is beyond onr po\yer. I-Iere one competitior has been replaced. by another. The competitive picture is essentially as it was before the acquisition except for the aforementioned increase in the economic backing of the Visking casing business. If this competitive picture should at any time in the future alter in a manner \\which would indicate that our decision here is in error, a ne\v complaint based upon the new :facts inherent in the changed situation Gan be speedily issued. At this time, on this record, there is no shmving that the public interest would be served by an order requiring respondent to divest itself of the Visking sausage easing' business and the hearing examiner s dismissal of that portion of the complaint is hereby affirmed. Responclenfs appeal is granted to the extent heretofore indicated and in all other respects denied. The appeal of counsel supporting the compbint is denied. It is directed that an appropriate order issue with this opinion modifying the initia.l deeision in eonformity with the vie\ys herein expressed and adopting it, as modified, as the decision of the Commission.

C'ommi~sioner Anderson concurs in the result, and Commissioner Kern dissents.

Commissioner ELMAN, eoncurring :

I concur in the Commission s decision and order, and am in general , agreement with the views expressed in Chairman Dixon s foreeful opinion. I believe, however, that while the order of divestiture here is dearly warranted by the facts of record, it should be based on Inore narrow and limited grounds than those canvassed in the majority oplnlOn.

Opinion .j!) F. Fint. Some preliminary general observations may be in order. When one corporation ncquires the stock or assets of another, n, full inquiry into the economic. eft'ec.ts and implications of the transaction would necessarily cove.r n, very broad range. An e.conomist making a eomprehensi'- e study or analysis of the merger "-auld seek illumination on many matters. including industry structure and growth patterns, market power, prior marketing practices of the companies involved, market incentives to competition, the extent of product differentiation, industry economies of scale and the general problem of barriers to entry, etc. The scope of the Commission s inquiry in a Section 7 proceeding, however, should be far more limited. The Commission s responsibility is to pass on the legality of the challenged merger under defined statutory standards. It does not sit to examine and weigh the p1'OS and cons of the merger in all its aspects, or to decide, in the light of all the relevant data and opinions that might be adduced regarding its nature and effects, whether the merger is good or bad, wholesome or unwholesome, as a matter of national economic policy.

The national policy as to corporate mergers was established b~r Congress when it enacted Section 7 of the Clayton AGt. If a merger has characteristics proscribed by Section 7, it is unlawful. The Commission s function in a Section 7 proceeding is to determine whether those characteristics are present. Once it finds that they are, the acquisition must be declared il1legal and an appropriate order entered. So far as the Commission s inquiry is concerned, that ends the matter. I think it highly important, therefore, and even imperative in the interest of effective enforcement of the statute, to emphasize the need for simplifying and confining the range of issues in Section 7 proceedings. I have the impression that many cases have been dragged out almost interminably by the effort on both sides, sincere and conscientious though it be, to present every piece of oral and written evidence that conceivably might be relevant in appraising the nature and effects of the transaction in dispute. Too often the result has 1 See Crow?/ Zeller/well. Corp. v. Federal 'Prade CO1/1.1niRSiol/. D. Xo. 15.H04 , C.A. 9. June 5. 19G1 r::?!JG F. ::?c1 8001 at p. 823 r7 S. of\: D. 1::?G at l;'i(J"!: " COW:TI' ~~ W;I" nor eonl'('ruled :Ibont increasf'd dlkjeDc "; it 11S coIJcernf'd about the coj)Jpptjtcr tlh~ "mall hu"illpss man ,,-hosp ' little indepPIHlent units :ue gohhle!1 I!P h~' higg\'l" olles.' alld a bollt nutr competitors whose opportunities to 111('l't the prier's of thp lan!'!~ conCP1'1I a1111 hellce compete with it might he dimillished h~- a mergc1' which intTP:ised t.ll!~ C'ollC'pnt1'atioll of )JO\'\'CI' in the large organization. . . .

