United States District Court, Northern District of Illinois, E.D
November 19, 1974
SCIENCE PRODUCTS COMPANY, INC., A CORPORATION, PLAINTIFF,
CHEVRON CHEMICAL COMPANY, INC., A CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Robson, Chief Judge.
MEMORANDUM AND ORDER
Plaintiff, Science Products Company, Inc. ("Science"), has
brought a three count complaint against Chevron Chemical
Company, Inc. ("Chevron"), for trademark infringement, unfair
competition, and violations of the Sherman Act, 15 U.S.C. § 1
et seq. Count III alleges two offenses in violation of
Section 2 of the Sherman Act: that Chevron has monopolized or
attempted to monopolize the relevant market for garden
chemicals in the United States.
This matter is now before the court for a preliminary
determination of the relevant market. There is no dispute with
regard to the geographic market being national. The difference
comes with regard to the product market. The burden of this
issue is upon the plaintiff. It must establish by a
preponderance of the evidence that the alleged market is
cognizable under the Sherman Act.
Science contends that the relevant market for purposes of
its antitrust charges is defined as follows:
"The national market for small package garden
chemicals used in the home garden. The products
in the market include products similar to those
listed in Chevron's 1970 `Garden and Lawn
Chemicals Distributor Price List' but excluding
those products listed therein under the heading
Science specifically excludes products which it categorizes as
"dry fertilizers" and "household insecticides." Chevron has
defined the market as "the market for all products which
affect plant or insect life in and around the home" and
specifically includes both "dry fertilizers" and "household
Pursuant to this court's order of July 2, 1974, the parties
submitted to the court briefs, affidavits and various exhibits
supporting their respective definitions of the relevant
product market as an element of Science's antitrust claims.
This memorandum opinion represents the court's preliminary
findings with regard to the relevant market issue and, unless
significant new evidence is introduced at trial, will
constitute the court's final findings of fact and conclusions
of law as to this issue.
After a careful review of the evidence and the law, the
court is of the opinion that Science has failed to demonstrate
by a preponderance of the evidence that the market alleged in
the complaint constitutes a relevant market for purposes of
the Sherman Act and that the market must be redefined to
include all products which affect plant or insect life in and
around the home. Specifically, the relevant product market
consists of the following categories of products:
1. Fertilizers, liquid and dry.
2. Pesticides. These include herbicides, fungicides and
insecticides used both inside and outside the home.
3. Combination products. These products combine fertilizers
with herbicides, insecticides and fungicides.
5. Specialty products. These products have a wide variety of
specialized applications to plant and insects.
I. The Standards
The leading case discussing the relevant product market is
the Cellophane case. United States v. E.I. Du Pont De Nemours &
Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). There,
the issue was whether the product market would consist of all
flexible packaging materials or merely cellophane. Initially,
the Court noted that the Sherman Act did not require products
to be either fungible or physically identical to be included
within the same product market. 351 U.S. at 394, 76 S.Ct. 994.
What is required is an appraisal of the "cross-elasticity of
demand" between the products sought to be included in the
putative market as well as consideration of whether those
products are "reasonably interchangeable."
"Cross-elasticity of demand" between products is measured by
"the responsiveness of the sales of one product to price
changes of the other." The court then added: "If a slight
decrease in the price of cellophane causes a considerable
number of customers of other flexible wrappings to switch to
cellophane, it would be an indication that a high
cross-elasticity of demand exists between them; that the
products compete in the same market." 351 U.S. at 400, 76
S.Ct. at 1010.
By contrast, products are "reasonably interchangeable" when
use and physical characteristics are found to be comparable.
In explaining this factor, the Court cautioned that:
"The varying circumstances of each case determine
the result. In considering what is the relevant
market for determining the control of price and
competition, no more definite rule can be
declared than that commodities reasonably
interchangeable by consumers for the same
purposes make up that `part of the trade or
commerce,' monopolization of which may be
illegal." 351 U.S. at 395, 76 S.Ct. at 1007
(footnotes and citations omitted).
