384 U.S. 563 (1966)
The United States brought this civil suit in April 1961 against Grinnell Corporation, American District Telegraph Co. (ADT), Holmes Electric Protective Co., and Automatic Fire Alarm Co. of Delaware (AFA).1 Grinnell held 76 percent of ADT's stock, 89 percent of AFA's stock, and 100 percent of Holmes's stock.2 ADT operated 121 central stations in 115 cities and provided both burglary and fire protection services.3 Holmes operated 12 stations in three cities offering only burglary protection.4 AFA operated three stations in three cities providing only fire protection.5 In 1961 these three companies accounted for more than 87 percent of the accredited central station service business in the United States, with ADT alone holding 73 percent.6
Over the years ADT acquired the stock or assets of 27 companies engaged in burglar or fire alarm services.7 Holmes acquired three such companies in New York City.8 Officials of seven of the acquired companies agreed not to engage in the protective service business in the area for periods ranging from five years to permanently.9 In 1906, prior to their affiliation with Grinnell, ADT and Holmes entered a written agreement allocating territories for their respective services and restricting competition between them.10 In 1907 Grinnell entered into a series of agreements with the other defendant companies and with Automatic Fire Protection Co. to the following effect.11 These agreements continued in substantial effect until 1954, after which the companies honored the territorial divisions through new contracts.12
Between 1955 and 1961 the defendants made offers to acquire at least eight additional central station companies, including four of the five largest nondefendant firms in the business.13 When the suit was filed each defendant had an outstanding offer to purchase one of the four largest nondefendant companies.14 ADT reduced its minimum basic rates to meet competition in some cities while renewing contracts at substantially increased rates in cities where it held a monopoly.15 It threatened retaliation against firms that contemplated entering the central station service business.16 The District Court held a trial beginning in June 1964 after pretrial conferences in which the parties invited the court to review documents and consider relief issues.17
All parties appealed from the District Court's judgment and decree.18 The United States appealed on the ground that the relief was inadequate.19 The defendants appealed on the merits, on the relief granted, and on the ground that the District Court denied them a fair trial before Judge Wyzanski.20 The Supreme Court noted probable jurisdiction over the consolidated appeals.21
Whether accredited central station protective services constitute the product market under the Sherman Act?22
Yes. The District Court correctly defined the product market as accredited central station protective services.25 There is a single basic service of property protection through a central station receiving signals.26 That service is unique and competes with other forms as evidenced by substantially greater insurance premium reductions for accredited service.27
The established facts show that ADT, Holmes, and AFA together control over 87 percent of this business with ADT alone at 73 percent operating 121 stations in 115 cities.28 Although different types of alarm services are not interchangeable with one another, the cluster of services offered from a single office reflects commercial realities.29 Other protective methods such as watchmen or local alarms differ markedly in reliability, responsiveness, and cost so that many customers will accept only central station protection.30
Accredited central station protective services constitute the product market under the Sherman Act.31
Related opinions on this issue
Justice Harlan cannot agree that the facts warrant restricting the product market to accredited central station protective services.32 Substantial evidence shows defendants feel competitive pressure from other forms of protection.33 They compete for customers and lower prices even in areas where no accredited central station competition is present.34
The record leaves misgivings about findings of market domination given the burden of proof on the Government.35 Concrete evidence of market behavior ranks higher than inference proof based on physical differences or insurance discounts.36 Harlan would remand for further proceedings on the product market definition.37
Joined by Justice Stewart
Justice Fortas concludes that the market definition is a Procrustean distortion tailored precisely to defendants' business.38 The court isolates only services defendants provide and arbitrarily excludes all alternative sources.39 Findings show fringe competition from watchmen, local alarms, and unaccredited stations forces defendants to operate at a loss in multiple cities.40
The definition excludes locally available alternatives such as cheaper alarm systems or watchman service despite evidence that customers switch among forms of protection.41 This approach lacks justification in economics, reason, or law because practical alternatives exist and vary by market and user.42