As the legislation wa sunder considera Hon by Congress it was duly appreciated tba t decentralized and deconcentra ted markets are often uneconomic and provide higher costs and prices. All this it laid aside in its concern o,er the ' curse of bigness ' and this concentration of power in the nation s markets which Congress thought advantaged the big man and disad,antaged the little one. Quoting in part the dissent of Douglas, J., in Unite(/. Sta.tcs v. Columbia Steel 334 U. S. 493 , 534. p, UNION CARBIDE CORPORATION 661 614 Ol)inion to create hardship to the been that relief has come, if at all, so late as parties, or frustration of the statutory policy, or both. 'Within the framework of the broad statutory provisions, the Commission has the duty to formulate, as best it can, specific eriteria for determining the legality of corporate mergers. To be sure, it is the obligation of a hearing examiner to eonfine the scope of a Seetion 7 proceeding as narrowly as the issues permit. But it is our responsibility to instruet the examiner as to 'the matters ,,-which are controlling, It is not enough, in my vie\\ to direct. the examiner "that he look at al1 the relevant facts of competition ~ " and to intimate broadly that "in certain situations the rigid yardstick of market shares might not only be extremely meaningful, but indeed perhaps conclusive under some cireumstanees on the issue of probability of competitive injury or tendency to monopoly:(' (Brillo Jl anufactw'ing Co., Inc. 5() C. 1672, D. 6557, issued i\Iareh 25 1960). Commissioner Kern, in his dissenting opinion here, fJllite properly observes ihat an examiner should shape the dimensions of a ease from pre-trial herring to conclusion in order to accomplish a fail' trial \"ith due process and yet maintain an unrepetitious, coneise sharp record. Quae' however how helpful it is to nn ex,lminer to be told that it is his duty " to be bound by established principles of relevancy and materialiti' and t hat once "relevant material is in the record it should be assessed Rnd evaluated, not ignored." An examiner conscientionsly attempt, ing to (lischarge his obligation under the Commission s Rules Practice to simplify and expedite the proceedings, but lmeertain as to what lines of inquiry he may safely bar the parties from pursuing, is entitled to more specific guidance from the Commission. From my point of view, therefore, it is not. a satisfactory disposition of a Section 7 case for the Commission to rationalize its decision in terms simply of a broad rule of reason:' or "relevancy. ~' Neither to Congress, which has shown great concern over excessive concentrations of economic power resulting from corporate mergers, nor to businessmen, who need to know whether a contemplated merger will stick 01' \vill be forcibly undone, perhaps after years of expensjye and wasteful litigation, is it enough to be given assurances that the Federfl 1 TnHle Commission will take. \yhateyer fiction it finds to be ~ A!' thl' Court ober\ed in the CnJ-/cn Zellerb(/('.Il eaf' ,q/(pra lIoll' J, al R:!fi (. S. & D. 160): " (S)ome writers JJave sl1ggf'stl'd that the Commi!'f'ioll. 01' the court". in inquiring into a claimed violation of ~ 7 should examine a multitude of "o-call€'d rf'IHant economic factors. As if the average anti-trust trial were not sufficientl:\" compllclltpd at best, some of these suggestions to enlarge the list of ' relevant factors' upon which finding-!' were required would tend to make a case of this kind so IIppn1lingly complicated that any judge might wen wonder whether th~ controversy was rpnl1y n jn"ticin hie one. And it is a bit hard to believe that Congress meant that a business concern contemplating- merger DIu"t undergo a similar \;trllggle to find out whether its plans mayor IDny not he carried onc"

, 662 FEDERAL TRADE COMMISSION DECISIONS, Opinioll 59 F, reasonable~' on the particular record. Nor is it much more areassuring to add that the Commission will base its decision upon "all the relevant facts of competition.

Of course, the Commission s decision should be reasonable and be made upon consideration of the relevant facts; but reasonableness and relevancy do not express absolute or self-defining standards of legality. One must go on to ask reasonable~' and "rele,-ant" in relation tolchat? Even in the la", of negligence, liability is not predicated simply on what the tribunal thinks is a "reasonable" or '; jusf' judgment, between the. particular parties on the particular facts, Nor did Congress in Section 7 of the Clayton Act give the Commission a blank check, to be filled out in each case as it thinks "reasonable. As I shah try to show, the Commission, at least in d0aJing \\ith socalle.c1 vertical mergers of the sort involved here, has no need to leave obscure or uncertain the applicable basic yardstick of legality. The term~i oJ Section, the policy of Congress manifested not only by the ~tatnte s provisions but by the legislative history, and the authoritative construction of the statute made by the Supreme Courtall combine to confirm the validitv of a sufficient-thou,g' h not necessaril~' exclusive-and relatively limited test: Does the merger helve the like1ihooc1 of foreelosing competition in n, substantial part of "any line of COl11l11eree in any section of the country F If a merger is clearly llnln.wfnl on this single naITO'" ground, quickly clel110nstTnhle hy easily ascertainable objective data ~ it js neither necessary nor cle~irahle to make further inquiry by considering e.vidence relevant to ot J18r possible bases for a finding of illegality. Only in the event that the illegality of the merger is not apparent upon application of this test should an eeonomie inquiry of broader range be undertaken, SN' onrl. Despite the length ,111c1 breH(lth Gi' tlh: procpec1ill ::; 1n the instant case 3 the facts \f1rich: jn my vjew establish illegal1it:- of the 11121' el' are ~tTikillp:h ~iJ~lplc'.

r:lion C'~n'hicle is nip ~e(,ollc11alg(\::;t chemicnJ ('~)nlpnn:- ;n the l' nitecl 8tatrs. In F);')(; , at ile' time of its :;\cCjnisitinll of \ isking. it had (1s~et::; of 11~ billion c1o11fll's. It ,,"~lS 11:,- far the COlllltT:" S hrg-est proclucer of polye11n' lelH' n\~im:;. the bn~ic 1',1"\'\' m::tlpria 1 from ,which po lye! 11;-I(,11e ~ T!w complaint was Issued July 8, 1957'. Bearings in support of the cnsc-in-chief commencefI on Novemher 12 , J !)57, and were held before henrin~ examiner in Ne1': York PhiJadclphin, Chicn?,o, nnd Wasllington, D. , in November nnd Decembf'.r 191)7 and in 1\Inrch J958. Counsel supporting the complaint rested their crIse-in-chief on 1I:Inrch 21, 1958. Defense hen rings were held In November 1958 and jn January. February, April nnfl .Tune 195D, until they were halted by tbedeath of the hearing examiner. After a second examiner 'Wns assigned to the case. further defense hearings were held in A U.l;118t, September, and Novemher 1959, and in .January, February, and. March 1960. Counsel supporting' the complaint presented rebnttnl evidence in l\1a~' ami JuneJ!1nO. .Aftf'r a sllrrelmttnl hearing jn WlIshington, C., on June 17 , 1960, the record was closed for the recf'ptinI1 of e,idence. The record contains more than 9, 100 pages of transcript and over :?OO exhibits.