Based on these considerations, the Court found that the
relevant market was the market for flexible packaging
The standard of "reasonable interchangeability" was
reaffirmed in Brown Shoe Co., Inc. v. United States,
370 U.S. 294, 325, 82 S.Ct. 1502, 1523, 8 L.Ed.2d 510 (1962), where the
Court also noted the possibility of the existence of
"The outer boundaries of a product market are
determined by the reasonable interchangeability
of use or the cross-elasticity of demand between
the product itself and substitutes for it.
However, within this broad market, well-defined
submarkets may exist which, in themselves,
constitute product markets for antitrust
purposes. . . . The boundaries of such a
submarket may be determined by examining such
practical indicia as industry or public
recognition of the submarket as a separate
economic entity, the product's peculiar
characteristics and uses, unique production
facilities, distinct customers, distinct prices,
sensitivity to price changes, and specialized
vendors." (Footnotes and citations omitted).
In defining the relevant product market, the Supreme Court
has directed that economic and commercial realities must be
examined. United States v. Continental Can Co., 378 U.S. 441
449, 84 S.Ct. 1738, 12 L.Ed.2d 953 (1964); Brown Shoe Co.,
Inc. v. United States, supra, 370 U.S. at 336, 82 S.Ct. 1502.
If competition cuts across product or industry lines, the
product market must be drawn broadly to include competition as
it exists. United States v. General Dynamics Corporation,
341 F. Supp. 534
, 555 (N.D.Ill. 1972), aff'd, 415 U.S. 486
, 94 S.Ct.
1186, 39 L.Ed.2d 530 (1974). Moreover, "the court must be wary
of falling into the temptation of tailoring the market to the
dimensions of the defendant's business." Cass Student
Advertising, Inc. v. National Educational Advertising Services,
Inc., 374 F. Supp. 796
(N.D.Ill. 1974, Decker J.).
II. Dry Lawn Fertilizers
In its initial brief, Science contended that the relevant
market included products similar to those listed in Chevron's
1970 "Garden and Lawn Chemicals Distributor Price List." This
list sets out a wide variety of products including
fertilizers, insecticides, fungicides, combination products,
applicators and various specialty products intended for both
lawn and garden use. The overwhelming majority of these
products are in
liquid form. Specifically excluded from the market were those
products Science categorized as being "dry fertilizers."
Science did not delineate the specific products it sought to
exclude, as the court directed, but merely alluded to
Chevron's 1970 "Lawn and Garden Dry Fertilizers Distributor
Price List" as being illustrative of "dry fertilizers." The
latter price list includes insecticides, herbicides,
fertilizers and applicators intended for use in both the
garden and the lawn. The common element possessed by each of
these chemical products is that they are in dry form. Thus the
clear dichotomy drawn by Science was between liquid lawn and
garden chemicals and dry lawn and garden chemicals.
Science, in its reply brief, to the amazement of the court,
substantially altered its definition of the relevant market.
Excluded from the revised market are all liquid chemicals
appearing in the 1970 "Garden and Lawn Chemicals Distributor
Price List" which are intended primarily for lawn use.
Included in the revised market are those dry chemicals
appearing on the "Lawn and Garden Dry Fertilizers Distributor
Price List" which are primarily intended for garden use. The
dichotomy now drawn by Science is between products, liquid and
dry, intended primarily for lawn use and products, liquid and
dry, intended primarily for use in the garden.
After examining the lawn and garden chemical market in light
of the criteria established by the Supreme Court, the court is
of the opinion that the plaintiffs have failed to establish by
a preponderance of the evidence a valid submarket under either
1. Industry and Public Recognition. Science has submitted no
evidence of public recognition of any submarket within the
lawn and garden chemical field. Science does contend that a
submarket consisting of dry lawn chemicals is recognized by
the existence of a separate trade association and by Chevron's
The trade association referred to is the Fertilizer
Institute. The Institute is concerned solely with the
fertilizer industry and not with other lawn and garden
chemicals. Science suggests that this fact establishes dry
lawn chemicals as a distinct submarket. However, the
Fertilizer Institute is basically an association of
agricultural fertilizer manufacturers. Very few manufacturers
of lawn and garden chemicals belong to it. The industry
association subscribed to by almost every manufacturer of lawn
and garden chemicals, including both Science and Chevron, is
the Chemical Specialties Manufacturers Association. The
industry membership of the latter association cuts across the
product lines Science seeks to establish and points toward
recognition of the lawn and garden chemical field as a unified
line of commerce.