Whether the geographic market for accredited central station services is national in scope?43
Yes. The District Court properly found the geographic market to be national.46 The business of providing accredited central station service is operated on a national level with national planning, multistate agreements, national insurers conducting inspection and rate-making, and ADT maintaining a national schedule of prices and nationwide contracts with multistate businesses.47 The established facts confirm that Grinnell controls the three companies through stock ownership and that their activities and acquisitions spanned many states.48
Although individual stations serve a 25-mile radius, the reality of how the defendants built and conduct their business reflects a broader national market.49
The geographic market for accredited central station services is national in scope.50
Related opinions on this issue
Joined by Justice Stewart
Justice Fortas maintains that the correct geographic market is local.51 The services are intensely local because premises are fixed and protection must be furnished on the spot by local personnel within minutes.52 Central stations serve only a 25-mile radius.53
Contracts are made locally on the basis of local conditions.54 A nationwide definition is a non sequitur that bootstraps from defendants' corporate structure rather than supplier-customer relations.55 The purpose of market definition is to find areas where a potential buyer may rationally look for services.56
Whether the defendants possessed monopoly power in the product market?57
Yes. The defendants possessed monopoly power because they controlled over 87 percent of the accredited central station service business nationwide.60 ADT alone held 73 percent across 121 stations in 115 cities where in 92 of those cities no other accredited stations existed.61 The established facts demonstrate that this share left no doubt of power to control prices and exclude competition, which the defendants wielded through acquisitions and restrictive practices.62
The defendants possessed monopoly power in the product market.63
Whether the defendants willfully acquired or maintained monopoly power through exclusionary practices?64
The second element of Sherman Act § 2 monopolization requires willful acquisition or maintenance of monopoly power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.65
Yes. The defendants willfully acquired and maintained monopoly power through exclusionary practices.66 These included the 1906 and 1907 territorial allocation agreements that continued in effect after 1954.67 ADT acquired 27 companies and Holmes acquired three companies with non-compete covenants from seven officials.68
Offers were made to acquire eight more firms between 1955 and 1961.69 ADT reduced rates to meet competition while raising them in monopoly cities and threatened retaliation against potential entrants.70 The established facts show these actions were undertaken plainly and explicitly for the single purpose of building and preserving the monopoly rather than through superior product or historic accident.71
The defendants willfully acquired or maintained monopoly power through exclusionary practices.72
Whether the District Court's decree provided adequate relief including divestiture and other remedies?73
No. The District Court's decree did not provide adequate relief.76 Grinnell's divestiture of its holdings in the alarm companies is justified.77 An injunction against further acquisitions is warranted.78 The details of ADT divestiture in at least 13 and possibly more cities must be determined by the District Court on remand.79
The five-year contract and equipment title practices require further exploration for protective provisions.80 Visitation rights should be reconsidered as a customary remedy.81 The broad generalized restraining order must be made specific to the precise practices found unlawful.82 The established facts confirm that ADT's 73 percent share and the combination's structure require more targeted remedies to restore competition.83
The District Court's decree did not provide adequate relief in all respects and the case must be remanded for further hearings on the nature of the relief.84
Whether Judge Wyzanski should have been disqualified on grounds of personal bias and prejudice?85
Disqualification for personal bias or prejudice under 28 U.S.C. § 144 requires that the alleged bias stem from an extrajudicial source. It must result in an opinion on the merits on some basis other than what the judge learned from participation in the case.86
No. Judge Wyzanski should not have been disqualified because any adverse attitudes he expressed were based solely on his study of the depositions and briefs that the parties themselves requested him to review during pretrial conferences.87 He repeatedly stated during trial that he had not made up his mind on the merits.88 The established facts show that the parties invited the court to examine documents and consider relief issues in advance.89 The statements reflected only his view that stringent relief would be called for if the government's allegations proved true.90
Judge Wyzanski should not have been disqualified on grounds of personal bias and prejudice.91