i.' , ,, ;);)) , UNION CARBIDE CORPORATION 663 614 Opinion film is made. Prior to November 1954 hen Eastman Kodak entered the field, union Carbide. and cluPont ,""ere the only manufacturers of polyethylene resins in the United States. In 1956, Union Carbide produced 47.9%, dnPont 21.1 %, and the other six producers, including Eastman ICodak, the remaining 31 % of domestic shipments of resins. In 1956 Visking was the largest producer of polyethylene film, with assets of more than 38 mi1Jion clo1Jars and annual sales of film approximating 27 million clonal's, Of the 113 million pounds of film annually produced in the United States, Visking made over 45 million pounds or 40.23%. Its nearest competitor accounted for about 6.5% , or about one-sixth of Yisking s shipments. Visking was thus also the largest single customer in the market for polyethylene resins used in the nlanufaeture of films. In 1956 , it purchased about 51112 million pounds of resins, or 30.7 % of all the resins shipped by resin manufacturers to film producers in that year. Sjnce about one-third of all domestic production of resins ,""as used in the manufacture of film, Visking s purchases constitntecl );j.l % of aU the resins produced and sold in the Uniteel States for every purpose.

Thin!, The hearing examiner and the Commission have found that Union Carbide s acquisition of Visking may foreclose other producers of polyethy lenl3 resins from free competition in that substantial share of the market for their products represented by Visking s purchases. I not only agree with this finding but believe that no other finding is supportable in vie"'" oJ the undisputed facts of record summarized n.bove.

For the reasons ,,-which I shn.ll elnboratebeJow, this finding suffices to establish the illegality of the merge.r, and I ".ould go no further. It is unnecessary, ~s both the hearing examine.r and the Commission agren, to resolve the dispute bet,yeen the parties as to the proper delineation oJ the relevant market in polyethylene resins. .A ceepting, for purposes of decision, respondent's definition of the market:18 embracing ft11 resins produced in the. United States, and not mel'eJy those designed or selected for manufac.ture into polyethylene 111m, I CODellr in the finding that by acquiring Yisking, 17union C~ll'bi(le secnred the pO'irer to remove from the l11nrket and allocate to itself exeJllsive)y the purchasing power of the Jnrgest single customer for resins in the market. The conclusion of illegality flo,,-ing from this finding also makes it unnec.essary, in my view, to resolve other questions discussed in the Commission s opinion. Fourth. On the view I take of this case, the, Supreme Courfs deci- T Q P /i QD C'O"sJOns 111 (/'luter,T" .I states cu~ ont (l? . ;)/--i- anc J, ;)U\) 36G U. S. 316 (1961), are clearly controlling. The facts of the instant ~ase bring it. well \within the scope of the principles set forth in dupont. To esta:blish a violation of Section 7, the Court held, two Opinion 59 F.

requirements of proof must be satisfied: (1) ;'The market affected must be substantial." (2) There must be "a Eke.lihood that competition may be ' foreclosed in a substantial share of (that market).'" 353 U. S. at 595 , quoting Standard Oil CO. Y. United States 337 U.S. 293, at 314.

Thus, whatever may be the tests under other provisions of our antitrust laws, it is clear that likelihood of foreclosure of competition in a substantial share of the market is a proper and sufficient test under Section 7. Any doubt. there may have been on this score "Was surely dispelled when, in its recent decision on relief in the d7.tPont case, the Court summarized its holding on the merits as follo-ws:

'\Ve held that dupont' acf)uisitioll of the ~:3 per ('ent of General ~lotors stock had led to the insulation frot//, free co1Jt/Jetitiol/ of -most of the Oe-neml Motors market, in automobile finishes and fauries. with the rrsultant likelihood at the time of suit of the crt:'atioll of a monopoly of n line of ('Oll1merce, and accordingly, that dupont had "iolated Section 7 of the Clayton A(' t. (Emphasis added. ) 366 U. S. 316, at 318--31D.

From a finding of insullation from free competition " of the substantial share of the market tlmt General :Motors represented, it followed that a violation of Section 7 had occurred. F?:jth. Thus, the acquisition of Visking by United Carbide constituted a violation of Section 7 without more, it created a likelihood of foreclosure t.o Union Carbide s eompetitors of a substantial share of the market for their polyethylene resins." The facts of the case make it difficu It-indeed almost impossible-to conclude that it did not. Visking is, by comparative standards, a massive. consumer polyethylene resins, and Union Carbide has ample productive capacity to satisfy its requirements in toto at ,will. Visking is no longer an independent entity, "holly free to buy from any willing seller; it is a ,,'holly owned and controlled component. of the leading supplier the raw product. from which its polyethylene film is made, A serious anticompetitive tendency is inherent in such a relationship. ",Vhere once Union Carbide faced competit ion in price, product qua)i1y, and service for the substantial market represented by Visking s purchases of resins, it may no'" sec11l'e this entire business simply by its own executive direction. Similarly, where once Union Carbide s competitors might reasonably have expected that. any appreciable measure of price . In the Ill/Pollt cal:'e the Court dealt with SpC'tioll, a~ it wa~ prior to HIIH" l(lu1Pllt ill 1950. 38 Stat. 731. 15 U. C. (1948 ed. ) 18. However, thil:' does not detract from the applleability of that decision to this case, since the amendments left unimpai"ed thf'. statute s prohibitions against acquisitions tending substantia1Jy to the lessening of competition or to the creation of a monopoly. 5 'The preliminary requirement of tbe dupont case-that thf'. market itself be found to substantial, 353 U.S, at 595-i8 indisputably satisfied in this case. as the figures in Paragrapb Second show.