Science contends that dry lawn fertilizers constitute a
separate market because they receive their own "special
advertising and promotion." This contention, however, ignores
the express testimony of Mr. Newhart, Science's vice-president
and sales manager, that companies marketing both "dry
fertilizers and home and garden chemicals . . . would try and
weave those two into one merchandising program." (Newhart
Dep., pp. 12-13.) Science's assertions are further belied by
the recommendations of the Opinion Research Corporation which
prepared a marketing survey for Chevron relating to dry lawn
fertilizers. That study concluded:
"Ortho [Chevron] should consider marketing a
complete lawn and garden program that effectively
ties in their pesticide superiority to their
fertilizer products. These products seem
naturally related to dealer and consumer. . . .
Dealers would also welcome product information
that gives a consumer knowledge from his point of
view as a home owner rather than being segmented as
a lawn maintainer, a gardener, a tree owner, etc."
Lawn Maintainer Study, Vol. II, p. vii.
Finally, Eugene Olshansky, the president of Science, has
testified that lawn and garden chemicals constitute a single
"BY MR. HANLEY:
"Q I show you . . . your 1971 distributor
prices for Science Products. I call your
attention to a title `Specialties-Growth
Regulators-Plant-Food' on one side of the page,
and on the other side of the page,
`Insecticides-Fungicides-Combinations,' and on
the third page `Weed, Grass and Vegetation
"What is your testimony, sir, with respect to
whether the titles which I have read constitute
separate or distinct or the same market of
"A These are all garden chemicals sold in the
garden chemical market. The difference is in the
name of the products. They are shipped together,
bought together, sold together. They are
displayed in the same places. So there is no real
difference between them.
"BY MR. HANLEY:
"Q Is your testimony then sir, that these are
all part and parcel of the same market?
"A Oh, definitely."
(Olshansky Dep., pp. 246-49.)
The price list referred to in the deposition contains
products falling into every product category, including dry
fertilizers and combination products, products meant for lawn
use, products meant for garden use, as well as products
intended for use primarily inside the house.
2. Physical Characteristics, Uses and Product
Interchangeability. All of the various products or
combinations of products in the lawn and garden chemical
market are intended to aid plant life and control insects.
They each perform that function in differing ways: a
fertilizer provides cell-building minerals; a fungicide kills
plant diseases; a herbicide kills unwanted nuisance plants; an
insecticide kills insects; specialty products perform various
specialized tasks relating to lawn and garden care; and
applicators apply the various products.
Virtually all of these products are combined to perform two
or more functions simultaneously. Their chemical ingredients
can be varied to fit particular consumer needs, or to meet
specific soil, weather and other environmental conditions.
Most are packaged in a variety of forms (liquid, dry, soluble
or aerosol) and sizes. Neither the form in which they are
marketed nor the size of the container in which they are sold
has any effect on the active ingredients contained in the
products. Significantly, liquid lawn and garden products
contain the same chemical components and are functionally
interchangeable with their dry, soluble and aerosol
It is apparent that the lawn and garden chemical market
includes a variety of products which are complementary rather
than directly interchangeable or directly competitive with
each other. Science concedes this fact but persists in arguing
that garden fertilizers are not directly interchangeable with
lawn fertilizers and therefore constitute a separate and
distinct line of commerce. However, even the briefest survey
of Chevron's "Products Manual" demonstrates that it is
impossible to generalize about the area in which the lawn and
garden products are all used. Many of these products can be,
and are, used on the lawn, in the garden and even inside the
house. No single group of related products is used exclusively
in only one such area, though individual products may be.
There is, as a result, substantial overlap of locus of use for
these products generally. Moreover, as Science concedes, a
relevant product market can include clusters or combinations
of products where that combination reflects commercial
realities. United States v. E.I. Du Pont De Nemours & Co.,
351 U.S. at 393, 76 S.Ct. 994; United States v. Continental
Can Co., supra, 378 U.S. at 456-457, 84 S.Ct. 1738; United
States v. Grinnell Corp., 384 U.S. 563, 574, 86 S.Ct. 1698, 16
L.Ed.2d 778 (1966).
