Read United States v. E. I. du Pont de Nemours & Co. ... Brief facts and answer

Question

Read United States v. E. I. du Pont de Nemours & Co. ... Brief facts and answer questions ... 1. What is a vertical merger? What requirements must be proven to find a vertical merger illegal? 2. Did the du Ponts act ethically in this case? 3. Did Du Pont ownership of 23 percent of the stock of General Motors constitute a vertical merger that gave Du Pont illegal preferences over competitors in the sale of finishes and fabrics to General Motors an therefore violate Section 7 of the Clayton Act?

Explanation / Answer

1. A vertical merger is a merger between two companies which produce different goods or services for one specific finished product. A vertical merger occurs when two or more firms merge operations while operating at different levels within an industry's supply chain.

After finding that du Pont's acquisition of 23 percent of General Motors (GM) stock foreclosed sales to GM by other suppliers of automotive paints and fabric, the Court held that the vertical merger had an illegal anticompetitive effect. Such requirements must be proven to find a vertical merger illegal.

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