.. );:/,, , !; , p UNION CARBIDE CORPORATION 665 614 Opinion product, or service superiority would increase their sales to Visking, now only the most. dramatic. departure-for example, one rendering Union Carbide s product obsolete,-could justify a hope of selling more resins to ' Visking than strictly suited the convenience of its dominant supplier-owner. In periods of slack demand, at minimum this would presumably be no resins at all. In the words of the second dupont opinion, quoted Su.P')YI Union Carbide s acquisition of Visking may reasonably be expected to lead to insulation from free competition of most of the (ViskingJ marke.t.. ~' (366 U. , at 318-319). The stark rea lities of this situation must openly invite- , indeed they do not compel-Union Carbicle s rivals to seek the security vertical integration for themselves. Beyond the encouragement further mergers, other adverse competitive effects may be reasonably inferred from the c.change in market structure accomplislled by 1he acquisition of Visbng, The foreclosure of a substantial proportion of a. market may raise barriers to the entry of ne\y competitors and ma.y jeopardize the position of existing ones. The acquisition of assured outlet for a large share of its product. may give the acquiring company, in this instance t.he industry leader, an important advantageover its competitors. It is unneressnry, ho\Ye~'el' to explore all ramifications of the change in market structure effected by the acquisition: nor is it necessary predict its ant.jeompetitin' consequences with the certainty required in Sherman Act cases. :\.s the Standard Oil and duPv.nt cases make clear, the test of Clayton Act violation is only whether there is a reasonable probability ~ or '"likelihood'; that the acquisition may re. sn It. in foreclosing competition in a. substantial share of the relevant market or "line of commerce.:~ And, as the Su preme Court. pointed out ill the. rirst. dupont opinion (353 1."i, ,lt f;07), "The statutory policy of fost.ering free eornpetition is obyionsly furthered ,,"hen no supplier has :111 acln111tnge over his competitors from an ac.quisition of his custol1ler s stock ror nssetsl hkely to h;l\"e the effects condemned by the statute'"

. It must not be forgotten that the CJnyton Act ,yas ' expressly aimed at curbing anheompetitive practices the/?' ine;jJ;pncy and oP/v' c.' 0(\ C'eonSU7JU7IftlW7J." ...-:1. ~\ep. 0. v)( ong. :"c .,ess. )14) (emphasis added(1 b~~ the Supreme Court in the 1-ir81 duPvnt opinion 35:-1 U. , n t 5D7). ,Ve need not ,,-a.it for monopoly to burgeon; indeed we are obligated under the statute to ple'"ent it from doing so. The operative ,words of Section "/ are " here ::: the effect. * * ~, may, "Tilllng-!1 not es!-:enting to the showing of illegality here, it may be ohseryec1 that the extent to which vertical integration has progressed in the industry-at least four of Union Carbide s seven competitors In the sale of resins having purchased film producers-already represents the type of collective efrcet upon the remaining competition, which was Doted by the Supreme Court in Standard Oil Co. United States 337 U. S. 293, 309 (lH49). Opinion 59 F.

not. "where * * * the effect * * * is," Sherman Act certainty is not required; a "reasonable probability" will suffice. S. Rep. No. 1775 81st Cong., 2d Sess., p. 6 (1950). 7 That this test is satisfied in the present case, I cannot doubt.

Perhaps it can be demonstrated that the Union Carbide- Visking merger lacks the magnitude to confer upon the resultant combination present. monopoly power over price. But the legislators who sponsored the 1950 amendments to the statute took pains to explain that this \\as irrelevant:

Acquisitions of stock or assets have a cumulative effect, and control of tile market sufficient to constitute a violation of the Sherman Act may be ::Ichieved JJot in a single acquisition but as the result of a series of acquisitions. The bill is intended to permit intervention in such a cumulative process ",hen the effect of an acquisition may be a significant reduction in the vigor of competition, (':ven though this effect may not be so far-reaching as to amount to a combination in restraint of trade, create a monopoly, or constitute an attempt to monopolize. Such an effect may arise in various ways: such as . . . establishments of relationships between buyers and sellers which deprive their rivals of a fair opportunity to compete.

Under H.R. 2734 a merger or acquisition will be unlawful if it may han the effect of either (a) substantially lessening competition or (b) tending to create a monopoly. These two tests of illegality are intended to be similar to those which the courts have applied in interpreting tlJe smne language as used in other sections of :the Clayton Act. Thus, it would be unnecessary for the Government . . . to show that as a result of a merger the acquiring firm had already obtained such a degree of control that it possessed the power to destroy or exclude competitors or :fix prices. (H. Rep. No. 1191 , Sist Cong. , 1st Sess. p. 8 (1949).

Our concern must therefore be not so much with the present ef!'acts of an acquisition as \\ith its potential consequences for the future. Surely the merger involved in this ease is unlawful when measured in terms of such potentialities. To require significantly greater market fore,closure before acting would be to api)roach a Sherman Act test of concentration, thereby rendering Section 7 nugatory in practical application.

Dissenting Opinion of Commissioner I\::ERX. I find it. necessary to differ with some of the ,-je,,' s expressed by my colleagues including their proposed disposition of this proceeding. It seems to me that the Chairman \\-onlcl go to onf', extreme of injecting into our deliberations broad economic considerations de hours 7In United States v. Bethlehcm Steel Corp. 168 F. Supp. 576, 603 (S. ), .Tudge Weinfeld stated: "The Government is not required to establish with certitude that com. petition in fact ,,'m be substantially lessened. Its burden is met if it establishes a reasonable probability that the proposed merger will substantially lessen competition or tend to create a monopoly. '.-\ requirement of certainty and actuality of injury to competition js incompatible with an effort to supplement the Sherman Act by reaching incipient restraints.'" Quoting in part, S. Rep. No. 1775, supra. at p. 6. See also Crown Zelle1.bach supra note 1.