3. Production Facilities. The manufacture of dry lawn and
garden fertilizers is essentially a two-step process: first,
the production of the raw chemical components, i.e., nitrogen,
phosphorus, and potash; second, the blending of these
components into products suitable for consumer use. The
production of the raw chemical components requires expensive
and specialized equipment which are beyond the means of most
manufacturers. As a result, most companies marketing dry
fertilizers purchase their requirements of raw chemicals from a
chemical manufacturer and merely mix and repackage them in
smaller containers. Even the blending process requires
specialized and expensive conveyors and bagging equipment.
Moreover, because dry fertilizers are far bulkier than liquid
products, substantially more storage area for raw chemicals and
finished products would be required. Because of these initial
cost barriers, the manufacturing of dry fertilizers tends to be
concentrated in a few major corporations whose annual sales
By contrast, the chemical components of liquid lawn and
garden products can be produced in small production facilities
with relatively simple equipment. The essential process
involves mixing chemicals in a tank and bottling or packaging
directly from the mix in the tank. The equipment is small
enough to fit inside a garage and can be used to formulate
many different kinds of lawn and garden chemicals. This
equipment, however, is not suitable for the manufacture of dry
While there is some product distribution at the
manufacturer's level between liquid and dry products, that
distribution does not have competitive significance. The
relative ease of entry into the liquid lawn and garden
chemicals field and their interchangeability with dry products
allows smaller manufacturers to readily compete with those
larger firms possessing the necessary capital to produce dry
lawn and garden chemicals. Moreover, since all dry products,
whether meant for lawn or garden use, are manufactured by the
same process, any lawn-garden product line distinction based
on differing production facilities is meaningless.
4. Pricing and Cross-Elasticity of Demand. Channing Jones,
National Market Manager of the Home and Garden Department of
Chevron's Ortho Division, has testified that in his
experience, consumers will generally compare products and
prices based on the square foot coverage. Thus, in pricing a
bottle of liquid fertilizer, Chevron considers not only the
price which a consumer will pay for a competing bottle of
liquid fertilizer, but also the price he will pay for a bag of
dry fertilizer which would cover the same area of his lawn or
garden. And, in pricing a bag of dry fertilizer, Chevron
considers the price the consumer would pay for a comparable
bottle of liquid fertilizer. As a result, the prices of liquid
and dry fertilizers tend to be competitive. In addition, in a
situation where the price of either liquid or dry fertilizers
substantially exceeds the price of the other, Channing Jones
would expect to see an increased demand for the lower-priced
product. Channing Jones' unchallenged testimony clearly
demonstrates cross-elasticity of demand between liquid and dry
5. Specialized Vendors. In general, lawn and garden
chemicals are marketed through a tripartite distribution
channel-manufacturer, distributor, retailer — each of which
handles a representative line of products. However, some
manufacturers, such as O.M. Scott, a leader in sales of dry
fertilizers, distribute their products directly and exclusively
Lawn and garden chemicals are handled by a variety of retail
outlets: nurseries, garden supply shops, hardware stores,
department stores, variety shops,
discount stores, feed stores, grocery stores and a few very
large drug stores. With the exception of grocery and drug
stores, all of these outlets handle a full line of lawn and
Most lawn and garden chemicals have a limited and highly
seasonal market. As a result, most grocery and drug stores,
which have a serious demand for shelf space, handle these
products only on a seasonal basis. However, many grocery
stores, particularly in the South and West, do carry a full
line of lawn and garden chemicals on a year round basis. In
addition, an increasing number of grocery stores are now
selling various types of house plants and, in conjunction
therewith, are handling a wider range of home and garden
From the foregoing analysis, it is clear that lawn and
garden chemicals, whether dry or liquid, are distributed
through basically the same channels and reach the ultimate
consumer through identical retail outlets.
