For the first few hours after the U.S. Supreme Court laid down the antitrust law to Du Pont last week (see NATIONAL AFFAIRS), Wall Street reacted with anticipation. Du Pont stock shot up 6 points to 202½ in the hope of big stock dividends following the court's ruling that Du Pont interests must give up their 23% control (64 million shares) of General Motors stock, worth $2.7 billion. But when Wall Street took a more careful look, Du Pont stock slipped back down. Both Du Pont and G.M. stock fluctuated nervously for the rest of the week, as everyone tried to figure out what the ruling meant—not only for Du Pont and G.M. but for the U.S. business community as well. The impact was as stunning as it was to the Justice Department itself, which up to the last minute had only the slimmest hopes of winning.
What worried businessmen was the sweeping nature of the decision, putting a new emphasis on the nation's antitrust philosophy. As Justice Harold H. Burton wrote in his dissenting opinion: The ruling "disregards the language and purpose of the statute, 40 years of administrative practice and of the precedents . . . except one District Court decision. To make its case, the court requires no showing of any misuse of a stock interest—either at the time of acquisition or subsequently—to gain preferential treatment. All that is required, if this case is to be our guide, is that some court in some future year be persuaded that a 'reasonable probability' then exists that an advantage over competitors in a narrowly construed market may be obtained as a result of a stock interest." Moreover, added Burton, the decision marked the first time the Clayton Act has been applied to a vertical acquisition, i.e., a case where a company gets substantial control of a customer rather than a competitor.
Trouble All Around. As a result of the decision, businessmen could descry trouble ahead for dozens of big and little U.S. companies. Sears, Roebuck & Co. owns big blocks of stock in such suppliers as Whirlpool-Seeger Corp., Florence Stove Co., and Armstrong Tire & Rubber Co.; Gulf Oil has a 12% interest in Texas Gulf Sulphur, which supplies Gulf with sulphur; Olin Mathieson Chemical has 25.8% of Marquardt Aircraft and 50% of rocketmaker Reaction Motors, for which it is helping develop rocket fuel. And by successfully going back 30 years to trip Du Pont, trustbusters had won the right to try any company for things it did in long years past.
No businessman seriously believes that Du Pont bought into General Motors merely to wrap up a market for paint. Although the Supreme Court ruled that by its working control of G.M., Du Pont had been able to force its products on the automaker (specifically that Du Pont had supplied General Motors with about 67% of its paint and finish supplies, between 38% and 52% of its textile requirements in the years 1946 and 1947), the two items together make up only about 2% (or $20) of an auto's total cost. Du Font's total G.M. business amounted to only about 3% of the company's $795 million sales in 1947; Du Font's real profit from G.M. is from its stock investment, which last year paid the chemical company $126 million in dividends—nearly 6% of its total gross income.