.. . .. , ,, , UNION CARBIDE CORPORATION 667 614 Opinion the re.cord,1 ,yhereas Commissioner Elman would go to the other extreme of confining us to an exceedingly narrO\f view as to the. scope of the inquiry in reaching a determination as to whether the statutory tests of inegality have been demonstrated.

There is, I believe, a middle pflth find that is the path the Commission has uniform)y fol1mye(1.~ ~Ioreover, it is a technique which has been upheld upon review.

fJ In the matter of Brillo ill an1lfactunng Company, Inc. made it dear in an opinion remanding the proceeding to the heal~ing examiner that. relevant economic factors as ,yell as statjsbcaJ data in merger matters \fere important. In that opinion (p, 2) I said: It seems to 118 that the hearing exn.miner s first J'nling upon the motion ,ybieh u1'on 111)1)ea1, we reversed and remnnded, was unduly preoccupied with 111.1lsl1ing the so-ealled quantitative substantiality doctrine-in this case to a point unjw::tifi(~d l'y existing judicial precedents interpreting the requirements of Section 7 of the Clayton Act-and thereby ga,e oyerwhelming consider:ition to Inn.rket shares to the complete exclusion of all other relevant economic factors. Hu\yever, ttie l1~aring examiner in the initial deci:,;iuJj uu'" l)e.f~re us on appeal with an ambivalence that we deem unjustified by our remand direction, seems repelled by that which he once embraced. He now ignores the great and perhaps conclusive weight to be given to these very same considerations when li!"w('~l in cnmH' dion with an already existing heavy industry concentration and other relevant record facts. 'When we refused to adhere to the rigid yardstick utilized by the hearing examiner in his earlier ruling, and directed that he look at all the relevant. facts of competition, lye did not want to be tnl;:en to conclude that in certain situations the rigid yardstick of marJ;:et slwres might not nn1:-- he extremely meaningful, but indeed perhnps conclusive ll1Hler some 1 "While 'monopoJirs nre to be abhorred wherever they appear, it is of particular importance that they he arrested in an infant industry which appears oestincl1 for far greater expansion and growth. Strong and vigorous competition is the catalyst of rapid economic progress. Any Jessening of competition is therefore donbJy bnrmfuJ in a new indllstry since Hs inevitable effect is to slow down the growth rate of the industry. In these times, in the facf' of threats from abroad to f'conomicaJly ' bury ' 115, an flccclera teu rate of economic growth may wen be :l prerequisite to national sun-i,fll 'Linller tllese circumstances we must be especially vigilant to protect the economy from any obstacles to its rnpid expansion!' (Ste jJ. 656 of CJJairJJlllJ1 Dixon ~ Opinion hprein. An economist making a co'll1J)re.hensiye study or anfllysis of the merger would seek inumination on many mil tters, including indm;try structure and growth pattern:,;, market power, prior marketing practices of the companies invol' ecl, lllarl;pt illcenti'- es to competition, the extent of product differentiation, industn' economies of scale and the general problem of barriers to entry, etc. The scope of the Commission s ilh)uiry in a Section 7 proceeding, 11o\\"('\er, should be far 1I10re limited. 'nle Cmnmissioll s respollsibility is to pass on the legality of the clwllengecl merger under detinet! statutory criteria. It dops not sit to examine nncl '-;eight the pros and CO'/lS of the merger in nJJ its aspects, or to decide, in the Jig-ht of nil the reIC' IJJJt data and opinions that might bp addllced reg-:lTcling Us nature and effects, whet bel' the merger is good or bad holesol11e or unwholesoUl'- , as a matter of national pC' onoJJljc policy~- r See )L GG(I of Commi;.;"ioll!' r Elnl;\n oll(',Jrrill;; ol'ininll lwrr.ilj.

~ In the ~latter of Cro'/tn~ Zellerbach COI. 54 FTC 769, 798 (1957), F. C. Docket 6180; In rhe :\lllltel' of Scott Paper CompallY.. 57 FTC 1-n ;-', F. C'. 110ek!'t 6:ic,!) . is!"lIf'cl 1),'(:. Hi 1960; In the l\llltter of PUlsbul-Y M-ills, lug. 57, FTC 1274 , F. C. Docket GOOD , issued Dec. 16, 1960.

1 (;rolf/l. Zellerbach Y. 'I' trade He;:. He/",. (106') '1'1';111(' C;l~. ) J';lr. -;O.o:::S at ,8, 142 (9th Cir Tune 5, 1961). (296 F.2d 800, 7 S. & D. 12GJ 656 FTC 1672, F. C. Docket 6557 , issued :.iarcb 25 , 1960. Opinion 59 F.

circumstances on the issue of probability of competitive injury or tendency monopoly. Obviously, the more concentrated an industry, the more meaningful it becomes; indeed, the more meaningful any additional single evidentiary element bearing on this issue becomes.

Commissioner Elman s opinion would cut, back from these views. 'Vhile I have never been an advocate of extending the Rule of Reason theory beyond decided limits, it seems to me that ,ve have consider what I choose to call a Rule of Relevancy. Our own experts have indicated rather broad but I think sound eriteria with respect to what is relevant in assessing anti-competitive. effects and tendency monopoly in a Section 7 Clayton Act case.