It is apparent to the court that any attempt to divide the
market along the lines of dry as opposed to liquid products
may be readily disposed of by reference to the Supreme Court's
decision in United States v. Continental Can, supra, and this
court's subsequent decision in United States v. General
In Continental Can, the government charged that the merger of
a metal container manufacturer with a glass container
manufacturer violated Section 7 of the Clayton Act. The Court
concluded that the interindustry competition between glass and
metal containers was sufficient to warrant treating as a
relevant product market the combined glass and metal container
industries and all end uses for which they compete. Similarly,
in General Dynamics, this court grouped coal, gas, oil, uranium
and other forms of energy into a single line of commerce
because of the high level of interfuel competition. In the
instant case, the evidence clearly demonstrates that liquid and
dry lawn and garden chemicals are functionally interchangeable
and exhibit the same competitive traits as the container and
Science's belated attempt to distinguish lawn from garden
chemicals is equally unavailing. Lawn and garden chemicals are
produced by the same group of manufacturers, sold through the
same channels of distribution, are in part interchangeable and
are sold to the same class of consumer. They are, as Eugene
Olshansky, Science's president, conceded, part and parcel of
the same market.
III. Household Insecticides
Science also seeks to exclude from the relevant market
certain "household insecticides" similar to those described
under the heading "Household Program" in Chevron's 1970
"Garden and Lawn Chemicals Distributor Price List." These
products consist of liquid insecticides suitable for use
inside the home and marketed in aerosol cans. Science
distinguishes household insecticides from lawn and garden
chemicals on the following grounds:
1. The conclusory statements of Eugene Olshansky, president
of Science, and Al Livingston, president of Livingston Seed
Co., that at the manufacturers' and distributors' level
household insecticides are recognized as separate economic
2. Household insecticides are used primarily to kill
household insects which are nuisances to humans, whereas lawn
and garden insecticides are used to destroy insects which
infest and harm plants.
3. Household insecticides are relatively low in terms of
toxicity (active killing agent) and are commonly marketed in
aerosol form, whereas lawn and garden insecticides are much
higher in toxicity and are normally sold in powder form for
mixing in solutions and spraying with a mechanical applicator
or pouring directly on plants.
4. Household insecticides are sold to a broader range of
customers, i.e., homeowners
and apartment dwellers, whereas lawn and garden insecticides
are limited to homeowners with gardens and lawns.
5. Household insecticides and garden insecticides utilize
different channels of distribution. Household products are
sold predominantly in grocery and drug stores, while lawn and
garden products are sold in garden shops and garden
departments of department stores.
6. The competitors which dominate the sales of household
insecticides are different from those which lead in the area
of lawn and garden chemicals.
Science's arguments ignore the competitive realities of the
marketplace. Household insecticides share the same chemical
components and manufacturing facilities with insecticides
labeled and intended for outdoor use. Once a manufacturer
enters the lawn and garden chemical field, it can easily
expand its product line to include household insecticides.
This, in fact, has been the case. For example, S.C. Johnson,
one of the leading manufacturers of aerosol household
insecticides, also markets lawn and garden products and is
presently test-marketing a lawn fertilizer. Similarly, every
manufacturer of lawn and garden chemicals also markets at
least a few household insecticides.
Significantly, both Science and Chevron manufacture and
market products falling into every category including
household insecticides. Although some producers of household
insecticides, tend to concentrate their sales in grocery and
drug stores, in general, most distributors and retailers of
lawn and garden chemicals also handle household insecticides.
Moreover, Science has been unable to point to a single
manufacturer which makes any distinction in its organization
or personnel based upon products sold for use inside and
outside the home.
Science's attempts to distinguish household insecticides
from outdoor insecticides based on locus of use must fail. Of
the eight products listed under Chevron's "Household Program,"
six are specifically labeled suitable for outdoor use.
Science's argument that household insecticides are lower in
toxicity than products intended for outdoor use is equally
specious. Most household insecticides are packaged in aerosol
form and therefore in final diluted form. By contrast, many
outdoor insecticides are packaged in concentrated form and
must be diluted with water before they can safely be used.
Once diluted, the toxicity of these products is no stronger
and often weaker than the toxicity of household insecticides.
Thus, it can reasonably be concluded that household
insecticides do not represent a relevant market or submarket.
For the foregoing reasons, the court is of the opinion that,
unless significant new evidence is introduced at trial, the
relevant product market for the purposes of Science's
antitrust claims must be the market for all products which
affect plant or insect life in and around the home.
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