:Moreover, once such relevant material is in the record it should be assessed and evaluated, not ignored, l\1y disagreement with the vie"' s of Commissioner Elman rests his desire to restrict relevant material either by refusing to admit on the one hand (although he is not clear as to this), or by refusing to consider it on the other. ' I do not believe it possible to dictate with too great. pre~ision the limits of relevancy and I note that Commissioner Elman s efforts to do so ate quite general, but even these genetal comments somewhat distnrb me. For example: he states: " e(' ollomist making a comprehensive study 01' analysis of the merger 'yoldd seek illl11nination on many matters, including industry struetllre. and growth patterns~ market power, prior marketing praetiees of tlu'. eompanie.s involved, market incentives to competition, the extent of product clitI'el'e,ntintion, industry economies of seale and the genera.! problem of barriers to entry, etc. The scope of the. Commission s inquiry in ;1 ~e('tion 7 proceeding, hmye\'er, should be far more ,; Hnrllf'1'. (:omlle1i1io/l /llid Jlo/lO1/olis(.ic 7'p/ltie/ll'ieR i/l Mer!!f'rCI1Sf'R- 4./I Lco/lO/llil' l' rol,iem. i/l 1/ Deflol Setti/lg. 40 )'lnrq. L. It!'\" . 141 (1950): Bock, mergers 01/(1 Market ,', i:I' Prorl/lct Diil/CII,~io1l8 IG Bn1'ine~1' Record 192 (April 1959) : Bock, M('rYf'r. ~ Hllri Jfm'kct Si.:e- Geoyrolillic j)i/1l(,I/.~io1!. 16 Hu~iness Record 285 (,Tune 1959) : Bark, J/agen anri Mnrkf't Size- Other F(lctor. If) Business Hf'cord 347 ('Tuly 1959). 7 "'hill" SYIIIIHlthi7.ing- with his dpslre to limit the slzp of lpg-Ill rf'('of(ls. some.timf's ralher IIIHluly proliferated, neyertlIPless, thif' Is prlmaril~' the obligation of th(' hearing examiner. The hearing' examine/' IIInst, of cour~e, be mindful of Commissioner glman s laudable ohjecliyl' of hniJ.ling- a ('oncisf~ hill ('muplf'Ip rpcord. He !JIust likewise he g'uldeu In his manag-ement of Ill\:' pron';:s of tlh~ CIlSp. nmong other things h~' the ",arninl'" of the Xlnt"ll CirCllit Court of ,\pppnl;: in O/CII /.('1/('1'/)(/('11('('1'/1. \' r:/'. c. (:,upra. note 4) : Ou the other halld some writer!': Iw"p sugf"estecl that the Commission, or thp courts, inquiring into II clnimf'cl vlolntion of Spetioll 7 should f~xn!l1inp II multltudf' of so-called rp.leva n t pconom k fadon' \ Foot-l1ott' ami ttl~(L ) .\s i I' the n n'rag'f' a II li-trus t trill t \Veri' not sufficiently complicated I\t best, some of the suggestions to enlarge the list of ' relevant factors' upon which findings ,,-ere required would tend to make a case of this kine! so appallingly complknted th,nt any judf"e might well wouder whether the controversy was really a justiciable one (Footnote omittf'd). And It Is a bit hard to hel1e\'l~ that Congress meant that a business concern contem.platin~ mergl'f must under)!o a similar struggle tn find out whether Its plans mayor may not he carried oue" Rigid rull's of relevnllcy are 1101. practical It is the hearing l'xnmlllf'r S fl1l1crion alld duty 10 appl~' the stnudarcls. laid down h~' the courls awl till' Commission, tlf':dhlf' though tlwy Iw, to the' cire\Hustnnc\'s of path case as it tanH'S before him. He slwulcl shape tile dirm'rlsions (If n cusp fr(lm pre- trial hp111'ing to concll1!'.ion in onll.'rto aecompli"h ;\ fair ITial ,,-itli cllle pro(" "'" allcl ~'I:'I 1IIaillraiJI :111 IIlIrepf'titiolls . c"II(.i"". ,,1I:!r!, 1'1"('(11" , &:

UNION CARBIDE CORPORATION 669 614 Opinion limited." Yet, in his discussion of what he characterizes as the strikingly simple" facts establishing illegality of this merger, those facts certainly include a great deal of data coming within the purview of "industry structure, and " arket power. " Furthermore, if are dealing, as I think we should with statistical data over a number of years when they are in the record, certainly growth patterns a. important. Furthermore " prior marketing practices" of the companies involved may furnish important bases upon which to predicate a decision of probable effect upon competition of the challenged merger. Certainly a "thorough probing of the problem of ba.rriers to entry" may constitute, and indeed has constituted, not only in prior Commission cases hut in this proceeding, an important consideration. The Chairman in considering the effect of the acquisition in the line ofcomme.rce consisting of high pressure polyethylene resin sold for film extrusion purposes quite properly made a special point of commenting upon the lack of ease of entry.8 And counsel for respondent in demonstrating lack of effect on competition at the film level of competition not only placed into the record, but stressed in brief and argument evidence indicating ease of entry into the film extruding field.

Sole reliance upon the "strikingly simple~' facts, of course, would make it unnecessary to resolve other questions discussed in the Commission ~s opinion; yet this would shut the door on a consideration of important post-acquisition market facts in the record subsequent to 1956. \Vhere available, I would consider post-acquisition facts not only relevant, but most persuasive, Certainly they were to the Supreme Court in the dupont case. Indeed we have considered them in most of our Commission merger matters.

Rigid yardsticks may become legal hobgoblins.ll I would adhere our views expressed in prior cases. Furthermore, the Supreme Court' 8 "It seems clear that the polyethylene resin manufacturing industry is not marked by ease of entry. It takes a minimum expenditure of $9 000.000 to build n plant of acceptable efficiency. Two years are required to build such a plant and at least a year is required to recruit :lDU train a production and !"nlr!" !"tnff. Suhstnntinl f'Xpf'IHlitlll'f'S for continuing research are apparently necessary If a company is to be an effective competitor in tbls field. In 1959, Union Carbide spent approximately $3,500,000 in research and develop- ))H'nt of polyeth:rlf'ne resins" (See p. 652 of Chairman s opinion hen'in. Uni.ted States v. flllPont Co. 353 U. S. 586, 603 et seq. (1957). 10 In our recent opinion In the matter of Procter- Ga-mble Compa.-ny, C. Docket 6!)01issued June 15, 1961, remanding the proceeding to tlle hearing examiner we said: Moreover, this disposition of the matter, provldlI1g as it will a more complete and detailed post-acquisition picture, has the advantage of allowing the Commission an informed hindsight upon which- it can act rather than placing too strong a reliance upon trrne!u'I'OllS conjecture. (;18 F. c. 1207/ 11 In the Federal Trade Cornm-iss-uJn Report on Corporate Mergers and A. cquisitio1/S May 195fl. p. 174 , the following statement is peculiarly apposite: "The problems connected with the collection and analysis of facts sufficient to serve as a basis for decisions as to the In' oha hie competitive consequences of an acquisition are so complex tba t there is strong temptation to look for simple tests. Simple formulae are, however, untrustworthy Indices (If competithe consequences."

. . ) .

Opinion 59 F.

recent opinion in Tarnpa Electric 00. v. Nashville Coal 00. 12 furnishes further support to this position. ~foreover, it is significant that the United States Court of Appeals for the Ninth Circuit in reviewing the Commission s decision in the O'J' O1cn Zellerbach case not only made a full scale e~amination and analysis of all the factual material in the record, but with respect to one aspect of the proof stated "the record is most unsatisfactory and quite fragmentary, but apparently " 13 it is necessarily so.

I am certainly not unmindful of the proposition that in deterrl1ining whether a merger may substantially lessen competition or tend to create a monopoly the test is whether there is a reasonable probability of such anti-competitive effects nor am I unaware of the incipiency doctrine in connection with the application of the amended Clayton Act. I am also aware that we are dealing with a statute wherein the national policy clearly has been spelt out. However, we are also dealing with ,statutory language w hieh in fixing the standard of illegality employs the purposefully broad language "where the effect . may be substantially to lessen competition, or to tend to create a monopoly. :No deciding authority can with precision fix static guidelines governing the exact quantum of proof necessary to meet such a statutory requirement applicable alike to every given market setting. This not to say that given market dominanee in an oligopolistic industry any merger of sigl1ificance will not contravene the statute. Gin'll a certain market setting, a Ie'"~ simple compelling factors mip.-ht ;)(; :dl that is necessary to satisfy the statutory requirement as to illegality. On the other hand, as the. court said in the CrOE' lJ. Ze.1lel'vach case possibly more complicated tests and more extensive economic sm'Yf' may be required in some dose cases. " 1-1 But I believe that it is our duty to perform the full flUlction and responsibility of vl eighing a11 the relevant facts of record bearing on the issues involYec1: and further be.lieve that. in bnilc1in,1! a reco:cc1it is tlle duty oJ the hearin~~: examiner to be bound by established principles of l'eleYflllcy and. cmateriality. The question remains as to the appropriate disposition of this proceeding. The Commif;sion s opinion, giving as it does) eonsicleration to broad aspects of economic problems and glossillg over the postacquisition realities on the c.rucial question probable competitive effect, has provided a simple answer, This alls,yer 'Tas similarly arrived at by Commissioner Elman by confining consideration to c2Ttain basic statistical facts considered compelling and by refusing to consider most of the post-acquisition realities at all. ~L\applying the princi- :l2 365 u.s. 320 (1961).

13 Supra. note 4.

H Supra, note 4.

UNION CARBIDE CORPORATION 671 614 Opinion pies previously expressed in this opinion, however, I find the questions closer and the task more difficult. At the resin level of competition the post-acquisition market realities disclose that Union Carbide share of the n1arket for polyethylene resin has declined; that competing producers are in a healthy position having not only operated at capacity levels but having expanded production facilities; that Visking, which prior to the acquisition was Union Carbide s principal resin customer anyhow, had increased its purchases from Union Carbide s competitors after the acquisition; and that most producers (incidentally not small businessmen but the giants of the chemical industry) testified as to continuing vigorous and dynamic competition. At the film level of competition these same market realities disclose that Visking s share of the market for polyethylene film declined; that there has been an expansion of polyethylene production facilities by competitors; that there exists a competitive situation producing today a lower price for polyethylene film than cellophane (which according to the majority view is a less satisfactory material in many applications) ; and that a large number of new entrants are now operating in this i-ilm manufacturing field.

Irrespective, however, of the above considerations my decision in this case turns upon another ground. In considering the film level of competition, in my judgment the hearing examiner committed fatal and reversable error which has been perpetuated by my colleagues. In applying controlling judicial.) precedents to the tacts of record, I find the conclusion inescapable that the relevant market at the film level consists of flexible packaging materials and not just polyethylene film sold for packaging purposes. ,Ye will probably never again have before us for our guic1anee a case more directly in point on its facts th..o'1n the Cellophane case.15 The Supreme Court in that case held that cellophane did not constitute a separate market but that it was interchangeable with other flexible materials including polyethylene film and that all such materials formed part of the flexible packaging market. Any distinction that Cellophane was a Sherman Act monopoly case rather than a Section 7 anti-merger proceeding seems specious. Why should cellophane and other flexible packaging materials, including polyethylene film form a part of the same market in a monopoly ease but not in an anti-merger ease. It simply does not make sense. Nor do I find any real retreat from the Cellophane case in later cases including the Dupont-General 111 Oto1' case.16 l\ioreover the rccent. ease of Ta' 771pa Electric Co. v. N (lfiki'ille Coal CO. 17 further fortifies my conclusion. Indeed the Commission s opinion admits that 15 s. v. I. eluPont de Nem,OU1"S dE Co., 351 S. 377 (1956). 10 Supra note 17 Supra, note 12.

!, 672 FEDERAL TRADE. COl\fMISSIOX DECISIONS Order 59 F.

there is and will continue to be competition between polyethylene film and other flexible packaging materials.~' I-Iowever, persuasive to the Commission is the fact that there are certain advantages in using polyethy lene film over cellophane in many applications and including its lower price. To my mind these minor product advantages with respect to what are essentially competitive products constitute the essence of vital and vigorous competition. Furthermore in such dynamic. gro\yth industry, where research plays such a prominent role, what may be a, superior quality of one product today may be completely nullified by the improvements of competitive products tomorrow. The Commission s comparison of the c.ompetition between flexible packaging products to competition between cotton, silk, and linen, or brick, stone, and wood, appears ridiculous when we look at the physical exhibits in this record. (See respondent exhibits through 105 ~ ()51 through 65.5; 658 through 663, which demonstrate that it is hardly possible to tell one from another with the naked eye. The hearing examiner s erroneous determination of the relevant product market at the film level of competition resulted in Commission s counsels failure to develop the case in chief on the issue of probable eompetitiye eflect in that market. Some evidence covering this issue \yas adduced by respondent. Under the circumstances the public interest requires that the case be rem.Hnded and that the facts be fully explored demonstrating the competitive impact of the merger with respect to what is found here to be the relevant product market at the film level of competition-namely, the flexible packaging materials market.ls I would therefore vacate and set .aside the initial decision of the hearing examiner and remand the ease to him for further proceedings consistent with the views here expressed. IN AL Order This matter having come on to be heard upon cross-appeals by the parties from the hearing examiner s initial decision; and The Commission having rendered its decision denying the appeal of counsel supporting the complaint and partially granting and partially denying respondents appeal; and having directed in the accompanying opinion that the initial decision be modified: 18 I recognize that it is presently fashionable ill certain legal circles to discuss the administrative process almost entirely in tenm; of "regulatory lag" and "length of legal record~" and that this suggested disposition may be considered nut of bl1rmony with such an administrative approach. It should he rememberl'd, however, that we are considering here a lIlerger entl1iJing potentially Jarge economic conseqllenc('~ both to the public and to the pri\-ate interests involved. In order to perform that ta:,," fairly~- and conscientiously, deciding authority eallllot beCOl!ll' hosta!,:' !' to Ifg-alfashilliiS "I' till' day. UNION CARBIDE CORPORATION 673 614 Order It is ordel' That the initial decision be, and it hereby is, modified by:

(1) Striking from paragraph 69 the date "December, 1957" which appears in line twelve of the seventh subparagraph thereof and substituting therefor the date "1953"

(2) Striking from paragraph 74 the two sentences commencing on line ten with the words "It is" and ending on line sixteen with the words "polyethylene film It 7 S further ordel' That the order contained in the initial decision be, and it hereby is, modified to read as follows: It is ordered That the respondent, l1union Carbide Corporation, a. corporation, through its officers, directors, agents, representatives, and employees, within one year from the date of service of this order shall divest itself absolutely, in good faith, of all assets, properties rights and privilege. , tangible and intangible, including but not limited to all plants, machinery, equipn)ent, trade names, trademarks good will and business acquired by Union Carbide Corporation as result of its acquisition of the assets of The Visking Corporation, and so much of the plant machinery, buildings, improvements and equipment, of whatever description, as has been installed or placed by Union Carbide Corporation on the premises of Visking Company Division of Union Carbide Corporation, as may be necessary to restore Visking Company Division of Union Carbide Corporation to its fonner status as an effective, competitive entity in the polyethylene film industry, as organized and in ~substantially the basic operating form in which it existed at or about the time of the acquisition, with such additional assets as may represent the normal expansion of The Visking Corporation during the time of its operation as a division of Union Carbide Corporation.

it is further ordered That in such divestment no property above mentioned to be divested shall be sold or transferred, directly or indirectly, to anyone. who at the time of the divesture is a stockholder officer, director, employee, or agent of, or otherwise directly or indirectly connected with or under the control or influence of, respondent or any of respondent's subsidiaries or affiliated companies. It is further ordered That the complaint herein, insofar as it relates to the manufacture, offering for sale, sale and distribution of synthetic sausage casings, be, and the same hereby is, dismissed, I t is further _ordered That respondent Union Carbide Corporation shall, within sixty (60) days from the. date of service upon it of this order, submit in writing, for the consideration and approval of the Federal Trade Commission, its plan for compliance with this order including the date within which compliance can be efl'ecte.d. 693-490--64- Complaint 59 F.

s initial decision I t is further ordered That the hearing examiner as modified, be, and it hereby is, adopted as the decision of the Commission.

By the Commission, Commissioner Anderson concurring in the result and Commissioner Kern dissenting.